BERNADETTE TANGUILIG, Plaintiff and Respondent, v. BLOOMINGDALE‘S, INC., Defendant and Appellant.
No. A145283
First Dist., Div. Five.
Nov. 16, 2016.
6 Cal. App. 5th 665
Jackson Lewis, David S. Bradshaw, Nathan W. Austin, Patrick C. Mullin; and Michael C. Christman for Defendant and Appellant.
Cornerstone Law Group, Gordon W. Renneisen, Harry G. Lewis and Jennifer A. Donnellan for Plaintiff and Respondent.
BRUINIERS, J.—Bernadette Tanguilig, an employee at Bloomingdale‘s, Inc. (Bloomingdale‘s), filed a representative action on behalf of herself and fellow employees pursuant to the Labor Code Private Attorneys General Act of 2004 (PAGA) (
I. LEGAL FRAMEWORK
Because this case turns on a proper understanding of PAGA and application of Supreme Court precedent, we begin with pertinent passages from Iskanian discussing these issues: ” ‘In September 2003, the Legislature enacted [PAGA] [citations]. The Legislature declared that adequate financing of labor law enforcement was necessary to achieve maximum compliance with state labor laws, that staffing levels for labor law enforcement agencies had declined and were unlikely to keep pace with the future growth of the labor market, and that it was therefore 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.’ (Stats. 2003, ch. 906, § 1.)
” ‘Under this legislation, an “aggrieved employee” may bring a civil action personally and on behalf of other current or former employees to recover civil penalties for Labor Code violations. (. . .
” ’ ” . . . [T]he judgment in [a PAGA representative] action is binding not only on the named employee plaintiff but also on government agencies and any aggrieved employee not a party to the proceeding.” ([Arias v. Superior Court, supra, 46 Cal.4th at p. 985].) . . . “An employee plaintiff suing . . . under the [PAGA] does so as the proxy or agent of the state‘s labor law enforcement agencies. [] . . . [A]n action to recover civil penalties ‘is fundamentally a law enforcement action designed to protect the public and not to benefit private parties’ [citation]. . . .” (Arias, supra, 46 Cal.4th at p. 986.) [] [] [A] PAGA representative action is therefore a type of qui tam action. . . . The government entity on whose behalf the plaintiff files suit is always the real party in interest in the suit.’ (Iskanian, supra, 59 Cal.4th at pp. 379–382.)
Iskanian holds that an employee‘s right to bring a PAGA action is nonwaivable under state law (Iskanian, supra, 59 Cal.4th at pp. 382–383, citing
On August 15, 2014, Tanguilig filed a “representative PAGA action . . . on behalf of the state of California, and on behalf of herself and other current or former employees . . . , assert[ing] claims for civil penalties and statutory remedies.” Tanguilig alleged she was a current Bloomingdale‘s employee and the company failed to provide its commission-earning employees with paid rest periods, minimum wage for noncommission-producing activities, complete and accurate wage statements, and timely payment of their wages.
Bloomingdale‘s filed a motion to compel arbitration. The company produced a copy of the dispute resolution procedure (Agreement) that Tanguilig accepted as a condition of her employment. The Agreement required Tanguilig to submit “all employment-related legal disputes, controversies or claims” to a four-step dispute resolution process that culminated in final and binding arbitration. The Agreement prohibited an arbitrator from “consolidat[ing] claims of different [employees] into one (1) proceeding” and from “hear[ing] an arbitration as a class or collective action.”2
Iskanian had been decided by the time Bloomingdale‘s filed its motion. However, Bloomingdale‘s argued Iskanian was wrongly decided. It also argued this case was distinguishable from Iskanian because Tanguilig, unlike Iskanian, had the ability to opt out of the arbitration process. Bloomingdale‘s asked the trial court to “(1) compel the arbitration of Tanguilig‘s individual claims; and (2) stay this litigation as required by the [FAA].” In opposition, Tanguilig argued she had asserted no individual claims; a predispute waiver of representative PAGA claims was unenforceable under Iskanian; Iskanian was not distinguishable on the basis of the Agreement‘s opt-out provision as Iskanian exempted only certain postdispute waivers; and the representative action waiver rendered the Agreement unconscionable. In reply, Bloomingdale‘s argued the individual element of Tanguilig‘s PAGA claim was subject to
The court denied the motion to compel, ruling the representative action waiver was unenforceable under Iskanian despite the existence of an opt-out procedure in the Agreement. Bloomingdale‘s appealed.
III. DISCUSSION
On appeal, Bloomingdale‘s no longer argues Iskanian is distinguishable based on the opt-out provision. Instead, it argues that Iskanian was wrongly decided or, if Iskanian correctly ruled that a representative action waiver is unenforceable despite the FAA, that Tanguilig should have been required to arbitrate the individual element of her PAGA claim.
This appeal presents questions of law that we review de novo. (Franco v. Arakelian Enterprises, Inc. (2015) 234 Cal.App.4th 947, 955 [184 Cal.Rptr.3d 501].) We affirm the trial court‘s denial of the motion to compel arbitration in its entirety.
