LaCour v. Marshalls of California

Filed 8/29/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
ROBERT LACOUR
Plaintiff, Cross-defendant and A163920
Appellant,
(Alameda County Super. Ct.
v. No. RG21084368)
MARSHALLS OF CALIFORNIA,
LLC, et al.,
Defendants, Cross-
complainants and Appellants.
Plaintiff Robert LaCour appeals from a judgment in favor of Marshalls
of California, LLC and certain affiliated entities (collectively Marshalls) in
this action under the Labor Code’s Private Attorneys General Act of 2004
(PAGA) (Lab. Code, § 2698 et seq.). Marshalls cross-appeals.
Together, the appeal and the cross-appeal require us to address three
main questions: (1) Since, in Marshalls’ reading, LaCour’s notice of appeal
specifically mentions only the order granting Marshalls’ motion for judgment
on the pleadings, is an earlier order that formed the predicate for the
judgment appealable? (2) Did trial court err in rejecting Marshalls’ argument
that LaCour’s PAGA complaint was untimely? And (3) did the trial court err
in partially granting Marshalls’ motion to strike on grounds of claim
preclusion?
In answer to these questions, we hold that (1) LaCour’s notice of appeal
is sufficient to support an appeal of the adverse judgment against him
1
together with all preliminary orders that preceded it; (2) in light of the
Governor’s emergency order extending statutes of limitation in civil cases
during the COVID-19 pandemic—an order we hold was constitutional—the
trial court correctly ruled that LaCour’s PAGA complaint was timely filed;
and (3) the trial court erred in giving claim preclusive effect to a federal court
judgment in a prior PAGA case. The judgment will be vacated and the case
remanded for further proceedings.
I. BACKGROUND
LaCour, a former Loss Prevention Specialist at a Marshalls store, filed
this standalone PAGA action on January 4, 2021. Marshalls filed a demurrer
arguing that, because LaCour’s employment with Marshalls ended in May
2019, he had only a year and 65 days to bring a PAGA claim, and having
missed that deadline, the PAGA action was untimely.
Marshalls also filed a motion to strike, arguing in the alternative that
even if LaCour’s action was timely filed, all allegations of Labor Code
violations pre-dating November 17, 2020 must be stricken because PAGA
claims against Marshalls through that date were released in the settlement
of an earlier class and PAGA action. (See Order Approving Class Settlement
Rodriguez v. Marshalls of CA, LLC (C.D.Cal., July 31, 2020, No. ED CV 18-
1716-MWF (SPx)) 2020 WL 7753300.)1 After approving the settlement as
1 Rodriguez consisted of two cases that were consolidated for purposes
of the settlement approval process. One case was a class action filed by
plaintiff Alicia Rodriguez (C.D.Cal. No. CV 18-01716 MWF (SP)) alleging
gender discrimination along with certain violations of California wage-and-
hour laws based on “[Marshalls’] policy and practice of conducting security
checks anytime its employees leave a store with a purse or a bag, without
providing compensation for that time.” The other case, filed by plaintiff Joan
Paulino (C.D.Cal. No. CV 19-03618 MWF (Ex)), alleged the same wage-and-
hour violations but asserted them under PAGA. Plaintiff Rodriguez’s case
2
fair, reasonable, and adequate under federal class action standards, the
district court entered judgment by consent and dismissed the action with
prejudice. According to Marshalls, all of LaCour’s PAGA allegations should
be stricken under the doctrine of claim preclusion.
In response to the demurrer, LaCour argued that, under emergency
rule 9 of the California Rules of Court, Appendix I (Emergency Rule 9), which
was put into effect by the Governor during the pandemic, the otherwise
applicable limitations period for filing a PAGA claim was extended by six
months. And in response to the motion to strike, LaCour argued the
Rodriguez settlement release is unenforceable because plaintiff Paulino had
no authority to settle PAGA claims going beyond the factual basis of her pre-
suit notice to the Labor and Workforce Development Agency (LWDA).
According to LaCour, plaintiff Paulino’s LWDA notice covered only
Labor Code violations for off-the-clock work during time employees spent
undergoing an anti-theft bag check procedure at the end of their shifts.
LaCour claimed that his pre-suit notice letter to the LWDA, in contrast, dealt
with failure to reimburse uniform maintenance and other expenses, such as
the costs of using personal phones and vehicles for work purposes, in addition
to other kinds of claimed Labor Code violations not encompassed in Paulino’s
notice.
The trial court overruled Marshalls’ demurrer and granted its motion
to strike in part. The court ruled that Emergency Rule 9 was valid and tolled
the time for LaCour to bring his PAGA claims. Having decided that LaCour’s
was filed directly in federal court under federal diversity jurisdiction, and
plaintiff Paulino’s case was removed to federal court on the same
jurisdictional basis. For simplicity, since both actions were resolved in a
single judgment pursuant to a single settlement, we refer to them as
Rodriguez.
3
PAGA claims were timely presented, the court ruled that he would be allowed
to pursue those claims subject to a time cutoff in the Rodriguez release (i.e.,
only to the extent he sought to recover for Labor Code violations occurring
after the effective date of the Rodriguez release).
The court rejected LaCour’s argument that Paulino had no LWDA
authority to settle claims encompassed by LaCour’s LWDA notice. Noting
that, in a footnote, Paulino’s LWDA notice letter listed a variety of Labor
Code provisions, including Labor Code section 2802—which provided the
legal basis for LaCour’s PAGA claims, even though, factually, her complaint
dealt with off-the-clock work and the bag check policy—the court accepted
Marshalls’ argument that, as LWDA’s proxy, Paulino had authority to settle.
