SHEA HUGHES et al. v. TVI, INC. et al.

Case No. CU23-05591

Motion for Preliminary Approval of PAGA & Class Action Settlement

Plaintiffs SHEA HUGHES and JOSE VILLANUEVA move for preliminary approval of the settlement reached with Defendants TVI, INC., SAVERS RECYCLING, INC., and

SAVERS VALUE VILLAGE, INC. in Plaintiffs’ class action and Private Attorneys General Act (“PAGA”) suit against Defendants for labor law violations.

Preliminary Review of Class Action Settlement. Settlements of class actions are governed by California Rule of Court rule 3.769. Subsection (c) requires a preliminary approval by the court of the settlement after the settlement agreement and proposed class notice have been filed with the court and a proposed order has been lodged with the court. The settlement agreement and proposed class notice were filed with this motion. (Declaration of Raul Perez in Support of Motion (“Perez Dec.”) at ¶ 5, Exhibit 1.) There is a proposed order granting preliminary approval formally and separately lodged in the case file.

Here, the settlement occurred subsequent to mediation with a neutral mediator. (Perez Dec. at ¶ 4.) The involvement of a neutral mediator is a factor to be given considerable weight in maintaining the presumption that the settlement is the product of arms’-length negotiation. (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 129.) Nothing in the terms of settlement suggests preferential treatment or conflicts of interest among the proposed class members. The class members appear to be fairly treated according to their alleged harms.

The court requests that counsel appear prepared to discuss the reasonableness of the Total Settlement Amount of $1,200,000 as compared to estimates of Defendants’ potential liability. Counsel declares that between the damages for the claims and the penalties for statutory violations Defendants’ reasonable exposure could have been approximately $5.3 million. (Motion for Preliminary Approval at 19:6-12.) Further information on the evidence obtained and reviewed and the appropriateness of the discounts applied to calculate Plaintiffs’ likely recovery at trial in light of that evidence is requested.

Notice to Class Members; Certification. Certification is a procedure by which the court determines whether the plaintiff is a proper class representative and the action can proceed to trial as a class action. To obtain class certification, the proposed class representative(s) must show (1) an ascertainable class of sufficient size as to justify class action treatment (“numerosity”) and (2) a well-defined community of interest in questions of fact and law. (Vasquez v. Superior Court (1971) 4 Cal.3d 800, 809.) The factors the court considers in determining the community of interest element are (1) the predominance of common issues, (2) the typicality of the claims of the proposed class members, and (3) the ability of the proposed class representative to adequately represent the class. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.)

Plaintiffs have preliminarily established the requirements for class certification. The class is numerous at approximately 3,400 persons. The class is also readily ascertainable as its members are all in Defendants’ employment records. As for the community of interest requirement, all proposed class members were subject to Defendants’ same employment policies and practices, ensuring that common issues predominate among their claims and that the named plaintiff’s claims are typical of the

class. There is also no sign of any antagonism between the named plaintiff and the rest of the class. Lastly, Plaintiffs’ counsel appears up to the task of representing the class in light of their recitation of their experience with class actions and wage and hour cases in particular. (Perez Dec. at ¶¶ 16, 18-20, Exhibit 3.)

The proposed class notice provides extensive information to the recipients about the litigation status, what their options are, and how to exercise their preferred option. (Perez Dec. at ¶ 5, Exhibit 1 [Exhibit A to settlement agreement].) The notice explains that the recipient is receiving the notice because records indicate employment with Defendants in the class period. The notice states an estimated recovery and number of workweeks for the recipient, with information on how to submit more accurate information for payment. The notice tells the recipient that they will receive a payment with no action needed on their part but they may also exclude themselves from or object to the settlement, with explanations of what exclusion and objection mean. The notice is properly informative.

Deductions. The court observes that the issue of deductions is typically left to be explored in detail at the final approval stage; accordingly, Plaintiffs’ counsel makes minimal detailed argument in favor of particular deductions at this time. The court nonetheless conducts some analysis of the proposed deductions as part of preliminary evaluation of the reasonableness of the settlement.

