Whalley v. Wet Seal CA4/3 ( 2013 )

Filed 11/15/13 Whalley v. Wet Seal CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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
FOURTH APPELLATE DISTRICT
DIVISION THREE
LAUREN WHALLEY et al.,
Plaintiffs and Appellants, G047406
v. (Super. Ct. No. 30-2012-00563123)
THE WET SEAL, INC., et al., OPINION
Defendants and Respondents.
Appeal from an order of the Superior Court of Orange County, Gail Andrea
Andler, Judge. Order affirmed in part and reversed in part and remanded. Motion for
judicial notice. Denied.
Law Offices of Sima Fard and Sima Fard for Plaintiffs and Appellants.
Sheppard, Mullin, Richter & Hamilton, Ryan D. McCortney and Jason M.
Guyser for Defendants and Respondents.
* * *
Plaintiffs Lauren Whalley and Marysol Rosales filed a putative class action
for the alleged failure by defendants The Wet Seal, Inc. and The Wet Seal Retail, Inc. to
timely pay wages upon termination of employment, alleging violations of Labor Code
sections 201 and 202, unfair competition (Bus. & Prof Code, § 17200 et seq.; UCL) and,
by Rosales in a representative capacity, for civil penalties under the California Private
Attorney General Act (Lab. Code, § 2699 et seq.; PAGA). Upon motion by defendants,
the court ordered plaintiffs to arbitrate their individual claims and ruled their class and
representative claims were barred.
On appeal plaintiffs raise five issues,1 i.e., defendants waived their right to
compel arbitration, Rosales’s arbitration agreement is unenforceable for lack of
mutuality, the class claims are not barred because the agreements contained an implied
agreement to arbitrate them, if the order compelling arbitration is affirmed, it must be on
a classwide or representative basis, and the claim for injunctive relief for unfair
competition cannot be arbitrated.
We conclude the PAGA cause of action cannot be arbitrated individually or
arbitrated in a representative capacity and reverse that part of the order. The remainder of
the order is affirmed.
1 In their summary of the issues presented, plaintiffs raised another issue, their
right to discovery regarding formation and interpretation of the arbitration agreement.
But plaintiffs failed to set out this issue under a discrete heading or supply reasoned legal
argument and supporting authority. Therefore the claim is forfeited. (Cal. Rules of
Court, rule 8.204(a)(1)(B); Benach v. County of Los Angeles (2007) 149 Cal. App. 4th 836,
852; Evans v. CenterStone Development Co. (2005) 134 Cal. App. 4th 151, 165.) The
same defects plague the argument regarding lack of mutuality of Rosales’s agreement,
but because defendants discussed it on the merits instead of merely challenging the
procedural defects, plaintiffs had the right to and did respond to it in the reply brief and
we address the issue.
2
FACTS AND PROCEDURAL HISTORY
In May 2011 Whalley filed a putative class action in Alameda Superior
Court, alleging defendants violated the Labor Code by failing to pay wages due
employees upon termination of their employment. She included an additional cause of
action for violation of the UCL. Defendants answered the complaint, asserting as one of
their 39 affirmative defenses that the action should be stayed because there was an
agreement requiring the parties to arbitrate the dispute. Defendants also filed a petition to
coordinate the case with another wage and hour case pending against them in Orange
County Superior Court. The petition was denied.
Less than a week after the petition for coordination was denied and four
months after the complaint was filed, defendants filed a motion to compel Whalley’s
claims to arbitration. Defendants relied on an arbitration agreement signed by Whalley
that states she and defendants agreed to arbitrate disputes and specifically agreed “any
dispute arising out of or in any way related to your employment with the [defendants], or
its termination, shall be decided exclusively by final and binding arbitration . . . .”
Before the court ruled on the motion, Whalley was granted leave to file an
amended complaint, which contained the original two causes of action and added plaintiff
Rosales and her PAGA cause of action.
