The Class Action Weekly Wire – Episode 111: California Court Greenlights "Headless" PAGA Suit (Video)

Duane Morris Takeaway:This week's episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and special counsel Samson Huang with their discussion a key ruling from a California appeals court allowing a plaintiff to pursue PAGA claims solely on behalf of other aggrieved employees.

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Episode Transcript

Jerry Maatman: Hello everyone, and welcome to the Class Action Weekly Wire, the podcast where we explore critical class action legal developments. I'm Jerry Maatman, a partner at Duane Morris, and joining me today for the first time is Samson Huang, our newest member of our class action team, who is based in our Los Angeles office. Samson, thanks so much for being here today.

Samson Huang: Of course. Thanks, Jerry. I'm so glad to be here.

Jerry: Today we're discussing the recent ruling coming out of the California Court of Appeal in CRST Expedited, Inc. v. Superior Court of Fresno County, which addresses the legality of something known as a "headless" PAGA action. Can you start by explaining for our listeners the central issue in the case?

Samson: Absolutely. The heart of the case was whether an employee can bring a so-called "headless" PAGA action, meaning a Private Attorneys General Act claim that seeks civil penalties for labor code violations suffered only by other employees and not by the plaintiff themselves. This came up after the plaintiff dismissed, or tried to dismiss, his individual claims to avoid arbitration.

Jerry: So, as I understand it, the Court of Appeal in California had to decide whether or not this sort of lawsuit is even viable under the PAGA?

Samson: That's correct. The employer, CRST Expedited, argued that the statute's language—specifically the phrase "on behalf of himself or herself and other current or former employees"—meant that you must have, and bring, your own individual claim in order to piggyback off of, to have standing, for the nonindividual claims and they wanted the court to interpret the word "and" strictly in the conjunctive.

Jerry: And so how did that go for the employer in the Court of Appeal with respect to that particular argument?

Samson: Well unfortunately, the Court of Appeal disagreed with the employer, and found that the statutory language was ambiguous, holding that the word "and" could be actually interpreted as meaning either "and" or "or "—what we call an inclusive disjunctive—and the panel emphasized that PAGA is a remedial statute designed to empower private enforcement of labor laws. They reasoned that, allowing headless PAGA claims better served the statute's purpose, especially in light of recent procedural hurdles around arbitration after Viking River Cruises v. Moriana.

Jerry: Well, things weren't complicated enough. I know that Viking River Cruises created new law and basically stood for the proposition that if you're a worker, and you had signed an arbitration agreement with a class action waiver, you had to proceed in arbitration. And then, as I understand it, California courts have thereafter interpreted Viking River to allow, nonetheless, the employee, after arbitration, to go forward with a representative action on behalf of other representative employees. How did the Court of Appeal deal with Viking River Cruises in terms of whether that had an impact on headless PAGA actions?

Samson: Well, the issue of headless PAGA actions really wasn't addressed. In Adolph v. Uber Technologies, the California Supreme Court simply held that merely the fact that a plaintiff's individual PAGA claims compelled to arbitration pursuant to Viking River didn't mean that the plaintiff lost standing to maintain the representative nonindividual PAGA claims in court, and strongly suggested that if a plaintiff gets compelled to arbitration on the individual claim, the nonindividual claims should be stayed pending resolution of the arbitration. In this recent CRST case, this is a strategy that the plaintiffs' bar has developed in order to avoid arbitration.

Jerry: So, as I understand it, that was a gambit by the plaintiff's lawyer, a conscious decision to dismiss their individual claim, to try and get around Viking River?

Samson: That's right. And basically, the argument goes that if a plaintiff has no individual claim, there would be nothing left to compel into arbitration. Therefore, the court proceedings on the nonindividual claims can proceed. The employer in the case argued that by doing so, he lost standing and meaning by dismissing an individual PAGA claim, the plaintiff loses standing again. The Court of Appeal disagreed, and it held that even though the plaintiff wasn't personally seeking penalties anymore, he still qualified as an aggrieved employee because he had been subjected to labor code violations, or at least had alleged that he had been subjected to labor code violations, and completed the required notice procedures under PAGA.

Jerry: Well, what would be your prognostication for our listeners about whether or not there's a chance this could get reversed by the California Supreme Court?

Samson: Jerry, prior to this case there was another Court of Appeal in a case called Leeper v. Shipt which, while addressing the same issue, reached the opposite conclusion, and held that every PAGA claim necessarily includes both an individual and nonindividual component. And that case has actually been taken up to the California Supreme Court, which has granted review. So, CRST is definitely not the final word, and until the Supreme Court issues its opinion in Leeper, trial courts are free to choose between Leeper and CRST, in terms of which decision they want to follow. So, until then, employers and practitioners alike should be cautious.

Jerry: I know you do a lot of thought leadership in this particular space and help many employers with respect to PAGA compliance. What would be your quick advice for employers in dealing with this situation until there's resolution at the California Supreme Court level?

Samson: Well, I think this ruling really reinforces California's commitment to robust enforcement of labor laws through PAGA, and employers should revisit their arbitration agreements and attorneys should stay tuned to Leeper. The terrain is shifting quickly.

Jerry: Well, thanks so much for your thoughts and analysis in this very complex area, and welcome to the show and to your first podcast on behalf of Duane Morris. Thanks so much.

Samson: Thanks for having me, Jerry, and thank you, listeners.