Estrada v. Royalty Carpet Mills, Inc.

• Decision Date: 23 March 2022
• Docket Number: G058397, G058969
• Citation: 76 Cal.App.5th 685,292 Cal.Rptr.3d 1
• Parties: Jorge Luis ESTRADA et al., Plaintiffs and Appellants, v. ROYALTY CARPET MILLS, INC., Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

76 Cal.App.5th 685

292 Cal.Rptr.3d 1

Jorge Luis ESTRADA et al., Plaintiffs and Appellants,

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

G058397, G058969

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

Filed March 23, 2022

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

Baker & Hostetler, Daniel F. Lula, Costa Mesa, Vartan S. Madoyan, Los Angeles, and Joseph S. Persoff for Defendant and Appellant.

OPINION

MOORE, ACTING P. J.

The plaintiffs in this case were employees at three separate carpet manufacturing facilities operated by defendant Royalty Carpet Mills, Inc. (Royalty), which is now known as Royalty Carpet Mills, LLC. They alleged representative claims under the Private Attorneys General Act (PAGA; Lab. Code § 2698 et seq. ),¹ and class claims primarily based on purported meal and rest period violations. They sought premium pay under section 226.7 for these violations and asserted derivative claims for waiting time and wage statement penalties, among others. The trial court initially certified two classes: one for employees that worked at a facility in Porterville (the Porterville class) and another for employees that worked in two separate facilities in Orange County (the Dyer/Derian class). Following the presentation of evidence at trial, the court decertified the Dyer/Derian class and then entered judgment. The results were mixed and both sides appeal.

Plaintiffs make several contentions on appeal: (1) certain releases in settlement agreements that Royalty made with individual class members prior to trial are invalid; (2) the court erred in finding the Porterville class's meal period claim, which was added in an amended complaint, did not relate back to any prior complaint; (3) the court abused its discretion by decertifying the Dyer/Derian class; (4) the court incorrectly applied a seven percent prejudgment interest rate to premium pay awarded under section 226.7 rather than a 10 percent rate; (5) the court's judgment for Royalty on the Porterville class's derivative waiting time and wage statement claims was wrong; and (6) the court mistakenly dismissed the PAGA meal period claims of the Dyer/Derian employees on unmanageability grounds. As explained in this opinion, we agree with three of these contentions. We find the court erred in failing to apply the relation back doctrine, in decertifying the Dyer/Derian class, and dismissing the PAGA claims as unmanageable.

We publish this opinion primarily due to our discussion concerning unmanageable PAGA claims. Currently, only one published California opinion, Wesson v. Staples the Office Superstore, LLC (2021) 68 Cal.App.5th 746, 283 Cal.Rptr.3d 846 ( Wesson ), addresses this issue. It concluded courts have inherent authority to strike unmanageable PAGA claims. ( Id. at pp. 766-767, 283 Cal.Rptr.3d 846.) While we understand the concerns expressed in Wesson , we reach the opposite conclusion. Based on our reading of pertinent Supreme Court authority, chiefly Arias v. Superior Court (2009) 46 Cal.4th 969, 95 Cal.Rptr.3d 588, 209 P.3d 923, and Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 259 Cal.Rptr.3d 769, 459 P.3d 1123, we find a court cannot strike a PAGA claim based on manageability. These cases have made clear that PAGA claims are unlike conventional civil suits and, in particular, are not class actions. Allowing dismissal of unmanageable PAGA claims would effectively graft a class action requirement onto PAGA claims, undermining a core principle of these authorities. It would also interfere with PAGA's purpose as a law enforcement mechanism by placing an extra hurdle on PAGA plaintiffs that is not placed on the state. That said, courts are not powerless when facing unwieldy PAGA claims. Courts may still, where appropriate and within reason, limit the amount of evidence PAGA plaintiffs may introduce at trial to prove alleged violations to other unrepresented employees. If plaintiffs are unable to show widespread violations in an efficient and reasonable manner, that will just reduce the amount of penalties awarded rather than lead to dismissal.

As for Royalty, it makes two arguments in its cross-appeal. First, it asserts the trial court incorrectly found it liable to the Porterville class for meal period violations. We find the court correctly ruled that the meal policy at Porterville, which required employees to remain at the facility during meal breaks, violated governing law. Second, while the court dismissed the Dyer/Derian employees' PAGA meal period claim as unmanageable, it awarded the named plaintiffs individual PAGA penalties. Royalty contends courts cannot award PAGA penalties to individual plaintiffs because such claims can only be brought in a representative capacity. We need not address this argument given our finding that the court erred by dismissing the PAGA claim as unmanageable.

