Mondragon v. Santa Ana Healthcare & Wellness Centre CA2/1 ( 2021 )

Filed 9/28/21 Mondragon v. Santa Ana Healthcare & Wellness Centre CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
RUBYANN MONDRAGON, B307872
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. 19STCV26878)
v.
SANTA ANA HEALTHCARE &
WELLNESS CENTRE, LP, et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Rupert A. Byrdsong, Judge. Affirmed.
Fisher & Phillips, Grace Y. Horoupian, Christopher M.
Ahearn and Raymond W. Duer for Defendants and Appellants.
Cohelan Khoury & Singer, Michael D. Singer, Kristina De
La Rosa; Hekmat Law Group and Joseph M. Hekmat for Plaintiff
and Respondent.
_________________________
Plaintiff Rubyann Mondragon (Mondragon) sued her
former employer, Santa Ana Healthcare & Wellness Centre
(Santa Ana), seeking civil penalties under the Labor Code Private
Attorneys General Act of 2004 (PAGA; Lab Code, § 2698 et seq.)
for various wage, meal break and rest period violations. Santa
Ana moved to compel “individual” arbitration under the parties’
arbitration agreement, which provides that arbitration shall be
the exclusive forum for any dispute, and which prohibits
employees from joining or bringing a “representative action” or
“acting as a private attorney general or representative of others.”
The trial court denied Santa Ana’s motion, concluding that
it was bound by the California Supreme Court decision in
Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59
Cal.4th 348 (Iskanian), which held that agreements to waive the
right to bring PAGA representative actions were unenforceable.
It rejected Santa Ana’s contention that several intervening
United States Supreme Court cases rendered the Iskanian rule
invalid.
On appeal, Santa Ana renews its assertion that Iskanian
was wrongly decided and conflicts with controlling United States
Supreme Court authority. However, the specific issues before the
Iskanian court have not been decided by the United States
Supreme Court and we too remain bound by Iskanian. As such,
Mondragon’s PAGA waiver remains unenforceable.
We also reject Santa Ana’s suggestion that Mondragon’s
PAGA action can be split off into an individual arbitrable claim.
As explained in Iskanian, forcing a plaintiff to arbitrate a PAGA
claim for penalties as a single-claimant procedure would
frustrate the core objectives of the PAGA.
As there is nothing in Mondragon’s PAGA-only complaint
to compel arbitration, we affirm the trial court’s order.
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BACKGROUND
From December 18, 2017 to April 3, 2019, Mondragon was
employed by Santa Ana as a nurse and medication technician.
Throughout her employment Mondragon worked at Country Villa
Plaza, a skilled nursing facility operated by Santa Ana.1 On
December 18, 2017, as a condition of her employment,
Mondragon signed an agreement to be bound by an alternative
dispute resolution (ADR) policy (the Arbitration Agreement).2
A. The Arbitration Agreement
The ADR policy states, in relevant part: “The ADR [p]olicy
will be mandatory for ALL DISPUTES ARISING BETWEEN
EMPLOYEES, ON THE ONE HAND, AND YOUR EMPLOYER,
AND/OR ITS EMPLOYEES AND OFFICERS . . . ON THE
OTHER HAND. . . . [¶] For parties covered by this [ADR]
[p]olicy, alternative dispute resolution, including final and
binding arbitration, is the exclusive means for resolving covered
disputes . . . . [¶] . . . [¶] Covered disputes include any dispute
arising out of or related to my employment, the terms and
conditions of my employment and/or the termination of your
employment . . . .”
The ADR policy also contained a class action waiver: “I
understand and agree this ADR [p]rogram prohibits me from
joining or participating in a class action or representative action,
1 Additional defendants in this action include Country Villa
Plaza, Rockport Healthcare Support Services, LLC, and Rockport
Administrative Services, LLC. We use the term “Santa Ana”
throughout this opinion to collectively refer to all defendants.
2 The ADR policy, which spans three pages is followed by
the “agreement to be bound by [ADR] policy” which spans two
pages and repeats many of the same provisions.
3
acting as a private attorney general or representative of others,
or otherwise consolidating a covered claim with the claim of
others. Under this Policy, no arbitrator shall have the authority
to order such class action or representative action.”
The separate document signed by Mondragon entitled
“agreement to be bound by [ADR] policy,” reiterated that the
“ADR [p]olicy is understood to apply to all disputes relating to my
employment, the terms and conditions of my employment,” and
also reiterated the class/representative action waiver, stating: “I
agree this ADR policy 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 claims of others.”
