Judge David S. Cunningham, Case 20STCV04089 2022-10-20 Tentative Ruling

Judge: David S. Cunningham, Case: 20STCV04089, Date: 2022-10-20 Tentative Ruling

Salsbury’s motion to compel arbitration is granted as to Chavez’s individual claims, including the individual PAGA claim.[1]

* whether the “class arbitration” issue should be decided by the arbitrator or the Court; and

Salsbury is “[a] California corporation with its corporate headquarters and principal place of business in Los Angeles[.]” (Second Amended Complaint (“SAC”), ¶ 10(a).)

Culmin Staffing Group, Inc. (“Culmin”) is “[a] Delaware corporation with its principal place of business in New Jersey” and “conduct[s] business in numerous counties” in California, “including in Los Angeles County[.]” (Id. at ¶ 11(a)-(b).)

Chavez “is a California resident[.]” (Id. at ¶ 8.) He alleges that Salsbury and Culmin jointly employed him and that he worked for them as a general laborer from June 2017 to September 2019. (See ibid.)

Chavez filed the instant case (20STCV04089) on 1/31/20. He seeks to represent a class of Salsbury’s and Culmin’s current and former hourly, non-exempt California employees, alleging “wage and hour” violations under the Labor Code – e.g., failure to pay overtime and failure to provide meal and rest breaks – and a representative PAGA claim.

He also filed an individual action against Salsbury and Culmin (20STCV32978) on 8/28/20, which settled on 2/2/22. He alleged discrimination and retaliation claims.

Here, Salsbury moves to compel arbitration. The settlement agreement in the individual action includes an arbitration provision. Salsbury contends the provision requires Chavez to arbitrate the claims in the instant case.

“[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4^th 394, 413.)

“Under ‘both federal and state law, the threshold question . . . is whether there is an agreement to arbitrate.’” (Cruise v. Kroger Co. (2015) 233 Cal.App.4^th 390, 396, emphasis in original.)

The burden of proof rests with the petitioner. (See Rosenthal, supra, 14 Cal.4^th at 413 [requiring the petitioner to prove the existence of the agreement “by a preponderance of the evidence”].) To meet the burden, “the provisions of the written agreement and the paragraph that provides for arbitration . . . must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.” (Cal. Rules of Court, rule 3.1330; see also Condee v. Longwood Management Corp. (2001) 88 Cal.App.4^th 215, 218 [same].)

“Competent evidence is required to establish both the existence of the arbitration agreement and any ground for denial.” (Knight, et al., Cal. Prac. Guide: Alt. Disp. Res. (The Rutter Group 2021) ¶ 5:321.) “The verified petition (and attached copy of the agreement) normally proves the existence of the arbitration agreement. Affidavits or declarations may be necessary when factual issues are tendered.” (Ibid.)

The settlement agreement in the individual action (20STCV32978) is titled “SETTLEMENT AGREEMENT AND GENERAL RELEASE[.]” (McLoughlin Decl., Ex. A, p. 1, capitalizing, bolding, and underlining in original.)

The arbitration provision appears in paragraph 11. It states that (1) “[a]ny dispute” regarding the agreement, “unreleased claims[,]” or “future disputes” must be “resolved exclusively” by “final and binding arbitration[,]” (2) the American Arbitration Association (“AAA”) shall administer the arbitration using AAA rules, and (3) the Federal Arbitration Act (“FAA”) governs:

11. Any dispute arising under this Agreement or regarding the formation, validity, scope, breach or interpretation of this Agreement and any dispute between the parties regarding unreleased claims or any future disputes or claims between the parties, if any, shall be submitted and resolved exclusively through final and binding arbitration administered by the [AAA] and pursuant to the provisions of the applicable AAA Rules. The parties agree that this obligation to arbitrate shall be governed by the [FAA] and that AAA and the arbitrator shall consider this Agreement to be an individually negotiated agreement. In the event that either party violates this provision of the Agreement by continuing or initiating a civil action, the other party shall be entitled to recover its costs and attorneys' fees incurred in obtaining an order enforcing this agreement to arbitrate.

(Id. at Ex. A, p. 3, ¶ 11; see also id. at Ex. A, p. 5, ¶ 19 [stating that “[t]his Agreement shall be construed and enforced in accordance with, and governed by, the laws of the State of California, except to the extent the [FAA] applies to and governs the enforceability of the arbitration provision of this Agreement”], emphasis added.)

