Judge John J. Kralik, Case Number: BC723965, Date: 2024-01-12 Tentative Ruling

Plaintiff Patrick Pote (“Plaintiff” or “Pote”) works as a house cleaner for Defendant Handy Technologies, Inc. (“Defendant” or “Handy”). He alleges he and other service providers clean and repair clients’ houses for flat rates per job. He alleges that he was not paid for overtime, rest breaks, missed meals or rest breaks, expenses incurred like cleaning supplies or gas, or travel time to and between jobs.

The complaint was filed on October 3, 2018. The first amended complaint (“FAC”), filed November 19, 2018, alleges causes of action for: (1) declaratory relief; and (2) violations of the Private Attorneys General Act (“PAGA”) (Labor Code §2698 et seq.).

In the declaratory relief cause of action, Plaintiff alleges that there exists an actual and real controversy between the parties regarding whether the waiver to bring representative actions under PAGA in the arbitration agreement is enforceable. (FAC, ¶¶25-26.)

In the PAGA claim, Plaintiff alleges that he is an aggrieved employee who brings the claim in a representative capacity on behalf of current and former service providers of Defendant who were subjected to unlawful wage-and-hour practices. (FAC, ¶¶8, 31.) Plaintiff seeks to collect civil penalties for various Labor Code violations under sections 2699(f)(2) (for violating sections 432.5, 226.2, 226.7, 558, and 512), 226.3 (for violating section 226(a)), 203 (for violating sections 201 and 202), 558(a) (for violating section 510), 2699(f) (for violating sections 200 and 2802), and 225.5 (for violating section 221). (Id., ¶34.) Plaintiff alleges that he submitted notice to the Labor and Workforce Development Agency (“LWDA”) of the specific Labor Code violations. (Id., ¶36.)

On October 18, 2019, the Court denied Defendant’s motion to compel arbitration and stay the proceedings.

Defendant appealed the Court’s order denying the motion to compel arbitration and filed a Notice of Appeal on December 4, 2019.

On October 17, 2022, the Court of Appeal issued its order affirming the Court’s denial of the motion to compel arbitration. On February 2, 2023, the Court of Appeal issued a remittitur attaching the October 17, 2022 order.

On December 18, 2023, Proposed Intervenors Sandra McKenzie and James Taylor (“Proposed Intervenors”) filed a motion for leave to intervene.

Proposed Intervenors request judicial notice of Exhibits: (A) the notice of settlement filed in McKenzie v. Handy Technologies, Inc. (Court of Appeal, Second Appellate District Case No. B311936) on December 1, 2023 (“McKenzie Appeal”); (B) the objection to the notice of settlement in the McKenzie Appeal on December 1, 2023; (C) the operative complaint in McKenzie v. Handy Technologies, Inc. (LASC Case No. 20STCV20953) on June 3, 2020 (“McKenzie Action”); (D) the FAC in Pote v. Handy Technologies, Inc. in this action filed on November 19, 2018 (“Pote Action”); (E) the joint case management conference statement filed on November 21, 2023 in the Pote Action; and (F) Handy’s application for extension of time filed on October 2, 2023 in the McKenzie Appeal. The request is granted. (Evid. Code, § 452(d).)

(1) The court shall, upon timely application, permit a nonparty to intervene in the action or proceeding if either of the following conditions is satisfied:

(B) The person seeking intervention claims an interest relating to the property or transaction that is the subject of the action and that person is so situated that the disposition of the action may impair or impede that person's ability to protect that interest, unless that person's interest is adequately represented by one or more of the existing parties.

(2) The court may, upon timely application, permit a nonparty to intervene in the action or proceeding if the person has an interest in the matter in litigation, or in the success of either of the parties, or an interest against both.

(CCP § 387(d).) “The burden to qualify for intervention as-of-right is ‘minimal’ and evidence showing that existing representation ‘may be’ inadequate suffices.” (Accurso v. In-N-Out Burgers (2023) 94 Cal.App.5th 1128, 1137.)

A PAGA action is designed to protect the public, not to benefit private parties. (Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (2009) 46 Cal.4th 993, 1003, 95 Cal.Rptr.3d 605, 209 P.3d 937.) PAGA “does not create property rights, or any other substantive rights” for aggrieved employees. (Ibid.) It is a procedural statute authorizing private citizens to seek civil penalties that State agencies otherwise would recover. (LaFace v. Ralphs Grocery Co. (2022) 75 Cal.App.5th 388, 397, 290 Cal.Rptr.3d 447.) The PAGA statutory scheme permits the deputization of multiple private parties to pursue “separate but similar actions by different employees against the same employer.”

