Filed 11/19/19 McCray v. Wireless World, LLC CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

LESHAWN MCCRAY et al.,

Plaintiffs and Respondents,

v.

WIRELESS WORLD, LLC et al.,

Defendants and Appellants.

D074857

(Super. Ct. No. 37-2018-00005597- CU-OE-CTL)

APPEAL from an order of the Superior Court of San Diego County, Joan M. Lewis, Judge. Reversed and remanded with directions.

Skane Wilcox, Elizabeth A. Skane, Joel P. Glaser; Klinedinst, Thomas E. Daugherty and G. Dale Britton for Defendants and Appellants.

GrahamHollis, Graham S.P. Hollis, Nicole R. Roysdon and Kathryn M. Evans for Plaintiffs and Respondents.

Under the Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.), an employee may seek civil penalties for Labor Code violations committed against the employee and other “aggrieved employees” by bringing a representative action against the employer on behalf of the state. (Lab. Code, § 2699, subd. (a).) In Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian), our Supreme Court held “that a court may not enforce an employee’s alleged predispute waiver of the right to bring a PAGA claim in any forum.” (ZB, N.A. v. Superior Court of San Diego County (2019) 8 Cal.5th 175, 181 (ZB). )

In their complaint, plaintiffs LeShawn McCray and Dedrick Foster (together Plaintiffs) allege one cause of action against defendants Wireless World, LLC (Wireless World), Wireless Choice, Inc. (Wireless Choice), and Kristian Allos (together Defendants) under PAGA based on various Labor Code violations. As part of their employment with Wireless World, Plaintiffs signed identical arbitration agreements which contain provisions that (1) preclude the right to bring a representative action (for example, under PAGA) and (2) require arbitration of all disputes which arise out of or relate to Plaintiffs’ employment with Wireless World. Based on these provisions and the contention that Plaintiffs are not asserting representative claims, but in fact “claims made on their own behalf,” Defendants moved to compel arbitration. Citing Iskanian, supra, 59 Cal.4th 348, the trial court denied Defendants’ motion.

We reverse the order and remand for further proceedings. As we explain, within their one cause of action, Plaintiffs include allegations that suggest individual, in addition to PAGA representative, claims; and within their prayer, Plaintiffs seek some PAGA remedies and some remedies that are unavailable under PAGA. On remand, Plaintiffs shall unambiguously state both the claims and remedies they seek, after which the trial court may, to the extent necessary, determine the applicability of the arbitration provision to the specific claims and remedies being asserted.

I. FACTUAL AND PROCEDURAL BACKGROUND

Allos is the chief executive officer of Wireless World, which owns and operates a chain of retail stores that sells wireless telephones, tablets, and similar devices, as well as accessories and services related to these products. Wireless World operates as an independent retailer for Sprint Corporation, a global telecommunications company with its principal offices in Kansas.

McCray worked for Wireless World in various positions during the June 2016 – August 2017 time period; and Foster worked for Wireless World in various retail positions during the April 2016 – August 2017 time period. McCray and Foster each signed identical arbitration agreements “relating to, resulting from, or in any way arising out of Employee’s employment relationship with Employer and/or the termination of Employee’s employment relationship with Employer.” In both agreements, “Employer” is defined as Wireless Choice and “its officers, directors, partners, employees, agents, pension or benefit plans, administrators, or fiduciaries, or any subsidiary or affiliated company or corporation.” Each agreement, signed by the employee (McCray or Foster) and a Wireless World representative, is three single-spaced typewritten pages and contains 16 number paragraphs, some with lettered subparagraphs. We are not called upon to interpret any specific language or provision in the agreement, only to determine the enforceability of the provisions that (1) preclude representative actions and (2) require arbitration of all disputes.

Following termination of their employment in August 2017, Plaintiffs filed a superior court action against Defendants in January 2018. Alleging in part that Defendants were their ” ’employers’ as defined in and subject to the California Labor Code and Industrial Welfare Commission Wage Orders,” Plaintiffs assert one cause of action, alleging under PAGA a “representative action against Defendants on behalf of themselves and all other aggrieved employees of Defendants in California seeking PAGA penalties[.]” Plaintiffs further allege that they are ” ‘aggrieved employees’ ” for purposes of PAGA and that Defendants are their ” ’employers’ ” (or acting on behalf of an employer) for purposes of responsibility for the civil penalties Plaintiffs seek under PAGA.

