The court in Callahan v. Brookdale Senior Living Cmtys., No. 20-55603 (9th Cir. Jun. 29, 2022) found that an employee who sought intervention in a fellow employee's PAGA action was not entitled to intervene as a matter of right because she failed to show that her interests were inadequately represented. In addition. her request for permissive intervention was also denied as the same legal rights and interests were already represented and allowing intervention would not further the factual development of the case in any significant way.
Background Facts
Carolyn Callahan worked as a concierge for Brookdale Senior Living Communities, Inc. She is a plaintiff in an action brought against Brookdale for various labor code violations pursuant to the California Private Attorney General's Act (PAGA). PAGA, which is contained in Cal. Labor Code sections 2698-2699.5, permits employees to recover civil penalties for labor code violations on behalf of themselves, the state, or a current or former employee. After the claim was filed, Callahan and Brookdale reached a settlement. Appellant Mishelle Neverson, a plaintiff in another PAGA case against Brookdale, filed a motion to intervene in Callahan's case. The district denied Neverson's motion and validated the settlement agreement reached between Callahan and Brookdale.
Newsom appealed the decision denying her motion to intervene as well as the court validation of the settlement agreement. The court affirmed that the lower court was correct in denying Neverson's motion to intervene as well as refusing to allow her to challenge the settlement as she was not a party to that settlement.
Motion to Intervene as Matter of Law
A motion to intervene as a matter of law involves the entry of a third party into a lawsuit that is already underway who was not named as an original party, but claims to have a stake in the outcome of the matter. Rule 24(a)(2) allows an intervention of right when a movant successfully claims "an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impeded the movant's ability to protect its interest, unless existing parties adequately represent that interest." Courts posed with the question of whether to allow a party to intervene must apply a four part test established in the Wilderness Soc’y v. U.S. Forest Serv., 630 F.3d 1173, 1177 (9th Cir. 2011) case. The factors of the test are as follows:
- "The motion must be timely.
- The movant must claim a significantly protectable interest relating to the property or transaction that is the subject of the action.
- The movant must be so situated that the disposition of the action may as a practical matter impair or impede its ability to protect that interest; and
- The applicant's interest must be adequately represented by the parties to the action."
Neverson clearly meets the first three factors articulated by the Wilderness Society test. Despite that fact, the court here determined that she did not satisfy the fourth factor. Courts look to an additional three factors to assess whether a potential intervenor's interests will be adequately represented by the present parties in interest:
- "Whether the interest of a present party is such that it will undoubtedly make all of a proposed intervenor's arguments.
- Whether the present party is capable and willing to make such arguments; and
- Whether a proposed intervenor would offer any necessary elements to the proceeding that the other parties would neglect." Arakaki v. Cayetano, 324 F.3d 1078, 1086 (9th Cir. 2003). If the proposed intervenor’s interest is “identical to that of one of the present parties, a compelling showing should be required to demonstrate inadequate representation.” Id.
In the case at hand, Neverson and Callahan have identical interests in the litigation- to recover civil penalties on behalf of the California Labor & Workforce Development Agency (LWDA) pursuant to PAGA. Given that fact, Neverson must provide the court a compelling reason to believe that she is inadequately represented. Neverson's main arguments on this front are that the PAGA settlement amount is insufficient and that Callahan did not calculate the maximum PAGA penalties correctly. Neverson offers no independent calculations, however, to prove her contention and no other proof to show how the calculations are incorrect.
The court found this argument unpersuasive as it amounted to a difference of opinion in litigation strategy rather than an inadequate representation of Neverson's interest. "When a proposed intervenor has not alleged any substantive disagreement between it and the existing parties to the suit, and instead has rested its claim for intervention entirely upon a disagreement over litigation or legal strategy or legal tactics, courts have been hesitant to accord the applicant full party status," League of United Am. Citizens v. Wilson, 131 F.3d 1297 (1997). Neverson's singular argument that the settlement was insufficient and that she would not have agreed to it also does not meet the fourth prong in proving that her interests were not adequately represented.
Neverson also contends that Callahan was not properly deputized to settle all of the claims that were part of the settlement agreement due to the statute of limitations having run on those claims. Even if this argument holds water, the court noted that Neverson did not provide any evidence that she is the proper party to bring those claims if Callahan was not. Therefore, whether or not Callahan was properly deputized is irrelevant to the current question. If Callahan was not properly deputized that would speak to the validity of the settlement agreement, which was not at issue before this court. Neverson failed to show that Callahan did not adequately represent her interests. The district court's denial of her motion to intervene as a matter of right was affirmed.
