803 F.3d 425 (9th Cir. 2015), 13-55184, Sakkab v. Luxottica Retail North America, Inc.

Docket Nº:13-55184
Citation:803 F.3d 425
Opinion Judge:M. SMITH, Circuit Judge:
Party Name:SHUKRI SAKKAB, an individual, on behalf of himself, and on behalf of all persons similarly situated, Plaintiff-Appellant, v. LUXOTTICA RETAIL NORTH AMERICA, INC., an Ohio corporation, Defendant-Appellee
Attorney:Kyle R. Nordrehaug (argued), Norman B. Blumenthal, and Aparajit Bhowmik, Blumenthal, Nordrehaug& Bhowmik, La Jolla, California, for Plaintiff-Appellant. Keith A. Jacoby (argued), Scott M. Lidman, and Judy M. Iriye, Littler Mendelson, P.C., Los Angeles, California, for Defendant-Appellee. Andrew J...
Judge Panel:Before: Milan D. Smith, Jr., and N. Randy Smith, Circuit Judges, and Joan H. Lefkow,[*] Senior District Judge. Opinion by Judge Milan D. Smith, Jr.; Dissent by Judge N.R. Smith. N.R. SMITH, dissenting:
Case Date:September 28, 2015
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
SUMMARY

Plaintiff filed a putative class action against Luxottica asserting four causes of action arising out of his employment with Luxottica, including (1) unlawful business practices, (2) failure to pay overtime compensation, (3) failure to provide accurate itemized wage statements, and (4) failure to pay wages when due. The district court subsequently granted Luxottica's motion to compel arbitration... (see full summary)

 
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803 F.3d 425 (9th Cir. 2015)

SHUKRI SAKKAB, an individual, on behalf of himself, and on behalf of all persons similarly situated, Plaintiff-Appellant,

v.

LUXOTTICA RETAIL NORTH AMERICA, INC., an Ohio corporation, Defendant-Appellee

No. 13-55184

United States Court of Appeals, Ninth Circuit

September 28, 2015

Argued and Submitted, Pasadena, California, June 3, 2015.

Page 426

Appeal from the United States District Court for the Southern District of California. D.C. No. 3:12-cv-00436-GPC-KSC. Gonzalo P. Curiel, District Judge, Presiding.

SUMMARY[**]

Federal Arbitration Act / CA Private Attorney General Act

The panel reversed the district court's order granting Luxottica Retail North America, Inc.'s motion to compel arbitration of claims and dismissing plaintiff's first amended complaint, in a putative class action raising class employment-related claims and a non-class representative claim for civil penalties under the Private Attorney General Act.

Luxottica sought to compel arbitration under a dispute resolution agreement contained in its Retail Associate Guide. Plaintiff argued that the portion of the alternative dispute resolution agreement prohibiting him from bringing any PAGA claims on behalf of other employees was unenforceable under California law.

After the district court entered judgment in this case, the California Supreme Court announced the rule in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129 (2014), barring the waiver of representative claims under PAGA.

The panel held that the waiver of plaintiff's representative PAGA claim could not be enforced. The panel held that the Federal Arbitration Act did not preempt the California rule announced in Iskanian. Specifically, the panel held that following the logic of AT& T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), the Iskanian rule is a " generally applicable" contract defense that may be preserved by the FAA's § 2 savings clause, provided it did not conflict with the FAA's purposes. The panel further found that the Iskanian Rule did not conflict with the FAA's purposes.

The panel held that the non-PAGA claims in the first amended complaint must be arbitrated. The panel remanded for the district court and the parties to decide in the first instance where plaintiff's representative PAGA claim should be resolved, and to conduct other proceedings consistent with this opinion.

Dissenting, Judge N.R. Smith would hold that the majority should have applied Concepcion and deferred to the FAA's " liberal federal policy favoring arbitration." Judge N.R. Smith would hold that the Iskanian rule is preempted by the FAA, and he would affirm the district court.

Kyle R. Nordrehaug (argued), Norman B. Blumenthal, and Aparajit Bhowmik, Blumenthal, Nordrehaug& Bhowmik, La Jolla, California, for Plaintiff-Appellant.

Keith A. Jacoby (argued), Scott M. Lidman, and Judy M. Iriye, Littler Mendelson, P.C., Los Angeles, California, for Defendant-Appellee.

Andrew J. Pincus (argued) and Archis A. Parasharami, Mayer Brown LLP, Washington, D.C., for Amici Curiae.

Before: Milan D. Smith, Jr., and N. Randy Smith, Circuit Judges, and Joan H. Lefkow,[*] Senior District Judge. Opinion by Judge Milan D. Smith, Jr.; Dissent by Judge N.R. Smith.

