Huff v. Securitas Security Services USA, Inc. finds broad standing for plaintiffs bringing PAGA claims; [UPDATED]

I haven't posted anything yet about Epiq Systems Corp. v. Lewis (what's there to say that hasn't been kicking around for years in various ways), but certainly that decision motivates a renewed focus on PAGA claims in California.  And would you look at that?!  Here's a new decision about PAGA.  In Huff v. Securitas Security Services USA, Inc., the Court of Appeal (Sixth Appellate District) examined the following question:

This case presents the question of whether a plaintiff who brings a representative action under the Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698, et seq.) may seek penalties not only for the Labor Code violation that affected him or her, but also for different violations that affected other employees.

Slip op., at 1.  So at this point, I must admit that my assumption for about 5 seconds was that the answer would be a big "No, they may not."  To my surprise, the Court held to the contrary:

As we will explain, we conclude that PAGA allows an “aggrieved employee” –– a person affected by at least one Labor Code violation committed by an employer –– to pursue penalties for all the Labor Code violations committed by that employer.

Slip op., at 1.  That was unexpected.

The Court's primary analysis is well summarized by this passage:

When we interpret a statute our primary task is to ascertain the Legislature’s intent and effectuate the purpose of the law. We look first to the words of the statute itself as the most direct indicator of what the Legislature intended. (Hsu v. Abbara (1995) 9 Cal.4th 863, 871.) PAGA provides in section 2699, subdivision (a) that “any provision of this code that provides for a civil penalty to be assessed and collected by the Labor and Workforce Development Agency or any of its departments, divisions, commissions, boards, agencies, or employees, for a violation of this code, may, as an alternative, be recovered through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees pursuant to the procedures specified in Section 2699.3.” The statute then specifically defines “aggrieved employee” in section 2699, subdivision (c): “ ‘aggrieved employee’ means any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.”

As the trial court did, we interpret those provisions to mean that any Labor Code penalties recoverable by state authorities may be recovered in a PAGA action by a person who was employed by the alleged violator and affected by at least one of the violations alleged in the complaint. Indeed, we cannot readily derive any meaning other than that from the plain statutory language, and Securitas does not offer a reasonable alternative for what those provisions mean when read together.

Slip op., at 5-6.  After this, the Court spent a lot of time rejecting arguments that it should look to the legislative history (the Court held that when a statute is clear, it is not to consider legislative history) and other arguments about absurd results.  It rejected all of those arguments.

Of course, in good Apple presentation fashion, this case has a couple of items that qualify as a "one more thing" moment.  One of those moments included the following:

Section 2699, subdivision (f) creates a civil penalty for any Labor Code violation for which a penalty is not provided elsewhere in the law. The penalties under section 2699, subdivision (f) are “one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars ($200) for each aggrieved employee per pay period for each subsequent violation.” Securitas posits that using the definition of aggrieved employees in section 2699, subdivision (c) to calculate those penalties would allow over-counting in some cases to include weeks worked by employees affected by just one of the Labor Code violations alleged in the complaint, even if it is not the one giving rise to the penalties imposed by section 2699, subdivision (f). To the contrary, it is entirely possible to harmonize the two provisions. The method of calculation under section 2699, subdivision (f) imposes penalties based on the total number of employees that have been affected by an employer’s Labor Code violations. Though Securitas calls that “over-counting,” it is not impermissible for the Legislature to impose penalties measured in that way. Even if the method of calculation provided for by section 2699, subdivision (f) is something of a blunt instrument, it is not our role to rewrite the statute. (People v. Garcia (1999) 21 Cal.4th 1, 14.) Separation of powers principles require us to interpret the law as written, “and leave for the People and the Legislature the task of revising it as they deem wise.” (Id. at p. 15.) We also note that PAGA gives a court broad discretion to “award a lesser amount than the maximum civil penalty amount … if, based on the facts and circumstances of the particular case, to do otherwise would result in an award that is unjust, arbitrary and oppressive, or confiscatory.” (§ 2699, subd. (e)(2).) So the statute incorporates a remedy if the penalty calculation is unfair or arbitrary as applied to a particular employer.

Slip op., at 12-13.  Let that sink in for a moment.  If I am not imaging things, I believe that this means that for subdivision (f) penalties, the Court held that the correct method of counting up the penalties would be to count the total number of employees that qualify as "aggrieved" by any violation an multiply that number by the $100 or $200 penalty.  Oh my.  So, if this stands the test of time, more employers will avoid class actions with class waivers in their arbitration agreements, but if there are violations of any of the sections included in PAGA, the penalty calculation for that one year will be absolutely brutal.  Big winner?  The LWDA.  For California employers in the long run it will likely be a slight loss.  While Epiq will cut into class actions, that will be countered with larger penalty recoveries.  And since the statutory period is just one year, an employer that doesn't fully correct issues will see plaintiffs returning to that well with regularity.

Respondent and Plaintiff was successfully represented by Michael Millen.

UPDATE: In response to a question about my post, I want to clarify something that is potentially unclear. When I wrote, “…if there are violations of any of the sections included in PAGA, the penalty calculation for that one year will be absolutely brutal,” I was referring to the penalty look-back period of one year prior to filing. In other words, I was not saying that a specific one year period was implicated by this decision. I was only observing that the penalties for a one-year statute of limitation could be high, compared to a four-year statute in a wage and hour class action (plus whatever time passes while a case is pending).

