Judge: William D. Claster, Case: 19-01107762, Date: 2022-08-12 Tentative Ruling

1. Defendant Chartwell Staffing Services, Inc.'s Notice of Motion and Motion to (1) Compel Arbitration of Plaintiff Moises Mendoza's Individual PAGA Claim; (2) Dismiss Plaintiff's Non-Individual PAGA Claims; and (3) Stay Action Pending Arbitration ROA 459

2. Defendants Laguna Cookie Company Inc. and DF Stauffer Biscuit Co., Inc.'s Notice of Joinder (Related to ROA 453, 457, 459)   ROA 486

3. Defendant Chartwell Staffing Services, Inc.'s Notice of Motion and Motion to (1) Compel Arbitration of Plaintiff Maria Ruiz's Individual PAGA Claim; (2) Dismiss Plaintiff's Non-Individual PAGA Claims; and (3) Stay Action

Defendant Chartwell Staffing Services, Inc. has filed two motions to compel arbitration, one against Plaintiff Moises Mendoza and one against Plaintiff Maria Ruiz.  Defendants Laguna Cookie Company, Inc. and D.F. Stauffer Biscuit Co., Inc. (collectively, “Laguna Defendants”) move to join in Chartwell’s motions and have filed their own supporting memoranda.  Because the motions appear identical in all material respects, the Court will consider them together.  The Court rules as follows:

  1. The motions to compel arbitration are GRANTED.  Each Plaintiff is to separately arbitrate his or her individual PAGA claim.

 

  1. The requests to stay this case pending completion of the arbitrations are GRANTED.

 

  1. The requests to dismiss the representative portion of Plaintiffs’ PAGA claims are DENIED WITHOUT PREJUDICE to reconsideration upon completion of the arbitrations.

 

An arbitration review conference shall take place on March 14, 2023 at 8:30 a.m. in Department CX-104.

 

I.            Factual Background

Chartwell puts on evidence that both Mendoza and Ruiz signed arbitration agreements.  (See ROAs 453, 455.)  Neither Mendoza nor Ruiz puts on evidence or argument to the contrary, so the Court finds both Plaintiffs entered into arbitration agreements with Chartwell. 

Mendoza’s agreement provides, in relevant part, “In the event of any controversy . . . that arises from . . . the employment of . . . the undersigned employee . . . and Chartwell . . . the Employee and Chartwell . . . agree to submit the dispute to binding arbitration.”  (ROA 453, Ex. B, at p. 1.)  The agreement further provides, “the Employee is waiving the right to bring, or to participate in, a representative action, including a PAGA action,” and if this waiver is found unenforceable, “the Parties agree that a court of law, and not an arbitration, is the only forum for a representative action, including a PAGA action, against Chartwell.”  (Ibid.)  Finally, the agreement provides, “If any provision of this Agreement is determined to be invalid or unenforceable, said provision shall be limited to the extent necessary to make it valid and enforceable.”  (Ibid.)

It appears to the Court that Ruiz’s agreement (a more recent revision of Chartwell’s form) is materially identical to Mendoza’s in all respects relevant to this motion.  (ROA 455, Ex. C.)  In any event, neither Plaintiff identifies a difference between the two agreements.

II.          Discussion

E.            Enforceability as to Laguna Defendants

In their joinder, the Laguna Defendants argue that while they are not party to the arbitration agreements, they may nonetheless move to enforce them.  The Court agrees.  As the Laguna Defendants note, all Defendants are alleged to be agents of one another (2AC, ¶ 15).  That is, the Laguna Defendants are allegedly agents of Chartwell.  Under California law, nonsignatory agents are entitled to the benefit of their principals’ arbitration agreements.  (See Dryer v. Los Angeles Rams (1985) 40 Cal.3d 406, 418 [“If, as the complaint alleges, the individual defendants, though not signatories, were acting as agents for the Rams, then they are entitled to the benefit of the arbitration provisions.”].) 