According to Plaintiffs’ counsel, the civil penalties that Plaintiffs seek in their PAGA claim are for Defendants’ violations of Labor Code: sections 223, 1194, 1197, and 1198 (failure to pay minimum and regular hourly wages); sections 223, 510, 1194, and 1198 (failure to pay overtime wages); sections 226.7, 512, and 1198 (failure to provide compliant meal and rest periods); sections 221 and 223 (failure to pay commission wages); section 227.3 (failure to pay accrued vacation wages at termination); sections 201, 202, 204, and 1198 (failing to pay wages owed at termination); sections 226, 1174, and 1198 (failure to maintain accurate records to provide accurate itemized wage statements); sections 226, 246, and 1198 (failure to provide written notice of amount of sick leave); sections 1194, 1198, and 1199 (failure to pay reporting time pay); section 2751 (failure to provide a commission plan); and sections 98.6 and 1102.5 (retaliation and wrongful termination).

In addition to counsel’s summary of the penalties Plaintiffs are seeking, Plaintiffs’ complaint also contains allegations and a prayer for relief that suggest individual claims with recovery to Plaintiffs, not representative claims with civil penalties to be shared with the Labor and Workforce Development Agency.

Defendants moved to compel binding arbitration and to stay the superior court proceedings. Defendants argued that, under the Federal Arbitration Act (FAA) (9 U.S.C. § 4 et seq.) and the California Arbitration Act (Code Civ. Proc., §§ 1281, 1281.2), the claims in Plaintiffs’ complaint are subject to mandatory arbitration under the arbitration agreements and the FAA. Plaintiffs filed written opposition, in which they argued in part: Plaintiffs brought their claims in a PAGA representative action; pursuant to Iskanian, supra, 59 Cal.4th 348, Plaintiffs’ arbitration agreements do not affect their right to bring their PAGA claims in the superior court; and Iskanian is not preempted by the FAA. Defendants filed a written reply in which they asserted arguments they have abandoned on appeal based on this court’s recent opinion in Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602. (See fn. 8, post.)

Following oral argument, the trial court denied Defendants’ motion to compel arbitration, ruling that the present action “is a PAGA representative action” and that, under Iskanian, supra, 59 Cal.4th 348, “the arbitration agreement’s provision precluding this type of suit is unenforceable.” Defendants timely appealed, and we have jurisdiction. (Code Civ. Proc., § 1294, subd. (a); Hernandez v. Ross Stores, Inc. (2016) 7 Cal.App.5th 171, 176 [“The denial of a motion to compel arbitration is an appealable order.”].)

II. DISCUSSION

Defendants acknowledge that, under Iskanian, supra, 59 Cal.4th 348, a predispute agreement that waives an employee’s right to bring a representative PAGA action in court is neither enforceable nor preempted by the FAA. In their reply brief on appeal, Defendants argue that, because some of the claims in Plaintiffs’ PAGA cause of action seek what Defendants describe as “individual ‘victim specific relief,’ ” Iskanian does not bar the enforceability of the arbitration agreement as to those claims. As we explain, although Plaintiffs tell us that they are asserting only representative PAGA claims and seek only civil penalties for PAGA violations, in their complaint, Plaintiffs appear to allege otherwise. This is significant, since Iskanian bars only the enforcement of Plaintiffs’ promises not to bring representative PAGA claims. (See ZB, supra, 8 Cal.5th at p. 185 [“In Iskanian, we declared unenforceable as a matter of state law an employee’s predispute agreement waiving the right to bring . . . representative PAGA claims.”].)

Given the basis of the trial court’s ruling, we review the court’s order de novo. (Baxter v. Genworth North America Corp. (2017) 16 Cal.App.5th 713, 722 [” ‘ “On appeal from the denial of a motion to compel arbitration, ‘we review the arbitration agreement de novo to determine whether it is legally enforceable, applying general principles of California contract law.’ ” ‘ “].) The parties agree.

Under PAGA, an aggrieved employee may bring a civil action personally and on behalf of other current or former employees to recover civil penalties for certain violations of the Labor Code. (Lab. Code, § 2699, subds. (a), (g)(1); Arias v. Superior Court (2009) 46 Cal.4th 969, 980.) Where an aggrieved employee successfully recovers such a civil penalty, 75 percent goes to the Labor and Workforce Development Agency and 25 percent goes to the employee. (Lab. Code, § 2699, subd. (i); Arias, at pp. 980-981.)

