OBrien et al v. Siege Electric, Inc.

Filing 20

ORDER Granting Plaintffs Motion for Approval of Settlement Agreement (ECF No. 16 ). Signed by Judge Cynthia Bashant on 09/25/2024. (All non-registered users served via U.S. Mail Service)(mjw)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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JAMES O’BRIEN, et al.,

Case No. 23-cv-00897-BAS-DEB

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Plaintiffs,

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ORDER GRANTING PLAINTFFS’
MOTION FOR APPROVAL OF
SETTLEMENT AGREEMENT (ECF
No. 16)

v.
SIEGE ELECTRIC, INC.,
Defendant.

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Plaintiffs James O’Brien, Ricky Jordan, Tim Matthes, Jeremy Burton, Gregory

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Drummonds, and Joshua Walter bring this action against Defendant Siege Electric, Inc.,

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for violations of the Fair Labor Standards Act (“FLSA”), the California Labor Code, and

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California’s Private Attorneys General Act of 2004 (“PAGA”). (Compl., ECF No. 1.) On

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May 30, 2024, Plaintiffs filed a Motion to Approve the Settlement Agreement

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(“Settlement” or “Settlement Agreement”). (Mot., ECF No. 16.) The Court finds this

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motion suitable for determination on the papers submitted and without oral argument. See

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Fed. R. Civ. P. 78(b); CivLR 7.1(d)(1). For the following reasons, the Court GRANTS

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the Motion for Approval of the Settlement Agreement.

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I.

BACKGROUND

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Plaintiffs are current or former employees alleging Defendant failed to pay wages

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on their due date and refused to ensure all future payments were timely paid. (Compl. ¶

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16.) Specifically, Plaintiffs are or were electrical workers with Siege Electric, Inc., a

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construction industry employer and an electrical contractor licensed by the State of

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California. (Compl. ¶ 1.) Plaintiffs assert they suffered injury in fact and economic harm

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resulting from Defendant’s violations of the FLSA and the California Labor Code and thus

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seek waiting time penalties, civil penalties, and liquidated damages. (Compl. ¶ 14.) The

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parties have also identified other similarly aggrieved employees entitled to civil penalties

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pursuant to PAGA (“Aggrieved Employees”). (Settlement Agreement § 2, Martinez Decl.

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Ex. 2, ECF No. 16-4.)

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On February 22, 2024, the parties participated in an Early Neutral Evaluation

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Conference with Magistrate Judge Daniel E. Butcher and reached an agreement in

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principle. (ECF No. 13.) On May 30, 2024, Plaintiffs motioned the Court for an order

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approving the Settlement, which would resolve all claims and causes of action in this

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lawsuit. (ECF No. 16.)

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Under the terms of the Settlement Agreement, Defendant agrees to pay a total of

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$65,000.00 to Plaintiffs and Aggrieved Employees. (Settlement Agreement § 3.) The

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terms allocate $52,998.24 to be paid to Plaintiffs as follows: (1) $7,532.56 paid to James

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O’Brien; (2) $14,258.84 paid to Ricky Jordan; (3) $7,913.60 paid to Timothy Matthes; (4)

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$4,896.34 paid to Jeremey Burton; (5) $20,060.14 paid to Gregory Drummonds; and (6)

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$297.69 paid to Joshua Walters. (Id. § 3(d).)

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Moreover, $12,001.76 of the Settlement shall be paid to Aggrieved Employees and

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the California Labor and Workforce Development Agency (“LWDA”) as settlement of all

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claims for PAGA civil penalties. (Id. § 3(a).) Accordingly, the LWDA shall receive

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$9,001.32 of the PAGA claims, reflecting its 75% share, and Aggrieved Employees shall

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receive $3,000.44 of the PAGA claims, reflecting their remaining 25% share. (Id.) The

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Aggrieved Employees shall be paid as follows: (1) $354.39 paid to Charles Hann; (2)
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$283.51 paid to Joshua McBride; (3) $94.50 paid to Juan Ayala; (4) $283.51 paid to Luis

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Carranza; and (5) $23.61 paid to Magno Meneses. (Id. § 3(e).)
In return, Plaintiffs agree to release all claims against Defendant raised in this action,

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including claims raised under PAGA. (Mot. 3:21–22.)

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II.

LEGAL STANDARDS

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A.

