MARCUS VAUGHN et al. v. TESLA, INC.
A164053
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FIVE
Filed 1/4/23
CERTIFIED FOR PUBLICATION;
Defendant and appellant Tesla, Inc. (Defendant) appeals from the denial of its motion to compel arbitration of workplace race discrimination claims asserted by plaintiffs Monica Chatman and Evie Hall (Plaintiffs). Plaintiffs initially worked for Defendant through staffing agencies before signing employment letters prepared by Defendant in July 2017. Plaintiffs’ complaint alleged the discrimination occurred before and after the letters were signed. We determine the trial court properly relied on the language in an arbitration provision contained in the letters to exclude from arbitration those claims based on conduct occurring during periods Plaintiffs were employed by staffing agencies rather than directly by Defendant. We also conclude the trial court properly declined to mandate arbitration of Plaintiffs’ request for a public injunction. On that issue, we reject Defendant‘s two principal contentions. First, we hold that injunctions sought under the Fair Employment and Housing Act (FEHA) (
Defendant, a manufacturer of electric vehicles, operates a factory in Fremont, California. Through staffing agencies, plaintiff Chatman began working at Defendant‘s Fremont factory in November 2016 and plaintiff Hall began working there in March 2017. In July 2017 letters, Defendant offered Hall and Chatman employment at specified wages and with specified benefits. The letters stated, “If you accept our offer, your first day of employment will be August 2, 2017.”1
Plaintiffs each electronically signed their offer letters.2 Those offer letters contain the following arbitration agreement (Arbitration Provision):
[T]o ensure the rapid and economical resolution of disputes that may arise in connection with your employment with Tesla, you and Tesla agree that any and all disputes, claims, or causes of action, in law or equity, arising from or relating to your employment, or the termination of your employment, will be resolved, to the fullest extent permitted by law by final, binding and confidential arbitration . . .
(Italics and bolding omitted.)
In November 2017, plaintiff Marcus Vaughn filed a complaint alleging he suffered a racially hostile work environment at Defendant‘s Fremont factory. He alleged that he and other Black workers had “suffered severe and pervasive harassment.” Vaughn alleged three causes of action under FEHA. Although Defendant offered Vaughn direct employment, he never signed the offer letter, which contained an arbitration agreement. For that reason, the trial court denied Defendant‘s motion to compel arbitration of Vaughn‘s claims, and this Court affirmed in Vaughn v. Tesla, Inc. (May 21, 2019, A154753) [nonpub. opn.].
In November 2020, Defendant moved to deny class certification and to strike the class allegations in plaintiff Vaughn‘s complaint, arguing among other things that, because Vaughn was not bound to arbitrate, he could not adequately represent the interests of workers who had agreed to arbitration. The trial court directed Vaughn to file an amended complaint “that asserts subclasses.” In May 2021, plaintiff Vaughn filed a first amended complaint with proposed subclasses. On the same day, Vaughn moved for leave to file a second amended complaint adding Chatman and Titus McCaleb as named plaintiffs. In June 2021, Vaughn sought leave to add Hall as a named plaintiff.
Among other allegations, the Complaint alleges that Plaintiffs and other similarly situated Black co-workers were subjected to repeated instances of racial harassment and discrimination, including regularly being called racial slurs by co-workers and supervisors. Plaintiffs seek to represent a class of Black persons who worked in Defendant‘s factory at various times after November 2016. The Complaint asserts causes of action for “Race-Based Discrimination in Violation of FEHA,” “Race-Based Harassment in Violation of FEHA,” and “Failure to Prevent Race-Based Discrimination and Harassment in Violation of FEHA.” Plaintiffs are alleged to be part of a subclass of workers who were employed for portions of time by staffing agencies and subsequently became direct employees of Defendant. Plaintiffs seek relief against Defendant based on a “joint” or “dual” employer theory for periods they were employed by staffing agencies.4
In August 2021, Defendant moved to compel arbitration of Plaintiffs’ claims. Defendant pointed out that “[n]one of Chatman and Hall‘s allegations distinguish between the time they were employed by staffing companies and the time they were directly employed by Tesla” and argued, among other things, that the Arbitration Provision mandated arbitration because all of the claims “related to” Plaintiffs’ employment with Defendant. Defendant also argued Plaintiffs could not seek a “public injunction” under FEHA. In opposition, Plaintiffs argued, among other things, that they were not obligated to arbitrate claims based on conduct before August 2, 2017, which was the date the offer letter identified as the “first day of employment.” Plaintiffs also argued they had the right to seek a public injunction in court because the Arbitration Provision prohibited such an award in arbitration.
