Judge Holly J. Fujie, Case Number: 23STCV26824, Date: 2024-06-12 Tentative Ruling

DEPARTMENT 56 JUDGE HOLLY J. FUJIE, LAW AND MOTION RULINGS. The court makes every effort to post tentative rulings by 5.00 pm of the court day before the hearing. The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)], and are also available in the courtroom on the day of the hearing [see CRC 3.1308(b)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) call Dept 56 by 8:30 a.m. on the day of the hearing (213/633-0656) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no telephone call is necessary and all parties should appear at the hearing in person or by Court Call. Court reporters are not provided, and parties who want a record of motions and other proceedings must hire a privately retained certified court reporter.

Plaintiff David Sanchez was employed by Defendants as a Senior Service Manager from April 22, 2022 through July 28, 2023, when he was allegedly wrongfully terminated. Plaintiff alleges Defendants committed multiple Labor Code violations, including violating Plaintiff’s protected parental leave, wrongful termination, misclassification of Plaintiff as “exempt” when he was “non-exempt,” meal break violations, rest breach violations, unreimbursed expenses, wage statements and failure to pay all wages owed upon termination. On November 1, 2023, Plaintiff filed a complaint under the Private Attorney’s General Act (Labor Code §2698) (“PAGA”).

“A written provision in any [] contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.)

“If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” (9 U.S.C. §3.)

“[T]he United States Supreme Court has identified three categories of activity that Congress may regulate under the commerce power: (1) the channels of interstate commerce, (2) the instrumentalities of interstate commerce and persons or things in interstate commerce, and (3) those activities having a substantial relation to interstate commerce. The party asserting FAA preemption bears the burden to present evidence establishing a contract with the arbitration provision affects one of these three categories of activity, and failure to do so renders the FAA inapplicable.” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 238.)

“[T]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence . . . .” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.) “In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration [citation]. The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.” (Weeks v. Crow (1980) 113 Cal.App.3d 350, 353.) “Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.” (California Correctional Peace Officers Ass'n v. State (2006) 142 Cal.App.4th 198, 205.)

“[A] party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination.” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.)

“The FAA applies to contracts that involve interstate commerce (9 U.S.C. §§ 1, 2), but since arbitration is a matter of contract, the FAA also applies if it is so stated in the agreement.” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 963.) The Dispute Resolution Agreement expressly states that it is governed by the FAA. (Hurtado Dec., Ex. A, ¶1.) The FAA therefore applies by agreement.

Plaintiff Sanchez filed a separate complaint against Defendants alleging individual claims (Case No. 23STCV23750) based on the exact same facts alleged in this action. (RJN, Ex. C.) Plaintiff’s only claim in this action is for the PAGA civil penalties for Labor Code violations committed against him and against the class of employees of which he is the representative. In 23STCV23750, Plaintiff Sanchez and Defendant Douglas Emmett Management, LLC stipulated to arbitration pursuant to the parties’ Dispute Resolution Agreement. (RJN, Ex. D.)

Defendants asks that the court compel arbitration of Plaintiff’s individual PAGA claim pursuant to the same Dispute Resolution Agreement. The Dispute Resolution Agreement applies to “all disputes arising out of or related to may employment with, or the termination of my employment from, Douglas Emmett.” (Hurtado Dec., Ex. A, ¶1.)

“Douglas Emmett” is defined to include Defendant Douglas Emmett Management, LLC or “one of their affiliates, subsidiaries or parent companies.” (Id.) Plaintiff alleges that Defendant Douglas Emmett Management, Inc. and Douglas Emmett Management, LLC are agents and alter egos of one another and Plaintiff’s joint employer. (Complaint, ¶¶6-10.) Defendant Douglas Emmett Management, Inc. is the parent company of Douglas Emmett Management, LLC. (Hurtado Dec., ¶2.)

The arbitration agreement therefore applies to Plaintiff’s claims, which arise from his employment with and termination from Defendants’ employ. In addition, although Douglas Emmett, Inc. is not a signatory to the arbitration agreement, it is entitled to enforce the arbitration agreement based on its status as the parent company of Douglas Emmett Management, LLC. (Hurtado Dec., Ex. A, ¶1.) Because parent companies are expressly included as entities who may enforce the arbitration agreement, Douglas Emmett Management, Inc. may sue as a third party beneficiary of the Dispute Resolution Agreement. (Civil Code §1559.)

