Judge Teresa A. Beaudet, Case 21STCV15773 2022-10-13 Tentative Ruling

CY KISHIYAMA, et al.

Plaintiffs,

vs.

GUCKENHEIMER ENTERPRISES, INC., et al.

Defendants.

Case No.:

21STCV15773

Hearing Date:

October 13, 2022

Hearing Time: 10:00 a.m.

[TENTATIVE] ORDER RE:

DEFENDANTS’ MOTION TO COMPEL ARBITRATION OF PLAINTIFF CY KISHIYAMA’S INDIVIDUAL PAGA CLAIM AND DISMISS THE REPRESENTATIVE ACTION

Plaintiff Cy Kishiyama, an individual, on behalf of himself, all other aggrieved employees, and the general public (“Plaintiff”) filed this action against Defendants

Guckenheimer Enterprises, Inc. (“Guckenheimer Enterprises”) and Guckenheimer Services, LLC (jointly, “Defendants”) on April 27, 2021. Plaintiff filed the operative First Amended Complaint (“FAC”) on October 25, 2021 asserting one cause of action for civil penalties under the Private Attorneys General Act (“PAGA”).

Defendants now move for an order compelling arbitration of Plaintiff’s PAGA cause of action against Defendants on an individual basis and for an order staying this action pending completion of arbitration of Plaintiff’s PAGA claim. Defendants also move for an order dismissing Plaintiff’s representative PAGA claim. Plaintiff opposes.

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. Securities Corp. (1996) 14 Cal.4th 394, 413-414.)

Generally, on a petition to compel arbitration, the court must grant the petition unless it finds either (1) no written agreement to arbitrate exists; (2) the right to compel arbitration has been waived; (3) grounds exist for revocation of the agreement; or (4) litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues. (Code Civ. Proc., § 1281.2; Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-219.)

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Ibid. [internal quotations omitted].) This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act (“FAA”), which governs all agreements to arbitrate in contracts “involving interstate commerce.” (9 U.S.C. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

Defendants present evidence that on August 25, 2017, Guckenheimer Enterprises extended an offer of employment to Plaintiff to work as a Dishwasher in Los Angeles, California. (Hong Decl., ¶ 9.) Guckenheimer Enterprises’ offer letter contained a “DISPUTE RESOLUTION AGREEMENT” (the “Agreement”). (Hong Decl., ¶ 9, Ex. A.) Defendants indicate that the offer letter and Agreement were electronically signed by Plaintiff on September 7, 2017 at 9:02:53 a.m. (Hong Decl., ¶ 9, Ex. A.)

Defendants assert that the Agreement mandates arbitration of Plaintiff’s “individual” PAGA claim. The Agreement provides, inter alia, that “[t]his Agreement applies to any dispute arising out of or related to Employee’s employment with Guckenheimer Enterprises, Inc. or one of its affiliates, successor, subsidiaries or parent companies (“Company”) or termination of employment…” (Hong Decl., ¶ 9, Ex. A, § 1.)

In the opposition, Plaintiff notes that the Agreement contains a “Private Attorney General Waiver.” (Hong Decl., ¶ 9, Ex. A, § 5.) As Plaintiff notes, the Agreement provides as follows:

“You and the Company agree to bring any dispute in arbitration on an individual basis only, and not on a class, collective, or private attorney general representative action basis. Accordingly…(c) There will be no right or authority for any dispute to be brought, heard or arbitrated as a private attorney general representative action (“Private Attorney General Waiver”). The Private Attorney General Waiver shall be severable from this Agreement in any case in which a civil court of competent jurisdiction finds the Private Attorney General Waiver is unenforceable. In such instances and where the claim is brough as a private attorney general, such private attorney general claim must be litigated in a civil court of competent jurisdiction.” (Hong Decl., ¶ 9, Ex. A, § 5.)

The Agreement further provides that the “Private Attorney General Waiver shall be severable in any case in which the dispute is filed as an individual action and severance is necessary to ensure that the individual action proceeds in arbitration.” (Hong Decl., ¶ 9, Ex. A, § 5.)

