Judge: David Sotelo, Case: 20STCV18055, Date: 2022-09-19 Tentative Ruling
Case Number: 20STCV18055 Hearing Date: September 19, 2022 Dept: 40
MOVING PARTY: Defendant West Coast Liquidators,
Inc.
Plaintiff Steven Sanford—on behalf of himself and other unnamed
current and former employees of the Defendants—bring this Private Attorneys’
General Act (“PAGA”) representative action against Defendants West Coast
Liquidators, Inc., single cause of action for Civil Penalties and Wages
Pursuant to the PAGA alleging that the Defendant subjected Sanford to excessive
heat or humidity, and/or cold temperatures during cold times of the year, in
violation of Labor Code section 1198 and Section 15 of the IWC Wage Orders. (Former
Defendants Big Lots Stores, Inc. and Big Lots F&S, Inc. were dismissed
without prejudice in accordance with the parties’ October 16, 2020 Stipulation
for, inter alia, stay and dismissal of these parties.)
Defendant West Coast
Liquidators, Inc. (“WCL”)—in light of the United States Supreme Court’s
decision in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906,
1924-25 (“Viking River”) [pursuant to the Federal Arbitration Act and
preemption principles, abrogating, in part, Iskanian v. CLS Transp. Los
Angeles LLC (2014) 59 Cal.4th 348, 383-84 (“Iskanian”), insofar as Iskanian
prohibited the severability of PAGA claims into individual and representative
claims for purposes of arbitration]—now makes opposed Motions (1) to Compel
Arbitration of Plaintiff Sanford’s individual PAGA claim and (2) for Leave to
Amend WCL’s operative Answer and file a First Amended Answer to include an
affirmative defense for Arbitration Agreement.
It is not an issue
with this Court that the parties here a valid, binding arbitration agreement. The
only issues contended in this motion are: (1) whether Plaintiff’s individual
PAGA claims may be separated from the representative PAGA claims and compelled
to arbitration; and (2) what should happen to the representative PAGA claims if
the individual claims are compelled to arbitration.
For the following
reasons, the Court holds that Plaintiff’s individual PAGA claims may be
compelled to arbitration and stays the action as it pertains to the
representative PAGA claims.
Legal Standard: A party to an arbitration agreement
may seek a court order compelling the parties to arbitrate a dispute covered by
the agreement. (Code Civ. Proc.,¿§¿1281.2.) On a petition to compel
arbitration, the court must grant the petition unless it finds (1) no written
agreement to arbitrate exists, (2) the right to compel arbitration has been
waived, (3) grounds exist for revocation of the agreement, or (4) litigation is
pending that may render the arbitration unnecessary or create
conflicting¿rulings on common issues. (Code Civ. Proc., § 1281.2; see¿Condee¿v.
Longwood Management Corp.¿(2001) 88 Cal.App.4th¿215,¿218-19.) The
party seeking arbitration has the “burden of proving the existence of a valid
arbitration agreement by a preponderance of the evidence.” (Ruiz v. Moss
Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.” Once that
burden is satisfied, the party opposing arbitration must prove by a
preponderance of the evidence any defense to the petition.” (Lacayo v.
Cataline Restaurant Group Inc. (2019) 38 Cal.App.5th 244, 257.) “The trial
court sits as the trier of fact, weighing all the affidavits, declarations, and
other documentary evidence, and any oral testimony the court may receive at its
discretion, to reach a final determination.” (Ruiz, supra, 232
Cal.App.4th at p. 842.)
In determining the enforceability of an arbitration
agreement, the court considers “two ‘gateway issues’ of arbitrability: (1)
whether there was an agreement to arbitrate between the parties, and (2)
whether the agreement covered the dispute at issue.” (Omar v. Ralphs Grocery
Co. (2004)¿118 Cal.App.4th 955, 961.) If these issues are satisfied in
favor of the movant, (3) the party opposing arbitration must prove by a
preponderance of the evidence any defense to the petition. (Lacayo, supra,
38 Cal.App.5th at p. 257.)
An Arbitration Agreement Exists: “Parties are not
required to arbitrate their disagreements unless they have agreed to do so. [Citation.]
