Case Information
*1 Filed 8/31/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION TWO
MARIO BARRERA, et al., Plaintiffs and Respondents, A165445 v. (Marin County
APPLE AMERICAN GROUP LLC, Super. Ct. No. CIV2003539) et al., Defendants and Appellants.
Plaintiffs Mario Barrera and Francisco Varguez sued defendants—a nationwide restaurant chain—to recover civil penalties under the Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.) [1] for various Labor Code violations suffered by them and by other employees. Defendants moved to compel arbitration. The trial court denied the motion and defendants appealed.
Based on
Viking River Cruises, Inc. v. Moriana
(2022)
Therefore, the order denying defendants’ motion to compel arbitration is reversed in part and affirmed in part.
BACKGROUND
The Parties and the General Setting
Defendants and appellants are Apple American Group LLC; Apple American Group II LLC; Apple Mid Cal LLC; Applе Mid Cal II, LLC; Apple NorCal LLC; Apple SoCal LLC; Apple SoCal II LLC; Flynn Restaurant Group LP; Flynn Restaurant Group LLC; and Winecountry Apple, LLC (collectively, defendants). According to the operative complaint, defendants are related companies that together own and operate 460 Applebee’s restaurants in California and other states.
Plaintiffs and respondents are Mario Barrera and Francisco Varguez (collectively, plaintiffs). Barrera started working as a kitchen manager at an Applebee’s restaurant in San Rafael in approximately October 2001. Varguez started working as a cook at the same restaurant in approximately September 2008.
During their employment, plaintiffs were presented with and signed documents that included an arbitration provision, the details of which will be described below. Plaintiffs were no longer employed by defendants as of March 2020.
The Proceedings Below
On December 31, 2020, plaintiffs filed a complaint against defendants, and on April 15, 2021, a first amended complaint, in which plaintiffs alleged a single cause of action under PAGA for civil penalties on behalf of *3 themselves and other current and former employees of defendants. The cause of action is predicated on alleged violations of the Labor Code. [2] The first amended complaint asserts that plaintiffs are “aggrieved employees” for purposes of an action under PAGA, and that they complied with the requirements for commencing a PAGA action.
Initially, the case proceeded in relatively ordinary fashion, with defendants filing a demurrer, plaintiffs serving discovery requests, and defendants responding to those requests.
However, in March 2022, defendants filed a motion to compel arbitration and to stay proceedings. It was accompanied by a memorandum of points and authorities and several declarations, including of Tina Meyer, one of defendants’ California human resources business partners.
In her declaration, Meyer stated that in August 2017, defendants migrated their onboarding process onto an online portal that employees could log onto using their own usernames and passwords, and access various employment documents. Barrera, on August 9, 2017, and Varguez, on August 10, 2017, logged onto the online portal; accessed the employee *4 handbook containing the “Dispute Resolution Program” booklet and the “Receipt of Dispute Resolution Program Booklet and Agreement to Abide by Dispute Resolution”; and signed the agreement electronically.
Meyer attached these agreements to her declaration. Under the paragraph entitled “MUTUAL PROMISE TO RESOLVE CLAIMS BY BINDING ARBITRATION,” the agreements state: “In signing this Agreement, both the Company and I agree that all legal claims or disputes covered by the Agreement must be submitted to binding arbitration and that this binding arbitration will be the sole and exclusive final remedy for resolving any such claim or dispute. We also agree that any arbitration between the Company and me will be on an individual basis and not as a representative, class or collective action .” (Italics added.)
The agreements then provide: “This is an agreement to arbitrate all legal claims. Those claims include . . . claims for a violation of any other non- criminal federal, state or other governmental law, statute, regulation, or ordinance.” They also state that by entering into the agreement, “I am giving up my right to have my legal claims against the Company decided in court by a judge or jury” and also “giving up my rights to pursue a class, representative or collective action.”
The agreements further state that “the Federal Arbitration Act shall govern the interpretation, enforcement, and proceedings under this Agreement.”
Meyer’s declaration then explainеd that “employees such as Mr. Barrera and Mr. Varguez may be asked to read and sign the ‘Receipt of Dispute Resolution Program Booklet and Agreement to Abide by Dispute Resolution’ during their employment when a new version of the document was issued or for other record-keeping reasons.” On January 5, 2018, *5 Barrera and Varguez each signed a paper copy of the updated version of the agreement. A representative of defendants also signed the agreements.
This later version of the agreement contains similar language as the earlier version signed in 2017, except as follows. The paragraph “MUTUAL PROMISE TO RESOLVE CLAIMS BY BINDING ARBITRATION” states: “ We also agree that any arbitration between the Company and me will be on an individual basis and not as a class or collective action .” (Italics added.) Thus, this version, unlike the earlier version, does not include a reference to “representative” actions.
Meyer then concludes her declaration by stating: “I am informed and believe that once an individual is presented with the [Dispute Resolution Program] or Acknowledgment, there is no limit on the amount of time an individual may take to review and either reject or accept the Agreement. Likewise, once and individual is presented with the Employee Handbook, there is no limit on the amount of time that individual may take to review and either acknowledge or reject the Employee Handbook.”
In their motion, defendants sought to compel arbitration of plaintiffs’
PAGA claims based on Labor Code violations that plaintiffs suffered
personally (rather than their PAGA claims based on violations suffered by
other employees). According to defendants, “the only obstacle to arbitration
of the claim[s] here” was the California Supreme Court’s decision in
Iskanian v. CLS Transportation Los Angeles, LLC
(2014)
Plaintiffs opposed the motion, arguing that under then controlling law, “representative PAGA claims cannot be compelled to individual arbitration”; thаt defendants failed to establish the prerequisites for the issuance of a stay; and that defendants failed to prove the existence of a valid, binding arbitration clause. On the last point, plaintiffs maintained that the arbitration agreements they signed in 2018, not in 2017, were the operative agreements. Plaintiffs asserted that the operative agreements were unconscionable, and that defendants waived their right to arbitrate by delaying bringing the motion and litigating the case in court.
