1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 MICHELLE HINDS, et al., Case No. 18-cv-01431-JSW
8 Plaintiffs, ORDER GRANTING MOTION TO STRIKE PAGA CLAIM ASSERTED 9 v. AGAINST DEFENDANT FEDEX GROUND PACKAGE SYSTEM, INC. 10 FEDEX GROUND PACKAGE SYSTEM, INC., et al., Re: Dkt. No. 180 11 Defendants.
12 13 On January 3, 2022, the Court reserved ruling on Defendant FedEx Ground Package 14 System, Inc.’s (“FedEx”) motion to strike Plaintiffs’ claim under the California Labor Code 15 Private Attorneys General Act (“PAGA”). Dkt. No. 184, “January 3 Order”. The Court has 16 recounted the facts underlying Plaintiffs’ dispute with FedEx in prior orders and will not repeat 17 those facts here. In brief, FedEx has contracted with independent service providers (“ISPs”), one 18 of which was defendant Bay Rim Services, Inc. (“Bay Rim”). Plaintiffs each worked as drivers 19 for Bay Rim, and their theory of the case is that FedEx is liable as a joint employer for alleged 20 labor code violations. Plaintiffs also seek PAGA penalties on behalf of themselves and 21 approximately 20,000 other individuals who were directly employed by over 500 ISPs. 22 On August 18, 2021, the Court denied Plaintiffs’ motion for class certification, finding that 23 individualized issues predominated over common issues. FedEx then moved to strike or to 24 dismiss the PAGA claim arguing Plaintiffs did not have standing and that the claim against FedEx 25 would be unmanageable. In the January 3 Order, the Court concluded that, at this stage, Plaintiffs 26 had shown they were “aggrieved employees” for purposes of their individual PAGA claims but 27 deferred ruling on whether Plaintiffs would have standing to pursue the claim on behalf of 1 opportunity to present a trial plan and directed that any proposed plan “shall address any 2 affirmative defenses to be asserted by FedEx.” January 3 Order at 8:22-23. The parties met and 3 conferred, as directed, and have submitted their supplemental briefs. For the reasons that follow, 4 the Court GRANTS FedEx’s motion. 5 When the Court reserved issuing a final ruling on FedEx’s motion to strike, it noted a 6 recent opinion from the California Court of Appeal for the Second District, which concluded a 7 court could strike or dismiss a PAGA claim for lack of manageability. Wesson v. Staples the 8 Office Superstore, LLC, 68 Cal. App. 5th 746, 851 (2021).1 However, on March 23, 2022, Court 9 of Appeal for the Fourth District held otherwise. Estrada v. Royalty Carpet Mills, Inc., 76 Cal. 10 App. 5th 585, 2022 WL 855568, at *1, *10-12 (4th Dist. Mar. 23, 2022). As noted in those 11 opinions, there also is a split of authority within the district courts about whether a court may 12 dismiss or strike a PAGA claim based on manageability. See, e.g., Estrada, 2022 WL 855568, at 13 *10; Wesson, 68 Cal. App. 5th at 857 n.10.2 14 In reaching its conclusion, the Wesson court relied on the principle that courts have the 15 inherent authority to manage complex litigation. 68 Cal. App. 5th at 763-64. It also reasoned that 16 permitting a court to strike PAGA claim based on that authority would not conflict with PAGA’s 17 purpose, in part because not every claim would be subject to dismissal. Id. at 768-69. The 18 Wesson court also emphasized that it was not creating a per se rule; if a court relies on its inherent 19 authority to strike a PAGA claim, it should not do so lightly even if the PAGA claim is 20 “procedurally challenging.” Id. at 862, 864 (and noting, in context of class certification “refusing 21 1 “When interpreting state law, federal courts are bound by decisions of the state’s highest 22 court. In the absence of such a decision, a federal court must predict how the highest state court would decide the issue using intermediate appellate court decisions, decisions from other 23 jurisdictions, statutes, treatises, and restatements as guidance. However, where there is no convincing evidence that the state supreme court would decide differently, a federal court is 24 obligated to follow the decisions of the state’s intermediate appellate courts.” Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958, 960 (9th Cir. 2001) (internal quotation omitted). 25
