Merhi v. Lowes Home Center, LLC

[6] 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA [9] 10 ELIAS MERHI, et al., Case No.: 22cv545-LL-MMP 11 Plaintiffs, ORDER DENYING MOTION FOR 12 v. LEAVE TO FILE A FIFTH AMENDED COMPLAINT 13 LOWE’S HOME CENTER, LLC, et al., 14 Defendants. [ECF No. 46] [16] 17 This matter is before the Court on Plaintiffs’ Motion for Leave to File a Fifth 18 Amended Complaint (“5AC”). ECF No. 46. Lowe’s Home Centers, LLC (“Lowe’s”), the 19 only named Defendant in this case, filed a response in opposition to Plaintiffs’ Motion 20 [ECF No. 29], and Plaintiffs filed a Reply supporting their Motion [ECF No. 50]. The Court 21 finds this matter suitable for determination on the papers and without oral argument 22 pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7.1.d.1. Upon 23 review of the parties’ submissions and the applicable law, the Court DENIES the Motion 24 for Leave to File a Fifth Amended Complaint for the reasons stated below. 25 I. BACKGROUND 26 Plaintiffs seek leave to amend their complaint “to add the PAGA claims of Plaintiff 27 Cristina Marshall, Jeffrey Graham, Jose Ramos IV, Matthew Stransky and Sean O’Neil, 28 who are already Plaintiffs in this action.” ECF No. 46 at 10 (together, the “Proposed PAGA 1 Plaintiffs”). While Plaintiffs Graham, Ramos IV, Stransky, and O’Neil were plaintiffs in 2 the originally filed case, Plaintiff Marshall was added when the Plaintiffs filed their First 3 Amended Complaint on July 22, 2022. See ECF No. 17. 4 Plaintiffs originally filed this action in the Superior Court of California for the 5 County of San Diego, Case No. 37-2022-0005954-CU-OE-CTL, alleging ten causes of 6 action for various wage and hour claims. ECF No. 1-4 at 2. On April 20, 2022, Lowe’s 7 removed the case to this Court. ECF No. 1. The Court granted the parties’ request to extend 8 deadlines pending the issuance of the Supreme Court’s decision in Viking River Cruises, 9 Inc. v. Moriana, which was decided on June 15, 2023. 142 S. Ct. 1906 (2022); see ECF 10 No. 7. Following the ruling in Viking River, Plaintiffs filed their first amended complaint 11 (“FAC”) on July 22, 2022. ECF No. 17. Subsequently, the Court granted the parties’ joint 12 stipulation and motion to submit the individual claims of the following plaintiffs to 13 arbitration, and to stay each plaintiff’s respective claims pending the outcome of 14 arbitration: Elias Merhi (including his individual claims under the Private Attorneys 15 General Act of 2004 (“PAGA”)), Cal. Lab. Code. §§ 2698 et seq., Nicholas Sevilla, Sean 16 O’Neil, Jose Ramos IV, Megan Chambers, Rachel Wilkinson, Ellen Benton, Matthew 17 Stransky, Alexander Olson, Wanda Allen, Sean Carpenter, John Enright, Pamela Lehman, 18 Tyler Wintermote, Jennifer Strauss, Tracy Wilkins, Richard Silvas, Gloria Molano, Donna 19 Villanueva, Naeemah Rehn, Kimberly Underwood, Nathan Winston, Stephan (Steve) 20 Sellin, David Williams, Cristina Marshall, Tammy Pizano, Jimmy Padilla, Marcus Kastel, 21 and Mark Rodriguez. ECF No. 22. As a result, the only remaining claims in the FAC were 22 the claims brought by Plaintiff Jeffrey Graham, Plaintiff Omar Reyes, and the 23 representative portion of Plaintiff Elias Merhi’s PAGA claim. Id. 24 Upon joint motions by the parties, the Court thereafter allowed Plaintiffs to file their 25 second, third, and fourth amended complaints for the sole purpose of allowing additional 26 Plaintiffs to assert representative—non-individual—claims under PAGA. ECF Nos. 35, 42, 27 47. Plaintiffs Lehman, Enright, Kastel, Carpenter, Wilkinson, and Padilla were added as 28 PAGA plaintiffs in the second amended complaint [ECF No. 39] on April 24, 2023, 1 Plaintiffs Williams, Benton, and Sellin were added as PAGA plaintiffs in the third amended 2 complaint [ECF No. 43] on May 31, 2023, and Plaintiffs Wilkins, Olson, and Underwood 3 were added as PAGA plaintiffs in the fourth amended complaint [ECF No. 48] on June 30, 4 2023. In each instance, upon the parties’ stipulation that the additional