Kim v. Reins Internat. Cal., Inc. ( 2020 )

IN THE SUPREME COURT OF
CALIFORNIA
JUSTIN KIM,
Plaintiff and Appellant,
v.
REINS INTERNATIONAL CALIFORNIA, INC.,
Defendant and Respondent.
S246911
Second Appellate District, Division Four
B278642
Los Angeles County Superior Court
BC539194
March 12, 2020
Justice Corrigan authored the opinion of the Court, in which
Chief Justice Cantil-Sakauye and Justices Chin, Liu, Cuéllar,
Kruger, and Groban concurred.
KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
S246911
Opinion of the Court by Corrigan, J.
This case presents an issue of first impression: Do
employees lose standing to pursue a claim under the Labor Code
Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698
et seq.)1 if they settle and dismiss their individual claims for
Labor Code violations? We conclude the answer is no.
Settlement of individual claims does not strip an aggrieved
employee of standing, as the state’s authorized representative,
to pursue PAGA remedies.
I. BACKGROUND
A. Legal Overview
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. (See, e.g., § 203;
see also Murphy v. Kenneth Cole Productions, Inc. (2007) 40
Cal.4th 1094, 1103-1104 [distinguishing wages from statutory
penalties].) Statutory penalties, including double or treble
damages, provide recovery to the plaintiff beyond actual losses
incurred. (Murphy, at p. 1104.) Several Labor Code statutes
provide for additional civil penalties, generally paid to the state
unless otherwise provided. (E.g., § 225.5.) Before PAGA’s
1
All statutory references are to the Labor Code unless
otherwise stated.
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KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
enactment, only the state could sue for civil penalties. (Iskanian
v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348,
378 (Iskanian).) A few Labor Code violations are punishable as
criminal misdemeanors. (E.g., § 215.)
Government enforcement proved problematic. As to
criminal violations, local prosecutors often directed their
resources to other priorities. (Iskanian, supra, 59 Cal.4th at
p. 379.) The Labor Commissioner and other agencies were
likewise hampered in their enforcement of civil penalties by
inadequate funding and staffing constraints. (Ibid.) To
facilitate broader enforcement, the Legislature enacted PAGA,
authorizing “aggrieved employees” to pursue civil penalties on
the state’s behalf. (§ 2699, subd. (a); see Williams v. Superior
Court (2017) 3 Cal.5th 531, 545 (Williams).) “Of the civil
penalties recovered, 75 percent goes to the Labor and Workforce
Development Agency, leaving the remaining 25 percent for the
‘aggrieved employees.’ ” (Arias v. Superior Court (2009) 46
Cal.4th 969, 980-981 (Arias).)
An employee seeking PAGA penalties must notify the
employer and the Labor and Workforce Development Agency
(LWDA) of the specific labor violations alleged, along with the
facts and theories supporting the claim. (§ 2699.3,
subd. (a)(1)(A); see Arias, supra, 46 Cal.4th at p. 981.) If the
agency does not investigate, does not issue a citation, or fails to
respond to the notice within 65 days, the employee may sue.
(§ 2699.3, subd. (a)(2).) The notice requirement allows the
relevant state agency “to decide whether to allocate scarce
resources to an investigation.” (Williams, supra, 3 Cal.5th at
p. 546.)
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Opinion of the Court by Corrigan, J.
A PAGA claim is legally and conceptually different from
an employee’s own suit for damages and statutory penalties. An
employee suing under PAGA “does so as the proxy or agent of
the state’s labor law enforcement agencies.” (Arias, supra, 46
Cal.4th at p. 986, italics added.) Every PAGA claim is “a dispute
between an employer and the state.” (Iskanian, supra, 59
Cal.4th at p. 386; see id. at p. 384; Arias, at p. 986.) Moreover,
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, at p. 381.) Relief under PAGA is designed primarily
to benefit the general public, not the party bringing the action.
(Arias, at p. 986; Brown v. Ralphs Grocery Co. (2011) 197
Cal.App.4th 489, 501 (Brown).) “A PAGA representative action
is therefore a type of qui tam action,” conforming to all
“traditional criteria, except that a portion of the penalty goes not
only to the citizen bringing the suit but to all employees affected
by the Labor Code violation.” (Iskanian, at p. 382.) The
“government entity on whose behalf the plaintiff files suit is
always the real party in interest.” (Ibid.)
