Judge: Randy Rhodes, Case: 21CHCV00451, Date: 2023-02-01 Tentative Ruling
Case Number: 21CHCV00451 Hearing Date: February 1, 2023 Dept: F51
Dept. F-51
Date: 2/1/23
Case #21CHCV00451
MOTION TO COMPEL ARBITRATION
Motion filed on 8/22/22.
MOVING PARTY: Defendant Islands Restaurants, L.P., a
limited partnership (“Defendant”)
RESPONDING PARTY: Plaintiff Robert Thompson
(“Plaintiff”)
NOTICE: ok
RELIEF REQUESTED: An order: (1) compelling arbitration
of Plaintiff’s Private Attorney General Act (“PAGA”) claim on an individualized
basis; and (2) dismissing the representative PAGA claims on behalf of other
allegedly aggrieved employees.
TENTATIVE RULING: The motion is granted in part.
Plaintiff is ordered to submit his individual PAGA claim to arbitration
pursuant to the arbitration agreement. The Court defers the issue of dismissal
of Plaintiff’s representative claims pending the outcome of Adolph v. Uber
Technologies, Case No. S27467.
BACKGROUND
Plaintiff, a former employee of
Defendant, brings this Private Attorney General Act (“PAGA”) action in a
representative capacity on behalf of the State of California and other aggrieved
employees, alleging against Defendant various Labor Code violations.
On 6/11/21, Plaintiff filed his
complaint against Defendant for Civil Penalties pursuant to Labor Code section
2699 et seq. On 8/18/21, Defendant filed its answer.
On 8/22/22, Defendant filed the
instant motion to compel arbitration. On 1/19/23, Plaintiff filed his
opposition. On 1/25/23, Defendant filed its reply.
ANALYSIS
A.
Legal Standard
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. (Code of Civ. Proc. § 1281.2.) This is usually done by
presenting a copy of the signed, written agreement to the court. “A petition to
compel arbitration or to stay proceedings pursuant to Code of Civil Procedure
sections 1281.2 and 1281.4 must state, in addition to other required
allegations, the provisions of the written agreement and the paragraph that
provides for arbitration. The provisions must be stated verbatim or a copy must
be physically or electronically attached to the petition and incorporated by
reference.” (Cal. Rules of Court, rule 3.1330.)
The moving party must also
establish the other party’s refusal to arbitrate the controversy. (Code of Civ.
Proc. § 1281.2.) The filing of a lawsuit against the moving party for a
controversy clearly within the scope of the arbitration agreement affirmatively
establishes the other party’s refusal to arbitrate the controversy. (Hyundai
Amco America, Inc. v. S3H, Inc. (2014) 232 Cal.App.4th 572, 577.)
Here, the parties do not dispute
that there exists a valid, enforceable arbitration agreement between them, nor
that Plaintiff has refused to arbitrate the controversy. Defendant has attached
a copy of the arbitration agreement to the declaration of Reiko Matsumoto, its
Vice-President, Human Capital. The parties entered into the agreement upon
Plaintiff’s employment with Defendant.
The central issue is whether the
U.S. Supreme Court’s holding Viking River v. Moriana (2022) 142 S.Ct.
1906, applies to the instant case, thus requiring Plaintiff to submit his
individual PAGA claims to arbitration and dismissing his representative claims.
The arbitration agreement reads, in relevant part:
“4. Excluded
Claims: This Arbitration Agreement does not prevent Employee from filing
claims for workers’ compensation, unemployment insurance, or State disability
insurance, or filing claims for benefits under Islands’ group health, life,
disability, or other insurance or employee benefit plans, and claims which are
not subject to mandatory binding pre-dispute arbitration pursuant to federal
law. To the extent federal law prohibits enforcement of the representative
action waiver (discussed in Paragraph 8 below), also not covered by this
Agreement are: representative claims under California’s Private Attorneys
General Act of 2004, California Labor Code §§ 2698, et seq. and
representative claims for public injunctive relief under California Business
and Professions Code § 17203. Either party may request provisional relief,
including but not limited to preliminary injunctive relief, from a court of
competent jurisdiction without waiving the right to arbitration, to the extent
provided by applicable federal or state law, upon the ground that the award to
which the party may be entitled may be rendered ineffectual without provisional
relief. …
8. Waiver of Class
Action Claims: With the exception of those claims excluded in Paragraph
4 of this agreement, and except where prohibited by federal law, any dispute
covered by this Agreement must be brought on an individual basis only. Neither
party may submit a multi-plaintiff, class, collective or representative action
for resolution under this Agreement, and no arbitrator has authority to proceed
with arbitration on such a basis. Any disputes concerning the validity of
this multi-plaintiff, class, collective and representative action waiver will
be decided by a court of competent jurisdiction, not by the arbitrator. In
the event a court determines this waiver is unenforceable with respect to any
claim, this waiver shall not apply to that claim and that claim must be heard
in court.” (Ex. A to Matsumoto Decl. [emphasis added].)
B.
Arbitrability of PAGA Claims
Plaintiff argues that the arbitration
agreement “purports to waive Plaintiff’s right to bring a representative PAGA
action, both in court and in arbitration,” and is therefore invalid as it
“attempts to defeat Plaintiff’s statutory rights to bring a representative PAGA
claim.” (Pl.’s Opp. 4:22–24.)