B. The Complaint for Civil Penalties under the PAGA
1. The Complaint
On July 31, 2019, after the requisite 65-day notice period,3
Mondragon filed a “representative PAGA action” against Santa
3 Labor Code section 2699.3 of the PAGA requires a
plaintiff to “notify the employer and the Labor and Workforce
Development Agency (LWDA) of the specific labor violations
alleged, along with the facts and theories supporting the claim.”
(Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73,
81; see Lab. Code, § 2699.3, subd. (a)(1)(A).) The employee may
commence a PAGA action only “[i]f the [LWDA] does not
investigate, does not issue a citation, or fails to respond to the
notice within 65 days.” (Kim, supra, at p. 81; see Lab. Code,
§ 2699.3, subd. (a)(2).)
On May 16, 2019, Mondragon sent the requisite PAGA
notice to California’s LWDA and Santa Ana, detailing the facts
and theories in support of her allegations of Labor Code
violations.
4
Ana, seeking civil penalties on behalf of herself and other
aggrieved employees for a variety of wage, meal break, and rest
period violations. The complaint pled nine causes of action, each
stating that Mondragon was proceeding “as a representative of
the general public,” and was seeking “to recover any and all
penalties for each and every violation, in an amount according to
proof, as to those penalties that are otherwise only available in
public agency enforcement actions.”
In her prayer for relief, Mondragon again stated that she
sought “[m]aintenance of this claim as a [r]epresentative [a]ction
under the PAGA” and prayed for judgment “only as to those
remedies which are permissible . . . pursuant to the PAGA.”
2. Background on the PAGA
The California Legislature enacted the PAGA in 2003 after
deciding that lagging labor law enforcement resources made
additional private enforcement necessary “ ‘to achieve maximum
compliance with state labor laws.’ ” (Iskanian, supra, 59 Cal.4th
at p. 379, quoting Arias v. Superior Court (2009) 46 Cal.4th 969,
980.)
“The 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.” (Brown v.
Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 501.) Seventy-
five percent of any penalties collected by a PAGA representative
are distributed to the LWDA, while the remaining 25 percent are
distributed to the aggrieved employees. (Lab. Code, § 2699,
subd. (i).)
C. The motion to Compel Individual Arbitration
On July 24, 2020, Santa Ana moved to compel “individual
(and not collective or representative) arbitration” arguing that
the California Supreme Court’s holding in Iskanian—that
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California public policy bars the waiver of PAGA representative
claims—was wrongly decided and has since been further
undermined by United States Supreme Court precedent defining
the broad preemptive scope of the Federal Arbitration Act (FAA;
9 U.S.C. § 1 et seq.).4
On August 17, 2020, the court denied the motion at a
hearing with the parties, stating “the Iskanian case is still the
good-to-go authority on this issue.” Later that day, the trial court
issued a minute order and statement of decision summarizing its
ruling.
The trial court pointed out that several intermediate
appellate courts have held that the United States Supreme
Court’s broad view of the FAA’s preemptive scope in Epic Systems
Corp. v. Lewis (2018) 584 U.S. ___ [138 S.Ct. 1612, 200 L.Ed.2d
887] (Epic Systems) (one of the cases cited by Santa Ana) did not
undermine Iskanian’s reasoning or holding. The trial court
further noted that the recent PAGA decisions issued by the
California Supreme Court have continued to cite to Iskanian
without any indication that the United States Supreme Court
authority has effected any change. The court concluded that it
would therefore not enforce the provision of the Arbitration
Agreement that prohibits Mondragon “from joining or
participating in a . . . representative action” or “acting as a
private attorney general or representative of others.”
On September 11, 2020, Santa Ana timely appealed the
trial court’s order.
4 Within its moving papers, Santa Ana stated the court
should “dismiss this litigation or, in the alternative, stay the
proceedings pending the outcome of [Mondragon’s individual]
arbitration.”
6
DISCUSSION
A. Standard of Review
Where, as here, the trial court’s order denying a motion to
compel arbitration “rests solely on a decision of law,” we review
that decision de novo. (Robertson v. Health Net of California, Inc.
(2005) 132 Cal.App.4th 1419, 1425.)
B. The FAA
In 1925, the FAA was enacted in response to widespread
judicial hostility to arbitration agreements. (AT&T Mobility LLC
v. Concepcion (2011) 563 U.S. 333, 339 [131 S.Ct. 1740, 179
L.Ed.2d 742] (Concepcion).) Section 2 of the FAA—its primary
substantive provision—states in relevant part: “A written
provision in any maritime transaction or a contract evidencing a
transaction 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.” (9 U.S.C. § 2.)
