Charles v. Advanced Chemical Transport et al.

I.

Legal Standard

Whether a settlement is fair and reasonable, whether notice is adequate, whether certification is proper, and whether an attorney fee award is proper “are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234–235, disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)

The most important factor is the strength of the plaintiffs’ case on the merits, balanced against the amount offered in settlement. (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130 (Kullar).)

The record must permit “an understanding of the amount that is in controversy and the realistic range of outcomes,” and counsel’s assurance that the settlement is fair is no substitute for that showing. (Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, 799–801 (Clark); Kullar, supra, at pp. 120, 129–130.)

Similar to its review of class action settlements, a trial court must also “review and approve” any settlement of an action filed under the Private Attorneys General Action (“PAGA”). (Lab. Code, § 2699, subd. (s)(2).)

The trial court must “determine independently whether a PAGA settlement is fair and reasonable,” to protect “the interests of the public and the LWDA in the enforcement of state labor laws.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 76-77.)

A PAGA settlement may be substantially discounted, and courts often exercise their discretion to award PAGA penalties below the statutory maximum. (Carrington v. Starbucks Corp. (2018) 30 Cal.App.5th 504, 529; Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1213.)

II.

Discussion

A. Provisions of the Settlement

The settlement class consists of all non-exempt ACT direct hires and all non-exempt IQ employees placed at ACT, in California, from April 15, 2020 through the date of preliminary approval; a subset of Aggrieved Employees is defined by a PAGA Period running from April 15, 2023 through the same date. (Declaration of Evan S. Gaines (“Gaines Decl.”), Ex. B (“Agreement”), §§ 1.4, 1.5, 1.12, 1.31.)

Defendants estimate 736 Class Members with 75,000 workweeks and 553 Aggrieved Employees with 23,000 PAGA pay periods. (Id. at § 4.1.)

Defendants will pay a non-reversionary gross settlement amount of $2,029,500, including attorney fees of up to one-third ($676,500), litigation costs of up to $40,000, a PAGA allocation of $160,000 ($120,000 to the LWDA, $40,000 to Aggrieved Employees), and administration costs of up to $10,500. (Agreement, §§ 3.1–3.2.5.)

No service payment is sought.

The resulting net settlement of approximately $1,142,500 will be distributed pro rata by workweeks with no claim form, roughly $1,552 per Class Member.

Individual PAGA payments average roughly $72.

The Agreement provides that Apex Class Action Administration will administer the settlement at a capped $10,500 against a quoted $12,390, and its declaration adequately addresses competency, data security, insurance, and the absence of any relationship with the parties or counsel. (Agreement, ¶ 1.2; Declaration of Kimberly Sutherland, ¶¶ 2–7 and Ex. B.)

The Agreement further provides that funds from uncashed settlement checks will be tendered to the California State Controller Unclaimed Property Fund in the name of the Class Member. (Agreement, § 4.4.3.)

Code of Civil Procedure section 384 mandates that unclaimed or abandoned class members’ funds be given to “nonprofit organizations or foundations to support projects that will benefit the class or similarly situated persons, or that promote the law consistent with the objectives and purposes of the underlying cause of action, to child advocacy programs, or to nonprofit organizations providing civil legal services to the indigent.”

In this Court’s view, the Agreement’s Unclaimed Funds provision at paragraph 4.4.3 does not comply with Code of Civil Procedure section 384.

Therefore, the parties shall meet and confer to designate a cy pres beneficiary by written agreement and amend the Class Notice accordingly.

The statutes enumerated in the releases correspond in substance to the violations pleaded, including the sick pay and section 2810.5 allegations, and to that extent appear tailored to the operative pleading. (See Amaro v. Anaheim Arena Management, LLC (2021) 69 Cal.App.5th 521, 538.)

Nevertheless, three drafting problems require correction.

Sections 5.2, 5.3 and 8 are keyed to a “Class Release Period” and a “PAGA Release Period,” neither defined anywhere in the Agreement; the defined terms are “Class Period” and “PAGA Period.”

Section 5.3 then releases claims accruing “during the Class Release Period ... that accrued or occurred during the PAGA Release Period,” two clauses that cannot both be operative.

