Galarsa v. Dolgen California, LLC, F082404A

Background:

Galarsa electronically signed Dollar General’s employee arbitration agreement (March 2016) that included a broad arbitration requirement, a class/representative-action waiver, and a severability clause.
She sued under PAGA for multiple Labor Code violations she allegedly suffered and for violations allegedly suffered by other employees; she gave the required notice to the LWDA and filed in state court.
Dollar General moved to compel arbitration; the trial court denied the motion, and the Court of Appeal initially affirmed; the U.S. Supreme Court granted certiorari and remanded in light of Viking River Cruises v. Moriana.
On remand, the Court of Appeal held California’s Iskanian rule (PAGA representative waivers unenforceable) remains valid and that the arbitration agreement’s severability clause permits striking the invalid waiver.
The court construed the remaining agreement as covering only PAGA claims seeking penalties for violations suffered by Galarsa (Type A) and requiring arbitration of those claims.
The court held PAGA claims seeking penalties for violations suffered by other employees (Type O) may proceed in court; the order was reversed in part (Type A) and affirmed in part (Type O) and remanded to compel arbitration of Type A claims.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Enforceability of PAGA representative-action waiver	Waiver is invalid under California public policy (Iskanian) and cannot be enforced.	FAA preempts state-law rules limiting arbitration, so the waiver (and division of PAGA claims) should be enforced.	Iskanian’s anti-waiver rule remains valid under California law; the waiver is unenforceable as to PAGA representative claims.
Effect of severability clause	Severability preserves the arbitration agreement after striking unlawful waiver.	Same; enforce the remainder to the extent lawful.	Severability permits striking the invalid waiver and enforcing the remaining arbitration provisions.
Scope of arbitration (Type A v. Type O claims)	PAGA claims based on Galarsa’s own violations (Type A) are arbitrable; representative claims for other employees (Type O) are distinct and not covered by her employment-based arbitration consent.	Arbitration agreement covers all employment-related claims, so all PAGA claims should be arbitrated or dismissed.	The agreement covers and must send Type A claims to arbitration; it does not cover Type O claims because those arise from other employees’ rights.
Standing and splitting: whether Type O claims must be dismissed after Type A arbitration	Galarsa remains an "aggrieved employee" with standing to pursue Type O claims in court; California’s anti-splitting rule does not bar pursuing Type O claims separately.	Following Viking River, Type O claims lose standing and should be dismissed once Type A claims are compelled to arbitration.	Plaintiff retains PAGA standing for Type O claims; the court predicts (and holds here) that California law allows Type O claims to proceed in court after Type A arbitration.

Key Cases Cited

Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (U.S. 2022) (FAA preempts rule preventing division of PAGA into individual and non-individual claims)
Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (predispute waivers of representative PAGA actions violate public policy)
Kim v. Reins International California, Inc., 9 Cal.5th 73 (Cal. 2020) (PAGA standing requires aggrieved-employee status; discussion of splitting PAGA claims)
Arias v. Superior Court, 46 Cal.4th 969 (Cal. 2009) (PAGA deputizes employees to enforce state labor laws)
ZB, N.A. v. Superior Court, 8 Cal.5th 175 (Cal. 2019) (all PAGA actions are "representative" in the sense they are brought on the state's behalf)
Crowley v. Katleman, 8 Cal.4th 666 (Cal. 1994) (California rule against splitting causes of action and primary-right theory)
Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC, 55 Cal.4th 223 (Cal. 2012) (arbitration is a matter of consent; contractual scope principles)