Tovar v. Windsor Convalescent and Rehab. Center etc. CA4/3 ( 2021 )

Filed 12/9/21 Tovar v. Windsor Convalescent and Rehab. Center etc. 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
REINA TOVAR,
Plaintiff and Appellant, G060386
v. (Super. Ct. No. 19CV000354)
WINDSOR CONVALESCENT AND OPINION
REHABILITATION CENTER OF
SALINAS, LLC, et al.,
Defendants and Respondents.
Appeal from an order of the Superior Court of Monterey County, Lydia
Villarreal, Judge. Dismissed.
Fitzpatrick & Swanston, Charles Swanston, B. James Fitzpatrick, and Laura
L. Franklin; Diversity Law Group, Larry W. Lee, Kristen M. Agnew, Nicholas
Rosenthal, and Mai Tulyathan, for Plaintiff and Appellant.
Miller Barondess, Brian A. Procel and Jeffrey B. White, for Defendants and
Respondents.
Reina Tovar brought a putative class action alleging wage and hour
violations by her former employer Windsor Convalescent and Rehabilitation Center of
Salinas, LLC and its affiliated entities (Windsor). Her complaint also contained a
representative claim for Labor Code violations under the Private Attorney General Act of
2004 (Lab. Code, § 2698 et seq.) (PAGA claim). Based on an arbitration agreement
Tovar signed at the beginning of her employment with Windsor, the trial court issued a
prejudgment order compelling arbitration of Tovar’s individual claims, striking her class
claims, and severing and staying her PAGA claim pending arbitration of her individual
claims. The court also severed and struck a provision in the agreement that gave the
arbitrator’s findings preclusive effect on the PAGA claim. Tovar appeals from the order.
Tovar contends the “court erred in allowing any part of the arbitration
agreement to be enforced because the agreement’s illegal and overreaching objectives –
to prevent employees from bringing PAGA claims and to the extent any PAGA claims
are brought, to have those claims decided by an arbitrator – taint the entire agreement
with unconscionability.” (Boldface & italics omitted.) She asserts the court’s severance
of the two objectionable provisions was not authorized by the arbitration agreement and
enforcing any part of the agreement “condones [Windsor’s] bad faith scheme and
encourages other employers to overreach by including deliberately illegal clauses.”
Tovar acknowledges an order compelling arbitration is not appealable, but
she asserts the death knell exception applies here. We disagree. Because a representative
PAGA claim remains pending, the trial court’s order was not appealable under the death
knell doctrine. We decline Tovar’s request to treat her appeal as a petition for writ of
mandate as the circumstances do not warrant such treatment. Accordingly, we dismiss
the appeal from a nonappealable order. We nonetheless caution Windsor and other
employers that an ongoing failure to comply with Iskanian v. CLS Transportation Los
Angeles, LLC (2014) 59 Cal.4th 348, 384 (Iskanian) may in the future render an
employment arbitration agreement unenforceable.
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FACTS
I. Trovar’s Employment
In January 2018, Tovar was hired as a registered nurse by Windsor, a
skilled nursing facility that offers short-term, long-term, and rehabilitative health
services. Included within her new-hire packet were two documents concerning the
company’s arbitration policy: (1) Windsor’s “Alternative Dispute Resolution Policy”
(the Policy), and (2) Windsor’s “Agreement to be Bound by Alternative Dispute
Resolution Policy” (capitalization omitted) (the Agreement). Tovar signed the
Agreement because she was told the documents in her new-hire packet were required for
her employment.1 Tovar left her employment with Windsor in August 2018.
II. The Arbitration Agreement
Newly hired employees at Windsor were given a copy of the Policy, a
three-page document. This document explained the Policy was “mandatory for all
disputes arising between employees, on the one hand, and Windsor Convalescent and
Rehabilitation Center of Salinas, LLC . . . , on the other hand[ ]” (capitalization omitted)
and covered any employment-related disputes, including wage and hour claims. It also
addressed the alternative dispute resolution procedure—how the process is initiated, how
an arbitrator is selected, the arbitrator’s authority, and how fees and costs are allocated.
The Policy indicated an employee could opt out by completing a form and returning it to
Windsor’s “Payroll Coordinator” within 30 days and an employee would “not be
retaliated against or subject to any adverse employment action” if her or she opted out of
the Policy.