Following a hearing, the trial court granted Defendant‘s petition to compel arbitration in part and denied it in part. Regarding the scope of the Arbitration Provision, the court concluded, “Applying the plain language of the contracts,
The present appeal followed, and the trial court stayed any portion of the case that was not automatically stayed by the filing of the notice of appeal.
DISCUSSION
I. Legal Background and Standard of Review
“Both the California Arbitration Act (
The FAA mandates that “ambiguities about the scope of an arbitration agreement must be resolved in favor of arbitration.” (Lamps Plus, Inc. v. Varela (2019) ___U.S.___ [139 S.Ct. 1407, 1418, 203 L.Ed.2d 636] (Lamps Plus).)5 Nevertheless, “[t]here is no public policy . . . that favors the arbitration of disputes the parties did not agree to arbitrate.” (Howard, supra, 30 Cal.App.5th at p. 663.) That is because “it is a cardinal principle that arbitration . . . ‘is a matter of consent, not coercion,’ ” and ” ’ “a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” ’ ” (Pinnacle Museum Tower Assn. v. Pinnacle Mkt. Dev. (US), LLC (2012) 55 Cal.4th 223, 236 (Pinnacle Museum).) Thus, the policy favoring arbitration ” ‘does not override ordinary principles of contract interpretation’ . . . ‘[T]he terms of the
“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.” (Avery, supra, 218 Cal.App.4th at pp. 59–60.) “General contract law principles include that ‘[t]he basic goal of contract interpretation is to give effect to the parties’ mutual 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.” (
“Where, as here, the evidence is not in conflict, we review the trial court‘s denial of arbitration de novo.” (Pinnacle Museum, supra, 55 Cal.4th at p. 236.)
II. The Arbitration Provision Only Encompasses Claims Based on Conduct Following the Commencement of Direct, Contractual Employment
Defendant contends the trial court erred in concluding the Arbitration Provision does not apply to claims based on conduct preceding the commencement of direct, contractual employment on August 2, 2017. The court did not err.
A. Defendant‘s Interpretation is Contrary to the Plain Language of the Arbitration Provision
As noted previously, the Arbitration Provision states, “[T]o ensure the rapid and economical resolution of disputes that may arise in connection with your employment with Tesla, you and Tesla agree that any and all disputes, claims, or causes of action, in law or equity, arising from or relating to your employment, or the termination of your employment, will be resolved, to the fullest extent permitted by law by final, binding and confidential arbitration . . .” (Emphasis omitted.) Defendant‘s offer letters clarify the term “employment,” stating, “If you accept our offer, your first day of employment will be August 2, 2017.” Thus, it is clear that “employment” as used throughout the Arbitration Provision and specifically in the phrase “arising from or relating to your employment” refers to the period of direct,
Although Defendant does not expressly concede the point, it presents no argument disputing that “employment” in the Arbitration Provision must be construed to refer to the period of direct employment. Instead, the main thrust of Defendant‘s argument is that Plaintiffs’ “hostile work environment claims, even if based solely on conduct occurring before August 2, 2017, related to their employment with Tesla.”
Defendant is correct that the use of the phrase “arising from or relating to” signifies the Arbitration Provision is a “broad provision.” (Khalatian v. Prime Time Shuttle, Inc. (2015) 237 Cal.App.4th 651, 659 (Khalatian).) However, the phrase only acquires meaning by considering what two things are being related to each other—in this instance Plaintiffs’ claims and their direct employment with Tesla. (Ramos v. Superior Ct. (2018) 28 Cal.App.5th 1042, 1051 (Ramos) [“While the phrase ‘arising under or related to’ is very broad, it is necessarily qualified by what follows.“].)
It is well established—including in the very cases Defendant principally relies upon—that when courts say that an arbitration agreement including “relating to” is broad, it typically is because it expands the reach of the agreement to encompass claims rooted in the employment relationship, even if the claims do not actually arise from the employment contract itself. As explained in Rice v. Downs (2016) 248 Cal.App.4th 175, at page 186, ” ‘It has long been the rule in California that a broadly worded arbitration clause . . . may extend to tort claims that may arise under or from the contractual relationship. “There is no requirement that the cause of action
Consistent with the proposition that “relating to” acquires meaning from the subjects being related, the phrase normally encompasses extracontractual claims only “so long as they have their roots in the relationship between the parties which was created by the contract.” (Berman v. Dean Witter & Co., Inc. (1975) 44 Cal.App.3d 999, 1003; accord, Khalatian, supra, 237 Cal.App.4th at p. 660; Howard, supra, 30 Cal.App.5th at p. 664; Ramos, supra, 28 Cal.App.5th at p. 1052.) For example, Khalatian held that Labor Code claims were encompassed by the arbitration agreement in that case, even though the plaintiff did not rely on the compensation provisions in his employment contract (Khalatian, at p. 660); Ramos held that statutory employment claims were within the scope of an arbitration agreement because the underlying contract was relevant to the claims in several respects (Ramos, at p. 1053); and Howard held that a claim the defendant wrongfully diluted the value of the plaintiff‘s shares in the company was not rooted in the contractual employment relationship (Howard, at p. 670).
