336 F. Supp. 3d 1119
N.D. Cal.2018Background
- Plaintiff Ravi Whitworth (and four additional named plaintiffs) sued SolarCity for wage-and-hour violations, asserting individual, class, collective, and PAGA claims.
- Three plaintiffs (Whitworth, Carranza, Frias) signed arbitration agreements containing representative/PAGA waivers; parties agree their individual non-PAGA claims must be arbitrated post-Epic.
- Two additional plaintiffs (Farrohki, Whitford) signed near-identical arbitration agreements but did not plead PAGA claims; agreements contain a non-severability clause tied to class/representative/PAGA waivers.
- District court previously denied a motion to compel arbitration under Ninth Circuit precedent (Morris/Sakkab); the Supreme Court’s decision in Epic Sys. reversed Morris and prompted supplemental briefing.
- Court had to decide (1) whether Epic implicitly overruled Sakkab so PAGA claims must be arbitrated; (2) whether §558-based PAGA wage claims are arbitrable; (3) whether Farrohki and Whitford can be compelled to arbitrate given the PAGA-waiver language; and (4) whether nonarbitrable PAGA claims should be stayed pending arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Epic overruled Sakkab so PAGA claims must be arbitrated | Sakkab remains binding; PAGA representative claims cannot be waived and are nonarbitrable | Epic rejected reasoning underlying Morris and supports compelling arbitration of representative-waived claims | Court: Epic did not clearly overrule Sakkab; Sakkab remains controlling in Ninth Circuit, so PAGA representative claims are not arbitrable |
| Whether Labor Code §558-based PAGA claims (unpaid wages portion) must be arbitrated | PAGA §558 unpaid-wage component is part of the PAGA civil penalty and thus nonarbitrable under Iskanian | §558 unpaid wages are victim-specific and should be arbitrated (Esparza position) | Court: Likely outcome is Lawson/Thurman line — §558 recovery is a civil penalty under PAGA and not severable into arbitrable wage claims; §558-based PAGA claims are not arbitrable |
| Whether Farrohki and Whitford can be compelled to arbitrate despite a non-severable PAGA waiver in their agreements | Plaintiffs: prior California appellate rulings (SolarCity cases) estop enforcement; the non-severability clause renders whole agreement void when waiver invalid | SolarCity: those prior decisions involved plaintiffs who pleaded PAGA claims; issue preclusion does not apply here and waiver is severable when no PAGA claim is asserted | Court: Issue preclusion inapplicable; the PAGA waiver is collateral and severable under Cal. law; therefore Farrohki and Whitford must arbitrate their individual claims |
| Whether to stay nonarbitrable PAGA claims pending arbitration of individual claims | Plaintiffs: PAGA claims should proceed in court concurrently | SolarCity: stay is appropriate because arbitrable issues overlap and arbitration outcome will affect PAGA claims | Court: Exercising discretion, grants stay of PAGA claims pending arbitration of individual claims |
Key Cases Cited
- Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018) (Supreme Court holding arbitration agreements with individualized-action provisions are enforceable despite NLRA-based objections)
- Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425 (9th Cir. 2015) (Ninth Circuit holding PAGA representative claims cannot be waived and are nonarbitrable)
- Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348 (2014) (California Supreme Court holding private waivers of representative PAGA actions are unenforceable)
- Morris v. Ernst & Young, 834 F.3d 975 (9th Cir. 2016) (Ninth Circuit decision later reversed by Epic regarding enforceability of class waivers)
- Miller v. Gammie, 335 F.3d 889 (9th Cir. 2003) (framework for when circuit precedent is effectively overruled by a subsequent Supreme Court decision)
- Lawson v. ZB, N.A., 18 Cal. App. 5th 705 (2017) (California appellate decision treating §558 recovery as civil penalty for PAGA purposes; court found nonarbitrability)
- Thurman v. Bayshore Transit Mgmt., Inc., 203 Cal. App. 4th 1112 (2012) (California appellate decision construing §558 recovery as civil penalty including unpaid wages)
- Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83 (2000) (California Supreme Court on severability and enforcement of arbitration agreements)
- Marathon Entm't, Inc. v. Blasi, 42 Cal.4th 974 (2008) (California Supreme Court on illegal provision collateral to contract’s central purpose and severability)