Case Name: Ceneca Williams v. Corinthian International Parking Services, Inc., et al.
Case No.: 18-CV-333741

This is a putative class action alleging wage and hour violations by defendant Corinthian International Parking Services, Inc. Before the Court are Corinthian’s motion to compel arbitration and stay these proceedings and its demurrer to plaintiff’s fourth cause of action under the Private Attorneys General Act (“PAGA”). Plaintiff opposes both motions.

I. Allegations of the Operative Complaint

As alleged in the operative complaint, defendant provides transportation services to clients in California, particularly in the Bay Area. (First Amended Class and Representative Action Complaint (“FAC”), ¶ 8.) Plaintiff was employed by defendant as a driver from April 2016 to August 2017 as a non-exempt employee. (Ibid.) She alleges that defendant failed to provide legally compliant rest breaks and failed to reimburse employees for expenses, including costs associated with employer-mandated use of personal cell phones. (Id. at ¶ 22.) As a result, defendant failed to provide accurate itemized wage statements in violation of the Labor Code. (Id. at ¶ 23.) Finally, defendant failed to provide toilet facilities for drivers in violation of Labor Code section 2350. (Id. at ¶ 45.)

Based on these allegations, plaintiff brings claims for (1) violation of Labor Code section 226.7 by failing to provide rest breaks; (2) violation of Labor Code section 226, subdivision (a) by failing to provide accurate itemized wage statements; (3) violation of Labor Code section 2802 by failing to indemnify employees for business expenses; (4) penalties under PAGA; and (5) violations of the Unfair Competition Law (“UCL”).

In her original complaint, filed on August 29, 2018, plaintiff named an entity called Corinthian Ground Transportation L.A., Inc. as the defendant to this action. On September 21, she filed an amendment to the complaint naming Corinthian International Parking Services, Inc. as the defendant.

II. Motion to Compel Arbitration

Corinthian moves to compel arbitration of plaintiff’s first through third and fifth causes of action and to stay her PAGA claim. It urges that plaintiff voluntarily executed an arbitration agreement offered after she began her employment, which is enforceable and not unconscionable. Plaintiff responds that defendant has not properly authenticated the agreement upon which its motion is based; defendant has waived the right to compel arbitration by litigating wage and hour actions against other plaintiffs; and her employment falls within an exemption to the Federal Arbitration Act (“FAA”), so that she has a right to proceed in court under California law.

A. Legal Standard

Code of Civil Procedure section 1281.2 provides that a court must grant a petition to compel arbitration “if it determines that an agreement to arbitrate … exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement,” among other exceptions. (Code Civ. Proc., § 1281.2; see also 9 U.S.C. § 3 [the court must grant a motion to compel arbitration if any suit is brought upon “any issue referable to arbitration under an agreement for such arbitration”].)

The moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. (See Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 396 [under both federal and state law, “the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate”]; Rosenthal v. Great Western Fin’l Securities Corp. (1996) 14 Cal.4th 394, 413 [moving party’s burden is a preponderance of the evidence].) The burden then shifts to the resisting party to prove a ground for denial. (Rosenthal v. Great Western Fin’l Securities Corp., supra, 14 Cal.4th at p. 413.)

If the court orders arbitration “of a controversy which is an issue involved in [the] action or proceeding pending before [it], the court … shall, upon motion of a party …, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.) “If the issue which is the controversy subject to arbitration is severable, the stay may be with respect to that issue only.” (Ibid.)

B. Existence and Scope of Agreement to Arbitrate

Plaintiff does not appear to dispute that she executed the arbitration agreement upon which defendant’s motion is based. Still, she objects to the introduction of the agreement on grounds of lack of authentication, lack of personal knowledge, and hearsay. These objections are well-taken and are SUSTAINED. The agreement is presented as an exhibit to the declaration of Corinthian’s outside counsel, Susan E. Bishop. The declaration provides no indication that Ms. Bishop is personally familiar with or able to authenticate Corinthian documents. This is a fundamental defect that must be addressed in order for the Court to find that an agreement to arbitrate exists. (See Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 64 [employer did not meet its burden on motion to compel arbitration where it “failed to provide testimony from anyone who was present during [the employee’s] orientation, who gave or sent [the employee] an employee handbook, or who could explain how the orientation was conducted or what [orientation checklists that purported to show a handbook was provided to the employee] mean”]; Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 843-846 [affirming denial of motion where employer did not properly authenticate acknowledgement form it claimed employee had executed electronically].)

