Lacayo v. Catalina Rest. Grp. Inc.

Decision Date01 August 2019
Docket NumberE069833
Citation38 Cal.App.5th 244,250 Cal.Rptr.3d 444
Parties Yalila LACAYO, Plaintiff and Respondent, v. CATALINA RESTAURANT GROUP INC. et al., Defendants and Appellants.
CourtCalifornia Court of Appeals Court of Appeals

Ogletree, Deakins, Nash, Smoak & Stewart, Spencer C. Skeen, Jesse C. Ferrantella and Nikolas T. Djordjevski, San Diego, for Defendants and Appellants.

Payton Employment Law, Chantal McCoy Payton, Marissa L. Simmons ; McNicholas and McNicholas, Patrick McNicholas, David Angeloff and Chantal McCoy Payton, Los Angeles, for Plaintiff and Respondent.


MILLER, Acting P. J. Defendants and appellants Catalina Restaurant Group, Inc., Carrows Restaurants, Inc., Carrows Family Restaurants, Inc., Coco's Bakery Restaurants, Inc. and Coco's Restaurants, Inc. (collectively, Catalina Defendants) appeal the partial denial of their motion to compel arbitration. Plaintiff and respondent Yalila Lacayo (Lacayo) was an employee of Catalina Defendants. Lacayo filed her plaintiff's class action complaint on behalf of herself and others similarly situated (Class Members) against Catalina Defendants in superior court (Complaint) alleging numerous wage and hour violations under the Labor Code, and an injunctive relief claim under California's unfair competition law (UCL). ( Bus. & Prof. Code, § 17200 et seq. ) Catalina Defendants responded by filing a motion to compel arbitration of Lacayo's individual claims, including the UCL claim, and dismissal of the class claims (Motion). The trial court granted the Motion as to Lacayo's individual claims; refused to dismiss the class claims, instead letting the arbitrator decide if the class claims were subject to arbitration or a class action waiver; and denied the Motion as to the UCL claim; and stayed the matter until after arbitration was completed.

Catalina Defendants on appeal contend the trial court erred by (1) refusing to enforce the individual arbitration agreement according to its terms; and (2) refusing to compel arbitration of Lacayo's UCL claim. In supplemental briefing, both parties addressed whether Catalina Defendants could appeal the trial court's order granting arbitration of individual claims but refusing to dismiss the classwide claims, leaving the decision for the arbitrator. We find Catalina Defendants cannot appeal the portion of the Motion that granted arbitration for Lacayo's individual claims and the refusal to dismiss the class claims. This court need only address the order finding that the UCL claim was not subject to arbitration.



On July 20, 2017, Lacayo filed the Complaint on her own behalf and Class Members, with the first seven causes of action raising violations of the Labor Code, and the eighth cause of action raising the UCL claim based on Labor Code violations. The Labor Code violations included failure to pay overtime wages ( Lab. Code, §§ 204, 510, 1194 )1 ; failure to pay minimum wages ( §§ 1194, 1197, 1197.1 ); liquidated damages for failure to pay minimum wages (§ 1194.2); waiting time penalties (§§ 201-203); failure to provide meal breaks (§§ 226.2, 512); failure to provide rest breaks (§ 226.7); and failure to provide wage statements (§ 226).

Lacayo defined the Class Members as those who had worked as assistant managers employed by Catalina Defendants in California from the date of four years prior to the filing of the Complaint, or were salaried employees who made less than twice the minimum wage for full-time employment. Lacayo alleged she worked for Catalina Defendants in San Bernardino County as an assistant manager from 2009 through August 2015, and again from March 2016 to June 2016, and was subject to their unlawful policies. She estimated there were at least 400 Class Members who worked in Catalina Defendants' bakery restaurants. The claims were appropriately resolved as a class.

Lacayo alleged Catalina Defendants improperly classified her and the above-described employees as exempt but they did not qualify as exempt employees under the Labor Code. As a result, Lacayo sought on behalf of herself and the Class Members unpaid overtime compensation, unpaid minimum wages, unpaid contractual wages, wages for missed meals and rest periods, waiting time penalties, statutory penalties, restitution, declaratory and injunctive relief, attorney's fees and costs, prejudgment interest, and any other relief.