Thus, Defendant is mistaken in suggesting the Arbitration Provision must be applied to pre-contract disputes in order to give meaning to the inclusion of the words “relating to” in addition to “arising from.” As noted, the inclusion of “relating to” typically justifies applying arbitration agreements to claims that do not arise from the contract. In contrast, “narrow clauses” stating only “arising from” ” ‘have generally been interpreted to apply only to disputes regarding the interpretation and performance of the agreement.’ ” (Howard, supra, 30 Cal.App.5th at p. 664.) Thus, while courts have given significance to the inclusion of the more expansive “relating to” language, Defendant cites no authority that relies on the language to require arbitration of a pre-contract claim—i.e., arbitration of a claim not rooted in the employment relationship established by the contract containing an arbitration provision.
Defendant relies on an unpublished federal district court decision in which the court found an arbitration agreement applied to an action based on employees’ alleged deletion of material from their computers upon their termination. (Whole Body Research, LLC v. Digest MD, LLC (C.D. Cal. July 3, 2018, No. LA CV18-01233 JAK (JCx)) 2018 U.S.Dist. Lexis 217107, pp. 8–9.) In that case, the court concluded the arbitration agreement encompassed the “post-employment activity” because the former employees were able to access the computers due to their employment. (Id. at p. 9.) By
Defendant also points out that Plaintiffs “worked at the same Tesla factory, in the same role, with the same coworkers, for the same supervisors, under the same management” before August 2, 2017, and that Plaintiffs “allege [Defendant] Tesla engaged in the same unlawful conduct before and after they signed the arbitration agreement.” But the question in interpreting the Arbitration Provision is not whether Plaintiffs’ pre- and post-August claims are factually similar or share evidence in common, but whether Plaintiffs’ claims based on conduct that did not occur during Plaintiffs’ direct, contractual “employment” “relate to” the period of “employment” that followed the contracts. Here, the “alleged wrongs” during the period of staffing agency employment “exist independently of” the subsequent “employment relationship” with Defendant. (Howard, supra, 30 Cal.App.5th at p. 670.) Defendant cites no authority that factual commonalities are sufficient to justify extension of an arbitration agreement to pre-contractual employment claims absent any indication the parties understood the agreement would apply in that manner.
In summary, Defendant fails to persuade that the “relating to” phrase means the Arbitration Provision applies to any past dispute between the parties, based on events occurring before commencement of the contractual “employment” relationship. Defendant‘s proposed construction of “relating to” lacks support in the caselaw and would expand the application of the Arbitration Provision well beyond the reasonable expectations of the parties. (See Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 788 [” ‘An essential element of any contract is the consent of the parties, or mutual assent.’ . . . ‘Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts . . . .’ “]. ) Because Plaintiffs’ claims based on pre-August 2017 conduct are not “root[ed] in the relationship between the parties which was created by the contract“—because that relationship did not yet exist—the inclusion of the language “relating to” does not justify applying the Arbitration Provision to those claims. (Khalatian, supra, 237 Cal.App.4th at p. 660; Howard, supra, 30 Cal.App.5th at p. 664.)
Finally, our conclusion finds support in the provision‘s express statement of purpose: “[T]o ensure the rapid and economical resolution of disputes that may arise in connection with your employment with Tesla . .
B. The Salgado and Franco Decisions Do Not Support Defendant‘s Interpretation of the Arbitration Provision
The parties each argue that their position is supported by the decisions in Salgado v. Carrows Restaurants, Inc., supra, 33 Cal.App.5th 356 and Franco v. Greystone Ridge Condo., supra, 39 Cal.App.5th 221. Those cases are readily distinguishable.