Since Paulino had authority to settle on LWDA’s behalf, and since
judgment was entered in her case based on a court-approved settlement, the
court ruled that the res judicata effect of the judgment in Paulino’s case was
co-extensive with the scope of the Rodriguez settlement release. And because
the Rodriguez settlement release, by its terms, covers claims for the period
December 27, 2017 through November 17, 2020, the court granted the motion
to strike to the extent LaCour sought to pursue PAGA recovery for Labor
Code violations prior to November 17, 2020.
Marshalls then answered the complaint, simultaneously filing a motion
for judgment on the pleadings. In its motion for judgment on the pleadings,
Marshalls argued that, since LaCour was not an employee of Marshalls at
any time after November 17, 2019, he is not an aggrieved employee within
the meaning of the PAGA statute and therefore has no standing to sue under
our decision in Robinson v. Southern Counties Oil Co. (2020) 53 Cal.App.5th
476. The court granted the motion. LaCour appealed from the ensuing
judgment, and Marshalls cross-appealed.
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II. DISCUSSION
A. Appealability
Marshalls claims as a threshold matter that, in LaCour’s notice of
appeal, he states he is “only appealing the ‘[m]otion for judgment on the
pleadings’ and not the judgment itself or any other order issued by the trial
court.” On that premise, Marshalls argues that LaCour’s appeal is designed
as a partial appeal of a specific order preceding entry of judgment, and thus
he has failed to appeal from the order of May 7, 2021, granting Marshalls’
motion to strike in part. Because it was in the May 7, 2021 order that the
trial court addressed the enforceability and scope of the Rodriguez settlement
release, Marshalls argues, LaCour’s appeal should be dismissed because his
notice of appeal does not encompass the critical ruling he seeks to attack.
We reject this argument. Marshalls relies on the rule that, in a partial
appeal from a specific portion of an appealable judgment, only those portions
of the judgment that are identified in the notice of appeal are reviewable.
(See Gonzales v. R. J. Novick Constr. Co. (1978) 20 Cal.3d 798, 805; American
Enterprise, Inc. v. Van Winkle (1952) 39 Cal.2d 210, 216.) But that rule has
no applicability here. We are dealing with an appeal from a judgment, not
from a selected piece of a judgment.
The record shows that, on September 10, 2021, the trial court entered
both an order on Marshalls’ motion for judgment on the pleadings and
judgment on that order. While there is some ambiguity to LaCour’s notice of
appeal, the notice indicates he is appealing from a “judgment or order entered
on” September 10, 2021.2 We read notices of appeal liberally (Cal. Rules of
2 In Paragraph 1 of the Form App-002 Notice of Appeal that LaCour
filed, he checked the box “Other” and specified “Motion for judgment on the
pleadings.” Marshalls apparently reads that checked box to mean LaCour
5
Court, rule 8.100(a)(2)), and we construe LaCour’s notice of appeal to signal
his intent to seek review of the judgment under Code of Civil Procedure
section 904.1, subdivision (a)(1).
Since LaCour seeks review of an appealable judgment, under Code of
Civil Procedure section 906 all intermediate nonappealable orders related to
the judgment are reviewable as well (see Lopez v. Brown (2013)
217 Cal.App.4th 1114, 1133), without any need to specify them in the notice
of appeal (Roger v. County of Riverside (2020) 44 Cal.App.5th 510, 532).
LaCour argues—and Marshalls does not dispute—that the relatedness
criteria set out in Code of Civil Procedure section 906 are satisfied.3 We
agree and therefore conclude the May 7, 2021 order granting in part
Marshalls’ motion to strike is reviewable.
B. Timeliness
Next, we consider Marshalls’ argument, asserted by way of cross-
appeal, that the trial court erroneously overruled its demurrer. If LaCour’s
PAGA claims were untimely, we need not go on to consider his claim that the
trial court erroneously limited him to pursuing claims that arose after
November 17, 2020, which in turn was the basis for its ruling that he had no
intended only to appeal the order granting Marshalls’ motion for judgment on
the pleadings, not the judgment itself.
3 “Upon an appeal pursuant to Section 904.1 or 904.2, the reviewing
court may review the verdict or decision and any intermediate ruling,
proceeding, order or decision which involves the merits or necessarily affects
the judgment or order appealed from or which substantially affects the rights
of a party, including, on any appeal from the judgment, any order on motion
for a new trial, and may affirm, reverse or modify any judgment or order
appealed from . . . .” (Code Civ. Proc., § 906.)
6
standing to pursue this action at all. So we will address Marshalls’ cross-
appeal first.
“We review a trial court’s ruling on demurrer de novo [citation], giving
‘ “the complaint a reasonable interpretation, reading it as a whole and
viewing its parts in context. [Citations.] We deem to be true all material
facts properly pled. [Citation.] We must also accept as true those facts that
may be implied or inferred from those expressly alleged.” ’ ” (Mahan v.
Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 847.)
The statute of limitations under PAGA is one year from the date of the
last violation. (Code Civ. Proc., § 340, subd. (a); Esparza v. Safeway, Inc.
(2019) 36 Cal.App.5th 42, 59; Brown v. Ralphs Grocery Co. (2018)
28 Cal.App.5th 824, 839.) An alleged aggrieved employee cannot file a PAGA
action until after the aggrieved employee exhausts PAGA remedies by filing a
notice with the LWDA, and the statute of limitations is tolled up to 65 days to
give the LWDA a chance to respond to the notice. (Lab. Code, § 2699.3,
subds. (a), (d).)