Defendants filed a reply, responding to, among other arguments, plaintiffs’ defenses of unconscionability and waiver.
On May 17, 2022, the motion came on for hearing, prior to which the
trial court had issued a tentative ruling denying the motion and stay request.
Following argument, the court adopted the tentative as the final order. In
denying the motion, the court relied on a rule that pre-dispute agreements to
arbitrate PAGA claims are unenforceable, a rule followed by many California
Courts of Appeal based on language in
Iskanian
. (Citing
Correia v. NB Baker
Electric, Inc.
(2019)
On June 6, defendants appealed.
On June 15, the United Statеs Supreme Court issued its decision in
*7
Viking River
. (
Viking River
,
DISCUSSION
Introduction to the Analysis
Defendants argue that under either the 2017 or 2018 version of the arbitration agreement, and based on the United States Supreme Court’s decision in , plaintiffs must be compelled to arbitrate their PAGA claims based on Labor Code violations they personally experienced (i.e., “individual” PAGA claims). Once those claims are compelled to arbitration, defendants assert, plaintiffs lose standing to pursue in court their remaining PAGA claims based on Labor Code violations suffered by other employees (i.e., “non-individual” PAGA claims). Additionally, defendants ask us to decide in their favor plaintiffs’ defenses of unconscionability and waiver, issues that the trial court did not reach.
In response, plaintiffs at the outset ask us to dismiss the appeal and to issue monetary sanctions against defendants for bringing a frivolous appeal. On the merits, plaintiffs dispute that the “оperative” arbitration agreements—which they contend are the agreements the parties had signed in 2018—require arbitration of the PAGA claims. But even if their individual PAGA claims must be arbitrated, plaintiffs contend, they maintain standing to litigate the non-individual PAGA claims in court. Further, plaintiffs reassert that defendants waived their right to compel arbitration by delaying bringing their motion and litigating the case in court. Plaintiffs do not *8 address their claim of unconscionability.
Before we address these arguments, we determine whether the 2017 agreements or the 2018 agreements are the operative agreements. The trial court did not expressly state which agreements controlled. However, in the “Background” section of its ruling, the court cited to the 2018 agreements and stated that “both Plaintiffs Barrera and Varguez signed separate arbitration agreements with Defendants in which they agreed that ‘by entering into this Agreement, I am giving up my right to have my legal claims against the Company decided in court by a judge or jury.” We therefore infer that the court considered the 2018 agreements to be the operative arbitration agreements.
Defendants do not challenge this implied finding; indeed, they argue it
makes no difference which set of agreements governs because they are
entitled to their requested relief under either version. Given this, we will
proceed on the understanding that the 2018 agreements are the operative
agreements, which we will refer to as the “Agreements.” (See
Jameson v.
Desta
(2018)
Arbitration Generally and the Standard of Review The governing law is both federal and state in character. We begin with federal law.
The FAA applies to contracts that involve interstate commerce
(9 U.S.C. §§ 1, 2), but since arbitration is a matter of contract, the FAA also
applies if it is so stated in the agreement. (See
Victrola 89, LLC v. Jaman
Properties 8 LLC
(2020)
Section 2 of the FAA provides in relevant part: “A written provision
in . . . a contract . . . to settle by arbitration a controversy thereafter arising
out of such contract or transaction . . . shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.” (9 U.S.C. § 2.) Under the FAA, there is a strong
policy favoring arbitration. (
Moses H. Cone Memorial Hospital v. Mercury
Construction
(1983)
“ ‘Although the FAA preempts any state law that stands as an obstacle
to its objective of enforcing arbitration agreements according to their
terms, . . . we apply general California contract law to determine whether the
parties formed a valid agreement to arbitrate their dispute.’ ” (
Vaughn v.
Tesla, Inc.
(2023)
“ ‘General contract law principles include that “[t]he basic goal of
contract interpretation is to give effect to the parties’ mutuаl intent at the
time of contracting. [Citations.] . . . ‘The words of a contract are to be
understood in their ordinary and popular sense.’ ” [Citation.] Furthermore,
“ ‘[t]he whole of a contract is to be taken together, so as to give effect to every
part, if reasonably practicable, each clause helping to interpret the other.’
[Citation.]” ’ [Citation.]” (
Vaughn v. Tesla
,
The party seeking arbitration bears the burden of proving the existence
of an arbitration agreement, and the party opposing arbitration any defense,
such as unconscionability and waiver. (
Pinnacle Museum Tower Assn. v.
Pinnacle Market Development (US), LLC
(2012)
“Where, as here, the evidence is not in conflict, we review the trial court’s denial of arbitration de novo. [Citation.]” ( Pinnacle , 55 Cal.4th at p. 236.) [4]
Waiver of the Right to Compel Arbitration Because the issue of waiver is potentially determinative, we address it first.
Initially, as noted above, plaintiffs opposed arbitration on waiver
grounds, but the trial court did reach the issue. Defendants ask us to decide
the issue in the first instance as a matter of law. Given that the trial court’s
ruling was limited in scope, we could in theory remand to the trial court to
consider the mаtter. However, we agree with defendants that “because the
issue is purely one of law which we would be reviewing de novo, nothing
would be gained by remanding for this purpose.” (
Rayyis v. Superior Court
(2005)
Plaintiffs argue that defendants waived the right to arbitrate by “litigating this case for over a year” before filing their motion to compel arbitration. We disagree.