1 In the trial court, Windsor disputed Tovar’s statement she was required to
sign the Agreement, and Windsor submitted a declaration by its director of staff
development stating new hires were not required to sign the Agreement as a condition of
employment. The trial court made no explicit findings concerning this contested fact.
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The Policy described disputes covered by or excluded from its provisions.
A clause in the Policy specified if a lawsuit was filed containing claims covered by the
Policy and non-arbitrable claims, the court would stay litigation of the non-arbitrable
claims pending arbitration of the covered claims. This clause further stated, “In that
event, the arbitrator’s decision as to the claims that are subject to arbitration, including
any determinations as to disputed factual or legal issues, will be entitled to full force and
effect, and be binding, in any later court proceedings related to claims that are not subject
to arbitration.”
The Policy also contained a “class action waiver” (capitalization omitted)
that stated, “I understand and agree this ADR [Alternative Dispute Resolution] Program
prohibits me from joining or participating in a class action or representative action, acting
as a private attorney general or representative of others, or otherwise consolidating a
covered claim with the claim of others.” (Italics added.) A severability clause near the
end of the Policy provided, “In the event that any provision of this ADR Policy is
determined by a court of competent jurisdiction to be illegal, invalid or unenforceable to
any extent, such term or provision shall be enforced to the extent permissible under the
law and all remaining terms and provisions of this ADR Policy shall continue in full
force and effect.”
The Agreement, a two-page document, began with the statement, “I agree
that in the event employment disputes arise between Windsor . . . (herein collectively
referred to as the ‘Company’), on the one hand, and me, on the other hand, I will be
bound by the Company Alternative Dispute Resolution Policy . . . , which provides for
final and binding arbitration.” The Agreement reiterated the Policy applied to all
employment related disputes, including wage and hour claims. The class action waiver
from the Policy was repeated twice in the Agreement, once in all caps. Other terms from
the Policy were repeated in the Agreement, including the stay provision and the clause
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providing the arbitrator’s “determinations as to disputed factual or legal issues” would be
binding in later court proceedings on non-arbitrable claims.
Inconsistent with Windsor’s assertion the Agreement was voluntary and not
required as a condition of employment, the Agreement stated, “In consideration for and
as a material condition of employment with Windsor” the Policy “is the exclusive means
for resolving covered disputes; no other action may be brought in court or in any other
forum.” (Capitalization omitted.) Tovar signed the Agreement below an
acknowledgment she had been provided a copy of the Policy and the American
Arbitration Association Employment Arbitration Rules and Mediation Procedures.
III. Trovar’s Lawsuit
In January 2019, Tovar filed a lawsuit on behalf of herself and other
similarly situated current and former employees of Windsor, alleging eight causes of
action for Labor Code violations: (1) failure to provide meal periods or compensation in
lieu thereof; (2) failure to provide rest periods; (3) failure to pay hourly and overtime
wages; (4) failure to pay minimum wage; (5) failure to comply with itemized employee
wage statement requirements; (6) failure and refusal to pay agreed wages; (7) failure to
pay all wages upon termination; and (8) failure to timely pay wages. In the ninth cause of
action, Tovar brought a claim in a representative capacity under the PAGA, seeking
compensatory damages, statutory penalties, civil penalties, and reasonable attorney fees
and costs for the alleged Labor Code violations. The tenth cause of action alleged
individual and putative class claims for violations of Business and Professions Code
sections prohibiting unfair competition.
Tovar refused Windsor’s request to stipulate to the dismissal of her class
action allegations and to submit her individual claims to arbitration in conformance with
the Agreement.
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IV. Motion to Compel Arbitration, Opposition, and Reply
Windsor moved for an order compelling arbitration of Tovar’s individual
claims, dismissal of her class action allegations, and stay of her PAGA claim pending
arbitration of her individual claims. Windsor conceded the PAGA claim could not be
compelled to arbitration and asserted the PAGA waiver provision should be severed from
the Agreement. Windsor argued the Agreement’s remaining terms should be enforced
and under those terms, the PAGA claim should be stayed and the arbitrator’s findings of
fact and law would be binding on the trial court in the later proceedings on the PAGA
claim. Windsor further asserted the Agreement was not unconscionable, but if one of its
provisions was found unconscionable, the provision should be severed and the rest of the
Agreement enforced.
