Amicus Curiae Brief — Lyft, Inc., Petitioner v. Million Seifu

No. 23-769

IN THE

Supreme Court of the United States

______________________

LYFT, INC.,

Petitioner,

v.

MILLION SEIFU,

Respondent.

______________________

On Petition for a Writ of Certiorari

to the California Court of Appeal

______________________

BRIEF OF EMPLOYERS GROUP AND THE

CALIFORNIA EMPLOYMENT LAW COUNCIL

AS AMICI CURIAE IN SUPPORT OF

PETITIONER

______________________

ANTON METLITSKY

O’MELVENY & MYERS LLP

7 Times Square

New York, NY 10036

RYAN RUTLEDGE

ADRIANNA GUIDA

O’MELVENY & MYERS LLP

610 Newport Center Drive

Newport Beach, CA 92660

ADAM J. KARR

JASON ZARROW

Counsel of Record

O’MELVENY & MYERS LLP

400 South Hope Street

Los Angeles, CA 90071

(213) 430-6000

jzarrow@omm.com

Attorneys for Amici Curiae

i

TABLE OF CONTENTS

Page

INTEREST OF AMICI CURIAE .............................. 1

INTRODUCTION AND SUMMARY OF THE

ARGUMENT ......................................................... 2

ARGUMENT ............................................................. 5

I. CALIFORNIA LAW CONFLICTS WITH

VIKING RIVER ................................................... 6

II. CALIFORNIA’S CIRCUMVENTION OF

VIKING RIVER REINSTATES ALL THE

HARMS THAT DECISION SHOULD HAVE

FORECLOSED .................................................. 11

CONCLUSION ........................................................ 19

ii

TABLE OF AUTHORITIES

Page(s)

Cases

Adolph v. Uber Techs., Inc.,

532 P.3d 682 (Cal. 2023) ................................... 2, 8

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011) ................................. 2, 4, 6, 13

Bernstein v. Virgin Am., Inc.,

2020 WL 10618569 (N.D. Cal. Jan.

21, 2020) .............................................................. 13

Bernstein v. Virgin Am., Inc.,

3 F.4th 1127 (9th Cir. 2021) ............................... 13

Dean Witter Reynolds, Inc. v. Byrd,

470 U.S. 213 (1985) ............................................... 2

DIRECTV, Inc. v. Imburgia,

577 U.S. 47 (2015) ................................................. 6

Epic Sys. Corp. v. Lewis,

138 S. Ct. 1612 (2018)....................................... 2, 6

Estrada v. Royalty Carpet Mills, Inc.,

__ P.3d __, 2024 WL 188863 (Cal.

Jan. 18, 2024) ...................................................... 17

Fox v. Cares Cmty. Health,

2023 WL 6538410 (Cal. Super. Ct.

July 27, 2023) ...................................................... 18

Gunther v. Alaska Airlines, Inc.,

72 Cal. App. 5th 334 (2021) ................................ 14

Iskanian v. CLS Transp. L.A., LLC,

59 Cal. 4th 348 (2014)........................................... 6

iii

TABLE OF AUTHORITIES

(continued)

Page(s)

Lamps Plus, Inc. v. Varela,

139 S. Ct. 1407 (2019)........................................... 6

Moreno v. M&J Seafood Co.,

2023 WL 6538411 (Cal. Super. Ct.

Aug. 23, 2023) ..................................................... 18

Nordstrom Comm’n Cases,

186 Cal. App. 4th 576 (2010) .............................. 17

Perry v. Thomas,

482 U.S. 483 (1987) ............................................... 6

Preston v. Ferrer,

552 U.S. 346 (2008) ........................................... 2, 6

Ramsey v. Packaging Corp. of Am.,

2023 WL 9116636 (Cal. Super. Ct.

Nov. 17, 2023) ..................................................... 18

Reed v. CVS Pharmacy, Inc.,

2019 WL 12314054 (Cal. Super. Ct.

Oct. 30, 2019) ...................................................... 14

Sam v. Concordance Healthcare Sols. LLC,

2023 WL 6467612 (Cal. Super. Ct. Aug.

4, 2023) ................................................................ 18

Southland Corp. v. Keating,

465 U.S. 1 (1984)................................................... 6

Viceral v. Mistras Grp., Inc.,

2016 WL 5907869 (N.D. Cal. Oct. 11, 2016) ...... 17

Viking River Cruises, Inc. v. Moriana,

596 U.S. 639 (2022) ........................... 1, 3-4, 6-9, 13

iv

TABLE OF AUTHORITIES

(continued)