In Salgado, supra, 33 Cal.App.5th 356, the plaintiff had been a direct employee at the defendant restaurant for decades, before filing a lawsuit alleging claims for employment discrimination and violation of civil rights. (Id. at p. 358.) The following month, she signed an arbitration agreement, which contained two relevant provisions. (Id. at p. 359.) The first provided, ” ‘The Company and I agree and acknowledge that we will utilize binding arbitration as the sole and exclusive means to resolve all disputes which may arise out of or be related in any way to my application for employment and/or employment, including but not limited to the termination of my employment and my compensation.’ ” (Ibid.) The second provided in relevant part, ” ‘Both the Company and I agree that any claim, dispute, and/or controversy that I may have against the Company . . . or the Company may have against me, shall be submitted to and determined exclusively by binding arbitration.’ ” (Ibid.)
The Salgado court rejected the plaintiff‘s contention the arbitration agreement was not retroactive. As to the first provision, the court acknowledged the ” ‘may arise’ ” language suggested application to future claims, but concluded the use of ” ‘or’ ” meant that ” ‘all disputes’ related ‘in any way’ to employment” were also encompassed by the provision. (Salgado, supra, 33 Cal.App.5th at pp. 360–361.) As to the second provision, the court observed that it “unequivocally requires arbitration for ‘any claim’ [the plaintiff] has
In Franco, supra, 39 Cal.App.5th 221, direct employees of the defendant company were asked to sign an arbitration agreement encompassing ” ‘[a]ny and all claims . . . relating to any aspect of . . . employment with Employer (pre-hire through post-termination).’ ” (Id. at p. 223.) The plaintiff, who had been employed by the defendant company for years, signed the arbitration agreement days after filing an action alleging FEHA and other claims. (Id. at pp. 223–225.) The plaintiff opposed the defendant‘s petition for arbitration on the ground that the agreement “failed to expressly state that claims that had already accrued, including the claims asserted in plaintiff‘s complaint, were subject to arbitration.” (Ibid.) The court of appeal concluded the arbitration agreement encompassed the plaintiff‘s claims because it was not limited to claims that had yet to accrue and “the agreement‘s reference to claims relating to ‘pre-hire’ matters expresses an intent to cover all claims, regardless of when they accrued, that are not otherwise expressly excluded by the arbitration agreement.” (Ibid.; see also id. at p. 230.)
Clear differences exist between the Arbitration Provision and the comparable clauses in Salgado and Franco. Most significantly, the plain language of the Arbitration Provision does not encompass Plaintiffs’ claims because their direct “employment” with Defendant, as that term is used in the provision, did not begin until August 2017. In contrast, the plaintiffs in Salgado and Franco were direct employees long before execution of the arbitration agreements, so there is no question their claims were rooted in that employment, even though the claims accrued before the arbitration agreements were signed. Given the ongoing employment relationship, the key question in those cases was whether the arbitration agreements were properly ” ‘applied retroactively to transactions which occurred prior to execution of the arbitration agreement.’ ” (Salgado, supra, 33 Cal.App.5th at p. 361.) That is not the issue in the present case. Instead, the issue is whether the Arbitration Provision is properly applied to transactions that occurred prior to the existence of the contractual employment relationship, a fundamentally different matter.8
The differences between the Franco and Salgado cases and the present case undermine Defendant‘s argument that they support the conclusion that the Arbitration Provision applies to pre-contract disputes.
C. Defendant Has Not Shown the Trial Court Erred in Temporally Dividing Plaintiffs’ Claims
Finally, Defendant argues the trial court erred in temporally dividing Plaintiffs’ claims, sending to arbitration only those based on conduct during the period of direct, contractual employment. Defendant observes Plaintiffs “asserted claims covering the entire time they worked at Tesla . . . . They did not assert separate, sequential hostile work environment claims partitioned by time period and based on alleged conduct occurring before and after August 2, 2017.” But it is Defendant who obligated the trial court to temporally divide Plaintiffs’ claims by moving for arbitration. Defendant cites no authority the trial court was required in these circumstances to send to arbitration Plaintiffs’ claims based on conduct outside the scope of the Arbitration Provision.
In support of its argument, Defendant cites cases in which courts of appeal concluded it was improper for trial courts to split a plaintiff‘s Labor Code
Defendant does not dispute Plaintiffs allege they were subject to discrimination during the periods they worked at Defendant‘s factory on assignment by staffing agencies, or that the allegations are sufficient to state hostile work environment claims based solely on conduct during those same periods. Under California law, “If a plaintiff‘s . . . cause of action includes both arbitrable and inarbitrable claims, . . . the trial court must sever the cause of action, order the arbitrable portion to arbitration, and stay the inarbitrable portion pending the completion of arbitration.” (Clifford v. Quest Software Inc. (2019) 38 Cal.App.5th 745, 750.)
