Hutcheson v. Superior Court

• Decision Date: 07 February 2022
• Docket Number: A159861
• Citation: 290 Cal.Rptr.3d 60,74 Cal.App.5th 932
• Parties: Andrew HUTCHESON, Petitioner, v. The SUPERIOR COURT OF ALAMEDA COUNTY, Respondent; UBS Financial Services, Inc., Real Party in Interest.
• Court: California Court of Appeals Court of Appeals

74 Cal.App.5th 932

290 Cal.Rptr.3d 60

Andrew HUTCHESON, Petitioner,

v. The SUPERIOR COURT OF ALAMEDA COUNTY, Respondent;UBS Financial Services, Inc., Real Party in Interest.

A159861

Court of Appeal, First District, Division 2, California.

Filed February 7, 2022

Clapp and Lauinger LLP, James F. Clapp, Marita M. Lauinger, Carlsbad; Wynne Law Firm, Edward J. Wynne, Greenbrae; Altshuler Berzon LLP, Michael Rubin, Amanda Lynch, San Francisco, for Petitioner

Gibson, Dunn & Crutcher LLP, Michele L. Maryott, Irvine, Bradley J. Hamburger, Los Angeles, for Real Party in Interest

Miller, J. The Legislature enacted the Private Attorneys General Act of 2004 ( Lab. Code,¹ § 2698 et seq., (PAGA) ) for the "sole purpose" of increasing the limited capability of the State of California to enforce 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 ).) The statute authorizes "aggrieved employees" to file lawsuits on behalf of the state seeking civil penalties for violations of the Labor Code, and allocates 75 percent of the civil penalties recovered to the California Labor and Workforce Development Agency (LWDA) and the remaining 25 percent to all employees affected by the violation. (§ 2699, subd. (i); Moorer v. Noble L.A. Events , Inc. (2019) 32 Cal.App.5th 736, 742, 244 Cal.Rptr.3d 219.) PAGA requires that before filing suit, the so-called PAGA plaintiff must submit notice of the alleged violations to the LWDA and to the employer. (§ 2699.3, subd. (a).)

This case raises a narrow legal issue at the intersection of PAGA and the judicially created doctrine of relation back, a doctrine which, in certain circumstances, deems the claims in an amended complaint to have been filed on the date of the initial complaint for purposes of the statute of limitations. In this appeal, an aggrieved employee (the first employee) submitted notice of alleged Labor Code violations by his employer to the LWDA in compliance with PAGA and subsequently filed a complaint in superior court alleging a PAGA claim. The first employee later sought to amend his complaint to substitute in as the named plaintiff a different aggrieved employee (the second employee) who had worked for the same employer. The issue before us is whether the amended PAGA complaint (with the second employee as the named plaintiff) can relate back to the original PAGA complaint where the second employee submitted his PAGA notice after the original complaint was filed. At stake is the length of time for which the employer may be liable for statutory civil penalties if the alleged violations of the Labor Code are proven to be true.

This issue was presented below in a motion for summary adjudication brought by the employer on stipulated facts. The trial court granted the motion, concluding that the doctrine of relation back does not apply to PAGA claims in these circumstances. Because we conclude that the doctrine of relation back may apply, we reverse.

FACTUAL AND PROCEDURAL BACKGROUND

A. Stipulated Facts

The parties stipulated to the following facts:

Larry Van Steenhuyse (the first employee) worked for UBS Financial Services, Inc. (UBS) as a financial advisor. On December 22, 2017, he gave notice to the LWDA and UBS that he intended to seek penalties under PAGA on behalf of himself and all aggrieved UBS financial advisors in California for alleged Labor Code violations by UBS. He alleged that he and other financial advisors routinely incurred reasonable and necessary business expenses for travel, mileage, education, entertainment, and marketing, but were not reimbursed by UBS, in violation of section 2802. He also alleged that UBS failed to timely pay commissions to him and other financial advisors, in violation of section 204.

Van Steenhuyse did not receive any response from the LWDA within the statutorily required 65 days, and on the 66th day, February 26, 2018, as permitted by statute ( § 2699.3, subd. (a)(2) ), he filed suit in Alameda County Superior Court against UBS alleging a single cause of action for penalties under PAGA. The complaint, like the notice that Van Steenhuyse had submitted to the LWDA and UBS, alleged that UBS violated section 2802, by failing to indemnify financial advisors for business expenses, and violated section 204 with respect to the timely payment of commissions.

Andrew Hutcheson (the second employee) also worked for UBS as a financial advisor until he resigned his employment in December 2017. Like Van Steenhuyse, he gave notice to the LWDA and UBS of his intent to seek penalties under PAGA on behalf of himself and all aggrieved UBS financial advisors in California for UBS's alleged failure to reimburse business expenses and timely pay commissions. Hutcheson submitted his notice on April 18, 2018, and did not receive any response from the LWDA within 65 days, but he waited several months—until February 2019—to file his suit against UBS. Like Van Steenhuyse, Hutcheson filed suit in Alameda County alleging a single cause of action seeking penalties under PAGA for alleged violations of sections 2802 and 204.