plaintiffs would 5 arbitrate their individual claims and that the amended complaints would not raise any 6 substantively new issues or claims not already addressed by Defendant Lowe’s motion to 7 compel arbitration and dismiss or stay the non-individual PAGA claim brought by Plaintiff 8 Merhi [ECF No. 23], the Court ordered that the individual portion of the additional 9 plaintiffs’ PAGA claims be stayed, that Defendant not be required to respond to the 10 amended complaints, and that the non-individual PAGA claims be subject to this Court’s 11 ruling on Defendant’s pending motion. ECF Nos. 35, 42, 47. Plaintiffs filed the instant 12 Motion while the joint motion to file a fourth amended complaint was pending. See ECF 13 No. 46. 14 II. LEGAL STANDARD 15 Rule 15 of the Federal Rules of Civil Procedure provides that “[t]he court should 16 freely give leave” for a party to amend its complaint “when justice so requires.” Fed. R. 17 Civ. P. 15(a)(2). Although requests for leave to amend are generally granted with “extreme 18 liberality,” the Court considers the factors laid out in Foman v. Davis, 371 U.S. 178 , 182 19 (1962) when considering whether to grant leave to amend: undue delay, bad faith or 20 dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, 21 undue prejudice to the opposing party, and futility. See Brown v. Stored Value Cards, Inc., [22] 953 F.3d 567, 574 (9th Cir. 2020). “Of the Foman factors, prejudice to the opposing party 23 carries the most weight.” Id. (citing Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 , 24 1052 (9th Cir. 2003)). However, “[f]utility alone can justify the denial of a motion for leave 25 to amend.” Nunes v. Ashcroft, 375 F.3d 805, 808 (9th Cir. 2003) (citing Bonin v. Calderon, [26] 59 F.3d 815, 845 (9th Cir. 1995)). [28] 1 III. DISCUSSION 2 A. PAGA Pre-Filing Requirements 3 In order to bring a claim under PAGA, a plaintiff must exhaust the administrative 4 procedures set forth in Section 2699.3 of the California Labor Code. CAL. LAB. CODE 5 § 2699(a). Section 2699.3 provides that an “aggrieved employee or representative shall 6 give written notice” to the Labor and Workforce Development Agency (“LWDA”) and 7 their employer “of the specific provisions . . . alleged to have been violated,” as a 8 precondition to filing a civil action under PAGA. CAL. LAB. CODE § 2699.3(a)(1)(A). After 9 such pre-filing notice has been given, a plaintiff must either receive notice from the 10 LWDA, within 65 calendar days of the postmark date of the pre-filing notice, that it does 11 not intend to investigate the violations, or, if the LWDA does not respond, allow that time 12 period to elapse before commencing a civil action. CAL. LAB. CODE § 2699.3(a)(2)(A). 13 Finally, after exhausting the administrative procedures outlined by the statute, “a party 14 bringing a civil action must plead compliance with the pre-filing notice and exhaustion 15 requirements.” Varsam v. Lab. Corp. of Am., 120 F. Supp. 3d 1175 , 1182 (S.D. Cal. 2015) 16 (citations omitted); see also Esparza v. Safeway, Inc., 247 Cal. Rptr. 3d 875, 889-90 (Ct. 17 App. 2019 ). PAGA does not set out a separate statute of limitations. Therefore, PAGA 18 claims are subject to the one-year statute of limitations set out by section 340(a) of the 19 California Code of Civil Procedure. See Brown v. Ralphs Grocery Co., 239 Cal. Rptr. 3d 20 519, 530 (Ct. App. 2018); Thomas v. Home Depot USA Inc., 527 F. Supp. 2d 1003 , 100721 08 (N.D. Cal. 2007). 22 B. Administrative Exhaustion in this Case 23 “An employee who brings a PAGA action to recover civil penalties acts ‘as the proxy 24 or agent’ of the state.” Adolph v. Uber Techs., Inc., 532 P.3d 682 , 687 (Cal. 2023). In order 25 to become deputized to prosecute labor code violations for the state under PAGA, an 26 aggrieved employee must comply with PAGA’s notice requirements, and becomes 27 deputized only after the relevant state agency declines to allocate its own resources to 28 investigate the violations alleged. See id. at 687-88 (internal citations omitted). “The 1 Legislature’s sole purpose in enacting PAGA was ‘to augment the limited enforcement 2 capability of the [LWDA] by empowering employees to enforce the Labor Code as 3 representatives of the Agency.’” Kim v. Reins Int’l Cal., Inc., 459 P.3d 1123 , 1130 (Cal. 4 2020) (quoting Iskanian v. CLS Trans. Los Angeles, LLC, 327 P.3d 129, 149 (Cal. 2014)). 