Judge: William D. Claster, Case: 22-01258032, Date: 2022-10-21 Tentative Ruling
1. Defendant GUESS? RETAIL, INC.'s Notice of Motion and Motion
to Stay Proceedings ROA 34
2. Defendant GUESS? RETAIL, INC.'s Notice of Motion and Motion to Compel
Arbitration of Plaintiff's Individual Claims and Dismiss Representative
Claims ROA 30
3. Case Management Conference
Defendant Guess? Retail, Inc. moves to compel arbitration of the individual portion of Plaintiff Kaliah Rhoden’s PAGA claim, dismiss the representative portion of her PAGA claim, and stay proceedings pending the completion of arbitration. The Court rules as follows:
An arbitration review conference will take place in Department CX-104 on June 1, 2023 at 8:30 a.m.
I. Factual Background
Guess meets its initial burden under CRC 3.1330 to prove the existence of an agreement to arbitrate. Plaintiff puts on no evidence or argument to the contrary. The Court therefore finds that a valid arbitration agreement exists, and that it is attached to the Andreasen Declaration as Ex. A. The agreement includes the following relevant terms:
“The Company and Associate mutually agree that any dispute or controversy arising out of or in any way related to any Dispute, as defined herein, shall be resolved exclusively by a neutral arbitrator.” (Andreasen Decl., Ex. A, at p. 1.) The agreement defines a “Dispute” as “any claim or action arising out of or in any way related to . . . any contract of employment between the parties.” (Ibid.) The agreement excludes from its scope “any dispute if an agreement to arbitrate such dispute is prohibited by applicable law that is not subject to mandatory pre-dispute arbitration.” (Ibid.)
The agreement includes a class and representative action waiver that provides, in relevant part, “By signing this Agreement, Associate and the Company each agree that, to the extent permitted by applicable law, claims against the other can be brought only in an individual capacity, and not as a . . . representative, or private attorney general proceeding.” (Id., at p. 2.)
Finally, the agreement includes a severability clause. (Id., at p. 3.)
II. Discussion
A. Applicability of FAA
Guess argues the Federal Arbitration Act applies to the parties’ arbitration agreement. In support of this argument, it cites the testimony of Thomas Andreasen, the Vice President for Human Resources for Guess’s parent company, who states that Guess has retail stores in over 30 states and sells to customers worldwide. (Andreasen Decl., ¶ 7.) In addition, the parties’ agreement states that the FAA governs. (Andreasen Decl., Ex. A, at p. 1.) Plaintiff puts on no evidence or argument to the contrary. The Court therefore finds the FAA applies.
B. Wholesale PAGA Waiver
In Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, the California Supreme Court held that a waiver of PAGA claims is unenforceable as a matter of state law. In Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, the United States Supreme Court overruled Iskanian to the extent its holding was preempted by the FAA, concluding that a PAGA claim could be split into “individual” and “representative” portions, and the individual portion could be compelled to arbitration. But even under Viking River Cruises, a PAGA waiver remains unenforceable “if construed as a wholesale waiver of PAGA claims.” (Id., at pp. 1924-25.)
Plaintiff contends the class and representative action waiver in the agreement is an illegal wholesale waiver of PAGA claims. The Court disagrees. As noted above, the waiver applies only “to the extent permitted by applicable law,” and the agreement contains a severability clause. The agreement at issue in Viking River Cruises had both a wholesale PAGA waiver and a severability clause, and the United States Supreme Court read those provisions together to avoid the wholesale PAGA waiver forbidden by Iskanian. (Ibid.)
C. Excluded from Scope of Agreement
Plaintiff next argues her PAGA claim is excluded from the scope of the arbitration agreement. She points to the exclusion, identified above, of “any dispute if an agreement to arbitrate such dispute is prohibited by applicable law that is not subject to mandatory pre-dispute arbitration.” She argues that because the agreement illegally waives the representative PAGA claims, it is “prohibited by applicable law.” As a result, PAGA claims are outside the scope of the agreement.
The Court disagrees. As set forth above, the agreement is not an illegal wholesale waiver of PAGA claims. As a result, under Viking River Cruises, Plaintiff may be compelled to arbitrate the individual portion of her PAGA claim.
D. Further Proceedings
Under both the Federal Arbitration Act and the California Arbitration Act, this case must be stayed until the completion of Plaintiff’s arbitration. (9 U.S.C. § 3; CCP § 1281.4.)
In addition to the stay, Guess asks 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 Guess raising the issue again when Plaintiff’s arbitration concludes.