Taylor et al v. West Marine Products, Inc.

Filing 57

ORDER RE PAGA CLAIM AND ARTICLE III; AND VACATING HEARING for 45 Motion for Leave to File.(whalc2, COURT STAFF) (Filed on 3/26/2014).

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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For the Northern District of California

United States District Court

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KAREN TAYLOR, individually and on
behalf of all others similarly situated, and
PAULISA FIELDS,

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Plaintiffs,
v.

ORDER RE PAGA CLAIM
AND ARTICLE III; AND
VACATING HEARING

WEST MARINE PRODUCTS, INC.,
Defendant.
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No. C 13-04916 WHA

INTRODUCTION
In this putative wage-and-hour class action, the issue now presented is whether to permit

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an amendment to allege a so-called PAGA claim. For the reasons stated below, and subject to

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the conclusion of the order, the motion is GRANTED IN PART AND DENIED IN PART. The

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hearing set for April 3, 2014, is VACATED.

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STATEMENT
The background of this action is set forth in a prior order (Dkt. No. 41). In brief,

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defendant West Marine Products, Inc. is a boating supply retailer. Plaintiffs are Karen Taylor

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and Paulisa Fields, two of defendant’s former employees. Among other things, plaintiffs claim

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that defendant failed to provide its employees with sufficient breaks at work and adequate

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compensation for off-the-clock tasks, thereby committing unfair business practices and

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violations of California wage and overtime laws.

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On October 23, 2013, plaintiffs commenced this action, filing a first amended complaint

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nearly two months later. A motion to dismiss was granted in part. Plaintiffs then moved for

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leave to file a second amended complaint, which, among other changes, included a new claim

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under the California Labor Code Private Attorneys General Act. See Cal. Lab. Code 2698 et seq.

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Both sides then stipulated to the lodging of the second amended complaint effective March 6,

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2014, so long as (1) the second amended complaint would omit the new PAGA claim; and (2)

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defendant could file a Rule 12 motion as to the other claims alleged in the second amended

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complaint, within ten days of the stipulation’s approval. Pursuant to that stipulation, defendant

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filed a motion to dismiss several claims from the second amended complaint.
Plaintiffs now move for leave to file a third amended complaint, seeking one change to

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For the Northern District of California

United States District Court

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their present pleading: the addition of the PAGA claim. It would tack on civil penalties for

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alleged California Labor Code violations. Although the motion refers to the proposed pleading

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as a “second amended complaint,” this is incorrect, as the second amended complaint has already

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been lodged pursuant to the parties’ stipulation.

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ANALYSIS

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1.

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The parties disagree on what standard applies. Defendant contends that Rule 16 governs,

APPLICABLE STANDARD.

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because the case management order purportedly “instructed that all pleadings be amended ‘by

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March 31, 2014’” (Opp. 4). Rule 16 therefore applies, defendant argues, because plaintiffs’

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motion is set for hearing on April 3, 2014 — i.e., after the March 31 deadline.

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The order actually stated: “Leave to add any new parties or pleading amendments must

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be sought by March 31, 2014” (Dkt. No. 32) (emphasis added). This meant that plaintiffs had to

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seek leave to amend by March 31, not that their motion for leave had to be heard by that date.

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Rule 15 therefore applies, not Rule 16.

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2.

RULE 15.

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Rule 15(a)(2) permits a party to amend its pleading with the court’s leave, stating that

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“[t]he court should freely give leave when justice so requires.” In the Rule 15 context, our court

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of appeals instructed that “[f]ive factors are frequently used to assess the propriety of a motion
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for leave to amend: (1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4)

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futility of amendment[,] and (5) whether plaintiff has previously amended his complaint.” Allen

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v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990).

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Defendant opposes as follows. First, defendant argues that amendment is futile because

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plaintiffs assert the PAGA claim as a non-class claim. In defendant’s view, this violates Article

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III standing because plaintiffs reportedly bring the PAGA claim as a “representative” action on

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behalf of themselves and “other aggrieved employees,” without use of class action mechanisms

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under Rule 23. Second, defendant contends that granting leave would cause it prejudice, insofar

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as leave would moot defendant’s pending motion to dismiss several claims from the second
amended complaint and force defendant to respond to a third amended complaint. Third,

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For the Northern District of California

United States District Court

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defendant points out that plaintiffs have already amended the operative complaint twice. Fourth,

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defendant argues that there has been undue delay by plaintiffs in bringing the PAGA claim.

