Judge: William D. Claster, Case: 19-01050823, Date: 2022-09-02 Tentative Ruling
1. Defendants The Irvine
Company LLC, The Irvine Company Apartment Communities Inc., and Irvine
Management Company's Notice of Motion and Motion to Compel Arbitration of
Plaintiff's PAGA Claim ROA 352
2. Status Conference
Defendants The Irvine Company, LLC (“TIC”), The Irvine Company Apartment Communities, Inc. (“TICAC”), and Irvine Management Company (“IMC”) move to compel arbitration of Plaintiffs Joseph Delia and John M. Alvarado’s PAGA claims on an individual basis and to dismiss the representative portion of their PAGA claims. The Court rules as follows:
3. An arbitration review conference will take place on March 2, 2023 at 8:30 a.m.
EVIDENTIARY OBJECTIONS
Plaintiffs offer two objections to the declaration of Paul Amante, Jr., IMC’s vice president of human resources and custodian of documents. For each Plaintiff, Amante testifies, “In addition, consistent with standard procedure, there is an arbitration agreement in his personnel file with his signature and a date of [date].” (See Amante Decl., ¶¶ 3, 4.)
These objections are SUSTAINED on foundation grounds, but only as to the phrase “with his signature.” Amante does not lay sufficient foundation to authenticate Delia’s or Alvarado’s signatures. These objections are OVERRULED in all other respects. Amante, the custodian of records for human resources functions, may testify to the contents of each Plaintiff’s personnel file.
GROUNDS FOR RULING
I. Factual Background
The relevant factual background is undisputed.
A. Delia’s Agreement
Delia was employed by TICAC from July 2014 to May 2018. (Amante Decl., ¶ 3.) TIC was TICAC’s parent company. (Id., ¶ 1.) At the beginning of his employment, Delia signed an arbitration agreement. (See Delia Decl., ¶¶ 11-13.)
Delia’s agreement provides: “If you and [TIC] or any of its related entities (collectively, the ‘Company’) have a legal dispute regarding employment . . . we each agree to resolve that dispute through binding arbitration.” (Amante Decl., Ex. 1.) It further provides, “[T]he arbitrator shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this agreement.” It continues, “This agreement to arbitrate includes any disputes that the Company may have against you, and any disputes that you may have against the Company . . . arising out of or relating to your employment.” (Ibid.) It goes on, “All claims and disputes subject to this agreement must be brought in each party’s individual capacity, and not as a plaintiff . . . in any purported . . . representative proceeding.” (Ibid.) Finally, the agreement contains a severability clause: “If any part of this agreement is found unenforceable it will no longer be part of this agreement but it will not affect the enforceability of the remaining parts of this agreement.” (Ibid.)
B. Alvarado’s Agreement
Alvarado was employed by TICAC, and later its successor IMC, from May 2017 to December 2019. (Amante Decl., ¶¶ 1, 4.) At the beginning of his employment, Alvarado signed an arbitration agreement. (See Alvarado Decl., ¶¶ 7-9.)
Alvarado’s agreement provides, “If you and [TIC], Irvine Holding Company or any of their respective affiliates (collectively, the ‘Company’) have a legal dispute regarding employment . . . we each agree to resolve that dispute through binding arbitration.” (Amante Decl., Ex. 3, at p. 1.) It further provides, “[T]he arbitrator shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this agreement.” (Ibid.) It continues, “[t]he agreement to arbitrate includes any disputes that the Company may have against you, and any disputes that you may have against the Company . . . arising out of or relating to your employment.” (Ibid.)
However, Alvarado’s agreement treats PAGA claims differently from Delia’s. It provides, in relevant part:
Notwithstanding the foregoing, this agreement does not apply to . . . representative claims under [PAGA] unless and until applicable law allows for enforcement of waivers of PAGA in arbitration agreements governed by the Federal Arbitration Act . . . .
[. . .]
