Duran, due process and PAGA

In Arias v. Superior Court, 209 P.3d 923 (2009), the state Supreme Court addressed the issue of whether due process required that all claims brought under the Labor Code Private Attorneys General Act of 2004, California Labor Code Sections 2698-2699.5, be filed as class actions. The due process issue in Arias concerned the risk of multiple lawsuits in which judgments in favor of the defendant would not be binding against non-parties, but a judgment against the defendant would preclude the defendant from asserting its defense in subsequent litigation. The Supreme Court found that the defendant's due process concerns were not well founded because a judgment in a representative action "is binding not only on the named employee plaintiff but also on government agencies and any aggrieved employee not a party to the proceeding." Thus, the Supreme Court's decision in Arias addressed only one due process concern - the lack of binding judgment for or against a certified class - and did not address other due process concerns. Remaining questions about due process concerns arising from the presentation of PAGA claims at trial have yet to be definitively addressed.

In a PAGA case, especially when individualized questions predominate, the trial court will be required to assess whether the plaintiff can identify a manageable trial plan. The plaintiff must "prove Labor Code violations with respect to each and every individual on whose behalf [p]laintiff seeks to recover civil penalties." Hobbs-Rines v. Seagate Technologies LLC, 2009 U.S. Dist. LEXIS 19283, *4 (N.D. Cal. March 2, 2009). A plaintiff has the burden to describe a trial plan that will allow fair adjudication "with respect to each and every individual," especially because, as explained in Arias, those individuals will be bound by the judgment.

In Rix v. Lockheed Martin Corp., Civil No. 09cv2063 MMA (NLS), 2012 WL 13724, at *3-4 (S.D. Cal. Jan 4, 2012), the court denied a motion for class certification because individual questions predominated, leaving the plaintiff's PAGA claim. Defendant then filed a motion to strike the PAGA claim asserting that plaintiff could not demonstrate that he could "litigate a manageable PAGA claim." The court denied the motion to strike after plaintiff asserted that he could use "common evidence" to prove the PAGA claim. In the course of discovery, however, it became apparent that "adjudication of the PAGA claim will require 90 individualized inquiries into whether each and every one of the [security representatives] was properly categorized as exempt for each and every relevant work week." After plaintiff failed to identify any common evidence, the court denied without prejudice his motion to compel discovery of "every fact, witness and document relating to whether each of the 90 [security representatives] was properly categorized as exempt for each of the 148 relevant workweeks." Without that discovery and without any common evidence, the plaintiff will not be able to prove his PAGA claims.

When arguing that they can construct a viable trial plan for PAGA claims, plaintiffs will likely invoke their ability to use "[r]epresentative testimony, surveys, and statistical analysis ... as tools to render manageable determinations of the extent of liability." Brinker Restaurant Corp. v. Superior Court, 53 Cal. 4th 1004, 1054 (Cal. 2012) (Werdegar, J., concurring). The proper use of those tools will likely be closely examined by the state Supreme Court in its review of Duran v. U.S. Bank Nat'l Ass'n., 137 Cal. Rptr. 3d 391 (Cal. Ct. App. 2012). Duran involved the use at trial of what is essentially a survey: 21 "randomly" selected witnesses whose testimony was extrapolated to determine the claims of 260 class members. The Court of Appeal reversed the judgment in favor of the class, holding that the sample of 21 witnesses was neither truly random nor sufficiently large to permit the trial court to draw a valid conclusion that all 260 class members were misclassified. The appellate court held that "the trial court exceeded acceptable due process parameters by limiting the presentation of evidence of liability to the testifying [bank officers]. Fundamental due process issues are implicated not only by the unprecedented and inconsistent use of statistical procedures in the liability and damages phases, but also by the manner in which USB was hobbled in its ability to prove its affirmative defense." Particularly noteworthy was the court's observation that sampling should not be used to determine liability and that it was doubtful that a workable trial plan could be devised to adjudicate the individualized claims and defenses. Although Duran involves the trial of a class action rather than PAGA claims, its analysis of the due process concerns involved with the collective trial of individual claims and defenses should apply equally in PAGA litigation. Indeed, it is possible that the Supreme Court's decision in Duran will have implications for litigation brought by state or federal agencies that involve the collective trial of individual claims and defenses. In those cases, as in Duran, "[f]undamental due process issues are implicated" when plaintiffs seek to use statistical evidence that is not based on scientifically sound principles and when individual liability depends on detailed, fact-specific determinations.

The need to identify a viable trial plan may lead plaintiffs' attorneys to limit the scope of their PAGA claims. One concern for defendants has been that, without the limitations of class certification, plaintiffs could seek to recover under PAGA for a class that would be too unwieldy for class action litigation. The due process issues evaluated in Duran could lead plaintiffs' counsel to limit the scope of the relief sought or to reduce the number of allegedly aggrieved employees whose claims are presented in order to address manageability concerns. Nevertheless, even in a case limited to 90 individuals such as Rix, the need to conduct individualized inquiries for a large number of claims could preclude plaintiff from identifying a manageable trial plan.