Judge Bruce G. Iwasaki, Case Number: 23STCV25426, Date: 2024-06-12 Tentative Ruling

Tentative Ruling: The Motion to Compel Arbitration is denied.

In this employment action, Plaintiff Samuel Alvarado (Plaintiff) filed a Complaint on October 18, 2023, alleging numerous wage and hour Labor Code claims against his former employer, Defendant Henley Pacific LA LLC (Defendant). No Private Attorneys General Act (PAGA) claim was alleged. Then, on February 6, 2024, Plaintiff filed a First Amended Complaint, alleging a single representative PAGA cause of action. The PAGA cause of action incorporates the numerous Labor Code violations contained in the original Complaint. But the First Amended Complaint pleads that “Plaintiff is not seeking individual/victim specific relief.” (FAC ¶ 31.)

On May 14, 2024, Defendant filed a motion to compel arbitration pursuant to the parties’ arbitration agreement. In opposition, Plaintiff argues the FAA does not apply to this arbitration agreement and the PAGA claims are not arbitrable.

Under Code of Civil Procedure section 1281.2, a court may order arbitration of a controversy if it finds that the parties have agreed to arbitrate that dispute. Because the obligation to arbitrate arises from contract, the court may compel arbitration only if the dispute in question is one in which the parties have agreed to arbitrate. (Weeks v. Crow (1980) 113 Cal.App.3d 350, 352.) Since arbitration is a favored method of dispute resolution, arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question. (Id. at p. 353; Segal v. Silberstein (2007) 156 Cal.App.4th 627, 633.)

Defendant moves to compel arbitration of Plaintiff’s individual PAGA claims and stay the remaining representative PAGA claims while the arbitration is pending.

Defendant seeks to compel arbitration based on a 2022 Arbitration Agreement. In support of the existence of an arbitration agreement, Defendant submits evidence that Plaintiff began his employment with Defendant as a certified CSA on November 21, 2022, at Defendant’s Melrose Service Center located in Los Angeles, California. (Bowditch Decl., ¶ 15.) As part of the hiring and onboarding process, Defendant presented Plaintiff with the Arbitration Agreement through its Onboarding Portal within its HRIS System. (Bowditch Decl., ¶ 3, Ex. A.) To access the Arbitration Agreement, Plaintiff was required to click on a link in an email sent to his personal email address, which he provided during the application process. (Bowditch Decl., ¶¶ 3-4, Ex. B.) Then, Plaintiff was required to create a unique password, which was known only to him, and set up his unique user credentials within the Onboarding Portal. (Bowditch Decl., ¶¶ 5-6.) To review the Arbitration Agreement, Plaintiff was required to review and acknowledge Defendant’s Notice and Consent to Use Electronic Signatures; Plaintiff agreed to the use of his electronic signature and then opened, viewed, and signed the Arbitration Agreement using an electronic signature. (Bowditch Decl., ¶¶ 8–11, 15–19, Exs. A, D.)

The Agreement provides that Plaintiff and Defendant (referred to as the Company) “mutually consent to the resolution by binding arbitration of all claims or causes of action that the Company may have against [him] or that [he] may have against the Company or the “Company’s” current and former owners, partners, members, officers, directors, employees, representatives and agents, all subsidiary and affiliated entities, all benefit plans, the benefit plans’ sponsors, fiduciaries, administrators, affiliates, and all successors and assigns of any of them. (Bowditch Decl., Ex. A.) The Agreement continues by stating Specifically, these claims include, but are not limited to “claims for violation of any federal, state, local or other law, statute, regulation or ordinance, including, without limitation . . . compensation, classification, minimum wage, seating, expense reimbursement, overtime, meal breaks and rest periods[.]” (Bowditch Decl., Ex. A.)

The Arbitration Agreement further provides a class waiver which states, in pertinent part:

“This Agreement affects your ability to participate in class or collective actions. Both the Company and you agree to bring any dispute in arbitration on an individual basis only, and not on a class or collective basis on behalf of others. There will be no right or authority for any dispute to be brought, heard, or arbitrated as a class or collective action, or as a member in any such class or collective proceeding (“Class Action Waiver”). Notwithstanding any other provision of this Agreement or the JAMS Rules, disputes in court or arbitration regarding the validity, enforceability or breach of the Class Action Waiver may be resolved only by the court and not by an arbitrator. In any case in which (1) the dispute is filed as a class or collective action and (2) there is a final judicial determination that all or part of the Class Action Waiver is unenforceable, the class and/or collective action to that extent must be litigated in a civil court of competent jurisdiction, but the portion of the Class Action Waiver that is enforceable shall be enforced in arbitration… (Bowditch Decl., Ex. A, pp. 2–3 [emphasis in original].)

