Woodie v. AER Electronics, Inc. CA1/3

Filed 1/20/21 Woodie v. AER Electronics, Inc. CA1/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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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ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
RAYMOND WOODIE,
Plaintiff and Appellant, A159317
v.
AER ELECTRONICS, INC., et al., (Alameda County
Defendants and Respondents. Super. Ct. No. RG18892555)
Raymond Woodie appeals from an order denying his motion to declare
his arbitration agreement (Agreement) with former employer
AER Electronics, Inc., void and unenforceable because it purports to waive
his right to bring a representative action under the Labor Code Private
Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) (PAGA). We
reverse. The Agreement includes a nonseverable class action waiver that, by
its plain language, encompasses representative claims under PAGA that
cannot be waived. It is therefore void and unenforceable.
BACKGROUND
Woodie filed a putative class action against AER Electronics, Inc.,
AER Worldwide Holdings, LLC, and AER Management Services, Inc. (jointly,
AER), under the unfair competition law (Bus. & Prof. Code, § 17200 et seq.)
(UCL), alleging numerous violations of California wage and hour laws. In
response, AER moved to compel arbitration pursuant to the Agreement.
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Following procedural twists and turns not relevant to this appeal,
Woodie moved the trial court to declare the Agreement unenforceable because
it contains a nonseverable class action waiver that unlawfully waived his
right to bring a PAGA action. The class action waiver provision states:
“[T]here will be no right or authority for any dispute to be brought, heard or
arbitrated as a class, collective or representative action or as a class member
in any purported class, collective action or representative proceeding (‘Class
Action Waiver’). Notwithstanding any other clause contained in this
Agreement, the preceding sentence shall not be severable from this
Agreement in any case in which the dispute to be arbitrated is brought as a
class, collective or representative action.” (Boldface omitted.)
The trial court rejected Woodie’s contention that the waiver
encompassed PAGA claims: “Because the Arbitration Agreement does not
mention PAGA, . . . it is at worst ambiguous whether the phrase
‘representative action’ is intended to encompass qui tam actions brought
under PAGA. Given an ambiguity, ‘[a]n interpretation which gives effect is
preferred to one which makes void.’ ” The court therefore construed the class
action waiver to exclude PAGA actions and ruled that the clause and, with it,
the Agreement were enforceable.
This appeal is timely.
DISCUSSION
We first clarify what is not contested in this appeal. It is undisputed
that agreements that purport to waive an employee’s right to bring a PAGA
action are unlawful and unenforceable. As the Supreme Court explained in
Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348(Iskanian), “the Legislature’s purpose in enacting the PAGA was to augment
the limited enforcement capability of the [Labor and Workforce Development]
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Agency by empowering employees to enforce the Labor Code as
representatives of the Agency. Thus, an agreement by employees to waive
their right to bring a PAGA action serves to disable one of the primary
mechanisms for enforcing the Labor Code. Because such an agreement has
as its ‘object, . . . indirectly, to exempt [the employer] from responsibility for
[its] own . . . violation of law,’ it is against public policy and may not be
enforced.” (Id. at p. 383; Correia v. NB Baker Electric, Inc. (2019) 32
Cal.App.5th 602, 622; Montano v. Wet Seal Retail, Inc. (2015) 7 Cal.App.5th
1248, 1256–1257 (Montano).) Moreover, “ ‘ “a law established for a public
reason cannot be contravened by a private agreement.” ’ ” (Iskanian, at pp.
382–383, quoting Armendariz v. Foundation Health Psychare Services, Inc.
(2000) 24 Cal.4th 83, 100.)
Nor does AER dispute that the waiver provision is explicit and in plain
language nonseverable. Therefore, a finding that it is unenforceable
invalidates the Agreement in its entirety.1 (Securitas Security Services
USA, Inc. v. Superior Court (2015) 234 Cal.App.4th 1109 (Securitas).)
Securitas, addressing a nearly identical nonseverability clause, explains:
“The dispute resolution agreement . . . is not divisible, but presents an all-or-
nothing proposition: when [an] employee asserts class, collective or
representative claims, either the employee forgoes his or her right to
arbitrate such claims, [sic] or the entire agreement is unenforceable and the
parties must resolve their disputes in superior court.” (Id. at pp. 1125, 1126.)