2 See, e.g., January 3 Order at 5:6-9; Ortiz v. Amazon.com, LLC, No. 17-cv-3920-JSW, 2020 26 WL 5232592, at *2 (N.D. Cal. Sept. 2, 2020) (citing cases reflecting split, requiring plaintiff to present a trial plan prior to ruling on whether PAGA claim would be manageable, and denying 27 motion to strike without prejudice); Delgado v. Marketsource, Inc., No. 17-cv-07370-LHK, 2019 1 to certify on manageability grounds alone should be the last resort”) (quoting Noel v. Thrifty 2 Payless, Inc., 7 Cal. 5th 955, 978 (2019), in turn quoting Mullins v. Direct Digital, LLC, 795 F.3d 3 654, 664 (7th Cir. 2015)); see also Briseno v. ConAgra Foods, Inc., 844 F.3d 1121, 1128 (9th Cir. 4 2017) (citing Mullins with approval). Where possible, courts “should work with the parties to 5 render a PAGA claim manageable by adopting a feasible trial plan or limiting the claim’s scope.” 6 Id.; accord Briseno, 844 F.3d at 1128. 7 In contrast, the Estrada court highlighted that a plaintiff who asserts a PAGA claim is 8 acting “‘as the proxy or agent of the state’s labor law enforcement agencies’ and ‘represents the 9 same legal right and interest as the state labor law enforcement agencies – namely recovery of 10 civil penalties that otherwise would have been assessed and collected by the” Labor and 11 Workforce Development Agency. 2022 WL 855568, at *11 (quoting Arias v. Sup. Ct., 46 Cal. 4th 12 969, 986 (2009)). It reasoned that “to dismiss PAGA claims based on manageability would 13 interfere with PAGA’s express design as a law enforcement mechanism.” Id. at *12. 14 Although the Estrada court held that it is not proper to dismiss a PAGA claim for lack of 15 manageability, it acknowledged that “[s]ome PAGA claims involve hundreds or thousands of 16 alleged aggrieved employees, each with unique factual circumstances.” Id. To address such 17 concerns, “courts may, where appropriate and within reason, limit witness testimony and other 18 forms of evidence when determining the number of violations that occurred and the amount of 19 penalties to assess.” Id. As one example, the court suggested that the alleged violations could be 20 “narrowed … to employees at a single location or department.” Id. at *12 n.8. That approach, the 21 court reasoned, might encourage litigants to be “prudent in their approach to PAGA claims” and 22 would not be unfair to unrepresented aggrieved employees because “‘absent employees do not 23 own a personal claim for PAGA civil penalties, and whatever personal claims the absent might 24 have for relief are not at stake.’ … If a plaintiff alleges widespread violations of the Labor Code 25 by an employer in a PAGA action but cannot prove them in an efficient manner, it does not seem 26 unreasonable for the punishment assessed to be minimal.” Id. (quoting Williams v. Sup. Ct., 3 Cal. 27 5th 531, 547 n.4 (2017)). 1 but by the control necessarily vested in courts to manage their own affairs to as to achieve the 2 orderly and expeditious disposition of cases.’” Deitz v. Bouldin, 579 U.S. 40, 45 (2016) (quoting 3 Link v. Wabash R. Co., 370 U.S. 626, 630-31 (1962)). When a court uses that discretion, it “must 4 be a reasonable response to a specific problem and [it] cannot contradict any express rule or 5 statute.” Id.
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 MICHELLE HINDS, et al., Case No. 18-cv-01431-JSW
8 Plaintiffs, ORDER GRANTING MOTION TO STRIKE PAGA CLAIM ASSERTED 9 v. AGAINST DEFENDANT FEDEX GROUND PACKAGE SYSTEM, INC. 10 FEDEX GROUND PACKAGE SYSTEM, INC., et al., Re: Dkt. No. 180 11 Defendants.
