The Last Gasps of Iskanian?

Wing v. Chico Healthcare & Wellness Cntr., No. B310232 (D2d5 Apr. 28, 2022)

Leshane v. Tracy VW, Inc., No. C093881 (D3 Apr. 29, 2022)

In two cases over two days, the Court of Appeal affirms denials of motions to compel arbitration of claims based in the rule in Iskanian, finding, as other court of appeal decisions have held, that the Iskanian rule survives the U.S. Supreme Court’s intervening rulings in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) and Kindred Nursing Centers Ltd. Partnership v. Clark, 137 S. Ct. 1421 (2017).

What the Court in these cases doesn’t say is that that the Supreme Court recently heard a direct attack on Iskanian in Viking River Cruises v. Moriana. From the sound of the argument, it’s not long for the world.

Affirmed.

Can't Waive the PAGA Till You're a PAG

Julian v. Glenair, Inc., No. B277064 (D2d4 Dec. 13, 2017)

By now, it’s well-settled that an employee’s claims under the Labor Code Private Attorney General Act, or PAGA, aren’t arbitrable, even if the employee’s contract says they are. But the Supreme Court decision that set that rule—Iskanian—had some dicta suggesting that its rationale did not apply to post-dispute agreements to arbitrate. The theory is, basically, that a PAGA claim belongs to the state, so the employee can’t agree to arbitrate it in an employment agreement. But once the employee is litigating on the state’s behalf she’s free to make any tactical decisions related to the litigation she deems advantageous, which includes the right, post dispute, to agree to send a case to arbitration.

Iskanian Applies to Individual PAGA Claims, Too

Tanguilig v. Bloomingdale’s Inc., No. A145283 (D2d5 Nov. 16, 2016)

In Iskanian v. CLS Trans. L.A., 59 Cal. 4th 348 (2014), the Supreme Court held that Labor Code Private Attorney General Act claims cannot be sent to arbitration under an arb agreement that includes a class action waiver. The gist is that PAGA claims more or less belong to the government in a qui tam-like capacity. That being the case, the matter can’t go to arbitration unless the government consents. That logic holds true for non-class PAGA claims, as much as it does for representative actions. Which resolves this appeal, in which Defendant unsuccessfully moved to send Plaintiff’s individual PAGA claim to arbitration.

Affirmed.

Time to Fix that Arb Agreement . . .

Sandquist v. Lego Automotive, Inc., No. S220812 (Jul. 28, 2916)

Who decides if an arbitration can proceed on a class basis? It’s an unresolved question under both state and federal law. Because Court of Appeal decisions on the issue were somewhat inconsistent, the Supreme Court granted review on it. The answer, according to divided 4-3 court: It depends. 

Sometimes, It's Good to Be a Trucker . . .

Garrido v. Air Liquide Indus. U.S. LP, No. B254490 (D2d4 Oct. 26, 2015)

Before the U.S. Supreme Court stepped in with AT&T v. Concepcion, California state law more of less said that class action waivers in employment and consumer arbitration agreements are not enforceable. (Technically, there were multifactor tests, but most of the time they came out in favor of unenforceability.) Concepcion expressly reversed that rule for consumer contacts, abrogating a case called Discover Bank. And as the Cal. Supremes recognized more recently in the Iskanian case, the logic of Concepcion applies to employment cases too, thus abrogating their prior Gentry case.

But the whole reasoning of Concepcion depends on its reading of the Federal Arbitration Act’s preemption provision in 9 U.S.C. § 2. There are cases, however, to which the FAA, and thus its preemption rule, doesn’t apply. As the court recognizes here, in those cases, the logic of Concepcion shouldn’t control. Instead, in the absence of any indication that California state arbitration law has changed to reject the earlier Discover Bank and Gentry rationales on state law grounds, those cases are still good law when an agreement isn’t not governed by the FAA.

Notably, the FAA has an express carve out for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. Courts have read the final "any other class of workers" catchall to mean only “transportation workers.” And since plaintiff here is a truck driver with an interstate route, the FAA does not apply to his contract. In the absence of that, the California Arbitration Act applies, and without the FAA to preempt state law, the old Gentry rule controls. Which means that the class waiver in plaintiff’s employment contract can’t be enforced.

Affirmed.

PAGA Takes Down Another Arbitration Clause

Williams v. Superior Court, No. B261007 (D2d4 Jun. 9, 2015)

Plaintiff in this case filed a single count action over the Labor Code Private Attorney General Act, seeking damages for Labor Code violations in both an individual and representative capacity. Defendant moved to compel arbitration, arguing that plaintiff had contractually waived the right to bring PAGA claims, and that, in any event the Labor Code violations that were the factual predicates to his PAGA claims we subject to an arbitration clause in his employment agreement. The trial court held the claims were unwaivable, but agreed that the underlying violations, when applied to the plaintiff individually, could be severed out and sent to arbitration, with the rest of the case stayed until that gets resolved.