” ‘Before the PAGA was enacted, an employee could recover damages, reinstatement, and other appropriate relief but could not collect civil penalties. The Labor and Workforce Development Agency . . . collected them. The PAGA changed that.’ ” (Villacres v. ABM Industries Inc. (2010) 189 Cal.App.4th 562, 578; accord, Thurman v. Bayshore Transit Management, Inc. (2012) 203 Cal.App.4th 1112, 1126 (Thurman) [“Section 2699, subdivision (a) . . . ‘permits aggrieved employees to recover civil penalties that previously could be collected only by [the agency]’ “], disapproved on other grounds in ZB, supra, 8 Cal.5th at p. 196, fn. 8.) Under PAGA, the aggrieved employee “acts as ‘the proxy or agent of the state’s labor law enforcement agencies[,] . . . represent[ing] the same legal right and interest . . . —namely, recovery of civil penalties that otherwise would have been assessed and collected by the Labor Workforce Development Agency.’ ” (ZB, supra, 8 Cal.5th at p. 185, quoting Iskanian, supra, 59 Cal.4th at p. 380.) Accordingly, “[a]ll PAGA claims are ‘representative’ actions in the sense that they are brought on the state’s behalf.” (ZB, at p. 185.)

In Iskanian, supra, 59 Cal.4th 348, the Supreme Court “declared unenforceable as a matter of state law an employee’s predispute agreement waiving the right to bring these representative PAGA claims.” (ZB, supra, 8 Cal.5th at p. 185, italics added.) That is because any requirement for “employees to forgo PAGA claims in this way contravenes public policy by ‘serv[ing] to disable,’ through private agreement, one of the state’s ‘primary mechanisms’ for enforcing the Labor Code.” (Ibid., italics added; accord, Iskanian, at p. 383.)

Seeking civil penalties in a representative claim under PAGA does not limit the aggrieved employee from separately or concurrently pursuing claims for unpaid wages or remedies otherwise available. (Lab. Code, § 2699, subd. (g)(1); ZB, supra, 8 Cal.5th at p. 187.) Thus, Iskanian does not affect the aggrieved employee’s assertion of individual—as opposed to representative—claims for such unpaid wages or other remedies. (See Iskanian, supra, 59 Cal.4th at p. 388 [Iskanian’s bar to enforcement of a predispute waiver is limited to “an employee’s right to bring an action that can only be brought by the state or its representatives, where any resulting judgment is binding on the state and any monetary penalties largely go to state coffers”].)

Defendants focus on the differences between Plaintiffs’ representative claims under PAGA and what Defendants contend are Plaintiffs’ allegations of “individualized (i.e., victim-specific) relief”: “Although the complaint is purportedly brought on behalf of Plaintiffs and all other aggrieved employees, in truth, at least some of these claims are only claims for individual damages on behalf of the Plaintiffs. [¶] Specifically, the complaint seeks recovery of underpaid wages in an ‘amount sufficient to recover underpaid wages under Labor Code §§ 558 and 1197.1,’ liquidated damages, unreimbursed business expenses and other penalties recoverable by the [P]laintiffs alone.” (Italics added.) Thus, Defendants argue, because “[t]his case involves both . . . claims that can be pursued privately as well as claims that prior to PAGA could only be pursued by the Labor Commissioner,” the trial court erred in denying Defendants’ motion as to the entire complaint. According to Defendants, since Iskanian’s public policy considerations apply only to representative claims for civil penalties under PAGA, any claims for “individualized (i.e., victim-specific) relief” are unaffected by Iskanian and should be resolved by arbitration. We agree with this statement and apply it to the present appeal.

In support of their position, Defendants rely on Esparza v. KS Industries, L.P. (2017) 13 Cal.App.5th 1228 (Esparza). In Esparza, the employee agreed to binding arbitration for ” ‘all disputes and claims arising out of the submission of this application [for employment with the defendant employer].’ ” (Id. at p. 1235.) Following the termination of his employment, the employee sued the employer in superior court, asserting one cause of action under PAGA in the operative complaint. (Esparza, at p. 1235.) Alleging representative claims on behalf of himself as an aggrieved employee and other aggrieved employees based on PAGA violations of 16 sections of the Labor Code, the employee also sought—in addition to remedies under PAGA—all ” ‘unpaid wages, civil penalties, interest, attorneys’ fees and costs’ as well as statutory penalties . . . [and] ‘[a]n amount sufficient to recover unpaid wages under Labor Code § 558 [and] under Labor Code § 1197.1.’ ” (Esparza, at p. 1236.)

