Argued
March 30, 2022
ON
WRIT OF CERTIORARI TO THE COURT OF APPEAL OF CALIFORNIA
SECOND APPELLATE DISTRICT
The
question for decision is whether the Federal Arbitration Act,
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 §2698 et seq. PAGA enlists employees as
private attorneys general to enforce California labor law. 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 enforcement
action brought by California's Labor and Workforce
Development Agency (LWDA). 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. Iskanian v. CLS Transp
Los Angeles, LLC, 59 Cal.4th 348, 380. California
precedent also interprets the statute to contain what is
effectively a rule of claim joinder-allowing a party to unite
multiple claims against an opposing party in a single action.
An employee with PAGA 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.
Respondent
Angie Moriana filed a PAGA action against her former employer
Viking River Cruises, alleging a California Labor Code
violation. She also asserted a wide array of other violations
allegedly sustained by other Viking employees. Moriana's
employment contract with Viking contained a mandatory
arbitration agreement. Important here, that agreement
contained both a "Class Action Waiver"-providing
that the parties could not bring any dispute as a class,
collective, or representative action under PAGA-and a
severability clause-
specifying that if the waiver was found invalid, such a
dispute would presumptively be litigated in court. Under the
severability clause, any "portion" of the waiver
that remained valid would be "enforced in
arbitration." Viking moved to compel arbitration of
Moriana's individual PAGA claim and to dismiss her other
PAGA claims. Applying California's Iskanian
precedent, the California courts denied that motion, holding
that categorical waivers of PAGA standing are contrary to
California policy and that PAGA claims cannot be split into
arbitrable "individual" claims and nonarbitrable
"representative" claims. This Court granted
certiorari to decide whether the FAA preempts the California
rule.
Held:
The FAA preempts the rule of Iskanian insofar as it
precludes division of PAGA actions into individual and
non-individual claims through an agreement to arbitrate. Pp.
7-21.
(a) Based on the principle that "[arbitration is
strictly 'a matter of consent, '" Granite
Rock Co. v. Teamsters, 561 U.S. 287, 299, this Court has
held that "a party may not be compelled under the FAA to
submit to class arbitration unless there is a contractual
basis for concluding that the party agreed to do
so," Stolt-Nielsen S. A. v. AnimalFeeds Int'l
Corp., 559 U.S. 662, 684. Because class-action
arbitration mandates procedural changes that are inconsistent
with the individualized and informal mode of bilateral
arbitration contemplated by the FAA, see AT&T
Mobility LLC v. Conception, 563 U.S. 333, 347, class
procedures cannot be imposed by state law without presenting
unwilling parties with an unacceptable choice between being
compelled to arbitrate using such procedures and forgoing
arbitration all together. Viking contends that the
Court's FAA precedents require enforcement of contractual
provisions waiving the right to bring PAGA actions because
PAGA creates a form of class or collective proceeding. If
this is correct, Iskanian's prohibition on PAGA
waivers presents parties with an impermissible choice: Either
arbitrate disputes using a form of class procedures, or do
not arbitrate at all. Moriana maintains that any conflict
between Iskanian and the FAA is illusory because
PAGA creates nothing more than a substantive cause of action.
This Court disagrees with both characterizations of the
statute. Moriana's premise that PAGA creates a unitary
private cause of action is irreconcilable with the structure
of the statute and the ordinary legal meaning of the word
"claim." A PAGA action asserting multiple
violations under California's Labor Code affecting a
range of different employees does not constitute "a
single claim" in even the broadest possible sense.
Viking's position, on the other hand, elides important
structural differences between PAGA actions and class
actions. A class-action plaintiff can raise a multitude of
claims because he or she
represents a multitude of absent individuals; a PAGA
plaintiff, by contrast, represents a single principal, the
LWDA, that has a multitude of claims. As a result, PAGA suits
exhibit virtually none of the procedural characteristics of
class actions.
