Filed 2/5/20 Diaz v. First Class Vending, Inc. CA2/1

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

VICTOR DIAZ,

Plaintiff and Respondent,

v.

FIRST CLASS VENDING, INC.,

Defendant and Appellant.

B289205

(Los Angeles County

Super. Ct. No. BC651276)

APPEAL from a judgment of the Superior Court of Los Angeles County, Stephanie M. Bowick, Judge. Affirmed.

_______________

Zaller Law Group, Anthony J. Zaller, Anne McWilliams, Monica Penichet-Coates, Heather K. Cox and Deanna Leifer for Defendant and Appellant.

Matern Law Group, Matthew J. Matern, Dalia R. Khalili, Irina Kirnosova and Kiran Prasad for Plaintiff and Respondent.

_______________

First Class Vending, Inc. (FCV) appeals from the trial court’s denial of its motion to compel arbitration of a lawsuit brought by Victor Diaz that alleges a single cause of action under the California Private Attorney General Act (PAGA). FCV argues the prayer in Diaz’s PAGA action for “civil penalties . . . including but not limited to the amount of any unpaid wages of plaintiff ” reflects a non-PAGA claim for victim-specific relief that must be arbitrated under the parties’ arbitration agreement. We disagree and affirm.

On appeal, FCV relies on case law discussing whether California public policy barring arbitration of PAGA actions can apply to a PAGA action that seeks victim-specific relief. Even if we were to read Diaz’s complaint as seeking victim-specific relief, however, this case law is inapposite, because California public policy does not provide the basis on which Diaz’s PAGA action is nonarbitrable. Rather, the parties’ arbitration agreement expressly provides that any PAGA claims will not be arbitrated; it does not require a certain type of relief be sought via such a PAGA claim in order for this exclusion to apply. The operative complaint contains no non-PAGA cause of action. Moreover, the trial court found, and we agree, that Diaz would be judicially estopped from later making any claims for victim-specific unpaid wages unavailable under the PAGA, given Diaz’s repeated representations that he would not, as well as his offers to amend the complaint and clarify it did not assert such claims. There is thus neither a current dispute that may be arbitrated under the parties’ agreement, nor any likelihood of such an arbitrable dispute arising in the future. In short, there was nothing for the trial court to compel to arbitration.

PROCEDURAL AND BACKGROUND SUMMARY

A. The Arbitration Agreement

Diaz and his former employer, FCV, executed an arbitration agreement, the enforceability of which is not being challenged on appeal. It stated it was to be subject to the Federal Arbitration Act (FAA), and that the parties elected the FAA’s procedural provisions to govern any arbitration. The agreement required that the parties arbitrate “all disputes, claims or controversies of any kind between them,” with the express caveat that “[the] [a]greement does not cover . . . the right to bring representative actions . . . under the California Private Attorney General Act (PAGA).”

B. The PAGA

The PAGA authorizes aggrieved employees to act as private attorneys general and collect “civil penalties” for Labor Code violations, where the Labor and Workforce Development Agency (LWDA) has been notified and does not itself take action. (See Lab. Code, § 2699, subd. (a) [“[A]ny provision of this code that provides for a civil penalty to be assessed and collected by the Labor and Workforce Development Agency or any of its departments, divisions, commissions, boards, agencies, or employees, for a violation of this code, may, as an alternative, be recovered through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees.”].) Although a PAGA claim is based on factual allegations that an employer violated one or more Labor Code sections, it does not assert a cause of action under those sections, but rather under the PAGA, with the aggrieved employee acting “as a proxy or agent of the state’s labor enforcement agencies” and enforcing the code sections allegedly violated. (Esparza v. KS Industries, L.P. (2017) 13 Cal.App.5th 1228, 1241 (Esparza); see Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 380 (Iskanian).)

The PAGA “empowers employees . . . to recover civil penalties previously recoverable only by the Labor Commissioner” and “also creates new civil penalties, equally enforceable by aggrieved employees, for most other Labor Code violations that previously did not carry such penalties.” (ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 184–185 (ZB); see § 2699, subds. (a), (f) & (g)(1); Iskanian, supra, 59 Cal.4th at pp. 379–380.) The majority (75 percent) of any civil penalties an aggrieved employee recovers via such a PAGA action are distributed to the LWDA, and the remaining 25 percent is distributed among the aggrieved employees, including the private attorney general plaintiff bringing the action. (§ 2699, subd. (i); see Iskanian, supra, 59 Cal.4th at p. 380.) Relief obtained via a PAGA action must be shared with the state in this manner. The PAGA does not provide a legal basis for employees to directly recover statutory penalties (as opposed to civil penalties to be shared with the state), although employees may separately pursue such victim-specific relief via a private civil action or administrative proceedings. (See ZB, supra, 8 Cal.5th at pp. 185―186.)

