Judge: Stuart M. Rice, Case: 20STCV48283, Date: 2022-12-09 Tentative Ruling


Case Number: 20STCV48283    Hearing Date: December 9, 2022    Dept: 1

ANALYSIS

This ruling supplements the Court’s September 30, 2022 order granting in part defendant LeBleuChateau, Inc.’s (Defendant) motion to compel plaintiffs Estefani Verenice Ramirez and Christian Alberto Zelaya Berrios (Plaintiffs) to submit their claims to binding arbitration pursuant to their arbitration agreements (the Agreements).  After considering the papers, conducting an evidentiary hearing, and hearing argument from the parties, the Court found that the Agreements were enforceable and that Plaintiffs could not establish a defense to their enforcement.  This left a single issue to be resolved by further briefing, the disposition of Plaintiffs’ Private Attorney General Act (PAGA) claims in light of the United States Supreme Court’s decision in Viking River Cruises v. Moriana (2022) 142 S.Ct. 1906 (Viking River), which was decided after the motion was fully briefed.  The Court has received and considered the parties’ supplemental briefs and now rules as follows.

The Agreements provide, in pertinent part, as follows:

1. PURPOSE
…Employee and Company mutually agree that any action, claim, or controversy arising out of or in any way related to any “Dispute” as defined herein, shall be resolved exclusively by final and binding arbitration in Orange County, California.  …

2. DEFINITION
For purposes of this Agreement, the term “Disputes” means any action, claim, or controversy the Parties may have against each other…arising out of or in any way related to the hire, employment, remuneration, separation or termination of Employee.

The potential Disputes which the parties agree to arbitrate pursuant to this Agreement include, but are not limited to…the California Labor Code, including any Disputes brought by the Employee related to wages, breach of employment contract or the implied covenant of good faith and fair dealing, wrongful discharge, or tortious conduct (whether intentional or negligent) including defamation, misrepresentation, fraud, misappropriation of trade secrets, and infliction of emotional distress. …

4. CLASS ACTION WAIVER
Any Dispute must be brought in each party’s individual capacity, and not as a plaintiff or class member in any purported class, collection, representative, multiple plaintiff, or similar proceedings (hereinafter “Class Action”).  The Parties knowingly and expressly waive any ability to maintain any Class Action in any forum.  … Any claim that all or part of this Class Action Waiver is unenforceable, unconscionable, void, or voidable may be determined only by a court of competent jurisdiction, and not an arbitrator. 

THE PARTIES UNDERSTAND THAT THEY WOULD HAVE A RIGHT TO LITIGATE THROUGH A COURT, TO HAVE A JUDGE OR JURY DECIDE THEIR CASE AND BE A PARTY TO A CLASS OR REPRESENTATIVE ACTION. HOWEVER, THE PARTIESHAVE READ, UNDERSTOOD, AND CHOOSE TO HAVE ANY DISPUTES DECIDED INDIVIDUALLY, THROUGH ARBITRATION. 

…7. SEVERABILITY
The provisions of this Agreement are severable, and if any one or more are determined to be void or otherwise unenforceable, the remaining provisions shall continue to be in full force and effect.  (See Barajas Decl., Ex. A and Ex. B.) 

1.      Disposition of Individual PAGA Claims

Under Viking River, in cases which fall within the Federal Arbitration Act (FAA), “individual PAGA claims” (claims for Labor Code civil penalties for violations suffered by the plaintiff) must be arbitrated if they fall within the scope of an arbitration agreement, and California law which provides that individual PAGA claims cannot be separated from non-individual PAGA claims (i.e. those for civil penalties for violations suffered by other employees) is preempted.  (Viking River, supra, 142 S.Ct. at 1924-1925.)  Plaintiffs’ individual PAGA claims fall within the Agreements, because they are “action[s], claim[s], or controvers[ies] …arising out of or in any way related to the hire, employment, remuneration, separation or termination of Employee.”  The Agreements specifically identify Labor Code claims as a potential “Dispute.”

California law forbids separating the PAGA claims into individual and non-individual portions (see Iskanian v. CLS Transportation Los Angeles (2014) 59 Cal.4th 348, 384 (Iskanian); see also Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 88 [“Appellate courts have rejected efforts to split PAGA claims into individual and representative components.”])  However, Viking River holds that the FAA preempts that prohibition.  (Viking River, supra, 142 S.Ct. at 1924.)  The Court has already determined that the FAA applies to the Agreements. 