As the appellant, Defendant has the burden to show error, with “adequate argument including citations to supporting authorities.” (Yield Dynamics, Inc. v. TEA Sys. Corp. (2007) 154 Cal.App.4th 547, 557.) Defendant has failed to cite any authority to this court supporting its contention that the trial court was without authority to temporally divide Plaintiffs’ claims for adjudication in separate fora, sending to arbitration only those claims they agreed to arbitrate.
D. Conclusion
The trial court did not err in granting Defendant‘s petition to compel arbitration only as to Plaintiffs’ claims based on conduct occurring after August 2, 2017.11
Plaintiffs’ Complaint seeks a “public injunction, enjoining Defendant[] from committing further violations of the FEHA with respect to race discrimination and harassment against Black and/or African-American workers, and failure to prevent such.” The prayer for relief adds, “Such relief at minimum should include implementation of effective policies to prevent and correct race harassment, implementation of mandatory training regarding harassment for all of Defendant[‘s] managerial and non-managerial employees, and a public declaration that [Defendant‘s] widely-known racist practices contravene California law and will not continue and will not be tolerated.” The trial court denied Defendant‘s motion to compel as to Plaintiffs’ request for a public injunction. On appeal, Defendant contends the trial court erred because FEHA “does not authorize plaintiffs to obtain ‘public injunctions.’ ” Defendant also argues that, under the reasoning of the recent Viking River decision, the FAA preempts California‘s rule against contractual waivers of the right to seek a public injunction. We reject Defendant‘s contentions.
A. Plaintiffs May Seek a Public Injunction Under FEHA
In McGill v. Citibank, N.A. (2017) 2 Cal.5th 945 (McGill), at page 955, the California Supreme Court discussed the distinction “between private injunctive relief—i.e., relief that primarily ‘resolve[s] a private dispute’ between the parties [citation] and ‘rectif[ies] individual wrongs’ [citation], and that benefits the public, if at all, only incidentally—and public injunctive relief—i.e., relief that ‘by and large’ benefits the general public [citation] and that benefits the plaintiff, ‘if at all,’ only ‘incidental[ly]’ and/or as ‘a member of the general public.’ ” McGill discussed the court‘s prior decisions establishing that “public injunctive relief under the [Unfair Competition Law (UCL)], the [Consumer Legal Remedies Act (CLRA)], and the false advertising law is relief that has ‘the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public.’ ” (McGill, at p. 955, citing Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303 (Cruz) and Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066 (Broughton).) In McGill, the court concluded that an arbitration agreement waiving a statutory right to seek a public injunction “in any forum” is invalid as “contrary to California public policy” because it “would seriously compromise the public purposes the statute[ was] intended to serve.” (Id. at pp. 952, 961.) The court further held that the FAA “does not preempt this rule of California law or require enforcement of the waiver provision.” (Ibid.)12 In
The Arbitration Provision in the present case provides that “Any claim, dispute, or cause of action must be brought in a party‘s individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.” It also provides that “The arbitrator shall not have the authority to . . . award relief to a group or class of employees in one arbitration proceeding.” Plaintiffs argued in their brief on appeal that the Arbitration Provision “purports to prevent Plaintiffs from seeking a public injunction in any forum.” Defendant did not dispute that assertion in its reply brief. Nevertheless, for the first time at oral argument, Defendant appeared to argue the provision does not prohibit issuance of a public injunction in arbitration because McGill stated that an action seeking such relief “does not constitute the ‘pursu[it]’ of ‘representative claims or relief on behalf of others’ ” within the meaning of the ballot proposition at issue in that case. (McGill, supra, 2 Cal.5th at pp. 959–960.) That argument has been forfeited. (People v. Thompson (2010) 49 Cal.4th 79, 110, fn. 13.) In any event, the argument is misplaced. Plaintiffs did not argue the Arbitration Provision prohibits public injunctive relief in arbitration under the provision‘s language prohibiting “representative” claims. Instead, Plaintiffs highlighted the prohibition on “relief to a group or class of employees.” Defendant did not dispute at oral argument that a public injunction would constitute such prohibited relief. (See Blair v. Rent-A-Ctr., Inc. (9th Cir.
2019) 928 F.3d 819, 831 [concluding that an analogous provision “precludes the arbitrator from awarding public injunctive relief“].) Accordingly, because the Arbitration Provision provides for resolution of all covered disputes in arbitration, but prohibits an arbitrator from granting non-individual relief, the provision does waive Plaintiffs’ right to seek a public injunction “in any forum.” (McGill, at p. 956, italics omitted; Blair, at p. 831.)
