Carmax v. Areso: SCOTUS Denies Review of Case Applying Iskanian

In Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) (discussed here), the California Supreme Court held that an arbitration agreement "requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy" and unenforceable. In Fowler v. CarMax (Cal.App. unpub. 1/25/15), the California Court of Appeal affirmed in part a trial court order enforcing a class action waiver and compelling arbitration of individual wage and hour claims, but followed Iskanian in holding that the trial court erred in compelling arbitration of PAGA claims.

On December 14, 2015, the Supreme Court of the United States denied certiorari of the decision in Fowler, sub nom. CarMax Auto Superstores California, LLC v. Areso. The SCOTUS web page for CarMax is here, and the SCOTUSblog page for it is here.

Miranda v. Anderson Enterprises: "Death Knell" Doctrine Allows Immediate Appeal from Order Dismissing PAGA Allegations

In Miranda v. Anderson Enterprises, Inc. (Cal.App. 10/15/15), the plaintiff filed a class and PAGA representative action against the defendant. The defendant petitioned to compel individual arbitration, dismiss the class and PAGA claims, and stay the trial court proceedings. The trial court granted the petition, and the plaintiff appealed that part of the order relating to his PAGA claims.

In the published portion of the decision, the Court of Appeal held that the death knell doctrine gave the plaintiff right to appeal an immediate appeal from the trial court's order dismissing the PAGA allegations. 

As an initial matter, respondents contend the trial court’s order is not presently appealable. “Orders granting motions to compel arbitration are generally not immediately appealable.” Appellant argues his appeal falls within the death knell exception, which “provides that an order which allows a plaintiff to pursue individual claims, but prevents the plaintiff from maintaining the claims as a class action, . . . is immediately appealable because it ‘effectively r[ings] the death knell for the class claims.’ ” Appealability under the death knell doctrine requires “an order that (1) amounts to a de facto final judgment for absent plaintiffs, under circumstances where (2) the persistence of viable but perhaps de minimis individual plaintiff claims creates a risk no formal final judgment will ever be entered.” 

The Court held that PAGA actions are analogous to class actions for purposes of applying the death knell doctrine, and the plaintiff could appeal from the order dismissing his PAGA action.

The opinion is available here.

Mendoza v. Nordstrom: Cal. Supreme Court Agrees to Decide Wage Issues Certified by Ninth Circuit

In Mendoza v. Nordstrom, Cal Supreme Court Case No. S224611 (9th Cir,. No. 12-57130; 778 F.3d 834, Central District of California; 8:10-cv-00109-CJC-MLG), the Ninth Circuit certified three questions to the California Supreme Court. The Supreme Court agreed to review the issues, which are as follows:

(A) California Labor Code section 551 provides that ‘[e]very person employed in any occupation of labor is entitled to one day’s rest therefrom in seven.’ Is the required day of rest calculated by the workweek, or is it calculated on a rolling basis for any consecutive seven-day period? 

(B) California Labor Code section 556 exempts employers from providing such a day of rest ‘when the total hours of employment do not exceed 30 hours in any week or six hours in any one day thereof.’ (Emphasis added.) Does that exemption apply when an employee works less than six hours in any one day of the applicable week, or does it apply only when an employee works less than six hours in each day of the week? 

(C) California Labor Code section 552 provides that an employer may not ‘cause his employees to work more than six days in seven.’ What does it mean for an employer to ‘cause’ an employee to work more than six days in seven: force, coerce, pressure, schedule, encourage, reward, permit, or something else?

Mendoza is a putative class and PAGA action, so I've listed it under those categories on the blog.

The Supreme Court's web page for Mendoza is here. You can request automatic e-mail notifications from the Court here.

Governor Signs Bill to Provide Employers Opportunity to Cure Certain Wage Statement Claims in PAGA Actions

On October 2, 2015, Governor Brown signed Assembly Bill 1506, which amends the Labor Code Private Attorneys General Act of 2004 (PAGA) to provide employers the opportunity to cure certain check stub violations before being sued. AB 1506 is urgency legislation that goes into effect immediately. Here's how it works:

Labor Code section 226 requires employers to provide certain information to their employees on their wage statements, including the inclusive dates of the pay period (section 226(a)(6)) and the name and address of the employer (section 226(a)(8)). PAGA allows employees to seek civil penalties for violations of section 226.

Under the existing Labor Code section 2699.3(c), employers may cure certain violations within the time frames provided. If the employer cures, the plaintiff may not sue under PAGA.