Not every private citizen can serve as the state’s
representative. Only an aggrieved employee has PAGA
standing. (§ 2699, subd. (a); Amalgamated Transit Union, Local
1756, AFL-CIO v. Superior Court (2009) 46 Cal.4th 993, 1003,
1005 (Amalgamated Transit).) An “aggrieved employee” is
defined as “any person who was employed by the alleged violator
and against whom one or more of the alleged violations was
committed.” (§ 2699, subd. (c); hereafter § 2699(c).)2 We have
2
A “violation” is defined as “a failure to comply with any
requirement of the code.” (§ 22.)
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KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
held that employee unions lack standing to bring PAGA claims
because the associations are not “employed by” the defendants.
(§ 2699(c); see Amalgamated Transit, at pp. 1004-1005.) Here,
plaintiff Justin Kim settled his own Labor Code claims against
defendant Reins International California, Inc. (Reins). The
question is whether he retains standing to prosecute a
representative PAGA claim.
B. Facts of this Case
Reins operates restaurants in California and employed
Kim as a “training manager,” a position it classified as exempt
from overtime laws. Kim later sued Reins in a putative class
action, claiming he and other training managers had been
misclassified. The operative complaint alleged causes of action
for failure to pay wages and overtime (§ 1194); failure to provide
meal and rest breaks (§ 226.7); failure to provide accurate wage
statements (§ 226, subd. (a)); waiting time penalties (§ 203); and
unfair competition (Bus. & Prof. Code, § 17200). It also sought
civil penalties under PAGA (§ 2699).
Based on an agreement Kim signed when he was hired,
Reins moved to compel arbitration of the “individual claims” for
Kim’s own damages. The motion also sought to dismiss the class
claims and stay the PAGA claim until arbitration was complete.
Reins acknowledged that the PAGA claim could not be waived
(see Iskanian, supra, 59 Cal.4th at pp. 382-384) or arbitrated
under the parties’ agreement. The court dismissed Kim’s class
claims and ordered arbitration of all remaining claims except
the PAGA claim and the injunctive relief portion of the unfair
competition claim. The PAGA litigation was stayed until
arbitration was complete. Several months later, Reins served a
statutory offer to settle all of Kim’s “individual claims” for
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KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
$20,000, attorney’s fees, and costs. (See Code Civ. Proc., § 998.)
Kim accepted. In exchange, Kim dismissed his individual
claims, leaving only the PAGA claim for resolution.
With the stay lifted, Reins successfully moved for
summary adjudication on the ground that Kim lacked standing.
Reasoning that Kim’s rights had been “completely redressed” by
the settlement and dismissal of his own claims, the court
concluded Kim was no longer an “ ‘aggrieved employee’ ” with
PAGA standing. Judgment was entered for Reins3 and affirmed
on appeal. We granted review to determine whether Kim’s
settlement of individual Labor Code claims extinguished his
PAGA standing.
II. DISCUSSION
A standing requirement ensures that “courts will decide
only actual controversies between parties with a sufficient
interest in the subject matter of the dispute to press their case
with vigor.” (Common Cause v. Board of Supervisors (1989) 49
Cal.3d 432, 439.) When, as here, a cause of action is based on
statute, standing rests on the provision’s language, its
underlying purpose, and the legislative intent. (See Osborne v.
Yasmeh (2016) 1 Cal.App.5th 1118, 1127.)
A. Interpretation of PAGA’s Standing Provision
“In construing a statute, our task is to ascertain the intent
of the Legislature so as to effectuate the purpose of the
enactment. [Citation.] We look first to the words of the statute,
3
After granting the summary adjudication motion, the
court dismissed the action in its entirety. This appeal does not
challenge the dismissal of Kim’s previously stayed claim for
injunctive relief.
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KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
which are the most reliable indications of the Legislature’s
intent. [Citation.] We construe the words of a statute in context,
and harmonize the various parts of an enactment by considering
the provision at issue in the context of the statutory framework
as a whole.” (Cummins, Inc. v. Superior Court (2005) 36 Cal.4th
478, 487.) “If the statutory language is unambiguous, then its
plain meaning controls. If, however, the language supports
more than one reasonable construction, then we may look to
extrinsic aids, including the ostensible objects to be achieved
and the legislative history.” (Los Angeles County Metropolitan
Transportation Authority v. Alameda Produce Market, LLC
(2011) 52 Cal.4th 1100, 1107.) Considering the remedial nature
of legislation meant to protect employees, we construe PAGA’s
provisions broadly, in favor of this protection. (See Williams,
supra, 3 Cal.5th at p. 548; Brinker Restaurant Corp. v. Superior
Court (2012) 53 Cal.4th 1004, 1026-1027.)
