Judge Lynette Gridiron Winston, Case Number: 22PSCV00933, Date: 2023-09-20 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 22PSCV00933, Date: 2023-09-20 Tentative Ruling

Case Number: 22PSCV00933 Hearing Date: September 20, 2023 Dept: 6

Defendants’ Motion to Compel Arbitration

TENTATIVE RULING
The Court GRANTS the motion to compel arbitration in part. The parties are ordered to arbitrate Plaintiff’s individual PAGA claims. The action is stayed as to Plaintiff’s representative PAGA claims.

The Court will set a Status Conference re Arbitration.

Defendants are ordered to give notice of this ruling and file proof of service of same within five days.

BACKGROUND
This is a Private Attorneys General Act (PAGA) action. On August 29, 2022, Plaintiff Maria Mora (Plaintiff”) filed this action against Defendants All in the Family, LP, All in the Family II, LP, All in the Family IV, LP, All in the Family V, LLC, All in the Family VI, LLC, Big Huevos Holding, LLC, Big Huevos Holding, LP, Big Huevos Holdings II, LP, Big Huevos Holdings III, LP, Randy Corrigan, Barry Tu (collectively, “Defendants”) and Does 1 through 50, alleging PAGA claims for failure to provide employment records, failure to pay overtime/double time, failure to provide meal and rest periods, failure to pay minimum wages, failure to keep accurate and provide itemized wage statements, failure to pay reporting time, failure to pay “split shift” premiums, failure to timely pay wages during employment, failure to timely pay wages upon termination, failure to reimburse necessary business-related expenses and costs, and failure to provide notice of paid sick time and accrual. Plaintiff also seeks civil penalties.

On May 5, 2023, Defendants filed a motion to compel arbitration. On September 7, 2023, Plaintiff opposed the motion. On September 13, 2023, Defendants filed their reply.

LEGAL STANDARD
Parties may be compelled to arbitrate a dispute upon the court finding that: (1) there was a valid agreement to arbitrate between the parties; and (2) said agreement covers the controversy or controversies in the parties’ dispute.¿(Omar v. Ralphs Grocery Co. (2004)¿118 Cal.App.4th 955, 961.) A party moving to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court¿(1998) 62 Cal.App.4th 348, 356-357.) A party seeking to compel arbitration meets their initial burden of establishing the existence of a valid arbitration agreement by attaching a copy to the motion or petition to compel arbitration. (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060.)

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Ibid. [internal quotations omitted].)

ANALYSIS

Federal Arbitration Act v. California Arbitration Act
“’[T]he 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.’ [Citation]. ‘[T]he question is not whether the parties adopted the CAA’s procedural provisions: The state's procedural statutes (§§ 1281.2, 1290.2) apply by default because Congress intended the comparable FAA sections (9 U.S.C. §§ 3, 4, 10, 11) to apply in federal court. The question, therefore, is whether the parties expressly incorporated the FAA’s procedural provisions into their agreements.’” (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 345, quoting Valencia v. Smyth (2010) 185 Cal.App.4th 153, 177) [italics in original].

The governing procedural law for this Motion to Compel Arbitration is the California Arbitration Act since the Arbitration Agreement (defined below) does not expressly provide that its enforcement is governed by the Federal Arbitration Act (FAA). (Victrola 89, supra, 46 Cal.App.5th at pp. 345-346.) The Court further notes that, although the Arbitration Agreement indicates that the parties, “have agreed to submit to binding arbitration pursuant to the Federal Arbitration Act… any dispute, controversy or claim arising out of or relating to Employee's employment with the Company (including the termination of the employment relationship),” it subsequently states that, “[a]rbitration shall be conducted in accordance with the procedures of the California Arbitration Act (Cal. Code Civ. Proc. Section 1282 et seq., including section 1283.5)…” (Corrigan Decl., Ex. C, first paragraph) [bold in original].) Thus, it is unclear to what extent, if any, the FAA applies here. Either way, it does not appear that the applicability of the CAA will lead to a different outcome here.

A Valid Arbitration Agreement Exists
In establishing the existence of an agreement to arbitrate, it is sufficient for the defendant to provide a copy of the arbitration agreement or state the paragraph verbatim. (Baker v. Italian Maple Holdings, LLC, 13 Cal.App.5th 1152, 1160 (2017); Cal. Rules of Court, rule 3.1330.) Defendants have attached a copy of the subject arbitration agreement (the “Arbitration Agreement”) to their moving papers, and it provides that disputes arising out of Plaintiff’s employment with Defendants are to be submitted to binding arbitration. (Corrigan Decl., Ex. C.) The Court finds that Defendants have met their initial burden in establishing the existence of a valid arbitration agreement. The burden now shifts to Plaintiff to challenge its validity.