C. Diaz’s Initial PAGA Complaint

Diaz filed a complaint against FCV for violation of the PAGA. To support his PAGA claim, Diaz alleged violations of various code sections, including sections 510 and 512. Any employer who violates code sections that, like sections 510 and 512, “ ‘regulate hours and days of work,’ ” “shall be subject to civil penalty” as set forth in section 558. (§ 558, subd. (a).)

Section 558 sets forth both per-pay-period flat amount penalties and penalties in the amount of unpaid wages. (§ 558, subd. (a)(1)―(2).) Any “[w]ages recovered pursuant to [section 558] shall be paid directly to the affected employee.” (§ 558, subd. (a)(3).) Diaz’s initial complaint relied on section 558 by requesting “civil penalties for [defendants’] violations of the Labor Code provisions for which civil penalty is specifically provided,” including “ ‘civil penalties in the amount sufficient to recover unpaid wages owed to aggrieved employees pursuant to [section] 558[, subdivision] (a).’ ” The prayer for relief reiterated this request, praying, inter alia, “[f]or civil penalties according to proof, including but not limited to the amount of any unpaid wages of [plaintiff] and other aggrieved employees and all penalties authorized by the Labor Code [sections] 210, 226.3, 558, 1174.5, 1197.1, and 2699[, subdivisions] (a) and (f).”

D. Amendment of Diaz’s Complaint Following Esparza Decision

A few months after Diaz filed his initial complaint, Division Five of this court issued its opinion in Esparza, supra, 13 Cal.App.5th 1228, which is significant to both the procedural history and legal analysis of the instant appeal.

1. The Esparza decision

Esparza considered the limits of a rule the California Supreme Court adopted in Iskanian, supra, 59 Cal.4th 348. In Iskanian, the Court held that “California’s public policy prohibiting waiver of PAGA claims, whose sole purpose is to vindicate the [LWDA’s] interest in enforcing the Labor Code, does not interfere with the FAA’s goal of promoting arbitration as a forum for private dispute resolution.” (Id. at pp. 388―389.) Thus, “a PAGA claim lies outside the FAA’s coverage” and may not be compelled to arbitration even if it falls within the scope of an arbitration agreement governed by the FAA, “because it is not a dispute between an employer and an employee arising out of their contractual relationship,” but rather “a dispute between an employer and the state, which alleges directly or through its agents—either the [LWDA] or aggrieved employees—that the employer has violated the Labor Code.” (Id. at pp. 386―387.) In this way, the reasoning and holding of Iskanian distinguishes between private disputes between employee and employer (which must be arbitrated under the FAA, if otherwise within the scope of a valid arbitration agreement) and claims brought on behalf of the State of California (which cannot be arbitrated under California law, the FAA notwithstanding). “Iskanian attempted to define the boundary between the[se] two types of claims by stating that PAGA representative claims for civil penalties are not subject to arbitration.” (Esparza, supra, 13 Cal.App.5th at p. 1234, fn. omitted.)

The Court of Appeal in Esparza applied this distinction to a PAGA claim that purported to seek unpaid wages under section 558, in addition to civil penalties. (Esparza, supra, 13 Cal.App.5th at p. 1236.) Esparza ultimately “conclude[d] that, for the purposes of the Iskanian rule, PAGA representative claims for civil penalties are limited to those where a portion of the recovery is allocated to the [LWDA],” that “[c]laims for unpaid wages based on Labor Code section 558 are not allocated in this manner and, therefore, the Iskanian rule does not exempt such claims from arbitration.” (Esparza, supra, 13 Cal.App.5th at p. 1234; id. 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.”].) Because “it remain[ed] possible to interpret [the] [e]mployee’s amended complaint [in Esparza] as seeking the recovery of unpaid wages, which is a type of individual (i.e., victim-specific) relief,” and because “it was not clear whether [the] [e]mployee intend[ed] to relinquish his pursuit of those wage claims and pursue only PAGA representative claims seeking civil penalties” (id. at p. 1247), Esparza directed the trial court to conduct further proceedings to “determine the plaintiff ’s intention with respect to the pursuit of other claims”—that is, claims seeking relief other than civil penalties recoverable under the PAGA. (Ibid.) If the trial court concluded that the employee intended to “waive the claims for individualized relief (such as the recovery of unpaid wages pursuant to Lab. Code, § 558), then the litigation [could] proceed” on the remaining PAGA representative claims that seek “civil penalties paid largely into state coffers.” (Esparza, supra, at p. 1247.)

