Betancourt v. Prudential Overall Supply

• Decision Date: 07 March 2017
• Docket Number: E064326
• Citation: Betancourt v. Prudential Overall Supply, 9 Cal.App.5th 439, 215 Cal.Rptr.3d 344 (Cal. App. 2017)
• Court: California Court of Appeals
• Parties: Roberto BETANCOURT, Plaintiff and Respondent, v. PRUDENTIAL OVERALL SUPPLY, Defendant and Appellant.

9 Cal.App.5th 439

215 Cal.Rptr.3d 344

Roberto BETANCOURT, Plaintiff and Respondent,

v.PRUDENTIAL OVERALL SUPPLY, Defendant and Appellant.

E064326

Court of Appeal, Fourth District, Division 2, California.

Filed March 7, 2017

Hill, Farrer & Burrill, Kyle D. Brown, James A. Bowles, Los Angeles, and Edward S. McLoughlin for Defendant and Appellant.

Lawyers for Justice, Edwin Aiwazian, Arby Aiwazian, Glendale, and Joanna Ghosh for Plaintiff and Respondent.

OPINION

MILLER, J.

Plaintiff and respondent Roberto Betancourt (Betancourt) sued defendant and appellant Prudential Overall Supply (Prudential). Betancourt's complaint sets forth one cause of action: enforcement of the Labor Code under the Private Attorneys General Act (PAGA). (Labor Code, § 2698.)¹ Prudential filed a motion to compel arbitration.² The trial court denied Prudential's motion. Prudential contends the trial court erred. We affirm the judgment.

FACTUAL AND PROCEDURAL HISTORY

A. COMPLAINT

Betancourt alleged the following in his April 2015 complaint: Betancourt was employed by Prudential. Betancourt and other Prudential employees worked over eight hours per day or more than 40 hours per week. Prudential failed to compensate Betancourt and other employees for all the hours they worked, as well as for missed breaks and meal periods. Prudential's failure to pay Betancourt and other Prudential employees for all the time worked was due to Prudential's "uniform policy and systematic scheme of wage abuse."

Within the sole cause of action, for "Violation of California Labor Code [section] 2698, et seq.," a section which concerns PAGA claims, Betancourt alleges a series of violations: (1) failure to pay overtime; (2) failure to provide meal periods; (3) failure to provide rest periods; (4) failure to pay minimum wage; (5) failure to pay timely wages upon termination; (6) failure to pay timely wages during employment; (7) failure to complete accurate wage statements; (8) failure to keep complete and accurate payroll records; and (9) failure to reimburse necessary business-related expenses and costs.

In the "Prayer for Relief" section of the complaint, Betancourt requests "civil penalties pursuant to California Labor Code sections 2699(a), (f) and (g) plus costs/expenses and attorneys' fees for violation of California Labor Code sections 201 [wages due upon discharge or layoff], 202 [wages due upon resignation], 203 [wages not promptly paid], 204 [semimonthly wages], 226(a), 226.7, 510, 512(a), 1174(d), 1194, 1197, 1197.1, 1198, 2800 and 2802," as well as "such other and further relief as the Court may deem equitable and appropriate."

B. MOTION TO COMPEL ARBITRATION

Prudential filed a motion to compel arbitration. Prudential asserted Betancourt, on January 30, 2006, signed an Agreement to Arbitrate (the Agreement), which provided, " ‘I understand that it is my obligation to make use of the Company's Fair Treatment Process (‘FTP’) and to submit to final and binding arbitration any and all claims and disputes that are related in any way to my employment or the termination of my employment with Prudential Overall Supply.' " The Agreement further provides that Betancourt agreed " ‘to forego any right to bring claims on a representative or class member basis.’ "

Prudential argued that all of Betancourt's claims related to employment and therefore were subject to arbitration pursuant to the Agreement. Prudential also asserted that Betancourt's PAGA claim was not exempt from arbitration because it was not really a PAGA action. Prudential asserted Betancourt's action, in substance, was a standard wage and hour case, and therefore was subject to arbitration. Prudential further noted that Betancourt was seeking remedies that did not fall within a PAGA cause of action, such as business expenses, unpaid wages, interest, attorney's fees, and costs.³ Prudential argued Betancourt was attempting to evade arbitration by labeling his wage and hour claims as a PAGA case.

C. OPPOSITION

Betancourt opposed the motion to compel arbitration. First, Betancourt asserted there was insufficient evidence of a valid agreement to arbitrate. Prudential submitted the declaration of a custodian of records, which Betancourt argued was "woefully" inadequate. Second, Betancourt contended his complaint only set forth a PAGA claim, and the prayer for relief section of the complaint was not determinative of the type of claim raised. Third, Betancourt asserted the waiver of Betancourt's right to bring a representative action/PAGA case was unenforceable because it would violate the State of California's substantive right to have its laws enforced.

