Judge Michael P. Linfield, Case 21STCV36464 2022-08-25 Tentative Ruling

Judge: Michael P. Linfield, Case: 21STCV36464, Date: 2022-08-25 Tentative Ruling

Case Number: 21STCV36464 Hearing Date: August 25, 2022 Dept: 34

SUBJECT: Defendants’ Motion to Compel Arbitration and Strike or Dismiss PAGA Representative Claims

Moving Party: Defendants Galpin Motors, Inc., Galpin Auto Sports LLC, Galpin Jaguar Lincoln-Mercury, Inc., and Galpin Volkswagen

Resp. Party: Plaintiff Giovanni Diaz (“Diaz”)

Defendants Galpin Motors, Inc., Galpin Auto Sports LLC, Galpin Jaguar Lincoln-Mercury, Inc., and Galpin Volkswagen’s Motion to Compel Arbitration of Plaintiff Giovanni Diaz’s individual PAGA claims is GRANTED as modified below.

Defendants Galpin Motors, Inc., Galpin Auto Sports LLC, Galpin Jaguar Lincoln-Mercury, Inc., and Galpin Volkswagen’s Motion to Strike or Dismiss Plaintiff Giovanni Diaz’s representative PAGA claims is DENIED. The Court STAYS Plaintiff Giovanni Diaz’s representative PAGA claims pending the arbitration.

I. BACKGROUND

On October 4, 2021, Plaintiff Giovanni Diaz filed a complaint against Defendants Galpin Motors, Inc., Galpin Auto Sports LLC, Galpin Jaguar Lincoln-Mercury, Inc., and Galpin Volkswagen LLC (collectively “Defendants”) alleging Violations of the Private Attorneys General Act, under Labor Code § 2698, et seq.

On January 26, 2022, the Court overruled Defendants Galpin Motors, Inc., Galpin Auto Sports LLC, Galpin Jaguar Lincoln-Mercury, Inc., and Galpin Volkswagen's demurrer to Plaintiff Giovanni Diaz's Complaint.

On August 1, 2022, Defendants moved the Court for an order “enforcing the arbitration agreement entered into by Plaintiff GIOVANNI DIAZ (“Plaintiff”), compelling Plaintiff to submit his claims to binding individual arbitration and to strike or dismiss representative claims and allegations pursuant to the California Private Attorneys General Act of 2004 (“PAGA”) pursuant to California Code of Civil Procedure § 1281.2 and 1281.4, Viking River Cruises, Inc. v. Moriana (“Viking River”) (U.S. June 15, 2022) No. 20-1573, 2022 WL 2135491 and/or its inherent power to control the litigation before it in the interest of justice.” (Motion, p. 2:1-7.)

On August 12, 2022, Diaz opposed Defendants’ motion.

On August 18, 2022, Defendants replied to Diaz’s opposition.

II. ANALYSIS

1. Evidentiary Objections

On August 18, 2022, Defendants Galpin Motors, Inc., Galpin Auto Sports LLC, Galpin Jaguar Lincoln-Mercury, Inc., and Galpin Volkswagen submitted their Evidentiary Objections to the Declaration of Jaime Serb. Esq. and Exhibits thereto, submitted in support of Plaintiff Giovanni Diaz’s Opposition to the instant motion.

“A written trial court ruling in another case has no precedential value.” (Budrow v. Dave & Buster’s of California (2009) 171 Cal.App.4th 875, 885; Bolanos v. Superior Court (2008) 169 Cal.App.4th 744, 761; In re Molz (2005) 127 Cal.App.4th 836, 845; Santa Ana Medical Hospital Center v. Belshé (1997) 56 Cal.App.4th 819, 831.)

Therefore, Court sustains objections Nos. 1-6.

2. Request for Judicial Notice

On August 1, 2022, Defendants Galpin Motors, Inc., Galpin Auto Sports LLC, Galpin Jaguar Lincoln-Mercury, Inc., and Galpin Volkswagen request that the Court take judicial notice of the following documents in support of Defendants’ motion to compel arbitration.

1. Exhibit A: A true and correct copy of the Viking River Cruises, Inc. v. Moriana (U.S. June 15, 2022) No. 20-1573, 2022 WL 2135491, legal opinion.

The Court GRANTS Defendants’ request.

On August 12, 2022, Plaintiff Giovanni Diaz requests that the Court take judicial notice of the following documents in support of Diaz’s opposition to Defendants’ motion to compel arbitration.

1. An order issued by the Superior Court of California, County of Los Angeles, on July 27, 2022, in the case entitled Adams v. Pacific Villa, Inc., et al., Case No.: 20STCV37260 (a true and correct copy of which is attached as Exhibit 1 to the Declaration of Jamie Serb).

2. An order issued by the Superior Court of California, County of Los Angeles, on July 13, 2022, in the case entitled Gozzi v. Acadia Malibu, Inc., Case No. 19STCV39861 (a true and correct copy of which is attached as Exhibit 2 to the Declaration of Jamie Serb).