Plaintiff does not dispute that he signed the Agreement. (Opp’n at p. 3:10-11.) Therefore, the Court finds that Defendants have established that an arbitration agreement exists. However, Plaintiff asserts he has no “individual” PAGA claims authorized for arbitration under the Agreement. Plaintiff asserts that his lawsuit is not an “individual action,” but rather, is a “representative action” brought under PAGA. Plaintiff notes that “all applicable laws in existence when an agreement is made, which laws the parties are presumed to know and to have had in mind, necessarily enter into the contract and form a part of it, without any stipulation to that effect, as if they were expressly referred to and incorporated.” (Alpha Beta Food Markets, Inc. v. Retail Clerks Union (1955) 45 Cal.2d 764, 771.) Plaintiff further notes that the Agreement was signed in September 2017. (Hong Decl., ¶ 9, Ex. A.) In the 2014 case Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 387, the California Supreme Court noted that “every PAGA action, whether seeking penalties for Labor Code violations as to only one aggrieved employee—the plaintiff bringing the action—or as to other employees as well, is a representative action on behalf of the state.” (Emphasis in original.) Plaintiff asserts that therefore, in 2017, the parties understood a PAGA “representative action” to mean an action to recover civil penalties by an aggrieved employee representing the state.

By contrast, in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1916, the United States Supreme Court noted that “[i]n the first sense, PAGA actions are ‘representative’ in that they are brought by employees acting as representatives—that is, as agents or proxies—of the State. But PAGA claims are also called ‘representative’ when they are predicated on code violations sustained by other employees. In the first sense, ‘every PAGA action is . . . representative’ and ‘[t]here is no individual component to a PAGA action,” Kim, 9 Cal. 5th, at 87, 459 P. 3d, at 1131 (quoting Iskanian, 59 Cal. 4th, at 387, 327 P. 3d, at 151), because every PAGA claim is asserted in a representative capacity. But when the word ‘representative’ is used in the second way, it makes sense to distinguish ‘individual’ PAGA claims, which are premised on Labor Code violations actually sustained by the plaintiff, from ‘representative’ (or perhaps quasi-representative) PAGA claims arising out of events involving other employees. For purposes of this opinion, we will use ‘individual PAGA claim’ to refer to claims based on code violations suffered by the plaintiff.” (Emphasis in original.)

Defendants appear to concede Plaintiff’s assertion that the subject Agreement should be interpreted with regard to the parties’ understanding of the law when the Agreement was signed (before Viking River), stating that “[t]he agreement was signed in September 2017 – five years before Viking River when an ‘individual PAGA claim’ has not even been conceptualized yet.” (Reply at p. 3:25-26.)

Plaintiff also asserts that pursuant to the terms of the subject Agreement’s “Private Attorney General Waiver,” the agreement precludes any type of private attorney general claim from being arbitrated. As set forth above, the Agreement provides that “[t]here will be no right or authority for any dispute to be brought, heard or arbitrated as a private attorney general representative action.” (Hong Decl., ¶ 9, Ex. A, § 5.) As noted by Plaintiff, Section 5 of the Agreement does not specifically indicate that an “individual” private attorney general claim

asserted by Plaintiff is subject to arbitration. Defendants counter that “a plain reading of the Agreement shows that the intent of the provision is not to bar individual claims from arbitration, but rather to bar representative claims from arbitration.” (Reply at p. 4:1-2.)

The Court is not convinced by Defendants’ argument that the arbitration provision in Section 1 of the Agreement covers Plaintiff’s PAGA cause of action, as Section 5 of the Agreement provides that “[t]here will be no right or authority for any dispute to be brought, heard or arbitrated as a private attorney general representative action.” (Hong Decl., ¶ 9, Ex. A, § 5.)

In addition, Plaintiff argues that the Agreement’s “Private Attorney General Waiver” is unenforceable, such that Plaintiff’s entire PAGA action must proceed in court. The Court agrees.

