Judge: William D. Claster, Case: 21-01194588, Date: 2022-12-09 Tentative Ruling
Defendants Best Buy Stors, L.P. and Best Buy., Inc.'s Notice of Motion and Motion to Compel Arbitration and Dismiss ROA 99
Defendants Best Buy Co., Inc. and Best Buy Stores, L.P. (“Best Buy”) move to compel arbitration of Plaintiff Ashantae Williams’ PAGA claim. The Court rules as follows:
5. An arbitration review conference will be held in Department CX-104 on July 31, 2023 at 8:30 a.m.
Best Buy’s request for judicial notice of an unpublished decision of the San Bernardino County Superior Court is DENIED. “Even assuming for the sake of argument that [this case] involves the same issue as the case before [the Court] . . . a written trial court ruling has no precedential value.” (Santa Ana Hospital Medical Center v. Belshe (1997) 56 Cal.App.4th 819, 831.) Plaintiff’s requests for judicial notice of trial court rulings and an amicus brief are also DENIED.
I. Whether the PAGA Claim Must Be Arbitrated
Plaintiff does not deny that she entered into an arbitration agreement, nor does she contend the agreement is unconscionable. Instead, she argues the parties’ arbitration agreement either does not cover the PAGA claim at issue or is void.
A. Ambiguity
Plaintiff contends the agreement is ambiguous as to whether she agreed to arbitrate her PAGA claim individually, and that under standard rules of contract interpretation (i.e., that ambiguities are to be construed against the drafter, particularly in contracts of adhesion), the agreement should be construed not to require individual arbitration of her PAGA claim.
At issue are two portions of the agreement. First, the definition of “Claims Not Covered” includes “Representative claims under California’s Private Attorney General Act, unless and until applicable law determines that the representative action waiver in this Policy is enforceable as to such claims.” (McPherson Decl., Ex. 1, at p. 4.)
Second, the agreement contains the following PAGA waiver:
Private Attorney General Act Claims
If applicable law in the future allows for enforcement of California Private Attorney General Act (PAGA) representative action waivers, the parties (Employees, applicants, and Best Buy) in that case waive any right to initiate or participate in a PAGA representative action, and agree to bring all PAGA claims on an individual basis in arbitration, rather than in court. In any event, an arbitrator has no authority under this policy to preside over any PAGA representative action.
An Employee, former Employee or applicant may bring PAGA claims in arbitration solely on his or her own behalf. The PAGA representative action waiver above is severable from this Policy if it is unenforceable under applicable law, and if that is the case, any PAGA representative action must proceed in court and not in arbitration. (McPherson Decl., Ex. 1, at p. 5 [bolding omitted].)
PAGA claims are expressly carved out from being covered unless a representative action waiver is deemed valid. Furthermore, the agreement provides that if the representative action waiver is unenforceable, “any PAGA representative action must proceed in court and not in arbitration.” And the agreement provides that Plaintiff “may bring PAGA claims in arbitration solely on . . . her own behalf,” not that she must. Plaintiff therefore contends the agreement doesn’t cover her PAGA claim.
The Court disagrees. Plaintiff ignores the first paragraph of the PAGA waiver, in which she “agree[s] to bring all PAGA claims on an individual basis in arbitration, rather than in court” if representative action waivers are found valid. Under Viking River Cruises’ interpretation of the FAA, representative action waivers with severability clauses, like the one at issue here, are valid to the extent a PAGA claim can be split into representative and individual components, with the individual component sent to arbitration. (Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1924-25.) With that legal background in mind, there is no ambiguity. Plaintiff’s claim is covered.
B. Predispute Waivers
Second, Plaintiff argues predispute waivers of PAGA claims (or agreements to arbitrate them) are invalid because the State, the real party in interest, must consent. (See Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 387.)
