Verdugo v. Alliantgroup, L.P.
237 Cal. App. 4th 141
Cal. Ct. App.2015Background
- Rachel Verdugo, employed by Alliantgroup in Irvine, signed an employment agreement containing a mandatory forum-selection clause (Harris County, Texas) and a Texas choice-of-law clause.
- Verdugo filed a California class action asserting wage-and-hour claims under the California Labor Code (unpaid overtime, wage statements, meal/rest breaks, final pay, commissions, vacation pay), UCL restitution, and PAGA penalties.
- Alliantgroup moved to stay/dismiss based on the forum-selection and choice-of-law clauses; the trial court granted a stay. Verdugo appealed.
- California Labor Code provisions invoked are subject to antiwaiver principles (§ 219, § 1194), creating unwaivable employee rights and statutory remedies (penalties, interest, attorney’s fees).
- The Court of Appeal reversed the stay, holding Alliantgroup bore the burden to prove enforcing the clauses would not diminish Verdugo’s unwaivable California statutory rights, and Alliantgroup failed to meet that burden.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the defendant or plaintiff bears the burden on a motion to enforce a mandatory forum-selection clause when plaintiff’s claims rest on unwaivable California statutory rights | Verdugo: where claims rest on unwaivable Labor Code rights, defendant must prove enforcement will not diminish those rights | Alliantgroup: ordinary rule applies—plaintiff must prove forum clause is unreasonable or unfair | Held: Burden shifts to defendant; when statutory antiwaiver rights are at issue defendant must show enforcement will not diminish those rights (Wimsatt/America Online rule applied). |
| Whether enforcing the mandatory Texas forum and Texas choice-of-law clause would impermissibly waive or diminish California’s unwaivable Labor Code rights | Verdugo: clause effectively waives protections because Texas forum might not apply California law or provide equivalent remedies | Alliantgroup: Texas courts would likely apply California law despite the clause; or Texas law provides adequate remedies | Held: Defendant’s speculative assertion insufficient; Alliantgroup failed to show a Texas forum would preserve California rights or provide equivalent remedies, so enforcement could diminish rights. |
| Whether a comparative analysis of California and the foreign forum’s laws is required to assess diminution of rights | Verdugo: a comparison is needed to determine if rights would be diminished | Alliantgroup: prior cases (Hall/America Online) did not require comparison; no need here | Held: Comparative analysis is necessary when burden is on defendant; defendant may meet its burden by showing the foreign forum affords equal or greater protections or will apply California law. |
| Whether staying (rather than dismissing) preserves California court’s ability to resume the action if the foreign forum applies Texas law | Alliantgroup: stay is appropriate because California court can resume if foreign forum proves unsuitable | Verdugo: stay does not protect unwaivable rights if foreign forum applies different law | Held: The possibility of later resumption does not cure the required showing; resumption is limited and does not negate the need to prove no diminution of rights. |
Key Cases Cited
- Wimsatt v. Beverly Hills Weight etc. Internat., Inc., 32 Cal.App.4th 1511 (Cal. Ct. App.) (places burden on party seeking enforcement of forum clause when unwaivable statutory rights are implicated)
- America Online, Inc. v. Superior Court, 90 Cal.App.4th 1 (Cal. Ct. App.) (extended Wimsatt rationale to CLRA claims; defendant must prove enforcement won't diminish rights)
- Hall v. Superior Court, 150 Cal.App.3d 411 (Cal. Ct. App.) (forum and choice-of-law clauses unenforceable where they would evade state antiwaiver securities policy)
- Schachter v. Citigroup, Inc., 47 Cal.4th 610 (Cal.) (confirms Labor Code and related protections are unwaivable)
- Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (Cal.) (PAGA claims are unwaivable; discussion of limits on private waivers of statutory claims)