Awarding Attorneys Fees in PAGA Actions

Under PAGA, an aggrieved employee may bring a civil action personally and on behalf of other current or former employees and the state of California to recover civil penalties for Labor Code violations. Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 348, 380. Seventy-five percent of any PAGA penalties go to the LWDA, leaving the remaining 25 percent for the employees. Id. PAGA is intended to augment the limited enforcement capability of by empowering employees to enforce the Labor Code as representatives of the Agency. Id. at p. 383. A judgment in a PAGA action binds all those who would be bound by a judgment in an action brought by the government. Id. at 381.

A PAGA action need not meet the requirements of a class action lawsuit. Arias v. Superior Court (2009) 46 Cal.4th 969, 975. A court does not, for example, have a fiduciary duty to protect putative class members. Nonetheless, Labor Code § 2699(l), provides that [t]he superior court shall review and approve any penalties sought as part of a proposed settlement agreement pursuant to [PAGA]. The relief provided in a PAGA settlement must “be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public.” Villalobos v. Calandri Sonrise Farm LP (C.D. Cal., July 22, 2015, No. CV122615PSGJEMX) 2015 WL 12732709, at *13. The settlement must be reasonable in light of the potential verdict value. See O’Connor v. Uber Technologies, Inc. (N.D. Cal. 2016) 201 F.Supp.3d 1110, 1135. Courts will generally approve a PAGA settlement upon a showing that the settlement terms are “fundamentally fair, adequate, and reasonable” in light of PAGA’s policies and purposes. See Jordan v. NCI Grp., Inc., No. EDCV161701JVSSPX, 2018 WL 1409590, at *3 (C.D. Cal. Jan. 5, 2018) (finding that proposed settlement of plaintiff’s PAGA claims was fair, adequate, and reasonable in light of the policies and purposes of PAGA); Flores v. Starwood Hotels & Resorts Worldwide, Inc., 253 F. Supp. 3d 1074, 1075 (C.D. Cal. 2017) (same, and noting that the California Supreme Court, California legislature, California Courts of Appeal, and LWDA have failed to provide any definitive standard for PAGA settlement approval). A settlement may be substantially discounted, however, given that courts often exercise their discretion to award PAGA penalties below the statutory maximum even when a claim succeeds a trial. See Viceral v. Mistras Group, Inc. (N.D. Cal., Oct. 11, 2016, No. 15-CV-02198-EMC) 2016 WL 5907869, at *8-9).

As state and federal courts have held, PAGA claims that required highly individualized analysis cannot be effectively managed and therefore can be dismissed as unmanageable. See Fenley v. Rite Aid Corp. (Cal. Super. Ct. Santa Clara County Sept. 17, 2015) Case No. 1-12-CV-229127, 2015 WL 8240387, at *2 (dismissing PAGA claim for alleged wage and hour violations where Plaintiff failed to show how numerous individualized issues could be managed at trial); Amiri v. Cox Communications California, LLC (C.D. Cal. Sept. 27, 2017) 2017 WL 4400463 (granting motion to strike PAGA claims based on lack of manageability); Salazar v. McDonald’s Corp. (N.D.Cal. Jan. 5, 2017) 2017 WL 88999 (same); Brown v. American Airlines, Inc. (C.D. Cal. Oct. 5, 2015) 2015 WL 6735217, at *4 (granting motion to strike where claims required “too many individualized assessments to determine PAGA violations concerning overtime pay”); Bowers v. First Student, Inc.  (C.D. Cal Apr. 23, 2015) 2015 WL 1862914, at *4 (granting motion to strike where a “multitude of individualized assessments” for various underlying wage and hour violations rendered claim unmanageable); Bright v. 99 Cents Only Stores (Cal. Super. Ct. L.A. County Dec. 7, 2011) 2011 WL 12913379 at *2 (granting motion to strike PAGA representative action due to unmanageability).

“California has long recognized, as an exception to the general American rule that parties bear the costs of their own attorneys, the proprietary of awarding an attorney fee to a party who has recovered or preserved a monetary fund for the benefit of himself or herself and others. In awarding a fee from the fund or from the other benefited parties, the trial court acts within its equitable power to prevent the other parties’ unjust enrichment.” Lafitte v. Robert Half Intern., Inc. (2016) 1 Cal.5^th 480, 561 (approving percentage of recovery method in wage and hour class action); Fox v. Hale & Norcross Silver Mtn. Co. (1895) 108 Cal. 475, 476 (approving fee payment from common fund in early derivative case). A prevailing PAGA plaintiff is entitled to no more than his or her “reasonable [attorney] fees.” Harrington v. Payroll Entertainment Services, Inc. (2008) 160 Cal.App.4^th 589, 594 (emphasis in original); Labor Code § 2699(g)(1).