Lewis v. Simplified Labor Staffing Solutions, Inc. ( 2022 )

Filed 12/5/22
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
SYLVESTER LEWIS, B312871
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. 20STCV26893)
v.
SIMPLIFIED LABOR STAFFING
SOLUTIONS, INC. et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Malcolm Mackey, Judge. Reversed and
remanded.
Hill Farrer & Burrill, E. Sean McLoughlin and Clayton J.
Hix, for Defendants and Appellants.
Mahoney Law Group, Kevin Mahoney, Berkeh Alemzadeh,
Raleigh Dixon; Ferguson Case Orr Paterson and John A. Hribar
for Plaintiff and Respondent.
_________________________________
INTRODUCTION
This is an appeal of an order denying the motion of
defendant and appellant Simplified Labor Staffing Solutions, Inc.
(Simplified) 1 to compel arbitration of plaintiff and respondent
Sylvia Lewis’s 2 claims brought under the California Private
Attorneys General Act of 2004, Labor Code section 2698 et seq.
(PAGA). 3 Simplified’s motion was based on Lewis’s predispute
agreement to arbitrate all claims arising from their employment
relationship. The trial court understandably denied the motion
based on a rule followed by numerous California Courts of Appeal
that predispute agreements to arbitrate PAGA claims are
unenforceable. We hold that this rule cannot survive the U.S.
Supreme Court’s recent decision in Viking River Cruises, Inc. v.
Moriana (2022) ___U.S.___ [142 S.Ct. 1906] (Viking River).
We further hold that the scope of the arbitration clause is to be
determined by the arbitrator, in accordance with the arbitration
agreement. Specifically, the parties’ dispute about whether non-
individual PAGA claims are governed by the arbitration
1 Simplified’s co-defendant Simplified Staffing Labor
Solutions, LLC is also a party to this appeal. Additional co-
defendants below, Maersk Inc., DAMCO USA Inc., and DAMCO
Distributions Services Inc., are not parties to this appeal.
2 The complaint alleges that, despite the caption, the
plaintiff’s first name is Sylvia. We refer to her by her surname,
as is customary, and use the same pronouns that she does in her
respondent’s brief.
3 Undesignated statutory references herein are to the Labor
Code.
2
agreement, in the same way individual PAGA claims are, is an
issue for the arbitrator to address. Accordingly, we reverse.
BACKGROUND 4
Simplified is a multi-state temporary staffing services
company. It supplies labor and staffing to clients in California
and elsewhere in the United States. As a result, Simplified is
engaged in and involved in interstate commerce within the
meaning of the Federal Arbitration Act (FAA), 9 U.S.C. section 1et seq.
Simplified hired Lewis in September 2019. On or about her
hire date, Lewis signed an arbitration agreement and class action
waiver. The agreement was made pursuant to the FAA and
requires arbitration of all “claims that arise out of [her]
employment relationship with [Simplified],” subject to limited
exceptions not relevant here. The agreement also states that, if
any provision “is adjudged to be void or otherwise unenforceable,
in whole or in part, such adjudication shall not affect the validity
of the remainder of the Agreement.” Once hired, Simplified
staffed Lewis with clients for whom Lewis acted as a materials
handler responsible for loading and unloading freight.
In 2020, Lewis filed a complaint against Simplified, as well
as an affiliate of Simplified’s and Simplified’s clients with whom
she was staffed. Lewis brought her claims pursuant to PAGA.
Lewis alleged a number of Labor Code violations, including
failures to pay wages, provide meal and rest periods, maintain
accurate payroll records, and reimburse business expenses.
4 We draw the background from the allegations of the first
amended complaint, which we accept as true for purposes of this
appeal, and the documents submitted in connection with the
motion to compel arbitration.