Fair Labor Standards Act

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“The FLSA was enacted to protect covered workers from substandard wages and

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oppressive working hours.” Selk v. Pioneers Mem’l Healthcare Dist., 159 F. Supp. 3d

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1164, 1171 (S.D. Cal. 2016). Specifically, “[t]he FLSA establishes federal minimum wage,

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maximum-hour, and overtime guarantees that cannot be modified by contract.” Genesis

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Healthcare Corp. v. Symczyk, 569 U.S. 66, 69 (2013). “[C]laims for unpaid wages under

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the FLSA may only be waived or otherwise settled if settlement is supervised by the

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Secretary of Labor or approved by a district court.” Selk, 159 F. Supp. 3d at 1172.

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“The Ninth Circuit has not established criteria for district courts to consider in

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determining whether a FLSA settlement should be approved.” Beidleman v. City of

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Modesto, No. 1:16-cv-1100-DAD-SKO, 2017 WL 5257087, at *2 (E.D. Cal. Oct. 26,

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2017). However, district courts in the Ninth Circuit generally apply the standard adopted

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by the Eleventh Circuit in Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th

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Cir. 1982). Id.; see also Roberts v. City of Chula Vista, No. 16-cv-1955-MMA (DHB),

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2017 WL 6541105, at *2 (S.D. Cal. Dec. 21, 2017). Thus, in reviewing a FLSA settlement,

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courts must determine whether the settlement represents a “fair and reasonable resolution

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of a bona fide dispute.” Lynn’s Food Stores, 679 F.2d at 1355. “A bona fide dispute exists

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when there are legitimate questions about ‘the existence and extent of Defendant’s FLSA

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liability.’” Selk, 159 F. Supp. 3d at 1172 (quoting Ambrosino v. Home Depot U.S.A., Inc.,

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No. 11-cv-1319 L(MDD), 2014 WL 1671489, at *1 (S.D. Cal. Apr. 28, 2014)). A court

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will not approve a settlement where there is no question that the FLSA entitles the plaintiffs

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to the relief sought, because it would shield employers from the full cost of complying with

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the statute. See id.
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Once a court determines that a bona fide dispute exists, “it must then determine

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whether the settlement is fair and reasonable.” Id. Courts should consider the following

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factors in evaluating whether a settlement is fair and reasonable: (1) the plaintiff’s range of

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possible recovery; (2) the stage of proceedings and the amount of discovery completed;

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(3) the seriousness of the litigation risks faced by the parties; (4) the scope of any release

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provision in the settlement agreement; (5) the experience and views of counsel; and (6) the

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possibility of fraud or collusion. Id. at 1173. A “district court must ultimately be satisfied

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that the settlement’s overall effect is to vindicate, rather than frustrate, the purposes of the

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FLSA.” Id.

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Lastly, the Court must evaluate whether the award of attorneys’ fees and costs is

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reasonable. See Selk, 159 F. Supp. 3d at 1180; see also 29 U.S.C. § 216(b) (noting that in

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a FLSA action, the court “shall, in addition to any judgment awarded to the plaintiff or

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plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the

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action.”).

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B.

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The California Legislature enacted PAGA to allow employees to initiate a civil

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action against their employers for Labor Code violations. See Sakkab v. Luxottica Retail

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N. Am. Inc., 803 F.3d 425, 429 (9th Cir. 2015). Under PAGA, “an aggrieved employee”

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may bring an enforcement action “on behalf of himself or herself and other current or

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former employees.” Cal. Labor Code § 2699(a). Because the LWDA and its constituent

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departments and divisions are unable to prosecute employers for every Labor Code

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violation, “[a]n employee bringing a PAGA action does so as the proxy or agent of the

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state’s labor law enforcement agencies.” Sakkab, 803 F.3d at 435 (internal citations

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omitted).

Private Attorneys General Act

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Consequently, the parties are required to submit any proposed settlement to the

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LWDA concurrently with its submission to the court. Cal. Labor Code § 2699(l)(2).

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Additionally, the court must review and approve any penalties sought. Id.

