Recent PAGA Settlement Demonstrates Why PAGA Cases Are Typically Worth Far Less Than the Maximum Theoretical Recovery

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On January 11, 2022, Judge Cunningham of the Los Angeles Superior Court conditionally approved a $7.5 million agreement to settle three overlapping Private Attorneys General Act (PAGA) actions, the lead case titled Reyes v. Kellermeyer Bergensons Servs., LLC. The consolidated settlement is perhaps the largest settlement approved since the California Court of Appeal defined the standard for reviewing a PAGA settlement in Moniz v. Adecco USA, Inc., 72 Cal. App. 4th 56 (2021). (To read about the Moniz decision, click here.)

The decision is notable not only for the size of the settlement, but for a lengthy tentative decision that provides a pithy summary of the many reasons why a PAGA plaintiff’s realistic recovery is often far less than the maximum possible exposure. Although the plaintiffs estimated a maximum exposure of over $104 million, for several reasons, the court agreed that the $7.5 million settlement amount was “fair, reasonable, and adequate” in light of the realistic recovery and the risks inherent in pursuing a PAGA claim.

  • First, the maximum exposure assumed that more than one PAGA penalty could be awarded to an aggrieved employee for a single violation (often referred to as “stacking”). As the defendant pointed out, there do not appear to be any known court decisions authorizing stacking.
  • Second, the maximum exposure assumed that the court could award heightened penalties for “subsequent” violations. As multiple courts have held, such penalties are not available unless the Labor Commissioner has previously cited employer for the violation. (To read about the Gunther v. Alaska Airlines, Inc., 72 Cal. App. 5th 334 (2021) decision on this point, click here.)
  • Third, if the claims are not susceptible of common proof, then the plaintiff “would still face significant practical problems in aggregating any material exposure,” because “each violation would need to be proven as to each person and for each period for which recovery is sought.” Tentative at 18 (reciting defendant’s argument). This could mean that many individual employees will need to testify at trial in order to prove a significant number of violations, which may be difficult or impossible as a practical matter.
  • Fourth, the plaintiff’s theories of liability may not be capable of proof in a manageable trial. If the claims could only be proven by a fact-intensive, employee-by-employee analysis, the court is authorized to limit the claims to a manageable scope or strike them entirely. (To read about Wesson v. Staples the Office Superstore, LLC, 68 Cal. App. 5th 746 (2021), which authorizes courts to strike or limit PAGA claims, click here.)
  • Fifth, even if liability is proven, courts have broad discretion to award any amount of penalty up to the maximum. The court specifically cited the case of Carrington v. Starbucks Corp., 30 Cal. App. 5th 504 (2018), in which the court awarded only $5 per pay period because any violations that occurred were the result of human error in enforcing the company’s lawful policies.

PAGA claims are notoriously difficult to value, given the inherent uncertainties that lie at several different stages of the lawsuit. However, the Reyes settlement provides a useful roadmap for evaluating those uncertainties and for explaining—to an opposing party or a court—why the realistic range of outcomes may be far less than what the plaintiff seeks.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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