Reyes v. Hi-Grade Materials Co. – Continuing the Trend to Limit PAGA Gamesmanship

Chavez, the plaintiff in Reyes v. Hi-Grade Materials Co., filed a putative class action complaint asserting violations of the Labor Code. He then amended his complaint to add a claim for penalties under PAGA[1] on behalf of the state of California and all allegedly aggrieved employees based on the same Labor Code violations. Chavez v. Hi-Grade Materials Co., (2025) WL 1231999, at *2. The trial court denied class certification on a number of grounds, including lack of manageability, leaving Chavez’s individual claims and the representative PAGA claim. Id.

Chavez appealed the denial of class certification, asserting the denial was appealable before final judgment under the death knell doctrinebecause the order terminating the putative class claims was the practical equivalent of a final judgment for the absent class members. Id. at *3. “The death knell doctrine is ‘a tightly defined and narrow’ exception to the one final judgment rule that allows for appellate review of an order denying class certification. Id. at *3 (citing In re Baycol Cases I & II, 51 Cal. 4th 751, 760 (2011).) “Under the doctrine, a denial of class certification is appealable before final judgement if it effectively terminates the entire action as to the class…without the possibility of a group recovery.” Chavez at *3 (Internal citation omitted.)

The defendants argued that the denial of class certification was not the equivalent to a final judgment because the PAGA claim remained intact at the time the trial court issued the order. Id. at *3. The defendants further argued the remaining PAGA action provided the plaintiff some proposed class members an avenue of recovery. Thus, the death knell had not been sounded. Id. After receiving the defendant’s response to the appeal, Chavez voluntarily dismissed his individual and representative PAGA claims. Id. at *4.

The Court of Appeal agreed with the defendants, holding there was no appellate jurisdiction under the death knell doctrine, or otherwise, even though not all putative class members had an avenue of recovery through the remaining PAGA action. Id. at *3. The court found Chavez’s voluntary dismissal of the PAGA claims did not retroactively make the denial of class certification appealable, noting that a contrary finding would “encourage procedural gamesmanship” and “would also encourage plaintiffs to abandon PAGA claims brought on behalf of the state and other aggrieved employees solely for the purpose of manufacturing appellate jurisdiction to obtain review of an otherwise nonappealable class certification order.” Id. at *5. The court held that even if the representative PAGA claim had been voluntarily dismissed before the appeal, the dismissal did not retroactively “transform a nonappealable order denying class certification into an appealable order.” Id. at *5.

As stated above, the Chavez decision follows a trend of courts seeking to limit the gamesmanship and abuse of PAGA by preventing plaintiffs’ attorneys from using PAGA claims as a bargaining chip, only to dismiss them where dismissal is not for the benefit of the state or the allegedly aggrieved employees, but rather as a litigation or settlement tactic designed to further plaintiffs’ counsel’s benefit. While there is a possibility Chavez could lead to increased resistance by plaintiffs to consolidate putative class actions and PAGA claims, the ruling is overall favorable for employers.

Moreover, while the California Supreme Court has held that manageability is not a basis for striking PAGA claims and affirmed that lack of manageability of the claims is a factor that could lead to the assessment of minimal penalties under PAGA penalties. Estrada v. Royalty Carpet Mills, Inc. (2024) 15 Cal. 5th 582, 619. Thus, denial of class certification for lack of manageability continues to be an important lever to substantially reduce or perhaps even eliminate PAGA exposure.

The ArentFox Schiff Labor, Employment & OSHA group will continue to monitor developments in this area. If you have any questions, please contact your relationship professional at the firm or any of the authors.