Judge: Armen Tamzarian, Case: 24STCV10253, Date: 2024-09-23 Tentative Ruling
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Case Number: 24STCV10253 Hearing Date: September 23, 2024 Dept: 52
Defendant
Tesla, Inc.’s Motion to Compel Arbitration of Individual PAGA Claim and Stay
Remaining Non-Individual PAGA Claims
Defendant
Tesla, Inc. (formerly known as Tesla Motors, Inc.) moves to compel arbitration
of plaintiff Jack Panossian’s individual claims under the Private Attorneys
General Act (PAGA) and stay the representative PAGA claims. (See Viking River Cruises, Inc. v. Moriana
(2022) 596 U.S. 639, 662-663 (Viking River); Adolph v. Uber
Technologies, Inc. (2023) 14 Cal.5th 1104, 1113-1114 (Adolph)
[discussing arbitrable “individual” PAGA claims and nonarbitrable
representative or “non-individual” claims].)
FAA’s
Transportation Worker Exception does not apply
Plaintiff argues the Federal
Arbitration Act (FAA) does not apply because this case falls within the
transportation worker exception to the act.
He further contends that “[b]ecause the FAA does not control here,
substantive California law applies . . .
and pursuant to Labor Code §§ 229 and 432.6, Plaintiff’s suit may be maintained
without regard to the existence of any private agreement to arbitrate.” (Opp., p. 5.)
The court does not reach the
issue of whether Labor Code sections 229 and 432.6 prohibit an order compelling
arbitration in this case because the court rejects plaintiff’s argument
regarding the FAA.
The FAA does not “apply
to contracts of employment of seamen, railroad employees, or any other class of
workers engaged in foreign or interstate commerce.” (9 U.S.C. § 1.) “[A] transportation worker’s employment
agreement does not become subject to the FAA simply because the agreement
declares that it is subject to the FAA.
By stating that it is subject to and governed by the FAA, the agreement
necessarily incorporates section 1 of the FAA, which includes the exemption for
transportation workers.” (Garrido v.
Air Liquide Industrial U.S. LP (2015) 241 Cal.App.4th 833, 839–840.)
Plaintiff
does not meet his burden of showing he belonged to “a class of workers engaged
in foreign or interstate commerce.” (9
U.S.C. § 1.) “The party opposing arbitration bears the burden of demonstrating that
the exemption applies.” (Performance
Team Freight Systems, Inc. v. Aleman (2015) 241 Cal.App.4th 1233, 1241.) This exception does not require the
employee to “work for a company in the transportation industry.” (Bissonnette v. LePage Bakeries Park St.,
LLC (2024) 601 U.S. 246, 252.) Instead,
“a
transportation worker is one who is ‘actively’ ‘ “engaged in transportation” of
... goods across borders via the channels of foreign or interstate
commerce.’ [Citation.] In other words, any exempt worker ‘must at
least play a direct and “necessary role in the free flow of goods” across
borders.’ ” (Id. at p. 256.) The transportation worker exception
“emphasizes the actual work that the members of the class, as a whole,
typically carry out.” (Southwest
Airlines Co. v. Saxon (2022) 596 U.S. 450, 456 (Saxon).)
Plaintiff’s
final position at Tesla was as a “Parts Advisor for the Parts Department at
Tesla’s Burbank Service Center.”
(Panossian Decl., ¶ 3.) Plaintiff
testifies, “As a Parts Advisor for Tesla, I handled a variety of
responsibilities. My main job objective
was to facilitate the ordering, movement, and acquisition of parts and
equipment for the various Tesla electric vehicles the Service Center serviced
on a daily basis. In order to fulfill
that objective, I worked closely with other departments of the Service Center,
including the in-house technicians who – like mechanics – were responsible for
the actual repairing and diagnostics of the Tesla vehicles.” (Id., ¶ 4.)
Plaintiff
further states that, when needed parts were not in stocked at the Burbank
Service Center or other nearby centers, he would order parts “from out of
state” or “from outside of the United States.”
