Judge Randolph M. Hammock, Case 21STCV26503 2022-12-08 Tentative Ruling

Judge: Randolph M. Hammock, Case: 21STCV26503, Date: 2022-12-08 Tentative Ruling

“[T]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence . . . .” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284). “In determining whether an arbitration agreement applies to a specific dispute, the court may examine only the agreement itself and the complaint filed by the party refusing arbitration [citation]. The court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made.” (Weeks v. Crow (1980) 113 Cal.App.3d 350, 353). “Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.” (California Correctional Peace Officers Ass'n v. State (2006) 142 Cal.App.4th 198, 205).

“[A] party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination.” (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284).

“If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies. . . .” (CCP § 1281.4.)

Defendant moves to compel arbitration of Plaintiff’s individual PAGA claim and for dismissal of the remaining representative PAGA claims. Defendant relies on the recent U.S. Supreme Court decision in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, which overturned the prior California rule prohibiting the separation of PAGA claims into individual and representative claims for purposes of arbitration. (See Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 383-84.)

California has a strong public policy in favor of arbitration as an expeditious and cost-effective way of resolving disputes. “Even so, parties can only be compelled to arbitrate when they have agreed to do so.” (Avila v. S. California Specialty Care, Inc. (2018) 20 Cal. App. 5th 835, 843.) “The party seeking to compel arbitration bears the burden of proving the existence of a valid arbitration agreement.” (Id.) An arbitration agreement is a contractual agreement. “General contract law principles include that ‘[t]he basic goal of contract interpretation is to give effect to the parties’ mutual intent at the time of contracting. [Citations.] ... The words of a contract are to be understood in their ordinary and popular sense.” [Citations.] (Garcia v. Expert Staffing W., 73 Cal. App. 5th 408, 412–13.)

You acknowledge and agree that you and the Company, will utilize binding arbitration as the sole and exclusive means to resolve all claims (legal or equitable), disputes or controversies arising out of, relating to, or resulting from your employment with the Company or the termination of your employment with the Company, except as provided below. Each Party specifically waives and relinquishes its respective rights to bring a claim against the other in a court of law, except as provided below, and this waiver will be equally binding on any person who represents or seeks to represent you or the Company in a lawsuit against the other in a court of law. Except as provided below, both of the Parties agree that any claim, dispute or controversy that you may have against the Company, or the Company may have against you, will be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act (“FAA”), including, but not limited, to questions regarding the scope of arbitration or the jurisdiction of the arbitrator. Additionally, the binding arbitration will be determined in conformity with the procedures of the California Arbitration Act (“CAA”), Cal. Code Civ. Proc. §§ 1280 et seq., including Section 1283.05 and all of the CAA’s other mandatory and permissive rights to discovery; however, the court may not refuse to enforce this Agreement or stay the arbitration proceeding under Cal. Code Civ. Proc. § 1281.2(c)

Finally, it is undisputed that the Federal Arbitration Act governs the Agreement here. Defendant demonstrates that it “provides mortgage loan services to customers in every state in the United States,” “assists customers in obtaining loans for out-of-state real property,” and “operates and has employees in multiple states…” (Athanasiou Decl. ¶ 2.) The Agreement also expressly provides that the FAA applies. (Id. ¶ 5 [“You and the Company agree the FAA applies to this Agreement”].) Plaintiff does not argue otherwise.

Relying on the Supreme Court’s recent holding in Viking River Cruises, Defendant argues that Plaintiff’s individual claim should be severed and sent to arbitration. Under the previous rule set forth in Iskanian, an employee’s individual PAGA claims were not arbitrable even if the parties had agreed to arbitrate individual claims. The defendant employer in Iskanian had attempted to argue 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 p. 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 p. 384.)

However, 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 p. 1923, internal citations omitted.) According to the U.S. Supreme Court, Iskanian’s rule was improper because it 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 p. 1924.)

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

To the extent allowable under applicable law, this Agreement will not be construed to allow or permit claims brought on behalf of any state or government as a private attorney general, including claims under California Private Attorneys General Act of 2004 (“PAGA”). By signing this Agreement, you are agreeing to waive any substantive or procedural rights you may have to sue on as a private attorney general. No court or arbitrator will have the authority under this Agreement to order claims brought on behalf of any state or government as a private attorney general, including claims under PAGA, to proceed in arbitration.

