Judge: Maurice A. Leiter, Case: 19STCV37794, Date: 2022-12-06 Tentative Ruling

Case Number: 19STCV37794    Hearing Date: December 6, 2022    Dept: 54

Hearing Date: December 6, 2022

Department 54, Judge Maurice A. Leiter

Motion to Compel Arbitration

Moving Party: Defendants Inter-Coast International Training, Inc., Inc. and Geeta Brown

Responding Party: Plaintiff Michele Spaurwe

T/R:    DEFENDANTS’ MOTION TO COMPEL ARBITRATION IS GRANTED IN PART AND DEFERRED IN PART. 

DEFENDANTS’ MOTION IS GRANTED AS TO PLAINTIFF’S INDIVIDUAL PAGA CLAIM.  THAT PORTION OF THE CASE IS STAYED PENDING BINDING ARBITRATION. 

THIS COURT DEFERS RULING ON THE ISSUE OF DISMISSAL OF PLAINTIFF’S REPRESENTATIVE CLAIM PENDING THE CALIFORNIA SUPREME COURT’S DECISION IN ADOLPH V. UBER TECHNOLOGIES, CASE NO. S27467. 

If the parties wish to submit on the tentative, please email the courtroom at¿SMCdept54@lacourt.org¿with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

            The Court considers the moving papers, opposition, and reply.

BACKGROUND

            On October 23, 2021, Plaintiff Michele Spaurwe initiated this PAGA action, individually and on behalf of similarly situated employees, based on allegations that Defendant Inter-Coast International Training, Inc. violated sections 2698 et seq. of the Labor Code by engaging in conduct that violated laws relating to overtime compensation, payment for all hours worked, and the provision of meal and rest breaks, among other matters.

            On March 23, 2020, Defendants previously filed Motions to Compel Binding Arbitration. By stipulation Defendants withdrew those motions.

            On June 27, 2022, Defendants renewed their motions to compel arbitration, after the Supreme Court’s decision in Viking River Cruises v. Moriana (2022) 142 S.Ct. 1906.

ANALYSIS

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate a controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists….”  (CCP § 1281.2.)  The right to compel arbitration exists unless the court finds that the right has been waived by a party’s conduct, other grounds exist for revocation of the agreement, or where a pending court action arising out of the same transaction creates the possibility of conflicting rulings on a common issue of law or fact.   (CCP § 1281.2(a)-(c).)  “The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.”  (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)

A.   Judicial Notice

Plaintiff asks the Court to take judicial notice of a ruling on similar issues in a separate action: Singh v. West Covina Motor Group LLC (Los Angeles Superior Court Case No. 21STCV41713) (Iwasaki, J.). The Court may take judicial notice of documents in a court file under Evidence Code § 452(d). Counsel are reminded that rulings of other trial courts are not precedent.

B.   Existence of Arbitration Agreement

Defendants move to compel arbitration based on the “Agreement to Arbitrate Claims” executed by Plaintiff on December 17, 2014. (Gonzalez Decl. ¶¶ 5-9; Adreani Decl., Exh. A.) The agreement provides:

I and the Company both agree to the fullest extent allowed by law, rule or regulation, that any claim dispute, and/or controversy that either party may have against one another (including, but not limited to, any claims of discrimination and harassment, whether they be based on the California Fair Employment and Housing Act, Title Vll of the Civil Rights Act of 1944, as amended, as all other applicable state or federal laws or regulations) which would otherwise require or allow resort to any court or other governmental dispute resolution forum between myself and the Company (or its owners, directors. officers, managers, employees, agents, and parties affiliated with its employee benefit and health plans) arising from, related to, or having any relationship or connection whatsoever with my seeking employment, with employment by, or other association with the Company, whether based on tort, contract, statutory, or equitable law, or otherwise, [with the sole exception of claims arising under the National Labor Relations Act which are brought before the National Labor Relations Board, claims for medical and disability benefits under the California Workers' Compensation Act, and Employment Development Department Claims), including wage and how claims of any kind, including claims for unpaid overtime and unpaid breaks and meal periods, shall be submitted to and determined exclusively by binding arbitration.