Once Rosales was added as a plaintiff, defendants were allowed to file a
supplemental motion to compel her to arbitrate her claims. The basis for this claim was
Rosales’s employment application, the final paragraph of which stated, “If I am hired, in
consideration for my employment . . ., any dispute arising out of or in any way related to
my employment, or its termination, including, but . . . not limited to, claims for wages or
other compensation due or penalties, breach of contract, violation of statute, violation of
common law or unlawful discrimination or harassment arising under any local, state or
federal law, shall be decided exclusively by final and binding arbitration . . . .” Rosales
initialed this provision, which was directly above her signature on the application.
3
During this time, and before the court ruled on the motion to compel
arbitration, plaintiffs filed a motion to transfer venue to Orange County, which was
granted. Once the case was transferred, defendants filed a new motion to compel
plaintiffs to arbitrate their individual causes of action and to dismiss the class and
representative claims. Defendants relied on the same arbitration provisions as set out
above and also argued the court should dismiss the class claims because the parties never
agreed to arbitrate representative or class disputes.
The court granted defendants’ motion and ordered the parties to arbitrate
plaintiffs’ individual claims; the class and representative claims were barred. The court
stayed the remainder of the action. It held the arbitration agreements executed by the
plaintiffs were enforceable. It further ruled arbitration of class claims under Whalley’s
agreement was barred since the agreement did not provide for it. In addition, as to
Rosales’s PAGA cause of action, the court found there is no right to bring a claim as a
representative under the PAGA and such right could be waived.
MOTION FOR JUDICIAL NOTICE
Plaintiffs request we take judicial notice of documents filed in Elizabeth
Montano v. The Wet Seal Retail, Inc., Los Angeles Superior Court Case No. BC472230
and The Wet Seal’s opening brief in its appeal of an order in that case. A motion for
judicial notice must include a statement as to why the subject matter of the motion is
relevant. (Cal. Rules of Court, rule 8.252(a)(2).) Plaintiffs failed to do so in the motion.
In their reply brief plaintiffs appear to lay out the basis for their claim as to
the relevance of the documents that are the subject of the motion. They assert Montano is
a putative class action matter involving claims under the Labor Code and an arbitration
provision. Plaintiffs claim Montano is a related case defendants should have disclosed.
This does not comport with court rules.
But even were we to consider this claim, it is not sufficient. The mere fact
the two cases might share the same subject matter does not make Montano relevant to the
4
instant case. (Ketchum v. Moses (2001) 24 Cal. 4th 1122, 1135, fn. 1 [no judicial notice
of irrelevant documents].)
And even were we to take judicial notice of the documents, we may not
take judicial notice of the truth of their contents. (Oiye v. Fox (2012) 211 Cal. App. 4th
1036, 1055 [“court may take judicial notice that pleadings were filed containing certain
allegations and arguments [citation], but a court may not take judicial notice of the truth
of the facts alleged”].)
Because we decline to take judicial notice, we do not consider any of
plaintiffs’ arguments on this issue or with respect to these documents as set out in the
reply brief. To the extent the arguments on this issue are based on documents included in
the record, we do not consider them because they were not raised in the opening brief.
(Mansur v. Ford Motor Co. (2011) 197 Cal. App. 4th 1365, 1387-1388.)
DISCUSSION
A. Waiver
Plaintiffs assert defendants waived their right to arbitrate and dismiss
representative and class claims because they “heavily” litigated the action for a year
before filing the motion, took a contrary position when they moved to compel arbitration
of “the entire case,” and did not file the motion to compel within 30 days.
Plaintiffs failed to make this argument in the trial court. A party may not
raise an argument for the first time on appeal. (Greenwich S.F., LLC v. Wong (2010) 190
Cal. App. 4th 739, 767.) This claim does not fall within the exception allowing pure
questions of law to be raised without first preserving them in the trial court. (Ibid.)
Whether a party has waived the right to compel arbitration is generally a question of fact
reserved for the trial court, whose decision we review for substantial evidence. (Saint
Agnes Medical Center v. PacifiCare of California (2003) 31 Cal. 4th 1187, 1196.) The
parties’ disagreements in their briefs on this issue demonstrate it is not a question of law.
