PAGA: Second District Div. 4 Holds Employee Has Standing To Bring PAGA Representative Claims After Individual Claim Is Sent To Arbitration
Court Follows Opening Provided By Justice Sonia Sotomayor's Concurrence In Viking Cruises v. Moriana.
Following the Supreme Court opinion in Viking Cruises v. Moriani, there could be no disagreement that employee Million Seifu's individual PAGA claim against Lyft for personal Labor Code violations he suffered could be arbitrated. But that left the hot issue to be decided: whether he had standing, after his individual claim had been directed to arbitration, to bring a representative claim for other employees.
In Milton Seifu v. Lyft, Inc., B301774 (2/4 3/30/23) (Collins, Currey, Stone), the court explained that Seifu did have standing: "We conclude that we are not bound by the analysis of PAGA standing set forth in Viking River. As Justice Sotomayor recognized in her concurring opinion, PAGA standing is a matter of state law that must be decided by California courts. Until we have guidance from the California Supreme Court, our review of PAGA and relevant state decisional authority leads us to conclude that a plaintiff is not stripped of standing to pursue non-individual PAGA claims simply because his or her individual PAGA claim is compelled to arbitration." The court remanded to the trial court to decide whether the representative claims should be stayed pending arbitration of the individual.
The court relied on the California Supreme Court case Kim v. Reins International, 9 Cal.5th 13 (2020) to reach its conclusion that Seifu had standing under California law. The law is remedial and given a liberal interpretation to effect the Legislature's purpose of enforcing California's labor laws. We have blogged about other California cases that reached the same conclusion about standing: Tricia Galarasa v. Dolgen California, LLC, post dated 3/8/23, and Tom Piplack v. In-N-Out Burgers, post dated 3/20/23. We're eager to see how this turns out when the California Supreme Court decides Adolph v. Uber Technologies.
Stay: Despite Plain Language Of The FAA, Ninth Circuit Holds That Judge Has Discretion To Dismiss Case Rather Than Stay It, Once All Claims Are Subject To Arbitration
Holding Is Consistent With Ninth Circuit Precedent But Not The Language Of The Federal Arbitration Act.
"The sole question before us is whether the Federal Arbitration Act (“FAA”) requires a district court to stay a lawsuit pending arbitration, or whether a district court has discretion to dismiss when all claims are subject to arbitration. Although the plain text of the FAA appears to mandate a stay pending arbitration upon application of a party, binding precedent establishes that district courts may dismiss suits when, as here, all claims are subject to arbitration. Thus, we affirm." William F. Forrest, et al v. Keith Spirrizzi et al, No. 22-16051 (9th Cir. 3/21/23) (Bennett, Graber, Desai).
Judges Graber and Desai, fully concurring in the majority opinion, nevertheless urged that the Ninth Circuit consider the matter en banc to issue an opinion consistent with the language of the FAA, and that the Supreme Court take up the issue. As Judge Graber points out, "When a party requests a stay pending arbitration of “any issue referable to arbitration under an agreement in writing,” the court “shall . . . stay the trial of the action” until the arbitration concludes or unless the requesting party is “in default in proceeding with such arbitration.” 9 U.S.C. § 3 (emphases added)." Squaring the language of the FAA with not staying the trial of the action when any issue is referred to arbitration is a bit like squaring the circle.
COMMENT: “When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean — neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master – – that’s all.” — Alice's Adventures in Wonderland.
Prompt Payment: California Common Law Provides A Basis For Shifting Arbitration Fees When A Party Is Unable To Pay Its Share
Yet Another Skilled Nursing Home Case.
One of our sidebar categories is "Prompt payment" referring to statutory provisions applying to consumer and employment cases requiring the drafting party to promptly pay arbitration fees and costs or waive its right to arbitrate. But California case law, upon which the next case relied, also provides that in circumstances where a party is unable to pay, it may petition the court to have the counterparty choose between paying the expenses in arbitration or litigating in court. That's what happened in Jimmy Hang v. RG Legacy I, LLC, et al., G061265 (4/3 2/7/23) (Motoike, Goethals, Sanchez).
"Citing Roldan v. Callahan & Blaine (2013) 219 Cal.App.4th 87 (Roldan), the trial court found Daniel [plaintiff] was indigent at the time of his death and granted the petition to compel arbitration on the condition that, within 15 days, the RG Legacy parties agree to pay all arbitration fees and costs, else waive the right to arbitrate the matter." RG Legacy appealed rather than pay fees and costs, and the Court of Appeal affirmed the trial court's order.
Note that the named plaintiff is "Jimmy Hang." One twist is that the alleged victim of elder abuse and nursing home negligence, plaintiff Daniel Hang, was dead. He had been indigent, and his estate lacked assets. The remaining plaintiffs, Jimmy Hang and Daniel's widow, dropped their wrongful death suit, eliminating the issue of whether they had assets. Jimmy continued in the lawsuit solely as successor to Daniel, i.e., as successor to an indigent.
COMMENT: California case law has developed so that the contractual right to arbitrate can be trumped by the right to a forum of the indigent plaintiff unable to pay for arbitration. The leading cases relied upon in Jimmy Hang v. RG Legacy are Roldan and Weiler v. Marcus & Millichap Real Estate Investment Services, Inc., 22 Cal.App.5th 970 (2018) (Weiler). We have posted about Roldan on 8/28/13 and about Weiler on 5/1/18. The party who questions whether the indigent party really has assets could petition the court to conduct limited discovery on the issue. Apparently that was not done in the Jimmy Hang case.
