Prime Healthcare v. Superior Court: Arbitration Findings, PAGA Standing, and the Law of the Case Doctrine
In Prime Healthcare Management, Inc. v. Superior Court, the California Court of Appeal addressed whether an employer may rely on adverse arbitration findings on individual Labor Code claims to defeat a plaintiff’s standing to pursue remaining claims under the Private Attorneys General Act (PAGA) in superior court. The court also considered whether subsequent appellate authority, including the California Supreme Court’s decision in Adolph v. Uber Technologies, Inc., constituted an intervening change in the law sufficient to override the law of the case doctrine. The court answered both questions in the negative.
The case arose from a wage-and-hour action filed by a former employee of Prime Healthcare asserting individual Labor Code claims and a PAGA claim seeking civil penalties on behalf of the State of California. Pursuant to an arbitration agreement, the employee’s individual, non-PAGA Labor Code claims were compelled to arbitration. The arbitration agreement did not require arbitration of any PAGA claims, whether individual or nonindividual, and the PAGA claims remained stayed in superior court. The arbitrator ruled in the employer’s favor on all individual Labor Code claims, and the trial court confirmed the arbitration award.
Relying on the arbitration findings, the employer moved for judgment on the pleadings as to the PAGA claims, arguing that because the arbitrator found no Labor Code violations as to the employee individually, the employee was not an “aggrieved employee” and therefore lacked standing to pursue PAGA penalties. The trial court granted the motion. On appeal, however, the Court of Appeal reversed, holding that the arbitrator’s findings on individual Labor Code claims did not have preclusive effect on the PAGA claims. That decision became final after the California Supreme Court denied review.
The employer later renewed its effort to defeat the PAGA claims, contending that later appellate decisions from other districts conflicted with the earlier ruling and that Adolph constituted intervening controlling authority requiring a different result. The trial court rejected those arguments, concluding that the prior appellate decision was law of the case. The employer then sought writ relief.
The Court of Appeal denied the petition. The court reaffirmed that PAGA claims are law-enforcement actions brought on behalf of the state, with the employee acting as the state’s proxy. Because no PAGA claims—individual or nonindividual—were submitted to arbitration, the arbitrator was not tasked with deciding PAGA standing. Moreover, the State, as the real party in interest, neither participated in nor consented to arbitration of the PAGA claims. As a result, the arbitration award had no preclusive effect on the PAGA claims, and neither claim preclusion nor issue preclusion applied.
The court also rejected the employer’s reliance on purportedly conflicting appellate decisions from other districts. Later decisions reaching different conclusions did not constitute a change in controlling law and therefore did not displace the law of the case established in this litigation. Absent an intervening decision from the California Supreme Court or a statutory change, the trial court remained bound by the prior appellate ruling.
Nor did Adolph overrule or undermine that ruling. The Supreme Court in Adolph addressed a different procedural posture involving arbitration agreements that compel arbitration of individual PAGA claims following Viking River Cruises, Inc. v. Moriana. Nothing in Adolph held that adverse arbitration findings on non-PAGA individual Labor Code claims automatically defeat standing to pursue remaining PAGA claims in court.
Where, as here, the arbitration agreement does not compel arbitration of individual PAGA claims, the determination of whether the plaintiff is an “aggrieved employee” remains a judicial gateway issue. Once that determination has been resolved by an appellate court, it binds the trial court absent a true intervening change in controlling law.
Finally, the Court of Appeal concluded that extraordinary writ relief was unwarranted. The employer had an adequate remedy at law, and there was no showing of irreparable harm justifying immediate intervention.
Prime Healthcare reinforces several principles that continue to shape post-Viking River and post-Adolph PAGA litigation. Arbitration victories on individual Labor Code claims do not necessarily eliminate exposure to PAGA claims where those claims were never arbitrated. The procedural scope of the arbitration agreement matters, as does the distinction between arbitrability and preclusive effect. And absent the State’s consent, arbitration findings cannot be used indirectly to extinguish remaining PAGA claims in superior court.