Piplack v. In-N-Out Burgers
(2023)
On appeal, the plaintiffs renewed their argument the defendant waived
the right to arbitrate by litigating the case in the trial court. (
Piplack
,
supra
,
The
Piplack
court then observed, “Similarly, in the present case,
defendant raised its right to arbitrate as soon as it had any chance of
success.” (
Piplack
,
Likewise here. Defendants moved to compel arbitration soon after it
learned the United States Supreme Court granted сertiorari in
Viking River
with respect to the
Iskanian
rule—which they explained in their motion was
“the only obstacle to arbitration of the claim here” and likely to be overturned
in . Thus, as in
Piplack
, defendants “raised [their] right to
arbitrate as soon as [they] had any chance of success.” (
Piplack
,
Arbitrability of the PAGA Claims
The Law on Agreements to Arbitrate PAGA Claims PAGA
PAGA authorizes any “aggrieved employee” to initiate a civil action against a former employer “on behalf of himself or herself and other current or former employees” to recover civil penalties for violations of the Labor Code ordinarily “assessed and collected by the Labor and Workforce Development Agency . . . .” (§ 2699, subd. (a).)
“An employee suing under PAGA ‘does so as the proxy or agent of the
state’s labor law enforcement agencies.’ [Citation.] . . . Moreover, the civil
penalties a PAGA plaintiff may recover on the state’s behalf are distinct from
the statutory damages or penalties that may be available to employees suing
for individual violations. [Citation.] Relief under PAGA is designed
primarily to benefit the general public, not the party bringing the action.
[Citation.] ‘A PAGA representative action is thеrefore a type of qui tam
action,’ conforming to all ‘traditional criteria, except that a portion of the
penalty goes not only to the citizen bringing the suit but to all employees
affected by the Labor Code violation.’ [Citation.] The ‘government entity on
whose behalf the plaintiff files suit is always the real party in interest.’ ”
(
Kim v. Reins International California, Inc.
(2020)
Iskanian
In
Iskanian
, the California Supreme Court held “an arbitration
agreement requiring an employee as a condition of employment to give up the
right to bring representative PAGA actions in any forum is contrary to public
policy.” (
Iskanian
,
Based on
Iskanian
’s reasoning that the state is the real plaintiff in
interest in a PAGA action, California Courts of Appeal subsequently held
*15
that an employee’s pre-dispute agreement to arbitrate PAGA claims is
unenforceable absent a showing the state also consented to the agreement.
(E.g.,
Herrera v. Doctors Medical Center of Modesto
(2021) 67 Cal.App.5th
538, 550, fn. 3;
Correia v. NB Baker Electric, Inc., supra,
32 Cal.App.5th at
p. 622;
Julian v. Glenair, Inc.
(2017)
“This rule and the logic behind it seemed sound—until
Viking River
.”
(
Nickson v. Shemran, Inc.
(2023)
Viking River In Viking River , the United States Supreme Court considered whether the FAA preempted certain of Iskanian ’s holdings. ( Viking River , 596 U.S. at pp. ___, ___ [142 S.Ct. at pp. 1913, 1917].)
The
Viking River
court began its analysis by explaining PAGA claims
are “representative” in two ways. (
Viking River
,
clear in its use of the term ‘representative’ and would use the phrase ‘
“individual PAGA claim” to refer to claims based on code violations suffered
by the plaintiff.’ [(
Viking River
,
Given its conclusion that the FAA applies, the court went on to consider whether the FAA preempts two of Iskanian ’s rules, which it described this way: “ Iskanian ’s principal rule prohibits waivers of ‘representative’ PAGA claims in the first sense. That is, it prevents parties from waiving representative standing to bring PAGA claims in a judicial or arbitral forum. But Iskanian also adopted a secondary rule that invalidates agreements to separately arbitrate or litigate ‘individual PAGA claims for Labor Code violations that an employee suffered,’ on the theory that resolving victim- specific claims in separate arbitrations does not serve the deterrent purpose of PAGA.” ( Viking River supra , 596 U.S. at pp. ___–___ [142 S.Ct. at pp. 1916–1917].)
The
Viking River
court determined the FAA does not preempt
Iskanian
’s principal rule. (
Viking River
, 596 U.S. at pp. ___–___, ___–
___ [142 S.Ct. at pp. 1922–1923, 1924–1925].) It reasoned that because the
FAA is concerned with the forum in which disputes are resolved, not with the
substantive law that resolves them, it did
not
preempt this rule. (
Id.
at p. ___
[
However, the
Viking River
court held the FAA preempts
Iskanian
’s
secondary rule “preclud[ing] [the] division of PAGA actions into individual
and non-individual claims through an agreement to arbitrate.” ( ,
,
The court then turned to the agreement at issue, which required
“arbitrat[ion] [of] any dispute arising out of [the plaintiff’s] employment” and
contained a waiver provision “providing that in any arbitral proceeding, the
parties could not bring any dispute as a class, collective, or representative
PAGA action. . . .” (
Viking River
,
Analysis With an understanding of , and by reading the plain language of the Agreements, we agree with defendants that plaintiffs’ individual PAGA claims must be sent to arbitration.
As noted, the Agreements state: “In signing this Agreemеnt, both the Company and I agree that all legal claims or disputes covered by the Agreement must be submitted to binding arbitration and that this binding arbitration will be the sole and exclusive final remedy for resolving any such claim or dispute. We also agree that any arbitration between the Company and me will be on an individual basis and not as a class or collective action.”
Two paragraphs later, the Agreements state: “ This is an agreement to arbitrate all legal claims. Those claims include: . . . claims for a *19 violation of any other non-federal, state or other governmental law, statute, regulation or ordinance . . . .”