Marshalls argues that since LaCour’s employment ended in May 2019,
he had up to a year and 65 days to file his civil complaint (i.e., August 2020 at
the latest), taking into account the 65-day tolling period. From that premise,
Marshalls contends, this action is time-barred because LaCour did not file his
PAGA notice with LWDA until November 4, 2020, and this action was not
filed until January 4, 2021.
Marshalls acknowledges the trial court’s ruling that, under Emergency
Rule 9, issued by the Judicial Council (the Council), the PAGA statute of
limitations was tolled from April 6, 2020 through October 30, 2020, which
had the effect of extending his deadline to file with the LWDA his notice of a
PAGA claim until November 24, 2020. As the trial court saw things,
7
Emergency Rule 9 tolling pushed the deadline to file the complaint in this
action into the latter part of January 2021. Marshalls now challenges the
trial court’s tolling analysis on the ground Emergency Rule 9 is both
“unconstitutional and prohibited by statute.”
We reject the challenge.
On March 4, 2020, in the midst of a rapidly unfolding civil crisis across
the state, Governor Newsom issued a proclamation under the California
Emergency Services Act (CESA) (Gov. Code, §§ 8567, 8571, 8627), a statutory
scheme charging him with the responsibility to provide a coordinated response
to emergencies. Noting the initial outbreak of COVID-19 in Wuhan, China,
and the speed with which the virus was spreading globally, he declared that
“the conditions of Government Code section 8558(b)”—which defines a “State of
Emergency”—had been met.4
Within eight days of this initial proclamation, Governor Newsom issued
Executive Order N-25-20 (March 12, 2020), directed to various executive
branch agencies and county and local governments. Executive Order N-25-20
granted certain kinds of emergency authority, such as the power to suspend in-
person meeting requirements under the Bagley-Keene Act and the conferral of
power to “commandeer property” such as “hotels and other places of temporary
4 A “[s]tate of emergency,” consists of a “duly proclaimed existence of
conditions of disaster or of extreme peril to the safety of persons and property
within the state caused by conditions such as air pollution, fire, flood, storm,
epidemic, riot, drought, cyberterrorism, sudden and severe energy shortage,
electromagnetic pulse attack, plant or animal infestation or disease, the
Governor’s warning of an earthquake or volcanic prediction, or an
earthquake, or other conditions.” (Gov. Code, § 8558, subd. (b).) It excludes
conditions resulting from a labor controversy or conditions causing a state of
war emergency. (Ibid.)
8
residence, medical facilities, and other facilities that are suitable for use . . .
[to] quaratin[e], isolate[e] or treat individuals who test positive for COVID-19.”
Soon thereafter, Governor Newsom turned his attention to the
judiciary. On March 27, 2020, he issued Executive Order N-38-20,
specifically for the purpose of giving “the Judicial Council and its
Chairperson[5] maximum flexibility to adopt any rules concerning civil or
criminal practice or procedure they may deem necessary to respond to the
COVID-19 pandemic, while ensuring that the rules adopted ‘shall not be
inconsistent with statute,’ as provided in Article VI, section 6 of the
California Constitution.”
Executive Order N-38-20 provided in relevant part as follows: “In the
event that the . . . Council or its Chairperson, in the exercise of rulemaking
authority consistent with Paragraph 2, wishes to consider a rule that would
otherwise be inconsistent with any statute concerning civil or criminal
practice or procedure, the relevant statute is suspended . . . [¶] (a) . . . to the
extent it is inconsistent with the proposed rule.”
Acting in parallel with the Governor, the Council took a series of steps
to ensure courts would remain open and functioning during the COVID-19
crisis. Among them was Emergency Rule 9, adopted on April 6, 2020.
Emergency Rule 9 provided as follows: “Notwithstanding any other law, the
5 The Judicial Council was created in 1926 by a constitutional
amendment (now Cal. Const., art. VI, § 6, former art. VI, § 1a) and is chaired
by the Chief Justice of California. By constitutional charge, the Council is
empowered to adopt rules for court administration, practice and procedure
not “inconsistent with statute.” (Cal. Const., art. VI, § 6, subd. (d); see
Cantillon v. Superior Court (1957) 150 Cal.App.2d 184, 187; Paul D. v.
Superior Court (1984) 158 Cal.App.3d 838, 841 [unless rules “transcend
legislative enactments,” they “have the force of law”].)
9
statutes of limitations and repose for civil causes of action that exceed 180
days are tolled from April 6, 2020, until October 1, 2020.” (Emergency Rule
9, subd. (a).) By its terms, this rule was “intended to apply broadly to toll any
statute of limitations on the filing of a pleading in court asserting a civil
cause of action.” (Id., Advisory Committee Comment.)
LaCour argues that, in passing Emergency Rule 9, the Council was
fully authorized to act and that Emergency Rule 9 passes constitutional
muster. First, he points out that Emergency Rule No. 9 was enacted
pursuant to Governor Newsom’s Executive Order N-38-20, which empowered
the Council to set rules in order to address problems caused by the COVID-19
pandemic. And in Newsom v. Superior Court (2021) 63 Cal.App.5th 1099,
1113 (Newsom), a Third District Court of Appeal panel not only interpreted
Government Code section 8627 to confer emergency lawmaking authority on
the Governor co-extensive with the Legislature’s police power, but held that
that delegation was constitutional.
Second, without regard to Executive Order N-38-20, LaCour argues
that Government Code section 68115, subdivision (a)(4) allows the
Chairperson of the Judicial Council, during a time of “war, insurrection,
pestilence, or other public calamity,” to “declare that a date or dates on which
an emergency condition, as described in this section, substantially interfered
with the public’s ability to file papers in a court facility or facilities be deemed
a holiday for purposes of computing the time for filing papers with the court
under sections 12 and 12a of the Code of Civil Procedure.”
