Titus v. Paramount Equity Mortgage, LLC, 2:17-cv-00349

Background

Plaintiff Denise Titus, an hourly non-exempt employee, sued Paramount Equity Mortgage, LLC under the FLSA and California Labor Code, including a PAGA representative claim.
Titus signed an arbitration agreement as a condition of employment on September 14, 2015.
The arbitration agreement required arbitration of employment disputes and contained (1) a class/collective action waiver and (2) a PAGA representative-action waiver, each requiring claims to be pursued only on an individual basis.
Defendant moved to compel arbitration and to enforce the waivers. The motion was decided on briefs without oral argument.
The court evaluated enforceability under the Federal Arbitration Act (FAA) and applicable state-law contract defenses, with attention to NLRA preemption issues and California law on PAGA waivers.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Enforceability of class-action waiver	Morris makes class waivers imposed as a condition of employment unlawful under the NLRA; waiver interferes with concerted activity	Waiver is distinguishable because employees can still pursue joint litigation (e.g., joinder) even if class/collective actions are barred	Waiver unenforceable: Morris controls—class waivers as a condition of employment unlawfully restrict concerted activity under the NLRA; cannot compel class arbitration absent contractual basis
Enforceability of PAGA waiver	PAGA waivers are void under California law (Iskanian); FAA does not preempt that rule	FAA preempts state restrictions on arbitration, so PAGA waiver should be effective in federal court	PAGA waiver unenforceable: California law forbids PAGA waivers and Ninth Circuit precedent holds FAA does not preempt Iskanian; waiver provides no basis to compel arbitration
Whether to compel individual arbitration of plaintiff's claims	Plaintiff cannot be compelled to arbitrate class or representative claims; agreement cannot be severed to force class arbitration	Agreement requires arbitration of employment disputes and individual-only proceedings	Motion to compel arbitration denied because key waivers are unenforceable and class/representative claims cannot be forced into arbitration
Effect of Supreme Court grant of certiorari in Morris	Morris remains binding until reversed; certiorari does not nullify Ninth Circuit precedent	Defendant argued certiorari undermined Morris' precedential effect	Court rejected defendant's argument: grant of certiorari does not remove binding effect of the Ninth Circuit decision for this court

Key Cases Cited

Perry v. Thomas, 482 U.S. 483 (establishes strong federal policy favoring enforcement of arbitration agreements)
Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (courts must compel arbitration when parties agreed)
Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir.) (class-action waivers as a condition of employment violate the NLRA)
Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (party cannot be compelled to class arbitration absent contractual basis)
Iskanian v. CLS Transp. L.A., LLC, 59 Cal.4th 348 (Cal. Sup. Ct.) (PAGA waivers are unenforceable under California law)
Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425 (9th Cir.) (FAA does not preempt California rule invalidating PAGA waivers)
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (limits state-law defenses to arbitration agreements that would disfavor arbitration)
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (ambiguities in scope of arbitrable issues resolved in favor of arbitration)
United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (arbitration clause should be enforced unless it is clear it does not cover the dispute)