Kim v. Reins International California, Inc. ( 2017 )

Filed 12/29/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
JUSTIN KIM, B278642
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC539194)
v.
REINS INTERNATIONAL
CALIFORNIA, INC.,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Kenneth R. Freeman, Judge. Affirmed.
Kingsley & Kingsley, Eric B. Kingsley, Ari J. Stiller and
Lyubov Lerner for Plaintiff and Appellant.
Ogletree, Deakins, Nash, Smoak & Stewart, Spencer C.
Skeen, Tim L. Johnson, Jesse C. Ferrantella and Jonathan H. Liu
for Defendant and Respondent.
INTRODUCTION
Appellant Justin Kim sued his former employer, Reins
International California, Inc., alleging individual and class
claims for wage and hour violations, and seeking civil penalties
on behalf of the State of California and aggrieved employees
under Labor Code section 2698 et seq., the Labor Code Private
Attorneys General Act of 2004 (PAGA). Reins successfully moved
to compel arbitration of Kim’s individual claims. While
arbitration was pending, Kim accepted an offer to settle his
individual claims and dismiss those claims with prejudice. Reins
then moved for summary adjudication on the PAGA claim,
asserting that Kim was no longer an “aggrieved employee”
because he had dismissed his individual claims against Reins,
and therefore he no longer had standing to assert a claim under
the PAGA. The trial court granted Reins’s motion and entered
judgment.
According to the PAGA, “‘aggrieved employee’ means any
person who was employed by the alleged violator and against
whom one or more of the alleged violations was committed.”
(Lab. Code, § 2699, subd. (c). 1) The question on appeal is whether
Kim, after settling and dismissing his individual claims against
Reins with prejudice, continued to have standing under the
PAGA as an “aggrieved employee.” We hold that Kim’s dismissal
of his individual Labor Code claims with prejudice foreclosed his
standing under PAGA, and therefore affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The facts are largely undisputed. Reins operates one or
more restaurants in California. Kim was employed by Reins as a
1All further statutory references are to the Labor Code
unless otherwise indicated.
2
“training manager,” a position Reins classified as exempt from
overtime requirements. Kim sued Reins in a putative class
action, alleging that training managers were salaried employees
who worked between 50 and 70 hours per week, and should not
have been classified as managers because they never performed
any managerial tasks. In his first amended complaint (the
operative complaint for purposes of appeal), Kim alleged causes
of action for failure to pay wages and overtime; failure to allow
meal and rest periods; failure to provide adequate wage
statements pursuant to section 226, subdivision (a); waiting time
penalties under section 203; unfair competition under Business
and Professions Code, section 17200 et seq. (section 17200); and
civil penalties under the PAGA pursuant to section 2699.
Kim signed an arbitration agreement when he began
working for Reins in 2013. Based on this agreement, Reins
moved to compel arbitration of Kim’s individual claims, dismiss
the class claims, and stay the PAGA cause of action until
arbitration was complete. The trial court granted the motion to
compel arbitration, reserved the issue of class arbitrability for the
arbitrator, and stayed litigation on the PAGA claim and the claim
for injunctive relief under section 17200.
While arbitration was pending, Reins served Kim with an
offer to compromise under Code of Civil Procedure section 998.
Kim accepted the offer. Pursuant to the parties’ agreement, Kim
dismissed his individual claims with prejudice and dismissed the
class claims without prejudice, leaving only the PAGA cause of
action intact. The court lifted the stay on the PAGA cause of
action and set a date for trial.
Reins filed a motion for summary adjudication of Kim’s
PAGA cause of action. Reins argued that because Kim had
3
dismissed his individual causes of action against Reins, he was
no longer an “aggrieved employee” under the PAGA and therefore
could not maintain the PAGA cause of action. Kim opposed the
motion, asserting that he did not lose PAGA standing by settling
his individual claims against Reins.
The court granted the motion for summary adjudication,
and then granted Reins’s oral motion to dismiss the case. In its
tentative ruling, which the court adopted as its final ruling, the
court reasoned, “Plaintiff, once he dismissed his claims with
prejudice pursuant to the [Code of Civil Procedure] §998 offer,
was no longer suffering from an infringement or denial of his
legal rights. His rights have been completely redressed. He no
longer is aggrieved.” The court also stated that Kim “ceased
being an aggrieved employee by virtue of his settlement. Under
these circumstances, he no longer has standing to bring a PAGA
claim.” At the hearing, as the court dismissed the case, it
encouraged the parties to appeal: “The case is dismissed, and I
encourage you to take it up and educate us all on what we should
do in the future.”
