Placido Valdez v. Terminix Int'l Co. ( 2017 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAR 3 2017
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
PLACIDO VALDEZ, on behalf of himself No. 15-56236
and others similarly situated,
D.C. No.
Plaintiff-Appellee, 2:14-cv-09748-DDP-E
v.
MEMORANDUM *
TERMINIX INTERNATIONAL
COMPANY LIMITED PARTNERSHIP,
DBA Antimite Termite and Pest Control, a
Delaware Limited Partnership,
Defendant-Appellant.
Appeal from the United States District Court
for the Central District of California
Dean D. Pregerson, District Judge, Presiding
Submitted February 16, 2017**
Pasadena, California
Before: M. SMITH and OWENS, Circuit Judges, and HELLERSTEIN,*** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes that this case is suitable for
decision without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Alvin K. Hellerstein, United States Senior District
Judge for the Southern District of New York, sitting by designation.
Defendant-Appellant Terminix International Company Limited Partnership
(Terminix) appeals from the district court’s order denying its motion to dismiss or
compel arbitration of Plaintiff-Appellee Placido Valdez’s representative claim
under California’s Private Attorneys General Act (PAGA). We have jurisdiction
pursuant to 9 U.S.C. § 16(a)(1)(B) and our review is de novo. See Sakkab v.
Luxottica Retail N. Am., Inc., 803 F.3d 425, 429 (9th Cir. 2015). We reverse the
portion of the district court’s order denying the motion to compel arbitration of the
PAGA claim, and remand to the district court to consider whether to dismiss or
stay the action pending arbitration.
Terminix insists that the district court should have dismissed the PAGA
claim for three reasons. First, Terminix contends that the Federal Arbitration Act
(FAA) preempts California’s rule that a waiver of the right to bring a PAGA claim
is invalid (the Iskanian rule). See Iskanian v. CLS Transp. Los Angeles, LLC, 59
Cal. 4th 348 (2014). That argument fails, however, in light of our recent decision
in Sakkab. There, we held that “the Iskanian rule does not stand as an obstacle to
the accomplishment of the FAA’s objectives, and is not preempted.” Sakkab, 803
F.3d at 427.
Next, Terminix contends that if Sakkab applies, “its reasoning is
questionable” in light of DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015).
Specifically, Terminix argues that in light of Imburgia, Iskanian’s rule must be
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preempted “because it relies on an arbitration-specific contract defense.” That
aspect of Imburgia, however, did not announce new law. Rather, it evinces a
garden-variety application of the FAA preemption test. Like Imburgia, moreover,
Sakkab correctly applied existing precedent regarding the FAA’s “savings clause.”
Sakkab acknowledged that the relevant state defense—the Iskanian rule—“must be
a ‘ground[] . . . for the revocation of any contract.” 803 F.3d at 432 (quoting 9
U.S.C. § 2). It concluded “that the Iskanian rule is a ‘generally applicable’
contract defense,” id. at 433, because it “bars any waiver of PAGA claims,
regardless of whether the waiver appears in an arbitration agreement or a non-
arbitration agreement,” id. at 432 (emphasis added). Terminix’s argument that
Imburgia casts doubt on Sakkab is thus meritless.
Finally, Terminix contends that the district court erred in concluding that
PAGA claims categorically cannot proceed to arbitration. The district court
reasoned that a PAGA claim “belongs to the state, and the state has not waived the
judicial forum,” even where a private employee signs an employment contract
requiring that PAGA claims be pursued in arbitration.
The district court’s holding on this point is incorrect.1 Iskanian and Sakkab
clearly contemplate that an individual employee can pursue a PAGA claim in
1
We note that the district court did not have the benefit of our opinion in
Sakkab when it decided this case.
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arbitration, and thus that individual employees can bind the state to an arbitral
forum. To start, Iskanian recognized that although “[t]he government entity on
whose behalf the plaintiff files suit is always the real party in interest in the suit,”
59 Cal. 4th at 382, “the judgment in a PAGA representative action is binding not
only on the named employee plaintiff but also on government agencies and any
aggrieved employee not a party to the proceeding,” id. at 380 (quotation marks and
alterations omitted). Employees can bind government agencies because they
“represent[] the same legal right and interest” as the government in PAGA
proceedings. Id. at 380 (quoting Arias v. Superior Court, 46 Cal. 4th 969, 986
(2009)). Indeed, “[a]n employee plaintiff suing . . . under the PAGA does so as the
proxy or agent of the state’s labor law enforcement agencies.” Id. (emphasis
added) (quoting Arias, 46 Cal. 4th at 986). Accordingly, an individual employee,
acting as an agent for the government, can agree to pursue a PAGA claim in
arbitration. Iskanian does not require that a PAGA claim be pursued in the judicial
forum; it holds only that a complete waiver of the right to bring a PAGA claim is
invalid. See, e.g., id. at 391 (concluding that “Iskanian must proceed with bilateral
arbitration on his individual damages claims, and CLS must answer the
representative PAGA claims in some forum” (emphasis added)).
Sakkab likewise recognized that individual employees may pursue PAGA
claims in arbitration. See, e.g., Sakkab, 803 F.3d at 436 (“[T]here is no need to
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protect absent employees’ due process rights in PAGA arbitrations.”); id. at 438
(“[W]hether arbitration of representative PAGA actions is likely to ‘generate
procedural morass’ depends, first and foremost, on the procedures the parties
select.”). We have also upheld district court decisions compelling arbitration of
PAGA claims. See, e.g., Wulfe v. Valero Ref. Co.-Cal., 641 F. App’x 758, 760 (9th
Cir. 2016) (“The district court did not err in compelling arbitration of Wulfe’s
[PAGA] claim.”).
Given that PAGA claims are eligible for arbitration, we must decide if the
PAGA claim here falls within the scope of the arbitration clause. It does. The
parties mutually agreed “to arbitrate covered Disputes.” That clause of the parties’
agreement applies even after the representative action waiver is severed. See ER
114 (stating that, in the event that a Plan provision is severed, “[a]ll remaining
provisions shall remain in full force and effect”). Additionally, since the PAGA
claim “relat[es] to [Valdez’s] employment relationship with the Company,” and
arises under a “state” “employment related law[],” it constitutes a covered dispute.
See ER 111. The district court therefore erred by denying the motion to compel
arbitration of the PAGA claim.2
REVERSED and REMANDED.
2
Valdez’s request for judicial notice is denied. See Dkt. No. 18.
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