OPINION

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M. SMITH, Circuit Judge:

This appeal presents issues of first impression regarding the scope of Federal Arbitration Act (FAA) preemption, 9 U.S.C. § 2 et seq., and the meaning of the Supreme Court's decision in AT& T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011). We must decide whether the FAA preempts the California rule announced in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129 (2014), which bars the waiver of representative claims under the Private Attorneys General Act of 2004 (PAGA), Cal. Lab. Code § 2698 et seq. After closely examining Concepcion and the Court's other statements regarding the purposes of the FAA, we conclude that the Iskanian rule does not stand as an obstacle to the accomplishment of the FAA's objectives, and is not preempted. We reverse the judgment of the district court and remand for further proceedings.

FACTS AND PROCEDURAL BACKGROUND

The Plaintiff-Appellant, Shukri Sakkab (Sakkab), is a former employee of Lenscrafters,

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an eyewear retailer owned by the Defendant-Appellee, Luxottica Retail North America, Inc. (Luxottica). On January 17, 2012, Sakkab filed a putative class action complaint against Luxottica in the Superior Court of the State of California in and for the County of San Diego. The complaint asserted four causes of action arising out of Sakkab's employment by Luxottica, including (1) unlawful business practices, (2) failure to pay overtime compensation, (3) failure to provide accurate itemized wage statements, and (4) failure to pay wages when due. The complaint alleged that Luxottica misclassified Sakkab and other employees as supervisors so that they would be exempt from overtime wages and meal and rest breaks. Luxottica answered and timely removed the case to federal court. On March 27, 2012, Sakkab filed a first amended complaint (FAC) adding a non-class, representative claim for civil penalties under the PAGA.

On April 23, 2012, Luxottica filed a motion to compel arbitration under the dispute resolution agreement contained in its " Retail Associate Guide." The agreement provided, in pertinent part:

You and the Company each agree that, no matter in what capacity, neither you nor the Company will (1) file (or join, participate or intervene in) against the other party any lawsuit or court case that relates in any way to your employment with the Company or (2) file (or join, participate or intervene in) a class-based lawsuit, court case or arbitration (including any collective or representative arbitration claim).1

Sakkab signed an acknowledgment indicating that he understood and agreed to the terms of the dispute resolution agreement on June 25, 2010.

On January 10, 2013, the district court granted Luxottica's motion to compel arbitration and dismissed the FAC. The court noted that Sakkab did not dispute that his first four claims were arbitrable. Sakkab argued, however, that the portion of the alternative dispute resolution agreement prohibiting him from bringing any PAGA claims on behalf of other employees was unenforceable under California law. For this reason, Sakkab argued, even if he was required to arbitrate his claims, he could not be denied a forum for his representative PAGA claim. The district court rejected Sakkab's argument that the right to bring a representative PAGA claim is unwaivable under California law. At the

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time, the California Supreme Court had not yet considered whether PAGA waivers were enforceable under California law. Relying on the Supreme Court's decision in AT& T Mobility LLC v. Concepcion, the district court concluded that the FAA would preempt a state rule barring waiver of PAGA claims. The court then granted the motion to compel arbitration of the claims in the FAC, dismissed Sakkab's complaint, and entered judgment. This timely appeal followed.

JURISDICTION AND STANDARD OF REVIEW

The district court had jurisdiction under 28 U.S.C. § 1332(d)(2). We have appellate jurisdiction under 28 U.S.C. § 1291 because this is an appeal from a final judgment of the district court.

" The district court's decision to grant or deny a motion to compel arbitration is reviewed de novo." Knutson v. Sirius XM Radio Inc., 771 F.3d 559, 564 (9th Cir. 2014) (quoting Bushley v. Credit Suisse First Boston, 360 F.3d 1149, 1152 (9th Cir. 2004)).

DISCUSSION

After the district court entered judgment in this case, the California Supreme Court ruled that PAGA waivers are unenforceable under California Law. Iskanian, 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129. On appeal, Luxottica argues that the FAA preempts the Iskanian rule. After considering the history of the PAGA statute and the Supreme Court's FAA preemption cases, we hold that the FAA does not preempt the Iskanian rule.

I. The Labor Code Private Attorneys General Act

California's Labor Code Private Attorneys General Act of 2004, Cal. Lab. Code § 2698 et seq., " 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, 59 Cal.4th at 360. An action brought under the PAGA is a type of qui tam action. Id. at 382.

The PAGA was enacted to correct two perceived flaws in California's Labor Code enforcement scheme. Id. at 378-79. The first flaw was that civil penalties were not available to redress violations of some provisions of the Labor Code. Id. at 378. Those provisions only provided for criminal sanctions, not civil fines, and could only be enforced in criminal prosecutions brought by district attorneys, not in civil actions brought by the Labor Commissioner. See id. at 379. As a result, many violations of the Labor Code went unpunished. Id. The PAGA addressed this problem by providing for civil penalties for most Labor Code violations. " For Labor Code violations for which no penalty is provided, the PAGA provides that the penalties are generally $100 for each aggrieved employee per pay period for the initial violation and $200 per pay period for each subsequent violation." Id. (citing Cal. Lab. Code § 2699(f)(2)).2

The second flaw the PAGA addressed was that, even where the Labor...

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