We need not address the argument that the Council had independent
authority to promulgate Emergency Rule 9 under Government Code 68115,
subdivision (a)(4), because we agree that Executive Order N-38-20 authorized
the promulgation of Emergency Rule 9 and is constitutional.
10
In attacking Executive Order N-38-20, Marshalls reads the California
Emergency Services Act (CESA) (Gov. Code, § 8550 et seq.) too narrowly.
According to Marshalls, the language in Government Code section 8571
empowering the Governor to the suspend “any regulatory statute, or statute
prescribing the procedure for conduct of state business, or the orders, rules,
or regulations of any state agency” pertains only to “state agenc[ies].”
Marshalls then points out, quite correctly, that the Council is not a “state
agency.”6
But this argument rests on a false premise. Government Code section
8571 extends to “statute[s] prescribing the procedure for conduct of state
business”—“or”—“the orders, rules, or regulations of any state agency.”
(Italics added.) We see no ambiguity here. The plain statutory terms,
correctly parsed, permit the temporary suspension of statutes governing
“procedure for the conduct of state business.” And since the business of
courts is necessarily state business, the Governor’s emergency power to
suspend statutes extends to rules of court procedure. Now, the Governor may
also suspend “orders, rules or regulations of any state agency” under
Government Code section 8571; and since “agencies” are always governed by
statute at some level, there may be some overlap between the “state agency”
and “state business” clauses. But the disjunctive phrasing of the statute
creates two different fonts of authority.
On the deeper question of Executive Order N-38-20’s constitutionality,
Marshalls points out that we need not follow Newsom, which of course is true
where we have “good reason” to conclude a sister court erred. (Greyhound
6 A “state agency” is defined by statute as “any department, division,
independent establishment, or agency of the executive branch of the state
government.” (Gov. Code, § 8557.)
11
Lines, Inc. v. County of Santa Clara (1986) 187 Cal.App.3d 480, 485 [“We
respect stare decisis, . . . which serves the important goals of stability in the
law and predictability of decision. Thus, we ordinarily follow the decisions of
other districts without good reason to disagree.”].) But we think Newsom is
soundly reasoned. We agree that “section 8627 giving the executive the
state’s ‘police power,’ i.e., quasi-legislative power, in an emergency” does not
“violate the constitutional separation of powers by delegating such authority
to the Governor.” (Newsom, supra, 63 Cal.App.5th at pp. 1113–1114.)
Marshalls argues, alternatively, that Newsom addressed the broad
question whether CESA grants to the Governor any power to “make or
amend statutes,” a power which can only be exercised by the Legislature
under our tripartite scheme of Government. The question raised here is
narrower, Marshalls contends. If we were to recognize an open-ended
gubernatorial power to “suspend” statutes, Marshalls argues, we would be
sanctioning an “arbitrary exercise” of quasi-legislative power. We
acknowledge the seriousness of the argument, but reject it.
Marshalls urges us to invoke the principle that, when a statute can be
interpreted in two different ways, one of which is constitutional, one of which
may not be, the path of sure constitutionality should be chosen. With that
idea, we have no quarrel. But it applies where there is genuine ambiguity,
and here we have none, at least not on this record. The Governor’s CESA
powers are definitionally confined to circumstances in which the state faces
“ ‘conditions of . . . extreme peril to life, property, and the resources of the
state’ ” must be deployed “so as to ‘mitigate the effects’ ” of the emergency.
(California Correctional Peace Officers Assn. v. Schwarzenegger (2008)
163 Cal.App.4th 802, 811–825.)
12
No one questions in this case whether those conditions were met. We
can certainly imagine cases at the margins where a particular application of
the Governor’s CESA powers goes beyond what may be necessary to “mitigate
the effects” of the declared emergency—a matter on which, were it properly
raised, we would owe the Governor considerable deference in the absence of
some demonstrated infringement of constitutional freedoms—but this is not a
close case.
Marshalls concedes that, in April 2020, a 35-day reprieve from the
otherwise applicable PAGA limitations period would have been valid and
constitutionally permissible under the Council’s independent authority
pursuant to Government Code section 68115, subdivision (a)(4). Boiled down
to its essence, then, Marshalls’ complaint is that, in authorizing the Council
to adopt a longer suspension period of several months, the Governor acted
arbitrarily. Given the prevailing circumstances the Governor found
Californians were facing in March and April 2020, we have no trouble
disagreeing.
As the trial courts began to reopen in the late Spring of 2020, criminal
cases and other cases having statutory priority deservedly ranked ahead of
the general run of non-preference civil cases on their dockets. If for no reason
other than to slow down the flow of newly filed civil cases during that period
so that priority cases could be handled more easily, extending limitations
periods out for several months made sense. Since, at the time, no one could
predict how long the COVID-19 crisis would last, we see nothing arbitrary
about the Governor’s and Council’s actions.
C. Claim Preclusion
We now turn to the merits of the trial court’s order granting in part
Marshalls’ motion to strike. LaCour contends that the trial court erred by
giving res judicata effect to the federal district court’s Rodriguez judgment,
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and alternatively that even if that judgment was entitled to preclusive effect
barring her PAGA claims for the period of time covered by the Rodriguez
release (December 27, 2017 through November 17, 2020), the court erred in
granting Marshalls’ motion for judgment on the pleadings for lack of
standing. We will vacate as moot the order granting judgment on the
pleadings. We need not reach the issue of standing because we agree the
trial court erred in giving claim preclusive effect to the Rodriguez judgment.