3
Simplified moved to compel arbitration. The trial court
denied the motion on the grounds that predispute agreements to
arbitrate PAGA claims are not enforceable. Following the
approach of several California Courts of Appeal, the trial court
reasoned that, because the State of California is the real plaintiff
in interest in a PAGA action (Iskanian v. CLS Transportation Los
Angeles, LLC (2014) 59 Cal.4th 348, 382 (Iskanian)), it is the
consent of the State, and not of the named employee plaintiff,
that is required to compel arbitration. Under the unique
structure of PAGA, the reasoning goes, an employee can speak for
the State only after it has become “aggrieved” under the statute,
which can occur only after the dispute has arisen. 5 Following
Iskanian, the trial court interpreted the FAA as inapplicable to
disputes involving the State such that there could be no FAA
preemption.
Simplified timely appealed. Its appeal is authorized by
Code of Civil Procedure section 1294, subdivision (a).
While the appeal was pending, but after regular briefing
was complete, the Supreme Court issued its decision in Viking
River. In addition, before it filed its reply, Simplified settled
PAGA claims brought against it in a separate action styled
Shackelford v. Simplified Labor Staffing Solutions, Inc. (C.D.Cal.
No. 2:20-cv-06846-AB-AFM) (the Shackelford Action). We
5 Published decisions taking this approach include: Herrera
v. Doctors Medical Center of Modesto, Inc. (2021) 67 Cal.App.5th
538, 549 (Herrera); Collie v. The Icee Co. (2020) 52 Cal.App.5th
477, 481–482 (Collie); Correia v. NB Baker Electric, Inc. (2019)
32 Cal.App.5th 602, 622; v. Glenair, Inc. (2017) 17 Cal.App.5th
853, 872; Betancourt v. Prudential Overall Supply (2017)
9 Cal.App.5th 439, 449; Tanguilig v. Bloomingdale’s, Inc. (2016)
5 Cal.App.5th 665, 677.
4
requested, and the parties submitted, supplemental briefing on
the impact of these events on the resolution of this appeal.
DISCUSSION
I. Standard of Review
Where, as here, there are no disputed factual issues, we
review de novo the trial court’s decision on a petition to compel
arbitration. (Alvarez v. Altamed Health Services Corp. (2021) 60
Cal.App.5th 572, 581.) Preemption is a question of law subject to
de novo review. (Saheli v. White Memorial Medical Center (2018)
21 Cal.App.5th 308, 316.)
II. PAGA
PAGA was enacted to remedy underenforcement of the
Labor Code. (Iskanian, supra, 59 Cal.4th at p. 379.) The
Legislature attributed this underenforcement to a lack of
resources available to the government agencies responsible for
enforcement. (Ibid.) Its solution was to outsource enforcement to
private individuals affected by their employers’ violations.
To accomplish this, PAGA allows “aggrieved employees” to
act as “private attorneys general,” but only after giving the Labor
and Workforce Development Agency (LWDA) the opportunity to
prosecute the alleged violations itself. (§§ 2699, subd. (c), 2699.3,
subd. (a).) An “aggrieved employee” is an employee against
whom at least one alleged Labor Code violation was committed.
(§ 2699, subd. (a).)
To give the LWDA the opportunity to prosecute alleged
violations, the aggrieved employee must send notice to the LWDA
and the employer specifying such violations. (§ 2699.3, subd.
(a)(1).) The aggrieved employee is automatically deputized to
proceed with its civil suit if (i) the LWDA does not respond
(id., subd. (a)(2)(A)); (ii) the LDWA responds that it does not
5
intend to investigate (ibid.); or (iii) the LWDA notifies the
employee of its intent to investigate but does not issue a citation
within 120 days after its decision to investigate (id., subd
(a)(2)(B)). So deputized, the aggrieved employee wields the power
of the state to seek civil penalties for employers’ Labor Code
violations without any further involvement by the LWDA.
Notably, aggrieved employees are not limited to suing on
violations committed against them. So long as they suffered some
violation, they assume standing to recover for any violation
committed by their employer. We refer to claims on account of
violations suffered by the plaintiff employee as “individual
claims” and those suffered only by the plaintiff’s co-workers as
“non-individual claims.”