Van Steenhuyse's and Hutcheson's notices and complaints are worded almost identically, and they make the same allegations of facts and theories concerning UBS's purported violations of sections 2802 and 204.

B. Proceedings in the Trial Court

In March 2019, Hutcheson filed a motion to intervene in Van Steenhuyse's lawsuit and replace Van Steenhuyse as the named plaintiff.² The parties stipulated to the filing of an amended complaint that added Hutcheson as the named plaintiff and removed Van Steenhuyse. The parties also stipulated to the dismissal of Van Steenhuyse's PAGA claim with prejudice and the dismissal of Hutcheson's separate lawsuit without prejudice. What the parties could not agree upon was whether the doctrine of relation back could apply.

The amended complaint alleged that under the doctrine of relation back the statute of limitations for Hutcheson's claim as substitute plaintiff extended back to December 22, 2016, which was one year before Van Steenhuyse submitted his notice of intent. UBS disputed that the doctrine of relation back applied, and the parties agreed to submit the issue for resolution by the trial court in a motion for summary adjudication to be filed by UBS based on stipulated facts.³

In its motion, UBS argued that Hutcheson was barred from recovering PAGA penalties for any alleged Labor Code violations that occurred before December 19, 2017, one year and 65 days before Hutcheson had filed his own suit. UBS argued that the amended complaint did not meet the general requirements for relation back, and even if it did, the doctrine could not apply because Hutcheson had not submitted his PAGA notice until after Van Steenhuyse filed suit. UBS contended that Hutcheson was attempting to circumvent the PAGA notice requirement by benefiting from a complaint that was filed before he submitted his notice.

The trial court granted the motion. The court presumed, without deciding, that the general requirements for relation back had been met, and ruled that even so, the doctrine did not apply because allowing relation back would frustrate the Legislature's intent of requiring notice under section 2699.3, subdivision (a), as a precondition to filing a PAGA action. Hutcheson filed a petition for writ of mandate, which raises the narrow issue whether relation back can apply in the circumstances here, where a proposed substitute plaintiff submitted PAGA notice after the filing of the original complaint.⁴

DISCUSSION

A. Applicable Law and Standard of Review

1. PAGA

The purpose of PAGA is to increase the LWDA's limited enforcement capability by authorizing aggrieved employees to enforce Labor Code provisions on the agency's behalf. ( Kim , supra , 9 Cal.5th at p. 86, 259 Cal.Rptr.3d 769, 459 P.3d 1123.) An aggrieved employee who files a suit under PAGA acts as the LWDA's proxy, and represents the "same legal right and interest as [the LWDA] in a proceeding that is designed to protect the public," rather than to benefit the plaintiff or other private parties. ( Amalgamated Transit Union, Local 1765, AFL-CIO v. Superior Court (2009) 46 Cal.4th 993, 1003, 95 Cal.Rptr.3d 605, 209 P.3d 937 ( Amalgamated ).) A representative action under PAGA is "a type of qui tam action," and the LWDA, as the government entity on whose behalf the plaintiff has filed suit "is always the real party in interest." ( Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 382, 173 Cal.Rptr.3d 289, 327 P.3d 129.)

The civil penalties imposed under PAGA " ‘ "are intended to punish the wrongdoer and to deter future misconduct." ’ " ( Kim , supra, 9 Cal.5th at p. 86, 259 Cal.Rptr.3d 769, 459 P.3d 1123.) The portion of the civil penalties paid to the LWDA supplement the agency's funding for enforcing labor laws and for educating "employers and employees about their rights and responsibilities" under the Labor Code. (§ 2699, subd. (i).)

The provisions of PAGA that pertain to the issue before us concern the prerequisites for standing, the requirement of notice, and the statute of limitations. We describe them briefly.

First, standing. The Labor Code establishes two criteria for standing as an "aggrieved employee" who can represent the state as a PAGA plaintiff and sue "on behalf of himself or herself and other current or former employees." ( § 2699, subd. (a).) An aggrieved employee is "someone ‘who was employed by the alleged violator’ and ‘against whom one or more of the alleged violations was committed.’ " ( Kim , supra , 9 Cal 5th at pp. 83-84, 259 Cal.Rptr.3d 769, 459 P.3d 1123, quoting § 2699, subd. (c) ); see also Williams v. Superior Court (2017) 3 Cal.5th 531, 546, 220 Cal.Rptr.3d 472, 398 P.3d 69 [standing provision in PAGA allows suit to be "brought by any ‘aggrieved employee’ "].)

Second, notice. An employee who meets the standing requirements in section 2699, subdivision (c)...