Source: https://scocal.stanford.edu/opinion/iskanian-v-cls-transportation-34328
Timestamp: 2019-04-21 19:03:08+00:00

Document:
the FAA. We conclude that it is and that our holding to the contrary in Gentry v.
its motion to compel arbitration after Gentry.
Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.).
deputizing employees to prosecute Labor Code violations on the state‘s behalf.
representative actions in an employment contract.
of powers under the California Constitution.
employment were to be submitted to binding arbitration before a neutral arbitrator.
other defenses that all of plaintiff‘s claims were subject to binding arbitration.
employment arbitration agreements are invalid under certain circumstances.
mandate directing the superior court to reconsider its ruling in light of Gentry.
October 29, 2009, the trial court granted Iskanian‘s motion.
LLC v. Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740] (Concepcion).
arbitration and dismissing the class claims with prejudice.
a representative action, according to the terms of the arbitration agreement.
to compel arbitration. We granted review.
viability of Gentry in light of Concepcion.
employer had systematically failed to pay overtime wages to a class of employees.
did not require a case-specific showing that the class waiver was exculpatory.
preempts Gentry‘s rule against employment class waivers.
unconscionability rule set forth in Sonic II.
approximate the advantages of a class proceeding, then a class waiver is invalid.
The Berman waiver addressed in Sonic II is different from a class waiver.
arbitration. Gentry, unlike Sonic II, cannot be squared with Concepcion.
156 Cal.App.4th 138, 148–149; Jackson v. S.A.W. Entertainment Ltd. (N.D.Cal.
protections, so that it facilitates accessible, affordable resolution of wage disputes.
Concepcion that the FAA preempts the Gentry rule.
waiver in this case is invalid under the National Labor Relations Act (NLRA).
recently refused to enforce that portion of the NLRB‘s opinion. (D.R. Horton, Inc.
Board‘s position and the Fifth Circuit‘s reasons for rejecting it.
that the latter but not the former is an unfair labor practice.
prevails over the earlier enacted FAA to the extent there is a conflict.
employees in the exercise of the rights guaranteed in‖ section 7. (29 U.S.C.
their statutory rights under the Fair Labor Standards Act in an arbitral forum.
engaged in concerted activity.‘ 127 Rest. Corp., 331 NLRB 269, 275–76 (2000).
‗overridden by a contrary congressional command.‘ ‖ (CompuCredit v.
of employees to litigate statutory employment claims in favor of arbitration.
instance as it considers the wide variety of cases that come before it‘ ‖ (NLRB v.
class actions, may be construed as an implied bar to a class action waiver.
and the FAA under the reasoning of Concepcion.
F.Supp.2d 784, 789–790; Morvant v. P.F. Chang’s China Bistro, Inc. (N.D.Cal.
2012) 870 F.Supp.2d 831, 844–845; Jasso v. Money Mart Express, Inc. (N.D.Cal.
2012) 879 F.Supp.2d 1038, 1048–1049; but see Herrington v. Waterstone Mortg.
collective activity would run afoul of section 7.
arbitration by failing to diligently pursue arbitration. We disagree.
arbitration in response to Iskanian‘s complaint, which included class action claims.
him. We have said that ―prejudice . . . is critical in waiver determinations.‖ (St.
Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1205; Roberts v. El Cajon Motors, Inc.
right to arbitrate when a later change in the law permits arbitration.
cognizable prejudice. We conclude that CLS has not waived its right to arbitrate.
penalties for violating various statutes related to withholding wages due]; Stats.
prosecutions.‖ (Sen. Judiciary Com., Analysis of Sen. Bill No. 796 (Reg. Sess.
Industrial Relations (DIR) ―was failing to effectively enforce labor law violations.
We summarized the Legislature‘s response to this problem in Arias v.
Agency, and the notice must describe facts and theories supporting the violation.
characteristics of a PAGA representative action: ―An employee plaintiff suing . . .
public and not to benefit private parties‘ (People v. Pacific Land Research Co.