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3.

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This order allows the amendment, subject to an important caveat. Under PAGA, 25% of

ARTICLE III.

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any recovery of civil penalties would go to “aggrieved employees,” with the other 75% to the

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California Labor and Workforce Development Agency. Cal. Lab. Code 2699(i). As such, absent

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certification of a class under Rule 23, plaintiffs “generally must assert [their] own legal rights

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and interests, and cannot rest [their] claim[s] to relief on the legal rights or interests of third

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parties.” Michael Ivey v. Apogen Technologies, Inc., 11CV366 DMS NLS, 2011 WL 3515936,

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*3 (S.D. Cal. Aug. 10, 2011) (Judge Dana M. Sabraw); see also Adams v. Luxottica U.S.

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Holdings Corp., SA CV 07-1465 AHS, 2009 WL 7401970, *6 (C.D. Cal. July 24, 2009) (Judge

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Alicemarie H. Stotler). This is because Article III “require[s] a plaintiff to show, inter alia, that

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he has actually been injured by the defendant’s challenged conduct,” such that “a plaintiff whose

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cause of action is perfectly viable in state court under state law may nonetheless be foreclosed

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from litigating the same cause of action in federal court, if he cannot demonstrate the requisite

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injury.” Lee v. Am. Nat. Ins. Co., 260 F.3d 997, 1001–02 (9th Cir. 2001).

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Nonetheless, plaintiffs rely on Baumann v. Chase Inv. Servs. Corp., 12-55644, 2014 WL

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983587, *4–5 (9th Cir. Mar. 13, 2014), an unpublished decision, for the proposition that “[o]ne

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need not certify a class to pursue a PAGA claim in federal court” (Reply 9). Such reliance is

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misplaced. Baumann was a removal case that merely construed the Class Action Fairness Act.

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It did not consider Article III standing. Indeed, Baumann stated, “We do not today decide

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whether a federal court may allow a PAGA action otherwise within its original jurisdiction to

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proceed under Rule 23 as a class action.” 2014 WL 983587, *5.

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It is true that several of my colleagues have said that PAGA claims need not be brought

(N.D. Cal. 2013) (Judge Claudia Wilken); Willner v. Manpower Inc., C 11-02846 JSW, 2012

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For the Northern District of California

as class claims. See, e.g., Gallardo v. AT & T Mobility, LLC, 937 F. Supp. 2d 1128, 1137–38

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United States District Court

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WL 1570789, *9 (N.D. Cal. May 3, 2012) (Judge Jeffrey S. White); and Moua v. Int’l Bus.

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Machines Corp., 5:10-CV-01070 EJD, 2012 WL 370570, *4 (N.D. Cal. Jan. 31, 2012) (Judge

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Edward J. Davila). While these decisions found that a PAGA claim need not be certified under

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Rule 23, they did so in on the ground that PAGA claims are not class actions, following Arias v.

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Superior Court, 46 Cal. 4th 969, 975–80 (2009). There was no analysis of Article III standing

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(except for a single sentence in a footnote by Judge Davila). See Moua, 2012 WL 370570, *4

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n.3.

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But Article III imposes a mandatory standing requirement. A state legislature may relax

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standing requirements for the state courts, but may not do so for cases heard in federal court.

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“[N]o matter its reasons, the fact that a State thinks a private party should have standing to seek

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relief for a generalized grievance cannot override our settled law to the contrary,” and “[s]tates

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cannot alter that role simply by issuing to private parties who otherwise lack standing a ticket to

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the federal courthouse.” Hollingsworth v. Perry, 133 S. Ct. 2652, 2667 (2013).