Thus, this issue is forfeited.
5
B. Mutuality of Rosales’s Arbitration Agreement
In the opening brief, plaintiffs list as an issue whether the arbitration
provision in Rosales’s employment application is unenforceable because “substantially
[sic] unconscionable for lack of mutuality” and argue the court should have a stayed a
decision on this issue until the Supreme Court decided Wisdom v. AccentCare (2012) 202
Cal. App. 4th 591, review granted March 28, 2012, S200128, review dismissed July 24,
2013. In Wisdom, in addition to finding an arbitration provision in an employment
application was procedurally unconscionable, the court held it was substantively
unconscionable because of the lack of mutuality. To invalidate an arbitration provision
based on unconscionability, there must be a finding it is both substantively and
procedurally unconscionable. (Armendariz v. Foundation Health Psychcare Services,
Inc. (2000) 24 Cal. 4th 83, 114.)
In their brief defendants did not rely on Wisdom but argued there was no
lack of mutuality, citing Roman v. Superior Court (2009) 172 Cal. App. 4th 1462 in
support. In response, plaintiffs sought to distinguish Roman and also relied on Wisdom,
despite acknowledging review had been granted.2 This was the extent of their argument.
They did not develop reasoned legal argument Rosales’s arbitration provision was
unconscionable. This is consistent with their lack of argument in the opening brief.
Failure to do so forfeits this argument on appeal. (Evans v. CenterStone Development
Co., supra, 134 Cal.App.4th at p. 165.)
C. Class and Representative Claims
Plaintiffs contend the court erred in ruling class arbitration is barred. The
question is whether either of the arbitration provisions allow class arbitration and whether
Rosales’s agreement allows for representative claims. We conclude the arbitration
2
A case may not be cited as authority once review has been granted. (Witte v.
Kaufman (2006) 141 Cal. App. 4th 1201, 1208.)
6
provisions do not contain either an explicit or implicit agreement to arbitrate on a
classwide or representative basis, nor may such a provision be read into them.
1. Class Claims
In Stolt-Nielsen S.A. v. Animalfeeds International Corp. (2010) 559 U.S.
662 (Stolt-Nielsen) the court considered the issue of “whether the parties agreed to
authorize class arbitration.” (Id. at p. 687.) The arbitration agreement in question was
silent as to class arbitration and the parties had stipulated they had not agreed to such a
procedure. Nevertheless the arbitrators decided class arbitration was permitted under the
agreement. When the case finally came to the Supreme Court, it invalidated that decision
and in doing so laid out some basic principles governing the interpretation of arbitration
agreements vis-à-vis class actions, making it the generally authoritative case on this issue.
Under the Federal Arbitration Act (9 U.S.C. § 1 et seq.; FAA) a party may
not be forced to engage in class arbitration unless the agreement shows the party agreed
to do so. (Stolt-Nielsen, supra, 559 U.S. at p. 684.) An arbitration agreement must be
construed to “‘give effect to the contractual rights and expectations of the parties.’
[Citation.]” (Id. at p. 682.) “An implicit agreement to authorize class-action
arbitration . . . is not a term that . . . may [be] infer[red] solely from the fact of the parties’
agreement to arbitrate. . . . [C]lass-action arbitration changes the nature of arbitration to
such a degree that it cannot be presumed the parties consented to it by simply agreeing to
submit their disputes to an arbitrator.” (Id. at p. 685.) “[T]he differences between
bilateral and class-action arbitrations are too great for arbitrators [or courts] to
presume . . . that the parties’ mere silence on the issue of class-action arbitration
constitutes consent to resolve their disputes in class proceedings.” (Id. at p. 687, fn.
omitted.)
Kinecta Alternative Financial Solutions, Inc. v. Superior Court (2012) 205
Cal. App. 4th 506 (Kinecta) is in accord. In Kinecta the court held the plaintiff-employer
could not be compelled to arbitrate class claims because it had never agreed to do so.
7
The plaintiff and one of its employees signed an employment agreement containing an
arbitration provision. Although the provision did not expressly waive class arbitration,
the language referred only to the employee and did not mention any other employees.