As set forth above, the Agreement provides that “[t]here will be no right or authority for any dispute to be brought, heard or arbitrated as a private attorney general representative action.” (Hong Decl., ¶ 9, Ex. A, § 5.) The Agreement also provides that “[t]he Private Attorney General Waiver shall be severable from this Agreement in any case in which a civil court of competent jurisdiction finds the Private Attorney General Waiver is unenforceable. In such instances and where the claim is brought as a private attorney general, such private attorney general claim must be litigated in a civil court of competent jurisdiction.” (Ibid., emphasis added.)

As Plaintiff notes, the arbitration agreement at issue in Iskanian contained a similar “class and representative action waiver” that stated “[e]xcept as otherwise required under applicable law, (1) EMPLOYEE and COMPANY expressly intend and agree that class action and representative action procedures shall not be asserted, nor will they apply, in any arbitration pursuant to this Policy/Agreement; (2) EMPLOYEE and COMPANY agree that each will not assert class action or representative action claims against the other in arbitration or otherwise; and (3) each of EMPLOYEE and COMPANY shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person.” (Iskanian v. CLS Transportation Los Angeles, LLC, supra, 59 Cal.4th at pp. 360-361 [internal quotations omitted].) The Iskanian Court concluded that “where, as here, 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.” (Id. at p. 384.) The Iskanian Court further concluded that “the FAA’s goal of promoting arbitration as a means of private dispute resolution does not preclude our Legislature from deputizing employees to prosecute Labor Code violations on the state’s behalf. Therefore, the FAA does not preempt a state law that prohibits waiver of PAGA representative actions in an employment contract.” (Iskanian v. CLS Transportation Los Angeles, LLC, supra, 59 Cal.4th at p. 360.)

In Viking River Cruises, the United States Supreme Court held 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. This holding compels reversal in this case. The agreement between Viking and Moriana purported to waive ‘representative’ PAGA claims. Under Iskanian, this provision was invalid if construed as a wholesale waiver of PAGA claims. And under our holding, that aspect of Iskanian is not preempted by the FAA, so the agreement remains invalid insofar as it is interpreted in that manner. But the severability clause in the agreement provides that if the waiver provision is invalid in some respect, any ‘portion’ of the waiver that remains valid must still be ‘enforced in arbitration.’ Based on this clause, Viking was entitled to enforce the agreement insofar as it mandated arbitration of Moriana’s individual PAGA claim. The lower courts refused to do so based on the rule that PAGA actions cannot be divided into individual and non-individual claims. Under our holding, that rule is preempted, so Viking is entitled to compel arbitration of Moriana’s individual claim.” (Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1924-1925) The Viking River Cruises Court further held that “[a]s we see it, PAGA provides no mechanism to enable a court to adjudicate nonindividual PAGA claims once an individual claim has been committed to a separate proceeding...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.” (Id. at p. 1925.)

Plaintiff notes that the Agreement here provides that “[t]he Private Attorney General Waiver shall be severable from this Agreement in any case in which a civil court of competent jurisdiction finds the Private Attorney General Waiver is unenforceable. In such instances and where the claim is brought as a private attorney general, such private attorney general claim must be litigated in a civil court of competent jurisdiction.” (Hong Decl., ¶ 9, Ex. A, § 5.) By contrast, in Viking River Cruises, “Moriana’s employment contract with Viking contained a mandatory arbitration agreement. Important here, that agreement contained both a ‘Class Action Waiver’—providing that the parties could not bring any dispute as a class, collective, or representative action under PAGA—and a severability clause—specifying that if the waiver was found invalid, such a dispute would presumptively be litigated in court. Under the severability clause, any ‘portion’ of the waiver that remained valid would be “enforced in arbitration.’” (Viking River Cruises, Inc. v. Moriana, supra, 142 S.Ct. at p. 1911.) As Plaintiff notes, the Agreement here does not contain a provision providing that “any portion” of the subject Private Attorney General Waiver that remained valid would be “enforced in arbitration,” such that any “individual” PAGA claim by Plaintiff would be subject to arbitration.

Based on the foregoing, the Court does not find that Defendants have shown that the dispute here is covered by the arbitration provision in Section 1 of the Agreement.

For the foregoing reasons, Defendants’ motion to compel arbitration is denied.

Superior Court of California

County of Los Angeles

Department 50