1. Principles of Res Judicata
“We review a dismissal on grounds of res judicata de novo as an issue of
law. [Citation.] Res judicata—law Latin for ‘a thing adjudicated’—is an
umbrella term encompassing issue preclusion and claim preclusion, both of
which describe the preclusive effect of a final judgment. As a general matter
under the doctrine of claim preclusion, a final judgment on the merits bars
parties or parties in privity from ‘ “successive litigation of the very same
claim . . . as the earlier [action].” ’ [Citation.] The driving principle behind
the claim preclusion doctrine is that the parties have had a ‘ “full and fair
opportunity to litigate” ’ claims alleged in the first action.” (Guerrero v.
Department of Corrections & Rehabilitation (2018) 28 Cal.App.5th 1091, 1098
(Guerrero); see Taylor v. Sturgell (2008) 553 U.S. 880, 892 (Taylor).)
“Unlike issue preclusion, which applies only to issues that were
actually litigated, claim preclusion applies not just to what was litigated, but
more broadly to what could have been litigated. Here, under what is
sometimes known as the rule against ‘claim splitting,’ the doctrines of bar
and merger do the work. (See Rest.2d Judgments, § 24 (Second
Restatement).) ‘Merger’ expresses the idea that, for a winning plaintiff, all
claims the plaintiff did raise or could have raised merge into the judgment in
his favor. (See id., § 18.) If the plaintiff attempts to litigate any of those
claims again, the judgment itself serves as a defense. ‘Bar,’ on the other
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hand, refers to the related idea that a judgment for a winning defendant bars
the plaintiff from litigating any claims he brought or could have brought in
the prior suit. (See id., § 19.)” (Guerrero, supra, 28 Cal.App.5th at p. 1098.)
This case involves the bar aspect of claim preclusion.
“The basic principles of claim preclusion are roughly the same under
California and federal law, but there are some key differences. For example,
while federal law defines a ‘claim’ for purposes of claim preclusion using a
transactional test [Mpoyo v. Litton Electro-Optical Systems (9th Cir. 2005)
430 F.3d 985, 987], California law uses the older pleading term ‘cause of
action’ and defines it according to the common law doctrine of primary rights.
The more modern transactional approach has been adopted by the Second
Restatement. (See Rest.2d Judgments, § 24.) Although . . . our high court
ha[s] moved California law toward alignment with the overall approach to
issue and claim preclusion in the Second Restatement, at least in the
terminology we employ (see DKN Holdings LLC v. Faerber (2015) 61 Cal.4th
813, 824 (DKN Holdings)), some features of California claim preclusion law
remain distinctive. The primary rights doctrine is one such area. (Boeken v.
Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 804 (Boeken).)” (Guerrero,
supra, 28 Cal.App.5th at p. 1099, fn. omitted.)
Adopting the same approach the trial court took, the parties analyze
the claim preclusion issue presented in this case under the primary rights
doctrine. Although that is the correct conclusion, in their briefs neither of the
parties addresses why. When pressed to do so at oral argument, they agreed
on why, and so do we: Because we are dealing with a federal judgment in a
diversity case, federal common law governs (Semtek Int’l Inc. v. Lockheed
Martin Corp. (2001) 531 U.S. 497 (Semtek)), and under Semtek we apply “the
law of the state where the judgment-issuing federal court sat, a holding
15
which effectively embeds [California] law into federal law unless some
paramount federal interest calls for a departure from it.” (Guerrero, supra,
28 Cal.App.5th at p. 1100; see Semtek, at p. 508.)7 There being no such
federal interest in this PAGA case, California law applies.
California law is clear that “[a] dismissal with prejudice is considered a
judgment on the merits preventing subsequent litigation between the parties
on the dismissed claim.” (Kim v. Reins International California, Inc. (2020)
9 Cal.5th 73, 91; see, e.g., Boeken, supra, 48 Cal.4th at p. 793 [citing cases];
Citizens for Open Access etc. Tide, Inc. v. Seadrift Assn. (1998) 60 Cal.App.4th
1053, 1065 (Citizens for Open Access) [“ ‘ “A judgment entered . . . by consent
or stipulation, is as conclusive a . . . bar as a judgment rendered after
trial.” ’ ”].) When an action is dismissed “with prejudice” following a
settlement—a step known in the parlance of res judicata as “retraxit” (Torrey
Pines Bank v. Superior Court (1989) 216 Cal.App.3d 813, 820)—“ ‘[t]he
statutory term “with prejudice” clearly means the plaintiff’s right of action is
terminated and may not be revived. . . . [A] dismissal with prejudice . . . bars
any future action on the same subject matter.’ ” (Boeken, supra, at p. 793.)
Under Boeken, the first issue we must address is the claim identity
element of res judicata, which is where the primary rights doctrine comes
into play. Our Supreme Court has explained that a “ ‘ “cause of action” is
7 As we explained in Guerrero, supra, 28 Cal.App.5th at page 1100,
“This aspect of Semtek is consistent with the conventional approach to
conflict of laws in federal diversity cases.” (See Semtek, supra, 531 U.S. at
pp. 508–509 [In diversity cases, “[s]ince state, rather than federal,
substantive law is at issue [Erie R. Co. v. Tompkins (1938) 304 U.S. 64] there
is no need for a uniform federal rule. And . . . nationwide uniformity is better
served by having the same claim-preclusive rule (the state rule) apply
whether the dismissal has been ordered by a state or a federal court. . . . Any
other rule would produce the sort of ‘forum shopping . . . and . . . inequitable
administration of the laws’ that Erie seeks to avoid.”].)
