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Class Action Defense Cases–Arias v. Superior Court: California Supreme Court Holds Representative Actions Under UCL Must Comply With Class Action Requirements But Labor Law PAGA Representative Claims Need Not Meet Class Action Requirements

Employee Representative Action Under California’s Unfair Competition Law (UCL) Must Satisfy Class Action Requirements, but Employee Representative Actions Seeking Penalties Under California Labor Code’s Private Attorneys General Act of 2004 (PAGA) Need Not Satisfy Class Action Requirements California Supreme Court Holds

Plaintiff filed a putative class action against his former employer, Angelo Dairy, alleging labor law violations; the class action complaint alleged causes of action for violations of the Labor Code, labor regulations, and an Industrial Welfare Commission wage order, for .breach of contract and “breach of the warranty of habitability on the ground that defendants provided residential units in a defective and dangerous condition,” for violations of California’s Unfair Competition Law (UCL) “based on defendants’ failures to credit plaintiff for all hours worked, to pay overtime wages, to pay wages when due, to pay wages due upon termination, to provide rest and meal periods, and to obtain written authorization for deducting or offsetting wages.” Arias v. Superior Court, ___ Cal.4th ___, 95 Cal.Rptr.3d 588, 2009 WL 1838973, *1 (Cal. June 29, 2009). In addition, the class action complaint sought enforcement under the UCL of penalties provided for in the Labor Code, and alleged under California’s Private Attorneys General Act of 2004 (PAGA), Labor Code § 2698 et seq., that “defendants had violated the Labor Code, labor regulations, and an Industrial Welfare Commission wage order by failing to pay all wages due, to provide itemized wage statements, to maintain adequate payroll records, to pay all wages due upon termination, to provide rest and meal periods, to offset proper amounts for employer-provided housing, and to provide necessary tools and equipment.” Id. Defense attorneys moved to strike five causes of action in the class action complaint “on the ground that plaintiff failed to comply with the pleading requirements for class actions”; the trial court granted the motion. Id. Plaintiff sought a writ of mandate from the Court of Appeal, which held that UCL claims brought in a representative capacity had to satisfy class action requirements, but that representative labor law claims under PAGA need not, id. The Supreme Court granted review and held “that an employee who, on behalf of himself and other employees, sues an employer under the [UCL]…for Labor Code violations must satisfy class action requirements, but that those requirements need not be met when an employee’s representative action against an employer is seeking civil penalties under [PAGA].” Id.

The Supreme Court began in analysis by rejecting plaintiff’s claim that representative actions under the UCL (brought individually and on behalf of others) need not comply with the requirements for class actions. Arias, at *2. After summarizing California’s UCL, including the 2004 amendments thereto, and after noting that California Code of Civil Procedure § 382 does not mention the words “class action,” the Court addressed the issue of whether the UCL, as amended by the voters so as to require that private plaintiffs bringing representative actions comply with Section 382, “imposes a requirement that the action be brought as a class action.” Id. Based on the Supreme Court’s analysis of the statutory language, and recognizing that a “literal construction of an enactment…will not control when such a construction would frustrate the manifest purpose of the enactment as a whole,” id., at *3, the Supreme Court concluded that California voters clearly intended “to impose class action requirements on private plaintiffs’ representative actions” under the UCL, id. The Court therefore held that representative actions under the UCL must comply with class action requirements, id., at *4.

The Supreme Court next addressed “whether class action requirements must also be satisfied when an aggrieved employee seeks civil penalties for himself and other employees under [the Labor Code Private Attorneys General Act of 2004 for an employer’s alleged Labor Code violations.” Arias, at *4. After summarizing PAGA, the Court addressed defense claims that the Court of Appeal erred in holding that class action requirements need not be met for such claims, id. The Supreme Court explained the appellate court’s reasoning as follows:

The court relied on these four reasons: (1) Labor Code section 2699, subdivision (a), states that “[n]otwithstanding any other provision of law” an aggrieved employee may bring an action against the employer “on behalf of himself or herself and other current or former employees”; (2) similar language in former section 17204 of the Business and Professions Code, which authorized “any board, officer, person, corporation or association or by any person” to bring an action “acting for the interests of itself, its members or the general public” (see fn. 3, ante ), permitted a representative action that was not brought as a class action; (3) unlike the current version of the unfair competition law’s section 17203 (see fn. 3, ante ), the Labor Code Private Attorneys General Act of 2004 does not expressly require that representative actions comply with Code of Civil Procedure section 382; and (4) a private plaintiff suing under this act is essentially bringing a law enforcement action designed to protect the public.

Id., at *5. The Court’s rejected defense challenges to these findings, see id., at *5-*9, and affirmed the judgment of the Court of Appeal, id., at *9.

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