MEMORANDUM RE: JOINT MOTION FOR APPROVAL OF SETTLEMENT AND ENTRY OF STIPULATED

WILLIAM B. SHUBB, District Judge.

Plaintiffs Jesus Rodriguez and Rigoberto Loa brought this action against defendants RCO Reforesting, Inc. ("RCO") and Roberto Ochoa, asserting various wage and hour and employment law claims under federal and state law. (Second Am. Compl. ("SAC") (Docket No. 39).) Before the court is the parties' Joint Motion for Approval of Settlement and Entry of Stipulated Judgment. (Docket No. 86.)

I. Factual and Procedural Background

Defendants employed plaintiffs as temporary forestry workers pursuant to the H-2B visa program. (SAC ¶ 1.) Plaintiffs allege that defendants had a policy of not paying plaintiffs for overtime work and not reimbursing plaintiffs for their travel and visa costs, which reduced their pay to below minimum wage. (Id. ¶¶ 1, 23-26, 60.) Plaintiffs further allege that defendants failed to provide plaintiffs with legally mandated meal and rest periods, itemized wage statements, and reimbursements for necessary protective gear. (Id. ¶¶ 1, 16, 27, 29, 73-76, 141.) These practices allegedly violate the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 216 et seq., the Migrant and Seasonal Agricultural Worker Protection Act ("AWPA"), 29 U.S.C. § 1801 et seq., and various provisions of California law.

Plaintiff filed their original complaint on October 22, 2016. (Compl. (Docket No. 1).) After the court granted Rodriguez's motion to amend his complaint to add Loa (Docket No. 22), plaintiffs filed their first amended complaint on April 17, 2017. (First Am. Compl. (Docket No. 24).) Shortly thereafter, plaintiff filed a motion to conditionally certify a FLSA collective action and provide notice to potential opt-in plaintiffs. (Docket No. 33.) After the court denied plaintiffs' initial motion without prejudice (Docket No. 31), plaintiffs filed another motion to certify a FLSA collective action (Docket No. 33) and the court granted that subsequent motion (Docket No. 42). The court ordered defendants to produce the contact information of all potential class members, approved an opt-in period of six months, and authorized notice to all prospective class members.1 (Docket No. 45.) By this time, plaintiffs, pursuant to a joint stipulation, filed their second amended complaint, adding a cause of action under the Private Attorneys General Act ("PAGA") of 2004, California Labor Code § 2698, et seq. Since then, both parties engaged in discovery and agreed to mediate their dispute before a magistrate judge of this court. The parties took part in six different settlement conferences, ultimately reaching a settlement on November 13, 2018. (Docket Nos. 84 & 85.)

The settlement agreement provides that judgment shall be entered in favor of plaintiffs and against defendants in the amount of $500,000. ([Proposed] Stipulated J. and Order ("Agreement"), Statement by the Parties ¶ J (Docket No. 91).) The judgment would be allocated in the following manner: $24,553.25 payable to plaintiff Rodriguez to settle his individual claims; $84,816.50 payable to plaintiff Loa to settle his individual claims; $313,943.27 representing underpaid wages payable to absent aggrieved employees; $36,056.73 representing penalties pursuant to the PAGA, $27,042.40 of which payable to the California Labor Workforce Development Agency ("LWDA") and $9,014.33 of which payable to the absent aggrieved employees; and $40,630.25 representing attorneys' fees and costs payable to plaintiffs' counsel. (Id.) Defendants would pay $20,000 within 180 days after approval of the settlement and $500 per month commencing no later than ten days after approval of the settlement. (Id. ¶ K.) If defendants fail to make three or more payments or have significant improvement in their financial situation, the monetary amount of the judgment increases at most to $1,000,000. (See id.) As part of the settlement, the parties propose a distribution plan whereby plaintiffs' counsel would provide notice and distribute payments to the absent aggrieved employees, including those located in Mexico. (Agreement, Judgment and Order Section B ¶ 4; Distribution Plan (Docket No. 91-1).)

The proposed stipulated judgment also includes injunctive relief. Defendants and their agents would be permanently enjoined and restrained from violating the FLSA, the AWPA, and any applicable California labor law or regulation. (Agreement, Judgment and Order Section A.) Defendants would be required to pay their employees for all compensable time worked, comply with relevant overtime pay requirements, cover the cost of business expenses, provide employees with meal and rest breaks, maintain appropriate records of their employees' wages, pay for their employees' visa expenses and travel costs, provide adequate water and sanitation, and agree not to request or demand any person pay back money due under the judgment. (Agreement, Judgment and Order Section A ¶¶ 1-8.) The injunctive relief would cover all H-2B workers employed by defendants for the performance of forestry and reforesting services.

