Class Actions: Required for UCL Claims, Not Required for PAGA

The Third District Court of Appeal has ruled that, under the Proposition 64 revisions to the Unfair Competition Law [UCL] (Business & Professions Code § 17203), a representative claim must be brought as a class action because the UCL now requires compliance with the class action provisions of Code of Civil Procedure § 382; however, the Private Attorneys General Act [PAGA] expressly allows a person to prosecute a representative claim without requiring that it be brought as a class action. In Arias v. The Superior Court of San Joaquin County (Angelo Dairy) (2007) __ Cal.App.4th __, plaintiff brought an action for overtime wages, and meal and rest period claims on behalf of a group of dairy workers. He did not style the complaint as a class action, but alleged claims under the UCLA and PAGA.

As to the UCL claim, Arias argued that the plain language of Proposition 64 is clear and unambiguous, and that it contains no requirement that a representative suit be brought as a class action. The court disagreed, holding that

although Proposition 64 does not on its face require a representative claim to be pled as a class action, it requires that the claim comply with section 382, which is commonly understood to authorize class actions. The requirement that a representative claim comply with section 382 makes plain that a representative UCL claim must be pursued as a class action. To the extent that Proposition 64 presents any ambiguity, we resolve it by the indicia of the voters’ intent. That intent, as set forth in the official ballot pamphlet, was that representative claims under the UCL be brought as class actions.

Thus, the court upheld the trial court's order granting a motion to strike the UCL claims. However, with respect to the PAGA claim, Arias's writ petition was granted. The court held that, unlike the UCL,

the Labor Code statute authorizing a private enforcement action is an exception to the class action requirement.

So, one must allege class allegations to bring a representative claim under the UCL, but need not do so under the PAGA. Both issues are of potential interest to the Supreme Court, so we'll be watching to see if this one gets review, and if so, as to what issues. The full text of Arias can be found at the court's opinion pages, in pdf or word format.

Comments

[Kevin Norte]

Prior to Arias, it was clear to me that was where the Court was headed. PAGA “simply deputizes an employee to recover a penalty under section 256, which penalty previously was recoverable only by the Labor Commission.” (Dunlap v. Superior Court (2006) 142 Cal.App.4th 330, 340, fn 6.) “[P]laintiffs seeking civil penalties recoverable by the state [emphasis added] in such suits for violations of any Labor Code provision specified in section 2699.5 must now plead compliance with section 2699.3, subdivision (a)’s ‘administrative procedures’.” (Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 382-383.) From there it was easy to guess that a COurt would see the penalty against the employer was the entire penalty as to the employment pool.

[greedy associate]

Jackson Lewis is telling their clients that this case "increased the potential liability to employers in wage and hour class actions in a decision on a procedural issue involving class certification of wage and penalty claims under the California Labor Code" because the PAGA claims didn't have to be certified. This case did not make new law. PAGA cases have never had to be certified. That was the whole point of the PAGA.

[Kevin Norte]

One thing that is not clear under PAGA is the remedy under which 25% of the penalty is doled out to the unrepresented employee. Does the name plaintiff keep it all or is the plaintiff obliged to distribute it to the unnamed, uncertified, unascertainable current and former (presumably aggrieved) employees? How do we know who is entitled to recover and who is not? Who keeps the residual? How is recovery limited to avoid duplication?

Furthermore, now suppose there was a class and some opted out, later one of those class members who had opted out might bring a PAGA case based on exactly the same conduct. Defendant, of course, will argue res judicata. Plantiff, under ARIAS/DUNLAP, will presumably argue that he or she has stepped into the shoes of the state. Because the state would not be precluded from bringing an action for civil penalties resulting from Labor Code violations, nor should the PAGA plaintiff be precluded from such an action, if I am interpreting this correctly.

[Question]

Anyone know how much the state has recovered through PAGA penalties? I've heard something like $500,000 to date. Given all of the w & l litigation since 2004, doesn't seem like a lot...

[wagelaw]

Good question. We have that information in a notebook from a seminar we went to in May. We'll dig it up and put together a post about it.