California PAGA Cases Can’t Be Dismissed Due to Unmanageability

Trial courts in California can no longer discard lawsuits brought under the state’s Private Attorneys General Act (PAGA) over concerns that they would be unmanageable to try in court, following a ruling from the California Supreme Court.

The court’s decision in Estrada v. Royalty Carpet Mills is “going to embolden the plaintiff’s bar,” and it’s going to make settlements much more difficult, said Andrew Paley, an attorney with Seyfarth in Los Angeles. As a result of the ruling announced Jan. 18, “there’s going to be a tremendous amount of litigation and frankly confusion at the trial court level.”

The ruling “essentially removes what was a potent defense for employers in PAGA cases,” said Brett Greving, an attorney with Cozen O’Connor in San Francisco. It “makes PAGA cases easier to try from an employee’s perspective, so that may lead to more PAGA cases being filed.”

[See related article, “The Three Biggest PAGA Questions California Employers Have for 2023”]

Most PAGA claims deal with labor violations like unpaid wages or missed meal breaks. They can be an individual claim or a class-action claim. To determine manageability, courts consider whether issues pertaining to individual class members may be fairly and efficiently adjudicated.

In Estrada, a group of employees sued a carpet manufacturer with worksites in Santa Ana and Irvine, Calif., claiming it failed to provide required meal breaks. A trial court dismissed the case as being unmanageable. An appeals court reversed the trial court’s decision, allowing the case to proceed. The company claimed that allowing the case to go forward violated its due process rights and argued that trial courts can strike claims to preserve judicial resources and prevent trials from becoming excessively complex and time-consuming.

However, the state supreme court disagreed, saying, “Our case law has recognized that the inherent authority of trial courts to dismiss claims is limited and operates in circumstances that are not present here.” Dismissing the case is permitted only when the plaintiff has failed to prosecute diligently or the plaintiff has no valid cause of action, the court found.

Royalty Carpet Mills did not respond to a request for comment.

Narrowing the Scope

Some options remain for employers that want to reduce their liability.

“Ultimately, all Estrada actually says is the trial court can’t dismiss the case,” Paley said. “The trial court retains all of the tools that it always possessed to efficiently try the case in a manageable fashion. That is the strategy that employers need to be pursuing.”

For a PAGA class action, the size of the class depends on how you define “aggrieved employee,” or someone who has standing to bring a PAGA claim. Paley noted that judges can limit the scope of the class and the evidence presented at trial to make the case manageable, depending on the facts of the case. For example, instead of defining the class as all nonexempt employees in California, the court could limit it to only employees who reported to a certain manager or only employees who held a certain job title.

“I would expect the court would narrow it only to the maximum extent that it becomes manageable,” Paley said. “Any restriction [on class size] is good and useful. That [discretion for the court] is still a substantial victory for employers, even if it’s not a home run.”