Estrada v. Royalty Carpet Mills, Inc.

• Jurisdiction: California,United States
• Citation: Estrada v. Royalty Carpet Mills, Inc., 15 Cal.5th 582, 541 P.3d 466, 317 Cal.Rptr.3d 219 (Cal. 2024)
• Citation: 541 P.3d 466,317 Cal.Rptr.3d 219,15 Cal. 5th 582
• Decision Date: 18 January 2024
• Parties: Jorge Luis ESTRADA et al., Plaintiffs and Appellants, v. ROYALTY CARPET MILLS, INC., Defendant and Appellant.
• Court: California Supreme Court
• Docket Number: S274340

15 Cal.5th 582

541 P.3d 466

317 Cal.Rptr.3d 219

Jorge Luis ESTRADA et al., Plaintiffs and Appellants,

v.ROYALTY CARPET MILLS, INC., Defendant and Appellant.

S274340

Supreme Court of California.

January 18, 2024

Ginez, Steinmetz & Associates, Rudy Ginez, Jr. ; CE Smith Law Firm and Clifton E. Smith, Santa Ana, for Plaintiffs and Appellants.

Baker & Hostetler, Joseph L. Chairez, Costa Mesa, Daniel F. Lula, Costa Mesa, Vartan S. Madoyan, Los Angeles, Joseph S. Persoff, David B. Rivkin, Jr., and Andrew M. Grossman for Defendant and Appellant.

Shaw Koepke & Satter and Jens B. Koepke for Board of Trustees of the California State University as Amicus Curiae on behalf of Defendant and Appellant.

Munger, Tolles & Olson, Malcolm A. Heinicke, San Francisco, Katherine M. Forster, Los Angeles, and Minkee Sohn, Los Angeles, for Chamber of Commerce of the United States of America, California Chamber of Commerce, National Retail Federation and Retail Litigation Center Inc. as Amici Curiae on behalf of Defendant and Appellant.

DLA Piper, Julie Dunne and Matthew Riley, San Diego, for Employers Group and California Employment Law Counsel as Amici Curiae on behalf of Defendant and Appellant.

Opinion of the Court by Guerrero, C. J.

The Courts of Appeal have reached contrary conclusions as to whether trial courts have the inherent authority to strike¹ a Labor CodePrivate Attorneys General Act of 2004(PAGA;Lab. Code, § 2698 et seq. )² claim on manageability grounds.(CompareEstrada v. Royalty Carpet Mills, Inc.(2022)76 Cal.App.5th 685, 697, 292 Cal.Rptr.3d 1( Estrada )[concluding that trial courts lack such inherent authority] with Wesson v. Staples the Office Superstore, LLC(2021)68 Cal.App.5th 746, 766–767, 283 Cal.Rptr.3d 846( Wesson )[concluding that trial courts possess such inherent authority];see alsoWoodworth v. Loma Linda University Medical Center(2023)93 Cal.App.5th 1038, 1047, 311 Cal.Rptr.3d 486, review grantedNov. 1, 2023, S281717( Woodworth )[agreeing with Estrada that "trial courts may not strike or dismiss a PAGA claim for lack of manageability"].)We granted review to consider the issue.³

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.⁴

Accordingly, we affirm the Court of Appeal's judgment as that court reached the same conclusion we reach here.(SeeEstrada, supra , 76 Cal.App.5th at p. 697, 292 Cal.Rptr.3d 1.)⁵

I.FACTUAL AND PROCEDURAL BACKGROUND⁶

Royalty operated two facilities relevant here: one located on Derian Avenue (Derian) and the other on Dyer Road (Dyer) in Orange County.( Estrada , supra , 76 Cal.App.5th at p. 698, 292 Cal.Rptr.3d 1.)

PlaintiffJorge Luis Estrada worked at Derian.( Estrada, supra , 76 Cal.App.5th at p. 698, 292 Cal.Rptr.3d 1.)Estrada filed a complaint against Royalty alleging various claims, including one asserting that Royalty violated Labor Code provisions requiring that it provide first and second meal periods,⁷ and one seeking PAGA penalties for various alleged Labor Code violations.( Estrada , at p. 698, 292 Cal.Rptr.3d 1.)

Estrada and plaintiffPaulina Medina, a former Royalty employee who worked at Dyer, filed a second amended complaint that realleged Estrada's individual claims as class claims and retained the PAGA claim from the original complaint.( Estrada , supra , 76 Cal.App.5th at p. 698, 292 Cal.Rptr.3d 1.)Thereafter, Estrada, Medina, and 11 other plaintiffs filed the operative third amended complaint.( Id . at p. 699, 292 Cal.Rptr.3d 1.)The third amended complaint alleged a total of seven class claims, one which was based on the failure to provide first and second meal periods, and one which sought PAGA penalties for various Labor Code violations, including those related to meal periods.( Ibid . )

Several named plaintiffs moved for class certification in June 2017.( Estrada , supra , 76 Cal.App.5th at p. 700, 292 Cal.Rptr.3d 1.)As relevant here, the trial court certified a Dyer/Derian class composed of former nonexempt hourly workers who worked at the two facilities between December 13, 2009, and June 14, 2017.( Ibid . )The court also certified three Dyer/Derian subclasses, including a meal period subclass to determine whether "class members were provided timely first meal periods and/or deprived of second meal periods."( Ibid . )

