Judge Salvatore Sirna, Case Number: 24PSCV00775, Date: 2024-06-27 Tentative Ruling

Judge: Salvatore Sirna, Case: 24PSCV00775, Date: 2024-06-27 Tentative Ruling

Case Number: 24PSCV00775 Hearing Date: June 27, 2024 Dept: G

Defendants Superior Herbal Health, LLC and SHL-El Monte, LLC’s Motion to Compel Plaintiff’s Individual PAGA Claims to Arbitration and Stay All Proceedings Pending the Completion of Arbitration

Respondent: Plaintiff Oliver Summers

TENTATIVE RULING

Defendants Superior Herbal Health, LLC and SHL-El Monte, LLC’s Motion to Compel Plaintiff’s Individual PAGA Claims to Arbitration is GRANTED.

The present action is STAYED pending the arbitration of Plaintiff Oliver Summers’ individual PAGA claims.

BACKGROUND

This is a wage and hour action brought pursuant to the Private Attorneys General Act (PAGA). From September 2022 to August 2023, Plaintiff Oliver Summers worked for Defendants Superior Herbal Health, LLC (Superior Herbal Health) and SHL-El Monte, LLC (SHL-El Monte) as a director of retail. On March 13, 2024, Summers filed a PAGA complaint against Superior Herbal Health, SHL-El Monte, and Does 1-10, alleging a single cause of action for civil penalties pursuant to the Labor Code.

On April 19, 2024, Superior Herbal Health and SHL-El Monte filed the present motion. A hearing on the present motion is set for June 27, 2024, with a case management conference and OSC Re: Failure to File Proof of Service set for August 1, 2024.

ANALYSIS

Superior Herbal Health and SHL-El Monte move to compel Summers to binding arbitration pursuant to an arbitration agreement. For the following reasons, the Court GRANTS their motion.

Legal Standard

“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281.) The court must grant a petition to compel arbitration unless it finds no written agreement to arbitrate exists, the right to compel arbitration has been waived, grounds exist for revocation of the agreement, or litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues. (Code Civ. Proc., § 1281.2.) A petition to compel arbitration functions as a motion. (Code Civ. Proc., § 1290.2.)

In a motion or petition to compel arbitration, “the moving party bears the burden of producing ‘prima facie evidence of a written agreement to arbitrate the controversy.’” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa).) Once the court finds an arbitration agreement exists, the party opposing arbitration bears the burden of establishing a defense to enforcement by preponderance of the evidence. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) In interpreting an arbitration agreement, courts apply the same principles used to interpret contractual provisions with the fundamental goal of giving effect to the parties’ mutual intentions and applying contractual language if clear and explicit. (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 177.) Because public policy strongly favors arbitration, “any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hosp. v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.)

The Federal Arbitration Act (FAA) applies to contracts that involve interstate commerce (9 U.S.C. §§ 1, 2), but since arbitration is a matter of contract, the FAA also applies if stated in the agreement. (See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355.) Pursuant to the FAA, the court’s role “is limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” (Philadelphia Indemnity Ins. Co. v. SMG Holdings, Inc. (2019) 44 Cal.App.5th 834, 840, quoting U.S. ex rel. Welch v. My Left Foot Children’s Therapy, LLC (9th Cir. 2017) 871 F.3d 791, 796.)

Discussion

In this case, Superior Herbal Health and SHL-El Monte argue the present action is subject to an arbitration agreement that Summers signed when Summers’ employment commenced on September 22, 2022. (Groshans Decl., ¶ 7-8, Ex. B.) In the agreement, Superior Herbal Health and Summers agreed that “any claim, dispute, or controversy arising out or relating to [Summers’] employment with [Superior Herbal Health], or the separation of that employment shall be submitted to final and binding arbitration in accordance with the terms of this Mutual Agreement to Arbitrate Disputes.” (Groshans Decl., Ex. B, p. 1.) The agreement also included specific examples of claims, disputes, or controversies subject to arbitration which included those pursuant to the California Labor Code. (Groshans Decl., Ex. B, p. 1.) The agreement further stated that Superior Herbal Health and Summers “agree that claims must be brought in each party’s individual capacity, and not as a . . . representative proceeding.” (Groshans Decl., Ex. B, p. 2.)