A. Iskanian
We first reject Bloomingdale‘s suggestion that we depart from Iskanian either as wrongly decided or as superseded by intervening United States Supreme Court precedent.
In its opening brief, Bloomingdale‘s relies on pre-Iskanian United States Supreme Court decisions and post-Iskanian federal district court decisions to support its argument that the case was wrongly decided. Bloomingdale‘s fails to recognize that, as an inferior state court, we are bound to follow the California Supreme Court‘s holding in Iskanian under the doctrine of stare decisis. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455 [20 Cal.Rptr. 321, 369 P.2d 937].) More specifically, in the absence of a subsequent contrary decision of the United States Supreme Court, we are bound by the California Supreme Court‘s holding on the issue of federal law that Bloomingdale‘s contends was wrongly decided in Iskanian (i.e., FAA does not preempt California‘s bar against compelled waiver of a PAGA representative action). (See People v. Neer (1986) 177 Cal.App.3d 991, 999 [223 Cal.Rptr. 555].) Furthermore, we are bound by the Iskanian court‘s interpretation of the pre-Iskanian United States Supreme Court decisions cited by Bloomingdale‘s. Finally, we note that the Ninth Circuit has ruled that Iskanian correctly decided the federal question, thus superseding conflicting
In its reply brief, Bloomingdale‘s argues that Iskanian is no longer good law in light of DIRECTV, Inc. v. Imburgia (2015) 577 U.S. 47 [193 L.Ed.2d 365, 136 S.Ct. 463] (DIRECTV), which was decided after enforcement of the Iskanian rule in the above-cited California decisions. We are unpersuaded that DIRECTV provides grounds for a departure from Iskanian. In DIRECTV, our colleagues in the Second Appellate District had held a binding arbitration provision in a customer service agreement that included a class action prohibition was unenforceable under California law. (DIRECTV, at p. [136 S.Ct. at p. 466].) The agreement at issue provided that “if the ‘law of your state’ makes the waiver of class arbitration unenforceable, then this entire arbitration provision ‘is unenforceable.’ ” (Ibid.) At the time the California plaintiffs entered into their agreement with DIRECTV, class-arbitration waivers were unenforceable under state law pursuant to Discover Bank v. Superior Court (2005) 36 Cal.4th 148 [30 Cal.Rptr.3d 76, 113 P.3d 1100]. The United States Supreme Court subsequently held the Discover Bank rule was preempted by the FAA. (AT&T Mobility LLC v. Concepcion, supra, 563 U.S. at p. 352.) The Second District had reasoned that FAA preemption of the Discover Bank rule did not change the result in the plaintiffs’ controversy with DIRECTV because the parties were free to refer in the contract to California law as it would have been absent federal preemption and the court so construed the contract. (DIRECTV, at p. [136 S.Ct. at p. 467].) The Supreme Court reversed, holding that the Second District‘s interpretation of the phrase “law of your state” related only to arbitration agreements, and therefore did not place arbitration contracts ” ‘on equal footing with all other contracts’ ” and consequently did not give ” ‘due regard . . . to the federal policy favoring arbitration.’ ” (Id. at p. [136 S.Ct. at p. 471].)
Bloomingdale‘s argues DIRECTV nevertheless undermines Iskanian because DIRECTV takes a hard look at whether a state rule places arbitration agreements on an equal footing with other contracts (see DIRECTV, supra, 570 U.S. at p. [136 S.Ct. at pp. 468–471]), whereas Iskanian, in Bloomingdale‘s words, “failed to look beyond whether its rule is ‘general’ in name only.” This argument is unpersuasive. Bloomingdale‘s erroneously identifies “the Iskanian rule” as the substantive requirement that a contract ensure “the availability of the right to recover civil penalties on behalf of other employees.” For the purpose of applying the FAA‘s savings clause (i.e., of comparing how state courts treat arbitration contracts versus other contracts), the relevant state law rule is the principle of contract law applied in Iskanian: the state law bar against contractual waivers of statutory rights, which is codified in
We conclude that Iskanian definitively resolves the arbitrability of the representative claim. The representative action waiver in the Agreement is unenforceable under state law and this California rule is not preempted by the
B. Individual PAGA Claim
Bloomingdale‘s argues that, even if we follow Iskanian and hold the representative action waiver unenforceable, we should compel arbitration of “the individual portion of Tanguilig‘s PAGA claim” and stay “the representative portion” pending completion of arbitration. Tanguilig responds that no individual cause of action exists under PAGA and, even if it did, her claim is by nature representative and cannot be split into individual and representative components.
It is less than clear whether an “individual” PAGA cause of action is cognizable, even in a judicial forum. Permitting pursuit of only individual penalties appears inconsistent with PAGA‘s objectives. An action to recover civil penalties ” ’ “is fundamentally a law enforcement action designed to protect the public and not to benefit private parties.” ’ ” (Iskanian, supra, 59 Cal.4th at p. 381.) Iskanian addressed the possibility of an individual PAGA claim as follows: “[The employer] argues that the arbitration agreement at issue here prohibits only representative claims, not individual PAGA claims for Labor Code violations that an employee suffered. Iskanian contends that the PAGA, which authorizes an aggrieved employee to file a claim ‘on behalf of himself or herself and other current or former employees’ (
The Iskanian court observed, ” ‘[A]ssuming it is authorized, 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, even if an individual claim has collateral estoppel effects. (Arias[ v. Superior Court], supra, 46 Cal.4th at pp. 985–987.) Other employees would still have to assert their claims in individual proceedings.’ (Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 502 [128 Cal.Rptr.3d 854], fn. omitted.)” (Iskanian, supra, 59 Cal.4th at p. 384.) Thus, while assuming the possibility of such a claim, the Iskanian court did not directly decide whether an “individual PAGA claim” (i.e., a PAGA claim brought solely on behalf of the plaintiff) is cognizable.