For these reasons, we reverse the trial court's order decertifying the Dyer/Derian class and dismissing the related PAGA claim as unmanageable, and we affirm and reverse various aspects of the court's judgment.

IFACTS AND PROCEDURAL HISTORY

A. The Complaints

Royalty operated warehouses and carpet manufacturing facilities at various locations in California until June 14, 2017, when it ceased operations. Three facilities are relevant to this appeal. The first facility was in Porterville, California (Porterville), which is part of Tulare County. The two other facilities were in Orange County on Dyer Road in Santa Ana (Dyer) and Derian Avenue in Irvine (Derian).²

Plaintiff Jorge Estrada was a dye weigher at Derian. On December 13, 2013, he filed a complaint against Royalty alleging causes of action for (1) meal period violations ( §§ 226.7, 512, subd. (a) ); (2) rest period violations ( § 226.7 ); (3) waiting time penalties ( § 203 ); (4) wage statement penalties ( § 226, subd. (e) ); (5) unlawful business practices ( Bus. & Prof. Code, § 17200 ; UCL); and (6) PAGA penalties ( § 2698, et seq. ). All these claims were asserted individually, except for the PAGA claim. He later filed a first amended complaint, which is immaterial to this appeal.

A second amended complaint (SAC) was filed on October 22, 2014, by Estrada and new plaintiff Paulina Nava Medina, a mender and creeler at Dyer. The SAC retained the PAGA claim and realleged Estrada's individual claims as class claims. The proposed class covered Royalty's employees at Dyer, Derian, and Porterville, specifically, "[a]ll current and former nonexempt employees of [Royalty], who worked in its carpet manufacturing and warehouse facilities in California at any time from December 13, 2009, through the date of judgment."

In 2016, Royalty made settlement proposals to individual putative class members, offering them payments of varying amounts in exchange for a release of their claims. In all, 232 out of 388 putative class members accepted and entered into settlement agreements with Royalty (about 60 percent of the putative class), while 156 refused. The specific distribution among facilities was (1) for Dyer, 66 putative class members settled and 59 did not; (2) for Derian, 51 putative class members settled and 40 did not; and (3) for Porterville, 115 class members settled and 57 did not.

A third amended complaint (TAC), the operative complaint at trial, was filed on November 17, 2016. The TAC's proposed class was virtually the same as the SAC. But, along with Estrada and Medina, the TAC added 11 new plaintiffs, several of which worked at Porterville. In all, the TAC alleged seven class claims and one representative PAGA claim: (1) meal period violations, (2) rest period violations, (3) wage statement penalties, (4) waiting time penalties, (5) penalties under section 558, (6) PAGA penalties, (7) UCL violations, and (8) declaratory relief. These claims are summarized below.

Of particular relevance on appeal is plaintiffs' meal period claim. In the SAC, the meal period claim was primarily based on allegations that Royalty failed to provide timely first meal periods and deprived employees of second meal periods. The TAC included these theories but also alleged Porterville had a unique policy that prevented employees from leaving the facility during meal periods (the on-premises meal policy). Plaintiffs asserted Porterville's on-premises meal policy was facially unlawful. As for the rest break claim, it was based on allegations that Royalty did not allow employees at the three facilities to take their required rest breaks or discouraged them from doing so.

Plaintiffs' claims for wage statement and waiting time penalties were derivative of their meal and rest break claims. As background, if an employer fails to provide an employee with a lawful meal or rest break, section 226.7, subdivision (c) requires the employer to pay the employee "one additional hour of pay at the employee's regular rate of compensation." This is commonly known as "premium pay." (See Donohue v. AMN Services, LLC (2021) 11 Cal.5th 58, 67-68, 78, 275 Cal.Rptr.3d 422, 481 P.3d 661 ( Donohue ).) Plaintiffs asserted Royalty failed to provide premium pay for the meal and rest break violations alleged in their complaint. Due to this failure, they asserted their wage statements were inaccurate because they did not include the premium pay to which they were entitled. Likewise, plaintiffs sought waiting time penalties because Royalty failed to provide this allegedly owed premium pay to employees upon separation from employment.

Plaintiffs' PAGA claim was based on the alleged violations of the Labor Code set forth above, and their UCL claim was similarly based on the alleged meal and rest period violations. Finally, the new declaratory relief claim sought to invalidate the releases in the individual settlement agreements on grounds they were void and unenforceable.³

B. Class Certification

Nine of the 13 named plaintiffs moved for class certification in ...