(Adreani Decl., Exh. A.) This action arises from Plaintiff’s employment with Defendants. And the agreement provides it is governed by the FAA. (Id.) While Defendant Greeta Brown is not a signatory to the arbitration agreement, she is an intended third-party beneficiary because she is an employee of Defendant Inter-Coast, and Plaintiff’s claims also are directed at Defendant Brown. (Brown Decl. ¶ 3; see Metalclad Corp. v. Ventana Envtl. Organizational P’ship (2003) 109 Cal. App. 4th 1705, 1713.)

C.   Enforceability of Agreement

1.    Waiver

Plaintiff argues that Defendants waived their right to compel arbitration under either the FAA and CAA. (Opposition at pp. 7-13.)

Under federal law, “[a] party seeking to prove waiver of a right to arbitration must demonstrate: (1) knowledge of an existing right to compel arbitration; [and] (2) acts inconsistent with that existing right. . . .” (Fisher v. A.G. Becker Paribas Inc. (9th Cir. 1986) 791 F.2d 691, 694.) There is no requirement to show that the opposing party has been prejudiced by the inconsistent conduct. (Morgan v. Sundance, Inc. (2022) 142 S. Ct. 1708, 1713-1714.)

Under California law, “[i]n determining waiver, a court can consider (1) whether the party's actions are inconsistent with the right to arbitrate; (2) 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; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced” the opposing party.” (St. Agnes Medical Center v. PacifiCare of California¿(2003) 31 Cal.4th 1187, 1198, internal quotations omitted.)¿“Answering a complaint and participating in litigation, on their own, do not waive the right to arbitrate.” (Gloster¿v. Sonic Automotive, Inc.¿(2014) 226 Cal.App.4th 438, 449.)¿As arbitration is a favored method of dispute resolution, “waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof.”¿(Id.¿at¿447.)¿

Plaintiff argues that Defendants have been aware of Plaintiff’s arbitration agreement for several years, acted inconsistently with their rights by withdrawing the prior motions to compel. Plaintiff contends that Defendants should not be excused from timely seeking to compel arbitration based on the recent decision in Viking River. (Id. at pg. 10.) Plaintiff also says that Defendants invoked the litigation machinery by filing various motions, including a “Motion to Quash Summons, two rounds of demurrers, a motion for reconsideration of the order granting Plaintiff’s peremptory challenge under Code of Civil Procedure § 170.6, and an opposition to Plaintiff’s motions to compel discovery responses.” (Id. at pg. 9.) Plaintiff reasons that Defendants have been engaged in delay tactics to avoid complying with discovery and to prevent this case from being timely adjudicated. (Id. at pp. 9-10, 12.)

The Court is unpersuaded that Defendants acted inconsistently with their right to compel binding arbitration. Defendants initially sought to compel binding arbitration in March 2020. At the time Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 was an impediment to their efforts. As discussed below, this changed after Viking River was decided. Defendants’ withdrawal of their prior arbitration motion was not without reason.

Plaintiff relies on Morgan v. Sundance, Inc. (2022) 142 S. Ct. 1708 for the proposition that new law does not excuse conduct inconsistent with the right to compel arbitration, but Morgan did not reach that conclusion. The U.S. Supreme Court merely rejected the “arbitration-specific waiver rule demanding a showing of prejudice;” it did not reach any factual determination as to whether the defendant “knowingly relinquish[ed] the right to arbitrate by acting inconsistently with that right.” (Id. at 1712, 1714.) Unlike in Morgan, the Defendants here have not “defended [themselves] against [Plaintiff’s] suit as if no arbitration agreement existed.” (See Id. at 1711.) Defendants attempted to evoke their right to arbitration but were impeded by the rule set forth in Iskanian. Defendants’ filing a motion to quash service of summons and demurring to the complaint does not evoke the litigation machinery; this was done during the pleading stages of litigation. And Plaintiff has not shown that Defendants have taken advantage of the discovery process by propounding discovery from Plaintiff. Plaintiff has failed to meet the burden to establish waiver.

