2017-00224367-CU-OE

Kristina Perata Rockholt vs. BHC Sierra Vista Hospital, Inc.

Nature of Proceeding: Hearing on Demurrer to 2nd Amended Complaint

Filed By: McClintock, Rachel L.

Defendants BHC Sierra Vista Hospital, Inc. d/b/a Sierra Vista Hospital, UHS of Delaware, Inc., UHS Sub III, LLC, Van Sipanya, Kristi Kline, John Michael Zauner, Jason Farris, Nicole Sinclair Samuel, and Hahn Tran (collectively, “Defendants”) demurrer to the Eleventh Cause of Action in Plaintiff Kristina Perata Rockholt’s (“Plaintiff”) Second Amended Complaint (“SAC”) is OVERRULED.

This is an employment dispute wherein Plaintiff alleges wrongful termination in violation of public policy, wage and hour claims, unfair competition, and negligent supervision. The SAC includes an Eleventh Cause of Action seeking remedies under the Private Attorney General Act [PAGA]. (SAC at 27-29.) Plaintiff alleges that she worked for Defendants between March 2011 and September 2017 as “a case manager in the social services department and at the time of her resignation, she was an outpatient clinician, as a Licensed Marriage & Family Therapist.” (SAC at 2.) Plaintiff also alleges that Defendants “hoodwinked employees into working off the-clock by overloading them with work but not giving employees enough time to complete it.” (SAC at 5.)

Defendants’ demurrer is pursuant to Code of Civil Procedure § 430.10(e) [the pleading does not state facts sufficient to constitute a cause of action], and indeed Defendants argue that Plaintiff’s Eleventh Cause of Action for Remedies Under the Private Attorney General Act (“PAGA”) fails to state facts sufficient to constitute a cause of action against Defendants. Defendants have not interposed a motion to strike; just the demurrer on the one ground asserted.

The parties met and conferred telephonically on June 5, 2018, prior to the filing of the instant demurrer. (Declaration of Rachel L. McClintock (“McClintock Decl.”) ¶¶ 6-7, Exh. 2.) The Court finds that the procedural preconditions for the instant demurrer have been satisfied. (See Code Civ. Proc. § 430.41.)

Standards on Demurrer

The function of a demurrer is to test the sufficiency of the pleading it challenges by raising questions of law. (Salimi v. State Comp. Ins. Fund (1997) 54 Cal.App.4th 216, 219; Nordlinger v. Lynch (1990) 225 Cal.App.3d 1259, 1271.) “For the purpose of determining the effect of a complaint, its allegations are liberally construed, with a view toward substantial justice. (Cal.Code Civ.Proc. §452; Amarel v. Connell (1988) 202 Cal.App.3d 137, 140-141; Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 43, fn. 7.) A general demurrer to the complaint must be overruled if any cause of action is stated. (Quelimane Co. v. Stewart Title Guaranty Co. , supra, at p.

39. In this respect, the Court treats the demurrer as admitting all material facts

properly pleaded, but not contentions, deductions or conclusions of fact or law, and considers matters which may be judicially noticed. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1111-1112.)

Discussion

In challenging the Eleventh Cause of Action for violation of the PAGA, Defendants argue that “Plaintiff cannot simultaneously pursue her individual claims and a PAGA representative action in the same lawsuit, as doing so creates an irreconcilable conflict of interest between Plaintiff and the putative employees whose interests she seeks to represent.” (P&As at 6.) This, of course, begs the question whether any cause of action is stated.

A plaintiff who brings a PAGA claim “does so as the proxy or agent of the state’s labor law enforcement agencies.” (Arias v. Superior Court (2009) 46 Cal.4th 969, 985.) Because the “plaintiff represents the same legal right and interest as state labor law enforcement agencies,” the California Supreme Court has found that “a judgment in an employee’s action under the Act binds not only that employee but also the state labor law enforcement agencies.” (Id.) Accordingly, “because the employee’s PAGA action-acts as a ‘substitute’ for a governmental action, the judgment binds all those who would be bound by an action brought by the government, including nonparty employees.” (O’Connor v. Uber Technologies, Inc. (N.D. Cal. 2016) 201 F. Supp. 3d 1110, 1127 (citing Arias, 46 Cal.4th 969, 985). As such, “where plaintiffs bring a PAGA representative claim, they take on a special responsibility to their fellow aggrieved workers who are effectively bound by any judgment.” (Id. at 1134 (citing Iskanian v. CLS Transportation Los Angeles LLC (2014) 59 Cal.4th 348, 381).) The PAGA statute does not enable a single aggrieved employee to litigate his or her claims, but requires an aggrieved employee “on behalf of herself or himself and other current or former employees” to enforce violations of the Labor Code by their employers. (Reyes v. Macy’s, Inc. (2011) 202 Cal.App.4th 1119, 1123-1124.)