The final clause of section 2, the FAA’s savings clause,
“permits agreements to arbitrate to be invalidated by ‘generally
applicable contract defenses, such as fraud, duress, or
unconscionability,’ but not by defenses that apply only to
arbitration or that derive their meaning from the fact that an
agreement to arbitrate is at issue.” (Concepcion, supra, 563 U.S.
at p. 339.) Moreover, even if a state-law rule is “generally
applicable,” it is preempted if it conflicts with the FAA’s
objectives. (Concepcion, supra, at p. 341.)
For example, in Concepcion, the United States Supreme
Court held that the FAA preempted California’s rule classifying
class action or collective action waivers in consumer contracts of
adhesion as unconscionable. (Concepcion, supra, 563 U.S. at
7
pp. 340-352.) The Concepcion court noted that although
California’s rule did not explicitly discriminate against
arbitration (see id. at pp. 341-343), it “interfer[ed] with
fundamental attributes of arbitration” (id. at p. 344), by
effectively imposing formal classwide arbitration procedures on
the parties against their will. (Id. at pp. 345-347.) As such, the
rule was preempted by the FAA. (Concepcion, supra, at p. 352.)
C. The Iskanian Rule
In Iskanian, the plaintiff-employee signed an agreement
which provided that “ ‘any and all claims’ ” arising out of his
employment were to be submitted to binding arbitration before a
neutral arbitrator and that neither the employee nor the
employer could “ ‘assert class action or representative action
claims against the other.’ ” (Iskanian, supra, 59 Cal.4th at
p. 360.) The employee subsequently brought both a class action
and a PAGA representative action against his employer. (Id. at
p. 361.)
The Iskanian court first addressed the employee’s class
action waiver and determined that, under Concepcion, the refusal
to enforce a class action waiver in an employment arbitration
agreement would conflict with the FAA by interfering with the
fundamental attributes of arbitration. (Iskanian, supra, 59
Cal.4th at p. 364.) The court, however, reached a different
conclusion on the waiver of the employee’s PAGA action.
The court held that a complete ban on PAGA actions was
contrary to public policy, and unenforceable as a matter of state
law, because it would “disable one of the primary mechanisms for
enforcing the Labor Code”—the use of deputized citizen-
employees to augment the limited enforcement capability of the
LWDA and pursue the civil penalties used to deter such
violations. (Iskanian, supra, 59 Cal.4th at p. 384.) The court
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held that such a rule did not conflict with the FAA because the
FAA was intended to govern “the resolution of private disputes,
whereas a PAGA action is a dispute between an employer and the
state . . . [a]gency.” (Iskanian, supra, at p. 384.) The court
analogized a PAGA claim to a qui tam action and stated that
such actions generally fall outside the FAA’s purview. (Iskanian,
supra, at pp. 382, 387.)
Notwithstanding Iskanian’s observations that “a PAGA
claim lies outside the FAA’s coverage” (Iskanian, supra, 59
Cal.4th at p. 386), the court left open the possibility that
representative PAGA claims might be subject to arbitration if
that were the parties’ preference: “Although the arbitration
agreement can be read as requiring arbitration of individual
claims but not of representative PAGA claims, neither party
contemplated such a bifurcation. [The plaintiff] has sought to
litigate all claims in court, while [the employer] has sought to
arbitrate the individual claims while barring the PAGA
representative claim altogether. In light of the principles above,
neither party can get all that it wants. [The plaintiff] must
proceed with bilateral arbitration on his individual damages
claims, and [the employer] must answer the representative PAGA
claims in some forum. The arbitration agreement gives us no
basis to assume that the parties would prefer to resolve a
representative PAGA claim through arbitration.” (Iskanian,
supra, at p. 391, italics added.)
D. The Iskanian Rule Remains Binding Authority
Regarding Enforceability of PAGA Waivers
Santa Ana claims the United States Supreme Court’s
interpretation of the FAA preemption clause in three recent cases
undermines Iskanian’s holding and requires California courts to
enforce PAGA representative action waivers. Santa Ana relies on
9
Lamps Plus, Inc. v. Varela (2019) 587 U.S. ___ [139 S.Ct. 1407,
203 L.Ed.2d 626] (Lamps Plus), Epic Systems, supra, 584 U.S. ___
[138 S.Ct. 1612], and Kindred Nursing Centers L.P. v. Clark
(2017) 581 U.S. ___ [137 S.Ct. 1421, 197 L.Ed.2d 806] (Kindred
Nursing).) We are not persuaded.
