Short take-away: PAGA action cannot be dismissed solely on manageability grounds

 

Short take-away:  Trial courts do not have inherent power to strike PAGA claims because they are supposedly "unmanageable"

The California Supreme Court has resolved a split of authority between appellate districts as to whether a trial court has inherent power to strike a Private Attorney General Act claim on grounds it is not manageable. (Estrada v. Royal Carpet Mills (January 18, 2024) S274340.)   Such PAGA claims are made under the "Labor Code Private Attorneys General Act of 2004," found at Labor Code section 2698, et seq.

Plaintiff Estrada filed suit, asserting Royalty violated Labor Code provisions requiring that it provide required break and rest periods, as well as seeking PAGA penalties for these Labor Code violations.  Plaintiff filed amended complaints realleging the individual claims as a class action.  The trial judge, the Hon. Randall J. Sherman, of the Orange County Superior Cout, held a bench trial as to the issue of individual vis a vis class claims and, though a class had already been certified, issued an order decertifying the class due to inconsistent individual claims, dismissing the PAGA claim, and entering a judgment of dismissal.

The Fourth District, Division Three, reversed the trial court and the Supreme Court granted review.  Chief Justice Guerrero wrote for a unanimous court and explained:

We now conclude that trial courts lack inherent authority to strike PAGA claims on manageability grounds. In reaching this conclusion, we emphasize that trial courts do not generally possess a broad inherent authority to dismiss claims. Nor is it appropriate for trial courts to strike PAGA claims by employing class action manageability requirements. And, while trial courts may use a vast variety of tools to efficiently manage PAGA claims, given the structure and purpose of PAGA, striking such claims due to manageability concerns — even if those claims are complex or time-intensive — is not among the tools trial courts possess. (Id., p. 2; footnote omitted.)

The Supreme Court explained that while trial courts do have inherent authority to establish procedures where no procedure exists, this does not extend to a broad power to dismiss claims.  Estrada  thus quoted from Weiss v. People ex rel. Dept. of Transportation (2020) 9 Cal. 5th 840, at 865, on this point:

While "[t]here may be cases in which the use of a nonstatutory motion procedure to dismiss a cause of action before trial is called for, . . . courts should be wary of such requests.” (Id., p. 8.)

Therefore, Estrada concluded that the requirement of "manageability" present in class action suits did not apply to PAGA claims. (Id., p. 20-22.)

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2024 California Supreme Court preveiw

2024 brings us the second year of service by California's new Chief Justice

On January 2, 2023, Chief Justice Patricia Guerrero was sworn in as the 29th Chief Justice of California.  She followed former Chief Justice Tani Cantil-Sakauye, who was regarded as a strong leader who brought stability and consistency to the administration of justice.  2024 will therefore be Chief Justice Guerrero's second year of service.

Predictions for 2024

If we were to hazard a prediction as to the ideology and direction of the Court in 2024, we would predict that its stability and consistency would continue.  In fact, there is only one remaining Republican appointee, Justice Corrigan, who was appointed by Governor Schwarzenegger in 2005.

More to the point, given the fact that Mr.  Schwarzenegger hardly governed as a political conservative, it appears the court is entirely moderate to left of center in terms of ideology.  There have been no notable four to three decisions in recent memory and the Court has become known for its unanimous seven to zero decisions. 

Key rulings likely to involve the scope of protections for employees

In 2024 the Supreme Court has already issued an opinion regarding whether a trial court may dismiss a Private Attorney General (PAGA) claim related to meal and rest breaks on "manageability" grounds. (Estrada v. California Commerce Club).  We will discuss Estrada in a future post, but it is worth noting this is not the only case relating to employment pending before the Supreme Court and, indeed, other cases with employment law issues may be granted review.  

The question then becomes:  will counsel for employees continue their recent success?  We will see, and, in the meantime, note that briefs of cases that have or will soon be argued are available here. 

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Court, not arbitrator, decides whether minor may disaffirm contract including arbitration provision

 

Class action suit by minors alleging deceptive practices in "in app" purchases may proceed despite the fact the videogame license came with arbitration provision

A minor, of course, may affirm or disaffirm a contract once they reach the age of majority. (Family Law Code sections 6700 and 6710.)  This is to protect minors from "their lack of judgment and experience. . . ." (Sparks v. Sparks (1950) 101 Cal. App. 2d 129, at 137.)  

