Cal. Bus. & Indus. Alliance v. Becerra

• Decision Date: 30 June 2022
• Docket Number: G059561
• Citation: 80 Cal.App.5th 734,296 Cal.Rptr.3d 128
• Parties: CALIFORNIA BUSINESS & INDUSTRIAL ALLIANCE, Plaintiff and Appellant, v. Xavier BECERRA, as Attorney General, etc., Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

80 Cal.App.5th 734

296 Cal.Rptr.3d 128

CALIFORNIA BUSINESS & INDUSTRIAL ALLIANCE, Plaintiff and Appellant,

v.Xavier BECERRA, as Attorney General, etc., Defendant and Respondent.

G059561

Court of Appeal, Fourth District, Division 3, California.

Filed June 30, 2022

Epstein Becker & Green, Richard J. Frey, Robert H. Pepple, David M. Prager, Brock J. Seraphin, Devin L. Lindsay ; Nixon Peabody and Richard J. Frey for Plaintiff and Appellant.

Eimer Stahl, Robert E. Dunn, John D Tripoli, and Collin J. Vierra for Chamber of Commerce of the United States of America as Amicus Curiae on behalf of Plaintiff and Appellant.

LevatoLaw and Ronald C. Cohen for California Business Roundtable as Amicus Curiae on behalf of Plaintiff and Appellant.

Rob Bonta, Attorney General, Thomas S. Patterson, Assistant Attorney General, Paul Stein and Aaron Jones, Deputy Attorneys General, for Defendant and Respondent.

OPINION

SANCHEZ, J.

Plaintiff California Business & Industrial Alliance appeals from a judgment of dismissal entered after the trial court sustained the demurrer of defendant Xavier Becerra, in his official capacity as Attorney General of the State of California, without leave to amend. Plaintiff, a lobbying group for small and midsized businesses in California, filed this action seeking a judicial declaration that the Labor Code Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698 et seq. ), is unconstitutional under various theories and an injunction forbidding defendant from implementing or enforcing PAGA. PAGA allows California employees to sue their employers and pursue civil penalties on behalf of the state for violations relating not only to themselves, but also to other California employees of the same employer.

On appeal, plaintiff asserts a single theory: that PAGA violates California's separation of powers doctrine by allowing private citizens to seek civil penalties on the state's behalf without the executive branch exercising sufficient prosecutorial discretion. We reject this theory for two reasons. First, our Supreme Court held in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129 ( Iskanian ), that "PAGA does not violate the principle of separation of powers under the California Constitution." ( Id. at p. 360, 173 Cal.Rptr.3d 289, 327 P.3d 129.) Despite plaintiff's allegation in its complaint that Iskanian is "incorrect," and its arguments before us that this statement is either "dictum" or is limited to a different type of separation of powers challenge, Iskanian is directly on point and controlling, and we have no authority to defy its mandate.

Second, even if Iskanian did not require this result, we would reach it anyway through application of California's preexisting separation of powers doctrine. PAGA is not meaningfully distinguishable from comparable qui tam statutes outside the employment context, including the California False Claims Act ( Gov. Code, § 12650 et seq. ) the Insurance Frauds Prevention Act ( Ins. Code, § 1871 et seq. ) the Safe Drinking Water and Toxic Enforcement Act of 1986, colloquially known as Proposition 65 ( Health & Saf. Code § 25249.5 et seq. ) and many others. Plaintiff and its supporting amici fail to produce even one single case in which any of these many statutes has been held to violate California's separation of powers doctrine. Nor do they identify any sufficiently significant distinctions between those statutes and PAGA, or any other compelling reason for us to break new ground.

Accordingly, we affirm the judgment of the trial court.

FACTS AND PROCEDURAL HISTORY

Plaintiff California Business & Industrial Alliance is a lobbying group, organized in Washington, D.C., which represents small and midsized businesses in California. While plaintiff's general purpose is promoting the interests of these businesses, its specific animating purpose is "accomplishing the repeal or reform of PAGA." In service of that goal, plaintiff sued defendant Xavier Becerra, then California's Attorney General, in his official capacity, seeking declaratory and injunctive relief. Plaintiff sought a judicial declaration that PAGA was unconstitutional and injunctive relief barring defendant from implementing or enforcing PAGA.

