JILL L. BURKHARDT, Magistrate Judge.
Before the Court is an unopposed joint motion titled "Second Revised Joint Motion to Dismiss Claims Under the Private Attorneys General Act of 2004 (`PAGA')," which was filed by the parties to this litigation, Plaintiff David Vargas and Defendant Central Freight Lines, Inc. ("CFL"). (ECF No. 41.)
Plaintiff initiated this case on February 26, 2016, in this district court. (ECF No. 1.) The operative complaint is titled "Second Amended Class Action Complaint" and alleges that Defendant employed Plaintiff and other pick-up and delivery drivers, but improperly failed to make statutory meal periods or rest breaks available or failed to pay an hour's pay in lieu thereof, failed to provide accurate, itemized wage statements, and as a result, improperly failed to pay all wages due consistent with California law. (See ECF No. 22.) Further, Plaintiff alleges that Defendants' written meal period policy is facially invalid as it marks only shifts of eight hours or more as eligible for meal periods. (Id.) Plaintiff's Sixth Cause of Action is for civil penalties pursuant to the Private Attorney General Act, California Labor Code § 2699, et seq. ("PAGA") on behalf of himself and the putative class of pick-up and delivery drivers. (Id.)
Although Plaintiff was pursuing this case as a class action when he filed the Second Amended Class Action Complaint, he did not file a motion for class certification by February 17, 2017, the deadline to do so. (See ECF No. 30.)
On May 22, 2017, the parties filed a motion titled "Revised Joint Motion to Dismiss Claims Under the Private Attorneys General Act of 2004." (ECF No. 33.) On June 12, 2017, the then-assigned district judge denied that motion, concluding that the release provisions in the settlement agreement contained ambiguities regarding the scope of the released claims. (ECF No. 35 at 2-3.) The judge explained that, "[t]he release provisions of the Agreement do not necessarily support the parties' representation that, based on the dismissal without prejudice, the putative class members would remain free to assert their individual claims under California Labor Code." (Id.) The district judge also denied the motion on the alternative ground that "it does not comply with this Court's Standing Orders for Civil Cases relating to Settlement and Dismissal." (ECF No. 35 at 4.)
On July 23, 2017, the parties filed a motion titled "Second Revised Joint Motion to Dismiss Claims Under the Private Attorneys General Act of 2004." (ECF No. 41.) In support of the Second Revised Joint Motion to Dismiss, the parties contend that they have remedied all deficiencies identified in prior court orders denying prior motions to dismiss the claims brought in this case by Judge M. James Lorenz. (Id.) On July 27, 2017, the parties consented to have a United States magistrate judge conduct all proceedings in this case, and this case was reassigned to Magistrate Judge Jill L. Burkhardt in accordance with 28 U.S.C. § 636(c) and Federal Rule of Civil Procedure 73. (ECF No. 42.) The Second Revised Joint Motion to Dismiss is presently before the Court.
The California Labor & Workforce Development Agency ("LWDA") "is assigned responsibility under California law for bringing actions to enforce the state's labor laws." Porter v. Nabors Drilling USA, L.P., 854 F.3d 1057, 1060 (9th Cir. 2017). "In response to a concern that labor law enforcement agencies like LWDA `were unlikely to keep pace with the future growth of the labor market,' the California legislature passed the Private Attorneys General Act of 2004 (`PAGA'), codified in sections 2698, et seq. of the Labor Code." Id. (quoting Arias v. Superior Court, 46 Cal.4th 969, 980 (2009)). PAGA "authorizes an employee to bring an action for civil penalties on behalf of the state against his or her employer for Labor Code violations committed against the employee and fellow employees, with most of the proceeds of that litigation going to the state." Iskanian v. CLS Trans. Los Angeles, LLC, 59 Cal.4th 348, 360 (2014); see also Cal. Lab. Code § 2699(a).