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Accordingly, this order will allow the amendment but only on the understanding that

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plaintiffs may seek PAGA penalties for which they have Article III standing and prudential

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standing, including (without limitation) violations involving them or those perpetrated in

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connection with any wage-and-hour claims ultimately certified herein under Rule 23. This order

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rejects the proposition that someone who worked briefly for an employer in one location and was
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the victim of one type of labor code violation has Article III standing to seek PAGA penalties as

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to every type of labor code violation, every employee, and every location, without satisfying the

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requirements of Rule 23. See Luxottica U.S. Holdings Corp., 2009 WL 7401970, *6. In

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disability-access injunction cases, it is appropriate to allow wheelchair-bound plaintiffs who

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encountered only one barrier to seek to remove all barriers because such plaintiffs allege an

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intent to return to the premises. See Doran v. 7-Eleven, Inc., 524 F.3d 1034, 1042–44 (9th Cir.

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2008). Penalties for past violations lack this element.

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Here the order notes that there has not been undue delay in seeking this amendment. The

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original complaint alleged labor code violations on October 23, 2013, and plaintiffs did not begin
to exhaust the administrative process required to assert the PAGA claim until December 13,

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For the Northern District of California

United States District Court

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2013. See Cal. Lab. Code 2699.3(a). This time gap, however, was less than two months.

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Defendant also complains about plaintiffs’ delay in asserting the PAGA claim after exhaustion

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was complete, but again, the delay was short, amounting to five weeks only (by defendant’s own

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calculation) (Opp. 1). While plaintiffs may have been able to assert the PAGA claim back when

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they alleged the underlying labor code violations in October 2013, the delay presented here is

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not enough to deny leave, especially “[w]here there is lack of prejudice to the opposing party

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and the amended complaint is obviously not frivolous, or made as a dilatory maneuver in bad

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faith . . . .” Hurn v. Ret. Fund Trust of Plumbing, Heating & Piping Indus. of S. California, 648

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F.2d 1252, 1254 (9th Cir. 1981) (internal citations omitted).

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The Court is concerned that the addition of a PAGA claim for relief will complicate any

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settlement if and when the time for settlement arrives. While a full litigation on the merits might

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allow for full recovery on behalf of any class certified herein, a settlement would most likely

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involve a compromise and a more limited recovery fund. How would this be split between the

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class and the LWDA? The LWDA will have a stake in designating all or most of it as penalties,

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whereas the class will have a stake in designating all or most of it as damages. Put differently,

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counsel will be representing the class, on the one hand, and the LWDA as a private attorney

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general. Yes, their interests are parallel in part but also in conflict in part. It is premature to

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adjudicate this now, but the issue is flagged for counsel’s consideration as the case progresses.

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CONCLUSION
For the reasons stated above, plaintiffs’ motion is GRANTED IN PART AND DENIED IN

plaintiffs only as to labor code violations as to which plaintiffs have Article III standing.

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Certainly, this will include violations as to plaintiffs themselves. If Rule 23 classes are

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eventually certified to assert various California Labor Code violations, then as to each violation

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proven for each such class member, PAGA penalties may be sought by plaintiffs as additional

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relief. If, however, Rule 23 certification is ultimately denied in this case, the PAGA violations

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For the Northern District of California

PART. The amendment is allowed but with the caveat that the PAGA claim may be asserted by

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United States District Court

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will be limited to those proven for our plaintiffs named herein — unless, somehow, plaintiffs can

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show they have Article III standing to pursue violations as to others. It is premature to fix the

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ultimate reach of our plaintiffs’ Article III and prudential standing. Accordingly, subject to the

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above caveat, plaintiffs may file the third amended complaint by 5 PM ON MARCH 28, 2014.

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The hearing set for April 3, 2014, is VACATED.

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Defendant’s motion to dismiss will still proceed on May 1, 2014. Although directed at

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dismissing claims 2, 3, 4, and 5 from the second amended complaint, defendant’s motion will be

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construed as challenging the same claims under the third amended complaint, given that those

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claims remain unchanged from the second amended complaint. No more Rule 12 type motions

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may be filed as to the PAGA claim. Please note that there will be no more motions to amend

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after March 31, 2014, absent a showing of good cause under Rule 16.

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IT IS SO ORDERED.

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Dated: March 26, 2014.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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