1. Statutory Language
The plain language of section 2699(c) has only two
requirements for PAGA standing. The plaintiff must be an
aggrieved employee, that is, someone “who was employed by the
alleged violator” and “against whom one or more of the alleged
violations was committed.” (§ 2699(c).) Both requirements
derive from readily ascertainable facts, and both are satisfied
here. Kim was employed by Reins and alleged that he
personally suffered at least one Labor Code violation on which
the PAGA claim is based. Kim is thus an “aggrieved employee”
with standing to pursue penalties on the state’s behalf.
Reins concedes Kim had PAGA standing when he sued but
contends the standing somehow ended when Kim settled his
claims for individual relief. Reins argues PAGA standing is
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KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
premised on a plaintiff’s injury. In its view, “Whether someone
has representative standing under PAGA depends on whether
the employee has a continuing injury to redress via the PAGA
mechanism, through the time of judgment. . . . Once the injury
has been redressed through settlement, . . . it is no longer a
continuing injury capable of redress through PAGA.” The
argument fails because it is at odds with the language of the
statute, the statutory purpose supporting PAGA claims, and the
overall statutory scheme.
Reins contends Kim is no longer an “aggrieved employee”
because he accepted compensation for his injury. The logic here
is illusive. The Legislature defined PAGA standing in terms of
violations, not injury. Kim became an aggrieved employee, and
had PAGA standing, when one or more Labor Code violations
were committed against him. (See § 2699(c).) Settlement did
not nullify these violations. The remedy for a Labor Code
violation, through settlement or other means, is distinct from
the fact of the violation itself. For example, employers can pay
an additional hour of wages as a remedy for failing to provide
meal and rest breaks. (§ 226.7, subd. (c).) But we have held that
payment of this statutory remedy “does not excuse a
section 226.7 violation.” (Kirby v. Immoos Fire Protection, Inc.
(2012) 53 Cal.4th 1244, 1256, italics added.)
Further, Reins’s assertion that a PAGA plaintiff is no
longer “aggrieved” once individual claims are resolved is at odds
with the Legislature’s explicit definition. Section 2699(c)
defines an “aggrieved employee” as “any person who was
employed by the alleged violator and against whom one or more
of the alleged violations was committed.” It does not require the
employee to claim that any economic injury resulted from the
alleged violations. “ ‘ “When a statute prescribes the meaning
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KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
to be given to particular terms used by it, that meaning is
generally binding on the courts.” ’ ” (Security Pacific National
Bank v. Wozab (1990) 51 Cal.3d 991, 998.) Reins’s use of
“aggrieved” as synonymous with having an unredressed injury
is at odds with the statutory definition.4
Reins’s interpretation would add an expiration element to
the statutory definition of standing. It would expand
section 2699(c) to provide that an employee who accepts a
settlement for individual damage claims is no longer aggrieved.
Of course, the Legislature said no such thing. In construing a
statute, we are “ ‘careful not to add requirements to those
already supplied by the Legislature.’ ” (Ennabe v. Manosa
(2014) 58 Cal.4th 697, 719.) “ ‘ “Where the words of the statute
are clear, we may not add to or alter them to accomplish a
purpose that does not appear on the face of the statute or from
its legislative history.” ’ ” (Ibid.; see Vasquez v. State of
California (2008) 45 Cal.4th 243, 253.) If the Legislature
intended to limit PAGA standing to employees with unresolved
compensatory claims when such claims have been alleged, it
could have worded the statute accordingly. “That it did not
4
Reins accords too much significance to language in our
prior opinions observing that PAGA standing requires the
plaintiff to have suffered “harm” (Williams, supra, 3 Cal.5th at
p. 558) or “injury” (Amalgamated Transit, supra, 46 Cal.4th at
p. 1001) from the employer’s wrongful conduct. Of course, “cases
are not authority for propositions that are not considered.”
(California Building Industry Assn. v. State Water Resources
Control Bd. (2018) 4 Cal.5th 1032, 1043.) Read in context, these
terms were simply shorthand for the requirement that a PAGA
representative be someone “against whom one or more of the
alleged violations was committed.” (§ 2699(c).)
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Opinion of the Court by Corrigan, J.
implies no such . . . requirement was intended.” (Williams,
supra, 3 Cal.5th at p. 546.)
