Noel Payan vs. Evolve Growth Initiatives, LLC, et al

Case Number

24CV04586

Case Type

Hearing Date / Time

Mon, 07/21/2025 - 10:00

Nature of Proceedings

Plaintiff’s Unopposed Motion For Approval Of Settlement Pursuant To The Private Attorneys General Act of 2004 (“PAGA”)

Tentative Ruling

Noel Payan vs. Evolve Growth Initiatives, LLC, et al.             

Case No. 24CV04586

           

Hearing Date: July 21, 2025                                                

HEARING:              Plaintiff’s Unopposed Motion For Approval Of Settlement Pursuant To The Private Attorneys General Act of 2004 (“PAGA”)

                                                           

ATTORNEYS:        For Plaintiff Noel Payan: Elliot J. Siegel, Julian Burns King, King & Siegel LLP, Xavier Villegas, Law Office Of Xavier Villegas, APC

For Defendants Evolve Growth Initiatives, LLC and Michelle Gross: Brian T. Daly, Christina M. Behrman, Mullen & Henzell L.L.P.

TENTATIVE RULING:

For all reasons discussed herein, the motion of plaintiff for approval of settlement pursuant to the Private Attorneys General Act of 2004 (“PAGA”) is denied.

Background:

On July 11, 2024, plaintiff Noel Payan filed, as Superior Court of Riverside County case number CVRI2402352, a representative complaint against Evolve Growth Initiatives, LLC, and Michelle Gross (collectively, defendants), alleging one cause of action for statutory civil penalties under Labor Code section 2698 et seq. (the Labor Code Private Attorneys General Act of 2004 or PAGA).

In the complaint, plaintiff alleges that while he was employed by defendants as a Residential Counselor, which is a full-time nonexempt position, defendants failed to compensate plaintiff and all other similarly situated current and former employees (the Aggrieved Employees) for all hours worked, failed to record or compensate plaintiff and the Aggrieved Employees for actual time worked at correct overtime rates, deprived plaintiff and the Aggrieved Employees of compliant meal and rest periods, failed to list the correct applicable hourly rates of pay and amount of gross and net wages earned by plaintiff and the Aggrieved Employees, failed to timely pay to plaintiff and the Aggrieved Employees all wages due upon termination or discharge, and failed to reimburse plaintiff and the Aggrieved Employees for cellphone, internet, and other expenses incurred in the regular course of their employment. (Compl., ¶¶ 1-3 & 11, 15-16, 18, 21, 25-27, 29-30, 35, 37-38, & 42-43.)

Court records further reflect that, pursuant to a stipulation of the parties, the action was transferred to and received by this court on August 20, 2024. (See Aug. 20, 2024, Joint Stip. To Change Venue & Notice Re Transferred Action.)

On February 7, 2025, defendants filed an answer to the complaint, and on March 7, 2025, filed an amended answer to the complaint generally denying its allegations and asserting twenty-seven affirmative defenses.

On April 1, 2025, defendants filed a notice of related case identifying Superior Court of San Diego County case number 24CU023118C entitled Axel Olea Velarde v. Evolve Growth Initiatives, LLC, as related to this action.

On June 23, 2025, plaintiff filed an unopposed motion for an order approving the terms of a Joint Stipulation of Settlement of PAGA Representative Action (the Settlement Agreement) entered into between plaintiff, in his capacity as a private attorney general for the State of California, and defendants, and for the entry of final judgment.

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 his counsel, Elliot J. Siegel (Siegel), who declares that a copy of the Settlement Agreement is attached to that declaration as exhibit 1. (Siegel Decl., ¶ 22.) Siegel explains that the Settlement Agreement provides for the payment by defendants of a maximum settlement amount (the MSA) of $225,000. (Siegel Decl., ¶ 24 & Exh. 1, ¶ 4.)

The Settlement Agreement also provides, subject to the court’s approval, that an amount not to exceed $75,000, or one-third of the MSA, will be deducted from the MSA and paid to plaintiff’s counsel as reimbursement for attorney’s fees incurred in this action; that the amount of $18,000 will be deducted from the MSA and paid to plaintiff’s counsel for reimbursement of plaintiff’s litigation costs; that the amount of $10,000 will be deducted from the MSA and paid to plaintiff as a “Service Enhancement Award”; and that an amount not to exceed $12,000 will be deducted from the MSA and paid to Simpluris, Inc. (Simpluris), who is the third-party settlement administrator, as reimbursement for costs to administer the Settlement Agreement. (Siegel Decl., ¶¶ 24-26 & Exh. 1, ¶ 6, 7, 8 & 11; see also Declaration of Noel Payan, ¶ 20 [requesting a service award in the amount of $10,000].)