The trial court held a bench trial on plaintiffs’ claims.Plaintiffs presented "live testimony from 12 of the 13 named plaintiffs, deposition testimony from four different managers and officers of Royalty, live testimony from two of Royalty's human resources employees, and live testimony from an expert witness."( Estrada , supra , 76 Cal.App.5th at p. 701, 292 Cal.Rptr.3d 1.)In defense, Royalty presented testimony from two former employees and an expert witness.( Ibid . )

Following the presentation of evidence, the trial court entered an order decertifying the two Dyer/Derian meal period subclasses alleging the first and second meal period violations,⁸ on the ground that there were too many individualized issues to support class treatment.( Estrada , supra , 76 Cal.App.5th at p. 702, 292 Cal.Rptr.3d 1.)⁹In the same order, the trial court dismissed the PAGA claim seeking penalties for the alleged Dyer/Derian meal break-related violations with respect to persons other than the named plaintiffs as being unmanageable.( Estrada , at p. 702, 292 Cal.Rptr.3d 1.)¹⁰The trial court subsequently entered judgment.( Estrada , at p. 703, 292 Cal.Rptr.3d 1.)Plaintiffs appealed from the decertification order and the judgment.( Ibid . )

In the Court of Appeal, plaintiffs claimed that the trial court abused its discretion by decertifying the Dyer/Derian meal period subclasses and erred in dismissing the subclasses’ PAGA meal period claims on manageability grounds.( Estrada , supra , 76 Cal.App.5th at pp. 709–714, 719–727, 292 Cal.Rptr.3d 1.)The Court of Appeal agreed with plaintiffs on both issues.( Id . at pp. 714, 726, 292 Cal.Rptr.3d 1.)The Court of Appeal reversed the trial court's order that had decertified the Dyer/Derian meal period subclasses and dismissed that portion of the Dyer/Derian PAGA claim based on meal period violations.( Id . at p. 731, 292 Cal.Rptr.3d 1.)The Court of Appeal directed the trial court to hold a new trial on both claims on remand, and added, "[a]s to both, we leave it in the court's discretion to determine whether additional witnesses or other evidence will be allowed in light of the principles set forth in this opinion."( Ibid . )

We granted Royalty's petition for review to resolve the issue dividing the appellate courts: whether trial courts have inherent authority to strike a PAGA claim on manageability grounds.

II.DISCUSSION

Royalty and amici curiae¹¹ claim that California trial courts have inherent authority to strike PAGA claims on manageability grounds.In support of this assertion, Royalty and amici curiae raise two primary arguments that differ in their conception of the scope of a trial court's inherent authority.Specifically, Royalty and amici curiae argue that a trial court may strike: (1)any claim that is unmanageable for reasons of judicial economy; or, at a minimum, (2)any representative claim that is unmanageable, as with class claims and representative claims brought under a former version of the unfair competition law (UCL)(Bus. & Prof. Code, former § 17200 et seq.).Royalty also suggests that retrial of the plaintiffs’ representative PAGA claim would violate Royalty's right to due process and that trial courts must have discretion to strike PAGA claims in order to preserve the due process rights of defendants generally.After providing an overview of the relevant law, we consider each argument in turn.

A.Governing Law

We begin with an overview of the three areas of law upon which Royalty's and amici curiae's arguments are primarily based: California courts’ inherent authority, the PAGAstatute, and the concept of manageability.

1.Courts’ Inherent Authority

This court has identified two primary sources of California courts’ inherent authority: "equitable power derived from the historic power of equity courts[citation], and supervisory or administrative powers which all courts possess to enable them to carry out their duties."( Bauguess v. Paine(1978)22 Cal.3d 626, 635, 150 Cal.Rptr. 461, 586 P.2d 942( Bauguess ).)

These two sources of power have translated into two principal ways in which California courts have exercised their inherent authority, namely: (1) to address gaps in the law by applying procedures contained in related statutory provisions (see, e.g., People v. Arredondo(2019)8 Cal.5th 694, 707, 256 Cal.Rptr.3d 574, 454 P.3d 949[courts may " ‘ "create new forms of procedures" in the gaps left unaddressed by statutes and the rules of court’ "];In re Cook(2019)7 Cal.5th 439, 446–447, 247 Cal.Rptr.3d 669, 441 P.3d 912[courts have inherent authority to apply Pen. Code, § 1203.01 to preserve evidence of youth-related factors for a hearing to be held pursuant to People v. Franklin(2016)63 Cal.4th 261, 202 Cal.Rptr.3d 496, 370 P.3d 1053]); and (2) to adopt procedures necessary to perform essential judicial functions (see, e.g., Citizens Utilities Co. v. Superior Court(1963)59 Cal.2d 805, 813, 31 Cal.Rptr. 316, 382 P.2d 356( Citizens Utilities )[courts have inherent power to determine the appropriate amount of just compensation for inverse condemnation];James H. v....