Judge David S. Cunningham, Case 19STCV12719 2023-04-07 Tentative Ruling

Judge: David S. Cunningham, Case: 19STCV12719, Date: 2023-04-07 Tentative Ruling

Moving Party: CitiStaff Solutions, Inc. (“CitiStaff”) and Dependable Highway Express, Inc. (“DHE”) (jointly “Defendants”)

DHE “is a shipping and transportation company with locations throughout California.” (Opposition, p. 2.) CitiStaff “is a staffing company.” (Id. at pp. 2-3.) CitiStaff allegedly assigned Plaintiff and other “hourly, non-exempt workers to DHE’s facility on Olympic Boulevard in Los Angeles, California.” (Id. at p. 3.)

Plaintiff alleges “wage and hour” violations and seeks civil penalties under the Private Attorneys General Act (“PAGA”) “as a proxy for the State of California for all aggrieved employees[.]” (Id. at p. 4.)

On 5/2/22, the Court heard Defendants’ motion to strike the PAGA cause of action. Defendants argued that the PAGA cause of action is unmanageable. The Court found the motion premature and denied it without prejudice.

On 10/6/22, the Court heard the renewed motion to strike and continued the hearing to 1/6/23.

At issue is whether the hearing should be continued for a third time or whether the renewed motion to strike should be granted now.

“Defendants rely on Wesson v. Staples the Office Superstore, LLC (2021) 68 Cal.App.5^th 746”:

There, the plaintiff filed a PAGA claim on behalf of himself and 345 other general managers. The trial court granted the defendant’s motion to strike, and the Second District Court of Appeal affirmed:

Wesson's claim asserted Labor Code violations as to 346 Staples GMs, premised on Staples's alleged misclassification of those employees as exempt executives. By their nature, claims involving employee misclassification are highly fact-dependent, as the inquiry focuses on the work actually performed by the employee, as well as the employer's realistic expectations and the realistic requirements of the job. Thus, trials involving misclassification claims often involve significant amounts of factual minutiae and therefore tend to be lengthy even when they involve only a few employees.

In the class action context, our Supreme Court acknowledged that misclassification cases “can pose difficult manageability challenges.” It explained: “Although common proof may be possible if there are uniform job requirements or policies, an employer's liability for misclassification under most Labor Code exemptions will depend on employees’ individual circumstances. Liability to one employee is in no way excused or established by the employer's classification of other employees.”

The record in this case raised significant manageability concerns. Staples adduced evidence that the GM position was not standardized, and that there was great variation in how Staples GMs performed their jobs and the extent to which they performed non-exempt tasks. The evidence showed that Staples stores varied widely in size, sales volume, staffing levels, labor budgets, and other variables that affected GMs’ work experience. Staples's evidence also showed that how GMs spent their time depended on their experience, aptitude, and managerial approaches, among other factors. The trial court credited this evidence, and Wesson does not contest it on appeal. Based on this evidence, Staples argued that Wesson's claims would require individualized assessments of each GM's classification and would lead to “an unmanageable mess” that “would waste the time and resources of the Court and the parties . . . .”

Wesson agreed that Staples's affirmative defense would require individualized assessments of the 346 GMs, stating in his briefing to the court that “Staples [would] need to proffer ‘a GM-by-GM, week-by-week analysis’ throughout the entire relevant time period that all of the GMs were properly classified as exempt executives.” And he did not suggest there was a manageable way to litigate Staples's exemption defense. Instead, Wesson argued that the manageability inquiry need not consider a defendant's affirmative defenses, asserting that “a manager misclassification PAGA claim is ‘manageable’ so long as [the] [p]laintiff's prima facie case, concerning each aggrieved employee at issue, is provable by resort to common evidence.” Thus, in addressing the litigation of Staples's exemption defense in the trial plan he proposed to the court, Wesson insisted that it would be improper for him to “dictate how Staples should go about proving its exemption defense,” and simply pledged that he would not attempt to prevent Staples from proving its affirmative defense as it saw fit. At the hearing on the issue, the parties estimated they would need six trial days per GM to litigate GMs’ classification individually, or roughly eight years.