Plaintiff contends the Arbitration Agreement is unenforceable because it contains language providing for the waiver of Plaintiff’s PAGA claims. In particular, Plaintiff references the following language from the Arbitration Agreement:

Except as otherwise required under applicable law, Employee and the Company expressly agree that: (1) class and collective action procedures are waived, and shall not be asserted, nor will they apply, in any arbitration (or dispute adjudicated in any other forum) pursuant to this Agreement; (2) Employee agrees that Employee will not participate in any class or collective action, claim or procedure instigated by any other person. The parties also agree that, to the extent permitted by law, they will be precluded from asserting in arbitration, or any other forum, any representative claims otherwise permitted by law. No arbitrator shall have the authority under this Agreement to order any such class or collective action(s).

(Opp., at p. 3:3-11, citing Corrigan Decl., Ex. C, second paragraph.)

Plaintiff cites the United States Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, which upheld many of the holdings from Iskanian v. CLS Transportation Los Angeles LLC (2014) 59 Cal.4th 348, including the rule that that a wholesale waiver of representative claims is invalid. (142 S.Ct. at p. 1922; see also Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1117 [noting that Viking River upheld the prohibition against waiver of PAGA claims].) Plaintiff contends that this provision of the Arbitration Agreement renders it unenforceable. Defendants do not appear to dispute that the Arbitration Agreement may contain a waiver of representative PAGA claims. However, Defendants argue that the severability clause renders the Arbitration Agreement enforceable as it relates to Plaintiff’s individual claims. (Reply, 2:22-4:5.)

While the Court agrees with Plaintiff that the language in the Arbitration Agreement purporting to waive Plaintiff’s PAGA claims is unenforceable, the Court disagrees that such language renders the whole Arbitration Agreement unenforceable. The Arbitration Agreement contains a severability clause. (Corrigan Decl., Ex. C, eighth paragraph.) Viking River and Adolph both provide that such invalid language can be severed while the remainder of the Arbitration Agreement is enforced. (Viking River, supra, 142 S.Ct. at p. 1925; Adolph, supra, 14 Cal.5th at pp. 1124-1125.)

Here, the Court finds the Arbitration Agreement does purport to waive representative PAGA claims. But the severability clause in the agreement provides that “[i]f any provision of this Agreement is held invalid, the invalidity shall not affect other provisions of the Agreement which can be given effect without the invalid provisions, and to this end the provisions of this Agreement are declared to be severable.” Based on this clause, Defendants are entitled to enforce the Arbitration Agreement insofar as it mandated arbitration of Plaintiff’s individual PAGA claims.

The Court further notes that Plaintiff does not dispute that her claims otherwise arise out of her employment with Defendants, which claims fall within the scope of the Arbitration Agreement. (See Corrigan Decl., Ex. C, first paragraph [“Employee and the Company have agreed to submit to binding arbitration pursuant to the Federal Arbitration Act… any dispute, controversy or claim arising out of or relating to Employee's employment with the Company (including the termination of the employment relationship)…”] [bold in original]). Accordingly, Plaintiff’s individual PAGA claims are subject to arbitration.

Plaintiff also contends that Plaintiff’s claims cannot be split between individual and representative claims because Plaintiff is not seeking “damages for violation of the labor code; it seeks attorney fees, costs and statutory penalties under PAGA” and there is “no request for ‘unpaid wages and meal and rest period premiums under the labor code.’” (Opp., at p. 5:17-24, citing Compl. Prayer pp. 20-21.)

Plaintiff’s contention against splitting Plaintiff’s PAGA claims because she is not praying for damages is unpersuasive. Contrary to Plaintiff’s contentions in the Opposition, Plaintiff is alleging an individual PAGA claim as she alleges in Paragraph 87: “Pursuant to California Labor Code section 2699, REPRESENTATIVE PLAINTIFF, individually, and on behalf of all AGGRIEVED EMPLOYEES, requests and is entitled to recover penalties from DEFENDANTS and each of them, for violations of the Labor Code as more fully described herein according to proof, interest, attorneys’ fees and costs pursuant to California Labor Code section 218.5…” (Compl., ¶ 87.) Plaintiff also alleges among other things that she suffered meal and rest period violations. (Compl., ¶ 77 [“DEFENDANTS failure to provide legally required meal and rest periods to REPRESENTATIVE PLAINTIFF and other AGGRIEVED EMPLOYEES constitutes unlawful and/or unfair activity prohibited by California Labor Code sections 226.7, 512(a), and the applicable Wage Orders.”])