The new law adds Labor Code sections 226(a)(6) and (8) to the list of statutes that the employer may cure. For the wonks out there, it actually accomplishes this by deleting sections (6) and (8) from the list of statutes for which there is no opportunity to cure.

Amended section 2699(d) provides:

A violation of paragraph (6) or (8) of subdivision (a) of Section 226 shall only be considered cured upon a showing that the employer has provided a fully compliant, itemized wage statement to each aggrieved employee for each pay period for the three-year period prior to the date of the written notice sent pursuant to paragraph (1) of subdivision (c) of Section 2699.3.

Amended section 2699.3(c)(2)(B)(ii): provides:

No employer may avail himself or herself of the notice and cure provisions of this subdivision with respect to alleged violations of paragraph (6) or (8) of subdivision (a) of Section 226 more than once in a 12-month period for the same violation or violations contained in the notice, regardless of the location of the worksite.

Legislative Counsel’s digest is available here.

Sakkab v. Luxottica: Ninth Circuit Holds that Federal Arbitration Act Does Not Preempt Iskanian Holding that PAGA Representative Action Waivers Are Unenforceable

In Sakkab v. Luxottica Retail North America, Inc. (9th Cir. 9/28/15) ___ F.3d ___, the Ninth Circuit has held that the Federal Arbitration Act (FAA) does not preempt the holding of Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) that agreements to waive representative claims under the Labor Code Private Attorneys General Act of 2004 (PAGA) are not enforceable.

Plaintiff Shukri Sakkab filed a class and PAGA representative action against Luxottica, accusing it of misclassifying supervisors in its Lenscrafters stores as exempt employees. The district court granted Luxottica's motion to compel arbitration of all claims and dismissed Sakkab's complaint. Sakkab appealed, arguing that the waiver of his PAGA claims was not enforceable. The Ninth Circuit reversed, holding as follows:

The FAA provides that an agreement to arbitrate "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." The FAA preempts state law "to the extent that it 'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" However, under its "savings clause," the FAA does not preempt "generally applicable contract defenses, such as fraud, duress, or unconscionability."

The FAA does not preempt Iskanian, which held that that pre-dispute agreements to waive PAGA claims are unenforceable. First, the Iskanian rule is a "generally applicable contract defense" that bars any waiver of PAGA claims, "regardless of whether the waiver appears in an arbitration agreement or a non-arbitration agreement."

Second, the rule does not conflict with the FAA's purposes: overcoming judicial hostility toward arbitration, and ensuring enforcement of the terms of arbitration agreements. 

Iskanian does not evidence judicial hostility toward arbitration. It does not prohibit arbitration of PAGA claims. "It provides only that representative PAGA claims may not be waived outright." 

Iskanian does not conflict with the FAA's goal of ensuring enforcement of the terms of arbitration agreements. In AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 321, the Supreme Court considered California's Discover Bank rule, which invalidated agreements to waive class claims in certain consumer cases. Concepcion held that the alternative to such a waiver, class arbitration, would sacrifice the principal advantages of arbitration: informality, speed, and efficiency. The Court thus held that the Discover Bank rule interfered with the parties' selection of the arbitral forum.

In contrast, because class actions and representative PAGA actions differ fundamentally, the Iskanian rule prohibiting waiver of representative PAGA claims "does not diminish parties’ freedom to select informal arbitration procedures."

Because a PAGA action is a statutory action for penalties brought as a proxy for the state, rather than a procedure for resolving the claims of other employees, there is no need to protect absent employees’ due process rights in PAGA arbitrations.... Because representative PAGA claims do not require any special procedures, prohibiting waiver of such claims does not diminish parties’ freedom to select the arbitration procedures that best suit their needs. Nothing prevents parties from agreeing to use informal procedures to arbitrate representative PAGA claims.

Finally, the Court's conclusion that the FAA does not preempt the Iskanian rule is bolstered by the fact that PAGA is part of California's legislative scheme for enforcing its labor laws, and such legislation falls within California's police powers. A PAGA action is a form of qui tam action, and the FAA was not intended to preclude states from authorizing qui tam actions. 

Given the Court's holding that the PAGA waiver is invalid, the Court remanded to the district court to determine whether the PAGA claims should be arbitrated or litigated in court. 

The opinion is available here.

