PAGA: Fifth District Holds PAGA Claim Can Be Split Into Arbitrable Claims And Non-Arbitrable Representative Claims
A Typology Of PAGA Claims.
Tricia Galarsa v. Dolgen California, LLC, F082040A (5th Dist. 2/24/23) (Franson, Pena, Snauffer), is an addition to the growing cottage industry of cases seeking to make sense of Viking River Cruises, Inc. v. Moriana, 596 U.S. ___ [142 S.Ct. 1906] (2022) (Viking River). The case reverses a trial court order rejecting arbitration of individual PAGA claims and affirms insofar as it also rejected arbitration of representative PAGA claims.
The logic of Viking River is something like this: California case law rejected the splitting of PAGA claims into individual and representative claims. California law allowed representative claims to be litigated. The Federal Arbitration Act (FAA) and Supreme Court cases require individual PAGA claims subject to arbitration to be arbitrated. If representative claims cannot be arbitrated, individual claims must be arbitrated, and individual and representative claims can't be split, then the individual claims get to be arbitrated and severed from the representative claims, which must be dismissed, because no "aggrieved" individual will then have standing for the representative claims in litigation.
Galarsa develops a typology of PAGA claims. Type A claims are those seeking a civil penalty for violation of the Labor Code suffered by the plaintiff and covered by an arbitration agreement subject to the FAA. Type O claims are for those harms suffered by an employee other than plaintiff. Type A and Type O both apply to claims for which, before the enactment of PAGA, the civil penalties sought could only be enforced by the state's labor enforcement agencies. Type A and O claims exclude restitution of wages, and include only claims subject to civil penalties and the 75-25 % split of the penalties between the State and the plaintiff.
Galarsa concludes that under Viking River, waiver of litigation of the representative claims was invalid. Galarsa explains the federal court's interpretation of state law does not bind the state court, and in particular, Galarsa concludes that Type A and Type O claims can be split. If the waiver of litigation of Type O claims is invalid even under Viking River, and Type A and Type O claims can be split, then Type A claims can be sent to arbitration, the invalid waiver of the right to litigate Type O claims can be severed, and Type O claims will not get sent to arbitration.
COMMENT: The creative argument in Galarsa is its prediction that the California Supreme Court would rule that Type A and Type O claims can be split. The argument is splitting of Type A and Type O claims is necessary to carry out effective enforcement of labor laws, by protecting Type O claims, and Type A and Type O claims do not involve the same primary right, with harms to the plaintiff and harms to others being different injuries. However logical this argument may be, it would seem to put Galarsa at odds with other California appellate cases insisting that PAGA claims cannot be split. A creative argument that has not yet been considered has not yet been decided.
PAGA, Issue Preclusion: Arbitrator’s Ruling In Favor Of Corporation Did Not Preclude Employees From Suing Manager For Wage And PAGA Claims
Trial Court's Denial Of Right To Amend Was Error.
The Rocha brothers, Thomas and Jimmy, sued their former employer U-Haul Co. of California, and their manager Sandusky, alleging Sandusky had harassed them at work. The matter was arbitrated and the brothers lost their claim against U-Haul. However, before the matter went to arbitration, the trial judge denied the brothers' effort to amend their claims to add PAGA claims against U-Haul and to add wage and hour and PAGA claims against Sandusky. The brothers appealed confirmation of the arbitrator's award in favor of U-Haul, arguing that the arbitration agreement was unconscionable, and that they should have been allowed to amend their complaint. Thomas Rocha et al. v. U-Haul Co. of California, et al., B322599 (2/1 2/2/23) (Rothschild, Bendix, Benke) (partially published).
After a discussion of unconscionability (unpublished), and concluding that the agreement was not unconscionable, the court moved on to the trial judge's refusal to allow amendment of the complaint. Split decision on appeal: the court's refusal to amend and add a PAGA claim against U-Haul was affirmed, because the arbitrator had found no labor violations by U-Haul, and that precluded a PAGA claim against the employer by virtue of issue preclusion. But the Court of Appeal saw no reason to deny the brothers' request to add wage claims against Sandusky for work the brothers allegedly did for Sandusky personally outside their work for U-Haul, and thus no reason to deny the request to add a PAGA claim against Sandusky personally. So that part of the order denying the request to amend was reversed.
Internet Commerce: Ninth Circuit Agrees Online Ticket Purchasers Were Bound By Agreement To Arbitrate
CONSPICUOUS NOTICE.
In a putative antitrust class action, plaintiffs sued Live Nation Entertainment, Inc./Ticketmaster LLC for charging "supra-competitive fees" for tickets to events. Defendants moved successfully to compel arbitration in the trial court, and the Ninth Circuit affirmed. Oberstein et al v. Live Nation Entertainment, Inc. et al (9th Cir. 2/13/23) (Boggs, Wardlaw, Ikuta).
Two BigLaw firms squared off against one another in the appeal to address an issue that will be familiar to readers of this blog: whether an agreement on the internet that fell somewhere between a click-wrap and a browserwrap was sufficient to create an agreement between the consumer and the seller. As a refresher, see our post dated 3/26/2016: Internet contracts “come primarily in two flavors: ‘clickwrap’ (or ‘click-through’) agreements, in which website users are required to click on an ‘I agree’ box after being presented with a list of terms and conditions of use; and ‘browsewrap’ agreements, where a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen,” quoting from Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2014)."
Here, the court concluded that the agreement sufficiently noticed the consumer that the consumer was agreeing to arbitrate: the font was conspicuous, in color other than the rest of the text, near buttons the consumer had to click on, and by clicking on buttons and proceeding through the process of purchasing the ticket, the consumer evidenced consent.