The trial court in Esparza denied the employer’s motion to compel arbitration of the claims in the complaint, and the employer appealed. (Esparza, supra, 13 Cal.App.5th at pp. 1236-1237.) The Court of Appeal affirmed the denial of the motion insofar as it denied arbitration of the PAGA representative claims for civil penalties, but remanded for further proceedings related to claims for unpaid wages. (Esparza, at p. 1247.) The court reasoned that, under Iskanian, the PAGA claims for civil penalties were the only claims not subject to the parties’ arbitration agreement; in contrast, the “[e]mployee’s claims for unpaid wages are subject to arbitration pursuant to the terms of the parties’ arbitration agreement and the Federal Arbitration Act.” (Esparza, at p. 1246 [“The rule of nonarbitrability adopted in Iskanian is limited to representative claims for civil penalties in which the state has a direct financial interest.”].) Esparza reasoned, first, “[the e]mployee’s attempt to recover unpaid wages under Labor Code section 558 is, for purposes of the Federal Arbitration Act, a private dispute arising out of his employment contract with [the employer]”; and second, “[the e]mployee’s attempt to recover wages on behalf of other aggrieved employees involves victim-specific relief and private disputes . . . because (1) those employees could pursue recovery of the unpaid wages in their own right and (2) the unpaid wages recovered would not go to state coffers.” (Esparza, at p. 1246.)

In Esparza, the employee’s counsel prepared the trial court’s order which included the statement that the employee ” ‘only seeks PAGA civil penalties and no individual damages.’ ” (Esparza, supra, 13 Cal.App.5th at p. 1247.) The appellate court would not interpret the statement as the employee’s waiver of the claims for unpaid wages, because at the time the state of the law regarding wages as civil penalties under PAGA was uncertain. (Ibid.) Accordingly, the appellate court remanded the matter to the trial court, with the following directions:

“[T]o conduct further proceedings . . . that allow [the e]mployee to unambiguously state his intention about pursuing the claims for unpaid wages and any other types of individualized relief. If [the e]mployee intends to pursue those claims, they must be arbitrated. . . . [¶] Alternatively, if [the e]mployee intends to (1) limit the claims pursued to PAGA representative claims seeking civil penalties paid largely into state coffers and (2) waive the claims for individualized relief (such as the recovery of unpaid wages pursuant to Lab. Code, § 558), then the litigation can proceed on those limited claims.” (Esparza, at p. 1247, italics added.)

The facts in Esparza and the present case are strikingly similar. In particular, the employee in Esparza and Plaintiffs here each filed a complaint with one cause of action under PAGA; yet, within that one cause of action, each of the two complaints asserted both representative claims for civil penalties under PAGA where the state is the primary beneficiary of any monetary recovery and individual claims for damages (e.g., wages) where the individual claimants are the sole beneficiaries of any monetary recovery. (See Esparza, supra, 13 Cal.App.5th at pp. 1235-1236.) Thus, to the extent Plaintiffs are asserting individual claims and/or seeking any remedies that are not principally for the benefit of the Labor and Workforce Development Agency under PAGA, the trial court here erred in denying Defendants’ motion to compel arbitration of such claims and/or remedies; and we reverse the court’s order denying Defendants’ motion on this basis.

As we explain, we will follow Esparza’s lead and remand for further proceedings to determine exactly what claims and remedies Plaintiffs are seeking. At that point, the parties and the trial court may, to the extent necessary, determine the applicability of the arbitration provision to the specific claims and remedies being asserted.

