Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and associate Sarah Gilbert with their discussion of key developments in litigation and legislation related to the California Private Attorneys General Act.
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Episode Transcript
Jerry Maatman: Thanks, loyal blog listeners and readers for joining us on this week’s installment of the Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and I’m joined by my colleague, Sarah Gilbert, of our San Diego office. Welcome, Sarah.
Sarah Gilbert: Great to be here, Jerry. Thank you.
Jerry: Today we wanted to discuss trends and important developments in state court class action, litigation. Since the decision of where to file a class action is always a strategic imperative for the plaintiff’s bar, and then, whether or not to remove it from state court to federal court. For defense counsel, class action litigation is very much like buying real estate – location, location is everything, Sarah, what are some of the considerations that you’re often speaking to your clients about in terms of state court versus federal court class action litigation.
Sarah: So, although almost all state law procedural requirements for class certification mirror Rule 23 of the federal rules. The plaintiffs’ bar often perceives state courts as having more positive predisposition towards their clients’ interests, particularly where putative class members have connections to the state and the events at issue occurred in the state where the action is filed. Beyond forum shopping between state and federal court, the plaintiffs’ bar also seeks out individual states that are believed to be more plaintiff-friendly, such as California, Georgia, Florida, Illinois, Louisiana, Massachusetts – among others – and these are actually among the leading states where plaintiffs’ lawyers file a volume of class actions. These courts are thought to have more relaxed procedural rules related to discovery, consolidation, and class certification; a lower bar for evidentiary standards; and higher than average jury awards – among other considerations – all of which incentivize forum shopping related to state class actions.
Jerry: I’ve been a lawyer 42 years, and I think at last, count, I’ve been in 48 different states defending class action litigation. And I’d have to say that although state statutory rules and regimes are based loosely on Federal Rule 23, every state approaches class action litigation a little differently, and there are nuances to the law. What do you think is important, for example, for companies operating in California to know about the nuances of California class action litigation?
Sarah: Absolutely. So, it is very important for companies in California to pay attention to California’s controversial Private Attorneys General Act – we call it the PAGA. The PAGA authorizes workers to file lawsuits, to recover civil penalties on behalf of themselves, other employees and the State of California, for state labor code violations. As of now, California is the only state to have enacted this type of law so far. However, several other states are considering their own similar private attorneys general laws, including New York, Washington, Oregon, New Jersey, and Connecticut. So it will be crucial to monitor state legislation on this topic given the impact such laws will have on class litigation strategy moving forward.
Jerry: Well, I know this has been an especially interesting year for PAGA related developments, especially following the reform legislation signed by Governor Newsom in June. And, as I understand it, after June of 2024, there’ll be a new regime in terms of how PAGA damages, PAGA procedures will take place. And although not to be applied retroactively and only into the future, it’s going to be a brand-new playing field in California. I know you’ve been working very hard on strategies for clients to deal with these changes, what would be some of the high-level points or takeaways that you think are important for clients?
Sarah: Sure. So I mean, as is clear and as you referenced, the PAGA reforms and activity are hotly contested, hotly debated in California. California is the epicenter of class actions filed in state court. It has more class action litigation than any other state. While all varieties of class-wide cases are filed in California, a high majority of those are consumer fraud and employment-related. And something I know, with all of our clients in California facing such claims, is that even where an employer’s written formal policies appear facially neutral and compliant – which is very often the case – employees may successfully seek class certification for demonstrating common issues where an employer’s practices and protocols allegedly violate the law, even if those policies, as written, appear to be compliant.
Jerry: Thanks, Sarah. You know, I think it’s very interesting – most companies think that the California Supreme Court exists to find in favor of plaintiffs. Yet in the last month it issued the Lyft decision, which has a direct ‘apples and oranges’ practical effect on PAGA litigation. As I read the opinion, it says, where an employer is facing multiple PAGA actions and settles one of them, the litigants in the other pending PAGA actions cannot parachute in, intervene and challenge the other settlement. So it makes it easier for a company to deal with PAGA litigation and to settle litigation. What are some of your thoughts on the takeaways from the California Supreme Court decision in Lyft?
Sarah: Yeah, absolutely. This was a seminal ruling came out on August 1st of this year. To give some background, in rapid succession between May to July 2018, three plaintiffs, all Lyft drivers, Olson, Seifu, and Turrieta filed separate PAGA actions alleging improper classification as independent contractors. So in 2019, Turrieta reached a $15 million settlement with Lyft, which included a payment of $5 million in attorneys’ fees. As part of the settlement, Turrieta amended her complaint to allege all PAGA claims that could have been brought against Lyft. She then filed a motion for court approval of the settlement consistent with practice. And although the LWDA did not object to the settlement, when Olson and Seifu, the other two plaintiffs, and their counsel, got wind of the settlement, they moved to intervene, and objected. The trial court denied the intervention requests, approved the settlement, and then denied motions by Olson and Seifu to vacate the judgment in the Turrieta PAGA action. The court of appeal affirmed, finding that as nonparties, Olson and Seifu lacked standing to move to vacate the judgment, as only an aggrieved party can appeal from a judgment. On the intervention issue, the Court of appeal explained that the real party interest in a PAGA action is the State of California, and thus neither Olson nor Seifu had a direct interest in the case.
The California Supreme Court then granted review to consider whether a PAGA plaintiff has the right to intervene, object to, or move to vacate a judgment in a related pocket action that purports to settle the PAGA claims that a plaintiff has brought on behalf of the State. The California Supreme Court ended up agreeing with the court of appeal and the trial court, and they made a few notable findings. The California Supreme Court noted there was nothing in the PAGA statute expressly permitting intervention, and that PAGA’s purpose to penalize employers who violate California wage & hour laws and deter such violations was well served by the settling PAGA plaintiff, thus having other PAGA plaintiffs involved in a settled PAGA claim is not necessary to effectuate PAGA’s purpose. Relatedly, the Supreme Court also found significant the fact that the PAGA statute only requires that notice of settlement be sent to the LWDA and approved by the trial court, necessarily implying that other litigants need not be informed of the settlement or otherwise involved.
The Supreme Court also noted that permitting intervention would result in a PAGA claim involving multiple sets of lawyers, all purporting to advocate for the same client, fighting over who could control the litigation and settlement process, and who could recover the attorneys, fees. The Supreme Court highlighted that PAGA plaintiffs nonetheless have a variety of options to pursue other than intervention, such as consolidation or coordination of PAGA cases, to facilitate resolution of the claims in a single proceeding; or PAGA plaintiff can offer arguments and evidence to a trial court related to the PAGA settlement; or raise his or her concerns with the LWDA, so as to spur LWDA action.
Finally, the Supreme Court then held that the same reasoning for its conclusion against a right to intervention also meant that a PAGA plaintiff has no right to move to vacate the judgment obtained by another PAGA plaintiff in a separate PAGA action, or to require that any objections he or she files to another plaintiff settlement be ruled upon.
Jerry: Thanks for that excellent overview, Sarah. I think 2024 and 2025 are going to be bellwether years in California, not only for PAGA related rulings, especially as the reform legislation is implemented, but just class action litigation in general. As our loyal blog readers and listeners know, we do an annual study called the Duane Morris Class Action Review. We download every filing, every ruling in state and federal courts throughout the United States. This morning there were 118 class actions recorded as being filed yesterday, and 40% of them were in the state of California. So California is truly the epicenter of class action litigation. Well, thanks so much for joining us on this weekly episode, Sarah, and thanks so much for your thought leadership in this space.
Sarah: Thank you. Thank you, Jerry.