52 F. Supp. 3d 1070 | E.D. Cal. | 2014
ORDER
This matter is before the Court pursuant to Defendant Hobby Lobby Stores, Ine.’s (“Defendant”) Motion to Dismiss Plaintiffs Complaint or, in the alternative, Compel Arbitration and Stay all Proceedings. (Mot. to Dismiss, ECF No. 6.) Plaintiff Maribel Ortiz (“Plaintiff’) has filed an opposition to Defendant’s motion. (PL’s Opp’n to Def.’s Mot. to Dismiss, ECF No. 14.) The Court has carefully considered the arguments raised in Defendant’s Motion and Reply as well as Plaintiffs Opposition. For the reasons set forth below, the Court DISMISSES without prejudice Plaintiffs claims so that they may be addressed in arbitration, as required by the parties’ Mutual Arbitration Agreement (“Arbitration Agreement”).
I. BACKGROUND
Plaintiff Ortiz brings this putative class action against her previous employer Defendant Hobby Lobby Stores, Inc., on behalf of herself, all others similarly situated, and the general public. (Compl., ECF No. 1 at ¶ 1.) Plaintiff worked as a retail employee for Defendant from November 2010 to January 2013. (ECF No. 14 at 6.) Plaintiff alleges that Defendant has failed to pay her and all other similarly situated individuals for all vested vacation pay,failed to pay at least minimum wages for all hours worked, failed to provide accurate written wage statements, and failed to timely pay them all of the owed final wages following separation of employment. (ECF No. 1 at ¶ 1.) Based on violations of the Fair Labor Standards Act (“FLSA”), the Labor Code, and the Business and Professions Code, Plaintiff seeks recovery as part of a class action under Rule 23 of the Federal Rules of Civil Procedure. (ECF No. 1.) Additionally, Plaintiff seeks to collect civil penalties as part of a representative action for Defendant’s violations of the California Private Attorney General Act (“PAGA”). (ECF No. 1 at ¶ 1.)
Defendant contends that Plaintiffs Complaint fails to state a claim upon which relief can be granted because all of Plaintiffs claims are subject to arbitration under the parties’ Arbitration Agreement. (ECF No. 6 at 16-17.) Thus, ’ Defendant moves this Court to dismiss Plaintiffs complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 6 at 16-17.) Alternatively, Defendant requests the Court to issue an order compelling Plaintiff to submit her claims to arbitration on an individual basis as well as requests a stay of all proceedings pending resolution of the arbitration, pursuant to 9 U.S.C. §§ 3, 4 (2006). (ECF No. 6 at 16-17.)
II. STANDARD OF LAW
“[T]he federal law of arbitrability under the Federal Arbitration Act (“FAA”) governs the allocation of authority between courts and arbitrators.” Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir.2008). There is an “emphatic federal policy in favor of arbitral dispute resolution.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 631, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). As such, “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Id. at 626, 105 S.Ct. 3346 (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr.
Generally, in deciding whether a dispute is subject to an arbitration agreement, the Court must determine: “(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.2000). As such, the Court’s role “is limited to determining arbitrability and enforcing agreements to arbitrate, leaving the merits of the claim and any defenses to the arbitrator.” Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 479 (9th Cir.1991).
“In determining the existence of an agreement to arbitrate, the district court looks to ‘general state-law principles of contract interpretation, while giving due regard to the federal policy in favor of arbitration.’ ” Botorff v. Amerco, No. 2:12-cv-01286, 2012 WL 6628952, at *3 (E.D.Cal. Dec. 19, 2012) (citing Wagner v. Stratton, 83 F.3d 1046, 1049 (9th Cir.1996)). An arbitration agreement may only “be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” AT & T Mobility LLC v. Concepcion, — U.S. -, 131 S.Ct. 1740, 1748, 179 L.Ed.2d 742 (2011) (quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996)). Therefore, courts may not apply traditional contractual defenses like duress and unconscionability, in a broader or more stringent manner to invalidate arbitration agreements and thereby undermine FAA’s purpose to “ensur[e] that private arbitration agreements are enforced according to their terms.” Id. at 1748 (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)).
If a court “... determines that an arbitration clause is enforceable, it has the discretion to either stay the case pending arbitration, or to dismiss the case if all of the alleged claims are subject to arbitration.” Delgadillo v. James McKaone Enters., Inc., No. 1:12-cv-1149, 2012 WL 4027019, at *3 (E.D.Cal. Sept. 12, 2012). The plain language of the FAA provides that the Court should “stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement....” 9 U.S.C. § 3. However, “9 U.S.C. § 3 gives a court authority, upon application by one of the parties, to grant a stay pending arbitration, but does not preclude summary judgment when all claims are barred by an arbitration clause. Thus, the provision does not limit the court’s authority to grant dismissal in the case.” Sparling v. Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir.1988).
