Judge: Stephen P. Pfahler, Case: 23STCV00362, Date: 2024-01-31 Tentative Ruling

Case Number: 23STCV00362    Hearing Date: January 31, 2024    Dept: 68

Dept. F-49

Date: 1-31-24

Case #23STCV00362

Trial Date: Not Set

ARBITRATION/STAY/DISMISS

MOVING PARTY: Plaintiff, FRC Balance, LLC

RESPONDING PARTY: Plaintiff, Lanaye Gibson, et al.

RELIEF REQUESTED

Motion to Compel Arbitration, Dismiss Representative Action, or Stay Proceedings

SUMMARY OF ACTION

On January 6, 2023, plaintiff Lanaye Gibson filed a PAGA action for wage and hour violations against FRC Balance LLC, an Arizona limited liability company. On March 13, 2023, Plaintiff filed a first amended complaint strictly for Civil Penalties Under the Private Attorney General Act. On May 1, 2023, the action was transferred from Department 11 to Department 30. On May 25, 2023, Defendant filed a 170.6 challenge to the assigned judicial officer in Department 30, thereby leading to reassignment.

RULING: Granted as to Individual Arbitration/Granted as to Stay of PAGA Action/Denied as to Dismissal

Request for Judicial Notice: Granted

·         The court also takes judicial notice of the existence of the order from another courtroom itself, but declines to take judicial notice of any truth of a factual finding incorporated into said order for purposes of issuing the decision. (Kilroy v. State of California (2004) 119 Cal.App.4th 140, 147-148; Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1565.)

Defendant FRC Balance LLC moves to compel individual arbitration as to named plaintiff Lanaye Gibson, including the PAGA claims, and a dismissal of the representative PAGA action. Alternatively, Defendant moves for a stay of the representative PAGA pending the completion of arbitration. Plaintiff in an extensive opposition leads with a claim waiver to seek arbitration, and an improper request for dismissal in violation of California law. Plaintiff additionally challenges any alternative request for a stay and instead maintains the right to concurrently pursue the representative PAGA action. Defendant in reply denies any waiver, maintains that the United States Supreme Court action on PAGA claims brought under the Federal Arbitration Act (FAA) requires dismissal, and alternatively concedes to a required a stay under California law.

Defendant seeks arbitration under the FAA. Pending future court review, the court finds the instant motion compelling arbitration remains governed by California law. (Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 (Viking); Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1119; see Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 477–479; Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 346.)

“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.) “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.” (Code Civ. Proc., § 1281.2.)

The law creates a general presumption in favor of arbitration. In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. “‘Under “both federal and state law, the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate.”’” (Long v. Provide Commerce, Inc. (2016) 245 Cal.App.4th 855, 861.) “Private arbitration is a matter of agreement between the parties and is governed by contract law. (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 313.) In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. The burden then shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud, unconscionability, etc.). (Rosenthal v. Great Western Fin'l Securities Corp. (1996) 14 Cal.4th 394, 413-414; Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 164–165; Hotels Nevada v. L.A. Pacific Ctr., Inc. (2006) 144 Cal.App.4th 754, 758.) Any challenges to the formation of the arbitration agreement should be considered before any order sending the parties to arbitration. The trier of fact weighs all evidence, including affidavits, declarations, documents, and, if applicable, oral testimony to determine whether the action goes to arbitration. (Hotels Nevada v. L.A. Pacific Ctr., Inc., supra, 144 Cal.App.4th at p. 758.)

The parties present no dispute over the existence of the agreement itself and the right to seek arbitration. The court therefore finds the agreement valid and enforceable as to the Defendant and the individual Plaintiff. [Declaration of Joanna Lawler.] The court therefore considers defenses to arbitration, and the latest cases on PAGA.

Waiver

“Although a court may deny a petition to compel arbitration on the ground of waiver (§ 1281.2, subd. (a)), waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof. (Citations.) [¶] Both state and federal law emphasize that no single test delineates the nature of the conduct that will constitute a waiver of arbitration. (Citations.) ‘“In the past, California courts have found a waiver of the right to demand arbitration in a variety of contexts, ranging from situations in which the party seeking to compel arbitration has previously taken steps inconsistent with an intent to invoke arbitration [citations] to instances in which the petitioning party has unreasonably delayed in undertaking the procedure. [Citations.] The decisions likewise hold that the ‘bad faith’ or ‘wilful misconduct’ of a party may constitute a waiver and thus justify a refusal to compel arbitration. [Citations.]”’ (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195–1196.)

While prejudice was the prevailing standard for determining waiver, a party challenging waiver under an FAA governed agreement is no longer “required to demonstrate a waiver of one's right to arbitration, and the waiver inquiry should instead focus on the actions of the holder of that right.” Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 966 accord Morgan v. Sundance, Inc. (2022) 596 U.S. 411, 416-417.) Given the incorporation of the uniquely California law PAGA claims renders the agreement at least partially subject to California rules for arbitration, the court remains unclear as to whether the federal standard also governs state standards considering waiver.