A contract to arbitrate will not be inferred absent a¿‘clear agreement.’ [Citation.]
When determining whether a valid contract to arbitrate exists, we apply
ordinary state law principles that govern contract formation. [Citation] In
California, a¿‘clear agreement’¿to arbitrate may be either express or implied
in fact. [Citation.]” (Davis v. Nordstrom, Inc. (9th Cir. 2014)
755¿F.3d¿1089, 1092-93 [applying California law].) The court is only required
to make a finding of the agreement’s existence, not an evidentiary
determination of its validity. (Condee, supra, 88 Cal.App.4th at
p. 219.)
WCL argues that the parties entered an arbitration agreement
on April 4, 2019, when “Plaintiff [Sanford] electronically signed the ‘Mutual
Arbitration Agreement for New Associates’ on Big Lots University through use of
his Employee ID and the unique and secure password he created” and attaches
supporting declarations and exhibits to this effect. (See Mot., 8:16-18; see
Mot, Lang Decl., ¶ 1-11, Exs. 1-3.) Sanford’s Opposition does not appear to
challenge the existence of an agreement between the parties, he instead appears
to challenge the scope and enforceability of the Arbitration Agreement. (See
Opp’n, 4:21-5:8, 6:6-9:5.)
A review of the three exhibits to the Lang Declaration, as
well as a review of the Declaration itself shows that Plaintiff signed an
Arbitration Agreement that WCL may invoke.
First, WCL’s evidence shows that during Sanford’s onboarding
process in his employment with WCL, Plaintiff Sanford was required to complete
an Arbitration Agreement module, which contained an Arbitration Agreement
between the parties and which Sanford completed and signed. (Mot, Lang Decl., ¶
1-11, Exs., 1-3.)
Second, the Agreement executed by the parties provides in
relevant part:
“This Agreement, with the exception of certain excluded
claims described below, applies to any legal claims or disputes between [Sanford]
and Big Lots, or its parent, subsidiary, or affiliated companies and their
officers, directors, or managers, arising out of or related to [Sanford’s] employment,
application for employment, or termination of employment with Big Lots (‘Covered
Claim(s)’).” (Mot., Lang Decl., Ex. 1, p. 1.)
“Big Lots and [Sanford] mutually consent to the resolution
by arbitration of all Covered Claims. Big Lots and [Sanford] expressly waive
the right to file a lawsuit in court against each other asserting any Covered
Claims, and also waive the right to a jury trial.” (Mot., Lang Decl., Ex. 1, p.
1.) “Big Lots and [Sanford] may not assert any class, collective, or
representative action claims in any arbitration pursuant to this Agreement or
in any court or any other forum. Nor shall the arbitrator have any authority to
arbitrate Covered Claims on a class, collective, or representative basis. All
Covered Claims must be arbitrated on an individual basis.” (Mot., Lang Decl.,
Ex. 1, p. 2.)
“Claims for civil penalties under the California Private
Attorneys General Act (‘PAGA’) may be brought as a representative action in
court, but may not be brought as a representative action before an arbitrator
pursuant to this Agreement. However, if applicable law is revised to permit the
waiver of PAGA representative action claims or any portion of such claims, then
this Agreement shall be construed to waive the right of the parties to bring
such a claim in any arbitration pursuant to this Agreement or in court or any
other forum.” (Mot., Lang Decl., Ex. 1, p. 2.)
While the Arbitration Agreement is one “between [Sanford]
and Big Lots [no differentiation as to Stores, Inc. or F&S, Inc.], or its
parent, subsidiary, or affiliated companies” (Mot., Lang Decl., Ex. 1, p. 1),
Big Lots Stores, Inc., Big Lots F&S, Inc., and WCL are all affiliated
companies, with Big Lots Stores and WCL being affiliated companies and Big Lots
F&S being a subsidiary of Big Lots Stores (Mot., Catignani Decl., ¶ 18, Ex.