III. ANALYSIS
Through its motion, Defendant seeks to dismiss Plaintiffs Complaint for failure to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 6 at 16-17.) •Alternatively, Defendant requests the Court to issue an order compelling Plaintiff to submit her claims to arbitration on an individual basis and to stay all proceedings pending resolution of the arbitration, pursuant to 9 U.S.C. §§ 3, 4. (ECF No. 6 at 16-17.)
A. Existence of a Valid Arbitration Agreement
In deciding whether to compel arbitration, the Court must determine: “(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.2000). In making this determination, the Court “should apply ordinary state-law principles that govern the formation of contracts.” Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir.2003). Under California law, a valid contract requires: (1) parties capable of contracting; (2) mutual consent; (3) a lawful object; and (4) sufficient cause or consideration. Cal. Civ.Code § 1550. An arbitration agreement cannot be invalidated for unconscionability absent a showing of both procedural and substantive unconscionability. Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83, 114, 99 Cal.Rptr.2d 745, 6 P.3d 669 (2000). The procedural element focuses on oppression or surprise due to unequal bargaining power; the substantive element focuses on overly harsh or one-sided results. Kilgore v. KeyBank, Nat’lAss’n, 673 F.3d 947, 963 (9th Cir.2012) (quoting Armendariz, 24 Cal.4th at 89, 99 Cal.Rptr.2d 745, 6 P.3d 669). The party challenging the arbitration agreement bears the burden of establishing unconscionability. Pinnacle Museum Tower Ass’n v. Pinnacle Mkt. Dev. (US), LLC, 55 Cal.4th 223, 247, 145 Cal.Rptr.3d 514, 282 P.3d 1217 (2012).
Plaintiff argues that Defendant failed to prove the existence of the Arbitration Agreement because Defendant submitted the Arbitration Agreement without any foundation or authentication. (ECF No. 14 at 5-7.) Further, Plaintiff claims that the Arbitration Agreement is unenforceable because it is procedurally and substantively unconscionable under California and Federal law. (ECF No. 14 at 7-24.) The Court finds the Arbitration Agreement enforceable for the following reasons.
1. Authentication of the Arbitration Agreement
Plaintiff first argues that Defendant submitted the Arbitration Agreement without any foundation or proper authentication. (ECF No. 14 at 5-7.) “The question of whether the authenticity of a document has been sufficiently proved prima facie to justify its admission in evidence rests in the sound discretion of the trial judge.” Arena v. United States, 226 F.2d
Defendant attached the Arbitration Agreement as an exhibit to Martin Mumm’s Declaration in support of Defendant’s Motion to Dismiss. (Decl. of Martin Mumm in Supp. of Def.’s Mot. to Dismiss, ECF No. 9; ECF No. 9-1.) Mr. Mumm is a district manager for Defendant. (ECF No. 9 at 2.) His Declaration is based on his personal knowledge and his review of Plaintiffs employment files. (ECF No. 9 at 2.) As a district manager, Mr. Mumm is familiar with Defendant’s hiring and orientation process, which involves the Defendant presenting the Arbitration Agreement to the prospective employees and obtaining their signature. (ECF No. 15 at 3). Mr. Mumm declared under penalty of perjury that the information provided in his Declaration is true and correct. (ECF No. 9 at 2.) Furthermore, the Arbitration Agreement, dated November 11, 2010, has been signed by Plaintiff. (ECF No. 9-1 at 3.)
Based on Mr. Mumm’s Declaration and the signed Arbitration Agreement, the Court finds that Defendant provided sufficient evidence to support a finding that the item is what Defendant claims it is—the Arbitration Agreement between Defendant and Plaintiff.
2. Procedural Unconscionability
Plaintiff maintains that the Arbitration Agreement is procedurálly unconscionable for the following reasons: (1) the Arbitration Agreement was forced upon Plaintiff on a take-it-or-leave-it basis, without permitting Plaintiff any opportunity to negotiate its terms; (2) Defendant failed to show that the Arbitration Agreement was presented individually; (3) the Arbitration Agreement fails to provide an opportunity for judicial review; and (4) the Arbitration Agreement did not attach the rules of arbitration. (ECF No. 14 at 9-12.)
California courts apply a “sliding scale” analysis in making determinations of unconscionability: “the 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.” Kilgore, 673 F.3d at 963 (quoting Armendariz, 24 Cal.4th at 89, 99 Cal.Rptr.2d 745, 6 P.3d 669). “No matter how heavily one side of the scale tips, however, both procedural and substantive unconscionability are required for a court to hold an arbitration agreement unenforceable.” Id. (quoting Armendariz, 24 Cal.4th at 89, 99 Cal.Rptr.2d 745, 6 P.3d 669). The Court must apply this balancing test to determine if the Arbitration Agreement is unenforceable.
a. Contract of Adhesion
Plaintiff claims the Arbitration Agreement was forced upon Plaintiff on a take-it-or-leave-it basis, without permitting Plaintiff any opportunity to negotiate its terms. (ECF No. 14 at 5, 9-10.) Defendant replies that the mere fact that the Arbitration Agreement was presented as a condition of employment does not establish surprise or oppression that rises to the level of procedural unconscionability. (ECF No. 15 at 5.)