2. Diaz’s first amended complaint

Following the Esparza decision, Diaz sought and obtained leave to file an amended complaint that removed all references to section 558 (the operative complaint). The prayer for relief in the operative complaint, like that in the original version, describes the relief Diaz seeks “individually and on behalf of all other aggrieved employees,” as including “civil penalties according to proof, including but not limited to the amount of any unpaid wages of [plaintiff] and other aggrieved employees and all penalties authorized by” various code sections. Unlike the initial complaint, however, the operative complaint does not include section 558 in this list. This is the only reference to “unpaid wages” in the operative complaint.

E. FCV’s Motion to Compel Arbitration

FCV moved to compel arbitration of what it perceived to be a victim-specific claim for unpaid wages that remained in the operative complaint, based on the lone reference to “unpaid wages of plaintiff ” in the prayer for relief. In opposing the motion, Diaz represented to the court that he was “not seeking unpaid wages under Labor Code section 558 or any other section,” and that the reference to “unpaid wages” was a means of describing an amount of civil penalties Diaz sought and intended to share with the state. Diaz also informed the court in his opposition that he was “prepared to amend his complaint to remove any references to unpaid wages that were not removed in filing the [first amended complaint], and would have stipulated to do so had [FCV] attempted to meet and confer,” but that FCV never responded to Diaz’s request to meet and confer, thereby “forc[ed] [Diaz] to file an opposition.”

At the hearing on the motion, Diaz reiterated his willingness to amend the operative complaint to clarify that “the plaintiff is not seeking to keep 100 percent of any of the penalties . . . and if the court feels that the complaint is read in that way, we will be happy to amend it.” FCV counsel responded that such an amendment would be insufficient to “clarify exactly what [Diaz is] alleging and what [Diaz is] attempting to seek to recover in this case.” Counsel for FCV explained that references to other Labor Code violations alleged to support Diaz’s PAGA claim (which FCV counsel viewed as involving individual relief), as well as the fact that Diaz could have amended the complaint after FCV filed its motion to compel, but instead “chose not to” and “opposed [FCV’s] motion,” made FCV “nervous” that even such an amendment would not fully disclaim Diaz’s interest in pursuing victim-specific relief. For example, FCV answered in the negative when the court asked whether, if the court were to “by way of interlineation today . . . change[ ] the amended complaint to say, ‘civil penalties including but not limited to those for any unpaid wages,’ ” this would alleviate FCV’s concerns. (Italics added.)

The trial court ultimately denied the motion without requiring that Diaz amend the operative complaint in the manner Diaz had offered. In so ruling, the trial court distinguished Esparza, because the complaint in that action sought section 558 unpaid wages in addition to civil penalties, whereas the operative complaint here “specifically provides that it only seeks unpaid wages to the extent they are considered civil penalties in a PAGA action.” The court further explained that Diaz, unlike the plaintiff in Esparza, “ha[d] unequivocally stated his intention to relinquish any claims for individual wages not payable, in part, to LWDA.” Based on these representations, the court found that Diaz would be judicially estopped from later choosing to pursue such claims for unpaid wages. Thus, the court concluded that “[c]ompelling [Diaz] to arbitrate claims here that he no longer intends to pursue would not serve any practical purpose,” and denied the motion to compel arbitration.

F. The Instant Appeal

FCV appealed the court’s denial of the motion. FCV’s appeal does not challenge the trial court’s findings that the arbitration agreement was valid and enforceable or that Diaz was judicially estopped from seeking victim-specific unpaid wages.