However, to be eligible to file a claim under PAGA, an aggrieved employee must first exhaust the administrative procedures set forth in the California Labor Code, which includes submitting the allegations of Labor Code violations to both LWDA and the employer. Cal. Lab. Code § 2699.3(a)(1)(A). Thereafter, and if LWDA declines to intervene within a certain period, the aggrieved employee is eligible to "commence a civil action pursuant to Section 2699." Id. § 2699.3(a)(2)(A). Aggrieved employees who commence civil actions under PAGA do so "as the proxy or agent of the state's labor law enforcement agencies." Arias, 46 Cal. 4th at 986. Because the "plaintiff represents the same legal right and interest as state labor law enforcement agencies, . . . a judgment in an employee's action under [PAGA] binds not only that employee but also the state labor law enforcement agencies." Id. As a result, the judgment "binds all those, including nonparty aggrieved employees, who would be bound by a judgment in an action brought by the government." Id. But, "the nonparty employees, because they were not given notice of the action or afforded an opportunity to be heard, are not bound by the judgment as to remedies other than civil penalties" under PAGA. Baumann v. Chase Inv. Servs. Corp., 747 F.3d 1117, 1123 (9th Cir. 2014).
"PAGA actions . . . primarily seek to vindicate the public interest in enforcement of California's labor law." Id. Both the California Supreme Court and the Ninth Circuit have concluded that "[a] PAGA representative action is . . . a type of qui tam action." Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348, 382 (2014); see Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 429 (9th Cir. 2015); Porter, 854 F.3d at 1061. "A qui tam action for citizen enforcement traditionally has three elements: "(1) that the statute exacts a penalty; (2) that part of the penalty be paid to the informer; and (3) that, in some way, the informer be authorized to bring suit to recover the penalty." Porter, 854 F.3d at 1061 (citations omitted).
Under PAGA, if the employer employs one or more employees, as is the case here, the civil penalty is $100 for each aggrieved employee per pay period for the "initial violation" and $200 for each aggrieved employee per pay period for each "subsequent violation." Cal. Lab. Code § 2699(f)(2). Seventy-five percent of the civil penalties are distributed to LWDA, and the remainder is distributed to the aggrieved employee(s) who initiated the claim. Id. § 2699(i). "The employee's recovery is thus an incentive to perform a service to the state,
When PAGA claims are settled, the trial court must "review and approve" the settlement.
With respect to putative class actions, in 1989, the Ninth Circuit held class notice may be required under Federal Rule of Civil Procedure 23(e) prior to voluntary dismissal of putative class claims even in cases where no class has been certified. Diaz v. Trust Territory of Pac. Islands, 876 F.2d 1401, 1408-11 (9th Cir. 1989). Diaz held that in deciding whether the putative class should receive notice of voluntary dismissal of putative class claims, courts:
Diaz, 876 F.2d at 1408.
Subsequent to Diaz, in 2003, Rule 23(e) was specifically amended to make clear that court approval was not required of "settlements with putative class representatives that resolved only individual claims." See Fed. R. Civ. P. 23 advisory committee's note to 2003 amendment. As a result, there remains "some uncertainty" about whether the Diaz holding applies in the wake of the 2003 amendments to Rule 23(e). See, e.g., Gonzalez v. Fallanghina, LLC, No. 16cv1832, 2017 WL 1374582, at *4 (N.D. Cal. Apr. 17, 2017) (citing Lyons v. Bank of Am., NA, No. 11cv1232, 2012 WL 5940846, at *1 & n.1 (N.D. Cal. Nov. 27, 2012)). District courts in the Ninth Circuit "continue to follow Diaz to evaluate a proposed settlement and dismissal of putative class claims." Id.; Dunn v. Teachers Ins. & Annuity Ass'n of Am., No. 13-CV-05456-HSG, 2016 WL 153266, at *3 (N.D. Cal. Jan. 13, 2016) (explaining this approach "strikes the right balance between the full-bore fairness review for settlement of certified class claims, and doing nothing at all to ensure that putative class members are protected").
First, the parties request an order dismissing with prejudice Plaintiff's individual claims for Causes of Action One through Five of the operative complaint. (ECF Nos. 33 at 5; 33-2 at 2; 41 at 4.) In support, the parties represent that they settled Plaintiff's individual claims for a total of $5,000 in exchange for a general release of all claims. (ECF No. 33 at 3.) Accordingly, the Court GRANTS the parties' motion insofar as it requests that Plaintiff's individual claims for Causes of Action One through Five be dismissed with prejudice.