2.    Individual PAGA Claims

Relying Viking River Cruises v. Moriana, 142 S.Ct. 1906 (2022), Defendants assert that Plaintiff’s individual PAGA claim should be severed and sent to arbitration, and the representative PAGA claims should be dismissed. Under the previous rule in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, an employee’s individual PAGA claims were not arbitrable even if the parties had agreed to arbitrate individual claims. The defendant employer in Iskanian argued that “the arbitration agreement at issue here prohibits only representative claims, not individual PAGA claims for Labor Code violations that an employee suffered.” (Iskanian supra, 59 Cal.4th at 383.) Rejecting this, the California Supreme Court held that such a separation “frustrates the PAGA's objectives” because “a single-claimant arbitration under the PAGA for individual penalties will not result in the penalties contemplated under the PAGA to punish and deter employer practices that violate the rights of numerous employees under the Labor Code.” (Id. at 384.)  

The U.S. Supreme Court overturned this restriction, holding that “Iskanian’s prohibition on contractual division of PAGA actions into constituent claims unduly circumscribes the freedom of parties to determine the issues subject to arbitration and the rules by which they will arbitrate . . . and does so in a way that violates the fundamental principle that arbitration is a matter of consent.” (Viking River, supra, 142 S.Ct. at 1923, internal citations omitted.) The Court held that Iskanian improperly coerced parties to litigate all PAGA claims even where the parties agreed to arbitrate claims arising out of Labor Code violations suffered by the Plaintiff. (Id. at 1924.)  

Under Iskanian, Plaintiff’s individual PAGA claims would have been indivisible from the representative claims, precluding arbitration of the individual claims. Under Viking River, this division is now permitted, and the agreement to arbitrate Plaintiff’s individual claims must be enforced.   

Defendants’ Motion to Compel Arbitration is GRANTED as to Plaintiff’s individual PAGA claim. 

3.    Dismissal of Plaintiff’s Representative PAGA Claim 

Remaining for decision is what should happen to Plaintiff’s non-individual claims, which are not subject to arbitration.  Viking River held that a plaintiff loses standing to assert a non-individual PAGA claim once her individual claims are compelled to arbitration:  

[A]s we see it, PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding. Under PAGA's standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action. See Cal. Lab. Code Ann. §§ 2699(a), (c). When an employee's own dispute is pared away from a PAGA action, the employee is no different from a member of the general public, and PAGA does not allow such persons to maintain suit. See¿Kim [v. Reins Int’l. California, Inc.] 9 Cal.5th [73,] 90, 259 Cal.Rptr.3d 769, 259 Cal.Rptr.3d, 459 P.3d at 1133¿(“PAGA's standing requirement was meant to be a departure from the ‘general public’ ... standing originally allowed” under other California statutes). As a result, Moriana lacks statutory standing to continue to maintain her non-individual claims in court, and the correct course is to dismiss her remaining claims.

(Viking River, supra, 142 S.Ct. at 1925.)   

But the Supreme Court recognized that this ultimately is an issue of state law. The California Supreme Court is set to decide this issue in Adolph v. Uber Technologies, Case No. S27467.  It granted review on July 20, 2022, and on August 1, 2022 announced that the issue to be briefed is: “Whether an aggrieved employee who has been compelled to arbitrate claims under the Private Attorneys General Act (PAGA) that are ‘premised on Labor Code violations actually sustained by’ the aggrieved employee…maintains statutory standing to pursue ‘PAGA claims arising out of events involving other employees’ in court or in any other forum the parties agree is arbitrable.” 

The Court will defer its ruling as to dismissal of the representative claims pending the California Supreme Court’s decision in Adolph.