July 20, 2022

May Courts Strike Unmanageable PAGA Claims? California Supreme Court to Answer

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Do trial courts have inherent authority to strike or narrow Private Attorneys General Act (PAGA) claims they deem unmanageable? On June 22, 2022, the California Supreme Court agreed to resolve this issue on appeal from Estrada v. Royalty Carpet Mills, Inc. (2022) 76 Cal.App.5th 685, the outcome of which may affect how trial courts manage their dockets and how parties raise and defend PAGA claims.

Estrada Holding and Rationale

Estrada held that trial courts have no such authority as to PAGA claims. Relying primarily on Kim v. Reins International California, Inc., the Fourth Appellate District reasoned that manageability is a requirement for class actions, which PAGA claims are not. Estrada, at 711-712, citing Kim (2020) 9 Cal.5th 73, 86-87 and Arias v. Sup. Ct. (2009) 46 Cal.4th 969, 975. Estrada further explained that "[a]llowing dismissal of unmanageable PAGA claims would effectively graft a class action requirement onto PAGA claims, undermining a core principle of these authorities. It would also interfere with PAGA's purpose as a law enforcement mechanism by placing an extra hurdle on PAGA plaintiffs that is not placed on the state." Id. at 697.

The Estrada court then suggested that, "where appropriate and within reason, courts may limit witness testimony and other forms of evidence when determining the number of violations that occurred and the amount of penalties to assess." Id. at 713. The Estrada court stated that "[t]his approach may also encourage plaintiffs' counsel to be prudent in their approach to PAGA claims and to ensure they can efficiently prove alleged violations … or risk being awarded a paltry sum of penalties, if any." Id. Effectively, and paradoxically, Estrada suggests that courts are powerless to dismiss unmanageable PAGA claims, but may refuse to award damages on the same basis.

Estrada's Conflict with Wesson v. Staples

Estrada is also notable because it deviated from Wesson v. Staples The Office Superstore, LLC (2021) 68 Cal.App.5th 746, previously the only published California appellate decision addressing this issue. Wesson found that "courts have inherent authority to manage litigation with the aim of protecting the parties' rights and the courts' ability to function." Id., at 763 and 766, citing Weiss v. People ex rel. Dept. of Transportation (2020) 9 Cal.5th 840, 863. This power derives from article VI, section 1 of the California Constitution. Wesson at 763. Furthermore, while the Second Appellate District acknowledged that PAGA claims are not class actions, it reasoned the California Supreme Court has suggested PAGA claims are still subject to manageability requirements. Wesson, at 766-767, citing Williams v. Sup. Ct. of L.A. Cnty. (2017) 3 Cal.5th 531, 559 ["proof of a uniform policy is one way a plaintiff might seek to render trial of the action manageable."].

Estrada acknowledged Wesson's contrary ruling but disagreed with its holding and analysis. Instead of analyzing courts' inherent power to manage litigation under the California Constitution, Estrada held firmly to the strict reading of PAGA as an immutable, administrative enforcement action. Estrada, at 712.

The California Supreme Court to Resolve Lingering Issues

Many questions linger over PAGA's manageability. Estrada's failure to address each Wesson argument, including the power vested to judges under the California Constitution, leaves the California Supreme Court to settle the dispute. Furthermore, with the U.S. Supreme Court's recent decision in Vikings River Cruises, Inc. v. Moriana (VRC), the California Supreme Court may revisit the state's role in PAGA actions. VRC, No. 20-1573 (U.S. Jun. 15, 2022).

While we await its decision, the California Supreme Court declined to depublish the Estrada and Wesson opinions, leaving courts to follow whichever they find more persuasive. Whatever the Supreme Court's decision, employers will learn whether they can continue to use unmanageability as a defense to PAGA or if they must devise new ways to address them head-on.

Special thanks to Summer Associate Hassan Smith for his valuable contributions to this GT blog post. Not a licensed attorney.

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