Finally, the Arbitration Agreement states it “is governed by the Federal Arbitration Act (9 U.S.C. §§ 1-16.).” (Bowditch Decl., Ex. A.)

In opposition, Plaintiff does not dispute the existence of the arbitration agreement or otherwise deny signing the agreement. Thus, there is no factual dispute as to the existence of a valid arbitration agreement between the parties. Rather, the dispute is whether Plaintiff’s claim is arbitrable under the Arbitration Agreement.

The Arbitration Agreement recites that it is governed by the FAA. But Plaintiff argues that Defendant has not presented any evidence to support the application of the Federal Arbitration Act (FAA). In its moving papers, Defendant argues – without evidence – that it operates more than 100 service stations providing instant oil changes across the state of California; further, these service stations utilize products and supplies that are shipped from out of state, and these service centers provide services to travelers from out-of-state. (Mot., 12:9-11.) In its reply, however, Defendant submits evidence substantiating these statements. (Bowditch Reply Decl., ¶¶ 2-5.) Thus, Defendant has submitted evidence to support the applicability of the FAA.

In opposition, Plaintiff relies on Hoover v. American Income Life Insurance Co. (2012) 206 Cal.App.4th 1193, to argue that the evidence fails to demonstrate “that interstate commerce is connoted by Plaintiff’s employment relationship with Defendant.” (Opp., p. 2.) In Hoover, the employee was a life insurance agent located in California who sold policies for a Texas firm. (Hoover, supra, 206 Cal.App.4th at p. 1207.) Division Two of Fourth District Court of Appeal held there was no evidence to show the employment relationship “had a specific effect or ‘bear[ing] on interstate commerce in a substantial way.’ [Citation.]” (Id. at p. 1208.)

As a preliminary matter, several cases have declined to follow Hoover. (See e.g., Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 682; Evenskaas v. California Transit, Inc. (2022) 81 Cal.App.5th 285, 297, fn. 5; Duarte v. JPMorgan Chase Bank, National Association (C.D. Cal., Nov. 15, 2021, No. 221CV01907ODWAFMX) 2021 WL 5299908, at *3 [“Moreover, to the extent Hoover, a state appellate-level case, suggests the relationship between a single employee and his or her employer must have ‘a specific effect or bearing on interstate commerce in a substantial way,’ id. (quotation marks, brackets, and citation omitted), the Court disagrees”].)

Moreover, the discussion in Hoover regarding interstate commerce was dicta. In refusing to enforce the arbitration agreement, the appellate court held the defendant implicitly waived its right to arbitrate because, prior to moving to compel arbitration, it had caused considerable delay, conducted litigation in a style inconsistent with the right to arbitrate, and availed itself of mechanisms not available at arbitration, such as depositions. (Id. at p. 1203-1204.) The court then further explained that even if defendant “had not waived its right to assert arbitration, [the court] would [have] decide[d] [defendant] could not compel arbitration” (id. at p. 1206) of plaintiff's wage and hour claims because California law provides a judicial forum for such claims “ ‘without regard to the existence of any private agreement to arbitrate ...’ ” (Id. at p. 1207 [citing Labor Code, § 229].) The court noted that although this state law is inapplicable “when there is federal preemption under the FAA,” the defendant had failed to provide evidence demonstrating its contract with plaintiff had any effect on interstate commerce. (Id. at pp. 1207–1208.) According to the court, the only “facts” defendant had established were that plaintiff “was a California resident who sold life insurance policies” and that the defendant was “based in Texas.” (Ibid.) The court concluded that, standing alone, such facts were insufficient to “demonstrate FAA coverage.” (Ibid.)