The statutory language reflects that the Legislature did
not intend to link PAGA standing to the maintenance of
individual claims when such claims have been alleged. An
employee has PAGA standing if “one or more of the alleged
violations was committed” against him. (§ 2699(c), italics
added.) This language indicates that PAGA standing is not
inextricably linked to the plaintiff’s own injury. Employees who
were subjected to at least one unlawful practice have standing
to serve as PAGA representatives even if they did not personally
experience each and every alleged violation. (§ 2699(c).) This
expansive approach to standing serves the state’s interest in
vigorous enforcement. (See Arias, supra, 46 Cal.4th at pp. 980-
981.)
Consistent with our interpretation of standing, two recent
decisions have concluded that a plaintiff’s inability to obtain
individual relief is not necessarily fatal to the maintenance of a
PAGA claim. In Raines v. Coastal Pacific Food Distributors, Inc.
(2018) 23 Cal.App.5th 667, 670, the plaintiff sought statutory
and civil penalties for a failure to provide accurate wage
statements. (§ 226, subd. (a).) The court concluded the
individual claim was properly dismissed because the plaintiff
failed to show a quantifiable injury from the violation (see § 226,
subd. (e)), but it was error to dismiss the related PAGA claim
because injury is not a requirement for civil penalties. (Raines,
at pp. 678-680.) Rejecting the notion “that ‘ “no injury” amounts
to “no violation” ’ ” (id. at p. 680), the court explained that
“damages and civil penalties have different purposes . . . .
Damages are intended to be compensatory, to make one whole.
[Citation.] Accordingly, there must be an injury to compensate.
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Opinion of the Court by Corrigan, J.
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 even if it does not result in injury.” (Id. at p. 681.)
Similarly, in Lopez v. Friant & Associates, LLC (2017) 15
Cal.App.5th 773, 784-785, the plaintiff’s failure to satisfy the
requirements for individual relief under section 226,
subdivision (e) did not defeat his PAGA claim for civil penalties.
The court observed that a PAGA claim is not “derivative of, or
dependent on” an individual claim for relief. (Lopez, at p. 786.)
2. Statutory Purpose
As noted, PAGA claims are different from conventional
civil suits. The Legislature’s sole purpose in enacting PAGA was
“to augment the limited enforcement capability of the [LWDA]
by empowering employees to enforce the Labor Code as
representatives of the Agency.” (Iskanian, supra, 59 Cal.4th at
p. 383; see id. at pp. 388-389.) Accordingly, a PAGA claim is an
enforcement action between the LWDA and the employer, with
the PAGA plaintiff acting on behalf of the government. (Id. at
pp. 382-384.) The state can deputize anyone it likes to pursue
its claim, including a plaintiff who has suffered no actual injury.
(See id. at p. 382.) Moreover, civil penalties recovered on the
state’s behalf are intended to “remediate present violations and
deter future ones,” not to redress employees’ injuries. (Williams,
supra, 3 Cal.5th at p. 546; see Iskanian, at p. 381; Brown, supra,
197 Cal.App.4th at p. 501.)
Although representative in nature, a PAGA claim is not
simply a collection of individual claims for relief, and so is
different from a class action. The latter is a procedural device
for aggregating claims “when the parties are numerous, and it
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Opinion of the Court by Corrigan, J.
is impracticable to bring them all before the court.” (Code Civ.
Proc., § 382.) In a class action, the “representative plaintiff still
possesses only a single claim for relief—the plaintiff’s own.”
(Watkins v. Wachovia Corp. (2009) 172 Cal.App.4th 1576, 1589
(Watkins).) If a representative plaintiff voluntarily settles her
claim, she no longer has an interest in the class action and may
lose the ability to represent the class.5 (Watkins, at p. 1592; see
Wallace v. GEICO General Ins. Co., supra, 183 Cal.App.4th at
pp. 1400-1401.) “But a representative action under PAGA is not
a class action.” (Huff v. Securitas Security Services USA, Inc.
(2018) 23 Cal.App.5th 745, 757 (Huff).) There is no individual
component to a PAGA action because “ ‘every PAGA action . . . is
a representative action on behalf of the state.’ ” (Iskanian,
supra, 59 Cal.4th at p. 387.) Plaintiffs may bring a PAGA claim
only as the state’s designated proxy, suing on behalf of all
affected employees. (See Arias, supra, 46 Cal.4th at p. 986;
Reyes v. Macy’s, Inc. (2011) 202 Cal.App.4th 1119, 1123-1124.)
