Judge: Michael P. Linfield, Case: 20STCV13849, Date: 2022-07-29 Tentative Ruling

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Case Number: 20STCV13849    Hearing Date: July 29, 2022    Dept: 34

SUBJECT:                 Defendant FS Hotels LA, Inc.’s Motion to Dismiss, or in the Alternative Stay, the Representative Action       

Moving Party:          Defendant FS Hotels LA, Inc.

Resp. Party:            Plaintiff Raul Maldonado

 

 

 

The Court DENIES Defendant’s Motion to Dismiss the Representative action and STAYS Plaintiff’s representative PAGA action pending direction from the California Supreme Court or California Court of Appeal as to Plaintiff’s standing as an “aggrieved employee.”

 

I.           BACKGROUND

 

This is a Labor Code dispute arising from alleged violations of law governing required rest periods, overtime pay, reimbursement of employer related expenses, and improper wage statements.

 

On April 9, 2020, Plaintiff filed a complaint alleging Defendant violated provisions of the Private Attorneys General Act of 2004, Cal. Lab. Code §§ 2698 et seq.

 

On July 5, 2022, Defendant moved this Court to dismiss, or in the alternative stay, the representative PAGA action.

 

On July 18, 2022, Plaintiff filed opposition to Defendant’s Motion to Dismiss, but did not oppose a stay of proceedings related to the representative PAGA action.

 

On July 22, 2022, Defendant and Movant replied to Plaintiff’s opposition.

 

II.        ANALYSIS

 

A.          Legal Standard

 

A complaint is subject to dismissal for failure to state a claim if “one cannot determine from the complaint who is being sued, for what relief, and on what theory.”  (McHenry v. Renne (9th Cir. 1996) 84 F.3d 1172, 1178.) Indeed, a judge should be able to dismiss claims “that are sufficiently fantastic to defy reality as we know it: claims about little green men, or the plaintiff’s recent trip to Pluto, or experiences in time travel.”  (Ashcroft v. Iqbal, 556 U.S. 662, 696 [129 S. Ct. 1937, 1959, 173 L. Ed. 2d 868] (2009) J. Souter, dis.)

 

 

 

B.          Discussion

 

1.           Arbitration

 

“If an application has been made to a court of competent jurisdiction . . . to arbitrate a controversy which is an issue involved in an action or proceeding pending before a court . . . the court in which such action or proceeding is pending shall stay the action or proceeding until . . . an arbitration is had.” (Code Civ. Proc., § 1281.4.) The issue in question is then “held in abeyance until the arbitration has been had in accordance with the terms of the agreement . . . [and] the court retains vestigial jurisdiction over the court action during time.” (Weiler v. Marcus & Millichap Real Estate Investment Services, Inc. (2018) 22 Cal.App.5th 970, 979.) It is undisputed the parties have agreed to arbitrate Plaintiff’s individual PAGA claim. (Lerma Decl., ¶ 5; Opposition, p.2:10-11.) Accordingly, the Court is inclined to either stay, or in the alternative proceed with trial on the representative PAGA claims.

 

2.           It is unclear whether or not Viking River Cruise effects this matter.

 

The Supreme Court of the United States recently held that the Federal Arbitration Act preempts a rule of California law that invalidates contractual waivers of the right to assert representative claims under the Private Attorneys General Act (PAGA) in any forum. (Viking River Cruises v. Moriana (2022) 142 S.Ct. 1906, 2022 WL 2135491.) The Viking opinion holds that individual, not representative, PAGA claims can be compelled into arbitration if the parties have consented. (Id. at *11.) However, the Supreme Court upheld case law which prohibits a wholesale waiver of PAGA claims, including a waiver of representative standing altogether to assert PAGA actions. (Id. at *6, 11.)

 

The California legislature enacted PAGA with the goal of enhancing limited labor law enforcement resources by empowering employees to enforce Labor Code as private attorneys general, or representatives of the state. (Arias v. Superior Court (2009) 46 Cal.4th 969, 980.) PAGA confers a cause of action on “aggrieved employees” to bring representative claims. (Id. at 980, see also Cal. Lab. Code § 2699(a).) A PAGA claim is distinct from individual civil claims under the labor code because the employee becomes a proxy or agent of the state, thus the claim is unlike others that confer a right to statutory damages under the Labor Code. (Kim v. Reins Int’l Cal. Inc. (2020) 9 Cal.5th 73, 81.)

 

        Under PAGA, civil penalties may be “recovered through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees.” (Cal. Lab. Code § 2699(a).) Aggrieved employees are defined as “any person who was employed by the alleged violator” and “against whom one or more of the alleged violations was committed.” (Id. at (c).) Case law holds that a plaintiff’s rights to a representative action are not barred by settlement or dismissal of individual claims. (Kim, at 80, 83-91.) The Kim court further held that settlement, or other means to remediate a violation, did not “nullify” the fact of the violation. (Id. at 84.) The California Supreme Court found that a narrow construction of PAGA standing was “contrary to the statute’s purpose to ensure effective code enforcement” and “runs counter to the broader statutory scheme,” including the express authority to bring a PAGA suit separately from an individual claim for relief. (Id. at 87-88.)

