Court halts 'headless' PAGA lawsuits, mandates arbitration for single claim

Plaintiffs' attorneys have been trying, with some success, to avoid arbitration in Private Attorneys General Act cases by filing what are known as "headless" lawsuits in which no individual claim is sought.

But a 2nd District Court of Appeal panel has put a halt to the practice, at least for now, ruling Monday that Christina Leeper's PAGA lawsuit against a Target Corp. subsidiary included an individual claim -- even though she said it didn't -- and ordering it to arbitration while staying her lawsuit on behalf of co-workers.

"Leeper is undoubtedly a victory for the defense bar," said Lauren K. Teukolsky of plaintiffs' firm Teukolsky Law.

Teukolsky said in a phone interview Tuesday that the decision creates a split with a different 2nd District panel decision in April that has prompted many similar PAGA lawsuits by plaintiffs who disclaimed individual damages for themselves to avoid arbitration.

"I think there's going to be a huge wave of defendants filing motions for reconsideration of lower court decisions that have allowed such lawsuits to proceed," Teukolsky said, adding that superior court judges have been split on whether to allow them without individual claims going to arbitration.

The plaintiffs' bar has been filing such claims since an appellate panel in April reversed a Santa Barbara County Superior Court judge's decision that Lizbeth Balderas lacked standing to bring a PAGA action because she did not include an individual claim, allowing her case on behalf of co-workers to proceed. Balderas v. Fresh Start Harvesting Inc., B326759 (2nd District Court of Appeal, filed Feb. 22, 2023).

But in Monday's decision, 2nd District, Division 1 Presiding Justice Frances Rothschild wrote that Balderas did not apply to Leeper's lawsuit against a Target Corp. subsidiary which includes an individual PAGA claim that must be sent to arbitration even though she said it should not.

Leeper's lawsuit claims wage-and-hour violations and that she and other workers were misclassified as independent contractors.

"Balderas did not have occasion to discuss, did not discuss, and its holding does not address, whether a plaintiff may carve out an individual PAGA claim from a PAGA action," Rothschild wrote.

"In arguing to the contrary, Leeper relies entirely on dicta in Balderas that may suggest the Court of Appeal accepted the plaintiff's and trial court's characterization of PAGA claims as capable of being asserted on behalf of aggrieved employees other than the named plaintiff," she added.

The panel reversed Los Angeles County Superior Court Judge Daniel S. Murphy and directed him to compel the parties to arbitrate Leeper's individual claim and stay the lawsuit on behalf of her co-workers. Leeper v. Shipt Inc., 2024 DJDAR 11978 (2nd District Court of Appeal, filed July 10, 2024).

Attorneys with Lieff Cabraser Heimann & Bernstein LLP, who represent Leeper, could not be reached for comment about whether they plan to appeal the decision to the state Supreme Court.

If Leeper stands, "it is the end of the headless PAGA case," said Teukolsky, who added that she expects the state high court to "weigh in during the next year or so. ... There's just a lot of uncertainty."

Aside from the question of whether individual plaintiffs can avoid arbitration while pursuing PAGA claims on behalf of the state and their co-workers, Leeper also raises another concern among the plaintiffs' bar: stays.

Litigation stays can last a year or two and are a disadvantage for plaintiffs' attorneys because discovery is delayed, Teukolsky said.

Attorneys with Seyfarth Shaw LLP represent Target and declined comment.

Christopher A. Crosman, a Seyfarth partner, argued in court papers that Leeper "contorted" the meaning of the 2004 law.

"She styled this individual claim as being for standing purposes only, so that she could pursue a representative action," he wrote. "That is, she alleged an individual PAGA claim while at the same time asserting that it was not really an individual claim. PAGA, however, neither contemplates nor recognizes this kind of phantom claim."