Multi-Year PAGA Trials: What’s a Court to Do?

RLC's Analysis of Estrada v. Royalty Carpet Mills arguments

By [ Larissa Whittingham ]
12/15/2023

Oral arguments are available to watch now in Estrada et al. v. Royalty Carpet Mills, Inc.: an important case for retailers with large employee populations in California. In the Estrada case, the Supreme Court of California is grappling with whether a trial court may make “manageability” determinations, up to and including dismissal of a PAGA lawsuit (i.e., “striking” the PAGA count) in California state courts.

Background

What is “manageability,” you ask? Even that is subject to dispute in this case. One approach – mentioned by Justice Jenkins during the arguments – views manageability as a product of class action procedure. The other approach asks the Court to recognize that all courts have inherent authority to manage cases – including imposing restrictions on parties and party counsel, up to and including striking PAGA claims if the group of aggrieved employees and alleged violations that Plaintiff has pled is impossible to take to trial in a “manageable” manner.

This question is important because of how broadly many plaintiffs’ attorneys plead PAGA claims. With no class certification requirements (or other opportunities to limit the number of those implicated) in a PAGA claim, defendants are at the mercy of often impossibly broad groups of allegedly aggrieved employees – based simply on what was pled. Until trial, plaintiffs’ attorneys may view it in their best interest to plead a broad group for bargaining power in settlement negotiations. So far one California appellate case, Wesson v. Staples the Office Superstore, LLC, has held that California state courts do have inherent authority to strike PAGA claims that are unmanageable. In that case, the trial “would have lasted eight years.”

The district court in Estrada followed Wesson’s guidance and struck the PAGA claim on manageability grounds. Plaintiff appealed and the California Court of Appeals disagreed with Wesson, holding courts cannot strike a PAGA claim on manageability grounds. Besides opining that manageability really is a construct of class action claims and therefore inapplicable in PAGA, the Estrada appellate courts also claimed that allowing “courts to dismiss PAGA claims based on manageability would interfere with PAGA’s express design as a law enforcement mechanism.”

Argument Analysis

That background takes us back to the oral arguments in the Supreme Court of California – as it considers how to resolve the California intermediate appellate court split between Wesson and Estrada. At arguments, the Court was interested in three main things.

Where does the manageability authority come from?

The source of a court’s authority to manage claims was a subject of interest from several justices. Because PAGA does not follow class action procedure, the source of a court’s ability to strike or otherwise limit claims is not based on class action rules. Rather, justices considered a source derived from the constitution and a source based on prior judicial interpretation known to the legislature at the time of enacting PAGA (jump to 18 minutes, 24 seconds to watch Malcolm Heinicke, counsel for the RLC and other amici, discuss this source of authority).

How far does manageability power extend?

After discussing the source of the authority, the Court needed to consider how far that authority extends. Justice Liu was very mindful of this issue, as he noted the significance of a court striking an entire claim that was authorized by the legislature. He had clearly thought through ways to approach this ahead of time, as he offered up ideas of a standard for when manageability may limit statutory causes of action, such as when the claims may “overwhelm the proper functioning of the judiciary” or “otherwise impede the efficient functioning of the trial court.”

What’s a Court to do with ridiculously long trials?

Once Plaintiff’s attorney’s time for argument began, the justices quickly demonstrated they understood the need for some level of manageability determinations – even if the source and scope questions are difficult.

“What else can we offer [district court judges]?”, Justice Groban frankly asked Plaintiff’s counsel when counsel could not identify any meaningful way to plan for a trial that may include hundreds of witnesses for PAGA plaintiffs’ attorneys to prove a case. Plaintiff’s counsel offered up the possibility of multiple mini-trials for cases that would take multiple years on their own, but that was not well received by the Court. “I can hear my friends on the trial court saying, ‘all you’ve bought me is a 6-year trial that will take 10 years.”, Justice Groban responded, with Justice Evans similarly expressing skepticism of the workability of that approach.

What’s Next

The Court should issue a decision by early February, if it follows its typical timing. The RLC will notify members in its weekly publication, Courtside with the Retail Litigation Center, when the opinion is released.

California employers will want to pay close attention to how the Court answers the second and third questions above. On the plus side, the justices do seem to understand the onerus task of taking many overbroad PAGA claims to trial, which makes it likely that the Court will recognize an inherent power to manage claims. The big question mark in our minds is whether the Court will recognize that this power extends all the way to striking a PAGA count or whether the Court will impose a limit short of completely striking unmanageable PAGA claims. Assuming the Court recognizes the power to manage PAGA counts, in-house retail litigators and outside counsel handling PAGA claims will want to collaborate on when and how to bring manageability concerns to the district court’s attention in light of the Supreme Court’s decision.

Thanks to Malcolm Heinicke for authoring the joint amicus brief filed by the U.S. Chamber of Commerce, California Chamber of Commerce, National Retail Federation, and the Retail Litigation Center, and for his excellent oral advocacy.