PAGA penalties are set at $100 for each aggrieved
employee per pay period for the initial violation and $200 for each
aggrieved employee per pay period for each subsequent violation.
(§ 2699, subd. (f)(2).) Penalties recovered in a PAGA action are
shared between the LWDA (75 percent) and aggrieved employees
(25 percent). (§ 2699, subd. (i).) The successful PAGA plaintiff is
also entitled to its attorney fees and costs. (§ 2699, subd. (g)(1).)
An aggrieved employee’s right to recover for the universe of
its employer’s Labor Code violations substantially amplifies the
risk employers face in a PAGA action. Predictably, then,
employers have sought to limit their PAGA exposure by contract.
The California Supreme Court addressed one approach to doing
so in Iskanian, supra, 59 Cal.4th 348.
A. Iskanian
The Iskanian court considered (a) whether predispute
PAGA waivers are permissible under state law; and, if not
6
(b) whether the FAA preempts a state prohibition on PAGA
waivers.
As to the first question, the court found that an employee
cannot prospectively waive a PAGA claim. It reasoned that
PAGA waivers would violate public policy and provide a
mechanism for employers to exculpate themselves in
contravention of Civil Code sections 1668 and 3515. (Iskanian,
supra, 59 Cal.4th at p. 383.)
In concluding that the particular waiver at issue was
unenforceable, the Iskanian court considered and rejected the
employer’s argument that it was not a true waiver because it
preserved the employee’s right to assert individual PAGA claims
in arbitration and barred only non-individual claims. The court
held that any waiver of non-individual claims (one of two classes
of claims the Iskanian court referred to as “representative”) is
unenforceable because requiring separate actions to seek redress
for the same violation would undermine PAGA’s purposes of
punishing and deterring Labor Code violations. (Iskanian, supra,
59 Cal.4th at pp. 383–384.) Appellate courts applying Iskanian
interpreted this aspect of its analysis as prohibiting splitting
PAGA claims into individual and non-individual components to
permit arbitration of the individual claims. (See Kim v. Reins
International California, Inc. (2020) 9 Cal.5th 73, 88 [citing
cases].)
The Iskanian court next turned to the question of whether
the FAA preempts its rule against PAGA waivers, and found no
preemption. It determined that barring PAGA waivers posed no
“ ‘obstacle to the accomplishment of the FAA’s objectives’ ”
because “the FAA aims to ensure an efficient forum for the
resolution of private disputes, whereas a PAGA action is a
7
dispute between an employer and the state . . . .” (Iskanian,
supra, 59 Cal.4th at p. 384.) It elaborated that “a PAGA claim
lies outside of the FAA’s coverage because it is not a dispute
between an employer and an employee arising out of their
contractual relationship. It is a dispute between the employer
and the state, which alleges directly or through its agents—either
the [LDWA] or aggrieved employees—that the employer has
violated the Labor Code. . . . [In a PAGA action], the state is the
real party in interest.” (Id. at pp. 386–387.)
B. California Appellate Courts Interpret Iskanian
as Barring Predispute Agreements to Arbitrate
PAGA Claims
Seizing on Iskanian’s holding that the State is the real
plaintiff in interest, California appellate courts have refused to
enforce predispute agreements to arbitrate PAGA claims.
As already noted, they reason that an employee is not an
“aggrieved employee” under PAGA before a dispute arises and, as
such, cannot act as an agent for the State at that time. (See, e.g.,
Herrera, supra, 67 Cal.App.5th at p. 550, fn. 3; Collie, supra,
52 Cal.App.5th at pp. 481–482.) Under this reasoning, only once
an employee is aggrieved and deputized as the State’s agent
under PAGA can the employee’s consent be imputed to the State.
We refer to this rule as the “State-must-consent rule.”
However, the rule does not require direct consent by the
State. Rather, the rule permits an aggrieved employee, having
been deputized by the State by operation of law, to elect to
arbitrate PAGA claims without consultation with the State.