The second paragraph unambiguously mandates arbitration of “all legal claims,” which include “claims for a violation of [a] . . . state . . . statute.” These broad provisions no doubt cover plaintiffs’ PAGA claims that are based on defendants’ alleged Labor Code violations.
The first paragraph does provide a limitation, namely that claims
submitted to arbitration “will be on an
individual basis
. . . .” (Italics added.)
As noted,
Viking River
characterized PAGA claims based on violations the
plaintiff personally sustained as “individual” claims, and PAGA claims based
on violations that other employees sustained as “non-individual” claims. (See
Viking River
, 596 U.S. at pp. ___, ___–___ [142 S.Ct. at pp. 1916, 1924–
1925].) Based on this, we construe the “individual basis” limitation contained
in the Agreements here as requiring arbitration of only plaintiffs’ individual
PAGA claims, thereby precluding arbitration of the non-individual PAGA
claims. (See, e.g.,
Parsittie v. Schneider Logistics, Inc.
(C.D.Cal. Feb. 8, 2023,
CV 19-03981-MWF (AFMx))
Plaintiffs nonetheless argue that the Agreements do not encompass *20 their PAGA claims whatsoever. Preliminarily, we note that plaintiffs present a number of arguments, but do not do so under appropriate headings. Plaintiffs’ substantive arguments fall under the heading “Strong Contractual Reasons Exist for Denying Appellants’ Motion,” and specifically its two subheadings. However, some of the arguments do not match the subheadings they fall under. Also, plaintiffs repeat some of the same arguments under the different subheadings. We are not inclined to repair this situation by stitching the arguments together and then supplementing them to create coherent reasoning. Accordingly, we will address the arguments in the order presented by plaintiffs.
Plaintiffs’ first subheading asserts: “Unlike the Viking River Agreement, the Proffered Arbitration Agreements Contain No PAGA Waiver and No Disaggregation of PAGA Claims into ‘Individual’ and ‘Representative’ Components.” Under this subheading, plaintiffs first argue that the Agreements in this case, “unlike that at issue in Viking River , do[es] not contain a representative, PAGA, or qui tam action waiver.” They also state the Agreements do not “disaggregate[ ] [the PAGA claims] into ‘individual’ and ‘representative’ components.” Instead, plaintiffs argue, the Agreements contain a “a waiver of ‘class and collective’ actions,” which explained is not the same as a PAGA claim. Plaintiffs conclude that because the Agreements contain no PAGA or “representative” waiver, “there is simply no basis to compel arbitration in this case.”
Plaintiffs do not articulate why the absence of a PAGA waiver in the Agreements necessarily precludes defendants’ requested relief. But they seem to suggest the Agreements must expressly include language waiving the right to arbitrate “representative” or “PAGA” claims before a court may split PAGA actions into arbitrable and non-arbitrable claims. We reject such *21 a suggestion.
It is true that the provision at issue here is not explicit as the one in
Viking River
, which expressly prevented arbitration of “any dispute as a
class, collective,
or representative PAGA action
.” (
Viking River
,
Next, we address plaintiffs’ passing statement within its discussion of the lack of a PAGA waiver that the Agreements do not “even mention[] PAGA.” The suggestion that the Agreements do not cover PAGA claims because they do specifically mention “PAGA” is simply unpersuasive. As concluded above, the broad language in the Agreements providing for arbitration of “all legal claims,” including “claims for a violation of [a] . . . state . . . statute,” clearly covers PAGA claims.
Plaintiffs then argue that the Agreements do not cover PAGA claims
based on their characterization of a PAGA action as a dispute between the
employer and the state (rather than the employer and employee). Plaintiffs
largely rely on but, as defendants observe, that decision rejects
*22
plaintiffs’ assertion. Specifically, the United Stаtes Supreme Court disagreed
with
Iskanian
’s reasoning “that a PAGA action lies outside the FAA’s
coverage entirely because § 2 is limited to controversies ‘arising out of’ the
contract between the parties [citation] and a PAGA action ‘is not a dispute
between an employer and an employee arising out of their contractual
relationship,” but ‘a dispute between an employer and the state.’ [Citation.]”
(
Viking River
,
We move on to plaintiffs’ second subheading: “Because the Agreements Do Not Contain A Representative Action Waiver, Appellants’ Request for Relief Is Invalid.” Under this subheading, plaintiffs first argue that even if the Agreements cover PAGA claims, they require the parties to arbitrate both the individual and non-individual PAGA claims. Because defendants sought to compel only the individual PAGA claims, plaintiffs contend, this court “cannot provide the relief [defendants] seek” and must affirm the order denying the motion to compel arbitration. We disagree. This argument is again premised on plaintiffs’ disregard for the Agreements’ provision stating that “any arbitration . . . will be on an individual basis.”
For this reason, plaintiffs’ reliance on
Diaz v. Macy’s West Stores, Inc.
(C.D.Cal. Nov. 23, 2022, CV 19-00303 PSG (MAAx)) 2022 U.S. Dist. LEXIS
*23
212825 (
Diaz
) is misplaced. In
Diaz
, the defendants argued the plaintiff was
required “to arbitrate her individual PAGA claims against Defendant and
[was] precluded from bringing non-individual PAGA claims against
Defendant in the arbitration.” (
Diaz
,
supra
,
On the first point, the
Diaz
court explained that the first paragraph of
the arbitration agreement “unambiguously mandates arbitration for all
employment-related disputes arising out of any law—federal, state, or local—
except where otherwise limited. That broad provision no doubt covers
Plaintiff's individual PAGA claims that are based on Defendant’s alleged
Labor Code violations.” (
Diaz
,
supra
,
Regarding the second point, the
Diaz
court found that the second
paragraph of the arbitration agreement did “not on its face exclude
representative PAGA claims from being adjudicated in the same arbitration
proceeding.” (
Diaz
,
Here, it is true that the Agreements are similar to that of Diaz in that *24 they broadly describe the types of claims subject to arbitration and include a waiver of the right to arbitrate “as a class or collective action.” However, unlike in Diaz , the Agreements here include additional language that restricts arbitration “on an individual basis.” As such, Diaz is inapposite.