5
Courts have distinguished between voluntary and
involuntary settlements as a means of addressing the “pick off”
problem. The problem arises when a defendant pays the full
amount of the named plaintiff’s individual claim, then seeks
dismissal of the class action on the ground that the named
plaintiff is no longer part of the class. (Watkins, supra, 172
Cal.App.4th at p. 1589.) By this tactic, “the defendant seeks to
avoid exposure to the class action by ‘picking off’ the named
plaintiff, sometimes . . . serially.” (Ibid.) However, both
California and federal courts “have concluded that the
involuntary receipt of relief does not, of itself, prevent the class
plaintiff from continuing as a class representative.” (Id. at
p. 1590; see Deposit Guaranty Nat. Bank v. Roper (1980) 445
U.S. 326, 332-333, 339; Wallace v. GEICO General Ins. Co.
(2010) 183 Cal.App.4th 1390, 1398-1399.)
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KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
Reins’s injury-based view of standing would deprive many
employees of the ability to prosecute PAGA claims, contrary to
the statute’s purpose to ensure effective code enforcement.
“Hurdles that impede the effective prosecution of representative
PAGA actions undermine the Legislature’s objectives.”
(Williams, supra, 3 Cal.5th at p. 548.)
3. Statutory Context
Reins’s interpretation also runs counter to the broader
statutory scheme. (See Poole v. Orange County Fire Authority
(2015) 61 Cal.4th 1378, 1384-1385.) “ ‘[W]e do not construe
statutes in isolation, but rather read every statute “with
reference to the entire scheme of law of which it is part so that
the whole may be harmonized and retain effectiveness.” ’ ”
(Horwich v. Superior Court (1999) 21 Cal.4th 272, 276.)
a. Other PAGA Provisions
“Aggrieved employee” is a term of art in PAGA. It governs
not just who has standing to bring a PAGA claim, but also who
may recover a share of penalties and how those penalties are
calculated. Reins’s interpretation of the term would seriously
impair the state’s ability to collect and distribute civil penalties
under these provisions.
Section 2699, subdivision (f)(2) calculates the amount of
civil penalties based on the number of violations per pay period
“for each aggrieved employee.” If plaintiffs who settle individual
claims are no longer considered “aggrieved employees,” as Reins
asserts, violations against them would no longer be included in
this calculation. As a result, the state’s recovery in future PAGA
suits, or through its own suit, would be diminished. Employers
could potentially avoid paying any penalties to the state simply
by settling with the individual employees. And these individual
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Opinion of the Court by Corrigan, J.
settlements would not be subject to the safeguards of PAGA
settlements, which require notice to the LWDA and court
oversight. (See § 2699, subd. (l)(2).)
Additionally, because section 2699, subdivision (i)
provides that 25 percent of civil penalties recovered are to be
distributed to “aggrieved employees,” plaintiffs who settle
individual claims would not be eligible to receive a share of
penalties, even if their settlements specifically excluded
compensation for civil penalties that would otherwise be due.
Thus, beyond considerations of standing, Reins’s interpretation
would allow employers to reduce their liability for civil
penalties, without state oversight and contrary to PAGA’s goal
of strengthening Labor Code enforcement. (See Arias, supra, 46
Cal.4th at p. 980.)
b. Stand-Alone PAGA Claims
Reins’s suggestion that Kim must maintain his individual
claim for relief to retain PAGA standing also conflicts with
plaintiffs’ recognized ability to bring stand-alone PAGA claims.
Section 2699, subdivision (g)(1) states that “[n]othing in this
part shall operate to limit an employee’s right to pursue or
recover other remedies available under state or federal law,
either separately or concurrently with an action taken under this
part” (italics added). This provision expressly authorizes PAGA
suits brought “separately” from individual claims for relief.
(§ 2699, subd. (g)(1).) Indeed, many PAGA actions consist of a
single cause of action seeking civil penalties. Appellate courts
have rejected efforts to split PAGA claims into individual and
representative components. (See, e.g., Zakaryan v. The Men’s
Wearhouse, Inc. (2019) 33 Cal.App.5th 659, 671-672,
disapproved on another ground in ZB, N.A. v. Superior Court
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KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
(2019) 8 Cal.5th 175, 196, fn. 8; Perez v. U-Haul Co. of California
(2016) 3 Cal.App.5th 408, 420-421.) Standing for these PAGA-
only cases cannot be dependent on the maintenance of an
individual claim because individual relief has not been sought.
c. Penalty Provisions Without a Private Right of
Action
Premising PAGA standing on the existence of an
unredressed injury would also be inconsistent with numerous
Labor Code statutes that impose civil penalties without
affording a private right of action. The Legislature authorized
PAGA actions for a broad range of Labor Code violations. (See
§ 2699.5.) While these statutes all describe prohibited conduct,
many do not authorize individual damage suits by employees.
