Opinion
Case No. 2:18-cv-02898 WBS-DB
08-28-2020
STEPHEN WANDERER, as an individual and in his representative capacity, Plaintiff, v. KIEWIT INFRASTRUCTURE WEST CO.; and DOES 1 through 25, inclusive, Defendants.
MEMORANDUM AND ORDER RE: JOINT MOTION TO APPROVE SETTLEMENT OF AND DISMISS CLAIM UNDER THE PRIVATE ATTORNEYS' GENERAL ACT
Plaintiff Stephen Wanderer ("Plaintiff"), individually and in a representative capacity, brought this lawsuit against Defendant Kiewit Infrastructure West Co. ("Defendant") alleging wrongful termination, retaliation in violation of California Labor Code §§ 1102.5 and 98.6, violations of wage and hour laws, and seeking civil penalties under the Private Attorneys' General Act ("PAGA") based on the alleged misclassification of plaintiff and other employees as exempt from overtime. (First Am. Compl. "FAC") (Docket No. 10).) Before the court is the parties' Joint Motion to Approve of Settlement and to Dismiss Plaintiff's Claim under the PAGA. ("Joint Mot. for Settlement") (Docket No. 28.)
I. Factual and Procedural Background
Defendant Kiewit is a construction company incorporated under the laws of the State of Delaware and with its "nerve center" located in the State of Nebraska. (Notice of Removal ("NOR") (Docket No. 1 at ¶¶ 12-13).) Defendant employed plaintiff as a Site Safety and Health Officer ("SSHO") at various locations within California, including the Oroville Dam, the Folsom Dam, and Kiewit's Fairfield Office, from on or around September 15, 2013 until May 12, 2018. (FAC at ¶¶ 6-12.)
On July 5, 2018, plaintiff sent defendant a letter stating that he intended to pursue a PAGA claim based on defendant allegedly misclassifying him as exempt from overtime. (See Mem. of Points and Authorities in Supp. of Joint Mot. to Approve Settlement and to Dismiss Claim under the PAGA ("Settlement Mem.") at 1 (Docket No. 29).) Plaintiff submitted the same letter ("PAGA Letter") to the California Labor Workforce Development Agency ("LWDA"). (See Settlement Mem. at 1.) The LWDA did not respond to the PAGA Letter. (Id.)
The operative complaint asserts eight causes of action: (1) wrongful termination in violation of public policy; (2) retaliation in violation of California Labor Code §§ 1102.5 and 98.6; (3) violation of California Labor Code § 201; (4) failure to pay overtime wages in violation of California Labor Code § 510; (5) violation of California Labor Code § 1174; (6) violation of California Labor Code § 226(a); (7) civil penalties under PAGA for violations of the above Labor Code provisions; and (8) unfair competition in violation of Business and Professions Code § 17200. (See FAC at 4-13.)
After exchanging extensive discovery, the parties reached a settlement through the court's Voluntary Dispute Resolution Program with Douglas Robert Thorn of Thorn Law Firm. (See Settlement Mem. at 2.) Mr. Thorn has practiced law for over thirty years, had extensive trial experience, and has served as a neutral in over 200 cases, including employment cases. (See id. at 3.)
Pursuant to the settlement agreement, the parties agreed to settle plaintiff's individual claims, without admission of fault or liability, for a general release and dismissal upon the Court's approval of the parties' settlement as to the PAGA claim. (See id. at 2.) The parties entered into a separate confidential settlement related to plaintiff's other claims. (See id.) The parties settled plaintiff's individual claims only, and the PAGA Settlement Agreement does not release any claim on behalf of any other allegedly affected employee. (See id.) The settlement of plaintiff's claims is contingent on the court issuing a final Order which approves the settlement agreement, dismisses the action (including plaintiff's PAGA Claim) with prejudice as to the plaintiff and without prejudice as to other allegedly affected employees, and denies an award of civil penalties to the plaintiff. (See id.)
The parties have not given any indication as to the amount that plaintiff and plaintiff's counsel will receive in the settlement of the individual claims.