16
based upon the harm suffered, as opposed to the particular theory asserted
by the litigant. [Citation.] Even where there are multiple legal theories upon
which recovery might be predicated, one injury gives rise to only one claim for
relief. “Hence a judgment for the defendant is a bar to a subsequent action
by the plaintiff based on the same injury to the same right, even though he
presents a different legal ground for relief.” [Citations.]’ Thus, under the
primary rights theory, the determinative factor is the harm suffered. When
two actions involving the same parties seek compensation for the same harm,
they generally involve the same primary right.” (Boeken, supra, 48 Cal.4th at
p. 798.)
The second issue concerns “privity,” a concept which extends the res
judicata effect of a prior judgment beyond the parties to their nonparty
privies. “As applied to questions of preclusion, privity requires the sharing of
‘an identity or community of interest,’ with ‘adequate representation’ of that
interest in the first suit, and circumstances such that the nonparty ‘should
reasonably have expected to be bound’ by the first suit.” (DKN Holdings,
supra, 61 Cal.4th at p. 826.) Thus, we have recognized that in “ ‘ “certain
limited circumstances,” ’ a nonparty may be bound by a judgment because
she was ‘ “adequately represented by someone with the same interests who
[wa]s a party” ’ to the suit. [Citation.] These circumstances include
representative suits brought on a nonparty’s behalf by an agent or proxy,
such as this PAGA action.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th
56, 89 (Moniz); see Arias v. Superior Court (2009) 46 Cal.4th 969, 986; Taylor,
supra, at pp. 894–895; Rest.2d Judgments, § 41.)
Applying these principles, there are two key questions to decide. First,
under the primary rights test, can we say that Paulino pleaded or could have
pleaded the same claims that LaCour now seeks to pursue? Second, when
17
Paulino settled her PAGA claims in Rodriguez, was she acting in privity with
LaCour? We conclude that the answer to both questions is no.
2. Identity of Claims
Looking at the operative complaint in Rodriguez, the only Labor Code
violations embraced by the pleaded PAGA claims in that action focus
narrowly on compensation for off-the-clock work during time employees spent
undergoing an anti-theft bag check procedure at the end of their shifts. That
is the “injury” Paulino allegedly suffered and the hook for her PAGA claim as
an “aggrieved employee” on behalf of other Marshalls employees. While the
claim preclusive effect of the Rodriguez judgment may extend beyond
Paulino’s pleaded claims to claims she could have brought if we were to
define the “injury” suffered more broadly as her right to be free from any and
all Labor Code violations in the course of her employment with Marshalls,
one problem Marshalls faces in arguing for such broad preclusive effect is
that Paulino’s LWDA notice letter tracks her complaint. It, too, is limited to
off-the-clock work at the end of shifts.
For us to say that, because Paulino “could have” alleged a broader set of
PAGA claims in Rodriguez—encompassing the raft of additional wage-and-
hour violations LaCour seeks to pursue in this case under the principle that
they arise out of the same legal “injury”—and thus that the claim preclusive
effect of the Rodriguez judgment bars this case, we would need proof that
Paulino was deputized by the LWDA to file suit on the broader set of PAGA
claims that LaCour subsequently brought. Nothing in the record shows that
Paulino had that authority.
The requirement of pre-suit administrative exhaustion of PAGA claims
is not particularly stringent, but it is not an empty formality either.
Textually, the PAGA scheme is unmistakably clear on this point. “As a
condition of suit, an aggrieved employee acting on behalf of the state and
18
other current or former employees must provide notice to the employer and
the responsible state agency ‘of the specific provisions of [the Labor Code]
alleged to have been violated, including the facts and theories to support the
alleged violation.’ (Lab. Code, § 2699.3, subd. (a)(1)(A), [italics added]; id.,
subd. (c)(1)(A)[same].)” (Williams v. Superior Court (2017) 3 Cal.5th 531,
545.) Thus, for a PAGA plaintiff to obtain authorization to sue as a proxy for
the state, she must provide notice to the LWDA of at least minimal “facts and
theories” to support a proposed PAGA claim.
Without such a minimal showing, the LWDA, as the responsible
enforcement agency, has no basis to determine whether it may wish to take
direct enforcement action. “Put another way, ‘something more than bare
allegations of a Labor Code violation’ is necessary to constitute adequate
notice. [Citation.] Mere code section references with prose excerpting or
rephrasing the statutory language are ‘insufficient because they simply
paraphrase[] the allegedly violated statutes.’ [Citation.] Instead, ‘the plain
meaning’ of the phrase ‘ “facts and theories to support [the] alleged
violation” ’ indicates that plaintiffs are ‘required to put forward sufficient
facts to support their claims of labor violations.’ ” (Uribe v. Crown Building
Maintenance Co. (2021) 70 Cal.App.5th 986, 1004; see Brown v. Ralphs
Grocery Co. (2018) 28 Cal.App.5th 824.)
Because Paulino’s LWDA notice letter identified nothing more than
failure to compensate employees for off-the-clock work at the end of shifts, it
is impossible to say she “could have” sued for other violations.8 Whether she
8 At oral argument before the trial court on Marshalls’ motion to strike,
LaCour emphasized the narrowness of Paulino’s pleaded claims in Rodriguez,
and in its order granting in part the motion to strike, the court noted that
plaintiff Paulino’s LWDA notice letter—which was attached to her
19
could have obtained broader authorization is pure speculation. In analyzing
the identity of claims requirement for claim preclusion, the trial court
overlooked this problem by taking the view that “[w]here a claim has been
settled, the scope of claim preclusion changes from a claim preclusion
analysis of the ‘harm suffered’ to a contract analysis of the scope of the
release.” That assumes the answer to the legal question at hand. Rather
than assess what was or could have been properly pleaded in Rodriguez,
which was required in order to analyze the primary rights issue, the trial
court focused on what was released. The two inquiries are not the same.
