Tag: PAGA

BREAKING: Supreme Court Reverses California Court of Appeal in Viking River Cruises v. Moriana

On June 15, 2022, the U.S. Supreme Court issued its decision on Viking River Cruises, Inc. v. Moriana (Case No. 20-1573) reversing the California Court of Appeal’s decision to affirm the denial of Viking’s motion to compel arbitration Moriana’s “individual” PAGA claim and to dismiss her other PAGA claims.

As previously reported, the question presented in Viking River Cruises involved whether the Federal Arbitration Act (“FAA”) preempts the California Supreme Court’s decision in Iskanian v. CLS Transp. Los Angeles, LLC, 58 Cal.4th 380 (2014), which invalidates contractual waivers of representative claims under California’s Labor Code Private Attorneys General Act (“PAGA”).

In a majority opinion authored by Justice Alito, the Court held that while Iskanian’s prohibition on “wholesale waivers” of PAGA claims is not preempted by the FAA, Iskanian’s rule that PAGA actions cannot be divided into “individual” and “non-individual claims” is preempted.

Applying this holding to the parties, the Court held that Viking was entitled to enforce the parties’ arbitration agreement insofar as it mandated arbitration of Moriana’s individual PAGA claim.  As for Moriana’s non-individual PAGA claims,  because PAGA itself “provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding,” Moriana lacks “statutory standing” under PAGA to litigate her “non-individual” claims separately in state court.  Accordingly, “the correct course is to dismiss her remaining claims.”

Article By Timothy Kim and Michele J. Beilke of Hunton Andrews Kurth

For more litigation legal news, click here to visit the National Law Review.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.

Supreme Court to Consider Whether the FAA Mandates Arbitration of PAGA Actions

On Dec. 15, 2021, the United States Supreme Court granted certiorari in Viking River Cruises, Inc. v. Moriana, and likely will decide by summer 2022 whether the Federal Arbitration Act (FAA) preempts California public policy and requires enforcement of arbitration agreements that purport to waive an employee’s ability to pursue representative actions under the California Private Attorneys General Act (PAGA). Employers have been waiting for the Supreme Court to take up this issue and are watching the case with interest.

Currently, per the California Supreme Court’s decision in Iskanian v. CLS Transportation Los Angeles, LLC, arbitration agreements that waive an employee’s right to pursue PAGA representative actions are considered void and unenforceable. In Iskanian, the California Supreme Court held the FAA does not preempt California state law prohibiting prospective PAGA waivers because PAGA actions are between the employer and the state, not the employee. Thus, the state of California is the real party in interest, not the employee bringing suit, and although the employee may have executed a binding arbitration agreement, the state of California did not. Thus, arbitration agreements that purport to waive the right, expressly or otherwise, to bring a PAGA representative action are not enforceable.

In Viking River, the employee filed a PAGA representative action seeking civil penalties for various alleged violations of the California Labor Code, despite signing an arbitration agreement with her employer agreeing to resolve all future employment-related disputes with the employer via individual arbitration. Relying on the agreement, the employer moved to compel the action to arbitration. The trial court denied the motion, and the Court of Appeal affirmed the denial citing California state law as articulated in Iskanian. The California Supreme Court subsequently denied the employer’s petition for review.

Viking River then petitioned the U.S. Supreme Court for certiorari, relying on the Supreme Court’s decisions in AT&T Mobility LLC v. Concepcion and Epic Systems Corp. v. Lewis. These decisions held that courts may not disregard bilateral arbitration agreements or reshape traditional individualized arbitration by mandating class-wide arbitration procedures without all parties’ consent. Viking River argued the Supreme Court needed to review the case to reaffirm the FAA and national policy in favor of arbitration. Viking River further argued review was necessary to ensure that Concepcion and Epic promote bilateral arbitration, rather than simply result in “representational litigation” under PAGA by those who agreed to arbitrate individually. In granting review, the Supreme Court will decide “[w]hether the Federal Arbitration Act requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under PAGA.”

This will be a closely watched decision for both sides of the bar and will likely have a groundbreaking effect on California employment litigation. Should the Supreme Court decide in Viking River’s favor, PAGA-only actions, which have become the preference of California plaintiffs’ attorneys in the face of arbitration agreements containing class action waiver provisions, will largely become a thing of the past for those employers who mandate individual arbitration for employees. Although it is by no means certain how the Supreme Court will decide this issue, employers should certainly be ready to revisit any arbitration agreements with California employees and consider what if any changes the ultimate ruling may warrant.

Article By Ashley M. Farrell Pickett and Radha D.S. Kulkarni of Greenberg Traurig, LLP

For more litigation legal news, click here to visit the National Law Review.
©2021 Greenberg Traurig, LLP. All rights reserved.

California Court Enforces Waivers of Class and Private Attorneys General Act “PAGA” Representative Claims

The National Law Review recently published an article regarding PAGA Representative Claims written by Labor & Employment Practice of Morgan, Lewis & Bockius LLP:

Recent court decision represents significant development for parties seeking to enforce arbitration agreements containing class and representative waivers.

