Cole v. Lane Bryant, Inc.

• Court: District Court, N.D. California
• Decided: February 10, 2025
• Docket: 5:22-cv-06714
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 SHANIA COLE, Case No. 22-cv-06714-PCP

8 Plaintiff, ORDER DENYING MOTION FOR 9 v. PRELIMINARY APPROVAL OF CLASS ACTION AND PAGA 10 LANE BRYANT, INC., et al., SETTLEMENT 11 Defendants. Re: Dkt. No. 30

12 13 Plaintiff Shania Cole moves for preliminary approval of a class settlement in this 14 employment lawsuit against Lane Bryant Brands OPCO LLC. For the reasons that follow, the 15 motion is denied without prejudice. 16 BACKGROUND 17 Cole was a stylist for Lane Bryant from approximately June 2021 to June 2022. She 18 worked three to four days per week for four to six hours per day greeting customers, assisting 19 customers with shopping needs, cleaning the store, disinfecting fitting rooms, and cashiering. Dkt. 20 No. 29, at 8. 21 In the operative September 2022 complaint, Cole asserted violations of various California 22 labor laws. Cole alleges that Lane Bryant failed to pay minimum wages earned, failed to provide 23 compliant rest and meal breaks, failed to provide accurate wage statements, failed to timely pay 24 wages upon termination, willfully failed to pay wages, and engaged in unlawful and unfair 25 business practices. Cole filed a notice letter with the Labor and Workforce Development Agency 26 on October 10, 2022 alleging various Labor Code violations by Lane Bryant. 27 After the operative complaint was filed, the parties engaged in discovery and one round of 1 The parties entered into a signed memorandum of understanding on October 27, 2023. Id. 2 On October 10, 2024, the parties jointly moved to amend Cole’s complaint to add (1) a 3 claim under California’s Private Attorneys General Act (PAGA), and (2) an additional California 4 labor law claim based on unpaid overtime. Dkt. No. 29. On the same date, the parties also moved 5 for preliminary approval of a class action and PAGA settlement, conditional certification of the 6 settlement classes, appointment of class representatives and counsel, and approval of class notices. 7 Dkt. No. 30. The filing included a copy of the class action settlement agreement and release. Dkt. 8 No. 30-1. The Court ordered the parties to provide supplemental briefing addressing several 9 issues. Dkt. No. 36. Cole submitted her supplemental brief on December 2, 2024, Dkt. No. 37, and 10 the Court heard argument on the motion for preliminary approval on December 12, 2024. 11 Under the terms of the settlement, defendant will contribute a total gross amount of 12 $1,150,000. The parties propose allocating $10,000 of that amount as an incentive payment to 13 Cole; $646,666.67 to the class members; $15,000 to the aggrieved employees (the “PAGA 14 Member Payment”); $45,000 to the Labor & Workforce Development Agency (LWDA); 15 $383,333.33 to attorney’s fees and $25,000 to attorney’s expenses; and $25,000 to settlement 16 administration costs. 17 Cole requests certification of a class including any person who worked for Lane Bryant as 18 a non-exempt, hourly employee in the State of California at any time from January 1, 2021, 19 through and including the earlier of: (i) January 25, 2024 or (ii) the Date of Preliminary Approval, 20 and who does not timely opt-out of the Settlement (termed “Class Members”). The settlement 21 defines “PAGA Members” to include any person who worked for Lane Bryant as a non-exempt, 22 hourly employee in California at any time from August 22, 2022, through the earlier of: (i) 23 January 25, 2024 or (ii) the Date of Preliminary Approval (“PAGA Period”). 24 For individuals who are within the class and do not opt out, the proposed settlement 25 includes a release of all federal and state law claims that were or could have been pleaded based 26 on the factual allegations in the first amended complaint or any prior complaint. The aggrieved 27 employees are required to release all claims under PAGA for all California Labor Code violations 1 There are approximately 1,435 Class Members and approximately 850 PAGA Members. 