The court entered judgment in favor of Reins. Kim timely
appealed.
DISCUSSION
The issue in this case is straightforward: After an
employee plaintiff has settled and dismissed individual Labor
Code causes of action against the employer defendant, does the
plaintiff remain an “aggrieved employee” with standing to
maintain a PAGA cause of action? We hold that where an
employee has brought both individual claims and a PAGA claim
in a single lawsuit, and then settles and dismisses the individual
employment causes of action with prejudice, the employee is no
4
longer an “aggrieved employee” as that term is defined in the
PAGA, and therefore that particular plaintiff no longer maintains
standing under PAGA.
The proper interpretation of a statute and the application
of the statute to undisputed facts are questions of law, which we
review de novo. (See, e.g., Smith v. Superior Court (2006) 39
Cal. 4th 77, 83; Lazarin v. Superior Court (2010) 188 Cal. App. 4th
1560, 1569.)
A. PAGA background
The Legislature enacted the PAGA in 2003. (Arias v.
Superior Court (2009) 46 Cal. 4th 969, 980 (Arias).) In doing so,
“[t]he Legislature declared that . . . it was . . . 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.” (Ibid.) “[T]he
Legislature’s purpose in enacting the PAGA was to augment the
limited enforcement capability of the [Labor and Workforce
Development] Agency by empowering employees to enforce the
Labor Code as representatives of the Agency.” (Iskanian v. CLS
Transp. Los Angeles, LLC (2014) 59 Cal. 4th 348, 383 (Iskanian).)
The PAGA therefore “authorizes a representative action
only for the purpose of seeking statutory penalties for Labor Code
violations (Lab.Code, § 2699, subds. (a), (g)), and an action to
recover civil penalties ‘is fundamentally a law enforcement action
designed to protect the public and not to benefit private parties’
[citation].” (Arias, supra, 46 Cal.4th at p. 986.) “A PAGA
representative action is therefore a type of qui tam action. . . .
The government entity on whose behalf the plaintiff files suit is
always the real party in interest in the suit.” (Iskanian, supra,
5
59 Cal.4th at p. 382.) “Of the civil penalties recovered, 75 percent
goes to the Labor and Workforce Development Agency, leaving
the remaining 25 percent for the ‘aggrieved employees.’ ([Lab.
Code] § 2699, subd. (i).)” (Arias, supra, 46 Cal.4th at pp. 980-981.)
B. PAGA’s standing requirement
“PAGA imposes a standing requirement; to bring an action,
one must have suffered harm. [Citations.]” (Williams v. Superior
Court (2017) 3 Cal.5th 531, 558.) An action may be brought “by
an aggrieved employee on behalf of himself or herself and other
current or former employees.” (§ 2699, subd. (a).) “‘[A]ggrieved
employee’ means any person who was employed by the alleged
violator and against whom one or more of the alleged violations
was committed.” (Id., subd. (c).)
To determine whether Kim fits the definition of “aggrieved
employee” in section 2699, we look to the language of the statute.
“Our fundamental task in interpreting a statute is to determine
the Legislature’s intent so as to effectuate the law’s purpose. We
first examine the statutory language, giving it a plain and
commonsense meaning. . . . If the language is clear, courts must
generally follow its plain meaning unless a literal interpretation
would result in absurd consequences the Legislature did not
intend. If the statutory language permits more than one
reasonable interpretation, courts may consider other aids, such
as the statute’s purpose, legislative history, and public policy.”
(Coalition of Concerned Communities, Inc. v. City of Los Angeles
(2004) 34 Cal. 4th 733, 737.)
The parties do not dispute that Kim was employed by
Reins. Kim alleged in his first amended complaint that he was a
person against whom Labor Code violations were committed.
Pursuant to his allegations, therefore, it appears that Kim was
6
an aggrieved employee at the time his complaint was filed. What
is less clear, however, is whether Kim continued to be “aggrieved”
once his individual Labor Code claims had been settled and
dismissed.
