Judge: Joseph Lipner, Case: 22STCV35935, Date: 2024-01-25 Tentative Ruling

Case Number: 22STCV35935    Hearing Date: January 25, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendant Dermalogica, LLC (“Dermalogica”) moves for an order compelling Plaintiff John Edward Castillo (“Plaintiff”) to arbitrate his claims against Dermalogica. Dermalogica also seeks a stay on this matter pending arbitration.

The Court GRANTS Dermalogica’s motion to compel arbitration and STAYS this action as to Plaintiff’s non-individual PAGA claims pending arbitration of the issue of whether Plaintiff is an aggrieved employee.

The Court sets a status conference regarding arbitration for October 2, 2024 at 8:30 a.m.  Dermalogica shall give notice.

Background

This PAGA action concerns Plaintiff’s employment with Dermalogica and Randstad Inhouse Services, L.P. (collectively, “Defendants”). Plaintiff alleges a number of wage and hour violations which are subject to PAGA penalties.

Plaintiff executed an agreement with Dermalogica whereby the parties agreed to arbitrate disputes arising out of the employment relationship.

Plaintiff filed this action on November 14, 2022. The operative complaint is now the First Amended Complaint (“FAC”), filed on March 9, 2023, which raises a claim for civil penalties under PAGA. On April 24, 2023, the Court dismissed Plaintiff’s non-PAGA claims without prejudice.

On April 27, 2023, Plaintiff propounded sets of special interrogatories and requests for document production on Dermalogica. On June 16, Dermalogica responded with only objections.

On June 9, 2023, Dermalogica served Plaintiff with its first petition to compel arbitration with a hearing date for August 10, 2023, which the Court subsequently rescheduled to October 18, 2023.

On July 6, 2023, the parties submitted a stipulation to a stay on the action pending the resolution of Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104. On July 27, 2023, after Adolph came down, the Court retroactively approved the stay for the period of July 6, 2023 – July 17, 2023.

On August 25, 2023, Dermalogica withdrew the first motion to compel arbitration.

On September 7, Plaintiff’s counsel proposed resolving the remaining PAGA claim at a global mediation, to which Dermalogica’s counsel responded, “Let us check with client and circle back with you next week.” (Tran Decl. ¶ 12.) As a result, Plaintiff did not move to compel further discovery responses. (Tran Decl. ¶ 12.) Dermalogica’s counsel never provided a response regarding mediation, despite several follow-ups from Plaintiff’s counsel.

At a Case Management Conference on October 18, 2023, Dermalogica’s counsel informed Plaintiff and the Court that they would move to compel arbitration a second time.

Dermalogica filed this motion – the second arbitration motion – on December 28, 2023. Plaintiff filed an opposition and Dermalogica filed a reply.

Discussion

Plaintiff does not dispute the existence of the arbitration agreement, but rather argues that Dermalogica has waived the right to arbitrate.

Waiver

In order to prove a waiver of the right to arbitrate, a nonmoving party was traditionally required to demonstrate that the moving party (1) was aware of its right to compel arbitration, (2) acted inconsistently with that right, and (3) prejudiced the nonmoving party as a result. (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1203, citing U.S. v. Park Place Associates, Ltd. (9th Cir. 2009) 563 F.3d 907, 921.) However, the Supreme Court has recently held that “prejudice is not a condition of finding that a party, by litigating too long, waived its right to stay litigation or compel arbitration under the FAA.” (Morgan v. Sundance, Inc. (2022) 596 U.S. 411, 419.)

“The relevant factors establishing waiver include whether the party's actions are inconsistent with the right to arbitrate; whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; whether a party delayed for a long period before seeking a stay; whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and whether the delay affected, misled, or prejudiced the opposing party.” (Hoover, supra, 206 Cal.App.4th at p. 1204.) “[T]he bad faith or willful misconduct of a party may constitute a waiver and thus justify a refusal to compel arbitration.” (Davis v. Blue Cross of Northern California (1979) 25 Cal.3d 418, 426 [internal quotations and citations omitted].)

“[A] party may be said to have “waived” its right to arbitrate by an untimely demand, even without intending to give up the remedy. In this context, waiver is more like a forfeiture arising from the nonperformance of a required act.” (Burton v. Cruise (2010) 190 Cal.App.4th 939, 944 [citation omitted].) However, some California appellate courts hold that “a delay is found unreasonable only when it is combined with the attempt by the party asserting a right to arbitrate to obtain an advantageous litigation position during the delay.” (Gloster v. Sonic Automotive, Inc. (2014) 226 Cal.App.4th 438, 449.) “[T]he absence of a reasonable explanation for delay is a significant factor weighing in favor of finding waiver.” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 969.)