We need not decide this question either, since we conclude that, regardless of whether an individual PAGA cause of action is cognizable, a PAGA plaintiff‘s request for civil penalties on behalf of himself or herself is not subject to arbitration under a private arbitration agreement between the plaintiff and his or her employer. This is because the real party in interest in a PAGA suit, the state, has not agreed to arbitrate the claim. (See Iskanian, supra, 59 Cal.4th at p. 382 [“[t]he government entity on whose behalf the plaintiff files suit is always the real party in interest in the suit“].)
“Simply put, 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 has violated the Labor Code. Through his PAGA claim, Iskanian is seeking to recover civil penalties, 75 percent of which will go to the state‘s coffers. . . . [A]ny judgment in a PAGA action is binding on the government . . . [Citation.] . . . ‘[E]very PAGA action, whether seeking penalties for Labor Code violations as to only one aggrieved employee—the plaintiff bringing the
Because a PAGA plaintiff, whether suing solely on behalf of himself or herself or also on behalf of other employees, acts as a proxy for the state only with the state‘s acquiescence (see
The FAA reflects the ” ‘fundamental principle that arbitration is a matter of contract.’ ” (AT&T Mobility LLC v. Concepcion, supra, 563 U.S. at p. 339.) “[A] party may not be compelled under the FAA to submit to . . . arbitration unless there is a contractual basis for concluding that the party agreed to do so.” (Stolt-Nielsen S. A. v. AnimalFeeds Int‘l Corp. (2010) 559 U.S. 662, 684 [176 L.Ed.2d 605, 130 S.Ct. 1758].) As Iskanian observed, the United States Supreme Court itself held in a somewhat analogous case that an Equal Employment Opportunity Commission (EEOC) enforcement action seeking victim-specific relief cannot be ordered to arbitration based on the victim‘s arbitration agreement with his or her employer, relying primarily on the rationale that “the EEOC [is] not a party to the arbitration agreement.” (Iskanian, supra, 59 Cal.4th at p. 386, citing EEOC v. Waffle House, Inc. (2002) 534 U.S. 279, 289 [151 L.Ed.2d 755, 122 S.Ct. 754] [“nothing in the [FAA] authorizes a court to compel arbitration of any issues, or by any parties, that are not already covered in the agreement“; FAA “does not purport to place any restriction on a nonparty‘s choice of a judicial forum“].) We believe that the same reasoning is applicable to PAGA actions, where the state is the real party in interest.
Holding that a PAGA claim, individual or collective, cannot be arbitrated pursuant to a predispute arbitration agreement without the state‘s consent does not conflict with the purposes of the FAA. “[T]he FAA aims to ensure an efficient forum for the resolution of private disputes” (Iskanian, supra, 59 Cal.4th at p. 384), not qui tam citizen actions on behalf of the government for the purposes of enforcing state law (id. at p. 385). (See Valdez v. Terminix Internat. Co. Limited Partnership (C.D.Cal., July 14, 2015, No. CV 14-09748 DDP (Ex)) 2015 U.S.Dist. Lexis 92177, pp. *27–*28.) [representative PAGA action cannot be ordered to arbitration without state‘s consent: “[a]s a matter of logic, if the claim belongs primarily to the state, it should be the state and not the individual defendant that agrees to waive the judicial forum“];6
Bloomingdale‘s suggests it would be absurd if arbitration of individual Labor Code claims for statutory penalties and unpaid penalties were permissible as is true under current law,7 but the individual portion of a PAGA representative claim were not arbitrable. We disagree. With respect to state legislative intent, we note that the Legislature has provided a variety of enforcement mechanisms for Labor Code violations—e.g., individual administrative claims for back wages, PAGA claims, Labor and Workforce Development Agency actions for civil penalties on behalf of multiple employees, and prosecutions for criminal misdemeanors (see Dunlap v. Superior Court (2006) 142 Cal.App.4th 330, 337–338 [47 Cal.Rptr.3d 614] [citing PAGA legislative history])—and expressly provided that PAGA was not intended to displace the other enforcement options (see ibid.;
Finally, our analysis is not altered by the Iskanian court‘s observation that representative actions might better serve PAGA‘s purposes than an
IV. DISPOSITION
The order denying Bloomingdale‘s motion to compel arbitration is affirmed. Bloomingdale‘s shall bear Tanguilig‘s costs on appeal.
Jones, P. J., and Simons, J., concurred.
Appellant‘s petition for review by the Supreme Court was denied March 1, 2017, S239170.