DISCUSSION

FCV argues on appeal that the lone reference to “unpaid wages of [plaintiff]” “can be read and interpreted to mean that [Diaz] continues to seek individual, victim-specific damages as seeking individual relief ” for Diaz alone, not as seeking a civil penalty to be shared with the state, and that, under Esparza and the California Supreme Court’s recent decision in ZB, supra, 8 Cal.5th 175, the trial court should have compelled to arbitration this purportedly separate, victim-specific “claim” and stayed litigation of the remaining portions of Diaz’s PAGA action. (See id. at pp. 183, 182 [“unpaid wages and premium wages per . . . section 558” were not recoverable as civil penalties under the PAGA via a private citizen’s PAGA action]; Esparza, supra, 13 Cal. App.5th at p. 1234 [holding “[t]he Iskanian rule does not exempt . . . from arbitration” “[c]laims for unpaid wages based on . . . section 558”].)

For the reasons set forth below, we disagree.

A. Standard of Review

We review de novo “a trial court order granting or denying a motion to compel arbitration” where there are no factual disputes regarding extrinsic evidence. (Bono v. David (2007) 147 Cal.App.4th 1055, 1061–1062.) While the parties here do appear to dispute whether Diaz intends to seek victim-specific relief via the operative complaint, this dispute has no effect on our analysis of FCV’s arguments. As such, our review is de novo.

B. The Operative Complaint Is a PAGA Action and Asserts No Other Legally Cognizable Claims

The reference to “unpaid wages” in the prayer for relief does not change the nature of the operative complaint as a representative action under the PAGA. In arguing to the contrary, FCV correctly notes that the unpaid wages referenced in section 558 “[are] not recoverable under the PAGA,” as the Supreme Court recently held in ZB. (ZB, supra, 8 Cal.5th at p. 182 [“[T]he ‘amount sufficient to recover underpaid wages’ [under section 558] . . . is not a civil penalty that a private citizen has authority to collect through the PAGA,” but rather an amount the Labor Commissioner may collect in addition to fixed civil penalties.].) Although ZB ’s holding is specific to “unpaid wages” under section 558—which the operative complaint no longer references—the Court suggested in dicta that “unpaid wages” under other code sections likewise may not constitute “civil penalties” recoverable via an employee’s PAGA action. (See, e.g., ZB, supra, 8 Cal.5th at pp. 182, 190―192.) But even if, as FCV suggests, the operative complaint’s general reference to “civil penalties, including but not limited to unpaid wages” can be understood as a request for relief unavailable via a PAGA action, this speaks only to whether Diaz will be able to recover the relief he requests on the legal basis he alleges. If such relief is unavailable in a PAGA action, Diaz will not be able to recover it via the operative complaint. But this does not change the nature of the cause of action as pleaded; it remains one under the PAGA.

Nor does the “unpaid wages” language in the prayer for relief indicate that the operative complaint asserts some additional non-PAGA claim. The complaint asserts only one cause of action: “violation of the Private Attorney General Act.” Even if the operative complaint still referenced section 558, that section does not provide a basis for a non-PAGA cause of action. (See ZB, supra, 8 Cal.5th at p. 182 [“section 558 does not . . . permit a private right of action” except through the PAGA].) Nor do the allegations of code violations underlying Diaz’s PAGA action assert separate bases for relief; rather, they are factual allegations supporting Diaz’s PAGA action.

The operative complaint is thus a PAGA action and only a PAGA action, even if some of the relief Diaz seeks thereby may not be recoverable as a matter of law.

C. The Parties’ Arbitration Agreement Does Not Authorize Arbitration of Any PAGA Action

Under both the FAA and California Arbitration Act (CAA), “ ‘arbitration is a matter of contract, and a party cannot be required to submit to arbitration any dispute which he has not agreed to so submit.’ [Citations.] This axiom recognizes the fact that arbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit such grievances to arbitration.” (AT&T Technologies, Inc. v. Communications Workers (1986) 475 U.S. 643, 648–649; Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 384–385 [“the FAA does not force parties to arbitrate when they have not agreed to do so”]; Cheng–Canindin v. Renaissance Hotel Associates (1996) 50 Cal.App.4th 676, 683 [same under California state law].) The arbitration agreement between Diaz and FCV expressly states that it “does not cover . . . the right to bring representative actions under the [PAGA].” A PAGA action by an aggrieved employee is necessarily a representative action, so the “representative action” language of the agreement does not, as FCV contends, qualify the exclusion of PAGA actions from the disputes that must be arbitrated. Thus, by the plain terms of the parties’ arbitration agreement, Diaz’s PAGA action is not arbitrable. Because, as discussed above, Diaz alleges no other legally cognizable cause of action or claim in the operative complaint, there was nothing in the operative complaint the trial court could have compelled to arbitration under the parties’ agreement. As FCV notes, “[t]he FAA requires courts to rigorously ‘enforce arbitration agreements according to their terms.’ ” (Epic Systems Corp. v. Lewis (2017) 584 U.S. __ [138 S.Ct. 1612, 1621].) Here, the trial court correctly enforced the terms of the parties’ agreement by denying the motion to compel arbitration.

