Placido Valdez v. Terminix Int'l Co.
681 F. App'x 592
| 9th Cir. | 2017Background
- Plaintiff Placido Valdez brought a representative claim under California's Private Attorneys General Act (PAGA) against his employer, Terminix.
- Terminix moved to dismiss or compel arbitration of the PAGA claim; the district court denied the motion.
- Terminix appealed, arguing (1) the Federal Arbitration Act (FAA) preempts California's rule invalidating PAGA-waiver provisions (the Iskanian rule); (2) Supreme Court precedent in DIRECTV v. Imburgia undermines Sakkab; and (3) PAGA claims cannot be compelled to arbitration because the claim belongs to the state.
- The Ninth Circuit reviewed de novo, relying on its precedent in Sakkab v. Luxottica, and concluded the district court lacked the benefit of Sakkab when it decided the motion.
- The panel held that PAGA claims can be subject to arbitration and that the arbitration clause at issue covers Valdez’s PAGA claim; it reversed the denial of the motion to compel arbitration and remanded for the district court to consider dismissal or stay pending arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FAA preempts California's rule invalidating PAGA-waiver provisions (Iskanian) | Valdez: Iskanian remains good law; PAGA waivers are invalid under California law. | Terminix: FAA preempts Iskanian, so PAGA waivers in arbitration agreements are enforceable. | Rejected. Under Sakkab, Iskanian is a generally applicable contract defense and is not preempted by the FAA. |
| Whether DIRECTV v. Imburgia undermines Sakkab's reasoning | Valdez: Imburgia does not change Sakkab’s application of the FAA savings clause. | Terminix: Imburgia suggests arbitration-specific defenses cannot save state rules like Iskanian. | Rejected. Imburgia applied ordinary FAA preemption analysis and does not overturn Sakkab. |
| Whether an individual can bind the state to arbitrate PAGA claims | Valdez: PAGA claims are actions by the state; the state hasn’t waived judicial forum, so representative PAGA claims must be litigated. | Terminix: An employee acting as the state’s agent can agree to arbitrate; PAGA claims can proceed in arbitration. | Held for Terminix. Iskanian and Sakkab contemplate that individual employees (as agents) may pursue PAGA claims in arbitration. |
| Whether Valdez’s PAGA claim falls within the arbitration clause | Valdez: The district court found PAGA claims cannot be arbitrated. | Terminix: The arbitration clause covers employment-related disputes, including PAGA claims; severance of waiver doesn’t void the arbitration provision. | Held for Terminix. The clause covers Valdez’s PAGA claim; the denial to compel arbitration was reversed and remanded. |
Key Cases Cited
- Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425 (9th Cir. 2015) (held Iskanian is not preempted and PAGA claims can be arbitrated under certain conditions)
- Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (California rule invalidating complete waivers of the right to bring representative PAGA actions)
- DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015) (Supreme Court application of FAA preemption principles to state-law contract defenses)
- Arias v. Superior Court, 46 Cal.4th 969 (Cal. 2009) (explains that PAGA plaintiffs act as the state's proxy or agent in representative labor-law enforcement suits)
- Wulfe v. Valero Ref. Co.-Cal., [citation="641 F. App'x 758"] (9th Cir. 2016) (affirming district court orders compelling arbitration of a PAGA claim)