Judge Armen Tamzarian, Case 22STCV21065 2023-05-05 Tentative Ruling

Judge: Armen Tamzarian, Case: 22STCV21065, Date: 2023-05-05 Tentative Ruling

Case Number: 22STCV21065 Hearing Date: May 5, 2023 Dept: 52

Defendant Global Aviation Management Group, Corp.’s Motion to Compel Arbitration of Plaintiff’s Individual Claims and to Dismiss His Representative PAGA Claims

Defendant Global Aviation Management Group, Corp. moves to compel arbitration of plaintiff Leo Angel Martinez’s individual claims under the Private Attorneys General Act (PAGA) and to dismiss his representative PAGA claims.

Plaintiff argues the parties never agreed to arbitrate any PAGA claims. Plaintiff relies on section 7 of the parties’ Dispute Resolution Agreement, which provides:

Class and Collective Action Waiver

Private attorney general representative actions under the California Labor Code are not arbitrable, not within the scope of this Agreement and may be maintained in a court of law. However,

(a) There will be no right or authority for any dispute to be brought, heard or arbitrated as a class action (“Class Action Waiver”). By entering into this Agreement, the parties waive the right to pursue covered claims on a class basis or to participate as a class member in any class action involving a claim covered by this Agreement. …

(b) There will be no right or authority for any dispute to be brought, heard or arbitrated as a collective action (“Collective Action Waiver”). By entering into this Agreement, the parties waive the right to pursue covered claims on a collective basis or to participate as a class member in any collective action involving a claim covered by this Agreement. …

… In no circumstance shall an arbitrator have authority to preside over or determine claims brought on a class, collective, or representative basis on behalf of a group of employees.

(Bonventre Decl., Ex. F, § 7.) Plaintiff relies on the first paragraph of section 7.

As plaintiff notes, all the published cases on this subject involve arbitration agreements with one substantial difference from the agreement in this case. All those agreements included an invalid waiver of PAGA claims, followed by a severability or savings clause. (Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. ___, 142 S.Ct. 1906, 1911, 1916-1917, 1925 (Viking River); Galarsa v. Dolgen California, LLC (2023) 88 Cal.App.5th 639; Piplack v. In-N-Out Burgers (2023) 88 Cal.App.5th 1281; Gregg v. Uber Technologies, Inc. (2023) 89 Cal.App.5th 786 (Gregg); Seifu v. Lyft, Inc. (2023) 89 Cal.App.5th 1129 (Seifu).) In contrast, here, defendant’s agreement followed California law and expressly did not include a waiver of PAGA claims, which would have been unenforceable. As plaintiff contends, the parties never agreed to waive any PAGA claims or to require that PAGA claims be brought via binding arbitration instead of in court.

In their papers, the parties agree that because they entered this contract before the United States Supreme Court decided Viking River, at the time there was no division of arbitrable “individual” PAGA claims and non-arbitrable “representative” PAGA claims. That was the state of the law at the time. (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 87 [“There is no individual component to a PAGA action because ‘ “every PAGA action ... is a representative action on behalf of the state” ’ ”].)

Plaintiff argues that in light of the state of the law, the parties necessarily intended to exclude all PAGA claims from the arbitration agreement. Defendant argues that, when read in conjunction with the rest of the contract, this language shows the parties intended to exclude only PAGA claims on behalf of other aggrieved employees—not any individual PAGA claims.

Though the provision excludes “[p]rivate attorney general representative actions,” use of the word “representative” does not mean the parties intended only to exclude actions where the plaintiff represents other aggrieved employees. “The Viking River court explained that PAGA claims are ‘representative’ in two ways: first, all PAGA claims are ‘representative’ because a plaintiff brings a PAGA claim as an agent or proxy for the state. [Citation.] Second, some PAGA claims are ‘representative’ because they are brought by employees to address violations suffered by other employees, as well as themselves.” (Seifu, supra, 89 Cal.App.5th at p. 1131.)