In addition to the doctrine of third party beneficiary, Plaintiff is also equitably estopped from opposing arbitration of his claims against Douglas Emmett Management, Inc. on grounds that it is not a signatory. Plaintiff cannot claim on the one hand that Douglas Emmett Management, Inc. and Douglas Emmett Management, LLC are one entity, while on the other hand argue that Douglas Emmett Management, Inc. cannot compel arbitration as a nonsignatory to an agreement signed by its alleged alter ego. (Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1288 (defendants sued as alter egos of signatory to arbitration agreement could enforce the arbitration agreement; plaintiff was equitably estopped from objecting on grounds that defendants were nonsignatories).)

Defendants therefore establish the existence of an applicable arbitration agreement to Plaintiff’s individual PAGA claims. In order to avoid arbitration, Plaintiff must establish that the agreement is unenforceable, e.g. unconscionability.

Plaintiff fails to establish grounds to deny enforcement of the arbitration agreement

Plaintiff filed an opposition on May 28, 2024, the original hearing date of this motion. Plaintiff argues there are no individual PAGA claims asserted in this action. Plaintiff argues that by definition, there is no such thing as an individual PAGA claim, because all PAGA claims are representative actions brought on behalf of the state. Plaintiff does not contest the existence of an arbitration agreement but denies that it is applicable to this action, which only asserts representative PAGA claims.

Plaintiff’s complaint indicates otherwise. Plaintiff specifically alleges in his first cause of action that he is seeking to recover civil penalties for “numerous violations of the Labor Code against Plaintiff.” (Complaint, ¶42.) Plaintiff alleges: “Pursuant to PAGA, Plaintiff seeks civil penalties due to Plaintiff, other aggrieved employees and the State of California…In addition, pursuant to PAGA, Plaintiff seeks to recover civil penalties…from Defendant in a representative action for the violations set forth above.” (Complaint, ¶48.) These allegations allege both individual claims and representative PAGA claims. In addition, by its terms, PAGA allows an “aggrieved employee” to file a civil action “on behalf of himself or herself and other current or former employees” to recover civil penalties under PAGA. (Labor Code §2699(a).) The footer of Plaintiff’s complaint also indicates it is a complaint for “damages.” At best, whether Plaintiff is alleging individual claims against Defendants is unclear based on the allegations of the complaint. The Court assume that Plaintiff’s allegations of violations against him individually are solely made for purposes of standing under PAGA as an “aggrieved employee.”

Plaintiff relies on Balderas v. Fresh Start Harvesting, Inc. (2024) 101 Cal.App.5^th 533 for the proposition that an individual plaintiff may bring a representative PAGA claim without having to allege an individual PAGA claim. The court agrees that under Balderas, an individual plaintiff who is an “aggrieved employee” may file a representative PAGA action without having to also allege an individual PAGA claim. (Balderas, supra, 101 Cal.App.5^th at 329-330 (plaintiff need not allege individual claims against employer to establish standing to sue under PAGA; plaintiff’s allegations establishing status as “aggrieved employee” was sufficient.) Balderas, however, is factually distinguishable. The plaintiff in Balderas clearly alleged that the only claims asserted in the complaint were representative. The Balderas complaint alleged the following: “Ms. Balderas is not suing in her individual capacity; she is proceeding herein solely under the PAGA, on behalf of the State of California for all aggrieved employees, including herself and other aggrieved employees.” (Balderas, supra, 101 Cal.App.5^th at 327.)

In addition, Balderas did not involve a motion to compel arbitration, nor did it involve the issue of whether PAGA claims based on violations of the Labor Code committed against an individual plaintiff could be severed from violations of the Labor Code committed against all other employees for purposes of arbitration. Balderas is therefore procedurally distinguishable as well.

Unlike the plaintiff in Balderas, Plaintiff’s complaint does not contain an unequivocal denial that the action is brought in his individual capacity. Given Plaintiff’s failure to establish that he is not bringing any individual PAGA claims, Defendant’s request to compel arbitration of Plaintiff’s individual claims is granted.