Specifically, Plaintiff argues that
the language of Paragraph 4 “excludes PAGA claims and make no distinction
between representative PAGA claims as to individuals or aggrieved employees.” (Id.
at 1:21–23.) However, the Court finds that this language does not restrict
arbitration of Plaintiff’s individual PAGA claims, but rather merely the
representative ones. The scope of the arbitration agreement includes
“any dispute between” Plaintiff and Defendant, “such as claims for discrimination,
harassment, retaliation, unpaid wages, or wrongful termination, as well as any
claims Islands may have against Employee.” (Ex. A to Matsumoto Decl., ¶¶ 1–2.)
Defendant argues that Plaintiff’s
individual claim should be severed and submitted to arbitration. Under the
previous rule set forth in Iskanian v. CLS Transportation Los Angeles, LLC
(2014) 59 Cal.4th 348, 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.” (59 Cal.4th at
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 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, 142 S.Ct. at 1923.) 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 1924.)
The U.S. Supreme Court then
partially abrogated the rule in Iskanian. Specifically, the Court held
that the Federal Arbitration Act preempts a prohibition on PAGA claims from
being divided into “individual” and “non-individual” claims and compelling the
individual claims to arbitration. (Id. at 1925.) Additionally, if an
agreement contains a severability clause, then the employer is “entitled to
enforce the agreement insofar as it mandate[s] arbitration of [the employee’s]
individual PAGA claim.” (Id.)
Here, the parties have agreed to
arbitrate their individual employment disputes. Under the previous rule 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.
Additionally, the Agreement contains a valid severability provision, which
allows these claims to be severed. (Ex. A to Matsumoto Decl., ¶ 8 (“In the
event a court determines this waiver is unenforceable with respect to any
claim, this waiver shall not apply to that claim and that claim must be heard
in court.”).)
Accordingly, Defendant’s individual
PAGA claim is subject to arbitration pursuant to the arbitration agreement
entered into between the parties.
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C.
Standing/Dismissal of Remaining Claims
If the Court has ordered
arbitration, the action or proceeding shall be stayed. (Code Civ. Proc. §
1281.4.) Here, however, Defendant argues that Plaintiff’s remaining
representative PAGA claims should be dismissed.
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, 142
S.Ct. at 1925.) However, as Plaintiff notes, the Supreme Court also recognized
that this is ultimately an issue of state law. The California Supreme Court is
set to decide the issue in Adolph v. Uber Technologies, Case No. S27467.
The California 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.”
Accordingly, this Court will defer
its ruling only as to the issue of dismissal of the remaining representative
claim pending the California Supreme Court’s decision in Adolph. Nevertheless,
as discussed above, Plaintiff is compelled to submit his individual PAGA claim
to arbitration.
D.
Waiver
Contractual arbitration rights are subject to waiver, and
waiver may be expressed or implied from the parties' conduct. (Code Civ. Proc.
§ 1281.2, subd. (a).) “The relevant factors establishing waiver include whether
the party's actions are inconsistent with the right to arbitrate; whether the
litigation machinery has been substantially invoked and the parties were well
into preparation of a lawsuit before the party notified the opposing party of
an intent to arbitrate; whether a party delayed for a long period before
seeking a stay; whether important intervening steps [e.g., taking advantage of
judicial discovery procedures not available in arbitration] had taken place;
and whether the delay affected, misled, or prejudiced the opposing party.” (Fleming
Distribution Company v. Younan (2020) 49 Cal.App.5th 73, 80.)
The party asserting
waiver bears the burden of showing “whether, under the totality of the
circumstances, the defaulting party has acted inconsistently with the
arbitration right.” (Aviation Data, Inc. v. American Express Travel Related
Services Co., Inc. (2007) 152 Cal.App.4th 1522, 1537.) This a “heavy burden
… and any doubts regarding a waiver allegation should be resolved in favor of
arbitration.” (St. Agnes Medical Center v. PacifiCare of California
(2003) 31 Cal.4th 1187, 1195.)
Here, Plaintiff argues that Defendant has
waived its right to arbitrate the instant action by conducting discovery and
delaying almost two years to bring the instant motion. Defendant argues in
reply that despite having propounded discovery requests, “by agreement of the
parties, Plaintiff has not served a single response to the Island's
interrogatories and requests” pending mediation efforts. (Def.’s Reply, 10:10–11.)
Additionally, Defendant argues that it did not intentionally delay to bring the
instant motion, as its “right to compel arbitration did not exist until
the U.S. Supreme Court rendered its decision in Viking River on June 15,
2022 and any attempt to compel arbitration prior to this date would have been
futile.” (Id. at 9:9–11.)
Based on the foregoing, the Court
finds that Plaintiff has not met his burden of showing that Defendant has acted
inconsistently with its right to arbitrate Plaintiff’s individual PAGA claim.
As such, the Court finds that Defendant has not waived its arbitration right.
CONCLUSION
The motion is granted in part. Plaintiff is ordered to
submit his individual PAGA claim to arbitration pursuant to the arbitration
agreement. The Court defers the issue of dismissal of Plaintiff’s
representative claims pending the outcome of Adolph v. Uber Technologies,
Case No. S27467.