The trial court granted Kinecta’s motion to compel arbitration of her individual wage and
hour claims but denied its motion to dismiss the class claims.
On appeal, citing Stolt-Nielsen, the court reversed the trial court’s ruling
denying dismissal of the class claims (Kinecta, supra, 205 Cal.App.4th at p. 519),
reasoning the language of the arbitration provision limited arbitration to the individual
parties (id. at pp. 509, 517-518).
Stolt-Nielsen specifically did not “decide what contractual basis may
support a finding that the parties agreed to authorize class-action arbitration.” (Stolt-
Nielsen, supra, 559 U.S. at p. 687, fn. 10.) Rather, we must rely on traditional principles
of contract interpretation. (Id. at p. 681 [“interpretation of an arbitration agreement is
generally a matter of state law”].)
“‘The fundamental rule is that interpretation of . . . any contract . . . is
governed by the mutual intent of the parties at the time they form the contract. [Citation.]
The parties’ intent is found, if possible, solely in the contract’s written provisions.
[Citation.] “The ‘clear and explicit’ meaning of these provisions, interpreted in their
‘ordinary and popular sense,’ unless ‘used by the parties in a technical sense or a special
meaning is given to them by usage’ [citation], controls judicial interpretation.”
[Citation.] If a layperson would give the contract language an unambiguous meaning, we
apply that meaning.’ [Citations.]” (Nelsen v. Legacy Partners Residential, Inc. (2012)
207 Cal. App. 4th 1115, 1129.)
The arbitration provisions under review are not susceptible to an
interpretation class actions were authorized or agreed upon. There is no explicit mention
of class arbitration. Moreover, the language does not lend itself to a construction
authorizing class arbitration.
8
In Whalley’s arbitration agreement she is identified as “You” and
defendants are identified as the “Company.” The agreement provides “you and the
Company mutually agree to arbitrate disputes under the terms and conditions set forth
herein”; applies to “any dispute arising out of or in any way related to your employment”;
applies to disputes “you may have with the Company”; “shall remain in full force and
effect, notwithstanding any change in your position, title or any other term condition of
your employment with the Company”; “constitutes and contains the entire agreement
between you and the Company with respect to arbitration and the resolution of disputes”;
and “you and the Company . . . by this agreement, give up [the right to a jury trial] and
agree to resolve by arbitration any and all disputes . . . related to your employment . . . .”
(Italics added; capitalization omitted.)
The arbitration provision in Rosales’s employment application contains
similar language: “If I am hired, in consideration for my employment . . ., any dispute
arising out of or in any way related to my employment, or its termination, including,
but . . . not limited to, claims for wages or other compensation due or penalties, breach of
contract, violation of statute, violation of common law or unlawful discrimination or
harassment arising under any local, state or federal law, shall be decided exclusively by
final and binding arbitration, in the County where I am last employed. . . . This
agreement to arbitrate shall remain in full force and effect, notwithstanding any change in
my position, title or any other term or condition of my employment with the Company.”
(Italics added.)
Both agreements demonstrate arbitration was limited to disputes between
plaintiffs and defendants. (See Kinecta, supra, 205 Cal.App.4th at p. 519 [similar
language sufficient to support order dismissing class claims]; see also Nelsen v. Legacy
Partners Residential, Inc., supra, 207 Cal.App.4th at pp. 1129-1130, fn. omitted
[language in arbitration agreement “only covers claims, disputes, and controversies
‘between myself (the plaintiff) and Legacy Partners’” and “unambiguously negates any
9
intention by [the defendant] to arbitrate claims or disputes to which [the plaintiff] was not
a party”].)
Plaintiffs maintain the broad language that requires “any dispute” to be
arbitrated encompasses class arbitration. This argument was rejected in Kinecta. The
agreement in that case referred to “‘any claim, dispute, and/or controversy.’” (Kinecta,
supra, 205 Cal.App.4th at p. 511, fn. 1.) But the court focused, as must we, on the
language restricting the arbitration to disputes between the two parties to the agreement.