II. Discussion
A. PAGA Settlement
"[A] PAGA action is a statutory action in which the penalties available are measured by the number of Labor Code violations committed by the employer." Sakkab v. Luxottica Retail N. Am., Inc., 804 F.3d 425, 435 (9th Cir. 2015). The employees bringing the action do so as agents or proxies of the state's labor law enforcement agencies. See id. Any agreement to waive PAGA claims is an agreement to limit the penalties plaintiff-employees may recover on behalf of the State. See id. at 436. Because a settlement of PAGA claims settles claims that could otherwise be brought by the State, the trial court must "review and approve" any settlement of PAGA claims. See Cal. Lab. Code. § 2669(1)(2). Before the trial court can review and approve of any settlement of PAGA claims, "[t]he proposed settlement shall be submitted to the [LWDA] at the same time that it is submitted to the court." Id. Plaintiff provided a copy of the proposed settlement agreement to the LWDA on July 15, 2020, concurrently with the filing of the Joint Mot. for Settlement. (Decl. of Rachel Renno in Supp. of Joint Mot. for Settlement at ¶ 2 ("Renno Decl.") (Docket No. 30)).
The LWDA has not appeared in this case and has not filed any objection to the proposed joint settlement.
The trial court, in reviewing the award of civil penalties under the PAGA, may exercise its discretion to lower the amount of penalties awarded if "to do otherwise would result in an award that is unjust, arbitrary and oppressive, or confiscatory." See Cal. Lab. Code § 2699(e)(2). Because State law enforcement agencies are the real parties in interest, the court's task is to ensure that the State's interest in enforcing the law is upheld. See Rodriguez v. RCO Reforesting Inc., No. 2:16-cv-2523 WBS DMC, 2019 WL 331159, at *3 (E.D. Cal Jan. 24, 2019) (citing Sakkab, 803 F.3d at 435).
Other than the provisions previously discussed, "PAGA does not establish a standard for evaluating PAGA settlements." See Rodriguez, 2019 WL 331159 at *4 (citing Smith v. H.F.D. No. 55, Inc., No. 2:15-CV-01293 KJM KJN, 2018 WL 1899912, at *2 (E.D. Cal. Apr. 20, 2018)). The LWDA itself has stated that it is not aware of any existing case law definitively establishing a standard to review PAGA settlements. Id. (citing Ramirez v. Benito Valley Farms, LLC, No. 16-CV-04708-LHK, 2017 WL 3670794, at *3 (N.D. Cal. Aug. 25, 2017)). At least a few district courts have applied the factors in Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998), to evaluate a PAGA settlement. See, e.g., Smith, 2018 WL 1899912, at *2; Ramirez, 2017 WL 3670794, at *3; O'Connor v. Uber Techs., 201 F. Supp. 3d 1110, 1134 (N.D. Cal. 2016). The Hanlon factors, which are traditionally used to evaluate class action settlements, include (1) the strength of plaintiffs' case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed; (6) the expertise and views of counsel; (7) the presence of government participation; and (8) the reaction of class members to the proposed settlement. See Hanlon, 150 F.3d at 1026. "Many of these factors are not unique to class action lawsuits and bear on whether a settlement is fair and has been reached through an adequate adversarial process." See Ramirez, 2017 WL 3670794, at *3. Thus, the court finds these factors useful in evaluating a settlement of PAGA claims.
The third, seventh, and eighth factors, however, are not relevant to this settlement because it is not a class action and the LWDA has not participated. See Smith, 2018 WL 1899912, at *2 (holding that these factors were inapplicable in a PAGA settlement that was not a class action, which resolved only the plaintiff's individual PAGA claims, and where the LWDA had filed no submission reflecting a position on the settlement.) In addition to analyzing the settlement under the five remaining Hanlon factors, the court must determine whether the settlement would be "unjust, arbitrary and oppressive, or confiscatory" with respect to defendant, see Cal. Lab. Code § 2699(e)(2), and whether "the settlement provisions are at least as effective as the protections or remedies provided by state and federal law or regulation for the alleged violation." See Cal. Lab. Code § 2699.3(b)(4).