Just above the signature lines, the settlement agreement emphasizes that it was “freely and voluntarily entered into by Chavez on the advice of his attorneys of record in the Action, the Law Offices of Ramin R. Younessi.” (Id. at Ex. A, p. 5, ¶ 21, emphasis added.)

Importantly, Chavez’s signature and printed name appear on the signature lines. (See id. at Ex. A, p. 5.) There is no dispute that he signed the settlement agreement following weeks of revisions and negotiations between his counsel and defense counsel. (See Opposition, p. 2 [admitting that Chavez signed the settlement agreement]; see also McLoughlin Decl., ¶ 4 [representing that Chavez’s counsel and defense counsel revised and negotiated the settlement agreement from 12/29/21 to 1/24/22].)

Chavez asserts that the arbitration provision is unenforceable because the settlement agreement carves out the instant claims. (See Opposition, pp. 3-5 [arguing that “Plaintiff’s claims in this dispute are not within the scope of arbitration because they are explicitly carved out in the [settlement] agreement”], capitalizing and bolding deleted.)

The Court disagrees. The settlement agreement mentions the instant case in three paragraphs. The paragraphs exclude the instant claims from the list of released claims, not from arbitration:

6. In consideration of the above, and except as otherwise specifically provided by this Agreement, Chavez covenants not to sue and releases and discharges Culmin Staffing Group, Inc., Salsbury Industries, Inc. and all of their past and present predecessor, successor, parent, subsidiary, affiliated and/or related entities, and their past and present owners, shareholders, directors, officers, supervisors, employees, representatives, attorneys, insurers and agents ("the Releasees") from all claims of any kind whatsoever that Chavez has or may have against any of the Releasees arising prior to Chavez 's execution of this Agreement ( the "Released Claims"). The Released Claims include any and all claims arising out of, or related to Chavez 's employment with or termination from Culmin or Salsbury, including, but not limited to, claims or potential claims described in paragraph 1 above, all claims alleged in the Action, any claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Americans with Disabilities Act, Disability Discrimination in Violation of the Fair Employment and Housing Act, Age Discrimination in Violation of the Fair Employment and Housing Act, Age Discrimination in violation of the Fair Employment and Housing Act, Failure to Prevent Discrimination in Violation of the Fair Employment and Housing Act, Failure to Provide Reasonable Accommodations in Violation of the Fair Employment and Housing Act, Failure to Engage in the Interactive Process in Violation of the Fair Employment and Housing Act, Retaliation in Violation of the Fair Employment and Housing Act, Wrongful Termination in Violation of Public Policy, the Family and Medical Leave Act, and any analogous local or state law or statute, the California Fair Employment and Housing Act, California Government Code section 12940, et seq., the California Labor Code, the California Family Rights Act, the Employee Retirement Income Security Act, the Worker Adjustment and Retraining Notification Act, any actual or potential claim for economic damages, wrongful termination, wrongful termination in violation of public policy, hostile work environment harassment, retaliation, whistleblower claims, employment discrimination, harassment or discrimination of any kind, discrimination or harassment based on race or national origin, sexual harassment, age discrimination, disability discrimination, failure to engage in the interactive process, failure to accommodate, failure to hire, retaliation in violation of public policy, failure to mitigate, national origin discrimination, racial discrimination, physical injuries, personal injuries, work-related injuries,, breach of contract, tort, intentional and/or negligent infliction of emotional distress, intentional and/or negligent misrepresentation, breach of contract, breach of the covenant of good faith and fair dealing, fraud, wages, overtime, missed meals and break premiums, statutory or civil penalties, severance pay, relocation expenses, expenses, expense reimbursements, insurance costs, insurance reimbursements, stocks, stock options, sick leave, holiday pay, vacation pay, life insurance, health and medical insurance, medical expenses, medical expense reimbursements, reimbursements of any kind, relocation benefits, or any other fringe benefit, defamation, loss of consortium, and any other claim based upon any act or omission of Defendants and/or any of the Releasees. The Released Claims do not include Chavez's claims asserted in Los Angeles County Superior Court Case No.: 20STCV04089.

7. Section 1542 of the Civil Code of the State of California ("Section 1542") provides:

"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HA VE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR."

Chavez waives all rights under Section 1542 or any other law or statute of similar effect in any jurisdiction with respect to the Released Claims. Chavez acknowledges that he understands the significance of and specifically assumes the risk regarding the consequences of such release and such specific waiver of Section 1542. Chavez acknowledges and agrees that with the specific exception of Chavez's claims asserted in pending Los Angeles County Superior Court Case No.: 20STCV04089, this Agreement releases all claims existing or arising prior to his execution of this Agreement that he has or may have or may claim to have against Culmin, Salsbury or the Releasees, whether such claims are known or unknown and suspected or unsuspected by Chavez, and Chavez forever waives all inquiries and investigations into any and all such claims.