II. Discussion

A. FLSA Settlement

"Although the Ninth Circuit has not established a standard for district courts to follow when evaluating an FLSA settlement, California district courts frequently apply the standard established by the Eleventh Circuit in Lynn's Food Stores, Inc. v. U.S. By and Through U.S. Dep't of Labor, 679 F.2d 1350, 1352 (11th Cir. 1982)." Thompson v. Costco Wholesale Corp., No. 14-cv-2778 CAB WVG, 2017 WL 697895, at *6 (S.D. Cal. Feb. 22, 2017). Under this standard, plaintiffs may settle and release their claims against their employer or putative employer if the parties obtain court approval of the proposed settlement and if the settlement constitutes "a fair and reasonable resolution of a bona fide dispute over FLSA provisions." 29 U.S.C. § 216(b); Lynn's Food Stores, 679 F.2d at 1355. Court approval is necessary to ensure an employee does not waive statutory rights due to an employer overreaching in a non-adversarial context. Lynn's Food Stores, 679 F.2d at 1354.

"A bona fide dispute exists when there are legitimate questions about the existence and extent of Defendant's FLSA liability." Seguin v. County of Tulare, No. 16-cv-1262 DAD SAB, 2018 WL 1919823, at *2 (E.D. Cal. Apr. 24, 2018). Here, although the parties have reached a settlement, significant disagreement remains. For instance, the parties dispute whether defendants' employees regularly worked more than 40 hours per week, resulting in minimum wage and overtime violations. (See Mem. in Supp. of Joint Mot. for Approval of Settlement and Entry of Stipulated J. at 7 (Docket No. 86-2).) Even though defendants do not deny liability under the FLSA outright, disagreements regarding the scope of liability are sufficient to create a bona fide dispute. See Seguin, 2018 WL 1919823, at *2-3 (finding the same).

This court uses a "totality of circumstances approach that emphasizes the context of the case and the unique importance of the substantive labor rights involved" to determine whether a settlement under the FLSA is fair and reasonable. See Guinn v. Sugar Transp. of the Nw., Inc., No. 2:16-CV-00325 WBS EFB, 2018 WL 5793432, at *2 (E.D. Cal. Nov. 2, 2018) (quoting Selk v. Pioneers Mem'l Healthcare Dist., 159 F.Supp.3d 1164, 1173 (S.D. Cal. 2016)). A settlement that reflects "a fair and reasonable compromise of issues that are actually in dispute may be approved to promote the efficiency of encouraging settlement of litigation." Wagner v. Cty. of Inyo, No. 1:17-CV-00969 DAD JLT, 2018 WL 3203116, at *3 (E.D. Cal. June 28, 2018) (citations omitted). The court finds that this settlement is fair and reasonable for multiple reasons.

First, the settlement reflects an actual compromise. Even though the total settlement amount is greater than the total possibly recovery under the FLSA, the settlement also resolves plaintiffs' claims under California law. Moreover, the settlement significantly extends the payout period to accommodate defendants' financial condition. (See Rice Settlement Decl. ¶ 11.) Plaintiffs might not be able to recover otherwise because defendants have indicated an intention to file for bankruptcy absent these specific payment terms. (Id.) The court also gives considerable weight to plaintiffs' counsel's conclusion that "this settlement is reasonable and represents the best chance we have of recovering money" (id.) given her involvement with the litigation and extensive experience with similar cases. See Guinn, 2018 WL 5793432, at *2 (giving counsel the same deference). Finally, the settlement helps plaintiffs avoid the uncertainty of recovery at trial, further indicating that it is a legitimate compromise. See Selk, 159 F. Supp. 3d at 1175.

Second, parties entered into this agreement after conducting discovery and adequately investigating the claims. (See Decl. of Benjamin R. Botts ("Botts Decl.") ¶ 3 (Docket No. 86-11).) Plaintiffs' counsel maintains that they took three depositions and were preparing to file a motion for partial summary judgment. (See Mem. in Supp. of Joint Mot. for Approval of Settlement and Entry of Stipulated J. at 8.) Settlements that take place after counsel is given the opportunity to review documents, investigate, and estimate the value of the claims are typically considered fair and reasonable. See Ontiveros v. Zamora, 303 F.R.D. 356, 371 (E.D. Cal. 2014) (Shubb, J.).

