PAGA and Intervention: Replacing a Plaintiff Who Wants Out

One of the seminal cases in the world of California’s Private Attorneys General Act, or PAGA, is Iskanian v. CLS Transportation.  Iskanian wound its way up to the California Supreme Court, which ultimately held that arbitration agreements that attempt to limit a plaintiff’s right to bring PAGA actions are unenforceable.

Now Iskanian is back in the news.  After years of struggle, the plaintiff, Mr. Iskanian, decided that he did not want to proceed with the case.  (It is unclear why he reached that decision.)  In an interesting twist, he then filed a motion, representing himself, to dismiss his individual claims (which were being arbitrated) as well as his PAGA claims.  His attorneys then sought to replace him with Mr. Frost, another individual from the group of limousine drivers that Mr. Iskanian belonged to.  

In another interesting twist, Judge Hess prevented Mr. Iskanian’s former attorneys from conducing discovery into the reasons for Mr. Iskanian’s sudden about-face.  We therefore do not know whether someone paid him off in order to achieve that result.

The practice of replacing named plaintiffs is not uncommon in class actions.  Usually courts will permit the attorneys handling the case to do so if it is in the interest of the class.  (But not always.  See, for example, Starbucks Corp. v. Superior Court (Lords) 194 Cal. App. 4th 820 (2011).)

But PAGA claims are different.  The Los Angeles County Superior Court, the Hon. Robert L. Hess presiding, denied the attorneys’ motion, on several grounds:

First, the proposed replacement for Mr. Iskanian had not properly exhausted his administrative remedies under Labor Code 2699.3.  Judge Hess found that those requirements were mandatory and substantive, and could not be disregarded.

Second, Judge Hess found that Mr. Frost, the proposed replacement for Mr. Iskanian, did not have an interest in the underlying PAGA claims.  That is because PAGA does not create property rights or other rights.  A PAGA claim is not something in which Mr. Frost could claim a property interest. Furthermore, Mr. Frost remained free to pursue his individual claims under Labor Code.  For these reasons, Judge Hess denied Mr. Frost’s motion to intervene in the case.

Judge Hess also rejected the argument that PAGA claims should be treated like class actions, or like shareholders’ derivative lawsuits.  This is consistent with both Arias v. Superior Court (2009) 46 Cal. 4th 969, and Bauman v. Chase Investment Services (9th Cir. 2014) 747 F.3d 1117, which note the differences between class actions and PAGA claims.

The final act in the Iskanian saga is therefore an unmitigated win for the company that employed Mr. Iskanian.  Not only did it prevent Mr. Iskanian from pursuing his class claims, it also avoided liability under PAGA.  The losers, of course, are the other limousine drivers who otherwise might very well have recovered significant money, as well as the State of California, which missed out on its share of the PAGA penalties.