COMMENT: The keys to a binding agreement in internet commerce are reasonably conspicuous notice of the arbitration agreement and action by the consumer to unambiguously manifest consent. That's enough to impart constructive notice.
Waiver: Ninth Circuit Holds Waiver Of Right To Arbitrate Did Not Occur Despite Delay In Bringing Motion To Compel
Defendant Consistently Asserted Right To Arbitrate And Litigation Conduct Was De Minimis.
The Supreme Court case Morgan v. Sundance, Inc. (2022) has made it easier to argue that a party has waived its right to arbitrate for two reasons: first, while the party resisting arbitration bears the burden of establishing a waiver of the right to arbitrate, it no longer bears a "heavy burden." Second, the party resisting arbitration no longer needs to show that it will be prejudiced if the court were to order arbitration. Despite the greater ease with which a waiver of the right to arbitrate has been waived, the Ninth Circuit agreed with the trial court that defendant had not waived its right to arbitrate. Teresa Armstrong v. Michaels Stores, Inc., 21-15397 (9th Cir. 2/13/23) (McKeown, Fletcher, Bennett).
Waiver of the right to arbitrate cases tend to be pretty fact-specific. The plaintiff in Armstrong filed her complaint against her employer in state court in October 2017. Defendant removed the case to federal court, and an amended complaint was filed. Some small amount of discovery was conducted. The Epic Systems case was decided by the Supreme Court in 2018, holding that an agreement requiring individual arbitration was enforceable and did not violate the National Labor Relations Act of 1935 provision allowing employees to engage in collective action. After Epic Systems was decided, Defendant moved to compel arbitration in 2018. Under those circumstances, the panel held that Michaels Stores had not waived its right to arbitrate.
We posted about the Morgan v. Sundance decision on 5/24/22. We have also written two articles in the Daily Journal about waiver of the right to arbitrate and the discrepancy between federal law, which no longer requires a showing of prejudice to prove waiver, and California state law.
First District, Div. 1 Affirms Order Denying Petition To Compel Arbitration Because Defendant Failed To Establish Existence Of Arbitration Agreement
No Evidence Of Signed Agreement.
Bruno Fleming sued Oliphant Financial for allegedly violating the California Rosenthal Fair Debt Collection Practices Act. Oliphant unsuccessfully petitioned the trial court to compel arbitration. The Court of Appeal affirmed the trial court's order denying Oliphant's petition to compel arbitration. Fleming v. Oliphant Financial, LLC, A165837 (1/1 1/31/23) (Devine, Humes, Margulies).
Oliphant failed to meet its burden of establishing the existence of an arbitration agreement. Fleming had signed a credit card application, but apparently there was a lack of evidence that he had signed an arbitration agreement or that he had received one.
This is pretty basic stuff. Rejecting Oliphant's efforts to finesse the threshold issue, the court addresses a few points.
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- As the party moving to compel arbitration, Oliphant had the burden of proof of establishing that the parties agreed to arbitrate.
- An argument that the arbitration agreement delegates the question of arbitrability to the arbitrator fails if the arbitration agreement doesn't exist.
- Contract formation will be addressed under state law.
- The court, not the arbitrator, gets to decide whether an agreement to arbitrate exists.
- Oliphant's choice-of-law argument that the arbitration agreement requires the application of Delaware law fails if there is no arbitration agreement.
Unable To Apply “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act” Retroactively, Fourth Dist. Div. 3 Nevertheless Finds Arbitration Provisions Unconscionable
Panel Is Very Critical Of Confidentiality Provisions In Sexual Harassment Dispute With Arbitration Provision.
Some California Appellate panels and justices make it a practice to neatly summarize the opinion in the first paragraph. I like that practice. Our next case, in which the Court of Appeal issued a peremptory writ of mandate issue directing the trial court to vacate its order compelling arbitration and enter a new order denying the motion to compel arbitration, made excellent use of that practice in a 36-page slip opinion. Cassandra Murrey v. Orange County Superior Court; General Electric Company et al (real parties in interest), G061329 (4/3 1/30/23) (O'Leary, Bedsworth, Marks). So let's let the panel, in an opinion penned by Justice O'Leary, speak:
"In March 2022, President Joseph R. Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the Act) (9 U.S.C. §§ 401, 402), representing the first major amendment of the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) since its inception nearly 100 years ago. This legislation, having bipartisan support, voids predispute arbitration clauses in cases, such as the one before us now, involving sexual harassment allegations. We regret that this new legislation does not apply retroactively to Casandra Murrey’s complaint filed in March 2021. Nevertheless, we will consider Murrey’s writ petition because the highly secretive and one-sided provisions of her arbitration agreement make it both procedurally and substantively unconscionable. The agreement is factually distinguishable from existing case authority upholding employment adhesion contracts and exemplifies why the legislature drafted House Bill No. 4445. We conclude the trial court erred by enforcing an unconscionably void arbitration agreement."
This case is particularly interesting for its critical analysis about confidentiality language in arbitration agreements in sexual harassment disputes. In this case, "Murrey was forced to agree she would not 'publish or disseminate' the arbitration award." Justice O'Leary wrote, " GE’s confidentiality provision serves no purpose other than to benefit GE. Future employees cannot take advantage of findings in past arbitrations or prove a pattern of discrimination and/or retaliation." Here, the confidentiality provision weighed heavily in finding the arbitration agreement "substantively unconscionable." Ordinarily confidentiality agreements are upheld, but it is clear that the court viewed such requirements to be onerous in the circumstances of a sexual harassment dispute.
We note California Code of Civil Procedure § 1001 prohibits a provision within a settlement agreement that prevents or restricts the disclosure of factual information related to a claim filed in a civil action or a complaint filed in an administrative action. The Murrey case does not involve a settlement agreement.