In sum, in defining the scope of arbitrable claims, the Agreements provide that only individual PAGA claims can be arbitrated. Under Viking River , this is permissible. Therefore, the order denying defendants’ motion to compel arbitration is incorrect. Plaintiffs’ individual claims can be arbitrated—unless the Agreements are unenforceable on some other ground.
Unconscionability
In opposing the motion to compel arbitration, plaintiffs argued the
Agreements are unconscionable. The trial court did not decide the issue. As
with thе waiver issue, we may decide the unconscionability issue in the first
instance since our review does not call for the resolution of contested facts.
(See
Rayyis v. Superior Court
,
As another preliminary matter, defendants assert plaintiffs have
abandoned their unconscionability defense by failing to address it in their
respondents’ brief. Despite plaintiffs’ omission, we decline to treat it as a
default or concession and will decide the issue on the record and defendants’
appellate briefs. (Cf.
In re Bryce C.
(1995)
Turning to the merits, we begin with the applicable law. “A contract is
unconscionable if one of the parties lacked a meaningful choice in deciding
*25
whether to agree and the contract contains terms that are unreasonably
favorable to the other party. [Citation.] Under this standard, the
unconscionability doctrine ‘ “has both a procedural and a substantive
element.” ’ [Citation.]” (
OTO L.L.C. v. Kho
(2019)
“Both procedural unconscionability and substantive unconscionability
must be shown, but ‘they need not be present in the same degree’ and are
evaluated on ‘ “a sliding scale.” ’ [Citation.] ‘[T]he more substantively
oppressive the contract term, the less evidence of procedural
unconscionability is required to come to the conclusion that the term is
unenforceable, and vice versa.’ ” (
Pinnacle
,
“The burden of proving unconscionability rests upon the party
asserting it. [Citations.]” (
OTO
,
We first address procedural unconscionability. The extent of plaintiffs’ argument on this issue in their opposing papers is this single paragraph: “[A]ll of Defendants’ non-exempt employees were forced to sign an arbitration agreement if they wanted to be hired or continue to work at an Applebee’s Franchise. Meyer Decl. ¶¶ 5 & 9. The arbitration agreement was one of a plethora of documents presented to Plaintiffs, and Plaintiffs did not have a meaningful opportunity to negotiate its terms. Meyer Decl. ¶¶ 5–6 & 9. Rather, it was presented on a take-it or leave-it basis, along with the other onboarding documents. Id. Each of these facts favors a finding of procedural *26 unconscionability.”
As just quoted, plaintiffs’ procedural unconscionability arguments relied solely on the declaration of defendants’ California human resources business partner, Tina Meyer, attached to the motion to compel arbitration. Plaintiffs did not present separate evidence. In paragraphs 5 and 6 of her declaration, Meyer describes how defendants in August 2017 migrated its onboarding process to an online portal and began directing current and employees to use the portal “to fill out required employment information and sign documents”; that although employees may print copies of any documents they wish to retain in hard copy, they must digitally sign all documents that require a signature; and that employees “were afforded time (on the clock) to sign the [employment] documents.” Then, in paragraph 9, Meyer states that “employees such as [plaintiffs] may be asked to read and sign the ‘Receipt of Dispute Resolution Program Booklet and Agreement to Abide by Dispute Resolution’ during their employment when a new version of the documеnt was issued or for other record-keeping reasons.” Meyer also avers that hand- signed copies of the updated version of the agreement were contained in plaintiffs’ personnel files.
The paragraphs cited by plaintiffs establish the general facts that plaintiffs were presented with versions of the agreement during their employment and that they signed those documents either digitally or in paper copy. However, those and other paragraphs of the declaration do not provide much information on the circumstances surrounding the formation and negotiation of the Agreements. (See OTO , 8 Cal.5th at pp. 126– 127 [circumstances relevant to establishing oppression include the amount of time the party is given to consider the proposed contract; amount and type of pressure exerted on the party to sign the proposed contract; the length of the *27 proposed contract and the length and complexity of the challenged provision; the education and experience of the party; and whether the party’s review of the proposed contract was aided by an attorney].) For example, the declaration does not provide the cоntext in which plaintiffs were presented with and signed the Agreements, other than the means by which they could view and sign it (i.e. via the online portal or in hard copy). It does not set forth any discussions defendants may have had with the plaintiffs before they were presented with and signed the Agreements. The declaration also does not shed light on plaintiffs’ ability or inability to negotiate and understand the terms of the Agreements. What the declaration does state, however, is that when using the online portal, employees were “afforded time (on the clock) to sign documents.” It also states “there is no limit on the amount of time an individual may take to review and either . . . reject [or accept the Agreement.]”
In view of the above, Meyer’s declaration does not contain any facts or
raise any reasonable inferences that plaintiffs were “forced to sign” the
Agreements, or that they lacked “a meaningful opportunity to negotiate [the]
terms,” or that the Agreements were “presented on a take-it or leave-it basis.”
