Arbitration, PAGA: Supreme Court Holds In Viking Cruises v. Moriana That PAGA Claims Can Be Arbitrated
I Told You So.
In my January 7, 2022 post about Viking Cruises, Inc. v. Moriana, I predicted that the employee Angie Moriana would lose her argument that her Private Attorney General Act (PAGA) employment claim against her employer Viking Cruises, could avoid mandatory arbitration. I promised, "If my prediction proves to be accurate, I will let you know." So I'm letting you know. However, I somewhat simplistically based my "prediction" on the way the Supreme Court is currently constituted. But as we will see, the court's opinions in this case do not fall along simple left-right lines, and only Justice Clarence Thomas dissented.
Justice Samuel Alito delivered the majority opinion of the court. Viking Cruises, 20-1573 (6/15/22). The opinion states: "We hold that the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate. This holding compels reversal in this case."
Part I of the opinion is an introduction that describes the background of the case and Moriana's claim. Alito explains that PAGA provides for "representative" claims in two different respects: first, the plaintiff employee represents state interests; second, the employee represents other employee's PAGA claims, which may be predicated on violations different from those of the plaintiff employee. Part II is an exegesis on the FAA and PAGA. In Part II, Alito explains that the fact that an employee represents state interests is not incompatible with bilateral arbitration. Instead, he maintains it is representation in the second sense — representation of other claims by other claimants — that is incompatible with arbitration. Part III states, "We think that . . . a conflict between PAGA’s procedural structure and the FAA does exist, and that it derives from the statute’s built-in mechanism of claim joinder." Part IV repeats the holding, and concludes that Viking Cruises is entitled to arbitrate Moriana's individual PAGA claim. But the representative PAGA claims of other employees cannot be arbitrated under the PAGA scheme by Moriana, because only an aggrieved party can bring a PAGA claim, meaning only the other employees can bring their own individual PAGA claims — at least, that is how Alito interprets that PAGA statutory scheme.
We have spent more time than usual describing the parts of the majority opinion, because it spawned a concurrence written by Justice Amy Coney Barrett, joined by Justice Brett Kavanaugh and Chief Justice John Roberts (with the exception of a footnote), a concurrence by Justice Sonya Sotomayor, and a dissent by Justice Thomas. Barrett concurred in Part III, but believed that parts I, II, and IV were unnecessary to the court's decision: "I agree that reversal is required under our precedent because PAGA’s procedure is akin to other aggregation devices that cannot be imposed on a party to an arbitration agreement." Chief Justice Roberts concurred in parts I and III.
Justice Sotomayor concurred based on her understanding that, "As a whole, the Court’s opinion makes clear that California is not powerless to address its sovereign concern that it cannot adequately enforce its Labor Code without assistance from private attorneys general." She believes that in an appropriate case, California courts interpreting California law will get to decide whether the employee has "standing" to pursue representative PAGA claims, and that if necessary, the California legislature can "modify the scope of statutory standing under PAGA within state and federal constitutional limits." [Query whether the current case is an "appropriate case" in Sotomayor's understanding.] Sotomayor's concurrence seems to invite a continuing PAGA dialogue between the United States and California Supreme Courts.
Justice Thomas dissents, based on his consistent position that the Federal Arbitration Act does not apply to the states. An explanation of his "iconoclastic" position can be found in an article by Brian Farkas, The Continuing Voice of Dissent:
Justice Thomas and the Federal Arbitration Act," Harvard Negotiation Law Review, vol 22:33 (2016). As the most conservative voice on the court, Thomas rejects a broad application of the Commerce Clause, accepts the limited interpretation of the Privilege and Immunities Clause of the 14th Amendment, and pretty much rejects incorporation of basic rights under the Due Process Clause of the 14th Amendment. He's a states rights guy. And so his position on the far-right spectrum of the Supreme Court bench would result in allowing California to limit arbitration to protect employees. Presumably states following policies that do not protect employees as much as California does would also be protected by Thomas's deference to states' rights.
Arbitration, Waiver: Your Blogger Has An Article About Waiver Of The Right To Arbitrate In The Daily Journal
The Article Is Entitled "The United States and the California Supreme Courts are not on the same page."
My article in the June 10, 2022 online edition of the Daily Journal contrasts the analysis of waiver of the right to arbitrate in the SCOTUS case Morgan v. Sundance (2022) with the analysis in the California Supreme Court case St. Agnes Medical Center v. PacifiCare of California (2003). SCOTUS does not require a showing of prejudice by the party opposing arbitration before the party seeking arbitration can be found to have waived its right to arbitrate [see my 5/24/22 post on Morgan v. Sundance]. The California Supreme Court views the matter differently. In 2003, the St. Agnes court endorsed federal cases requiring a finding of prejudice before there could be a waiver of the right to arbitrate. That is no longer the case after Morgan v. Sundance. Time to rethink the matter?
Viewing the article online requires a subscription the Daily Journal.
Arbitration, Discovery: SCOTUS Rules Federal Courts Can’t Grant US Discovery For Arbitration Outside US
Foreign Arbitration Panels Are Not A "Foreign Or International Tribunal".