Turning to the validity of the Arbitration Provision, Defendant does not dispute that, under McGill, an arbitration agreement that precludes a plaintiff from pursuing public injunctive relief in any forum is invalid and unenforceable as a matter of state law (but see Part III.B., post). Instead, Defendant argues Plaintiffs’ claims are not for public injunctive relief because under FEHA only an “aggrieved” person with an interest ” ’ ” ‘over and above the interest held in common with the public at large’ ” ’ ” has standing to file an action. (Dep‘t of Fair Emp. & Hous. v. M&N Fin. Corp. (2021) 69 Cal.App.5th 434, 443; see also
Defendant also argues the statutes at issue in McGill, Broughton, and Cruz—the false advertising law, the UCL, and the CLRA—are distinguishable from FEHA.13 Defendant points out the false advertising law is “explicitly a statutory protection for the ‘public in this state’ (
Defendant does not dispute that injunctive relief is available in a FEHA action. Although the false advertising law, the UCL, and the CLRA contain provisions expressly authorizing injunctions (McGill, supra, 2 Cal.5th at pp. 954-955), the California Supreme Court has held injunctive relief is also available under FEHA. (Aguilar v. Avis Rent A Car Sys., Inc. (1999) 21 Cal.4th 121, 131-132; see also id. at p. 132 [“courts can, and often do, issue injunctions prohibiting the recurrence or continuation of employment discrimination“].) As Defendant apparently recognizes, the determinative issue is whether the injunctive relief sought “has the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public” (McGill, at p. 951; see also Broughton, supra, 21 Cal.4th at p. 1081; Cruz, supra, 30 Cal.4th at pp. 315-316), not whether the statutory authorization of injunctive relief is express or implied.
We reject Defendant‘s argument that requests for injunctive relief under the statues addressed in McGill may have “the primary purpose and effect of
Citing that provision, the California Supreme Court stated, in the context of a sex discrimination claim, “The public policy against sex discrimination and sexual harassment in employment . . . is plainly one that ‘inures to the benefit of the public at large rather than to a particular employer or employee.’ [Citation.] No extensive discussion is needed to establish the fundamental public interest in a workplace free from the pernicious influence of sexism. So long as it exists, we are all demeaned.” (Rojo v. Kliger (1990) 52 Cal.3d 65, 90 (Rojo).) Similarly, in the context of an age discrimination claim, the Court stated, “there can be little doubt that the FEHA‘s express policy condemning employment discrimination against older workers is one that benefits the public at large. . . . [T]he pernicious effects of age discrimination in employment are not confined to the employees who are its immediate targets. . . . [T]he practice of age discrimination, like other invidious forms of discrimination, ‘foments domestic strife and unrest’ in the workplace (
The reasoning of those cases is fully applicable to discrimination on the basis of race. (Carmichael v. Alfano Temp. Pers. (1991) 233 Cal.App.3d 1126, 1132 [extending RojoFlannery v. Prentice (2001) 26 Cal.4th 572, 584 [” ‘[t]he policy that promotes the right to seek and hold employment free of prejudice is fundamental’ “]; Armendariz v. Found. Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 100 [“There is no question that the statutory rights established by the FEHA are ‘for a public reason.’ “].)
Because Plaintiffs’ request for a public injunction “has ‘the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public’ ” (McGill, supra, 2 Cal.5th at p. 955), the trial court properly denied Defendant‘s motion to compel arbitration as to that claim.17
B. The FAA Does Not Preempt California‘s No-Waiver Rule
The FAA “stands as ‘a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.’ ” (Pinnacle Museum, supra, 55 Cal.4th at p. 235; see also Cronus Invs., Inc. v. Concierge Servs. (2005) 35 Cal.4th 376, 384.) “To ensure that arbitration agreements are enforced according to their terms, ‘the FAA pre-empts state laws which “require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.” ’ ” (Pinnacle Museum, at p. 235.)
In McGill, supra, 2 Cal.5th 945, the California Supreme Court concluded “that the FAA does not require enforcement of a provision in a predispute arbitration agreement that, in violation of generally applicable California contract law, waives the right to seek in any forum public
Although McGill specifically addressed the UCL, the CLRA, and the false advertising law, Defendant does not suggest its reasoning is less than fully applicable to a claim for a public injunction under FEHA (though Defendant does dispute that such relief is available, as addressed in Part III.A., ante). Instead, Defendant argues the United States Supreme Court‘s recent decision in Viking River, supra, 142 S. Ct. 1906, requires us to conclude McGill‘s no-waiver rule is preempted by the FAA. We disagree.
