Hensley v. Medely CA2/2 ( 2022 )

Filed 9/30/22 Hensley v. Medely CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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 TWO
JEAN HENSLEY, B311571
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No.
v. 19STCV10238)
MEDELY, INC.,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los
Angeles County, Yolanda Orozco, Judge. Reversed with
directions.
K&L Gates, Eugene Ryu and Penny Chen for Defendant
and Appellant.
Aegis Law Firm, Samuel A. Wong, Kashif Haque, Jessica L.
Campbell and Fawn F. Bekam for Plaintiff and Respondent.
__________________________________________
Appellant Medely, Inc. operates an online platform to help
healthcare workers seeking jobs connect with medical facilities
needing workers. Respondent Jean Hensley found jobs through
Medely’s platform. Despite agreeing to arbitrate disputes under
the Federal Arbitration Act (FAA) (9 U.S.C.S. § 1 et seq.),
Hensley sued Medely on behalf of herself and others under the
Private Attorneys General Act of 2004 (PAGA) for alleged Labor
Code violations. (Lab. Code, § 2698 et seq.)1
The Supreme Court recently held that an employer is
entitled under the FAA to compel arbitration of an employee’s
individual claims, separate and apart from PAGA claims alleged
on behalf of others. (Viking River Cruises, Inc. v. Moriana (2022)
596 U.S. ___ [142 S.Ct. 1906, 213 L.Ed.2d 179] (Viking).)
Following Viking, we reverse the order denying Medely’s motion
to compel arbitration and direct the court to enter a new order
requiring Hensley to arbitrate her individual claims.
FACTS AND PROCEDURAL HISTORY
Hensley’s Lawsuit
Hensley used Medely’s online platform to find nursing work
at healthcare facilities. Medely classified her as an independent
contractor. Hensley filed suit in 2019 “on behalf of herself and all
other aggrieved employees employed by [Medely] through[out]
California.” She seeks civil penalties under PAGA for willful
employment misclassification and failure to pay overtime wages,
provide meal periods or rest breaks, provide accurate itemized
wage statements, maintain accurate records, timely pay wages or
reimburse business expenses.
1 Undesignated statutory references are to the Labor Code.
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Medely’s Motion to Compel Arbitration
Medely, a software company, has an online platform that
healthcare professionals use to find short term jobs at medical
facilities. To access the platform, professionals create accounts
and agree to the terms of a service agreement (Agreement). Each
time users book jobs, they must reconfirm their acceptance of the
Agreement. Medely’s chief executive Waleed Nasr declares that
that Hensley created an account in July 2017 and booked six jobs
using Medely’s platform. Each time, Hensley logged onto her
account and reconfirmed her consent to the Agreement.
The Agreement’s introduction reads: “[D]isputes between
us to be submitted to binding and final arbitration. (1) You will
only be permitted to pursue claims and seek relief against us on
an individual basis, not as a plaintiff or class member in any
class or representative action or proceeding; and (2) you are
waiving your right to seek relief in a court of law and to have a
jury trial on your claims.” Section 17, the Agreement’s
arbitration clause, states that it is governed by the FAA.
The Agreement denies any employment relationship with
professionals or medical facilities or “a partnership or agency
relationship between the Medical Facility and Medely. . . .
Medely does not, in any way, supervise, direct or control the
Professional’s work or services performed in any manner. Medely
does not set the Professional’s work hours and location of work,
nor is Medely involved in determining the type or manner of
compensation.” Professionals “acknowledge and agree that there
is no employment, part-time employment, consulting, contractor,
partnership, or joint venture relationship whatsoever between
you and us. Medely is not an employment service or agency and
does not secure employment for you.”
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Medely asked the court to compel arbitration of Hensley’s
lawsuit or, under a delegation clause, the issue of whether she
was misclassified as an independent contractor. In opposition,
Hensley asserted that she did not agree to arbitrate; that
predispute waivers of PAGA claims are invalid; and Medely
waived the right to arbitrate.