In opposition, Tovar contended the Agreement was unconscionable and
therefore unenforceable. Tovar asserted the Agreement was procedurally unconscionable
because it was “a one-sided adhesive arbitration agreement.” She argued it was
substantively unconscionable because its terms ostensibly required her to waive any
PAGA claims. Tovar spotlighted that four years prior to Windsor presenting the
Agreement to her to sign, the California Supreme Court had held “where . . . an
employment agreement compels the waiver of representative claims under the PAGA, it
is contrary to public policy and unenforceable as a matter of state law.” (Iskanian, supra,
59 Cal.4th at p. 384.) She argued that after the Supreme Court’s Iskanian decision in
2014, Windsor knew the PAGA waiver provision was an illegal term and included it
nonetheless, rendering the entire Agreement unconscionable.
Tovar asserted the substantive unconscionability of the Agreement was
compounded by the provision giving the arbitrator’s decisions preclusive effect on the
PAGA claim. Tovar contended this provision was “a backdoor attempt to get around the
Iskanian rule prohibiting arbitrations of PAGA claims[,]” and if this provision was
enforced, it “would accomplish the very result that the California Supreme Court
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denounced in Iskanian.” Arguing the Agreement was “permeated with
unconscionability” and Windsor acted in bad faith, Tovar asserted severance was an
inappropriate remedy and the court should refuse to enforce the Agreement.
In its reply, Windsor denied the Agreement was either procedurally or
substantively unconscionable. As to procedural unconscionability, Windsor argued there
was no oppression because Tovar was not required to sign the Agreement and she could
have opted out within 30 days of signing but failed to do so. Windsor asserted Tovar had
not demonstrated substantive unconscionability and the Agreement did not shock the
conscience. Windsor maintained the court should enforce the Agreement, including the
provision the arbitrator’s findings would be binding on the PAGA claim.
V. Trial Court’s Ruling
The trial court severed the PAGA waiver provision from the Agreement
and severed and struck the provision giving the arbitrator’s decisions preclusive effect as
to the PAGA claim. The court granted Windsor’s motion to compel arbitration of
Tovar’s non-PAGA claims, stuck the class action allegations, and stayed the PAGA claim
pending arbitration.
DISCUSSION
I. Appealability
The first issue we must consider is whether the trial court’s order is
appealable. Generally, orders compelling arbitration are considered interlocutory and are
not immediately appealable. (Code of Civ. Proc., § 1294; Nguyen v. Applied Medical
Resources Corp. (2016) 4 Cal.App.5th 232, 242 (Nguyen).) Tovar contends the court’s
order is appealable under the death knell doctrine, “a judicially created exception to the
one final judgment rule, [which] treats an order that dismisses class claims while
allowing individual claims to survive as an appealable order.” (Cortez v. Doty Bros.
Equipment Co. (2017) 15 Cal.App.5th 1, 8 (Cortez).) We conclude the death knell
doctrine does not apply because of the remaining representative PAGA claim.
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Under the death knell doctrine, an order is immediately appealable “when
‘it effectively terminates the entire action as to [a] class, in legal effect being “tantamount
to a dismissal of the action as to all members of the class other than plaintiff.”’
[Citations.]” (Williams v. Impax Laboratories, Inc. (2019) 41 Cal.App.5th 1060, 1066
(Williams).) In Munoz v. Chipotle Mexican Grill, Inc. (2015) 238 Cal.App.4th 291(Munoz), the court explained the reasoning behind the death knell doctrine: “The
rationale of permitting appeal of what would otherwise be an intermediate order is that
absent immediate review, the plaintiff would have no financial incentive to pursue his or
her case to final judgment just to preserve the ability to appeal the denial of the plaintiff’s
class certification motion. [Citation.]” (Id. at p. 308.) But “orders that only limit the
scope of a class or the number of claims available to it are not similarly tantamount to
dismissal and do not qualify for immediate appeal under the death knell doctrine; only an
order that entirely terminates class claims is appealable. [Citations.]” (In re Baycol
Cases I & II (2011) 51 Cal.4th 751, 757-758 (Baycol).)
