California Supreme Court Expands Scope of Discovery in Representative Actions under Private Attorneys General Act

JohnQuieroLE - resized [45] 170504_0034_1a_square2Guest Commentary

By John F. Querio, a Partner, and Lacey L. Estudillo, an Appellate Fellow, with Horvitz & Levy LLP.

On July 13, 2017, the California Supreme Court decided Williams v. Superior Court, which expanded a plaintiff’s discovery rights in actions brought pursuant to California’s Private Attorneys General Act (PAGA).  PAGA permits an employee to bring a representative action “‘on behalf of himself or herself and other current or former employees’ to recover civil penalties” for wage-related violations of California’s Labor Code—penalties that were previously recoverable solely by the state’s labor-law enforcement agencies.  Amalgamated Transit Union, Local 1756 v. Superior Court, 46 Cal. 4th 993, 1003 (2009).

Employee Michael Williams filed a representative PAGA action against Marshalls, alleging the retail company failed to provide him and other employees meal and rest periods, accurate wage statements, timely payment of earned wages, and business-expense reimbursement.  Williams served interrogatories requesting contact information for 16,500 current and former nonexempt Marshalls employees throughout California.

Marshalls declined to produce this information, arguing the request was (1) overbroad because it extended beyond the Costa Mesa store where Williams worked and beyond his job classification; (2) was unduly burdensome because it sought private information without demonstrating good cause; and (3) invaded the privacy of third parties under Article I, § 1 of the California Constitution.

Williams moved to compel Marshalls to produce the contact information for all of its employees statewide.

The trial court granted Williams’s motion in part, ordering Marshalls to provide the contact information for employees of its Costa Mesa store, after providing those employees notice and an opportunity to opt out of disclosure.  The trial court denied the motion as to contact information for employees of every other California store.

The court ruled Williams could renew his discovery motion if he appeared for a six-hour deposition and indicated that Marshalls could rely on this deposition testimony to challenge the merits of Williams’s claims.  Williams filed a petition for writ of mandate in the Court of Appeal challenging the denial of access to employee contact information from the remaining stores.

The Court of Appeal affirmed the trial court’s ruling, holding that discovery requests of this nature must be justified by good cause.  Because Williams failed to “evince any knowledge of the practices of Marshalls at other stores [or] any fact that would lead a reasonable person to believe he knows whether Marshalls has a uniform statewide policy,” he was not entitled to the contact information of employees beyond his store location.

The appellate court also concluded that, because Williams’s request implicated third-party privacy interests, Williams had to demonstrate a compelling need for the contact information by showing it was “directly relevant and essential to the fair resolution of the underlying lawsuit.”

The California Supreme Court reversed the Court of Appeal’s decision, ruling the trial court abused its discretion by limiting discovery to the Costa Mesa location.

The court rejected the company’s argument that the scope of discovery in PAGA representative actions should be narrower than discovery in class actions.  It reasoned that “a civil litigant’s right to discovery is broad,” and there was nothing unique about PAGA claims that would justify limiting the scope of discovery under California law.  The purposes of PAGA, in the court’s view, would be “ill-served by presuming, notwithstanding the failure explicitly to so indicate in the text, that deputized aggrieved employees must satisfy a PAGA-specific heightened proof standard at the threshold, before discovery.”

The court concluded that Williams’s request for statewide contact information was not overbroad because it sought only to “identify other California employees, inferentially as a first step to identifying other aggrieved employees and obtaining admissible evidence of the violations and policies alleged in the complaint.”  The court noted that there may be “special reason[s] to limit or postpone” a representative plaintiff’s access to contact information, but the “default position” is that contact information is discoverable.

The court also rejected the company’s argument that producing contact information for thousands of employees was unduly burdensome without a prior showing that Williams or others had been subjected to Labor Code violations.  The court concluded that the statutory scheme imposes no good-cause requirement for seeking such contact information via interrogatories.  It explained that Marshalls, as the objecting party, had the burden of showing compliance with the discovery requests would be unduly burdensome, but noted Marshalls had not offered any supporting evidence.

The court recognized that California law allows a court to “establish the sequence and timing of discovery for the convenience of the parties and witnesses and in the interest of justice” upon a showing of “good cause,” Cal. Civ. Proc. Code § 2019.020, but concluded that provision did not apply because Marshalls did not file an appropriate motion.

Finally, the court found that the company’s privacy objection did not support the denial of statewide discovery.  The court recognized that absent employees have a bona fide interest in the confidentiality of their contact information, but concluded employees did not have a reasonable expectation of privacy because employees would not expect their contact information would be withheld from a plaintiff seeking to prove labor law violations and recover civil penalties on their behalf.

The court reasoned that the privacy interests of employees throughout California could have been protected by conditioning discovery on the plaintiff’s providing them notice and an opportunity to opt out, as was done for discovery of contact information of employees at the Costa Mesa store.  The court also recognized that trial courts may supplement such a notice/opt-out procedure with a protective order prohibiting disclosure of any employee contact information to anyone beyond the participants in the lawsuit.

The Williams opinion is the latest in a string of recent decisions by California courts favoring employee-plaintiffs in collective PAGA litigation.  See, e.g., Iskanian v. CLS Transp. L.A., LLC, 59 Cal. 4th 348, 378-89 (2014) (holding California law bars enforcement of PAGA representative action waivers in employment arbitration agreements, and Federal Arbitration Act (FAA) does not preempt this result).  Because Williams allows plaintiffs to conduct statewide fishing expeditions to discover alleged employer misconduct, it will likely increase employers’ discovery costs in PAGA litigation.

There are a few silver linings in the Williams opinion.  First, the court analogized representative PAGA actions to class actions in order to rule that discovery in PAGA cases is as broad as in class actions.  This is in some tension with the court’s reasoning in Iskanian.  There, the court held that the FAA does not preempt California law barring enforcement of PAGA representative action waivers in arbitration agreements because PAGA representative actions are categorically different from class actions.  The more California courts treat PAGA representative actions like class actions in areas besides arbitration (e.g., the scope of discovery, as in Williams), the stronger employers’ arguments become that the Iskanian rule discriminates against arbitration in violation of the FAA.  See Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421, 1426 (2017) (holding FAA “preempts any state rule discriminating on its face against arbitration” and “also displaces any rule that covertly accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the defining features of arbitration agreements”); DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468 (2015) (holding FAA requires “plac[ing] arbitration contracts ‘on equal footing with all other contracts’”).

Another potential glimmer of hope is the Williams court’s implicit suggestion that a plaintiff in a PAGA representative action must prove that trial of the action will be manageable before being allowed to proceed on a representative basis.  Lower courts in California are deeply divided on whether such a manageability requirement exists, and the Williams opinion may help employers in other cases in arguing that it does.

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