 

        “The authority and only authority is the State, and if that be so, the voice adopted by the State as its own (whether it be of its Legislature or of its Supreme Court) should utter the last word.” (Erie R. Co. v. Tompkins (1938) 304 U.S. 64, 78-9.) The Erie rule is the cornerstone of our unique blend of federalism, and thus limits the power of the federal government to usurp substantive legal matters spoken to by either a legislature or a state Supreme Court. Standing in state court is thus a matter for California courts to determine under guidance from the legislature.

 

        Defendant and movant FS Hotels argues that Viking River Cruises controls this case. (Motion, p. 5:22-24.) Respondent and plaintiff Maldonado counter that Movant is relying on a misreading of the Supreme Court’s Viking opinion. (Opposition p.6:3-9.) There is no dispute as to whether Plaintiff signed an agreement to arbitrate, that Defendant is a party to the same agreement, nor that the parties have agreed to arbitrate Maldonado’s individual PAGA claim. (Hiller Decl., Ex. 2; Lerma Decl., Ex. 3.)  However, Movant relies upon dicta that would in effect nullify California labor law in a substantive matter that is squarely with the purview of the state legislature. (Reply, p. 2:6-10.)

 

The issue then hinges upon the standing of the representative action, and whether Plaintiff Maldonado maintains his legal standing as an aggrieved employee. Without determining the underlying issue, this Court does acknowledge that this question has not been answered definitively. The rule established under Kim would dictate that Maldonado became an aggrieved employee at the time that a violation was committed against him. (Kim, at 85.)

 

To further complicate the matter Jarobe v. Hanlees Auto Group is

is currently under review by the California Supreme Court. The Jarobe Court stated that “[b]ecause a PAGA claim is representative and does not belong to an employee individually, an employer should not be able to dictate how and where the representative action proceeds. . . . Accordingly . . . the trial court did not abuse its discretion in declining to stay the PAGA action pending the arbitration of [plaintiff’s] individual claims.” (Jarobe v. Hanlees Auto Group (2020) 53 Cal.App.5th 539, 557.) If the Supreme Court concludes that the trial court has not abused its discretion, then it would stand to reason that Maldonado’s representative claim could advance. The Court is not prepared to either dismiss or rule on Maldonado’s status while uncertainty surrounding PAGA and the Viking decision are being decided within the California Supreme Court.

 

 

In addition to Jarobe, the California Supreme Court has also granted review in Adolph v. Uber Technologies, Inc. (Cal. Ct. App., Apr. 11, 2022, No. G059860) 2022 WL 1073583, review granted (July 20, 2022). Adolph holds that the status of an employee as aggrieved is to be determined by the trial court, not an arbitrator. (Id., at *5.) Should the California Supreme Court agree with the holding of the Court of Appeal, then it is within the power of this Court to rule on Plaintiff’s status as an aggrieved employee.

 

        This Court is bound by California common law and adheres to doctrines and decisions that reflect matters defined by the state legislature and state courts. While Viking has effectively allowed individual PAGA claims to be pared away from representative actions where there is an arbitration agreement, the matter of standing is unclear. Because of this, the Court must stay, pending further direction from the California Supreme Court. Should the reasoning of Jarobe stand, then Maldonado may move the Court to lift its stay and commence with trial proceedings.

 

3.           Viking River Cruises, Inc. v. Moriana has been petitioned for rehearing, Rule 45 may govern.

 

Rule 45 of the Supreme Court of the United States deals with procedures when a petition for rehearing has been filed. (U.S. Sup. Ct. R. 45.) The rule states, “[t]he filing of a petition for rehearing stays the mandate until disposition of the petition, unless the Court orders otherwise. If the petition is denied, the mandate issues forthwith.” (Id., at subpart 2.) Moriana filed a petition for rehearing on the Viking decision on July 1, 2022 which in effect stays the Viking decision that defendant’s entire argument is based upon. (Viking, petition No. 20-1573.)

 

As of the writing of this tentative decision, Viking River Cruises is not the law.  As such, the Court cannot determine the validity of Defendant’s arguments regarding part IV of the Viking opinion. Thus, a stay of proceedings is the most appropriate remedy while the Supreme Court of the United States and the California Court’s decide these matters.

 

 

III.     CONCLUSION

 

Because of the reasons listed above, the Court DENIES Defendant’s Motion to Dismiss the Representative action and STAYS Plaintiff’s representative PAGA action pending direction from the California Supreme Court or California Court of Appeal as to Plaintiff’s standing as an “aggrieved employee.”