Judge: Michelle Williams Court, Case: 21STCV42310, Date: 2022-10-13 Tentative Ruling

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Case Number: 21STCV42310    Hearing Date: October 13, 2022    Dept: 74

21STCV42310           JUSTIN RIDGWAY vs ENSIGN UNITED STATES DRILLING

Defendant Ensign United States Drilling (California) Inc’s Motion to Compel Arbitration of Individual PAGA Claims and Dismiss Representative PAGA Claims

TENTATIVE RULING:  The Motion to Compel Arbitration of Individual PAGA Claims and Dismiss Representative PAGA Claims is GRANTED in part.  Plaintiff’s individual PAGA claims are ordered to arbitration. Plaintiff’s representative PAGA claims shall remain in this action, which is STAYED in its entirety pending the outcome of arbitration.  A Status Conference re Initiation of Arbitration is scheduled for November 28, 2022.

Background

On November 17, 2021, Plaintiff Justin Ridgway filed this action against Ensign United States Drilling (California) Inc. The initial complaint was filed as a class action asserting six wage and hour causes of action.

On March 3, 2022, Plaintiff filed the First Amended Complaint, removing the class claims, and seeking individual relief as well as PAGA penalties.

On April 21, 2022, the Court entered the parties’ stipulated order dismissing Plaintiff’s individual wage and hour claims without prejudice and staying the action pending the outcome of Viking River Cruises, Inc. v. Moriana (2022) 142 S. Ct. 1906.

Motion

On September 14, 2022, Defendant Ensign United States Drilling (California) Inc. filed its motion to compel arbitration of individual PAGA claims and to dismiss representative PAGA action. Defendant’s motion is based upon the United States Supreme Court’s opinion in Viking River Cruises, Inc. v. Moriana (2022) 142 S. Ct. 1906.

Opposition

On October 4, 2022, Plaintiff filed an opposition to the motion, which he acknowledges is untimely. (Code Civ. Proc. § 1005(b) (“All papers opposing a motion so noticed shall be filed with the court and a copy served on each party at least nine court days.”).) Plaintiff’s opposition was due on September 30, 2022.

However, Defendant responded on the merits and is not prejudiced.

Reply

In reply, Defendant reiterates its arguments that the arbitration agreement covers Plaintiff’s individual PAGA claim and the representative PAGA claim should be dismissed.

Judicial Notice

Defendant requests the Court take judicial notice of the procedural history of this action. The request is GRANTED. (Evid. Code §§ 452(d); 452(h).)

Motion to Compel Arbitration

Standard

“California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes. To further that policy, section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies. Those statutory exceptions arise  where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967; Code Civ. Proc. § 1281.2.) Similarly, “under the FAA, the strong federal policy favoring arbitration agreements requires courts to resolve any doubts concerning arbitrability in favor of arbitration.” (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 176 (internal quotations omitted).) 

In deciding a petition to compel arbitration, trial courts must decide first whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue whether the claims are covered within the scope of the agreement.  (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The opposing party has the burden to establish any defense to enforcement. (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 579 (“The petitioner, T–Mobile here, bears the burden of proving the existence of a valid arbitration agreement and the opposing party, plaintiffs here, bears the burden of proving any fact necessary to its defense.”).) 

Procedurally, a petition to compel arbitration or stay proceedings must state verbatim the provisions providing for arbitration, or must have a copy of them attached.  (Cal. R. Ct., rule 3.1330.) 

The FAA Applies

“With respect to the moving party’s burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

Defendant provides three documents entitled Agreement to Arbitrate All Claims and Waive Class and Representative Actions between Defendant Ensign United States Drilling (California) Inc. and Plaintiff Justin Ridgway dated May 19, 2017, October 5, 2018, and September 28, 2020. (Diaz Decl. Ex. A-C.) Defendant moves to compel arbitration pursuant to the September 28, 2020 agreement. (Mot. at 10:16 (“The last arbitration agreement Ridgway signed, at issue in this pending action . . .”).)