In arguing that Plaintiff’s “conflicts of interest” prohibit her from being a proper PAGA representative in this action, Defendants compare a PAGA action to an employment class action, arguing that the employee plaintiff in both types of actions should be held to the same standards. (P&As at 7.) Defendants argue that in order to be deemed an adequate class representative, a plaintiff must show not only that her claims or defenses are typical of the class, but also that she can adequately represent the interests of the class. Defendants argue that this is part of the community of interest requirement. (Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096,1103-04.) Defendants argue that a conflict of interest that goes to the “very subject matter of the litigation” will defeat a party’s suitability as a class representative. (Richmond v. Dart Industries, Inc. (1981) 29Cal.3d 462,470.) Of course, even analogising to class actions, arguendo, it is held that disposing of class allegations at the pleading stage or determination of class suitability is disfavored by California courts. See In re BCBG Overtime Cases, (2008) 163 Cal. App. 4th 1293; Rose v. Medtronics, Inc., (1980) 107 Cal.App.3d 150, 154; Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 CaI.App.4th 471, 487-488.

In any event, Defendants argue that “Plaintiff’s pursuit of her individual and PAGA claims in the same lawsuit undoubtedly creates an irreconcilable conflict of interest with the claims of the employees she purports to represent because she seeks to increase her individual recovery for her wrongful termination and negligent supervision claims at the expense of the putative aggrieved employees. Thus, because Plaintiff’s interests are inconsistent with the claims of the putative aggrieved employees, she is not suitable to represent the putative employees in the PAGA action.” (P&As at 8.)

Defendants cite to the Sandoval case to support their argument. (P&As at 8 (citing Sandoval v. Roadlink United States Pac., Inc. (C.D. Cal. Oct. 9, 2011) 2011 U.S. Dist. LEXIS 130378 at *17-18.) Such authority is not binding on this Court. However, Sandoval does not support Defendants’ argument. Sandoval did not analyze whether a plaintiff can ever permissibly seek recovery on her own individual claims, and simultaneously in the same action, seek recovery under PAGA on behalf of state agencies representing the interests of multiple employees. Instead, Sandoval analyzed a class action settlement agreement that would have apportioned more money toward plaintiffs’ individual discrimination claims at the expense of money to be paid toward class claims, which suggested collusion between the individual plaintiffs and the settling defendant at the expense of absentee class members. In rejecting the proposed settlement on grounds that the class representative was inadequate given the lopsided settlement, the court found that “while Plaintiffs’ individual claims of race discrimination do not directly conflict with the class claims of compensation for unpaid wages and failure to provide meal breaks, the individual award amount under the settlement agreement represents a substantial deduction from the class recovery amount, and thus, suggests collusion.” (Id. at *17-18, *33-34.)

Yet, unlike the issue in Sandoval, the issue currently before this Court on the instant demurrer in no way involves determination of whether there is a fair allocation of settlement funds as between individual and class claims. Instead, the issue currently before this Court is whether, as a matter of law, a plaintiff can ever simultaneously allege individual causes of action along with a PAGA cause of action.

Defendants have not cited to any cases holding that, as a matter of law, conflict of interest concerns always necessarily preclude a plaintiff from alleging individual causes of action and simultaneously alleging a PAGA cause of action. Likewise, Defendants have not cited any cases holding that as a matter of law, simultaneously alleging such causes of action will always and necessarily lead to a prohibitive conflict of interest with other employees given their interests in the PAGA claim.

Indeed, the California Supreme Court has analyzed at least one case where a plaintiff has simultaneously brought his own individual employment law claims and a PAGA claim in the same case. (See Arias v. Superior Court (2009) 46 Cal. 4th 969, 975-76.) While no “conflict of interest” issues were actually presented to the Court in that appeal, it is notable that the Court’s ruling in no way suggests that a conflict of interest exists as a matter of law in that scenario.

The potential for a conflict of interest exists in every type of case, and if Plaintiff were to propose a potentially “collusive” settlement allocation as between her own individual claims and the PAGA claim, Sandoval may well control at that time. But no such evidence of “collusion” has yet been presented to this Court, and nor could such evidence properly accompany a pleadings motion like the instant demurrer.

Accordingly, Defendants’ demurrer must be OVERRULED.

Defendants shall file and serve an Answer no later than September 9, 2018.

The minute order is effective immediately. No formal order pursuant to CRC Rule 3.1312 or further notice is required.