{"id":1110,"date":"2024-01-18T19:54:23","date_gmt":"2024-01-18T23:54:23","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=1110"},"modified":"2024-01-18T19:54:23","modified_gmt":"2024-01-18T23:54:23","slug":"california-supreme-court-rules-that-lack-of-manageability-is-an-improper-basis-upon-which-to-strike-a-paga-claim-but-leaves-open-due-process-challenges","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/01\/18\/california-supreme-court-rules-that-lack-of-manageability-is-an-improper-basis-upon-which-to-strike-a-paga-claim-but-leaves-open-due-process-challenges\/","title":{"rendered":"California Supreme Court Rules That Lack Of Manageability Is An Improper Basis Upon Which To Strike A PAGA Claim, But Leaves Open Due Process Challenges"},"content":{"rendered":"

\"\"<\/a>By Eden E. Anderson, Gerald L. Maatman, Jr., and Jennifer A. Riley<\/b><\/p>\n

Duane Morris Takeaways: <\/b><\/em>On January 18, 2024, the California Supreme Court issued its opinion<\/a> in Estrada v. Royalty Carpet Mills, No. S274340 (Cal. Jan. 18, 2024). It is a game changer for employers operating in California.\u00a0 The Supreme Court held, in a unanimous decision, that trial courts lack inherent authority to dismiss claims under the Private Attorneys General Act of 2004 \u2013 the \u201cPAGA\u201d- with prejudice due to lack of manageability.\u00a0 The Supreme Court declined to address whether, and under what circumstances, a defendant\u2019s right to due process might ever support striking a PAGA claim. As such, the decision in Estrada is a required read for employers and their decision-makers.<\/i><\/b><\/p>\n

Case Background<\/b><\/p>\n

Jorge Estrada filed a putative class and PAGA action against his former employer asserting, as relevant here, meal period violations.\u00a0 After two classes comprised of 157 individuals were certified, the case was tried to the bench.\u00a0 The trial court ultimately decertified the classes, finding there were too many individualized issues to support class-wide treatment.\u00a0 Although the trial court awarded relief to four individual plaintiffs, it dismissed the non-individual PAGA claim on the grounds that it was not manageable.<\/p>\n

On appeal, Estrada argued that PAGA claims have no manageability requirement, and the Court of Appeal agreed in Estrada<\/i> v. Royalty Carpet Mills, Inc<\/i>., 76 Cal.App.5th 685 (2022). The Court of Appeal reasoned that class action requirements do not apply in PAGA actions and, therefore, the manageability requirement rooted in class action procedure was inapplicable.\u00a0 Further, the Court of Appeal reasoned that \u201c[a]llowing courts to dismiss PAGA claims based on manageability would interfere with PAGA\u2019s express design as a law enforcement mechanism.\u201d Id<\/i>. at 712. The Court of Appeal acknowledged the difficulty that employers and trial courts face with PAGA claims involving thousands of allegedly aggrieved employees, each with unique factual circumstances, but concluded that dismissal for lack of manageability was not an available tool for a trial court to utilize.<\/p>\n

The Court of Appeal in Estrada <\/i>recognized its holding was contrary to the holding in Wesson v. Staples the Office Superstore, LLC<\/i>, 68 Cal.App.5th 746 (2021), and created a split in authority.\u00a0 In Wesson<\/i>, the trial court struck a PAGA claim as unmanageable, and the Court of Appeal affirmed. The claims at issue in Wesson<\/i> involved the alleged misclassification of 345 store managers.\u00a0 The employer\u2019s exemption affirmative defense turned on individualized issues as to each manager\u2019s performance of exempt versus non-exempt tasks which varied based on a number of factors including store size, sales volume, staffing levels, labor budgets, store hours, customer traffic, all of which varied across the stores.\u00a0 The split in authority prompted the California Supreme Court to grant review in Estrada<\/i>.<\/p>\n

The California Supreme Court\u2019s Decision<\/b><\/p>\n

At the outset, the California Supreme Court noted that the issue before it was whether trial courts possess inherent authority to \u201cstrike\u201d PAGA claims for lack of manageability, defining the word \u201cstrike\u201d to mean a dismissal with prejudice. Jan. 18 Opinion<\/em> at 7. The Supreme Court then addressed, and rejected, the employer\u2019s argument that trial courts possess inherent authority to, for judicial economy purposes, strike any claim a plaintiff asserts. The Supreme Court explained that the power to dismiss a claim with prejudice is limited to cases involving a failure to prosecute, frivolous claims, or egregious misconduct, and that judicial economy does not warrant the dismissal of any claim.<\/p>\n