The legislative history demonstrates that the term
“aggrieved employee” was not initially defined in the original
proposed language of section 2699. (Sen. Bill 796, introduced
Feb. 21, 2003.) Employer groups opposing the bill expressed
concerns that this type of statute could be abused by the filing of
thousands of lawsuits against small businesses by members of
the general public. (Judiciary Com., Analysis of Sen. Bill No. 796
(2003–2004 Reg. Sess. as amended Apr. 29, 2003, p. 6.) To
address these concerns, the bill sponsors stated that “private
suits for Labor Code violations could be brought only by an
‘aggrieved employee’” and the bill “would not open private actions
up to persons who suffered no harm from the alleged wrongful
act.” (Judiciary Com., Analysis of Sen. Bill No. 796 (2003–2004
Reg. Sess.) as amended Apr. 29, 2003, p. 7.) The bill was
amended “[t]o clarify who would qualify as an ‘aggrieved
employee’ entitled to bring a private action under this section,”
defining “aggrieved employee” to be “any person employed by the
alleged violator . . . against whom one or more of the violations
alleged in the action was committed.” (Judiciary Com., Analysis
of Sen. Bill No. 796 (2003–2004 Reg. Sess.) as amended Apr. 29,
2003, p. 8.)
C. Kim did not maintain PAGA standing following his
dismissal with prejudice
The legislative history makes clear that the PAGA was not
intended to allow an action to be prosecuted by any person who
did not have a grievance against his or her employer for Labor
7
Code violations. Here, Kim initially asserted that he had been
harmed by Reins’s alleged violations of the Labor Code. But by
accepting the settlement and dismissing his individual claims
against Reins with prejudice, Kim essentially acknowledged that
he no longer maintained any viable Labor Code-based claims
against Reins. As a result, following the dismissal with prejudice
Kim no longer met the definition of “aggrieved employee” under
PAGA. Kim therefore did not have standing to maintain a PAGA
action against Reins, and Reins’s motion to dismiss was properly
granted.
Reins acknowledges that “Kim’s voluntary dismissal of his
Labor Code claims with prejudice impacts his PAGA standing
only. It does not affect other employees.” Kim states in his
opening brief, “Settling with the individual employee for his
separate individual [L]abor [C]ode claims does not prevent the
state’s claims from moving forward.” We agree with both of these
statements, and note that Kim’s dismissal affects only Kim’s
standing as PAGA representative—it does not reflect on the
veracity of the PAGA allegations asserted in Kim’s complaint, nor
the ability of any aggrieved employee in a position substantially
similar to Kim’s to assert such PAGA claims. 2
We note that our holding is confined to the specific
circumstances at issue in this case: Kim asserted both individual
Labor Code claims and a PAGA claim in the same lawsuit, and he
2 Reins also suggests in its brief that “dismissal with
prejudice is a conclusive adjudication of the dismissed causes of
action in the defendant’s favor.” To the extent Reins suggests
that Kim’s dismissal may operate as a finding on the merits
regarding any alleged Labor Code violations under the PAGA, or
that a PAGA claim by any other employee is somehow barred as
a result of Kim’s dismissal, we reject any such argument.
8
voluntarily chose to settle and dismiss his individual Labor Code
claims with prejudice. Kim argues that affirming the trial court’s
dismissal of his PAGA claim accomplishes a “backdoor PAGA
waiver” in violation of Iskanian. Iskanian held that “an
employee’s right to bring a PAGA action is unwaivable,” and an
employer defendant may not compel a plaintiff employee to
arbitrate PAGA claims. (Iskanian, supra, 59 Cal.4th at p. 383.)
Because the court here ordered the parties to arbitrate Kim’s
individual claims, and then dismissed the PAGA action after Kim
and Reins settled the individual claims, Kim asserts that the
court “essentially allowed Kim’s arbitration agreement to waive
his right to pursue a PAGA claim by keeping Kim’s claim stayed
during the compelled arbitration and then using Kim’s
settlement in arbitration as a bar to his right to continue with his
PAGA claim.”
We disagree. Kim’s lack of PAGA standing is unrelated to
the court’s order to arbitrate the individual claims. Moreover, no
findings were made by an arbitrator. Had Kim chosen to dismiss
his individual claims with prejudice in the absence of any
arbitration agreement, we would reach the same conclusion.
Kim’s acknowledgement that he no longer has any viable Labor
Code claims against Reins—not the order relating to
arbitration—is the fact that undermines Kim’s standing. The
effect of arbitration on PAGA standing is not presented in this
case, and we do not decide any such issue here.
9
DISPOSITION
The judgment is affirmed. Reins is entitled to costs on
appeal.
CERTIFIED FOR PUBLICATION
COLLINS, J.
We concur:
EPSTEIN, P. J.
MANELLA, J.
10