Iskanian Survives Epic

Correia v. NB Baker Elec., Inc., No. D073798 (D4d1 Feb. 25, 2019)

The Court of Appeal here affirms a decision severing out a PAGA representative claim as not amenable to arbitration while compelling arbitration of the rest of the case. In getting to that result, the Court makes three basic decisions:

First, The fact that Plaintiff mistakenly filed an opposition to the petition to compel nine court days before the hearing (which is the rule for regular motions under Code of Civil Procedure § 1005(b) instead of ten days after service of the petition (the rule for arbitration oppositions under § 1290.6) did not prevent the court from reaching the merits. The deadline in § 1290.6 is not jurisdictional, so the court could give relief for good cause.

Second, the California Supreme Court’s decision in Iskanian v. CLS Transportation—which held that waivers of PAGA representative claims are unenforceable—remains good law following the U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018)—which held that the National Labor Relations Act did not preclude class action waivers in employment agreements. Epic said that FAA preemption is broad, but it is not crosswise with Iskanian’s central point—that PAGA claims are essentially qui tam claims that belong to the government and thus can’t be waived by an agreement between private parties.

Third, although some federal courts suggest otherwise, PAGA claims—whether representative or individual—can’t be compelled to arbitration at all. Iskanian didn’t reach that issue, but it’s logic compels it. Because PAGA claims belong to the state, the statutory right to bring them in court can’t be waived in pre-dispute arbitration because the state has not consented. agreement without the state’s consent. A PAGA plaintiff does becomes semi-agent of the state when he brings his or her claims. In that capacity, the plaintiff could arguably consent to arbitration post-lawsuit on the state’s behalf. But at the time an employee signs a pre-dispute arbitration agreement, no such agency exists.

Affirmed.

Informed Consent Is Cruicial to a Conflicts Waiver

Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc., No. S232946 (Cal. Aug. 30, 2018)

Back in 2016, the Court of Appeal vacated an arbitration award in an attorney fee arbitration, holding that a law firm’s retainer agreement (and the arbitration clause within it) was completely void under Rule of Professional Conduct 3-310(C)(3) due to an undisclosed conflict of interest. At the time the client engaged the firm, the firm was adverse to the client in an unrelated matter. Thus, notwithstanding the agreement’s general forward conflicts waiver, there was no informed consent because the actual conflict was not specifically disclosed. And that meant the law firm couldn’t get paid anything and had to disgorge what it had been paid to date. The Supreme Court granted review.