Page(s)

Volt Info. Scis., Inc. v. Bd. of Trs. of

Leland Stanford Junior Univ.,

489 U.S. 468 (1989) ............................................... 2

Statutes

9 U.S.C. § 1 ................................................................. 2

Cal. Lab. Code § 2699(a) ............................................ 3

Cal. Lab. Code § 2699(c) ............................................ 3

Cal. Lab. Code § 2699(f)(2)....................................... 13

Cal. Lab. Code § 2699(i) ........................................... 16

Rules

S. Ct. R. 10(c) ............................................................ 11

Other Authorities

California Private Attorneys General Act

of 2004, CABIA Found. (Oct. 2021) .................... 13

Emily Green, State Law May Serve As

Substitute for Employee Class

Actions, Daily Journal (Apr. 17, 2014) ............... 12

Erin Coe, Iskanian Ruling to Unleash Flood

of PAGA Claims, Law360 (June 24, 2014)......... 12

Ken Mashinchi, Grove and Salas Contend that

PAGA Lawsuits are Killing Kern County

Businesses, ABC 23 News (Sept. 6, 2016) .......... 15

v

TABLE OF AUTHORITIES

(continued)

Page(s)

Ken Monroe, Another Voice: It’s Time to

Repeal PAGA Now. The Fate of Small

Businesses Hinges On It., Sacramento

Business Journal (Oct. 14, 2021) ....................... 16

Ken Monroe, Op-Ed: Frivolous PAGA

Lawsuits Are Making Some Lawyers

Rich, But They Aren’t Helping Workers

or Employers, L.A. Times (Dec. 6, 2018) ............ 15

Maureen A. Weston, The Clash: Squaring

Mandatory Arbitration with

Administrative Agency and Representative

Recourse, 89 S. Cal. L. Rev. 103 (2015) .............. 12

Michael J. Nader & Zachary V. Zagger,

No COVID-19 Slowdown for

California PAGA Filings: The Data

Is In, 12 Nat’l L.R. 198 (2023) ............................ 14

PAGA Case Search, Cal. Dep’t of Indus.

Relations ............................................................. 17

Robyn Ridler Aoyagi & Christopher J. Pallanch,

The PAGA Problem: The Unsettled State of

PAGA Law Isn’t Good for Anyone, 2013-7

Bender’s Cal. Lab. & Emp. Bull. (2013)............. 12

Tim Freudenberger et al., Trends in PAGA

Claims and What It Means for California

Employers, Inside Counsel (Mar. 19, 2015) ....... 12

INTEREST OF AMICI CURIAE

The Employers Group is the nation’s oldest and

largest human resources management organization

for employers. It represents California employers of

all sizes in many different industries, which collectively employ millions of employees. The Employers

Group seeks to enhance the predictability and fairness of the laws and decisions regulating employment

relationships.1

The California Employment Law Council

(“CELC”) is a nonprofit organization composed of approximately 70 California employers—most of which

have a national and/or international market presence—that collectively employ hundreds of thousands

of employees. The CELC promotes its members’ common interests in fostering reasonable, equitable, and

progressive rules of employment law for the benefit of

employers and employees alike.

Having participated as amici curiae in Viking

River Cruises, Inc. v. Moriana, 596 U.S. 639 (2022),

see Br. of Emp’rs Grp. as Amicus Curiae in Support of

Pet’r (No. 20-1573); Br. of Cal. Emp. L. Council as

Amicus Curiae in Support of Pet’r (No. 20-1573),

amici are uniquely positioned to assess both the impact and implications of California’s rejection of that

decision. See also Br. of Emp’rs Grp. as Amicus Curiae in Support of Pet’rs, Epic Sys. Corp. v. Lewis, 138

1 No counsel for any party authored this brief in whole or in part,

and no entity or person other than amici and their counsel made

any monetary contribution toward the preparation or submission of this brief. Amici timely notified all parties of their intent

to file this brief.

2

S. Ct. 1612 (2018) (No. 16-285); Br. of Emp’rs Grp. &

Cal. Emp. L. Council as Amici Curiae in Support of

Appellant, Adolph v. Uber Techs., Inc., 532 P.3d 682

(Cal. 2023) (No. S274671). Indeed, the decision below

and similar decisions from California courts are just

the latest in a long line of California cases flouting the

Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq.,

and this Court’s jurisprudence regarding arbitration.

