Judge Elaine Lu, Case 22STCV03262 2022-08-25 Tentative Ruling

On July 27, 2022, plaintiff Eugenia Calva De Garcia (“Plaintiff”), as an individual and on behalf of herself and the State of California and all other aggrieved employees, filed the instant action against defendants GNIMGT, Inc. (“GNIMGT”) and Good Nite Inn Sylmar, Inc. (“Good Nite”) (collectively, “Defendants”), asserting violations of the Private Attorney General Act (“PAGA”).

On March 3, 2022, Defendants filed the instant motion to compel arbitration and to stay all proceedings.

Defendants employed Plaintiff as a non-exempt, hourly-paid worker from around June 2010 until she was terminated in or about December 2020. (Compl., ¶ 21.) Defendants exercised control over the wages, hours, and working conditions of Plaintiff and all other aggrieved employees. (Compl., ¶ 9.)

At all times relevant to the Complaint, Defendants utilized the same unlawful wage and hour policies and practices across all of their California locations or facilities and subjected all aggrieved employees to these same policies and practices regardless of the facilities where they worked in California. (Compl., ¶ 10.) Therefore, Plaintiff brings this action on behalf of the State of California and aggrieved employees, to assert violations of the California Labor Code and the applicable Industrial Welfare Commission Wage Order. (Compl., ¶ 13.)

On March 3, 2022, Defendants filed a request for judicial notice of the Petition for Writ of Certiorari that Petitioner Viking River Cruises, Inc. filed with the United States Supreme Court (“SCOTUS”) on May 10, 2021 in the matter of Viking River Cruises v. Moriana, Docket No. 20-1573 (Exhibit 1). Defendants’ unopposed request as to that petition is granted. (Evid. Code, § 452, subd. (d) [providing that a court may take judicial notice of any court record of the United States].)

Defendants also ask the Court to take judicial notice of the SCOTUS website associated with the petition for writ of certiorari mentioned above: https://www.supremecourt.gov/docket/docketfiles/html/public/20-1573.html. Defendants state that the website shows that SCOTUS granted the petition on December 15, 2021, and set oral argument for March 30, 2022. Defendant’s request is denied. (See Searles Valley Minerals Operations, Inc. v. State Bd. of Equalization (2008) 160 Cal.App.4th 514, 519 [declining to take judicial notice of materials contained in the U.S. Department of Energy website pursuant to Evidence Code section 452, subdivision (h) because “although it might be appropriate to take judicial notice of the existence of the website[], the same is not true of [its] factual content”].)

On August 12, 2022, Plaintiff filed a request for judicial notice of documents attached as exhibits to the declaration of Nikki Trenner (filed on August 12, 2022):

1. An order issued by the Superior Court of California, County of Los Angeles, on July 27, 2022, in the case entitled Adams v. Pacific Villa, Inc., et al., Case No.: 20STCV37260 (Exhibit 1);

2. An order issued by the Superior Court of California, County of Los Angeles, on July 13, 2022, in the case entitled Gozzi v. Acadia Malibu, Inc., Case No. 19STCV39861 (Exhibit 2);

3. An order issued by the Superior Court of California, County of Los Angeles, on July 15, 2022, in the case entitled Singh v. West Covina Motor Group LLC, Case No. 21STCV41713 (Exhibit 3);

4. An order issued by the Superior Court of California, County of Los Angeles, on July 29, 2022, in the case entitled Maldonado v. FS Hotels LA, Inc., Case No. 20STCV13849 (Exhibit 4); and

5. An order issued by the Superior Court of California, County of Los Angeles, on July 21, 2022, in the case entitled Taylor v. In-N-Out Burgers, Case No. 21STCV18259 (Exhibit 5).

Plaintiff’s unopposed request is granted. (Evid. Code, § 452, subd. (d) [providing that a court may take judicial notice of any court record of this state].) However, the Court will not take judicial notice of the truth of the findings in the ruling. (See Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375.)

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (See Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.) Under Code of Civil Procedure section 1281, a “written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.”

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. . . .” (CCP §1281.2.)

The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract. (Marcus & Millichap Real Estate Inv. Brokerage Co. v. Hock Inv. Co. (1998) 68 Cal.App.4th 83, 88.) When presented with a petition to compel arbitration, the trial court's first task is to determine whether the parties have in fact agreed to arbitrate the dispute. (Ibid.)

“Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394 explained: ‘[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. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. If the party opposing the petition raises a defense to enforcement—either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation (see §1281.2(a), (b))—that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’ (Rosenthal, supra, at 413.) According to Rosenthal, facts relevant to enforcement of the arbitration agreement must be determined ‘in the manner . . . provided by law for the . . . hearing of motions.’ (Rosenthal, supra, at 413, quoting §1290.2.) This ‘ordinarily mean[s] the facts are to be proven by affidavit or declaration and documentary evidence, with oral testimony taken only in the court’s discretion.’ (Rosenthal, supra, at 413–414; . . .).” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 761-62.)