Alcantar v. Hobart Service: Ninth Circuit Addresses Claims that Employer Must Pay Service Technicians for Time Spent Commuting in Company Vehicles

Alcantar v. Hobart Service, ___ F.3d ___ (9th Cir. 9/3/15), discusses class certification under Federal Rule of Civil Procedure (FRCP) section 23, issues of compensable commute time, and the notice requirement of the Labor Code Private Attorneys general Act (PAGA). The opinion gives a good summary of the facts, so let's start there:

ITW, [defendant] Hobart’s parent company, designs and manufactures commercial food equipment. Hobart provides after-sale maintenance and repair services to ITW’s customers. [Plaintiff] Alcantar works for Hobart as a service technician. 

Alcantar and other service technicians provide most services on-site. They drive to and from customer locations in vehicles Hobart provides, carrying the tools and replacement parts necessary to make repairs. Although they spend most of their time at customer locations, each technician is assigned to one of Hobart’s thirteen California branch offices.  

As hourly employees, the technicians are compensated for the time they spend fixing equipment and the time they spend driving to and from different assignments. If they commute in the service vehicles, they are also compensated for the time spent driving from their homes to their first assignments and from their last assignments back home, but only to the extent it falls outside their "normal commute" [the time employees normally spend commuting from their homes to their assigned branch offices].

Alcantar sued, alleging that employees commuting in Hobart vehicles were subject to Hobart's control and should be paid overtime compensation for all commute time. Alcantar also alleged that Hobart failed to provide the required meal and rest periods.

The district court denied Alcantar's motion for class certification of the overtime claim. It held that Alcantar had not shown that Hobart had a uniform policy requiring technicians to commute in its vehicles and that this precluded a finding of commonality under FRCP 23(a)(2). 

The district court also denied certification of the meal and rest period claims, holding that individual questions as to why employees missed their meal and rest periods would predominate, and that the plaintiff could not meet the predominance requirement of FRCP 23(b)(3).

On a separate motion for summary judgment, the court held that Hobart did not owe the plaintiff for the commute time, but held that Alcantar had raised triable issues of fact as to the meal and rest period claims.

On a second motion for summary judgment, the court held that Alcantar had not complied with PAGA's notice requirement.

The Ninth Circuit affirmed in part and reversed in part, holding as follows:

The district court erred in denying certification of the overtime claim. First, "there is a question of fact as to whether Hobart requires technicians to use its vehicles for their commute." Second, Alcantar raised a common issue as to whether Hobart exercised control over its employees while driving company vehicles, such that their commute time should be compensated. Third, the district court erred in considering the merits of this common question. Whether the plaintiff would prevail on the merits or not does not impact the commonality analysis under FRCP 23(a)(2).

The district court did not err in denying certification of the meal and rest period claims. Common questions did not predominate under FRCP 23(b)(3). Instead, individual questions as to why employees missed their meal and rest periods would predominate.

The district court erred in granting summary judgment for Hobart on the commuting time claim. Although Hobart argued that technicians could choose not to use Hobart's vehicles, Alcantar argued that the choice was illusory because the branch offices did not have secured parking available for the vehicles, and the technicians were responsible for the tools and parts inside the vehicles. Alcantar thus raised a question of fact as to whether Hobart required its technicians to use its vehicles for their commute.

The district court did not err in granting summary judgment for Hobart on Alcantar's PAGA claims. Alcantar's notice to the Labor and Workforce Development Agency contained only a series of legal conclusions, rather than the facts and theories supporting the claim. 

Plaintiff’s letter—a string of legal conclusions with no factual allegations or theories of liability to support them—is insufficient to allow the Labor and Workforce Development Agency to intelligently assess the seriousness of the alleged violations. Neither does it provide sufficient information to permit the employer to determine what policies or practices are being complained of so as to know whether to fold or fight. 

The opinion is available here. 

Universal Protection Service v. Superior Court (Parnow): Incorporation of AAA Rules into Arbitration Agreement Gives Arbitrator Power to Determine Whether Agreement Authorizes Class Arbitration

Universal Protection Service, LP v. Superior Court (Parnow) (8/18/15) --- Cal.App. 4th --- is another case addressing whether the court or arbitrator has authority to decide the arbitrability of claims.

Employees filed a class action and representative action under the Labor Code Private Attorneys General Act (PAGA) alleging wage claims against their former employer, Universal Protection Services (UPS). UPS cross-complained, seeking a declaration that (1) the trial court, not the arbitrator, should decide whether the parties' arbitration agreement barred class relief and (2) that the arbitration agreement barred class actions. UPS then moved to compel individual arbitration and stay the court proceedings. The trial court denied the petition, ruling that the arbitrator should decide the arbitrability issues. The Court of Appeal affirmed, holding as follows:

The American Arbitration Association (AAA) employment arbitration rules provide: "The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement." In addition, the AAA Supplementary Rules for Class Arbitrations give the arbitrator authority to decide "whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class."

