Judge Richard S. Whitney, Case 37-2023-00014957-CU-OE-CTL 2024-01-26 Tentative Ruling

Judge: Richard S. Whitney, Case: 37-2023-00014957-CU-OE-CTL, Date: 2024-01-26 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - January 25, 2024

01/26/2024 10:30:00 AM C-68 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Richard S. Whitney

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Civil - Unlimited Other employment Motion Hearing (Civil) 37-2023-00014957-CU-OE-CTL ESPARZA VS OTAY MESA SALES INC [E-FILE] CAUSAL DOCUMENT/DATE FILED:

TENTATIVE RULING: DEFENDANTS' MOTION TO COMPEL ARBITRATION OF PLAINTIFF'S INDIVIDUAL PAGA CLAIM AND REQUEST FOR STAY is GRANTED.

Defendants Otay Mesa Sales, Inc. ('Otay Mesa') and Otaysales.com, Inc. (collectively, 'Defendants') seeks to compel Plaintiff Alejandro Esparza's individual PAGA claims and to stay the remaining representative PAGA claims.

CCP section 1281.2 provides On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, 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....

(CCP §1281.2.) The moving party must prove by a preponderance of the evidence the existence of the arbitration agreement and the dispute is covered by the agreement. (Rosenthal v. Great Western Fin.

Securities Corp. (1996) 14 Cal.4th 394, 413.) The burden then shifts to the resisting party to prove by a preponderance of the evidence a ground for denial, e.g., unconscionability. (Id.) Plaintiff solely disputes whether the arbitration agreement at issue permits this Court to split Plaintiff's PAGA action into an individual and nonindividual parts. Under Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 certain PAGA disputes may be compelled to arbitration notwithstanding Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348. Iskanian, which is now overruled in part, states 'where...an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.' (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 384.) 'After Iskanian, several appellate courts [] held that an individual PAGA plaintiff may not be required to arbitrate his or her PAGA claim.' (Contreras v. Superior Court of Los Angeles County (2021) 61 Cal.App.5th 461, 472.) The Supreme Court in Viking River determined PAGA claims are arbitrable on an individual basis. (Viking River, supra, 142 S.Ct. at 1913 ['Under this Courts holding, Iskanian's prohibition on wholesale waivers of PAGA claims is not preempted by the FAA. But Iskanian's rule that PAGA actions cannot be divided into individual and Calendar No.: Event ID: TENTATIVE RULINGS

3014490 46 CASE NUMBER: CASE TITLE: ESPARZA VS OTAY MESA SALES INC [E-FILE] 37-2023-00014957-CU-OE-CTL non-individual claims is preempted, so Viking was entitled to compel arbitration of Moriana's individual claim.']) Viking River overruled Iskanian's rule that effectively precluded claim splitting a PAGA claim. Since Viking River became the law, parties could split a PAGA claim. Viking River now allows a court to find the 'representative' portion of the PAGA claim may not be compelled to arbitration while the 'individual' portion of the PAGA claim may be compelled to arbitration. In Viking River the agreement contained a severance clause that permitted the Court to sever the portion of the agreement that waived representative PAGA claims. Plaintiff argues that because the arbitration agreement at issue here does not contain a severance clause, this Court cannot compel arbitration.

The arbitration agreement at issue states, in part: Except as otherwise prohibited by law...all parties hereby agree to submit any and all claims, of any type whatsoever, to binding arbitration, including but not limited to claims arising from the employment relationship between OTAY MESA SALES, INC., including its officers, directors, and employee [sic], all claims based on sexual harassment, discrimination, violations of public policy, fraud, breach of contract, employment claims of any type, wage claims, all tort claims, wrongful termination and any claims brought under any or all of the following laws: Federal Civil Rights act of 1964, section 701 et. Seq., age discrimination in employment act, Fair Employment and Housing Act (California Government Code), California Labor Code, and the Americans with Disabilities Act (ADA). Employee specifically agrees to waive any and all rights to bring a class action suit or multiple party suit, of any type whatsoever, against employer.

