Last week, California’s First District Court of Appeal issued an opinion that could concentrate PAGA litigation in venues hand-selected by plaintiffs’ attorneys, without regard to where the representative plaintiff actually worked. The published decision in Crestwood Behavioral Health, Inc. v. Superior Court of Alameda Cty. (Crestwood), No. A160523 (Cal. Ct. App. Feb. 17, 2021) holds any county in which a non-party, allegedly aggrieved employee worked is a proper venue for a PAGA action, even if the PAGA plaintiff did not work in the county or if the employer’s principal place of business is in a different county.
The decision rubber-stamps forum shopping by PAGA plaintiffs. Following a common theme in PAGA jurisprudence, the decision tends to undermine pre-dispute employment arbitration agreements, which typically provide for arbitration to be held in the county where the employee worked.
Basics of Representative PAGA Actions
Under the PAGA, current and former employees who claim to have suffered at least one violation of California’s Labor Code file a representative lawsuit on behalf of the state’s labor law enforcement agencies. To maintain a PAGA claim, plaintiffs must establish standing as an “aggrieved employee,” which the statute defines as a current or former employee “against whom one or more of the alleged violations was committed.” PAGA plaintiffs seek to recover civil penalties for the alleged violations they experienced, and for those experienced by other allegedly “aggrieved employees,” who are not parties to the action.
Notably, California courts allow PAGA plaintiffs who experience a violation of just one Labor Code provision to recover civil penalties for that violation and for other violations of different Labor Code provisions experienced by the nonparty employees. The applicable penalties are established by the Labor Code, most of which are $100 per pay period. PAGA claims do not provide for unpaid wages or other individualized relief for the named plaintiff or the allegedly aggrieved, nonparty employees.
PAGA litigation has led to quasi-legislative judicial decisions that, at times, have disagreed with and/or ignored legal interpretations published by the same labor law enforcement agencies PAGA plaintiffs purportedly represent.
The Crestwood Case
In Crestwood, the plaintiff formerly worked in Solano County, but she alleged wage and hour violations in treatment centers in many other California locations. (Such systemic or uniform violations are alleged in nearly all PAGA actions.) The plaintiff filed suit in Alameda County, where Crestwood operated just two of its 20-plus California facilities. Crestwood moved to transfer venue to Sacramento County where its principal place of business is located. The trial court denied Crestwood’s motion.
Crestwood filed a petition for writ of mandate arguing the PAGA claim “arose” only in Solano County, where plaintiff worked and suffered the alleged Labor Code violations. The company asserted that because PAGA plaintiffs must establish standing in order to maintain the PAGA claim, PAGA actions “arise” where named-plaintiffs suffer the alleged violations, not where the plaintiffs allege other, nonparty employees suffer violations. In other words, Crestwood argued that a PAGA action “arises” from the alleged violation(s) against the named plaintiff.
The court recognized that “[o]nce she establishes standing, [the PAGA plaintiff] is suing as a proxy for the state” and “has no individual claim.” It also recognized that the standing requirement “ensures that courts decide ‘only actual controversies ... .’” Nonetheless, the court ignored this sequencing in analyzing where a PAGA claim “arises,” and it rejected Crestwood’s venue argument as “metaphysical.”
The appellate court did not specify when a PAGA claim “arises” or otherwise define the statutory term “arose” as used in California’s venue provisions. The court simply focused on the plaintiff’s state-wide, representative claims, and asserted that the PAGA plaintiff’s “personal allegations” are merely “necessary to establish standing, not venue.” In doing so, the court did not address California legal authorities stating that, for purposes of establishing proper venue, “It is where the shaft strikes the plaintiff, not where it is drawn, that counts.” (See Colusa Air Pollution Control Dist. v. Superior Court, 226 Cal.App.3d 880, 888 (Ct. App. 1991).)
Further, the court summarily claimed the Legislature would not “restrict proper venue to the location of an individual employee … suing on behalf of all aggrieved employees.” Of course, the “individual employee”—the PAGA plaintiff—is the only aggrieved employee who is a party to the action, and the PAGA plaintiff may not file a claim exclusively on behalf of other aggrieved employees.
Ultimately, the appellate court held that venue is proper in any county in which any of the allegedly aggrieved, nonparty employees worked,” and thus Alameda County was a proper venue. The proceedings have not addressed the merits of the case and merely addressed the venue issue.
A Bridge Too Far – How Might Crestwood Will Effect PAGA Litigation and Jurisprudence?
The Crestwood court appears to neglect the variety of alleged violations that may lead to a PAGA claims, the speculative nature of such state-wide allegations, and the realities of PAGA litigation. It is entirely possible that, under Crestwood, PAGA actions will be tried in counties where there are no allegedly aggrieved employees because, during litigation, it became clear the allegedly unlawful conduct occurred only at the plaintiff’s worksite in a different county.
The decision is unlikely to have a significant impact on PAGA litigation in the near term. Distant and delayed litigation is commonplace as a result of the COVID-19 pandemic. Since March 2020, our superior courts’ backlog of cases has grown and litigation of civil actions has faced substantial delays. Remote conferences, hearings, and depositions have become mandatory. When courts reopen in the future, the “new normal” will likely embrace remote appearances and proceedings.
In the long term, this decision could make it even more difficult to expeditiously resolve PAGA claims on the merits. The plaintiffs’ bar may concentrate PAGA litigation in favorable venues in the coastal appellate districts, such as the First (SF) and Second (LA) Districts. Select superior courts in those districts, that the plaintiffs’ bar view as favorable, already heavily impacted and unable to swiftly dispose of existing civil cases, would be inundated with additional PAGA lawsuits. PAGA plaintiffs may invite the delay, as they claim “continuing” civil penalty liability that accrues each passing pay period. That mounting threat of potential civil penalty liability, growing indefinitely, would force many employers to settle meritless claims in exchange for peace of mind.
Crestwood’s most lasting impact may be felt by PAGA’s jurisprudence. Concentrating PAGA litigation in a select few superior courts in two or three appellate districts is likely to create an echo chamber of employee-friendly decisions, one following the other. That would likely lead to more PAGA claims being filed in the same superior courts and would further embolden the plaintiffs’ bar to pursue quasi-legislative theories of liability.