Under both the Federal Arbitration Act (“FAA”) and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) “With respect to the moving party’s burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

Defendants assert that in connection with her employment with GNIGMT, Plaintiff executed an arbitration agreement. In support of this assertion, the Defendants present the declaration of Liz Gutierrez (“Gutierrez”), the Director of Human Resources for GNIGMT. (Gutierrez Decl. ¶ 2.) Plaintiff has not filed any evidentiary objections to the declaration.

Gutierrez attests to the following facts. She is responsible for all human resources functions for GNIGMT, which manages and operates various economy lodging properties in California called “Good Nite Inns.” (Gutierrez Decl. ¶ 2.) On June 3, 2010, GNIMGT employed Plaintiff as a housekeeper at the Good Nite Inn in Sylmar, California. (Gutierrez Decl. ¶ 4.) In connection with being employed by GNIGMT, Plaintiff entered into a written, Spanish-language arbitration agreement with GNIMGT on December 21, 2021. (Gutierrez Decl. ¶ 5, Exh. A.) The English version of that agreement (the “Arbitration Agreement”) is attached to Gutierrez’s declaration as Exhibit B. (Gutierrez Decl. ¶ 5.)

Plaintiff’s name (Eugenia Calva De Garcia) appears on the signature section of the Spanish version of the Arbitration Agreement. (Gutierrez Decl., Exh. A, p. 3, bottom of the page.) In addition, the numbers next to Plaintiff’s name (12-21-11) match the date Gutierrez testifies that Plaintiff entered into the Arbitration Agreement on December 21, 2021. (Gutierrez Decl. ¶ 5.)

Under California law, “[t]he burden of persuasion is always on the moving party to prove the existence of an arbitration agreement with the opposing party by a preponderance of the evidence ….” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 169 (“Gamboa”).)

“However, the burden of production may shift in a three-step process.” (Gamboa, supra, 72 Cal.App.5th at p. 165.) “First, the moving party bears the burden of producing ‘prima facie evidence of a written agreement to arbitrate the controversy.’ [Citation.]” (Ibid.) “If the moving party meets its initial prima facie burden and the opposing party disputes the agreement, then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement.” (Ibid.) “If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties. The burden of proving the agreement by a preponderance of the evidence remains with the moving party.” (Id. at pp. 165–166.)

“[D]efendants may meet their initial burden to show an agreement to arbitrate by attaching a copy of the arbitration agreement purportedly bearing the opposing party’s signature.” (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060; see also Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541 [“The party seeking arbitration can meet its initial burden by attaching to the petition a copy of the arbitration agreement purporting to bear the respondent's signature.”].)

Here, Defendants have submitted a Spanish version of the Arbitration Agreement bearing Plaintiff’s purported signature, and thus, Defendants have met their initial burden.

“If the moving party meets its initial prima facie burden and the opposing party does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion.” (Gamboa, supra, 72 Cal.App.5th at p. 165.)

Here, Plaintiff does not dispute the existence of (or that she signed) the Arbitration Agreement. Accordingly, Defendants have met their burden of persuasion.

“A party seeking to enforce an arbitration agreement has the burden of showing FAA preemption.” (Lane v. Francis Capital Mgmt. LLC (2014) 224 Cal.App.4th 676, 684.) California law provides that parties may expressly designate that any arbitration proceeding should move forward under the FAA’s procedural provisions rather than under state procedural law.^{^[1]} (Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal. 4th 376, 394). Otherwise, the FAA provides for enforcement of arbitration provisions in any “‘contract evidencing a transaction involving commerce.’ (9 USC § 2.)” (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 277.) Accordingly, “[t]he party asserting the FAA bears the burden to show it applies by presenting evidence establishing the contract with the arbitration provision has a substantial relationship to interstate commerce[.]” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 234, [italics added].) Moreover, as noted above, California contract law applies to the validity of the arbitration agreement. (Winter, supra, 166 Cal.App.4th at p. 947.)

However, Defendants argue that the FAA applies because GNIMGT “is in the business of providing lodging at its Inns to guests who not only reside in California, but who also reside in all other states in this country and in other countries, and who travel to California for business and/or for personal reasons.” (Gutierrez Decl., ¶ 3.) In addition, “[i]n order to operate the Inns, Good Nite routinely purchases supplies and engages in commercial transactions with vendors, suppliers and/or service providers in California and from states other than California.” (Gutierrez Decl., ¶ 3.)