Subject to the exclusion of PAGA claims above, you and the Company also waive any right for any dispute to be arbitrated as a [PAGA] action (“PAGA Waiver”) to the extent permitted by applicable law. This PAGA Waiver does not apply to any claim you bring in arbitration as a private attorney general solely on your own behalf and not on behalf of or regarding others. In instances where the claim is brought as a PAGA representative action, the PAGA claim must be litigated in a civil court of competent jurisdiction. (Id., at p. 2.)
That is, Alvarado’s agreement entirely excludes PAGA claims unless PAGA waivers are enforceable, and subject to that exclusion, it waives PAGA claims. So, if applicable law permits the enforcement PAGA waivers, the PAGA waiver is triggered (except that an employee may arbitrate a PAGA claim arising from violations affecting the employee himself). If applicable law does not permit PAGA waivers, a PAGA representative action must be litigated in court.
II. Motion for Reconsideration
Plaintiffs argue this motion is an improper motion for reconsideration, as the Court previously denied Defendants’ motion to compel Delia’s claims to arbitration. They assert that because Defendants failed to comply with CCP § 1008(a), the Court lacks jurisdiction to consider this motion.
The Court disagrees. A leading treatise explains: “The name of the motion is not controlling. The above requirements [under CCP § 1008(a)] apply to any motion that asks the judge to decide the same matter previously ruled on.” (Weil, et al., Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2022) ¶ 9:324.1 [emphasis original].) Defendants previously asked the Court to decide whether Delia’s entire PAGA claim could be sent to arbitration. The Court ruled in Delia’s favor. Defendants now ask the Court to decide whether the individual portion of Delia’s PAGA claim can be sent to arbitration, and if so, to decide what should be done with the representative portion of Delia’s PAGA claim. The Court has not previously answered these questions. Because the two motions do not involve the “same matter,” this is not an improper motion for reconsideration.
III. Waiver
Plaintiffs argue the arbitration agreements cannot be enforced because Defendants have waived the ability to enforce them through litigation conduct. Although the arbitration agreements purport to give the arbitrator authority to decide all questions of arbitrability, waiver by litigation conduct is a matter traditionally reserved to a court. As a result, unless the agreement specifically includes “language . . . requiring the arbitrator to determine the waiver issue under all circumstances,” the question of waiver by litigation conduct is for a court to decide. (Hong v. CJ CGV Am. Holdings, Inc. (2013) 222 Cal.App.4th 240, 258.) Neither agreement here includes such language, so the Court will decide the issue.
This case has been litigated for several years, with multiple dispositive motions filed and considerable discovery taken. At present, Plaintiffs have submitted their second trial plan, and Defendants are soon due to submit their response. Relying on Morgan v. Sundance (2022) 142 S.Ct. 1708, Plaintiffs argue this is more than enough to waive the right to compel arbitration.
Under Morgan, a party to an arbitration agreement governed by the FAA waives its right to compel arbitration if it (1) knows of an existing right to arbitration and (2) acts inconsistently with that right. (Id., at p. 1714.) Both agreements here purport to be governed by the FAA (see Amante Decl., Exs. 1, 3), Defendants put on evidence that they are engaged in interstate commerce (see Amante Decl., ¶ 5), and Plaintiffs implicitly concede the applicability of the FAA by relying on Morgan. The Court therefore finds the FAA governs and will apply the Morgan standard.
Under Morgan, waiver can only be found if a party knows of an existing right to arbitration. Before last June’s decision in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, no such right existed. PAGA claims could not be waived or compelled to arbitration under Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348. Viking River Cruises held, for the first time, that a PAGA claim could be split into “individual” and “representative” components, and the individual portion could be compelled to arbitration under a PAGA waiver. (Viking River Cruises, supra, 142 S.Ct. at p. 1925.) While Defendants have heavily litigated this case over the past three years, until Viking River Cruises was handed down, they had no right to compel arbitration. There was nothing to waive. Defendants filed this motion within a month of Viking River Cruises being handed down. They have not waived the right to compel arbitration.
