Judge Randolph M. Hammock, Case 22STCV1469 2022-09-14 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.)

Plaintiff has not opposed the motion, and thus, has not raised any defenses to enforcement of the agreement to arbitrate. It is undisputed, then, that the parties entered into a valid, binding arbitration agreement. The only issues in this motion are: (1) whether the gateway issue of arbitrability should be left to the arbitrator, (2) whether Plaintiff’s individual PAGA claims may be separated from the representative PAGA claims and compelled to arbitration; and (2) what should happen to the representative PAGA claims if the individual claims are compelled to arbitration. Each is addressed in turn.

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.)

Employer and Employee agree that it is in their best interests to resolve any and all disputes, claims, or controversies, of any kind, arising from or relating in any way to the foregoing Employment Agreement, the interpretation, performance, breach, or enforcement of that agreement, or the employment relationship between them, including, without limitation, hiring, work performance and conduct, wages, hours, working conditions, compensation, benefits, and/or termination or resignation (collectively, “Disputes”) through final and binding arbitration.

Under the FAA, an agreement to arbitrate “shall be valid, irrevocable, and enforceable.” (9 U.S.C. § 2). The United States Supreme Court has broadly interpreted the FAA. Under this interpretation, the statute is to be read “as insisting that the ‘transaction’ in fact ‘involve’ interstate commerce, even if the parties did not contemplate an interstate commerce connection.” (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 28). “The statute's language, background, and structure establish that section 2's ‘involving commerce’ words are the functional equivalent of the phrase ‘affecting commerce,’ which normally signals Congress' intent to exercise its commerce power to the full[.]” (Id. at p. 265.) “Congress Commerce Clause power ‘may be exercised in individual cases without showing any specific effect upon interstate commerce’ if in the aggregate the economic activity in question would represent ‘a general practice ... subject to federal control.’ [Citations.] Only that general practice need bear on interstate commerce in a substantial way.” (Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56-57.)

An arbitration clause is governed by the FAA if the agreement is a contract “evidencing a transaction involving commerce.” (9 U.S.C. § 2.) Courts “broadly construe” this phrase, because the FAA “embodies Congress’ intent to provide for the enforcement of arbitration agreements within the full reach of the Commerce Clause.” (Giuliano v. Inland Empire Pers., Inc. (2007) 149 Cal.App.4th 1276, 1286.)

Defendant argues the parties’ relationship evidences a transaction involving commerce. Defendant is a national staffing firm with offices in seven states; it provides temporary staff to countless businesses, including many in the logistics and shipping sector, such as national transportation firms which handle interstate commerce. (See Case Decl., generally.) Defendant also presents evidence that Plaintiff herself had specific duties impacting interstate commerce, including “contacting clients and potential clients about their staffing needs and attempting to sell Empire’s temporary staffing services,” which included a focus on “interstate logistics and shipping companies.” (Id. ¶ 4.)

As an initial matter, Defendant argues that the arbitrator, and not this court, should decide the arbitrability of the claims here. Defendant relies on the Agreement’s delegation provision, which provides that “[t]he arbitrator shall have authority to determine his or her jurisdiction, including to resolve all issues of ‘arbitrability.’” (Case Decl., Ex. 1. at p. 7.)

“Although threshold questions of arbitrability are ordinarily for courts to decide in the first instance under the FAA [citation], the ‘[p]arties to an arbitration agreement may agree to delegate to the arbitrator, instead of a court, questions regarding the enforceability of the agreement.’” (Mendoza v. Trans Valley Transp. (2022) 75 Cal. App. 5th 748, 766.) Defendant’s motion does not present any authority applying a delegation clause in the PAGA context.

Based on this court’s research, the Court of Appeal addressed a PAGA delegation clause in 2021 in the case of Contreras v. Superior Court of Los Angeles County (2021) 61 Cal.App.5th 461. There, the issue was whether a delegation clause could leave to the arbitrator the authority to decide if the plaintiffs were aggrieved employees under PAGA. The Court of Appeal held it did not, because such delegation efforts would impermissibly split a single PAGA claim into individual and representative claims. That result was in direct violation of the California Supreme Court’s ruling in Iskanian, supra, which prohibited the severance of PAGA claims into individual and representative claims for purposes of arbitration. (59 Cal.4th at 383-84.) Now, however, because Viking River has overruled Iskanian “insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate,” it would appear by implication that Conteras has been severely undermined. (See Viking River, supra, 142 S. Ct. at 1924.) Be that as it may, to this court’s knowledge, it has not been expressly overruled. [FN 1] Suffice it to say, this issue is in flux. Accordingly, this court will continue with its analysis by assuming that the issue of arbitrability is still a question for this court to decide now.

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.)

Here, the parties have agreed to arbitrate their employment disputes, including PAGA claims. Under the old 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.

The point emphasized in Viking River is that when parties agree to arbitrate disputes arising from Labor Code violations individually sustained by an employee, they must be held to that agreement, notwithstanding the resulting division of the PAGA claims. Similarly, the parties here are bound by their agreement to arbitrate claims arising from Labor Code violations sustained by Plaintiff in the course of his employment, even if it means separating those claims from the claims based on violations suffered by other employees.

The remaining issue is what should happen to Plaintiff’s remaining non-individual claims, which is 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.”

Judge of the Superior Court

FN 1 - This court notes again that the moving party did not raise this authority, and by failing to oppose the motion, neither did Plaintiff. At risk of advancing arguments not raised by either party, the court will stop its discussion here. Defendant may explain at the hearing why controlling authority requires the gateway arbitrability issue be reserved for the arbitrator.

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.