5 Accordingly, a PAGA claim is an enforcement action between the LWDA and the 6 employer, with the PAGA plaintiff acting on behalf of the government. Id. Furthermore, 7 because the plaintiff’s role is to act as a representative of the LWDA, “PAGA requires that 8 before filing suit, the so-called PAGA plaintiff must submit notice of the alleged violations 9 to the LWDA and the employer.” Hutcheson v. Superior Ct., 290 Cal. Rptr. 3d 60 , 62 (Ct. 10 App. 2022 ) (citing CAL. LAB. CODE § 2699.3(a)). “The submission of notice to the LWDA 11 and the employer is a mandatory precondition for acting as plaintiff in a PAGA suit.” Id. 12 at 67. 13 Plaintiffs argue that the United States Supreme Court’s decision in Viking River 14 “altered the PAGA landscape” by finding that “PAGA could be divided into individual and 15 representative claims[,]” and that “prior to Viking River there was no individual PAGA 16 claims and therefore each aggrieved employee was not required to file their own PAGA 17 claim and could instead rely on the representative nature of PAGA.” ECF No. 50 at 7. 18 Plaintiffs further argue that “[g]iven that individual PAGA claims did not exist prior to 19 Viking River, there was no authority setting forth an individual employee’s requirements 20 for administrative exhaustion, or what was required to file an individual PAGA claim.” Id. 21 In that same vein, Plaintiffs posit that “Plaintiff Merhi, in giving notice to the LWDA, and 22 subsequently initiating this lawsuit, is acting as a representative of all Aggrieved 23 Employees including Plaintiffs Marshall, Graham, Ramos IV, Stransky and O’Neil.” ECF 24 No. 46 at 16. Plaintiffs argue that “Merhi’s original LWDA notices and PAGA claim gave 25 notice to Defendants that all aggrieved employees would be seeking PAGA penalties for 26 the claims asserted by the Plaintiffs seeking to now add their PAGA claims[,]” and that 27 Merhi’s LWDA notices were “all that was required prior to Viking River for all Aggrieved 28 Employees to maintain their status as being able to recover PAGA penalties.” Id. at 17-18. 1 Plaintiffs submit that Viking River “found that individual claims exist,” and that “Plaintiffs 2 therefore had no choice but to supplement the LWDA notices to name additional 3 individuals asserting the same claims to preserve their individual claims.” Id. at 18. 4 Defendant contends that the Proposed PAGA Plaintiffs failed to provide timely 5 notice of their claims, that Plaintiffs unduly delayed in seeking leave to amend their 6 complaint, and that the Proposed PAGA Plaintiffs’ PAGA claims are now time-barred. 7 ECF No. 49 at 8. Defendant therefore asserts that the proposed amendment should be 8 denied as futile. Id. More specifically, Defendant argues that an individual may only be 9 deputized to bring a PAGA claim to if they meet the administrative exhaustion requirement 10 by providing timely notice to the LWDA, and that a PAGA litigant’s substantive role in 11 enforcing labor laws as a proxy for the state requires that the exhaustion requirement be 12 met by every employee seeking to pursue a PAGA claim. Id. at 10. Defendant also argues 13 that the relation-back doctrine “cannot be used to allow untimely pre-suit notices to relate 14 back to timely pre-suit notices.” Id. at 11. 15 According to the fourth amended complaint (“4AC”), the Proposed PAGA Plaintiffs 16 worked for Lowe’s until May 21, 2021 (O’Neil) [ECF No. 46 ¶ 5], July 8, 2021 (Ramos 17 IV) [id. ¶ 6], May 31, 2021 (Graham) [id. ¶ 10], July 15, 2021 (Stransky) [id. ¶ 11], and 18 June 2, 2021 (Marshall) [id. ¶ 25]. Therefore, each of the Proposed PAGA Plaintiffs’ 19 LWDA notices would have been due no later than May (O’Neil and Graham), June 20 (Marshall), and July (Ramos IV and Stransky) of 2022. Brown, 239 Cal. Rptr. 3d 530 -31. 