In opposition, Plaintiff argues that the FAA does not apply because “Plaintiff was hired in California and exclusively worked at locations in California.” (Opposition, p. 2:27-28.) Moreover, “Defendants are corporate entities operating solely in California with their principal places of business in California.” (Opposition, pp. 2:28-3:1.) “Therefore, [Plaintiff argues] the FAA does not govern the arbitration agreement because there is no evidence to establish Plaintiff’s activities under the contract bore any substantial relationship to interstate commerce.” (Opposition, pp. 3:28-4:2.)

In their reply, the Defendants argue that “for the FAA to govern an arbitration agreement, a defendant need only establish that its operations involve or affect interstate commerce, regardless of whether the plaintiff was directly involved in such operations.” (Reply, p. 3:9-11 [italics in original].) Here, the “undisputed evidence shows that Defendants are in the business of providing lodging for people who reside in all 50 states and abroad. In that regard, Defendants derive revenue from their active engagement in interstate commerce.” (Reply, p. 3:12-14 [italics in original].) In light of the evidence the Defendants have presented showing that their business involves interstate commerce, Defendants assert that “this Court should find that that Plaintiff’s arbitration agreement is governed by the FAA.” (Reply, p. 5:2-8.)

“Typically, courts look to the parties’ contract and business operations in determining whether the contract falls within the scope of the FAA.” (Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1120 [citing a federal case].)

Here, the Court finds that Defendants’ Good Nite Inns affect interstate commerce. “[T]he [United States] Supreme Court has repeatedly addressed the effects on interstate commerce of hotels, motels, and other elements of the hospitality industry.” (Gulf Coast Hotel-Motel Ass'n v. Mississippi Gulf Coast Golf Course Ass’n (5th Cir. 2011) 658 F.3d 500, 506.) “In [Camps Newfound/Owatonna, Inc. v. Town of Harrison, Me. (1997) 520 U.S. 564 (“Camps Newfound”)], for example, the Supreme Court considered a dormant commerce clause challenge to a tax that had a disparate impact on a camp with many out-of-state campers. [Citation.] The Supreme Court firmly rejected the argument that the dormant commerce clause was inapplicable, concluding that although summer camps and hotels are services that are consumed locally, they may have substantial effects on interstate commerce ….” (Ibid.)

Even though petitioner’s [summer] camp does not make a profit, it is unquestionably engaged in commerce, not only as a purchaser, [citations], but also as a provider of goods and services. It markets those services, together with an opportunity to enjoy the natural beauty of an inland lake in Maine, to campers who are attracted to its facility from all parts of the Nation. The record reflects that petitioner ‘advertises for campers in [out-of-state] periodicals . . . and sends its Executive Director annually on camper recruiting trips across the country.’ [Citation.] Petitioner’s efforts are quite successful; 95 percent of its campers come from out of State. The attendance of these campers necessarily generates the transportation of persons across state lines that has long been recognized as a form of ‘commerce.’

Here, Gutierrez has declared that even though Defendants’ Good Nite Inns are located only in California, they provide lodging to out-of-state residents. By generating the transportation of persons across state lines to lodge at its inns, GNIMGT has shown that its inn may have substantial effect on interstate commerce. (Cf. Ramirez v. LQ Management, L.L.C. (C.D. Cal., May 29, 2020, No. 219CV06507ODWJPRX) 2020 WL 2797285, at *2 [“Ramirez’s employment with LQ affected interstate commerce because she was employed in housekeeping at the La Quinta Inn and Suites at LAX and the operation of even local hotels involves interstate commerce”].)

“A trilogy of cases …, recognizes that if a contract involves interstate commerce, the FAA’s substantive provision (9 U.S.C. § 2) applies to the arbitration. But the FAA’s procedural provisions (9 U.S.C. §§ 3, 4, 10, 11) do not apply unless the contract contains a choice-of-law clause expressly incorporating them. In [Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394] the parties’ contract involved interstate commerce, making the FAA’s substantive provision (9 U.S.C. § 2) applicable, but the contract did not contain a choice-of-law clause. The court concluded the FAA’s procedural provision requiring a jury trial (9 U.S.C. § 4) did not apply in state court and instead the CAA’s procedural provisions—mandating the use of law-and-motion procedures—governed.” (Valencia v. Smyth, supra, 185 Cal.App.4th at pp. 173–174 [italics in original].)

Applying this line of cases, the Court finds that Plaintiff’s employment with the Defendants affected interstate commerce, and the FAA’s substantive provision (9 U.S.C. § 2) applies to the Arbitration Agreement, but the FAA’s procedural provisions (9 U.S.C. §§ 3, 4, 10, 11) do not apply because there is no choice-of-law clause expressly incorporating them.

Plaintiff brings her PAGA claim on an individual and representative basis. Defendants contend that by executing the Arbitration Agreement, Plaintiff agreed to arbitrate, on a non-representative basis, all claims against them.