The Supreme Court rejected the employer\u2019s argument that the manageability requirement for class actions should be imported into PAGA actions. It reasoned that there are three structural differences between class actions and PAGA representative actions that warrant treating these claims differently, as well as differences in jurisprudential history. The three structural differences cited by the Supreme Court were: (1) that plaintiffs in PAGA actions are not required to establish superiority or predominance of common issues; (2) PAGA\u2019s purpose is to maximize enforcement of labor laws; and (3) that the California Labor and Workforce Development Agency (LWDA) can impose civil penalties for Labor Code violations without considering manageability.<\/p>\n

As to jurisprudential history differences, the Supreme Court noted that, unlike class actions which were an \u201cinvention of equity,\u201d PAGA actions are not \u201ccreatures of equity.\u201d\u00a0Id<\/i>. at 30. Thus, while class action jurisprudence developed to create various common law requirements for class actions that are not set forth in California\u2019s class action statute, the PAGA statute provides detailed statutory requirements for maintaining a PAGA claim, thereby constraining trial courts from using \u201cextra-statutory inherent authority to strike PAGA claims that the Legislature has authorized.\u201d\u00a0Id. <\/i>at 31. Because PAGA\u2019s express wording permits a plaintiff who has suffered one labor code violation to seek civil penalties on behalf of other employees for \u201cviolations that vary widely in nature,\u201d imposing a manageability requirement would \u201cdefeat the purpose of statute.\u201d\u00a0Id<\/i>. at 32.<\/p>\n

The Supreme Court declined to address whether, and under what circumstances, a defendant\u2019s right to due process might ever support striking a PAGA claim other than to note that any such authority would be \u201cnarrow authority of last resort.\u201d\u00a0Id<\/i>. at 41. Although the employer argued its due process rights would be violated if the PAGA claims against it were re-tried, the Supreme Court noted that the employer had only offered the testimony of two employees in the original trial and, thus, the due process issue was \u201chypothetical.\u201d\u00a0Id<\/i>. at 40. The Supreme Court, however, agreed that employers have a due process right to present an affirmative defense, but emphasized that an employer has no due process right to present the testimony of an \u201cunlimited number of individual employees\u201d or \u201ceach allegedly aggrieved employee.\u201d\u00a0Id<\/i>. at 40.<\/p>\n

The Supreme Court concluded by noting that trial courts have \u201cnumerous tools\u201d to manage complex cases, and suggested that the \u201cextent of liability\u201d in a PAGA case can be determined by surveys or statistical methods that estimate the number of aggrieved employees.\u00a0Id. <\/i>at 41. The Supreme Court emphasized that the burden of proof in a PAGA case remains with plaintiffs who should endeavor to be \u201cprudent in their approach to PAGA claims\u201d and that, if \u201ca plaintiff alleges widespread violations of the Labor Code . . . but cannot prove them in an efficient manner, it does not seem unreasonable for the punishment assessed to be minimal.\u201d Id<\/i>. at 44.<\/p>\n

Implications For Employers<\/b><\/p>\n

The Estrada<\/i> opinion strikes a blow to employers facing PAGA claims by removing lack of manageability as a ground for dismissal.\u00a0 While the California Supreme Court encouraged PAGA plaintiffs to be prudent to their approach to their PAGA theories, in practice, such prudence is uncommon.\u00a0 On the bright side, the decision leaves open an employer\u2019s ability to seek dismissal on due process grounds.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Eden E. Anderson, Gerald L. Maatman, Jr., and Jennifer A. Riley Duane Morris Takeaways: On January 18, 2024, the California Supreme Court issued its opinion in Estrada v. Royalty Carpet Mills, No. S274340 (Cal. Jan. 18, 2024). It is a game changer for employers operating in California.\u00a0 The Supreme Court held, in a unanimous … <\/p>\n

Continue reading “California Supreme Court Rules That Lack Of Manageability Is An Improper Basis Upon Which To Strike A PAGA Claim, But Leaves Open Due Process Challenges”<\/span><\/a><\/p>\n","protected":false},"author":651,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[107],"tags":[],"ppma_author":[92,7,9],"class_list":["post-1110","post","type-post","status-publish","format-standard","hentry","category-paga-actions"],"authors":[{"term_id":92,"user_id":651,"is_guest":0,"slug":"eeanderson","display_name":"Eden Anderson","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2023\/07\/andersoneden-100x100.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""},{"term_id":7,"user_id":575,"is_guest":0,"slug":"gmaatman","display_name":"Gerald L. Maatman, Jr.","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2022\/09\/maatmangerald-100x100.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""},{"term_id":9,"user_id":576,"is_guest":0,"slug":"jariley","display_name":"Jennifer A. Riley","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2023\/08\/rileyjennifer-100x100.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1110","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/users\/651"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/comments?post=1110"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1110\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/media?parent=1110"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/categories?post=1110"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/tags?post=1110"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/ppma_author?post=1110"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}