Proposed Intervenors move for leave to intervene in the action, pursuant to mandatory and/or permissive intervention rules.

Proposed Inventors argue that they have a direct interest in the outcome of the litigation as Handy has represented that Proposed Intervenors’ claims have been fully “encompassed” in a pending, clandestine PAGA settlement in the Pote Action. (See Szeto Decl., ¶6, Ex. B.) Proposed Intervenors argue that they were not aware of the negotiations between Handy and Pote and their counsel, which occurred on September 1, 2023, nor were they invited to the mediation discussions; rather, they were informed by Handy that their entire case was resolved without their knowledge or consent. (Id., ¶7.) Proposed Intervenors argue that they are actively litigating overlapping PAGA claims against Handy in the McKenzie Action before Judge Jill Feeney in Department 78. They argue that the have been deputized by the State of California to pursue additional penalties for Handy’s willful miscalculation of aggrieved PAGA employees, failure to maintain accurate business records, failure to pay timely wages during employment, and failure to provide timely tips—claims that were not alleged in the Pote Action. Proposed Intervenors argue that Handy is attempting to release the State of California and the aggrieved PAGA employees’ additional claims with the wrong PAGA representative. As such, they argue that they are currently impaired or impeded from protecting their interests and are no longer adequately being represented by the current parties, such that mandatory and/or permissive intervention is appropriate.

In opposition, Plaintiff argues that he filed the Pote Action on October 3, 2018 and 20STCV20953 filed their own follow-on action on June 3, 2020 in the McKenzie Action, alleging virtually the same claims. Plaintiff argues that despite publicly filing the complaint with the Court and the PAGA notice publicly available on the LWDA’s website, Proposed Intervenors’ counsel did not check to see if a PAGA action already existed and they never sought to coordinate/consolidate the actions or contact Plaintiff’s counsel until December 2023. Plaintiff states that when Plaintiff’s counsel discovered on December 6, 2023 that Proposed Intervenors intended to file a motion for leave to intervene, they requested that the motion be put off until they could get more information about potential settlement and to meet and confer.

Plaintiff argues that Proposed Intervenors’ motion is untimely as they did not file their motion until 20 months after Plaintiff filed the Pote Action and that Plaintiff and Defendant have already expended time and resources to negotiate and finalize a PAGA settlement. Further, Plaintiff argues that Plaintiff, counsel, and the Court can adequately protect the LWDA and the State of California’s interests (the real parties in interest). Plaintiff also argues that Proposed Intervenors technically do not have a “legal” interest in the matter as they have no substantive or property rights in civil penalties recovered under PAGA, which are the interest of the State. Finally, Plaintiff argues that Proposed Intervenors have not shown that continuing the litigation without their participation as parties would impair their ability to protect their rights.

In Handy’s opposition, Handy makes similar arguments that Proposed Intervenors are untimely seeking intervention nearly 5 years after the Pote Action was filed, that the settlement was reached after arm’s length negotiations, private parties do not have proprietary interests in PAGA claims, and Proposed Intervenors have not shown how their interests are not adequately protected. Handy argues that even if Proposed Intervenors had an interest in the settlement, Proposed Intervenors have not shown how Plaintiff does not adequately represent Proposed Intervenors’ interests and their aggrieved employees.[1] Handy and Pote finalized and executed the Memorandum of Understanding (“MOU”) memorializing the settlement on December 22, 2023. (Nelson Decl., ¶11.)

Proposed Intervenors rely on Accurso v. In-N-Out Burgers (2023) 94 Cal.App.5th 1128, in support of their argument that intervention is proper. In Accurso, Tom Piplack and Brianne Marie Taylor were the lead plaintiffs in a PAGA action against In-N-Out in Orange and Los Angeles Counties. (Accurso, supra, 94 Cal.App.5th at 1132.) Upon learning of settlement negotiations in a subsequent, overlapping PAGA action brought by Ryan Accurso against In-N-Out in Sonoma County, Piplack and Taylor filed a proposed complaint in intervention in the Sonoma County action and moved to intervene. The trial court denied the motion, but the Court of Appeal vacated the order and remanded for reconsideration. (Id.)