California's Second District, Division Six, has upheld the role of a trial court in determining whether a minor has disaffirmed a contract made by said minor. (J.D. v. Electronic Arts (January 17, 2024) E080414.)  The appellate court summarized the complaint and challenges to such as follows:

On February 14, 2022, J.R. II filed a putative class action against EA, alleging causes of action for unlawful and unfair business practices in violation of the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.), violation of the Consumer Legal Remedies Act (Civ. Code, § 1750 et seq.), and unjust enrichment.  J.R. alleged that EA deceptively induced players of Apex Legends, “especially impressionable minors,” to purchase digital game-specific currency in order “to purchase cosmetic items, characters, lootboxes, and other items within the Apex Legends virtual world.”
EA moved to stay the action and to compel arbitration under Code of Civil Procedure sections 1281.2 and 1281.4, arguing that J.R. II’s claims are covered by an arbitration agreement contained within EA’s user agreement, which J.R. II agreed to in order to play Apex Legends. (Id., p. 1.)

Finding it had the authority to decide whether J.R. disaffirmed the contract with EA, the trial court found he had done so according to the declaration he had submitted in opposition to the motion.  The Hon. Craig Riemer, Judge Presiding of the Riverside County Superior Court, thus denied EA's motion to compel contractual arbitration under the rules of the American Arbitration Association; therefore permitted the class action to proceed.

EA appealed and argued that because the contract provided arbitration should proceed according to the rules of the AAA, the arbitrator must decide the issue of whether J.R. disaffirmed all or part of the agreement to arbitrate.  J.R. argued that he had disaffirmed the entire user agreement, including the "delegation clause" regarding arbitration, and argued the trial court had the authority to decide this issue.

In an opinion written by Justice Menetrez, the Second District found J.R.'s declaration provided that he had in fact disaffirmed the entire contract, including the delegation provision.  The court also explained the delegation provision was severable from the remainder of the contract and that the disaffirmance of this provision was valid no matter whether defenses to other parts of the agreement were valid.    

Analysis

This opinion continues the California trend of the increasing role of trial courts supervising private arbitration and, indeed, in deciding major legal issues related to what can or cannot be arbitrated.  Put another way, the time in which a trial court was more likely to have the arbitrator decide all issues related to contractual arbitration appears to be long passed. 

This suit also illustrates the dangers inherent in the apparently lucrative business of encouraging minors to make in-app purchases without the permission of their parents.

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Short Take-Away - Insured Must Arbitrate UIM Claim Even Though Bad Faith Suit Has Already Been Filed Against the Insurer

 

The First Appellate District, Division Two, has held an insurer may demand arbitration of an underinsured motorist claim (UIM) made after the insured settled with the uninsured motorist (UM) and then made a claim for the UIM policy limits; indeed, the insured was required to arbitrate even though the insured had already filed a claim for bad faith against the insurer. (Tornal v. CSAA Ins. (Jan. 11, 2024) A167666.)  As Tornal explained:

Plaintiff’s policy provided UM/UIM coverage of up to $300,000 per accident. Plaintiff made a written demand to defendant under the policy for $275,000—the policy limits of $300,000, less the $25,000 she had already received from the settlement with the UIM. Defendant [insurer] refused to tender the $275,000 demanded. (Id., p. 3.)

Plaintiff and insured Tornal then filed a bad faith suit against CSAA, and the latter filed a petition to compel arbitration pursuant to the insurance policy and California's Insurance Code section 11580.2.  The trial court denied CSAA's request to compel arbitration of the underlying UIM claim and CSAA appealed.

Justice Richman and his colleagues reversed, finding the trial court erred in denying the petition.  The appellate court noted that CSAA was not challenging the right of its insured to sue for breach of contract and bad faith, but, instead, was seeking adjudication of the amount owed under its policy.  Said policy and California law provided that this should be resolved by way of arbitration and not a "bad faith" suit:

. . . [B]ecause the parties disagreed over the amount of UIM damages owed to plaintiff, defendant was entitled under section 11580.2, subdivision (f) and the terms of the policy to arbitrate the issue of UIM damages. (Id., p. 22.)