The evidence and argument before the trial court revealed no apparent way to litigate Staples's affirmative defense in a fair and expeditious manner, as the defense turned in large part on GMs’ actual work experience, yet there was extensive variability in the group of Staples's GMs. The parties agreed that individualized litigation of the issue as to each of 346 GM would require a trial spanning several years with many hundreds of witnesses. The trial court reasonably concluded that such a trial would “not meet any definition of manageability.”

To be sure, Staples would have been able to offer common proof relating to its realistic expectations as to how GMs should spend their time and the realistic requirements of the job. In the unpublished portion of this opinion, we concluded its common evidence on those issues precluded summary adjudication. But the fact that certain evidence is minimally sufficient for purposes of summary adjudication does not mean that a factfinder would find it credible and persuasive at trial. Thus, Staples could not be expected to limit its defense to common evidence on its realistic expectations and the realistic requirements of the job, while ignoring the issue of how individual GMs actually spent their time -- the “first and foremost” consideration under the IWC wage order.

Wesson's argument below that a court should ignore affirmative defenses in assessing manageability makes little sense. That a plaintiff may prove his or her prima facie case relatively quickly and efficiently is of little comfort if any fair presentation of a cognizable defense would seize the court's resources for years to come.

For the first time on appeal, Wesson contends that Staples had no due process right to call every GM as a witness at trial, and thus that the trial court could have rendered a trial on his claim manageable simply by limiting Staples's ability to litigate its defense individually as to each GM. In support, Wesson points to certain language by our Supreme Court in Duran. The language he references does not support his contention.

In holding that the trial court impermissibly constrained the defendant's ability to present a defense, the Duran court explained, “While class action defendants may not have an unfettered right to present individualized evidence in support of a defense, ... a class action trial management plan may not foreclose the litigation of relevant affirmative defenses, even when these defenses turn on individual questions.” The court further stated: “No case, to our knowledge, holds that a defendant has a due process right to litigate an affirmative defense as to each individual class member. However, if liability is to be established on a classwide basis, defendants must have an opportunity to present proof of their affirmative defenses within whatever method the court and the parties fashion to try these issues.”

This language, cited by Wesson, indicates that a defendant is not categorically entitled, in every case, to litigate an affirmative defense individually as to each class member. Yet in the same breath, the court stressed that defendants must have a fair opportunity to litigate their affirmative defenses in some way, even if that entails individualized evidence. A trial court thus may not “significantly impair[]” the defendant's ability to present a defense. As discussed, the evidence before the trial court supported its determination that Staples's affirmative defense could not be fairly litigated through common proof, and no evidence before the court suggested it could.

In his reply brief, Wesson summarily asserts for the first time that Staples could have sought to manage individual issues through “ ‘pattern and practice evidence, statistical evidence, sampling evidence, expert testimony, and other indicators of ... centralized practices ....’ ” He made no such claim below, relying instead on the assertion that the manageability of Staples's defense was irrelevant. Moreover, nothing in the record suggested that these were feasible means of proving how individual GMs spent their time, and Wesson's argument on appeal is woefully insufficient to establish that the trial court abused its discretion in concluding to the contrary.

We do not hold that a PAGA misclassification case can never be managed through common-proof methods. However, Wesson's lack of cooperation with the trial court's inquiry in this regard stymied the court's efforts to devise a plan that would allow the action to proceed, in whole or in part. On the record before us, the trial court's determination that Wesson's PAGA claim was unmanageable was eminently reasonable. Accordingly, we find no abuse of discretion in the court's decision to strike Wesson's PAGA claim.

(Wesson, supra, 68 Cal.App.5^th at 772-775, citations and footnotes omitted, underlined case names added.)

“Plaintiff cites Estrada v. Royalty Carpet Mills, Inc. (2022) 76 Cal.App.5^th 685, 2022 WL 855568 . . . for the proposition that a PAGA cause of action ‘cannot be struck on manageability grounds’”:

[In Estrada,] [t]he Fourth District Court of Appeal considered Supreme Court precedent and rejected Wesson:

While we understand the concerns expressed in Wesson, we reach the opposite conclusion. Based on our reading of pertinent Supreme Court authority, chiefly Arias v. Superior Court (2009) 46 Cal.4th 969, 95 Cal.Rptr.3d 588, 209 P.3d 923, and Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 259 Cal.Rptr.3d 769, 459 P.3d 1123, we find a court cannot strike a PAGA claim based on manageability. These cases have made clear that PAGA claims are unlike conventional civil suits and, in particular, are not class actions. Allowing 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. That said, courts are not powerless when facing unwieldy PAGA claims. Courts may still, where appropriate and within reason, limit the amount of evidence PAGA plaintiffs may introduce at trial to prove alleged violations to other unrepresented employees. If plaintiffs are unable to show widespread violations in an efficient and reasonable manner, that will just reduce the amount of penalties awarded rather than lead to dismissal.