With respect to the analysis on mandatory intervention, the Accurso Court found that as deputized proxies of the LWDA, Piplack and Taylor each had a public enforcement charge that qualified as a significantly protectable interest and that any settlement of a PAGA claim within the ambit of their LWDA proxy authorizations could potentially impair their legitimate proxy authority conferred upon them. (Id. at 1146.) The Court stated that “[s]ince Piplack and Taylor possess a legal interest sufficient to trigger eligibility for intervention as-of-right, their entitlement to mandatory intervention turns on whether they are ‘so situated that the disposition of the action may impair or impede’ their protectable interests and the closely related issue of adequacy of representation ‘by one or more of the existing parties.’” (Id. [quoting CCP § 387(d)(1)(B)].) The Court found that Piplack and Taylor did not need to establish that their interests will be impaired, but only that there is a substantial probability that their interest will be so affected; however, the Court found that they failed to meet this modest burden. (Id. at 1149.) The Court also found that Piplack and Taylor failed to meet their burden that Accurso and his counsel were inadequate representative because the settlement negotiations fell through and, in the absence of an actual settlement demonstrating that Accurso exceeded the scope of his LWDA authorization, the mere potential that he may be unable or unwilling to represent Piplack and Taylor’s interest in a future, hypothetical settlement was speculative. (Id. at 1152-53.)

[D]o nonparty PAGA claimants with overlapping claims have something significant to add to the settlement approval process? We think they may, and we are of the view that permissive intervention supplies a means to make sure the perspective of potentially affected non-party PAGA claimants is included in the settlement approval process.

Naturally, the proponents of a hard-won settlement will have little or no incentive to point out that the proposed settlement terms exceed anyone's authority; that the releases given are overbroad; that the consideration is inadequate; or that the allocation of money to be paid is in any respect unfair. As a result, trial courts are often faced with the sometimes challenging task of spotting deficiencies in a proposed PAGA settlement without assistance from anyone other than participants to the settlement negotiations.[] But in situations where PAGA claimants with their own overlapping claims in other pending cases show up and wish to provide input, we see no reason why they should not be given a seat at the table. And should trial courts wish to ensure that such PAGA claimants are meaningfully involved in the settlement approval process, permissive intervention even before the settlement approval process begins may be a way to ensure that they are fully prepared to do so.

(Accurso, supra, 94 Cal.App.5th at 1153-54 [footnote omitted].) Although In-N-Out argued that allowing permissive intervention would disrupt the litigation, the Court found that Piplack and Taylor’s proposal did not enlarge the scope of the case and arguably, in the long run, sought judicial economy to save judicial time in multiple courts. (Id. at 1154.)

First, the Court will address whether the motion for intervention was timely filed. The Pote Action was filed on October 3, 2018. The McKenzie Action was filed on June 3, 2020. On November 28, 2023, Proposed Intervenors’ counsel received an email from Handy’s counsel stating: “We have been advised that a settlement in principle has been reached in the matter of Pote v. Handy, and that this settlement will encompass the claims in your case.” (Szeto Decl., Ex. B.) On December 13, 2023, Pote’s counsel sent an email stating, “We wanted to let you know that Handy’s counsel in the Pote matter and I are willing to share some of the details of the parties’ proposed settlement. We encourage you, therefore, to hold off on filing a motion to intervene from now.” (Szeto Suppl. Decl., Ex. E.) Proposed Intervenors filed this motion on December 18, 2023. The Court will find that the motion was timely filed after notice of the settlement agreement and will consider the motion on its substantive merits with respect to the reasons for intervention.

Next, similar to the Accurso case, Proposed Intervenors have shown that they have a public enforcement charge that would qualify as a significantly protectable interest, such that any settlement of a PAGA claim within the ambit of their LWDA proxy authorizations could potentially impair their legitimate proxy authority conferred upon them. Proposed Intervenors argue that they are not seeking to expand the scope of the litigation, but rather seek a seat at the table to ensure the settlement has proper representation for the claims Pote and Handy are attempting to release. (Mot. at p.10.) This is difficult to ascertain completely as a copy of the settlement agreement has not been provided to Proposed Intervenors or the Court, but the LWDA notices are available. Based on these notices, it appears that there is both potential overlap, and a potential that some claims in McKenzie are beyond the scope of the Pote LWDA. For this reason, the Proposed Intervenors may have a point of view that the Court should consider in approving a Pote settlement.