“On federal questions, intermediate appellate courts in
California must follow the decisions of the California Supreme
Court, unless the United States Supreme Court has decided the
same question differently.” (Correia v. NB Baker Electric, Inc.
(2019) 32 Cal.App.5th at p. 619; see also Chesapeake & Ohio Ry.
v. Martin (1931) 283 U.S. 209, 221 [51 S.Ct. 453, 75 L.Ed. 983];
Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450,
455; People v. Whitfield (1996) 46 Cal.App.4th 947, 955-957.)
In Epic Systems, an accountant sued his employer for
violations of the federal Fair Labor Standards Act of 1938 (FLSA;
29 U.S.C. § 201 et seq.) and California overtime law. (Epic
Systems, supra, 584 U.S. at p. ___ [138 S.Ct. at p. 1620].) The
employee had signed an arbitration agreement that “specified
individualized arbitration, with claims ‘pertaining to different
[e]mployees [to] be heard in separate proceedings.’ ” (Id. at
p. 1621.) The accountant sought to litigate the state law claim as
a class action and the FLSA claim on behalf of a nationwide class
under FLSA’s collective action procedures. (Epic Systems, supra,
at p. ___ [138 S.Ct. at p. 1620].)
In compelling arbitration, the United States Supreme
Court reconfirmed Concepcion’s holding that the FAA requires
enforcement of class action waivers. It also rejected the
employee’s argument, as did the Iskanian court, that the
National Labor Relations Act’s guarantee of the right to engage
in “concerted activit[y]” (29 U.S.C. § 157) preempted the FAA on
10
this issue. (Epic Systems, supra, 584 U.S. at p. ___ [138 S.Ct. at
pp. 1623-1630]; Iskanian, supra, 59 Cal.4th at p. 372.)
Notwithstanding Epic Systems, courts considering the
continuing vitality of Iskanian have unanimously concluded that,
in light of the unique nature of a PAGA action—i.e., a suit to
punish and deter state labor violations for the benefit of the
public—Epic System’s interpretation of the FAA’s preemptive
scope does not defeat Iskanian’s holding for purposes of an
intermediate appellate court applying the law.5 (See Correia v.
NB Baker Electric, Inc., supra, 32 Cal.App.5th at p. 620 [Epic
Systems did not consider “the unique nature of a PAGA claim”
nor “the implications of a complete ban on a state law
enforcement action” and thus Iskanian remains good law]; cf.
Sakkab v. Luxottica Retail North American, Inc. (9th Cir. 2015)
803 F.3d 425, 435-436 [upholding Iskanian rule against FAA
5 In distinguishing the FLSA claim brought in Epic
Systems, the Correia court pointed to the following passage from
Iskanian: “ ‘Our opinion today would not permit a state to
circumvent the FAA by, for example, deputizing employee A to
bring a suit for the individual damages claims of employees B, C,
and D. This pursuit of victim-specific relief . . . would be
tantamount to a private class action . . . .’ ” (Correia v. NB Baker
Electric, Inc., supra, 32 Cal.App.5th at p. 619, quoting Iskanian,
supra, 59 Cal.4th at p. 387.)
Unlike the PAGA, the FLSA is focused on such victim-
specific relief. (See 29 U.S.C. § 216 [discussing various
compensatory damages available to victim employees under
FLSA]; cf. United States v. Edwards (4th Cir. 2021) 995 F.3d 342,
346 [observing that additional liquidated damages in amount
equal to unpaid wages and overtime compensation available
under FLSA “makes perfect sense when considering that the goal
is to provide full compensation to employees”].)
11
preemption by noting that: (1) unlike class action plaintiff, PAGA
plaintiff does not vindicate the right to damages for absent
employees, but acts as a proxy for the state; and (2) a
representative PAGA action does not require any of the formal
procedures associated with class actions]; Rivas v. Coverall N.
Am., Inc. (2021) 842 Fed.Appx. 55, 56 [stating that while Epic
Systems and Lamps Plus reiterated and reapplied rule
announced in Concepcion—“a case Sakkab considered at length”
“neither case expanded upon Concepcion in such a way as to
abrogate Sakkab”].)
