September 19, 2021

Volume XI, Number 262

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September 17, 2021

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Manageability – a New Weapon to Stave Off Unmanageable PAGA Claims

On September 9, 2021, California’s Court of Appeal issued an important decision in Wesson v. Staples The Office Superstore, LLC (“Wesson”), holding that trial courts have discretion to strike claims brought under the Private Attorneys General Act (“PAGA”) when a trial of the action would be unmanageable.  Unless the California Supreme Court grants review, Wesson will be binding upon California state courts and federal district courts.

Background of the Wesson case

The plaintiff worked for the defendant as a General Manager (“GM”) in California.  In 2015, he filed a class action lawsuit against the company alleging that it misclassified GMs as exempt executive employees (who are not entitled to meal and rest periods or overtime pay) when – according to the plaintiff – GMs should have been classified as non-exempt hourly employees.  The plaintiff subsequently amended his complaint to add a PAGA claim seeking nearly $36 million in civil penalties on behalf of 346 GMs (including himself).

The plaintiff moved to certify a class of California GMs, but the trial court denied the motion because the plaintiff had not demonstrated that his claims were susceptible to common proof.  Specifically, the trial court found there was too much variation in how GMs performed their jobs and the extent to which they performed their non-managerial tasks.

Following the denial of class certification, the defendant filed a motion to strike the PAGA claim on the ground that it would be unmanageable at trial and would violate the company’s due process rights for the same reasons that the court had found the plaintiff’s class claims to be unmanageable.  In particular, because the GM position was not standardized, the defendant argued there was a high degree of variation in how each of the 346 GMs performed their jobs (including the extent to which they performed non-exempt tasks).  Thus, the defendant argued that the plaintiff’s PAGA claim would require individualized assessments of each GM’s classification, leading to an “unmanageable mess” that would “waste the time and resources of the Court and the parties.”  Before ruling on the defendant’s motion, the trial court judge invited the plaintiff to submit a trial plan showing that his PAGA claim would be manageable.

In his trial plan, the plaintiff explained that he intended to make his initial case by showing that, as a matter of policy and common practice, GMs did not receive off-duty meal and rest breaks or overtime pay.  However, the plaintiff failed to address how the parties would then litigate the defendant’s exemption defense.  Indeed, the plaintiff’s counsel conceded that the defendant’s defense would require a “GM-by-GM, week-by-week analysis throughout the entire relevant time period,” and that each GM would require six trial days of examination (leading to an eight-year trial).  Nonetheless, he argued that the PAGA claim was manageable at trial so long as his part of the case was manageable, and that he had no duty to address how the defendant would prove its defenses.

The trial court’s ruling

The trial court disagreed with the plaintiff.  The court found that the defendant’s defenses could not be litigated by way of common proof, and that the proposed trial plan did not at all address how the parties or the court should address this issue.  The court further noted that a multi-year trial involving witnesses and documents individually pertaining to each of 346 GMs “does not meet any definition of manageability.”  Accordingly, the court granted the defendant’s motion to strike the PAGA claim.  The plaintiff appealed.

The Court of Appeal’s decision

On September 9, 2021, the Court of Appeal issued a decision affirming the trial court’s order and explaining why trial courts can, and often should, strike PAGA claims if trial of the claims would prove unmanageable after the plaintiff has had a fair opportunity to provide a trial plan addressing individualized issues.

First, the Court explained that trial courts have authority to ensure that PAGA claims will be manageable at trial (including by striking PAGA claims that cannot be tried manageably).  In doing so, the court resolved a dispute that had arisen in the federal district courts where cases split on this fundamental question.  The Court of Appeal held that the authority to declare cases unmanageable derives from courts’ inherent authority to manage complex litigation to prevent it from “monopolizing the services of the court to the exclusion of other litigants.”  The Court further noted that the PAGA statute’s (Labor Code section 2699) lack of an express manageability requirement is not determinative.  Indeed, California courts have uniformly required class action proponents to demonstrate that individual issues will not predominate despite the fact that Code of Civil Procedure section 382 (California’s class action statute) does not contain an explicit manageability requirement.

Second, the Court explained that trial planning and manageability inquiries must account for a defendant’s affirmative defenses.  Defendants have the right to present evidence necessary to establish their defenses.  Where a defendant can litigate defenses by way of common proof, courts may limit the presentation of individualized evidence that would be cumulative or have little probative value.  However, where individualized issues are incompatible with common proof, courts must preserve the defendant’s ability to present its defense in a complete and fair manner.  Where that raises an issue of trial manageability, the court may exercise its authority to dismiss unmanageable claims.

Third, the Court rejected the argument (that some district courts had adopted) that imposing a manageability requirement would unduly interfere with enforcement of PAGA claims.

The Court was careful to note that PAGA claims should not be stricken every time manageability concerns arise.  Instead, courts should “work with the parties to render a PAGA claim manageable by adopting a feasible trial plan or limiting the claim’s scope” whenever possible.  But where the unmanageability results from the nature of the PAGA claim itself – and not a court’s unwillingness to work with the parties – the court may strike the claim.  The decision grants trial courts broad discretion to evaluate trial plans in a specific case.

Based on these principles, the Court of Appeal held that the trial court had not abused its discretion in striking the PAGA claim.  In particular, the trial court gave the plaintiff ample opportunity to propose a trial plan demonstrating manageability.  The plaintiff not only failed to do so, but also embraced the argument that manageability was not his responsibility to address, regardless of the due process issues that created.  Both the trial court and Court of Appeal disagreed.

Implications

Wesson is the first published appellate decision to squarely address the issue of manageability in the PAGA context.  In the absence of conflicting authority, the general rule is that California’s trial courts and federal district courts must follow intermediate state appellate decisions.  Thus, unless the California Supreme Court grants review, Wesson will bind both state trial courts and federal district courts in the state and sweep away the line of district court decisions that had held to the contrary.

In light of Wesson, defendants should consider requesting that PAGA plaintiffs offer a trial plan showing exactly how they intend to manageably try the case, including the defenses.  If individualized issues will predominate at trial – whether in plaintiff’s case in chief or with regard to the defendant’s defenses – the defendant should consider moving to strike the PAGA claim as unmanageable.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 257
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About this Author

Thomas R. Kaufman Labor & Employment Attorney Sheppard Mullin Century City, CA
Partner

Mr. Kaufman is a partner in the Labor & Employment Practice Group in the firm's Century City office.

Areas of Practice

Mr. Kaufman's practice is in employment litigation defense, with an emphasis on California Labor Code and federal wage/hour class actions.  Mr. Kaufman has handled class litigation matters for a wide variety of industries, including banks and mortgage lenders, hospitals, large newspapers, information technology companies, restaurants, and other retailers.  Mr. Kaufman also is...

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