In Bower v. Inter-Con Security Systems, Inc. (2014) 232 Cal.App.4th 1035, 1044-1049, the moving party attempted to settle the case on a class-wide basis and obtained discovery from the plaintiffs prior to filing a motion to compel arbitration. (Ibid.) The court found that this conduct was inconsistent with the party’s right to arbitrate because it took advantage of discovery, delayed arbitration of the individual claim, and attempted to settle the claim class-wide instead of on an individual basis as compelled by the arbitration agreement. (Id. at p. 1045.)

In Garcia v. Haralambos Beverage Co. (2021) 59 Cal.App.5th 534, 543-545, a moving party acted in a manner inconsistent with its right to arbitrate where it engaged in class-wide mediation, represented in status conference statements that it did not intend to arbitrate, and responded to the plaintiff’s discovery requests and meet and confers. (Ibid.)

In Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4th 1443, the court found that the defendant had waived arbitration where the defendant waited until its demurrer to the second amended complaint was overruled to even produce the arbitration agreement. (Id. at pp. 1448-1449.) The defendant had also repeatedly stalled the plaintiff’s discovery efforts and had withheld the arbitration agreement from prior document production. (Ibid.)

Conversely, in Gloster v. Sonic Automotive, Inc. (2014) 226 Cal.App.4th 438, 449, the moving parties deferred a motion to compel arbitration while awaiting the results of another defendant’s demurrer, which would have simplified the arbitration motion, and filed the motion four months after the demurrer’s resolution. (Ibid.) The moving parties filed no motions of their own and restricted their litigation activity to responding to discovery and attending case management conferences. (Ibid.) The court found that the moving parties had not waived arbitration. (Id. at p. 450.)

Here, Dermalogica has not propounded discovery, has not actually engaged in mediation, and notified Plaintiff early-on of the existence of the arbitration agreement and its intent to arbitrate. Dermalogica did not file any demurrers. Dermalogica restricted its litigation activity to responding to discovery and attending case management conferences, much like in Gloster.

Also as in Gloster, Dermalogica had a facially reasonable explanation for its decision to delay filing the current version of the motion.  The California Supreme Court issued Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104 on July 17, 2023.  This opinion mooted portions of Dermalogica’s first motion to compel arbitration. Dermalogica asserts that the decision presented new considerations and Dermalogica needed to consider it before filing its updated arbitration motion. 

Under these facts, it does not appear to be supported that Dermalogica has substantially engaged the litigation machinery. Thus, the Court concludes that Dermalogica has not waived arbitration.

Litigation of Non-Individual Claims

Plaintiff argues that, even if the Court compels arbitration of his individual PAGA claims, he should be permitted to continue to litigate the representative PAGA claims in court.

Arbitration of Plaintiff’s individual claims do not require the dismissal of Plaintiff’s non-individual claims.  “PAGA authorizes ‘an aggrieved employee,’ acting as a proxy or agent of the state Labor and Workforce Development Agency (LWDA), to bring a civil action against an employer ‘on behalf of himself or herself and other current or former employees to recover civil penalties for Labor Code violations they have sustained.” (Adolph v. Uber Technologies, Inc., supra, 14 Cal.5th at p. 1113, quoting Lab. Code, § 2698.) “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.” (Id. at p. 1114.)

“To have PAGA standing, a plaintiff must be an aggrieved employee — that is, (1) someone who was employed by the alleged violator and (2) against whom one or more of the alleged violations was committed.” (Adolph, supra, 14 Cal.5th at p. 1113.) Settlement of a plaintiff’s individual claims does not nullify their status as an aggrieved employee because “[t]he remedy for a Labor Code violation, through settlement or other means, is distinct from the fact of the violation itself.. (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 84 [emphasis in original].)

Adolph provides that Plaintiff maintains standing to litigate her non-individual claims in court. However, Plaintiff may not litigate the issue of whether she is an aggrieved employee in both court and arbitration. (Adolph, supra, 14 Cal.5th at p. 1124.) The solution suggested by Adolph is to stay the litigation in court pending the determination of the plaintiff’s aggrieved status in arbitration. (Id. at p. 1123-1124.) If the arbitrator makes a determination the Plaintiff is aggrieved that is then confirmed and reduced to a final judgment, it would then be binding on the court. (Ibid.) Conversely, if the arbitration results in an adopted final judgment that Plaintiff is not aggrieved, then Plaintiff would lack standing to prosecute the non-individual claims. (Ibid.)

          To conserve the resources of the parties and the Court, and in light of the issues that will be arbitrated, the Court stays the non-individual PAGA claims pending arbitration.