Until recently, California courts were split on whether Private Attorneys General Act (“PAGA”) claims could be dismissed for a lack of “manageability” – referring to the practicality of effectively conducting a trial on the issues. Like class actions, PAGA actions generally purport to represent a significant number of an employer’s current and former employees. However, there are important distinctions between class and PAGA actions, which caused California’s appellate courts to issue conflicting opinions on how PAGA cases should be adjudicated. The California Supreme Court’s recent decision in Estrada v. Royalty Carpet Mills has largely settled the issue. Unfortunately for California employers, the decision follows a trend that continues to go against businesses in California.
After reviewing the legal and factual issues in the case, and analyzing the governing law, the California Supreme Court concluded that trial courts lack inherent authority to strike PAGA claims on manageability grounds. In reaching this conclusion, the high court emphasized that trial courts do not generally possess a broad inherent authority to dismiss claims and noted that it is not appropriate for trial courts to strike PAGA claims by employing class action manageability requirements. Accordingly, it concluded that, while trial courts may use a vast variety of tools to efficiently manage PAGA claims, given the structure and purpose of PAGA, striking such claims due to manageability concerns — even if the claims are complex or time-intensive — is not among the tools they possess.
However, the Court’s holding was not absolute, leaving a slight opening for employers, and by extension, trial courts, to dismiss PAGA claims for other reasons. In relevant part the Court “express[ed] 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.” In defining the “tools” available to trial courts to ensure PAGA claims are effectively tried, the Court did not “foreclose on the possibility that a defendant could demonstrate that a trial court’s use of case management techniques so abridged the defendant’s right to present a defense that its right to due process was violated…”
The Court did not offer any further insight or guidance as to how or when a defendant’s right to due process might be violated through a trial court’s “management techniques” or specify the threshold at which a PAGA claim would be too burdensome for fair adjudication. While the opinion alludes to and concedes that constitutional due process protections are paramount, the takeaway from this decision is that employers have lost a major tool in defending themselves against claims that often serve to threaten the employer’s ability to do business in California.