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Nonetheless, “PAGA does not provide express guidance about the scope or nature

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of judicial review.” Abelar v. Am. Residential Servs., L.L.C., No. ED CV19-00726 JAK

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(JPRx), 2019 WL 6054607, at *3 (C.D. Cal. Nov. 14, 2019). In the absence of binding

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guidance, federal district courts reviewing PAGA settlements have drawn on factors

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utilized by the Ninth Circuit in Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998),

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which are used to evaluate whether a class action settlement is “fundamentally fair,

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adequate, and reasonable.” See O’Connor v. Uber Techs., 201 F. Supp. 3d 1110, 1134

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(N.D. Cal. 2016). Many of the factors used to evaluate class action settlements, such as

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“the strength of the plaintiff’s case; the risk, expense complexity, and likely duration of

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further litigation . . . the amount offered in settlement . . . the experience and views of

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counsel” can be useful in evaluating the fairness of a PAGA settlement. Hanlon, 150 F.3d

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at 1026; see also Moniz v. Adecco USA, Inc., 72 Cal. App. 5th 56, 77 (1st Dist. 2021).

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These factors are assessed in view of “PAGA’s public policy goals of ‘benefit[ing] the

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public by augmenting the state’s enforcement capabilities, encouraging compliance with

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Labor Code provisions, and deterring noncompliance.’” Eisenacher v. VITAS Hospice

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Servs. LLC, No. 20-cv-04948-RS, 2021 WL 1846574, at *2 (N.D. Cal. Apr. 2, 2021)

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(quoting O’Connor, 201 F. Supp. 3d at 1132–33).

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III.

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ANALYSIS
A.

Fair Labor Standards Act
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Bona Fide Dispute

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As a threshold matter, the Court finds that a bona fide dispute exists between the

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parties over potential liability under the FLSA. Plaintiffs’ Complaint alleges Defendant

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became liable for damages by failing to pay the minimum wage required by FLSA when it

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failed to timely pay wages on payday and paid wages with checks that later bounced.

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(Comp. ¶¶ 112–18.) Plaintiffs’ investigation revealed various alleged labor violations and

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corresponding civil and statutory penalties. (Martinez Decl. ¶¶ 2–3.) Defendant has denied

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these allegations and raised various affirmative defenses. (Ans. 10:24–21:22, ECF No. 7.)

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Thus, there are legitimate questions about the existence of Defendant’s FLSA liability and

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the ensuing extent of it.
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Reasonable Settlement

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Satisfied that a bona fide dispute exists, the Court next considers the relevant factors

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in determining whether the Settlement Agreement is fair and reasonable under the FLSA.
a.

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Plaintiff’s Range of Possible Recovery

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“A district court evaluates the plaintiff’s range of potential recovery to ensure that

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the settlement amount agreed to bears some reasonable relationship to the true settlement

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value of the claims.” Selk, 159 F. Supp. 3d at 1174. However, the settlement amount

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agreed to need not represent a certain percentage of the maximum possible recovery. See

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id.; see also Nat’l Rural Telecomms. Coop. v. DIRECTV, Inc., 221 F.R.D. 523, 527 (C.D.

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Cal. 2004) (“[I]t is well-settled law that a proposed settlement may be acceptable even

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though it amounts to only a fraction of the potential recovery that might be available to the

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class members at trial.”). Ultimately, the court must be satisfied that the amount agreed to

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is fair and reasonable under the circumstances presented. See Selk, 159 F. Supp. 3d at

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1174.

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Here, Plaintiffs proposed $75,000.00 at the ENE Conference to resolve this lawsuit.

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(Martinez Decl. ¶ 12.) This figure represented the approximate total amount of damages

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and civil penalties they alleged plus the accrued prejudgment interest as of the date of the

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ENE Conference. (Id. ¶¶ 11–12.) Since the agreed upon amount of $65,000.00 is

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approximately 86% of the alleged claims, the Court finds the Settlement Agreement is fair

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as it will remediate a significant percentage of Plaintiffs’ alleged damages. Therefore, the

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Court is satisfied that the total amount bears a reasonable relationship to the true settlement

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value of the claims and is reasonable given the circumstances.

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b.

Stage of Proceedings

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The court also evaluates the stage of the proceedings and the amount of discovery

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completed to ensure that “the parties carefully investigated the claims before reaching a

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resolution.” Ontiveros v. Zamora, 303 F.R.D. 356, 371 (E.D. Cal. 2014). This factor will
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weigh in favor of approval if the parties have sufficient information to make an informed

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decision regarding settlement. Linney v. Cellular Alaska P’ship, 151 F.3d 1234, 1239 (9th

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Cir. 1998).