See, e.g., AT&T Mobility LLC v. Concepcion, 563 U.S.

333 (2011); Preston v. Ferrer, 552 U.S. 346 (2008).

Amici both have strong interests in ensuring that this

Court’s arbitration precedents are respected.

INTRODUCTION AND

SUMMARY OF THE ARGUMENT

Congress enacted the FAA in 1925 “to overrule the

judiciary’s longstanding refusal to enforce agreements to arbitrate.” Dean Witter Reynolds, Inc. v.

Byrd, 470 U.S. 213, 219-20 (1985). The “principal

purpose of” the FAA is “ensuring that private arbitration agreements are enforced according to their

terms.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland

Stanford Junior Univ., 489 U.S. 468, 478 (1989).

Giving effect to that purpose—and in response to

the fact that the “judicial hostility towards arbitration

that prompted the FAA” has continued to “manifest[]

itself in a great variety of devices and formulas,” Concepcion, 563 U.S. at 342 (quotations omitted)—this

Court has repeatedly invalidated state rules that undermine agreements to arbitrate. Many such rules

have emanated from California. This is one of several

cases currently pending before the Court reflecting

California’s continued hostility to arbitration. See Br.

3

of Emp’rs Grp. as Amicus Curiae in Support of Pet’rs,

Uber Techs., Inc. v. Gregg (No. 23-645).

Two Terms ago, this Court held in Viking River

that California law was preempted insofar as it prevented employees from agreeing to arbitrate “individual” claims under the California Labor Code Private

Attorneys General Act (“PAGA”)—i.e., “claims based

on code violations suffered by the plaintiff.” 596 U.S.

at 648-49. Under Viking River, where an employee

and employer agree to arbitrate PAGA claims on an

individual basis, the employee’s individual PAGA

claim must be “pared away” from the remainder of the

“PAGA action” and “committed to a separate proceeding.” Id. at 663.

Almost immediately after Viking River was decided, California courts rejected that rule. California

Labor Code § 2699(a) authorizes “an aggrieved employee on behalf of himself or herself and other current or former employees” to assert a claim under

PAGA. Section 2699(c), in turn, defines an aggrieved

employee as a person “against whom one or more of

the alleged [Labor Code] violations was committed.”

Thus, to assert other employees’ Labor Code violations under PAGA, a plaintiff must also assert an individual PAGA claim.

In the decision below, the California Court of Appeal held that an employee could use his individual

PAGA claim as a toehold to assert other employees’

PAGA claims notwithstanding the fact that he agreed

to arbitrate his individual claim. Under Viking River,

that should have been impossible. The arbitrable individual claim should have been “pared away” from

4

the rest of the “PAGA action” and “committed to a separate proceeding.” 596 U.S. at 663. And without an

individual PAGA claim to litigate in court, Plaintiff

should have been left without standing to assert

PAGA claims for others, so the non-individual claims

should have been dismissed. Yet the Court of Appeal

held the opposite, reasoning that Plaintiff maintained

his status as an aggrieved employee with PAGA

standing, even after his individual PAGA claim was

compelled to arbitration.

California’s decision to thwart Viking River has

real practical consequences—consequences that Viking River should have foreclosed. It is well known

that “representative” PAGA claims seeking workforce-wide penalties create a massive “risk of ‘in terrorem’ settlements.” Concepcion, 563 U.S. at 350. As

the Court observed in Viking River, PAGA’s penalties

are individually “modest; but given PAGA’s additive

dimension, low-value claims may easily be welded together into high-value suits.” 596 U.S. at 647. In the

years before Viking River, PAGA claims seeking millions of dollars in penalties had skyrocketed, as enterprising plaintiffs (and their counsel) used PAGA actions as a procedural sleight of hand to avoid agreements to arbitrate bilaterally. These lawsuits, like

class actions, exerted enormous settlement pressure

against businesses—many relying on aggregate penalties for technical Labor Code violations—forcing

them to pay up or take a bet-the-business gamble.

And it was not only large employers who were the

targets of such threats—small businesses were, too,

and it takes much less to exert this sort of settlement

5

pressure on smaller businesses that simply cannot afford to take that gamble. One California small business owner, for example, was subject to a PAGA suit

seeking $30 million in penalties because her business’s paychecks listed the date the check was issued,

instead of the dates the check covered (i.e., 9/6/16 instead of 9/1/16-9/6/16)—truly a technical violation.