Under California law, “it is procedurálly unconscionable to require employees, as a condition of employment, to waive their right to seek redress of grievances in a judicial forum.” Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1172 (9th Cir.2003) (citing Armendariz, 24 Cal.4th at 114-15, 99 Cal.Rptr.2d 745, 6 P.3d 669).
Based on California law, the Court finds that the Arbitration Agreement is procedurally unconscionable because it is part of an adhesion contract. However, this level of procedural unconscionability is only minimal, so the Court must consider Plaintiffs supplemental arguments to determine if the Arbitration Agreement is unenforceable.
b. Presentation of the Arbitration Agreement
Plaintiff claims that Defendant failed to demonstrate that the Arbitration Agreement was presented individually as opposed to buried in several other documents. (ECF No. 14 at 10-11.) Additionally, Plaintiff claims she does not recall reading or receiving the Arbitration Agreement. (ECF No. 14 at 11.) Defendant replies that even if the Arbitration Agreement was presented along with other documents, it does not establish procedural unconscionability. (ECF No. 15 at 5.)`
The Arbitration Agreement at issue here is clearly labeled, in bold font, “Mutual Arbitration Agreement.” (ECF No. 9-1.) The Arbitration Agreement is its own two-page document and has its own signature lines. (ECF No. 9-1.) There are no facts showing the document was buried amongst other documents. Distinguishing from the cases that Plaintiff relies on, the Court considers Kilgore, where the Ninth Circuit determined that the arbitration provision in that case was “not buried in fine print ..., but was instead in its own section, clearly labeled,” so it was not procedurally unconscionable. 673 F.3d at 957. Similarly, this Court finds that the Arbitration Agreement was properly presented.
Moreover, Plaintiffs assertion that she does not recall receiving the Arbitration Agreement is inconsequential. “When a party signs a document agreeing that he/ she has read the arbitration agreement, the burden shifts to them to demonstrate they did not agree to arbitrate.” Jackson v. TIC—The Indus. Co., No. 1:13-cv-02088, 2014 WL 1232215, at *5 (E.D.Cal. Mar. 24, 2014) (citing Reilly v. WM Fin. Servs., Inc., 95 Fed.Appx. 851, 852-53 (9th Cir.2004)). Plaintiff has not met her burden in demonstrating she did not agree to arbitrate.
For these reasons, this Court holds that the presentation of the Arbitration Agreement does not render the Arbitration Agreement procedurally unconscionable.
c. No Opportunity for Judicial Review
Plaintiff claims that the Arbitration Agreement is procedurally unconscionable because it does not provide an opportunity for judicial review. (ECF No. 14 at 11.) The Arbitration Agreement provides, “The parties agree that the decision of the arbitrator shall be final and binding.” (ECF No. 9-1 at 2.)
“[A]n arbitration agreement does not have to explicitly provide for judicial review for judicial review to be available.” Hwang v. J.P. Morgan Chase Bank, N.A., No. CV 11-10782, 2012 WL 3862338, at *3 (C.D.Cal. Aug. 16, 2012) (citing Little v. Auto Stiegler, Inc., 29 Cal.4th 1064, 1075 n.
Accordingly, the Court finds that the Arbitration Agreement’s lack of an express provision permitting judicial review does not establish procedural unconscionability.
d. Failure to Attach Arbitration Rules
Plaintiff claims the rules of arbitration were not attached to the Arbitration Agreement and this renders the Arbitration Agreement procedurally unconscionable. (ECF No. 14 at 11-12.) Defendant replies that as a matter of California contract law, parties are free to incorporate arbitration rules by reference so long as the rules are clearly identified and accessible. (ECF No. 15 at 6.) Defendant is correct.
“Under California law, parties to an agreement can incorporate the terms of another document into the agreement by reference.” Fardig, 2014 WL 2810025, at *4 (citing Troyk v. Farmers Grp., Inc., 171 Cal.App.4th 1305, 1331, 90 Cal.Rptr.3d 589 (2009); Wolschlager v. Fid. Nat’l Title Ins. Co., 111 Cal.App.4th 784, 790, 4 Cal.Rptr.3d 179 (2003)). However, “the reference must be clear and unequivocal, the reference must be called to the attention of the other party and he must consent thereto, and the terms of the incorporated document must be known or easily available to the contracting parties.” Collins v. Diamond Pet Food Processors of Cal., LLC, No. 2:13-cv-00113, 2013 WL 1791926, at *5 (E.D.Cal. April 26, 2013) (quoting Shaw v. Regents of Univ. of Cal., 58 Cal.App.4th 44, 54, 67 Cal.Rptr.2d 850 (1997) (internal quotation marks omitted)).
