How The Issue Presented Was Framed Made All The Difference.
View of a frame-maker's workshop circa 1900. Wikipedia article "Picture frame."
As putative members of the so-called Guerra class action, Bautista and Garcia signed settlement agreements containing an arbitration clause and waiver of representative actions in 2014. The Guerra action did not include a PAGA claim. In 2018, Bautista and Garcia brought PAGA representative actions against their employer. The trial judge denied the employer's motion to compel arbitration, and it appealed. Bautista v. Fantasy Activewear, Inc., et al, B297070 (2/1 7/24/20) (Chaney, Rothschild, Bendix).
Under Iskanian v. CLS Transportation Los Angeles, LLC ,59 Cal.4th 348 (2014), PAGA claims are representative actions brought by an employee on behalf of the state, akin to qui tam actions. Because the state (here, the Labor and Workforce Development Agency) is the real party in interest, but not a signatory to the arbitration agreement, PAGA claims generally are not arbitrated.
Here, the defendant/appellant employer argued the 2014 settlement agreements incorporated JAMS rules, and the JAMS rules delegated the issue of arbitrability to the arbitrator. In other words, the issue of arbitrability was not for the court to decide.
Disagreeing with the employer's argument, the Court of Appeal affirmed the trial court's order denying the motion to arbitrate. The Court framed the issue: "The question here is not whether a PAGA representative action may ever be arbitrable or who is empowered in any particular circumstance to determine arbitrability, but rather whether an arbitration agreement binds a real party in interest that never agreed to arbitrate." And when Bautista and Garcia entered into settlement agreements with arbitration clauses in 2014, they were not acting as agents of the state, nor was the state a signatory. So Bautista and Garcia could not be bound to arbitrate as proxies of the state when they brought PAGA claims in 2018.
COMMENT: Deciding the issue of arbitrability can be delegated to the arbitrator. The teaching of this case and other California cases is "that arbitration agreements entered into before a plaintiff has been deputized for purposes of a PAGA representative action is [sic] not enforceable for purposes of the PAGA representative action." In other words, the existence of an arbitration agreement precedes even a determination of who decides arbitrability.
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