A federal judge has refused to approve, for now, a $12 million deal that would have ended a class action lawsuit against Delta Air Lines for allegedly denying California workers meal and rest periods and allegedly shorting their pay.
In the ruling, the judge said she believed the deal may pay too little money to the state of California under a controversial state law and may pay too much to the attorneys who brought the lawsuit.
On May 2, U.S. District Judge Araceli Martinez-Olguin denied a motion to approve the settlement sought by attorneys from the Setareh Law Group, of Beverly Hills, in the action against Delta.
The lawsuit dates to 2022, when the Setareh lawyers filed suit on behalf of named plaintiff Marvin Toledo, identified only as a Delta hourly employee working for the airline in California.
The lawsuit accused Delta of violating California labor laws.
The action was brought under California's so-called Private Attorney General Act (PAGA), which generally authorizes individual workers to sue employers for alleged state labor law violations on behalf of their fellow workers.
For decades, the PAGA law has exposed employers to a mounting storm of lawsuits, seeking potentially big payouts for often small or merely technical violations of California labor law.
Essentially, the law authorizes individual workers and their lawyers to step into court in place of California state labor officials. Before PAGA's enactment, only California state officials were empowered to enforce those labor rules on behalf of entire workforces.
Employers targeted by such actions could be forced to pay penalties, the bulk of which would go to the state of California. But under PAGA, employers could also be made to pay another large chunk to cover the fee demands of the lawyers who sued them.
This has generated a cottage industry of plaintiffs' lawyers who critics say use PAGA lawsuits to rake in fees, while generating significantly less benefits for workers. A recent analysis from the law firm of Duane Morris revealed that as recently as 2022, nearly 8,000 notices of PAGA actions were filed against California employers.
Other analyses have shown PAGA lawsuits increased by 273% in California courts from 2011-2022, as lawyers sought to cash in on the large and relatively easy paydays. An analysis by the firm of Baker & Welsh showed PAGA lawsuits have forced California employers to pay more than $10 billion to end PAGA lawsuits since 2013.
Under typical PAGA settlements, the state could claim as much as 75% of the payouts as "penalties." The remaining 25% would be paid to workers.
Employers could also be made to pay more to the lawyers who sued them to cover those lawyers' fee demands.
In the action against Delta, Toledo and the lawyers from the Setareh firm accused the airline of allegedly denying workers meal and rest periods required by California law and of shorting workers' pay, including by making them stand for 30 minutes or longer without pay in security screening lines before they could begin their regular work shifts, among other alleged violations of California labor law.
The lawsuit did not include pilots or flight attendants.
Proceedings continued for more than two years, before the plaintiffs announced a settlement deal in court earlier this year.
However, Judge Martinez-Olguin said she believed the deal was deficient in several ways.
First, she questioned how much the Setareh lawyers were going to receive in fees. Under the deal, the attorneys said they could claim one-third of the total settlement as fees, or nearly $4 million.
The judge said she was particularly concerned with what she said could be a so-called "clear sailing agreement" within the settlement, under which Delta would agree to not oppose the lawyers' fee request. The judge questioned if the arrangement was evidence of "collusion" between the plaintiffs' lawyers and Delta.
The plaintiffs, she said, failed "to provide meaningful explanation in support of such a large attorney fee award" in a purported PAGA settlement.
Further, Martinez-Olguin questioned the amount that would be paid to the state under the settlement. While the total amount of the settlement was $12 million, the deal would assign only $600,000, or about 5% of the total funds, to the PAGA portion of the settlement. That would mean the state would receive $450,000.
The judge said she believed this amount may be insufficient.
"Courts in this District regularly deny approval of PAGA settlements that represent a small proportion of the total settlement fund," the judge wrote.
And the judge further questioned a move by plaintiffs to narrow the definition of the workers who can claim a portion of the settlement. She noted the deal would cover about 5,000 Delta employees in California. According to the motion for settlement, they would receive an average payment of $1,488, but the actual payment would be calculated based on their individual number of workweeks.
However, the judge noted the settlement would exclude many other workers, particularly including those hired by Delta through "staffing agencies or third parties." It would include only those hired by the airline directly.
The judge said the plaintiffs must "provide more fulsome explanation why the difference in the class scope is appropriate."
The judge directed the plaintiffs to file a new motion and justify both the PAGA portion of the settlement and the $3.99 million attorney fees, while explaining why the fee provisions shouldn't be seen as a "collusive arrangement."
Plaintiffs' lawyers have not yet responded to the judge's ruling in court.
Plaintiffs are represented by attorneys Shaun Setareh, Thomas Segal and Farrah Grant, of the Setareh Law Group.
Delta has been represented by attorney Nicole L. Antonopoulos and others with the firm of Morgan Lewis & Bockius, of San Francisco, Palo Alto and Costa Mesa.