We agree with these and other appellate courts that have
recognized the limited reach of Epic Systems in the context of
PAGA suits. (See, e.g., Winns v. Postmates Inc. (2021) 66
Cal.App.5th 803, 812; Olson v. Lyft, Inc. (2020) 56 Cal.App.5th
862, 872; Provost v. YourMechanic, Inc. (2020) 55 Cal.App.5th
982, 998; Collie v. The Icee Co. (2020) 52 Cal.App.5th 477; Correia
v. NB Baker Electric, Inc., supra, 32 Cal.App.5th at p. 620.)
The two other United States Supreme Court decisions cited
by Santa Ana plainly do not abrogate Iskanian. In Lamps Plus,
an employee who had signed an arbitration agreement sued
Lamps Plus in federal court to pursue claims on behalf of a
putative class of employees whose tax information had been
compromised as a result of a hacker-related breach. (Lamps
Plus, supra, 587 U.S. at p. ___ [139 S.Ct. at pp. 1412-1413].)
Although the arbitration agreement was ambiguous as to
whether the parties had agreed to class arbitration, the Ninth
Circuit construed the agreement against Lamps Plus (the drafter
of the agreement) and approved a classwide arbitration order.
(Id. at p. ___ [139 S.Ct. at pp. 1413-1414.) The high court
reversed, holding the FAA preempted California’s contra
proferentem rule (requiring agreements be held against the
12
drafter) when the rule is used “to impose class arbitration in the
absence of the parties’ consent.” (Lamps Plus, supra, at p. ___
[139 S.Ct. at pp. 1415, 1418, fn. omitted].)
In Kindred Nursing, the United States Supreme Court
rejected the argument that an arbitration agreement between a
nursing facility and its resident, which had been entered by the
resident’s attorney-in-fact, was unenforceable. (Kindred Nursing,
supra, 581 U.S. at p. ___ [137 S.Ct. at pp. 1425-1426].) The high
court concluded that a judicially-created state rule (that a power
of attorney could not entitle a representative to waive the right to
a jury trial absent a “clear statement” specifically granting such
authority) violated the FAA. (Kindred Nursing, supra, at
pp. 1425-1427.)
We fail to discern how these cases compel us to abandon
our high court’s holding in Iskanian. The central concern in
Iskanian was whether an outright waiver of representative
PAGA actions would defeat the state’s augmented enforcement of
its labor laws. In contrast, Kindred Nursing focused on a state
rule that effectively singled out arbitration agreements for
disfavored treatment. Similarly, Lamps Plus rejected imposing a
state rule of contract interpretation that would have forced class-
wide arbitration of private party claims absent the parties’
consent to such procedures.
Neither case decided or considered whether a worker may
waive the right to bring a representative action on behalf of a
state government in any forum. Neither case mentions PAGA or
similar laws in other states. Accordingly, under the doctrine of
stare decisis, we are bound to follow our Supreme Court’s
decision in Iskanian. (See Auto Equity Sales, Inc. v. Superior
Court, supra, 57 Cal.2d at pp. 455-456.)
13
E. Mondragon May Not Be Compelled to Arbitrate Her
PAGA Action on an Individual Basis
Santa Ana requests an order compelling Mondragon to
submit her PAGA claims “to binding individual (not collective or
representative) arbitration.” Under Iskanian, however, such an
order cannot issue.
In Iskanian, the court noted there existed a split in
authority regarding whether an employee could file an individual
claim under the PAGA. (Iskanian, supra, 59 Cal.4th at p. 383.)
The court went on to explain that, even assuming the PAGA
permitted an individual claim for penalties, “a single-claimant
arbitration under the PAGA for individual penalties will not
result in the penalties contemplated under the PAGA to punish
and deter employer practices that violate the rights of numerous
employees under the Labor Code.” (Iskanian, supra, 59 Cal.4th
at p. 384.) Because compelling a single-claimant procedure would
frustrate the core objectives of the PAGA, the court held that the
right to bring a representative PAGA case could neither be
waived nor bifurcated and compelled to arbitration on an
“individual” basis. (Id. at p. 384.)
Mondragon’s complaint is expressly designated as a “PAGA
representative action” and it alleges that, as “a representative of
the general public,” she is seeking penalties on behalf of all
aggrieved employees. Thus, like the plaintiff in Iskanian,
Mondragon cannot be compelled to arbitrate her PAGA action on
an individual basis. (Iskanian, supra, 59 Cal.4th at pp. 384, 391.)
14
DISPOSITION
The order denying the motion to compel arbitration is
affirmed. Mondragon shall recover her costs on appeal.
NOT TO BE PUBLISHED
CRANDALL, J.*
We concur:
ROTHSCHILD, P. J.
BENDIX, J.
*Judge of the San Luis Obispo County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
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