10. With the specific exception of Chavez's claims asserted in Los Angeles County Superior Court Case No.: 20STCV04089, Chavez agrees not to prosecute or continue to prosecute or assist any other person in the preparation or prosecution of any lawsuit, charge, complaint or claim against Defendants or the Releasees except as required by judicial process or law after Chavez gives at least ten ( l 0) days written notice of such judicial process or action to Defendants or the Releasees and their respective attorneys and they have fully asserted their confidentiality, privacy or other legal rights.

(McLoughlin Decl., Ex. A, pp. 1-3, ¶¶ 6-7, 10, emphasis added.) Effectively, the instant claims constitute unreleased claims under the plain language. (See, e.g., Reply, pp. 10-11.) It follows that the arbitration provision is enforceable as to Chavez’s individual causes of action since it states that “any dispute between the parties regarding unreleased claims . . . shall be submitted and resolved exclusively through final and binding arbitration[.]” (Id. at Ex. A, p. 3, ¶ 11, emphasis added.)[3]

Chavez contends “the broad language of the arbitration provision indicates that [Chavez] can proceed in class-wide arbitration”:

The arbitration provision is clear that the parties should be permitted to proceed in arbitration on a class-wide basis. The arbitration provision explicitly provides that “any dispute arising under this Agreement and any dispute between the parties regarding unreleased claims or any future disputes or claims between the parties...shall be submitted and resolved exclusively through final and binding arbitration.” There is no statement that claims cannot be brought on a class-wide basis. Class arbitration is permissible if there is a reasonable basis that the contract includes class claims, even if it does not expressly mention class claims. Sutter v. Oxford Health Plans, 675 F.3d 215, 222-223 (3rd Cir. 2012). If Defendant is correct in its assertion that the class action claims in this dispute are “unreleased” and therefore subject to arbitration, then Mr. Chavez should be permitted to proceed in arbitration on a class-wide basis because Mr. Chavez’s claims in this dispute seek class-wide relief.

(Opposition, p. 6, capitalizing and bolding deleted, underlined case name added.)

The Court is inclined to continue the hearing for supplemental briefing on whether class arbitration should be decided by the arbitrator or the Court and, if the Court should decide, whether the agreement allows class arbitration.

Alternatively, Chavez requests discovery to find a new class representative to litigate the class claims. (See Opposition, pp. 6-9.)

The request is premature. The Court needs to consider the supplemental briefs first.

Before Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 (“Viking River”), the applicable law was Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4^th 348. “Iskanian’s principal rule prohibits waivers of ‘representative’ PAGA claims in the first sense.” (Viking River, supra, 142 S.Ct. at 1916, underlined case name added.) “That is, it prevents parties from waiving representative standing to bring PAGA claims in a judicial or arbitral forum.” (Ibid., emphasis in original.) “But Iskanian also adopted a secondary rule that invalidates agreements to separately arbitrate or litigate ‘individual PAGA claims for Labor Code violations that an employee suffered,’ on the theory that resolving victim-specific claims in separate arbitrations does not serve the deterrent purpose of PAGA.” (Id. at 1916-1917, underlined case name added; see also, e.g., Knight, supra, at ¶ 5:49.4m [citing California case law for the proposition that a “single count under PAGA could not be ‘split into an arbitrable individual claim and a nonarbitrable representative claim”].)

In Viking River, the plaintiff “executed an agreement to arbitrate any dispute arising out of her employment.” (Viking River, supra, 142 S.Ct. at 1916.) “The agreement contained a ‘Class Action Waiver’ providing that in any arbitral proceeding, the parties could not bring any dispute as a class, collective, or representative PAGA action.” (Ibid.) “It also contained a severability clause specifying that if the waiver was found invalid, any class, collective, representative, or PAGA action would presumptively be litigated in court.” (Ibid.) “But under that severability clause, if any ‘portion’ of the waiver remained valid, it would be ‘enforced in arbitration.’” (Ibid.)