(Id. at p. 517.)
Likewise the provision in Whalley’s agreement allowing the arbitrator to
award “any form of remedy or relief . . . that would otherwise be available in court” is of
no avail. A class action is neither a remedy nor relief; it is a procedure. Finally,
plaintiffs mischaracterize Whalley’s agreement as specifically excluding certain claims,
arguing class claims are not listed. We have found no such exclusions in the agreement.
Alternatively, plaintiffs contend the arbitration agreement must be analyzed
according to Gentry v. Superior Court (2007) 42 Cal. 4th 443 (Gentry). In Gentry, the
plaintiff filed a putative class action against his employer for alleged wage and hour
violations, some of which were based on Labor Code sections protecting unwaivable
rights. Although the arbitration agreement between the plaintiff and the employer
expressly waived the right to a class action, our Supreme Court held that waiver
unenforceable. (Id. at p. 457.) It concluded that “when it is alleged that an employer has
systematically denied proper overtime pay to a class of employees and a class action is
requested notwithstanding an arbitration agreement that contains a class arbitration
waiver, the trial court must consider [four] factors . . . .” (Id. at p. 463.) If these four
factors are shown and the court determines on that basis class arbitration is “likely to be a
significantly more effective practical means of vindicating the rights of affected
employees than individual litigation or arbitration,” and the applicable statutes would be
10
“less comprehensive[ly] enforce[d]” if a class action was not allowed, then the class
arbitration waiver must be voided. (Ibid.)
It is an open question as to whether Gentry remains good law after AT&T
Mobility v. Concepcion LLC (2011) __U.S. __ [131 S. Ct. 1740] (Concepcion), which
overruled Discover Bank v. Superior Court (2005) 36 Cal. 4th 148. Discover Bank
concluded class action arbitration waivers in most consumer adhesion contracts are
unconscionable and therefore unenforceable. (Id. at pp. 162-163.) Concepcion held the
rule in Discover Bank was preempted by the FAA “[b]ecause it ‘stands as an obstacle to
the accomplishment and execution of the full purposes and objectives of Congress . . . .’”
(Concepcion, supra, __U.S. at p. __ [131 S.Ct. at p. 1753].) A state “cannot require a
procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons”
(ibid.) nor can it “prohibit[] outright the arbitration of a particular type of claim” (id. at p.
__ [131 S.Ct. at p. 1747).
Although Gentry was based on principles similar to those in Discover Bank,
Concepcion did not address it. Thus, cases are split as to whether Gentry remains viable.
(Compare, e.g., Kinecta, supra, 205 Cal.App.4th at p. 5106 [“Gentry appears to remain
the binding law in California” despite Concepcion; dicta]; Truly Nolen of America v.
Superior Court (2012) 208 Cal. App. 4th 487, 507 [although Concepcion “implicitly
disapproved” Gentry, court will not “disregard” decision without “specific guidance”
from California Supreme Court] with, e.g., Morvant v. P.F. Chang’s China Bistro, Inc.
(N.D.Cal. 2012) 870 F. Supp. 2d 831, 840-841 [no distinction between Discover Bank and
Gentry and class action waiver must be enforced under Concepcion].) The California
Supreme Court is considering this issue in Iskanian v. CLS Transportation of Los Angeles
LLC (2012) 206 Cal. App. 4th 949, review granted September 19, 2012, S204032. We
need not decide this question because even if the case remains good law, plaintiffs have
not satisfied their burden under Gentry.
11
To invalidate an express waiver of the right to file a class action, or, in this
case, to read the right to arbitrate a class action into the arbitration provisions, plaintiffs
have the burden to provide sufficient facts (Gentry, supra, 42 Cal.4th at p. 463) to show:
(1) “the modest size of the potential individual recovery”; (2) “the potential for retaliation
against members of the class”; (3) “the fact that absent members of the class may be ill
informed about their rights”; and (4) “other real world obstacles to the vindication of
class members’ rights to [timely payment of wages upon termination] through individual
arbitration” (ibid.). In deciding whether plaintiffs have met the burden, a court has broad
discretion. (Id. at pp. 463-464.)