Commentary

A contrary result would have meant, of course, that an insured unable to settle a UIM or UM claim to their liking could stymie the request of the insured to arbitrate this issue by first filing a suit alleging bad faith breach of the insurance policy.

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Court may consider attorney incivility in deciding whether to lower attorney fees awarded (Snoek v. Exaktime)

 

Courts may consider the incivility of counsel in deciding whether to lower the amount awarded to a party for said attorney's efforts

The Second District, Division Three, of the California Court of Appeal has upheld a trial court ruling reducing the amount of attorney fees awarded to a party due to the incivility of counsel for that party.  (Snoek v. Evaktime (October 21, 2023) BC708964.)  The Hon. Michael P. Linfield, Judge Presiding, of the Los Angeles County Superior Court, applied such a modifier against the plaintiff for the conduct of his counsel when the trial court awarded attorney fees:

Plaintiff Steve Snoeck appeals from the trial court’s order awarding him $686,795.62 in attorney fees after the court applied a .4 negative multiplier to its $1,144,659.36 adjusted lodestar calculation “to account for [p]laintiff’s counsel’s . . . lack of civility throughout the entire course of this litigation.” The court awarded Snoeck fees after he prevailed on one of his six causes of action against his former employer ExakTime Innovations, Inc. on his complaint for disability discrimination under the Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900 et seq.) and related causes of action. The jury [had previously] awarded Snoeck $130,088 in damages on his claim ExakTime failed to engage in a good faith interactive process with him. (Id., p. 2.)

In ruling upon a post-trial motion for attorney fees, the trial court found plainrtiff's counsel's rates of $535.00 to $750.00 per hour "reasonable" but made several alterations to the fees requested, including mathematical corrections and applying a 1.2 positive multiplier to the to the "lodestar" rate awarded, given the length of the case and its "contingent" nature.  However, the trial court also found that plaintiff's counsel, Perry Smith, had been uncivil in sending communications containing ad hominem attacks on defense counsel and applied a .4 negative multiplier to the entire fee award.

In an opinion written by Justice Edgarton, the Second District found the trial court acted well within its discretion when it made this reduction.  In doing so the appellate court rejected the argument the .4 reduction was an improper "sanction" as well as that such a reduction controverted the purpose of the fee-shifting provision in FEHA:

Moreover, the court’s order specifically recognized civility was not just a moral good but an aspect of attorney skill. And, as discussed, ample evidence supports the court’s reduction of the lodestar to account for plaintiff’s counsel’s skill given his incivility toward opposing counsel and the court. (Cf. Edgerton v. State Personnel Bd. (2000) 83 Cal.App.4th 1350, 1363 [affirming application of positive multiplier given, in part, “ ‘the skill displayed by plaintiff’s counsel in overcoming the intransigent opposition of defendant’ ”].)
Nor did the court contravene the principles of the FEHA in doing so. The lodestar adjustment method—which gives the court the discretion to augment or diminish the lodestar figure to arrive at a reasonable fee—is the gold standard for determining an attorney fee award under the FEHA. (Id., p. 34; original emphasis.)

Potential consequences for counsel whose fees are reduced due to their own actions

To the extent such a fee reduction results in a decrease in monies ultimately paid to the client (and this is a hypothetical here, as we have no way of knowing if the plaintiff actually paid any fees out-of-pocket) a counsel whose actions have caused such a reduction in what is ultimately paid to a client may face certain consequences.  

First, the client may assert that engaging in uncivil conduct harming said client is a breach of the duty duties owed by the attorney, such as duties related to being a fiduciary and competently performing legal services.

Moreover, such an attorney assuredly owes a duty to the client to explain the consequences of such a ruling in terms of the reduction in attorney fees awarded including the specific reasons such fees are being reduced.  This implicates provisions of the California Rules of Professional Conduct, including rule 1.4 which provides a lawyer must keep a client informed as to significant developments in the case.  

Further, Rule 1.7 requires informing the client of any conflict of interest, and the breach of a fiduciary duty owed a client may be said to create such a "conflict."  Specifically, case law holds that  “attorneys have a fiduciary duty to disclose material facts to their clients, an obligation that includes disclosure of acts of malpractice.” (Beal Bank SSB v. Arter & Hadden LLP (2007) 42 Cal. 4th 503, at 514.)