The Court of Appeal’s opinion in Gregg is instructive. There, the parties’ arbitration agreement did not merely refer to PAGA “representative actions.” Instead, the two relevant provisions expressly applied to a PAGA representative action “brought on behalf of others.” First, the severance clause provided that, if the PAGA waiver was found unenforceable, “any representative action brought under PAGA on behalf of others must be litigated in a civil court of competent jurisdiction and not in arbitration.” (Gregg, supra, 89 Cal.App.5th at p. 798.) Second, a separate provision stated the arbitration agreement did not apply to “ ‘[a] representative action brought on behalf of others under [PAGA], to the extent waiver of such a claim is deemed unenforceable by a court of competent jurisdiction.’ ” (Ibid., alterations in original.) The court emphasized the importance of the phrase “on behalf of others,” including by italicizing “others” and noting that the employee’s brief omitted that language in two places. (Id. at p. 798, fn. 4.)

Here, the arbitration agreement excludes all “[p]rivate attorney general representative actions” from its scope. The agreement does not specify that it only excludes PAGA actions “brought on behalf of others.”

Defendant notes that elsewhere the agreement states it “applies, without limitation, to disputes with any entity or individual arising out of or related to the … employment relationship or the termination of that relationship (including post-employment defamation or retaliation), contracts, trade secrets, unfair competition, compensation, classification, minimum wage, seating, expense reimbursement, overtime, breaks and rest periods.” (Bonventre Decl., Ex. F, § 2.)

Though plaintiff’s PAGA claim includes penalties arising from violations of the Labor Code’s provisions on minimum wage, overtime, and breaks, it is legally distinct. An aggrieved employee’s “right to civil penalties is different from [the] right to damages.” (Gavriiloglou v. Prime Healthcare Management, Inc. (2022) 83 Cal.App.5th 595, 605.)

Here, the key rule of contract interpretation is that courts resolve inconsistencies by giving effect to the more specific provision. “Where two provisions appear to cover the same matter, and are inconsistent, the more specific provision controls over the general provision.” (Starlight Ridge South Homeowners Assn. v. Hunter-Bloor (2009) 177 Cal.App.4th 440, 447.) Section 7’s language that “[p]rivate attorney general representative actions under the California Labor Code are not arbitrable, not within the scope of this Agreement and may be maintained in a court of law” is the only provision specifically addressing PAGA actions. It controls over the more general and seemingly inconsistent provisions regarding Labor Code claims and collective actions.

Moreover, defendant’s argument discounts the importance of the first clause of the sentence referring to minimum wage and other Labor Code claims: “Except as it otherwise provides, this Agreement applies, without limitation…” (Bonventre Decl., Ex. F, § 2.) In section 7, the agreement “otherwise provides” that it does not apply to PAGA claims.

Defendant further argues, “Had the California Supreme Court never ruled in Iskanian that PAGA waivers in arbitration agreements were unenforceable, Defendant most assuredly would not have included the PAGA carve-out language to which Plaintiff repeatedly clings in his opposition.” (Reply, p. 4.) What defendant would have done is irrelevant. Only what it actually did matters. “Contract formation is governed by objective manifestations, not the subjective intent of any individual involved. The test is what the outward manifestations of consent would lead a reasonable person to believe.” (Allen v. Smith (2002) 94 Cal.App.4th 1270, 1277, internal quotes and alterations omitted.)

Finally, defendant contends the court should sever the language “not within the scope of this Agreement and may be maintained in a court of law.” (Reply, p. 5.) This is an issue of interpretation, not severance. Defendant relies on authority about severing unconscionable provisions. (Civ. Code § 1670.5(a); Ajamian v. CantorCO2e, L.P. (2012) 203 Cal. App. 4th 771, 802-803.) Neither party contends this provision is unconscionable. It is not. Defendant may now regret including this provision or may have subjectively intended a different meaning, but the provision is mutual and fair.

Disposition

Defendant Global Aviation Management Group, Corp.’s motion to compel arbitration is denied. Defendant shall serve and file a responsive pleading within 20 days.