Case Contains Rich Discussion Of Arbitration, PAGA, Federal Preemption, And Divergence Of State And Federal Law.
Plaintiffs sued their former employer, alleging wage and hour violations and seeking civil penalties under California's Private Attorney General Act of 2004 (PAGA). Employer successfully petitioned to arbitrate, with one exception: the trial court held that under Iskanian v. CLS Transportation Los Angeles, LLC (2014), the PAGA claim could not be arbitrated, without the consent of the state. A PAGA claim is in the nature of a qui tam action, and the state has a stake in the outcome. Employer appealed the adverse PAGA ruling. Correia v. NB Baker Electric, Inc., D073798 (4/1 2/25/19) (Haller, McConnell, Nares).
The Court of Appeal affirmed. Notwithstanding SCOTUS cases such as Epic and Concepcion, finding that the Federal Arbitration Act (FAA) has broad preemptive scope, the Court of Appeal holds that Iskanian is still good law, because the federal cases did not address the precise question presented by Iskanian, because Iskanian involves a claim for civil penalties brought on behalf of the state, and the enforceability of an agreement barring a PAGA representative action in any forum.
The Court notes that some federal cases have found that, even if an agreement barring a representative action in any forum is unenforceable under Iskanian, Iskanian does not prevent a court from directing a representative action to arbitration. As the Court explains, however, California appellate courts have reached a different conclusion, based on the fact that in a PAGA action, the State of California plays a role.
COMMENT: The Court acknowledges, "[T]here are different ways of viewing a qui tam lawsuit regarding the true claim owner and whether the state and the employee can both be considered to be real parties in interest in the lawsuit for purposes of evaluating an employee's authority to waive rights to bring claims in court." The PAGA claim seems to have a mixed nature, because state authority is required, explicitly or implicitly, for the employee to proceed with the claim, and the state gets 75% of the penalty. On the other hand, the employee brings the claim, and the state does not supervise the litigation. However, the Court explains that at the time of the predispute waiver, the state still retains authority over the claim. Under the Court's reasoning, the state could waive rights to a court forum at the time the dispute arises. Of course, there is no reason to expect that to ever happen.
The opinion also points out a deadline trap for the unwary. The employer argued that plaintiffs' response to its arbitration petition was untimely. Plaintiffs treated the petition as a motion to which a response would be due nine court days before the hearing, but a response is due 10 days after the arbitration moving papers are served. (Code Civ. Proc., section 1290.6). Fortunately for plaintiffs, the Court of Appeal said that it was not clear whether the arbitration petition statute or the general motions statute governed, but in either case, the deadline was not jurisdictional. The safe solution for the practitioner is to calendar the earlier response date.
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