88 Cal.App.5th 1281
Cal. Ct. App.2023Background
- Plaintiffs Piplack and Sherrod (former In-N-Out employees) sued for PAGA penalties based on employer clothing and cleaning-product policies; suit included individual and representative PAGA claims.
- Both plaintiffs had signed arbitration agreements containing a "Private Attorney General Waiver" with severability clauses.
- Defendant moved to compel arbitration after the U.S. Supreme Court’s Viking decision was pending; the trial court denied the motion under Iskanian and defendant appealed.
- While the appeal was pending, the U.S. Supreme Court decided Viking (holding individual PAGA claims are severable and arbitrable under the FAA).
- The Court of Appeal held Piplack’s individual PAGA claim must be sent to arbitration; remanded Sherrod’s disaffirmance claim for factual findings; and held plaintiffs retain standing to pursue representative PAGA claims in court under Kim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitration agreement for individual PAGA claims | Arbitration agreement (and severability language) does not compel arbitration of PAGA claims; waiver unenforceable | Viking requires severing individual PAGA claims and sending them to arbitration; agreement’s severability enforces arbitration of individual claims | Individual PAGA claims are arbitrable; agreement’s severability provisions permit arbitration of individual claims and litigation of representative claims in court |
| Waiver of right to arbitrate (delay, litigation conduct, settlement talks) | In-N-Out waived arbitration by participating in litigation, omitting arbitration defense early, and negotiating settlements | Delay was reasonable given unsettled law; seeking arbitration once it might succeed is not waiver (futility rule) | No waiver as a matter of law; defendant timely sought arbitration once victory was plausible under changing precedent |
| Sherrod’s capacity/disaffirmance (signed as minor) | Sherrod entered agreement as a minor and disaffirmed after majority, so individual claim not arbitrable | Agreement is enforceable; factual dispute exists on disaffirmance timing and effect | Remanded to trial court to resolve factual disputes and decide disaffirmance in the first instance |
| Standing to pursue representative PAGA claims if individual claim is arbitrated | Plaintiffs retain PAGA standing so long as they are "aggrieved employees" per Kim, even if individual claims are in arbitration | Viking suggested that once individual claim is severed to arbitration, plaintiff lacks standing to pursue representative claims in court | Court follows Kim: plaintiffs retain standing to pursue representative PAGA claims in court despite individual claims being sent to arbitration; representative claims not dismissed |
Key Cases Cited
- Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (U.S. 2022) (FAA preemption requires severing and arbitrating individual PAGA claims; majority questioned standing for representative claims)
- Kim v. Reins Int’l Cal., Inc., 9 Cal.5th 73 (Cal. 2020) (PAGA standing requires only that plaintiff be an "aggrieved employee")
- Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (California rule barring waiver and splitting of PAGA claims was earlier governing law)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (FAA preempts state rules that prohibit arbitration of class-action waivers)
- Morgan v. Sundance, Inc., 142 S. Ct. 1708 (U.S. 2022) (waiver of arbitration under FAA depends on intentional relinquishment, not prejudice)
- Gentry v. Superior Court, 42 Cal.4th 443 (Cal. 2007) (discussion of class actions and public policy in wage cases)