3. An order issued by the Superior Court of California, County of Los Angeles, on July 15, 2022, in the case entitled Singh v. West Covina Motor Group LLC, Case No. 21STCV41713 (a true and correct copy of which is attached as Exhibit 3 to the Declaration of Jamie Serb).

4. An order issued by the Superior Court of California, County of Los Angeles, on July 29, 2022, in the case entitled Maldonado v. FS Hotels LA, Inc., Case No. 20STCV13849 (a true and correct copy of which is attached as Exhibit 4 to the Declaration of Jamie Serb).

5. An order issued by the Superior Court of California, County of Los Angeles, on July 21, 2022, in the case entitled Taylor v. In-N-Out Burgers, Case No. 21STCV18259 (a true and correct copy of which is attached as Exhibit 5 to the Declaration of Jamie Serb).

The Court DENIES Diaz’s requests. “A written trial court ruling in another case has no precedential value.” (Budrow v. Dave & Buster’s of California (2009) 171 Cal.App.4th 875, 885; Bolanos v. Superior Court (2008) 169 Cal.App.4th 744, 761; In re Molz (2005) 127 Cal.App.4th 836, 845; Santa Ana Medical Hospital Center v. Belshé (1997) 56 Cal.App.4th 819, 831.)

3. Legal Standard

1. Motion to Compel Arbitration

Code of Civil Procedure section 1281.2 states:

“The court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

(a) The right to compel arbitration has been waived by the petitioner; or

(b) Grounds exist for the revocation of the agreement.

(c) 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. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295.” (CCP § 1281.2.)

A proceeding to compel arbitration is in essence a suit in equity to compel specific performance of a contract. (Freeman v. State Farm Mutual Auto Insurance Co. (1975) 14 Cal.3d 473, 479.) Such enforcement may be sought by a party to the arbitration agreement. (CCP § 1280(e)(1).) Under both the Federal Arbitration Act and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (CCP § 1281.2.)

The petition to compel arbitration functions as a motion and is to be heard in the manner of a motion, i.e., the facts are to be proven by affidavit or declaration and documentary evidence with oral testimony taken only in the court's discretion. (CCP §1290.2; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413, 414.) The petition to compel must set forth the provisions of the written agreement and the arbitration clause verbatim, or such provisions must be attached and incorporated by reference. (Cal. Rules of Court, rule 3.1330; see Condee v. Longwood Mgmt. Corp. (2001) 88 Cal.App.4th 215, 218, 219.)

To decide a petition to compel arbitration, trial courts must first decide whether an enforceable arbitration agreement exists between the parties, and then determine whether the claims are covered within the agreement’s scope. (Omar v. Ralphs Grocer Co. (2004) 118 Cal.App.4th 955, 961.)

2. Unconscionability

The Court may decline to enforce an arbitration agreement if the party opposing arbitration can establish that the agreement is unconscionable. For an arbitration agreement to be unenforceable as unconscionable, both procedural and substantive unconscionability must be present. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th83, 114.) Procedural and substantive unconscionability need not be present to the same degree. (Ibid.) “In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Ibid.)

“[T]he core concern of the unconscionability doctrine is the absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. The unconscionability doctrine ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as overly harsh, unduly oppressive, so one-sided as to shock the conscience, or unfairly one-sided. All of these formulations point to the central idea that the unconscionability doctrine is concerned not with a simple old-fashioned bad bargain, but with terms that are unreasonably favorable to the more powerful party. These include terms that impair the integrity of the bargaining process or otherwise contravene the public interest or public policy; terms (usually of an adhesion or boilerplate nature) that attempt to alter in an impermissible manner fundamental duties otherwise imposed by the law, fine-print terms, or provisions that seek to negate the reasonable expectations of the non-drafting party, or unreasonably and unexpectedly harsh terms having to do with price or other central aspects of the transaction." (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1145 (cleaned up).)

Such an arbitration agreement is lawful if it “(1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum. Thus, an employee who is made to use arbitration as a condition of employment 'effectively may vindicate [his or her] statutory cause of action in the arbitral forum.' ” (Armendariz, 24 Cal.4th at 102.)

3. Rules of the Supreme Court of the United States

“In a case on review from a state court, the mandate issues 25 days after entry of the judgment, unless the Court or a Justice shortens or extends the time, or unless the parties stipulate that it issue sooner. The 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.” (U.S. Sup. Ct. R. 45.2.)

4. Discussion

a. Viking River and Diaz’s Individual PAGA Claims

Defendants argue that the U.S. Supreme Court’s holding in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, reh'g denied (U.S., Aug. 22, 2022, No. 20-1573) 2022 WL 3580311 (“Viking River”) provides authority for the Court to compel arbitration of Diaz’s individual claims and strike Diaz’s representative claims under the Federal Arbitration Act (“FAA”) for lack of standing. (Motion, MPA, p. 6:15-19.) Diaz does not contest that he executed a Dispute Resolution Agreement (“DRA”) with Galpin Motors, Inc. on December 18, 2019. (Lorenzo Decl., ¶ 5, Ex. A.)