(Panossian Decl., ¶ 5.) If nearby
centers had the part, he would “make arrangements, i.e., mailing or courier
service, to have that part sent or picked up for transport.” (Ibid.)
Plaintiff
testifies he “also submitted orders to request delivery of lithium-ion battery
packs for the various Tesla electric vehicles.”
(Panossian Decl., ¶ 6.) “On a
weekly basis, 6 to 8 battery packs would be delivered to our Service Center on
an eighteen-wheeler semi-truck.” (Ibid.) “[T]hese battery packs originated from out of
state.” (Ibid.) Plaintiff “had to use the Service Center’s
forklift truck, drive over to the trailer of the semi-trailer truck, secure and
unload the battery packs from the semi-truck’s trailer and organize or store it
within the Service Center.” (Ibid.) Plaintiff similarly “would use the forklift
truck to” unload windshields and “would sometimes use the forklift truck to”
unload tires. (Id., ¶ 7.)
Finally,
plaintiff testifies he “maintained responsibilities in the orderly packaging
and shipping of various return items,” such as “the battery, CPU, air
conditioning systems, condensers, [and] circuit boards … of Tesla electric
vehicles.” (Panossian Decl., ¶ 8.) He was “responsible for the repackaging and
printing of shipping labels” and would send the items “to other locations in
and outside of California.” (Ibid.)
With its
reply brief, defendant submitted the declaration of Faiz Malik, a senior
regional manager of Tesla’s service and collision parts operations. (Malik Decl., ¶ 1.) He testifies, “Plaintiff’s manager directly
reported to me during Plaintiff’s employment with Tesla.” (Id., ¶ 2.) “The primary role of a Parts Advisor is to
support repairs of Tesla’s products. A
Parts Advisor is responsible for locating, ordering, and organizing parts that
are used by Technicians in the repair of Tesla vehicles. Except in rare instances, when a Parts Advisor
sources a part, the part is already in Tesla’s possession because Tesla has
manufactured the part itself or it has already taken possession of the part
from a vendor. A Parts Advisor typically
sources parts from the inventory of the Service Center where they work, and
sometimes they source parts from another Tesla Service Center or distribution
center. Parts Advisors are not
responsible for shipping, receiving, or delivering Tesla’s finished vehicles. Parts Advisors play no role in transporting
goods across state or international borders.”
(Id., ¶ 4.)
Malik
further testifies, “The physical component of the job – where Parts Advisors
are involved with the physical movement of parts – is limited. The bulk of the job involves non-physical
tasks such as monitoring inventory within the parts system, communicating parts
updates and availability with relevant team members, preparing internal orders,
reviewing upcoming appointments and ensuring they are properly prepared and
documented in Tesla’s system, among other tasks, where they are not involved in
the movement of parts.” (Malik Decl., ¶
6.) He states, “A Parts Advisor in
California does not frequently handle delivery of Tesla batteries, windshields,
or tires. On average, a Parts Advisor
spends about 10 to 15 minutes a week handling deliveries of Tesla battery packs
to service centers, about 20 to 40 minutes a week handling the delivery of
windshields, and about 25 minutes of their workday handling the delivery of
tires. A Parts Advisor in California
typically spends about a maximum of 30 minutes a week on handling the packing
and shipping of return items.” (Id.,
¶ 10.)
Malik also
testifies that most Tesla parts that plaintiff would order originated in
California: “There are more than 50 Service Centers in California, including
multiple Service Centers in Southern California. Tesla also has multiple distribution centers
in California, including the Lathrop distribution center, which is the largest
distribution center in the United States.
Given the sheer number and size of the Service Centers and distribution
centers in California, the vast majority of the parts that a Parts Advisor in
California sources originate from Service Centers and distribution centers
within California. Based on my review of
Tesla’s data maintained in the ordinary course of business, approximately
85-90% of parts that Parts Advisors source originate from Service Centers and
distribution centers in California.”
(Malik Decl., ¶ 8.) Moreover,
Malik testifies that “approximately 85% of the time,” the Service Center
already stocks the parts needed for a repair.
