Rocha v. U-Haul Co. of Cal. ( 2023 )

Filed 2/2/23
CERTIFIED FOR PARTIAL PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
THOMAS ROCHA et al., B322599
Plaintiffs and Appellants, (Fresno County
Super. Ct. No.15CECG03393)
v.
U-HAUL CO. OF CALIFORNIA
et al.,
Defendants and Respondents.
APPEAL from orders and the judgment of the Superior Court
of Fresno County, Rosemary T. McGuire, Judge. Affirmed in part
and reversed in part.
Law Office of Dean B. Gordon and Dean B. Gordon for
Plaintiffs and Appellants.
Norton Rose Fulbright US and Ryan T. McCoy for Defendants
and Respondents.
Pursuant to California Rules of Court, rules 8.1100 and
8.1110, this opinion is certified for publication with the exception
of the Discussion post, parts A and B.1.
Plaintiffs and appellants Thomas Rocha and his brother
Jimmy Rocha (the brothers) appeal following a judgment affirming
an arbitration award that resolves an employment dispute between
the brothers, their former employer, defendant and respondent
U-Haul Co. of California (U-Haul), and their former manager at
U-Haul, defendant and respondent Don Sandusky. On appeal,
the brothers challenge the court’s order compelling their dispute
to arbitration, arguing that the arbitration agreement they signed
with U-Haul is unconscionable and thus unenforceable. We
disagree and, accordingly, affirm the order compelling arbitration.
The brothers also challenge the court’s order, issued before
the court ordered the matter to arbitration, denying them leave to
amend their complaint. The proposed amendment includes a Labor
Code cause of action against Sandusky for unpaid wages regarding
work the brothers allegedly performed at Sandusky’s residence
solely for his personal benefit. We see no basis on which the court
could deny the brothers leave to assert such a claim.
The brothers’ proposed amendment also includes a claim for
relief under California’s Private Attorney General Act (Lab. Code,
§ 2698 et seq.)1 (the PAGA)2 based on the Labor Code violations
by U-Haul and/or Sandusky reflected in the proposed amended
1 Unless otherwise indicated, all further statutory citations
are to the Labor Code.
2 The PAGA authorizes certain “aggrieved employee[s]” to act
as private attorneys general and collect “civil penalt[ies]” for Labor
Code violations, where the Labor and Workforce Development
Agency (LWDA) has been notified and does not itself take action.
(See Lab. Code, § 2699, subd. (a).) A PAGA claim is technically
“an enforcement action between the LWDA and the employer,”
with the plaintiff acting as a proxy for the government. (Kim v.
Reins International California, Inc. (2020) 9 Cal.5th 73, 86 (Kim).)
2
complaint. But the brothers cannot establish PAGA standing to
bring a claim based on Labor Code violations by U-Haul already
alleged in the operative complaint, because the arbitrator found
no such violations occurred, and that finding has issue preclusive
effect. It would thus have been futile to allow the brothers to allege
such a PAGA claim. The arbitrator’s finding does not affect the
brothers’ ability to establish PAGA standing based on the proposed
alleged Labor Code violation by Sandusky involving unpaid wages,
however, and we see no other fatal deficiencies in the proposed
PAGA claim against Sandusky.
Therefore, we conclude the court abused its discretion in
denying the brothers leave to amend their complaint to add both
PAGA and non-PAGA claims against Sandusky based on the unpaid
wages violation they propose to allege. Accordingly, we reverse
the court’s order to the extent it denies leave to amend to add such
claims and reverse the judgment as it applies to Sandusky. In all
other respects, we affirm the orders and judgment.
FACTS AND PROCEEDINGS BELOW
A. The Brothers Sign an Arbitration Agreement with
U-Haul as a Term of Employment
U-Haul hired Thomas Rocha as a mechanic in 1997. In 2003,
the company implemented an employment dispute resolution policy,
which required that all employees sign an arbitration agreement
as a condition of continued employment. As part of this policy,
Thomas Rocha signed a one-page document entitled “U-Haul
Employee Agreement to Arbitrate.”
3
Later in 2003, U-Haul hired Jimmy Rocha as a mechanic as
well.3
U-Haul revised the company’s employee dispute resolution
policy in 2007 and 2013, and in both instances informed the
brothers they were required to sign an updated arbitration
agreement as a term of continued employment at U-Haul. They
both did so.
The 2013 iteration of the arbitration agreement is the
one at issue in this appeal. It is a three-page document, the first
two pages of which contain a “memorandum” bearing the title,
“Notice to Employees About U-Haul’s Employment Dispute
Resolution [EDR] Policy.” This portion of the agreement “explains
the procedures, as well as how the arbitration policy works as a
whole.” The final page of the document bears the caption “U-HAUL
EMPLOYEE AGREEMENT TO ARBITRATE” and requires the
electronic signature of the employee. We shall refer to the entirety
of this three-page document as “the arbitration agreement.”
Each of the brothers submitted his electronic signature on
the arbitration agreement in 2013.
The following key language appears in the EDR policy
portion of the arbitration agreement: “Please take the time to
read this material. IT APPLIES TO YOU. It will govern all
existing or future disputes between you and U-Haul . . . or its
parent, subsidiary, sister or affiliated companies or entities, and
each of its and / o r their employees, officers, directors or agents
(‘U-Haul’) that are related in any way to your employment
3
The record does not reflect whether Jimmy Rocha signed an
arbitration agreement upon his hiring in 2003, but it is undisputed
he signed subsequent arbitration agreements with U-Haul, as noted
below.
4
with U-Haul . . . except for charges filed with the National Labor
Relations Board [NLRB]. [¶] . . . [¶] The EDR . . . covers all
disputes relating to or arising out of employment with U-Haul . . .
or the termination of that employment. . . . [¶] Your decision to
accept employment or to continue employment with U-Haul . . .
constitutes your agreement to be bound by the EDR. . . . [B]oth
you and U-Haul are bound to use the EDR as the only means
of resolving any employment-related disputes. This mutual
agreement to arbitrate claims also means that both you and
U-Haul forego any right either may have to a judge or jury trial
on claims relating in any way to your employment. . . . [¶] As
permitted by applicable law, you and U-Haul also agree to forego
and waive any right to bring an action as a private attorney
general.” (Underscoring omitted.) It further provides as follows
regarding the scope of arbitration pursuant to the agreement: “The
arbitration process is limited to disputes, claims or controversies
that a court of law would be authorized to entertain or would have
jurisdiction over to grant relief and that in any way arise out of,
relate to or are associated with your employment with U-Haul . . .
or the termination of your employment. The parties in any such
arbitration will be limited to you and U-Haul, unless you and
U-Haul agree otherwise in writing.”
