Judge Virginia Keeny, Case LC106845 2022-09-07 Tentative Ruling

Judge: Virginia Keeny, Case: LC106845, Date: 2022-09-07 Tentative Ruling

Case Number: LC106845 Hearing Date: September 7, 2022 Dept: W

FERNANDEZ v. PRIME HEALTHCARE SERVICES, INC., et al.

Motion to compel arbitration and DISMISS REPRESENTATIVE CLAIMS

Date of Hearing: September 7, 2022 Trial Date: None set.

Department: W Case No.: LC106845

Moving Party: Defendants Prime Healthcare Services—Encino Hospital, LLC, and Prime Healthcare Services, Inc.

Responding Party: Plaintiff Vicente Fernandez

BACKGROUND

Plaintiff brings a representative action pursuant to the Private Attorneys General Act of 2004, California Labor Code section 2698, et seq. (PAGA) on behalf of all other current and former California non-exempt employees of Defendants for engaging in a pattern and practice of wage and hour violations under the California Labor Code. (Compl. ¶ 1.) Defendants’ wage and hour and Industrial Welfare Commission (IWC) Wage Order violations toward Plaintiff and other aggrieved employees in California include (1) failure to provide compliant meal and rest periods; (2) failure to pay all overtime wages; (3) failure to maintain accurate records; (4) failure to provide accurate itemized wage statements; and (4) failure to timely pay wages due during and upon separation of employment. (Compl. ¶ 3.)

Plaintiff filed his complaint on February 7, 2018. Plaintiff filed a first amended complaint on November 7, 2018, eliminating claims pursuant to Labor Code section 558. (Compare Compl. ¶¶ 53–54 to First Am. Compl. ¶¶ 53–54.) Plaintiff filed his second amended complaint on December 7, 2021, adding a second named Plaintiff, Svetlana Di Meo. (Second Am. Compl. ¶¶ 9–10.)

Defendants seek to compel arbitration of Plaintiff’s individual PAGA claims and dismiss his PAGA representative action. (Defs.’ Not. Mot. Compel Arbitration Dismiss Representative Claims, p. 2.) Plaintiff filed his Opposition to Defendants’ Motion to Compel Arbitration and Dismiss Representative Claims on August 24, 2022. (Pl.’s Opp’n Defs.’ Mot. Compel Arbitration Dismiss Representative Claims, p. 1.) Defendants filed their Memorandum of Points and Authorities in Support of Defendants’ Reply to Plaintiff’s Opposition to Defendants’ Motion to Compel Arbitration and Dismiss Representative Claims on August 29, 2022. (Defs.’ Mem. P. & A. Support Defs.’ Reply Pl.’s Opp’n Defs.’ Mot. Compel Arbitration Dismiss Representative Claims, p. 1.)

[Tentative] Ruling

1. Defendants’ request to compel arbitration of Plaintiff’s individual PAGA claim is moot.

2. Defendants’ request to dismiss representative claims is stayed.

ANALYSIS

Code of Civil Procedure section 1281.2 permits a party to file a petition to request that the court order the parties to arbitrate a controversy. Here, Plaintiff has stipulated to arbitrate his individual PAGA claim, so Defendant’s Motion to Compel Arbitration regarding Plaintiff’s individual PAGA claim is moot. (Defs.’ Mem. P. & A. Mot. Compel Arbitration, p. 10, Davoudian Decl. ¶ 2, Ex. B; Pl.’s Opp’n Defs.’ Mot. Compel Arbitration, p. 2.)

The remaining issues here pertain to (1) whether this Court should sever the portion of the arbitration agreement that waives an employee’s right to bring a PAGA action, and (2) whether Plaintiff has maintained standing to pursue a representative PAGA claim even though his individual claims are resolved through arbitration.

1. The unenforceable representative PAGA wavier in the Arbitration Agreement should be severed.

Where a contract has several distinct parts, one of which is lawful and one is unlawful, the contract is void as to the latter and void as to the rest. (Code Civ. Proc. § 1599.) If a contract is capable of severance, the overarching inquiry in the decision whether to sever the illegal portions and enforce the remainder is whether the interests of justice would be furthered by severance. (MKB Management, Inc. v. Melikian (2010) 184 Cal.App.4th 796, 805.)

In Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 348, the California Supreme Court held that an employee’s right to bring a PAGA action is not waivable. (Iskanian, supra, 59 Cal.4th at p. 383, abrogated by Moriana v. Viking River Cruises (2022) 142 S.Ct. 1906.) The U.S. Supreme Court’s opinion in Moriana v. Viking River Cruises (2022) 142 S.Ct. 1906, allows for a division of PAGA actions into individual and representative claims, and ultimately upheld the Iskanian rule that the representative, non-individual portion of a PAGA claim is not waivable even if an individual PAGA claim could be compelled to arbitration. (Viking River Cruises, supra, 142 S.Ct. at 1924–1925.)

Plaintiff argues that rather than rewriting the Parties’ agreement, this Court should sever portions of the agreement that are unenforceable, in accordance with MKB Management, Inc.