And both releases reach claims that “reasonably could have been alleged based on facts ascertained during the Action”; facts ascertained in discovery are not facts pleaded, and that phrase shall be deleted. (Amaro, supra, at p. 538.)

The PAGA release also extends more than two years past the April 2024 LWDA notices, without explanation.

B. Fairness of the Settlement

Class Counsel obtained policies, pay stubs, and payroll and time data before mediating with Brandon McKelvey, Esq., on August 20, 2025. (Gaines Decl., ¶¶ 15–17; Lindsay Decl., ¶¶ 5–6.)

The Gaines declaration values the claims at $1,212,051 (off-the-clock, on-call and rounding), $110,073 (overtime), $387,307 (regular rate), $10,469,239 (rest periods), a figure printed as “$5,706,45” (meal periods, net of premiums paid), and figures printed as “$1,910,59” for both wage statement and waiting time penalties, plus PAGA penalties totaling $8,702,000. (Gaines Decl., ¶¶ 21-27.)

Reading the truncated figures as $5,706,450 and $1,910,590, class claims total roughly $21.7 million and total exposure roughly $30.4 million.

The gross settlement is about 6.7 percent of that figure; the net settlement about 5.3 percent of the class claims; and the PAGA allocation about 1.8 percent of the claimed penalties.

The moving papers provide no aggregate exposure figure, no percentage, and no riskadjusted valuation appear anywhere; counsel state only that the analysis “reveals that the negotiated settlement falls within a realistic range of recovery.” (Gaines Decl., ¶ 17.)

That is the conclusion, not the reasoning.

The largest component is the $10,469,239 rest period claim (nearly half the class exposure) and rests on a “presumed 100% violation rate, estimated based on Plaintiffs’ experience,” though the same records yielded a measured 49.6 percent rate for meal periods. (Id. at ¶¶ 22-23.)

Nothing explains how the $160,000 PAGA figure was derived or why it vindicates the state’s interest. (Moniz, supra, 72 Cal.App.5th at pp. 76–77.)

The assertion that Defendants have “a limited ability to pay any judgment due to financial constraints” is unsupported. (Gaines Decl., ¶ 28.)

While none of the above observations necessarily mean settlement is unreasonable.

A recovery of five to seven percent of a maximum built on a presumed 100 percent violation rate may be entirely defensible once that maximum is discounted to a realistic figure.

But the Court cannot make that judgment on a record that supplies the numerator and leaves it to guess at the denominator.

Further, the Court cannot fairly assess the adequacy of the settlement without the opportunity to review the separate individual settlements with the Plaintiffs.

C. The Separate Individual Settlements with Plaintiffs

No service payment is sought.

Instead, Defendants agreed to pay each Plaintiff $20,000 ($40,000 total) “in exchange for a general release of all claims (with Civil Code section 1542 waivers),” under separate agreements negotiated at the same mediation that produced the class settlement. (Agreement, §§ 1.14, 3.2.1, 5.1; Gaines Decl., ¶ 16.)

Such an arrangement “creates a possible conflict of interest between the class representative and the absent class members,” and where the representative receives consideration outside the common fund the court must satisfy itself that his own recovery did not influence the bargain struck for the class. (Clark, supra, 175 Cal.App.4th at pp. 804–807; see Radcliffe v. Experian Information Solutions, Inc. (9th Cir. 2013) 715 F.3d 1157, 1164– 1165.)

Plaintiffs are entitled to settle individual termination claims.

The concern is that $40,000 (or roughly two percent of the entire gross settlement) was negotiated simultaneously with, and by the same counsel as, the class settlement, and structured so that it is paid outside the fund rather than scrutinized as a service award within it.

The record does not permit the Court to resolve that concern.

Neither Plaintiff’s declaration discloses the amount (Charles Decl., ¶ 9; Williams Decl., ¶ 12), a Class Member reading the proposed notice would learn nothing of these payments at all, and the Court cannot evaluate whether $20,000 each is commensurate with the individual claims released.

Section 1.14 compounds the confusion by stating that Plaintiffs “will remain entitled to receive their individual settlement payments from the Net Settlement Amount” — apparently meaning their pro rata Individual Class Payments but using the same phrase as the side payments.

