Judge considers exception to California’s private attorney general’s arbitration clause

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On Wednesday, a judge will consider whether a Viking River Cruises employee can sue the company on behalf of all of its employees. (Travel Fairy via Shutterstock)

The past few decades have seen several cases of ongoing disagreement between the Supreme Court and California lawmakers and judges. The Supreme Court held that the Federal Arbitration Act enforces the enforcement of pre-dispute arbitration agreements in state and federal courts. As a result, the justices rejected all efforts to undermine the broad application of these agreements to transfer disputes between businesses and employees or customers from the courts to arbitrators. California, through its courts and lawmakers, has taken a different view, arguing that individuals have more leverage in lawsuits against businesses in court than in arbitration, especially if they can aggregate their claims as they do in class actions.Wednesday’s Argument Viking River Cruises v. Moriana The current chapter on this divergence is introduced.

This case involves pay, California’s Private Attorney General Act. Under the statute, any employee can bring a lawsuit against his employer to bring a claim against the employer on behalf of all employees. For example, in the recent PAGA lawsuit against Lyft, an employee filed a claim on behalf of more than 500,000 Lyft drivers; cases involving tens of thousands of employees are commonplace. To explain further, PAGA authorizes any individual employee to bring any claim that an employer violates California labor laws; 75% of the award goes to the state, and the rest is distributed as a group to aggrieved employees. The employee in this case (Angie Moriana) sought relief under PAGA against Viking River Cruises alleging that the company failed to pay all wages due, overtime pay, and other violations. Viking argues that the lawsuit should fail because Moriana’s employment agreement requires individualized arbitration of all disputes related to her employment with Viking and expressly waives her right to assert such claims through PAGA.

A California court rejected the Vikings’ arguments on the basis of well-established California law (from a Iskanian v. CLS Transportation Los Angeles).State courts recognize that the Federal Arbitration Act will take precedence over rules of state law that prevent consumers from waiving their right to seek relief in class actions or rules that restructure arbitration to be conducted on a class-wide basis; Supreme Court cases include AT&T Mobility v. Concepcion Such California rules have been rejected in the past. But in the California court’s view, these cases do not apply here because seeking relief under PAGA is not the same as a class action, mainly because other employees (who are making claims) are not involved in the lawsuit.

No one was surprised when the Supreme Court Grant Review. Viking argues that the California court’s decision flagrantly deviates from the Supreme Court’s decision in the district and directly ConcepcionFor Viking, Moriana agrees that personalized arbitration means that neither the courts nor the legislature in California have the authority to transfer disputes to another court or to aggregate claims from multiple employees in the same lawsuit. It argues that the same issues that prompted the Supreme Court to deny California’s mandate for class-based arbitration forced the rejection of the PAGA process here. Most notably, the PAGA process for claims against tens of thousands of employees is so far removed from the bilateral individualized arbitration process that it undermines the streamlined efficiency of what Viking River claims is its bargaining.

Moriana thinks the case doesn’t look like it at all Concepcion. Concepcion The State of California is prohibited from insisting on specific procedures for adjudicating and aggregating claims. Individual claims all remain the same, albeit limited to one specific forum: Personalized Arbitration. In contrast, the contract in this case seeks to “confiscate” PAGA claims authorized by the state legislature. If Moriana is asked to waive, she cannot bring this representative claim in any court or arbitration proceeding. Because the PAGA claim — the private attorney general’s claim that Viking violated California’s labor code — cannot be brought to arbitration or to a separate court, Viking’s argument would eliminate any way of proceeding under PAGA.

Viking’s central response was that PAGA created a program rather than a statement. According to Viking, there is no such thing as a “PAGA statement.” Instead, PAGA established a process for filing claims under California labor law. The State of California (which has not signed an arbitration agreement with Viking) remains free to pursue these claims, as should any employee who has not signed an agreement to pursue their claims in arbitration. But for Viking, Moriana’s consent to bilateral individualized arbitration should preclude any process of consolidating others’ claims.

On first reading, the arguments on both sides appear to be more balanced than the dubious summary of Moriana’s argument above would suggest. But this view reflects my view of how judges might react to these cases.In this case, such as Concepcion, pressing two different buttons: the “Encourage arbitration” button and the “Aggregate claims against businesses are essentially racketeering” button.I don’t think it’s likely that any of the majority of the justices Concepcionor any judge appointed since the decision in that case, views the case in the same Concepcion. They may view proceedings under PAGA as extortion, just as they would consider extortion in more traditional class action (or class-based arbitration) proceedings. If I’m right, the case will likely spark fierce opposition in favor of California’s ruling, but little disapproval of the majority’s outcome.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to SCOTUSblog in various capacities, is counsel on an amicus brief in support of Viking River Cruises in this case. The author of this article is not affiliated with the firm.]

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