Randy Goad vs SRG Operating Inc et al

Case Number

24CV00643

Case Type

Hearing Date / Time

Fri, 09/12/2025 - 10:00

Nature of Proceedings

CMC; Motion for Approval

Tentative Ruling

For all reasons discussed herein, the motion of plaintiff for approval of settlement under the Private Attorneys General Act of 2004 is denied without prejudice.

Background:

On February 5, 2024, plaintiff Randy Goad filed a representative complaint against SRG Operating, Inc., Senior Resource Group LLC, SRG Partners, LLC, and SRG Partners Communities Investment CO, LLC, (collectively, defendants), alleging one cause of action for violation of Labor Code section 2698 et seq. (the Labor Code Private Attorneys General Act of 2004 or PAGA).

In the complaint, plaintiff alleges that from 2019 through May 8, 2023, plaintiff worked for defendants as an hourly, non-exempt employee with job titles of security guard dishwasher, and kitchen helper. (Compl., ¶¶ 30-32.) During plaintiff’s employment, defendants failed to compensate plaintiff for all hours worked, failed to afford meal or rest periods and suitable resting and seating facilities, mandated off-the-clock and seven consecutive days of work, failed to pay minimum and overtime wages, failed to provide accurate wage statements, unlawfully deducted costs for uniforms and other business expenses, failed to keep accurate payroll records, failed to provide paid sick leave and accrued paid time off, failed to provide final wages in a timely manner, and required plaintiff to agree in writing to unlawful conditions of employment, among other things. (Compl., ¶¶ 33-151.)

Plaintiff further alleges that this is a representative action filed on behalf of all employees who worked for defendants directly or via a staffing agency at any time from one year plus 65 days from the filing of the complaint. (Compl., ¶ 23.)

On March 6, 2024, the court entered an order on a stipulation by the parties that plaintiff’s individual PAGA claim shall be submitted to arbitration and that the remaining action, including plaintiff’s representative PAGA claims, shall be stayed pending completion of that arbitration.

On May 12, 2025, plaintiff filed an unopposed motion for approval of a proposed settlement under PAGA.

Analysis:

The PAGA “empowers employees to sue on behalf of themselves and other aggrieved employees to recover civil penalties previously recoverable only by the Labor Commissioner…. [Citations] The PAGA also creates new civil penalties, equally enforceable by aggrieved employees, for most other Labor Code violations that previously did not carry such penalties. [Citation.] [¶] All PAGA claims are ‘representative’ actions in the sense that they are brought on the state’s behalf. The employee acts as ‘the proxy or agent of the state’s labor law enforcement agencies’ and ‘represents the same legal right and interest as’ those agencies — ‘namely, recovery of civil penalties that otherwise would have been assessed and collected by the Labor Workforce Development Agency.’ [Citations.] The employee may therefore seek any civil penalties the state can, including penalties for violations involving employees other than the PAGA litigant herself.” (ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 184-185 (ZB); Lab. Code, § 2699, subd. (a).)

“A PAGA claim is legally and conceptually different from an employee’s own suit for damages and statutory penalties. ... Every PAGA claim is ‘a dispute between an employer and the state.’ [Citations.] Moreover, the civil penalties a PAGA plaintiff may recover on the state’s behalf are distinct from the statutory damages or penalties that may be available to employees suing for individual violations. [Citation.] Relief under PAGA is designed primarily to benefit the general public, not the party bringing the action.” (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 81, original italics (Kim).)

The court must review and approve any settlement of a civil action filed pursuant to PAGA. (Lab. Code, § 2699, subd. (s)(2).) When evaluating a settlement of claims brought under PAGA, the court must determine whether it is “fair, reasonable, and adequate in view of PAGA’s purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 77, disapproved on another ground in Turrieta v. Lyft, Inc. (2024) 16 Cal.5th 664, 709-710 (Moniz).) The plaintiff must also submit the proposed settlement to the LWDA “at the same time that it is submitted to the court.” (Lab. Code, § 2699, subd. (s)(2).)