As stated in Iskanian and confirmed in Viking River, Plaintiff is correct that a wholesale waiver remains unenforceable. Viking River left intact Iskanian's holding that representative PAGA claims are not arbitrable. (Id. at pp. 1924–1925 [“The agreement between Viking and Moriana purported to waive ‘representative’ PAGA claims. Under Iskanian, this provision was invalid if construed as a wholesale waiver of PAGA claims. And under our holding, that aspect of Iskanian is not preempted by the FAA ....”].) Here, however, the Agreement only purports to waive the right to bring PAGA claims “[t]o the extent allowable under applicable law.” (Id.) As the law currently stands, a wholesale waiver is unenforceable. Thus, that portion of the Agreement is disregarded. Moreover, Defendant does not contend that Plaintiff has waived the right to bring PAGA claims—it only seeks to compel arbitration of the individual claims. Under Viking River, it may do so.

A remaining issue is what should happen to Plaintiff’s remaining non-individual claims, which are not subject to arbitration. The Viking River Court held that a plaintiff loses standing to assert a non-individual PAGA claim once her own individual claims are compelled to arbitration. (Viking River, supra, 142 S.Ct. at p. 1925.) The Supreme Court directly addressed what “should have been done” with the plaintiff’s non-individual claims. The Court stated:

[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 Cruises, 142 S.Ct. 1906, Slip Opn. at 21.

However, the Supreme Court also recognized that this is ultimately an issue of state law. It comes as no surprise, then, that the California Supreme Court is set to decide the issue in Adolph v. Uber Technologies, Case No. S27467. The Supreme Court granted review on July 20, 2022, and on August 1, 2022, set the issue to be briefed as: “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.”

This court recognizes that on December 5, 2022, the Second Appellate District addressed PAGA arbitration in a published opinion in Sylvester Lewis v. Simplified Labor Staffing Solutions, Inc., et al. (B312871.) Consistent with Viking River, the Court predictably held that pre-dispute agreements to arbitrate PAGA claims are enforceable. Notably, and as relevant here, it also held that the question of whether nonindividual PAGA claims are governed by the arbitration agreement is an issue for the arbitrator to decide. As Defendant does here, the employer in Lewis argued that under Viking River, the Plaintiff lost standing to arbitrate her non-individual claims in court once the individual claims are arbitrated. (Id. p. 18.) But like Plaintiff here, the employee contended that the Viking River discussion supporting dismissal was a matter of state law and not binding. (Id.)

The Lewis Court determined it “need not decide whether an arbitration agreement can require that non-individual PAGA claims be arbitrated because the arbitrator must decide whether the [employer’s] arbitration agreement calls for such arbitration at all.” (Id.) The Court noted that the Agreement in that case incorporated the rules of the American Arbitration Association (“AAA”), whose rules on “Jurisdiction” provides that “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.” (Id. at 19 [citing AAA rules].) The Court found this rule “clearly leaves to the arbitrator to determine whether the agreement to arbitrate extends to Lewis’s nonindividual PAGA claims.” (Id. at 19.) The Court therefore remanded with directions that “when the case is ordered to arbitration, the scope of the claims subject to arbitration be submitted to the arbitrator.” (Id.)

Here, the agreement to arbitrate provides that the parties “agree to use Judicate West for arbitration,” and an “arbitrator will be selected in accordance with the then-current rules of Judicate West for selecting an arbitrator.” (Bartlett Decl., Exh. 6, ¶ 11.) Like the AAA rules, the Judicate West Commercial Arbitration Rules provide:

To the fullest extent permitted under applicable law, disputes as to the jurisdiction of the arbitrator and arbitrability of any issue, including disputes regarding the existence, scope, or validity of the agreement, or any part thereof, that is the basis for the arbitration or any other disputes, will be heard and determined by the arbitrator.

Accordingly, because the Judicate West rules require that the arbitrator herself decide “disputes as to the jurisdiction of the arbitrator and arbitrability of any issue,” it appears whether the nonindividual claims are arbitrable is a question for the arbitrator to decide—at least under Lewis. In that event, the proper route is to compel all claims in this case—both individual and nonindividual—to arbitration.