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Wednesday, October 27, 2010

Court of Appeal Affirms Dismissal of PAGA Representative Action Based on Prior Class Action Settlement

Villacres v. ABM Industries, Inc. (October 22, 2010) --- Cal.App.4th ----, 2010 WL 4142264, is one of the few California cases dealing with the 2004 Labor Code Private Attorneys General Act (PAGA).

An employee filed a class action against his employer for violation of California wage laws. He sought civil penalties under PAGA and Labor Code section 558. The case settled for $2.5 million, with $730,000 being allocated to civil and statutory penalties. The superior court approved the settlement and dismissed the case with prejudice.

Just two days after final approval, a member of the prior class filed a second class action against the same employer. In his first amended complaint, he dropped the class allegations and sought to pursue a representative action for civil penalties under PAGA. See Arias v. Superior Court, discussed here.

The trial court (Judge Lichtman, LASC) granted the employer's motion for summary judgment on the ground that plaintiff's claims were barred by res judicata. The Court of Appeal affirmed:
We agree with the trial court. A court-approved settlement in a prior suit precludes subsequent litigation on the same cause of action. Res judicata bars not only issues that were raised in the prior suit but related issues that could have been raised. Here, plaintiff attempted a second time to recover civil penalties for alleged Labor Code violations. But he could have sought to expand the scope of the prior action to include his additional penalty claims. In the alternative, he could have opted out of the class. Instead he reaped the benefits of the settlement in the prior action and then promptly filed this suit, seeking more penalties. We conclude res judicata applies and affirm.
Slip op. at 1.

The Court explained that "cause of action" in the res judicata context means more than the mere count alleged by the plaintiff. It entails the primary right allegedly injured:
The cause of action is the right to obtain redress for a harm suffered, regardless of the specific remedy sought or the legal theory (common law or statutory) advanced.... ‘[T]he “cause of action” is based upon the harm suffered, as opposed to the particular theory asserted by the litigant.... Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief. “Hence a judgment for the defendant is a bar to a subsequent action by the plaintiff based on the same injury to the same right, even though [the plaintiff] presents a different legal ground for relief.” ...’ Thus, under the primary rights theory, the determinative factor is the harm suffered. When two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right.”
Slip op. at 6.

The defendant here argued "that employees must assert all known Labor Code violations and PAGA penalties in a single suit, at least where the violations are related to wages." Slip op. at 10. The plaintiff argued that "each Labor Code violation and each corresponding PAGA penalty constitute a separate primary right." Ibid. The Court declined to resolve this dispute:
We need not decide whether, as defendants argue, the primary rights theory treats all wage-related Labor Code violations and PAGA penalties as a single cause of action or whether, as Villacres contends, every Labor Code violation and PAGA penalty involves a separate primary right. The disposition in this case does not turn on such broad propositions. Instead, we focus on the specific circumstances of this litigation.
Slip op. at 10.

Instead, the Court noted: "Villacres could have (1) objected to the proposed settlement on the ground it should have included additional Labor Code violations and corresponding PAGA penalties, (2) sought to intervene in Augustus to pursue the same goal, or (3) opted out of the settlement and preserved his right to bring an independent action." Slip op. at 11. The Court held his failure to take any such action barred him from pursuing the second action:
Villacres's PAGA claims could have been raised in the prior action for purposes of res judicata.... Because Villacres did not raise his PAGA claims in Augustus-through objection, intervention, or by way of appeal- or opt out of the class, this suit is barred by res judicata.
Slip op. at 13.

The Court then held that Villacres was in privity of contract with the prior plaintiffs because he was a member of the class:
On a similar point, Villacres contends the State of California is, as a legal matter, the actual plaintiff here. Not so. The PAGA authorized Villacres to file this action “on behalf of himself ... and other current or former employees.” (§ 2699, subd. (a).) The act “empowers or deputizes an aggrieved employee to sue for civil penalties ... as an alternative to enforcement by the [State].” (Dunlap v. Superior Court (2006) 142 Cal.App.4th 330, 337; see § 2699, subd. (a).) “[A] PAGA claim can only be filed where the State has made an affirmative decision not to pursue the matter, either by deciding not to investigate at all or by investigating and then deciding the employer should not be cited and subjected to penalties.” (Waisbein v. UBS Financial Services Inc ., supra, 2007 WL 4287334, at p.*2; see § 2699.3.) “ ‘[The] PAGA [is] a powerful tool for aggrieved employees.’ “ (Franco v. Athens Disposal Co., Inc., supra, 171 Cal.App.4th at p. 1302, italics added.)
Slip op. at 20.

Finally, the Court found "no public policy reason for refusing to invoke the doctrine of res judicata." Slip op. at 19.

The full text is available here.

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