This Court's FAA precedents treat bilateral arbitration
as the prototype of the individualized and informal form of
arbitration protected from undue state interference by the
FAA. See, e.g., Epic Systems Corp. v. Lewis, 584
U.S. __, __. Viking posits that a proceeding is
"bilateral" only if it involves two and only two
parties and "is conducted by and on behalf of the
individual named parties only." Wal-Mart Stores,
Inc. v. Dukes, 564 U.S. 338, 348. Thus,
Iskanian's prohibition on PAGA waivers is
inconsistent with the FAA because PAGA creates an
intrinsically representational form of action and
Iskanian requires parties either to arbitrate in
that format or forgo arbitration altogether.
This Court disagrees. Nothing in the FAA establishes a
categorical rule mandating enforcement of waivers of standing
to assert claims on behalf of absent principals. Non-class
representative actions in which a single agent litigates on
behalf of a single principal necessarily deviate from the
strict ideal of bilateral dispute resolution posited by
Viking, but this Court has never held that the FAA imposes a
duty on States to render all forms of representative standing
waivable by contract or that such suits deviate from the norm
of bilateral arbitration. Unlike procedures distinctive to
multiparty litigation, single-principal, single-agent
representative actions are "bilateral" in two
registers: They involve the rights of only the absent real
party in interest and the defendant, and litigation need only
be conducted by the agent-plaintiff and the defendant.
Nothing in this Court's precedent suggests that in
enacting the FAA, Congress intended to require States to
reshape their agency law governing who can assert
claims on behalf of whom to ensure that parties will
never have to arbitrate disputes in a proceeding that
deviates from bilateral arbitration in the strictest sense.
Pp. 7-17.
(b) PAGA's built-in mechanism of claim joinder is in
conflict with the FAA. Iskanian's prohibition on
contractual division of PAGA actions into constituent claims
unduly circumscribes the freedom of parties to determine
"the issues subject to arbitration" and "the
rules by which they will arbitrate," Lamps Plus,
Inc. v. Varela, 587 U.S.__, __, and does so in a way
that violates the fundamental principle that
"arbitration is a matter of consent,"
Stolt-Nielsen, 559 U.S., at 684. For that reason,
state law cannot condition the enforceability of an agreement
to arbitrate on the availability of a procedural mechanism
that would permit a party to expand the scope of the
anticipated arbitration by introducing claims that the
parties did not jointly agree to arbitrate.
A state rule imposing an expansive rule of joinder in the
arbitral context would defeat the ability of parties to
control which claims are subject to arbitration by permitting
parties to superadd new claims to the proceeding, regardless
of whether the agreement committed those claims to
arbitration. When made compulsory by way of
Iskanian, PAGA's joinder rule functions in
exactly this way. The effect is to coerce parties into
withholding PAGA claims from arbitration.
Iskanian's indivisibility rule effectively
coerces parties to opt for a judicial forum rather than
"forgo[ing] the procedural rigor and appellate review of
the courts to realize the benefits of private dispute
resolution." Stolt-Nielsen, 559 U.S., at 685.
Pp. 17-19.
(c) Under this Courts holding, Iskanian's
prohibition on wholesale waivers of PAGA claims is not
preempted by the FAA. But Iskanian's rule that
PAGA actions cannot be divided into individual and
non-individual claims is preempted, so Viking was entitled to
compel arbitration of Moriana's individual claim. PAGA
provides no mechanism to enable a court to adjudicate
non-individual PAGA claims once an individual claim has been
committed to a separate proceeding. And under PAGA's
standing requirement, a plaintiff has standing to maintain
non-individual PAGA claims in an action only by virtue of
also maintaining an individual claim in that action. As a
result, Moriana would lack statutory standing to maintain her
non-individual claims in court, and the correct course was to
dismiss her remaining claims. Pp. 20-21.
Reversed
and remanded.
ALITO
J., delivered the opinion of the Court, in which BREYER
SOTOMAYOR, KAGAN, and GORSUCH, JJ., joined, in which ROBERTS,
C. J., joined as to Parts I and III, and in which KAVANAUGH
and BARRETT, JJ., joined as to Part III. SOTOMAYOR, J., filed
a concurring opinion. BARRETT, J., filed an...