This is clear from the disposition in Iskanian, where the court left
it to the employer and employee to decide whether they would
8
agree to arbitrate the employee’s PAGA claims. (See Iskanian,
supra, 59 Cal.4th at p. 391.)
C. Viking River
Viking River addressed our Supreme Court’s holdings in
Iskanian and its analysis bears directly on the issues presented
in this case.
Viking River involved an “agreement to arbitrate any
dispute arising out of [the plaintiff’s] employment.” (Viking
River, supra, 142 S.Ct. at p. 1916.) The agreement further
contained a waiver of the right to assert, among other things, a
representative PAGA action (i.e., non-individual claims). To the
extent this waiver was found invalid, the agreement provided
that the PAGA action would proceed in court, but if any “portion”
of the waiver was valid, it would be enforced in arbitration.
(Ibid.) After her employment ended, the Viking River plaintiff
sued in California under PAGA for one violation she suffered
personally and for several other non-individual claims. (Ibid.)
The employer moved to compel arbitration of the individual claim
but was denied. Relying on Iskanian, Division Three of our court
affirmed, holding that the PAGA waiver was unenforceable and
that PAGA claims cannot be split into arbitrable individual
claims, on the one hand, and non-arbitrable non-individual
claims, on the other. The Viking River court reversed and
remanded on FAA preemption grounds.
The preliminary issue underlying its analysis is addressed
only in a footnote but is critically important: contrary to one of
Iskanian’s holdings, the Viking River court found the FAA does
apply to PAGA claims. (Viking River, supra, 142 S.Ct. at p. 1919,
fn. 4.) To reach this conclusion, the Viking River court
specifically rejected Iskanian’s characterization of a PAGA action
9
as “ ‘not a dispute between an employer and an employee arising
out of their contractual relationship,’ but ‘a dispute between an
employer and the state.’ ” (Viking River, at p. 1919, fn. 4, quoting
Iskanian, supra, 59 Cal.4th at p. 387.) Given its conclusion that
the FAA applies, the court went on to consider whether the FAA
preempted Iskanian’s outright prohibition on PAGA waivers.
First, it rejected the argument that precedents in the class
action context finding preemption of forced class arbitration
compelled the same result for PAGA actions. It explained that, in
contrast to a class representative, a PAGA plaintiff represents
only a single principal and not a multitude of absent class
members. (Viking River, supra, 142 S.Ct. at p. 1920.) As such,
unlike class actions, PAGA actions do not present the problems of
notice, due process, and adequacy of representation that require
robust procedural safeguards above and beyond those envisioned
by traditional arbitration. (Id. at p. 1921.) Thus, PAGA claims
are susceptible to resolution through arbitration without
conflicting with its “traditionally individualized form” and the
corresponding efficiency that arbitration promises. (Ibid.)
It also rejected the argument that PAGA claims conflict
with the objectives of arbitration because, instead of being a
dispute between two principals, PAGA cases consist of one
principal defending against an agent (the aggrieved employee)
acting for an absent principal (the State). The court noted that it
had never “suggested that single-agent, single-principal
representative suits are inconsistent [with] the norm of bilateral
arbitration as [the court’s] precedents conceive of it.” (Viking
River, supra, 142 S.Ct. at p. 1921.)
In short, the Viking River court found that nothing in the
fundamental character of PAGA claims conflicts with the parties’
10
right to choose arbitration for the resolution of their claims and
to enjoy the FAA-guaranteed benefits of that choice. As such, it
found no FAA preemption of Iskanian’s ban on PAGA waivers.