The Company [GNIMGT] and the undersigned Employee hereby agree that any dispute with any party that may arise from Employee’s employment with the Company or the termination of the Employee’s employment with the company shall be resolved by mandatory, binding arbitration before a retired judge. This binding arbitration also includes disputes with the Company’s affiliates, successors and other employees (when directly related to Employee’s employment).

The Court finds that the broad language of the Arbitration Agreement covers the scope of Plaintiff’s individual PAGA claim because it arises from her employment with the Defendants. Therefore, unless any grounds exist at law or equity for voiding the agreement, Plaintiff’s individual PAGA claim is arbitrable.

The Company and I [Plaintiff] expressly intend and agree as follows: (1) that class action and representative action procedures shall not be asserted, nor will they apply, in any arbitration pursuant to this Agreement; (2) that neither the Company nor I will assert, participate in, or join class action or representative action claims against the other in arbitration or otherwise; and (3) that the Company and I shall only submit our own, individual claims in arbitration and will not seek to represent the interests of any other person.

In Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (“Iskanian”), the California Supreme Court held that “an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.” (Id. at p. 360.)

However, Defendants argue that in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 (“Viking”), SCOTUS recently abrogated Iskanian and “held that once an individual PAGA claim has been compelled to arbitration, the remaining non-individual claim should be dismissed for lack of standing.” (Reply, p. 6:17-19.)

In opposition, Plaintiff argues that “PAGA’s plain statutory language and the California Supreme Court’s interpretation in [Kim v. Reins International California, Inc. (2020) 9 Cal. 5th 73 (“Kim”)] make clear that an ‘aggrieved employee’ who has been authorized to seek civil penalties on behalf of the LWDA is not stripped of statutory standing upon being forced to adjudicate a portion of her claim in arbitration rather than in court.” (Opposition, pg. 11:1-4.)

“Petitioner Viking River Cruises, Inc. (Viking), [was] a company that offer[ed] ocean and river cruises around the world. When respondent Angie Moriana [Moriana] was hired by Viking as a sales representative, she executed an agreement to arbitrate any dispute arising out of her employment.” (Viking, supra, 142 S.Ct. at pp. 1915–1916.) As in the instant case, “[t]he agreement [in Viking River Cruises] 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.” (Id. at p. 1916.)

“Moriana filed a PAGA action against [Viking], alleging a California Labor Code violation. She also asserted a wide array of other violations allegedly sustained by other Viking employees.” (Viking, supra, 142 S.Ct. at p. 1911.)

“Viking moved to compel arbitration of Moriana’s individual PAGA claim and to dismiss her other PAGA claims.” (Viking, supra, 142 S.Ct. at p. 1911.)

“Applying California’s Iskanian precedent, the California courts denied that motion, holding that [1] categorical waivers of PAGA standing are contrary to California policy and [2] that PAGA claims cannot be split into arbitrable ‘individual’ claims and nonarbitrable ‘representative’ claims.” (Viking, supra, 142 S.Ct. at p. 1911.)

In Viking, SCOTUS “granted certiorari to decide whether the FAA preempts [that] California rule.” (Viking, supra, 142 S.Ct. at p. 1911.)

SCOTUS held that “[t]he FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Viking, supra, 142 S.Ct. at p. 1911.) In so holding, SCOTUS noted that PAGA “permits ‘aggrieved employees’ to use the Labor Code violations they personally suffered as a basis to join to the action any claims that could have been raised by the State in an enforcement proceeding.” (Id. at p. 1923 [emphasis added].) Therefore, by invalidating agreements that sought to arbitrate “only individual” PAGA claims, Iskanian prohibited parties from contracting around that joinder device. (Ibid.) However, Iskanian’s “prohibition on contractual division of PAGA actions into constituent claims unduly circumscribe[d] the freedom of parties to determine ‘the issues subject to arbitration’ and ‘the rules by which they will arbitrate,’ [citation], and [did] so in a way that violate[d] the fundamental principle that ‘arbitration is a matter of consent,” [citation].” (Ibid.) “If the parties agree to arbitrate ‘individual’ PAGA claims based on personally sustained violations, Iskanian allow[ed] the aggrieved employee to abrogate that agreement after the fact and demand either judicial proceedings or an arbitral proceeding that exceed[ed] the scope jointly intended by the parties. The only way for parties to agree to arbitrate one of an employee’s PAGA claims [was] to also ‘agree’ to arbitrate all other PAGA claims in the same arbitral proceeding.” (Id. at p. 1924.) “The effect of Iskanian’s rule mandating [that] mechanism [was] to coerce parties into withholding PAGA claims from arbitration.” (Ibid.) “As a result, Iskanian’s indivisibility rule effectively coerce[d] parties to opt for a judicial forum rather than ‘forgo[ing] the procedural rigor and appellate review of the courts in order to realize the benefits of private dispute resolution.’ [Citations.]” (Ibid.) In Viking, the California courts refused to enforce the arbitration agreement insofar as it mandated arbitration of Moriana’s individual PAGA claim because the Iskanian rule provided that “PAGA actions cannot be divided into individual and non-individual claims.” (Id. at p. 1925.) However, under SCOTUS’s holding, that “rule [was] preempted, so Viking [was] entitled to compel arbitration of Moriana's individual claim,” since arbitration is a matter of contract. (Ibid.) Similarly, the Court has held above that Defendants here are entitled to compel arbitration of Plaintiff’s individual PAGA claim.