Third, and finally, the parties reached the settlement through arm's length negotiations, facilitated by an impartial mediator. There is a low probability of fraud or collusion because a magistrate judge of this court oversaw six different settlement conferences between the parties. See Beidleman v. City of Modesto, No. 1:16-CV-01100 DAD SKO, 2018 WL 1305713, at *5 (E.D. Cal. Mar. 13, 2018) (reaching a similar conclusion). These conferences also indicate that the parties carefully investigated their claims by considering a neutral opinion in evaluating the strength of their arguments. See Ontiveros, 303 F.R.D. at 371.

Given these findings, the court concludes that the settlement reached is a fair and reasonable resolution of bona fide disputes. Accordingly, the court approves of the parties' settlement of plaintiffs' FLSA claims.

B. 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., 803 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. Id. Any agreement to waive PAGA claims is an agreement to limit the penalties plaintiff-employees may recover on behalf of the state.2 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. Cal. Lab. Code § 2699(l)(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. Consistent with this court's order on December 21, 2018 (Docket No. 87), the parties transmitted a copy of their Joint Motion for Approval of Settlement and Entry of Stipulated Judgment to the LWDA (Decl. of Cynthia L. Rice ¶ 2 (Docket No. 89)).3 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." 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. Sakkab, 803 F.3d at 435.

Other than the provisions previously discussed, "[the] PAGA does not establish a standard for evaluating PAGA settlements." See 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 Corporation, 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." 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. 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, 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," 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. Throughout the negotiations and in the resulting settlement, the parties took into consideration defendants' weak financial condition and ensured that the payment terms were structured so that defendants would not have to file for bankruptcy. Plaintiffs' counsel, who has reviewed defendants' financial records, reveals that defendants owe several hundred thousand dollars in federal and state taxes and penalties, defendants' real property is subject to tax liens, and private parties have obtained judgments against defendants of more than $500,000. (See Rice Settlement Decl. ¶ 11.) To accommodate these circumstances, the parties have substantially delayed full payment. (See id.) Where plaintiffs have undertaken such steps to account for defendants' financial situation and avoid the further expense of litigation, the court concludes that a settlement would not be unjust, arbitrary and oppressive, or confiscatory. See Ramirez, 2017 WL 3670794, at *4 (reaching a similar conclusion).

Second, "the strength of plaintiff's case" factor also favors approval of the settlement. Because the parties reached a settlement prior to an order on the merits, this court has not yet evaluated the merits of the settling plaintiffs' case. Now the court believes that plaintiffs have colorable claims on the merits. While defendants dispute the scope of their liability, they admit that they did not compensate many of its workers for transportation time in violation of California law. (See Rice Settlement Decl. ¶ 7.) Further, plaintiffs' counsel has undertaken significant efforts to investigate plaintiffs' claims and estimate the total liability for defendants' PAGA violations. (See id. ¶ 9.)

Third, "the risk, expense, complexity, and likely duration of further litigation" factor strongly favors approval of the settlement. The parties reached this settlement early in the litigation. Further litigation would necessitate further expenses and costs for both parties. Given defendants' weak financial condition, continuing litigation would reduce the amount available for settlement and jeopardize defendants' ability to satisfy final judgment. Where a settlement "provides timely, certain, and meaningful recovery" and ensures that there are resources available for monetary recovery and injunctive relief, it ought to be favored. Ramirez, 2017 WL 3670794, at *5.

Fourth, the settlement allocates $350,000 of the gross amount as the PAGA allocation. Of the $350,000, $313,943.17 is directed payable to other aggrieved employees for underpaid wages.4 See Cal. Lab. Code § 558(a)(3) (requiring that wages recovered for an underpaid employee be paid to that employee); see also Cal. Lab. Code § 1197.1(a)(3) (requiring that wages recovered for an employee paid less than the minimum wage be paid to that employee). The other $36,056.73 will be collected as civil penalties with 75% payable to the LWDA and 25% payable to the aggrieved employees. See Cal. Lab. Code § 2699(i) ("[C]ivil penalties recovered by aggrieved employees shall be distributed as follows: 75 percent to the Labor and Workforce Development Agency . . . and 25 percent to the aggrieved employees."). Plaintiffs' counsel estimates the total potential liability for underpaid wages and civil penalties at $5.6 million. (See Rice Settlement Decl. ¶ 9.) Even though the settlement requires defendants to pay only little more than 6% of the estimated value of plaintiffs' PAGA claims, this amount is still significant and represents plaintiffs' best chance at any recovery. Further, the addition of injunctive relief ensures that defendants comply with relevant law going forward. Accordingly, "the amount offered in settlement" factor favors approval.5

