Judge: William D. Claster, Case: 22-01246368, Date: 2022-09-09 Tentative Ruling
Defendant Hometown Equity Mortgage, Inc.'s Notice of Motion and Motion to Compel Arbitration ROA #40
Defendant Hometown Equity Mortgage, LLC moves to compel arbitration of Plaintiff Tan Nguyen’s PAGA-only complaint. The Court rules as follows:
3. The Court sets an arbitration review conference for March 29, 2023 at 8:30 a.m.
EVIDENTIARY OBJECTIONS
Plaintiff offers four objections to the Kourasis Declaration submitted in support of Defendant’s motion. Objections 1 and 2 are SUSTAINED. Objections 3 and 4 are OVERRULED; however, the Court will not rely on this testimony, because (1) the arbitration agreement speaks for itself, and (2) counsel cannot testify to legal conclusions.
GROUNDS FOR RULING
I. Existence of Agreement
Plaintiff suggests in his opposition that Defendant has not proven the existence of an arbitration agreement. Plaintiff appears to misunderstand the operation of CRC 3.1330. “For purposes of a petition to compel arbitration, it is not necessary to follow the normal procedures of document authentication. . . . Rule 371 [now Rule 3.1330] does not require the petitioner to introduce the agreement into evidence or provide the court with anything more than a copy or recitation of its terms. Petitioner need only allege the existence of an agreement and support the allegation as provided in Rule 371.” (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219.) In short, once the petitioner alleges the agreement exists, the respondent bears the burden of proving the agreement’s nonexistence. (Ibid.)
Defendant has introduced a copy of the agreement into evidence. (Kourasis Decl., Ex. 1.) Because this meets Defendant’s burden under CRC 3.1330, the burden shifts to Plaintiff to put on evidence that the agreement doesn’t exist. Plaintiff puts on no such evidence here, so the Court finds an arbitration agreement exists.
II. Applicability of FAA
Defendant seeks to compel arbitration of Plaintiff’s PAGA claim under the recent Viking River Cruises case. (See Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906.) Plaintiff points out, however, that Viking River Cruises only applies if the Federal Arbitration Act (FAA) applies to this arbitration agreement. If not, then the anti-waiver rule of Iskanian applies. (See Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348.)
The party claiming the FAA preempts state law bears the burden of proving the FAA applies. (See Woolls v. Superior Court (2005) 127 Cal.App.4th 197, 211.) Here, Defendant bears the burden of proving the arbitration agreement is a “contract evidencing a transaction involving [interstate] commerce.” (9 U.S.C. § 2.)
Plaintiff relies on two cases to argue Defendant hasn’t met its burden. Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, like this case, involved an out-of-state company’s California employees. The Court of Appeal held the interstate nature of the employment contract was not enough to invoke the FAA. Instead, more evidence of an effect on interstate commerce was needed: “The only established facts are that Hoover was a California resident who sold life insurance policies. Even though AIL is based in Texas, there was no evidence in the record establishing that the relationship between Hoover and AIL had a specific effect or ‘bear[ing] on interstate commerce in a substantial way.’” (Id., at p. 1207.)
Plaintiff next cites Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227. In that case, the employer “presented no evidence to establish any connection to interstate commerce. Indeed, CW Painting presented nothing about the nature of its business or Carbajal’s work that showed any connection with interstate commerce. Carbajal’s complaint shows she worked for CW Painting in California serving California customers. Accordingly, CW Painting failed to meet its burden to show the FAA applied.” (Id., at p. 239.)
Defendant fails to mention either of these authorities in its reply, even though they are central to Plaintiff’s arguments about the FAA. Nevertheless, the Court finds them distinguishable. The arbitration agreement here provides, “This Agreement is entered into under the Federal Arbitration Act, and shall be interpreted and construed in accordance with the law and procedures developed under that statute.” (Kourasis Decl., Ex. 1, § 8.) Significantly, neither Hoover nor Carbajal involved an arbitration agreement where the parties agreed the FAA would apply.
Here, by expressly designated the FAA as the law governing their agreement and saying nothing about California law, the parties “adopted the FAA – all of it – to govern their arbitration.” (Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1122) Put simply, since the parties agreed the FAA would govern the arbitration agreement, the Court finds it applies here.
III. Scope of Permission to File PAGA Claims
The arbitration agreement provides, “Any and all claims or controversies arising out of Employee’s application or candidacy for employment, employment, compensation, and/or cessation of employment with the Company shall be resolved through final and binding arbitration.” (Kourasis Decl., Ex. 1, § 1.) This “specifically” includes “any wage-related or compensation dispute, or any other employment related claim arising under the . . . Labor Code.” (Id., § 2.) The agreement also contains a class and representative action waiver: “To the fullest extent permitted by law, the parties agree that they shall not join or consolidate claims submitted for arbitration under this Agreement with those of any other persons, and that no form of class, collective, or representative action shall be maintained without the mutual consent of the parties.” (Id., § 5.)
Under Viking River Cruises, this sort of language requires arbitration of Plaintiff’s individual PAGA claim. But Plaintiff argues § 3 of the agreement requires PAGA claims to be heard in court, rather than by an arbitrator. Section 3 provides:
Notwithstanding the provisions of this Agreement, Employee shall have the right to file a claim for workers’ compensation and unemployment insurance benefits with the appropriate state agencies, unfair labor practice charges with the National Labor Relations Board, a Private Attorney General Act (‘PAGA’) claim arising under Labor Code section 2699 et. seq., and administrative charges with the Equal Employment Opportunity Commission, California Department of Fair Employment and Housing, and any similar state agency. Unless otherwise required by applicable law, all other employment-related claims shall be resolved by final and binding arbitration and not by a jury in a court of law.
The Court disagrees with Plaintiff’s reading of this language. Considering the context of the disputed language, the repeated references to administrative agencies make clear that an employee is permitted to file claims with the appropriate administrative agency, not in a court. Here, that would be the LWDA: an employee may file a PAGA claim, and the LWDA will either pursue it or not. And while the agreement has no specific mention of the LWDA, it does mention “any similar state agency.”
This provision allows employees to file PAGA claims with the LWDA. Should the LWDA choose not to pursue them, the employee may file suit as provided by PAGA, and the PAGA claims are subject to Viking River Cruises’ rule of individual arbitration.
IV. Further Proceedings
Following Viking River Cruises, Plaintiff is ordered to individually arbitrate the individual portion of his PAGA claim.
This leaves the question of what to do with the representative portion of Plaintiff’s PAGA claim. 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 will deny the request to dismiss the representative claims without prejudice to Defendant raising the issue again when the arbitration concludes. In the meantime, the case is stayed pending the outcome of Plaintiff’s arbitration.