12 13 On January 3, 2022, the Court reserved ruling on Defendant FedEx Ground Package 14 System, Inc.’s (“FedEx”) motion to strike Plaintiffs’ claim under the California Labor Code 15 Private Attorneys General Act (“PAGA”). Dkt. No. 184, “January 3 Order”. The Court has 16 recounted the facts underlying Plaintiffs’ dispute with FedEx in prior orders and will not repeat 17 those facts here. In brief, FedEx has contracted with independent service providers (“ISPs”), one 18 of which was defendant Bay Rim Services, Inc. (“Bay Rim”). Plaintiffs each worked as drivers 19 for Bay Rim, and their theory of the case is that FedEx is liable as a joint employer for alleged 20 labor code violations. Plaintiffs also seek PAGA penalties on behalf of themselves and 21 approximately 20,000 other individuals who were directly employed by over 500 ISPs. 22 On August 18, 2021, the Court denied Plaintiffs’ motion for class certification, finding that 23 individualized issues predominated over common issues. FedEx then moved to strike or to 24 dismiss the PAGA claim arguing Plaintiffs did not have standing and that the claim against FedEx 25 would be unmanageable. In the January 3 Order, the Court concluded that, at this stage, Plaintiffs 26 had shown they were “aggrieved employees” for purposes of their individual PAGA claims but 27 deferred ruling on whether Plaintiffs would have standing to pursue the claim on behalf of 1 opportunity to present a trial plan and directed that any proposed plan “shall address any 2 affirmative defenses to be asserted by FedEx.” January 3 Order at 8:22-23. The parties met and 3 conferred, as directed, and have submitted their supplemental briefs. For the reasons that follow, 4 the Court GRANTS FedEx’s motion. 5 When the Court reserved issuing a final ruling on FedEx’s motion to strike, it noted a 6 recent opinion from the California Court of Appeal for the Second District, which concluded a 7 court could strike or dismiss a PAGA claim for lack of manageability. Wesson v. Staples the 8 Office Superstore, LLC, 68 Cal. App. 5th 746, 851 (2021).1 However, on March 23, 2022, Court 9 of Appeal for the Fourth District held otherwise. Estrada v. Royalty Carpet Mills, Inc., 76 Cal. 10 App. 5th 585, 2022 WL 855568, at *1, *10-12 (4th Dist. Mar. 23, 2022). As noted in those 11 opinions, there also is a split of authority within the district courts about whether a court may 12 dismiss or strike a PAGA claim based on manageability. See, e.g., Estrada, 2022 WL 855568, at 13 *10; Wesson, 68 Cal. App. 5th at 857 n.10.2 14 In reaching its conclusion, the Wesson court relied on the principle that courts have the 15 inherent authority to manage complex litigation. 68 Cal. App. 5th at 763-64. It also reasoned that 16 permitting a court to strike PAGA claim based on that authority would not conflict with PAGA’s 17 purpose, in part because not every claim would be subject to dismissal. Id. at 768-69. The 18 Wesson court also emphasized that it was not creating a per se rule; if a court relies on its inherent 19 authority to strike a PAGA claim, it should not do so lightly even if the PAGA claim is 20 “procedurally challenging.” Id. at 862, 864 (and noting, in context of class certification “refusing 21 1 “When interpreting state law, federal courts are bound by decisions of the state’s highest 22 court. In the absence of such a decision, a federal court must predict how the highest state court would decide the issue using intermediate appellate court decisions, decisions from other 23 jurisdictions, statutes, treatises, and restatements as guidance. However, where there is no convincing evidence that the state supreme court would decide differently, a federal court is 24 obligated to follow the decisions of the state’s intermediate appellate courts.” Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958, 960 (9th Cir. 2001) (internal quotation omitted). 25
2 See, e.g., January 3 Order at 5:6-9; Ortiz v. Amazon.com, LLC, No. 17-cv-3920-JSW, 2020 26 WL 5232592, at *2 (N.D. Cal. Sept. 2, 2020) (citing cases reflecting split, requiring plaintiff to present a trial plan prior to ruling on whether PAGA claim would be manageable, and denying 27 motion to strike without prejudice); Delgado v. Marketsource, Inc., No. 17-cv-07370-LHK, 2019 1 to certify on manageability grounds alone should be the last resort”) (quoting Noel v. Thrifty 2 Payless, Inc., 7 Cal. 5th 955, 978 (2019), in turn quoting Mullins v. Direct Digital, LLC, 795 F.3d 3 654, 664 (7th Cir. 2015)); see also Briseno v. ConAgra Foods, Inc., 844 F.3d 1121, 1128 (9th Cir. 4 2017) (citing Mullins with approval). Where possible, courts “should work with the parties to 5 render a PAGA claim manageable by adopting a feasible trial plan or limiting the claim’s scope.” 6 Id.; accord Briseno, 844 F.3d at 1128. 7 In contrast, the Estrada court highlighted that a plaintiff who asserts a PAGA claim is 8 acting “‘as the proxy or agent of the state’s labor law enforcement agencies’ and ‘represents the 9 same legal right and interest as the state labor law enforcement agencies – namely recovery of 10 civil penalties that otherwise would have been assessed and collected by the” Labor and 11 Workforce Development Agency. 2022 WL 855568, at *11 (quoting Arias v. Sup. Ct., 46 Cal. 4th 12 969, 986 (2009)). It reasoned that “to dismiss PAGA claims based on manageability would 13 interfere with PAGA’s express design as a law enforcement mechanism.” Id. at *12. 