Viking River Cruises, Inc. v. Moriana

• Court: United States Supreme Court
• Citation: 142 S.Ct. 1906,213 L.Ed.2d 179
• Docket Number: 20-1573
• Parties: VIKING RIVER CRUISES, INC., Petitioner v. Angie MORIANA
• Decision Date: 15 June 2022

142 S.Ct. 1906
213 L.Ed.2d 179

VIKING RIVER CRUISES, INC., Petitioner
v.
Angie MORIANA

No. 20-1573

Supreme Court of the United States.

Argued March 30, 2022
Decided June 15, 2022

Paul D. Clement, Washington, DC, for Petitioner.

Scott L. Nelson, Washington, DC, for Respondent.

Douglas A. Wickham, Ian T. Maher, Littler Mendelson, P.C., Los Angeles, CA, Paul D. Clement, Counsel of Record, George W. Hicks, Jr., Michael D. Lieberman, Darina Merriam, Kirkland & Ellis LLP, Washington, DC, for Petitioner.

Scott L. Nelson, Public Citizen, Litigation Group, Washington, DC, Michael Rubin, Altshuler Berzon Llp, San Francisco, CA, Kevin T. Barnes, Counsel of Record, Gregg Lander, Law Offices of Kevin T. Barnes, Los Angeles, CA, for Respondent.

Justice ALITO delivered the opinion of the Court.^*

We granted certiorari in this case to decide whether the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. , preempts a rule of California law that invalidates contractual waivers of the right to assert representative claims under California's Labor Code Private Attorneys General Act of 2004. Cal. Lab. Code Ann. § 2698 et seq. (West 2022).

I

A

The California Legislature enacted the Labor Code Private Attorneys General Act (PAGA) to address a perceived deficit in the enforcement of the State's Labor Code. California's Labor and Workforce Development Agency (LWDA) had the authority to bring enforcement actions to impose civil penalties on employers for violations of many of the code's provisions. But the legislature believed the LWDA did not have sufficient resources to reach the

142 S.Ct. 1914

appropriate level of compliance, and budgetary constraints made it impossible to achieve an adequate level of financing. The legislature thus decided to enlist employees as private attorneys general to enforce California labor law, with the understanding that labor-law enforcement agencies were to retain primacy over private enforcement efforts.

By its terms, PAGA authorizes any "aggrieved employee" to initiate an action against a former employer "on behalf of himself or herself and other current or former employees" to obtain civil penalties that previously could have been recovered only by the State in an LWDA enforcement action. Cal. Lab. Code Ann. § 2699(a). As the text of the statute indicates, PAGA limits statutory standing to "aggrieved employees"—a term defined to include "any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed." § 2699(c). To bring suit, however, an employee must also exhaust administrative remedies. That entails providing notice to the employer and the LWDA of the violations alleged and the supporting facts and theories. § 2699.3(a)(1)(A). If the LWDA fails to respond or initiate an investigation within a specified timeframe, the employee may bring suit. § 2699.3(a)(2). In any successful PAGA action, the LWDA is entitled to 75 percent of the award. § 2699(i). The remaining 25 percent is distributed among the employees affected by the violations at issue. Ibid.

California law characterizes PAGA as creating a "type of qui tam action,"¹ Iskanian v. CLS Transp. Los Angeles, LLC , 59 Cal.4th 348, 382, 327 P.3d 129, 148, 173 Cal.Rptr.3d 289 (2014). Although the statute's language suggests that an "aggrieved employee" sues "on behalf of himself or herself and other current or former employees," § 2699(a), California precedent holds that a PAGA suit is a " ‘representative action’ " in which the employee plaintiff sues as an " ‘agent or proxy’ " of the State. Id. , at 380, 173 Cal.Rptr.3d 289, 327 P.3d at 147 (quoting Arias v. Superior Court , 46 Cal.4th 969, 986, 95 Cal.Rptr.3d 588, 209 P.3d 923, 933 (2009) ).

