Defending PAGA Claims In the Golden State Is Further Eroded By The Estrada Decision

On January 18, 2024, the California Supreme Court concluded in Estrada v. Royalty Carpet Mills, Inc. that manageability arguments alone can no longer be grounds for dismissal of a Private Attorneys General Act (PAGA) claim. The Court held that, while trial courts may use a variety of tools to efficiently manage PAGA claims, striking such claims due to manageability concerns, even if those claims are complex or time-intensive, is not among the tools trial courts possess. As a result, employers in the Golden State remain vulnerable to unwieldy PAGA claims.

Background

Plaintiff Jorge Luis Estrada along with twelve co-named plaintiffs sued their employer on behalf of themselves and other aggrieved employees for multiple violations of the California Labor Code. During the trial, numerous individuals testified, including several named plaintiffs, managers and HR staff of the Defendant employer. At the close of trial, relying on Wesson v. Staples the Office Superstore, LLC, the trial court dismissed the PAGA claim on grounds that it was too complex and unmanageable.

The Court of Appeal reversed the dismissal, holding that “allowing dismissal of unmanageable PAGA claims would effectively graft a class action requirement onto PAGA claims, undermining a core principle” established in at least two prior California Supreme Court cases. The Court of Appeal concluded that, although a court could limit the presentation of evidence to ensure a manageable trial (which might make it challenging for the plaintiff to prove widespread violations), courts lacked the authority to strike or limit PAGA claims before trial.

The California Supreme Court granted review to decide whether trial courts have inherent authority to strike or limit PAGA claims that could not otherwise be made manageable. Following oral argument, employers crossed their fingers tight that the Supreme Court would find that trial courts held such authority.

Unfortunately for employers, the California Supreme Court, after reviewing legal and factual issues, rejected the trial court’s decision that a lack of predominance for class claims meant that the PAGA claims were unmanageable. The Court concluded that trial courts lack inherent authority to strike PAGA claims on manageability grounds, overturning Wesson. Instead, the ruling instructs trial courts to use “tools,” such as limiting testimony, types of evidence, representative testimony, and surveys to make unwieldy PAGA cases manageable within bounds of due process.

Key Takeaways

The Estrada decision further aligns with California’s trend of limiting traditional defenses for PAGA claims, defenses often available in class action procedures and safeguards secured through arbitration agreements.

However, it’s worth noting that the Court’s decision still allows trial courts to manage PAGA claims effectively using methods such as demurrer, motion for summary judgment, or narrowing the plaintiff’s definition of ‘aggrieved employees.’ Additionally, the Supreme Court emphasized that PAGA’s public policy is subordinate to constitutional due process protections. That is, the ruling does not bar the trial court from striking a PAGA claim where the available “tools” fail to sufficiently safeguard an employer’s constitutional due process rights.

Pearlman, Brown & Wax, LLP will continue to monitor developments related to defending PAGA claims. For questions regarding PAGA generally, or the Estrada decision, please contact the firm’s Employment Law department for guidance.