Because the arbitration agreement incorporated the AAA rules, the arbitration agreement "clearly and unmistakably" gave the arbitrator the power to decide whether the agreement authorizes class arbitration.

The opinion is available here.

Williams v. Superior Court: Cal. Supreme Court Grants Review of Holding that Trial Court May Allow Discovery on Incremental Basis in PAGA Action

In Williams v. Superior Court (Marshalls of CA, LLC) (5/15/15) --- Cal.App.4th --- (discussed here), the Court of Appeal held that in a PAGA action, the trial court may require the plaintiff to proceed with discovery incrementally, rather than receiving the names and contact information of allegedly aggrieved employees at the start of the litigation.

The California Supreme Court granted review on August 19, 2015, stating the issues as follows: 

(1) Is the plaintiff in a representative action under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) entitled to discovery of the names and contact information of other “aggrieved employees” at the beginning of the proceeding or is the plaintiff first required to show good cause in order to have access to such information?  

(2) In ruling on such a request for employee contact information, should the trial court first determine whether the employees have a protectable privacy interest and, if so, balance that privacy interest against competing or countervailing interests, or is a protectable privacy interest assumed? (See Hill v. National Collegiate Athletic Association (1994) 7 Cal.4th 1; Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th

Williams v. Superior Court is case no. S227228, and the Court's web page for it is here.

Williams v. Superior Court (Pinkerton Governmental Services): Trial Court Cannot Split PAGA Action and Compel Arbitration of Individual Issues

Williams v. Superior Court (6/9/15) --- Cal.App.4th ---, is one of those rare opinions that is written clearly and concisely. The introduction gives you almost all you need to know:

Petitioner Andre Williams filed a single-count representative action pursuant to the Private Attorney General Act, Labor Code section 2699 et seq. (PAGA), alleging that real party in interest Pinkerton Governmental Services, Inc. (Pinkerton) violated various provisions of the Labor Code [related to rest periods]. In response, Pinkerton moved to enforce petitioner’s waiver of his right to assert a representative PAGA claim, or alternatively, for an order staying the PAGA claim, but sending the “individual claim” that petitioner had been subjected to Labor Code violations to arbitration pursuant to a written agreement. The trial court denied the motion to enforce the waiver, but granted the alternative relief. Williams petitioned this court for a writ reversing the trial court’s order, arguing that it violated Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 384 (Iskanian). We agree with the trial court that under Iskanian, the waiver of a right to assert a representative PAGA claim in any forum is unenforceable. However, we conclude that petitioner’s single cause of action under PAGA cannot be split into an arbitrable “individual claim” and a nonarbitrable representative claim. Accordingly, we grant the petition.

A little additional detail: Pinkerton argued, and the trial court agreed, that there was a "threshold dispute" as to whether Pinkerton denied the plaintiff rest periods, and that Pinkerton had the right to compel the plaintiff to arbitrate this dispute. The Court of Appeal rejected this argument.

The opinion is available here.

Williams v. Superior Court (Marshalls of CA): Court Properly Limited Discovery of Employees' Contact Information in PAGA Action

In Williams v. Superior Court (Marshalls of CA, LLC) (5/15/15) --- Cal.App.4th ---, the plaintiff filed a PAGA action for meal and rest period violations and sought discovery of contact information for Marshalls's non-exempt employees. The trial court granted plaintiff's motion to compel in part, ordering Marshalls to produce contact information for the employees only at its Costa Mesa store, and denying plaintiff's request for state-wide discovery, but allowing plaintiff to renew his motion to compel the remaining information after he had been deposed “for at least six productive hours,” at which time Marshalls could attempt to show plaintiff’s substantive claims had no factual merit.

The Court of Appeal affirmed, holding as follows:

Plaintiff's complaint alleged only that he and perhaps others at the Costa Mesa store suffered Labor Code violations. Plaintiff showed no knowledge of Marshalls' [sic] practices at other stores. "That being the case, it was eminently reasonable for the trial judge to proceed with discovery in an incremental fashion..."

The cost of state-wide discovery also justified incremental discovery.

Nothing in PAGA gives a representative plaintiff the same right to discovery that the Labor Commissioner would have in an enforcement action.