First, there is no indication that the settlement would be unjust, arbitrary and oppressive, or confiscatory as to defendants. Both sides have agreed that the settlement is fair and reasonable. (See Settlement Mem. at 4.) Defendant has given no indication that the settlement would be unduly burdensome or unjust. Based on the exchange of substantial information and Mr. Thorn's recommendation, both sides have agreed to allocate zero dollars to plaintiff's individual PAGA claim. (See id. at 3.) Plaintiff voluntarily entered into an agreement to accept a monetary benefit to settle his individual claims and not pursue his PAGA claim. (See id. at 4.) Given that both sides have agreed to the settlement and to avoid the further expense of litigation, and the Settlement Agreement does not release any claim on behalf of any other allegedly affected employee, the court concludes that a settlement would not be "unjust, arbitrary and oppressive, or confiscatory." See Rodriguez, 2019 WL 331159, at *4.
Second, the "strength of plaintiff's case" factor also favors approval of settlement. The parties exchanged substantial information at mediation, and the parties' mediator, Mr. Thorn, concluded that the defendant presented compelling evidence and arguments that it properly classified plaintiff as exempt under California's administrative exemption. (See Settlement Mem. at 3.) Mr. Thorn likewise concluded that defendant raised a convincing argument that plaintiff did not comply with PAGA's administrative requirement because his PAGA letter referred only to plaintiff and did not place the LWDA or defendant on notice of his intention to pursue a representative claim. (See id. at 3.); see Khan v. Dunn-Edwards Corp., 19 Cal. App. 5th 804, 809 (2nd Dist. 2018) (affirming summary judgment for defendant where notice "expressly applied only to [plaintiff]" and failed to give the LWDA an adequate opportunity to decide whether to investigate a representative action or provide the company an adequate opportunity to respond to the agency.).) These defenses present a substantial risk to plaintiff's PAGA Claim and the likelihood that the penalties sought by the plaintiff, either in whole or in part, will not be awarded. Courts have noted that legal uncertainty favors approval of a settlement. See Smith, 2018 WL 1899912, at *3.
Third, "the risk, expense, complexity, and likely duration of further litigation" factor strongly favors approval of the settlement. The parties reached this settlement after nearly two years of litigation. The parties have conducted extensive investigation, discovery, and arms-length negotiation between experienced and informed counsel and with the assistance of a seasoned and well-respected mediator. (See Settlement Mem. at 3.) Further litigation would necessitate further expenses and costs for both parties. Where a settlement "provides timely, certain, and meaningful recovery," it ought to be favored. See Ramirez, 2017 WL 3670794, at *5.
Fourth, the settlement reflects the parties' mutual agreement to allocate zero dollars to plaintiff's individual PAGA claim. (See Settlement Mem. at 3.) The parties arrived at this claim based on the exchange of substantial information, Defendant's anticipated defenses and Mr. Thorn's recommendation. (Id.) Plaintiff voluntarily entered into an agreement to accept a monetary benefit to settle his individual claims and not pursue his PAGA claim. (Id. at 4.) Courts have previously approved settlements where parties mutually agree to allocate zero dollars or another nominal amount to a PAGA claim. See Nordstrom Comm'n Cases, 186 Cal. App. 4th 576, 589 (4th Dist. 2010)(holding that there was "no abuse of discretion in the trial court's approval of the settlement agreement" which allocated zero dollars for PAGA penalty claims as part of the overall settlement of the case.); see also Alcala v. Meyer Logistics, Inc., No. CV 17-7211 PSG(AGRx), 2019 WL 4452961, at *9 (C.D. Cal. June 17, 2019) (observing that courts have approved PAGA claims which fall "within the zero to two percent range.") Moreover, plaintiff's settlement does not impair the rights or release the claims of other allegedly aggrieved employees. (See Settlement Mem. at 4.) Accordingly, "the amount offered in settlement" factor favors approval.