(Id., ¶ 9.)
Based on
this record, the court finds plaintiff does not meet his burden of showing he
was a transportation worker. The work
plaintiff performs differs substantially from that in Saxon. There, though the employee’s job title was a
“ramp supervisor” (596 U.S. at p. 454), the Supreme Court repeatedly referred
to how “frequently” the plaintiff physically loaded and unloaded cargo (id.
at pp. 450, 453, 454, 455, 456, 463). The
Court defined the “class of workers” as “cargo loaders.” (Id. at p. 461.) “[A]irplane cargo loaders plainly do perform ‘activities
within the flow of interstate commerce’ when they handle goods traveling in
interstate and foreign commerce, either to load them for air travel or to
unload them when they arrive.” (Id.
at p. 463.) The Court concluded the
plaintiff “frequently loads and unloads cargo on and off airplanes that travel
in interstate commerce” and “therefore belongs to a ‘class of workers engaged
in foreign or interstate commerce’ to which § 1’s exemption applies.” (Ibid.) In this case, plaintiff might be a
transportation worker if the relevant class of workers were forklift drivers,
which is analogous to cargo loaders. That
is not the relevant class of workers. The
record shows plaintiff only occasionally uses a forklift to unload cargo.
The
relevant class of workers is “parts advisors,” which primarily means managing
inventory. Aside from driving a forklift
to unload cargo, none of plaintiff’s other duties are those of a transportation
worker.
Plaintiff
also relies on authority about warehouse workers. In Ortiz v. Randstad Inhouse Services, LLC
(9th Cir. 2024) 95 F.4th 1152, 1161 (Ortiz), the employee did “warehouse
work: transporting packages to and from storage racks, helping other employees
in obtaining packages so they could be shipped, and assisting the Outflow
Department to prepare packages for their subsequent shipment.” The court analogized to Saxon: “Like
Saxon, Ortiz handled Adidas products near the very heart of their supply chain.
In each case, the relevant goods were
still moving in interstate commerce when the employee interacted with them, and
each employee played a necessary part in facilitating their continued movement.” (Id. at p. 1162.) The court concluded, “Saxon ensured that
baggage would reach its final destination by taking it on and off planes, while
Ortiz ensured that goods would reach their final destination by processing and
storing them while they awaited further interstate transport.” (Ibid.)
In
contrast, plaintiff, is not part of an “ongoing interstate journey to [the
goods’] final destination.” (Ortiz,
supra, 95 F.4th at p. 1162.) He worked
at the goods’ final destination, at least as for the approximately 85% of parts
that were already stocked at his workplace.
(Malik Decl., ¶ 9.) A product’s
interstate journey ends if it is “transformed,” such as “constituent
ingredients” being made “into meals.” (Carmona
Mendoza v. Domino's Pizza, LLC (9th Cir. 2023) 73 F.4th 1135, 1138.) That is what occurred at plaintiff’s
workplace. Malik testifies, “Tesla’s
Service Centers use the component parts to perform repairs, maintenance and
other services on Tesla vehicles that it had previously sold to its customers. After the Service Tesla’s Service
Centers use the component parts to perform repairs, maintenance and other
services on Tesla vehicles that it had previously sold to its customers.” (Malik Decl., ¶ 5.)
Plaintiff’s
class of workers is not one that unloads, transports, or prepares cargo during
its interstate journey. Nearly his
entire job concerned ordering vehicle parts to be used to complete repairs at
his workplace in Burbank. He did not
transport the parts to other service centers or to consumers. He only sometimes unloaded parts before they
were used for repairs. Plaintiff does
not meet his burden of showing he falls within the FAA’s transportation worker
exemption. The FAA applies and therefore
preempts Labor Code sections 229 and 432.6, which plaintiff contends would
otherwise permit him to avoid arbitration.
