CHRISTINA HOWITSON v. EVANS HOTELS, LLC et al.
D078894
Court of Appeal, Fourth Appellate District, Division One, State of California
July 21, 2022
CERTIFIED FOR PUBLICATION
Schneider Wallace Cottrell Konecky, Carolyn H. Cottrell and David C. Leimbach for Plaintiff and Appellant.
Barnes & Thornburg, Kevin D. Rising and Garrett S. Llewellyn for Defendants and Respondents.
The Legislature enacted the Private Attorneys General Act of 2004 (
This case (1) involves the legal issue of whether an employee who settles individual claims against the employer for alleged Labor Code violations is subsequently barred by claim preclusion from bringing a PAGA enforcement action against the employer for the same Labor Code violations when, prior to settlement, the employee could have added the PAGA claims to the existing action; and (2) requires the application of claim preclusion principles.2
As we explain, because the two actions involve different claims for different harms and because the state, against whom the defense is raised, was neither a party in the prior action nor in privity with the employee, we conclude the requirements for claim preclusion are not met in this case.
Background and First Lawsuit
Plaintiff Christina Howitson worked for defendants Evans Hotels, LLC and The Lodge at Torrey Pines Partnership, L.P. (collectively, Evans Hotels) as a room service server at The Lodge at Torrey Pines for about one month, between April and May 2019. On March 26, 2020, Howitson served LWDA with notice of her intention to file a PAGA action against Evans Hotels for violations of the Labor Code. Evans Hotels responded to LWDA on April 27, 2020. The required 65-day statutory waiting period ended on June 1, 2020 without any response by LWDA.
On May 26, 2020, Howitson filed an individual and putative class action lawsuit against Evans Hotels (sometimes, First Lawsuit). The First Lawsuit did not include any PAGA claims, instead asserting 10 causes of action based on myriad alleged violations of the Labor Code and unfair competition laws (
On June 15, 2020 Evans Hotels served Howitson with an arbitration demand and an offer to compromise for $1,500 plus attorney fees pursuant to
About 10 days after accepting the 998 Offer, Howitson filed the instant PAGA action against Evans Hotels “based on the same factual predicates as the [First Lawsuit]” (sometimes, Second Lawsuit). In October 2020, Evans Hotels demurred, alleging claim preclusion (i.e., res judicata) barred this Lawsuit as a result of the judgment in the First Lawsuit. Evans Hotels argued that Howitson “strategically opted” not to pursue the PAGA claims in her First Lawsuit; that the two lawsuits involved the same, or nearly the same, alleged violations of the Labor Code; and therefore, Howitson violated “California‘s well-settled prohibition against claim splitting.”
Howitson opposed the demurrer. She argued claim preclusion did not apply because neither the harms nor the parties were the same in the two lawsuits.
Trial Court‘s Ruling
In its minute order of January 29, 2021 sustaining the demurrer without leave to amend, the trial court found that the parties in the First and Second Lawsuits were “the same“;3 that both involved the “same Labor Code violations“; and that, because Howitson could have brought the PAGA claims in the First Lawsuit, which ended in a “final judgment on the merits,” the state-based PAGA claims were barred by claim preclusion.
DISCUSSION
A. Standard of Review
On appeal from a judgment dismissing an action after sustaining a demurrer, we review de novo whether the complaint states facts sufficient to
Because it is a question of law, we review de novo the trial court‘s conclusion that claim preclusion was applicable in this case. (Irritated Residents, supra, 11 Cal.App.5th at p. 1218; see Louie v. BFS Retail & Commercial Operations, LLC (2009) 178 Cal.App.4th 1544, 1553 (Louie) [“dismissal on res judicata grounds presents a question of law, which we review de novo“].)
B. PAGA
“Before enactment of the PAGA in 2004, several statutes provided civil penalties for violations of the Labor Code. The Labor Commissioner could bring an action to obtain such penaltiеs, with the money going into the general fund or into a fund created by the [LWDA] for educating employers. (See
In enacting PAGA, the “Legislature declared that adequate financing of labor law enforcement was necessary to achieve maximum compliance with state labor laws, that staffing levels for labor law enforcement agencies had declined and were unlikely to keep pace with the future growth of the labor market, and that it was therefore 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. (
“California‘s Labor Code contains a number of provisions designed to protect the health, safety, and compensation of workers. Employers who violate these statutes may be sued by employees for damages or statutory penalties. [Citations.] Statutory penalties, including double or treble damages, provide recovery to the plaintiff beyond actual losses incurred. [Citation.] Several Labor Code statutes provide for additional civil penalties, gеnerally paid to the state unless otherwise provided. [Citation.] Before PAGA‘s enactment, only the state could sue for civil penalties.” (Kim, supra, 9 Cal.5th at p. 80.)