F.            Waiver

 

Plaintiffs argue Defendants have waived their ability to compel arbitration by actively participating in litigation (including voluminous discovery) for nearly three years.  The Court disagrees. 

Under the Federal Arbitration Act (which governs these agreements), a party waives its right to compel arbitration if it (1) knows of an existing right to arbitration and (2) acts inconsistently with that right.  (See Morgan v. Sundance (2022) 142 S.Ct. 1708, 1714.)  Prior to the United States Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, the relief Defendants now seek was barred by controlling precedent of the California Supreme Court.  (See Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348.)  Stated simply, there was no existing right to arbitration for Defendants to knowingly waive.

Plaintiffs argue Viking River Cruises changed nothing relevant to this case.  They point out that the PAGA waiver in the arbitration agreements purports to entirely waive an employee’s right to bring a PAGA claim, and that Viking River Cruises left undisturbed Iskanian’s holding that such “wholesale” PAGA waivers are unenforceable.  (See Viking River Cruises, supra, 142 S.Ct. at pp. 1924-1925.) 

This argument ignores the severability clause in the arbitration agreements: “If any provision of this Agreement is determined to be invalid or unenforceable, said provision shall be limited to the extent necessary to make it valid and enforceable.”  (ROA 453, Ex. B, at p. 1.)  The agreement in Viking River Cruises was nearly identical to this one: it had a waiver providing the parties “could not bring any dispute as a class, collective, or representative PAGA action,” and it had a severability clause providing that “if any ‘portion’ of the wavier remained valid, it would be ‘enforced in arbitration.’”  (Viking River Cruises, supra, 142 S.Ct. at p. 1916.)  The United States Supreme Court explained that while the wholesale PAGA waiver was unenforceable under Iskanian, based on the severability clause, “Viking was entitled to enforce the agreement insofar as it mandated arbitration of Moriana’s individual PAGA claim.”  (Id., at p. 1925.  As used in Viking River Cruises, an “individual” PAGA claim is based on Labor Code violations personally suffered by the plaintiff, while a “representative” PAGA claim is based on Labor Code violations suffered by other aggrieved employees.)

That is, Viking River Cruises held, for the first time, that a wholesale PAGA waiver like the one at issue in this case may be used to compel an “individual” PAGA claim to arbitration, provided a severability clause permits enforcement of the agreement to the extent it is valid.  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.  Chartwell filed the present motions less than a month later, and the Laguna Defendants promptly joined the motions.  In these circumstances, there is no waiver.

G.           Venue

 

Plaintiffs next argue the arbitration agreements require the PAGA claim to be heard in a court, not before an arbitrator.  They rely on the following language: “If the Waiver of Representative Action is found to be unenforceable, the Parties agree that a court of law, and not an arbitration, is the only forum for a representative action, including a PAGA action, against Chartwell.”  (ROA 453, Ex. B, at p. 1.)  They note, correctly, that a wholesale PAGA waiver is still unenforceable under Iskanian, and they contend this means the PAGA claim must proceed in this Court.

Once again, this argument is foreclosed by Viking River Cruises and the arbitration agreements’ severability clause.  The agreement at issue in Viking River Cruises provided that “if the waiver was found invalid, any class, collective, representative, or PAGA action would presumptively be litigated in court.”  (Viking River Cruises, supra, 142 S.Ct. at p. 1916.)  Under Iskanian, the wholesale PAGA waiver in Viking River Cruises was unenforceable.  But because of the severability clause, Moriana was ordered to arbitrate her individual PAGA claim.  The same is true here.  Although the wholesale waiver of PAGA claims is unenforceable under Iskanian, the severability clause in Plaintiffs’ arbitration agreements means their individual PAGA claims must be arbitrated.

H.           Representative PAGA Claims/Stay of Proceedings

 

Defendants ask the court to stay this case while each Plaintiff’s individual PAGA claims are separately arbitrated.  A stay pending completion of the arbitrations is required in these circumstances.  (CCP § 1281.4.)

Defendants also 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.”  (Id., 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 when the arbitrations conclude.