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One-year MICRA Statute of Limitations Applies to Claim Against Ambulance Driver Who Read-Ended Another Motorist (Gutierrez v. Tostado)

 

The one-year Statute of Limitations in California's MICRA regime bars untimely claim against driver of ambulance who rear-ended third-party motorist while transporting another patient

Plaintiff Gutierrez was driving on the I-280 when he was rear-ended by an ambulance driven by defendant Tostado.  The driver and ambulance operator brought a motion for summary judgment based on the statute of limitations found in California's Medical Injury Compensation Reform Act (MICRA).  This statute was passed by the voters in 1975 and limits the amounts recoverable due to alleged negligence in providing medical services.  

The Hon. Christopher J. Rudy of the Santa Clara County Superior Court granted the motion.  On appeal, the Sixth Appellate District upheld the grant of summary judgment over the dissent of one Justice. (Gutierrez v. Tostado (December 1, 2023) H049983.)

Upon appeal, the issue was whether the one-year MICRA statute of limitations found in Code of Civil Procedure section 340.5, as opposed to the general two-year statute of limitations for tort actions, applied.  In other words, did MICRA's provisions apply where the negligence of medical providers was directed at a non-patient such as fellow motorist Gutierrez, who just happened to be driving in front of defendants' ambulance?

 

Justice Greenwood, joined by Justice Grover, wrote for the majority and found that because Tostado was driving the ambulance he was providing "professional [medical] services" at the time of the accident.  Therefore, the time limitations found in MICRA applied.  This is important because under case law such as Flores v. Presbyterian Intercommunity Hospital (2016) 63 Cal. 4th 75, at 88, only actions “alleging injury suffered as a result of . . . the provision of medical care to patients” are subject to MICRA. (Gutierrez, p. 3; italics added.)

The majority answered this question affirmatively and cited to Canister v. Emergency Ambulance Service, Inc. (2008) 160 Cal. App. 4th 388, at 407, where the MICRA one-year limit applied to injury to someone injured while riding in an ambulance who was not a patient.  As Gutierrez explained at pages five to six, the MICRA time limit applied to someone not receiving medical service but who was nonetheless still injured as a result of negligence in providing such services:

 

In Canister, a police officer accompanying an arrestee in the back of an ambulance was injured when the ambulance hit a curb. At the time of the accident, the ambulance was being driven by one EMT while another attended to the arrestee in the rear of the ambulance. The officer sued for negligence. (Canister, supra, 160 Cal.App.4th at p. 392.) After finding that an EMT was a health care provider and that transporting a patient constituted professional services within the meaning of MICRA, the Canister court held that MICRA extends to “ ‘any foreseeable injured party, including patients, business invitees, staff members or visitors, provided the injuries alleged arose out of professional negligence.’ [Citation.]” (Id. at pp. 407-408.) The court concluded that it was foreseeable as a matter of law that a police officer accompanying an arrestee in an ambulance might be injured in the operation of the ambulance. (Id. at p. 408.)

 

Justice Bromberg dissented and wrote that neither the plaintiff nor the defendants could have anticipated that MICRA would apply in this situation, i.e., "a run-of-the-mill traffic accident involving an ambulance that happened to be transporting a patient on a non-emergency matter, presumably with its siren off." (Gutierrez dissent, p. 2.)  The dissent also noted the plaintiff's lawyers were unlikely to know that MICRA applied to his claim because in 1982 the MICRA provisions specifically related to paramedics were removed. (Gutierrez dissent, p. 4.)  Moreover, at the time MICRA was enacted the general statute of limitations for tort claims was one-year, meaning MICRA was not intended to shorten the time to bring claims. Rather, its purpose was to reduce the amount of monetary awards for medical malpractice to prevent a reduction in affordable and available medical care to the public.

Further review of Gutierrez

This case may ultimately be headed to the California Supreme Court, given that the case law cited by the majority and dissent lacks harmony as to when MICRA does or does not apply.

It should also be noted that earlier this year MICRA was amended by the California legislature.  The original $250,000 "cap" on claims for professional medical negligence was increased.  Wrongful death claims from medical malpractice are now "capped" at $500,000 and this amount will increase by $50,000 each January until the maximum is $1,000,000.  For other claims, the "cap" is $350,000, with yearly increases of $40,000 until the new limit reaches $750,000.

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