In light of this holding, the “remaining question [in Viking was] what the lower courts should have done with Moriana’s non-individual claims. Under [SCOTUS’s] holding in [Viking], those claims may not be dismissed simply because they are ‘representative,’” since “Iskanian’s rule remains valid to that extent.” (Viking, supra, 142 S.Ct. at p. 1925.) The majority opinion in Viking proceeded to note: “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.” (Id. [emphasis added].)

According to the majority opinion in Viking, “[u]nder 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. See Cal. Lab. Code Ann. §§ 2699(a), (c). 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. See [Kim, supra, 9 Cal.5th at p. 90] (‘PAGA’s standing requirement was meant to be a departure from the ‘general public’ ... standing originally allowed’ under other California statutes). As a result, Moriana lack[ed] statutory standing to continue to maintain her non-individual claims in court, and the correct course [was] to dismiss her remaining claims.” (Viking, supra, 142 S.Ct. at p. 1925 [emphasis added].)

[t]he Court concludes that the FAA poses no bar to the adjudication of respondent Angie Moriana’s ‘non-individual’ PAGA claims, but that PAGA itself ‘provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding.’ Ante, at 1925. Thus, the Court reasons, based on available guidance from California courts, that Moriana lacks ‘statutory standing’ under PAGA to litigate her ‘non-individual’ claims separately in state court. Ibid. Of course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word. Alternatively, if this Court’s understanding is right, the California Legislature is free to modify the scope of statutory standing under PAGA within state and federal constitutional limits.

(Viking, supra, 142 S.Ct. at p. 1925 (conc. opn. of Sotoyamor, J.) [emphasis added].)

In a similar vein, Justice Barrett concurred in the judgment, agreeing that reversal was required because PAGA’s procedure “is akin to other aggregation devices that cannot be imposed on a party to an arbitration agreement.” (Viking, supra, 142 S.Ct. at p. 1926 (conc. opn. of Barrett, J.).) However, Justice Barrett’s concurring opinion, joined by Justice Kavanaugh and Chief Justice Roberts, expressly declined to join in the majority opinion’s further holding that Moriana lacked statutory standing to continue to maintain her non-individual claims. (Viking, supra, 142 S.Ct. at p. 1926 (conc. opn. of Barrett, J. [“[t]he discussion in Parts II and IV of the Court’s opinion is unnecessary to the result, and much of it addresses disputed state-law questions as well as arguments not pressed or passed upon in this case.”]).)

First, the FAA preempts Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims.

Second, even after Viking, whether a plaintiff has the standing to maintain her non-individual PAGA claims in court once her individual PAGA claims are compelled to arbitration remains a question for California courts to decide. However, California seemingly answered that question in Kim.

In Kim, “plaintiff Justin Kim settled his own Labor Code claims against defendant …,” and the “question [was] whether he retain[ed] standing to prosecute a representative PAGA claim.” (Kim, supra, 9 Cal.5th at p. 82.)

The California Supreme Court held that a plaintiff retains standing to pursue representative PAGA claims even after their individual claims are settled. (Kim, supra, 9 Cal.5th at p. 80 [“This case presents an issue of first impression: Do employees lose standing to pursue a claim under the Labor Code Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698 et seq.) [footnote omitted] if they settle and dismiss their individual claims for Labor Code violations? We conclude the answer is no. Settlement of individual claims does not strip an aggrieved employee of standing, as the state’s authorized representative, to pursue PAGA remedies”].)

In so holding, our state high court explained: “Although representative in nature, a PAGA claim is not simply a collection of individual claims for relief, and so is different from a class action. The latter is a procedural device for aggregating claims ‘when the parties are numerous, and it is impracticable to bring them all before the court.’ (Code Civ. Proc., § 382.) In a class action, the ‘representative plaintiff still possesses only a single claim for relief—the plaintiff's own.’ [Citation.] If a representative plaintiff voluntarily settles her claim, she no longer has an interest in the class action and may lose the ability to represent the class.” (Kim, supra, 9 Cal.5th at pp. 86-87 [emphasis added].)