“Absent any evidence, we cannot just assume there was procedural
unconscionability.” (
Performance Team Freight Systems, Inc. v. Aleman
(2015)
But even assuming plaintiffs have shown procedural unconscionability, they have failed to show substantive unconscionability. Plaintiffs argued below that “the arbitration agreement[s] [are] substantively unconscionable on [their] face because [they] contain[ ] an illegal provision that seeks to force PAGA claims into arbitration.” However, as defendants note, this argument is foreclosed by , which upheld the validity of agreements to *28 arbitrate PAGA claims, except to the extent they contained a wholesale waiver to bring a PAGA action in any forum. (See Viking River , supra , 142 S.Ct. at pp. 1924–1925.)
Accordingly, we conclude as a matter of law that plaintiffs did not meet their burden in establishing the Agreements are unconscionable.
Standing to Pursue Non-Individual Claims Having concluded there are valid agreements to arbitrate plaintiffs’ individual PAGA claims, the question, then, is what to do with plaintiffs’ non- individual PAGA claims.
In
Viking River
, the United States Supreme Court suggested that once
the plaintiff was required to arbitrate her individual PAGA claim, her non-
individual claim must be dismissed. (
Viking River
,
Defendants argue we should dismiss the non-individual claims for lack
of standing, as suggested in
Viking River
. Plaintiffs contend this court is not
bound to follow federal decisions interpreting state law, and under the rules
on PAGA standing established by the California Supreme Court in
Kim
, they
do not lose statutory standing to maintain their non-individual PAGA claims
in court. Plaintiffs prevail, as our Supreme Court has recently held in
Adolph
,
By way of brief background, since at least five published
*29
California Court of Appeal decisions have squarely addressed the issue of
whether a plaintiff continues to have standing under PAGA to litigate non-
individual claims after the individual claims are compelled to arbitration.
And all five reached the same conclusion: dismissal for lack of standing is
not required by California law. (
Nickson, supra,
90 Cal.App.5th at pp. 134–
135;
Seifu v. Lyft, Inc
. (2023)
As plaintiffs assert, California is not bound by the United States
Supreme Court’s interpretation of PAGA and its standing requirements.
(
Adolph
,
As noted, PAGA authorizes an “aggrieved employee” to recover civil
penalties for violations of the Labor Code “to be assessed and collected by the
Labor and Workforce Development Agency.” (§ 2699, subd. (a).) “For
purposes of [PAGA], ‘aggrieved employee’ means any person who was
employed by the alleged violator and against whom one оr more of the alleged
violations was committed.” (§ 2699, subd. (c).) “ ‘In construing a statute, our
task is to ascertain the intent of the Legislature so as to effectuate the
purpose of the enactment[,]’ [citation][,] . . . look[ing] first to ‘the words of the
statute, which are the most reliable indications of the Legislature’s intent.’
[Citation.]” (
Adolph
,
supra
,
Relying on its previous decision in
Kim
, the California Supreme Court
in
Adolph
reiterated the statutory requirements a plaintiff must satisfy to
have standing to recover civil penalties under PAGA. (See
Adolph
,
supra
,
“In Kim , we declined to impose additional requirements not found in the statute. ( Kim , supra , 9 Cal.5th at pp. 84–91.) The plaintiff, Kim, sued his employer, alleging individual claims for damages and a PAGA claim for civil penalties. ( Kim , at p. 82.) Kim settled and dismissed the individual claims for damages, proceeding only with the PAGA claim. ( Kim , at p. 82.) The employer conceded that Kim had PAGA standing when he filed suit but argued that Kim’s ‘standing somehow ended’ once his individual claims settled. ( Kim , at p. 84.) According to the employer, PAGA standing is premised on an unredressed injury, and because Kim received compensation for his injury, he no longеr had the status of an ‘aggrieved employee.’ ( Kim , at p. 84.)
“We rejected this argument, finding it inconsistent with the statutory language in several respects. ( Kim , 9 Cal.5th at pp. 83–86.) First, ‘[t]he Legislature defined PAGA standing in terms of violations . . . . Kim became an aggrieved employee, and had PAGA standing, when one or more Labor Code violations were committed against him,’ and ‘[s]ettlement did not nullify these violations. The remedy for a Labor Code violation, through settlement or other means, is distinct from the fact of the violation itself,’ and only the latter is required for PAGA standing. ( Kim , at p. 84.) Second, nothing in the text of the statute requires the plaintiff to have an unredressed injury; reading such a requirement into the statute would be ‘at odds with the statutory definition.’ ( Id. at p. 85.) Third, allowing post- violation events to strip an aggrieved employee of the ability to pursue a PAGA claim ‘would add an expiration element to the statutory definition of standing.’ ( Kim , at p. 85.)” ( Adolph , 14 Cal.5th at pp. 1120–1121.)
The court in
Adolph
also found instructive
Johnson v. Maxim
*32
Healthcare Services, Inc.
(2021)
As observed in
Adolph
, “
Kim
and
Johnson
make clear [that] a worker
becomes an ‘aggrieved employee’ with standing to litigate claims on behalf of
fellow employees upon sustaining a Labor Code violation committed by his or
her employer.” (
Adolph
,
supra
,
This interpretation, the court stated, also comports with the statute’s
legislative history and purpose, “ ‘which is “to ensure effective code
enforcement.” ’ [Citations.]” (
Adolph
,
supra
,
Turning to our case, we apply
Kim
and
Adolph
on the question of
PAGA standing and hold that plaintiffs here have established standing to
recover civil penalties under PAGA for Labor Code violations committed
against other employees. In the operative complaint, plaintiffs alleged they
were employed by defendants, that they suffered “one or more” Labor Code
violations on which their PAGA claim is based, and that they seek “to recover
civil penalties . . . on behalf of [themselves] . . . and other current and former
employees who worked for Defendants.” They are therefore “aggrieved
employee[s]” within the meaning of PAGA with standing to assert PAGA
claims on behalf of themselves and other employees. (See
Kim
,
supra
, 9
Cal.5th at pp. 84–85;
Adolph
,
Defendants’ arguments that plaintiffs lack standing to pursue the non- individual PAGA claims are unpersuasive. In their opening brief, defendants contend that “[n]othing in PAGA’s statutory text or legislative history suggests Plaintiffs can still be classified as ‘aggrieved emplоyees’ in a *34 separate action once their PAGA claims are sent to arbitration.” However, such an interpretation is at odds with that of our Supreme Court in Adolph and Kim . (See Adolph supra , 14 Cal.5th at pp. 1114, 1120–1123, 1128; Kim , , 9 Cal.5th at pp. 83–91.) Not surprisingly, defendants’ arguments on standing in their opening brief do not mention Kim .