Hernandez v. Restoration Hardware, Inc. tells class action objectors to get party status or get lost

I frequently contemplate things without any real expectation that I will get an answer.  One thing I wonder about in the practice of law is whether California Courts of Appeal develop cultures as an institution (i.e., whether each Appellate District has a significant impact on its constituent members over time), or whether the tendencies are happenstance of the appointments (i.e., whether the tendencies of each Appellate District -- and Division therein -- is just the sum of random events like the preferences of the appointing administration and the timing of open seats). An application of this pondering occurred to me mere moments ago, when I read Hernandez v. Restoration Hardware, Inc. (March 14, 2016), in which the Fourth Appellate District, Division One, held that named party status is required to appeal a class action judgment. Jinkies!

In Hernandez v. Restoration Hardware, a bench trial resulted in a class recovery of up to $36,412,350.  The class representatives requested fees of $9,103,087.50 (25 percent of the total maximum fund). Francesca Muller, a class members, requested that the court order notice of the fee motion be sent to all class members.  The court denied the request, awarded the fees, and entered judgment.  Muller filed a notice of appeal. Class representative Hernandez substantively opposed the appeal but argued that Muller lacked standing to appeal at all. The Court of Appeal addressed the threshold issue of whether Muller had standing to appeal.

Recognizing that only an aggrieved party has standing to appeal, the Court began by recognizing the distinction between names class representatives and absent class members:

Indeed, "[t]he structure of the class action does not allow absent class members to become active parties, since 'to the extent the absent class members are compelled to participate in the trial of the lawsuit, the effectiveness of the class action device is destroyed.' "  (Ibid., fn. omitted.)  Although unnamed class members may be deemed "parties" for the limited purposes of discovery (Southern California Edison Co. v. Superior Court (1972) 7 Cal.3d 832, 840), unnamed class members are not otherwise considered "parties" to the litigation.  (Cf. National Solar Equipment Owners' Assn. v. Grumman Corp. (1991) 235 Cal.App.3d 1273, 1282 ["unnamed class members do not 'stand on the same footing as named parties' "].)

Slip op., at 9.  The Court then began its analysis by considering Eggert v. Pac. States S. & L. Co., 20 Cal. 2d 199 (1942), which considered the same issues presented here.  Concluding that Eggert was factually almost identical, theCourt concluded that Eggert required dismissal of the action:

Eggert appears to be on "all fours" with the present action: both involved a class action; both involved a matter litigated to judgment; both involved a challenge to the postjudgment attorney fee award to the counsel for the named plaintiff; both involved appellants who were members of the class, but not named parties, and who had appeared through counsel to object to the attorney fee award; and both involved members who took no steps to be added as named plaintiffs.  Accordingly, under Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, we must adhere to Eggert and dismiss the appeal.

Slip op., at 11.  The Court then commented on several decisions from Courts of Appeal that permitted appeals by non-party class members:

Muller also cites several cases in which California appellate courts stated a class member who was not a party to the action obtains appellate standing to challenge the judgment merely by interposing an objection to the judgment below.  However, neither of the cases cited by Muller, Consumer Cause, Inc. v. Mrs. Gooch's Natural Food Markets, Inc. (2005) 127 Cal.App.4th 387 and Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, made any effort to reconcile their conclusions with Eggert, and instead rooted their conclusions in the analysis contained in Trotsky v. Los Angeles Fed. Sav. & Loan Assn. (1975) 48 Cal.App.3d 134 (Trotsky).  (See Wershba, at pp. 235-236 [citing only Trotsky on issue of standing]; Consumer Cause, at pp. 395-396 [citing Trotsky and Wershba on issue of standing].)  Accordingly, we examine Trotsky.

Slip op., at 12.  That examination of Trotsky was not flattering, and the Court quickly concluded that Trotsky had failed to consider the "party" element of section 902:

Trotsky focused primarily on whether an objector to a settlement was "aggrieved" within the meaning of Code of Civil Procedure section 902, concluding objectors were aggrieved because " '[i]t is possible that, within a class, a group of small claimants might be unfavorably treated by the terms of a proposed settlement. For them, the option to join is in reality no option at all,' " and reasoning that because those claimants might be forced to choose between "equally unpalatable alternatives"—of accepting either nothing or an unfair settlement—those parties were sufficiently aggrieved for purposes of the right to appeal.  (Trotsky, supra, 48 Cal.App.3d at pp. 139-140.)  However, Trotsky did not examine the distinct "party" element of Code of Civil Procedure section 902, nor make any effort to reconcile its conclusion with Eggert's holding that unnamed class members whose only appearance was to object to the attorneys' fees had no standing to appeal because they were not "parties" and did not avail themselves of the "ample opportunity . . . to become parties of record . . . ."  (Eggert, supra, 20 Cal.2d at p. 201.)  Because Eggert teaches the "party" requirement of Code of Civil Procedure section 902 is not met merely because the "aggrieved" requirement of section 902 might also be satisfied as to a nonparty class member, we conclude Trotsky's analysis of standing is flawed and that Trotsky and its progeny (which includes both Consumer Cause, Inc. v. Mrs. Gooch's Natural Food Markets, Inc., supra, 127 Cal.App.4th 387 and Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th 224) should not be followed.

Slip op., at 13-14.  Well now.  That's....interesting.  The Court went on to point out that federal courts handle this differently, but California courts aren't federal courts, and there is no requirement that California follow the federal approach.  You have to at least respect the cut of this Court's jib to state that they are bound to follow a factually similar 1942 decision and reject much more recent decisions for failing to address the California Supreme Court's Eggert decision. That said, of the many things I ponder, one is whether this case case more than 90 days of shelf life.