14 Although the Estrada court held that it is not proper to dismiss a PAGA claim for lack of 15 manageability, it acknowledged that “[s]ome PAGA claims involve hundreds or thousands of 16 alleged aggrieved employees, each with unique factual circumstances.” Id. To address such 17 concerns, “courts may, where appropriate and within reason, limit witness testimony and other 18 forms of evidence when determining the number of violations that occurred and the amount of 19 penalties to assess.” Id. As one example, the court suggested that the alleged violations could be 20 “narrowed … to employees at a single location or department.” Id. at *12 n.8. That approach, the 21 court reasoned, might encourage litigants to be “prudent in their approach to PAGA claims” and 22 would not be unfair to unrepresented aggrieved employees because “‘absent employees do not 23 own a personal claim for PAGA civil penalties, and whatever personal claims the absent might 24 have for relief are not at stake.’ … If a plaintiff alleges widespread violations of the Labor Code 25 by an employer in a PAGA action but cannot prove them in an efficient manner, it does not seem 26 unreasonable for the punishment assessed to be minimal.” Id. (quoting Williams v. Sup. Ct., 3 Cal. 27 5th 531, 547 n.4 (2017)). 1 but by the control necessarily vested in courts to manage their own affairs to as to achieve the 2 orderly and expeditious disposition of cases.’” Deitz v. Bouldin, 579 U.S. 40, 45 (2016) (quoting 3 Link v. Wabash R. Co., 370 U.S. 626, 630-31 (1962)). When a court uses that discretion, it “must 4 be a reasonable response to a specific problem and [it] cannot contradict any express rule or 5 statute.” Id. Barring a definitive ruling from the California Supreme Court, Wesson does provide 6 support for the conclusion that striking a PAGA claim would not directly contradict that statute. 7 As noted, Plaintiffs’ theory is that FedEx jointly employs any individual employed by any 8 ISP. Thus, Plaintiffs’ ability to obtain any PAGA penalties from FedEx, whether for themselves 9 or for other aggrieved individuals, depends upon a finding that FedEx was their joint employer 10 and a joint employer for individuals employed by other ISPs. That critical issue has yet to be 11 decided. Plaintiffs maintain that their case in chief will be manageable because they will use 12 FedEx Scanner Data and expert testimony to establish the number of violations by FedEx that may 13 have occurred. They also argue that any manageability issues arise from FedEx’s affirmative 14 defenses, which they claim are legal issues. They have advised that their trial plan is to file a 15 motion for summary judgment on those defenses and, if unsuccessful, will rely on records 16 produced by FedEx and their expert to show that no drivers took a meal break. In light of the 17 Court’s conclusions on the motion for class certification, the Court concludes that plan does not 18 adequately take into consideration FedEx’s affirmative defenses. 19 Plaintiffs also continue to argue that FedEx can be held liable for alleged rest and meal 20 break violations even if an ISP complied with its obligations to its employees, citing Serrano v. 21 Aerotek, Inc., 21 Cal. App. 5th 773 (2018), disapproved on other grounds by Donohue v. AMN 22 Servs., LLC, 11 Cal. 5th 58, 77 (2021). The Court considered Serrano in connection with the 23 motion for class certification and still is not persuaded that Serrano stands for the proposition that 24 an employee might recover a “windfall” from a joint employer “even though a direct employer 25 actually complied with the Labor Code and with Wage Order 9.” (Order Denying Mot. for Class 26 Cert. at 16:6-14.) Therefore, the Court also concludes Plaintiffs’ continued reliance on this theory 27 does not adequately address how the Court could resolve the PAGA claim and determine penalties ] Code provisions at issue. 2 The non-party aggrieved employees may not have a personal claim for PAGA penalties, 3 || buta PAGA claim “functions as a substitute for an action brought by the government itself, a 4 || judgment in that action binds all those, including nonparty aggrieved employees, who would be 5 || bound by a judgment in an action brought by the government.” Arias, 46 Cal. 4th at 986 6 || (emphasis added). The Court will assume for the sake of argument that Plaintiffs would have 7 || standing under PAGA to pursue claims against FedEx for individuals directly employed by ISPs 8 other than Bay Rim. Plaintiffs have not persuaded the Court that they have a viable trial plan to 9 || make the PAGA claim manageable as to violations on behalf of those aggrieved employees, who 10 || could be bound by a judgment that FedEx was not their joint employer. Arias, 46 Cal. 4th at 986. 11 Further, neither Wesson nor Estrada addressed the issue of striking a PAGA claim in the context 12 || of joint employment and can be distinguished on that basis. E 13 Accordingly, the Court will exercise its inherent authority to limit Plaintiffs’ PAGA claim 14 || the alleged violations by Bay Rim and GRANTS FedEx’s motion to strike. 3 15 IT ISSO ORDERED. || pated: April 25, 2022 (| / □□ to iERFR ty bay a 18 United Syfet Distrif Judge 19 20 21 22 23 24 25 26 27 28