The only question for us is whether the court erred when it found that
PAGA claims are not within the scope of AER’s class action waiver. Well-
1 It is therefore irrelevant that Woodie did not plead a PAGA claim.
The determinative question is the validity of the Agreement, not the
allegations of the complaint.
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settled principles control our inquiry. “We interpret the arbitration
agreement as we would any other contract. ‘ “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.” ’ [Citation.] ‘We review
the scope of an arbitration provision de novo when, as here, that
interpretation does not depend on conflicting extrinsic evidence.’ ” (Kec v.
Superior Court (2020) 51 Cal.App.5th 972, 978 (Kec); Securitas, supra, 234
Cal.App.4th at pp. 1116–1117 [de novo review].)
Since the parties here presented no conflicting extrinsic evidence on the
meaning of the class action waiver, we will independently review the
contractual language to determine whether it encompasses PAGA claims.
Although the provision does not specifically identify or name claims brought
under PAGA, it expressly encompasses “any dispute” that is brought “as a
class, collective or representative action . . . .” (Boldface omitted, italics
added.) By their very nature, actions brought under PAGA are
representative actions. “All PAGA claims are ‘representative’ actions in the
sense that they are brought on the state’s behalf. The employee acts as ‘ “the
proxy or agent of the state’s labor law enforcement agencies” ’ and
‘ “represents the same legal right and interest as” ’ those agencies—‘ “namely,
recovery of civil penalties that otherwise would have been assessed and
collected by the Labor Workforce Development Agency.” ’ ” (ZB, N.A. v.
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Superior Court (2019) 8 Cal.5th 175, 185, quoting Iskanian, supra, 59 Cal.4th
at p. 380.)
The Supreme Court in Iskanian and, more recently, the Fourth
Appellate District in Kec recognized that waivers of “representative actions”
encompass actions brought under PAGA. (Iskanian, supra, 59 Cal.4th at p.
378 [“There is no dispute that the contract’s term ‘representative actions’
covers” PAGA claims]; Kec, supra, 51 Cal.App.5th at p. 978; see Davis v.
TWC Dealer Group, Inc. (2019) 41 Cal.App.5th 662, 675 [provision barring
“ ‘any attempt . . . to file or join other employees in a class, collective or joint
action or arbitration’ ” could be read to preclude PAGA actions].) So even
though the class action waiver here “ ‘does not mention PAGA,’ ” as AER
observes, its attempted waiver of any “representative action” encompasses
PAGA claims. Interpreted in accord with standard rules of contract
interpretation, the Agreement is not ambiguous on this point.
Alternatively, AER cites Iskanian, supra, and Marenco v. DirecTV LLC
(2015) 233 Cal.App.4th 1409 to argue the Agreement is enforceable as to
Woodie’s UCL claims even if the waiver provision is unlawful to the extent it
encompasses PAGA claims. “If a ‘representative action [waiver] is
unlawful,’ ” they maintain, “Iskanian and Marenco would have found the
arbitration agreements unenforceable in total. Because they did not,
representative action waivers are enforceable and [Woodie’s] arguments to
the contrary are without merit.”
This argument overlooks a critical distinction. Unlike the arbitration
agreements in Iskanian and Marenco, AER’s Agreement explicitly prohibits
severance of the class and representative action waiver from the arbitration
agreement. Selective enforcement of the class waiver provision to nullify its
application to representative PAGA actions but not to Woodie’s UCL claims
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would “amount[] to an attempt to unilaterally modify the contract provision
by allowing its severance” in violation of the clear contractual language.
(Kec, supra, 51 Cal.App.5th at p. 980; see Securitas, supra, 234 Cal.App.4th
at p. 1126; see also Montano, supra, 7 Cal.App.5th at p. 1258.) The trial
court in effect did just that and erred when it construed “representative”
actions to exclude representative actions brought under PAGA.
DISPOSITION
The order is reversed. The matter is remanded, and the superior court
is directed to enter a new order granting Woodie’s motion to declare the
Agreement void and unenforceable.
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_________________________
Siggins, P. J.
WE CONCUR:
_________________________
Fujisaki, J.
_________________________
Jackson, J.
A159317/Woodie v. AER Electronics, Inc.
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