(Estrada, supra, 76 Cal.App.5^th 685, 2022 WL 855568, at *1, underlined case names added.)

“Estrada and Wesson create a split of authority. Both remain published and citable.” (5/2/22 Tentative Ruling Re: Motion to Strike, p. 5.)

On 6/22/22, the Supreme Court granted review of Estrada to determine whether “trial courts have inherent authority to ensure that claims under [PAGA] will be manageable at trial, and to strike or narrow such claims if they cannot be managed[.]” (Estrada v. Royalty Carpet Mills (2022) 511 P.3d 191.)[1]

The Court is inclined to continue the hearing for a reasonable period to see if the Supreme Court rules before the trial. The trial date has been vacated, so there is time for a continuance.

At the last hearing, the Court stated that it “leans toward following Wesson because it is a Second District decision.” (5/2/22, Tentative Ruling Re: Motion to Strike, p. 5.)

While the Court remains inclined to follow Wesson pending the Supreme Court’s ruling, the Court favors a continuance and supplemental briefing. Plaintiff notes that discovery is incomplete. The discovery cutoff for fact discovery was moved to 10/14/22. (See 8/23/22 Joint Stipulation and Order to Continue Discovery Cut-Off, p. 4.) No expert discovery has been done. (See Opposition, p. 8.) Plaintiff’s expert plans to conduct a survey for the purpose of obtaining and providing representative evidence. (See ibid.) The Court tends to agree with Plaintiff that it should not decide manageability pre-survey. (See id. at p. 8 n.6 [arguing that it is premature for the Court to reject/strike the expert’s unfinished survey work].) A continuance until the survey is complete plus supplemental briefing discussing the results will allow the Court to resolve the issue on a full record instead of in a vacuum. (See, e.g., id. at p. 8 n.5 [requesting an opportunity to address concerns about the survey when its finished and/or to submit an amended trial brief].)

Additionally, the Court favors continuing the hearing because the parties are in the process of rescheduling private mediation. (See 8/23/22 Joint Stipulation and Order to Continue Discovery Cut-Off, p. 2.) Deciding the manageability issue now may jeopardize the mediation – e.g., it may cause one side or the other to either cancel or not participate meaningfully.

Defendants’ manageability challenge is based on statements in Plaintiff’s current trial plan. Given that (1) the “Wesson vs. Estrada” issue is before the Supreme Court, (2) discovery and the survey are incomplete, and (3) Plaintiff appears interested in filing an amended trial plan, the Court declines to reach the merits at this time.

Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 (“Viking River”)

Defendants contend the Court should allow them to compel arbitration of the aggrieved employees’ individual PAGA claims. They cite Viking River as support. (See Motion, pp. 13-14.)

Prior to Viking River, the applicable law was Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4^th 348. “Iskanian’s principal rule prohibits waivers of ‘representative’ PAGA claims in the first sense.” (Viking River, supra, 142 S.Ct. at 1916, underlined case name added.) “That is, it prevents parties from waiving representative standing to bring PAGA claims in a judicial or arbitral forum.” (Ibid., emphasis in original.) “But Iskanian also adopted a secondary rule that invalidates agreements to separately arbitrate or litigate ‘individual PAGA claims for Labor Code violations that an employee suffered,’ on the theory that resolving victim-specific claims in separate arbitrations does not serve the deterrent purpose of PAGA.” (Id. at 1916-1917, underlined case name added; see also, e.g., Knight, supra, at ¶ 5:49.4m [citing California case law for the proposition that a “single count under PAGA could not be ‘split into an arbitrable individual claim and a nonarbitrable representative claim”].)

In Viking River, the plaintiff “executed an agreement to arbitrate any dispute arising out of her employment.” (Viking River, supra, 142 S.Ct. at 1916.) “The agreement contained a ‘Class Action Waiver’ providing that in any arbitral proceeding, the parties could not bring any dispute as a class, collective, or representative PAGA action.” (Ibid.) “It also contained a severability clause specifying that if the waiver was found invalid, any class, collective, representative, or PAGA action would presumptively be litigated in court.” (Ibid.) “But under that severability clause, if any ‘portion’ of the waiver remained valid, it would be ‘enforced in arbitration.’” (Ibid.)