Citing AAA Rules Held Sufficent to Let the Arbitrator Decide Class Arbitration Issue

Univ. Protection Serv. v. Superior Court, No. D066919 (D4d1, as amended Mar. 12, 2015)

As we’ve discussed, when it comes to deciding whether an arbitration can occur on class basis there is a division of authority (upon which review has been granted by the California Supreme Court) as to whether it is an issue for the court to decide. Although there is general agreement that the issue can be assigned to the arbitrator if the parties clearly express that intent. Going with the majority rule (that the court decides) the court here holds that the trial court erred in determining that the issue is by default for the arbitrator. But the parties agreement specifically invoked a set of AAA rules that clearly state that the arbitrator decides whether a class claim can be brought. That was enough, in the court’s opinion, to get out of the default rule. So even though the trial court got the rule wrong, the result was right.

Writ denied.

Update: Review granted June 10, 2015.

Arbitration Is More Efficient, Except when It Isn't

Assoc. of L.A. Deputy Sheriffs v. Cnty. of L.A., No. B254982 (Feb. 17, 2015)

The union representing thousands of Deputy Sheriffs claims that they are being deprived of pay for so-called donning and doffing time under the terms of their collective bargaining agreement. The CBA requires members to grieve that kind of issue in an individual, not a class, arbitration. The union tried to sidestep that obligation by filing a case in superior court. When the county moved to compel, the union argued that Code of Civil Procedure § 1281.2(c) afforded the court discretion to stay the arbitrations pending a class-wide interpretation of certain terms of the MOU.  The trial court agreed, but the court of appeal reverses.  

Section 1281.2 lets the court stay an arbitration pending a decision on issues  “not subject to arbitration,” which might moot the need to arbitrate. Because the interpretation of the CBA was clearly arbitrable, § 1281.2(c)’s “not subject to arbitration” rule couldn't apply.” So even if it would have been more efficient to for the court to globally decide the question, instead of having it decided 10,000 times in different arbitrations, that’s what the CBA and the law required.

Reversed.

Employer Waives Right to Arbitrate by Participating in Discovery

Bower v. Inter-Con Security Sys., Inc., No. A135940 (D1d3 Dec. 31, 2014)

This is a wage and hour class action where the plaintiff signed an employment agreement containing an arbitration provision with a class action waiver. But the employer didn’t immediately move to compel. Instead, it both responded to and propounded discovery, including discovery on class issues. Only after plaintiff tried to expand the class and efforts to settle the case on a class-wide basis failed did it move to compel the case to arbitration. But the trial court ruled that, by that time, it had waived the right to compel. The court of appeal affirms. Although the evidence on the issue was mixed there was substantial evidence to support the trial court’s decision that defendant was aware of its right to arbitrate, that it acted inconsistently with that right, and that plaintiff was prejudiced.

Affirmed.

Death Knell on Class Claims

Sandquist v. Lebo Automotive, No. B244412 (D2d7 July 22, 2014)

In this putative employment class action, the trial court in this case granted defendant’s motion to compel arbitration. In the process of doing so, it also struck plaintiff’s class allegations without prejudice because a class action waiver provision in the employment agreement ostensibly precluded litigation on a classwide basis.  In a later order, the court dismissed the class claims with prejudice. 
 
The court first holds that, although an order compelling arbitration is generally not appealable, the second order here is. Under the “death knell doctrine,” an order that is tantamount to a dismissal of the claims of the absent class members can be appealed. The trial court’s order striking plaintiffs’ class allegations did not meet that test—claims dismissed without prejudice are not effectively terminated. But the later order did. And even though plaintiff’s notice of appeal cited only the first order, the court construes the notice liberally to find that plaintiff was effectively appealing both orders.
 
As to the merits, the trial court should not have struck the class allegations. That issue, which required the court to interpret the agreement, should have been reserved for the arbitrator to decide. Although the precedent is split on the issue, the majority rule is that whether class-wide arbitration is barred is a procedural issue that falls within the arbitrator’s purview, as opposed to a more fundamental question of whether the parties actually agreed to arbitrate, which is reserved for the court to decide. The court here follows that rule.

reversed. 

**Note: The Supreme Court granted review on November 12, 2014. Given the similar grant in Network Capital Funding, it would seem that the court will resolve the split referenced above.