The Arbitration Agreement provides, “arbitration shall be conducted pursuant to the American Arbitration Association’s National Rules for Resolution of Employment Disputes or the Institute for Christian Conciliation’s Rules of Procedure for Christian Conciliation....” (ECF No. 9-1 at 2.) As correctly noted by Defendant, the rules of both arbitral forums are easily accessible on the organizations’ websites.
Based on the Arbitration Agreement’s clear and unambiguous incorporation of the arbitration rules and the accessibility of those rules, the Court concludes that the failure to attach the ruies does not render the Arbitration Agreement procedurally unconscionable.
3. Substantive Unconscionability
Plaintiff maintains that the Arbitration Agreement is substantively unconscionable because it: (1) is unconscionable under Armendariz and Gentry; (2) includes only employment-related disputes and exempts all other disputes that are commonly brought by employers; (3) denies Plaintiff the right to file suit within the applicable statute of limitations; (4) prohibits agreements affecting concerted activity by workers; and (5) contains a waiver provision that “bars Plaintiff from proceeding on a representative, collective or classwide basis.” (ECF No. 14 at 9-12.)
a. Substantive Unconscionability under Gentry
Relying primarily on Gentry v. Superior Court, 42 Cal.4th 443, 64 Cal.
In Gentry, the court found that class action waivers in employment contracts are unenforceable when “the prohibition of classwide relief would undermine the vindication of the employees’ unwaivable statutory rights .... ” 42 Cal.4th at 450, 64 Cal.Rptr.3d 773, 165 P.3d 556. However, numerous federal courts have found that Gentry has been overruled by the United States Supreme Court’s decision in Concepcion. Fardig, 2014 WL 2810025, at *5. (citing Morvant v. P.F. Chang’s China Bistro, Inc., 870 F.Supp.2d 831, 840-41 (N.D.Cal.2012); Velazquez v. Sears, Roebuck & Co., No. 13-cv-680, 2013 WL 4525581, at *7-8 (S.D.Cal. Aug. 26, 2013); Cunningham v. Leslie’s Poolmart, Inc., No. CV 13-2122, 2013 WL 3233211, at *4-5 (C.D.Cal. June 25, 2013)). Concepcion prohibits states from establishing laws that condition the enforceability of arbitration provisions on the availability of classwide relief because such rules interfere with the fundamental attributes of the FAA, which “is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings.” AT & T Mobility LLC v. Concepcion, — U.S.-, 131 S.Ct. 1740, 1748, 179 L.Ed.2d 742 (2011).
Based on Concepcion and the FAA, the Court finds that the class waiver provision does not render the Arbitration Agreement substantively unconscionable.
b. Claims Subject to Arbitration
Plaintiff also claims the Arbitration Agreement is unconscionable because it only includes employment disputes, exempting all other claims commonly brought by employers from arbitration. (ECF No. 14 at 12.) Defendant replies that Plaintiffs argument is flawed. (ECF No. 15 at 7.)
An arbitration agreement that “compels arbitration of the claims employees are most likely to bring against [the employer] but exempts from arbitration the claims [the employer] is most likely to bring against its employees” is substantively unconscionable. Jackson, 2014 WL 1232215, at *5 (citing Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 778, 785 (9th Cir.2002) (citations omitted)). For example, in Ferguson v. Countrywide Credit Indus., Inc., the Ninth Circuit found that the arbitration agreement was substantively unconscionable because it excluded claims “for worker’s compensation or unemployment compensation benefits,
c. Statute of Limitations
Plaintiff claims the Arbitration Agreement denies employees the right to file suit within the applicable statute of limitations by requiring employees to file their claims “no later than 10 days after [they become] aware of the dispute.” (ECF No. 14 at 5, 12-13.) Defendant replies that the statute of limitations provision does not affect Plaintiffs ability to vindicate her statutory rights because the statute of limitations provision only applies in instances where no statute of limitations is been provided by statute. (ECF No. 15 at 8.)
The Arbitration Agreement’s statute of limitations provision only applies if there is no limitations period provided by the applicable statute. (ECF No. 9-1 at 2.) All of Plaintiffs claims have a statute of limitations set by statute.
d. Agreements Affecting Concerted Activity by Workers
Plaintiff claims that the Arbitration Agreement violates the Norris La Guardia Act (“NLGA”) and the National Labor Relations Act (“NLRA”) because it contains a class action waiver provision that effectively prohibits workers from exercising their right to engage in concerted activity. (ECF No. 14 at 15-24.) Plaintiff bases her argument primarily on the National Labor Relations Board’s (“NLRB”) decision in D.R. Horton, Inc. & Cuda, 357 NLRB No. 184 (Jan. 3, 2012) (“Horton I ”), where the NLRB held that the NLRA prohibits contracts that compel employees to waive their right to participate in class proceedings to resolve wage claims. (ECF No. 14 at 15-24.) Defendant replies that the D.R. Horton decision cannot be given primacy post -Concepcion. (ECF No. 15 at 10-11.)
