Battle over 'headless' PAGA cases lands before California Supreme Court

A tactic used by plaintiffs' attorneys to avoid arbitration in Private Attorneys General Act lawsuits--by declining to file individual claims and instead suing on behalf of current and former coworkers--has sharply divided state appellate courts.

It has stirred concerns -- including 2nd District Court of Appeal Justice Brian M. Hoffstadt's warning about the creation of a class of 'professional PAGA plaintiffs' -- and prompted the California Supreme Court to take the unusual step of granting review, on its own motion, of a Target Corp. subsidiary's appellate victory.

The dispute centers on so-called "headless PAGA cases," which did not exist before two major rulings, a June 2022 decision by the U.S. Supreme Court and a July 2023 state Supreme Court decision.

California appellate courts have ruled seven times on whether plaintiffs can avoid arbitration by filing representative actions without an individual claim, according to Clarkson Law Firm PC partner Glenn A. Danas, who is representing Christina Leeper in the pending state Supreme Court case.

Workers have prevailed four times in the Court of Appeal, while companies have won three times, including in the case now being briefed before the state Supreme Court. Leeper v. Shipt Inc. et al., S289305 (Cal. S. Ct., filed April 16, 2025).

Meanwhile, lower courts continue to issue conflicting rulings.

"They clearly want to weigh in on the issue so much that they took it up sua sponte," Lauren K. Teukolsky of plaintiff's firm Teukolsky Law APC said about the state Supreme Court's action.

The justices asked two questions: "(1) Does every Private Attorneys General Act action necessarily include both individual and non-individual PAGA claims, regardless of whether the complaint specifically alleges individual claims? (2) Can a plaintiff choose to bring only a non-individual PAGA action?"

The U.S. Supreme Court decision in 2022 appeared to be a win for employers. Justice Samuel A. Alito Jr. wrote that California law "provides no mechanism to enable a court to adjudicate nonindividual PAGA claims once an individual claim has been committed to a separate proceeding."

But Justice Sonia M. Sotomayor wrote in a concurring opinion that California courts would have "the last word" on state law. Viking River Cruises v. Moriana, 20-1573 (S. Ct., filed May 10, 2021).

A year later, the California Supreme Court did just that. Justice Goodwin H. Liu wrote that individuals whose claims for labor law violations are referred to arbitration may still pursue claims on behalf of their colleagues in court despite the U.S. Supreme Court decision.

"In sum, where a plaintiff has filed a PAGA action comprised of individual and non-individual claims, an order compelling arbitration of individual claims does not strip the plaintiff of standing to litigate non-individual claims in court," Liu wrote. Adolph v. Uber Technologies Inc., 2023 DJDAR 7311 (Cal. S. Ct., filed May 20, 2022).

Since then, plaintiffs' lawyers have pushed the envelope further to get around the disadvantage of individual workers being forced into arbitration.

The strategy is simple: The plaintiff does not file a claim on their own behalf, giving up a possible share of a PAGA victory in arbitration, and instead sues only on behalf of their colleagues.

Danas wrote in a brief filed with the state high court that the Legislature "intended for a PAGA plaintiff to have the authority and discretion to choose to bring only non-individual PAGA claims," because it is supposed to be a qui tam action for the benefit of the state Labor and Workforce Development Agency, which gets the bulk of any award.

Cases that are stuck in arbitration because of individual claims "involve undue risks of delay and distraction," Danas continued.

"As such, a PAGA plaintiff's discretion must extend to declining to pursue civil penalties for those isolated Labor Code violations committed against the PAGA plaintiff individually," he wrote.

"That is particularly so when doing so avoids an arbitration, a procedural morass that, at most, could yield only nominal relief to the state, and no relief to other aggrieved employees, while imposing a substantial delay on advancing the Legislature's objectives of punishing and deterring the violations at issue," Danas added.

Theane D. Evangelis, a partner with Gibson, Dunn & Crutcher LLP who represents Shipt Inc. and its parent company, Target, characterized the case as "a blatant attempt to circumvent the U.S. Supreme Court's holding in Viking River Cruises."

"For decades, courts and commentators never questioned that a PAGA action must include an individual claim on behalf of the plaintiff," she added in an email. "Plaintiff's attempt to abandon her individual claims in order to avoid arbitration violates the clear text of PAGA and the Federal Arbitration Act."

The opening briefs for Target and Leeper, who has settled her individual claim, debate the language of the statute, including the significance a key word: "and."

"PAGA permits an 'aggrieved employee' to bring 'a civil action' to enforce the Labor Code 'on behalf of himself or herself and other current or former employees.' This plain language should be the beginning -- and the end -- of the inquiry," Evangelis wrote.

She argued that the Legislature replaced the word "or" with "and" before passing the legislation, meaning that a PAGA claim cannot be filed without an individual claim, which under Viking River Cruises must be sent to arbitration.

"The fact that no party, jurist or commentator even contemplated that a PAGA action could be brought without asserting an individual claim until after the U.S. Supreme Court held in Viking River that individual claims must be submitted to arbitration only confirms that plaintiff's approach is rooted in hostility to arbitration," Evangelis added.

But Danas, in a phone interview, countered that "individual claims were not even a thing when the statute was passed" because claims were not supposed to be divided into two parts.

Further, he added in a brief, the whole point of the law is to deter labor law violations, and private plaintiffs can make decisions to advance that goal - which includes the option of foregoing an individual claim.

Looming in the background is the possibility that the business-friendly U.S. Supreme Court could take another look at California's PAGA law, and the state high court's pro-worker decisions, if it rules for Leeper.

Evangelis' brief, citing Danas' characterization of arbitration as a "procedural morass," said a ruling in favor of "headless PAGA" cases "runs headlong into the Federal Arbitration Act."

"There can be little doubt that a rule allowing an aggrieved employee to assert only non-individual PAGA claims -- and thereby evade a binding arbitration agreement -- would be 'hostile to arbitration' and thus preempted by the FAA," she wrote.

But Michael Rubin, an attorney with Altshuler Berzon LLP who successfully represented former Uber Eats driver Erik Adolph in the state Supreme Court win two years ago, said he does not believe the U.S. Supreme Court will revisit Viking River Cruises.

"There isn't any federal issue," he said in a phone interview.

That was the problem for employers in Viking River Cruises. Several justices appointed by Republican presidents -- who might normally be expected to be sympathetic to employers -- wanted no part of California's law.

Justice Clarence Thomas, as he has done consistently, dissented and wrote that the Federal Arbitration Act "does not apply to proceedings in state courts."

Justice Amy Coney Barrett, joined in all or in part by Justice Brett M. Kavanaugh and Chief Justice John G. Roberts Jr., agreed with the judgment; but wrote that much of Alito's opinion "addresses disputed state-law questions as well as arguments not pressed or passed upon in this case."

But even if the U.S. Supreme Court doesn't get involved, the unusual nature of headless PAGA cases is divisive in state appellate courts and even among plaintiff's lawyers, who say clients need to be informed about potential awards they might be giving up if they don't sue - even if that means going into individual arbitration.

"There needs to be a disclosure to the client about what they are waiving," Teukolsky said. "I think it's important that the plaintiff goes into the case eyes wide open."

Rubin said some plaintiffs might be willing to sue even if they get less in monetary damages themselves. "Sometimes, PAGA plaintiffs care deeply about Labor Code violations," even if they have left the company, he said.

Employers can protect themselves to some extent by drafting broader agreements, but many do not, he said.

"They move slowly and don't anticipate what courts are going to do next," Rubin added. "Tons of arbitration agreements will need to be revised" if Leeper wins.