Another small business spent over $100,000 in attorney’s fees to respond to a letter asserting PAGA violations sent from a law firm that filed over 800 similar

claims. Small businesses obviously cannot withstand

the sort of pressure imposed by even the threat of

these kinds of suits, given the draconian penalties

that are possible because of PAGA’s scheme for aggregating penalties. Viking River should have foreclosed

shakedown litigation of this sort. But because California has rejected Viking River, it continues unabated. Yet again, this Court’s intervention is necessary.

ARGUMENT

This Court should grant certiorari to resolve a

clear conflict between California law and this Court’s

recent decision in Viking River. Viking River invalidated under the FAA a California rule prohibiting employees from agreeing to arbitrate individual PAGA

claims—i.e., claims for California Labor Code violations they personally suffered. Under Viking River,

where the parties agree to arbitrate bilaterally, individual PAGA claims must be pared away from nonindividual claims and compelled to a separate arbitral

proceeding, with the now-headless non-individual

PAGA claims dismissed. California has rejected that

rule. And not only does California law conflict with

6

Viking River, but it lets in through the back door all

the harms this Court in Viking River ushered out the

front.

I. CALIFORNIA LAW

VIKING RIVER

CONFLICTS

WITH

California has long exhibited an intense hostility

to arbitration, and this Court has long rejected California’s efforts to evade the strictures of the FAA. See,

e.g., Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407

(2019); Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612

(2018); Concepcion, 563 U.S. at 342; DIRECTV, Inc. v.

Imburgia, 577 U.S. 47 (2015); Preston, 552 U.S. at

346; Perry v. Thomas, 482 U.S. 483 (1987); Southland

Corp. v. Keating, 465 U.S. 1 (1984). In the most recent

iteration of this long-running battle about the supremacy of federal law, this Court invalidated a mandatory “claim joinder” rule inconsistent with parties’

freedom to determine which claims will—or will not—

be subject to arbitration. Viking River, 596 U.S. at

660.

In Iskanian v. CLS Transportation Los Angeles,

LLC, 59 Cal. 4th 348 (2014), the California Supreme

Court had held that California law “invalidates agreements to arbitrate only ‘individual PAGA claims for

Labor Code violations that an employee suffered.’”

Viking River, 596 U.S. at 659 (quoting Iskanian, 59

Cal. 4th at 383). “This prohibition on contractual division of PAGA actions into constituent claims,” this

Court held in Viking River, violated the FAA because

it “unduly circumscribe[d] the freedom of parties to

determine the issues subject to arbitration and the

rules by which they will arbitrate,” in contravention

of “the fundamental principle that arbitration is a

7

matter of consent.” Id. at 659-60 (quotations omitted).

Under Iskanian, “[t]he only way for parties to agree

to arbitrate one of an employee’s PAGA claims [wa]s

to also ‘agree’ to arbitrate all other PAGA claims in

the same arbitral proceeding.” Id. at 661. But the

FAA ensures that the “parties … control which claims

are subject to arbitration,” id. at 660, including

whether arbitration should encompass asserted statutory violations by all employees (as under Iskanian)

or just the employee bringing suit (as under Viking

River).

The Court thus held “that the FAA preempts the

rule of Iskanian insofar as it precludes division of

PAGA actions into individual and non-individual

claims through an agreement to arbitrate.” Id. at 662.

Where, as in Viking River, the parties agree to arbitrate the employee’s PAGA claim individually, that

individual claim must be “pared away” from the nonindividual PAGA claims (i.e., those asserting Labor

Code violations sustained by other employees) and

“committed to a separate proceeding,” namely, arbitration. Id. at 663. Under Viking River, a plaintiff is

prevented from “maintaining an individual claim [in

a PAGA] action” where he or she agreed to arbitrate

that individual claim. Id. And once the individual

PAGA claim has been pared away from the non-individual claims, there is nothing for a court to do but “to

dismiss [the plaintiff’s] remaining [non-individual]

claims.” Id.

California decisions conflict directly with that

rule. Contrary to Viking River’s mandate that individual PAGA claims be “pared away” from non-indi-

8

vidual claims and “committed to a separate proceeding,” California courts have held that individual

PAGA claims remain in the litigation, tethered to the

non-individual PAGA claims as the predicate for statutory standing to assert those non-individual claims

in court.

Take the California Supreme Court’s decision in

Adolph v. Uber Technologies, Inc., 532 P.3d 682 (Cal.

