In March 2017, Kelly Rose, a former employee of Hobby Lobby Stores, Inc., notified the California Labor and Workforce Development Agency (LWDA) and Hobby Lobby that she intended to seek civil penalties under PAGA on behalf of herself, the State of California, and other hourly-paid individuals who were employed by Hobby Lobby in California as cashiers or who were assigned cashier duties. Rose’s claims were based on allegations that Hobby Lobby violated the so-called “suitable seating” provisions of Industrial Welfare Commission Wage Order No. 7-2001 by not providing seats for cashiers. (Cal. Code Regs., tit. 8, § 11070, subds. 1, 14.)

After the statutory deadline for the LWDA to respond to the notice had passed, Rose filed a civil action against Hobby Lobby alleging two causes of action based on the facts and theories alleged in her PAGA notice. The litigation proceeded for several years, and eventually a bench trial was held that resulted in a judgment for Hobby Lobby on both causes of action.

In a separate appeal, the Court of Appeal affirmed the judgment. (Rose v. Hobby Lobby Stores, Inc. (March 25, 2025, A168301) [nonpub. opn.].) After judgment was entered, Hobby Lobby filed a memorandum of costs totaling $474,707.80.

The trial court issued an order inviting the LWDA, which had not participated in the litigation, to file an amicus brief addressing its liability for an award of costs to a prevailing defendant in a PAGA action. At the trial court’s direction, Hobby Lobby served the order on the LWDA, at which point the LWDA first learned of Hobby Lobby’s attempt to recover its costs. The LWDA then filed a motion to intervene, which the trial court granted.

The trial court concluded that the LWDA is responsible for costs incurred by defendants who prevail on PAGA claims, but struck certain cost items that Rose had challenged, resulting in an award of costs against the LWDA in the amount of $124,585.24. The LWDA timely appealed from the costs order. The trial court did not award Hobby Lobby any costs against Rose, and Rose is not a party to this appeal.

The LWDA appealed, raising an issue of first impression: Is the LWDA liable for the litigation costs incurred by a prevailing defendant in an action filed under PAGA?

The Court of Appeal concluded that costs are not recoverable against the LWDA where it did not participate in the litigation. Accordingly, it reversed the trial court costs order in the published case of Rose v. Hobby Lobby Stores CA1/2 – A169640 (May 2025).

In seeking costs from the LWDA, Hobby Lobby relied on Code of Civil Procedure §1032(b), the general cost-recovery statute, which provides that a prevailing party is entitled to recover its costs “[e]xcept as otherwise expressly provided by statute,” and Code of Civil Procedure section 1028, which provides that when the State is a party to an action costs are “awarded against it on the same basis as against any other party.”

PAGA provides that “[a]ny employee who prevails in any action shall be entitled to an award of reasonable attorney’s fees and costs” (Lab. Code, § 2699, subd. (k)(1)), but says nothing about prevailing employers. Hobby Lobby argues that in view of the guidance provided by our Supreme Court in Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 989 for interpreting so-called “one-way” fee and cost shifting statutes like the one in PAGA, the Court of Appeal should conclude that PAGA does not contain an express exception to section 1032(b) and therefore as a prevailing defendant Hobby Lobby is entitled to recover its costs.

In Murillo, the Supreme Court construed a fee and cost shifting provision in the Song-Beverly Act (Civ. Code, § 1790 et seq), California’s automobile “lemon law,” which expressly permits a prevailing plaintiff-buyer to recover costs and attorney fees but is silent with respect to a prevailing defendant-seller. Murillo held that silence does not create an express exception to section 1032(b); therefore, a prevailing defendant-seller in a case brought under the Song-Beverly Act is entitled to recover its costs under section 1032(b). (Id. at p. 991.)

The LWDA argues that legislative history shows that Labor Code section 2699, subdivision (k)(1) was intended to displace the general cost recovery rule of section 1032(b), and that Murillo, which concerns a consumer protection statute rather than a provision of the Labor Code, is inapposite.

Hobby Lobby argued unpersuasively that the LWDA was nevertheless a party to Rose’s action from its commencement because Rose filed her PAGA suit as the LWDA’s agent, and that under Civil Code section 2330 the LWDA, as principal, is responsible for the acts and liabilities of its agent.

“The LWDA did not sue Hobby Lobby. The LWDA was not a party to Rose’s lawsuit, nor did it take any action in the lawsuit until it moved to intervene, which it did only after it got word that Hobby Lobby sought to impose its costs on the LWDA. Accordingly, Hobby Lobby cannot recover its costs from the LWDA.”

“Because we conclude that the LWDA was not a party to Rose’s PAGA action, Code of Civil Procedure section 1028, which provides that when the State is a party costs are to be awarded against it on the same basis as against any other party, has no application here.”

“Hobby Lobby also argues that even if the LWDA was not a party to Rose’s PAGA action, it is liable for costs as the real party in interest. This argument is unpersuasive because Hobby Lobby cites no case in which litigation costs were imposed against a real party in interest that did not participate in the litigation.”