In Horton I, the NLRB held that an agreement compelling employees to waive their right to engage in concerted activity was an unfair labor practice, and concluded that the FAA did not preclude this rule
Based on federal law, the Court finds that neither the NLGA nor the NLRA render the Arbitration Agreement substantively unconscionable.
e. PAGA Action Waivers
Plaintiff first argues the Arbitration Agreement’s waiver provision does not encompass her right to bring a representative PAGA claim. Plaintiff interprets the Arbitration Agreement’s waiver provision to bar actions only including more than one named plaintiff, and therefore argues her representative PAGA action does not fall within the scope of the waiver provision. (ECF No. 14 at 13-14.) Defendant replies that the waiver provision includes Plaintiffs representative PAGA claim. (ECF No. 6 at 14-15; ECF No. 15 at 9.) The Court agrees with Defendant and finds that the waiver provision is sufficiently broad to encompass representative PAGA claims. Fardig, 2014 WL 2810025, at *6 n. 8 (“[T]he Agreement’s waiver of bringing claims ‘as part of a class action, collective action, or otherwise jointly with any third party’ is sufficiently broad to encompass representative PAGA claims.”).
In the alternative, Plaintiff argues that, if the PAGA claim is covered by the Arbitration Agreement, the resulting waiver of her PAGA claim is unconscionable. (ECF No. 14 at 14-15.)
Plaintiff claims that representative PAGA action waivers are substantively unconscionable and therefore unenforceable. (ECF No. 14 at 14-15.) Defendant replies that PAGA action waivers are valid and enforceable. (ECF No. 15 at 9-10.) The California Supreme Court has recently held that such waivers are unenforceable because they violate public policy. Most federal district courts within the state, however, hold that a waiver of PAGA claims is enforceable because the FAA prohibits a conclusion holding otherwise.
On June 23, 2014, the California Supreme Court held that an employment agreement containing a PAGA action waiver is unenforceable. Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348, 384, 173 Cal.Rptr.3d 289, 327 P.3d 129 (2014) (“Where ... an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.”) The Court reasoned that it is against public policy for an employment agreement to deprive employees of the option to pursue a PAGA claim before the dispute ever arises. Id. at 382-84, 173 Cal.Rptr.3d 289, 327 P.3d 129. The Court explained that a “rule against PAGA waivers does not frustrate the FAA’s objectives because ... the FAA aims to ensure an efficient forum for the resolution of private disputes, whereas a PAGA action is a dispute between an employer and the state Labor and Workforce Development Agency.” Id.
There is only one district court that has addressed the California Supreme Court’s Iskanian decision. Ten days before the California Supreme Court decided Iskani-an, the Central District Court addressed the Arbitration Agreement at issue in this case and concluded that representative PAGA action waivers are enforceable “because concluding otherwise would undermine the FAA’s policy of favoring the arbitration of claims.” Fardig, 2014 WL 2810025, at *6. After the Iskanian court issued its decision on June 23, 2014, the plaintiffs in Fardig asked the Central District Court to reconsider its order concluding the Arbitration Agreement was not substantively unconscionable for containing a waiver of the right to bring collective
Consistent with the Fardig holding, a majority of District Courts have found representative PAGA action waivers enforceable under the FAA and the United States Supreme Court’s ruling in Concepcion. See generally, Luchini v. Carmax, Inc., No. CV F 12-0417, 2012 WL 2995483, at *14 (E.D.Cal. July 23, 2012) (viewing “PAGA as an obstacle to enforce of arbitration agreements governed by the FAA,” and holding that “the arbitration agreement, including its class waiver, must be enforced according to its terms, despite the attributes of PAGA”);
Departing from the majority of the district courts, the court in Cunningham v. Leslie’s Poolmart, Inc. found that an employee cannot waive his right to pursue a representative PAGA claim in an arbitration agreement, and if he does so, the PAGA action waiver is unenforceable. No. CV 13-2122, 2013 WL 3233211, at *8 (C.D.Cal. June 25, 2013) (citing Arias v. Superior Court, 46 Cal.4th 969, 95 Cal.Rptr.3d 588, 209 P.3d 923 (2009)). The court relied on the California Appellate Court’s decision, Franco v. Athens Disposal Co., Inc., where the court ruled that a contract containing a representative PAGA action waiver was unenforceable as contrary to public policy. Id. at *8-10 (citing 171 Cal.App.4th 1277, 90 Cal.Rptr.3d 539 (2d Dist.2009)). The court noted, “If plaintiff is barred from pursuing a representative action under PAGA, he is wholly forbidden from asserting his right to pursue a twenty-five percent portion of the civil penalties recoverable by the government for labor code violations allegedly committed by defendant.” Id. That result would not be permissible under California law or the FAA. Id. According to Cunningham, the FAA does not preempt states from creating a rule that prohibits representative PAGA action waivers. Id. The court reasoned:
Under Concepcion, the FAA is focused on preserving the procedural integrity of arbitration by preventing states from imposing costly, complex, and time consuming formalities upon the arbitration process. The FAA does not, however, place a categorical limit on a state’s power to use private enforcement mechanisms to accomplish public policy goals above and beyond the resolution of individual claims. Consequently, although the FAA preempts state law imposing the presence of certain procedures in the arbitration, the FAA does not preempt state laws ensuring that a plaintiff may assert substantive rights in arbitration.