Defendants finally confront
Kim
for the first time in their reply brief,
[6]
contending that it does not apply here. This is because, they argue,
Kim
“was
decided under a different legal landscape that could not address the issue
presently before this Court.” Without citation, defendants represent that
“
Kim
’s premise assumed that PAGA claims could not be sent to arbitration
under
Iskanian
, which has since been abrogated by
Viking River
. . . .”
Defendants mischaracterize
Kim
. Defendants perhaps may be relying on one
sentence in
Kim
’s summary of the case’s procedural history where it states
that the defendant acknowledged in its motion to compel “that the PAGA
claim could not be waived [citing
Iskanian
] or arbitrated under the parties’
agreement.” (
Kim
,
Moreover, any attempts to factually distinguish
Kim
are also
unavailing. To the extent defendants argue
Kim
applies only when a plaintiff
settles the underlying Labor Code claims, we disagree. The court in
Johnson
rejected a similar argument. After noting the plaintiff alleged she was an
“aggrieved employee” under PAGA, the court stated, “[t]he fact that [her]
individual claim may be time-barred does not nullify the allegеd Labor Code
violations nor strip [her] of her standing to pursue PAGA remedies.”
(
Johnson, supra,
Defendants also cite several authorities, but none supports its position.
For example, in
Amalgamated Transit Union, Local 1756, AFL-CIO v.
Superior Court
(2009)
Defendants also rely on
Bodine v. Superior Court
(1962) 209 Cal.App.2d
354, but that case is inapposite. There, the appellate court considered
whether the trial court erred by agreeing to empanel a jury in the second half
of a hearing on a probate petition for determining heirship, when the
executor of the estate and the heirs who initially appeared at the hearing
*36
previously stipulated to proceed without a jury. (
Id.
at pp. 356–359.) As
observed in
Gregg
, although
Bodine v. Superior Court
“noted severance of a
civil action results in two or more separate cases with distinct judgments,” it
did not “apply this principle in a manner to suggest, let alonе hold, that a
plaintiff loses standing to assert non-individual claims under PAGA once he
or she is compelled to arbitrate his or her individual claim.” (
Gregg
,
89 Cal.App.5th at pp. 805–806.) Indeed,
Adolph
explained that “[n]othing in
PAGA or any other relevant statute suggests that arbitrating individual
claims effects a severance. When a case includes arbitrable and
nonarbitrable issues, the issues may be adjudicated in different forums while
remaining part of the same action.” (
Adolph
,
In short, we are compelled to follow Adolph and Kim and hold that plaintiffs have standing to litigate their non-individual PAGA claims in court.
This leads us to the parties’ requests for a stay of the non-individual PAGA claims. Plaintiffs argue that if their non-individual PAGA claims are not dismissed, they should be stayed pending our Supreme Court’s decision in Adolph , which had not yet been issued at the time of the parties’ briefing. However, because Adolph has since been decided, plaintiffs’ stay request is moot.
In their reply brief, defendants agree that the non-individual PAGA
claims should be stayed, but argue the stay should be imposed until the
arbitration of the individual claims is completed. As support, defendants cite
both the FAA and the California Arbitration Act, which provide that where a
court orders arbitration on an issue in any proceeding before the court, the
court upon application or motion “shall” stay proceedings pending completion
of the arbitration. (9 U.S.C. § 3; Code Civ. Proc. § 1281.4.) Defendants
additionally cite to Cаlifornia case law holding that when “issues subject to
*37
litigation under . . . PAGA might overlap those that are the subject to
arbitration of . . . individual claims, the trial court must order an appropriate
stay of trial court proceedings.” (
Franco v. Arakelian Enterprises, Inc.
(2015)
Here, the trial court denied defendants’ stay request, which was based
on different reasons than the ones they now raise. Specifically, defendants
requested a stay until then pending was decided, but the trial
court denied the request because it declined to speculate on when and how
Viking River
would be decided. Because the court did not have an
opportunity to rule on the stay request based on the reasons now raised by
defendants, we remand the matter for the trial court to determine whether a
stay of plaintiffs’ non-individual PAGA claims would be appropriate under
the circumstances. (Cf.
Seifu
,
Requests to Dismiss Appeal and Impose Monetary Sanctions Finally, we consider—and deny—plaintiffs’ requests that we dismiss the appeal and impose $20,250 in monetary sanctions against defendants for filing a frivolous appeal.
At the threshold, both requests are procedurally defective because they
were not filed in separate motions in this court, as required by the Rules of
Court. (See Cal. Rules of Court, rule 8.54(a)(1) [“a party wanting to make a
motion in a reviewing court must serve and file a written motion”];
*38
id.