Fourth, Betancourt argued the Agreement was unconscionable because (a) Betancourt had no opportunity to negotiate the Agreement; (b) Betancourt was not given a copy of the Agreement, instead the Agreement was explained to him; (c) the Agreement could be interpreted as causing Betancourt to waive his right to bring a PAGA case—a right that cannot be waived; (d) the Agreement could cause Betancourt to bear unreasonable costs; and (e) the Agreement is illusory and lacks mutuality.

D. HEARING

On August 6, 2015, the trial court held a hearing on Prudential's motion. At the beginning of the hearing, the trial court explained that a PAGA claim is not subject to an agreement to arbitrate. (Iskanian , supra , 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129.) The trial court further explained that, to the extent Betancourt's requested remedies are inconsistent with a PAGA case, the proper procedure would be for Prudential to file a motion to strike. The trial court stated its tentative ruling was to deny Prudential's motion pursuant to Iskanian .

Prudential said Betancourt's claims should be subject to arbitration, and therefore it did not understand how it could bring a motion to strike. The trial court explained that Prudential would be requesting a bifurcated trial on some of the Labor Code violations. The trial court said, "My suggestion is do all your discovery, and then file a motion to strike once you've established exactly what Labor Code violations [ ]he's alleging." The court stated that Prudential would need to separate the PAGA and non-PAGA claims. The trial court concluded, "A motion to compel arbitration is not the proper vehicle." The trial court denied Prudential's motion without prejudice to Prudential filing a motion to strike.

DISCUSSION

Prudential contends the trial court erred by denying the motion to compel arbitration because, under the Agreement, Betancourt's claims are subject to arbitration.

Because the trial court's denial of Prudential's motion was based upon a decision of law, we apply the de novo standard of review.⁴ (Carlson v. Home Team Pest Defense, Inc. (2015) 239 Cal.App.4th 619, 630, 191 Cal.Rptr.3d 29.)

"[T]o bring a motion to compel arbitration, a party must plead and prove:

‘(1) the parties' written agreement to arbitrate a controversy ...; (2) a request or demand by one party to the other party or parties for arbitration of such controversy pursuant to and under the terms of their written arbitration agreement; and (3) the refusal of the other party or parties to arbitrate such controversy pursuant to and under the terms of their written arbitration agreement.’ " (Sky Sports, Inc. v. Superior Court (2011) 201 Cal.App.4th 1363, 1368, 134 Cal.Rptr.3d 405, italics omitted.) A party who has not signed an arbitration agreement cannot be compelled to arbitrate. Additionally, a party who has not signed an arbitration agreement cannot be compelled to arbitrate merely because the complaint defined the injured group as including employees who had signed arbitration agreements. (Ibid. )

The PAGA was designed to address two problems. The first problem was that alleged Labor Code violations often went unenforced because they were punishable as criminal misdemeanors, and prosecutors rarely investigated or prosecuted the alleged violations. The second problem was that when civil penalties could be assessed, there were few government resources to pursue enforcement of the penalties. (Iskanian , supra , 59 Cal.4th at p. 379, 173 Cal.Rptr.3d 289, 327 P.3d 129.)

In response to these problems, the Legislature enacted the Labor Code Private Attorneys General Act of 2004 (PAGA), which authorizes "aggrieved employees, acting as private attorneys general, to recover civil penalties for Labor Code violations." (Iskanian , supra , 59 Cal.4th at p. 379, 173 Cal.Rptr.3d 289, 327 P.3d 129.) " ‘In a lawsuit brought under [the PAGA], the employee plaintiff represents the same legal right and interest as state labor law enforcement agencies—namely, recovery of civil penalties that otherwise would have been assessed and collected by the Labor Workforce Development Agency.’ " (Id. at p. 380, 173 Cal.Rptr.3d 289, 327 P.3d 129.) "The civil penalties recovered on behalf of the state under the PAGA are distinct from the statutory damages to which employees may be entitled in their individual capacities." (Id. at p. 381, 173 Cal.Rptr.3d 289, 327 P.3d 129.) "A PAGA representative action is therefore a type of qui tam action." (Id. at p. 382, 173 Cal.Rptr.3d 289, 327 P.3d 129.)

Betancourt has brought a PAGA case. Betancourt has alleged violations on a representative basis, cited law pertaining to PAGA (§ 2698 ), and seeks civil penalties. There has been no challenge to the pleadings, such that the nature of the case has been clarified or changed. (See L. B. Laboratories v. Mitchell (1952) 39 Cal.2d 56, 60, 244 P.2d 385 ["He made no effort by demurrer to have the complaint clarified"].) Therefore, the case remains a PAGA matter.

The trial court correctly denied Prudential's motion to compel arbitration because a defendant cannot rely on a predispute waiver by a private employee to compel arbitration in a PAGA case, which is brought on behalf of the state. (County of Solano v. Lionsgate Corp. et al. (2005) 126 Cal.App.4th 741, 749, fn. 5, 24 Cal.Rptr.3d 362 ; see also Iskanian , supra , 59...