PAGA Claims May Proceed Despite Arguments That Trying Them Could Be ‘Unmanageable,’ California Supreme Court Rules

The California Supreme Court has determined that trial courts lack the authority to strike claims brought under California’s Private Attorneys General Act (PAGA) on the grounds that trying them would be unmanageable.

In a long-awaited decision, the Supreme Court also reminded trial courts of various tools and case management techniques they can use to make PAGA claims manageable.

Employers Have Faced PAGA Actions Alleging Widespread Violations

California employers have been inundated with lawsuits under the state’s Private Attorneys General Act, which permits employees to sue on behalf of themselves and other “aggrieved employees” for violations of the California Labor Code.

Given the courts’ expansive views on discovery and standing in these cases, and the lack of procedural protections present in the class action requirements, employers and courts have faced broad PAGA representative actions alleging widespread violations. Courts are still grappling with how to try such expansive cases.

One hope was that courts could strike PAGA claims if trying them would be unmanageable. The California Supreme Court has now determined that courts lack the inherent authority to do so. The court’s decision in Estrada v. Royalty Carpet Mills, Inc. resolved a split among California’s appellate courts as to whether trial courts have inherent authority to strike PAGA claims on the ground that the claim is “unmanageable.” The Courts of Appeal previously were split on this issue, with one court holding that the trial courts possess broad inherent authority to strike PAGA claims as unmanageable, see Wesson v. Staples the Office Superstore, LLC, and the other holding that the trial courts lack such inherent authority. See Estrada v. Royalty Carpet Mills, Inc.

The California Supreme Court concluded that trial courts cannot strike PAGA claims based on class action manageability standards. It reasoned that because PAGA claims are not class claims, it is inappropriate for the trial court to strike PAGA claims by employing class action requirements.  

How Trial Courts Can Manage PAGA Cases

The high court affirmed, however, that trial courts have various tools and case management techniques to make PAGA claims manageable, which include:

• Limiting testimony and the presentation of evidence.
• Narrowing the scope of the PAGA claim.
• Ruling in the defendant’s favor that a plaintiff is unable to prove allegations because they’ve pleaded too broadly.
• Assessing minimal penalties where a plaintiff alleges widespread Labor Code violations in a PAGA action but cannot prove them efficiently.

The court did not address the issue of “whether a defendant’s right to due process can ever support striking a PAGA claim, and if so, the circumstances under which such striking would be appropriate.”  Accordingly, Estrada leaves open the argument that trial courts may strike PAGA claims that are so broad that attempting to try the PAGA representative claim in one trial would impede a defendant’s due process right to defend itself. 

The court also emphasized the importance and long history of the manageability requirement for both California and federal (Rule 23) class actions, outside the context of a PAGA claim.

Key Takeaways for Employers

In short, although Estrada confirms that courts lack broad discretion to dismiss PAGA representative claims based on class action manageability standards, the case does not entirely disarm employers of their defenses to such claims. Indeed, Estrada warns employees to be scrupulous in their pleadings——or face the risk of adverse pre-trial rulings and reduced recoveries.

The key takeaways for employers are:

• Trial courts lack broad, inherent authority to strike a PAGA claim under class action manageability standards.
• Trial courts are not prohibited from striking a PAGA claim that would impede a defendant’s due process rights.
• While trial courts may not strike a PAGA claim as unmanageable, they may use case management techniques and tools to limit the claim to make it manageable, including by limiting the scope of the claim or limiting the evidence to be presented at trial.
• Plaintiffs are encouraged “to be prudent in their approach to PAGA claims” and “ensure they can efficiently prove alleged violations to unrepresented employees.”
• “If a plaintiff alleges widespread violations of the Labor Code by an employer in a PAGA action but cannot prove them in an efficient manner, it does not seem unreasonable for the punishment assessed to be minimal.”
• Courts may rule in an employer’s favor when an employee pleads a PAGA claim in such “an overbroad or unspecific manner” that the employee is unable to prove liability as to all or most employees.
• Estrada also confirms the importance of demonstrating manageability in the class action context, both in California and for Rule 23 class actions, which is helpful authority in defending class actions outside the context of PAGA.