But Iskanian’s Analysis Of PAGA Representative Action Waivers Remains Intact Under This Court’s Analysis.
The California Supreme Court developed the “Broughton-Cruz” rule, under which arbitration provisions are unenforceable as against public policy if they require arbitration of Unfair Competition Law, False Advertising Law, or Consumer Legal Remedies Act injunctive relief claims brought for the public’s benefit. Our local Court of Appeal in Santa Ana has now ruled: “The Broughton-Cruz rule falls prey to AT&T Mobility’s sweeping directive because it is a state-law rule that prohibits arbitration of UCL, FAL, and CLRA injunctive relief claims brought for the public’s benefit.” McGill v. Citibank, N.A., Case No. G049838 (4/3 Dec. 18, 2014) (Aronson, Rylaarsdam, Thompson) (published).
Going at the problem with a fine scalpel, the Court explains that the rule in Iskanian, which rejects a predispute waiver of representative PAGA action claims, is consistent with its holding in McGill v. Citibank, N.A. – and thus Iskanian remains intact, at least in the Fourth District, Division 3 (We note that some federal district courts have disagreed with Iskanian).
The Court explains the PAGA action “is fundamentally different than the injunctive relief action under the other statutes [UCL, FAL, or CLRA].” In the PAGA action, the plaintiff truly represents the interests of the state. The PAGA action is more like a qui tam action, with 75% of the civil penalties going to the Labor and Workforce Development Agency, and the remainder paid to the aggrieved employees. Because the role of the state is primary, with notice to the state being a condition for filing a PAGA action, the PAGA plaintiff acts as a “proxy or agent of the state’s labor law enforcement agencies.” The state is not a party to the arbitration agreement. “Iskanian concludes a PAGA action poses no obstacle to FAA purposes because the FAA only applies to private agreements between parties to arbitrate their dispute.”