Attorneys’ fees in class action cases are typically based upon a percentage of the gross settlement amount, under the “common fund” doctrine, which spreads the cost of the attorney among all of the parties benefited (the class). The California Supreme Court explained the advantages and disadvantages of both the common fund method and the lodestar-multiplier method (hours worked by hourly rate, multiplied by a factor to account for risk and high quality of work) before endorsing the common fund method cross-checked by the lodestar-multiplier method in Laffitte v.

Robert Half International, Inc. (2016) 1 Cal.5th 480, 489-490 (Laffitte). The court observes, again understanding that counsel has not yet advanced a detailed argument concerning the lodestar amount for this case, that this case resolved with much less work involved than Laffitte, which took eight and a half years and saw extensive written discovery, extensive law and motion practice, sixty-eight depositions, three summary judgment motions, a class certification motion, a motion for reconsideration of class certification, a motion to decertify the class, numerous experts, and two full-day mediations.

In that context an award of one third of nineteen million dollars as attorneys’ fees was not an abuse of discretion.

This case resolved without formal motion practice or discovery. (Perez Dec. at ¶¶ 6-10 [informally produced records reviewed but discovery processes such as deposition not performed].) Rather than an attorneys’ fees award of one third of the Total Settlement Amount, an attorneys’ fees award of 20% of the Total Settlement Amount (thus, a fee award of $240,000) is more appropriate given the evidence before the court.

The court finds that review of counsel’s claim of up to $20,000 in costs is better conducted at final approval with the aid of a detailed memorandum of costs.

The claim of up to $20,000 for settlement administration costs is notably higher than the figures quoted in other recent PAGA and class action settlements before the court. However, further review is likewise better conducted at final approval; the parties are notified that further and detailed information on settlement administration will be required.

The “service award” of $10,000 apiece for Plaintiffs’ personal efforts is not reasonable. At least one federal court has approved “reasonable incentive payments,” tied to the amount of time and effort spent pursuing the litigation, and the degree to which the class benefited. (Staton v. Boeing (2003) 327 F.3d 938, 977.) A secondary source for California class action law provided a copy of a 2001 San Francisco Court order approving a settlement containing “incentive awards” of $2,500 to certain class representatives who participated in discovery. (Cabraser, California Class Actions Practice and Procedure (2nd ed., September 2017 updated), Exhibit 15.)

Plaintiffs here provide evidence that they assisted the litigation largely only by communicating with their attorneys. (See, e.g., Declaration of Shea Hughes in Support of Motion at ¶ 7.) A service award of $2,500 apiece for Plaintiffs’ personal efforts appears appropriate on the evidence before the court.

Escalator Clause. The settlement agreement states that class members worked an estimated 174,554 compensable workweeks among them in the class period (July 28, 2021 to April 30, 2025). (Perez Dec. at ¶ 5, Exhibit 1 [settlement agreement paragraph 51].) The agreement contains an escalator clause stating that if it turns out that there are more than 10% more compensable workweeks in the class period than estimated Defendants can elect to either increase the total settlement amount (by 1% for each 1% of increased workweek total past 10%; i.e., if the total workweeks are 12% larger than estimated, the total settlement amount will increase by 2%) or elect to cut off the class claims period at the last point that the compensable period total did not exceed 110% of the estimate.

The escalator clause’s provision permitting Defendants to elect to cut the class period short is not fair or reasonable. The election provision gives Defendants control over the definition and size of the class Plaintiffs purport to represent. It is not fair or reasonable to permit Defendants to choose to curtail the class if it does not align with the original estimate. Further, the escalator clause provision permitting an increase of up to 10% in identified compensable workweeks with no matching increase in compensation to the class is not fair or reasonable. There is no stated basis for permitting Defendants to ignore a certain number of labor law violation claims or to effectively diminish compensation to the entire class via the escalator clause as written.

Conclusion. Plaintiffs’ motion is denied without prejudice to refile once appropriate modifications are made consistent with this ruling.