2 All PAGA Members are also Class Members. Plaintiff predicts the opt-out rate to be less than 3% 3 and expects the average net recovery to be approximately $470. 4 LEGAL STANDARD 5 While “[t]he Ninth Circuit has a strong judicial policy that favors settlements in class 6 actions,” Hudson v. Libre Technology, Inc., 2019 WL 5963648, at *3 (S.D. Cal. Nov. 13, 2019), 7 district courts must carefully “scrutinize pre-class certification settlements,” as there is a risk of 8 collusion between the defendant and class counsel to settle “without devoting substantial resources 9 to the case.” Briseño v. Henderson, 998 F.3d 1014, 1023–24 (9th Cir. 2021). “Approval of a 10 settlement is a two-step process. Courts first ‘determine whether a proposed class action 11 settlement deserves preliminary approval [including conditional class certification] and then, after 12 notice is given to class members, whether final approval is warranted.’” In re Volkswagen “Clean 13 Diesel” Mktg., Sales Pracs., & Prod. Liab. Litig., 229 F. Supp. 3d 1052, 1062 (N.D. Cal. 2017) 14 (quoting In re High-Tech Employee Antitrust Litig., 2014 WL 3917126, at *3 (N.D. Cal. Aug. 8, 15 2014)). 16 Rule 23 requires district courts to ensure that any class settlement is “fair, reasonable, and 17 adequate.” Fed. R. Civ. P. 23(e). In making this determination, a court must consider whether: 18 “(A) the class representatives and class counsel have adequately represented the class; (B) the 19 proposal was negotiated at arm’s length; (C) the relief provided for the class is adequate, taking 20 into account: (i) the costs, risks, and delay of trial and appeal, (ii) the effectiveness of any 21 proposed method of distributing relief to the class, including the method of processing class- 22 member claims, (iii) the terms of any proposed award of attorney’s fees, including timing of 23 payment, and (iv) any agreement required to be identified under Rule 23(e)(3); and (D) the 24 proposal treats class members equitably relative to each other.” Id. 25 Similarly, under PAGA, “court[s] shall review and approve any settlement of any civil 26 action filed pursuant to [PAGA],” Cal. Labor Code § 2699(l)(2), because a plaintiff who brings a 27 PAGA claim “does so as the proxy or agent of the state’s labor law enforcement agencies.” Arias 1 applied a Rule 23-like standard, asking whether the settlement of the PAGA claims is 2 ‘fundamentally fair, adequate, and reasonable in light of PAGA’s policies and purposes.’” 3 Haralson v. U.S. Aviation Servs. Corp., 383 F. Supp. 3d 959, 972 (N.D. Cal. 2019) (quoting 4 Jordan v. NCI Grp., Inc., No. EDCV161701JVSSPX, 2018 WL 1409590, at *2 (C.D. Cal. Jan. 5, 5 2018)). 6 ANALYSIS 7 I. Cole’s defense of the PAGA settlement is premised on incorrect calculations. 8 PAGA “authorizes an employee to bring an action for civil penalties on behalf of the state 9 against his or her employer for Labor Code violations committed against the employee and fellow 10 employees, with most of the proceeds of that litigation going to the state.” Sakkab v. Luxottica 11 Retail N. Am., Inc., 803 F.3d 425, 429 (9th Cir. 2015) (quoting Iskanian v. CLS Transportation 12 Los Angeles, LLC, 59 Cal. 4th 348, 360 (2014)). “PAGA provides that the penalties are generally 13 $100 for each aggrieved employee per pay period for the initial violation and $200 per pay period 14 for each subsequent violation.” Id. at 429 (quoting Iskanian, 59 Cal. 4th at 379, and citing Cal. 15 Lab. Code § 2699(f)(2)) (emphasis added). 16 The parties plan to allocate $60,000 from the Gross Settlement Amount for resolution of 17 the PAGA claim based on their estimate that the defendant’s potential PAGA exposure is 18 approximately $3,500,000 (35,000 violative pay periods × $100). The parties, however, have 19 artificially lowered the total potential value of the PAGA claim by not including the $200 20 subsequent violation penalty.