There is a reason for the standard representation in virtually all
settlement agreements that the settling parties are authorized to release
claims specified in the release: Contractually, no release is effective without
party authority to effectuate it. For the same reason, the underlying issue of
LWDA authorization-to-sue is inextricably bound up with the identity of
claims analysis here. If she purports to settle PAGA claims that are not the
subject of an adequate LWDA notice letter, a PAGA plaintiff exceeds her
authority to act on behalf of the LWDA and to that extent cannot bind the
LWDA to a judgment, at least not one that will have claim preclusive effect
against a PAGA claimant authorized to litigate a broader set of PAGA claims.
By skipping over this issue, the trial court’s focus on the scope of the
Rodriguez release relieved Marshalls of the burden to show that Paulino
actually pleaded or could have pleaded the same PAGA claims that LaCour
now seeks to pursue.
complaint—in a footnote listed nine of the ten Labor Code sections on which
LaCour’s claims rest. But her allegations focusing on off-the-clock work at
the end of shifts supplied the only factual predicate for this laundry list of
statutory citations.
20
True enough, as the trial court noted, any plaintiff can agree to a
settlement release that is broader than the claims she pleaded or could have
pleaded; and in the mine run of cases, where plaintiffs typically act on their
own authority, that will generally be sufficient to give a judgment resting on
such a release full preclusive effect. But in the PAGA context, where the
interests of nonparties are implicated, we must proceed cautiously in
analyzing res judicata. A settlement release exceeding the plaintiff’s LWDA
authorization will limit the claim preclusive effect of a judgment in binding
nonparties, since it will prevent a defendant who later seeks to interpose a
res judicata defense from meeting the identity of claims requirement
necessary to trigger preclusion.
Arguing to the contrary, Marshalls relies heavily on language in Moniz,
supra, 72 Cal.App.5th 56, where this court stated that “[t]aken together,
PAGA’s statutory scheme and the principles of preclusion allow, or
‘authorize,’ a PAGA plaintiff to bind the state to a judgment through
litigation that could extinguish PAGA claims that were not specifically listed
in the PAGA notice where those claims involve the same primary right
litigated.” (Id. at p. 83.) But Marshalls takes that language out of context. If
a PAGA claimant’s pre-suit notice, for example, fails to list a particular Labor
Code section that might apply to the factual showing made in the claimant’s
LWDA notice, the notice would still be adequate to support a release of
claims resting on that unlisted violation; the unlisted claim, in that scenario,
would be nothing more than an alternative legal theory to justify recovery for
the same injury. But that is not the case we have here. Because Paulino
made no factual showing beyond her end-of-shift theory to support any of the
various statutes on the menu of Labor Code sections she mentioned in a
21
footnote to her LWDA notice letter, we cannot say that the doctrine of claim
preclusion applies.
We made no effort in Moniz to predict how far the primary rights
doctrine might extend in the kind of case we have here, where the issue of res
judicata is squarely presented, because the application of that doctrine
always depends on the specific nature of the claim involved. Thus, we took
care to emphasize there that we were “not addressing the preclusive effect of
any settlement” in Moniz, “nor could we,” because the “preclusive effect of a
prior judgment is determined by the court in which it is asserted, not the
court that rendered it.” (Moniz, supra, 72 Cal.App.5th at p. 84.) This case,
by contrast, arises from a ruling upholding a res judicata defense based on a
judgment in a prior case. And on the record before us, where a PAGA
claimant agreed to entry of judgment resolving a variety of claims for which
she provided no factual basis to the LWDA—and thus failed to give LWDA an
opportunity to investigate—we hold that the prior judgment does not
extinguish unlisted PAGA claims in litigation brought by other authorized
PAGA plaintiffs because such claims do not arise from violations of the same
primary rights Paulino was authorized to pursue.
It is important to bear in mind the issue we were addressing in the
passage from Moniz that Marshalls invokes. At issue there was the validity
of a PAGA settlement releasing claims that were neither listed in the
plaintiff’s LWDA notice nor pleaded in the operative complaint. (Moniz,
supra, 72 Cal.App.5th at p. 79–86.) We went on to hold that trial courts
“should evaluate . . . PAGA settlement[s] to determine whether [they are]
fair, reasonable, and adequate in view of PAGA’s purposes to remediate
present labor law violations, deter future ones, and to maximize enforcement
of state labor laws.” (Moniz, supra, 72 Cal.App.5th at p. 77.) Because a
22
PAGA claimant may settle a case with judicial approval of the settlement, we
said, it is logical to expect “he or she is authorized to bind the state to a
settlement releasing claims commensurate with those that would be barred
by res judicata in a subsequent suit had the settling suit been litigated to
judgment by the state.” (Id. at p. 83.) But that logic is not inexorable under
all circumstances. Even after the searching inquiry our holding in Moniz
requires, it may be that, in a later case, a subsequent PAGA claimant will
identify limitations on a prior settling PAGA claimant’s authority that no one
had any incentive to bring to the court’s attention in the prior case.
Since “ ‘[t]he burden of proving that the requirements for application of
[claim preclusion] have been met is upon the party seeking to assert it as a
bar or estoppel’ ” (Patel v. Crown Diamonds, Inc. (2016) 247 Cal.App.4th 29,
40), a PAGA claimant facing a res judicata defense may always raise
questions about whether that burden has been met. And while a prior,
judicially approved settlement will generally provide prima facie proof
sufficient to meet the defendant’s burden, the imprimatur of judicial approval
will not always be conclusive on the issue of res judicata. Where, as here, the
record affirmatively shows that a settlement release extends beyond the
plaintiff’s authority to act on behalf of the LWDA, such a settlement will
certainly bind the settling PAGA plaintiff by its literal terms, but any
judgment entered pursuant to the settlement will have limited preclusive
effect in binding non-parties.
