Judge Stephen P. Pfahler, Case 21CHCV00364 2022-08-15 Tentative Ruling

Motion for Summary Judgment on the PAGA Complaint for Violation of Labor Code section 2698, et seq.

Plaintiff Jerry Hernandez alleges Defendant B&B Manufacturing Co. violated certain wage and hour laws. On December 30, 2016, Plaintiff filed a PAGA complaint for Violation of Labor Code section 2698, et seq. Defendant B&B Manufacturing Co. answered the complaint on July 14, 2021. On September 15, 2021, the court denied the motion for judgment on the pleadings.

Defendant B&B Manufacturing Co. brought a motion for summary judgment on grounds that Plaintiff Jerry Herandez lacks standing to bring an action either as an individual or on behalf of the other employees, due to the execution of a separation agreement upon his termination, which included a waiver of claims under Civil Code section 1542. Plaintiff in opposition to the original motion maintained standing based on the agency enforcement mechanism powers provided by the PAGA statute. Defendant in reply challenged standing given the most recent United States Supreme Court ruling on the subject of standing and waivers in PAGA cases. (Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 (Viking).)

Because the Viking case came down after the submission of the opposition and before the reply, at the request of Plaintiff during oral argument, the court granted Plaintiff leave to file a supplemental brief addressing the impact of Viking on this specific case, with a right of reply for Defendant. The court specifically requested Plaintiff address “the impacts to Iskanian and Kim relative to the individual standing issues raised by the Supreme Court for settled parties seeking to continue participating as the representative in a PAGA action. The court also requests briefing on the issue of the appointment of a new representative should the designated lead lose standing. In other words, what is the impact of Viking River Cruises on the remaining statutory causes of action to the aggrieved employees who neither waived their claims nor individually settled.”

Plaintiff in supplemental opposition challenges the application of Viking to the instant case. As a threshold argument, Plaintiff requests a continuance on two grounds: the petition for rehearing filed with the United States Supreme Court on Viking and a case accepted by the California Supreme Court regarding California PAGA claims in light of Viking.

Plaintiff relies on Rule 45 of the United States Supreme Court for the lack of enforceability of Viking pending the review. Rule 45 “stays the mandate until disposition of the petition,” unless and until the petition is denied. The court finds no supporting argument that the petition for rehearing invokes the mandamus provisions thereby staying interpretation of the case. “2. In a case on review from a state court, the mandate issues 25 days after entry of the judgment, unless the Court or a Justice shortens or extends the time, or unless the parties stipulate that it issue sooner. The filing of a petition for rehearing stays the mandate until disposition of the petition, unless the Court orders otherwise. If the petition is denied, the mandate issues forthwith.” (U.S. Sup. Ct. R. 45.) Even if the petition constituted a writ of mandamus, the timing requirements within the Supreme Court rules lapsed. The opinion was released on June 15. Twenty-five days later was July 10, 2022 (Sunday), therefore July 11, 2022, which is well after the briefing deadline provided to Plaintiff.

Plaintiff also requests for a continuance of the hearing pending and a case granted certiorari to the California Supreme Court regarding individual PAGA claims in light of Viking. Plaintiff provides no specific citation, and only identifies the case as “Adolph v. Uber Techs.” The court shows an unpublished opinion entitled Adolph v. Uber Technologies, Inc. (Cal. Ct. App., Apr. 11, 2022, No. G059860) 2022 WL 1073583, review granted (July 20, 2022).) The court declines to defer consideration of the case pending review of an unpublished opinion by the California Supreme Court. (See Cal. Rules of Court, rule 8.1115.)

More substantively, Plaintiff seeks to limit the impact of Viking through the supposition that Viking only impacts “FAA-governed” arbitration claims, which is not at issue in the instant action. (Viking, supra, 142 S.Ct. at pp. 1924–1925.) Given PAGA claims cannot otherwise be waived under California law, Plaintiff therefore retains standing. (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 83-84 (Kim) Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 383 (Isakanian).) Plaintiff cites to a recently released opinion regarding standing of the individual in a PAGA action. (Howitson v. Evans Hotels, LLC (Cal. Ct. App., July 21, 2022, No. D078894) 2022 WL 2866213 (Howiston).) The argument depends on a distinction between the settlement of individual claims compared to PAGA claims that cannot be waived by an individual. (Howitson, supra, 2022 WL 2866213, at *8–9.)