Id.
This Court recognizes the reasoning in Cunningham, and agrees that, un
Therefore, the Arbitration Agreement is not substantively unconscionable for containing a representative PAGA action waiver.
B. Whether the Arbitration Agreement Encompasses the Disputed Issues
Because the Court has found that the Arbitration Agreement is valid and enforceable, the Court must determine “whether the agreement encompasses the dispute[s] at issue.” Chiron, 207 F.3d at 1130. In relevant part, the Arbitration Agreement requires Defendant and Plaintiff to arbitrate all employment-related disputes. Additionally, the Arbitration Agreement prohibits employees from bringing any claim as part of a class action, collective action, or a joint third party action. (ECF No. 9-1 at 2.)
Plaintiff brings six employment-related disputes as part of a class action and one employment-related dispute as part of a representative action. (ECF No. 1.) Consequently, all of Plaintiffs claims fall within the scope of the Arbitration Agreement. Notably, Plaintiffs claims also fall within the scope of the Arbitration Agreement’s waiver provision and therefore Plaintiff may be prohibited from bringing those claims in court or in arbitration. As such, the Court will address whether Plaintiff can proceed with her claims in arbitration pursuant to the Arbitration Agreement.
1. Class Action Claims
The Arbitration Agreement’s waiver provision prohibits Plaintiff from proceeding on a class basis. As discussed above, arbitration agreements containing class action waivers are valid and enforceable. See generally Concepcion, 131 S.Ct. 1740. Therefore, Plaintiff must pursue her claims in arbitration on an individual basis, if at all. The FLSA permits Plaintiff to bring her first cause of action as an individual action. The Labor Code permits Plaintiff to bring her second, third, fourth, and fifth causes of actions as individual actions. The Business and Professions Code permits Plaintiff to bring her sixth cause of action as an individual action. Therefore, Plaintiff must pursue her first six causes of action in arbitration on
2. Representative PAGA Claim
The Arbitration Agreement’s waiver provision prohibits Plaintiff from pursuing her representative PAGA claim in arbitration. See Section II.A.3.e., supra. Accordingly, the Court must determine whether Plaintiff can bring her PAGA action in arbitration on an individual basis. California courts indicate that PAGA claims may not be brought on an individual basis. California federal district courts disagree on the issue.
“In interpreting state law, federal courts are bound by the pronouncements of the state’s highest court. If the particular issue has not been decided, federal courts must predict how the state’s highest court would resolve it.” Hemmings v. Tidyman’s Inc., 285 F.3d 1174, 1203 (9th Cir.2002) (internal citations omitted). Although the California Supreme Court has not directly addressed this issue, state courts have generally held that PAGA actions cannot be brought on an individual basis. The California Supreme Court explained, “In a ‘representative action,’ the plaintiff seeks recovery on behalf of other persons. There are two forms of representative actions: those that are brought as class actions and those that are not.” Arias v. Superior Court, 46 Cal.4th 969, 977 n. 2, 95 Cal.Rptr.3d 588, 209 P.3d 923 (2009). Relying on Arias, a California Court of Appeal clarified that a PAGA claim is not an individual claim because “[a] plaintiff asserting a PAGA claim may not bring the claim simply on his or her own behalf but must bring it as a representative action and include ‘other current or former employees.’ ” Reyes v. Macy’s, Inc., 202 Cal.App.4th 1119, 1123, 135 Cal.Rptr.3d 832 (1st Dist.2011). Therefore, the court explained, “The PAGA statute does not enable a single aggrieved employee to litigate his or her claims, but requires an aggrieved employee ‘on behalf of herself or himself and other current or former employees’ to enforce violations of the Labor Code by their employers.” Id. at 1123-24, 135 Cal.Rptr.3d 832 (emphasis in original).