“After leaving her position” with the defendant, the plaintiff “filed a PAGA action . . . in California court.” (Ibid.) “Her complaint contained a claim that [the defendant] had failed to provide her with her final wages within 72 hours, as required by” Labor Code sections 101 and 102. (Ibid.) “But the complaint also asserted a wide array of other code violations allegedly sustained by other . . . employees, including violations of provisions concerning the minimum wage, overtime, meal periods, rest periods, timing of pay, and pay statements.” (Ibid.) The defendant “moved to compel arbitration of [the plaintiff’s] ‘individual’ PAGA claim” – i.e., “the claim that arose from the violation she suffered — and to dismiss her other PAGA claims.” (Ibid.) “The trial court denied that motion, and the California Court of Appeal affirmed, holding that categorical waivers of PAGA standing are contrary to state policy and that PAGA claims cannot be split into arbitrable individual claims and nonarbitrable ‘representative’ claims.” (Ibid.)

The Court of Appeal’s ruling “was dictated by . . . Iskanian.” (Ibid., underlined case name added.) “Iskanian’s principal prohibition required the lower courts to treat the representative-action waiver” in Viking River “as invalid insofar as it was construed as a wholesale waiver of PAGA standing.” (Id. at 1917, underlined case name added.) “The agreement's severability clause, however, allowed enforcement of any ‘portion’ of the waiver that remained valid, so the agreement still would have permitted arbitration of [the plaintiff’s] individual PAGA claim even if wholesale enforcement was impossible.” (Ibid.) “But because” Iskanian “prohibits division of a PAGA action into constituent claims, the state courts refused to compel arbitration of that claim as well.” (Ibid.)

The High Court granted review and reversed, holding, eight to one, that the FAA preempts Iskanian “insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Id. at 1924.) The opinion instructs:

This holding compels reversal in this case. The agreement between [the defendant] and [the plaintiff] purported to waive “representative” PAGA claims. Under Iskanian, this provision was invalid if construed as a wholesale waiver of PAGA claims. And under our holding, that aspect of Iskanian is not preempted by the FAA, so the agreement remains invalid insofar as it is interpreted in that manner. But the severability clause in the agreement provides that if the waiver provision is invalid in some respect, any “portion” of the waiver that remains valid must still be “enforced in arbitration.” Based on this clause, [the defendant] was entitled to enforce the agreement insofar as it mandated arbitration of [the plaintiff’s] individual PAGA claim. The lower courts refused to do so based on the rule that PAGA actions cannot be divided into individual and non-individual claims. Under our holding, that rule is preempted, so [the defendant] is entitled to compel arbitration of [the plaintiff’s] individual claim.

The remaining question is what the lower courts should have done with [the plaintiff’s] non-individual claims. Under our holding in this case, those claims may not be dismissed simply because they are “representative.” Iskanian’s rule remains valid to that extent. But as we see it, PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding. Under PAGA's standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action. [Citation.] When an employee's own dispute is pared away from a PAGA action, the employee is no different from a member of the general public, and PAGA does not allow such persons to maintain suit. [Citation.] As a result, [the plaintiff] lacks statutory standing to continue to maintain her non-individual claims in court, and the correct course is to dismiss her remaining claims.

* Iskanian is preempted to the extent it bars dividing PAGA claims into individual and representative claims;

* the presence of a severability clause allows the defendant to compel the plaintiff’s individual PAGA claim to arbitration; and

* once the plaintiff’s individual PAGA claim is compelled to arbitration, he or she lacks standing to maintain the representative PAGA claim.

The High Court’s standing ruling is nonbinding. In fact, the California Supreme Court is set to decide the standing question in a case called Adolph v. Uber Technologies, Inc.

* stays the case as to the representative PAGA claim until the California Supreme Court rules.

[1] “PAGA” means Private Attorneys General Act.

[2] Chavez declares that he is “a native Spanish speaker and [has] limited ability to read English especially when it comes to legal contracts.” (Chavez Decl., ¶ 2.) The argument fails to change the analysis for at least two reasons. One, lack of understanding of English does not bar enforcement. (See, e.g., Ramos v. Westlake Services LLC (2015) 242 Cal.App.4^th 674, 687 [“[T]he fact that [the plaintiff] signed a contract in a language he may not have completely understood would not bar enforcement of the arbitration agreement. If [the plaintiff] did not speak or understand English sufficiently to comprehend the English Contract, he should have had it read or explained to him.”].) Two, Chavez had attorney representation when he signed the settlement agreement.

[3] Chavez argues that the Court should construe the settlement agreement and the arbitration provision against Salsbury because it is ambiguous, and Salsbury drafted it. (See Opposition, p. 5.) The Court disagrees. The plain language is sufficiently clear; it treats the instant claims as unreleased claims. Moreover, the evidence shows that both sides took part in the drafting process. (See McLoughlin Decl., ¶ 4.)