A PAGA representative action is therefore a type of qui tam action.
enacted by the First Congress. (See Vermont Agency of Natural Resources v.
[its] own . . . violation of law,‖ it is against public policy and may not be enforced.
Cal.App.4th 1119, 1123–1124 [agreeing with Iskanian‘s position] with Quevedo v.
PAGA, a prohibition of representative claims frustrates the PAGA‘s objectives.
and unenforceable as a matter of state law.
enforcement agency. (See, e.g., Italian Colors, supra, 570 U.S. at p. __ [133 S.
[130 S.Ct. 2772, 2775] [employment discrimination suit]; Stolt-Nielsen S.A. v.
against lender for violations of South Carolina law]; Doctor’s Associates, Inc. v.
state disclosure requirements related to franchise agreement]; Gilmer v.
on behalf of the state for such remedies.
p. 7.) This arrangement likewise does not interfere with the FAA‘s policy goal.
Labor Code violations traditionally prosecuted by the state.
arbitration as a forum for private dispute resolution.
scarce resources by enlisting willing citizens in the task of civil enforcement.
county hires outside counsel to do its bidding.
interference with legislative or executive functions of state or local government.
augmenting scarce government resources for civil prosecutions.
contractors. There is no conflict between the rule in those cases and the PAGA.
powers principle under the California Constitution.
claims, and CLS must answer the representative PAGA claims in some forum.
to resolve a representative PAGA claim through arbitration.
forfeited this contention and cannot raise it on appeal.
remand the cause for proceedings consistent with this opinion.
WE CONCUR: CANTIL-SAKAUYE, C. J.
(Concepcion), American Express Co. v. Italian Colors Restaurant (2013) 570 U.S.
we issued Sonic II to change my view.
a federal antitrust claim prohibitively expensive. (Italian Colors, supra, 570 U.S.
Sonic II‘s dicta is valid under the FAA.
II. THE PAGA WAIVER IS UNENFORCEABLE.
All further unlabeled statutory references are to the Labor Code.
employees as well, is a representative action on behalf of the state.
Colors, supra, 570 U.S. at p. __ [133 S.Ct. at p. 2310]; see Mitsubishi Motors v.
does not run afoul of the FAA.
aggrieved employees — that the employer has violated the Labor Code.‖ (Maj.
needlessly adopt a novel theory that renders the FAA completely inapplicable.
Third, contrary to the majority‘s assertion, EEOC v. Waffle House, Inc.
requires a ―nonparty‖ to arbitrate claims it has not agreed to arbitrate (id. at p.
what the court has said ―on numerous occasions‖ (Stolt-Nielsen S.A. v.
declare private agreements to arbitrate PAGA claims categorically unenforceable.
agreement and pursue those claims in court as the state‘s ―representatives.‖ (Maj.
CONCURRING AND DISSENTING OPINION BY WERDEGAR, J.
then is true today. I would reverse the Court of Appeal‘s decision in its entirety.
employment on the promise not to join together with fellow workers in a union.
conditioning employment on a compulsory contractual promise not to unionize.
struck down the bans as an infringement on liberty of contract. (Coppage v.
to yellow-dog contracts in Hitchman Coal & Coke Co. v. Mitchell (1917) 245 U.S.
interference, the use of contractual bans on collective action blossomed.
Lochner v. New York (1905) 198 U.S. 45.
Act (1989) 89 Colum. L.Rev. 789, 846-849.
become an empty statement of historical fact.‖ (Ibid., quoting Texas & N. O. R.
United States‖ and unenforceable in any court of the United States. (29 U.S.C.
Labor Relations Act (commonly known as the Wagner Act after its author, Sen.
conditions of their employment or other mutual aid or protection.‖ (29 U.S.C.
employees in the exercise of‖ their right to engage in concerted, collective activity.
Debate on Sen. No. 1958, 74th Cong., 1st Sess., 79 Cong. Rec. 7570 (daily ed.
upheld against constitutional challenge Congress‘s ―safeguard‖ of this right.
the right to engage in collective action includes the pursuit of actions in court.