Plaintiffs failed to prove factors two through four. Although they filed their
own declarations and one by their counsel, none of them stated any facts related to those
three elements. And in their briefs plaintiffs do not point to any evidence whatsoever to
support those factors.3 Thus, Gentry does not provide any basis for ordering class
arbitration. (Gentry, supra, 42 Cal.4th at p. 463; Truly Nolen, supra, 208 Cal.App.4th at
p. 510.)
2. Representative Claim Under the PAGA
Labor Code section 2699, subdivision (a) provides that, in cases where a
civil penalty could be levied and collected by the Labor and Workforce Development
Agency for violation of the Labor Code, alternatively, the penalty may “be recovered
through a civil action brought by an aggrieved employee on behalf of himself or herself
and other current or former employees pursuant to the procedures specified in Section
2699.3.” An employee bringing a PAGA claim “does so as the proxy or agent of the
3 Plaintiffs’ brief mention of the trial court’s failure to address whether they were
entitled to further discovery as to the Gentry factors is waived for lack of authority and
reasoned legal argument. (Evans v. CenterStone Development Co., supra, 134
Cal.App.4th at p. 165.) In any event, having raised Gentry in their opposition to the
motion to compel arbitration, they were required to produce sufficient evidence and are
not entitled to a second chance to satisfy that burden. (Nelsen v. Legacy Partners
Residential, Inc., supra, 207 Cal.App.4th at p. 1132.)
12
state’s labor law enforcement agencies. The act’s declared purpose is to supplement
enforcement actions by public agencies, which lack adequate resources to bring all such
actions themselves.” (Arias v. Superior Court (2009) 46 Cal. 4th 969, 986.) “Restitution
is not the primary object of a PAGA action, as it is in most class actions.” (Brown v.
Ralphs Grocery Co. (2011) 197 Cal. App. 4th 489, 499 (Brown).)
The complaint contains a cause of action on behalf of Rosales seeking those
penalties on behalf of herself and the PAGA class members. The court ruled Rosales had
to arbitrate the PAGA claim only on her own behalf and the representative claim was
barred. Plaintiffs contend Rosales has the right to arbitrate her PAGA claim on a
representative basis. To reach this issue some background is needed.
In California there is a split of authority as to whether the right to arbitrate a
PAGA claim can be waived. Brown, supra, 197 Cal. App. 4th 489 is the case most often
cited as authority for the proposition waivers of the right to arbitrate a PAGA claim may
be held invalid under state law and the FAA does not control.
In Brown the arbitration provisions stated all disputes between defendant
and its employees were required to be arbitrated and the parties had no right to bring
representative claims on as a private attorney general. Defendant argued this prevented
plaintiff from arbitrating a PAGA representative claim. The appellate court disagreed.
It held Concepcion did not address waivers of the right to bring a
representative action under the PAGA. Nor is California law rendering such waivers
unenforceable preempted by the FAA. (Brown, supra, 197 Cal.App.4th at pp. 498-503.)
Concepcion “does not purport to deal with the FAA’s possible preemption of contractual
efforts to eliminate representative private attorney general actions to enforce the Labor
Code.” (Id. at p. 500.) “If the FAA preempted state law as to the unenforceability of the
PAGA representative action waivers, the benefits of private attorney general actions to
enforce state labor laws would, in large part, be nullified.” (Id. at p. 502; see also Plows
v. Rockwell Collins, Inc. (C.D.Cal. 2011) 812 F. Supp. 2d 1063, 1070.)
13
On the other hand, there are California federal court cases that hold a
waiver of the right to arbitrate a PAGA representative claim is enforceable. Quevedo v.
