Justices to consider California’s private-attorney-general exception to arbitration clause

Case PREVIEW

The last couple of many years have witnessed the functioning out in various conditions of a sustained disagreement amongst the Supreme Court docket and California legislators and judges. The Supreme Courtroom has taken the watch that the Federal Arbitration Act compels the enforcement, in state and federal courts, of pre-dispute arbitration agreements. Accordingly, the justices have rejected each individual effort and hard work to undermine the capacious application of people agreements to shift disputes between enterprises and staff members or consumers from courts to arbitrators. California, performing via its courts and legislators, has taken a various standpoint, believing that people today will have extra leverage in litigation in opposition to companies in court than they will in arbitration, and specifically if they can aggregate their statements as they do in class actions. The argument on Wednesday in Viking River Cruises v. Moriana offers the present chapter in that disagreement.

This case requires PAGA, California’s Private Attorneys General Act. Below that statute, any employee can convey an action against her employer, asserting statements in opposition to the employer on behalf of all workforce. For case in point, in a new PAGA action in opposition to Lyft, a solitary staff asserted promises on behalf of far more than 500,000 Lyft drivers instances involving tens of 1000’s of staff members are program. To demonstrate more, PAGA authorizes any particular person worker to deliver any declare that the employer has violated California’s Labor Code 75% of the award goes to the condition and the remainder is dispersed to the aggrieved staff as a group. The employee in this circumstance (Angie Moriana) sought reduction beneath PAGA from Viking River Cruises, alleging that the corporation failed to shell out all wages because of, failed to pay out extra time, and fully commited other violations. Viking argued that the action should really fail due to the fact Moriana’s work agreement identified as for individualized arbitration of all disputes about her work with Viking and explicitly waived her right to assert these types of claims by means of PAGA.

The California courts turned down Viking’s argument, relying on properly settled California law (from a circumstance named Iskanian v. CLS Transportation Los Angeles). The state courts recognize that the Federal Arbitration Act would preempt a condition-law rule that prevented shoppers from waiving their correct to look for reduction in a class motion or that restructured arbitration to proceed on a classwide basis Supreme Court docket situations including AT&T Mobility v. Concepcion have rejected such California rules in the previous. But in the look at of the California courts, all those instances do not use right here simply because trying to get aid below PAGA is not the exact as a course motion, principally because the other employees (whose promises are presented) do not take part in the litigation.

It astonished no person when the Supreme Court granted critique. Viking argues that the selections of the California courts are a flagrant departure from the Supreme Court’s rulings in the region and that a choice in its favor follows instantly from Concepcion. For Viking, Moriana’s settlement to individualized arbitration indicates that neither courts nor legislatures in California have the power to transfer the dispute to yet another discussion board or to aggregate the promises of numerous workers in the exact proceeding. It argues that the identical difficulties that enthusiastic the Supreme Court to reject California’s mandate for class-based arbitration compel rejection of the PAGA proceeding in this article. Most clearly, a PAGA continuing presenting claims of tens of 1000’s of workers is so remote from a bilateral individualized arbitration continuing that it ruins the streamlined performance for which Viking River statements it bargained.

Moriana argues that this case is not at all like Concepcion. Concepcion barred California’s insistence on a distinct process for adjudicating and aggregating promises. The specific statements all remained intact, albeit restricted to a individual forum: individualized arbitration. By distinction, the contract in this situation seeks “forfeiture” of the PAGA claims approved by the condition legislature. If Moriana is held to her waiver, she cannot present that representative declare in any court docket or arbitration continuing. Simply because the PAGA declare – a non-public attorney normal assert asserting that Viking has violated California’s Labor Code – could not be introduced in arbitration or in a independent court, Viking’s argument would eliminate any way to continue under PAGA.

Viking’s central response is that PAGA produces a method rather than a claim. There is, Viking contends, no these types of thing as a “PAGA claim.” There is, alternatively, a procedure set up by PAGA to provide claims beneath the California Labor Code. The point out of California (which has not signed an arbitration agreement with Viking) stays totally free to go after those people statements, as really should any workforce that have not signed agreements to go after their promises in arbitration. But for Viking, Moriana’s settlement to bilateral individualized arbitration should really stop any proceeding that aggregates the claims of other individuals.

On first looking at, the arguments of the get-togethers may look more effectively balanced than the doubtful summary of Moriana’s argument presented higher than indicates. But that standpoint reflects my sense of the justices’ likely response to these scenarios.  This circumstance, like Concepcion, pushes two distinctive buttons: the “arbitration is to be encouraged” button and the “aggregating claims against corporations is inherently extortionate” button. I believe it not likely that any of the justices in the bulk in Concepcion, or any of the justices appointed because that scenario was resolved, will see this situation any in a different way than Concepcion. They’re very likely to understand proceedings under PAGA as extortionate in just the way that they understand extortion in much more traditional proceedings in class steps (or class-primarily based arbitration). If I’m correct about that, then the situation might generate a spirited dissent in aid of the California ruling, but tiny hand-wringing about the final result from the the vast majority.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to SCOTUSblog in various capacities, is counsel on an amicus brief in support of Viking River Cruises in this case. The author of this article is not affiliated with the firm.]