Here, in the body of their complaint, Plaintiffs assert claims under PAGA for civil penalties based on violations of at least 19 Labor Code statutes. In addition—and with no mention of PAGA—Plaintiffs also plead:

• recovery of “all unpaid and/or underpaid wages pursuant to Labor Code sections 558 and 1197.1,” which deal with unpaid and underpaid wages;
•
• recovery of “civil penalties . . . on behalf of themselves and other aggrieved employees for Defendants’ violations of the Labor Code, including but not limited to Defendants’ violations of Labor Code sections 98.6, 201, 202, 204, 221, 223, 226(a), 226.7, 227.3, 246, 510, 512, 1102.5, 1174(d), 1197, 1198, 1199, 2751, and 2802”;
•
• entitlement to a civil penalty under Labor Code section 558 for violations of statutes dealing with meal periods and overtime wages, “which shall be paid directly to each affected employee” (italics added);
•
• entitlement, under Labor Code section 1197.1, to a “civil penalty . . . as well as liquidated damages pursuant to Labor Code section 1194.2, and any applicable penalties imposed pursuant to Labor Code section 203, which shall be paid directly to each affected employee” based on minimum wage violations under Labor Code section 1197 (italics added);
•
• with regard to retaliation, “pursuant to Labor Code section 98.6(a)(3), Defendants are subject to a civil penalty not to exceed $10,000 per aggrieved employee for each violation of Labor Code section 98.6, to be awarded to the employee or employees who suffered the violation” (italics added);
•
• also with regard to retaliation, “under Labor Code section 1102.5(f),” Wireless World and Wireless Choice “are subject to a civil penalty not to exceed $10,000 for each violation of Labor Code section 1102.5” (italics added);
•
• with regard to the withholding of wages under Labor Code sections 221 (repayment of wages) and 223 (certain underpayments of wages), under section 225.5, “Defendants . . . are subject to a civil penalty . . . [which] shall be recovered on behalf of the Labor Commissioner” (italics added);
•
• with regard to the failure to pay wages under Labor Code section 210, “Defendants . . . are subject to a civil penalty . . . [which] shall be recovered on behalf of the Labor Commissioner” (italics added); and
•
• Labor Code sections 226.3 and 1174.5 “provide[] for a civil penalty” upon proof of an employer’s failure to provide and maintain specified employment records.
•
Correspondingly, in the prayer of their complaint, under PAGA Plaintiffs seek an award of “civil penalties” and “attorney’s fees and costs of suit.” In addition—and with no mention of PAGA, the state of California, the Labor and Workforce Development Agency, or any state agency—Plaintiffs also seek awards of:

• “civil penalties . . . for each underpaid employee for each pay period for which the employee was underpaid”;
•
• “underpaid wages pursuant to Labor Code section 558”;
•
• “underpaid wages . . . pursuant to Labor Code section 1197.1”;
•
• “liquidated damages pursuant to Labor Code section 1194.2”; and
•
• “applicable penalties imposed pursuant to Labor Code section 203.”
•
In their merits brief on appeal, Plaintiffs describe their lawsuit as a “PAGA-only representative action” and tell us that they “filed a representative action complaint against [Defendants] . . . , alleging a sole cause action under PAGA”. Consistently, in the prayer of their complaint, Plaintiffs affirmatively state that they “are only seeking such civil penalties that are required to be shared with the L[abor and ]W[orkforce ]D[evelopment ]A[gency]”. However, as we have just described, Plaintiffs’ sole cause of action contains numerous allegations supporting non-PAGA individual claims, and correspondingly their prayer seeks relief that is unavailable in a representative action under PAGA.

For this reason, as in Esparza, supra, 13 Cal.App.5th at page 1247, on remand the trial court shall conduct further proceedings, in whatever form or format that is acceptable to the court, that require Plaintiffs to unambiguously state their intention about pursuing PAGA claims, non-PAGA claims, and all remedies—including but not limited to wages, civil penalties, and damages of any sort. In PAGA terminology, Plaintiffs must expressly distinguish any claim for relief in which they are not acting as ” ‘the proxy or agent of the state’s labor law enforcement agencies’ and ‘represent[ing] the same legal right and interest as’ those agencies—’namely, recovery of civil penalties that otherwise would have been assessed and collected by the Labor Workforce Development Agency.’ ” (ZB, supra, 8 Cal.5th at p. 185, quoting Iskanian, supra, 59 Cal.4th at p. 380.)

At that point, the parties and the trial court may, to the extent necessary, determine the applicability of the arbitration provision to the specific claims and remedies being asserted.

 

III. DISPOSITION

The order denying Defendants’ motion to compel binding arbitration and to stay the superior court proceedings is reversed. The trial court shall conduct further proceedings to determine the specific claims for relief and remedies Plaintiffs are asserting in this action and, if necessary, whether such claims and remedies are subject to the parties’ arbitration agreements. Defendants are entitled to their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).)

IRION, J.

WE CONCUR:

HALLER, Acting P. J.

O’ROURKE, J.