(Decl. Sandner, Exhibit A.) In the memorandum that accompanied the arbitration agreement, employees were informed, inter alia, that: By agreeing to arbitration, you can pursue all individual claims under California, federal, or otherwise applicable laws that you could assert in court. However, you will be barred from participating in or pursuing any class or representative actions related to your employment with Company, except claims that cannot be compelled for arbitration. For example, representative actions brough pursuant to the Private Attorneys General Act of 2004 ('PAGA') cannot be compelled to arbitration under California law....

(Decl. Sandner, Exhibit A.) The arbitration agreement states '[e]mployee specifically agrees to waive any and all rights to bring a class action suit or multiple party suit, of any type whatsoever, against employer.' The Court agrees the above clause is not unambiguously a wholesale waiver of PAGA representative actions. The phrase 'multiple party suit, of any type whatsoever,' does not necessarily apply to representative PAGA claims.

A PAGA action is a 'type of qui tam action,' not a multiple party action. (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 81.) 'The 'government entity on whose behalf the plaintiff files suit is always the real party in interest.'' (Id. [Citation omitted].) Further, the above clause does not reference PAGA.

While the memorandum does indicate Plaintiff would be barred from pursuing 'any class or representative actions,' the memorandum does not explicitly state it interprets the above clause. Further, it explicitly states that Plaintiff could still pursue a representative PAGA action. Even if the memorandum were considered as being incorporated with the arbitration agreement, the Court would find that it purports to interpret it based on the state of the law at the time. When the arbitration agreement and the memorandum were signed and issued it was before Viking River overruled Iskanian and made it lawful to compel arbitration as to individual PAGA claims while splitting it from the representative portion of a PAGA action. The memorandum essential recognizes the arbitration clause is not a wholesale waiver as Plaintiff could not 'be compelled to arbitration' as to representative actions. If the last sentence of the above arbitration clause were interpreted as applying to representative PAGA claims, then this portion of Calendar No.: Event ID: TENTATIVE RULINGS

3014490 46 CASE NUMBER: CASE TITLE: ESPARZA VS OTAY MESA SALES INC [E-FILE] 37-2023-00014957-CU-OE-CTL the memorandum would not make sense, unless it was acknowledging the limiting phrase '[e]xcept as otherwise prohibited by law,' as the law prohibits compelling representative PAGA actions. In such instance, the sentence would not be a wholesale waiver of PAGA claims.

As the arbitration agreement does not clearly indicate the parties intended that future laws would not be applicable to the agreement, subsequent changes in the law are deemed to become part of the agreement. (See City of Torrance v. Workers' Comp. Appeals Bd. (1982) 32 Cal.3d 371, 379.) The general rule is 'that judicial decisions are to be applied retroactively.' (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 24.) Plaintiff has failed to show that the general rule does not apply to Viking River.

Further, unlike in DeMarinis, this arbitration agreement does not contain a 'poison pill,' which explicitly forbids severability. (DeMarinis v. Heritage Bank of Commerce 2023 WL 9113099, at *1.) 'As Westmoreland observed, 'Had Kindercare simply included a waiver of representative claims in its arbitration agreement and not included the poison pill at the end of the agreement, the result here could have been substantially similar to that in Viking River' and other California decisions following Viking River.' (Id. at *6 [Citation omitted].) If the Court were to interpret the arbitration agreement as containing a wholesale waiver of PAGA actions, the Court would sever the unenforceable portion, as is permitted in the absence of a poison pill in the agreement. (Civ. Code, § 1599; see Marathon Entertainment, Inc. v. Blasi (2008) 42 Cal.4th 974, 991–995.) Plaintiff's individual PAGA claims are arbitrable and the remaining representative PAGA action may be stayed pending the arbitration of Plaintiff's individual PAGA claims. (Adolph v. Uber Technologies, Inc.

(2023) 14 Cal.5th 1104.) The motion is granted. The Court elects to stay the remainder of this matter not compelled to arbitration. A status conference is hereby set for August 16, 2024, at 10:00 am.

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