California courts adhering to the prejudice standard generally included examples with propounded discovery or service of an answer, where such action reveals the strategies or theories that would not otherwise be available to the party in arbitration. (Berman v. Health Net (2000) 80 Cal. App. 4^th 1359, 1367; Davis v. Continental Airlines, Inc. (1997) 59 Cal. App. 4^th 205, 212.) Excessive and unreasonable delay in a demand for arbitration can also support a finding of a waiver. (Spear v. California State Auto. Assn. (1992) 2 Cal.4th 1035, 1043; Allstate Ins. Co. v. Gonzalez (1995) 38 Cal.App.4th 783, 790.) “‘[W]hat constitutes a reasonable time is a question of fact, depending on the situation of the parties, the nature of the transaction, and the facts of the particular case.’ Among the facts a court may consider is any prejudice the opposing party suffered because of the delay. [Citation.]” (Spear v. California State Auto. Assn. supra, 2 Cal.4th at 1043.) Plaintiff in fact asserts waiver on the lack of any affirmative defense and based on the purported delays in bringing the subject motion.

The determination of diligence applicable to an arbitration motion constitutes a factual determination based on the “reasonable diligence in the prosecution of the action[].” (Allstate Ins. Co. v. Gonzalez (1995) 38 Cal.App.4th 783, 790; Schumpert v. Tishman Co. (1988) 198 Cal.App.3d 598, 603.) The subject action commenced on January 6, 2023. On March 13, 2023, Plaintiff filed a first amended complaint. On May 1, 2023, the action was transferred from Department 11 (complex court) to Department 30. On May 25, 2023, Defendant filed a 170.6 challenge to the assigned judicial officer in Department 30, thereby leading to reassignment. According to defendant, the parties negotiated efforts for arbitration in September through December, which was approximately around the time of the first Case Management Conference in Department 68. [Declarations of Cameron Davila and Michiko Vartanian.]

The court finds no specific argument regarding the omission of the arbitration in the answer, and finds the declarations support a consistent intent to seek arbitration. The court finds the circumstantial delays, at least in part caused by the two transfers, and uncertainty while waiting for publication of the Adolph v. Uber action until July 2023, presents reasonable circumstances for the timing of the motion. Even now, the parties disagree over the interpretation of Adoph v. Uber, which further indicates the inability to reach an accord and the necessity of scheduling a hearing, which also contributed to the delays. The court therefore finds no waiver.

Individual Claims, FAA and PAGA

The motion depends on the specific compelling of arbitration as to individual plaintiff Gibson and then a dismissal of the action, due to the lack of a real party in interest prosecuting the PAGA statutory claims. Defendant relies on the latest United States Supreme Court statement on the subject.

“[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, 9 Cal.5th at 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, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1925 (“Viking”).)

Nevertheless, the California Supreme Court on authority regarding the right to determine the arbitrability of its own state laws, found that PAGA claims cannot be waived under California law. “Standing under PAGA is not affected by enforcement of an agreement to adjudicate a plaintiff's individual claim in another forum. Arbitrating a PAGA plaintiff's individual claim does not nullify the fact of the violation or extinguish the plaintiff's status as an aggrieved employee...” (Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1121 (“Adolph”).)  Plaintiff therefore retains standing to bring the PAGA action, and the court denies the motion to dismiss the PAGA claims. (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 83-84; Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 383.)

On the question of compelling arbitration as to the individual PAGA claims, the court finds no authority barring the right to compel arbitration of the individual claims. (Adolph, supra, 14 Cal.5th at p. 1126.) The Adolph court recognized the necessity to bifurcate arbitration between individual and non-individual PAGA claims where a valid clause exists. “We hold that the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate. ...” (Viking 142 S.Ct. at pp. 1924-1925.) The court therefore orders the individual PAGA claims to arbitration.

As for the representative portion, the court grants the motion to stay this portion of the action pending the completion of arbitration, rather than concurrent adjudication of both claims. “[T]he trial court may exercise its discretion to stay the non-individual claims pending the outcome of the arbitration pursuant to section 1281.4 of the Code of Civil Procedure. Following the arbitrator's decision, any party may petition the court to confirm or vacate the arbitration award under section 1285 of the Code of Civil Procedure. If the arbitrator determines that [Plaintiff] is an aggrieved employee in the process of adjudicating his individual PAGA claim, that determination, if confirmed and reduced to a final judgment (Code Civ. Proc., § 1287.4), would be binding on the court, and [Plaintiff] would continue to have standing to litigate his nonindividual claims. If the arbitrator determines that [Plaintiff] is not an aggrieved employee and the court confirms that determination and reduces it to a final judgment, the court would give effect to that finding, and [Plaintiff] could no longer prosecute his non-individual claims due to lack of standing.” Adolph, supra, 14 Cal.5th at pp. 1123-1124.)

The motion is therefore granted as to individual arbitration of all claims, stayed as to the non-individual PAGA claims, and denied as to dismissal of the non-individual PAGA claims.

The parties may stipulate to an arbitrator. If the parties are unable to agree upon an arbitrator, the parties may submit a list of one to two arbitrators from each side, where the court will select the arbitrator. The parties have 30 days from the date of this order to begin the selection process.

The court will set an OSC re: Arbitration Status at the time of the hearing.

Defendant to give notice.