In Iskanian, its most recent decision regarding PAGA, the California Supreme Court does not explicitly state whether PAGA claims may exist on an individual basis. However, the Court indicated that only representative PAGA actions fulfill the purpose of the statute. 59 Cal.4th at 384, 173 Cal.Rptr.3d 289, 327 P.3d 129. The Court held, “whether or not an individual claim is permissible under the PAGA ... [t]hat plaintiff and other employees might be able to bring individual claims for Labor Code violations in separate arbitrations does not serve the purpose of the PAGA.” Id. Because the California Supreme Court finds that individual PAGA actions are not consistent with the state’s statutory intent, this Court considers this case to be consistent with previous rulings on this issue.
Under federal law, there is a split of opinion as to whether a PAGA action can be brought on an individual basis. Some district courts have permitted employees to pursue PAGA actions in arbitration on an individual basis. See Fardig, 2014 WL 2810025, at *7 (“Plaintiffs’ PAGA claims are arbitrable on an individual basis, and the Arbitration Agreement’s provision barring a PAGA claim on behalf of others is enforceable.”); Miguel, 2013 WL 452418, at *9-10 (holding that the plaintiff could arbitrate his PAGA claim individually based on the court’s reasoning in Queve-do); Quevedo, 798 F.Supp.2d at 1140-42 (finding the representative PAGA waiver to be enforceable, but permitting plaintiff
Other district courts, however, have found that PAGA actions cannot be brought on an individual basis. See Luchini, 2012 WL 2995483, at *16 (“Dismiss[ing] without prejudice the [plaintiffs] class, collective and PAGA claims in that such claims are not subject to arbitration with [the plaintiffs] individual claims.”); Machado v. M.A.T. & Sons Landscape, Inc., No. 2:09-cv-00459, 2009 WL 2230788, at *2-4 (E.D.Cal. July 23, 2009) (stating that a PAGA action cannot be brought as an individual action—it may only be brought as a representative action); Cunningham, 2013 WL 3233211, at *8 (clarifying that PAGA requires that actions must be brought on a representative capacity because “PAGA does not recognize the existence of an individual claim”).
This Court finds that PAGA actions cannot exist on an individual basis. The plain language of the statute permitting PAGA actions states that a plaintiff must bring such an action “on behalf of himself or herself and other current or former employees.” Cal. Labor Code § 2699(a) (emphasis added). This interpretation is supported by California courts. Therefore, the Court finds that Plaintiffs PAGA action falls within the waiver provision and Plaintiff is barred from pursuing her PAGA action in arbitration.
C. Motion to Dismiss, or in the Alternative, Compel Arbitration and Stay the Proceedings
Having concluded that a valid arbitration agreement exists and that the disputes are encompassed within the scope of the agreement, the Court must dismiss the action or compel the action to arbitration and stay the proceedings. A district court “has the discretion to either stay the case pending arbitration or to dismiss the case if all of the alleged claims are subject to arbitration.” Delgadillo v. James McKaone Enters., Inc., No. 1:12-cv-1149, 2012 WL 4027019, at *3 (E.D.Cal. Sept. 12, 2012.) The Court concludes that all of Plaintiffs claims are subject to arbitration, and therefore dismisses Plaintiffs claims without prejudice.
IV. CONCLUSION
For the foregoing reasons, the Court DISMISSES Plaintiffs claims without prejudice so that they can be addressed in arbitration.
IT IS SO ORDERED.
. The Arbitration Agreement provides:
Employee and Company hereby agree that any dispute, demand, claim, controversy, cause of action, or suit (collectively referred to as ‘Dispute’) that Employee may have ... with or against Company ... that in any way arises out of, involves, or relates to Employee’s employment with Company ... shall be submitted to and settled by final and binding arbitration in the county and state in which Employee is or was employed.... This Agreement between Employee and Company to arbitrate all employment-related Disputes includes, but is not limited to, all Disputes under or involving ... the Fair Labor Standards Act ... and all other federal, state, and municipal statutes, regulations, codes, ordinances, common laws, or public policies that regulate, govern, cover, or relate to ... wages, compensation, work hours, ... and any other employment-related Dispute in tort or contract.”
(ECF No.'9-1 at 2.) (emphasis added).
. See American Arbitration Association, Employment Arbitration Rules and Mediation Procedures-English (Nov. 1, 2009), https://www. adr.org/aaa/ShowProperty?nodeId=/UCM/ ADRSTG_004362&revision=latestreleased; The Institute for Christian Conciliation, Rules of Procedure, http://www.peacemaker.net/site/
. Plaintiff only cites to Armendariz for a statement of law. (ECF No. 14 at 8.) As such, the Court focuses its analysis on Plaintiff's argument under, Gentry.
. Specifically, the Arbitration Agreement provides:
The parties agree that all Disputes contemplated in this Agreement shall he arbitrated with Employee and Company as the only parties to the arbitration, and that no Dispute contemplated in this Agreement shall be arbitrated, or litigated in a court of law, as part of a class action, collective action, or otherwise jointly with any third party.
(ECF No. 9-1 at 2.) (emphasis added).