4, ¶ 2; Reply, Thomas Decl., ¶¶ 2-3).
These circumstances show an agreement to arbitrate
employment disputes exists between WCL (as an affiliate of what appears to be Big
Lots, Inc.) and Sanford, where Sanford’s Opposition does not provide grounds
for the Court to conclude otherwise. (See Opp’n generally.)
Scope of the Arbitration Agreement: “[T]he decision
as to whether a contractual arbitration clause covers a particular dispute
rests substantially on whether the clause in question is ‘broad’ or ‘narrow’.”
(Bono v. David (2007) 147 Cal.App.4th 1055, 1067.) “‘A “broad” clause
includes those using language such as “any claim arising from or related to
this agreement”’ [Citation] or ‘arising in connection with the [a]greement’
[Citation.]” (Rice v. Downs, supra, 248 Cal.App.4th at p. 186
[italics omitted].) “But clauses requiring arbitration of a claim, dispute, or
controversy ‘arising from’ or ‘arising out of’ an agreement, i.e., excluding
language such as ‘relating to this agreement’ or ‘in connection with this
agreement,’ are ‘generally considered to be more limited in scope than would
be, for example, a clause agreeing to arbitrate “‘any controversy … arising out
of or relating to this agreement[.]’” [Citations.]” (Id. at p. 186-87
[italics omitted].) “Several Ninth Circuit cases have held that agreements
requiring arbitration of ‘any dispute,’ ‘controversy,’ or ‘claim’ ‘arising
under’ or ‘arising out of’ the agreement are intended to encompass only
disputes relating to the interpretation and performance of the agreement.” (Id.
at p. 187.)
WCL argues that Viking River—abrogating in part Iskanian, the prior California precedent
prohibiting the separation of PAGA claims into individual and representative
claims for purposes of arbitration—leads to a conclusion that WCL and
Lang entered a pre-dispute agreement to arbitrate employment disputes that includes
Sanford’s individual PAGA claim against WCL and directly compares the facts of
this case to that of Viking River to advance this position. (Mot.,
5:8-6:18.) Specifically, WCL argues that in Viking River and in this
action circumstances arose where (1) “employee and employer entered a broad
pre-dispute agreement to arbitrate employment disputes,” (2) the “employee
agreed to not bring class, collective, or representative actions,” (3) the
employee agreed he could not bring representative PAGA claims in arbitration,
(4) the employee brought a PAGA-only suits encompassing individual and
representative Labor Code claims, and (5) the arbitration agreement contained a
severability clause allowing the enforcement of any part of the waiver
remaining valid, which compels the conclusion that Sanford’s PAGA claims must
be forced into arbitration (without clear arguments elaborating this last position).
(Mot., 5:8-6:18.)
Plaintiff argues that the text of the Arbitration Agreement
is not correctly stated by WCL and instead provides that Sanford may bring PAGA
actions in Court but not in arbitration. (Opp’n, 7:3-6; see Mot., Lang Decl.,
Ex. 1, p. 2 [“Claims for civil penalties under the California Private Attorneys
General Act (‘PAGA’) may be brought as a representative action in court, but
may not be brought as a representative action before an arbitrator pursuant to
this Agreement”].) Sanford further argues that Viking River is
distinguishable because Viking River’s conclusion that the individual
PAGA claims in that case subject to arbitration was a result of several
specific considerations different from the circumstances of this case,
including the fact that Viking River involved an arbitration agreement
that prohibited all PAGA claims—a clause the Supreme Court reaffirmed as void—and
a further clause providing that, to the extent that this waiver of claims
remained valid, remaining claims could be compelled into arbitration—the clause
upon which the Supreme Court relied to determine that, the PAGA claim otherwise
waived by the voided clause in the Viking River arbitration agreement
remained viable but was subject to arbitration according to the terms of the
agreement. (Opp’n, 7:1-8:5.) Last, Sanford argues that the ‘waiver’ argument
advanced by WCL on motion is conclusory and is most likely conclusory by design
because the Arbitration Agreement’s waiver terms have nothing to do with
arbitration and instead amount to a clause providing that, to the extent that
individual PAGA claims can be waived by a future change in law, the WCL-Sandord
Arbitration Agreement waives the parties’ PAGA claims in arbitration, court, or
any forum, under circumstances where Viking River expressly reaffirms
California law holding that PAGA claims are not waivable. (Opp’n, 8:6-9:5; see Viking
River, supra, 142 S.Ct. at pp.
