Johnson v. Contemporary Services CA2/8 ( 2015 )

Filed 3/18/15 Johnson v. Contemporary Services CA2/8
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
ANGELA JOHNSON et al., B246792
Plaintiffs and Appellants. (Los Angeles County Super.
Ct. No. BC439520)
v.
CONTEMPORARY SERVICES
CORPORATION,
Defendant and Respondent,
APPEAL from an order of the Superior Court of Los Angeles County. Kevin C.
Brazile, Judge. Reversed and remanded with directions.
Schonbrun DeSimone Seplow Harris & Hoffman, V. James DeSimone,
Michael D. Seplow and Erin M. Pulaski, for Plaintiffs and Appellants.
Reed Smith, Remy Kessler and Steven B. Katz, for Defendant and Respondent.
__________________________
Plaintiffs Angela Johnson and Edwin Merino appeal from the order confirming an
intermediate arbitration award which determined that plaintiffs’ representative Private
Attorney General’s Act claims (Lab. Code, § 2698, et seq. (PAGA)) against employer
Contemporary Services Corporation had to be arbitrated as individual claims only. The
parties agree that intervening authority – Iskanian v. CLS Transportation Los Angeles,
LLC (2014) 59 Cal. 4th 348 (Iskanian)– requires that those claims proceed in some forum
as a representative claim. We therefore reverse the orders confirming the arbitration
award and compelling arbitration of the PAGA claim and remand for further proceedings
to determine whether the representative PAGA claim should proceed along with the
arbitration of the plaintiffs’ individual arbitration claims or be resolved in the superior
court.
FACTS AND PROCEDURAL HISTORY
In June 2010, Angela Johnson and Edwin Merino filed a class action against their
employer, Contemporary Services Corporation, alleging numerous violations of the
Labor Code related to wages, hours, meal periods, and rest breaks. Their complaint
included a claim under PAGA, which allows employees to act as agents of the state in
bringing both individual and representative actions to vindicate workers’ statutory rights.
(Iskanian, supra, 59 Cal.4th at pp. 378-380.)
When plaintiffs filed their complaint the law was in flux concerning the extent to
which certain class action claims could be litigated in court when the parties had an
arbitration agreement that was either silent on, or expressly barred, representative claims.
The primary issue revolved around AT&T Mobility LLC v. Concepcion (2011)
563 U.S. ___, 131 S. Ct. 1740, and whether under the Federal Arbitration Act (9 U.S.C.
§ 1, et seq.) state law was barred from requiring arbitration of class claims unless the
parties had agreed to do so. Contemporary filed a petition to compel arbitration of
plaintiffs’ individual claims only, pursuant to an arbitration provision in their standard
employment agreement that was silent on the issue of representative actions. The trial
court granted the petition and directed the arbitrator to decide several issues relating to
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the enforceability and scope of the arbitration agreement, including unconscionability, the
propriety of arbitrating class action claims, and whether the arbitrator had authority to
decide the PAGA claim.
The arbitrator issued her intermediate award in August 2012, finding that the
arbitration agreement was not substantively unconscionable, and that the employer could
not be compelled to arbitrate representative actions, including the PAGA claim, when the
agreement was silent on that issue. After plaintiffs’ unsuccessfully sought to have the
arbitrator reconsider or vacate her award, Contemporary brought a motion asking the trial
court to confirm the award as a judgment. (Code Civ. Proc., § 1285.) Plaintiffs opposed
the motion on several grounds, including the impropriety of precluding representative
PAGA claims. The trial court granted the motion in December 2012, two years before
the Supreme Court was to issue its opinion in Iskanian. Plaintiffs appealed.1
1
We issued a notice of default and directed plaintiffs to either provide a copy of a
judgment or show cause why the appeal should not be dismissed. Plaintiffs asked us to
save the appeal under the “death knell” doctrine, because the trial court’s order
effectively terminated their representative claims (In re Baycol Cases I & II (2011)
51 Cal. 4th 751, 757), or to treat it as a writ petition. We then discharged our order to
show cause and restored the case to active status.
Contemporary now contends that we should dismiss the appeal because the trial
court’s order is not appealable. It relies on Judge v. Nijjar Realty, Inc. (2014)
232 Cal. App. 4th 619 (Judge), which held that an order confirming an arbitrator’s interim
award allowing a representative PAGA claim to proceed through arbitration was not
appealable because the award was not a final resolution of the substantive issues. (Id. at
pp. 633-636.) We disagree.
First, unlike Judge, where the arbitrator’s interim award permitted representative
PAGA claims to proceed through arbitration, the interim award in this case required that
all of plaintiffs’ group claims – representative PAGA and putative Labor Code class
action – proceed only through arbitration and only as individual claims.