The EDR policy portion also provides that the Federal
Arbitration Act (9 U.S.C. § 1 et seq.) (FAA) shall govern the
agreement, and that if the FAA cannot apply, applicable state
arbitration statutes (that is, those of California) shall govern.
In addition, “[t]he Employment Arbitration Rules and Mediation
Procedures of the American Arbitration Association (‘AAA’) in
place at the time of the dispute” govern “the procedures to be used
in arbitration.” The EDR policy provides the website from which
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one can obtain these AAA rules and procedures, and provides a link
to review the procedures before signing, if desired.
The policy also speaks to the finality of an arbitration award,
noting generally that “[a]n impartial and independent arbitrator
chosen by agreement of both you and U-Haul will be retained to
make a final decision on your claim, based on applicable law. The
arbitrator’s decision is final and binding on you and U-Haul.”
As to the funding of the arbitration proceedings, the EDR
policy provides: “Your share of such AAA filing and arbitrator fees
shall not exceed the maximum fee established by the applicable
AAA rules or the amount equal to your local court civil filing fee,
whichever is less. U-Haul will pay all of the remaining fees and
administrative costs of the arbitrator and the AAA unless, in
accordance with applicable law, an arbitrator orders a different
allocation of those fees and costs.” Finally, the arbitration
agreement contained a severability clause, indicating “the
arbitrator or a court may sever any part of the EDR procedures
that do not comport with the [FAA] or applicable case law.”
The final page of the arbitration agreement, which each of the
brothers electronically signed, reflects a general acknowledgment
and acceptance of the EDR policy as follows: “I acknowledge that I
have been given the opportunity to receive and review a copy of the
[EDR] [p]olicy, and have been advised to consult a legal advisor of
my own choice about the EDR. I agree that it is my obligation to
make use of the EDR and to submit to final and binding arbitration
any and all claims and disputes (except for charges filed with
the [NLRB]) that are related in any way to my employment or the
termination of my employment with U-Haul . . . . I understand
that, unless otherwise required by law or contract, final and binding
arbitration will be the sole and exclusive remedy for any such claim
or dispute . . . and that, by agreeing to use arbitration to resolve my
6
dispute, both U-Haul and I agree to forego any right we each may
have had to a judge or jury trial on issues covered by the EDR.”
This final signature page also includes more specific
acknowledgments of key aspects of the EDR policy, including those
highlighted above. Namely, it expressly acknowledges the type
of disputes that fall within the scope of the arbitration obligation
the signatory is assuming; that only the signing employee, U-Haul,
U-Haul’s related companies, and U-Haul employees / officers will be
bound to arbitrate such disputes; that the FAA will govern and
AAA procedural rules will apply; that the employee has been given
“sufficient information about and links to” these rules; and that the
employee’s “maximum out-of-pocket expenses” associated with an
arbitration under the agreement “shall not exceed the maximum
fee established by applicable AAA rules or the amount equal to
my local court civil filing fee, whichever is less.”
B. U-Haul Terminates the Brothers and They Sue
The brothers filed administrative complaints with the
federal Equal Employment Opportunity Commission alleging
that Sandusky, their manager at U-Haul, had harassed them and
discriminated against them. Several weeks later, on May 14, 2015,
Sandusky terminated the brothers’ employment. On July 15, 2015,
the brothers filed administrative complaints with and obtained
immediate right-to-sue notices from the former Department of
Fair Employment and Housing4 regarding what they alleged were
retaliatory terminations.
4 On June 30, 2022, the former Department of Fair
Employment and Housing was renamed the Civil Rights
Department. (Sen. Bill No. 189 (2021−2022 Reg. Sess.);
Stats. 2022, ch. 48, § 30.)
7
On November 2, 2015, the brothers filed a complaint in the
Fresno County Superior Court against U-Haul and Sandusky, in
connection with which they paid $435 in filing fees. The original
complaint set forth four causes of action under California’s Fair
Employment and Housing Act (FEHA)—retaliation, discrimination,
and harassment based on race / color /national origin, and failure to
prevent such retaliation, discrimination, and harassment—as well
as a retaliation cause of action under section 1102.5 et seq. against
U-Haul, and a defamation cause of action against Sandusky and
U-Haul.
The brothers then filed a first amended complaint pursuant
to Code of Civil Procedure section 472, which added allegations that
they had served a PAGA notice on the California LWDA, U-Haul,
and its attorneys (a prerequisite to bringing a PAGA claim), as well
as allegations about their efforts to exhaust their administrative
remedies. The first amended complaint also included a seventh
cause of action for declaratory relief, seeking a court order finding
U-Haul’s arbitration agreement unenforceable.
C. U-Haul and Sandusky Move to Compel
Arbitration and the Brothers Seek Leave
To File a Further Amended Complaint
U-Haul and Sandusky moved to compel arbitration and stay
proceedings pending arbitration. The brothers opposed on the
ground, inter alia, that there was no enforceable arbitration
agreement. The next day, the brothers sought, on an ex parte basis,
to stay the motions5 to compel arbitration and allow the brothers to
seek leave to file a second amended complaint on an expedited time
5 U-Haul and Sandusky filed two motions to compel
arbitration, one regarding Thomas Rocha’s claims and one
regarding Jimmy Rocha’s claims.
8
frame. The court denied the application and ordered the motion
for leave to amend “be heard as a noticed motion,” and took the
motions to compel arbitration off calendar until the amendment
issue was resolved.
The brothers thereafter filed a noticed motion for leave to
file a second amended complaint (the proposed amended complaint)
that added, inter alia, a section 1194 claim against Sandusky for
his failure to pay minimum wages to the brothers for work they
performed for Sandusky personally. Specifically, the proposed
amended complaint alleged that Sandusky “failed to pay [the
brothers] . . . minimum wage of $8.00 or $9.00 per hour (depending
on the time period) for any work that they performed for Sandusky”
(capitalization omitted) and that Sandusky “failed to provide [them]
with time cards or pay stubs in order to avoid paying the minimum
hourly wage.” The proposed amendments alleged that “Sandusky
would tell [the brothers] not to clock out, and then Sandusky would
tell them to work at his personal residence, moving furniture,
gardening, trimming trees, etc. Thus, U-Haul was paying [the
brothers] for the work they performed for Sandusky’s personal
benefit until 3:30 p.m., which was the time that they would
normally end their shifts. However, if [the brothers] worked past
the end of their shifts, neither U-Haul nor Sandusky paid them for
that time.” (Boldface and capitalization omitted.)
