Howitson v. Evans Hotels, LLC

• Decision Date: 21 July 2022
• Docket Number: D078894
• Citation: 81 Cal.App.5th 475,297 Cal.Rptr.3d 181
• Parties: Christina HOWITSON, Plaintiff and Appellant, v. EVANS HOTELS, LLC et al., Defendants and Respondents.
• Court: California Court of Appeals

81 Cal.App.5th 475

297 Cal.Rptr.3d 181

Christina HOWITSON, Plaintiff and Appellant,

v.EVANS HOTELS, LLC et al., Defendants and Respondents.

D078894

Court of Appeal, Fourth District, Division 1, California.

Filed July 21, 2022

Schneider Wallace Cottrell Konecky, Carolyn H. Cottrell, Emeryville, and David C. Leimbach, San Diego, for Plaintiff and Appellant.

Barnes & Thornburg, Kevin D. Rising, and Garrett S. Llewellyn, Los Angeles, for Defendants and Respondents.

HALLER, J.

The Legislature enacted the Private Attorneys General Act of 2004 ( Lab. Code, § 2698 et seq., (PAGA) )¹ for the "sole purpose" of increasing the limited capability of the state to remedy violations of the Labor Code. ( Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 86, 259 Cal.Rptr.3d 769, 459 P.3d 1123 ( Kim ).) PAGA authorizes an "aggrieved employee" to file a lawsuit on behalf of the state seeking civil penalties for violations of the Labor Code, allocating 75 percent of the penalties recovered to the California Labor and Workforce Development Agency (LWDA), with the remaining 25 percent to all employees affected by the violation. (§ 2699, subd. (i).) Before filing suit, PAGA requires the plaintiff to submit a notice of the alleged violations to LWDA and the employer. (§ 2699.3, subd. (a).) LWDA then has 60 days to respond to the notice and if no response is forthcoming after 65 days, the plaintiff may commence a PAGA civil action. (Id. , subd. (a)(2)(A).)

This case (1) involves the legal issue of whether an employee who settles individual claims against the employer for alleged Labor Code violations is subsequently barred by claim preclusion from bringing a PAGA enforcement action against the employer for the same Labor Code violations when, prior to settlement, the employee could have added the PAGA claims to the existing action; and (2) requires the application of claim preclusion principles.²

As we explain, because the two actions involve different claims for different harms and because the state, against whom the defense is raised, was neither a party in the prior action nor in privity with the employee, we conclude the requirements for claim preclusion are not met in this case.

OVERVIEW

Background and First Lawsuit

Plaintiff Christina Howitson worked for defendants Evans Hotels, LLC and The Lodge at Torrey Pines Partnership, L.P. (collectively, Evans Hotels) as a room service server at The Lodge at Torrey Pines for about one month, between April and May 2019. On March 26, 2020, Howitson served LWDA with notice of her intention to file a PAGA action against Evans Hotels for violations of the Labor Code. Evans Hotels responded to LWDA on April 27, 2020. The required 65-day statutory waiting period ended on June 1, 2020 without any response by LWDA.

On May 26, 2020, Howitson filed an individual and putative class action lawsuit against Evans Hotels (sometimes, First Lawsuit). The First Lawsuit did not include any PAGA claims, instead asserting 10 causes of action based on myriad alleged violations of the Labor Code and unfair competition laws ( Bus. & Prof. Code, § 17200 et seq. ).

On June 15, 2020 Evans Hotels served Howitson with an arbitration demand and an offer to compromise for $1,500 plus attorney fees pursuant to Code of Civil Procedure section 998 (998 Offer). On July 20, 2020, Howitson accepted the 998 Offer. The 998 Offer in part provided, "Judgment is to be entered in favor of Plaintiff ... in her individual capacity, in the amount of [$1,500] plus statutory costs including attorneys’ fees incurred to the date of this offer in the amount to be determined by the Court, according to proof. Such judgment shall extinguish her individual claims in the [First Lawsuit], including all damages, attorneys’ fees, costs, expenses, and interest thereon incurred to date." (Italics added.) On September 20, 2020, the trial court entered judgment for Howitson "in her individual capacity." (Italics added.)

Second Lawsuit; Demurrer of Evans Hotels

About 10 days after accepting the 998 Offer, Howitson filed the instant PAGA action against Evans Hotels "based on the same factual predicates as the [First Lawsuit]" (sometimes, Second Lawsuit). In October 2020, Evans Hotels demurred, alleging claim preclusion (i.e., res judicata) barred this Lawsuit as a result of the judgment in the First Lawsuit. Evans Hotels argued that Howitson "strategically opted" not to pursue the PAGA claims in her First Lawsuit; that the two lawsuits involved the same, or nearly the same, alleged violations of the Labor Code; and therefore, Howitson violated "California's well-settled prohibition against claim splitting."

