Issue preclusion is a legal principle that bars the re-litigation of previously litigated issues in a subsequent case, even if the causes of action are different. However, this principle only applies to parties involved in the original lawsuit or in privity with them. The privity requirement has created confusion in California's courts, particularly in PAGA claims.

PAGA is a California law that allows employees to sue their employers for Labor Code violations on behalf of the state and other "aggrieved employees." PAGA claims often involve multiple employees who were not parties to the original lawsuit for shared Labor Code violations. This has raised questions about whether those employees should be bound by the outcome of the original lawsuit.

In Gavriiloglou v. Prime Healthcare Management (2022), the Court of Appeal for the Fourth District held that a previous arbitration award finding no Labor Code violations against the plaintiff did not preclude that same plaintiff from having PAGA standing to sue their employer again for the same violations. Wow; read that sentence again! The court determined that a party cannot be prevented from re-litigating an issue when they participated in successive actions in different capacities.

However, in Rocha v. U-Haul Co. of Cal. (2023), the Court of Appeals for the Second District directly challenged Gavriiloglou's "different capacity" analysis. In this case, two brothers filed a complaint against their employer, U-Haul, alleging, among other things, a Labor Code violation for unlawful retaliation. During litigation, the brothers proposed an amended complaint that included a request for relief under PAGA based on the same violation they had already alleged in their original complaint. The trial court denied the brothers' proposed amendment and ordered their case to arbitration, where an arbitrator issued a final award in favor of U-Haul on all claims, including the brothers' alleged Labor Code violations.

The brothers appealed the trial court's decision to deny their PAGA claim, citing Gavriiloglou, but the Court of Appeal disagreed and held that once a final adjudication specifically finds that a Labor Code violation did not occur, a plaintiff is barred from any further litigation regarding that violation, no matter their capacity. As the Rocha brothers were parties to the arbitration as well as parties against whom preclusion is sought in a successive claim, the Court held that issue preclusion was properly applied to their case.

The Court also noted that none of the cases cited in Gavriiloglou established a general rule that issue preclusion requires the precluded party to have acted in the same capacity in both proceedings. These cases all involved claim preclusion, which prevents the re-litigation of the same cause of action in a second suit between the same parties or parties in privity after a final judgment on the merits. The Court found no legal precedent supporting a requirement for the "same capacity" in relation to issue preclusion.

Overall, the law surrounding the application of issue preclusion in PAGA claims remains unclear, and further clarification is needed. As with many novel issues in PAGA litigation where Courts of Appeal disagree, the California Supreme Court may take up the issue (pun intended).  Stay tuned!