Plaintiff’s argument that a PAGA claim can never be an “individual claim” ignores Viking River Cruises, Inc. v. Moriana (“Viking”) (2022) 596 U.S. 639, 645-646 and Adolph v. Uber Technologies, Inc. (“Adolph”) (2023) 14 Cal.5th 1104, 1124, both of which analyzed whether PAGA claims could be split into “individual PAGA claims” and “representative PAGA claims” for purposes of arbitration. Both cases determined that a PAGA claim could be split in such a way. As explained in Viking River Cruises, Inc., the phrase “representative PAGA claims” has two meanings depending on the issue being discussed:

“PAGA's unique features have prompted the development of an entire vocabulary unique to the statute, but the details, it seems, are still being worked out. An unfortunate feature of this lexicon is that it tends to use the word ‘representative’ in two distinct ways…In the first sense, PAGA actions are ‘representative’ in that they are brought by employees acting as representatives—that is, as agents or proxies—of the State. But PAGA claims are also called ‘representative’ when they are predicated on code violations sustained by other employees. In the first sense, ‘every PAGA action is ... representative’ and ‘[t]here is no individual component to a PAGA action,’ (citations omitted), because every PAGA claim is asserted in a representative capacity. But when the word ‘representative’ is used in the second way, it makes sense to distinguish ‘individual’ PAGA claims, which are premised on Labor Code violations actually sustained by the plaintiff, from ‘representative’ (or perhaps quasi-representative) PAGA claims arising out of events involving other employees.” (Viking., supra, 596 U.S. at 648.)

Thus, in determining whether a PAGA claim can be split into individual (claims arising from the individual plaintiff’s injuries) and “representative” (claims arising from injuries to persons other than the individual plaintiff) components for purposes of arbitration, “representative” is being used in the second sense discussed in Viking, not the first sense as it was used in Kim v. Reins (2020) 9 Cal.5^th 73, 88.)

Plaintiff’s argument that, by definition, a PAGA claim cannot have individual components ignores the two distinct uses of the word “representative” in connection with PAGA claims. Plaintiff improperly uses the first definition of representative (i.e. representative or proxy of the state) to analyze whether a PAGA claim can be separated into individual and “representative claims” (i.e. claims based on violations suffered by persons other than the plaintiff) for purposes of arbitration.

In Viking, the Supreme Court held that the individual claims could be separated from the representative claims and a plaintiff could be forced to arbitrate his or her “individual PAGA claims.” (Viking, supra, 596 U.S. at 649.) “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.” (Id. at 662 (emphasis added).) Viking went on to hold that PAGA claims cannot be dismissed merely because they are representative. (Id. at 663.) However, Viking also found that once a plaintiff’s individual claims were sent to arbitration pursuant to the parties’ agreement, the remaining representative claims (i.e. the claims based on injuries suffered by others) had to be dismissed for lack of standing. (Id. at 663.)

In Adolph, the California Supreme Court reversed Viking River Cruises on the issue of standing. “Where a plaintiff has brought a PAGA action comprising individual and non-individual claims, an order compelling arbitration of the individual claims does not strip the plaintiff of standing as an aggrieved employee to litigate claims on behalf of other employees under PAGA.” (Adolph, supra, 14 Cal.5^th at 1114.)

Thus, based on Viking and Adolph, PAGA claims can be split into individual PAGA claims and representative claims and doing so does not violate the definition or inherent nature of PAGA. Plaintiff’s argument ignores Viking and Adolph and the two distinct uses of “representative” when discussing PAGA—(1) when discussing a plaintiff’s status as a proxy plaintiff and (2) when discussing severability of the underlying violations against the individual plaintiff from violations against all other employees for purposes of arbitration. .

Plaintiff fails to raise any valid grounds to deny Defendants’ Motion to Compel Arbitration. Defendants’ Motion to Compel Arbitration is therefore granted.

In Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 662, the US Supreme Court held that wholesale waivers of “representative” PAGA claims are invalid. The Supreme Court also found the arbitration agreement therein valid and enforceable as to the PAGA plaintiff’s individual claims based on a severability clause. The invalid wholesale waiver of PAGA claims could be severed from the arbitration agreement due to the severability clause. (Viking River Cruises, Inc., supra, 596 U.S. at 662.)

Defendants argues that, pursuant to Viking River Cruises, Plaintiff’s individual claims can be arbitrated despite the unenforceable waiver of representative PAGA claims contained in the Dispute Resolution Agreement. The court agrees and hence compels arbitration of Plaintiff’s individual PAGA claims for the reasons stated above.