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Here, the parties did not engage in formal discovery as they did not proceed beyond

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the pleading stage. Despite this, Plaintiffs have investigated and documented the alleged

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labor violations entitling them to FLSA liquidated damages. (Martinez Decl. ¶ 3.)

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Furthermore, Plaintiffs have shared findings concerning damages, waiting time penalties,

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statutory penalties, and prejudgment interest owed to them with Defendant. (Martinez

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Decl. ¶¶ 7–8; Ochoa Decl. ¶ 6.) Given the information exchanged, the Court finds the

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parties had “sufficient information” to reach an informed decision. Linney, 151 F.3d at

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1239. Accordingly, this factor favors approval of the Settlement Agreement.

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c.

Seriousness of the Litigation Risks

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Courts favor settlement where “there is a significant risk that litigation might result

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in a lesser recover[y] for the class or no recovery at all.” Bellinghausen v. Tractor Supply

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Co., 306 F.R.D. 245, 255 (N.D. Cal. 2015). Here, there is a significant risk of lesser

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recovery or no recovery at all since fully litigating the matter could result in Defendant’s

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dissolution. (Martinez Decl. ¶ 3; Ochoa Decl. ¶ 4.) Given the gravity of this risk and the

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uncertainty over the outcome of litigation, this factor weighs in favor of approving the

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Settlement Agreement.

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d.

Scope of Release

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“Courts review the scope of any release provision in a FLSA settlement to ensure

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that class members are not pressured into forfeiting claims, or waiving rights, unrelated to

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the litigation.” Selk, 159 F. Supp. 3d at 1178. Indeed, “a gap between the allegations

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brought in the case and the claims released in a settlement agreement will militate against

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finding the settlement fair and reasonable.” Id. Here, the liability release is commensurate

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with Plaintiffs’ claims. The Settlement Agreement provides a remedy for each claim raised

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and no claims or rights have been forfeited. (Settlement Agreement § 4; Martinez Decl.

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8:6–9.) Thus, the Court is satisfied that the release provision is limited in scope and “does
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not force class members to forfeit unrelated claims.” See Selk, 159 F. Supp. 3d at 1179.

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Accordingly, this factor weighs in favor of approval of the Settlement Agreement.

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e.

Experience of Counsel

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“The opinions of counsel should be given considerable weight both because of

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counsel’s familiarity with th[e] litigation and previous experience with cases.” Larsen v.

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Trader Joe’s Co., No. 11-cv-5188-WHO, 2014 WL 3404531, at *5 (N.D. Cal. July 11,

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2014). “Parties represented by competent counsel are better positioned than courts to

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produce a settlement that fairly reflects each party’s expected outcome in litigation.”

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Rodriguez v. W. Publ’g Corp., 563 F.3d 948, 967 (9th Cir. 2009) (quoting In re Pac. Enters.

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Sec. Litig., 47 F.3d 373, 378 (9th Cir. 1995)). Plaintiffs’ lead counsel has over twenty-four

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years practicing and specializing in labor and employment law, handling numerous wage

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and hour claims. (Ochoa Decl. ¶ 13.) Conversely, Defendant’s counsel specializes in

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employment law and has over twenty-four years of practice, including routinely handling

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wage and hour class actions. (Martinez Decl. ¶ 20.) Further, Plaintiffs’ counsel believe

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that their investigation accurately identified and assessed the damages asserted in the

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Complaint and that the Settlement fairly and reasonably remedies those claims. (Mot. 8:

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11–19.) Consequently, the Court is satisfied with counsel’s wealth of experience, and their

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opinion is given due weight. The Court finds that this factor also weighs in favor of

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approving the Settlement Agreement.

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f.

Possibility of Fraud or Collusion

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Finally, the possibility of fraud or collusion also factors into the fairness of a

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proposed settlement agreement. See Selk, 159 F. Supp. 3d at 1180. The Court finds no

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evidence that the parties or their counsel colluded or pursed their own self-interests in

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reaching the Settlement. The parties reached a settlement through negotiations facilitated

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by mediation, minimizing the risk of collusion. Moreover, the Settlement reflects a

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reasonable compromise of the disputed claims, damages, and the risk of further litigation.