Unconscionability
Plaintiff argues the agreement is unconscionable. Unconscionability
requires both procedural and substantive unconscionability using a sliding
scale. (OTO, L.L.C. v. Kho (2019)
8 Cal.5th 111, 125.) “Procedural
unconscionability focuses on the elements of oppression and surprise.” (Serafin v. Balco Properties Ltd., LLC
(2015) 235 Cal.App.4th 165, 177.)
“Substantive unconscionability focuses on the actual terms of the
agreement and evaluates whether they create overly harsh or one-sided
results. (Ibid., internal quotes
omitted.)
Plaintiff shows a low degree of procedural unconscionability. “ ‘Arbitration contracts imposed as a
condition of employment are typically adhesive.’ ” (Davis v. Kozak (2020)
53 Cal.App.5th 897, 906 (Davis).) “By itself, however,
adhesion establishes only a ‘low’ degree of procedural unconscionability.” (Id. at p. 907.) Plaintiff shows nothing oppressive or
surprising other than adhesion. Including
the arbitration provision in a four-page letter was not surprising or
inconspicuous.
Plaintiff shows no substantive unconscionability. He argues the provision permitting injunctive
relief is not mutual because that term typically favors employers. A provision that is facially mutual may “be
substantively unconscionable when it requires the employee to arbitrate the
claims he or she is mostly likely to bring, but allows the employer to go to
court to pursue the claims it is most likely to bring.” (Carbajal v. CWPSC, Inc. (2016)
245 Cal.App.4th 227, 248.)
Here, the parties’ agreement provides, “Nothing in this agreement is
intended to prevent either you or Tesla from obtaining injunctive relief in
court to prevent irreparable harm pending the conclusion of any such
arbitration; thus, claims for temporary or emergency injunctive relief to
preserve the status quo prior to and/or in aid of arbitration are permitted.” (Flesch Decl., Ex. 1, p. 3.)
This provision is comparable to one the California Supreme Court held
was not unconscionable. Even assuming “employers
are, in general, more likely than employees to seek provisional relief during
the pendency of an arbitration,” a clause permitting provisional relief “does
no more than recite the procedural protections already secured by [Code of
Civil Procedure] section 1281.8(b), which expressly permits parties to an
arbitration to seek preliminary injunctive relief during the pendency of the
arbitration.” (Baltazar v. Forever 21,
Inc. (2016) 62 Cal.4th 1237, 1247.)
Plaintiff also argues the agreement is substantively unconscionable because
it purports to waive unwaivable rights to bring representative actions,
including PAGA or class actions. But, as
plaintiff acknowledges, if the FAA applies, it preempts California law and
thereby makes those rights waivable. Regardless,
if this provision were substantively unconscionable, it would be
severable. “The strong legislative and
judicial preference is to sever the offending term and enforce the balance of
the agreement” unless the agreement is “permeated by unconscionability.” (Lange v. Monster
Energy Company (2020) 46 Cal.App.5th 436, 453, internal
quotes, citations, and alterations omitted.)
Plaintiff identifies at most a single unconscionable provision. Unconscionability does not permeate the
agreement. The lone purportedly
unconscionable term could be severed.
Individual PAGA Claim
Plaintiff
argues defendant cannot move to compel his individual PAGA claims because there
is no such thing. He contends, “[A]n
individual PAGA claim is a fiction born from Viking River.” (Opp., p. 17.) This court, however, is bound by Viking
River. Moreover, while some
decisions by the California Court of Appeal have criticized the “legal fiction”
plaintiff challenges, the California Supreme Court confirmed its overall validity
in Adolph.
Plaintiff
relies on Balderas v. Fresh Start Harvesting, Inc. (2024) 101
Cal.App.5th 533 (Balderas), which held, “[A]n employee who does not
bring an individual claim against her employer may nevertheless bring a PAGA
action for herself and other employees of the company.” (Id. at p. 536.) “The inability for an employee to pursue an
individual PAGA claim does not prevent that employee from filing a
representative PAGA action.” (Id.
at p. 537.) The court held the plaintiff
had standing to bring a PAGA action based on the following principle: “There
are only two requirements for PAGA standing.