D. Fees, Costs, and Administration Expenses

The one-third fee request is consistent with the benchmark California courts commonly apply in wage-and-hour class actions, and the Court is not inclined to disturb it at this stage.

The Court will scrutinize the percentage with a lodestar cross-check at final approval, and Class Counsel shall submit lodestar information (rates, timekeepers, hours) and itemized costs beforehand.

Because this matter resolved through informal discovery and a single mediation without a contested certification motion, counsel should be prepared to address the resulting multiplier.

Preliminary approval of these amounts is without prejudice to the determination at final approval.

E. Conditional Certification of Class

Plaintiffs request the class be conditionally certified for purposes of the settlement.

California Code of Civil Procedure section 382 authorizes certification of a class “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court ...”

Plaintiffs state that there are approximately 736 class members who can be identified from a review of Defendant’s records.

The Court finds that there are common questions regarding whether class members were subjected to unlawful conduct and that proposed class may be conditionally certified for settlement purposes.

F. Class Notice

California Rules of Court, rule 3.769, subdivision (f), requires that notice of the final approval hearing contain “an explanation of the proposed settlement and procedures for class members to follow in filing written objections to it and in arranging to appear at the settlement hearing.”

The proposed notice is well organized, written in plain language, and will be mailed in English and Spanish.

Nevertheless, the notice cannot be approved in its present form because it misstates the settlement in several respects:

1. Section 4.2 calculates Individual PAGA Payments by “dividing $50,737.50” by the PAGA pay periods; the Agreement allocates $40,000 (Agreement, § 3.2.5).

The figure appears to be a holdover from another settlement.

2. Section 3.1 lists a “Class Representative Service Payment” among the deductions, and Section 7 and the summary table refer to a “Service Award” request.

No such payment exists.

These references shall be replaced with an accurate description of the separate individual settlements.

3. Section 3.2.A describes the $676,500 as covering “attorneys’ fees and actual and reasonable litigation expenses,” though up to $40,000 in expenses is sought in addition.

The notice thus understates total deductions and shall state the two requests separately.

In addition, the following language regarding the final approval hearing shall be added to the notice:

Class members may appear at the final approval hearing in person or remotely using the link for Department 5, and should review the remote appearance instructions beforehand: https://santaclara.courts.ca.gov/online-services/remote-hearings

Class members who wish to appear remotely are encouraged to contact class counsel at least three days before the hearing, if possible, so that potential technology or audibility issues can be avoided or minimized.

A revised proposed notice shall be lodged with the Court.

III.

Conclusion

The Court CONTINUES the motion to November 5, 2026 at 1:30 p.m. in Department 5 and CONTINUES the Case Management Conference set for 2:30 p.m. on August 10, 2026 to the same November 5, 2026 at 2:30 p.m.

No later than 16 court days before the continued hearing, Plaintiffs shall file a supplemental brief, supported by declarations, addressing each of the following:

1. A complete valuation: aggregate maximum exposure, corrected figures, a supported rest period estimate, an accounting for the expense and sick pay claims, and a riskadjusted valuation identifying the discounts applied and the reasons for them, with the percentage of each that the settlement represents;

2. An independent justification for the $160,000 PAGA allocation;

3. Evidence of Defendants’ asserted limited ability to pay, or withdrawal of the assertion;

4. As to the individual settlements: lodging of both agreements for in camera review; declarations from each Plaintiff disclosing the amount, describing the claims released, and confirming no portion is consideration for supporting the class settlement; and a declaration from Class Counsel on the timing of those negotiations;

5. A justification for the differing workweek credit given direct hires and IQplaced workers, or a revised allocation formula, along with confirmation that Plaintiffs adequately represent both subgroups;

6. An amended agreement or stipulated addendum defining the release periods, correcting section 5.3, deleting the “facts ascertained during the Action” language, clarifying section 1.14, and addressing the scope of the PAGA release; and

7. A revised class notice, redlined and clean, correcting the deficiencies in Section II.F and disclosing the individual settlements.

Plaintiffs shall also lodge a revised proposed order and a fully executed agreement.

Nothing here should be read as a conclusion that the settlement is unfair; the difficulty is with the sufficiency of the record and with provisions that do not accurately describe what the parties have agreed to.

Plaintiff shall prepare the order.

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