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Lastly, the Court finds no evidence of “subtle signs” of collusion, such as “when counsel

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receive a disproportionate distribution of the settlement, or when the class receives no
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monetary distribution but class counsel are amply rewarded.” In re Bluetooth Headset

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Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir. 2011). Accordingly, this factor likewise

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favors approval of the Settlement Agreement.
g.

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Attorneys’ Fees

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Lastly, because a court supervised settlement of FLSA claims is ultimately reduced

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to a judgment, under the FLSA an award of reasonable fees is required. See 29 U.S.C. §

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216(b). Allowing parties to waive an award of fees could undermine Congress’ intent that

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a FLSA claimant “should receive his full wages plus the penalty without incurring any

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expense for legal fees or costs.” See Maddrix v. Dize, 153 F.2d 274, 275–76 (4th Cir.

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1946). Therefore, the court must evaluate whether the award of attorneys’ fees and costs

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is reasonable. See Selk, 159 F. Supp. 3d at 1180.

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Here, Plaintiffs’ counsel noted in their supplemental brief that they have waived their

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right to recover attorneys’ fees and costs since the union representing Plaintiffs has agreed

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to cover these fees as a third-party payer. (ECF No. 19.) Additionally, Plaintiffs’ counsel,

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in consultation with Plaintiffs and the union, have decided against negotiating terms that

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would reimburse the union for its attorneys’ fees and costs to minimize the risk that they

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recover nothing given Defendant’s liquidity problems. Id. The Court is satisfied this

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approach is reasonable given the insolvency concerns and because Plaintiffs are not

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forfeiting a significant portion of the Settlement to cover attorneys’ fees and cost. Thus,

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this factor favors approval of the Settlement Agreement.

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The Court is satisfied that the balance of the factors weighs in favor of approval.
Therefore, the Court approves the FLSA Settlement.

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B.

Private Attorneys General Act

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As a preliminary matter, the Court finds that Plaintiffs have satisfied the statutory

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requirement of submitting the proposed Settlement Agreement to the LWDA. (Martinez

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Decl. Ex. 3.) Cal. Labor Code § 2699(l)(2). The Court further finds that the PAGA portion

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of the Settlement is “fundamentally fair, adequate, and reasonable.” See O’Connor, 201

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F. Supp. 3d at 1134.
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First, the amount offered in the Settlement Agreement provides the LWDA and

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Aggrieved Employees with a significant percentage of the penalties alleged. The PAGA

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claimants contend they were owed approximately $14,000.00 in civil penalties as of the

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ENE Conference. (Martinez Decl. ¶ 12 n.3.) The Settlement includes a total payment of

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just over $12,000.00 in PAGA penalties. (Settlement Agreement § 3(a).) The parties

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calculated this figure by applying an 86% multiplier to the alleged claims and civil

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penalties. (Mot. 4 n.2.) Accordingly, the Settlement Agreement offers a fair and adequate

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remedy for the claims alleged in the Complaint and reasonably remediates the alleged labor

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violations raised therein.

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Second, Plaintiffs’ counsel identified and gathered evidence supporting Labor Code

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violations by recording the number of violations suffered and the corresponding civil and

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statutory penalties, suggesting a thorough investigation and well-documented case.

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(Martinez Decl. ¶¶ 2–3.) As such, the strength of Plaintiffs’ case, combined with the risk,

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cost, and likely duration of further litigation—which could potentially lead to Defendant’s

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bankruptcy—weigh in favor of approving the PAGA portion of the Settlement Agreement.

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Finally, when considering the Settlement Agreement in relation to PAGA’s public

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policy objectives—namely, enhancing the state’s enforcement capabilities, promoting

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compliance, and deterring violations—it effectively advances these goals. The Settlement

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not only ensures the enforcement of state and federal labor laws but also requires Defendant

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bear a significant portion of the penalties associated with the noticed Labor Code

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violations. This serves to deter future violations and promote adherence to the law.
For these reasons, the Court approves the PAGA portion of the Settlement.

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IV.

CONCLUSION

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In light of the foregoing, the Court GRANTS Plaintiffs’ Motion for Approval of the

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Settlement Agreement. The Court DISMISSES WITH PREJUDICE this action and

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directs the Clerk of Court to close the case.

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IT IS SO ORDERED.

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DATED: September 25, 2024

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