Here, Sections 5 and 5.2 of the Arbitration Agreement provide:

All claims covered by this Agreement must be submitted on an individual basis. No claim may be arbitrated on a class, representative, or collective basis. The parties expressly waive any right with respect to any covered Claims to submit, initiate, or participate in a representative capacity, or as a plaintiff, claimant or member in a class action, collective action or other representative or joint action, regardless of whether the action is filed in arbitration or in court.

. . .

The parties further agree that neither party may bring, pursue, or act as a plaintiff or representative in any purported representative proceeding or action, including any claims under the California Private Attorneys General Act, or otherwise participate in any such representative proceeding or action other than on an individual basis.

(Davoudian Decl., Ex. B, p. 2.) Further, Section 11 of the Arbitration Agreement, Severability, states, “If any provision of this Agreement is determined to be illegal or unenforceable, such determination shall not affect the balance of this Agreement, which shall remain in full force and effect and such invalid provisions shall be deemed severable.” (Davoudian Decl., Ex. B, p. 3.)

Sections 5 and 5.2 purport to waive Plaintiff’s right to participate in any representative, non-individual PAGA action, which runs afoul of the Iskanian rule as abrogated by Viking River Cruises. Therefore, according to Section 11 of the Agreement, Sections 5 and 5.2 of the Agreement must be stricken and the representative PAGA action allowed to proceed in this Court.

2. Plaintiff maintains standing to pursue a representative PAGA claim even though his individual claims are resolved through arbitration.

Nonetheless, Defendants argue that once Plaintiff’s individual PAGA claims are compelled to binding arbitration, pursuant to the terms of the Arbitration Agreement and Viking River Cruises, this Court must dismiss Plaintiff’s remaining representative PAGA claims because plaintiff will have lost standing to pursue claims on a representative basis (as his individual PAGA claim is no longer before the court). (Defs.’ Mem. P. & A. Mot. Compel Arbitration, pp. 18–19.) Defendants cite the California Supreme Court’s opinion in Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, which noted that statutory standing in California “rests on the [statute’s] language, its underlying purpose, and the legislative intent.” (Kim, supra, 9 Cal. 5th at p. 83.)

Defendants refer to the plain language of PAGA’s statutory standing provisions, interpreting the statute as requiring both individual and nonindividual claims to be litigated together in the same action. (Defs.’ Mem. P. & A. Mot. Compel Arbitration, p. 19, citing Lab. Code § 2699(a).) Defendants interpret the plain language of the Labor Code and the U.S. Supreme Court’s opinion in Viking River Cruises to confer standing on a Plaintiff in a PAGA action only when the Plaintiff also maintains an individual claim. (Defs.’ Mem. P. & A. Mot. Compel Arbitration, p. 19, citing Viking River Cruises, supra, 142 S.Ct. at 1924–1925; Lab. Code § 2699(a).)

Plaintiff argues that Defendants’ standing argument is based on dictum in the Viking River Cruises majority opinion that is not binding on this Court and is distinguishable here because there are significant differences between narrower federal Article III standing and who is an “aggrieved employee” under PAGA’s standing requirements and California’s standing requirement that a plaintiff is a “real party in interest.” (Pl.’s Opp’n Defs.’ Mot. Compel Arbitration, pp. 6–7.)

Plaintiff cites to Kim for support that for PAGA standing, Labor Code section 2699(c) only imposes two requirements for being an “aggrieved employee”: the plaintiff must be someone who was “‘employed by the alleged violator’ and ‘against whom one or more of the alleged violations was committed.’” (Kim, supra, 9 Cal. 5th at pp. 83–84.) Even if the plaintiff was no longer “injured” because their claims were settled, the statute defines standing “in terms of violations, not injury.” (Kim, supra, 9 Cal. 5th at p. 84.) Therefore, the “remedy for a Labor Code violation, through settlement or other means, is distinct from the fact of the violation itself.” (Kim, supra, 9 Cal. 5th at p. 84.)

Plaintiff’s argument depends on a reading of the Viking River Cruises’s discussion of standing under PAGA as “mere dictum.” The court is not convinced that the majority’s evaluation of a plaintiff’s standing to pursue a PAGA action when their individual PAGA claim has been ordered to arbitration can be viewed so narrowly. Nonetheless, in light of the California Supreme Court’s grant of review in Adolph v. Uber on July 11, 2022 and the ongoing evolution of decisional law in this area, the court believes the prudent course is to stay the representative PAGA claims. (See Viking River Cruises, J. Sotomayor, concurring, at pp. 1925-1926 [“if this Court's understanding of state law is wrong, California courts, in an appropriate case, will have the last word. Alternatively, if this Court's understanding is right, the California Legislature is free to modify the scope of statutory standing under PAGA within state and federal constitutional limits.”])

CONCLUSION

Defendants’ request to compel arbitration of Plaintiff’s individual PAGA claim is moot. Defendants’ request to dismiss representative claims is stayed pending the decision in Adolph v. Uber Technologies.