However, the Viking River court did find a conflict between
the FAA and Iskanian’s prohibition on splitting individual claims
from non-individual claims in an arbitration agreement. This
prohibition, it explained, “unduly circumscribes the freedom of
parties to determine ‘the issues subject to arbitration’ and the
‘rules by which they will arbitrate’ ” by imposing on them an all
or nothing choice: arbitrate both individual and non-individual
claims or forego arbitration entirely. (Viking River, supra, 142
S.Ct. at p. 1923.) Were splitting allowed, parties might (as the
Viking River parties did) prefer to resolve higher-stakes non-
individual claims in a judicial forum where multilayered review
is available to correct errors, but to arbitrate lower-stakes
individual claims as to which convenience considerations may
outweigh lack of meaningful review. (Id. at p. 1924.) Because
Iskanian’s anti-splitting rule deprives parties of the right to
choose those claims they wish to arbitrate, the Supreme Court
concluded that it is preempted by the FAA. (Viking River, at
p. 1924.)
Against this backdrop, we consider whether the trial court
should have compelled arbitration of Lewis’s claims against
Simplified.
III. Viking River Compels Reversal
In refusing to compel arbitration, the trial court relied only
on the notion that the absence of state consent renders a
predispute arbitration agreement unenforceable. As already
noted, the State-must-consent rule flows from Iskanian’s premise
that PAGA claims represent a dispute between the employer and
11
the state, rather than the employee, rendering the state the real
party in interest. (Iskanian, supra, 59 Cal.4th at p. 386.)
Iskanian relied on this premise only to conclude that PAGA
claims are exempt from the FAA, stopping short of deeming them
not arbitrable as a matter of law. (Id. at p. 384.) But California
appellate courts extended the premise to bar enforcement of
predispute arbitration agreements, reasoning that no plaintiff is
an “aggrieved employee” predispute and therefore no predispute
plaintiff has authority to bind the state as its agent under PAGA.
(See fn. 5, supra.) These appellate courts largely sidestepped the
question of FAA preemption based on Iskanian’s holding that the
FAA does not apply to PAGA. (See, e.g., Herrera, supra, 67
Cal.App.5th at p. 550.)
Viking River explicitly rejected that PAGA claims are
exempt from the FAA. We must therefore consider whether the
FAA preempts the State-must-consent rule. 6 We conclude that,
beyond preemption, Viking River’s reasoning destroys the
foundation of the State-must-consent rule. But even if it did not,
the rule would be preempted.
6 Even though the Viking River court did not directly
consider the State-must-consent rule, its enforcement of the
predispute arbitration agreement is a strong indication that it
would find the rule is preempted. It would appear anomalous for
us to find an arbitration agreement unenforceable based on a
characteristic shared with an agreement just enforced by the
Supreme Court. Nevertheless, consistent with the rule that cases
are not authority for propositions not considered, we address
preemption of the State-must-consent rule.
12
A. The State-Must-Consent Rule Does Not Survive
Viking River
1. Since PAGA Actions Necessarily Involve
Employer-Employee Disputes, the
Private Agreement to Arbitrate Must Be
Enforced
Iskanian deemed PAGA outside of the FAA’s coverage by
construing PAGA disputes as arising solely between the employer
and the State. (Iskanian, supra, 59 Cal.4th at pp. 386–387.)
Viking River rejected this interpretation, recognizing that PAGA
actions necessarily involve a dispute between the employee and
the employer (while simultaneously recognizing the State’s
interest, as well). (Viking River, supra, 142 S.Ct. at p. 1919, fn. 4
[PAGA claims may “in some sense also [be] a dispute between an
employer and the State”] (italics added).)
Even though all PAGA claims are representative and
belong to the State (Iskanian, supra, 59 Cal.4th at pp. 387, 388),
it is the employee’s personal interest in the litigation—redressing
a Labor Code violation suffered at the hands of the employer—
that is a necessary predicate for the action. (See Viking River,
supra, 142 S.Ct. at p. 1919, fn. 4; § 2699, subd. (c).) Implicit in
Viking River’s result is that, though the PAGA plaintiff may be
an agent for the State as the real party in interest (the court
assumed as much, Viking River, at p. 1914, fn. 2), she is also
something more. (Cf. Devlin v. Scardelletti (2002) 536 U.S. 1, 10
[“The label ‘party’ does not indicate an absolute characteristic,
but rather a conclusion about the applicability of various
procedural rules that may differ based on context”].) The
Supreme Court is well aware “that a contract cannot bind a
nonparty.” (EEOC v. Waffle House, Inc. (2002) 534 U.S. 279,
13
294.) That the employee’s predispute agreement to arbitrate was
sufficient to compel enforcement necessarily reflects that the
employee also enjoys the status of a principal in her own right in
a PAGA action.
