Judge: Holly J. Fujie, Case: 24STCV14151, Date: 2025-01-02 Tentative Ruling

Case Number: 24STCV14151    Hearing Date: January 2, 2025    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

MOVING PARTY:  Defendant ASND, LLC (“Defendant”)

RESPONDING PARTY: Plaintiff Nancy Martinez (“Martinez”)

            The Court has considered the moving and opposition papers.

BACKGROUND

            This is a Private Attorneys General Act (“PAGA”) action. On June 6, 2024, Plaintiff filed the operative complaint (the “Complaint”) against Defendant and Does 1 through 25 alleging a Representative Claim for PAGA penalties under California Labor Code sections 201, 202, 203, 204 and/or 204b, 210, 226, 226.3, 226.7, 233, 246, 510, 512, 558, 1174, 1174.5, 1194, 1197.1, 1198, 2802, and IWC Wage Order 5-2001).

            On December 9, 2024, Defendant filed an amended motion to compel arbitration (the “Motion”). On December 18, 2024, Plaintiff filed an opposition to the Motion (the “Opposition”).            

DISCUSSION

            The Federal Arbitration Act (“FAA”), while a federal statute, applies in California courts and requires state courts to enforce arbitration agreements as required by the federal common law developed under the FAA. (Southland Corp. v. Keating (1984) 465 U.S. 1, 15-16.) The FAA preempts and invalidates state law and state judicial decisions that disfavor arbitration or require arbitration provisions to pass higher scrutiny. (Southland Corp., supra (1984) 465 U.S. at 12; Perry v. Thomas (1987) 482 U.S. 483, 490.) If the parties designate the FAA applies, then California arbitration law is preempted. (Rodriguez v. American Techs., Inc. (2006) 136 Cal.App.4th 1110, 1121-1122.)

¿           A court’s inquiry is limited to a determination of (1) whether a valid arbitration agreement exists and (2) whether the arbitration agreement covers the dispute. (9 U.S.C. § 4; Chiron Corp. v. Ortho Diagnostics Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130; Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 84; Simula, Inc. v. Autoliv, Inc. (9th Cir. 1999) 175 F.3d 716, 720 [if the finding is affirmative on both counts the FAA requires the Court to enforce the arbitration agreement in accordance with its terms]; Lacayo v. Cataline Restaurant Group Inc. (2019) 38 Cal.App.5th 244, 257 [Where moving party meets initial burden, “the party opposing arbitration must prove by a preponderance of the evidence any defense to the petition”].) 

The FAA governs all agreements to arbitrate in contracts “involving interstate commerce.” (Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.) The term “involving” commerce “is broad and is indeed the functional equivalent of “affecting’ commerce.” (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 273-274.) The U.S. Supreme Court has held that this broad interpretation includes employment contracts. (Circuit City Stores v. Adams (2001) 532 U.S. 105, 106.) The defendant bears the burden of proving applicability of the FAA by showing that its activities constitute interstate commerce. (Hoover v. Am. Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1207.) Failure to demonstrate that the employment agreement affects interstate commerce renders the FAA inapplicable. (Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 687-688.)

Arbitration Agreement

“Parties are not required to arbitrate their disagreements unless they have agreed to do so. A contract to arbitrate will not be inferred absent a ‘clear agreement.’ When determining whether a valid contract to arbitrate exists, we apply ordinary state law principles that govern contract formation. In California, a ‘clear agreement’ to arbitrate may be either express or implied in fact.” (Davis v. Nordstrom, Inc. (9th Cir. 2014) 755 F.3d 1089, 1092-93 [applying California law] [internal citations omitted].)

            In support of the Motion, Defendant attaches a copy of the ‘Mutual Agreement to Arbitrate Employment-Related Disputes’ (the “Arbitration Agreement”) executed by Plaintiff on July 7, 2023. (Yacoub Decl., Ex. A.) Plaintiff does not dispute the existence or validity of the Arbitration Agreement but rather argues that Defendant has not shown that the FAA applies. The Arbitration Agreement expressly states, however, that it is governed by the FAA: “This Agreement shall be governed and construed in accordance with the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. ("FAA").” (Yacoub Decl., Ex. A, § 7) In addition, Defendant asserts that Plaintiff’s employment with Defendant involves interstate commerce because Defendant purchases medical supplies from Illinois and receives payments from Medicare. (Yacoub Decl. ¶¶ 7-8) The U.S. Supreme Court has held that contracts ‘involving commerce’ include employment contracts. (Circuit City Stores, supra 532 U.S. at 106.)

Thus, Defendant met its burden that an arbitration agreement exists. 

Arbitrability of PAGA Claims

            Defendant argues that whether Plaintiff has standing to bring her representative PAGA claims depends on whether Plaintiff is an ‘aggrieved employee’ and thus this issue must first be resolved by an arbitrator before Plaintiff can proceed to litigate the representative PAGA claims. (Mot. pp. 5:22-6:12) In relevant portion, the Arbitration Agreement states: “The Arbitrator shall have the authority to adjudicate any cause of action or the entire claim pursuant to a motion to dismiss, motion for summary adjudication and/or motion for summary judgment.” (Yacoub Decl., Ex. A, § 8) Plaintiff’s ‘aggrieved employee’ status is not a standalone cause of action or claim, it is an element of an ‘individual’ PAGA claim. Upon review of the Complaint, Plaintiff brings only a single cause of action for ‘Representative Claim for PAGA penalties.’ (Complaint, p. 9.) Thus, because Plaintiff chooses not to assert an ‘individual’ PAGA claim, there is nothing to send to arbitration and no claim for an arbitrator to resolve.

            Defendant argues that Balderas v. Fresh Start Harvesting, Inc., (2024) 101 Cal.App.5th 533 “does not stand for the proposition that a representative PAGA claim can proceed in court where a valid arbitration agreement exists” (Mot. p. 10:2-4.) If Plaintiff had brought an individual PAGA claim, the “aggrieved employee” status may be determined as part of arbitration for the individual PAGA claim, but this does not logically result in the conclusion that Plaintiff must arbitrate the question of “aggrieved employee” status when Plaintiff only alleges a representative claim.

            Thus, Defendant’s Motion to Compel Arbitration is DENIED.

Moving Party is ordered to give notice of this ruling.           

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.

Dated this 2nd day of January 2025