Howitson opposed the demurrer. She argued claim preclusion did not apply because neither the harms nor the parties were the same in the two lawsuits.

Trial Court's Ruling

In its minute order of January 29, 2021 sustaining the demurrer without leave to amend, the trial court found that the parties in the First and Second Lawsuits were "the same";³ that both involved the "same Labor Code violations"; and that, because Howitson could have brought the PAGA claims in the First Lawsuit, which ended in a "final judgment on the merits," the state-based PAGA claims were barred by claim preclusion.

DISCUSSION

A. Standard of Review

On appeal from a judgment dismissing an action after sustaining a demurrer, we review de novo whether the complaint states facts sufficient to constitute a cause of action under any legal theory. ( McCall v. PacifiCare of California, Inc. (2001) 25 Cal.4th 412, 415, 106 Cal.Rptr.2d 271, 21 P.3d 1189 ; Association of Irritated Residents v. Department of Conservation (2017) 11 Cal.App.5th 1202, 1218, 218 Cal.Rptr.3d 517 ( Irritated Residents ).) "We give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law." ( City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865, 62 Cal.Rptr.3d 614, 161 P.3d 1168.) In reviewing the sufficiency of the complaint, we may also consider matters that are subject to judicial notice. ( Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.)⁴

Because it is a question of law, we review de novo the trial court's conclusion that claim preclusion was applicable in this case. ( Irritated Residents, supra , 11 Cal.App.5th at p. 1218, 218 Cal.Rptr.3d 517 ; see Louie v. BFS Retail & Commercial Operations, LLC (2009) 178 Cal.App.4th 1544, 1553, 101 Cal.Rptr.3d 441 ( Louie ) ["dismissal on res judicata grounds presents a question of law, which we review de novo"].)

B. PAGA

"Before enactment of the PAGA in 2004, several statutes provided civil penalties for violations of the Labor Code. The Labor Commissioner could bring an action to obtain such penalties, with the money going into the general fund or into a fund created by the [LWDA] for educating employers. (See § 210 [civil penalties for violating various statutes related to the timing and manner in which wages are to be paid]; § 225.5 [civil penalties for violating various statutes related to withholding wages due]; Stats. 1983, ch. 1096.) Some Labor Code violations were criminal misdemeanors. [Citations.]" ( Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 378, 173 Cal.Rptr.3d 289, 327 P.3d 129, disapproved on another ground as stated in Viking River, supra , 142 S.Ct. 1906.)

In enacting PAGA, the "Legislature declared that adequate financing of labor law enforcement was necessary to achieve maximum compliance with state labor laws, that staffing levels for labor law enforcement agencies had declined and were unlikely to keep pace with the future growth of the labor market, and that it was therefore in the public interest to allow aggrieved employees, acting as private attorneys general, to recover civil penalties for Labor Code violations, with the understanding that labor law enforcement agencies were to retain primacy over private enforcement efforts. (Stats. 2003, ch. 906, § 1.)" ( Arias v. Superior Court (2009) 46 Cal.4th 969, 980, 986, 95 Cal.Rptr.3d 588, 209 P.3d 923 ( Arias ) [holding an aggrieved employee seeking civil penalties under PAGA against the employer need not meet class certification requirements because a PAGA action "is fundamentally a law enforcement action designed to protect the public and not to benefit private parties"].)

"California's Labor Code contains a number of provisions designed to protect the health, safety, and compensation of workers. Employers who violate these statutes may be sued by employees for damages or statutory penalties. [Citations.] Statutory penalties, including double or treble damages, provide recovery to the plaintiff beyond actual losses incurred. [Citation.] Several Labor Code statutes provide for additional civil penalties, generally paid to the state unless otherwise provided. [Citation.] Before PAGA's enactment, only the state could sue for civil penalties." ( Kim, supra , 9 Cal.5th at p. 80, 259 Cal.Rptr.3d 769, 459 P.3d 1123.)

PAGA deputizes "aggrieved employees" to bring a representative lawsuit on behalf of the state to enforce labor laws. ( Kim, supra , 9 Cal.5th at p. 81, 259 Cal.Rptr.3d 769, 459 P.3d 1123 ; Iskanian, supra , 59 Cal.4th at p. 386, 173 Cal.Rptr.3d 289, 327 P.3d 129.) An "aggrieved employee" is defined under PAGA as "any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed." ( § 2699, subd. (c) ; see also Kim , at p. 82, 259 Cal.Rptr.3d 769, 459 P.3d 1123 [quoting § 2699, subd. (c) in recognizing the rule that "employee unions lack standing to bring PAGA claims because the associations are not ‘employed by’ the defendants"].) Although an aggrieved employee is the named plaintiff in a PAGA action and has standing to sue, the aggrieved employee sues only as the ...