Second, as Contemporary acknowledges, the Judge court distinguished its holding
from arbitration orders that are appealable under the death knell doctrine. (Judge, supra,
232 Cal.App.4th at p. 634, fn. 13.) Contemporary contends that the death knell exception
is not available because that doctrine has only been applied to class action claims and
plaintiffs have dismissed theirs. Even though Judge involved the appealability of
arbitration orders for representative PAGA claims, that court did not state that PAGA
claims were exempt from the death knell doctrine. Regardless, we believe the death knell
3
The Supreme Court decided Iskanian, supra,59 Cal. 4th 348 in June 2014, after
Contemporary filed its appellate respondent’s brief. Iskanian held that the FAA
preempted California decisions holding that class action waivers of employees’
unwaivable statutory rights were not enforceable, except in regard to PAGA claims,
which were actions by the state being prosecuted by individuals. (Id. at pp. 359-360,
382-384.) Left unresolved in Iskanian was the proper forum for adjudicating the
plaintiff’s representative PAGA claims: either in state court or in arbitration along with
the plaintiff’s individual claims. Because the arbitration agreement gave no clue how the
parties might feel about the issue, the Supreme Court left it to the parties and the trial
court to sort it out on remand. (Id. at pp. 391-392.)
Plaintiffs here filed their appellate reply brief after Iskanian was filed. In light of
that decision, plaintiffs withdrew their appeal as to their non-PAGA claims. As for the
PAGA claims, they contended that not only should they proceed as representative claims
– they should do so in a trial court action, not arbitration.
Contemporary then filed a letter with the court stating that in light of Iskanian it
conceded that absent review of that decision by the United States Supreme Court we were
bound to apply its holding concerning PAGA claims. Contemporary asked us to
postpone a decision pending a ruling by the United States Supreme Court on a certiorari
petition in Iskanian. We did so. On January 20, 2015, the petition for writ of certiorari in
Iskanian was denied. (___ U.S. ___, 2015 WL 231976.)2
analysis applies here because the arbitrator’s interim award eliminated the only remaining
representative claim.
2
In a letter filed after oral argument, Contemporary has asked us to again stay our
decision pending a ruling by the United States Supreme Court, this time on a petition for
writ of certiorari, in Bridgestone Retail Operations, LLC v. Brown (U.S.S.C. case No 14-
790), sub nom. Brown v. Superior Court (2014 WL5409196)), which also concerns the
arbitrability of representative PAGA actions. According to Contemporary the high court
has signaled its intention to grant the petition. We decline to stay this matter further, and
any new developments can be raised before the trial court on remand.
4
DISCUSSION
Based on Iskanian, supra, 59 Cal. 4th 348, plaintiffs have abandoned their appeal
as to all but their PAGA claim, while Contemporary concedes that the PAGA claim may
proceed on a representative basis. As a result, we will reverse the order confirming the
arbitration award as to the PAGA claim. The only issue left for determination is where
that claim will be adjudicated. As the Iskanian court wondered, will the parties agree on
a single forum for resolving the PAGA claim and the other claims? If not, should the
PAGA claim be bifurcated, with it proceeding in litigation while the plaintiffs’ individual
claims go to arbitration? If bifurcation occurs, should the arbitration or the superior court
action be stayed? (Id. at pp. 391-392.)
At bottom, plaintiffs’ assertion that the PAGA claim should be litigated is a
challenge not to the order confirming the arbitration award but to the underlying order
compelling arbitration. Although no immediate, direct appeal lies from an order
compelling arbitration, such an order is subject to review on appeal from the final
judgment. (Abramson v. Juniper Networks, Inc. (2004) 115 Cal. App. 4th 638, 648-649.)3
The court in Garden Fresh Restaurant Corporation v. Superior Court (2014)
231 Cal. App. 4th 678 (Garden Fresh) considered a writ petition brought by an employer
being sued by employees for wage and hour violations and under PAGA after the trial
court granted the employer’s petition to compel arbitration, but directed the arbitrator to
determine whether under the arbitration agreement the PAGA claim should be litigated or
arbitrated.
The Garden Fresh court granted the petition, holding that such a determination
was a “gateway” issue for the trial court to resolve unless the parties’ arbitration
agreement clearly provided otherwise. Such clarity did not exist, however, because, as
here, the arbitration provision was silent on the issue of class and representative claims.
(Garden Fresh, supra, 231 Cal.App.4th at pp. 687-689.) The Court of Appeal then
3
As stated in footnote 1, ante, even though we are not reviewing a judgment, we are
still reviewing an appealable order.
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remanded the matter to the trial court to determine the issue. We believe that is the
appropriate resolution in this case, given that Iskanian, supra, 59 Cal. 4th 348 is new
authority, and that as a result the issue was first raised in plaintiffs’ appellate reply brief.
DISPOSITION
We reverse the order confirming the arbitration award, and the underlying order
compelling arbitration but only as to the PAGA claim. The trial court is directed to
conduct further proceedings as necessary to determine whether the parties’ arbitration
agreement contemplates arbitration of the representative PAGA claims, and whether
plaintiffs’ representative PAGA claims should be arbitrated or litigated and whether such
claims should be bifurcated. Plaintiffs shall recover their costs on appeal.
RUBIN, J.
WE CONCUR:
BIGELOW, P. J.
GRIMES, J.
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