In Viking River, the U.S. Supreme Court confronted a California precedent and rules of joinder that, according to the majority, prevented the arbitration of PAGA claims. (Viking River, 142 S.Ct. at p. 1924.) The Court held that the FAA preempts such rules “insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Id.) Thus, the defendant employer in Viking River was entitled to enforce its agreement insofar as the agreement mandated arbitration of the former employee’s individual PAGA claim. (Viking River, 142 S.Ct. at 1925.) Since Plaintiff was now no longer litigating her case, she lacked statutory standing to maintain her representative, non-individual PAGA claims, and the Court held that “the correct course is to dismiss her remaining claims.” (Id.)

The respondent in Viking River petitioned the Court for rehearing on July 6, 2022, and the Court denied rehearing on August 22, 2022. (Viking River Cruises, Inc. v. Moriana (U.S., Aug. 22, 2022, No. 20-1573) 2022 WL 3580311.) While the U.S. Supreme Court considered rehearing, Rule 45.2 of the U.S Supreme Court applied, and Viking River was not binding authority. However, the Supreme Court’s recent rehearing denial makes the Court’s majority decision in Viking River binding precedent, such that Defendants are entitled to enforce their agreement against Diaz’s individual PAGA claims.

b. Viking River and Diaz’s Representative PAGA Claims

The U.S. Supreme Court in Viking River held that a plaintiff loses standing to assert a representative PAGA claim once her own individual claims are compelled to arbitration. (Viking River, 142 S.Ct. at p. 1925.) The Viking River majority opinion assumed that “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.”

The issue of statutory standing under PAGA was not fully addressed in Viking River. The dictum cited above, which the concurrence correctly observed was “unnecessary to the result,” turns on State law, and involves, among other things, the definition of an “aggrieved employee” under PAGA. As Justice Sotomayor pointed out, that determination is a matter of State law for the California courts to decide. Thus, the assumption in Viking River that plaintiff’s representative claims should be dismissed is not binding on us.

The California Supreme Court has held that a plaintiff retains standing even after their individual claims are settled. (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 80.) In California, any “aggrieved employee” has standing to sue under PAGA. (Lab. Code, § 2699, subd. (a).) An “aggrieved employee” is defined as someone “who was employed by the alleged violator” and “against whom one or more of the alleged violations was committed.” (Id., subd. (c).) This does not require an employee to actually maintain a claim against the employer to have standing. “The remedy for a Labor Code violation, through settlement or other means, is distinct from the fact of the violation itself.” (Kim, supra, 9 Cal.5th at p. 84.) “The Legislature defined PAGA standing in terms of violations, not injury. [Plaintiff] became an aggrieved employee, and had PAGA standing, when one or more Labor Code violations were committed against him. (See § 2699(c).) Settlement [would] not nullify these violations.” (Ibid.)

By the same logic, arbitration of the individual claims would also not nullify those violations. Therefore, the Court finds that Plaintiff retains standing to assert the representative PAGA claims. Those claims are stayed pending the arbitration of the individual claims.

c. Procedural Unconscionability

Diaz charges that the DRA is procedurally unconscionable because he was offered the DRA to sign by Defendants without equal bargaining power or any ability to negotiate the DRA’s terms. The Court finds that the DRA is a contract of adhesion offered to Diaz on a take-it-or-leave-it basis. As an adhesion contract, the DRA is procedurally unconscionable.

d. Substantive Unconscionability

Diaz argues that the DRA “does not make clear that Defendants will pay for all costs uniquely associated with arbitration” and “does not permit judicial review of the arbitrator’s written decision” as the DRA is allegedly “silent on judicial review of the Arbitrator’s ruling.” (Opposition, p. 13:7-17.)

The Court finds that the DRA provides for neutral arbitrators, more than minimal discovery under the California Arbitration Act, and a written, reasoned opinion. (Lorenzo Decl., Ex. A, ¶¶ 6, 7.) The Court finds that the DRA mandates that Defendants pay for the arbitrator’s fees and costs relating to the arbitration forum but specifies that a party’s attorney’s fees and costs will be paid by that party unless the arbitrator shifts a party’s attorney’s fees and costs to the other party “in accordance with applicable law.” (Lorenzo Decl., Ex. A, ¶ 8.)

The Court finds this latter provision to be unconscionable because it allows the arbitrator to require the plaintiff to pay defense counsel’s fees. Although such a ruling must be done “in accordance with applicable law,” on a motion to confirm an arbitration award, this Court is not allowed to look at the reasons for the arbitrator’s decision. Thus, the arbitrator could require plaintiff to pay the defendant’s attorney's fees and the plaintiff would be without recourse.

5. Conclusion

With the exception indicated above, the Court does not find the DRA unconscionable. The Court will therefore sever the provision of the DRA which allows the arbitrator to shift defense counsel’s attorney's fees and costs to plaintiff.

With that one change, the Court will grant the motion to compel arbitration.

III. CONCLUSION