Page v. D.O.S. Pizza, Inc.

• Decision Date: 24 April 2020
• Docket Number: B292810
• Court: California Court of Appeals Court of Appeals
• Parties: LEMUEL AGUST PAGE, Plaintiff and Respondent, v. D.O.S. PIZZA, INC., Defendant and Appellant.

LEMUEL AGUST PAGE, Plaintiff and Respondent, v. D.O.S. PIZZA, INC., Defendant and Appellant.

B292810

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION THREE

April 24, 2020

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BC695275)

APPEAL from an order of the Superior Court of Los Angeles County, Elihu Berle, Judge. Affirmed.

Zaller Law Group, Anthony J. Zaller, Anne McWilliams, Monica Penichet-Coates and Michael E. Thompson for Defendant and Appellant.

Kingsley & Kingsley, Eric B. Kingsley and Ariel J. Stiller for Plaintiff and Respondent.

____________________ D.O.S. Pizza, Inc. (D.O.S.) appeals from the order of the trial court denying its motion to compel arbitration of the complaint brought by Lemuel Agust Page (Page) alleging a single cause of action for civil penalties under the Private Attorneys General Act of 2004 (PAGA) (Lab. Code,¹ § 2698 et seq.). We conclude that the PAGA complaint is not subject to arbitration. Accordingly, we affirm the order.

BACKGROUND

The sole cause of action in the operative complaint, brought on behalf of Page and other aggrieved employees of D.O.S., seeks penalties under PAGA for D.O.S.'s wage statement violations and its failure to provide rest breaks and meal periods, all contrary to sections 203, 226, subdivision (a), 226.7, and 512. The complaint alleges that Page notified the Labor and Workforce Development Agency (LWDA), the agency that enforces California's labor laws, of his intent to seek PAGA penalties.

D.O.S. moved to compel arbitration of Page's individual claim and to enforce his waiver of the PAGA representative action. The premise of D.O.S.'s motion was that the complaint was subject to a binding arbitration agreement (the agreement) executed by Page and D.O.S. at the commencement of Page's employment. LWDA is not a party to the agreement.

The agreement states in pertinent part that it "shall apply to any claim or dispute arising out of or related to the employment relationship or its termination including, but not limited to, claims of . . . violation of statute, nonpayment of wages, and all other similar claims." (Italics added.)

The agreement also prohibits arbitration of class and representative PAGA actions. It reads in relevant part, "the Arbitrator shall not consolidate or combine the resolution of any claim or dispute between the two Parties to this . . . Agreement with the resolution of any claim by any other party or parties, including but not limited to any other employee of the Company. Nor shall the Arbitrator have the authority to certify a class under [federal or state law] . . . and the Arbitrator shall not decide claims on behalf of any other party or parties on a class or any representative basis, including under [PAGA]." (Italics added.)

Additionally, the agreement establishes that the procedural and substantive provisions of the Federal Arbitration Act (9 U.S.C. § 1 et seq.) (the FAA), federal decisional law construing the FAA, and the rules of the arbitrator govern procedural issues under the agreement.

The trial court denied D.O.S.'s motion, finding that the PAGA claim could not be compelled to arbitration. D.O.S. timely appealed.

DISCUSSION

D.O.S. contends that the agreement to arbitrate is enforceable. It argues that the FAA and federal procedural and substantive decisional law govern the agreement and the parties expressly agreed to the choice of federal law, which law requires enforcement of the parties' agreement to arbitrate Page's statutory claims and to waive representative actions. D.O.S. also argues that under federal law, Page's individual PAGA claim can be compelled to arbitration, even if the representative claim cannot.

I. PAGA

The California Labor Code authorizes LWDA to collect civil penalties from employers for specified labor law violations. (Julian v. Glenair, Inc. (2017) 17 Cal.App.5th 853, 865 (Julian).) The Legislature enacted PAGA to enhance the state's enforcement of labor laws by allowing aggrieved employees, acting as private attorneys general, to recover civil penalties for violations, with the understanding that the enforcement agencies are to retain primacy over private enforcement efforts. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 379 (Iskanian).)