21 Plaintiffs and Lowe’s apparently agree that the LWDA first received notice that the 22 Proposed PAGA Plaintiffs intended to pursue claims under PAGA via Plaintiff Merhi’s 23 fourth amended LWDA notice filed on January 25, 2023 [ECF No. 46-8]. ECF Nos. 46 at 24 12, 46-1 ¶ 11, 49 at 10. However, the parties disagree on whether Merhi’s earlier LWDA 25 notices—submitted in January and February 2022—may serve as the Proposed PAGA 26 Plaintiffs’ LWDA notice(s) for the purpose of asserting their own claims under PAGA. 27 Merhi also submitted an amended LWDA notice on September 7, 2022. ECF No. 46-6. [28] 1 Plaintiffs essentially ask this Court to find that the Supreme Court in Viking River 2 created a standalone individual PAGA claim with its own separate-but-undefined 3 procedural requirements, and asks this Court to apply its proffered standard, that timely 4 notice by a single plaintiff in a case with overlapping representative claims be sufficient to 5 meet the administrative requirements for an aggrieved employee to be deputized to 6 represent the LWDA or the State of California in a PAGA action. In support of its 7 argument, Plaintiffs contend that the representative nature of PAGA claims supports a 8 reading of section 2699.3 that would allow Plaintiff Merhi’s LWDA notice to meet the 9 administrative exhaustion requirement for the Proposed PAGA Plaintiffs. See ECF Nos. 10 46 at 16-18, 50 at 4-6. In line with their position that there is “no authority setting forth an 11 individual employee’s requirements for administrative exhaustion, or what was required to 12 file an individual PAGA claim” [ECF No. 50 at 7], Plaintiffs have not cited any federal or 13 state case in which one PAGA plaintiff’s LWDA notice was deemed sufficient to meet the 14 notice requirement for another proposed PAGA plaintiff. This Court is disinclined to 15 fashion its own novel standard for administrative requirements imposed by statute. 16 The Supreme Court in Viking River distinguished between individual and non17 individual PAGA claims for the purposes of enforcing arbitration agreements, for 18 individual claims where either the LWDA or the State of California was not the real party 19 in interest, but it did not create a standalone “individual PAGA claim” with its own separate 20 procedural requirements. See Viking River, 142 S. Ct. at 1924-25 (finding that individual 21 PAGA claims were divisible from non-individual claims through an agreement to 22 arbitrate). “Indeed, it is a regular and accepted feature of litigation governed by the [Federal 23 Arbitration Act] that the arbitration of some issues does not sever those issues from the 24 remainder of the lawsuit.” Adolph, 532 P.3d at 693 (discussing whether Viking River 25 required the court to treat individual PAGA claims as a separate action). As reiterated by 26 the Supreme Court of California, PAGA “makes clear that the cause remains one action, 27 parts of which may be stated pending completion of the arbitration.” Id. Indeed, Viking 28 River makes clear that its use of the phrase “individual PAGA claim . . . refer[s] to claims 1 based on code violations suffered by the plaintiff” and that its purpose in articulating that 2 distinction served to clarify the difference between the sense in which PAGA actions “are 3 brought by employees acting as representatives” and the sense in which PAGA actions “are 4 predicated on code violations sustained by other employees.” 142 S. Ct. at 1916. 5 Furthermore, there is nothing novel about Viking River’s treatment of individual and non6 individual claims in a PAGA action as being distinct. See Kim, 459 P.3d at 1132 (holding 7 that PAGA claims could be brought both with and without individual claims for relief); 8 Iskanian, 327 P.3d at 154-55 (holding that the court’s analysis of an individual claim did 9 not apply to the representative PAGA claims in the action). 