The proposed amendment also includes a request for relief
under the PAGA, based on both the Labor Code violations alleged
in the original complaint (which again appeared in the proposed
amended complaint), and the alleged Labor Code violations by
Sandusky reflected only in the proposed amended complaint. The
court denied the brothers leave to amend. The court reasoned that
the proposed PAGA-related amendments would be futile, because
the brothers had not alleged facts giving them standing to seek
9
PAGA relief, as they were not suing on behalf of other former
or current employees.
Thereafter, the court granted U-Haul and Sandusky’s
motions to compel arbitration, rejecting the brothers’ argument
that the arbitration agreement was unconscionable and thus
unenforceable. Although the court found that the arbitration
agreement was procedurally unconscionable, the court also found
that it was not substantively unconscionable. As both procedural
and substantive unconscionability must be present to find the
agreement unenforceable, the trial court reasoned that the
arbitration agreement was valid and compelled the dispute to
binding arbitration.
D. U-Haul Prevails in the Arbitration of the
Brothers’ Claims
Each of the brothers paid $200 to initiate separate arbitration
proceedings, as required by the FAA. Thereafter, the parties agreed
to consolidate the two arbitrations.
The consolidated arbitration proceedings spanned
approximately two years. Following discovery, the brothers
abandoned their causes of action for defamation and declaratory
relief (seeking a determination that the arbitration policy was
invalid), opting to proceed only with the remaining five causes
of action in the operative complaint (the FEHA claims and
section 1102.5 retaliation claim) against U-Haul. On August 14,
2019, the arbitrator issued a 12-page “findings and final award,”
in favor of U-Haul on all causes of action. (Capitalization omitted.)
E. The Brothers Unsuccessfully Attempt To Vacate
the Arbitral Award and Appeal
The brothers moved to vacate the arbitrator’s award “on the
ground that the parties never entered into a binding enforceable
10
arbitration agreement,” because the agreements they signed were
unconscionable.
In opposing the motion to vacate, U-Haul requested the
court affirm the arbitration award, and further moved the court to
impose sanctions on the brothers. The court imposed the requested
sanctions, confirmed the arbitration award, and entered judgment
in favor of U-Haul and Sandusky.
The brothers timely appealed the judgment. Through their
appeal, the brothers seek reversal of: the judgment, the denial of
their motion to file the proposed amended complaint, and the order
granting U-Haul and Sandusky’s motions to compel arbitration.
They do not challenge the sanctions order.
DISCUSSION
On appeal, the brothers argue that the trial court erred
(1) in granting U-Haul’s motion to compel arbitration, and (2) in
denying them leave to file their proposed amended complaint.
A. Unconscionability
The brothers argue that the arbitration agreement is
unconscionable and thus unenforceable. We disagree. “[U]nder
California law, as under federal law, an arbitration agreement
may only be invalidated for the same reasons as other contracts.”
(Armendariz v. Foundation Health Psychcare Services, Inc. (2000)
24 Cal.4th 83, 98 (Armendariz).) Thus, under both the FAA
and California state law, unconscionability of an arbitration
agreement is a basis for denying a motion to compel arbitration.
(See id. at pp. 98 & 114 [FAA and California state law]; Little v.
Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1079 (Little).)
Where, as here, there are no meaningful factual disputes
regarding the agreement, and the language of an arbitration
provision is not in dispute, our review is de novo. (Molecular
11
Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186
Cal.App.4th 696, 707.)
“Unconscionability has procedural and substantive aspects.”
(Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th
638, 655; see also Armendariz, supra, 24 Cal.4th at p. 114.)
“Both procedural and substantive unconscionability must be
present before a contract or term will be deemed unconscionable.”
(Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th
165, 178 (Serafin); Armendariz, supra, at p. 114.) “Substantive
unconscionability focuses on the actual terms of the agreement,
while procedural unconscionability focuses on the manner in which
the contract was negotiated and the circumstances of the parties.”
(American Software, Inc. v. Ali (1996) 46 Cal.App.4th 1386, 1390.)
A “ ‘sliding scale is invoked’ ” where “the more substantively
oppressive the contract term, the less evidence of procedural
unconscionability is required to come to the conclusion that the
term is unenforceable, and vice versa.” (Armendariz, supra, at
p. 114.)
1. Procedural Unconscionability
Procedural unconscionability “focuses on the elements of
oppression and surprise. [Citation.] Oppression arises from an
inequality of bargaining power which results in no real negotiation
and an absence of meaningful choice.” (Serafin, supra, 235
Cal.App.4th at p. 177.)
Arbitration agreements imposed as a mandatory condition
of employment are not per se unlawful or unconscionable under
the FAA or California law. (Circuit City Stores, Inc. v. Adams
(2001) 532 U.S. 105, 119; Armendariz, supra, 24 Cal.4th at
pp. 97−99.) Instead, the unilateral, “take-it-or-leave-it” nature
of such agreements is but one factor courts consider in assessing
12
procedural unconscionability (Serpa v. California Surety
Investigations, Inc. (2013) 215 Cal.App.4th 695, 704), and
overall enforceability will depend on the “sliding scale” analysis
of procedural and substantive unconscionability noted above.
(See ibid. [“[w]hen . . . there is no other indication of oppression
or surprise [other than any oppression resulting from unequal
bargaining power], ‘the degree of procedural unconscionability
of an adhesion agreement is low, and the agreement will be
enforceable unless the degree of substantive unconscionability
is high’ ”]; Fittante v. Palm Springs Motors, Inc. (2003) 105
Cal.App.4th 708, 722.)
Some California courts have concluded that “where the
arbitration provisions presented in a contract of adhesion are
highlighted for the employee, any procedural unconscionability
is ‘limited.’ ” (Serafin, supra, 235 Cal.App.4th at p. 179.) For
example, where an arbitration provision appeared “in [a] two-page,
freestanding document, relating solely to arbitration, that [the
employee] received and signed,” it was “unquestionably highlighted”
(ibid.), and “a minimal degree of procedural unconscionability
ar[ose] from the adhesive nature of the agreement.” (Id. at p. 180.)
Similarly, in Roman v. Superior Court (2009) 172 Cal.App.4th 1462(Roman), the court found an arbitration provision appearing on
the last page of a seven-page document, “set forth in a separate,
succinct (four-sentence) paragraph” with a heading cautioning the
employee to read carefully, was not unconscionable. (Id. at p. 1471.)