In support of the motion, plaintiff submits a declaration of plaintiff’s counsel, Sepideh Ardestani (Ardestani), to which is attached a copy of a “PAGA Settlement Agreement” (the Agreement) between plaintiff and SRG Operating, Inc. (SRG). (Ardestani Decl., ¶ 2 & Exh. 1.) Ardestani states that a copy of the Agreement was submitted to the Labor & Workforce Development Agency (the LWDA). (Ardestani Decl., ¶ 2.) )

Ardestani sets forth a summary of the terms of the Agreement, which provides that SRG will pay a non-reversionary settlement amount of $675,000 (the Gross Settlement Amount or GSA) which is inclusive of payments to be made to the LWDA and the “aggrieved employees”, costs of settlement administration which are estimated at no more than $5,500 to be paid to settlement administrator Simpluris, Inc., a service award to plaintiff in the amount of $1,000, attorney’s fees in the amount of $225,000 which Ardestani contends is one-third of the GSA, and costs in the amount of $18,118.69. (Ardestani Decl., ¶¶ 8-9; see also Exh. 1, ¶ 3.2.)

Ardestani further asserts that, after payment of the amounts described above, the amount of the GSA remaining (the Net Settlement Amount or NSA) will total $425,311.31. (Ardestani Decl., ¶ 8; Exh. 1, ¶ 3.2.4.) Seventy-five percent of the NSA, or $318,983.48, will be paid to the LWDA, and twenty-five percent, or $106,327.83, will be distributed to the “aggrieved employees” in proportion to the total number of periods each individual worked during the “PAGA Period” of December 1, 2022, to April 15, 2025. (Ibid.)

Ardestani states that plaintiff estimated that SRG’s maximum exposure to civil penalties under PAGA totals approximately $23,094,300. (Ardestani Decl., ¶ 15.) Ardestani also states that a trial on the issues raised in this action would be unmanageable based on various multi-layered defenses raised by SRG as further described in the Ardestani declaration. (See Ardestani Decl., ¶¶ 17-24.)

Labor Code section 2699, subdivision (m), requires that 65 percent of the civil penalties recovered by “aggrieved employees”, as that term is defined in subdivision (c)(1) of that section, be distributed to the LWDA “for enforcement of labor laws, including the administration of this part, and for education of employers and employees about their rights and responsibilities under this code”, and that 35 percent of the recovered penalties be distributed to the aggrieved employees. (Lab. Code, § 2699, subd. (m).) The distribution provided in the Agreement further described above does not comply with subdivision (m) of Labor Code section 2699. Plaintiff offers no reasoned argument showing why the distribution proposed in the Agreement complies, or is exempt from complying, with the distributions required by PAGA.

PAGA authorizes the imposition of civil penalties against a defendant for violating provisions of the Labor Code “that themselves provide for civil penalties, and that were previously recoverable only by the Labor Agency or its related entities[]” as well as those provisions “that do not themselves provide for civil penalties.” (Sargent v. Board of Trustees of California State University (2021) 61 Cal.App.5th 658, 670, disapproved on another ground in Stone v. Alameda Health System (2024) 16 Cal.5th 1040, 1086, fn. 28.) The penalties authorized under PAGA are “distinct from the statutory damages to which employees may be entitled in their individual capacities []” and are “intended ‘to punish the employer’ for wrongdoing…. [Citation.]” (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 381, overruled on another ground in Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, 583; ZB, supra, 8 Cal.5th at pp. 185-186.) Further, PAGA penalties are not intended to “compensate employees for actual losses incurred….” (ZB, supra, 8 Cal.5th at p. 186; Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1117.)

In addition, civil penalties obtained by an aggrieved employee who brings suit under PAGA “are ... shared between the affected employees and the state.” (Mendoza v. Nordstrom, Inc. (2017) 2 Cal.5th 1074, 1079.) Further, the “[a]llocation of [3]5 percent to all aggrieved employees is consistent with the statutory scheme under which the judgment binds all aggrieved employees, including nonparties.” (Moorer v. Noble L.A. Events, Inc. (2019) 32 Cal.App.5th 736, 742.)

A reasonable interpretation of the complaint shows that plaintiff brings this action in a representative capacity under PAGA. Though plaintiff, through his counsel, contends that the GSA described above reflects reasonable civil penalties recoverable in this action after accounting for SRG’s defenses and other risks (see Ardestani Decl., ¶ 24.), the Agreement permits these civil penalties, as reflected in the GSA, to be reduced by amounts to be paid solely to plaintiff or his counsel for attorney’s fees and litigation costs incurred by plaintiff in this action and as a service award to plaintiff, and by amounts to be paid to Simpluris, Inc., who is not an “aggrieved employee” under PAGA.