10 It is not disputed that Plaintiff Merhi’s timely LWDA notice made clear that he was 11 seeking PAGA penalties on behalf of all aggrieved employees, but the same notice cannot 12 be understood to have notified the LWDA that other unnamed aggrieved employees not 13 named in the notice were seeking to meet the statutory requirements to be deputized as 14 PAGA plaintiffs. The plain language of PAGA indicates that in order to serve as a PAGA 15 plaintiff—i.e., to file a civil action—, a potential PAGA plaintiff (“aggrieved employee or 16 representative”) must give written notice to the LWDA, pay the requisite fee, and either 17 receive notice that the LWDA does not intend to investigate the alleged violation(s) set 18 forth in the notice within 65 calendar days, or receive no notice within that period, prior to 19 commencing a civil action under PAGA. CAL. LAB. CODE § 2699.3. In the absence of 20 statutory authority or any case law supporting Plaintiffs’ suggested interpretation that 21 Plaintiff Merhi, acting as a representative of all aggrieved employees, single-handedly met 22 the administrative exhaustion requirement for all aggrieved employees covered by the 23 representative portion of his PAGA claim, as predicated on code violations suffered by 24 other aggrieved employees, the Court cannot apply that standard in this case. While 25 Plaintiff Merhi’s LWDA notice was representative in the sense that it gave notice to the 26 LWDA of violations suffered by other employees, potentially including the Proposed 27 PAGA Plaintiffs, and that successful prosecution of those claims would have benefitted all 28 aggrieved employees as defined under PAGA, nothing suggests that a single plaintiff’s 1 LWDA notice may potentially deputize every aggrieved employee to pursue claims on 2 behalf of the LWDA or the State of California without specific notice, as set out in section 3 2699.3. Instead, the discussion of the distinction between individual and non-individual 4 PAGA claims by both the United States Supreme Court and the Supreme Court of 5 California suggest that the “aggrieved employee or representative” language should be 6 understood to distinguish between a potential PAGA plaintiff that bringing claims based 7 on labor code violations that were personally sustained (an “aggrieved employee”) and a 8 potential PAGA plaintiff bringing claims that their employer or former employer 9 committed labor code violations against other employees (a “representative”). See Viking 10 River, 142 S. Ct. at 1923; Adolph, 532 P.3d at 692. Plaintiff Merhi’s LWDA notice met 11 PAGA’s administrative exhaustion requirement to prosecute labor code violations on 12 behalf of the LWDA, but the LWDA was not provided notice of the PAGA claims of the 13 Proposed PAGA Plaintiffs until January 2023, well after the one-year limitations period 14 for each of the Proposed PAGA Plaintiffs. As such, Plaintiffs’ proposed amendments 15 asserting PAGA claims for those Plaintiffs are futile and the Motion for Leave to File a 16 Fifth Amended Complaint is therefore DENIED. ECF No. 46. 17 \\\ 18 \\\ 19 \\\ 20 \\\ 21 \\\ 22 \\\ 23 \\\ 24 \\\ [27] 1 Plaintiffs do not propose any limiting principle for their theory of administrative 28 exhaustion, and the Court declines to speculate as to its scope. l While the Proposed PAGA Plaintiffs, if they are determined to be aggrieved 2 ||employees, may still benefit from successful prosecution of any representative PAGA 3 ||claims brought by other PAGA plaintiffs, they have not met the requirements to be 4 deputized by the LWDA to prosecute such claims against Defendant. Although the Court 5 ||has considered all of the Foman factors, because futility of an amendment itself justifies 6 denial of a motion to amend, the Court declines to address Defendant’s additional 7 arguments that the instant Motion should be denied. 8 IT IS SO ORDERED. 9 Dated: September 28, 2023 NO 10 Qe | 11 Honorable Linda Lopez United States District Judge