Is Permissive Intervention Appropriate?
Federal Rule of Civil Procedure 24(b) gives a court the discretion to allow permissive intervention when:
- The movant shows an independent ground for jurisdiction.
- The motion is timely, and
- A common question of law and fact between the movant's claim or defense and the main action. Freedom from Religion Found, Inc. v. Geithner, 644 F.3d 836 (9th Cir. 2011).
If the court finds that these factors are satisfied, then it may consider additional following factors in making its decision:
- The nature and extent of the intervenor's interest
- Standing to raise relevant legal issues
- Legal position they seek to advance, and
- Its probable relation to the merits of the case. Spangler v. Pasadena City Bd. of Educ., 552 F.2d 1326, 1329 (9th Cir. 1977).
Court may also consider certain discretionary factors such as:
- If an intervention once denied warrants reexamination
- If intervenors' interests are adequately represented by other parties.
- whether the intervention will unduly delay the litigation
- whether the intervention will significantly contribute to the full development of the case. Donnelly v. Glickman, 159 F.3d 405 (9th Cir. 1998).
In the case at hand, the lower court determined that the three initial conditions for permissive intervention were met, but the additional factors pointed clearly against allowing intervention. It specifically noted that both Callahan and Neverson were deputized agents of LWDA and therefore asserted the same legal rights and interests in the suit. It also found that allowing Neverson to intervene would not significantly contribute to the overall factual development of the case since Callahan was privy to all of the applicable discovery. The court concluded that the district court did not abuse its discretion in denying Neverson's request to permissively intervene in the case. Finally, Neverson did not have the right to appeal the settlement agreement because she was never a party to the action.
Impact of PAGA Litigation Moving Forward
PAGA litigation continues to evolve as can be seen with this ruling as well as other recent rulings (see Viking River Cruises, Inc. v. Moriana, No. 20-1573 (U.S. Jun. 15, 2022) in which the US Supreme Court held that the Federal Arbitration Act (FAA) pre-empts the California Supreme Court's ruling in Iskanian v. CLS Transportation Los Angeles, LLC, No. S204032 (Cal. Jun. 26, 2014) which invalidated contracts that waive an individual's right to file lawsuits alleging PAGA claims; See also Gunther v. Alaska Airlines, Inc., 72 Cal.App.5th 334, 287 Cal. Rptr. 3d 229 (Cal. Ct. App. 2021) holding that heightened penalties for wage statement violations under Labor Code Section 226.3 are available only where an employer fails to provide a wage statement or keep required records at all). Despite these recent employer-friendly court decisions, PAGA continues to be a tool wielded and misused by enterprising Plaintiff Consumer Attorneys to attempt to extract large damage awards against well intentioned employers. Under PAGA, penalties can amass quickly and in a compounding manner. PAGA penalties can be $100 for each employee per pay period for the initial violation and $200 for each employee per pay period for any subsequent violations. By way of example, If we assume a company has 50 employees and there are continuing violations for one year (or 26 pay periods) then the PAGA violations would amount to 1,300 violations for a total of $130,000. If separate PAGA violations occur the damages could be stacked and compounded.
These “violations” with their corresponding penalties are actionable and compensable even if no real discernable harm has been incurred. As an example, PAGA violations can occur for incorrectly stating an employee’s social security or work ID number on a paystub. Moreover, an employer may not ever be alerted to inadvertent PAGA “violations”, that continually occur and accrue penalties and compound in the background, until the employer finds themselves served with a PAGA notice and then embroiled in PAGA litigation.
Since PAGA took effect in 2004, attorneys seeking to use PAGA as a sword have extracted billions of dollars in PAGA penalties, predominantly from small and mid-size businesses. Regardless of the mechanism, PAGA needs to be returned to its presumed place of holding willful violators accountable while at the same time not permitting the needless shakedown of well-intentioned business attempting to operate and grow in California. California voters will seemingly be called upon to attempt to steer PAGA back to a more reasoned enforcement mechanism as the California Fair Pay and Employer Accountability Act has qualified as a ballot measure in 2024, which if passed by the voters will take enforcement of PAGA claims away from enterprising Plaintiff Consumer Attorneys and place enforcement of PAGA claims back in the hands of independent regulators and Labor Commissioner.