“‘But a representative action under PAGA is not a class action.’ [Citation.] There is no individual component to a PAGA action because ‘“every PAGA action . . . is a representative action on behalf of the state.”’ ([Iskanian, supra, 59 Cal.4th at p. 387].) Plaintiffs may bring a PAGA claim only as the state’s designated proxy, suing on behalf of all affected employees.” (Id. at p. 87 [italics in original].)

Here, Plaintiff could have brought her PAGA claim “only” as the state’s designated proxy. Under Kim’s interpretation of PAGA standing, Plaintiff does not lose standing to maintain her representative (non-individual) PAGA claim in court even though the Court compels her individual PAGA claim to arbitration.

However, yet another question remains. Even if Plaintiff has the standing to maintain her PAGA representative claim court, the Arbitration Agreement expressly provided that both parties agreed not to bring any “representative” claims against each other in “arbitration or otherwise.” Therefore, a question arises whether the Court may compel the arbitration of Plaintiff’s representative PAGA claim because Plaintiff “agreed” to arbitrate that claim. The answer is no.

In Viking, SCOTUS recognized “two” Iskanian rules: a principal and a secondary one. “Iskanian’s principal rule …. prevents parties from waiving representative standing to bring PAGA claims in a judicial or arbitral forum.” (Viking, supra, 142 S.Ct. at p. 1916 [emphasis added].) “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 pp. 1916-1917 [emphasis added].)

Viking abrogated Iskanian’s secondary but not Iskanian’s principal rule. “We hold that the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate. This holding compels reversal in this case. The agreement between Viking and Moriana 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.” (Id. at pp. 1924-1925 [emphasis added].)

In short, under Viking, the FAA does not preempt Iskanian’s principal rule, which prevents parties from waiving representative standing to bring PAGA claims in a judicial or arbitral forum. Any such waiver remains invalid under the principal rule.

Therefore, in so far as the Arbitration Agreement contains a provision purporting to waive Plaintiff’s representative PAGA claim, that provision is invalid under Iskanian’s principal rule. Indeed, since arbitration is a matter of consent, Plaintiff could not have “agreed” to arbitrate any representative claim brought on behalf of the state without the state’s authority to do so.

However, because the Arbitration Agreement contains a severability clause, Defendants are entitled to enforce the agreement to compel arbitration of Plaintiff’s individual claims. (Viking, supra, 142 S.Ct. at p. 1925 [“[T]he 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, Viking was entitled to enforce the agreement insofar as it mandated arbitration of Moriana’s individual PAGA claim”]; Gutierrez Decl., Exh. B, p. 3 [“If any parts of this agreement are found to be invalid, illegal or unenforceable, the validity, legality and/or enforceability of the remaining provisions will not be affected or impaired by that determination. If any terms or sections of this agreement are determined to be unenforceable, they shall be modified so that the unenforceable term or section is enforceable to the greatest extent possible”].)

Accordingly, while Plaintiff’s individual PAGA claims are arbitrable, her representative claim is not, and she still has standing to maintain her representative claim in court.

“Once such a document is presented to the court, the burden shifts to the party opposing the motion to compel, who may present any challenges to the enforcement of the agreement and evidence in support of those challenges.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

“California courts analyze unconscionability as having a procedural and a substantive element.” (Kinney v. United Healthcare Services, Inc. (1999) 70 Cal.App.4th 1329.) “[B]oth elements must be present before a contract or contract provision is rendered unenforceable on grounds of unconscionability.” (Ibid.) The doctrine of unconscionability refers to “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) It consists of procedural and substantive components, “the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.” (Ibid.) Although both components of unconscionability must be present to invalidate an arbitration agreement, they need not be present in the same degree. (Armendariz v. Found Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 114.) “Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves. [Citations.] In other words, the more substantively unconscionable the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Ibid.) “The party resisting arbitration bears the burden of proving unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC (2012) 55 Cal.4th 223, 247.)

“Procedural unconscionability concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. It focuses on factors of oppression and surprise.” (Ibid.) “Surprise differs from oppression. Surprise is when a prolix printed form conceals the arbitration provision. [Citation.] Oppression, on the other hand, occurs when there is a lack of negotiation and meaningful choice. [Citation.] The presence of surprise or oppression requires higher scrutiny of the contract.” (Torrecillas v. Fitness International, LLC (2020) 52 Cal.App.5th 485, 493 (“Torrecillas”).)

“Adhesion contracts are form contracts a party with superior bargaining power offers on a take-it-or-leave-it basis.” (Torrecillas, supra, 52 Cal.App.5th at p.493.) “Whether the agreement was or was not a contract of adhesion is not the core question. Rather, from the standpoint of determining whether there was procedural unconscionability, the core issues are surprise and oppression.” (Ibid.) In the absence of “surprise or other sharp practices,” courts do not recognize that “adhesive” arbitration agreements establish a high degree of procedural unconscionability. (Baltazar v. Forever 21 Inc. (2016) 62 Cal.4th 1237, 1246.)