21 Under California law, “[a] good faith dispute” that an employer is 22 required to comply with a particular law “will preclude imposition” of [the] heightened [$200] penalt[y]. Amaral v. Cintas Corp. No. 2, 23 163 Cal.App.4th 1157, 78 Cal. Rptr. 3d 572, 607 (2008). “A ‘good faith dispute’ ... occurs when an employer presents a defense, based 24 in law or fact which, if successful, would preclude any recover[y] on the part of the employee.” Id. 25 Bernstein v. Virgin Am., Inc., 3 F.4th 1127, 1144 (9th Cir. 2021). Here, no such dispute exists. 26 While Lane Bryant disputes that it violated the identified Labor Code provisions in the manner 27 1 dispute that Cole’s employment was subject to those provisions. The circumstances here are 2 therefore fundamentally different from those presented in the cases cited by the parties in support 3 of their estimate. See Gunther v. Alaska Airlines, Inc., 72 Cal. App. 5th 334, 340 (2021) (noting 4 defendant’s contention that federal law preempted any application of California employment laws 5 to the employees at issue); Bernstein, 3 F.4th at 1133 (“Virgin disputes that it is subject to 6 California law[.]”); see also Amaral v. Cintas Corp. No. 2, 163 Cal.App.4th 1157, 1173 (2008) 7 (noting defendant’s argument that municipal living wage ordinance was unconstitutional and 8 therefore inapplicable to its employees). The parties have cited no California authorities 9 suggesting that the “subsequent” violation penalty should not be applied to subsequent violations 10 of Labor Code provisions that the defendant admits were fully applicable to the employees at 11 issue. 12 Because it omits any penalties for “subsequent” violations, plaintiffs’ estimate of Lane 13 Bryant’s total potential PAGA exposure is incorrect. If properly calculated with the $200 14 subsequent violation fees, the proposed settlement represents under 1% of the total potential value 15 of the PAGA claim. 16 “In this district, courts have raised concerns about settlements of less than 1% of the total 17 value of a PAGA claim.” Jennings v. Open Door Mktg., LLC, No. 15-CV-04080-KAW, 2018 WL 18 4773057, at *9 (N.D. Cal. Oct. 3, 2018) (citing Viceral, 2016 WL 5907869, at *9). “In approving 19 PAGA settlements accounting for less than one percent of the claims’ value, courts have identified 20 a number of factors that might support a lesser recovery.” Haralson v. U.S. Aviation Servs. Corp., 21 383 F. Supp. 3d 959, 973 (N.D. Cal. 2019). “First, courts have taken into account LWDA’s views, 22 or lack thereof, on the settlement.” Id. “Second, courts have considered whether they would be 23 likely to exercise their discretion under California Labor Code § 2699(e)(2) to reduce the amount 24 of PAGA penalties, were those claims to be litigated through judgment.” Id. “Third, courts have 25 considered whether the settlement provides additional non-monetary relief.” Id. at 974. “Finally, 26 some courts have concluded that a lower PAGA settlement is permissible where the Rule 23 27 settlement is ‘relatively substantial’ based on the circumstances of the case.” Id. (quoting Viceral 1 2016)). 2 Beyond noting that the LWDA has not yet objected to the settlement, the parties have not 3 addressed whether the other relevant factors warrant approval of a PAGA settlement representing 4 |} less than 1% of the total claim value—likely due to their erroneous calculation of the claim’s 5 potential value. Without further information regarding these factors the Court cannot determine 6 || whether the parties’ settlement of the PAGA claim warrants preliminary approval. And because 7 “the district court ... [does not] have the ability to delete, modify or substitute certain provisions” 8 and “[t]he settlement must stand or fall in its entirety,” Hanlon v. Chrysler Corp., 150 F.3d 1011, 9 1026 (9th Cir. 1998) (internal citations and quotations omitted), the Court’s inability to evaluate 10 || the propriety of the PAGA claim settlement precludes the Court from approving any other aspect 11 of the settlement. The motion for preliminary approval is therefore denied without prejudice. 12

IT IS SO ORDERED. 14 || Dated: February 10, 2025

P. Casey Pitts 17 United States District Judge 18 19 20 21 22 23 24 25 26 27 28