The employees' Constitutional privacy interests outweighed plaintiff’s need to discover their identities at this time.

[Plaintiff's] first task will be to establish he was himself subjected to violations of the Labor Code. As he has not yet sat for deposition, this task remains unfulfilled. The trial court could reasonably conclude that the second task will be to establish Marshalls’ [sic] employment practices are uniform throughout the company, which might be accomplished by reference to a policy manual or perhaps deposition of a corporate officer. The trial court could reasonably conclude that only then will plaintiff be able to set forth facts justifying statewide discovery.

The opinion is available here.

Iskanian v. CLS Transportation Los Angeles: Supreme Court Rules that FAA Preempts Public Policy and Unconscionability Analysis of Class Action Waivers, but Not PAGA Action Waivers

The California Supreme Court has just issued its decision in Iskanian v. CLS Transportation Los Angeles (6/23/14) --- Cal.4th ---. Without going into the details right now, here is the holding:

In this case, we again address whether the Federal Arbitration Act (FAA) preempts a state law rule that restricts enforcement of terms in arbitration agreements. Here, an employee seeks to bring a class action lawsuit on behalf of himself and similarly situated employees for his employer‘s alleged failure to compensate its employees for, among other things, overtime and meal and rest periods. The employee had entered into an arbitration agreement that waived the right to class proceedings. The question is whether a state‘s refusal to enforce such a waiver on grounds of public policy or unconscionability is preempted by the FAA. We conclude that it is and that our holding to the contrary in Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry) has been abrogated by recent United States Supreme Court precedent. We further reject the arguments that the class action waiver at issue here is unlawful under the National Labor Relations Act and that the employer in this case waived its right to arbitrate by withdrawing its motion to compel arbitration after Gentry.  

The employee also sought to bring a representative action under the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.). This statute authorizes an employee to bring an action for civil penalties on behalf of the state against his or her employer for Labor Code violations committed against the employee and fellow employees, with most of the proceeds of that litigation going to the state. As explained below, we conclude that an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy. In addition, we conclude that the FAA‘s goal of promoting arbitration as a means of private dispute resolution does not preclude our Legislature from deputizing employees to prosecute Labor Code violations on the state‘s behalf.  

Therefore, the FAA does not preempt a state law that prohibits waiver of PAGA representative actions in an employment contract. Finally, we hold that the PAGA does not violate the principle of separation of powers under the California Constitution. 

The opinion is available here. 

Baumann v. Chase Inv. Services Corp.: CAFA Provides No Basis for Federal Jurisdiction Over PAGA Action

Baumann v. Chase Inv. Services Corp., ___ F.3d ___, (9th Cir. Mar. 14, 2014) presents a single issue, stated as follows by the Ninth Circuit:

In Urbino v. Orkin Services, 726 F.3d 1118 (9th Cir. 2013) [discussed here] we held that potential PAGA penalties against an employer may not be aggregated to meet the minimum amount in controversy requirement of 28 U.S.C. § 1332(a). The remaining issue in this appeal is whether a district court may instead exercise original jurisdiction over a PAGA action under the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. §§ 1332(d), 1453, 1711-15. We hold that CAFA provides no basis for federal jurisdiction.

The Court began by explaining CAFA original jurisdiction as follows:

CAFA confers original jurisdiction to the district courts "of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which any member of the class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C. § 1332(d)(2)-(A). The claims of class members may be aggregated to determine whether the amount in controversy requirement has been satisfied. Id. § 1332(d)(6). The class also must have at least 100 members. Id. § 1332(d)(5)(B).

The Court the held that a PAGA action does not satisfy the "class action" requirement of section 1332(d)(2)-(A). It reasoned that PAGA actions are not class actions under state law, nor do they arise under a state law that "closely resembles Rule 23 or is like Rule 23 in substance or in essentials." Among other differences between PAGA actions and class actions:

PAGA does not require notice to unnamed aggrieved employees; 

Aggrieved employees may not opt out of a PAGA action; 

A PAGA plaintiff need not prove numerosity, commonality, typicality, or adequacy of representation; and 

If an employer defeats a PAGA action, unnamed aggrieved employees are not bound by the judgment, except as to PAGA remedies. 

"In the end, Rule 23 and PAGA are more dissimilar than alike. A PAGA action is at heart a civil enforcement action filed on behalf of and for the benefit of the state, not a claim for class relief."

Baumann is available here.