In addition to the above provisions, the arbitration agreement states “any arbitration under this agreement shall be governed by the [FAA] and California Code of Civil Procedure sections 1280, et seq. (including without limitation section 1283.05 and its mandatory and permissive rights to discovery).” (Groshans Decl., Ex. B, p. 1.) Based on this provision, the court finds the arbitration agreement is governed by the FAA.

In determining if Superior Herbal Health and SHL-El Monte established the existence of an applicable arbitration agreement, the court notes the subject arbitration agreement only appears to be between Superior Herbal Health and Summers. Nowhere in the agreement is SHL-El Monte listed as a party. Furthermore, the parties have presented evidence establishing that SHL-El Monte is a separate corporate entity from Superior Herbal Health and has never employed Summers. (Groshans Decl., ¶ 3.) Nonetheless, SHL-El Monte argues it can compel arbitration pursuant to doctrines of equitable estoppel and agency. (Motion, p. 9:12-11:16.)

The doctrine of equitable estoppel “precludes a party from asserting rights [they] otherwise would have had against another when [their] own conduct renders assertion of those rights contrary to equity.” (Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4th 1705, 1713, quoting International Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH (4th Cir. 2000) 206 F.3d 411, 417-418.) In the context of arbitration agreements, equitable estoppel applies when a signatory to an agreement with an arbitration clause is required to rely on that agreement’s terms in its action against the non-signing party or “when the claims against the nonsignatory are founded in and inextricably bound up with the obligations imposed by the agreement containing the arbitration clause.” (Pacific Fertility Cases (2022) 85 Cal.App.5th 887, 893, quoting Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 219.)

Here, Summers alleges the same Labor Code violations against both Superior Herbal Health and SHL-El Monte by alleging they are liable as joint employers. (Complaint, ¶ 9.) Because Summers’ claims against Superior Herbal Health are “founded in and inextricably bound up” with Summers’ claims against SHL-El Monte, the court finds the arbitration clause is applicable to SHL-El Monte through the doctrine of equitable estoppel.

In opposition, Summers argues the present action is solely a representative action and that there is no individual PAGA claims for Superior Herbal Health and SHL-El Monte to compel to arbitration. (Opp., p. 2:5-12.) In Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639 (Viking River), the U.S. Supreme Court distinguished between individual Labor Code violations that were suffered by the aggrieved employee (individual claims) and Labor Code violations that were suffered by other employees (representative claims). (Id., at p. 648-649.) The purpose for making this distinction was to determine whether a PAGA action could be split and whether the arbitration of the individual claims barred litigation of the representative claims. (Id., at p. 662-663.) The court concluded the FAA preempted a prohibition on splitting these claims and opined that arbitration of the individual claims would likely obviate an aggrieved employee’s standing to bring the representative claims. (Ibid.)

Subsequently, the California Supreme Court held the arbitration of individual PAGA claims did not eliminate an aggrieved employee’s standing to bring representative claims. (Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1114 (Adolph).) In doing so, the court acknowledged Viking River’s distinction between individual claims “‘premised on Labor Code violations actually sustained by’ the plaintiff” and representative claims “‘arising out of events involving other employees.’” (Ibid, quoting Viking River, supra, 596 U.S. at p. 648-649.) Thus, the fact that Summers’ PAGA action is classified as a representative action does not prevent the arbitration of any individual PAGA claim where Summers alleges Summers suffered a violation of the Labor Code.

Here, the Complaint specifically alleges the Labor Code violations at issue were committed “against Plaintiff.” (Complaint, ¶ 40.) Thus, the Court finds Summers’ PAGA action consists of individual claims that are subject to the arbitration agreement that Summers signed in September 2022. Because Superior Herbal Health and SHL-El Monte have adequately established the existence of an applicable arbitration provision that is governed by the FAA, the burden now shifts to Summers to establish any defense to the enforcement of this arbitration agreement. Because Summers’ opposition fails to do so, Superior Herbal Health and SHL-El Monte’s motion is GRANTED.

CONCLUSION

Based on the foregoing, Superior Herbal Health and SHL-El Monte’s motion to compel arbitration is GRANTED and the present action is STAYED pending the arbitration of Summers’ individual PAGA claims.