‘The plaintiff must allege that he or she is (1) “someone ‘who was
employed by the alleged violator’ ” and (2) someone “ ‘against whom one or more
of the alleged violations was committed.’ ” ’ ”
(Id. at pp. 538-539, quoting Adolph, supra, 14 Cal.5th at
p. 1122.)
Plaintiff’s
reliance on Balderas is misplaced.
The Court of Appeal did not review a motion to compel arbitration. Rather, it reversed the trial court’s order
striking the plaintiff’s complaint on the basis that the plaintiff had no
standing “because she had not filed an individual action seeking PAGA relief
for herself.” (Balderas, supra,
101 Cal.App.5th at p. 536.) That an
employee has standing to bring non-individual PAGA claims (without individual
PAGA claims) has no bearing on the extent to which an employer can compel
arbitration of disputes involved in non-individual PAGA claims.
Assuming
plaintiff brings only representative or non-individual PAGA claims in this
action, plaintiff still agreed to arbitrate an essential element of that
dispute. The parties’
arbitration agreement provides, “[T]o ensure the rapid and economical
resolution of disputes that may arise in connection with your employment with
Tesla, you and Tesla agree that any and all disputes, claims, or causes of
action, in law or equity, arising from or relating to your employment.” (Flesch Decl., Ex. 1, p. 2.)
Bringing
a representative PAGA claim requires plaintiff to resolve a dispute arising
from his employment: whether he is an aggrieved employee under PAGA. “To have PAGA standing, a plaintiff must be an
‘aggrieved employee’ — that is, (1) ‘someone “who was employed by the alleged
violator” ’ and (2) ‘ “against whom one or more of the alleged violations was
committed.” ’ ” (Adolph, supra,
14 Cal.5th at p. 1114.) Determining whether
defendant
violated plaintiff’s rights under the Labor Code is both (a) necessary for him
to have standing in this action, and (b) an arbitrable “dispute” under the
parties’ arbitration agreement.
The
Federal Arbitration Act generally requires enforcing written agreements “to
settle by arbitration a controversy … arising out of” a contract. (9 U.S.C. § 2.) Similarly, the California Arbitration Act generally
requires ordering arbitration of a “controversy” when a party establishes “the
existence of a written agreement to arbitrate a controversy.” (Code Civ. Proc., § 1281.2.) Plaintiff’s non-individual PAGA claims
include a “controversy” he agreed to arbitrate: whether defendant committed any
Labor Code violations against him.
Plaintiff has not established any basis permitting the court to refuse
to enforce the arbitration agreement as to that controversy.
Adolph
contemplated
this scenario. The California Supreme
Court stated Uber had “no convincing argument” against the plaintiff’s proposal
that “his PAGA action could proceed in the following manner if he were ordered
to arbitrate his individual PAGA claim: First, the trial court may exercise its
discretion to stay the non-individual claims pending the outcome of the
arbitration pursuant to section 1281.4 of the Code of Civil Procedure. Following the arbitrator’s decision, any party
may petition the court to confirm or vacate the arbitration award under section
1285 of the Code of Civil Procedure. If
the arbitrator determines that Adolph is an aggrieved employee in the process
of adjudicating his individual PAGA claim, that determination, if confirmed and
reduced to a final judgment [citation], would be binding on the court, and
Adolph would continue to have standing to litigate his nonindividual claims. If the arbitrator determines that Adolph is
not an aggrieved employee and the court confirms that determination and reduces
it to a final judgment, the court would give effect to that finding, and Adolph
could no longer prosecute his non-individual claims due to lack of standing.” (Adolph, supra, 14 Cal.5th at pp.
1123-1124.) That procedure is
appropriate in this action.
Disposition
Defendant Tesla, Inc.’s motion to
compel arbitration and stay proceedings is granted. The court hereby orders plaintiff Jack
Panossian to arbitrate his individual PAGA claims and the controversy over
whether he is an “aggrieved employee” under PAGA. The court hereby stays the entire
action pending resolution of the arbitration proceeding.