2023). Adolph held that the plaintiff’s individual

PAGA claim endowed him with standing to litigate

non-individual PAGA claims because the individual

PAGA claim “remain[ed] part of the same action,”

even after it had been compelled to arbitration. Id. at

693. But Viking River made clear that paring away

an individual claim and committing it to a separate

arbitral proceeding meant that the plaintiff could not

“maintain[] an individual claim” as part of the nonindividual PAGA litigation. 596 U.S. at 663. Contrary to the California Supreme Court’s decision, individual and non-individual PAGA claims are not forever fused together; under Viking River, they can and

must be “divided.” Id. at 662; see also Pet. 23-24.

The California Supreme Court believed that its rejection of Viking River would not impose practical

hardships on the parties because trial courts have discretion to stay litigation pending arbitration and can

give preclusive effect to an arbitrator’s decision on an

individual PAGA claim—if an employee wins in arbitration, he’ll be an aggrieved employee with standing

to litigate non-individual PAGA claims, and if he loses

in arbitration, he won’t be. Adolph, 532 P.3d at 692.

This discretionary stay-and-preclusion workaround

only underscores the problems with California law.

9

These procedures would have been unnecessary had

the court simply followed Viking River, and a discretionary stay is hardly protective of a federal right in

any case.

But setting these points aside, the court’s preclusion solution raises the stakes of individual arbitration far beyond what parties contemplate, in contravention of the FAA’s rule that party consent is key.

Under California law as it stands now, arbitration of

an employee’s individual PAGA claim decides not only

that claim but also whether collective litigation—often worth tens millions of dollars, infra Part II—can

proceed. Nominally “individual” arbitration, in other

words, is the PAGA equivalent of a class certification

proceeding—with preclusive effect on the merits. See

Pet. 22-23.

The decision below illustrates the problem. After

correctly concluding that Viking River required arbitration of Plaintiff’s individual PAGA claim, the California Court of Appeal nonetheless allowed him to

continue to litigate his non-individual PAGA claims

in court, with his arbitrable individual claim as the

hook for non-individual litigation. Pet. App. 14-20.

Viking River makes clear, however, that an individual

PAGA claim can no longer serve as the hook for litigating non-individual PAGA claims because the individual claim must be “pared away” from the non-individual claims and “committed to a separate proceeding.” 596 U.S. at 663. At that point—once the arbitrable individual claim has been pared away and

there remains no hook to litigate the non-individual

claims—the suit should be dismissed, as this Court

indicated in Viking River. Id. Nevertheless, the court

10

below held that Plaintiff had standing to maintain his

non-individual PAGA claims because he also asserts

an individual claim under the PAGA, and it refused

to dismiss any of his claims.

Compounding its error, the Court of Appeal refused to stay litigation on Plaintiff’s non-individual

claims because the trial court had not yet had the opportunity to determine whether concurrent litigation

and arbitration “would be appropriate under the circumstances.” Pet. App. 20. It is not. And the fact

that Lyft’s federal rights are now contingent on a

state trial court’s facts-and-circumstances analysis

clearly signals the need for this Court’s intervention.

It does not matter for preemption purposes, moreover, that California substantive law permits a plaintiff whose individual PAGA claim has been committed

to arbitration to litigate non-individual claims. In

fact, that’s the preemption problem. As explained, the

predicate for standing to assert non-individual PAGA

claims under California law is the plaintiff’s claim

that he or she personally suffered a Labor Code violation—in other words, the plaintiff’s individual PAGA

claim. Only by maintaining an individual PAGA

claim as part of the litigation does a plaintiff have

standing to assert non-individual PAGA claims. But

Viking River says that a plaintiff who agreed to arbitrate bilaterally may not maintain an individual

PAGA claim in the court action asserting non-individual claims. In this respect, Viking River’s application

of the FAA must control.

*

*

*

When a court orders an individual PAGA claim to

arbitration there are three, and only three, possible

11

outcomes: (i) the plaintiff prevails in whole or in part

in arbitration; (ii) the plaintiff loses in arbitration; or

(iii) the plaintiff refuses to proceed. Under any of

these outcomes, the plaintiff no longer has a personal

stake in the non-individual litigation. Yet California

courts have nonetheless held that a plaintiff’s non-individual claims may proceed in court, with the plaintiff’s individual claim grounding standing. That conclusion is incompatible with Viking River’s reasoning

and outcome. Once the individual claim is pared

away, the non-individual claims must be dismissed.