The court explained that “whatever procedural unfairness is
inherent in an adhesion agreement in the employment context,
it was limited” under such circumstances. (Id. at pp. 1470−1471.)
Under this authority, the agreement at issue here creates
only “limited” procedural unconscionability. (Roman, supra, 172
Cal.App.4th at p. 1471; see Serafin, supra, 235 Cal.App.4th at
13
p. 179.) The arbitration agreement is a stand-alone document,
“not buried in a lengthy employment agreement” (Roman, supra,
at p. 1471), and the signature page bears the heading, in all capital
letters, “U-HAUL EMPLOYEE AGREEMENT TO ARBITRATE.”
At the outset, the agreement flags for the signatory the importance
of reviewing the document—“Please take the time to read this
material. IT APPLIES TO YOU”—and clearly discloses, in an
underlined portion on the first page, that U-Haul is requiring the
employee to sign the agreement as a term of continued employment
at U-Haul. (See Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th
416, 422 [consent implied from continued employment after notice
of mandatory arbitration policy].) Nor does anything else in the
record indicate procedural unconscionability.
2. Substantive Unconscionability
Substantive unconscionability results from provisions that
are “overly harsh” or “one-sided.” (Little, supra, 29 Cal.4th at
p. 1071, internal quotations omitted; see, e.g., Armendariz, supra,24 Cal.4th at pp. 110−111 [provisions requiring employee to pay
arbitration fees beyond a certain amount].)
The brothers argue the agreement is substantively
unconscionable because they interpret it as: (1) preventing
an employee from bringing a claim related to U-Haul or their
employment at U-Haul against other U-Haul employees in
any forum (judicial or arbitral), (2) in practice, requiring the
brothers to pay more in connection with their arbitrated dispute
than they would have, had they proceeded solely in court,
(3) denying employees the right to appeal under any circumstances,
(4) prohibiting employees from seeking relief from governmental
agencies, and (5) requiring employees to waive the right to seek
PAGA relief. We address each of these in turn below, and
14
conclude none of them supports that the agreement as a whole is
substantively unconscionable. We need not decide if the PAGA
waiver provision is unconscionable, because that provision can be
severed and does not render the entire arbitration agreement
unenforceable.
a. Claims against U-Haul employees
The brothers argue that the agreement is unconscionable
because it forces them to effectively waive their right to bring
claims related to their employment at U-Haul against U-Haul
employees in any forum. Specifically, the brothers characterize
the arbitration agreement as “requir[ing] all employment-related
claims be arbitrated, [and] . . . . additionally illegally prohibit[ing]
its employees from making any claims, whatsoever, against any
other U-Haul employees, such as . . . Sandusky, even if the other
employee would be legally responsible in their individual capacity
for such harm.” (Boldface, capitalization, italics, and underscoring
omitted.) As the sole basis for this characterization, the brothers
cite the following language in the agreement: “ The parties in any
such arbitration will be limited to you and U-Haul, unless you and
U-Haul agree otherwise in writing.” The brothers ignore, however,
that “U-Haul” is a defined term in the arbitration agreement that
encompasses U-Haul employees (and the employees of U-Haul-
affiliated companies as well). Thus, the arbitration agreement
does not deny the brothers a forum in which to bring claims related
to their employment at U-Haul against U-Haul employees like
Sandusky, because such claims are arbitrable under U-Haul’s
arbitration agreement.
15
b. Arbitration fees
A predispute arbitration agreement that requires the
employee to bear any type of expense that he would not otherwise
bear in court is “contrary to public policy, and is therefore
grounds for invalidating or revoking an arbitration agreement.”
(Armendariz, supra, 24 Cal.4th at p. 110.) The brothers argue that
the arbitration agreement required them to pay more than the court
filing fee to arbitrate their claims, because it required them to pay
$200 in AAA filing fees to commence arbitration, in addition to the
$435 filing fee they had already paid the Fresno County Superior
Court to file their complaint. But the arbitration fees the brothers
paid were no more than—indeed, they were less than—the civil
suit filing fee, consistent with the arbitration agreement provisions
on fees. The fact that the brothers ignored their “obligation . . .
to submit to final and binding arbitration any and all claims and
disputes . . . that are related in any way to [their] employment or
the termination of [their] employment with U-Haul” as their “sole
and exclusive remedy,” and instead incurred a court filing fee in
addition to arbitration fees, is not a basis for finding the agreement
unconscionable. In addition, the record reflects U-Haul reimbursed
the brothers’ AAA filing fee.
c. Right to appeal
The brothers next argue that the arbitration agreement
is unconscionable because it denies them the right to appeal from
an arbitration award. This is an inaccurate characterization of
the agreement. The arbitration agreement states it is governed
by the FAA, which provides for appellate review of orders “refusing
a stay of any action” based on arbitration proceedings, “denying
a petition . . . to order arbitration to proceed,” “denying an
application . . . to compel arbitration,” “confirming or denying
16
confirmation of an award or partial [arbitral] award,” “modifying,
correcting, or vacating an [arbitral] award,” “an interlocutory
order granting, continuing, or modifying an injunction against
an arbitration that is subject to this title,” or “a final decision with
respect to an arbitration that is subject to [the FAA].” (9 U.S.C.
§ 16(a).) The arbitration agreement further provides that if
the FAA is found inapplicable, then it will be “governed by the
applicable state arbitration statutes”—here, California law,
which likewise provides for a right to appeal. (See Code Civ. Proc.,
§ 1294, subds. (b)−(d).) The arbitration agreement’s reference
to the decision of the arbitrator being “final and binding” is not
inconsistent with the right to appeal. Nor is an arbitration
agreement unconscionable for failure to explicitly reference judicial
review. (Little, supra, 29 Cal.4th at p. 1075, fn. 1 [“the fact that an
arbitration agreement does not explicitly provide for judicial review
is no basis for invalidating it”].)
d. Ability to seek relief in administrative fora
The brothers argue that the arbitration agreement is
unconscionable because it “prevents employees from pursuing
claims for statutory rights with the agencies that provide
an administrative forum for such claims.” This argument
misconstrues the current state of the law. “[T]he inclusion
of a provision limiting resort to an administrative forum
does not render [an] arbitration agreement unconscionable or
unenforceable.” (Pearson Dental Supplies, Inc. v. Superior Court
(2010) 48 Cal.4th 665, 682.) As our state Supreme Court explained
in Pearson—expressly addressing and distinguishing the cases on
which the brothers rely—only an arbitration agreement provision
that purports to prevent an administrative agency from taking
prosecutorial action is unconscionable. (Id. at p. 681.) Specifically,
17
our state Supreme Court held that “even if the [arbitration]
agreement [at issue] were understood to preclude ‘formal
administrative . . . proceedings,’ it would not be unlawful in all
possible applications. It is true that the United States Supreme
Court has recognized in EEOC v. Waffle House, Inc. (2002) 534 U.S.