Cir.) 542 F.2d 295, 297 [same]; Leviton Manufacturing Company, Inc. v. N.L.R.B.
employees to join collectively in litigation.
is unenforceable. (Kaiser Steel Corp. v. Mullins (1982) 455 U.S. 72, 83-86; J. I.
proceeding with a putative class action.
grounds for upholding the class waiver.
law rule that specific enforcement of agreements to arbitrate was unavailable.
agreements as enforceable as other contracts, but not more so.‖ (Prima Paint v.
the substantive rights guaranteed by those later enactments.
employment agreements and in employment arbitration agreements.
working conditions is core protected activity. (Labor Board v. Erie Resistor Corp.
(1963) 373 U.S. 221, 233-235; Automobile Workers v. O’Brien (1950) 339 U.S.
454, 456-457.) So too is a walkout. (Labor Bd. v. Washington Aluminum Co.
means over more peaceable ones.
U.S. 321 [179 L.Ed.2d 742, 131 S.Ct. 1740] and CompuCredit Corp. v.
consumer contracts. (AT&T Mobility LLC v. Concepcion, supra, 563 U.S. at p.
substantive rights to engage in collective action, rights not shared by consumers.
contrary congressional command‘ ‖ in other federal law. (Id. at p. ___ [132 S.Ct.
agreements to generally applicable bars against contract enforcement (9 U.S.C.
Procedure (28 U.S.C.), governing class actions, was not adopted until 1966.
shield from waiver the right to collective litigation in whatever manner available.
such deference. The right of collective action they codify need not yield.
Pubic Citizen Litigation Group and Scott L. Nelson for Plaintiff and Appellant.
Curiae on behalf of Plaintiff and Appellant.
Policyholders as Amicus Curiae on behalf of Plaintiff and Appellant.
Fund as Amici Curiae on behalf of Plaintiff and Appellant.
Amicus Curiae on behalf of Plaintiff and Appellant.
Schotz, Meisel, Forman & Leonard and Leo V. Leyva for Defendant and Respondent.
Retailers Association as Amici Curiae on behalf of Defendant and Respondent.
for Employers Group as Amicus Curiae on behalf of Defendant and Respondent.
Association of California as Amici Curiae on behalf of Defendant and Respondent.
Association as Amicus Curiae on behalf of Defendant and Respondent.
Petition for review after the Court of Appeal affirmed an order granting a motion to compel arbitration and dismissing class claims. This case presents the following issues: (1) Did AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S. Ct. 1740, 179 L.Ed.2d 742] impliedly overrule Gentry v. Superior Court (2007) 42 Cal.4th 443 with respect to contractual class action waivers in the context of non-waivable labor law rights? (2) Does the high court's decision permit arbitration agreements to override the statutory right to bring representative claims under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.)? (3) Did defendant waive its right to compel arbitration?
Plaintiff Arshavir Iskanian worked for defendant CLS Transportation Los Angeles, LLC (CLS) as a driver. He signed an agreement providing that “any and all claims” arising out of his employment had to be submitted to binding arbitration. The arbitration agreement also barred employees from bringing any claims as a class or representative action.
Iskanian filed a class action against CLS alleging various labor code violations. In response, CLS filed a motion to compel arbitration, which was granted by the trial court. While an appeal was pending, the California Supreme Court decided Gentry v. Superior Court, 165 P.3d 556 (Cal. 2007), which held that certain class action waivers in employment arbitration agreements were invalid. The Court of Appeal remanded to the superior court in light of Gentry.
On remand, CLS withdrew its motion to compel arbitration. Iskanian amended his complaint to also bring a representative action under California’s Private Attorneys General Act, Cal. Lab. Code § 2698 et seq., (PAGA) seeking civil penalties for labor code violations. Then the U.S. Supreme Court decided AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), which invalidated California’s Discover Bank rule that restricted consumer class action waivers in arbitration agreements governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (FAA). CLS renewed its motion to compel arbitration and dismiss the class claims arguing that Concepcion also invalidated Gentry. The trial court granted CLS’s motion and the Court of Appeal affirmed. The Court of Appeal also held that the representative claims under PAGA must be brought individually through arbitration under the terms of the contract and the FAA. The California Supreme Court granted review.