Fifth, regarding the extent of discovery completed and the stage of the proceedings, this lawsuit settled relatively early in the process. As mentioned previously, however, plaintiffs' counsel conducted an extensive review of the evidence, took three depositions, and was preparing to file a motion for summary judgment. (See Mem. in Supp. of Joint Mot. for Approval of Settlement and Entry of Stipulated J. at 8.) Both sides also took part in extensive settlement discussions before a magistrate judge, thereby developing a good sense of the risks and benefits of continuing litigation. See Ontiveros, 303 F.R.D. at 371. Accordingly, this factor also weighs in favor of approval.

Sixth, with respect to the experience and views of counsel, plaintiffs' counsel has significant experience with PAGA actions. Specifically, Ms. Rice maintains that she has "over 30 years of experience as a labor and employment rights litigator" and "regularly provide[s] training on the use of PAGA to obtain workforce wide relief." (See Rice Settlement Decl. ¶ 14.) Thus, counsel's conclusion that this settlement is plaintiffs' best chance at recovery is given considerable weight. 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 provides for significant injunctive relief. The injunctive relief mandates that defendants comply with relevant law related to compensable time, overtime pay, business expenses, meal and rest breaks, recordkeeping, visa and travel costs, water and sanitation, and kickbacks. The injunctive relief effectuates one of PAGA's main purposes by providing a mechanism for enforcing employees' rights under state and federal law. By combining monetary and injunctive relief, the settlement ensures that employees are compensated for past harms and that the employers are deterred from committing future violations. 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 approves of the parties' settlement of plaintiffs' PAGA claims.

C. Attorneys' Fees

Both FLSA and PAGA provide for the recovery of attorneys' fees and costs in any successful action. See 29 U.S.C. § 216(b) ("The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action."); 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."). Neither statute, however, provides a standard for evaluating attorneys' fees related to a settlement. Nevertheless, attorneys' fees under both statutes are typically calculated using the lodestar method. See Kerzich v. Cty. of Tuolumne, 335 F.Supp.3d 1179, 1185 (E.D. Cal. 2018) (Drozd, J.) (FLSA); Ramirez, 2017 WL 3670794, at *6 (PAGA). "The lodestar figure is calculated by multiplying the number of hours the prevailing party reasonably expended on the litigation (as supported by adequate documentation) by a reasonable hourly rate for the region and for the experience of the lawyer." In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935, 941 (9th Cir. 2011) (citing Staton v. Boeing Co., 327 F.3d 938, 965 (9th Cir. 2003)). "Lodestar amounts are presumed to be reasonable" and parties may of course "agree to a [] reduction in attorneys' fees in settlement of a claim." Kerzich, 335 F. Supp. 3d at 1186 (citations omitted).

Using the lodestar method, plaintiffs report a total amount of $344,907.50 for the work of four attorneys. (See Rice Settlement Decl. ¶ 13 ($66,557.50 for her own work at a rate of $650 per hour); Decl. of Laura Clauson Ferree ¶¶ 5-6 ($155,650 for her own work at a rate of $550 per hour and $59,700 for the work of Javier Castro at a rate of $300 per hour) (Docket No. 86-10); Botts Decl. ¶ 4 ($63,000 for his own work at a rate of $450 per hour).) The proposed settlement provides for recovery of attorneys' fees and costs only in the amount of $40,630.25, a little over 8% of the total settlement award and a little under 12% of counsel's estimated total lodestar. Given that the attorneys' fees award is substantially less than what would they could recover under their estimated lodestar6 and does not represent a substantial portion of the overall settlement, the court finds the requested fees to be reasonable.

Accordingly, the court approves of plaintiffs' request for attorneys' fees.

Concurrent with the filing of this memorandum, the court will sign and enter the stipulated judgment (Docket No. 91) with minor modifications.

IT IS SO ORDERED.