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MICHAEL GONZALES, et al., Plaintiffs, v. CHARTER COMMUNICATIONS, LLC, Defendant.
ORDER DENYING MOTION TO ENFORCE ARBITRATION AGREEMENTS [DKT. NO. 157]
Plaintiff Michael Gonzales and others brought wage and hour claims arising from their employment with Defendant Charter Communications, LLC (Charter) as maintenance technicians (MTs), including claims for violation of California's Private Attorneys General Act (PAGA). Dkt. No. 77. PAGA permits a plaintiff to serve as an agent of California's Labor and Workforce Development Agency (LWDA) and recover statutory penalties not only for labor code violations the plaintiff personally suffered but also for violations suffered by other “aggrieved employees.” Cal. Lab. Code § 2698 et seq. Plaintiff Gonzales, who did not sign an arbitration agreement, seeks to recover penalties for other aggrieved employees, including those whose claims are arbitrable. Charter has filed this motion “to enforce arbitration agreements,” contending that Gonzales may not pursue penalties for any aggrieved employee who is bound to arbitrate his or her claims.1 Dkt. No. 157 at 2. Plaintiffs oppose. Dkt. No. 160. For the following reasons, Charter's motion is largely denied.
This wage and hour case originally was filed on behalf of numerous individuals. The only remaining plaintiff is Gonzales. Plaintiffs Felipe Becerra and Carlos Serpas previously stipulated to dismiss their claims, Dkt. No. 100, and Plaintiff Artur Kosinksi concedes in response to this motion that his PAGA claim should be dismissed, Dkt. No. 160 at 6 n.1.
The scope of the claims in this case also has been narrowed. On January 26, 2022, the Court granted Charter's motion for summary judgment except for the state law claims arising from “circle of safety” inspections MTs performed off the clock, but on call, while using a company vehicle for personal reasons. Dkt. No. 138. One of these claims is a PAGA claim brought on behalf of 641 current and former MTs. Of this group, 493 MTs consented to a Solution Channel Mutual Arbitration Agreement (MAA) that requires Charter and signatory employees to arbitrate many disputes, including wage and hour disputes. Three MTs consented to an agreement that submits wage and hour disputes to individual arbitration with Judicial Arbitration and Mediation Services (JAMS Agreement). Dkt. Nos. 157-12, 157-14, 157-15.
Charter now contends that Gonzales cannot pursue PAGA penalties arising from labor code violations experienced by MTs who signed arbitration agreements. For this contention, Charter relies on erroneous readings of Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (2022), and its own arbitration agreements.
In Viking River, the Supreme Court held that the Federal Arbitration Act (FAA) preempts a rule of California law that invalidated an employee's agreement to arbitrate or litigate his individual PAGA claims for labor code violations separately from those experienced by other aggrieved employees. Charter contends that this holding effectively precludes Gonzales from obtaining civil penalties for violations experienced by any aggrieved employee who signed an arbitration agreement. A brief description of PAGA, the relevant California rules applicable to PAGA, and the Viking River decision demonstrate that Charter is mistaken.
PAGA authorizes an aggrieved employee to prosecute labor code violations “on behalf of himself or herself and other current or former employees ․” Cal. Lab. Code § 2699(a). In other words, PAGA allows an employee to bring an action for violations he or she suffered (i.e., individual PAGA claims) and for violations suffered by other aggrieved employees (i.e., nonindividual PAGA claims). Under California law, a PAGA lawsuit is considered a wholly representative action in that the plaintiff is pursuing the individual and nonindividual claims solely in his or her role as a state agent. Iskanian v. CLS Trans. L.A., LLC, 59 Cal. 4th 348, 380 (2014). Where civil penalties are not otherwise provided for in the labor code, PAGA provides for default penalties for labor code violations at a statutory rate based on the number of aggrieved employees and number of pay periods for which an employer committed violations. Id. § 2699(f). Aggrieved employees include “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” Id. § 2699(c). Penalties recovered are split, with 75% going to LWDA and 25% going to the aggrieved employees. Id. § 2699(i).
In Viking River, the U.S. Supreme Court analyzed two rules of California law that apply to PAGA-related waivers in arbitration agreements: (1) an employee cannot waive the right to bring PAGA claims; and (2) an employee cannot be required by an arbitration agreement to divide a PAGA action into individual and nonindividual claims. 142 S. Ct. at 1916–17 (discussing the rules derived from Iskanian). The Court left intact the first Iskanian rule, concluding that “[n]othing in the FAA establishes a categorical rule mandating enforcement of waivers of standing to assert claims on behalf of absent principals.” 142 S. Ct. at 1922; see also id. at 1919 (noting that “the FAA does not require courts to enforce contractual waivers of substantive rights and remedies”). The Court, however, found that the FAA preempts the second Iskanian rule. Id. at 1924 (“We hold that the FAA preempts the [second] rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.”).
Thus, under Viking River, an employee who has signed an agreement that submits an individual PAGA claim to arbitration must arbitrate that individual claim. The Supreme Court further found that once a plaintiff's individual PAGA claim has been dismissed based on an arbitration agreement, the plaintiff lacks statutory standing to pursue the nonindividual claims in court. 142 S. Ct. at 1925 (“Under PAGA's standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action.”).