Supreme Court Schedules Oral Argument in Iskanian

The California Supreme Court has scheduled oral argument in Iskanian v. CLS Transportation Los Angeles, LLC (6/4/12) --- Cal.App.4th --- (discussed here). In Iskanian, the Court of Appeal issued a broad-ranging decision which held, among other points: 

Concepcion invalidated the holding in Gentry v. Superior Court (2007) 42 Cal.4th 443, that class waivers in arbitration agreements should not be enforced if “class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration.” 

The NLRB incorrectly decided D.R. Horton (discussed here), and nothing in the NLRA or the Norris-La Guardia Act evidences an intent to override the FAA's policies in favor of construing arbitration agreements according to their terms.  

Contrary to the holding in Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489 (discussed here), Concepcion applies to a plaintiff's representative claims under the Labor Code Private Attorneys General Act (PAGA).  

Contrary to the holding in Reyes v. Macy’s Inc. (2011) 202 Cal.App.4th 1119, (discussed here), the plaintiff could pursue individual PAGA claims in arbitration.  

The Court will hear oral argument on Thursday, April 3, 2014, at 9:00 a.m., in Los Angeles. The Supreme Court's docket page for Iskanian is here.

We will address Iskanian at the State Bar Labor and Employment Law Section's Fourth Annual Advanced Wage and Hour Conference on July 30 in Los Angeles, so we will not run a separate Watch List webinar on it. I believe that the Conference will be available for viewing via webcast. More information to follow.

Mississippi ex rel. Hood v. AU Optronics Corp.: Restitution Action By State Is Not Mass Action Under CAFA

A quick word about this case. In Mississippi ex rel. Hood v. AU Optronics Corp., ___ U.S. ___ (1/14/14), the Supreme Court of the United States held that an action by a state, as the sole named plaintiff, to obtain restitution on behalf of itself and its citizens was not a "mass action" for purposes of the Class Action Fairness Act (CAFA). 

It will be interesting to see whether this case has any impact on the question of whether a representative action under the 2004 Labor Code Private Attorneys General Act (PAGA) is considered a class action or mass action for CAFA removal purposes. 

Mississippi ex rel. Hood v. AU Optronics Corp. is available here. 

Brown v. Superior Court: Supreme Court Grants Review of Another Arbitration Matter

In Brown v. Superior Court (Morgan Tire & Auto, LLC) (6/4/13) --- Cal.App.4th --- (discussed here), the Court of Appeal reversed in part a trial court order compelling individual arbitration of wage claims, holding that the Federal Arbitration Act (FAA) does not preempt California law prohibiting waiver of an employee's right to bring a representative action under the Labor Code Private Attorneys General Act (PAGA).

The California Supreme Court has granted review of that decision and deferred briefing pending its decision in Iskanian v. CLS Transportation of Los Angeles (Case No. S204032) (discussed here), which presents the following issues:

1. Did AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ impliedly overrule Gentry v. Superior Court (2007) 42 Cal.4th 443 with respect to contractual class action waivers in the context of non-waivable labor law rights? 
2. Does the high court's decision permit arbitration agreements to override the statutory right to bring representative claims under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.)? 
3. Did defendant waive its right to compel arbitration? 

Brown v. Superior Court is Case No. S211962, and the Supreme Court's web page for it is here.

Urbino v. Orkin: PAGA Penalties Not Aggregated to Satisfy Amount In Controversy Requirement for Federal Diversity Jurisdiction

Urbino v. Orkin Services of California, Inc., ___ F.3d ___ (9th Cir. 8/13/13) addresses federal jurisdiction over claims under California's Labor Code Private Attorneys General Act (PAGA).

Urbino filed a PAGA representative action against Orkin for alleged meal period, overtime, and vacation pay violations. Orkin removed, and the district court denied Urbino's motion to remand, holding that the potential penalties could be aggregated to satisfy the $75,000 amount in controversy requirement of diversity jurisdiction. The Ninth Circuit reversed, holding that the penalties cannot be aggregated. 

The claims of class members can be aggregated to meet the jurisdictional amount requirement only when they “unite to enforce a single title or right in which they have a common and undivided interest.” Slip op. at 7. Employees' rights under the Labor Code are held individually, and their claims cannot be aggregated: "Each employee suffers a unique injury—an injury that can be redressed without the involvement of other employees." Slip op. at 8. 

The Court rejected Orkin's argument that Urbino asserted not his individual interest, but rather the state’s "collective interest" in enforcing its labor laws through PAGA.