On reply, defendant cites Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215 for the proposition that a party petitioning to compel arbitration need not authenticate the arbitration agreement upon which its motion is based. However, Condee was called into doubt by a subsequent opinion by the same Court of Appeal, Toal v. Tardif (2009) 178 Cal.App.4th 1208. As discussed in Toal, “our Supreme Court has clearly stated [in Rosenthal v. Great Western Fin’l Securities Corp., supra, 14 Cal.4th 394] that a court, before granting a petition to compel arbitration, must determine the factual issue of ‘the existence or validity of the arbitration agreement’ ” by a preponderance of the evidence. (Toal v. Tardif, supra, 178 Cal.App.4th at pp. 1219-1220.) Toal specifically noted that “[t]o the extent Condee conflicts with Rosenthal, our Supreme Court’s decision is controlling.” Consistent with Toal, the Court finds that an arbitration agreement submitted in support of a petition to compel arbitration must be authenticated.

Given the likelihood that defendant can cure this evidentiary defect, the Court will address plaintiff’s remaining arguments in opposition to its motion. On reply, defendant submitted a declaration by its president and owner, which appears to properly authenticate the arbitration agreement. Still, the Court will continue defendant’s motion to permit plaintiff to respond to this new evidence. This continuance will also allow the parties to meet and confer on an informal resolution to defendant’s motion in light of the Court’s tentative ruling on plaintiff’s arguments below.

Plaintiff does not dispute that the agreement, if admissible, would cover the employment claims alleged in this action, with the exception of her PAGA claim. She correctly notes, however, that the agreement provides disputes “must be submitted for non-binding mediation before a third-party neutral and (if necessary) for final and binding resolution by a private and impartial arbitrator, to be jointly selected by [the employee] and Corinthian.” It appears that no such mediation has yet occurred. In the event that the parties are unable to agree to an informal resolution of defendant’s motion, they shall submit supplemental briefing addressing the procedure through which the Court should enforce the mediation prerequisite should it find that the arbitration agreement must be enforced.

C. Applicability of the FAA and Labor Code Section 229

Under the FAA, arbitration provisions may not be invalidated “by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339 (“Concepcion”); see also McGill v. Citibank, N.A. (2017) 2 Cal.5th 945, 962 [discussing Concepcion].) Among the defenses preempted by the FAA is Labor Code section 229, which provides that “[a]ctions to enforce the provisions of this article for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.” (See Perry v. Thomas (1987) 482 U.S. 483 [the FAA preempts Labor Code section 229].)

Plaintiff contends that she qualifies for an exemption to the FAA for transportation workers, and may consequently still invoke the protections of Labor Code section 229. While there is no evidence in the record to support such a finding, defendant also submitted no evidence to show that the FAA applies to this action with its moving papers, an issue on which defendant bears the burden of proof. (See Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 687–688 [“[a] party seeking to enforce an arbitration agreement has the burden of showing FAA preemption” and must, for example, introduce evidence showing “that the subject matter of the agreement involves interstate commerce”].) Consequently, the Court will address plaintiff’s argument that section 229 applies to her claims.

Section 229 encompasses claims for unpaid wages under the provisions of the article in which it is found, namely, “article 1 of division 2, part I, chapter 1 of the Labor Code, encompassing sections 200 through 244.” (Lane v. Francis Capital Management LLC, supra, 224 Cal.App.4th at p. 684.) Here, however, plaintiff brings claims for rest break violations under Labor Code section 226.7, wage statement violations under Labor Code section 226, failure to reimburse business expenses under Labor Code section 2802, and failure to provide toilet facilities in violation of Labor Code section 2350, along with derivative claims. These are not claims for unpaid wages under Labor Code sections 200 through 400. (See ibid. [claims for failure to provide meal or rest breaks and for wage statement violations are not subject to section 229].)