The September 28, 2020 agreement provides “[t]his Agreement evidences a transaction in interstate commerce, and the Federal Arbitration Act governs the interpretation and enforcement of this Agreement.” (Diaz Decl. Ex. C § 1.) Accordingly, the FAA applies. (See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355 (“But the presence of interstate commerce is not the only manner under which the FAA may apply. As discussed above, the parties may also voluntarily elect to have the FAA govern enforcement of the Agreement, as they did here.”).)

The Agreement Covers Plaintiff’s PAGA Claims

The September 28, 2020 agreement provides:

The scope of this Agreement is intended to be interpreted as broadly and inclusively as applicable state and federal law permits. It includes, but is not limited to all claims and disputes: (a) arising out of or relating to any aspect of the employment relationship between the parties, whether based in contract, tort, statute, fraud, misrepresentation, or any other legal theory; (b) that arose before the execution of this Agreement or any prior arbitration agreement between these parties, except as to claims that are the subject of existing class action litigation as of the date this Agreement is executed and in which Employee is, or is eligible to become, a member of a certified class; and (c) that may arise after the execution of this Agreement relating to any aspect of the employment relationship between the parties.

(Diaz Decl. Ex. C § 1.)

In his untimely opposition, Plaintiff contends “[a] plain reading of the operative agreement signed by Ridgway demonstrates that Ridgway did not agree to arbitrate individual or non-individual PAGA claims.” (Opp. at 4:3-6.) This interpretation lacks merit. The agreement requires arbitration of “all claims . . . arising out of or relating to any aspect of the employment relationship between the parties, . . . based in . . .  statute.” (Diaz Decl. Ex. C § 1.) A PAGA cause of action is a claim arising out of the employment relationship between the parties under statute and therefore falls within the express terms of the arbitration agreement. Plaintiff agreed to arbitrate PAGA claims. Additionally, the agreement prevents representative claims in arbitration as it only allows the arbitrator to provide individual relief. (Diaz Decl. Ex. C § 6.)

Accordingly, Defendant may only compel Plaintiff’s individual PAGA claim to arbitration. (Viking River Cruises, supra, 142 S.Ct. at 1924 (“We hold that the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.”).)

The Agreement Complies with Armendariz

To be enforceable, an arbitration agreement in an employment contract must comply with the requirements of Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, even when the FAA applies. The Armendariz requirements are that: “(1) the arbitration agreement may not limit the damages normally available under the statute; (2) there must be discovery sufficient to adequately arbitrate their statutory claim; (3) there must be a written arbitration decision and judicial review sufficient to ensure the arbitrators comply with the requirements of the statute; and (4) the employer must pay all types of costs that are unique to arbitration.” (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076.) 

The September 28, 2020 agreement does not limit the damages available to Plaintiff, does not limit discovery, requires a written award, and requires the employer to pay all costs unique to arbitration. (Diaz Decl. Ex. C §§ 3-4.) The Court finds the agreement complies with Armendariz.

Only Plaintiff’s Individual PAGA Claims are Ordered to Arbitration and the Action is Stayed Pending the Outcome of Arbitration

Defendant argues that the Court should make the same ruling as the Court in Viking River Cruises by sending Plaintiff’s individual PAGA claim to arbitration and dismissing the representative PAGA claim. (Mot. at 18:24-19:28.) Defendant contends “[o]nce Ridgway’s individual PAGA claim are compelled to arbitration, he loses standing to bring a representative PAGA action.” (Mot. at 19:24-25.)