279 . . . that an arbitration agreement between an employer and an
employee is not effective to bar the Equal Employment Opportunity
Commission from prosecuting statutory antidiscrimination
violations. And we have stated in Armendariz, supra, 24 Cal.4th
at page 99, footnote 6, anticipating Waffle House: ‘Nothing in this
opinion . . . should be interpreted as implying that an arbitration
agreement can restrict an employee’s resort to the Department
of Fair Employment and Housing, the administrative agency
charged with prosecuting complaints made under the FEHA,
or that the department would be prevented from carrying out
its statutory functions by an arbitration agreement to which it is
not a party.’ [¶] But as the United States Supreme Court recently
recognized in Preston v. Ferrer (2008) 552 U.S. 346 . . . , an
arbitration agreement could, under federal law, validly limit the
resort of an employee to an administrative agency that acts as
an adjudicator, rather than as a prosecutor, of employment claims,
such as the Labor Commissioner in this state. (Id. at p. 359.) Even
assuming an arbitration clause purporting to override the statutory
jurisdiction of an administrative adjudicator would violate
California law, state law would be preempted when applied to an
arbitration agreement covered by the [FAA].” (Pearson, supra, 48
Cal.4th at p. 681.)
The arbitration agreement does not prevent the brothers
from filing a claim or complaint with an administrative agency
that will prosecute a claim on their behalf. To the contrary, the
agreement expressly states it affects only the ability of U-Haul,
18
U-Haul affiliates, employees, and officers—not any administrative
agency—to prosecute or defend claims. It thus has no effect on the
ability of a government agency to pursue a prosecutorial role, as
opposed to an adjudicative one.
e. PAGA waiver
Finally, the brothers argue that the agreement is
unconscionable because it unlawfully prohibits employees from
bringing claims under the PAGA. Specifically, it provides that
“[u]nless otherwise prohibited by law, U-Haul and I additionally
agree to forego and waive any right to bring an action or claim
in a private attorney general capacity.” In so arguing, they cite
Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th
348 (Iskanian), for the proposition that “an agreement by employees
to waive their right to bring a PAGA action serves to disable one
of the primary mechanisms for enforcing the Labor Code. Because
such an agreement has as its ‘object, . . . indirectly, to exempt [the
employer] from responsibility for [its] own . . . violation of law,’ it
is against public policy and may not be enforced.” (Id. at p. 383,
quoting Civ. Code, § 1668, abrogated by Viking River Cruises,
Inc. v. Moriana (2022) 596 U.S. ___ [142 S.Ct. 1906, 213 L.Ed.2d
179] (Viking River).)
We need not consider whether the PAGA waiver here is
unconscionable under Iskanian, post-Viking River, because even
assuming it is, the provision may be severed and does not permeate
the arbitration agreement as a whole with unconscionability. (See
McManus v. CIBC World Markets Corp. (2003) 109 Cal.App.4th
76, 102; Little, supra, 29 Cal.4th at p. 1075 [severing single
unconscionable provision from arbitration agreement where doing
so would not require augmentation of the contract]; Dotson v.
Amgen, Inc. (2010) 181 Cal.App.4th 975, 985 [trial court abused
19
discretion by not severing unconscionable provision where “only one
provision of an agreement is found to be unconscionable and that
provision can easily be severed without affecting the remainder of
the agreement”].)
The court therefore properly compelled the parties’ dispute
to arbitration, and the judgment confirming the award resulting
from that arbitration must likewise be affirmed.
B. Leave to Amend
We turn next to the brothers’ arguments that the court
abused its discretion in denying them leave to amend their
complaint to add PAGA claims, as well as a non-PAGA claim
against Sandusky under section 1194.2. Although great liberality
should be exercised in granting a plaintiff leave to amend his or
her complaint, “ ‘[l]eave to amend should not be granted where . . .
amendment would be futile.’ ” (Ivanoff v. Bank of America, N.A.
(2017) 9 Cal.App.5th 719, 726, italics omitted.) We review a court’s
denial of leave to amend for an abuse of discretion. (Sullivan v.
City of Sacramento (1987) 190 Cal.App.3d 1070, 1081.)
1. Proposed Unpaid Wages Claim Against
Sandusky
The trial court did not identify any basis on which to deny the
brothers leave to amend the complaint to add this cause of action.6
On appeal, Sandusky argues that, under the proposed allegations,
U-Haul already paid the brothers for their work at Sandusky’s
residence, because they performed much of that work during their
shifts at U-Haul and without clocking out. Accordingly, Sandusky
argues, the brothers have failed to state a claim for unpaid wages.
But the complaint also alleges that Sandusky failed to pay the
6 Whether this claim is arbitrable is not a question before us.
20
brothers for work they performed for him after their U-Haul shifts
ended. Accepting these allegations as true, the brothers have
stated a claim for unpaid wages. We therefore conclude the court
abused its discretion in refusing to grant the brothers leave to
amend to bring this claim.
2. Proposed PAGA Claims
We next consider whether the trial court abused its discretion
in denying the brothers leave to amend to add a PAGA claim
against U-Haul and/or Sandusky.
We begin the analysis by determining whether the proposed
amended complaint contains sufficient allegations to establish that
the brothers have standing to bring a PAGA claim.
The brothers have identified two Labor Code violations
alleged in the proposed amended complaint, based on which they
argue they are “aggrieved employees” for purposes of establishing
PAGA standing: (1) the section 1102.5 violations already alleged
in the operative complaint, and (2) the section 1194 unpaid wages
violation they propose to allege against Sandusky.