Plaintiff contends that the Agreements contain a wholesale waiver of PAGA claims which is invalid under California law, law which has not been preempted by the FAA and Viking River.  Plaintiff is correct.  Iskanian provides that an employee’s pre-dispute waiver of the right to bring PAGA claims is contrary to public policy and invalid (Iskanian, supra, 59 Cal.4th at 383) and Viking River recognizes that “that aspect of Iskanian is not preempted by the FAA.”  (Viking River, supra, 142 S.Ct. at 1924-1925.)  The class action waiver, which includes a waiver of the right to be a plaintiff in a representative action, is invalid as a waiver of PAGA claims under Iskanian.

However, that does not render the Agreements invalid on the whole or provide that the PAGA claims cannot be arbitrated where they otherwise come within the scope of the arbitration provisions (i.e. “all Disputes arising out of or in any way related to the…employment…of Employee”).  As in Viking River, the Agreements contain a severability clause which provides that any provision of the Agreement which is void or otherwise unenforceable will not affect the remaining provisions.  Like the movant in Viking River, Defendant is “entitled to enforce the agreement insofar as it mandated arbitration of [Plaintiffs’] individual PAGA claim[s].”  (See Viking River, supra, 142 S.Ct. at 1925.)  Plaintiffs’ discussion of the analysis in Viking River allowing for “any ‘portion of the waiver that remains valid must still be ‘enforced in arbitration’” does not alter the conclusion that the Agreements here encompass their individual PAGA claims.  Unlike in Viking River, the waiver of PAGA claims contained in Section 4 of the Agreements cannot be divided into an enforceable “portion” to be “enforced in arbitration” because unlike the Viking River agreement, these Agreements do not speak of the waiver in “portions.”  The waiver is all-or-nothing with respect to PAGA claims, and as it is invalid under Iskanian, the effect of the waiver on the PAGA claims is nothing.  (See Iskanian, supra, 59 Cal.4th at 383.) 

Plaintiff’s analysis of the contractual language providing that claims “must be brought in each party’s individual capacity” is not convincing.  This language is in the Section 4 class action waiver, and governs what claims the parties are agreeing to forfeit.  The key language is, as discussed above, is in the first two sections, which define “Disputes” and state which “Disputes” the parties agree must be arbitrated.  Individual PAGA claims, as that term is defined in Viking River, come within those provisions. 

2.      Disposition of Non-Individual PAGA Claims

Defendant contends that with Plaintiffs’ individual PAGA claims sent to arbitration, their non-individual PAGA claims must be dismissed.  In Viking River, the U.S. Supreme Court reasoned that once a plaintiff’s individual PAGA claims were sent to arbitration, the plaintiff loses standing to assert non-individual PAGA claims.  (Viking River, supra, 142 S.Ct. at 1925.)  However, California law conveys PAGA standing on any person defined as an “aggrieved employee.”  (Lab. Code § 2699(a).)  An “aggrieved employee” is “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.”  (Lab. Code § 2699(c).)  A plaintiff may have standing as an “aggrieved employee” even where they have no right to monetary recovery or any unredressed injury at all, and even where they have settled all “individual claims” of any kind or those claims are substantively barred.  (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 82, 90-91 (Kim); see also Zuniga v. Alexandria Care Center, LLC (2021) 67 Cal.App.5th 871, 883 [plaintiff retained standing as an aggrieved employee despite settlement of her individual claims]; Johnson v. Maxim Healthcare Services, Inc. (2021) 66 Cal.App.5th 924, 930 [fact that plaintiff’s non-PAGA claims were time-barred “[did] not nullify the alleged Labor Code violations nor strip Johnson of her standing to pursue PAGA remedies.”) 

 

As the California Supreme Court has held:

 

Nothing in the legislative history suggests the Legislature intended to make PAGA standing dependent on the existence of an unredressed injury, or the maintenance of a separate, unresolved claim. Such a condition would have severely curtailed PAGA's availability to police Labor Code violations because, as noted, many provisions do not create private rights of action or require an allegation of quantifiable injury. Instead, true to PAGA's remedial purpose, the Legislature conferred fairly broad standing on all plaintiffs who were employed by the violator and subjected to at least one alleged violation.  (Kim, supra, 9 Cal.5th at 90-91.) 