Plaintiff's first amended complaint (the complaint)¹ contains extensive allegations regarding perceived defects in PAGA, both legal and practical. The complaint begins with a recitation of the background legal principles and sources of authority. In pure legal terms, plaintiff alleges PAGA violates the Eighth Amendment's prohibition against excessive fines, plaintiff's members' Fifth and Fourteenth Amendment rights to due process, California's separation of powers doctrine, and the Fourteenth Amendment's guarantee of equal protection. On a practical level, plaintiff contends the various provisions of the California Labor Code that are enforceable through PAGA are "unclear, cumbersome, counterintuitive, impossible to follow, or all of the foregoing." As an example, plaintiff complains that compliance with California's meal period requirements is "impracticable," "preposterous," and "hopeless." Plaintiff also alleges California's wage statement requirements have "spawned countless lawsuits alleging hyper-technical violations that have required employers to incur significant legal expenses in their defense as well as large settlements and damage awards in numerous cases." Plaintiff summarizes California's labor laws as "a daunting and confusing web of obligations for employers, robust and generous remedies for employees, and a framework that encourages vigorous enforcement through private rights of action."

Plaintiff's complaint next describes the history of PAGA, including certain portions of its legislative history, the coalition of "labor union and applicant attorney special interest groups" that supported it, and the identity of various opponents of the bill.² Plaintiff then sets forth the nuts and bolts of PAGA, describing the various categories of violations that can be asserted through PAGA, the resulting civil penalties, various procedural differences between PAGA and class action lawsuits, and the rules for providing notice of a PAGA action to the state. Plaintiff's complaint also discusses various cases interpreting and applying PAGA, including a particularly lengthy discussion of the Supreme Court's decision in Iskanian Lastly, before setting forth its causes of action, plaintiff complains at length about practical consequences of PAGA that plaintiff deems unfair, including a hypothetical calculation of very high civil penalties resulting from a PAGA enforcement action brought based upon a very modest underpayment of wages, various allegations of unethical or undesirable tactics by plaintiffs' attorneys in PAGA actions, and charts naming law firms which have frequently filed PAGA notices with the state and listing various nonprofits, charities, hospitals, and similar entities which have been "targeted" by PAGA.

The complaint contains five causes of action, only one of which is relevant here: plaintiff's cause of action for violation of California's separation of powers doctrine. In connection with this cause of action, plaintiff alleges PAGA's provisions "as a whole, viewed from a realistic and practical perspective, operate to arrogate, defeat, and/or materially impair, the exercise of the core powers and/or constitutional functions" of the executive and judicial branches of California's state government. Plaintiff also specifically alleges that this challenge to PAGA is not barred by Iskanian for various reasons.

Defendant demurred, arguing three of plaintiff's five causes of action (relating to plaintiff's separation of powers and due process arguments) fail as a matter of law. The trial court sustained the demurrer without leave to amend, concluding plaintiff's separation of powers claim was barred by Iskanian and plaintiff's due process claims failed in view of the rights of any PAGA defendant to notice and a hearing. Plaintiff's final remaining causes of action (relating to issues irrelevant to this appeal) were disposed of via summary judgment. All of plaintiff's claims having thus been defeated, the trial court entered judgment for defendant. Defendant timely appealed.

DISCUSSION

On appeal, plaintiff challenges only the trial court's ruling on defendant's demurrer to plaintiff's cause of action relating to California's separation of powers doctrine, and only as to the executive branch, not the judicial branch. Further, plaintiff argues solely that the demurrer should not have been sustained, and does not contend leave to amend should have been granted. This limits the scope of our analysis to a single issue of law: whether PAGA violates California's separation of powers doctrine by depriving the executive branch of control over enforcement of California's labor laws. We conclude the Supreme Court has already decided this issue against plaintiff's position in Iskanian, supra , 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129. Moreover, even if Iskanian were not applicable, we would nevertheless conclude PAGA does not violate California's separation of powers doctrine.

1. PAGA's History and Structure

In 2001, the California Assembly Committee on Labor and Employment held hearings regarding the effectiveness of the enforcement of wage and hour laws by the Department of Industrial Relations (DIR) in enforcing California's wage and hour laws. (Assem. Com. on Labor and Employment, Analysis of Sen. Bill No. 796 (Reg. Sess. 2003-2004) as amended July 2, 2003, p. 3.) The committee found that, despite the DIR's status as the single largest state labor law enforcement organization in the United States, it was failing to achieve effective enforcement of California's labor laws. (Ibid. ) "Estimates of the size [of] California's ‘underground economy’—businesses operating outside the state's tax and licensing...