Competing PAGA Plaintiffs Lack Standing to Intervene or Challenge Settlements of Other Plaintiffs

The Facts

In 2018, three Lyft drivers — Brandon Olson, Million Seifu, and Tina Turrieta — each filed separate PAGA actions against the company, claiming the ride-sharing service misclassified them as independent contractors.

In September 2019, Turrieta and Lyft reached a proposed settlement of $15 million.  However, when Turrieta moved for approval of the settlement in court, Olson objected and filed a motion to intervene.

Olson argued, inter alia, that Turrieta’s settlement was reached by way of a “reverse auction”— a settlement strategy utilized by defendants where plaintiffs in parallel class action lawsuits compete to obtain settlement funds from a defendant and negotiate a price that drops as the plaintiffs undercut each other.  The ultimate effect of the reverse auction is to preclude the other competing class actions once a settlement is reached with the lowest bidding plaintiff.

Citing similar concerns as Olson, Seifu also objected to the proposed settlement and argued that he had an interest in Turrieta’s action as a member of the PAGA settlement group.

In January 2020, during a settlement approval hearing, counsel for Turrieta and Lyft both argued that Olson and Seifu lacked standing to intervene or object to the proposed settlement because the PAGA case belonged to the State of California, and not the individual plaintiffs.  The lower court ruled in Turrieta’s and Lyft’s favor, approving the settlement.

After the judgment was entered, Olson and Seifu moved to vacate the decision, arguing that the lower court erred when ruling they had no standing to intervene in Turrieta’s settlement.  The lower court rejected the argument and denied the motions, again finding that Olson and Seifu lacked standing to either object to Turrieta’s settlement or move to set aside the judgment. Olson and Seifu appealed the decision.

The Court’s Opinion

In its 28-page published decision, the California Court of Appeals unanimously affirmed the lower court’s ruling that Olson and Seifu did not have standing to intervene and vacate the judgment approving the PAGA settlement secured by Turrieta.

Despite Olson’s and Seifu’s involvement in other PAGA lawsuits, the Court of Appeals  explained that Turrieta’s settlement had no effect on either Olson’s or Seifu’s individual claims.

The Court further explained in its decision: “Due to the unique nature of PAGA, in which the state is the real party in interest, appellants (Olson and Seifu) had no personal interest in Turrieta and therefore are not ‘aggrieved parties’ who may appeal from the judgment.”  The Court further explained that “whether someone is an ‘aggrieved employee’ as defined by section 2699, subdivision (c) and thus able to bring a lawsuit under PAGA is a distinct inquiry from whether a nonparty may become an aggrieved party because of a personal interest in a different lawsuit and thereby obtain standing to challenge the judgment.”  The Court further reiterated that an employee suing under PAGA “does so as the proxy or agent of the state’s labor law enforcement agencies,” and that every PAGA claim is in actuality “a dispute between an employer and the state.” Although “deputized under PAGA to prosecute their employer’s Labor Code violations on behalf of the state,” an employee is not allowed to act on the state’s behalf for all purposes.  Therefore, the Court was not persuaded that Olson’s and Seifu’s role as PAGA plaintiffs in their respective actions conferred upon them a personal interest in the settlement of another, separate PAGA claim, and they had no standing to seek to vacate the judgment or appeal.

What This Means for Employers

While some courts have rejected settlements reached via the “reverse auction” strategy, the appellate court’s ruling in Turrieta v. Lyft, Inc. is encouraging for employers because it permits them to use this strategy in PAGA actions based on the rationale that it is the state, not the individual plaintiff, that is the real party in interest. 

Therefore, employer defendants facing multiple PAGA lawsuits should consider taking advantage of the “reverse auction” strategy to most quickly and economically resolve multiple pending PAGA lawsuits brought by competing plaintiffs.