1. The Viking River Decision
The Viking River decision, issued in June 2022, did not purport to abrogate McGill in whole or in part, or even cite McGill or use the phrase “public injunction.” Instead, Viking River overruled a different California Supreme Court decision, Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian), which involved PAGA claims. PAGA “authorizes an employee to bring an action for civil penalties on behalf of the state against his or her employer for Labor Code violations committed against the employee and fellow employees, with most of the proceeds of that litigation going to the state.” (Iskanian, at p. 360.) In Iskanian, the court held that an agreement that waives representative claims under PAGA is “contrary to public policy and unenforceable as a matter of state law.” (Iskanian, at p. 384.) Iskanian also concluded the FAA did not preempt state law in that respect, because the “FAA‘s goal of promoting arbitration as a means of private dispute resolution does not preclude our
In Viking River, the United States Supreme Court characterized Iskanian as adopting two rules: The “principal rule prohibits waivers of ‘representative’ PAGA claims . . . 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, 142 S. Ct. at pp. 1916-1917.) Viking River held the FAA did not preempt Iskanian to the extent the decision prohibited waiver of an employee‘s right to pursue a “representative” PAGA claim on behalf of the state. (Viking River, at pp. 1924-1925.) That is because “the FAA does not require courts to enforce contractual waivers of substantive rights and remedies.” (Viking River, at p. 1919.)
On the other hand, Viking River held Iskanian was preempted to the extent it “invalidates agreements to arbitrate only ‘individual PAGA claims for Labor Code violations that an employee suffered.’ ” (Viking River, supra, 142 S. Ct. at p. 1923.) Viking River stated the “conflict between PAGA‘s procedural structure and the FAA . . . derives from the statute‘s built-in mechanism of claim joinder,” which permits broad joinder of the claims of other employees to the claim of the individual plaintiff. (Viking River, at pp. 1923-1924.) Viking River explained, “A state rule imposing an expansive rule of joinder in the arbitral context would defeat the ability of parties to control which claims are subject to arbitration. Such a rule would permit parties to superadd new claims to the proceeding, regardless of whether the agreement between them committed those claims to arbitration. Requiring arbitration procedures to include a joinder rule of that kind compels parties to either go along with an arbitration in which the range of issues under consideration is determined by coercion rather than consent, or else forgo arbitration altogether. Either way, the parties are coerced into giving up a right they enjoy under the FAA.” (Viking River, at p. 1924.)
Viking River continued, “When made compulsory by way of Iskanian, the joinder rule internal to PAGA functions in exactly this way. Under that rule, parties cannot agree to restrict the scope of an arbitration to disputes arising out of a particular ’ “transaction” ’ or ’ “common nucleus of facts.” ’ [Citation.] If the parties agree to arbitrate ‘individual’ PAGA claims based on personally sustained violations, Iskanian allows the aggrieved
For those reasons, Viking River held “the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Viking River, supra, 142 S. Ct. at p. 1924; see also Lewis v. Simplified Lab. Staffing Sols., Inc. (Dec. 5, 2022, B312871) __ Cal.App.5th __ [2022 WL 17414203, pp. 4-5] [summarizing Viking River‘enforced in arbitration.’ ” (Viking River, at p. 1911.) The court relied on that clause in concluding the defendant was entitled to compel arbitration of the plaintiff‘s individual claim, even though the arbitration agreement was invalid as to the representative claim. (Id. at p. 1925.)
Finally, the Viking River decision concluded the representative claim had to be dismissed because the plaintiff no longer had standing to assert the claim. (Viking River, supra, 142 S. Ct. at p. 1925.) The court reasoned, “PAGA provides no mechanism to enable a court to adjudicate nonindividual PAGA claims once an individual claim has been committed to a separate proceeding. Under PAGA‘s standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action. [Citation.] When an employee‘s own dispute is pared away from a PAGA action, the employee is no different from a member of the general public, and PAGA does not allow such persons to maintain suit. [Citation.] As a result, [the plaintiff] lacks statutory standing to continue to maintain her non-individual claims in court, and the correct course is to dismiss her remaining claims.” (Viking River, at p. 1925.)18
2. The Reasoning of
Defendant argues that, under Viking River, any claim for a public injunction under FEHA “would necessarily be distinct from the individual claim.” It further argues that, under the reasoning of Viking River, the trial court “must enforce the agreement to arbitrate the individual claim, and must then evaluate what remains of any representative claim after subtracting the individual component. If what remains is not actionable, then [the trial court] must dismiss the purported representative claim.”19 We disagree that Viking River requires that approach to Plaintiffs’ public injunction claim.