“ ‘[W]hen regulatory statutes provide a comprehensive scheme
for enforcement by an administrative agency,’ ” as with the
Labor Code, “ ‘courts ordinarily conclude that the Legislature
intended the administrative remedy to be exclusive unless the
statutory language or legislative history clearly indicates an
intent to create a private right of action.’ ” (Thurman v.
Bayshore Transit Management, Inc. (2012) 203 Cal.App.4th
1112, 1132, disapproved on another ground in ZB, N.A. v.
Superior Court, supra, 8 Cal.5th at p. 196, fn. 8.) Decisions
examining specific Labor Code provisions enforceable under
PAGA have frequently concluded that the statutes in question
do not support a private right to sue. Lu v. Hawaiian Gardens
Casino, Inc. (2010) 50 Cal.4th 592, 601, for example, held there
is no private right of action under section 351, which prohibits
employers from taking employees’ tips. (Lu, at p. 601.) Nor can
employees misclassified as independent contractors sue for
relief directly under section 226.8. (Noe v. Superior Court (2015)
237 Cal.App.4th 316, 337-341; cf. Thurman, at p. 1132 [no
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KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
private right of action for employees to enforce an Industrial
Welfare Commission wage order].) Most recently, we concluded
employees have no private right of action to pursue unpaid
wages under section 558. (ZB, at p. 188.)
The availability of civil penalties for statutes that provide
no individual relief highlights the flaw in Reins’s conception of
PAGA standing. In Reins’s view, PAGA standing requires that
the plaintiff have an unredressed injury. But plaintiffs cannot
address a claimed injury by private suit unless the statute
permits it. The concept of injury is especially inapposite in this
context. Requiring the existence of an unredressed injury to
support standing would be problematic for PAGA suits to
enforce the many Labor Code statutes that do not create a
private right to sue. Indeed, the very reason the Legislature
enacted PAGA was to enhance enforcement of provisions
punishable only through government-initiated proceedings.
(See Iskanian, supra, 59 Cal.4th at p. 379; Arias, supra, 46
Cal.4th at pp. 980-981.) Reins’s formulation of standing would
contravene this remedial purpose.
4. Legislative History
Although the meaning of PAGA’s standing requirement is
plain, the parties have advanced several arguments based on
legislative history. An examination of these matters further
supports our conclusion that PAGA standing is not lost when
representatives settle their claims for individual relief.6
6
The parties and amici curiae also assert numerous policy
arguments. However, we are called upon to interpret
section 2699(c) as written. Where, as here, the statutory
language, purpose, and context all point to the same
interpretation, policy arguments that the statute should have
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Opinion of the Court by Corrigan, J.
The original draft of the bill that enacted PAGA
authorized the recovery of civil penalties by an “aggrieved
employee” but did not define that term. (Sen. Bill No. 796 (2003-
2004 Reg. Sess.) as introduced Feb. 21, 2003.) Employer groups
objected that PAGA would be vulnerable to the same abuses
recently exposed under the Unfair Competition Law (UCL; Bus.
& Prof. Code, § 17200 et seq.). (See Sen. Judiciary Com.,
Analysis of Sen. Bill No. 796 (2003-2004 Reg. Sess.) as amended
Apr. 22, 2003, p. 7 (Senate Judiciary Committee Analysis).)
“California law previously authorized any person acting for the
general public to sue for relief from unfair competition.”
(Californians for Disability Rights v. Mervyn’s, LLC (2006) 39
Cal.4th 223, 227 (Californians for Disability Rights).) However,
some private attorneys had “exploited the generous standing
requirement of the UCL” by filing “ ‘shakedown’ suits to extort
money from small businesses” for minor or technical violations
where no client had suffered an actual injury. (In re Tobacco II
Cases (2009) 46 Cal.4th 298, 316; see Californians for Disability
Rights, at p. 228.) In response to this practice and to ensure that
PAGA suits could not be brought by “persons who suffered no
harm from the alleged wrongful act” (Senate Judiciary
Committee Analysis, p. 7), the sponsors added the definition of
“aggrieved employee” that now appears in section 2699(c). (See
Sen. Amend. to Sen. Bill No. 796 (2003-2004 Reg. Sess.) May 1,
2003, § 2; Senate Judiciary Committee Analysis, pp. 7-8; Assem.
Com. on Judiciary, Analysis of Sen. Bill No. 796 (2003-2004 Reg.
Sess.) as amended May 12, 2003, p. 4; Assem. Com. on Labor
been written differently are more appropriately addressed to the
Legislature.
