95 Cal.App.5th 63
Cal. Ct. App.2023Background
- Plaintiffs Mario Barrera and Francisco Varguez, former Applebee’s employees, signed employer arbitration agreements (online 2017 and paper 2018) that: broadly arbitrate “all legal claims,” require arbitration “on an individual basis,” and invoke the Federal Arbitration Act.
- Plaintiffs filed a single PAGA action alleging multiple Labor Code violations on behalf of themselves and other current/former employees.
- Defendants moved to compel arbitration of plaintiffs’ PAGA claims (focusing on claims based on violations plaintiffs personally suffered); trial court denied the motion and refused a stay; defendants appealed.
- After appeal, the U.S. Supreme Court decided Viking River, holding FAA preempts aspects of Iskanian and allowing arbitration of ‘‘individual’’ PAGA claims in some circumstances; California Supreme Court later decided Adolph on PAGA standing.
- The Court of Appeal held the Agreements require arbitration of plaintiffs’ individual PAGA claims, rejected waiver and unconscionability defenses, and — following Adolph — held plaintiffs retain standing to litigate non‑individual PAGA claims in court; remanded for entry of an order compelling arbitration of individual claims and for trial-court management (including potential stay) of non‑individual claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendant waived the right to compel arbitration by litigating in court before moving | Defendants delayed and litigated for over a year, so they waived arbitration | Delay was reasonable because defendants awaited Viking River; no unreasonable delay | No waiver as a matter of law; delay was not unreasonable (no forfeiture) |
| Whether the Agreements cover PAGA claims / require arbitration of PAGA claims | Agreements don’t expressly mention PAGA; thus they don’t compel PAGA arbitration | Agreements broadly cover “all legal claims” and require arbitration on an “individual basis” | Agreements cover PAGA; under Viking River, individual PAGA claims are arbitrable per the Agreements’ "individual basis" clause |
| Whether the Agreements are unconscionable | Agreements were presented on a take‑it‑or‑leave‑it basis and are substantively oppressive because they force PAGA into arbitration | No factual showing of procedural oppression; Viking River permits arbitration of individual PAGA claims | Plaintiffs failed to prove procedural or substantive unconscionability as a matter of law; agreements enforceable for individual claims |
| Whether compelling arbitration of individual PAGA claims strips plaintiffs of standing to pursue non‑individual claims in court | Compelling individual claims to arbitration means plaintiffs cannot maintain non‑individual PAGA claims (per Viking River reasoning) | Under California law (Kim), standing depends only on having been an employee against whom violations were committed; arbitration does not extinguish that status | Followed Adolph and Kim: plaintiffs retain PAGA standing to litigate non‑individual claims in court |
| Whether the non‑individual claims should be stayed pending arbitration | Plaintiffs asked for a stay; defendants asked for stay until arbitration completes | Defendants cite FAA and CCP §1281.4 to justify stay pending arbitration | Court remanded for trial court to decide whether and how to stay non‑individual claims (trial court discretion) |
Key Cases Cited
- Viking River Cruises, Inc. v. Moriana, 596 U.S. _ (U.S. 2022) (FAA preempts rule preventing contractual division of PAGA into arbitrable individual claims and non‑arbitrable representative claims in certain circumstances)
- Adolph v. Uber Technologies, Inc., 14 Cal.5th 1104 (Cal. 2023) (compelling arbitration of individual PAGA claims does not strip plaintiff of standing to pursue non‑individual PAGA claims in court)
- Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (pre‑Viking River rule: PAGA representative‑waivers unenforceable as contrary to public policy)
- Kim v. Reins International California, Inc., 9 Cal.5th 73 (Cal. 2020) (statutory PAGA standing requires only employment by alleged violator and that one or more violations were committed against the plaintiff)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (FAA preempts state rules that prohibit enforcement of arbitration agreements according to their terms)
- Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC, 55 Cal.4th 223 (Cal. 2012) (party seeking arbitration bears burden to prove agreement; arbitration defenses borne by resisting party)