, rule 8.276(a) [requiring a party seeking appellate sanctions to file and
serve a motion for sanctions]; see also Eisenberg, et al., Cal. Practice Guide:
Civil Appeals and Writs (The Rutter Group 2022) ¶¶ 5:37a, 5:44, 5:228.3,
11:126.) Plaintiffs’ non-compliance is grounds to deny their requests. (See
Saltonstall v. City of Sacramento
(2014)
Procedural defects aside, plaintiffs’ substantive arguments fail. With respect to the dismissal request, plaintiffs cite case law setting forth the principle that appellate courts generally should not resolve factual disputes in the first instance. However, plaintiffs fail to identify any factual dispute that we must purportedly resolve in this appeal. In any event, as indicated above, the issues presented on appeal do not require us to resolve contested facts.
Plaintiffs also argue that the appeal asks us “to sit in the shoes of a trial court and conduct a first-pass review of the law” and that “no error was made by the trial court in applying pre- Viking River law.” Plaintiffs do not explain, and we fail to see, how an appeal must be dismissed simply because an appellate court is faced with a change in the law that has intervened after the underlying trial court decision.
Turning to plaintiffs’ request for sanctions, they argue we should issue
monetary sanctions against defendants for filing a frivolous appeal. (See
Code Civ. Proc., § 907; Cal. Rules of Court, rule 8.276(a).) An appeal is
frivolous when any reasonable attorney would agree that the appeal is totally
and completely without merit. (
In re Marriage of Flaherty
(1982) 31 Cal.3d
637, 649.) Plaintiffs argue the appeal is frivolous because defendants did not
wait until after the United States Supreme Court issued its decision in
before filing the underlying motion; refused to dismiss this
*39
appeal; and filed a renewed motion to compel arbitration while the appeal
was pending. We disagree. Because the law on arbitration of PAGA claims is
evolving, defendants were presented with somewhat of a moving target in
their efforts to obtain their requested relief. Given this, the manner in which
defendants proceeded in both the trial court and in this court was not
completely meritless. (See
Piplack
,
The requests to dismiss the appeal and impose monetary sanctions are denied.
DISPOSITION
The order denying defendants’ motion to compel arbitration is reversed in part and affirmed in part. The order is reversed as to plaintiffs’ individual PAGA claims. The order is affirmed as to plaintiffs’ non-individual PAGA claims. The matter is remanded with directions to the trial court to enter a new order requiring plaintiffs to arbitrate their individual PAGA claims and for further proceedings regarding plaintiffs’ non-individual PAGA claims consistent with this opinion. The parties are to bear their own costs on appeal.
_________________________ Richman, Acting P. J.
We concur:
_________________________
Miller, J.
_________________________
Markman, J. *
Barrera v. Apple Amerivan Group LLC (A165445)
*Superior Court of Alameda County, Judge Michael Markman, sitting as assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Trial Court: Marin County Superior Court Trial Judge: Honorable Stephen Freccero; Attorney for Plaintiffs and Capstone Law APC, Ryan H. Wu, Respondents, Mario Barrera, Tyler Curtis Anderson; Francisco Varguez:
Attorney for Defendants and Reed Smith LLP, Kasey J. Curtis, Appellants, Apple American Mara D. Curtis, Brittany M.
Group LLC, et al.: Hernandez, Tanner Hendershot.
Notes
[1] Undesignated statutory references are to the Labor Code.
[2] Plaintiffs alleged: failure to pay overtime wages (§§ 510, 1198); fаilure to pay minimum wages (§§ 1182.12, 1194, 1197, 1198); failure to provide meal and rest periods (§§ 226.7, 512, subd. (a), 516, 1198); failure to pay timely wages (§ 204); failure to provide accurate and complete wage statements (§§ 226, subd. (a), 1198); failure to maintain payroll records (§ 1174, subd. (d)); failure to pay all earned wages during employment and upon termination (§§ 201 to 204); withholding tips and gratuities (§ 351); failure to provide suitable seating (§ 1198); failure to pay reporting time pay (§ 1198); failure to reimburse employees for work-related expenses (§ 2802); and failure to provide written notice of material information (§ 2810.5, subd. (a)(1)(A) to (C)). Plaintiffs alleged that these failures also violated “the applicable Industrial Welfare Commission Wage Order.” They did not specify the applicable wage order(s) except with respect to a few of the alleged violations.
[3] We also note that neither party raised in their moving and opposing
papers or their appellate briefs the delegation clause in the Agreements,
which state “the arbitrator, and not any . . . court, shall have the exclusive
authority to resolve any dispute relating to the interpretation, arbitrability,
applicability, enforceability or formation of this agreement.” Instead, the
parties proceeded as if the trial court would decide those issues. Thus, even if
we assume the parties did agree to delegate certain issues to the arbitrator,
they have forfeited that contractual right and have submitted the matter to
the court. (
Williams v. West Coast Hospitals, Inc.
(2022) 86 Cal.App.5th
1054, 1071, citing
In re Checking Account Overdraft Litigation MDL No. 2036
(11th Cir. 2012)
[4] Plaintiffs argue “the appeal is subject to a heightened standard of
review” because “the parties advanced conflicting views of the facts before the
trial court. . . .” But plaintiffs do not point us to any specific facts they claim
are conflicting. Nor do they specify the “heightened standard of review” they
ask us to apply. In any event, our review of the record and the parties’ briefs
reveals that the issues presented on appeal do not require resolving any
conflicting evidence. Therefore, de novo review applies. (
Pinnacle
,
[5] As explained in
Galarsa v. Dolgen California, LLC
(2023)
[6]
Kim
is controlling law in California on the issue of PAGA standing
and is directly adverse to defendants’ arguments. At least one court has
found it inappropriate for an appellant to raise controlling authority for the
first time in a reply brief. (See
Brawerman v. Loeb & Loeb LLP
(2022)