PAGA, FAA Preemption: Fourth District, Div. 3 Holds Arbitration Of Individual PAGA Claims Can Be Compelled, But Not Representative Claims
Texas Longhorn.
Clinton & Charles Robertson from Del Rio, Texas & San Marcos. Wikipedia. Between Scylla and Charybdis. Wikipedia.
Between Horns Of A Dilemma And Between Scylla And Charybdis.
In a PAGA case, the Court of Appeal, employing mixed salad metaphors, explains that it is between the horns of a dilemma and between Scylla and Charybdis. Tom Piplack v. In-N-Out Burgers, G061098 (4/3 3/7/23) (Sanchez, Bedsworth, Delaney). This is a PAGA case in which the Court of Appeal held that plaintiff Piplack's individual PAGA claims could be arbitrated and plaintiff Sherrod's individual PAGA claims had to be sent back to the trial court for consideration of Sherrod's argument that Sherrod had been underage when he agreed to arbitrate. However, the Court of Appeal held that the plaintiffs' representative claims could be litigated.
Returning to horns, dilemmas, Scylla and Charybdis, quandaries, plights, puzzles, and predicaments, Justice Sanchez explains that the court must follow SCOTUS's ruling in Viking River Cruises, Inc. v. Moriana, ___ U.S. ___ [142 S.Ct. 1906] (2022) (Viking), holding that Iskanian's ruling that PAGA claims could not be forced into arbitration was preempted by the Federal Arbitration Act. But Viking only requires this result as to individual PAGA claims. Viking did not preempt the portion of Iskanian prohibiting waiver of the right to pursue representative PAGA actions. Yet Viking apparently concluded that if the individual PAGA claim was arbitrated, then no one was left with standing under California law to bring the representative claim, even if the right to litigate the representative claim was not preempted.
Standing to bring the representative claim is an issue of state law that Justice Sanchez explains was decided in Kim v. Reins International California, Inc., 9 Cal.5th 73 (Kim) (2020). Because Kim is a recent case decided by the California Supreme Court, and because SCOTUS does not decide state law, Justice Sanchez resolved the court's dilemma by following Kim on the issue of state law standing. Kim has only two requirements for a plaintiff to have standing to bring a representative action: “The plain language of [Labor Code] section 2699(c) has only two requirements for PAGA standing. The plaintiff must be an aggrieved employee, that is, someone ‘who was employed by the alleged violator’ and ‘against whom one or more of the alleged violations was committed.’” (quoting Kim).
In short, the court followed "Viking on FAA preemption and Kim on PAGA standing."
Existence Of Agreement: There Is No Agreement Where Nursing Home Stroke Victim Lacked Capacity To Contract
Nursing Homes Continue To Create Arbitration Problems.
If our readers use the sidebar search box, they will discover other cases involving nursing homes. Sometimes the problem of enforcing an arbitration agreement involving a nursing home resident arises because a relative signs for the resident, and issues arise as to whether the relative had authority to bind the non-signatory. Here, it was the resident himself, a stroke victim, who signed the agreement. However, there was substantial evidence that he was mentally impaired and lacked the ability to contract. The Court of Appeal affirmed the trial court's order denying the skilled nursing home's petition to compel arbitration. Pemilady Algo-Heyres v. Oxford Manor, LP, B319601 (2/6 2/28/23) (Baltodano, Gilbert, Yegan). A rebuttable presumption exists that all persons have the capacity to make decisions and to be responsible for their acts or decisions.
Delegation, Unconscionability: First District Div. 2 Affirms Order Denying Petition To Compel Arbitration
On-Line Gaming Was The Context For The Case.
The world of on-line gaming presents challenges to companies wishing to bind players to arbitration. As our next case illustrates, gamers are likely to be treated as unsophisticated consumers with unequal bargaining power. Pavel Gostev v. Skillz Platform, Inc., A164407 (1/2 2/28/23) (Miller, Stewart, Richman).
Gostev, a gamer, alleged that Skillz Platform, Inc.'s game amounted to gambling and that it engaged in predator practices. By establishing an account, tapping next, and clicking on a hyperlink to Terms of Service, Gostev allegedly agreed that disputes would be delegated to an arbitrator to decide. Skillz moved to compel arbitration, and Gostev argued that the agreement failed to delegate decisions to an arbitrator by clear and unmistakeable evidence, and that the arbitration agreement was unconscionable. The trial court agreed with Gostev, and the Court of Appeal affirmed.
The problem with the delegation argument was that language that delegated decisions concerning disputes about Terms, Services, and Product was not clear enough. It could mean that the threshold dispute was delegated to the arbitrator to decide, or it could mean that only substantive disputes about the Terms, Services, and Product were delegated. The agreement also referenced the rules of the AAA which have sometimes been applied successfully to make a delegation argument. But the Court of Appeal explained that here, where the consumer was likely to be in a position of unequal bargaining power and sophistication, it would not accept reference to AAA rules as good enough to establish effective delegation.
The agreement was a take-it-or leave-it agreement, and hence, there was some degree of procedural unconscionability. Also the agreement was one-sided to substantively favor the company: plaintiff's monetary damages were limited to $50, arbitration was to be held in San Francisco, though the consumer was located in Washington, there was a one-year limitations period for bringing a claim, and a split of arbitration fees and costs limited consumer rights under the California Consumer Legal Remedies Act. Given the procedural and substantive unconscionability, the court agreed the arbitration agreement was unenforceable.