This Court should grant certiorari to ensure the supremacy of this federal law and because California

case law conflicts squarely with “relevant decisions of

this Court.” S. Ct. R. 10(c).

II. CALIFORNIA’S

CIRCUMVENTION

OF

VIKING RIVER REINSTATES ALL THE

HARMS THAT DECISION SHOULD HAVE

FORECLOSED

Certiorari was warranted in Viking River in the

absence of a conflict among lower courts given the

massive harms that California’s anti-arbitration policies imposed on California employers, including

amici’s members. Those harms are well documented.

The stakes of non-individual PAGA litigation are tremendous, and PAGA’s statutory claim-aggregation

procedures invite abuse and coerce exorbitant settlements. Viking River should have abated these harms,

but California’s decision not to follow Viking River has

reinstated them.

A. Before Iskanian, PAGA claims were an afterthought, asserted, if at all, on “the coattails of traditional class claims,” because the requirement that

12

plaintiffs turn over 75 percent of their recovery to the

State made PAGA less attractive. See Robyn Ridler

Aoyagi & Christopher J. Pallanch, The PAGA Problem: The Unsettled State of PAGA Law Isn’t Good for

Anyone, 2013-7 Bender’s Cal. Lab. & Emp. Bull. 1-2

(2013). But PAGA actions seeking penalties on behalf

of other employees skyrocketed in the wake of Iskanian as employees (and lawyers) sought to circumvent Concepcion and evade their agreements to bilaterally arbitrate PAGA claims. See, e.g., Maureen A.

Weston, The Clash: Squaring Mandatory Arbitration

with Administrative Agency and Representative Recourse, 89 S. Cal. L. Rev. 103, 127-28 (2015) (plaintiffs

have turned to PAGA as “a means … to avoid arbitration”); Tim Freudenberger et al., Trends in PAGA

Claims and What It Means for California Employers,

Inside Counsel (Mar. 19, 2015) (in the wake of Concepcion, PAGA has become “a particularly attractive

vehicle for plaintiffs’ attorneys to bring claims against

employers that instituted mandatory arbitration

agreements”); Erin Coe, Iskanian Ruling to Unleash

Flood of PAGA Claims, Law360 (June 24, 2014) (similar).

Data on the volume of PAGA litigation proves the

point. In 2005, the year after PAGA was enacted,

plaintiffs filed 759 PAGA notices—the precursor to

litigation required by the statute. See Emily Green,

State Law May Serve As Substitute for Employee

Class Actions, Daily J. (Apr. 17, 2014). By 2013, in

the aftermath of Concepcion but prior to Iskanian,

that number had already increased to 3,137. Id. After Iskanian, the number predictably continued to

grow. In fiscal years 2018-19 and 2019-20, 5,916 and

13

6,942 PAGA notices were filed, respectively, with the

California Labor and Workforce Development

Agency. California Private Attorneys General Act of

2004 at 8, CABIA Found. (Oct. 2021); see infra at 1617 (post-Viking River case count).2

B. The danger with PAGA is not just in the volume

of litigation but also its stakes. In each PAGA action,

the amount of civil penalties available is enormous. If

a PAGA plaintiff proves that her employer violated

the Labor Code, civil penalties are assessed against

the employer in many circumstances in the amount of

“one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two

hundred dollars ($200) for each aggrieved employee

per pay period for each subsequent violation.” Cal.

Lab. Code § 2699(f)(2). Multiply these penalties by

the number of employees, and the amount of PAGA

penalties can jump into the millions, even for a small

employer, fast.

This concern is not hypothetical. PAGA suits asserting non-individual claims on behalf of other employees often exert “unacceptable” pressure on defendants to settle, due to the “small chance of a devastating loss.” Concepcion, 563 U.S. at 350; see also

Viking River, 596 U.S. at 647. Many PAGA settlements and judgments illustrate this point. Examples

abound: Bernstein v. Virgin Am., Inc., 3 F.4th 1127,

1145 (9th Cir. 2021) (affirming $24.9 million in PAGA

civil penalties, as stated in Bernstein v. Virgin Am.,

Inc., 2020 WL 10618569, at *2 (N.D. Cal. Jan. 21,

2 https://cabiafoundation.org/app/uploads/2021/11/CABIA_PA-

GA-Report-2021.pdf.

