Page 1
S.C. Resolves Conflict Over Requisites for Issue Preclusion
By a MetNews Staff Writer
A nurse who was a class representative in an action against a staffing agency for wage and hour violations, which resulted in a stipulated judgment, is not barred from proceeding against the hospital at which the agency had placed her, the California Supreme Court held yesterday, affirming a decision of the Fourth District Court of Appeal’s Div. Two and repudiating a contrary view of this district’s Div. Two.
Chief Justice Tani Cantil-Sakauye wrote for a unanimous court in saying:
“Because the nurse was a party to the initial judgment, the judgment can be used against her whether or not she was in privity with some other party. But for claim preclusion, the affirmative defense asserted by the hospital, that is not enough. Instead, we have frequently explained that claim preclusion can be asserted only by a party in the first action or someone in privity with a party in the first action. In this case, a nonparty (the hospital) argues that it is in privity with a party (the staffing agency) to benefit from the claim-preclusive effect of a judgment that undoubtedly binds an opposing party (the nurse).
“That argument is not persuasive….There is no such privity here because of the hospital and staffing agency’s different legal interests.”
No Intervention
She explained that the hospital did not intervene in the first action, the staffing agency did not purport to represent the hospital’s interests in that litigation, and there was nothing in the judgment that was binding on the hospital. The chief justice explained:
Here, even if, as a factual matter, the hospital and staffing agency worked together to satisfy their payment obligations, that does not mean their legal interests were not distinct. Although the staffing agency describes this second case as concerning ‘the exact same wage and hour violations’ that were at issue in the first action, at oral argument the staffing agency declined to concede that it would need to indemnify the hospital for all liability arising from the conduct at issue in this second action.”
She continued:
“The implication is that at least some of the alleged violations could, in the staffing agency’s view, result in liability for the hospital but not for the staffing agency. This suggests a conflict of incentives rather than adequate representation. Likewise, the hospital may have had an interest in shifting fault to the staffing agency had it been party to that action—and the staffing agency, quite obviously, would not have represented that interest.”
The hospital—Eisenhower Medical Center in Rancho Mirage, founded by Bob Hope and his wife—relied on the April 16, 2018 opinion by Presiding Justice Elwood Lui in Castillo v. Glenair, Inc. Lui set forth:
“In a joint employer arrangement, can a class of workers bring a lawsuit against a staffing company, settle that lawsuit, and then bring identical claims against the company where they had been placed to work. We answer no.”
Plaintiffs Andrew and David Castillo had been placed by an agency, GCA Services Group, Inc., at Glenair, Inc. GCA paid them, based on time records kept by Glenair. Lui noted that the Castillos did not opt out of the class action, and that “it cannot be disputed that the Castillos’ claims here relate to the work they performed at Glenair during the same time period” that the class action covered.
He said “it is clear Glenair and GCA are in privity for present purposes” because the subject matter—alleged wage and hour violations—were identical, both the agency and the company played a role in payment of wages, and their interests were “intertwined.”
Fourth District’s View
The Fourth District’s Div. Two, in a Feb. 6, 2020 majority opinion by Justice Marsha G. Slough, said that the California Supreme Court’s 2015 opinion in DKN Holdings LLC v. Faerber requires that a non-party to an earlier suit, to raise claim preclusion (res judicata) must have expected to be bound by the outcome of that litigation. She wrote:
“We are not bound by the decision of the Second District….However, because stare decisis serves the important interests of stability in the law and predictability of decisions, we ordinarily follow the decisions of other districts, unless we have good reason to disagree….In this case, departure from Castillo is justified because the court failed to apply the test for privity articulated in DKN. As a result, its conclusion that the staffing agency and its client were in privity is not supported.”
Joined by Justice Michael J. Raphael, she said the first step in deciding if there is claim preclusion is to examine whether the subject matter is the same and, if so, whether the parties are identical or, if not, whether there is privity. She reasoned:
“By focusing overmuch on whether the subject matter of the litigation is the same, the Castillo court nearly collapses the second element (same parties) into the first (same claims). The court then justified finding a sufficiently close relationship on the fact that both companies were involved in paying the plaintiffs their wages. That’s simply not a sufficient basis for finding a client and staffing agency to be in privity.”
Presiding Justice Manuel A. Ramirez dissented, saying:
“I would follow Castillo, as a matter of stare decisis. Castillo at least has the virtue of stating clear rules on which parties on all sides can easily rely going forward. I do not find Castillo to be so plainly wrong as to justify creating a split of authority in this area.”
Chief Justice’s View
Cantil-Sakauye said in yesterday’s decision”
“To be sure, Castillo is correct that the privity inquiry focuses on the relationship between supposed privies in the context of the litigation—not a static analysis of the relationship between them. Two litigants may be privies in some circumstances yet strangers in others. But even viewed in the context of the initial litigation, the staffing agency and hospital’s divergent interests prevent a finding of privity.”
She said in a footnote:
“We do not address whether the nurse’s suit against the hospital concerns the same cause of action as her suit against the staffing agency, nor whether considerations unique to the class action context would alone authorize splitting such a cause of action across multiple suits.”
The case is Grande v. Eisenhower Medical Center, 2022 S.O.S. 2823.
Copyright 2022, Metropolitan News Company