“To qualify as appealable under the death knell doctrine, an order must
‘(1) amount[ ] to a de facto final judgment for absent plaintiffs, under circumstances
where (2) the persistence of viable but perhaps de minimis individual plaintiff claims
creates a risk no formal final judgment will ever be entered.’ [Citation.]” (Williams,
supra, 41 Cal.App.5th at p. 1067.) “Significantly, the two fundamental underpinnings of
the death knell doctrine are lacking when a plaintiff’s representative PAGA claim
remains pending in the trial court following the termination of the class claims.” (Cortez,
supra, 15 Cal.App.5th at p. 8.) This is because a PAGA claim is a representative action,
in which “‘an “aggrieved employee” may bring a civil action personally and on behalf of
other current or former employees to recover civil penalties for Labor Code violations.’
[Citation.]” (Iskanian, supra, 59 Cal.4th at p. 380.) Thus, where a PAGA claim remains
after the termination of class claims, the legal effect is not that of a final judgment for the
represented members and the death knell doctrine does not apply. In fact, “every
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appellate court that has addressed this issue . . . has similarly found the death knell
doctrine inapplicable when a PAGA claim remains pending after the termination of class
claims. [Citations.]” (Cortez, supra, 15 Cal.App.5th at pp. 8-9.)
We reached this conclusion in Nguyen, supra, 4 Cal.App.5th 232. There, as
here, plaintiff appealed after the trial court struck his class claims, stayed the PAGA
claim, and ordered him to arbitrate his individual claims. (Id. at p. 242.) We rejected
plaintiff’s contention the trial court’s order was reviewable under the death knell
doctrine, explaining: “‘Although the only class claim has been dismissed, the
representative PAGA claim remains and plaintiff does not contend there are any putative
class members who are not also aggrieved employees for purposes of the PAGA claim.
Accordingly, the order does not appear to constitute a de facto final judgment for absent
plaintiffs—the putative class members/aggrieved employees under PAGA—because their
PAGA claims remain pending.’ [Citation.]” (Id. at p. 243.)
Here, however, Tovar does contend there are “putative class members who
are not PAGA aggrieved employees” because they were employed by Windsor within the
four-year statute of limitations for the class claims but were not employed within the one-
year statute of limitation for the PAGA claim. She asserts as to these “absent class
members[]” the trial court’s order constitutes a de facto judgment and the death knell
doctrine should apply. Tovar’s argument overlooks a crucial requirement of the death
knell doctrine—“‘only an order that entirely terminates class claims is appealable.’
[Citation.]” (Nguyen, supra, 4 Cal.App.5th at p. 243.) “[O]rders that only limit the scope
of a class or the number of claims available to it are not . . . tantamount to dismissal and
do not qualify for immediate appeal under the death knell doctrine[.]” (Baycol, supra,51 Cal.4th at pp. 757-758.)
Perfect overlap between each member of the putative class and the PAGA
representative action is not necessary. Even if there are former employees who would
qualify as class members for some claims in the complaint but not aggrieved employees
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for the PAGA claim, the death knell doctrine is not applicable. The reason why is the
representative PAGA claim remains, even if the number of represented employees is
reduced. Thus, the first requirement for the death knell doctrine is not satisfied because
the trial court’s order does not “amount[] to a de facto final judgment for absent
plaintiffs” (Baycol, supra, 51 Cal.4th at p. 759) as there is a remaining representative
PAGA claim (Young v. RemX, Inc. (2016) 2 Cal.App.5th 630, 635).
Nor has Tovar shown the death knell doctrine’s second requirement is
satisfied here. This requirement is established when there is “a risk no formal final
judgment will ever be entered” because only “de minimis individual plaintiff claims”
remain. (Baycol, supra, 51 Cal.4th at p. 759.) Where a PAGA claim remains after the
dismissal of a class claim, “the PAGA plaintiff remains incentivized by the statutory
scheme to proceed to judgment on behalf of himself or herself as well as the individuals
he or she represents. [Citation.]” (Cortez, supra, 15 Cal.App.5th at p. 8.) Under PAGA,
the Legislature has “provided two financial incentives for aggrieved employees to
pursue” a claim. (Provost v. YourMechanic, Inc. (2020) 55 Cal.App.5th 982, 991.) First,
an employee can “seek any civil penalties the state can, including penalties for violations
involving employees other than the PAGA litigant herself.” (ZB, N.A. v. Superior Court
(2019) 8 Cal.5th 175, 185 (ZB).)2 “Generally speaking, the civil penalties available
under the PAGA are $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.’ [Citation.]” (Munoz, supra, 238 Cal.App.4th at pp. 310-311.) Although 75
percent of the civil penalties recovered under the PAGA must be distributed to the “Labor
and Workforce Development Agency for enforcement of labor laws,” the remaining 25
percent goes to the “aggrieved employees.” (Lab. Code, § 2699, subd. (i).) Second, a
prevailing PAGA plaintiff is entitled to attorney fees and costs. (Id., subd. (g)(1).)