“In a lawsuit brought under [PAGA], the employee plaintiff represents the same legal right and interest as state labor law enforcement agencies—namely, recovery of civil penalties that otherwise would have been assessed and collected by the [LWDA].” (Arias, supra, 46 Cal.4th at p. 986.) Thus, the civil penalties a PAGA plaintiff may recover on the state‘s behalf are distinct from the statutory damages or penalties that may be available to employees suing for individual violations. (Iskanian, supra, 59 Cal.4th at p. 381.) An action under PAGA “is fundamentally a law enforcement action” (Arias, at p. 986), and relief is “designed to protect the public and not to benefit private parties” (ibid.). “A PAGA representative action is therefore a type of qui tam action.” (Iskanian, at p. 382; see id at p. 386 [a PAGA action is “a dispute between an employer and the [LWDA]“].) “The government entity on whose behalf the plaintiff files suit is always the real party in interest.” (Id. at p. 382; see Kim, supra, 9 Cal.5th at p. 81 [same]; Arias, at p. 986 [same].)
A PAGA plaintiff may commence an action if LWDA gives notice that it will not investigate the alleged violations or “if no notice is provided by the LWDA within 65 calendar days of the postmark date” of the aggrieved employee‘s notice. (
Claim preclusion applies to ” ’ “matters which were raised or could have been raised, on matters litigated or litigatable” ’ in the prior action. [Citation.] ’ “The doctrine . . . rests upon the ground that the party to be affected, or some other with whom [the party] is in privity, has litigated, or had an opportunity to litigate the same matter in a former action in a court of competent jurisdiction, and should not be permitted to litigate it again to the harassment and vexation of his opponent.” ’ [Citаtion.] ’ “If the matter was within the scope of the action, related to the subject-matter and relevant to the issues, so that it could have been raised, the judgment is conclusive on it despite the fact that it was not in fact expressly pleaded or otherwise urged.” ’ ” (Wassmann v. South Orange County Community College Dist. (2018) 24 Cal.App.5th 825, 844.)
“With respect to claim preclusion . . ., three requirements must be met. First, the second lawsuit must involve the same ’ “cause of action” ’ as the first lawsuit. [Citation.] Second, there must have been a final judgment on the merits in the prior litigation. Third, the parties in the second lawsuit must be the same (or in privity with) the parties to the first lawsuit.” (City of Oakland v. Oakland Police & Fire Retirement System (2014) 224 Cal.App.4th 210, 228 (City of Oakland).) Even if these three requirеments are established, claim preclusion will not be applied “if injustice would result or if
D. Analysis
1. The “Causes of Action” Are Not the Same
Claim preclusion is based in part on the primary rights theory, which defines the scope of a cause of action and bars a party (or the party‘s privy) from bringing a second lawsuit if that suit “seek[s] to vindicate the same primary right.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 904 (Mycogen).) Under the primary rights theory, a cause of action is defined as: “(1) a primary right possessed by the plaintiff, (2) a corresponding duty imposed upon the defendant, and (3) a wrong done by the defendant which is a breach of such primary right and duty.” (Balasubramanian v. San Diego Community College District (2000) 80 Cal.App.4th 977, 991 (Balasubramanian).) The cause of action is based on the harm suffered, not on the legal theory asserted or relief sought. (Ibid.)
Here, we conclude the “harm suffered” by Howitson in the First Lawsuit is not the same harm as that suffered by the state in the Second Lawsuit. “Damages are intended to be compensatory, to make one whole. [Citation.] Accordingly, there must be an injury to compensate. On the other hand, ‘Civil penalties, like punitive damages, are intended to punish the wrongdoer and to deter future misconduct.’ [Citation.] An act may be wrongful and subject to civil penalties [under PAGA] even if it does not result in injury.’ ” (Kim, supra, 9 Cal.5th at p. 86.)
In the First Lawsuit, the hаrm suffered was to Howitson individually and to a putative class of former or current employees of Evans Hotel, for purported Labor Code violations to the employees themselves in which
That both the First and Second Lawsuits involved the same or almost the same alleged Labor Code violations does not change our conclusion that the “primary rights” in the two Lawsuits are not the same. As noted, under thе primary rights theory that right must be “possessed by the plaintiff.” (Balasubramanian, supra, 80 Cal.App.4th at p. 991, italics added.) In the First Lawsuit, it was Howitson who possessed the “primary right“— for her to be free from Labor Code violations as a former employee of Evans Hotels.