Plaintiff argues that Defendants “required Plaintiff to accept the conditions of the arbitration agreement on a take it or leave it basis, with no real opportunity to negotiate the terms.” (Opposition, p. 6:8-10.) Therefore, she implies that the Arbitration Agreement is procedurally unconscionable because it is a contract of adhesion.

However, Plaintiff has not filed any declaration or affidavit attesting to that fact or even what occurred when she entered the Arbitration Agreement. Instead, her opposition relies on the Defendants’ Director of Human Resources Gutierrez’s declaration to make her argument. (Opposition, p. 6:8-10, citing Gutierrez Decl., ¶¶ 4-5.) However, Gutierrez’s declaration does not state that the Arbitration Agreement was given on a “take it or leave it basis, with no real opportunity to negotiate the terms.” Instead, Gutierrez states, “[a]lthough Ms. de Garcia was given the opportunity to opt out of the Agreement, as the Agreement specifies, I am not aware that she ever did so.” (Gutierrez Decl., ¶ 5.) In any event, even if the Arbitration Agreement may have been presented on a take-it-or-leave-it basis, that would only establish a modest degree of procedural unconscionability, especially in the absence of surprise. (Torrecillas, supra, 52 Cal.App.5th at p.493; Baltazar v. Forever 21 Inc., supra, 62 Cal.4th at p.1246.)

In sum, the Court finds that Plaintiff has not met her burden of showing procedural unconscionability; even if she has, it is only to a minimal degree. “[A] finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915.)

“Substantive unconscionability” focuses on the terms of the agreement and whether those terms are “so one-sided as to ‘shock the conscience.’” (Kinney, supra, 70 Cal.App.4th at p.1330.) “Where a party seeks to arbitrate nonwaivable statutory civil rights in the workplace, such as the FEHA claims and wrongful termination claim that are involved here, there are five minimum requirements for the lawful arbitration of such rights pursuant to a mandatory employment arbitration agreement. Such an arbitration agreement is lawful if it “(1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a condition of access to the arbitration forum. Thus, an employee who is made to use arbitration as a condition of employment ‘effectively may vindicate [his or her] statutory cause of action in the arbitral forum.’ [Citation.]” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 102 (“Armendariz”).)

Plaintiff contends that the Arbitration Agreement is substantively unconscionable because it (1) fails to satisfy the Armendariz factor of providing “adequate” discovery, (2) fails to satisfy the Armendariz factor of providing that Defendants shall bear the costs unique to arbitration, (3) requires Plaintiff to waive her right to pursue a representative action under PAGA, and (4) it fails to satisfy the Armendariz requirement that arbitral decision be subject to judicial review.

Plaintiffs contends that the Arbitration Agreement does not provide for adequate discovery. The Arbitration Agreement provides: “The parties will be permitted to conduct discovery as determined by the arbitrator.” (Gutierrez Decl., Exh. B, p. 2, last paragraph.)

“[L]imiting discovery is one point of arbitration. A central goal is efficiency. A streamlined discovery process promotes this goal.” (Torrecillas, supra, 52 Cal.App.5th at p.497.) Under Armendariz, Plaintiff is entitled to “adequate,” not unlimited, discovery. (Armendariz, supra, 24 Cal.4th at pp. 105–106.)

The Court agrees with Plaintiff that the lack of the phrase “adequate discovery” renders the discovery provision in the Arbitration Agreement unconscionable because it is possible that the arbitrator may permit no discovery at all. Defendant argues that Rule 17 of the JAMS Rules, as made applicable by the agreement, provides for a fair exchange of information between the parties including depositions. (Reply, pp. 5:27-6:6.) However, the express terms of the Arbitration Agreement only provides that the parties will be permitted to conduct discovery “as determined by the arbitrator,” and the JAMS rules concerning discovery are not written in the agreement. Thus, there is at least ambiguity as to the scope of discovery, and the Court finds the discovery provision to be at least potentially unconscionable. “If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.” (Civ. Code § 1670.5, subd. (a).) Here, the Court will limit the application of the clause to read that: “The parties will be permitted to conduct adequate discovery sufficient to adequately arbitrate their claims as determined by the arbitrator.”

