California Supreme Court holds that trial courts do not have the inherent authority to strike unmanageable PAGA claims for judicial economy

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In Estrada v. Royalty Carpet Mills, the California Supreme Court published its long-awaited decision regarding the trial court’s ability to dismiss or strike Private Attorneys General Act (“PAGA”) claims based on their “unmanageability.” Before discussing the opinion, it is important to first define some key terms.

Key terms

  • “PAGA” is a unique California statute that empowers employees to file lawsuits for Labor Code violations on behalf of themselves and other employees. Under PAGA, these employees act as private attorneys general to enforce state labor laws, allowing them to seek civil penalties for violations that would otherwise be pursued only by the state labor enforcement agencies.
  • A “class action” is a legal process where one or several individuals represent a larger group (the “class”) in a lawsuit. It is used when numerous individuals have similar claims, making individual lawsuits impractical. Class actions consolidate these claims into a single lawsuit, addressing common legal issues efficiently. Key aspects include commonality of legal or factual issues, adequacy of representation by class representatives, and the typicality of their claims.
  • In legal terms, “manageability” refers to the practicality of effectively conducting a trial. It encompasses considerations such as the complexity of the issues involved, the number of parties or claims, and the efficiency with which the case can be tried. Manageability is a requirement for the viability of a class action case, where the court assesses whether the common issues in a case predominate over individual issues and whether a class action is a superior method of adjudication compared to individual lawsuits.

The Estrada opinion

Plaintiff Estrada sued Royalty Carpet Mills (“Royalty”) for multiple violations of the California Labor Code, including failure to provide first and second meal breaks, and for derivative civil penalties under PAGA. Estrada, and his 12 co-named plaintiffs, sued on behalf of themselves and others in two capacities, under California’s class-action procedural rules (i.e., the “class claims”), and as representatives of the state of California under PAGA (i.e., the “PAGA claim”).

At the end of the trial, the trial court ruled that both the class and PAGA cases were “unmanageable” and therefore could not proceed. The Court of Appeal reversed the trial court’s decision, holding that manageability is not a valid basis for dismissing PAGA claims.

On review of this case, the California Supreme Court held that trial courts do not have the inherent authority to strike unmanageable PAGA claims—at least for the sake of judicial economy. But this opinion was expressly limited to the facts of the Estrada case, so a trial court may still strike unmanageable PAGA claims. The Supreme Court further held that trial courts may use other “tools to ensure that “PAGA claim[s] are effectively tried,” including limiting testimony, types of evidence, using representative testimony, surveys, and statistical analyses. However, the opinion again acknowledged that even the full toolkit may not be sufficient to protect an employer’s due process in certain circumstances.

Unfortunately, the Court provided no guidelines on when trial courts should utilize their “toolkit” for PAGA claims, nor did it define what constitutes an “unfixable” claim that defies fair processing. This vagueness presents a challenge in discerning the appropriate approach for exceptionally intricate PAGA cases and identifying claims that are too problematic for standard legal procedures. Furthermore, this omission leaves unanswered questions about the approach courts should take with particularly complex PAGA claims and the threshold at which a claim becomes too burdensome for fair adjudication.

Key takeaways

The Estrada opinion significantly alters the litigation landscape for PAGA claims. With this ruling, the California Supreme Court continues its trend of eroding traditional defenses and safeguards available to employers, such as those established in class action procedures and enforceability of arbitration agreements. However, the Court conceded that the public policy underlying PAGA takes a back seat to constitutional due process protections. This is the critical takeaway. Because the typical PAGA involves numerous claims, a wide range of employees, different Labor Code violations and multiple worksites, a particular PAGA claim may be too unmanageable even under Estrada.

For employers and their attorneys, the Estrada opinion requires a shift in strategy. As soon as a PAGA notice or complaint is received, employers must assume the case will proceed to trial no matter how expansive and unwieldly. Furthermore, employers and their attorneys should focus on potential due process violations to present to the trial court with the hope that the trial court will use its “toolkit” to strike some or all PAGA claims.