D. Because PAGA Claims Are Not Arbitrable Under the Parties’ Agreement, the Precedent on Which FCV Relies Is Inapposite

Where—unlike here—parties have agreed to arbitrate PAGA claims (as was, for example, the case in Esparza), such claims might still avoid arbitration on California public policy grounds under Iskanian, even where the FAA applies. (See Iskanian, supra, 59 Cal.4th at pp. 388―389.) The “sole purpose” of “California’s public policy prohibiting waiver of PAGA claims” is “to vindicate the [LWDA’s] interest in enforcing the Labor Code.” (Ibid.) Similarly, as discussed above, the underlying logic of Iskanian’s preemption analysis is that the FAA, which governs private arbitration agreements, cannot require arbitration of a PAGA “public enforcement action” between the state and an employer based on an agreement to which the state was not a party. (Ibid.) Thus, where—again, unlike here—Iskanian and California public policy provide the sole basis on which a plaintiff seeks to avoid arbitration, it is important to determine whether the PAGA action at issue is in fact a “public enforcement action” that seeks only civil penalties to be shared with the state and thus “vindicate[s]” the LWDA’s interests. (Ibid.) Where the action is not and does not—and instead seeks victim-specific relief that will not be shared with the state—the California public policy blocking arbitration of PAGA claims may not apply, and/or the FAA may preempt it. The case law on which FCV relies, including ZB and Esparza, focuses on this distinction between various types of relief.

But such a distinction is immaterial where, as here, the underlying agreement already prohibits arbitration of PAGA claims, whether interpreted under the FAA or the CAA. The basis for denying arbitration here is not Iskanian and/or California public policy, but rather the language of the parties’ arbitration agreement. That language expressly excludes all PAGA actions from the scope of the agreement, regardless of the type of relief such an action seeks. The nature of the relief Diaz’s PAGA action prays for thus is not relevant to arbitrability, and the authority on which FCV relies, including Esparza and ZB, does not provide a basis for compelling arbitration of the operative complaint. FCV’s reliance on the holdings of these cases to support its argument is therefore unpersuasive.

Nor can FCV use the reasoning in these cases to argue that styling an action as one under the PAGA is insufficient to make it a “PAGA action,” as that phrase is used in the parties’ agreement. The plain language of that agreement determines arbitrability here. None of the evidence presented to the trial court suggests the agreement’s simple and unqualified reference to “representative actions under [the PAGA]” is ambiguous or incorporates a nuanced legal analysis regarding relief available in PAGA actions. (See Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1351.)

Moreover, to the extent Diaz is truly requesting unpaid wages unavailable under the PAGA, he will not be able to obtain that relief in this litigation, because he has pleaded no legally cognizable non-PAGA cause of action. Thus, even if FCV is correct that Diaz is disingenuously pleading a PAGA action so that he may litigate what is really a request for relief only available via arbitration, this effort will ultimately fail. Normally, the best course of action would have been to require Diaz to amend the operative complaint in the manner discussed with the trial court, and thereby avoid any possible confusion. Although such an amendment is not necessary for the operative complaint to be nonarbitrable under the parties’ agreement, it nevertheless would have best served the interests of certainty and judicial economy. In any event, Diaz is now judicially estopped from amending his complaint to include a non-PAGA request for unpaid wages. The litigation will be limited to the PAGA action in the operative complaint.

In sum, the operative complaint does not assert any legally cognizable non-PAGA cause of action. Under the parties’ agreement that only non-PAGA claims may be arbitrated, there is currently nothing to compel to arbitration. To the extent Diaz seeks to recover unpaid wages or waiting time penalties that are not, in fact, civil penalties, he may not do so under the operative complaint, nor may he amend that complaint to seek such relief. The trial court correctly denied the motion.

DISPOSITION

For the foregoing reasons, we affirm. Respondent shall recover his costs on appeal.

NOT TO BE PUBLISHED.

ROTHSCHILD, P. J.

We concur:

BENDIX, J.

WEINGART, J.*