2014-00159707-CU-OE

Ian Alvarado vs. Lewis Operating Corp.

Nature of Proceeding: Petition to Compel Arbitration

Filed By: Awrey, Jennifer A.

Defendant Lewis Operating Corp.’s (“Defendant”) Motion to Compel Arbitration is
GRANTED as to the first and second causes of action. The third cause of action is
ordered SEVERED, and the action is ordered STAYED.

Plaintiff’s First Amended Complaint, filed April 16, 2014, alleges three causes of
action: the first for “failure to pay wages owed,” the second for “unfair business
practices,” and a third for “penalties pursuant to the private attorney general act of
2004” pursuant to Labor Code §§ 2698, et seq. Plaintiff, a former employee of
Defendant, brings these claims on behalf of himself individually and on behalf of a
putative class.

Defendant bases its motion upon an arbitration clause in an employment offer letter to
Plaintiff Ian Alvarado (“Plaintiff”), the contents of an employee handbook provided to
Plaintiff, and an arbitration agreement signed by Plaintiff on October 10, 1013.

Plaintiff filed an “Opposition” to Defendant’s motion, but therein he clarifies that “[a]fter
careful review of the case law, the arbitration agreement, and the moving papers,” he
“does not oppose the Motion to Compel Arbitration as it relates to [his] claims for
unpaid wages and unlawful business practices, but does oppose the Motion to Compel
Arbitration as it relates to Plaintiff’s PAGA claim.” (Pl.’s Oppo. at 2.) Plaintiff argues
that the PAGA cause of action may not be arbitrable, citing Brown v. Ralphs Grocery
Co. (2011) 197 Cal.App.4th 489, 501 as well as Iskanian (Arshavir) v. CLS
Transportation of Los Angeles LLC (Sept. 19, 2012) 2012 Cal. LEXIS 8925, which is
currently being reviewed by the California Supreme Court. (Id. at 3-4.)

The Court notes that while the Opposition was filed one day late, the Court in its
discretion has considered the Opposition, as well as Defendant’s substantive Reply
thereto.

Accordingly, as to Plaintiff’s first and second causes of action, Defendant’s motion to
compel arbitration is GRANTED, and GRANTED as to Defendant’s request (Def.’s Ps
& As at 9) that the case be stayed pending the outcome of the arbitration.

Third Cause of Action (Private Attorneys General Act (“PAGA”))

As to Plaintiff’s third cause of action for violation of the PAGA, that cause of action is a
representative action on behalf of the State of California. The purpose of the PAGA is
not to recover damages or restitution, but to create a means of “deputizing” citizens as
private attorneys general to enforce the Labor Code, by seeking civil penalties under
the PAGA to punish and deter employer practices that violate the rights of numerous
employees under the Labor Code. (Brown v. Ralphs Grocery Co. (2011) 197
Cal.App.4th 489, 501.) As explained in Dunlap v. Superior Court (2006) 142
Cal.App.4th 330, 337, the PAG Act was adopted to augment the enforcement abilities
of the Labor Commissioner with a private attorney general system for labor law
enforcement. “The Legislature declared its intent as follows: ‘(c) Staffing levels for
state labor law enforcement agencies have, in general, declined over the last decade
and are likely to fail to keep up with the growth of the labor market in the future. [¶] (d)
It is therefore in the public interest to provide that civil penalties for violations of the
Labor Code may also be assessed and collected by aggrieved employees acting as
private attorneys general, while also ensuring that state labor law enforcement
agencies’ enforcement actions have primacy over any private enforcement efforts
undertaken pursuant to this act.’ (Stats. 2003, ch. 906, § 1, italics added.)” (142
Cal.App.4th at p. 337.)