Defendant in opposition seeks to apply the “rationale” of Viking in rejecting individual standing in a PAGA action on settled claims. Defendant agrees that arbitration is not at issue, but distinguishes Plaintiff’s argument on grounds that the employment severance agreement still constitutes a valid waiver of individual PAGA claims, and said agreement contains a severance clause including statutory or regulatory claims. (Viking, supra, 142 S.Ct. at p. 1925.) Defendant maintains Kim is consistent with Viking on divisible PAGA claims. (Ibid.) Finally, defendant challenges Plaintiff’s reliance on Howitzon as inapposite to Viking.[2]

The court addresses the standard for summary judgment. The pleadings frame the issues for motions, “since it is those allegations to which the motion must respond. (Citation.)” (Scolinos v. Kolts (1995) 37 Cal. App. 4th 635, 640-641; FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 382-383; Jordan-Lyon Prods., LTD. v. Cineplex Odeon Corp. (1994) 29 Cal.App.4th 1459, 1472.) The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atl. Richfield Co. (2001) 25 Cal.4th 826, 843.) “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.” (Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.) A defendant moving for summary judgment “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established.” (Code Civ. Proc., § 437c, subd. (p)(2).) “Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Ibid.)

“When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inference that may be drawn form that evidence, in the light most favorable to the party opposing summary judgment.” (Avivi, 159 Cal.App.4th at 467; see also Code Civ. Proc., § 437c, subd. (c).) “An issue of fact can only be created by a conflict in the evidence. It is not created by speculation, conjecture, imagination or guesswork.” (Lyons v. Security Pacific National Bank (1995) 40 Cal.App.4th 1001, 1041 (citation omitted).)

It remains undisputed that Plaintiff executed a severance agreement with a Civil Code 1542 waiver of all known and unknown claims as well.

(a) Notwithstanding any other provision of law, any provision of this code that provides for a civil penalty to be assessed and collected by the Labor and Workforce Development Agency or any of its departments, divisions, commissions, boards, agencies, or employees, for a violation of this code, may, as an alternative, be recovered through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees pursuant to the procedures specified in Section 2699.3.

(c) For purposes of this part, “aggrieved employee” means any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.

(g)(1) Except as provided in paragraph (2), an aggrieved employee may recover the civil penalty described in subdivision (f) in a civil action pursuant to the procedures specified in Section 2699.3 filed on behalf of himself or herself and other current or former employees against whom one or more of the alleged violations was committed.

In a case of first impression, the California Supreme Court found that an employee settling individual claims for Labor Code violations maintains standing to pursue a PAGA claim. (Kim, supra, 9 Cal.5th at pp. 83-84.) The court addressed the distinction between the individual settlement and the PAGA claim as the difference between damages for injury (unpaid overtime) versus the penalties available under a PAGA claim. (Id. at pp. 84-86.) Furthermore, the court noted the distinction between a PAGA action from a class action in that a PAGA constitutes a representative action on behalf of the state. (Id. at pp. 86-87.)

While the Kim court was not specifically presented with a 1542 question, the court contemplated the ability of an aggrieved party to prosecute the penalty claims on behalf of the state. “Nothing in the legislative history suggests the Legislature intended to make PAGA standing dependent on the existence of an unredressed injury, or the maintenance of a separate, unresolved claim. Such a condition would have severely curtailed PAGA's availability to police Labor Code violations because, as noted, many provisions do not create private rights of action or require an allegation of quantifiable injury. Instead, true to PAGA's remedial purpose, the Legislature conferred fairly broad standing on all plaintiffs who were employed by the violator and subjected to at least one alleged violation. Reins's narrower construction would thwart the Legislature's clear intent to deputize employees to pursue sanctions on the state's behalf.” (Id. at pp. 90-91; Johnson v. Maxim Healthcare Services, Inc. (2021) 66 Cal.App.5th 924, 930; Crestwood Behavioral Health, Inc. v. Superior Court of Alameda County (2021) 60 Cal.App.5th 1069, 1073.)

Because PAGA claims belong to the State of California, rather than the individual, under Kim, an employee’s right to bring a PAGA claim remains currently “unwaivable.” An aggrieved person, however, may knowingly waive a PAGA claim in electing to forego bringing such an action once they are aware of Labor Code violations. Preclusion “before any dispute arises” otherwise violates public policy. (Iskanian, supra, 59 Cal.4th at p. 383; CLS Transportation of Los Angeles, LLC addressed arbitration clauses, the logic blocking waivers seeking to relieve a party of its own “‘violation of the law’ [] is against public policy and may not be enforced.” (Julian v. Glenair, Inc. (2017) 17 Cal.App.5th 853, 868.)