PAGA works by empowering aggrieved employees to act as LWDA's proxy or agent to bring representative actions to recover statutory civil penalties for their employers' violations. (Julian, supra, 17 Cal.App.5th at p. 865.) A PAGA action is " 'a substitute for an action brought by the government itself' " (ibid.), where the governmental entity "is always the real party in interest" (Iskanian, supra, 59 Cal.4th at p. 382). Of the civil penalties recovered, LWDA receives 75 percent, while the remaining 25 percent goes to the aggrieved employees. (Julian, at p. 865.) To obtain authority to prosecute and collect the penalties, PAGA requires aggrieved employees to give LWDA notice. (§§ 2699, subd. (a), 2699.3, subd. (a)(1)(A).)

Accordingly, a PAGA claim is a type of qui tam representative action. (Iskanian, supra, 59 Cal.4th at p. 382.) " 'Traditionally, the requirements for enforcement by a citizen in a qui tam action have been (1) that the statute exacts a penalty; (2) that part of the penalty be paid to the informer; and (3) that, in some way, the informer be authorized to bring suit to recover the penalty.' [Citation.] PAGA conforms to these traditionalcriteria, except that a portion of the penalty goes not only to the citizen bringing the suit but to all employees affected by the Labor Code violation." (Ibid., italics omitted.)

Penalties under PAGA are unique to that statute. "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." (Iskanian, supra, 59 Cal.4th at p. 381; see ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 197 [§ 558 unpaid wage action for compensatory relief different from PAGA civil penalties].) Therefore, a suit to recover statutory civil penalties under PAGA is " ' "fundamentally a law enforcement action designed to protect the public and not to benefit private parties." ' " (Iskanian, at p. 387.)

Additionally, PAGA "forecloses separate but similar actions by different employees against the same employer." (Julian, supra, 17 Cal.App.5th at p. 866.) " 'Because an aggrieved employee's action under the [PAGA] functions as a substitute for an action brought by the government itself, a judgment in that action binds all those, including nonparty aggrieved employees, who could be bound by a judgment in an action brought by the government. The act authorizes a representative action only for the purpose of seeking statutory penalties for Labor Code violations.' " (Iskanian, supra, 59 Cal.4th at p. 381.) For this reason, "[a]ll PAGA claims are 'representative' actions in the sense that they are brought on the state's behalf." (ZB, N.A. v. Superior Court, supra, 8 Cal.5th at p. 185; accord, Iskanian, at p. 380.)²

II. The FAA

"Congress enacted the FAA in response to judicial hostility to arbitration and to ensure that private arbitration agreements are enforced according to their terms." (Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 614 (Correia).) The FAA's section 2 preempts state laws inconsistent with the FAA's provisions and objectives. (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339.) "[A] state law contract defense is unenforceable if it applies only to arbitration contracts, derives its meaning from the fact an arbitration agreement is at issue, or interferes with the fundamental attributes of arbitration." (Correia, at p. 614.) However, state laws applying to arbitration contracts are enforceable to the extent they do not conflict with the FAA. (Correia, at p. 614.)

III. Iskanian and its progeny

In Iskanian, supra, 59 Cal.4th at page 360, the plaintiff signed an agreement providing that all claims arising out of his employment were to be submitted to arbitration and that the parties would not assert representative claims. The plaintiff alleged causes of action against his employer for violations of the Labor Code and alleged a PAGA claim. The appellate court affirmed the trial court's grant of the employer's motion to compel arbitration, reasoning that the plaintiff was obligated to arbitrate the PAGA claim but was barred from litigating that claim in a representative capacity. (Id. at pp. 361-362.)

On review, our Supreme Court in Iskanian, supra, 59 Cal.4th at pages 382 to 384 analyzed two issues: (1) whether arbitration agreements waiving employees' rights to bring representative PAGA actions in any forum were unenforceable, and (2) whether the FAA preempted state law rules precludingsuch waivers. With respect to the first issue, Iskanian, at page 383, held that waivers made before any dispute between the employee and employer arose-so-called predispute waivers-that required employees to relinquish the right to assert a PAGA claim on behalf of other employees, are unenforceable as a matter of state law because they "harm the state's interests in enforcing the Labor Code and in receiving the proceeds of civil penalties used to deter violations," and are contrary to public policy. Iskanian declared, "[a]n employee's right to bring a PAGA action is unwaivable." (Ibid.) The Supreme Court declined to decide whether a plaintiff could assert an individual PAGA claim despite a PAGA waiver, declaring simply that "a prohibition of representative claims frustrates the PAGA's objectives." (Id. at p. 384, italics omitted.)

Turning to the...