As to the first possible basis for standing, in their initial
briefing to this court, the brothers stated “that if this court affirms
the trial court’s decision that the arbitration agreement[ ] [is]
enforceable”—as we do above—“then the parties are bound by
the finding of the arbitrator that U-Haul did not retaliate against
the [brothers] in violation of . . . section 1102.5, and [they] would
no longer be considered to be ‘aggrieved employees’ pursuant
to the PAGA statutes.” (Capitalization omitted.) We requested
supplemental briefing on this issue.7 In their supplemental
7Specifically, we requested supplemental briefing in
response to the following questions: “To what extent, if at all,
21
briefing, the brothers change their position and argue that
“the arbitrator’s conclusion that the [brothers] failed to prove
that U-Haul violated the Labor Code did not affect [their] status
as ‘aggrieved employee[s]’ under the PAGA.” (Boldface and
capitalization omitted.) For reasons we explain below, we disagree
and conclude the arbitrator’s finding that the brothers did not
suffer a section 1102.5 violation as alleged in the operative
complaint precludes them from qualifying as “aggrieved employees”
based on that same alleged violation.
The arbitrator’s finding does not have the same effect on the
brothers’ ability to establish PAGA standing based on Sandusky’s
alleged violation of section 1194. PAGA standing created by such
an alleged violation would only support a PAGA claim against
Sandusky.
does the arbitrator’s conclusion that respondent U-Haul . . .
did not violate appellants’ rights under the Labor Code affect
appellants’ status as ‘aggrieved employee[s]’ under [PAGA]
and, more specifically, . . . section 2699, subdivisions (a) and (c)?
Relatedly, how does this affect appellants’ standing to bring
a PAGA claim based on the allegations in the proposed second
amended complaint? In answering this question, please address
how, if at all, a proposed PAGA plaintiff who has actually litigated
(or arbitrated) the Labor Code violations, based on which he or
she would establish standing to bring a PAGA claim, is similar
to a proposed PAGA plaintiff who has settled claims based on
such Labor Code violations. (See Kim[, supra,] 9 Cal.5th 73.) [¶]
How, if at all, does Viking River[, supra,] 142 S.Ct. 1906 . . . affect
whether appellants have standing to bring a PAGA claim based
on the allegations in the proposed second amended complaint?”
22
a. General Analytical Framework: Principles
of Issue Preclusion Determine the Effect of
the Arbitrator’s Finding on the Brothers’
Standing To Bring Their Proposed PAGA
Claims
The PAGA defines an “aggrieved employee” who has standing
to bring a PAGA claim as “any person who was employed by the
alleged violator [of the Labor Code] and against whom one or more
of the alleged violations was committed.” (§ 2699, subd. (c).) Our
state Supreme Court has confirmed the use of the word “alleged”
in this definition reflects the Legislature’s intent not to impose
a “heightened preliminary proof requirement” for establishing
standing prior to adjudication on the merits—i.e., “as a condition
to the filing of suit or preliminary discovery.” (Williams v. Superior
Court (2017) 3 Cal.5th 531, 546.) Thus, unless and until there is
a finding on the merits regarding the alleged violation, allegations
of a Labor Code violation by an alleged employee or former
employee are alone sufficient to establish PAGA standing. (See
id. at pp. 545−546.)
Because settlement of an individual Labor Code claim does
not reflect any determination regarding the merits of an alleged
violation, but rather addresses injury from an alleged violation
and/or how to redress the alleged violation, such settlement does
not affect the ability of a plaintiff to later establish PAGA standing
using the same allegations. For this reason, our state Supreme
Court has concluded that an employee plaintiff who settles his
individual Labor Code claims against an employer may still be an
“aggrieved employee” for the purposes of bringing a PAGA claim
based on the same employer conduct. (See Kim, supra, 9 Cal.5th
at p. 80.) As our high court explained: “The Legislature defined
PAGA standing in terms of violations, not injury. . . . [Citation.] . . .
The remedy for a Labor Code violation, through settlement or other
23
means, is distinct from the fact of the violation itself.” (Id. at p. 84,
italics omitted.) Thus, absent an adjudication regarding the
underlying Labor Code violation, allegations of a violation will
suffice to establish standing—even for a plaintiff who has settled all
related non-PAGA claims.
By contrast, an adjudication that determines that a violation
has not occurred, like the arbitrator’s finding regarding U-Haul’s
alleged violations in this case, does not merely address injury or
redress, but finally determines “the fact of the violation itself ”—
precisely the situation the California Supreme Court noted was not
present in Kim. (Kim, supra, 9 Cal.5th at p. 84, italics omitted.)
Once the Labor Code violations based on which a plaintiff seeks to
qualify for PAGA standing have been finally adjudicated, the extent
to which that adjudication prevents a plaintiff from qualifying
for standing will depend on general principles of issue preclusion.
Such an approach is necessary in order to avoid inconsistent
adjudications as to whether a particular Labor Code violation
occurred. It is also entirely in line with the reasoning underlying
Kim, which focused on settlement being unrelated to an
adjudication of the merits of the underlying Labor Code claim.
(Cf. Donohue v. AMN Services, LLC (2018) 29 Cal.App.5th 1068,
1102 (Donohue) [because employee plaintiff ’s “individual (class)
claims [under the Labor Code had] failed . . . on the basis that
[the plaintiff] did not meet her burden of establishing an issue of
material fact as to the existence of a [Labor Code] violation” (italics
omitted), plaintiff could not establish PAGA standing using the
same Labor Code violation alleged in her individual claim], revd. on
other grounds Donohue v. AMN Services, LLC (2021) 11 Cal.5th 58.)
24
b. The Effect of the Arbitrator’s Finding on the
Brothers’ Standing To Bring Their Proposed
PAGA Claims
Having established that the effect of the arbitrator’s
section 1102.5 finding on the brothers’ ability to allege PAGA
standing in their proposed amended complaint will depend on
general principles of issue preclusion, we turn now to applying
those general principles.
Issue preclusion “precludes relitigation of issues argued
and decided in prior proceedings.” (Lucido v. Superior Court
(1990) 51 Cal.3d 335, 341; see id. at p. 341, fn. 3.) The doctrine
is applied “only if several threshold requirements are fulfilled,”
namely: (1) “the issue sought to be precluded from relitigation
must be identical to that decided in a former proceeding”;
(2) “this issue must have been actually litigated in the former
proceeding”; (3) “it must have been necessarily decided in the
former proceeding”; (4) “the decision in the former proceeding
must be final and on the merits”; and (5) “the party against
whom preclusion is sought must be the same as, or in privity
with, the party to the former proceeding.” (Id. at p. 341; see
DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 825.)
i. PAGA standing based on alleged
section 1102.5 violation
The requirements for issue preclusion are all satisfied
with respect to the issue of whether the brothers are “aggrieved
employees” based on the alleged section 1102.5 violation. The
arbitrator’s finding addressed the same issue the brothers want
to relitigate in connection with PAGA standing: whether U-Haul,
through its employee Sandusky or otherwise, retaliated against
the brothers in violation of section 1102.5. This issue was actually
litigated in the arbitration, and was necessary to resolution of the
25
claims in arbitration. The arbitrator’s section 1102.5 finding is final
and binding on the brothers. Finally, the brothers are the parties
against whom preclusion is sought, and they were parties to the
arbitration.8 Because all the requirements for issue preclusion are
met, the arbitrator’s finding precludes the brothers from using the
allegations in the proposed amended complaint that they suffered
a section 1102.5 violation to establish PAGA standing.