This status requires enforcement of an employee’s
predispute agreement to arbitrate PAGA claims. Congress’s
“ ‘preeminent concern . . . in passing [the FAA] was to enforce
private agreements into which parties had entered.’ ” (Perry v.
Thomas (1987) 482 U.S. 483, 490.) As a result, such agreements
must be “ ‘rigorously enforced.’ ” (Ibid.) Where, as here, an
employee agrees to arbitrate future disputes with her employer
and she later brings such a dispute as a PAGA action, courts
must hold her to her choice of forum for the resolution of her
dispute.
2. A State Law Rule Disregarding the
Employee’s Predispute Choice Is
Preempted
Having established that an employee’s interest in a PAGA
action is sufficient to support enforcement of the employee’s
agreement to arbitrate, an interpretation of state law preventing
enforcement of that agreement or interfering with the objectives
of arbitration is preempted by the FAA. (Southland Corp. v.
Keating (1984) 465 U.S. 1, 16, fn. 10 [“the [FAA] preempts a state
law that withdraws the power to enforce arbitration
agreements”]; AT&T Mobility LLC v. Concepcion (2011) 563 U.S.
333, 343 [a state law rule that “stand[s] as an obstacle to the
accomplishment of the FAA’s objectives” is preempted].)
The State-must-consent rule does just that. The FAA is
concerned specifically with enforcing predispute agreements to
arbitrate. (9 U.S.C. § 2 [“a contract evidencing a transaction
14
involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction . . . shall be
valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract”].)
Permitting PAGA arbitration consent to occur only once an
employee becomes aggrieved means consent can occur only after
a dispute has arisen. (See § 2699, subd. (c) [“ ‘aggrieved
employee’ means any person who was employed by the alleged
violator and against whom one or more of the alleged violations
was committed”] (italics added).) The State-must-consent rule
thereby prevents enforcement of predispute arbitration
agreements in contravention of the FAA’s guarantee that parties
may agree to settle future disputes by arbitration.
That the rule is a purported application of general agency
principles does not save it. “[A] state rule can be preempted not
only when it facially discriminates against arbitration but also
when it disfavors arbitration as applied.” (Sanchez v. Valencia
Holding Co., LLC. (2015) 61 Cal.4th 899, 924.) It is one thing to
generically refer to the employee as agent or proxy for the State
in a PAGA action. It is quite another to blindly apply agency
rules without regard to the unique character of the relationship.
The relationship between the State and the PAGA plaintiff
is defined exclusively by the PAGA statute. The statute and the
rights it creates are “unique.” (Collie, supra, 52 Cal.App.5th at
p. 483.) Unlike the typical agent, the PAGA plaintiff must have
been personally affected by the same wrong that it complains
about on behalf of its principal. (§ 2699, subd. (c).) As Viking
River recognizes, this elevates her status to something more than
a mere water carrier for the State’s dispute. And unlike a
traditional principal, the State delegates enforcement to the
15
employee entirely and irrevocably. Once the employee, by State
inaction or express authorization, obtains the right to sue, the
State defers completely to the employee in prosecuting PAGA
claims. It is the employee’s burden to prove her claims and the
employee’s right to dismiss or settle them without further
litigation. Once commenced, the State has no right of
intervention in a PAGA action. (See Magadia v. Wal-Mart
Assocs. (9th Cir. 2021) 999 F.3d 668, 677.) Indeed, even Iskanian
acknowledged that PAGA litigation proceeds “without
government supervision.” (Iskanian, supra, 59 Cal.4th at pp.