To the extent Plaintiff can—and does—assert anything but his individual interest, however, we are unpersuaded that such a suit, the primary benefit of which will inure to the state, satisfies the requirements of federal diversity jurisdiction. The state, as the real party in interest, is not a “citizen” for diversity purposes. 

Slip op. at 9. 

The opinion is available here. 

Brown v. Superior Court: Court Invalidates Arbitration Agreement's Waiver of PAGA Representative Action

In Brown v. Ralphs Grocery Co. (7/12/11) 197 Cal.App.4th 489, review denied 10/19/2011 (discussed here), the Court of Appeal held that the Federal Arbitration Act (FAA), as explained in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ (discussed here) does not preempt California law invalidating an employee's waiver of her right to bring an action under the Labor Code Private Attorneys General Act (PAGA). That's a mouthful, but in other words, even if an employee waives the right to bring a PAGA representative action, he or she can bring the action because the waiver is invalid.

On June 4, the Court of Appeal issued another Brown case on the same issue: Brown v. Superior Court (Morgan Tire & Auto, LLC) (6/4/13) --- Cal.App.4th ---. The Court reversed in part a trial court order compelling individual arbitration of wage claims, again holding that the FAA does not preempt California law prohibiting waiver of an employee's right to bring a PAGA representative action.  

A plaintiff suing for PAGA civil penalties is suing as a proxy for the State. A PAGA claim is necessarily a representative action intended to advance a predominately public purpose. When applied to the PAGA, a private agreement purporting to waive the right to take representative action is unenforceable because it wholly precludes the exercise of this unwaivable statutory right. AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740, does not require otherwise. 

Slip op. at 1-2.  

The Court held as follows: 

The defendant did not waive its right to compel arbitration by litigating the case in court for ten months before the U.S. Supreme Court issued its decision in Concepcion. In light of Gentry v. Superior Court (2007) 42 Cal.4th 443, it was reasonable for the defendant to believe that bringing a motion to compel individual arbitration would have been futile. Slip op. at 7-12. 

The National Labor Relations Board (NLRB) incorrectly decided D.R. Horton, Inc. (2012) 357 NLRB No. 184 (discussed here), and the National Labor Relations Act (NLRA) did not make the representative action waiver unenforceable. Citing Truly Nolen of America v. Superior Court (2012) 208 Cal.App.4th 487, 514-515 (discussed here) and Nelsen v. Legacy Partners Residential, Inc. (2012) 207 Cal.App.4th 1115, 1132-1135, review denied 11/2/12 (discussed here). Slip op. at 12-13. 

The FAA does not require "enforcement of a private agreement that wholly prevents the exercise of a statutory right intended for a predominantly public purpose." Slip op. at 16. The Court held that all PAGA actions are representative actions: 

The obvious public purpose of the law suggests that it is necessarily a representative action. Law enforcement does not take place on an individual basis. The PAGA does not give an employee any substantive rights. The PAGA merely allows the employee to act on behalf of the state when the employer violates other sections of the Labor Code. 

Slip op. at 17. 

The Court held that the portion of the agreement waiving the employee's right to bring a PAGA representative action was invalid, but the remainder of the agreement was valid, and the trial court should have compelled individual arbitration of the plaintiff's non-PAGA claims: 

It follows that the PAGA claim must be excluded from the order compelling arbitration and stayed pending resolution of the arbitration. 

Slip op. at 20. 

Even though the California Supreme Court denied review of Brown v. Ralphs Grocery back in 2011, I assume that it will grant review of this Brown decision and hold pending its decision in Iskanian v. CLS Transportation L.A., LLC (6/4/12) 206 Cal.App.4th 949, review granted 9/19/12 (discussed here). 

Brown v. Superior Court is available here.  

Franco v. Arakelian Enterprises: Supreme Court Issues Another Iskanian Grant-and-Hold

In Franco v. Arakelian Enterprises, Inc. (11/26/12) (discussed here), the Court of Appeal affirmed a trial court order denying individual arbitration of a putative wage and hour class action, holding:

Gentry v. Superior Court (2007) 42 Cal.4th 443, remains good law after AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___, and the class action waiver at issue was invalid.  

Because the class action waiver was invalid, Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) 559 U.S. ___, required that the action remain in court, where plaintiff could pursue class certification. 

Not surprisingly, on February 13, 2013, the California Supreme Court granted review and held briefing pending its decision in Iskanian v. CLS Transportation Los Angeles, LLC (6/4/12) (discussed here), which includes the following issue: 

Did Concepcion impliedly overrule Gentry with respect to contractual class action waivers in the context of non-waivable labor law rights?