On June 4, a unanimous panel of the California Court of Appeal for the Second District upheld a lower court’s ruling compelling individual arbitration of a plaintiff’s wage and hour claims and dismissing both class and representative claims under the California Labor Code Private Attorneys General Act (PAGA). Iskanian v. CLS Trans. Los Angeles, LLC, — Cal. Rptr. 3d —, No. B235158, 2012 WL 1979266 (Cal. Ct. App. 2d Dist. June 4, 2012). In so ruling, the court (i) held that the U.S. Supreme Court’s opinion in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (Concepcion), preempted any California law prohibiting arbitration of certain claims; (ii) rejected a recent decision from the National Labor Relations Board (NLRB); and (iii) held that employees may validly waive their right to bring PAGA claims on behalf of others as part of an arbitration agreement.

Background

As a driver for defendant CLS Transportation, LLC (CLS), plaintiff Arshavir Iskanian signed a “Proprietary Information and Arbitration Policy/Agreement” providing that any and all employment-related disputes would be submitted to binding arbitration. The arbitration agreement contained a waiver of the right to bring claims on behalf of a class or as a representative of others.

Notwithstanding this arbitration agreement, Iskanian filed a putative class action complaint against CLS, alleging that the company failed to pay overtime, provide meal and rest breaks, reimburse business expenses, provide accurate and complete wage statements, and pay final wages in a timely manner. CLS moved to compel arbitration, which the trial court initially granted. Shortly after the trial court issued its order, the California Supreme Court issued its opinion in Gentry v. Superior Court (Circuit City Stores), 42 Cal. 4th 443 (2007), holding that class action waivers in employment arbitration agreements were unenforceable as contrary to public policy. On appeal, CLS’s initial motion to compel arbitration was reversed, and the case proceeded to litigation in Superior Court.

Soon after the U.S. Supreme Court issued its opinion in Concepcion, which overruled California law in regards to class action waivers in commercial contracts, CLS renewed its motion to compel arbitration. The trial court granted the motion, and a second appeal followed.

Gentry Overruled

On appeal, the court affirmed, holding that Concepcion overruled Gentry and rejecting the plaintiff’s “vindication of statutory rights” argument. Finding that a purported intent to vindicate statutory rights “is irrelevant in the wake of Concepcion,” the court held that “[t]he sound policy reasons identified in Gentry for invalidating certain class waivers are insufficient to trump the far-reaching effect of the [Federal Arbitration Act (FAA)].” Iskanian, 2012 WL 1979266 at *5. Thus, the court held that any California statute or policy prohibiting arbitration of certain claims is invalid, and that under the FAA, class and representative waivers should be enforced according to their terms “so as to facilitate streamlined proceedings.” Id.

Rejection of D.R. Horton

The court also rejected the plaintiff’s argument that a recent decision by two members of the NLRB in D.R. Horton, Inc., 357 NLRB No. 184 (2012), barred enforcement of class and representative waivers in employment arbitration agreements as a violation of Section 7 of the National Labor Relations Act (NLRA).

Finding several faults with the D.R. Horton decision, the Iskanian court declined to give any deference to the NLRB, noting that “the FAA is not a statute the NLRB is charged with interpreting.” Iskanian, 2012 WL 1979266, at *6. The court instead followed the Supreme Court’s binding authority in CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012), that, unless the FAA is “overridden by a contrary congressional command,” then “agreements to arbitrate must be enforced according to their terms.” Iskanian, 2012 WL 1979266, at *7. Finding no such “congressional command” in the NLRA, the court rejected D.R. Horton. Id.

PAGA Waivers Enforceable

Departing from two prior decisions issued by other California Courts of Appeal, theIskanian court held that the representative action waiver of PAGA claims in the parties’ arbitration agreement was enforceable under Concepcion. The court compelled individual arbitration of the plaintiff’s PAGA claim, holding that “any state rule prohibiting the arbitration of a PAGA claim is displaced by the FAA.” Id. at *9. The court further held that California’s “Broughton-Cruz rule”—which bars arbitration of public injunctive relief actions—has been overruled by Concepcion. Accordingly, “the public policy reasons underpinning the PAGA do not allow a court to disregard a binding arbitration agreement. The FAA preempts any attempt by a court or state legislature to insulate a particular claim from arbitration.” Id. The court concluded that the plaintiff could not pursue representative claims against CLS.

Implications

The Iskanian decision, when coupled with another recent California opinion,Kinecta Alternative Financial Solutions, Inc. v. Superior Court (Malone), 205 Cal. App. 4th 506 (2012), which held that class allegations may be dismissed when a court compels individual arbitration, represents a significant development for parties seeking to enforce arbitration agreements containing class and representative waivers.

The Iskanian decision, however, creates a clear split in authority among California Courts of Appeal regarding the enforceability of PAGA representative action waivers. See, e.g., Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489 (2d Dist. 2011) (holding that PAGA waivers were not enforceable); Reyes v. Macy’s, Inc., 202 Cal. App. 4th 1119 (1st Dist. 2011) (following Brown and refusing to compel individual arbitration of PAGA claims). This split may lead to California Supreme Court review, which means that the issue may not be resolved anytime soon.

While awaiting a final outcome, employers should carefully consider enforcement of arbitration agreements and the scope of waivers contained in such agreements.

Copyright © 2012 by Morgan, Lewis & Bockius LLP