IV. Unconscionability
Finally, Plaintiffs argue the agreements are unconscionable for a variety of reasons. As Defendants point out, however, both agreements give the arbitrator the power to decide such questions. Both California law and the FAA allow the parties to make such a delegation of power. (See Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1123; Rent-A-Center West, Inc. v. Jackson (2010) 561 U.S. 63, 68-69.)
Ordinarily, this would be the end of the matter. But here, Plaintiffs specifically challenge that delegation as unconscionable. Under Rent-A-Center West, that challenge must be decided by the Court. (Id., at pp. 71-72 [contrasting a specific challenge to delegation of arbitrability with a general challenge to the agreement as a whole].)
Plaintiffs argue the delegation is unconscionable because the arbitrator, working on a fee-for-service basis, has a financial interest in whether the case is arbitrable. None of the three cases Plaintiffs cite on this point so holds. Neither Rent-A-Center West nor Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79 mentions this issue at all. Armendariz, Plaintiffs’ final authority, rejects an argument about money affecting arbitrator neutrality. It holds that imposing costs of arbitration on the employer will not “compromise the neutrality of the arbitrator”—that is, the arbitrator will not favor the party paying the bill—because “there are sufficient institutional safeguards, such as scrutiny by the plaintiff’s bar and appointing agencies like the AAA, to protect against corrupt arbitrators.” (Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 111.) The same is true here. To the extent an arbitrator might be biased in favor of arbitration because he has a financial interest in finding disputes arbitrable, institutional safeguards protect against it.
The delegation of arbitrability to the arbitrator is not unconscionable. Per the parties’ arbitration agreements, other questions regarding arbitrability are to be decided by the arbitrator.
V. Further Proceedings
Following Viking River Cruises, Plaintiffs are each ordered to individually arbitrate the individual portion of their PAGA claims. Plaintiffs’ remaining arguments regarding arbitrability are preserved for the arbitrator to decide.
This leaves the question of what to do with the representative portion of Plaintiffs’ PAGA claims. Defendants ask the Court to dismiss the representative portion of Plaintiffs’ PAGA claims without prejudice. This request follows the conclusion of Viking River Cruises, where the majority explained that under its view of California law, plaintiffs who are ordered to arbitrate their individual PAGA claims lose standing to prosecute representative PAGA claims: “But as 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.” (Viking River Cruises, supra, 142 S.Ct. at p. 1925.)
But “construction of a state statute by a federal court does not preclude a state court from later rejecting the federal court’s conclusion.” (16 Cal.Jur.3d (2022) Courts, § 324.) As two concurrences in Viking River Cruises pointed out, the majority may well be incorrect about PAGA standing. Justice Sotomayor wrote, “Of course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word.” (Viking River Cruises, supra, 142 S.Ct. at p. 1926 [conc. opn. of Sotomayor, J.].) And three justices noted the majority’s conclusion “addresses disputed state-law questions” and “is unnecessary to the result.” (Ibid. [conc. opn. of Barrett, J.].)
In fact, the California Supreme Court recently granted review in Adolph v. Uber Technologies, S274671, to answer this exact question. Per an order dated August 1, 2022, “The issue to be briefed and argued is limited to the following: Whether an aggrieved employee who has been compelled to arbitrate claims under the Private Attorneys General Act (PAGA) that are ‘premised on Labor Code violations actually sustained by’ the aggrieved employee [citation] maintains statutory standing to pursue ‘PAGA claims arising out of events involving other employees’ [citation] in court or in any other forum the parties agree is suitable.”
Were the Court to dismiss the representative PAGA claims only for Adolph to reach a different conclusion than Viking River Cruises, both judicial economy and the parties’ resources would be taxed by attempts to unwind the dismissal. Furthermore, the arbitrator may decide that neither Plaintiff has suffered any of the Labor Code violations complained of, meaning neither Plaintiff has PAGA standing regardless of what happens in Adolph. For these reasons, the Court will deny the request to dismiss the representative claims without prejudice to Defendants raising the issue again once the arbitrations conclude. In the meantime, the case is stayed pending the outcome of Plaintiffs’ arbitrations.