 

To dismiss Plaintiffs’ non-individual PAGA claims would create the incongruous possibility that they prevail on their individual claims in arbitration (establishing that they were “employed by the alleged violator” and “one or more of the alleged violations was committed” against them) only to find that the representative PAGA claims which that finding would qualify them to prosecute have been dismissed.  This is not a result that can be squared with the broad concept of standing articulated in Kim, Zuniga, and Johnson, cited above.

 

Defendant cites Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (2009) 46 Cal.4th 993 (Amalgamated Transit) and Robinson v. Southern Counties Oil Co. (2020) 53 Cal.App.5th 476 (Robinson) in support of its contention that the non-individual PAGA claims must be dismissed, but these cases address distinct and uncommon circumstances not present here.  In Amalgamated Transit, the plaintiff was not an “aggrieved employee,” but rather the union those employees belonged to.  (Amalgamated Transit, supra, 46 Cal.4th at 1004-1005.)  The California Supreme Court rejected the union’s PAGA suit on the ground that PAGA, specifically Lab. Code § 2699(c), defined “aggrieved employee” as “any person who was employed by the alleged violator and against whom one or more of the alleged violations were committed” and “[b]ecause plaintiff unions were not employees of defendants, they cannot satisfy the express standing requirements of the act.”  (Ibid.)  Here, as Defendant admits, Plaintiffs were employees. 

 

The Robinson case was similarly unusual, in that the plaintiff had opted out of a class action settlement in another action which included PAGA penalties for violations committed between March 16, 2013 and January 27, 2018.  (Robinson, supra, 53 Cal.App.5th at 480.)  He then filed his own suit for PAGA penalties after January 27, 2018, despite that he had stopped working for the defendant in 2017.  (Ibid.)  Because the plaintiff could not have suffered “one of the alleged violations” he was seeking to recover penalties for (because he was no longer employed by the time those violations allegedly began), the Court of Appeal affirmed the dismissal of his case.  (Id. at 483-484.)  Here, on the other hand, Plaintiffs seek PAGA penalties for violations committed during a time when they were employed by Defendant and could have suffered one of the alleged violations.  Robinson is not applicable either.  Tellingly, the U.S. Supreme Court cited Amalgamated Transit solely for its holdings concerning private rights in PAGA actions (see Viking River, supra, 142 S.Ct. at 1914 fn. 2, 1915) and did not cite Robinson at all. 

 

While the Supreme Court must “decide questions of state law when necessary for the disposition of a case brought to it for decision, although the highest court of the state had not answered them,” its decisions do not “finally settle the questions of state law involved[.]” (Meredith v. City of Winter Haven (1943) 320 U.S. 228, 237-238.) The question of standing for representative PAGA claims considering Viking River has left us with some uncertainty, which California Appellate tribunals have yet to address.  (See Viking River, supra, 142 S.Ct. at 1925 (conc. opn. of Sotomayor, J.) [“Of course, if this Court's understanding of state law is wrong, California courts, in an appropriate case, will have the last word.”]; see also Mills v. Facility Solutions Group, Inc. (Nov. 1, 2022, B313943) __ Cal.App.5th __ [2022 WL 16569298 at *13].)  This hotly contested issue is likely to be resolved in the near future, as the California Supreme Court has recently granted review in the case of Adolph v. Uber Technologies, Inc. (Apr. 11, 2022, G059860), review granted July 20, 2022, S274671.) 

 

This principle has been the law of the land for close to a century:

 

‘[L]aw in the sense in which courts speak of it today does not exist without some definite authority behind it. The common law so far as it is enforced in a State, whether called common law or not, is not the common law generally but the law of that State existing by the authority of that State without regard to what it may have been in England or anywhere else.’

…

‘The authority and only authority is the State, and if that be so, the voice adopted by the State as its own (whether it be of its Legislature or of its Supreme Court) should utter the last word.’  (Erie R. Co. v. Tompkins (1938) 304 U.S. 64, 79, quoting Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer Co. (1928) 276 U.S. 518, 533-534, 535 (diss. opn. of Holmes, J.))

 

The Court will therefore not dismiss Plaintiffs’ non-individual PAGA claims, but instead will stay them pending the outcome of arbitration.

 

Conclusion

 

For the foregoing reasons, Plaintiffs are required to arbitrate their individual PAGA claims.  Their non-individual PAGA claims are stayed pending the outcome of arbitration.  Plaintiff to give notice.