Nickson v. Shemran, Inc.
306 Cal.Rptr.3d 835
Cal. Ct. App.2023Background
- Plaintiff Blaine Nickson, a former hourly nonexempt employee, sued Shemran, Inc. (doing business as Barons Market) in a single-count PAGA action alleging wage-and-hour violations and seeking civil penalties on behalf of himself and other aggrieved employees.
- Shemran moved to compel arbitration under a signed employment arbitration agreement that required arbitration of "all claims" on an individual basis and expressly waived class and "private attorney general" (PAGA) claims.
- The trial court denied the motion to compel arbitration, relying on Iskanian v. CLS Transportation, which had held predispute waivers of PAGA actions unenforceable and disallowed splitting PAGA claims into individual and nonindividual components.
- While this appeal was pending the U.S. Supreme Court decided Viking River Cruises, Inc. v. Moriana, holding the Federal Arbitration Act (FAA) preempts Iskanian’s no-splitting rule so that individual PAGA claims in a predispute arbitration agreement may be compelled to arbitration, though PAGA waivers remain unenforceable.
- The arbitration agreement here also contains a clear delegation clause assigning arbitrability/enforceability questions (including unconscionability) to the arbitrator; moreover, California precedent (Kim v. Reins) holds an aggrieved employee retains PAGA standing to pursue nonindividual claims even if individual claims are resolved or time-barred.
- The Court of Appeal reversed the trial court: it ordered arbitration of Nickson’s individual PAGA claims, left nonindividual PAGA claims in superior court, and held unconscionability challenges to the agreement are for the arbitrator under the delegation clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are Nickson’s individual PAGA claims subject to arbitration? | Nickson argued Iskanian bars enforcement of predispute arbitration of PAGA claims and the trial court properly denied the motion. | Shemran argued Viking River requires enforcement of arbitration for individual PAGA claims under the FAA. | Viking River controls; FAA preempts Iskanian’s no-splitting rule — individual PAGA claims are arbitrable. |
| Is the Agreement’s waiver of PAGA claims enforceable? | Nickson contended the PAGA waiver is unenforceable as against California public policy. | Shemran relied on severability and Viking River’s ruling that PAGA waivers remain unenforceable but other terms can be enforced. | The PAGA waiver is unenforceable; severability allows enforcement of other arbitration provisions. |
| Who decides unconscionability/enforceability of the arbitration agreement? | Nickson argued the agreement is procedurally and substantively unconscionable and urged court review. | Shemran pointed to the delegation clause making arbitrator the exclusive decisionmaker on enforceability. | The delegation clause is clear and unmistakable; under Rent‑A‑Center the arbitrator, not the court, must decide unconscionability. |
| Does Nickson retain standing to litigate nonindividual PAGA claims after his individual claims are sent to arbitration? | Nickson relied on Kim v. Reins: PAGA standing is defined by past violations, so he retains standing to pursue nonindividual claims in court. | Shemran urged Viking River’s statement that courts should dismiss nonindividual claims when individual claims are committed to separate proceedings. | Follow Kim: California precedent controls standing; nonindividual PAGA claims remain in court despite arbitration of individual claims. |
Key Cases Cited
- Iskanian v. CLS Transp. L.A., LLC, 59 Cal.4th 348 (Cal. 2014) (state rule invalidating predispute waivers of PAGA actions and disfavoring splitting PAGA claims)
- Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (U.S. 2022) (FAA preempts California’s no-splitting rule; individual PAGA claims may be compelled to arbitration while PAGA waivers remain unenforceable)
- Rent‑A‑Center, W., Inc. v. Jackson, 561 U.S. 63 (U.S. 2010) (arbitration delegation clauses that clearly and unmistakably delegate enforceability questions are for the arbitrator)
- Kim v. Reins, 9 Cal.5th 73 (Cal. 2020) (PAGA standing is determined by occurrence of Labor Code violations, not by maintenance of unresolved individual claims)
- Johnson v. Maxim Healthcare Servs., Inc., 66 Cal.App.5th 924 (Cal. Ct. App. 2021) (follows Kim: individual claims being time‑barred does not strip PAGA standing to pursue nonindividual claims)