In the Second Lawsuit, however, the plaintiff possessing the primary right is the state, as if LWDA itself had brought the PAGA action. (See Kim, supra, 9 Cal.5th at p. 81 [“Every PAGA claim is ‘a dispute between an employer and the state.’ “]; Iskanian, supra, 59 Cal.4th at p. 380 [PAGA plaintiffs act as proxies for the state‘s labor law enforcement agencies, and they represent “the same legal right and interest” as those agencies: the “recovery of civil penaltiеs that otherwise would have been assessed and
2. The Parties Are Not the Same
We separately conclude that claim preclusion does not apply because the parties in the two lawsuits are not the same. (See City of Oakland, supra, 224 Cal.App.4th at p. 228.) In the First Lawsuit, Howitson was the real party in interest, as she as an individual and class representative sought damages against Evans Hotels for рurported Labor Code violations to the employees. (See
However, in the Second Lawsuit, the state is the real party in interest. (See Iskanian, supra, 59 Cal.4th at p. 382 [a PAGA action is a dispute between an employer and the state in which the state “is always the real party in interest“]; see also Kim, supra, 9 Cal.5th at p. 81; Arias, supra, 46 Cal.4th at p. 986.) Although the Legislature gave Howitson, an “aggrieved employee,” standing to act as a representative in the Second Lawsuit, she is not the real party in interest in that suit. (See
But this does not end our analysis. As noted, the same-party requirement for claim preclusion may also be satisfied if the party against whom the defense is raised (i.e., the state) was in privity with a party to the prior adjudication (i.e., Howitson). (See Bernard v. Bank of America Nat. Trust & Savings Assoc. (1942) 19 Cal.2d 807, 813; City of Oakland, supra, 224 Cal.App.4th at p. 228.)
3. Forfeiture
We first address Howitson‘s contention that Evans Hotels’ failure to raise privity in the trial court “waive[s]” or forfеits6 the issue on appeal. It is well-settled that the failure to raise an issue in the trial court typically forfeits on appeal any claim of error based on that issue. (See, e.g., In re Javier G. (2006) 137 Cal.App.4th 453, 464 [“Generally, issues not raised in the trial court cannot be raised on appeal.“].) Howitson points out that Evans Hotels did not rely on privity because they argued in their demurrer that the parties were the same in the two lawsuits, which argument the trial court
However, there are exceptions to the forfeiture rule. A court of review has discretion to consider an issue not raised in the trial court to the extent it presents a pure question of law or involves undisputed facts. (See In re Sheena K. (2007) 40 Cal.4th 875, 887, fn. 7; see also Haley v. Antunovich (2022) 76 Cal.App.5th 923, 930 [concluding the defendant forfeited the contention that the court improperly construed a statue by failing to raise that issue in the trial court, but exercising its discretion to decide the issue on appeal as it presented a question of law].)
Here, the facts are not in dispute and whether claim preclusion applies is a question of law. (See Irritated Residents, supra, 11 Cal.App.5th at p. 1218; see Louie, supra, 178 Cal.App.4th at p. 1553.) We therefore exercisе our discretion and address the merits of Evans Hotels’ contention that the state was in privity with Howitson and therefore is also bound by the judgment in the First Lawsuit.
4. No Privity Existed Between the State and Howitson
Evans Hotels argues that by “operation of law,” Howitson became an “agent of the State” when the 65-day period for LWDA to respond to her PAGA notice expired; and therefore, that she was “in privity with the State for the specific purpose of bringing PAGA claims [in the First Lawsuit] based on the alleged wage and hour violations.” (Italics added.) We find this argument unavailing.
“Privity is a concept not readily susceptible of uniform definition.” (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 875 (Clemmer).) ” ’ “Whether someone is in privity with the actuаl parties requires close examination of the circumstances of each case.” ’ ” (Citizens for Open Access to Sand and Tide, Inc. v. Seadrift Association (1998) 60 Cal.App.4th 1053, 1070 (Citizens).)
Privity “is a requirement of due process of law.” (Clemmer, supra, 22 Cal.3d at p. 874.) “In the final analysis, the determination of privity depends upon the fairness of binding [the nonparty] with the result obtained in earlier proсeedings in which it did not participate.” (Citizens, supra, 60 Cal.App.4th at 1070.) ” ’ “[T]he determination whether a party is in privity with another . . . is a policy decision.” ’ ” (Rodgers v. Sargent Controls & Aerospace (2006) 136 Cal.App.4th 82, 91.)
Here, the state had no interest in the subject matter of the First Lawsuit. (See Cal Sierra Development, Inc. v. George Reed, Inc. (2017) 14 Cal.App.5th 663, 674 [” ’ “Privity” as used in the context of res judicata or collateral estoppel, does not embrace relationships between persons or
In doing so, Howitson was not acting as a private attorney general under PAGA, “benefit[ing] the public by augmenting the state‘s enforcement capabilities, encouraging compliance with Labor Code provisions, and deterring noncompliance.” (See O‘Connor v. Uber Technologies, Inc. (N.D.Cal. 2016) 201 F.Supp.3d. 1110, 1132-1133.) The state, as a nonparty in the First Lawsuit, did not have an interest so similar to Howitson‘s that she was acting as the state‘s ” ’ ” ‘virtual representative’ ” ’ in the first action.’ ” (See Castillo v. Glenair, Inc. (2018) 23 Cal.App.5th 262, 277, quoting DKN Holdings, supra, 61 Cal.4th 813, 826.)