As explained above, the “conflict” between PAGA and the FAA “derives from the statute‘s built-in mechanism of claim joinder,” which permits joinder of the claims of a multitude of other employees to the individual plaintiff‘s claims. (Viking River, supra, 142 S. Ct. at pp. 1923-1924.) A public injunction claim presents no such possibility. Whether adjudicated in a judicial forum or arbitration, a request for a public injunction is based on the evidence presented in support of the plaintiff‘s claims and does not require adjudication of the claims of other parties. (See McGill, supra, 2 Cal.5th at p. 957 & fn. 1 [analyzing complaint‘s prayer for relief and distinguishing between requests for public injunctive relief and requests for damages, all based on same general allegations].) In other words, a claim for public injunctive relief does not allow a plaintiff “to unite a massive number of claims in a single-package suit.” (Viking River, at p. 1924.) Accordingly, McGill‘s rule prohibiting waiver of the public injunction remedy does not require the parties to engage in arbitration “that exceeds the scope jointly intended by the parties,” and it does not “unduly circumscribe[] the freedom of parties to determine ‘the issues subject to arbitration’ and ‘the rules by which they will arbitrate’ . . . in a way that violates the fundamental principle that ‘arbitration is a matter of consent.’ ” (Viking River, at pp. 1923-1924.)
Further, while a PAGA claim can be divided into an ” ‘individual’ ” portion involving “claims based on code violations suffered by the plaintiff,” and a ” ‘representative’ ” portion “arising out of events involving other employees” (Viking River, supra, 142 S. Ct. at p. 1916), the same is not true of a claim for public injunctive relief. A public injunction
In contrasting an action seeking a public injunction with a class action, McGill emphasized that a public injunction is a “substantive statutory remedy” rather than a ” ‘procedural device.’ ” (McGill, supra, 2 Cal.5th at p. 965statute allowing an aggrieved employee to recover civil penalties . . . that otherwise would be sought by state labor law enforcement agencies.” (Amalgamated Transit Union, Loc. 1756, AFL-CIO v. Superior Ct. (2009) 46 Cal.4th 993, 1003; see also Viking River, supra, 142 S. Ct. at p. 1919 [quoting that language in Amalgamated Transit].) Tellingly, in characterizing the problem with PAGA, Viking River emphasized that its “procedural structure” “[r]equir[es] arbitration procedures to include [an expansive] joinder rule.” (Viking River, at pp. 1923-1924, italics added.)
Preemption of a rule prohibiting waiver of the right to seek a public injunction would directly contradict the proposition that “the FAA does not require courts to enforce contractual waivers of substantive rights and remedies.” (Viking River, supra, 142 S. Ct. at p. 1919.) That is the principle underlying McGill‘s conclusion “that the FAA does not require enforcement of a provision in a predispute arbitration agreement that, in violation of generally applicable California contract law, waives the right to seek in any forum public injunctive relief. . . .” (McGill, supra, 2 Cal.5th at p. 963.) Viking River does not require a different result. (See also MacClelland v. Cellco P‘ship (N.D.Cal., July 1, 2022, No. 21-cv-08592-EMC) __ F.Supp.3d __ [2022 WL 2390997, p. 9] [rejecting preemption argument with respect to claim for public injunctive relief and stating, ”Viking River focused on a procedural mechanism particular to” PAGA].)20
The trial court‘s order is affirmed. Costs on appeal are awarded to Plaintiffs.
SIMONS, Acting P.J.
We concur.
BURNS, J.
WISEMAN, J.*
(A164053)
* Retired Associate Justice of the Court of Appeal, Fifth Appellate District, assigned by the Chief Justice pursuant to
Vaughn et al. v. Tesla, Inc. (A164053)
Trial Judge: Hon. Evelio M. Grillo
Trial Court: Alameda County Superior Court
Attorneys:
Holland & Knight LLP, Sara A. Begley, Christina T. Tellado; Reed Smith LLP, Raymond A. Cardozo, Tyree P. Jones, Brian A. Sutherland for Defendant and Appellant.
Bryan Schwartz Law, Bryan Schwartz; California Civil Rights Law Group, Larry Organ; Altshuler Berzon LLP, Michael Rubin, Corinne Johnson, Jonathan Rosenthal for Plaintiffs and Respondents.