The fact that Plaintiff does not seek damages does not prevent the arbitration of her individual PAGA claims. Here, Plaintiff filed a PAGA complaint seeking recovery on behalf of herself and other current or former employees. (Compl., ¶ 20 [“This is only a Private Attorney General Action Complaint, pursuant to California Labor Code section 2699 et seq., on behalf of REPRESENTATIVE PLAINTIFF and all other persons similarly situated who worked for DEFENDANTS in their California locations as nonexempt, hourly employees….”] and ¶¶ 26, 87.) Plaintiff also alleges that ”DEFENDANTS are each liable for civil penalties for violation of the California Labor Code as to REPRESENTATIVE PLAINTIFF and the other AGGRIEVED EMPLOYEES.” (Compl. ¶ 16.) Here, Plaintiff has clearly alleged an individual PAGA claim seeking civil statutory penalties, even if she is not seeking damages for alleged violations of the Labor Code. The Arbitration Agreement mandates arbitration of all disputes relating to or arising out of Plaintiff’s employment with Defendants and this Court has found that this provision is enforceable. Therefore, under Viking River, individual PAGA claims are severable and must be compelled to arbitration pursuant to the Arbitration Agreement. (Viking River, supra, 142 S.Ct. at p. 1925; Adolph, supra, 14 Cal.5th at 1126; Piplack v. In-N-Out Burgers (2023) 88 Cal.App.5th 1281, 1292.)

Further, none of the legal authorities Plaintiff cited support the contention that the prayer for relief determines whether a PAGA claim may be split between individual and representative claims.

Finally, Plaintiff also contends the terms of the Arbitration Agreement must be interpreted based on the law in effect at the time the parties entered into the Arbitration Agreement, which was Iskanian in January 2022. However, the fact that Iskanian was in effect at the time the parties entered into the Arbitration Agreement does not prevent this Court from applying case law decided after Iskanian. To conclude otherwise would effectively permit Plaintiff to make an end run around the rules set forth in Viking River and Adolph. It also would have prevented the United States Supreme Court from permitting the plaintiff’s claims in Viking River to be split into individual and representative claims since the law in effect before Viking River was Iskanian. (See Viking River, supra, 142 S.Ct. at pp. 1924-1925.)

Accordingly, the only remaining question is whether Plaintiff retains standing to pursue her representative PAGA claims in court.

Standing
As the California Supreme Court stated: “The question here is whether an aggrieved employee who has been compelled to arbitrate claims under PAGA that are premised on Labor Code violations actually sustained by the plaintiff maintains statutory standing to pursue PAGA claims arising out of events involving other employees in court. We hold that the answer is yes.” (Adolph, supra, 14 Cal. 5th at p. 1114 (internal citations and quotations omitted).)

The Court went on to state: “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.” ’ (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 83, 84, 259 Cal.Rptr.3d 769, 459 P.3d 1123 (Kim), quoting § 2699, subd. (c).) 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.5th at p. 1114.) The State of California cannot be compelled to arbitrate a representative PAGA claim. (Betancourt v. Prudential Overall Supply (2017) 9 Cal.App.5th 439, 446.)

Defendants contend that Plaintiff’s representative PAGA claims should be dismissed due to lack of standing per Viking River. However, when Defendants filed this motion, the California Supreme Court had yet to issue its decision in Adolph addressing this question of standing left open by Viking River. The California Supreme Court has made clear that a PAGA plaintiff does not lose standing to pursue representative claims in court merely because the plaintiff’s individual claims were compelled to arbitration. (Adolph, supra, 14 Cal.5th at p. 1114.)

The Court finds that Plaintiff sufficiently alleges that she is an aggrieved employee for purposes of pursuing PAGA claims against Defendants. First, Plaintiff alleges Defendants employed her. (Compl., ¶ 1.) Second, Plaintiff alleges that one or more of the alleged Labor Code violations were committed against her. (Compl., ¶¶ 27-67.) Therefore, the Court finds Plaintiff has standing to pursue her representative PAGA claims against Defendants in this court and declines to dismiss Plaintiff’s claims.

Staying Plaintiff’s Representative Claims Pending Completion of Arbitration
“If a court of competent jurisdiction, whether in this State or not, 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.

“If the issue which is the controversy subject to arbitration is severable, the stay may be with respect to that issue only.” (Code Civ. Proc., § 1281.4; see Adolph, supra, 14 Cal.5th at p. 1123 [“the trial court may exercise its discretion to stay the non-individual claims pending the outcome of the arbitration pursuant to section 1281.4 of the Code of Civil Procedure.”].)

Given the Court’s decision to compel arbitration of Plaintiff’s individual PAGA claims, the Court will stay the litigation of Plaintiff’s representative PAGA claims in this Court pending completion of the arbitration.

CONCLUSION
The Court GRANTS the motion to compel arbitration in part. The parties are ordered to arbitrate Plaintiff’s individual PAGA claims. The action is stayed as to Plaintiff’s representative PAGA claims.

The Court will set a Status Conference re Arbitration.

Defendants are ordered to give notice of this ruling and file proof of service of same within five calendar days.