Evans Hotels relies extensively on Villacres v. ABM Industries Inc. (2010) 189 Cal.App.4th 562 (Villacres) in arguing claim preclusion bars the Second Lawsuit. In Villacres, the plaintiff had been a member of a class action in a prior lawsuit alleging Labor Code violations against the employer. (Id. at p. 573.) After a settlement in the prior lawsuit in which the emplоyer agreed to pay $2.5 million to class members in return for a release of “any and all claims” that could have been asserted against the employer, the plaintiff initiated a second, PAGA lawsuit. (Id. at pp. 572-573.) The trial court granted the employer‘s motion for summary judgment in the PAGA action based on claim preclusion, which the Court of Appeal affirmed. (Id. at p. 574.)
In affirming, the Villacres court reasoned that the plaintiff neither objected to the settlement of the prior action in which the employer allocated
We question whether Villacres remains good law in light of the Supreme Court‘s repeated recognition that the real party in interest in a PAGA suit is the state, not the aggrieved employee. (See Kim, supra, 9 Cal.5th at p. 81; Iskanian, supra, 59 Cal.4th at p. 382; Arias, supra, 46 Cal.4th at p. 986.) As we have noted, although the Legislature gave Howitson standing to assert a PAGA action (see
In any event, we also conclude Villacres is factually inapposite. Here, Howitson‘s settlement and release in the 998 Offer (and the judgment entered thereon) involved her individual claims only. Conversely, in Villacres the settlement was class-wide, and unlike in the instant case, released “any and all claims . . . damages, action or causes of action . . . which . . . could have been asserted against the [Employer] arising out of or related to all claims for wages, penalties, interests, costs and attorneys’ feеs arising from the alleged violation of any provision of . . . California law and/or Federal law which [were] or could have been raised as part of the Plaintiffs’ claims.” (Italics omitted.) (Villacres, supra,
5. Additional Reasons Not to Apply Claim Preclusion
Even if the requirements for claim preclusion were established, exercising our independent review we would still decline to apply the doctrine to bar the Second Lawsuit. (See Consumers Lobby, supra, 25 Cal.3d at p. 902.)
First, applying claim preclusion under the circumstances of this case would undermine the Legislature‘s intent, repeatedly expressed by the Supreme Court over about the last decade, of protecting the public from Labоr Code violations that, absent PAGA, would remain unredressed. (See, e.g., Kim, supra, 9 Cal.5th at p. 86 [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]; Williams, supra, 3 Cal.5th at p. 548 [“Hurdles that impede the effective prosecution of representative PAGA actions undermine the Legislature‘s objectives.“]; Iskanian, supra, 59 Cal.4th at p. 383 [the Legislature enacted PAGA “to augment the limited enforcement capability of the [LWDA]“].)
Second, as summarized ante, less than two months passed between the date Howitson filed the First Lawsuit and her accеptance of the 998 Offer to settle her individual claims in that suit. It appears no discovery took place between the parties during this short time-period, and no issues were “actually litigated”7 between them such that the policy of promoting judicial
Third, when Howitson initially filed the First Lawsuit on May 26, 2020, the 65-day required waiting period for LWDA to investigate or respond had not yet expired. While at some point she could have added the state‘s PAGA claims to the First Lawsuit after she filed that action, she was not required by statute to do so. To the contrary. (
Fourth, PAGA expressly provides that an employee may bring suit separately from a PAGA action. (
For these additional reasons, we decline to apply claim preclusion to bar the Second Lawsuit.
Finally, we acknowledge our decision in this case does not resolve any of the issues raised in Viking River and make clear that on remand, Evans Hotels may, if it so chooses, bring a motion to compel arbitration of any or all PAGA claims brought by Howitson in this case. We offer no opinion whether Viking River will apply on remand. The record before us neither includes the purported arbitration agreement between Howitson and Evans Hotels nоr any language or other information from that purported agreement, including whether the parties agreed to be bound by the FAA; whether there was a severability clause that would require some, but perhaps not all, PAGA claims to be arbitrated as was the case in Viking River, among many other issues including whether Howitson ever signed such a purported agreement. The parties each recognize in supplemental briefing that these issues are not before this court and, in the event of a reversal, will be taken up on remand.
The judgment in favor of Evans Hotels is reversed. Howitson to recover her costs of appeal.
HALLER, J.
WE CONCUR:
McCONNELL, P. J.
AARON, J.