Franco v. Arakelian is Case No. S207760, and the Court's web page for it is here.  Iskanian is Case No. S204032, and the Court's web page for it is here.  

As always, you can register for email alerts on the Supreme Court's case summary pages.

Garvey v. KMart: Judge Alsup Rules For The Defense in "Suitable Seating" Case After Trial

The first of the "suitable seating" class actions has gone to trial, and it has resulted in a judgment -- though limited -- for the defense. 

In Garvey v. KMart Corporation (N.D. Cal. Case No. C 11-02575), the plaintiff alleged that KMart violates Labor Code section 1198 and Industrial Welfare Commission Wage Order No. 7 by failing to provide suitable seating to cashiers.  The case went to trial in November on a class limited to cashiers employed at a single KMart store. The court summarized its holding as follows: 

“All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats,” according to the law in California. In this civil action, class counsel have failed to prove that the nature of the work reasonably permits the seating modification urged by counsel at trial. Possibly a different modification involving a lean-stool would be provable but this record does not support it.

Slip op. at 1.  

A few notes regarding the trial: Plaintiff called six live witnesses, and defendant called four. The court gave each side 12 hours for witnesses at trial; both sides finished with time to spare. The court found "no genuine commonality issues" at trial and denied defendant's decertification motion. 

After describing the cash register work stations and procedures in detail, the Court found that most work done by cashiers could be done while seated, but cashiers need to stand "many times over the course of an hour." Slip op. at 12. The Court then found that class counsel's proposal -- re-arranging the work space to allow a stool to be stored under the counter in the register area -- would be "too unsafe, too inefficient, and too inconvenient to customers and cashiers."  Slip op. at 13-17.  

Next, the Court discussed -- and criticized -- a "secret" KMart policy that any cashier would be given a seat if he or she asked for one. The Court spoke critically of KMart's defense at several points. Perhaps because the Court felt annoyed by KMart's alternate efforts to use the policy as a defense and then to keep it out of evidence at trial, the Court held: 

After all of Kmart’s machinations, it would be poetic justice to hold Kmart to the full implications of its so-called policy, namely to hold that providing a seat in the existing configuration would be safe and practical. This would, however, not be actual justice, nor actual safety.

Slip op. at 18. 

The Court then took the highly unusual step of setting forth what it called "the best case for a plaintiff class." Slip op. at 18.  In the Court's view, this would involve the use of "lean-stools" that "allow an individual to place most of their weight on a supported seat, while remaining in a more upright, leaning position." Slip op. at 18-20. 

The Court then held that KMart "has a genuine customer-service rationale for requiring its cashiers to stand": 

[I]t is reasonable for Kmart to require its cashiers to stand while processing customers out the door so as to maximize the efficiency of the process and to project to its customers an attitude of efficiency and readiness to assist customers. 

Slip op. at 20-22.  However, the Court held that this rationale "might (or might not) be compatible with the judicious use of lean-stools."  Slip op. at 22.  

Finally, the Court noted that the litigation regarding the single store at issue at trial is "over and ready for appeal."  Slip op. at 22.  

As for all other Kmart stores in California, counsel could not agree as to whether the result in this trial should not control (Kmart counsel particularly refused to agree), so we must proceed to consider certification of classes covering one or more other stores in California and then to try those cases. 

Subsequent trials presumably will focus on what the Court called "the best case for a plaintiff class." 

Please email me here if you would a copy of the decision. 

Reyes v. Liberman Broadcasting: Supreme Court Grants Review of Class Action Waiver Decision Pending Iskanian

As suspected, the California Supreme Court has granted review in Reyes v. Liberman Broadcasting Inc. (8/31/12) --- Cal.App.4th --- (discussed here) pending its decision in Iskanian v. CLS Transportation L.A., LLC (6/4/12) 206 Cal.App.4th 949, review granted 9/19/12 (discussed here).

Reyes is a putative wage and hour class action and PAGA representative action in which the Court of Appeal held:

1. The arbitration agreement at issue did not authorize class arbitration. 
2. Given the possibility that California law prior to Concepcion barred enforcement of the arbitration agreement for this reason, the defendant did not waive its right to arbitration by not making its motion sooner. 
3. The NLRA does not prohibit enforcement of arbitration agreements that do not provide for class arbitration. 

The Supreme Court's docket for Reyes is here.