. Plaintiff’s first cause of action is an FLSA claim for Defendant’s failure to pay employees for all hours worked in violation of the FLSA. (ECF No. 1 at 6-7.) Pursuant to Section 255 of the United States Code, there is a two-year statute of limitations for Plaintiff’s FLSA claim. Plaintiff's second, third, fourth, and fifth causes of action are Labor Code claims for Defendant’s failure to pay hourly and overtime wages, failure to provide accurate written wage statements, failure to timely pay all final wages, and failure to indemnify. (ECF No. 1 at 7-15.) Pursuant to Section 338 of the California Code of Civil Procedure, there is a three-year statute of limitations for Plaintiff’s Labor Code claims. Plaintiff's sixth cause of action is a Business and Professional Code claim for unfair competition. (ECF No. 1 at 15-18.) Pursuant to Section 17208 of the California Business and Professions Code, there is a four-year statute of limitations for Plaintiff’s unfair competition claim. Plaintiff’s seventh, and final, cause of action is a representative PAGA claim to recover civil penalties from Defendant for violating the Labor Code. (ECF No. 1 at 18-21.) Pursuant to Section 340 of the California Code of Civil Procedure, there is a one-year statute of limitations for Plaintiff’s PAGA claim.
. The savings clause provides that arbitration agreements are to be enforced "save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.
. The California legislature enacted PAGA to allow a form of qui tarn action " 'in the public interest to allow aggrieved employees, acting as private attorneys general, to recover civil penalties for Labor Code violations, with the understanding that labor law enforcement agencies were to retain primacy over private enforcement efforts.’ ” Baumann v. Chase Inv. Servs. Corp., 747 F.3d 1117, 1121 (9th Cir.2014) (citing Arias v. Superior Court, 46 Cal.4th 969, 95 Cal.Rptr.3d 588, 209 P.3d 923 (2009)). If successful, "[t]he LWDA receives seventy-five percent of the penalties collected in a PAGA action, and the aggrieved employees the remaining twenty-five percent.” Id. at 1121 (citing Labor Code § 2699(a)).
. "[A] PAGA claim lies outside the FAA’s coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between an employer and the state, which alleges directly or through its agents—either the Labor and Workforce Development Agency or aggrieved employees—that the employer have violated the Labor Code.” Id. at 386-87, 173 Cal.Rptr.3d 289, 327 P.3d 129.
. In Luchini, the arbitration agreement prohibited the arbitrator from hearing class, collective, or representative actions. Luchini v. Carmax, Inc., No. CV F 12-0417, 2012 WL 2995483, at *3 (E.D.Cal. July 23, 2012). The defendant argued that “courts must enforce arbitration agreements ‘according to their terms’ " while the plaintiff argued that his “inability to bring a PAGA claim in a representative action equates to 'his inability to bring a PAGA claim at all.' " Id. at *13-14. In making this argument, the plaintiff relied on Brown v. Ralphs Grocery Co., 197 Cal.App.4th 489, 502-503, 128 Cal.Rptr.3d 854 (2d Dist.2011). The Brown court stated, "a single-claimant arbitration under the PAGA for individual penalties will not result in the penalties contemplated under the PAGA to punish and deter employer practices that violate the rights of numerous employees under the Labor Code .... That plaintiff and other employees might be able to bring individual claims for Labor Code violations in separate arbitrations does not serve the purpose of the PAGA ...” Id. at *14 (citing Brown, 197 Cal.App.4th at 502, 128 Cal.Rptr.3d 854). The court in Luchini found that while the Brown rationale was reasonable, federal courts have taken a different view because "Brown fails to reconcile the U.S. Supreme Court’s directives that the FAA displaces outright state law prohibition of 'arbitration of a particular type of claim' and that a state is unable to require a procedure inconsistent with the FAA, 'even if it is desirable for unrelated reasons.’ ” Id. (citing Concepcion, 131 S.Ct. at 1753). Due to this, the court compelled the plaintiff’s individual claims to arbitration, and dismissed without prejudice the plaintiff’s PAGA claims. Id. at *16.
. The Arbitration Agreement provides:
Employee and Company hereby agree that any dispute, demand, claim, controversy, cause of action, or suit (collectively referred to as 'Dispute') that Employee may have ... with or against Company ... that in any way arises out of, involves, or relates to Employee’s employment with Company ... shall be submitted to and settled by final and binding arbitration in the county and state in which Employee is or was employed .... This Agreement between Employee and Company to arbitrate all employment-related Disputes includes, but is not limited to, all Disputes under or involving ... the Fair Labor Standards Act ... and all other federal, state, and municipal statutes, regulations, codes, ordinances, common laws, or public policies that regulate, govern, cover, or relate to ... wages, compensation, work hours, ... and any other employment-related Dispute in tort or contract. ”
(ECF No. 9-1 at 2.) (emphasis added).