• California Supreme Court held that trial courts lack inherent authority to strike (dismiss with prejudice) claims under the PAGA.
• Class action manageability requirement cannot be superimposed onto PAGA claims.
• The Court did not decide whether an employer may strike an unmanageable PAGA claim on the ground that the claim violates an employer’s due process rights.
• The Court emphasized other tools are available to manage PAGA claims, including but not limited to representative testimony, surveys, statistical evidence, limits to witness testimony, demurrers, and motions for summary judgment.

On January 18, 2024, the California Supreme Court held that trial courts lack inherent authority to strike (dismiss with prejudice) claims under the Private Attorneys General Act of 2004 (PAGA)¹ on manageability grounds. The Court’s decision resolved a split in the Court of Appeal on this issue. In Wesson v. Staples the Office Superstore, LLC (2021),² the appellate court had concluded that trial courts possess such inherent authority, whereas in Estrada v. Royalty Carpet Mills, Inc. (2022),³ a different appellate court came to the opposite conclusion in finding that trial courts lack such inherent authority. The California Supreme Court affirmed the Court of Appeal’s judgment in Estrada.

This decision will have a significant impact on companies defending PAGA actions that have frequently argued, with varying degrees of success, that courts have inherent power to strike PAGA claims when the claims are unmanageable. The Court’s decision effectively eliminates an employer’s manageability defense in PAGA actions moving forward. The Court did not decide whether an employer may strike an unmanageable PAGA claim on the ground that the claim violates an employer’s due process rights. At the same time, the Court’s decision offers insight into other ways trial courts can manage evidence in PAGA cases.

Background

In Estrada, the plaintiffs filed a combined wage and hour class action and PAGA complaint. The complaint included causes of action for violation of California’s meal break laws. The trial court certified several meal period subclasses. After a bench trial on plaintiffs’ claims, the trial court entered an order decertifying the meal period subclasses on the ground that there were too many individualized issues to support class treatment. In the same order, the trial court dismissed the PAGA claim for meal period violations with respect to persons other than the named plaintiffs as being unmanageable. Plaintiffs appealed from the decertification order and the judgment. The Court of Appeal found that the trial court abused its discretion by decertifying the meal period subclasses and erred in dismissing the subclasses’ PAGA meal period claims on manageability grounds. The California Supreme Court granted the employer’s petition for review to resolve the manageability issue dividing the appellate courts.

PAGA Cases Are Different From Class Actions

In its analysis, the California Supreme Court first noted that trial courts lack inherent authority to strike a PAGA claim on manageability grounds based on judicial economy concerns. According to the Court, California case law recognizes that the inherent authority of trial courts to dismiss or narrow claims is very limited and operates in circumstances that were not present in Estrada, such as cases involving a failure to prosecute, frivolous claims, or egregious misconduct.

Next, the Court concluded that class claims differ significantly from PAGA claims in three ways that make it inappropriate to impose a class action-based manageability requirement on PAGA actions. First, manageability bears upon questions of superiority and the predominance of common issues, requirements unique to the class action context. But in PAGA actions, plaintiffs do not need to satisfy class action requirements such as establishing that common issues predominate. Second, unlike class claims, PAGA claims are effectively administrative enforcement actions, and imposing a manageability requirement would impede the effectiveness of such actions. Finally, unlike class claims, the court's authority to provide relief under PAGA is subject to specific statutory provisions that make it inappropriate to impose a manageability requirement on PAGA claims, as there is no manageability limitation on the Labor and Workforce Development Agency’s authority to assess a civil penalty against companies.

The Court then reviewed the history of class actions and PAGA claims to further justify application of a manageability requirement as to class actions, but not to PAGA actions. According to the Court, class action requirements, including manageability, developed in large measure from California courts’ assertion of their inherent equitable power. In contrast, a PAGA claim is a purely statutory claim arising under California law. The Court saw little reason to presume that the legislature would intend for courts to have broad extra-statutory inherent authority to strike PAGA claims that the legislature has not explicitly authorized.

Manageability Guidance for Future Cases

The Court’s opinion touched on two issues that may impact future PAGA litigation. First, the Court was careful to explain that while its decision concluded that manageability is an improper basis upon which to strike a PAGA claim, the Court left open the possibility that a PAGA claim might be stricken to protect a defendant’s due process rights. But striking a PAGA claim to protect a defendant’s due process rights would derive from a narrow authority “of last resort” to protect a constitutional right, rather than broad inherent authority to manage cases before the court. The Court expressed no opinion as to the hypothetical questions of “whether, and under what circumstances, a defendant’s right to due process might ever support striking a PAGA claim.”

Additionally, the Court emphasized that trial courts still have numerous tools that can be used to manage complex cases generally, including PAGA actions. The Court provided several non-exhaustive examples. For instance, the Court noted PAGA cases may benefit from representative testimony, surveys, and statistical evidence. The Court also noted that trial courts can limit the types of evidence a plaintiff may present or use other tools to assure a PAGA claim can be effectively tried, such as limiting witness testimony and other forms of evidence when determining the number of violations that occurred and the amount of penalties to assess. The Court approved the Estrada court’s comment that when a plaintiff cannot prove their claims in an efficient manner, “it does not seem unreasonable for the punishment assessed to be minimal.” And finally, the Court also noted that procedural tools such as demurrers and motions for summary judgment still exist to curtail overbroad and unspecific claims where a plaintiff would be unable to prove liability as to all or most employees.

Key Takeaways for Employers

The Court’s decision makes it more likely that plaintiffs will bring PAGA claims separately from class claims. The Court’s decision makes such cases harder to defend, as there is little chance claims will be dismissed prior to trial, even if resolving the claims will require voluminous evidence and individualized inquires. The Court’s decision provides approval regarding certain types of evidence that can be used to prove PAGA cases such as statistical evidence and surveys. The Court’s decision does not make clear how such tools can be reliable because PAGA cases are not subject to class action commonality or predominance requirements.

When defending future cases with manageability concerns, in addition to focusing on plaintiffs’ inability to prove that alleged violations actually occurred on a broad basis, employers must focus on due process constitutional arguments, rather than arguing that courts have an inherent authority to strike unmanageable PAGA claims. Finally, employers should consider implementing or updating their arbitration agreements to ensure that individual PAGA claims are subject to arbitration, in line with the recent Viking River Cruises v. Moriana and Adolph v. Uber Technologies decisions, which held that individual PAGA claims may be arbitrated.

Footnotes

¹ Lab. Code, § 2698 et seq.

² 68 Cal.App.5th 746, 766–767.

³ 76 Cal.App.5th 685, 697.