The cases the brothers cite are not to the contrary, as they
involve prior litigation addressing the injury from a violation, and
thus fall within the analytical framework of Kim. (See, e.g., Raines
v. Coastal Pacific Food Distributors, Inc. (2018) 23 Cal.App.5th
667, 670 [lower court erred in granting summary adjudication on
PAGA claim based on the plaintiff ’s failure to prove injury from a
section 226, subdivision (a) violation, as injury is required only for
individual claim under section 226, subdivision (e), not a PAGA
claim]; Lopez v. Friant & Associates, LLC (2017) 15 Cal.App.5th
773, 788 [“a plaintiff seeking civil penalties under PAGA for a
violation of section 226[, subdivision] (a) does not have to satisfy
the ‘injury’ and ‘knowing and intentional’ requirements” applicable
to an individual claim under section 226, subdivision (e)(1)].) Here,
however, the arbitrator’s finding squarely addresses “the fact of ”
the alleged Labor Code violation at issue both in the operative
8 As we discuss further below, this last requirement—
that the party against whom preclusion is sought be the same
in both proceedings—does not also require the party against
whom preclusion is sought be acting in the same capacity in
both proceedings. Nevertheless, even if, as at least one case has
held, issue preclusion does require such identical capacity (see
Gavriiloglou v. Prime Healthcare Management, Inc. (2022) 83
Cal.App.5th 595, 602−603 (Gavriiloglou)), this would not change
the ultimate outcome of our issue preclusion analysis below.
26
complaint and at the arbitration9 (Kim, supra, 9 Cal.5th at p. 84,
italics omitted): Specifically, the arbitrator found that the brothers
had “failed to carry their burden of establishing that [U-Haul]
violated the Government and Labor Code provisions as alleged
in their [c]laims.”
Although not couched in terms of an issue preclusion
analysis, we view Donohue, supra, 29 Cal.App.5th 1068, revd. on
other grounds (2021) 11 Cal.5th 58, as more on point than the cases
on which the brothers rely. Donohue held the trial court did not
err in granting the employer’s motion for summary adjudication
of a former employee plaintiff ’s PAGA cause of action based on the
court’s rulings against the employee on her non-PAGA class Labor
Code claims. (Id. at pp. 1100−1103.) The plaintiff acknowledged
that “each of the PAGA claims ‘is derivative of [the plaintiff ’s] other
claims under the . . . Labor Code”—that is, that she was seeking
standing as an “aggrieved employee” based on the same Labor Code
violations alleged in her individual claims. (Id. at p. 1100.) Given
the rulings in the context of the individual claims that no such
violations had occurred, the plaintiff “did not meet her burden of
establishing an issue of material fact as to whether she ‘individually
experienced’ any particular Labor Code violation,” as she must to
establish PAGA standing. (Id. at p. 1102.)
We disagree with Gavriiloglou, supra, 83 Cal.App.5th 595that the doctrine of issue preclusion applies differently when
considering the effect of an adjudication regarding a plaintiff ’s
9 With the exception of the defamation and declaratory relief
claims the brothers abandoned during arbitration, the claims to
which the arbitrator’s finding refers are the same as those alleged
in the operative complaint, and encompass all the conduct alleged
in the operative complaint.
27
individual Labor Code claim on that plaintiff ’s ability to establish
PAGA standing. In Gavriiloglou, Division Two of the Fourth
District concluded that an arbitral award concluding “that the
alleged Labor Code violations did not occur” against the plaintiff
(id. at p. 600) did not preclude that same plaintiff from qualifying
as an “aggrieved employee” under the PAGA based on the same
alleged Labor Code violations, because the plaintiff was acting
in different capacities in bringing her individual claim and her
PAGA claim. (Id. at pp. 602−603.) The court relied on a purported
general rule that “ ‘[w]ith respect to issue preclusion, a party
appearing in successive actions . . . is not precluded where the
capacities in which he participated are different.’ [Citation].”
(Id. at p. 603.) To support this proposition, Gavriiloglou cites
section 36, subdivision (2) of the Restatement Second of Judgments,
Code of Civil Procedure section 1908, subdivision (a)(2), and three
cases: Holman v. County of Santa Cruz (1949) 91 Cal.App.2d 502,
513; Meldrim v. Board of Supervisors (1976) 57 Cal.App.3d 341,
346 (Meldrim); Travis Glass Co. v. Ibbetson (1921) 186 Cal. 724,
729−730 (Travis Glass). (Gavriiloglou, supra, at pp. 602−603.) It
also refers to Howitson v. Evans Hotels, LLC (2022) 81 Cal.App.5th
475, 490−492 (Howitson) as coming “to a similar conclusion.”
(Gavriiloglou, supra, at p. 604.) None of these cases, however,
applied a broad rule that issue preclusion requires the precluded
party to have been acting in the same capacity in both proceedings
at issue—indeed, none of them even involves issue preclusion at
all. Rather, these cases—and the cited Code of Civil Procedure
section—on which Gavriiloglou relies all involve claim preclusion,
also referred to as res judicata. (See Code Civ. Proc., § 1908,
subd. (a)(2) [judgment is conclusive between the parties when
“litigating . . . in the same capacity”].) Claim preclusion or
“ ‘[r]es judicata’ describes the preclusive effect of a final judgment
28
on the merits” and “prevents relitigation of the same cause
of action in a second suit between the same parties or parties
in privity with them. Collateral estoppel, or issue preclusion,
‘precludes relitigation of issues argued and decided in prior
proceedings.’ ” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th
888, 896.)
Moreover, the claim preclusion cases cited in Gavriiloglou
are distinguishable from the instant matter in other ways as well.