Consequently, even if the FAA does not apply to this action as an initial matter or because plaintiff’s employment falls within an exemption, Labor Code section 229 does not apply to plaintiff’s claims. The Court will not deny defendant’s motion on this ground.

D. Waiver

Finally, assuming that an enforceable arbitration agreement exists, plaintiff contends that Corinthian has waived its right to compel arbitration by defending putative wage and hour class actions by other employees in court. In support of this argument, she cites cases addressing a party’s participation in litigation against the same party against which it seeks to enforce an arbitration agreement. The Court is unaware of any authority finding a waiver based on a party’s litigation conduct in cases involving third parties.

Whether the FAA or California law ultimately governs here, there is “a strong policy favoring arbitration agreements,” which “requires close judicial scrutiny of waiver claims.” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195.) “Although a court may deny a petition to compel arbitration on the ground of waiver (§ 1281.2, subd. (a)), waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof.” (Ibid.)

“Both state and federal law emphasize that no single test delineates the nature of the conduct that will constitute a waiver of arbitration.” (St. Agnes Medical Center v. PacifiCare of California, supra, 31 Cal.4th at p. 1195.) California courts have found a waiver in situations including where the party seeking to compel arbitration has previously taken steps inconsistent with an intent to invoke arbitration; the petitioning party has unreasonably delayed in undertaking the procedure; and where bad faith or willful misconduct are found. (Id. at pp. 1195-1196.) The court may consider the following factors:

(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) ‘whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place’; and (6) whether the delay ‘affected, misled, or prejudiced’ the opposing party.

(Sobremonte v. Superior Court (Bank of America Nat. Trust and Sav. Ass’n) (1998) 61 Cal.App.4th 980, 992, internal citations and quotations omitted.)

This issue of prejudice to the opposing party is critical to the analysis. (See St. Agnes Medical Center v. PacifiCare of California, supra, 31 Cal.4th at pp. 1203-1204.) “[M]erely participating in litigation”—even in the same case the proponent seeks to arbitrate—“by itself, does not result in a waiver”; rather, “[p]rejudice typically is found only where the petitioning party’s conduct has substantially undermined [the] public policy [in favor of arbitration] or substantially impaired the other side’s ability to take advantage of the benefits and efficiencies of arbitration.” (Ibid.)

Here, plaintiff does not even attempt to explain how she could be prejudiced by Corinthian’s litigation of claims brought by other employees. Nor is there evidence of even a general inconsistency in defendant’s approach: while plaintiff assumes that the other employees executed the same arbitration agreement that she apparently did, there is no evidence of this in the record, and the agreement was not presented to plaintiff until after the other actions were filed. Defendant’s litigation of claims filed by other employees is irrelevant to its right to arbitrate plaintiff’s claims and has not impacted plaintiff’s ability to enjoy the benefits of arbitration in this case.

E. Conclusion and Order

The hearing on defendant’s motion to compel arbitration is CONTINUED to June 14, 2019 at 9:00 A.M. in Department 1. The parties shall meet and confer in an attempt to reach an agreement regarding the resolution of this motion in light of the Court’s tentative ruling above.

If the parties are unable to reach agreement, plaintiff shall file any objections or other response to defendant’s new evidence submitted with its reply papers by May 17. Also by May 17, the parties shall file supplemental briefs of up to five pages addressing the procedure through which the Court should enforce the arbitration agreement’s mediation prerequisite assuming it finds that the agreement must be enforced.

III. Demurrer to the Fourth Cause of Action

In the event that plaintiff’s other claims proceed to arbitration, the Court will stay her PAGA claim. (See Franco v. Arakelian Enterprises, Inc. (2015) 234 Cal.App.4th 947, 966 [“[b]ecause the issues subject to litigation under the PAGA might overlap those that are subject to arbitration of Franco’s individual claims, the trial court must order an appropriate stay of trial court proceedings”].) Accordingly, it will defer ruling on the demurrer to the PAGA claim until the arbitration issue is resolved.

The hearing on defendant’s demurrer is also CONTINUED to June 14, 2019 at 9:00 A.M. in Department 1.

The Court will prepare the order.