Second, the parties request that the putative class allegations for Causes of Action One through Five be dismissed without prejudice. (ECF Nos. 33 at 5; 33-2 at 2; 41 at 4.) The parties agree that the dismissal of the putative class claims should be without prejudice and argue that the Court must review and approve their agreement under Federal Rule of Civil Procedure 23(e). (ECF No. 33 at 3-4.) The parties cite Diaz v. Trust Territory of Pac. Islands, 876 F.2d 1401, 1408 (9th Cir. 1989) in support of this argument. (Id.)
Federal Rule of Civil Procedure 23(e) states "[t]he claims, issues or defenses of a
Nevertheless, because district courts remain uncertain about whether the Diaz holding still applies in the wake of the 2003 amendments to Rule 23(e), district courts "continue to follow Diaz to evaluate the proposed settlement and dismissal of putative class claims." Dunn, 2016 WL 153266, at *3. Thus, applying Diaz, this Court will conduct the following inquiry:
Diaz, 876 F.2d at 1408.
In the present case, the Court concludes that the parties have satisfied the Diaz factors. Plaintiff is seeking to dismiss his class claims without prejudice, and thus, has not compromised the putative class's interests. In addition, the putative class members are unlikely to suffer any prejudice due to reliance on this class action. Plaintiff's counsel declares that there has been no publicity on this case. (ECF Nos. 33 at 2, 4; 33-1 at 3.) Further, Plaintiff's counsel represents that he has not been contacted by any putative class member about this case. (ECF No. 33 at 2.) Plaintiff's intent to dismiss his class claims without prejudice became publicly available information on March 13, 2017, with the filing of the first joint motion seeking to dismiss these claims. (ECF No. 31.) Thus, to the extent putative class members have been relying on this case to litigate their claims, they have had over six months to file either a motion to intervene or their own complaint against Defendant since March, 2017. (ECF Nos. 1; 31.)
Moreover, Plaintiff's Labor Code and Unfair Competition Law claims appear to be subject to three or four-year statutes of limitation, respectively.
Finally, the settlement in this case was the product of a full-day mediation before a retired judge. The Court is persuaded that the requested voluntary dismissal of the putative class action claims is not collusive.
Based on the foregoing, the Court concludes the risk of prejudice is too small to require class notice of the pre-certification voluntary dismissal.
Therefore, the Court GRANTS the parties' request for voluntary dismissal of Plaintiff's putative class action claims. The putative class allegations for Causes of Action One through Five of the operative complaint are dismissed without prejudice.
Third, the parties request that Plaintiff's Sixth Cause of Action for PAGA penalties be dismissed with prejudice and that the Court approve the Settlement Agreement, which is between Plaintiff, individually and in his capacity as a representative of the State of California on behalf of other aggrieved employees, and Defendant CFL. The Settlement Agreement
Because the settlement in this case serves to release Defendant CFL from PAGA claims, this Court must "review and approve" the settlement. Cal. Lab. Code § 2699(1). This Court's approval of the settlement turns on whether Plaintiff has presented law and facts specific to this case sufficient to persuade this Court that the PAGA settlement is fair and adequate based on a determination that it augments the state's enforcement capabilities, encourages compliance with Labor Code provisions, and deters noncompliance with California's labor law. See Baumann, 747 F.3d at 1123; O'Connor, 201 F. Supp. 3d at 1132-33. Importantly, Federal Rule of Civil Procedure 23(e) does not inform this analysis because there is no class action settlement before the Court. Flores, No. 14cv01093, 2017 WL 2224265, at *1 (C.D. Cal. May 19, 2017) ("the `fair, adequate, and reasonable' standard of Federal Rule of Civil Procedure 23(e) isn't particularly apt where, as here, there's no class action settlement in the mix").