2 A PAGA plaintiff, however, is not able to collect unpaid wages under
Labor Code section 558. (ZB, supra, 8 Cal.5th at p. 188.)
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Tovar asserts she might lack incentive to proceed to judgment because it is
possible she will be unable to recover statutory penalties through the PAGA. We are not
persuaded. The complaint alleged numerous Labor Code violations for which civil
penalties are available under the PAGA (Lab. Code, §§ 2699, 2699.5), and the complaint
alleged Windsor regularly employed more than 300 employees at an hourly rate.
Recovery under the PAGA could be substantial if multiple violations involving many
employees are proven. Thus, Tovar’s incentive to pursue litigation further does not
depend on her ability to recover statutory penalties through the PAGA or even on all
putative class members being entitled to PAGA civil penalties.
“‘Given the potential for recovery of significant civil penalties if the PAGA
claims are successful, as well as attorney fees and costs, [Tovar has] ample financial
incentive to pursue the remaining representative claims under the PAGA and, thereafter,
pursue [her] appeal from the trial court’s order denying class certification.’” (Nguyen,
supra, 4 Cal.App.5th at p. 243.) There is no basis to apply the death knell doctrine
because dismissal of the class claims does not create a real risk of an elusive final
judgment. Accordingly, the trial court’s order was not appealable under the death knell
doctrine.
II. Writ of Mandate
Anticipating we might conclude the court’s order was not appealable,
Tovar alternatively requests we treat her appeal as a petition for writ of mandate. An
order compelling arbitration should be reviewed by writ only “sparingly” (Cortez, supra,
15 Cal.App.5th at p. 10) and “‘under unusual circumstances’” (Munoz, supra,
238 Cal.App.5th at p. 312). After careful review, we decline to exercise our discretion
and treat the appeal as a petition for writ of mandate.
III. PAGA Waiver in Employment Agreement Post Iskanian
Because Tovar has not convinced us it is necessary to treat her appeal as a
petition for writ of mandate, we do not reach the merits of her substantive claim the trial
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court should have concluded the entire Agreement was unenforceable based on
Windsor’s bad faith inclusion of the PAGA waiver provision in the arbitration documents
years after Iskanian and inclusion of the provision giving the arbitrator’s findings of law
and fact preclusive effect on the court in subsequent litigation on the PAGA claim.
Nonetheless, as we discussed with counsel at oral argument, we are troubled by
Windsor’s inclusion of these provisions.
In Iskanian in 2014, our Supreme Court held an employer cannot require an
employee to waive a predispute PAGA claim and such a waiver in an employment
agreement “is contrary to public policy and unenforceable as a matter of state law.”
(Iskanian, supra, 59 Cal.4th at p. 384.) More than three years after Iskanian, Windsor
presented Tovar with its arbitration Policy and Agreement, both of which contained a
PAGA waiver provision. Windsor cannot claim these documents were simply outdated.
The revision date at the bottom of both documents indicates they were revised in March
2015, well after the Supreme Court’s decision in Iskanian. Thus, Windsor revised its
arbitration documents after Iskanian but did not remove the illegal PAGA waiver clause.
Windsor’s counsel emphasized it did not seek to enforce the PAGA waiver
provision. That Windsor did not seek to enforce this unlawful provision does not absolve
it of its misdeeds. Windsor has a duty to ensure its arbitration documents conform with
the law.3 Windsor or any other employer who continues to ignore the dictates of
Iskanian runs the very real risk a court (trial or appellate) will conclude the entire
agreement unenforceable. (Armendariz v. Foundation Health Psychcare Services, Inc.
(2000) 24 Cal.4th 83, 124-125, fn. 13 [“a party may waive its right to arbitration through
bad faith or willful misconduct”].)
3 At oral argument, Windsor’s counsel could not assure us the company’s
arbitration documents had been recently revised and the unconscionable provisions
excised.
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DISPOSITION
The appeal is dismissed. Windsor is awarded its costs on appeal.
O’LEARY, P. J.
WE CONCUR:
BEDSWORTH, J.
GOETHALS, J.
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