(1)	Did Concepcion overrule Gentry thereby making the class action waiver in Iskanian’s employment contract valid?
(2)	Even if Concepcion invalidates Gentry, does the National Labor Relations Act prohibit the class action waiver in his contract?
(3)	Did CLS waive its right to compel arbitration?
(4)	Are waivers of representative actions under PAGA valid under California Law? If so, would a state rule invalidating them be preempted by the FAA?
(1)	The U.S. Supreme Court’s decision in Concepcion did invalidate Gentry thereby making the class action waiver in Iskanian’s employment contract valid.
(2)	The court declined to interpret the National Labor Relations Act to prohibit the class action waiver in Iskanian’s contract.
(3)	CLS did not waive its right to compel arbitration.
(4)	Waiver of representative actions under PAGA are invalid under California law. Such a state rule does not run afoul of the FAA.
(1)	In Concepcion, the U.S. Supreme Court invalidated California’s Discover Bank rule, which banned class action waivers in certain consumer contracts because “[r]equiring the availability of classwide arbitration interferes with the fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” Concepcion, 131 S. Ct. at 1748. Two of the fundamental attributes of arbitration described by the Court were its informality and efficiency, which would be sacrificed if classwide arbitration were required. Because California’s Gentry rule would similarly be incompatible with these key features of arbitration, it must be preempted by the FAA in light of Concepcion.
(2)	The National Labor Relations Board (NLRB) in D.R. Horton Inc. & Cuda, 357 NLRB No. 184 (2012) (Horton I) determined that the National Labor Relations Act (NLRA) prohibited employers from compelling employees to waive their rights to bring class proceedings for wage dispute claims. The NLRA protects the rights of employees to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” In combination with the NLRA’s language barring employers from engaging in unfair employment practices, which includes forcing employees to relinquish their rights under the statute, the NLRB found that the NLRA prohibited class action waivers over wage disputes. While recognizing the tension with the FAA, the NLRB ruled that the FAA did not take precedence over its interpretation of the NLRA. The California Supreme Court disagreed with this interpretation, siding with the Fifth Circuit’s rejection of the NLRB’s interpretation in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013) (Horton II). The court found that the FAA’s liberal policy favoring arbitration was not overridden by an implicit command of the NLRA to ban class action waivers.
(3)	The California Supreme Court ran through six factors to determine if CLS had waived its right to compel arbitration, as developed in St. Agnes Medical Center v. PacifiCare of California, 82 P.3d 727 (Cal. 2003): (1) whether CLS’s actions were inconsistent with its right to arbitrate; (2) whether the litigation machinery had been substantially invoked and the parties were well into the lawsuit before CLS notified Iskanian of its intent to arbitrate; (3) whether CLS delayed before seeking to a stay of the proceedings; (4) Whether CLS filed a counterclaim without asking for a stay; (5) whether important steps such as key discovery procedures had already taken place; and (6) whether the delay misled Iskanian. Largely because CLS had initially moved to arbitrate before the change in California law went into effect causing it to abandon that motion, the court found that these factors weighed in CLS’s favor and concluded that it had not waived its right to arbitrate.
(4)	After reviewing the public policy behind the PAGA and its importance in enforcing labor laws in California, the court held that an employment agreement that compels the waiver of representative claims under PAGA is contrary to public policy and unenforceable under state law. Moreover, the court held that the FAA did not preempt this newly minted rule because it governs the arbitrability of private disputes whereas a PAGA action is technically a government enforcement action.
SCOCAL, Iskanian v. CLS Transportation , 59 Cal.4th 348 (2014); 327 P.3d 129 (Cal. 2014); 173 Cal. Rptr. 3d 289 (2014) available at: (https://scocal.stanford.edu/opinion/iskanian-v-cls-transportation-34328) (last visited Sunday April 21, 2019).

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