PAGA
Cabardo v. Patacsil (9th Cir., 2026): Partial PAGA Ruling Not Final for Appeal
Updated
In Cabardo v. Patacsil, the Ninth Circuit dismissed a group of creditors’ appeal for lack of jurisdiction. The creditors sought to challenge a ruling that part of a PAGA judgment could be discharged in the debtors’ Chapter 7 bankruptcy, but the court held that the district court’s order was not a final order because a related discharge issue had been remanded for trial. The opinion was filed for publication on August 27, 2026.
Background
Ernesto and Marilyn Patacsil operated group-home care facilities. In 2012, eight of their employees, led by Joseph Cabardo, sued them in federal court for California labor-law violations, including a claim for civil penalties under the Private Attorneys General Act (PAGA). A jury found for the plaintiffs, and the court awarded roughly $894,000 in damages and about $1.08 million in attorney fees, including roughly $80,000 in PAGA penalties.
A month later, the Patacsils filed for Chapter 7 bankruptcy. The creditors brought an adversary proceeding to have the PAGA judgment declared nondischargeable, relying on two provisions of the Bankruptcy Code: section 523, subdivision (a)(6), for “willful and malicious” injury, and section 523, subdivision (a)(7), for a fine or penalty payable to a governmental unit.
The bankruptcy court concluded that a trial was needed on intent under section 523(a)(6). On section 523(a)(7), it held that only the 75% of PAGA penalties payable to the state agency (about $60,000) was excepted from discharge—while the 25% payable to the employees (about $20,000) and the attorney fees were not.
The district court granted leave for an interlocutory appeal of the section 523(a)(7) ruling, affirmed it, and remanded the matter to the bankruptcy court for further proceedings. The creditors then appealed to the Ninth Circuit without seeking certification.
What the Court Held on Appellate Jurisdiction
The Ninth Circuit reviews its own jurisdiction de novo, even when the parties agree it exists. Under Title 28 United States Code section 158, subdivision (d)(1), the court has jurisdiction over orders that finally dispose of discrete disputes within a larger bankruptcy case, applying the flexible finality standard drawn from Supreme Court decisions and the court’s Landmark Fence factors.
The court first defined the relevant judicial unit. Drawing on the Bankruptcy Rules and the list of core proceedings, it held that the discrete dispute is the entire adversary proceeding to determine dischargeability—not a single legal theory within it. The same debt can be excepted from discharge under more than one provision of section 523.
Because the district court remanded for a trial on the section 523(a)(6) issue, the dischargeability proceeding was not final. The court warned against “slicing the case too thin” by treating a preliminary ruling on one exception as an appealable final order.
In a bankruptcy dischargeability dispute, the relevant judicial unit for finality is the entire adversary proceeding, not an individual discharge exception. An order resolving one exception is not final and appealable while another exception involving the same debt remains set for trial on remand.
Why the Landmark Fence Factors Pointed the Same Way
The court also rejected the creditors’ argument that the section 523(a)(7) question was a “pure legal” issue that could be reviewed separately. It explained that its earlier Century Centre reasoning, allowing an adversary proceeding to be divided by claim, no longer holds after the Supreme Court’s Bullard decision and the circuit’s Gugliuzza ruling.
Applying the four Landmark Fence factors, the court found each weighed against jurisdiction. A second appeal remained likely because the section 523(a)(6) issue required fact-finding on intent, judicial efficiency favored waiting for combined review, the bankruptcy court’s fact-finding role was best preserved by letting the remand run its course, and delay caused no irreparable harm. The court dismissed the appeal.
What This Means for You
This decision clarifies that, in a bankruptcy adversary proceeding over the dischargeability of a debt, an order deciding only one exception is not final and appealable while another exception involving the same debt is set for trial on remand. It touches disputes over whether a PAGA judgment—including its penalty and attorney-fee components—may be discharged in bankruptcy.
I write these summaries as general information about developments in California employment law. They are not legal advice and don’t create a mediator–client relationship. For guidance on a specific matter, consult a qualified attorney.