14

2020)); Brown v. Wal-Mart Stores, Inc., No. 5:09-cv03339-EJD (N.D. Cal.) (approving $65 million settlement in a PAGA suitable-seating action); Gunther v.

Alaska Airlines, Inc., 72 Cal. App. 5th 334, 348 (2021)

(awarding $25 million in PAGA penalties (reversed on

appeal)); Doe v. Google, Inc., No. CGC-16-556034 (Cal

Super. Ct. Dec. 4, 2023) (approving $27 million settlement of PAGA claims; plaintiffs’ counsel will receive

one third of the settlement amount); Reed v. CVS

Pharmacy, Inc., 2019 WL 12314054 (Cal. Super. Ct.

Oct. 30, 2019) (approving $19.5 million settlement in

a PAGA suitable-seating action); see infra at 17-18

(post-Viking River settlements).

C. The devastating effects of PAGA suits are felt

by businesses large and small. Big businesses are

easy targets for plaintiff’s lawyers given the technical

nature of many asserted Labor Code violations, the

size of the workforce, and the employer’s inclination

to settle rather than take a bet-the-company gamble.

But the risks are also stark for small businesses, because a far smaller litigation risk would be sufficient

to coerce defendants into settlement.3 A few examples illustrate the point: California Assembly Member

and small business owner Shannon Grove was subject

to a PAGA suit claiming $30 million in penalties,

3 See Michael J. Nader & Zachary V. Zagger, No COVID-19 Slow-

Down for California PAGA Filings: The Data Is In, 12 Nat’l L.R.

198 (2023), https://www.natlawreview.com/article/no-covid-19slowdown-california-paga-filings-data (noting that although

PAGA notice filings increased from fiscal year 2018-19 to 202021, the filings against large employers decreased, “suggesting

that plaintiffs’ counsel are focusing more on small and mid-size

companies with their PAGA filings”).

15

which she ultimately settled for just under half a million dollars. The $30 million price tag came from

Grove’s purported failure to issue paychecks with inclusive dates—for instance, the paycheck listed the

date the check was issued, instead of the dates for the

pay period that the check covered (i.e., 9/6/16 instead

of 9/1/16-9/6/16). The violation: trivial; potential penalties: massive.4

Ken Monroe, the owner of a family-owned business

that sells construction equipment, described being

subject to a PAGA suit for allowing employees to decide when to take their lunch breaks, instead of adhering to state law requiring that hourly employees

be provided a half-hour meal period after five hours of

work. “As I learned the hard way,” Monroe wrote,

“these penalties can add up fast, easily reaching hundreds of thousands of dollars for a small company like

ours (and millions for larger businesses).” And “[l]ike

virtually all companies that find themselves the target of a PAGA or class-action lawsuit,” Monroe’s business “negotiated a settlement rather than take the

risk of losing in court and facing the onerous maximum penalties prescribed by the law.”5

4 See Ken Mashinchi, Grove and Salas Contend that PAGA Law-

suits Are Killing Kern County Businesses, ABC 23 News (Sept. 6,

2016), https://www.turnto23.com/news/local-news/grove-and-s

alas-contend-that-paga-lawsuits-are-killing-kern-county-businesses.

5 See Ken Monroe, Op-Ed: Frivolous PAGA Lawsuits Are Making

Some Lawyers Rich, But They Aren’t Helping Workers or Employers, L.A. Times (Dec. 6, 2018), https://www.latimes.com/

opinion/op-ed/la-oe-monroe-paga-small-businesses-20181206story.html.

16

Another small business owner had received a letter asserting various PAGA violations from a law firm

that filed over 800 similar claims. “They throw those

accusations at you and expect you to defend yourself

and just bury you in paperwork. We’ve already spent

well north of $100,000 in attorney fees and that

doesn’t include all the staff time to audit all the payroll records and time sheets,” the business owner

said.6

D. No one benefits from this shakedown litigation—including the State of California. Although, in

theory, 75 percent of any recovery in a PAGA action

goes to the State, see Cal. Lab. Code § 2699(i), plaintiffs’ attorneys routinely receive a third of PAGA settlements, and can elect to allocate an even smaller

amount as PAGA penalties. Consider, for example, a

$10 million settlement in a PAGA case. One might

think that the State would recover $7.5 million, but

that is hardly how it works in practice. Instead, the

plaintiffs’ attorneys will immediately take $3.3 million off the top. Of the remaining $6.7 million, attorneys will generally allocate only a small portion, say

$500,000, to the PAGA claim, while the rest may be

allocated to the class-action settlement for the underlying California Labor Code violations (even if the

plaintiffs have signed enforceable class-action waivers of those claims). The result of these procedural

machinations is that of a $10 million settlement, the

State will receive only a pittance: $375,000. Again,

6 See Ken Monroe, Another Voice: It’s Time to Repeal PAGA Now.

The Fate of Small Businesses Hinges On It, Sacramento Business

Journal (Oct. 14, 2021), https://www.bizjournals.com/sacramento/news/2021/10/14/paga-family-business-association.html.