A district court can order the production of evidence “for use in a proceeding in a foreign or international tribunal.” 28 U.S.C. § 1782(a). The United States Supreme Court, in a unanimous decision authored by Justice Amy Coney Barrett, holds that a foreign arbitration panel outside the US is not a "proceeding in a foreign or international tribunal." Therefore, the district court cannot order the production of evidence. ZF Automotive US , Inc. v. Luxshare, Ltd, No. 21-401, together with No. 21–518, AlixPartners, LLP, et al. v. Fund for Protection of Investors’ Rights in Foreign States, (S. Ct. 6/13/22).
COMMENT: Limitations on discovery should be considered when agreeing to arbitrate (assuming one has a choice).
Arbitration, Nonsignatories: There Is No Agreement To Arbitrate Between San Diego And Instacart
PAGA Cases Are Not A Good Analogy For A Lawsuit Brought Directly By The City, Rather Than By Workers.
If the City of San Diego city attorney sues Instacart for violating the Unfair Competition Law, Business and Professions Act, §§ 17200 et seq., is the City bound by arbitration agreements between Instacart's Shoppers and Instacart? No, says the Court of Appeal, agreeing with the trial court, in The People v. Maplebear Inc., D079209M.PDF (4/1 6/6/22) (McConnell, Irion, Dato).
Maplebear Inc., doing business as Instacart, hires Shoppers to connect with buyers and help get products to the buyers. The Shoppers are characterized by Instacart as "independent contractors" and required to sign arbitration agreements with Instacart. However, the City is not a signatory, and the court explained that the City was suing under its enforcement powers on behalf of the people of California. The City claimed that misclassifying Shoppers as independent contractors denied them employee benefit protections, resulted in a loss of payroll tax, and created unfair advantage over competitors.
COMMENT: Much of the opinion is devoted to a detailed discussion of Iskanian, the California Supreme Court case holding that employees are not required to arbitrate PAGA claims, because PAGA claims are analogous to qui tam claims in which the state has an interest, and the state is not a signatory to arbitration agreements between employers and employees. However, the city attorney and Instacart must recognize that the California rule that PAGA claims are not subject to mandatory arbitration is now the subject of a case that has been argued before the US Supreme Court in a case awaiting a decision. Instacart argued that the City is really suing for the benefit of the employees, and should therefore be bound by their arbitration agreements — an argument that has been repeatedly made in PAGA cases by critics of Iskanian. If the rule in Iskanian falls in SCOTUS, then the City's argument could be weakened — but only if the rule in Iskanian applies to the City's argument.
The Court of Appeal explained that Instacart "inverted" the ruling of Iskanian, and therefore Iskanian did not apply. Iskanian allowed the worker to sue on behalf of the state. That was not the case with the Shoppers, who did not bring the suit. Rather, the City of San Diego sued directly on behalf of the People's enforcement powers, not primarily for the benefit of the workers, and the City was not party to an arbitration agreement.
Settlement: Marital Settlement Agreement Is Held To Be Waiver Of Surviving Spouse’s Spousal Rights
Read Probate Code §§ 144 – 144.
An enforceable marital settlement agreement can lead to a waiver of spousal rights. In Welch v. Welch, B311507 (2/5 5/31/22) (Moor, Rubin, Kim), a husband and wife, anticipating the dissolution of their marriage, entered into a marital settlement agreement (MSA) to distribute their property. The court entered judgment, the wife died, and the surviving husband sought to undo the settlement agreement. He succeeded in the trial court, but failed in the Court of Appeal.
The issue was whether the surviving spouse, the husband, waived spousal rights enumerated in the Probate Code, § 141(a) by entering into the MSA. The Court of Appeal held that the MSA was enforceable, because it was a complete property settlement, the parties were represented by counsel, and the husband had received a "fair and reasonable disclosure of the property or financial obligations" of his wife.
Arbitration, Enforceability: No Agreement Where Company Was Unable To Establish Automatic Sending Of Electronic Receipt
Existence Of Agreement Was Not An Issue To Delegate To Arbitrator.
Fiona Trinity sued Life Insurance Company of North America and individuals (LINA parties) for employment-related claims. The LINA Parties moved unsuccessfully to compel arbitration in the trial court, and the Court of Appeal affirmed. The LINA parties could not establish the existence of an agreement to arbitrate, and even if they could, the agreement would have been unconscionable. Trinity v. Life Insurance Company of America et al., B312302 (2/7 5/23/22) (Perluss, Segal, Feuer).
The defendant's PMK had testified as to the contract procedure, explaining that once the employee had clicked on a link indicating he or she had read an online employee handbook, which included an arbitration agreement, they would receive an email confirming their assent to the terms of the handbook. The problem was that the employer could not produce the automatically generated receipt and did not know how to retrieve it, and the employee did not remember reading or agreeing to the handbook.
While issues of arbitrability were delegated to the arbitrator here, whether there is an agreement to arbitrate in the first place is an issue for the judge to decide. The issue of arbitrability cannot be delegated under the terms of a nonexistent agreement.
COMMENT: In the 21st century, there is still at least one advantage to the use of a paper document with an inked signature. Electronic signing is permissible, but then one must carefully follow procedure and have a good storage and retrieval system for electronic data.