The holding in Viking River is inapplicable here because Gonzales did not sign an arbitration agreement. He is therefore free to pursue both individual and nonindividual PAGA claims in this action. Nothing in Viking River, moreover, suggests that Gonzales is precluded in his representative capacity from obtaining penalties for violations suffered by aggrieved employees who agreed to arbitrate their claims. As the Supreme Court explained, those employees are not “parties” to the litigation and do not possess “anything more than an inchoate interest in the litigation proceeds.” Id. at 1920; see also id. (“PAGA actions do not adjudicate the individual claims of multiple absent third parties ․”). Consequently, Charter's contention that Viking River serves to limit the scope of penalties that can be recovered for the nonindividual claims in this action—to include penalties only for other aggrieved employees who have not signed an arbitration agreement—is without merit.
Nor do the arbitration agreements signed by other MTs preclude consideration of the violations they experienced in calculating penalties in this case. Charter vaguely argues that Gonzales cannot prove labor code violations as to these MTs without their “participation” in this case, which is prohibited under the arbitration agreements. The argument appears to be that the arbitration agreements preclude the signatory employees from receiving any litigation proceeds and from even submitting evidence in favor of Gonzales (as third-party witnesses). Neither arbitration agreement contains these prohibitions.
The MAA includes a representation, collective, and class action waiver provision, which states:
You and Charter agree that both parties may only bring claims against the other party in their individual capacity and not as a plaintiff or class member in any purported class or representative proceeding ․ Additionally, the arbitrator shall not be permitted to order consolidation of claims or a representative, class, or collective, arbitration.
Dkt. No. 157-2 (Decl. of John Fries), Ex. C at 15.
Properly read, the MAA merely prevents a signatory from “bring[ing] claims against the other party ․ as a plaintiff or class member in any purported class or representative proceeding ․” Id. This prohibition does not prevent employees from having an “inchoate interest”—or responding to third-party subpoenas—in suits brought by others. A signatory party cannot be said to have brought a claim in either circumstance. Charter attempts to broaden the scope of the arbitration agreement by citing to language in an email announcing the MAA, which stated: “By participating in Solution Channel, you and Charter both waive the right to initiate or participate in court litigation (including class, collective and representative actions) ․” Decl. of John Fries Ex. A at 9. However, the MAA contains an integration clause that “supersedes any prior or contemporaneous oral or written understanding on this subject ․” Decl. of John Fries Ex. C at 17. Thus, even if the email could be interpreted more broadly than the contract language (which is questionable),2 it is not relevant in light of the integration clause. See, e.g., Grey v. Am. Mgmt. Servs., 204 Cal. App. 4th 803, 807–08 (2012) (construing an integration clause that superseded all prior understandings as referring to all prior agreements).
The JAMS Agreement, signed by three MTs, “includes a waiver of any rights that you or [Charter/its predecessor] may have to bring or participate in an action against each other on a representative, class, or collective basis.” Dkt. Nos. 157-12, 157-14, 157-15. Even this language, which precludes participation in representative actions, does not necessarily limit a signatory employee's ability to receive litigation proceeds from a successful PAGA action. See discussion supra at 4–5. Though worded slightly differently, the JAMS Agreement does not suggest that a signatory employee is precluded from receiving proceeds resulting from its “inchoate interest” in litigation brought by another. Viking River, 142 S. Ct. at 1920. Nor does that agreement, by its terms as reasonably construed, prevent a signatory employee from providing evidence of possible labor code violations in PAGA actions pursued by a nonsignatory party. Indeed, if that were the case, the agreement would raise unconscionability questions. See Baxter v. Genworth North Am. Corp., 16 Cal. App. 5th 713, 724–26 (2017) (arbitration provision that “forbids questioning of coemployees about the substance of an employee's claim” found substantively unconscionable).3
Charter seeks to limit the penalties available for Gonzales's PAGA claim based on arbitration agreements he did not sign. There is no basis in Viking River or any relevant arbitration agreement for imposing this limitation. Accordingly, Charter's motion is DENIED, except that Kosinski is dismissed from this action.
IT IS SO ORDERED.
1. It is not clear that Charter's motion, which essentially requests a judicial ruling on the scope of an available remedy, is procedurally proper. Nevertheless, the Court has elected to consider it in the absence of any objection by Gonzales.
2. The email sought to explain the general contents of the arbitration agreement in simple terms to a non-legal audience. In that context, it would be inappropriate to interpret this communication to provide a more expansive interpretation of the legal document. Moreover, the terms used in the email notifying employees that they would be waiving their right “to initiate or participate in court litigation” does not suggest a waiver beyond the ability to bring claims in court litigation.
3. In light of its conclusion, the Court does not address Gonzales's various challenges to the enforceability of the arbitration agreements.
Stanley Blumenfeld, Jr. United States District Judge
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Docket No: Case No. 2:20-cv-08299-SB-AS
Decided: November 18, 2022
Court: United States District Court, C.D. California.
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