As the California courts conceive of it, the State "is always the real party in interest in the suit." Iskanian , 59 Cal.4th at 382, 173 Cal.Rptr.3d 289, 327 P.3d at 148.² The primary function of PAGA is to

142 S.Ct. 1915

delegate a power to employees to assert "the same legal right and interest as state law enforcement agencies," Arias , 46 Cal.4th at 986, 95 Cal.Rptr.3d 588, 209 P.3d at 933. In other words, the statute gives employees a right to assert the State's claims for civil penalties on a representative basis, but it does not create any private rights or private claims for relief. Iskanian , 59 Cal.4th at 381, 173 Cal.Rptr.3d 289, 327 P.3d at 148 ; see also Amalgamated Transit , 46 Cal.4th 993, 1002, 95 Cal.Rptr.3d 605, 209 P.3d 937, 943 (2009). The code provisions enforced through the statute establish public duties that are owed to the State, not private rights belonging to employees in their "individual capacities." Iskanian , 59 Cal.4th at 381, 173 Cal.Rptr.3d 289, 327 P.3d at 147. Other, distinct provisions of the code create individual rights, and claims arising from violations of those rights are actionable through separate private causes of action for compensatory or statutory damages. Id., at 381–382, 173 Cal.Rptr.3d 289, 327 P.3d at 147–148 ; see also Kim v. Reins Int'l California, Inc. , 9 Cal.5th 73, 86, 259 Cal.Rptr.3d 769, 459 P.3d 1123, 1130 (2020) ("[C]ivil penalties recovered on the state's behalf are intended to remediate present violations and deter future ones, not to redress employees’ injuries" (internal quotation marks omitted; emphasis deleted)). And because PAGA actions are understood to involve the assertion of the government's claims on a derivative basis, the judgment issued in a PAGA action is binding on anyone "who would be bound by a judgment in an action brought by the government." Arias , 46 Cal.4th at 986, 95 Cal.Rptr.3d 588, 209 P.3d at 933.

California precedent also interprets the statute to contain what is effectively a rule of claim joinder. Rules of claim joinder allow a party to unite multiple claims against an opposing party in a single action. See 6A C. Wright, H. Miller, & E. Cooper, Federal Practice and Procedure § 1582 (3d ed. 2016) (Wright & Miller). PAGA standing has the same function. An employee with statutory standing may "seek any civil penalties the state can, including penalties for violations involving employees other than the PAGA litigant herself." ZB, N. A. v. Superior Court , 8 Cal.5th 175, 185, 252 Cal.Rptr.3d 228, 448 P.3d 239, 243–244 (2019). An employee who alleges he or she suffered a single violation is entitled to use that violation as a gateway to assert a potentially limitless number of other violations as predicates for liability. This mechanism radically expands the scope of PAGA actions. The default penalties set by PAGA are $100 for each aggrieved employee per pay period for the initial violation and $200 for each aggrieved employee per pay period for each subsequent violation. Cal. Lab. Code Ann. § 2699(f)(2). Individually, these penalties are modest; but given PAGA's additive dimension, low-value claims may easily be welded together into high-value suits.

B

Petitioner Viking River Cruises, Inc. (Viking), is a company that offers ocean and river cruises around the world. When respondent Angie Moriana was hired by

142 S.Ct. 1916

Viking as a sales representative, she executed an agreement to arbitrate any dispute arising out of her employment. The agreement contained a "Class Action Waiver" providing that in any arbitral proceeding, the parties could not bring any dispute as a class, collective, or representative PAGA action. It also contained a severability clause specifying that if the waiver was found invalid, any class, collective, representative, or PAGA action would presumptively be litigated in court. But under that severability clause, if any "portion" of the waiver remained valid, it would be "enforced in arbitration."

After leaving her position with Viking, Moriana filed a PAGA action against Viking in California court. Her complaint contained a claim that Viking had failed to provide her with her final wages within 72 hours, as required by §§ 101 – 102 of the California Labor Code. But the complaint also asserted a wide array of other code violations allegedly sustained by other Viking employees, including violations of provisions concerning the minimum wage, overtime, meal periods, rest periods, timing of pay, and pay statements. Viking moved to compel arbitration of Moriana's "individual" PAGA claim—here meaning the claim that arose from the violation she suffered—and to dismiss her other PAGA claims. The trial court denied that motion, and the California Court of Appeal affirmed, holding that categorical waivers of PAGA standing are contrary to state policy and that PAGA claims cannot be split into arbitrable individual claims and nonarbitrable "representative" claims.

This ruling was dictated by the California Supreme Court's decision in Iskanian . In that case, the court held that pre-dispute agreements to waive the right to bring "representative" PAGA claims are invalid as a matter of public policy. What, precisely, this holding means requires some explanation. PAGA's unique features have prompted the development of an entire vocabulary unique to the statute, but the details, it seems, are still being worked out. An unfortunate feature of this lexicon is that it tends to use the word "representative" in two distinct ways, and each of those uses of the term "representative" is connected...