389–390.) 7
Moreover, concern over “binding” the state-as-principal to a
predispute, pre-agency agreement is misplaced. The State has
the unqualified right to undertake prosecution of any Labor Code
violation a prospective PAGA plaintiff seeks to bring. (§ 2699,
subd. (h).) Should it elect to do so, the LWDA is free to proceed in
any manner and forum it is authorized to by statute, without
regard to any agreement by the prospective plaintiff to arbitrate.
(See EEOC v. Waffle House, Inc., supra, 534 U.S. at p. 294 [EEOC
not bound to arbitrate enforcement action vindicating rights of
employee who agreed to arbitrate all claims].) The State’s
unfettered right to proceed outside of arbitration by pursuing
7 PAGA was since amended to require the aggrieved
employee to provide notice to the LWDA of certain events in
PAGA actions filed on or after July 1, 2016, including notices of
proposed settlements when submitted for court approval.
(§ 2699, subd. (l)(2).) Nevertheless, the statute provides that
“[t]he superior court shall review and approve any settlement of
any civil action filed pursuant to [PAGA],” but contains no
language giving the LWDA any veto right over a proposed
settlement. (Ibid.)
16
enforcement in its own name is incompatible with the notion that
it is in any way “bound” by the employee’s predispute agreement
to arbitrate.
In short, to feign deference to the preferences of the state-
as-principal under these circumstances is to ignore that, at the
point that the employee has the right to sue, the State has
manifested a lack of preference about how the litigation will
proceed. Since the PAGA plaintiff is entitled to choose
arbitration without consulting the State after the dispute arose
(see Iskanian, supra, 59 Cal.4th at p. 391), disregarding her
earlier choice simply because the State was not yet involved
serves only one apparent purpose: to let the employee renege on
her agreement.
In reaching our conclusion that the State-must-consent rule
is preempted, we note the absence of disagreement from our
Supreme Court or from Lewis. Iskanian did not hold that PAGA
claims are inarbitrable as a matter of law. (See Sakkab v.
Luxottica Retail N. Am., Inc. (9th Cir. 2015) 803 F.3d 425, 434
[“The California Supreme Court’s decision in Iskanian expresses
no preference regarding whether individual PAGA claims are
litigated or arbitrated”].) Rather, it held that a waiver depriving
a PAGA plaintiff of any forum was unenforceable. (Ibid.) Indeed,
in his concurring opinion, Justice Chin expressed concern that
the decision could be read to permit a blanket PAGA arbitration
ban and rejected it: “Under the majority’s view . . . , the state
may, without constraint by the FAA, simply ban arbitration of
PAGA claims and declare agreements to arbitrate such claims
unenforceable. I do not subscribe to that view, for which the
majority offers no case law support.” (Iskanian, supra, 59 Cal.4th
at p. 396 (conc. opn. of Chin, J.).)
17
For her part, Lewis answered Simplified’s preemption
arguments solely by reference to Iskanian’s blanket exemption of
PAGA claims from the FAA. In her supplemental brief filed after
Viking River rejected that exemption, Lewis did not argue the
State-must-consent rule escaped preemption for other reasons.
Instead, she conceded that she was bound to arbitrate her
individual claims based on her predispute agreement to do so,
undercutting any argument that the State-must-consent rule
survived Viking River.
B. Arbitrability of the Non-individual Claims Is an
Issue for the Arbitrator
Simplified and Lewis agree that Lewis’s individual PAGA
claims must be arbitrated. Where disagreement remains is what
to do with her non-individual claims. Simplified now argues that
Viking River requires dismissal because Lewis’s obligation to
arbitrate her individual claims maroons her non-individual
claims in court without a plaintiff. Lewis argues that the Viking
River discussion supporting dismissal is not binding on us and
her obligation to arbitrate her individual claims does not affect
her standing to pursue her non-individual claims. In urging that
her non-individual claims survive, she declines to concede they
must be arbitrated.