For all reasons discussed above, the plain language of PAGA requires civil penalties recovered by aggrieved employees to be distributed in the percentages set forth under Labor Code section 2699, and to be shared by the aggrieved employees and the state. Plaintiff does not provide, and the court is unaware of, any legal authority which would permit the distributions required under Labor Code section 2699 to be altered or effectively reduced by an additional distribution to plaintiff or plaintiff’s counsel as described in the Agreement and above. Moreover, the express language of PAGA does not authorize third parties such as a settlement administrator to share in the civil penalties obtained by an aggrieved employee in a PAGA suit.

Civil penalties under PAGA may “not go disproportionately to the PAGA plaintiff....” (Moniz, supra, 72 Cal.App.5th at p. 87.) By providing for a larger distribution of civil penalties to plaintiff, the Agreement impermissibly allocates a greater share of these penalties to plaintiff in a manner that primarily benefits plaintiff and his counsel. “Relief under PAGA is designed primarily to benefit the general public, not the party bringing the action.” (Kim, supra, 9 Cal.5th 73, 81.) For these additional reasons, the terms of the Agreement are contrary to the purposes of PAGA further discussed above. (Moniz, supra, 72 Cal.App.5th at p. 87.)

In addition, unlike enhancement or incentive awards which may be available to a named plaintiff in a class action lawsuit (see Clark v. American Residential Services, LLC (2009) 175 Cal.App.4th 785, 806), plaintiff fails to cite, and the court is unaware of, any legal authority authorizing the payment of a service award to a plaintiff who brings an action under PAGA, such as the service award sought by plaintiff here, or pursuant to which the distributions set forth in Labor Code section 2699 may be reduced by the payment of such an award.

Plaintiff has also failed to make a sufficient showing that the Agreement is fair, reasonable, or appropriate in regard to the attorney’s fees requested by plaintiff. (Lab. Code, § 2699, subd. (k)(1) [fee award must be “reasonable”]; Harrington v. Payroll Entertainment Services, Inc. (2008) 160 Cal.App.4th 589, 594 [amount of fees was reasonable given the “amount of the settlement”].)

For example, the present record reflects that the civil penalties to be distributed to and shared by the LWDA and the aggrieved employees totals $423,500. (Ardestani Decl., ¶ 8; Exh. 1, ¶ 3.2.2.) The attorney’s fees requested by plaintiff total $225,000, representing more than 50 percent of the share of civil penalties available for distribution to the LWDA and the aggrieved employees [423,500 x .50 = 211,750]. Plaintiff fails to explain why, under the circumstances present here, the recovery of attorney’s fees in an amount that reflects more than 50 percent of the civil penalties to be distributed to and shared by the LWDA and the aggrieved employees is reasonable. (Lab. Code, § 2699, subd. (k)(1) [prevailing employee is “entitled to an award of reasonable attorney’s fees and costs]; Gunther v. Alaska Airlines, Inc. (2021) 72 Cal.App.5th 334, 357-358 [general discussion of what constitutes “reasonable attorney fees”].)

Though the parties to an action for civil penalties under PAGA may, under appropriate circumstances, include within their settlement amounts that the parties agree will be separately paid by a PAGA defendant apart from civil penalties (for example, for attorney’s fees that may be recovered pursuant to Labor Code section 2699), a PAGA representative action is “ ‘fundamentally a law enforcement action designed to protect the public and not to benefit private parties’ [citation].” (Arias v. Superior Court (2009) 46 Cal.4th 969.) For all reasons discussed above, plaintiff has failed to show why the Agreement is fair, adequate, or reasonable, or that plaintiff has, in light of the issues discussed above, “adequately represented the state’s interests, and hence the public interest.” (Moniz, supra, 72 Cal.App.5th at p. 89.) Therefore, and for all reasons described above, the court will deny the motion.

To the extent the parties revise or restructure their settlement to conform to the requirements of PAGA, the court’s denial of the present motion is without prejudice to any appropriate future motion for approval of any revised or restructured settlement.