The Court’s Rulings
The court initially granted Medely’s motion to compel
arbitration. It found that Medely proved the existence of an
arbitration agreement: Hensley clicked on a button to manifest
assent to the Agreement, first to create her account then each
time she booked jobs. The court found that the Agreement
delegates authority to the arbitrator to resolve whether Hensley
was properly classified as an independent contractor.
Over a month later, Hensley petitioned for reconsideration.
Medely opposed the motion, arguing that it was untimely and the
new case law Hensley cited did not change existing law on PAGA.
On reconsideration, the court denied the motion to compel
arbitration. It acknowledged that Medely proved the existence of
an arbitration agreement and Hensley agreed to it multiple
times. However, because there is no agreement to arbitrate
between Medely and the state of California, Hensley is
“deputized” to represent the state in the PAGA action.
DISCUSSION
1. Appeal and Review
Appeal lies from denial of a motion to compel arbitration.
(Code Civ. Proc., § 1294, subd. (a).) We independently construe
the Agreement on de novo review. (Molecular Analytical Systems
v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 707;
Eminence Healthcare, Inc. v. Centuri Health Ventures, LLC
(2022) 74 Cal.App.5th 869, 875.)
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2. Ruling on Reconsideration
Medely argues that the trial court erred by reconsidering
its decision to correct a “potential misinterpretation of the law”
caused by Hensley’s failure “to raise all arguments and
authority.” The court did not rely on Code of Civil Procedure
section 1008 because reconsideration was not sought within the
10-day statutory time frame. Instead, it exercised its inherent
authority to “correct its own errors,” citing Le Francois v. Goel
(2005) 35 Cal.4th 1094, 1107 [on its own motion, court may
reconsider prior interim orders to correct errors]. The court was
entitled to use its core power in this manner. (Id. at p. 1104.)
There is no basis for reversal owing to a procedural defect.
(Cal. Const., art. VI, § 13 [judgment cannot be set aside for
procedural error unless it resulted in a miscarriage of justice].)
Medely was not deprived of notice or an opportunity to be heard
before the court ruled. In any event, we independently review
the ruling with full briefing by the parties, curing any procedural
error below. (Raines v. Coastal Pacific Food Distributors, Inc.
(2018) 23 Cal.App.5th 667, 683.)
3. PAGA Civil Actions
PAGA allows “an aggrieved employee on behalf of himself
or herself and other current or former employees” to seek civil
penalties for labor violations, after exhausting administrative
procedures. (§§ 2699, subd. (a), 2699.3, 2699.5.) “ ‘[A]ggrieved
employee’ means any person who was employed by the alleged
violator and against whom one or more of the alleged violations
was committed.” (§ 2699, subd. (c).) The employee acts on behalf
of the state to redress Labor Code violations. (Arias v. Superior
Court (2009) 46 Cal.4th 969, 986.)
4. The Viking Case
When the trial court ruled, governing law barred splitting a
PAGA action into arbitrable “individual” claims and non-
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arbitrable “representative” claims. (Iskanian v. CLS
Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 383
(Iskanian); Kim v. Reins International California, Inc. (2020) 9
Cal.5th 73, 88 [“courts have rejected efforts to split PAGA claims
into individual and representative components”].) This aspect of
Iskanian was recently overruled in Viking, supra, 142 S.Ct. 1906.
The Supreme Court held that California “cannot condition
the enforceability of an agreement to arbitrate on the availability
of a procedural mechanism that would permit a party to expand
the scope of the anticipated arbitration by introducing claims
that the parties did not jointly agree to arbitrate.” (Viking,
supra, 142 S.Ct. at p. 1923.) “A state rule imposing an expansive
rule of joinder in the arbitral context would defeat the ability of
parties to control which claims are subject to arbitration. Such a
rule would permit parties to superadd new claims to the
proceeding, regardless of whether the agreement between them
committed those claims to arbitration.” (Id. at p. 1924.)
The FAA preempts Iskanian to the extent “it precludes
division of PAGA actions into individual and non-individual
claims through an agreement to arbitrate.” (Viking, supra, 142
S.Ct. at p. 1924.) “Iskanian’s indivisibility rule effectively coerces
parties to opt for a judicial forum rather than ‘forgo[ing] the
procedural rigor and appellate review of the courts to realize the
benefits of private dispute resolution.’ ” (Id. at p. 1912.) Thus,
under the FAA plaintiffs can, in fact, be compelled to arbitrate
their individual PAGA claims.