“After leaving her position” with the defendant, the plaintiff “filed a PAGA action . . . in California court.” (Ibid.) “Her complaint contained a claim that [the defendant] had failed to provide her with her final wages within 72 hours, as required by” Labor Code sections 101 and 102. (Ibid.) “But the complaint also asserted a wide array of other code violations allegedly sustained by other . . . employees, including violations of provisions concerning the minimum wage, overtime, meal periods, rest periods, timing of pay, and pay statements.” (Ibid.) The defendant “moved to compel arbitration of [the plaintiff’s] ‘individual’ PAGA claim” – i.e., “the claim that arose from the violation she suffered — and to dismiss her other PAGA claims.” (Ibid.) “The trial court denied that motion, and the California Court of Appeal affirmed, holding that categorical waivers of PAGA standing are contrary to state policy and that PAGA claims cannot be split into arbitrable individual claims and nonarbitrable ‘representative’ claims.” (Ibid.)

The Court of Appeal’s ruling “was dictated by . . . Iskanian.” (Ibid., underlined case name added.) “Iskanian’s principal prohibition required the lower courts to treat the representative-action waiver” in Viking River “as invalid insofar as it was construed as a wholesale waiver of PAGA standing.” (Id. at 1917, underlined case name added.) “The agreement's severability clause, however, allowed enforcement of any ‘portion’ of the waiver that remained valid, so the agreement still would have permitted arbitration of [the plaintiff’s] individual PAGA claim even if wholesale enforcement was impossible.” (Ibid.) “But because” Iskanian “prohibits division of a PAGA action into constituent claims, the state courts refused to compel arbitration of that claim as well.” (Ibid.)

The United States Supreme Court granted review and reversed, holding, eight to one, that the FAA preempts Iskanian “insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Id. at 1924.) The opinion instructs:

This holding compels reversal in this case. The agreement between [the defendant] and [the plaintiff] purported to waive “representative” PAGA claims. Under Iskanian, this provision was invalid if construed as a wholesale waiver of PAGA claims. And under our holding, that aspect of Iskanian is not preempted by the FAA, so the agreement remains invalid insofar as it is interpreted in that manner. But the severability clause in the agreement provides that if the waiver provision is invalid in some respect, any “portion” of the waiver that remains valid must still be “enforced in arbitration.” Based on this clause, [the defendant] was entitled to enforce the agreement insofar as it mandated arbitration of [the plaintiff’s] individual PAGA claim. The lower courts refused to do so based on the rule that PAGA actions cannot be divided into individual and non-individual claims. Under our holding, that rule is preempted, so [the defendant] is entitled to compel arbitration of [the plaintiff’s] individual claim.

The remaining question is what the lower courts should have done with [the plaintiff’s] non-individual claims. Under our holding in this case, those claims may not be dismissed simply because they are “representative.” Iskanian’s rule remains valid to that extent. But as we see it, PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding. Under PAGA's standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action. [Citation.] When an employee's own dispute is pared away from a PAGA action, the employee is no different from a member of the general public, and PAGA does not allow such persons to maintain suit. [Citation.] As a result, [the plaintiff] lacks statutory standing to continue to maintain her non-individual claims in court, and the correct course is to dismiss her remaining claims.

* Iskanian is preempted to the extent it bars dividing PAGA claims into individual and representative claims;

* the presence of a severability clause allows the defendant to compel the plaintiff’s individual PAGA claim to arbitration; and

* once the plaintiff’s individual PAGA claim is compelled to arbitration, he or she lacks standing to maintain the representative PAGA claim.[2]

Ultimately, the Court does not need to analyze the Viking River issue at this time. There is no motion to compel arbitration pending, so the issue is unripe. Whether Defendants should be allowed to file a motion to compel arbitration can be discussed at the 10/6/22 hearing.

[1] As of this week, the Supreme Court still has not ruled in Estrada.

[2] The High Court’s standing ruling is nonbinding. In fact, the California Supreme Court is set to decide the standing question in a case called Adolph v. Uber Technologies, Inc.