(See Travis Glass, supra, 186 Cal. at pp. 729−730 [action for the
conversion by plaintiff acting in his individual capacity did not
preclude subsequent claim by plaintiff in his capacity as a creditor
of the company determined in the first litigation to be the new
owner of the bottles]; Meldrim, supra, 57 Cal.App.3d at p. 346
[judgment regarding validity of an ordinance brought by a county
supervisor in his individual capacity against the county and the
county auditor did not bar a subsequent suit challenging the
ordinance and naming as defendants the county supervisors in
their capacity as public officers]; Holman, supra, 91 Cal.App.2d
at p. 513 [a suit against fire commissioners in their individual
capacities did not restrict a suit against them in their official
capacities]; Howitson, supra, 81 Cal.App.5th at p. 482 [settlement
of employee’s Labor Code and unfair competition claims,
individually and as a representative of a putative class, without
any adjudication of the merits, did not have claim preclusive effect
on her PAGA claim “ ‘based on the same factual predicates’ ”].) The
cases Gavriiloglou cites cannot provide authority for a proposition
they do not address. Nor are we aware of any basis in the case law
or logic for creating an identical capacity requirement for issue
preclusion now.
But even assuming, for the sake of argument, that
Gavriiloglou is correct that the identical capacity requirement
29
applies to issue preclusion, we still disagree with the decision’s
further conclusion that the “same right” exception to the
requirement is inapplicable under circumstances like those
presented here. Under the same right exception, “ ‘ “[w]here a
party though appearing in two suits in different capacities is in
fact litigating the same right, the judgment in one estops him in
the other.” [Citations.]’ ” (Gavriiloglou, supra, 83 Cal.App.5th at
p. 603, quoting Bernhard v. Bank of America (1942) 19 Cal.2d 807,
814 (Bernhard).) The same right is at issue in (1) the arbitrator’s
assessment of whether U-Haul’s treatment of the brothers on a
particular occasion or occasions violated a particular Labor Code
section (made in the context of adjudicating an individual Labor
Code claim) and (2) the court’s assessment of whether that same
conduct constituted a violation of that same Labor Code section
(made in the context of a PAGA standing analysis). The two
assessments depend on exactly the same law and exactly the same
conduct. Regardless of the context in which this question is asked,
the employer either violated the employee’s rights or it did not; this
determination “derive[s] from readily ascertainable facts” that are
the same in both contexts. (Kim, supra, 9 Cal.5th at p. 84.) Thus,
differences in the capacity in which the brothers are appearing in
connection with these two assessments—as individuals seeking
damages for harm suffered in one, and as proxies for the state
seeking statutory penalties in the other—have no effect on either
assessment, the conduct considered, or the applicable law.
In reaching a contrary conclusion—that the same right
exception did not apply—Gavriiloglou relies on the different
remedies sought by a PAGA plaintiff and an individual plaintiff
to distinguish the two rights at issue. Specifically, Gavriiloglou
explained that because “ ‘[individual] employees do not own a
personal claim for PAGA civil penalties [citation], and whatever
30
personal claims [individual] employees might have for relief are
not at stake [citation].’ [Citation.] Thus, in the arbitration, [a
plaintiff] [is] litigating her own individual right to damages for
Labor Code violations, whereas in . . . [a] PAGA action, she
is litigating the state’s right to statutory penalties for Labor Code
violations.” (Gavriiloglou, supra, 83 Cal.App.5th at p. 603, italics
added.) The “individual right to damages” under a particular code
section and a “state’s right to statutory penalties” under the exact
same code section are distinguished only by the available remedy.
(Ibid.) And under Kim, whether a remedy had been provided for a
particular Labor Code violation plays no role in establishing PAGA
standing. (See Kim, supra, 9 Cal.5th at p. 84 [“[t]he remedy for a
Labor Code violation, through settlement or other means, is distinct
from the fact of the violation itself,” italics omitted].) Remedy aside,
determining whether a plaintiff suffered a Labor Code violation is
no different in the context of an individual Labor Code claim than
it is in the context of determining an employee’s standing to bring
a PAGA claim. Therefore, in these two scenarios, the plaintiff “ ‘is
in fact litigating the same right.’ ” (Bernhard, supra, 19 Cal.2d at
p. 814.)
Thus, even if Gavriiloglou were correct that issue preclusion
requires identical capacity, the same right exception to that
requirement would apply here, and issue preclusion would prevent
the brothers from establishing PAGA standing based on the alleged
Labor Code violations in the proposed amended complaint.
ii. PAGA standing based on Sandusky’s
violations of section 1194.2
The brothers next argue that the arbitrator’s finding does not
bar them from having PAGA standing because the arbitrator “did
not actually litigate or arbitrate all of the Labor Code violations
based on which they would establish standing to bring a PAGA
31
claim.” (Boldface and capitalization omitted.) The only
alleged Labor Code violation they point to besides the alleged
section 1102.5 violation discussed above, however, is Sandusky’s
alleged violations of section 1194.2 by failing to pay the brothers
for their work, as set forth in the proposed amended complaint.
Whether a section 1102.5 violation occurred and whether a
section 1194.2 violation occurred are obviously not identical issues.
Issue preclusion thus does not prevent the brothers from relying
on Sandusky’s alleged section 1194.2 violation to establish PAGA
standing. Moreover, because the proposed amended complaint
alleges that Sandusky employed the brothers and committed this
Labor Code violation against them, it sufficiently alleges that the
brothers are “aggrieved employees” for the purposes of establishing
standing to bring a PAGA claim against Sandusky. This alleged
violation is not a basis on which the brothers can establish standing
to bring a PAGA claim against U-Haul, because U-Haul is not
the employer who allegedly violated section 1194.2. (See Huff v.
Securitas Security Services USA, Inc. (2018) 23 Cal.App.5th 745,
751 [“PAGA allows an ‘aggrieved employee’—a person affected by
at least one Labor Code violation committed by an employer—to
pursue penalties for all the Labor Code violations committed by
that employer,” italics added].) But the brothers should have been
permitted to amend their complaint to allege a PAGA claim against
Sandusky based on the proposed alleged unpaid wages violation.10
10The arbitrability of any portion of the proposed PAGA
claim against Sandusky is not an issue before this court.
32
DISPOSITION
The order granting the motion to compel arbitration is
affirmed.
The order denying leave to file a second amended complaint
is reversed to the extent it denies leave to add the proposed
PAGA and non-PAGA unpaid wages claims against Sandusky.
The judgment is reversed as it applies to Sandusky. In all other
respects, the judgment is affirmed. Respondent U-Haul is awarded
its costs on appeal.
TO BE PARTIALLY PUBLISHED.
ROTHSCHILD, P. J.
We concur:
BENDIX, J.
BENKE, J.*
* Retired Associate Justice of the Court of Appeal, Fourth
Appellate District, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
33