Plaintiff also contends that the Arbitration Agreement does not state that the Defendants shall bear all costs unique to the arbitration. The Court disagrees. In Fittante v. Palm Springs Motors, Inc. (2003) 105 Cal.App.4th 708, the Court of Appeal (considering the California Supreme Court’s findings in Armendariz) explained that costs such as “filing fees and other similar and usual administrative costs, are common to both court and administrative proceedings, and are therefore not problematic.” (Id. at p. 719) “But costs uniquely associated with arbitration, such as payment of the arbitrator's fees and room rental—equivalent to paying a judge’s salary and courtroom costs—are not imposed directly on litigants in state or federal courts. Such unique costs must be borne by the employer, if the arbitration agreement may be so interpreted.” (Ibid.) Here, the Arbitration Agreement provides that “[w]ith the exception of a filing fee that shall not exceed the cost to file a comparable claim in state or federal court, the Company shall pay the fees and costs of the Arbitrator, and each party to the extent permitted by law. With the exception of a filing fee that shall not exceed the cost to file a comparable claim in state or federal court, the Company shall pay the fees and costs of the Arbitrator, and each party shall pay for its own costs and attorneys’ fees.” (Gutierrez Decl., Exh. B, p. 2, last paragraph.) Accordingly, the Court finds that the Arbitration Agreement satisfies the costs requirement under Armendariz.

Plaintiff also argues that the Arbitration Agreement fails to provide for judicial review of the arbitration award on the grounds that the agreement is silent as to whether such review is allowed. Plaintiff offers no legal authority to support this argument. Nor does Plaintiff offer any explanation why judicial review would not be available pursuant to the provisions of Code of Civil Procedure sections 1285 et. seq.

Accordingly, the Court does not find Plaintiff’s arguments regarding the Armendariz factors persuasive.

The Court has already addressed this issue above in its discussion regarding the scope of the Arbitration Agreement and finds that the following clause is invalid:

The Company and I expressly intend and agree as follows: (1) that class action and representative action procedures shall not be asserted, nor will they apply, in any arbitration pursuant to this Agreement; (2) that neither the Company nor I will assert, participate in, or join class action or representative action claims against the other in arbitration or otherwise; and (3) that the Company and I shall only submit our own, individual claims in arbitration and will not seek to represent the interests of any other person.

In light of the above, the Court finds that Plaintiff has failed to meet her burden of showing unconscionability because the Court has severed or otherwise limited the only provisions it has found substantively unconscionable, and Plaintiff has not presented evidence of procedural unconscionability.

Because the issues subject to litigation under the representative PAGA claim might overlap those that are subject to arbitration of Plaintiff’s individual PAGA claim, the Court hereby orders a stay of litigation of Plaintiff’s representative PAGA claim pending arbitration of Plaintiff’s individual PAGA claim. (Franco v. Arakelian Enterprises, Inc. (2015) 234 Cal.App.4th 947, 966 [citing Code Civ. Proc., § 1281.4.) The stay will preserve the status quo until the arbitration is resolved, preventing any proceedings in this Court from disrupting or rendering ineffective the arbitrator’s jurisdiction to decide the issues that are subject to arbitration. (Franco v. Arakelian Enterprises, Inc., 234 Cal.App.4th at p. 966 [finding that the proper course under this circumstance is to grant the petition to compel arbitration of the plaintiff’s individual claims, deny the motion to compel arbitration of any PAGA claim, and stay the trial court proceedings pending arbitration of the non-PAGA claims. (Id. at p. 966, citing Code Civ. Proc., § 1281.4.)

Based on the foregoing, Defendants GNIMGT, Inc. and Good Nite Inn Sylmar, Inc.’s motion to compel arbitration is GRANTED as to Plaintiff’s individual PAGA claims. Plaintiff’s individual PAGA claims are to be heard in arbitration.

The Court severs the following provision from the Arbitration Agreement: “The Company and I expressly intend and agree as follows: (1) that class action and representative action procedures shall not be asserted, nor will they apply, in any arbitration pursuant to this Agreement; (2) that neither the Company nor I will assert, participate in, or join class action or representative action claims against the other in arbitration or otherwise; and (3) that the Company and I shall only submit our own, individual claims in arbitration and will not seek to represent the interests of any other person.”

The Court limits the discovery provision in the Arbitration Agreement to read: “The parties will be permitted to conduct adequate discovery sufficient to adequately arbitrate their claims as determined by the arbitrator.”

The Court orders litigation of Plaintiff’s representative PAGA claims – the only portion of the action that remains before this court -- stayed in its entirety until completion of the arbitration or Plaintiff’s individual PAGA claims.

The parties are to appear for a status conference re status of arbitration on November 4, 2022 at 8:30 am.

Moving Party Defendant GNIMGT, Inc. is also to give electronic notice and file proof of service of such on Plaintiff.

[1] “But the parties may ‘expressly designate that any arbitration proceeding [may] move forward under the FAA’s procedural provisions rather than under state procedural law.’ [Citation.] Absent such an express designation, however, the FAA’s procedural provisions do not apply in state court.” (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 174; see also Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1122.)

County of Los Angeles

Department 26