Do trial courts have the inherent authority to dismiss a claim under the Private Attorneys General Act (PAGA) on the grounds of manageability?
No, the unanimous California Supreme Court recently concluded.
Royalty Carpet Mills operated two California facilities, one of which Jorge Luis Estrada worked at. He filed a complaint against Royalty alleging various claims, including that the employer violated Labor Code provisions requiring that it provide meal breaks and another seeking PAGA penalties for various alleged Labor Code violations.
Estrada and another Royalty employee subsequently filed a second amended complaint; a third amended complaint that added another 11 named plaintiffs was later filed that alleged a total of seven class claims including PAGA claims.
The trial court certified various classes and held a bench trial. Following the presentation of evidence from both sides, the trial court entered an order decertifying two of the subclasses and dismissing the PAGA claim as being unmanageable.
Estrada appealed. The appellate panel reversed and Royalty appealed to the state's highest court.
Royalty – supported by several amici – argued that California trial courts have inherent authority to strike PAGA claims on manageability grounds.
The court disagreed.
"[W]e emphasize that trial courts do not generally possess a broad inherent authority to dismiss claims," the court wrote. "Nor is it appropriate for trial courts to strike PAGA claims by employing class action manageability requirements. And, 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 those claims are complex or time-intensive – is not among the tools trial courts possess."
Contrary to Royalty's contention that trial courts possess a broad and general power to dismiss claims in the name of judicial economy, California case law has recognized that the inherent authority of trial courts to dismiss claims is limited and operates in circumstances not present in the case at hand, the court said. Similarly, none of the statutes cited by Royalty revealed the broad inherent authority the employer argued for.
The court also took pains to distinguish PAGA claims – created by the legislature to maximize the enforcement of labor laws – from class actions, which require a manageability analysis.
"Given that a PAGA plaintiff need not demonstrate that common issues predominate or that a representative or non-individual PAGA claim is superior to other forms of adjudication, the requirement that a plaintiff demonstrate the manageability of a class claim does not establish a similar manageability requirement for any related PAGA claim," the court wrote.
Imposing a freestanding manageability requirement as to PAGA claims would invite courts to consider the administrative burdens of the action in a vacuum and could lead to the dismissal of many PAGA cases in contravention of the legislature's intent, the court added.
"We reject a rule that would likely result in courts relying on class action manageability determinations in striking PAGA claims, even where the primary factors driving the class manageability determination (e.g., predominance and superiority) have no applicability in the PAGA context," the court said.
In addition to the structural differences between a class action and a PAGA claim, the two have differing jurisprudential histories.
"[O]ur precedent makes clear that PAGA permits a plaintiff to have representational standing to seek penalties on behalf of individuals who have allegedly suffered violations that vary widely in nature," the court wrote. "To permit the striking of such claims merely because they require individual determination would deprive the State of the very remedy the Legislature has authorized and would thereby defeat the purpose of the statute."
The court was not persuaded that Royalty demonstrated any potential violation of its right to due process if the plaintiffs' PAGA claims were retried, noting that trial courts have numerous tools that can be used to manage complex cases generally, and PAGA cases in particular.
"Trial courts face the sometimes difficult task of employing case management techniques in a way that preserves the parties' statutory and constitutional rights," the court explained. "[S]triking a PAGA claim on manageability grounds alone, as the trial court did in this case, is inconsistent with a plaintiff's statutory right to bring such a claim and is beyond a trial court's inherent authority. And while we do not foreclose 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, that showing has not been made here."
To read the opinion in Estrada v. Royalty Carpet Mills, Inc., click here.
Why it matters
While acknowledging the challenges presented by complex cases, the unanimous California Supreme Court was clear: trial courts cannot strike a PAGA claim on the grounds of manageability.
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