Macy’s, Inc. (C.D. Cal. 2011) 798 F. Supp. 2d 1122 explained that “requiring arbitration
agreements to allow for representative the PAGA claims on behalf of other employees
would be inconsistent with the FAA.” (Id. at p. 1142.) It would slow down the process
and make it more expensive. In addition, an erroneous decision would not have the
benefit of an appeal. (Ibid.) The court concluded the plaintiff’s individual PAGA claim
was arbitrable and the provision precluding a representative PAGA claim could be
enforced. (Ibid.; see also Velazquez v. Sears, Roebuck & Co. (S.D.Cal. Aug. 26, 2013,
No. 13cv680-WQH-DHB) 2013 WL 4525581, *1-*3 [under FAA PAGA waiver
enforceable]; Grabowski v. C.H. Robinson Co. (S.D.Cal. 2011) 817 F. Supp. 2d 1159,
1180-1181 [PAGA claim was arbitrable and waiver of representative action in arbitration
agreement enforceable; Quevedo’s reasoning more persuasive than that of Brown].)
In the agreement before us, there is no waiver of the right to bring a PAGA
claim. In fact, the agreement allows for disputes regarding wage claims and for
compensation and penalties. Nor is there an express waiver of the right to arbitrate a
representative claim. But, as discussed above, the language of the arbitration agreement
limits the proceedings to disputes between plaintiffs and defendants only. Thus, the issue
is whether the PAGA provides for an individual right of action or is representative only.4
4 Currently our Supreme Court has before it two cases that each came down on
different sides of the question. In Iskanian v. CLS Transportation Los Angeles, LLC,
supra, S204032, relying on the FAA and Concepcion, supra, __U.S. __ [131 S. Ct. 1740],
the court enforced a waiver of the right to arbitrate a PAGA claim and noted that the
plaintiff could arbitrate the PAGA claim individually. On the other side, Brown v.
Superior Court (2013) 216 Cal. App. 4th 1302, review granted September 11, 2013,
S211962, held a PAGA claim was a representative action and not an individual one and
because the arbitration agreement did not provide for representative actions, the PAGA
claim could not be arbitrated but had to be severed and stayed.
14
The majority view is a PAGA claim can be brought as a representative
action only. In Arias v. Superior Court, supra, 46 Cal. 4th 969, the court instructed that a
plaintiff bringing a PAGA action is acting “as the proxy or agent of the state’s labor law
enforcement agencies.” (Id. at p. 986.) Brown, supra, 197 Cal. App. 4th 489 amplified
“[t]he purpose of the PAGA is not to recover damages or restitution, but to create a
means of ‘deputizing’ citizens as private attorneys general to enforce the Labor Code.
[Citation.] [T]he relief is in large part ‘for the benefit of the general public rather than the
party bringing the action.’” (Id. at p. 501.)
In Machado v. M.A.T. & Sons Landscape, Inc. (E.D.Cal. July 23, 2009, No.
2:09-cv-00459 JAMJFM) 2009 WL 2230788 the court reviewed the language of the
statute and held that common use of the word “and” in the provision that an employee
could sue “on behalf of himself or herself and other current or former employees” (Lab.
Code, § 2699, subd. (a), italics added) clearly and unambiguously meant a PAGA claim
was a representative action. (Machado v. M.A.T. & Sons Landscape, Inc., supra, 2009
WL at p. *2; see Reyes v. Macy’s, Inc. (2011) 202 Cal. App. 4th 1119, 1123 [plaintiff may
not bring individual PAGA claim].)
In Grabowski v. C.H. Robinson, Inc., supra, 817 F. Supp. 2d
1159, the court, without addressing the language of Labor Code section 2699,
subdivision (a), by default decided a PAGA claim could be litigated individually when it
held that the plaintiff’s PAGA claim was arbitrable and the arbitration agreement’s
provision prohibiting a representative action was enforceable. (Grabowski v. C.H.
Robinson, Inc., supra, 817 F.Supp.2d at p. 1181; see Valle v. Lowe’s HIW, Inc. (N.D.Cal.
Aug. 22, 2011, No. 11-14895C) 2011 WL 3667441, *6 [without analysis of statutory
language, held PAGA claim arbitrable even if agreement interpreted to prohibit
representative claims].)
