Khalatian v. Prime Time Shuttle CA2/8
237 Cal. App. 4th 651
| Cal. Ct. App. | 2015Background
- Plaintiff Khalatian worked as an airport shuttle driver for defendants (Prime Time / Rideshare) from ~2009–2012 and signed an owner-operator subcarrier Agreement labeling him an independent contractor and requiring arbitration of "any controversy or claim arising out of or relating to this Agreement."
- Khalatian sued alleging misclassification and multiple Labor Code wage-and-hour claims plus related common-law claims; he did not plead a PAGA claim or seek relief on behalf of the LWDA.
- Defendants moved to compel arbitration 14 months after the original complaint; the trial court denied the motion, finding defendants waived arbitration and that plaintiff’s statutory labor claims were not subject to arbitration.
- Defendants argued the Federal Arbitration Act (FAA) governs because the Agreement involves interstate commerce (airport shuttle operations, online bookings, interstate passengers).
- The Court of Appeal held the FAA applies, the arbitration clause is broad enough to cover Khalatian’s claims, and defendants did not waive arbitration because plaintiff suffered no prejudice from the 14‑month delay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the FAA apply (i.e., does the Agreement "involve commerce")? | Khalatian contended he drove only intrastate and did not press FAA preemption below. | Defendants: their shuttle operations (LAX service, contracts with online travel vendors, interstate passenger flow) evidence interstate commerce so FAA applies. | FAA applies; Agreement involves interstate commerce. |
| Do Khalatian’s statutory Labor Code and related claims fall within the arbitration clause? | Khalatian argued statutory labor claims do not arise from the contract and thus are not arbitrable. | Defendants argued the clause is broad ("arising out of or relating to") and covers claims challenging the Agreement’s characterization of the parties. | The arbitration clause is broad; all of Khalatian’s claims are arbitrable under the FAA. |
| Did defendants waive the right to arbitrate by litigating and delaying 14 months? | Khalatian argued defendants actively litigated and delayed until near trial, causing waiver and prejudice. | Defendants: limited discovery and participation, no depositions or motions; no prejudice from delay; answering does not waive arbitration. | No waiver: delay alone insufficient where opposing party shows no prejudice; trial court’s waiver findings unsupported. |
| Are PAGA claims arbitrable here? | Khalatian alleged LWDA notice in general allegations but did not assert a PAGA cause of action. | Defendants noted PAGA claims are generally non-arbitrable but plaintiff did not pursue PAGA relief. | Court: PAGA not implicated because plaintiff did not assert a PAGA claim. |
Key Cases Cited
- Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348 (2014) (waiver factors and PAGA non-arbitrability principles)
- St. Agnes Med. Ctr. v. PacifiCare of Cal., 31 Cal.4th 1187 (2003) (prejudice is critical to waiver analysis)
- Perry v. Thomas, 482 U.S. 483 (1987) (FAA preempts state law that bars arbitration of statutory claims)
- Abel v. S. Shuttle Servs., Inc., 631 F.3d 1210 (11th Cir. 2011) (intrastate airport shuttle service can involve interstate commerce based on practical continuity of travel)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614 (1985) (statutory claims arbitrable when FAA governs)
- Southland Corp. v. Keating, 465 U.S. 1 (1984) (broad arbitration clauses cover statutory claims where FAA applies)
- Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001) (FAA exemption for contracts of employment of transportation workers discussed)
- Lane v. Francis Capital Mgmt. LLC, 224 Cal.App.4th 676 (2014) (party seeking FAA preemption bears burden to show transaction involves interstate commerce)