Christina Howitson worked for Evans Hotels, LLC and The Lodge at Torrey Pines Partnership, L.P. as a room service server at The Lodge at Torrey Pines for about one month, between April and May 2019.

On March 26, 2020, Howitson served the California Labor and Workforce Development Agency (LWDA) with notice of her intention to file a Private Attorneys General Act (PAGA) action against Evans Hotels for violations of the Labor Code. The required 65-day statutory waiting period ended on June 1, 2020 without any response by LWDA.

On May 26, 2020, Howitson filed a lawsuit – an individual and putative class action lawsuit against Evans Hotels. This first Lawsuit did not include any PAGA claims, instead asserting 10 causes of action based on myriad alleged violations of the Labor Code and unfair competition laws

On June 15, 2020 Evans Hotels served Howitson with an arbitration demand and an offer to compromise for $1,500 plus attorney fees pursuant to Code of Civil Procedure section 998. On July 20, 2020, Howitson accepted the 998 Offer. The 998 Offer in part provided, “Judgment is to be entered in favor of Plaintiff . . . in her individual capacity..” .) The trial court entered judgment for Howitson “in her individual capacity.”

About 10 days after accepting the 998 Offer, Howitson filed the instant PAGA action against Evans Hotels “based on the same factual predicates as the first lawsuit. Evans Hotels demurred, alleging claim preclusion (i.e., res judicata) barred this second lawsuit as a result of the judgment in the first Lawsuit. The trial court sustained the demurrer without leave to amend. The Court of Appeal reversed in the published case of Howitson v Evans Hotels D078894 (July 2022).

This case (1) involves the legal issue of whether an employee who settles individual claims against the employer for alleged Labor Code violations is subsequently barred by claim preclusion from bringing a PAGA enforcement action against the employer for the same Labor Code violations when, prior to settlement, the employee could have added the PAGA claims to the existing action; and (2) requires the application of claim preclusion principles.
Claim preclusion applies to “matters which were raised or could have been raised, on matters litigated or litigatable in the prior action.”

Three requirements must be met. First, the second lawsuit must involve the same “cause of action” as the first lawsuit. Second, there must have been a final judgment on the merits in the prior litigation. Third, the parties in the second lawsuit must be the same (or in privity with) the parties to the first lawsuit.

Here the “harm suffered” by Howitson in the first lawsuit is not the same harm as that suffered by the state in the second lawsuit. Damages in the first case are intended to be compensatory, to make one whole. Accordingly, there must be an injury to compensate. On the other hand, Civil penalties, like punitive damages in the second case, are intended to punish the wrongdoer and to deter future misconduct.

Because the two actions involve different claims for different harms and because the state, against whom the defense is raised, was neither a party in the prior action nor in privity with the employee, the Court of Appeal conclude the requirements for claim preclusion are not met in this case.