1924-25 [Iskanian’s holding that “waive[r] of ‘representative’ PAGA
claims” is “invalid if construed as a wholesale waiver of PAGA claims” “is not
preempted by the FAA”].)
The Court finds that Plaintiff’s individual PAGA claims are within
the scope of the Arbitration Agreement on its face. First, the Complaint pleads
Labor Code violations against Plaintiff Sanford as a result of the Defendants
exposing Sanford and current and former employees to excessive heat or cold in
violation of Labor Code section 1198 and Section 15 of the IWC Wage Orders. (Complaint,
1:18-21 [WCL collectively referred to as Defendants in Complaint] & ¶¶ 12-15
[excessive heat and cold allegations], 16-26 [stated cause of action].)
Second, the parties executed an Arbitration Agreement that
WCL may invoke (see discussion supra at Whether Arbitration Agreement Exists) and
which encompasses “any legal claims or disputes between [Sanford] and Big Lots,
or its parent, subsidiary, or affiliated companies and their officers,
directors, or managers, arising out of or related to [Sanford’s] employment,
application for employment, or termination of employment with Big Lots
(‘Covered Claim(s)’).” (Mot., Lang Decl., Ex. 1, p. 1.) Third, while the
Agreement provides that “[c]laims for civil penalties under the California
Private Attorneys General Act (‘PAGA’) may be brought as a representative
action in court,” nothing about this clause relates to Plaintiff Sanford’s
individual PAGA claims—the very subject matter WCL seeks to compel into
arbitration by way of this Motion—for the clear reason that the clause involves
“[c]laims [Sanford] may … br[ing] as a representative,” not by Sanford as an
individual. (Mot., Lang Decl., Ex. 1, p. 2 [Class, Collective, and
Representative Action Waiver, second paragraph].) Fourth, the Arbitration
Agreement’s language providing that “if applicable law is revised to permit the
waiver of PAGA representative action claims or any portion of such claims, then
[the] Agreement shall be construed to waive the right of the parties to bring
such a claim in any arbitration pursuant to this Agreement or in court or any
other forum” (Mot., Lang Decl., Ex. 1, p. 2) is unrelated to the question of
Sanford’s individual PAGA rights, i.e., the ‘severability’ clause deals with waiver
of representative PAGA claims if permissible by law, not questions of
individual PAGA claims. (See Reply, 3:24-4:18.) Finally, individual PAGA claims
are severable from representative PAGA claims for the purposes of compelling
arbitration. (Viking River Cruises,
Inc. v. Moriana (2022) 142
S.Ct. 1906, 1924-25 [pursuant to the Federal Arbitration Act and preemption
principles, abrogating, in part, Iskanian v. CLS Transp. Los Angeles LLC
(2014) 59 Cal.4th 348, insofar as Iskanian prohibited the severability
of PAGA claims into individual and representative claims for purposes of
arbitration].)
Accordingly, the Court finds (1) an agreement to arbitrate
exists between the parties, may be invoked by WCL, and encompasses the
employment disputes WCL seeks to compel into arbitration—Sanford’s individual
PAGA claims against WCL—and (2) for the purposes of this Motion to Compel
Arbitration, Viking River permits severability of Plaintiff Sanford’s
individual PAGA claims and his representative PAGA claims against WCL.