We think the better view is the PAGA provides for a representative, not an
individual, action. The statutory language is plain and not ambiguous. This controls our
15
interpretation of the provision. (Elk Hills Power, LLC v. Board of Equalization (2013) 57
Cal. 4th 593, 609-610.)
Thus, even though under the arbitration agreement Rosales agreed to
arbitrate “claims for wages or other compensation due or penalties . . . [and] violation of
statute,” she cannot be compelled to litigate her PAGA claim as an individual, as the
court ordered. On the other hand, because the arbitration provision limits arbitration to
Rosales and defendants, defendants cannot be compelled to arbitrate the PAGA claim as
a representative action.
In short, the representative PAGA claim is not barred but cannot be ordered
to arbitration. It follows, then, the only conclusion to be reached is the PAGA claim
should be severed from the remainder of the complaint. (RN Solution, Inc. v. Catholic
Healthcare West (2008) 165 Cal. App. 4th 1511, 1521-1522 [courts may sever
nonarbitrable claims from arbitrable claims].) We reverse those portions of the order that
compel Rosales to arbitrate her PAGA claim on an individual basis and that bar her
representative PAGA claim but we exclude that claim from the arbitration.
D. Arbitrability of UCL and Injunction Claims
Plaintiffs assert their request for an injunction under the UCL to prevent
defendants’ alleged wage and hour violations cannot be arbitrated under Cruz v.
PacifiCare Health Systems, Inc. (2003) 30 Cal. 4th 303.5 Cruz held a request for
injunctive relief in a UCL claim for the benefit of the public or third parties is not
arbitrable. (Id. at pp. 315-316.)
5 In dicta, Nelsen stated this claim would not be viable under Concepcion, supra,
__U.S. __ [131 S. Ct. 1740]. (Nelsen v. Legacy Partners Residential, Inc., supra, 207
Cal.App.4th at p. 1136]; see also Kilgore v. KeyBank, N.A. (9th Cir. 2012) 673 F.3d 947,
959 [Cruz does not survive Concepcion].) Concepcion confirmed that a state law
banning arbitration of a specific type of claim, such as for injunctive relief under the UCL
for the benefit of the public, is prohibited by the FAA. (Concepcion, supra, __U.S. __ at
p. __ [130 S.Ct. at p. 1747].) We need not reach this argument since the issue has been
forfeited on appeal.
16
Whether Cruz would apply here is a question of fact, i.e., would the
injunction plaintiffs seek “more than incidentally benefit the public.” (Nelsen v. Legacy
Partners Residential, Inc., supra, 207 Cal.App.4th at p. 1136.) Plaintiffs failed to make
this argument in their opposition to the motion to compel arbitration, denying defendants
the opportunity to contest it and the trial court the ability to rule on it. This forfeits the
claim on appeal. (Ibid.; see also Greenwich S.F., LLC v. Wong, supra, 190 Cal.App.4th
at p. 767.)
Plaintiffs assert they raised this issue, but cite only to their oppositions in
the Alameda County proceedings. They claim, without any record references, they
attached copies of “papers previously filed” to their opposition filed in the Orange
County Superior Court. But plaintiffs did not argue the issue in their Memorandum of
Points and Authorities or at the hearing on the motion. Merely attaching documents is
not the equivalent of presenting an issue for the court to decide.
Finally, we reject plaintiffs’ conclusion there is nothing in the order
specifically compelling these claims be arbitrated. The minute order plainly states the
parties must arbitrate the individual claims, and it bars representative claims. Thus, the
request for injunctive relief under the UCL must be arbitrated on an individual basis.
(Nelsen v. Legacy Partners Residential, Inc., supra, 207 Cal.App.4th at p. 1136.)
17
DISPOSITION
That portion of the order compelling Rosales to arbitrate her PAGA claim
individually and prohibiting her representative claim is reversed. Her PAGA claim shall
not be arbitrated. The parties shall bear their own respective costs on appeal.
THOMPSON, J.
WE CONCUR:
BEDSWORTH, ACTING P. J.
MOORE, J.
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