We need not decide whether an arbitration agreement can
require that non-individual PAGA claims be arbitrated because
the arbitrator must decide whether the Simplified arbitration
agreement calls for such arbitration at all. 8 The Simplified
8 Justice Sotomayor’s concurrence in Viking River, supra,
142 S.Ct. at pp. 1925–1926, is an example of the school of thought
that the viability of non-individual PAGA claims after the
18
arbitration agreement incorporates the Employment Arbitration
Rules & Procedures of the American Arbitration Association
(AAA). The AAA Rule on “Jurisdiction” provides that “[t]he
arbitrator shall have the power to rule on his or her own
jurisdiction, including any objections with respect to the
existence, scope or validity of the arbitration agreement.”
This provision clearly leaves to the arbitrator to determine
whether the agreement to arbitrate extends to Lewis’s non-
individual PAGA claims. (See Nguyen v. Applied Medical
Resources Corp. (2016) 4 Cal.App.5th 232, 245 [arbitrability
determined by arbitrator under AAA rules].) We therefore will
remand with directions that, when the case is ordered to
arbitration, the scope of the claims subject to arbitration be
submitted to the arbitrator.
IV. We Decline to Take Judicial Notice of Simplified’s
Settlement in the Shackelford Action
In regular briefing, Simplified asserted, without record
support, that a settlement it reached in the Shackelford Action
deprived Lewis of standing to maintain her PAGA action. We
requested further briefing on this topic as well as a copy of the
settlement on which Simplified based its assertion. The parties
complied and we now decline to take judicial notice of the
Shackelford Action settlement. The parties dispute the facts
relevant to its resolution.
individual claims are compelled to arbitration is an open question
for further exploration by California courts. (See, e.g.,
Gavriiloglou v. Prime Healthcare Management, Inc. (2022) 83
Cal.App.5th 595 [finding arbitration of an individual PAGA claim
did not prevent the employee from pursuing non-individual
PAGA claims in court, post-Viking River].)
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Most notably, the parties dispute the date through which
the Shackelford Action settlement applies to PAGA claims it
settled. Lewis contends that it was through October 30, 2020,
the date of preliminary approval of the settlement. She offers no
citation or explanation for this assertion. Simplified contends
that it was through “the date of final approval” of the settlement,
which was June 22, 2021. However, this is not apparent from the
record citation Simplified offered in support, which states only
that “[t]he State of California’s claims for civil penalties pursuant
to PAGA are also extinguished,” without specifying to what
PAGA claims this refers. The preceding sentence contains the
capitalized term “PAGA Claims” which appears to be undefined.
Moreover, the “Released Claims” in the settlement agreement,
which include as part of their definition PAGA claims, are limited
to those based on “facts that occurred on or before August 10,
2020.”
Lewis contends that “[t]he PAGA period in this case is
ongoing” but does not explain why. While not necessarily
dispositive, we are directed to no evidence concerning whether
Lewis still works for Simplified. At least as of the date of her
complaint (July 16, 2020), Lewis alleged that she was still
employed by Simplified. She further alleged that the harms
alleged in her complaint were ongoing. Simplified does not argue
Lewis lacked standing as of the date of her complaint or with
respect to PAGA claims post-dating the Shackelford Action
settlement.
Given the state of the record and the underdeveloped
arguments on the point, we make no determination of the date
through which the Shackelford Action PAGA release was
effective, but decide only that the parties have failed to
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demonstrate on the record before us that the facts concerning the
settlement are sufficiently certain to be judicially noticed.
We leave determination of the effect of the settlement, if any, to
further proceedings on remand.
DISPOSITION
The order denying Simplified’s motion to compel arbitration
is reversed and the matter is remanded for further proceedings in
accordance with this opinion. Reversal is the result of an
intervening change in law. In the interests of justice, the parties
shall bear their own costs on appeal.
CERTIFIED FOR PUBLICATION
*
HARUTUNIAN, J.
We concur:
STRATTON, P. J.
GRIMES, J.
* Judge of the San Diego Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
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