While Plaintiff argues against a wholesale preclusion of the waiver, the cases require consideration of the actual waiver language. A case addressing a knowing waiver of PAGA claims found that Civil Code section 1542 was valid and enforceable given the PAGA waiver language. (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 86.) The Moniz court specifically found the 1542 waiver valid “that were or could have been pled based on the factual allegations of the complaint,” including PAGA claims. The case is consistent with Iskanian regarding the bar against waivers of claims for non-party employee personal claims. (Ibid.) The case therefore behooves the court to examine the actual plain language of the settlement for a known waiver of PAGA claims. [Declaration of Lisa Schick, Ex. 2.] Section five (5) of the agreement provides in relevant part:

“It is the intention of the Employee to fully, finally and forever settle and release all of the claims, actions, obligations, damages, liabilities, disputes and difference described above, whether known or unknown, foreseen, unforeseen, patent or latent that now exist, may exist, or formerly have existed between the parties and that in furtherance of this intention the releases given herein shall be and will remain in effect as a full and complete general release notwithstanding the discovery or existence of any additional or different facts…”

In reference to the “above” language, section four (4) summarizes the nature of the waived claims: “claims arising out or relating Employee’s employment and to any acts or events involving him and the Company, or its principals, including without limitation any and all claims whether based in tort, contract, or upon any federal, state or local law, statute or regulation, or based on Age Discrimination…”

Nothing in the plain language of the settlement in any way addresses PAGA either explicitly or even a reference to wage and hour claims. Other than a separation of employment and payment of $200, the agreement lacks description of the nature of the dispute, including a potential wage and hour dispute. Still, the section 1542 language allows for a waiver of PAGA claims belonging to the individual. (Moniz v. Adecco USA, Inc., supra, 72 Cal.App.5th at p. 86.) Noticeably absent from Plaintiff’s brief is any address of the actual waiver language, and instead only an emphasis on the bar on waivers to the individual PAGA action. While the language remains somewhat broad, the law interpreting section 1542 waivers allows for known waiver of claims arising from past conduct. Any intention to provide leave certain for certain types claims in a future proceeding must otherwise be manifestly stated. (Villacres v. ABM Industries Inc. (2010) 189 Cal.App.4th 562, 589.) The court therefore finds that the settlement agreement, absent any showing of language preserving a potential, individual PAGA claim, constituted a knowing, valid waiver of the individual pre-settlement PAGA claims. (Id., at pp. 589–590; see Arias v. Superior Court (2009) 46 Cal.4th 969, 987.)

Given the waiver of past PAGA claims with the employment severance agreement, the court, must now also consider the impact of Viking, as it relates to standing for a PAGA action by a settling party. The court agrees with Plaintiff’s argument that a party cannot waive PAGA claims via an arbitration agreement, and the plain language of the opinion upholds Iskanian on this point.[3]

Nevertheless, any arbitration clause is not at issue in the instant motion—only the separately executed severance agreement. The second part of the holding directly applies to the subject action.

“[A]s 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. See Cal. Lab. Code Ann. §§ 2699(a), (c). 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. See Kim, 9 Cal.5th at 90, 259 Cal.Rptr.3d 769, 259 Cal.Rptr.3d, 459 P.3d at 1133 (“PAGA's standing requirement was meant to be a departure from the ‘general public’ ... standing originally allowed” under other California statutes). As a result, Moriana lacks statutory standing to continue to maintain her non-individual claims in court, and the correct course is to dismiss her remaining claims.” (Viking 142 S.Ct. at p. 1925.)

Thus, while the United State Supreme Court left the anti-waiver of future claims provisions of Iskanian intact, the court finds the rationale underpinning the standing arguments regarding the division of cases between individual and non-individual are now invalidated under the circumstances presented in the instant case. Plaintiff validly waived all known and unknown accrued claims under 1542, and now seeks to proceed solely as a PAGA representative. The court additionally distinguishes the application of Howitson. While the Howitson court properly recognizes the distinction regarding PAGA belonging to the State of California, the case was not presented with a section 1542 waiver question. The court only addressed a section 998 settlement offer of individual claims and a future PAGA claim. (Howitson, supra, 2022 WL 2866213, at *9.)[4]

The court therefore holds that under Viking, Plaintiff Hernandez lacks standing to bring the instant action in a representative capacity given the undisputed settlement and waiver of the individual claims in the separately filed action. [Declaration of Lisa Schick, Ex. 2; Declaration of Ransom Boynton, Ex. 1.] The court grants the motion for summary judgment as to the representative action brought by Plaintiff Hernandez.

[1]The court acknowledges the reply to evidentiary objections, but finds no objections listed in the court electronic filing system either way. Regardless, the court finds the declaration of Lisa Schick admissible for purposes of considering the existence of the waiver following the settlement of individual claims.

[2]The court declines to consider any arbitration clause related arguments. The arguments were not raised in the prior motion, and the court sua sponte declines to consider any new or alternative arguments.

[3]“We hold that the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate. This holding compels reversal in this case. The agreement between Viking and Moriana 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, Viking was entitled to enforce the agreement insofar as it mandated arbitration of Moriana'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 Viking is entitled to compel arbitration of Moriana's individual claim.” (Viking 142 S.Ct. at pp. 1924-1925.)

[4]The court also explicitly states that the court offers “no opinion [on] whether Viking River” will apply on remand.” (Howitson, supra, 2022 WL 2866213, at *10.)