Defendant, however, also argues that Viking requires dismissal of Plaintiff’s remaining non-individual PAGA claims for lack of standing. (Motion, 19:20-22.) As discussed above, in Adolph, the California Supreme Court rejected the analysis in Viking of an individual plaintiff’s standing to maintain an action for representative PAGA claims once his or her individual PAGA claims were sent to arbitration. (Adolph, supra, 14 Cal.5^th at 1124.) Instead, under Adolph, a court may exercise its discretion to stay the representative claims pending arbitration of the individual claims. (Id.) If the arbitrator ultimately determines that Plaintiff is not an aggrieved employee, Defendants may then move for summary judgment of the representative claims on grounds of lack of standing. (Id.) Until then, Defendants cite no authority that would allow the Court to dismiss the representative claims simply because the individual claims have been sent to arbitration.

Defendants' request to stay litigation of the representative claims pending arbitration of Plaintiff’s individual claims is granted

The FAA provides for a stay of proceedings if the issues therein are referrable to arbitration. 9 U.S.C. § 3. In addition, Code of Civil Procedure § 1281.4 states, in relevant part:

“If a court . . . has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.”

Defendants ask that litigation of the representative claims be stayed pending arbitration of Plaintiff’s individual claims. Defendants’ request to stay the representative claims pending arbitration of Plaintiff’s individual claims is granted.

Defendants’ request to stay this action pending resolution of Winters PAGA case is denied

Defendants also ask that the court exercise its inherent authority and stay this action pending resolution of an earlier-filed PAGA case against them, Ernest Winters v. Douglas Emmett, Inc., et al., Case No. 21STCV10680. (RJN, Ex. A.) The court compelled arbitration of Winters’ individual PAGA claims on September 6, 2022. Defendants argue the overlap between this case and the Winters case justifies staying this action until the pending arbitration in Winters is completed.

Defendants’ request to stay this entire action pending resolution of the arbitration of the individual PAGA claims in Winters is denied. The pending arbitration in Winters only involves the individual claims asserted by Winters. Any overlap between his individual claims and Plaintiff’s individual claims would not justify staying Plaintiff’s action until the arbitration in Winters is completed.

Defendants’ Motion to Compel Arbitration is GRANTED as to Plaintiff’s individual PAGA claims. Defendants’ request to stay litigation of the representative PAGA claims pending arbitration of Plaintiff’s individual PAGA claims is GRANTED. Defendants’ request to stay this entire litigation pending arbitration of the individual PAGA claims in Winters is DENIED.

Defendants’ request for a statement of decision is denied pursuant to CCP §1291

“In superior courts, upon the trial of a question of fact by the court, written findings of fact and conclusions of law shall not be required. The court shall issue a statement of decision explaining the factual and legal basis for its decision as to each of the principal controverted issues at trial upon the request of any party appearing at the trial. The request must be made within 10 days after the court announces a tentative decision unless the trial is concluded within one calendar day or in less than eight hours over more than one day in which event the request must be made prior to the submission of the matter for decision. The request for a statement of decision shall specify those controverted issues as to which the party is requesting a statement of decision. After a party has requested the statement, any party may make proposals as to the content of the statement of decision. [T]he statement of decision shall be in writing, unless the parties appearing at trial agree otherwise; however, when the trial is concluded within one calendar day or in less than 8 hours over more than one day, the statement of decision may be made orally on the record in the presence of the parties.” (CCP §632.)

“A statement of decision shall be made by the court, if requested pursuant to Section 632, whenever an order or judgment, except a special order after final judgment, is made that is appealable under this title.” (CCP §1291.) “An order compelling arbitration is not appealable but may be reviewed by writ petition. (Laymon v. J. Rockcliff, Inc. (2017) 12 Cal.App.5th 812, 825.)

Only an order denying arbitration is appealable. (CCP § 1294(a); Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 787.)

The Court is granting the motion to compel arbitration. As such, the order is not appealable but may be reviewed by writ proceeding. CCP §1291 only requires a statement of decision whenever an order or judgment is made that is appealable under Title 9 of the Code of Civil Procedure. CCP §1294 does not identify an order granting a motion to compel arbitration as being an appealable order, nor is an order granting the partial motion to compel arbitration a judgment entered pursuant to Title 9.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court