In an Increasingly Rare Employer-Side Victory, California Court of Appeal Confirms Trial Courts Can Dispose of Unmanageable PAGA Actions

09.20.2021

The inability to enforce arbitration agreements against employees and the lack of class certification requirements has made Private Attorneys General Act (“PAGA”) representative actions the claim du jour of the Plaintiff’s wage and hour bar.  Largely unrecoverable defense fees and costs often drive these cases to an early, and comparatively expensive settlement, even where claims may have little or no merit – solely due to the statutory scheme supporting this Plaintiff’s cottage industry.  

Courts are often reluctant to dispose of these types of cases short of a merits trial, a dispositive motion based on a developed factual record, or a settlement, because there is no express statutory mechanism in the PAGA statute itself to assess the viability of litigating or trying the case on a representative basis. Until recently, no published California Court of Appeal authority acknowledged the trial court’s ability to dispose of a PAGA case short of trial where the manageability of a PAGA claim is lacking, even though this made sense and was in line with the court’s abilities to address class actions and manage the cases before it in general.

In Wesson v. Staples the Office Superstore, LLC (9/9/21; 2^ND DCA, Div. 4), Plaintiff Fred Wesson was employed as a General Manager for Staples between 2006 and 2016. In 2015, Wesson filed a putative class action against Staples alleging he, and 345 other current and former general managers throughout California, were misclassified as exempt employees. Wesson subsequently amended his complaint to add a cause of action seeking civil penalties under PAGA. 

Wesson moved to certify a class of Staples California GMs, but the trial court denied the motion, concluding he had not demonstrated that his claims were susceptible to common proof. The court found that important factual questions relating to whether GMs spent most of their worktime performing exempt, managerial tasks could not be resolved on a class-wide basis. It reasoned that there was too much variation in how Staples’ GMs performed their jobs and the extent to which they performed non-managerial tasks.

Following the court’s denial of class certification, Staples moved to strike Wesson’s PAGA claim, arguing that given the number of employees his claim covered and the nature of his allegations, the action would be “unmanageable” and would violate Staples’ due process rights. Relying on this evidence and on the trial court’s findings in denying class certification, Staples argued that determining whether the allegedly aggrieved employees covered by the suit would require individualized proof as to each and that the claim could not be fairly and efficiently litigated.

Wesson, in response, argued that the trial court lacked authority to ensure that PAGA actions are manageable, and argued that even if the court had such authority it was sufficient that his prima facie case was manageable. While Staples’ motion was pending, Wesson moved for summary adjudication of his PAGA claim. Before ruling on the merits of Staples’ motion, the trial court concluded it had inherent power to strike an unmanageable PAGA claim and invited Wesson to submit a trial plan showing that his PAGA action would be manageable at trial.

In his trial plan, Wesson explained he intended to prove up his prima facie case using common proof, establishing that GMs did not receive off-duty meal and rest periods and worked overtime without receiving overtime pay. However, Wesson did not attempt to address how the parties could litigate Staples’ exemption defense. According to Wesson’s trial plan, Staples would “be permitted to present whatever evidence it want[ed], be it testimony of GMs, supervisors, corporate representatives, documentary evidence of Staples’ policies, procedures, and expectations, or any other evidence Staples deem[ed] necessary.” At a subsequent hearing on Staples’ motion, the parties estimated they would need a total of six trial days per GM to litigate GMs’ classification as exempt executives on an individual basis. Based on that estimate, the trial would have lasted eight years.

In granting Staples’ motion to strike, the Court noted that there was no evidence that Staples’ defense could be litigated through common proof and – even cutting the parties’ estimated length of trial in half – concluded, “[a] four-year trial involving witnesses and documents individually pertaining to each of 346 General Managers does not meet any definition of manageability.” The Court then denied Wesson’s motion for summary adjudication as moot.

Wesson challenged both rulings on appeal, stating that (1) the court should have granted his motion because Staples failed to provide individualized evidence in support of its exemption defense, at least as to some GMs; (2) the court had no authority to strike his PAGA claim as unmanageable; and (3) that any manageability assessment need not have considered Staples’ affirmative defense.

In affirming the lower court’s decision, the Court of Appeal concluded that:

1. 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;
2. 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; and
3. given the state of the record and Wesson’s lack of cooperation with the trial court’s manageability inquiry, the court did not abuse its discretion in striking his PAGA claim as unmanageable.

The court did not hold that a PAGA misclassification case can never be managed through common-proof methods. However, Wesson’s failure to provide an appropriate trial plan and lack of cooperation with the trial court’s inquiry in this regard stymied the court’s efforts to devise a plan that could possibly allow the action to proceed, in whole or in part. The Court of Appeal stated, “On the record before us, the trial court’s determination that Wesson’s PAGA claim was unmanageable was eminently reasonable.” This welcome and predictable result is particularly true given the nature of the claims asserted in this action because, as noted by the Court, “claims involving employee misclassification are highly fact-dependent, as the inquiry focuses on the work actually performed by the employee, as well as the employer’s realistic expectations and the realistic requirements of the job.” Consequently, “trials involving misclassification claims often involve significant amounts of factual minutiae and therefore tend to be lengthy, even when they involve only a few employees.”

Whether the underlying claims in any PAGA case are unmanageable will depend on the nature of the claims—such as misclassification, Equal Pay Act, off-the-clock work claims, etc.—and the facts of the case.  But Wesson is an important case for the defense bar and employers which have been pointing out the lack of manageability of many PAGA claims for years.  Now, with Court of Appeal authority in hand, trial courts should be more willing to assess the viability of certain PAGA cases short of trial.  The trick will be demonstrating the lack of manageability to the court and determining the best timing and vehicle to bring it to the court’s attention.

This AALRR publication is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR presentation/publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process. 

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