5. The Agreement Requires Individual Arbitration
The FAA governs the Agreement’s arbitration clause.
Parties may “expressly designate” the FAA in their agreement.
(Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th
376, 394.) Thus, the FAA controls our interpretation of the
Agreement. (Prima Donna Development Corp. v. Wells Fargo
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Bank, N.A. (2019) 42 Cal.App.5th 22, 35 (Prima Donna);
Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th
1110, 1121–1122.)
In plain language, the Agreement requires arbitration of
individual claims. Users of Medely’s platform must submit to
arbitration “on an individual basis.” Section 17.1 reads: “[Y]ou
are agreeing in advance that you will not participate in or seek to
recover monetary or other relief in any lawsuit filed against
Medely alleging class, collective, and/or representative claims. . . .
Instead, by agreeing to arbitration, you may bring your claims
against Medely in an individual arbitration proceeding.” Section
17.5 repeats that “all claims and disputes within the scope of this
arbitration agreement must be arbitrated on an individual basis
and not on a class basis, only individual relief is available, and
claims of more than one user cannot be arbitrated or consolidated
with those of any other user.”
Medely is “entitled to enforce the agreement insofar as it
mandated arbitration of [Hensley’s] individual PAGA claim[s].”
(Viking, supra, 142 S.Ct. at p. 1925.) The arbitrator will
necessarily decide if Hensley is an “aggrieved employee” (§ 2699,
subd. (c)) or bar her from asserting PAGA if it finds that she is
not an employee. (Henry Schein, Inc. v. Archer & White Sales,
Inc. (2019) 586 U.S. ___, ___ [139 S.Ct. 524, 529, 202 L.Ed.2d 480]
[contract may delegate to an arbitrator the gateway issue of
arbitrability]; Trinity v. Life Ins. Co. of North America (2022) 78
Cal.App.5th 1111, 1122.).)
6. Severability Clause
The FAA does not preempt Iskanian’s rule prohibiting the
“wholesale waiver of PAGA claims.” (Viking, supra, 142 S.Ct. at
p. 1924.) The Agreement does not explicitly state that users
waive PAGA claims. And even if the Agreement’s ban on
representative claims is construed as an impermissible waiver of
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PAGA claims, its section 17.6 allows any invalid or unenforceable
parts to “be severed and the remainder of the Arbitration
Agreement shall continue in full force and effect.”
When a severability clause removes parts of an agreement
that are invalid in some respect, any part of the agreement that
remains valid must still be enforced in arbitration. “Based on
this [severability] clause, [Medely] was entitled to enforce the
agreement insofar as it mandated arbitration of [Hensley]’s
individual PAGA claim[s].” (Viking, supra, 142 S.Ct. at p. 1925.)
7. Hensley Forfeited Her Unconscionability Claims
After Hensley filed a respondent’s brief, the Supreme Court
decided Viking. We asked Hensley’s counsel “to file an informal
letter brief discussing the Viking River decision and appellant’s
arguments regarding that decision.” Ignoring the limited scope of
her task, Hensley’s counsel devoted nearly the entire brief to the
issue of unconscionability. Counsel concedes she is raising
unconscionability “for the first time.” We did not authorize
counsel to raise a new issue in the letter brief.
Hensley forfeited the issue of unconscionability. (Prima
Donna, supra, 42 Cal.App.5th at p. 42 [plaintiff forfeited
unconscionability as a defense to an arbitration agreement by
failing to raise the issue in the trial court].) It is far too late to
assert unconscionability just before oral argument.
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DISPOSITION
The order denying appellant Medely’s motion to compel
arbitration is reversed. The trial court is directed to issue an
order compelling respondent Hensley to arbitrate her individual
claims against Medely and to stay her non-individual PAGA
claims pending completion of the arbitration.
The parties to bear their own costs on appeal.
NOT TO BE PUBLISHED.
LUI, P. J.
We concur:
CHAVEZ, J.
HOFFSTADT, J.
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