Judge Lynne M. Hobbs, Case Number: 23STCV10241, Date: 2024-08-06 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 23STCV10241, Date: 2024-08-06 Tentative Ruling

Case Number: 23STCV10241 Hearing Date: August 6, 2024 Dept: 61

GINA BURCIAGA vs B.S.D. CAPITAL, INC., A CORPORATION, et al.

TENTATIVE

Defendants B.S.D. Capital, Inc., Fund California, LLC, and Lendistry SBLC, LLC’s Motion to Compel Arbitration is DENIED.

Plaintiff to provide notice.

DISCUSSION

On petition of a party to an arbitration agreement to arbitrate a controversy, a court must order the petitioner and respondent to arbitrate the controversy if it determines the arbitration agreement exists, unless (1) the petitioner has waived its right to arbitrate; (2) grounds exist for the revocation of the agreement; or (3) “[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.” (Code Civ. Proc., § 1281.2.)

“[T]he party moving to compel arbitration bears the burden of establishing the existence of a preponderance of the evidence any fact necessary to its defense. The role of the trial court is to sit as a trier of fact, weighing any affidavits, declarations, and other documentary evidence, together with oral testimony received at the court's discretion, to reach a determination on the issue of arbitrability.” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 758.)

Defendants B.S.D. Capital, Inc., Fund California, LLC, and Lendistry SBLC, LLC (Defendants) move to compel arbitration of Plaintiff Gina Burciaga’s (Plaintiff) individual PAGA claims and to stay her representative claims pending resolution of the arbitration, pursuant to an arbitration agreement and the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, in which the Court held that the Federal Arbitration Act (FAA) preempted California’s rule prohibiting “division of PAGA actions into individual and non-individual claims through an agreement to arbitrate,” and allowed PAGA defendants “to compel arbitration of [a PAGA plaintiff’s] individual claim.” (Id. at p. 1925.)

The arbitration provision that Defendants present is contained in an offer letter executed by Plaintiff on December 20, 2020. (Sands Decl. Exh. 1.) That provision states in full:

Arbitration: You and the Company shall submit to mandatory and exclusive binding arbitration of any controversy or claim arising out of, or relating to, this Agreement or any breach hereof. Such arbitration shall be conducted through the American Arbitration Association in the State of California in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association in effect at that time.

(Sands Decl. Exh. 1.)

Plaintiff in opposition contends that she is not subject to arbitration under Viking River Cruises because she brings this action solely in a representative capacity, without individual claims. (Opposition at pp. 3–5.) Plaintiff has filed an ex parte application set for the same hearing date as this motion, seeking to dismiss her individual claims. Plaintiff further argues that the arbitration agreement does not encompass her PAGA claims under Viking River Cruises because the agreement contains no language waiving representative or PAGA actions. (Opposition at pp. 5–6.) Plaintiff contests whether the agreement is governed by the FAA, such that the holding of Viking River Cruises should apply. (Opposition at pp. 6–8.) Plaintiff finally argues that no stay of her representative claims is proper if her individual claims are ordered to arbitration. (Opposition at p. 11.)

To assess Plaintiff’s claims concerning the effect of her attempt to dismiss her individual PAGA claims, some explanation of the case law is appropriate. The California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, held that “an employee’s right to bring a PAGA action is unwaivable,” and thus “an agreement by employees to waive their right to bring a PAGA action. . . is against public policy and may not be enforced.” (Iskanian, supra, 59 Cal.4th at p. 383.) When the employer seeking to enforce the agreement argued that the agreement “prohibits only representative claims, not individual PAGA claims,” which it claimed could proceed to arbitration. (Id. at p. 384.) The court disagreed, reasoning that PAGA “does not permit an employee to file an individual claim.” (Ibid.)

The U.S. Supreme Court in Viking River Cruises upheld Iskanian’s prohibition on waiver of representative PAGA actions against a preemption challenge under the FAA, but held that the FAA preempted Iskanian’s prohibition on splitting PAGA claims into arbitrable individual claims and non-arbitrable representative claims. (See Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 659.) The court concluded, however, that sending the plaintiff’s individual claims to arbitration left her without standing to prosecute her representative claims. (Id. at p. 663.)

But the California Supreme Court in Adolph v. Uber Technologies, Inc. (2023) 14 Cal.4th 1104, held that the U.S. Supreme Court was mistaken on this last point of California state law. “Standing under PAGA is not affected by enforcement of an agreement to adjudicate a plaintiff's individual claim in another forum.” (Id. at p. 1121.) The court held that there are “only two requirements for PAGA standing: . . . The plaintiff must allege that he or she is (1) someone ‘who was employed by the alleged violator’ ” and (2) someone “ ‘against whom one or more of the alleged violations was committed.’ ” (Id. at p. 1120.)

In Balderas v. Fresh Start Harvesting, Inc. (2024) 101 Cal.app.5th 533, the court held that because PAGA standing required only status as an aggrieved employee, it did not require the allegation of any individual PAGA claim to state a representative PAGA claim: “The statutory goal is furthered by extending broad standing to aggrieved employees who do not depend on the viability or strength of a plaintiff's individual PAGA claim. The inability for an employee to pursue an individual PAGA claim does not prevent that employee from filing a representative PAGA action.” (Balderas v. Fresh Start Harvesting, Inc. (2024) 101 Cal.App.5th 533, 537.)

From the above authority, Plaintiff is correct that she need not allege an individual PAGA claim seeking relief on her own behalf to pursue representative PAGA claims on behalf of other aggrieved employees. Although Plaintiff in fact alleges an individual PAGA claim in the present iteration of her Complaint — seeking “to recover civil penalties for herself and on behalf of all current and former aggrieved employees” (Complaint ¶ 1) — under Balderas and Adolph, it is not essential for Plaintiff to seek civil penalties for violations she suffered in order to seek penalties for the violations suffered by others: she need only allege she was an employee of the alleged violator and someone against whom one or more of the alleged violations was committed. (Adolph, supra, 14 Cal.4th at p. 1120.) Plaintiff presently seeks permission to dismiss her individual PAGA claims, and under the above authority, she may do so. And in doing so, Defendant’s request for arbitration becomes moot, as there remains no individual PAGA claim to arbitrate.

Defendants argue that Plaintiff cannot circumvent the arbitration agreement by dismissing her individual claims. (Reply at pp. 7–8.) But this argument rests upon no authority, and ignores the nature of the relief that Defendants themselves request in their motion. Defendants cannot seek arbitration of Plaintiff’s representative claims even if their motion is granted, because Defendants seek arbitration of only Plaintiff’s individual PAGA claims, i.e. any “claim seeking to recover a civil penalty imposed because of a Labor Code violation suffered by the plaintiff, which civil penalty, if recovered, will be distributed 75 percent to the Labor and Workforce Development Agency and 25 percent to the plaintiff as the employee aggrieved by the violation pursuant to section 2699, subdivision (i).” (Galarsa v. Dolgen California, LLC (2023) 88 Cal.App.5th 639, 648.) Arbitration of this claim has not been “circumvented.” Plaintiff has dismissed the claim.

The motion is therefore DENIED.