Siegel states that he estimates that, though the Settlement Agreement authorizes a deduction from the MSA for litigation costs in the amount of $18,000, plaintiff’s counsel’s actual litigation costs will total $14,132.89 by the conclusion of this action. (Siegel Decl., ¶ 24.)

The Settlement Agreement further provides that, after the amounts described above are deducted and paid from the MSA, the remainder of the MSA, which Siegel asserts will be no less than $120,867.11, will be designated as civil penalties under PAGA and allocated between the Labor & Workforce Development Agency (the LWDA) and the Aggrieved Employees, who are defined in the Settlement Agreement to include all current and former hourly, non-exempt employees of Evolve Growth Initiatives, LLC, who were employed in California from April 29, 2023, through the date of the court’s final approval of the Settlement Agreement. (Siegel Decl., ¶ 26 & Exh. 1, p. 1 & ¶¶ 1, 2, 9, & 12.)

Siegel explains that plaintiff’s expert determined that defendants’ maximum potential exposure to civil penalties under PAGA totals $950,000. (Siegel Decl., ¶ 69.) After accounting for risks arising from the arguments and defenses advanced by defendants in this action, plaintiff’s counsel determined that defendants’ realistic potential exposure to civil penalties, based on counsel’s assessment of the Aggrieved Employees’ chances of prevailing at trial, totals $232,750. (Siegel Decl., ¶¶ 70-76.) For this reason, Siegel asserts, the MSA represents 96.7 percent of defendants’ realistic exposure to civil penalties under PAGA and “is a clear win” for the Aggrieved Employees and the State of California. (Siegel Decl., ¶ 76.)

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.) The 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.)

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).) Accordingly, the 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 solely in a representative capacity under PAGA, and does not bring this action in any individual capacity or seek to recover anything apart from civil penalties authorized under PAGA. (See Compl., p. 1, ll. 1-3, p. 10, ll. 12-16, & ¶¶ 46 & 49.) Though plaintiff contends that the MSA reflects defendants’ maximum potential exposure to or liability for civil penalties under PAGA, the Settlement Agreement does not provide for a distribution of those penalties which complies with the statute. Instead, the Settlement Agreement permits the civil penalties recovered by plaintiff and the Aggrieved Employees, as reflected in the MSA, to be reduced by amounts to be paid solely to plaintiff or his counsel as reimbursement for attorney’s fees and litigation costs incurred by plaintiff in this action and as a service award, and for costs incurred by Simpluris, who is not an Aggrieved Employee or a party to this action.

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 by Labor Code section 2699 to be altered or effectively reduced by additional or higher distributions to plaintiff or plaintiff’s counsel as described in the Settlement Agreement and above. Moreover, the express language of PAGA does not authorize third parties such as Simpluris to share in the civil penalties obtained by an aggrieved employee in a PAGA suit.

Furthermore, the allocation of a 35 percent share of 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 to plaintiff of the civil penalties to be paid by defendants, the Settlement 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 Settlement 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 Settlement Agreement is fair, reasonable, or appropriate, or why an award of attorney’s fees in the amount requested by plaintiff is reasonable. (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, though plaintiff’s counsel contends that the MSA represents 96.7 percent of defendants’ maximum realistic exposure to civil penalties under PAGA, the MSA will not, for reasons further discussed above, be available for distribution to the LWDA or the Aggrieved Employees. Instead, the record reflects that the civil penalties to be distributed to and shared by the LWDA and the Aggrieved Employees, after the deductions described above, will total $113,867.11. ($225,000-75,000-14,132.89-10,000-12,000=$113,867.11; see also Siegel Decl., ¶¶ 25-26 & Exh. 1, ¶ 12.) This amount, on its face, does not represent 96.7 percent of defendants’ maximum realistic exposure in this case, which plaintiff contends totals $232,750 in civil penalties under PAGA. (See, e.g., Siegel Decl., ¶¶ 76-77.) Instead, the amount of civil penalties available for distribution under PAGA is less than one-half of defendants’ realistic exposure. ($232,750 / 2 = 116,375.)

The court’s calculations also show that the attorney’s fees requested by plaintiff, which total $75,000, represent more than 50 percent of the share of civil penalties available for distribution to the LWDA and the Aggrieved Employees following the deductions described above. ( [$75,000 / 113,867] * 100 = 65.86.) Plaintiff fails to explain why, under the circumstances present here, the recovery of attorney’s fees in an amount which reflects more than 50 percent of the share of 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 agreement to settle an action for civil penalties under PAGA may, under appropriate circumstances, include within that agreement amounts that the parties agree will be separately paid by the defendant apart from civil penalties (for example, for attorney’s fees that may be recoverable under 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 Settlement 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.