After this motion was fully briefed, a panel of the Court of Appeal for the Second Appellate District decided Lewis v. Simplified Labor Staffing Solutions, Inc. (Ct. App. Dec. 5, 2022) B312871. Lewis, a published case, expressly held that Iskanian’s bar on predispute PAGA waivers (referred to in that case as the “State-must-consent rule”) doesn’t survive Viking River Cruises. (See id., slip op. at p. 12 [“We conclude that, beyond preemption, Viking River’s reasoning destroys the foundation of the State-must-consent rule. But even if it did not, the rule would be preempted.”]; see also id., slip op. at p. 12, fn. 6 [noting that in Viking River Cruises, the United States Supreme Court enforced a predispute waiver].)
In accordance with Viking River Cruises and Lewis, Plaintiff was permitted to enter into a predispute PAGA waiver or agreement to arbitrate.
C. Nature of a PAGA Claim
Third, Plaintiff notes the agreement covers claims “between an Employee . . . and Best Buy.” (McPherson Decl., Ex. 1, at p. 2.) She argues that a PAGA claim is a dispute between the State and the employer, not the employee and the employer, so the claim isn’t covered. Furthermore, because the agreement allows the arbitrator to make an award on “an individual basis” (ibid.), Plaintiff argues this provision bars the arbitrator from awarding the State’s share of civil penalties as provided by PAGA.
Plaintiff is incorrect on both counts. As to whether a PAGA claim is solely a dispute between the State and the employer, the Court of Appeal’s recent decision in Lewis explains that the Supreme Court’s enforcement of a predispute arbitration agreement in Viking River Cruises means “the employee also enjoys the status of a principal in her own right in the PAGA action.” (Lewis, supra, slip op. at p. 14.)
As to what the arbitrator can award, Best Buy points out that Plaintiff leaves off part of the language in her quotation. The arbitrator “can award on an individual basis the same damages and remedies as a judge or jury could in court.” (McPherson Decl., Ex. 1, at p. 2 [emphasis added].) Since a judge could award penalties to the State on an individual PAGA claim, the arbitrator can do the same. The agreement does not bar an award of civil penalties.
II. Further Proceedings
In addition to the stay, Defendants ask the Court to dismiss the representative portion of Plaintiff’s PAGA claim. This request follows the conclusion of Viking River Cruises, where the majority explained that under its view of California law, plaintiffs 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 Plaintiff hasn’t suffered any of the Labor Code violations complained of, meaning Plaintiff lacks PAGA standing regardless of what happens in Adolph. For these reasons, the Court denies the request to dismiss the representative claim without prejudice to Defendants raising the issue again when Plaintiff’s arbitration concludes. Instead, the representative portion of the PAGA claim will be stayed pending the individual arbitration.
III. Pause of Representative Penalties
Finally, Best Buy argues the Court should exercise its discretion in penalty-setting (see Lab. Code, § 2699(e)(2)) to “pause” the accrual of penalties on the representative portion of the PAGA claim during any stay. It argues that the accrual of penalties on the representative portion during a stay “would unfairly burden Defendants with potentially substantial liability.” (Memo. at p. 19.)
The Court questions whether it has the discretion to do what Best Buy requests. Without a finding of liability, how can the Court set penalties in the first place, let alone exercise its discretion to adjust them downward?
More importantly, Best Buy never explains what is “unjust, arbitrary and oppressive, or confiscatory” (Lab. Code § 2699(e)(2)) about allowing representative penalties to accrue during a stay. For example, Best Buy doesn’t put on evidence that it’s taken any steps to change the reimbursement practices complained of, nor does it put on evidence or argument suggesting those practices are legal. If Best Buy’s reimbursement practices operate as alleged, and if those practices violate the Labor Code, what is “unjust, arbitrary and oppressive, or confiscatory” about the representative penalties continuing to accrue, particularly if the California Supreme Court decides Adolph in the employee’s favor? (Of course, should Adolph be decided in the employer’s favor, then the accrued representative penalties presumably would be unrecoverable in this action.)
On this record, the Court finds Best Buy has not shown that the accrual of representative penalties during a stay would be “unjust, arbitrary and oppressive, or confiscatory.” The Court therefore declines to pause the accrual of penalties.