Under Brown, an agreement that waived a PAG Act claim is illegal and unenforceable.
The Brown court determined that the relatively recent decision of the United States
Supreme Court in AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740, which
held that California decisional law invalidating class action waivers in consumer
arbitration agreements is preempted by the Federal Arbitration Act (9 U.S.C. §§ 1 et
seq.; (“FAA”)), does not apply to representative actions under the PAGA, and that the
waiver of plaintiff’s right to pursue a representative action under the PAGA was not
enforceable under California law. The Court notes that here, Plaintiff has not argued
that the arbitration provisions identified in Defendant’s moving papers are
unenforceable.

In more recent case of Iskanian, however, the appellate court disagreed with the
Brown decision and applied Concepcion to the PAGA, explaining that “the public policy
reasons underpinning the PAGA do not allow a court to disregard a binding arbitration
agreement. The FAA preempts any attempt by a court or state legislature to insulate a
particular type of claim from arbitration.” (Iskanian (Arshavir) v. CLS Transportation of
Los Angeles, LLC (Sept. 19, 2012) 206 Cal.App.4th 949, 966 (on review at Iskanian v.
CLS Transportation Los Angeles, LLC (2012) 2012 Cal. App. LEXIS 8925).) The
Iskanian court concluded that requiring courts to determine whether to impose class
arbitration on parties who contractually rejected it cannot be considered consistent with
the FAA objective of enforcing arbitration agreements according to their terms, even if
it is desirable for unrelated reasons. (Id. at 960.) The California Supreme Court has
not yet issued any final ruling with respect to Iskanian and whether PAGA claims are
arbitrable. Plaintiff notes that Iskanian and recent appellate cases involving this issue
have either been depublished (i.e. Iskanian) or not published. (Pl.’s Oppo. at 4 (citing
cases).) The Court’s reference here to Iskanian is not to cite it, but, rather, to provide
context to the tentative ruling. See, e.g. Cal Rules of Court, Rule 8.1115.

In its Reply, Defendant predicts that “it is unlikely that [the Iskanian] finding will
change,” citing exclusively federal district court authorities suggesting that PAGA
claims are arbitrable in the wake of Concepcion, and Defendant urges that “there is no
indication that Iskanian’s holding with respect to the arbitrability of PAGA claims will
change given that it is directly aligned with the logic of Concepcion.” (Reply at 3-4.)

The arbitration clauses emphasized in Defendant’s briefing do not expressly reference
“representative” actions; however, they do provide that “any and all disputes” will be
“resolved exclusively through arbitration.” (Def.’s Ps & As at 3-4.) Giving effect to the
express terms of the arbitration clauses here, under an Iskanian rationale, all of
Plaintiff’s claims, including representative claims under the PAGA, would be subject to
arbitration. However, Iskanian is under review and not citable. Yet, Brown is not
under review and remains citable, although Defendant’s Reply does not address it. (
See Brown, supra, 197 Cal.App.4th at 501-02.) Ultimately, given the unsettled nature
of the issue and because the opinion in Iskanian is not yet final, this Court SEVERS
the third cause of action under the PAGA, and orders the remaining causes of action
to arbitration.

This ruling is WITHOUT PREJUDICE to Defendant’s ability to file a subsequent motion to compel arbitration as to Plaintiff’s PAGA cause of action following issuance of the
California Supreme Court’s decision in Iskanian.

Incorrect Address

Moving party’s Amended Notice of Motion indicated the incorrect address. The correct
address for Department 53 of the Sacramento County Superior Court is 800 9th Street
, Sacramento, California, 95814. Moving party shall notify responding party(ies)
immediately.

Tentative Ruling System

Moving party’s Notice of Motion and Amended Notice of Motion do not provide notice
of the Court’s tentative ruling system, as required by California Rule of Court 3.1308
and Local Rule 1.06(D). Moving party is directed to contact non-moving party forthwith
and advise of Local Rule 1.06(D) and the Court’s tentative ruling procedure. If moving
party is unable to contact non-moving party prior to hearing, moving party shall be
available at the hearing, in person or by telephone, in the event non-moving party
appears without following the procedures set forth in Local Rule 1.06(B).

Moving party shall submit a formal order for the Court’s signature, pursuant to C.R.C.,
Rule 3.1312.