Defenses to the Arbitration Agreement: A “party
opposing arbitration must prove by a preponderance of the evidence any defense
to the petition” to compel arbitration in the matter. (Lacayo, supra,
38 Cal.App.5th at p. 257.)
Sanford raises two defenses against arbitration of his
individual PAGA claims: the Arbitration Agreement is subject to California law
without consideration as to FAA preemption—i.e., without regard to Viking
River, a case founded on FAA preemption of California PAGA law precedent in
Iskanian—because Plaintiff Sanford is a transportation worker and, by
the FAA’s own terms, transportation workers are exempt from any FAA preemption,
including the holding in Viking River relating to the severability of
PAGA claims; otherwise stated, Sanford argues that Viking River cannot
serve to sever his individual PAGA claims from the remainder of the
representative PAGA claims in this action because the FAA is inapplicable to
matters involving transportation workers, thus making Viking River
inapplicable to this action (an action involving a transportation worker) and
leaving Iskanian to control the question of whether Plaintiff Sanford
are arbitrable (the answer being that they are not). (Opp’n, 9:6-16.)
Sanford next argues that “California law holds that a PAGA
claim cannot be compelled to arbitration based on an arbitration agreement with
a private employee absent evidence of consent of the State of California to
arbitration because a PAGA claim is a dispute between the employer and the
State of California, not a dispute with the employee in his or her individual
capacity.” (Opp’n, 11:3-6.)
On Reply, WCL rebuts Sanford’s first defense by arguing generally
that the FAA exception for transportation workers is not applicable to Sanford
because the FAA exception at issue applies only for workers directly involved
in the transportation of goods across states or international borders” and
because Sanford was a logistics worker for WCL—receiving and shipping goods
from a warehouse—placing Plaintiff outside of the transportation worker
exception to the FAA. (See Reply, 4:19-7:19.)
The Reply, however, fails to address the State of California
consent argument advanced by Sanford. (See Reply generally.)
The Court finds that Sanford’s job duties do not appear to
be those that could be attributed to a transportation worker within the meaning
of the FAA and that Sanford has not provided sufficient evidence to demonstrate
this proposition by clear and convincing evidence.
Viking River Holds that Individual Claims May be
Separated: Under the previous rule set forth in Iskanian, an employee’s
individual PAGA claims were not arbitrable even if the parties had agreed to
arbitrate individual claims. The defendant employer in Iskianian had attempted
to argue that “the arbitration agreement at issue here prohibits only
representative claims, not
individual PAGA claims for Labor Code violations that an
employee suffered.” (Iskanian, supra, 59 Cal.4th at p. 383.) Rejecting this,
the California Supreme Court held that such a separation “frustrates the PAGA's
objectives” because “a single-claimant arbitration under the PAGA for
individual penalties will not result in the penalties contemplated under the
PAGA to punish and deter employer practices that violate the rights of numerous
employees under the Labor Code.” (Id. at p. 384.)
However, the U.S. Supreme Court overturned this restriction,
holding that “Iskanian’s prohibition on contractual division of PAGA actions
into constituent claims unduly circumscribes the freedom of parties to determine
the issues subject to arbitration and the rules by which they will arbitrate .
. . and does so in a way that violates the fundamental principle that arbitration
is a matter of consent.” (Viking River, supra, 142 S.Ct. at p. 1923, internal
citations omitted.) According to the U.S. Supreme Court, Iskanian’s rule was
improper because it coerced parties to litigate all PAGA claims even where the
parties agreed to arbitrate claims arising out of Labor Code violations
suffered by the Plaintiff. (Id. at p. 1924.)
Here, the parties have agreed to arbitrate “any and all
disputes . . . which arise from the employment relationship between Employee
and Employer or the termination thereof,” including claims under the Labor Code.
