Judge: Mark H. Epstein, Case: 23SMCV02051, Date: 2024-01-24 Tentative Ruling

Case Number: 23SMCV02051    Hearing Date: February 23, 2024    Dept: I

This is the continuation of defendant’s motion to compel arbitration.  At the last hearing, the court requested further briefing as to whether arbitration was proper where the only claim alleged was a PAGA claim—that is, the named plaintiff did not seek any personal recovery for the alleged wage and hour violations.  

The court is convinced that case law requires that plaintiff’s standing be arbitrated.  (Viking River Cruises, Inc. v. Moriana (2022) ___ U.S. ___, 142 S.Ct. 1906; Adolph v. Uber Technologies (2023) 14 Cal.5th 1104.)  In fact, in Adolph, the plaintiff’s second amended complaint (like this one) alleged only a PAGA claim.  The problem plaintiff has is that although there is no obligation for a PAGA plaintiff to seek personal damages, to have standing to assert a PAGA claim as a representative the named plaintiff must have been “aggrieved” by the wage and hour violations alleged.  Earlier California cases held that courts could not “split” the claims and force arbitration of the individual piece, but the United States Supreme Court saw it differently in Viking Rivers, holding that the arbitration agreement was binding and that the individual employee had to arbitrate the individual side of the claim, overruling the earlier California authority.  The Viking River Court went further and suggested that under those circumstances, the individual might lose the right to pursue the PAGA action, but our Supreme Court concluded that the Viking River Court erred in its application of California law (which it can do because the California Supreme Court is the final word on California law—trumping even the United States Supreme Court).  In Adolph, our Supreme Court concluded that standing under PAGA was not affected by enforcement of an agreement to adjudicate plaintiff’s individual claim by arbitration.  And that governs here.  While plaintiff is not seeking a personal recovery for the wage and hour violations he alleges, he is still alleging—as he must—that he did suffer by those violations and that he is an “aggrieved employee.”  Whether or not he is aggrieved is a question he agreed to arbitrate, and under Viking River the court must enforce that decision.  Were the court writing on a clean slate, the court might well come out differently.  But the slate is anything but clean here—having been written upon by both the United States Supreme Court and the California Supreme Court.  This court is a mere trial court; it will (of course) abide the teaching of higher authority.  Accordingly, the fact that plaintiff seeks no individual recovery is no bar to the motion.

The second issue is whether defendant has waived the arbitration or the arbitration agreement is unconscionable.  After all, even under the FAA, arbitration agreements are subject to the same contractual defenses as are other contracts. 

The court finds no waiver here.  While it is true defendant waited nine months to bring the motion, time alone is not the test.  The test is whether defendant did anything inconsistent with enforcing the agreement or whether there would be prejudice by enforcement due to the delay.  Thus, if defendant had demurred, that could be inconsistent with a theory that the merits should be arbitrated.  Similarly, if defendant had propounded discovery that would not be allowed in arbitration, that might well be a waiver.  But nothing like that happened here.  There was a delay, but no prejudice.  As such, there is no waiver. 

As to unconscionability, to make out that defense a plaintiff must show procedural and substantive unconscionability.  The stronger the showing on one prong, the less strong the showing need be on the other.  The court finds plaintiff has met the procedural prong.  This was essentially an adhesion contract.  Plaintiff had no bargaining power here.  Plaintiff was presented with a take-it-or-leave-it contract with no ability to negotiate.  That establishes at least minimal procedural unconscionability.  The court is aware of plaintiff’s other arguments—such as that DocuSign skips right to the part of a contract where a signature or initial is required.  But nothing in DocuSign precludes a party from reviewing the entire agreement, and plaintiff had the opportunity to do so here.  Nor is the arbitration clause so prolix that plaintiff could not understand what it meant.  In short, there is enough to meet the prong, but substantive unconscionability must still be shown and not to only a trivial extent.  Plaintiff raises a host of arguments he claims make the contract substantively improper.  But the court is unpersuaded.  The closest argument is a clause in which the defendant agrees to pay all of the costs of the arbitration if defendant initiates the arbitration proceeding or if plaintiff’s claim is less than $300,000.  Presumably, if plaintiff initiates the claim and it is for over $300,000, the defendant does not agree (through that clause) to the arbitration costs beyond what would otherwise be required.  But the JAMS rules—to which the arbitration agreement expressly refers—states that in an employment related case the only fee that the employee will be required to pay is the initial JAMS case management fee (which is similar to the court’s filing fee).  (JAMS Employment Arbitration Rule 31(c).)  Thus the JAMS rule would limit plaintiff’s arbitration costs even if the amount plaintiff claimed was over $300,000.  Further, in the instant case, plaintiff’s actual award (were plaintiff seeking it) would not be anywhere near $300,000, or at least that is how it seems.  Defendant contends that plaintiff’s recovery (were plaintiff seeking it) would be under $20,000.  That is consistent with plaintiff’s view as alleged in the complaint, in which he claims that his individual recovery would not exceed $75,000 (thus avoiding potential federal jurisdiction).  For both of those reasons, the court does not view the contract as substantively unconscionable, and thus that objection fails.  Therefore, the motion to compel arbitration is GRANTED.

The second part of the motion is defendant’s request that the court action be stayed pending arbitration.  Plaintiff opposes that request and asks that the arbitration and the PAGA claim go forward together.  The court agrees with the defense.  It makes sense to the court to adjudicate plaintiff’s standing by way of arbitration first.  If plaintiff lacks standing, then that will be binding here and the PAGA claim will be dismissed.  If, on the other hand, plaintiff has standing, he may then litigate the PAGA claims.  (Rocha v. U-Haul Co. of California (2023) 88 Cal.App.5th 65, cited with approval in Adolph, supra, 14 Cal.5th at pp. 1123-1124.)  The court sees no reason to depart from that procedure here.  Therefore, the proceedings in this court are STAYED PENDING THE OUTCOME OF ARBITRATION.  The court will set a status conference re: arbitration in approximately 270 days to make sure that the arbitration is proceeding apace.