17

this scenario is not hypothetical; this is exactly how

PAGA litigation plays out in real life. See, e.g., Viceral

v. Mistras Grp., Inc., 2016 WL 5907869, at *2 (N.D.

Cal. Oct. 11, 2016) (allocating $20,000 of a $6 million

settlement to the PAGA claim); Nordstrom Comm’n

Cases, 186 Cal. App. 4th 576, 580 (2010) (affirming a

settlement allocating $0 of an approximately $9 million settlement to the PAGA claim).

E. Viking River should have put an end to this

shakedown litigation. Supra Part I. But since Viking

River, the flow of PAGA actions has continued unabated. In the year preceding Viking River, plaintiffs

filed more than 6,500 PAGA notices. PAGA Case

Search, Cal. Dep’t of Indus. Relations (June 1, 2021 to

July 1, 2022). 7 For the same time period following

Viking River, plaintiffs filed more than 7,000 notices.

Id. (June 1, 2022 to July 1, 2023). And the California

Supreme Court’s recent decision in Adolph has

opened the floodgates even further. In the roughly

half-year since that case was decided, plaintiffs filed

more than 4,000 PAGA notices, a nearly 30 percent

increase over the same period the year before. Compare id. (July 18, 2023 to Jan. 11, 2024), with id. (July

18, 2022 to Jan. 11, 2023). Opening the floodgates

further still, the California Supreme Court recently

held that representative PAGA claims cannot be dismissed based on manageability concerns, even where

an individual plaintiff seeks to litigate diffuse Labor

Code violations on behalf of the entire workforce. Estrada v. Royalty Carpet Mills, Inc., __ P.3d __, 2024

WL 188863 (Cal. Jan. 18, 2024).

7 https://cadir.my.salesforce-sites.com/PagaSearch/.

18

Same as before, PAGA is being used to extort settlements from employers large and small for technical

(at best) violations of California law. To take one example of many, consider Moreno v. M&J Seafood Co.,

2023 WL 6538411 (Cal. Super. Ct. Aug. 23, 2023).

There, the parties recently settled plaintiffs’ California Labor Code claims for $750,410 with just $20,000

allocated to plaintiffs’ PAGA claims, and more than

$250,000 allocated to class counsel. As mentioned

above, Moreno’s settlement structure is by no means

unique—and it continues to be utilized. See also, e.g.,

Ramsey v. Packaging Corp. of Am., 2023 WL 9116636

(Cal. Super. Ct. Nov. 17, 2023) (nearly $975,000 settlement of Labor Code claims with $80,000 allocated

to PAGA claims and $325,000 allocated to class counsel); Sam v. Concordance Healthcare Sols. LLC, 2023

WL 6467612 (Cal. Super. Ct. Aug. 4, 2023) ($450,000

settlement of Labor Code claims with $67,500 allocated to PAGA claims and $150,050 allocated to class

counsel); Fox v. Cares Cmty. Health, 2023 WL

6538410 (Cal. Super. Ct. July 27, 2023) ($770,000 settlement, with $70,000 allocated to PAGA claims and

$269,500 allocated to class counsel).

Viking River should have brought this type of litigation to an end where the employee agreed to arbitrate bilaterally. But as these and many other cases

illustrate, by disregarding Viking River, California

has undermined the supremacy of federal law, and in

the process entrenched these significant harms for its

employers.

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CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted,

ANTON METLITSKY

O’MELVENY & MYERS LLP

7 Times Square

New York, NY 10036

RYAN RUTLEDGE

ADRIANNA GUIDA

O’MELVENY & MYERS LLP

610 Newport Center Drive

Newport Beach, CA 92660

ADAM J. KARR

JASON ZARROW

Counsel of Record

O’MELVENY & MYERS LLP

400 South Hope Street

Los Angeles, CA 90071

(213) 430-6000

jzarrow@omm.com

Counsel for Amici Curiae

February 16, 2024