16
KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
and Employment, Analysis of Sen. Bill No. 796 (2003-2004 Reg.
Sess.) as amended July 2, 2003, p. 4.)
Reins and its supporting amici curiae contend this history
illustrates a legislative intent to restrict PAGA standing to
plaintiffs with some “redressable injury.” It is apparent that
PAGA’s standing requirement was meant to be a departure from
the “general public” (Californians for Disability Rights, supra,
39 Cal.4th at p. 227) standing originally allowed under the UCL.
However, Reins reads too much into this objective. Nothing in
the legislative history suggests the Legislature intended to
make PAGA standing dependent on the existence of an
unredressed injury, or the maintenance of a separate,
unresolved claim. Such a condition would have severely
curtailed PAGA’s availability to police Labor Code violations
because, as noted, many provisions do not create private rights
of action or require an allegation of quantifiable injury. Instead,
true to PAGA’s remedial purpose, the Legislature conferred
fairly broad standing on all plaintiffs who were employed by the
violator and subjected to at least one alleged violation. Reins’s
narrower construction would thwart the Legislature’s clear
intent to deputize employees to pursue sanctions on the state’s
behalf. (See Iskanian, supra, 59 Cal.4th at p. 388; Huff, supra,
23 Cal.App.5th at p. 756.)
B. Preclusive Effect of an Individual Claim’s Dismissal
Apart from its statutory interpretation arguments, Reins
also contends principles of claim preclusion and retraxit bar
Kim from litigating the PAGA claim. Not so.
The claim preclusion doctrine, formerly called res
judicata, “prohibits a second suit between the same parties on
the same cause of action.” (Boeken v. Philip Morris USA, Inc.
17
KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
(2010) 48 Cal.4th 788, 792 (Boeken).) “Claim preclusion arises
if a second suit involves (1) the same cause of action (2) between
the same parties (3) after a final judgment on the merits in the
first suit.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th
813, 824 (DKN Holdings).) “Retraxit” describes the particular
application of claim preclusion to a claim that has been
dismissed with prejudice. (See Rice v. Crow (2000) 81
Cal.App.4th 725, 733-734.) A dismissal with prejudice is
considered a judgment on the merits preventing subsequent
litigation between the parties on the dismissed claim. (Federal
Home Loan Bank of San Francisco v. Countrywide Financial
Corp. (2013) 214 Cal.App.4th 1520, 1527; Torrey Pines Bank v.
Superior Court (1989) 216 Cal.App.3d 813, 820.)
It is unnecessary to address the preclusion elements in
detail because Kim’s settlement specifically excluded the
pending PAGA claim. Even as to claims that might otherwise
be barred, “ ‘parties may by agreement limit the legal effect of a
dismissal with prejudice so that it would not constitute a
retraxit and affect their rights in a later pending action.’ ”
(Legendary Investors Group No. 1, LLC v. Niemann (2014) 224
Cal.App.4th 1407, 1411.) Where a settlement agreement
expressly excludes certain claims, the resulting dismissal does
not preclude further litigation on the excluded claim. (See ibid.)
Reins’s preclusion argument stumbles at this threshold and is
inconsistent with the very agreement it made.7
7
Reins’s conduct below is troubling. Reins conceded Kim’s
PAGA claim had to be stayed in superior court while the other
claims were arbitrated. It then settled the arbitrable claims
with an offer that encompassed only Kim’s “individual claims.”
Indeed, Reins’s one-page offer mentions Kim’s individual claims
three times. When Kim returned to court to litigate the PAGA
18
KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
Moreover, Reins attempts to apply preclusion principles to
claims within the same lawsuit, yet we have consistently
described claim preclusion as a bar to claims brought in a
“second suit.” (E.g., DKN Holdings, supra, 61 Cal.4th at p. 824;
Boeken, supra, 48 Cal.4th at p. 792; Mycogen Corp. v. Monsanto
Co. (2002) 28 Cal.4th 888, 896.) The doctrine “promotes judicial
economy” because “all claims based on the same cause of action
must be decided in a single suit; if not brought initially, they
may not be raised at a later date.” (Mycogen Corp., at p. 897.)
Kim did not attempt to split his claims against Reins or
relitigate claims that had been previously resolved. His single
complaint encompassed seven causes of action. The six claims
for specific Labor Code violations were bifurcated and sent to
arbitration at Reins’s own urging. The seventh claim seeking
PAGA penalties was stayed pending completion of the
arbitration. The PAGA claim was never resolved. Indeed,
consistent with the settlement agreement, Kim’s request for
dismissal of the individual claims specified that “Cause of Action
Seven for penalties pursuant to Lab. Code § 2699 et seq.