3. Privity
“Our Supreme Court has recognized that: ‘[p]rivity is not susceptible of
a neat definition, and determination of whether it exists is not a cut-and-
dried exercise. (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865,
874; Lynch v. Glass (1975) 44 Cal.App.3d 943, 947.)’ In the final analysis, the
determination of privity depends upon the fairness of binding [a nonparty]
23
with the result obtained in earlier proceedings in which it did not
participate.” (Citizens for Open Access, supra, 60 Cal.App.4th at p. 1070.)
Indeed, because extending the preclusive effect of a judgment to a nonparty
runs up against the “ ‘deep-rooted historic tradition that everyone should
have his own day in court’ ” (Taylor, supra, 553 U.S. at pp. 892–893) the
privity requirement is compelled by due process (id. at p. 897.) Basic fairness
requires that “ ‘ “the nonparty have had an identity or community of interest
with, and adequate representation by, the . . . party in the first action.” ’ ”
(Citizens for Open Access, supra, 60 Cal. App.4th at p. 1070.)
To meet the shared interest requirement, a “nonparty alleged to be in
privity must have an interest so similar to the party’s interest that the party
acted as the nonparty’s ‘ “ ‘virtual representative’ ” ’ in the first action.”
(DKN Holdings, supra, 61 Cal.4th at p. 826; see Hansberry v. Lee (1940)
311 U.S. 32, 41–43; Rest.2d Judgments, § 42, subd. (1)(b)).) But there is a
notice component as well. Not only must the shared interest requirement be
met, but due process also requires that the nonparty “ ‘should reasonably
have expected to be bound’ ” by the prior adjudication. (DKN Holdings, at
p. 826; see Richards v. Jefferson County (1996) 517 U.S. 793, 799–802.) In
short, we must be able to say both that another party acted as the nonparty’s
virtual representative in the first action and that the circumstances put the
nonparty on notice he may be bound by the result there.
Applying these due process standards on this record, our privity
analysis turns on the same issue that drives our analysis of the identity of
claims element of res judicata. A PAGA plaintiff’s settlement of PAGA
claims beyond the scope of her LWDA notice letter will rob a judgment
founded on that settlement of res judicata effect, but here for a different
reason: An LWDA statutory proxy acting without authority cannot be said to
24
be in privity with her principal. In this case, as noted above, Paulino’s
LWDA notice was founded solely on a complaint about Labor Code violations
for failure to pay employees for off-the-clock work at the end of shifts. But
her settlement release in Rodriguez—and the preclusive effect Marshalls
contends should attach to the Rodriguez judgment—is far broader than that.
By agreeing to entry of judgment pursuant to a release exceeding Paulino’s
authorization to act as a proxy for LWDA, the Rodriguez settling parties ran
the risk the judgment entered pursuant to their settlement would be found
not to bind later claimants—such as LaCour—pursuing PAGA claims under
different or broader LWDA authorization.
This case illustrates that risk quite well. The PAGA pre-suit LWDA
notice requirement not only provides an objective source of proof for the scope
of Paulino’s authorized enforcement interest, but also puts subsequent PAGA
claimants on notice—precisely—of the circumstances in which they should
expect to be bound by another party’s litigation efforts. Because Paulino was
not authorized to pursue and settle claims in Rodriguez encompassing
allegations beyond the “facts and theories” specified in her narrow pre-suit
LWDA notice, we cannot say that she and LaCour shared an “identity or
community of interest” to such an extent that LaCour had reasonable notice
he may be bound as a nonparty privy and thus that his interests were
adequately represented by Paulino in the prior case.
4. Issue Preclusion
We hold that res judicata does not apply in this case, but with an
important caveat. Not only do LaCour’s pleaded PAGA claims appear to
encompass Paulino’s more narrowly focused PAGA claims, but he received a
share of the settlement proceeds in Rodriguez following approval of that
settlement. He is not eligible for double payment on the same Labor Code
violations Paulino pursued and resolved in Rodriguez within the scope of her
25
LWDA authority. Thus, we emphasize that our res judicata holding leaves
open the question of issue preclusion. (See Ayala v. Dawson (2017)
13 Cal.App.5th 1319, 1326.) We have no occasion to address the question of
issue preclusion, however, because Marshalls’ motion to strike and the trial
court’s ruling on that motion was based on claim preclusion. We therefore
limit our holding to claim preclusion, and express no view of the issue
preclusive effect of the Rodriguez judgment.
III. DISPOSITION
The judgment entered in favor of Marshalls and the order granting in
part Marshalls’ motion to strike are reversed. The order granting judgment
on the pleadings is vacated as moot. The order overruling Marshalls’
demurrer is affirmed. Costs on appeal are awarded to LaCour.
STREETER, J.
WE CONCUR:
BROWN, P. J.
GOLDMAN, J.
26
Trial Court: Superior Court of California, County of Alameda
Trial Judges: Hon. Brad Seligman and Hon. Winifred Y. Smith
Counsel: Setareh Law Group, Shaun Setareh and Thomas Segal for
Plaintiff, Cross-defendant and Appellant
Littler Mendelson, Bradley E. Schwan, Janine Kranz and
Brittany L. McCarthy for Defendants, Cross-
complainants and Appellants.
LaCour v. Marshalls of CA, LLC et al. – A163920