Catalina Defendants filed the Motion on October 6, 2017, in response to the filing of the Complaint. Catalina Defendants sought an order compelling Lacayo "to arbitrate her individual claims, dismissing class claims, and staying the action pending completion of arbitration." The Motion was brought under the Federal Arbitration Act (FAA) and California Code of Civil Procedure sections 1281.2 and 1281.4 on the grounds that Lacayo entered into a valid, binding and enforceable arbitration agreement and a class action waiver encompassing all claims and disputes related to her employment.

Catalina Defendants provided that Lacayo worked as a salaried manager for them, and when she started as a manager, she signed a document entitled "Mutual Agreement to Arbitrate Claims and Class Action Waiver" (Arbitration Agreement). On July 6, 2017, Lacayo was terminated from her employment after violating company policy. Despite having signed the Arbitration Agreement, she filed her Complaint in superior court. The FAA applied because Catalina Defendants engaged in interstate commerce and the parties agreed the FAA would apply in the Arbitration Agreement.

The Arbitration Agreement included a class action waiver, which provided as follows: "Any claim covered by this Agreement shall be brought and conducted solely on an individual basis and not in a class, multiple plaintiff or representative action, or as a named or unnamed member in a class, consolidated, representative or private attorney general action. Similarly, the arbitrator may not consolidate more than one party's claims, and may not otherwise preside over any form of a class action or representative proceeding. Notwithstanding the foregoing, Employee is not waiving his or her rights under the National Labor Relations Act, and he or she will not be retaliated against for concertedly challenging the validity of this Agreement through class or collective actions. "

The Arbitration Agreement also included a clause, "The Arbitrator, and not any federal, state, or local court or Company, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement, including but not limited to any claim that all or any part of this Agreement is void or voidable."

The Arbitration Agreement also provided that it would be governed by the FAA and was to be construed broadly. It included a section entitled "Claims Covered by the Agreement," which provided in pertinent part, "The claims covered by this Agreement include, but are not limited to, claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied); tort claims; claims for discrimination (including, but not limited to, race, sex, religion, national origin, age, marital status, medical condition, or disability) under state or federal law; claims for benefits (except where an employee benefit or pension plan specifies that its claims procedure shall culminate in an arbitration procedure different from this one), and claims for violation of any federal, state, or other governmental law, statute, regulation, or ordinance, except claims excluded in the Claims Not Covered section below." The next section was entitled "Claims Not Covered by the Agreement." It consisted of the following language, "Claims that Employee may have for workers' compensation, unemployment compensation benefits, or claims deemed not subject to arbitration under law are not covered by this Agreement. [¶] Upon a showing of reasonable cause, either party to this Agreement may petition a court of competent jurisdiction for immediate injunctive and/or equitable relief for unfair competition and/or the use and/or unauthorized disclosure or trade secrets or confidential information."

Catalina Defendants insisted that all of the claims were subject to arbitration under the Arbitration Agreement. Further, the Arbitration Agreement must be enforced by its terms. The trial court must dismiss the class claims as Lacayo clearly executed a class action waiver. Lacayo's UCL claim was not precluded from arbitration. The Arbitration Agreement provided that all disputes arising out of Lacayo's employment were subject to arbitration.


Lacayo filed opposition to the Motion. Lacayo rejected that the UCL claim was subject to arbitration based upon the Arbitration Agreement language, which provided that claims not covered by the agreement included "immediate injunctive and/or equitable relief for unfair competition." Lacayo also alleged she was going to amend the Complaint to include a Labor Code Private Attorneys' General Act of 2004 (PAGA) claim, which was not subject to arbitration.2 Further, the trial court should conclude that the class action waiver was unconscionable and the Arbitration Agreement was procedurally and substantively unconscionable.

Catalina Defendants filed a reply to the opposition to the Motion. Catalina Defendants insisted the Arbitration Agreement was neither procedurally nor substantively unconscionable. Catalina Defendants insisted Lacayo had misread the Arbitration Agreement as it pertained to arbitration of UCL claims. The Arbitration Agreement did not preclude arbitration of a UCL claim because it included permissive language. Catalina Defendants also claimed Lacayo was not entitled to injunctive relief because she no longer worked for Catalina Defendants. Further, the class action waiver was valid; the class claims must be dismissed.


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