(‘PAGA’) for the underlying violations . . . shall remain.” Reins
claim, which the parties had specifically carved out of the
settlement, Reins argued Kim had lost standing. Even if Reins’s
prior conduct did not amount to an estoppel, this turnabout was
hardly fair play. Moreover, Reins made its settlement offer
pursuant to Code of Civil Procedure section 998. If Kim had
rejected the offer and failed to obtain a more favorable award in
arbitration, he would have been liable for his own costs and all
costs Reins incurred after making the offer. (Code Civ. Proc.,
§ 998, subd. (c)(1).) Under the arguments Reins now advances,
section 998 offers would present employees like Kim with a
Hobson’s choice: either reject the offer and risk incurring
substantial liability for costs or accept the offer and lose the
ability to pursue the PAGA claim.
19
KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
cites no authority, and we are aware of none, holding that the
resolution of some claims can bar the litigation of other claims
that were asserted in the same lawsuit.
Reins’s reliance on Villacres v. ABM Industries Inc. (2010)
189 Cal.App.4th 562 is likewise unavailing. In Villacres, an
employer settled a class action seeking recovery for several
Labor Code violations and civil penalties under section 558.
Two days after the settlement, a class member brought a PAGA
claim for penalties under additional statutes. (Villacres, at
p. 569.) The court held claim preclusion barred this second suit
because the “PAGA claims could have been raised in the prior
action.” (Id. at p. 584.) Generally speaking, a prior judgment
between the same parties “is res judicata on matters which were
raised or could have been raised, on matters litigated or
litigable.” (Sutphin v. Speik (1940) 15 Cal.2d 195, 202.) But,
even assuming Villacres was correctly decided, the situation
here is obviously distinguishable. Kim did not attempt to
litigate his claims piecemeal. He joined all claims against Reins,
including one for PAGA penalties, in a single action. Claim
preclusion does not apply under these circumstances.
20
KIM v. REINS INTERNATIONAL CALIFORNIA, INC.
Opinion of the Court by Corrigan, J.
III. DISPOSITION
The Court of Appeal judgment is reversed, and the case is
remanded to the trial court for further proceedings on the PAGA
cause of action.
CORRIGAN, J.
We Concur:
CANTIL-SAKAUYE, C. J.
CHIN, J.
LIU, J.
CUÉLLAR, J.
KRUGER, J.
GROBAN, J.
21
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Kim v. Reins International California, Inc.
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 18 Cal.App.5th 1052Rehearing Granted
__________________________________________________________________________________
Opinion No. S246911
Date Filed: March 12, 2020
__________________________________________________________________________________
Court: Superior
County: Los Angeles
Judge: Kenneth R. Freeman
__________________________________________________________________________________
Counsel:
Kingsley & Kingsley, Eric B. Kingsley, Ari J. Stiller and Lyubov Lerner for Plaintiff and Appellant.
Cynthia L. Rice and Javier J. Castro for California Rural Legal Assistance, Inc., California Rural Legal
Assistance Foundation, California Employment Lawyers Association, Consumer Attorneys of California
and Asian Americans Advancing Justice-LA as Amici Curiae on behalf of Plaintiff and Appellant.
Capstone Law, Ryan H. Wu, Melissa Grant and John E. Stobart for Bet Tzedek as Amicus Curiae on behalf
of 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.
Davis Wright Tremaine, Rochelle L. Wilcox, Janet L. Grumer and Aaron N. Colby for Restaurant Law
Center, California Restaurant Association and Chamber of Commerce of the United States of America as
Amici Curiae on behalf of Defendant and Respondent.
Fine, Boggs & Perkins, John P. Boggs and Cory J. King for California New Car Dealers Association as
Amicus Curiae on behalf of Defendant and Respondent.
Morgan, Lewis & Bockius, Barbara J. Miller, John D. Hayashi and Thomas M. Peterson for The Employers
Group as Amicus Curiae on behalf of Defendant and Respondent.
Blank Rome, Laura Reathaford and Natalie Alameddine for Association of Southern California Defense
Counsel as Amicus Curiae on behalf of Defendant and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Eric B. Kingsley
Kingsley & Kingsley, APC
16133 Ventura Boulevard, Suite 1200
Encino, CA 91436
(818) 990-8300
Spencer C. Skeen
Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
4370 La Jolla Village Drive, Suite 990
San Diego, CA 92122
(858) 652-3100