United States: Surprising New Pro-Employer PAGA Decision

Issue

In Wesson v. Staples the Office Superstore, LLC, (Cal. Ct. App., Sept. 9, 2021, No. B302988) 2021 WL 4099059, Division Four of the Second Appellate District of the California Court of Appeal tackled an issue of first impression: "whether trial courts have inherent authority to ensure that PAGA claims will be manageable at trial, and to strike such claims if they cannot be managed." (Id. at *1.)

Result

After drawing on established principles of the courts' inherent authority to manage litigation, including ensuring the manageability of representative claims, the Court of Appeal concluded that "courts have inherent authority to ensure that PAGA claims can be fairly and efficiently tried and, if necessary, may strike claims that cannot be rendered manageable" and "as a matter of due process, defendants are entitled to a fair opportunity to litigate available affirmative defenses, and a court's manageability assessment should account for them..." (Id. at *2.)

Applying these principles to the factual record before the trial court, the Court of Appeal affirmed the trial court's order striking plaintiff's PAGA claim. Specifically, the Court of Appeal found that, given the state of the record and plaintiff's lack of cooperation with the trial court's manageability inquiry, the trial court did not abuse its discretion in striking his PAGA claim as unmanageable. (Id.)

Facts

In Wesson, plaintiff worked for Staples the Office Superstore, LLC ("Staples") as a store general manager ("GM"). In 2015, plaintiff brought an action against Staples alleging various causes of action including unpaid overtime and failure to provide meal and rest breaks.  (Id. at *2.) Each of plaintiff's claims was premised on the theory that Staples had misclassified the GM position as exempt.

Plaintiff subsequently amended his complaint to add a cause of action seeking civil penalties under PAGA. (Id.) Plaintiff's PAGA claim purported to cover 346 GMs and sought $36 million in civil penalties.  (Id. at *2.)

Plaintiff later moved to certify a class of GMs in the class action lawsuit, but the trial court denied his motion, concluding he had not demonstrated that his claims were susceptible to common proof. (Id. at *2.) Specifically, the trial court found that important factual questions relating to whether GMs spent most of their time performing exempt, managerial tasks could not be resolved on a classwide basis. (Id.)

Following the trial court's denial of class certification, Staples moved to strike plaintiff's PAGA claim, invoking the court's inherent authority to manage complex litigation. (Id.) In support of its motion, Staples pointed to the following evidence that purportedly established that the GM position was not standardized, and that there was great variation in how GMs performed their job duties and the extent to which they performed non-exempt tasks:

According to Staples's evidence, Staples stores varied widely in size, sales volume, staffing levels, labor budgets, store hours, customer-traffic levels, products and services offered for sale, and many other variables, all of which affected GMs' work experience. Staples's evidence also tended to show that how GMs spent their time depended on their experience, aptitude, and managerial approaches, as well as the size and composition of their management teams.  (Id.)

Relying on this evidence, Staples argued that 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." (Id.) Plaintiff opposed Staples' motion on various grounds, including the argument that imposing a manageability requirement would immunize employers from liability and defeat PAGA's purpose. Plaintiff also alternatively argued that, even if the court could require that PAGA claim be manageable, it should consider only the ability to try plaintiff's prima facie case, not the manageability of any affirmative defense.

Prior to ruling on the motion to strike, the trial court invited plaintiff to submit a trial plan showing that his claim would be manageable. (Id. at *3.) As relevant here, plaintiff conceded that to litigate its exemption defense, Staples would need to proffer substantial individualized proof. However, plaintiff did not attempt to address how the parties could litigate Staples' exemption defense, stating that it would be improper to dictate how Staples should go about proving its defense. (Id.)  Rather, according to plaintiff's trial plan, Staples would be permitted to present whatever evidence it deemed necessary. At a subsequent hearing, the parties estimated they would need a total of six trial days per GM to litigate their exemption status. Based on this estimate, the trial would last eight (8) years.  (Id.)

The trial court ultimately granted Staples' motion to strike. Initially, the court found that it had the authority to ensure the manageability of the PAGA claim. Then, based on the failure of plaintiff's trial plan to address how the parties could litigate Staples' affirmative defense, it determined the claim was unmanageable.  (Id.)

Analysis

The Court of Appeal affirmed the trial court's ruling, concluding that "courts have inherent authority to ensure that a PAGA claim will be manageable at trial — including the power to strike the claim, if necessary – and that this authority is not inconsistent with PAGA's procedures and objectives, or with applicable precedent."  (Id. at *9.) Initially, the Court of Appeal outlined the multitude of ways in which trial courts have exercised their inherent authority to ensure the manageability of representative actions – e.g., in the class action context or under the UCL. (Id.at *9-11.)  The Court of Appeal found that the same concerns attendant to the fair and efficient trial of representative claims in these other contexts applied with equal force to PAGA actions. Indeed, the Court of Appeal expressly recognized that PAGA claims could prove particularly unwieldy given their unique procedural requirements:

Indeed, PAGA claims may well present more significant manageability concerns than those involved in class actions. By its terms, PAGA includes no general requirement similar to the requirement in the class action context, that the plaintiff establish a well-defined community of interest, encompassing a showing that common questions predominate over individual ones. (See Washington Mutual, supra, 24 Cal.4th at 913, 103 Cal.Rptr.2d 320, 15 P.3d 1071 [discussing class action requirements]; Williams v. Superior Court (2017) 3 Cal.5th 531, 559, 220 Cal.Rptr.3d 472, 398 P.3d 69 (Williams) [PAGA actions do not require showing of uniform policy because "recovery on behalf of the state and aggrieved employees may be had for each violation, whether pursuant to a uniform policy or not"].) Thus, a PAGA claim can cover disparate groups of employees and involve different kinds of violations raising distinct questions.  (Id. at *11.)

            ...

Given that PAGA actions involve comparable or greater manageability concerns than other representative claims, we hold that trial courts may similarly exercise their inherent authority to ensure the manageability of PAGA claims and, if necessary, may preclude the use of this procedural device.  (Id. at *11.)

After determining the trial court possessed such authority, the Court of Appeal next analyzed the trial court's decision to strike plaintiff's PAGA claim. In outlining the scope of its inquiry in this regard, the Court of Appeal observed that "manageability in the context of PAGA requires that individual issues can be tried fairly and efficiently.  (Id. at *13.) The Court of Appeal noted that "[t]his assessment will depend on the circumstances of the case, and we do not believe any rigid rule can govern the court's assessment. In general, however, a need for individualized proof pertaining to a very large number of employees will raise manageability concerns." (Id.)  The Court of Appeal also observed that, in considering manageability issues, courts should account for a defendant's affirmative defenses.  (Id.)

Applying these principles, the Court of Appeal determined that the trial court did not abuse its discretion in striking plaintiff's PAGA claim because the record raised significant manageability concerns:

The evidence and argument before the trial court revealed no apparent way to litigate Staples's affirmative defense in a fair and expeditious manner, as the defense turned in large part on GMs' actual work experience, yet there was extensive variability in the group of Staples's GMs. (Cf. Duran, supra, 59 Cal.4th at 33, 172 Cal.Rptr.3d 371, 325 P.3d 916 ["If the variability [in a class] is too great, individual issues are more likely to swamp common ones and render the class action unmanageable"].) The parties agreed that individualized litigation of the issue as to each of 346 GM would require a trial spanning several years with many hundreds of witnesses. The trial court reasonably concluded that such a trial would "not meet any definition of manageability." (Id. at *15.)

Based on the foregoing, the Court of Appeal found no abuse in the trial court's decision to strike plaintiff's PAGA claim.

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