Plaintiff has demonstrated that the PAGA settlement in this case augments the state's enforcement capabilities. On February 23, 2016, Plaintiff provided written notice of the PAGA claims he sought to pursue on behalf of the State in this action to LWDA. (ECF Nos. 5 at 22; 5-1; 22 at 20; 22-1; 31 at 8; 31-1 at 7; 41-1 at 4-5; 41-3 at 4-5.) LWDA never notified Plaintiff that it intended to investigate the PAGA claims. (See ECF No. 41-1 at 5.) Accordingly, on April 5, 2016, and again on September 28, 2016, Plaintiff filed amended complaints that included a cause of action for statutory penalties under PAGA. (ECF No. 5.)
In February of 2017, the parties signed a settlement agreement with respect to the PAGA claims. And on March 13, 2017, the parties mailed a copy of the then-operative settlement agreement to LWDA. (ECF Nos. 31 at 2, 16; 33 at 3.) Then, pursuant to court order, the parties revised the settlement agreement and submitted the revised settlement agreement to LWDA via its online submission system on July 20, 2017. (ECF No. 41-2 at 2.) This is the Settlement Agreement presently before the Court. There is nothing in the record to date to suggest that LWDA intends to investigate or otherwise intervene in the settlement of the PAGA claims in this lawsuit. Given LWDA has done nothing to pursue the PAGA claims at issue despite having notice and 19 months to do so, the Court is persuaded that the PAGA settlement in this case augments the state's enforcement capabilities.
The Court is in the dark, however, as to whether the PAGA settlement in this case is fair and adequate in terms of encouraging compliance with Labor Code provisions and deterring employer practices that violate the rights of numerous employees under the Labor Code. Perhaps owing in part to the fact that there is no controlling standard of law on assessing whether PAGA settlements should be approved as fair and adequate, the parties essentially ask the Court to take their word for it that the settlement is fair and adequate. For example, Plaintiff's counsel declares the following:
(ECF No. 33-1 at 2.)
That the parties reached a settlement only after the exchange of discovery, extensive settlement negotiations, and a full-day mediation presided over by a neutral party is persuasive evidence that the settlement is not the product of fraud or collusion. (Id.; see also ECF No. 33 at 2, 5.) It is not, however, persuasive evidence that the settlement vindicates the public interest in enforcement of California's labor law.
The parties argue that only a "handful" of PAGA claims are at issue, but this representation does not aid the Court in its analysis. (ECF No. 33 at 2, 5.) The parties do not quantify the number of aggrieved employees, the number of violations, or the number of pay periods at issue in this case. (See id.) Under PAGA, the civil penalty is $100 for each aggrieved employee per pay period for the "initial violation" and $200 for each aggrieved employee per pay period for each "subsequent violation." Cal. Lab. Code § 2699(f)(2). In the operative complaint, Plaintiff alleges that over $5,000,000 is at issue in this case and that there are "hundreds" of aggrieved employees in California who are or have been affected by Defendants' Labor Code violations.
The parties also argue that the Court should approve their PAGA settlement as fair and reasonable because "district courts routinely approve similar settlements of PAGA claims." (ECF No. 33 at 2, 5.)
Having reviewed the record for this case and existing case law, the Court is not able to conclude, with the information before it, that the parties' settlement, with respect to Plaintiff's PAGA claims only, is fair and adequate in view of the purposes and policies of PAGA. Thus, the Court DENIES the motion insofar as it requests Plaintiff's Sixth Cause of Action for PAGA penalties be dismissed with prejudice and that the Settlement Agreement be approved.
For the reasons stated above, IT IS ORDERED THAT:
1. The parties' motion titled "Second Revised Joint Motion to Dismiss Claims Under the Private Attorneys General Act of 2004" (ECF No. 41) is GRANTED IN PART AND DENIED IN PART;
2. Plaintiff's individual claims for Causes of Action One through Five are DISMISSED WITH PREJUDICE;
4. The putative class allegations for Causes of Action One through Five are DISMISSED WITHOUT PREJUDICE;
5. Plaintiff's Sixth Cause of Action for PAGA penalties remains as the Court declines to approve the Settlement Agreement; and
6. Any renewed motion for approval of the Settlement Agreement must be filed no later than