Fifth, regarding the extent of discovery completed and the stage of the proceedings, the parties conducted informal and formal investigation and discovery into plaintiff's claims. (See id. at 3.) The parties engaged in written discovery, including requests for production, requests for admission, and interrogatories. (Decl. of Billie D. Wenter in Supp. of Joint Mot. for Settlement at ¶ 2("Wenter Decl.") (Docket No. 31).). Defendant produced over 12,000 pages in response to requests for production. Id. In addition, defendant deposed plaintiff on February 11, 2020. Id. Moreover, on June 30, 2020, the parties mediated the action through the court's Voluntary Dispute Resolution Program with Mr. Thorn. (See Settlement Mem. at 2.) Both sides thereby developed a good sense of the risks and benefits of continuing litigation. See Ontiveros v. Zamora, 303 F.R.D. 356, 371 (E.D. Cal. 2014) (Shubb, J.)(observing that the parties use of mediation, which took place after significant discovery, and their reliance on the mediator's proposal demonstrated that they had carefully considered and evaluated the strength of their arguments.) Accordingly, this factor weighs in favor of approval.
Sixth, with respect to the experience and views of counsel, plaintiff was represented by experienced counsel who arrived at this Settlement Agreement through arms-length negotiations and by participating in mediation through the court's Voluntary Dispute Resolution Program with the assistance of Mr. Thorn. (See Settlement Mem. at 1.) Plaintiff's counsel believes that the dismissal of the PAGA claim appropriately accounts for the challenges and potential risks of continuing litigation. (See id.) Thus, counsel's conclusion that this settlement is plaintiffs' best chance at recovery is given considerable weight. See Rodriguez, 2019 WL 331159 at *5. Accordingly, this factor weighs in favor of approval.
Seventh, and finally, this settlement is "at least as effective as the protections or remedies provided by state and federal law or regulation for the alleged violation." See Cal. Lab. Code § 2699.3(b)(4). As mentioned previously, this settlement resolves only plaintiff's individual claims for civil penalties; it is not a class settlement and therefore does not impair the rights or release the claims of any other allegedly aggrieved employees. (See Settlement Mem. at 1.) Here, Mr. Thorn concluded that plaintiff was properly classified as an employee exempt from overtime under California's administrative exemption. (Id. at 3); See 8 Cal. Code Regs. § 11040(1)(A)(2). "Given the statutory language [of PAGA], a plaintiff cannot recover on behalf of individuals whom the plaintiff has not proven suffered a violation of the Labor Code by the defendant." Cardenas v. McLane Foodservice, Inc., No. SACV 10-473 DOC (FFMx), 2011 WL 379413 at *3 (C.D. Cal. 2011). The plaintiff has not demonstrated the violation of the Labor Code by defendant for any additional employees and may not even be able to demonstrate a violation of the Labor Code by defendant in his own case. The court, therefore, finds that the settlement satisfies this provision of the California Labor Code.
Accordingly, because every relevant factor favors final approval of the settlement, the court will approve the parties' settlement of plaintiff's PAGA claims.
B. Attorneys' Fees
PAGA provides for the recovery of attorneys' fees and costs in any successful action. See Cal. Lab. Code § 2699(g)(1) ("Any employee who prevails in any action shall be entitled to an award of reasonable attorney's fees and costs."). Here, the parties have agreed to bear their own attorneys' fees and costs related to this action, and plaintiff's counsel waives any and all rights to further attorneys' fees and costs in connection with this action, except as separately agreed upon between plaintiff and plaintiff's counsel. See Stipulated Settlement Agreement (Docket No. 31-1 at 4.) The parties have also agreed to a mutual waiver of any right to pursue recovery of costs. (See Settlement Mem. at 4.) As plaintiff has not prevailed on any PAGA claim, he is not entitled to any attorney's fees under PAGA. Accordingly, the court approves of the joint decision by the parties to bear their own attorney's fees and waive their rights to pursue recovery of costs.
IT IS THEREFORE ORDERED that the parties' Joint Mot. for Settlement (Docket No. 28) be, and the same hereby is, GRANTED. Plaintiff is not entitled to any civil penalties under PAGA. This action, including plaintiff's PAGA Claim, is DISMISSED WITH PREJUDICE as to plaintiff, and DISMISSED WITHOUT PREJUDICE as to any individual or representative claims, including any PAGA claim, that may be brought by any other employees that may have been affected by defendant's alleged conduct.
The Clerk of Court is instructed to enter judgment accordingly. Dated: August 28, 2020
/s/_________
WILLIAM B. SHUBB
UNITED STATES DISTRICT JUDGE