Proposed Intervenors also argue that Pote cannot adequately represent Proposed Intervenors and that Pote cannot seek to release claims that are not specified within his LWDA notice. The LaCour v. Marshalls of California, LLC (2023) 94 Cal.App.5th 1172 case is instructive:

Contractually, no release is effective without party authority to effectuate it. For the same reason, the underlying issue of LWDA authorization-to-sue is inextricably bound up with the identity of claims analysis here. If she purports to settle PAGA claims that are not the subject of an adequate LWDA notice letter, a PAGA plaintiff exceeds her authority to act on behalf of the LWDA and to that extent cannot bind the LWDA to a judgment, at least not one that will have claim preclusive effect against a PAGA claimant authorized to litigate a broader set of PAGA claims.

(LaCour v. Marshalls of California, LLC (2023) 94 Cal.App.5th 1172, 1194.) “A settlement release exceeding the plaintiff's LWDA authorization will limit the claim preclusive effect of a judgment in binding nonparties, since it will prevent a defendant who later seeks to interpose a res judicata defense from meeting the identity of claims requirement necessary to trigger preclusion.” (Id.)

As summarized above in the “Background” section, the Pote Action includes causes of action for: (1) declaratory relief regarding the unenforceability of the representative action waiver; and (2) relief under PAGA on behalf of current and former service providers for Handy for requiring them to file an illegal arbitration agreement, for failure to provide meal and rest breaks, for failure to provide timely, accurate, itemized wage statements, for failure to make timely wage payments of all wages, for failure to pay overtime, for failure to pay for all hours worked, for withholding money from service providers in exchange for prompt payment of wages, and for failure to reimburse service providers for work-related expenses. Proposed Intervenors argue that the McKenzie Action stems from Handy’s misclassification of workers as independent contractors, delaying tips, and PAGA violations for Handy’s failure to: (1) pay minimum wage, (2) pay overtime, (3) provide meal periods, (4) authorize or permit rest periods, (5) pay timely wages upon termination, (6) pay timely wages during employment, (7) provide complete and accurate wage statements, (8) keep accurate business records, and (9) reimburse business expenses. Proposed Intervenors argue that they were deputized by the State of California to pursue 4 additional penalties against Handy in their complaint, including: (1) willful miscalculation of the aggrieved PAGA employees; (2) failure to maintain accurate business records; (3) failure to pay timely wages during employment; and (4) failure to provide timely tips. (Mot. at p.1.) In opposition, Pote argues that Proposed Intervenors are free to argue in the McKenzie Action that the settlement in the Pote Action does not encompass certain claims in their lawsuit on the ground that Pote lacked authority to release them. (Pl.’s Opp. at p.12.)

Given the extensive age of both cases, the apparent lack of any coordination to date, and that the case before the Court is near resolution, an extensive intervention in this case does not appear to promote the interests of judicial economy. Nevertheless, the Court believes that a limited, permissive intervention is appropriate. The Court will allow the Proposed Intervenors to intervene, to obtain a copy of the Settlement Agreement and to object to the Settlement Agreement if they feel they have an appropriate objection can be raised. This may occasion discussions of a global resolution to be reached at a table where everyone is present. Nevertheless, the Court will not at this time assume further jurisdiction over the resolution of the claims in the McKenzie Action. That will be left in Department 78, where it has been for three years.

For these reasons, the Court finds that Proposed Intervenors have sufficiently shown that they are entitled to limited permissive intervention for the purpose of objecting or approving of the settlement. In this Court’s view, that is chiefly the contribution that Proposed Intervenors can profitably add at this point in the litigation.

Proposed Intervenors Sandra McKenzie and James Taylor’s motion for leave to intervene is granted. The parties and counsel in these actions should make cooperative efforts to meet and confer regarding the settlement terms.

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[1] Handy informs the Court that the Pote Action was filed first and then 3 other overlapping PAGA-only actions against Handy were filed in Lagos v. Handy Technologies (July 6, 2023, LASC Case No. 23STCV15644), Cali v. Handy Technologies, Inc. (February 10, 2023, U.S. Dist. Court, Central District, Case No. 8:23-cv-00755-CJC-KES), and the McKenzie Action (June 3, 2020). (Nelson Decl., ¶10.) Counsel Michael W. Nelson states that the pending settlement in the Pote Action would release all PAGA claims based on Plaintiff’s theory of alleged independent contractor misclassification asserted in the Pote, Lagos, and Cali Actions, as well as the McKenzie Action. (Id.)

Superior Court of California

County of Los Angeles

Department B