In any event, as explained in Duarte v. JPMorgan Chase Bank, National Association (C.D. Cal., Nov. 15, 2021, No. 221CV01907ODWAFMX) 2021 WL 5299908 – Hoover applies a too narrow view of the applicability of the FAA. The U.S. Supreme Court has clarified that “application of the FAA [is not defeated] because the individual ... transaction[ ], taken alone, did not have a ‘substantial effect on interstate commerce.’ ” (Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56–57.) Rather, the question is whether the Defendant’s employment relationships with its employees, considered in the aggregate, affect interstate commerce.

Here, the evidence for applicability of the FAA is sufficient. As the reply notes, Defendant operates more than 100 service centers across the state of California providing instant drive-through oil changes and related automobile services. (Bowditch Reply Decl., ¶ 2.) The oil received by Defendant’s service centers and sold to customers is blended and manufactured outside the state of California, and then transported into California for sale. Similarly, the oil filters received by Defendant’s service centers and sold to customers are manufactured outside the state of California, including as far away as China, and transported into California for sale. (Bowditch Reply Decl., ¶ 2.) Additionally, the equipment used by Defendant’s service center employees are manufactured and supplied from Oklahoma and the uniforms are manufactured outside the state. (Bowditch Reply Decl., ¶ 3.) Finally, Defendant’s service centers provide services to numerous travelers from outside the State of California, who are traveling within California, and to travelers who will be heading on travel outside the State of California following service of their cars. (Bowditch Reply Decl., ¶ 5.)

Accordingly, the FAA applies to this Arbitration Agreement. The issue turns to whether the Agreement applies to this cause of action.

Plaintiff also argues that his PAGA claims are expressly excluded from the Arbitration Agreement. The Agreement provides that it does not apply to a “class or collective action.” Plaintiff is correct and Defendant – to a certain extent – does not disagree.

In reply, Defendant argues that a separate provision of the Arbitration Agreement governs PAGA claims – not the Class Action Waiver provision, described above. The Arbitration Agreement states: “Private attorney general representative actions brought on behalf of the state under the California Labor Code are not arbitrable, not within the scope of this Agreement and may be maintained in a court of law, but a claim you bring on your own behalf as an aggrieved employee for recovery of underpaid wages (as opposed to a representative claim for civil penalties) is arbitrable.” (Bowditch Decl., Ex. A at 2.)

Plaintiff contends that there are no claims he has brought on his own behalf to arbitrate. He insists he is not seeking “individual/victim specific relief or underpaid wages under this particular cause of action.” Thus, Plaintiff takes the position that there is nothing to arbitrate and requests the Court deny the motion and proceed with the representative PAGA claims.[1]

In response, Defendant argues that a PAGA representative claim cannot exist “solely on behalf of other alleged aggrieved employees.”

However, the recent case of Balderas v. Fresh Start Harvesting, Inc. (2024) 101 Cal.App.5th 533 holds that a plaintiff may have standing to bring a representative PAGA action without filing an individual PAGA claim. In Balderas, the Court of Appeal relied on our Supreme Court’s decision in Adolph to conclude that “the Viking River requirement of having to file an individual PAGA cause of action to achieve standing to file a representative PAGA suit was incorrect.” (Balderas, supra, 101 Cal.App.5th at p. __; 320 Cal.Rptr.3d 326, 329.) Rather, 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.” ’ ” (Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1120.)

The court in Balderas continued by stating that requiring individual claims “ ‘would “thwart the Legislature's clear intent to deputize employees to pursue sanctions on the state's behalf.” ’ ” (Ibid.; see also Johnson v. Maxim Healthcare Services, Inc. (2021) 66 Cal.App.5th 924, 281 Cal.Rptr.3d 478 [employee need not bring an individual claim against her employer to have standing to pursue a PAGA claim; it is sufficient to allege the employee suffered a Labor Code violation].)”

Based on this legal authority and the relief sought in the First Amended Complaint, only representative PAGA claims are alleged. No individual claims have been pleaded. By its terms, the Arbitration Agreement does not cover the representative claims.

[1] The Court acknowledges that Plaintiff’s opposition memorandum is inconsistent on this point, occasionally referring to “Plaintiff’s individual claims.” (Oppos. 5:24) But the Amended Complaint’s sole cause of action is for representative PAGA claims and paragraph 31 disclaims individual relief.

Department 58