While Plaintiff’s individual PAGA claim is properly ordered to arbitration, Plaintiff does not lose standing to bring a representative action under California law. The opinion in Viking River Cruises is not binding upon this Court as to the state law question of standing under a California statute. (See generally East Quincy Services Dist. v. General Accident Ins. Co. of America (2001) 88 Cal.App.4th 239, 246 (“As we repeatedly remind litigants, on questions of state law even U.S. Supreme Court decisions are not controlling.”).) The California Supreme Court’s ruling in Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73 is binding upon this Court and supports the conclusion that Plaintiff’s representative PAGA claims should not be dismissed.

In Kim, the Court addressed whether a plaintiff’s settlement of individual Labor Code violations deprived that plaintiff of PAGA standing. The Court stated “[t]he Legislature defined PAGA standing in terms of violations, not injury. Kim became an aggrieved employee, and had PAGA standing, when one or more Labor Code violations were committed against him. (See § 2699(c).) Settlement did not nullify these violations.” (Kim, supra, 9 Cal.5th at 84.) Similarly, compelling Plaintiff to arbitrate his individual PAGA claim does not nullify the alleged violations, it merely requires resolution of Plaintiff’s individual PAGA allegations in the arbitral forum. A PAGA plaintiff only lacks standing if he or she is adjudged to have not been an aggrieved employee. (Id. at 83-84 (“The plain language of section 2699(c) has only two requirements for PAGA standing. The plaintiff must be an aggrieved employee, that is, someone “who was employed by the alleged violator” and “against whom one or more of the alleged violations was committed.” (§ 2699(c).).”).) The parties’ arbitration agreement has no bearing on whether Plaintiff is an aggrieved employee and Plaintiff retains standing to pursue representative PAGA claims in court. Accordingly, there is no basis under California law to dismiss the representative PAGA claims at this time.

Plaintiff cites a federal district court ruling that is in accord. (Shams v. Revature LLC (N.D. Cal., Aug. 17, 2022, No. 22-CV-01745-NC) 2022 WL 3453068, at *3 (“Although the Supreme Court suggests that under PAGA, Moriana lost standing to pursue her non-individual PAGA claims, because the California Supreme Court is the final arbiter of California law, this Court applies Kim’s interpretation of PAGA standing to this case. Shams was employed by Revature and alleges that she suffered at least one of the asserted PAGA Labor Code violations, thus she is an aggrieved employee with standing to pursue penalties on the State's behalf. Accordingly, the Court DECLINES to dismiss the non-individual PAGA claims remaining in this case.”) (citations omitted).)

In reply, Defendant notes the district court in Johnson v. Lowe's Home Centers, LLC (E.D. Cal., Sept. 22, 2022, No. 221CV00087TLNJDP) 2022 WL 4387796, at *4 dismissed representative PAGA claims. (Reply at 9:16-22; Johnson, supra, 2022 WL 4387796, at *4 (“Absent intervening California authority, the Court declines to question the Supreme Court's interpretation on this issue.”).) The district court in Johnson cited Radcliff v. San Diego Gas & Electric Company (S.D. Cal., Sept. 12, 2022, No. 20-CV-1555-H-MSB) 2022 WL 4229305, at *4, which similarly stated: “[t]he Court is disinclined to substitute its own interpretation of California state law in place of an interpretation set forth so recently by the Supreme Court.” (Radcliff, supra, 2022 WL 4229305, at *4.) The district court in Radcliff relied upon precedent that federal district courts are bound by interpretations of state law made by higher federal courts absent intervening California authority, which his inapplicable here. (Ibid. citing Kona Enterprises, Inc. v. Est. of Bishop, 229 F.3d 877, 884 n.7 (9th Cir. 2000) (explaining that courts within the Ninth Circuit are bound by interpretations of state law by the Ninth Circuit in the absence of any subsequent indication from the state courts that the interpretation is incorrect.).) As noted above, this Court is bound by the California Supreme Court’s interpretation of standing under a state statute.

The Court orders Plaintiff’s individual PAGA claims to arbitration pursuant to the parties’ agreement. The Court stays the action and Plaintiff’s representative PAGA claim. (Code Civ. Proc. § 1281.4.)