Therefore, the parties have agreed to arbitrate Plaintiff’s individual PAGA claims.
Under the old rule set forth in Iskanian, Plaintiff’s individual PAGA claims
would have been indivisible from the representative claims, thus precluding
arbitration of the individual claims. However, under Viking River, this
division is now permitted, and the agreement to arbitrate Plaintiff’s
individual claims must be enforced.
While this result was achieved in Viking River by
severing the arbitration agreement due to an illegal PAGA waiver provision,
nothing in Viking River suggests that such a waiver and subsequent
severance are required for an employer to compel arbitration of individual PAGA
claims. The point emphasized in Viking River is that when parties agree to
arbitrate disputes arising from Labor Code violations individually sustained by
an employee, they must be held to that agreement, notwithstanding the resulting
division of the PAGA claims. Similarly, the parties here are bound by their
agreement to arbitrate claims arising from Labor Code violations sustained by
Plaintiff in the course of her employment, even if it means separating those
claims
from the claims based on violations suffered by other
employees.
There is No Agreement to Arbitrate Representative Claims:
The agreement is to arbitrate disputes arising out of “the employment
relationship between Employee [meaning Plaintiff] and Employer,” not the
employment relationship between Defendant and other employees. The U.S. Supreme
Court in Viking River recognized this distinction and held that parties
could not be compelled to arbitrate non-individual claims that they did not agree
to arbitrate. (Viking River, supra, 142 S.Ct. at pp. 1917, 1924.)
Here, the parties agreed to arbitrate Plaintiff’s individual
claims but not any representative claims. Under the old Iskanian rule,
this was impermissible because it would have required division of the
individual and representative claims. But because Viking River has
abrogated that part of Iskanian, Plaintiff may be compelled to arbitrate
solely the individual PAGA claims, as she agreed to.
The Remaining Representative Claims Are Stayed: The U.S. Supreme Court in Viking River
held that a plaintiff loses standing to assert a representative PAGA claim once
her own individual claims are compelled to arbitration. (Viking River,
supra, 142 S.Ct. at p. 1925.) However, the California Supreme Court has held
that a plaintiff retains standing even after their
individual claims are settled. (Kim v. Reins
International California, Inc. (2020) 9 Cal.5th 73, 80.)
Only an “aggrieved employee” has standing to sue under PAGA.
(Lab. Code, § 2699, subd. (a).) An “aggrieved employee” is defined as someone
“who was employed by the alleged violator” and “against whom one or more of the
alleged violations was committed.” (Id., subd. (c).) This does not require an employee
to actually maintain a claim against the employer to have standing. “The remedy
for a Labor Code violation, through settlement or other means, is distinct from
the fact of the violation itself.” (Kim, supra, 9 Cal.5th at p. 84.) “The
Legislature defined PAGA standing in terms of violations, not injury. [Plaintiff]
became an aggrieved employee, and had PAGA standing, when one or more Labor
Code violations were committed against [her]. (See § 2699(c).) Settlement
[would] not nullify these violations.” (Ibid.) By the same logic, arbitration
of the individual claims would also not nullify those violations.
Therefore, Plaintiff retains standing to assert the
representative PAGA claims. Those claims are stayed pending the arbitration of
the individual claims.
Note: The California Supreme
Court has granted review in Adolph v. Uber Technologies to address the
issues discussed above, so this Court stays the PAGA claims pending the
decision in Adolph.
I am attaching a copy of a recent ruling which shows my
reasoning for this action. [The relevant
issue is on page 6.]
The Motion to Compel
Arbitration is GRANTED.
West Coast Liquidators, Inc.’s motion to compel arbitration
is GRANTED as to Plaintiff’s individual PAGA claims and the Court stays the
action as to the remaining PAGA claims based on violations sustained by other aggrieved
employees.
Defendant’s Motions for Leave to Amend Answer is also GRANTED