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United States Court of Appeals, Ninth Circuit.

PLACIDO VALDEZ, on behalf of himself and others similarly situated, Plaintiff-Appellee, v. TERMINIX INTERNATIONAL COMPANY LIMITED PARTNERSHIP, DBA Antimite Termite and Pest Control, a Delaware Limited Partnership, Defendant-Appellant.

No. 15-56236

Decided: March 03, 2017

Before: M. SMITH and OWENS, Circuit Judges, and HELLERSTEIN, *** District Judge.


Defendant-Appellant Terminix International Company Limited Partnership (Terminix) appeals from the district court's order denying its motion to dismiss or compel arbitration of Plaintiff-Appellee Placido Valdez's representative claim under California's Private Attorneys General Act (PAGA). We have jurisdiction pursuant to 9 U.S.C. § 16(a)(1)(B) and our review is de novo. See Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 429 (9th Cir. 2015). We reverse the portion of the district court's order denying the motion to compel arbitration of the PAGA claim, and remand to the district court to consider whether to dismiss or stay the action pending arbitration.

Terminix insists that the district court should have dismissed the PAGA claim for three reasons. First, Terminix contends that the Federal Arbitration Act (FAA) preempts California's rule that a waiver of the right to bring a PAGA claim is invalid (the Iskanian rule). See Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014). That argument fails, however, in light of our recent decision in Sakkab. There, we held that “the Iskanian rule does not stand as an obstacle to the accomplishment of the FAA's objectives, and is not preempted.” Sakkab, 803 F.3d at 427.

Next, Terminix contends that if Sakkab applies, “its reasoning is questionable” in light of DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015). Specifically, Terminix argues that in light of Imburgia, Iskanian's rule must be preempted “because it relies on an arbitration-specific contract defense.” That aspect of Imburgia, however, did not announce new law. Rather, it evinces a garden-variety application of the FAA preemption test. Like Imburgia, moreover, Sakkab correctly applied existing precedent regarding the FAA's “savings clause.” Sakkab acknowledged that the relevant state defense—the Iskanian rule—“must be a ‘ground[ ] ․ for the revocation of any contract.” 803 F.3d at 432 (quoting 9 U.S.C. § 2). It concluded “that the Iskanian rule is a ‘generally applicable’ contract defense,” id. at 433, because it “bars any waiver of PAGA claims, regardless of whether the waiver appears in an arbitration agreement or a non-arbitration agreement,” id. at 432 (emphasis added). Terminix's argument that Imburgia casts doubt on Sakkab is thus meritless.

Finally, Terminix contends that the district court erred in concluding that PAGA claims categorically cannot proceed to arbitration. The district court reasoned that a PAGA claim “belongs to the state, and the state has not waived the judicial forum,” even where a private employee signs an employment contract requiring that PAGA claims be pursued in arbitration.

The district court's holding on this point is incorrect.1 Iskanian and Sakkab clearly contemplate that an individual employee can pursue a PAGA claim in arbitration, and thus that individual employees can bind the state to an arbitral forum. To start, Iskanian recognized that although “[t]he government entity on whose behalf the plaintiff files suit is always the real party in interest in the suit,” 59 Cal. 4th at 382, “the judgment in a PAGA representative action is binding not only on the named employee plaintiff but also on government agencies and any aggrieved employee not a party to the proceeding,” id. at 380 (quotation marks and alterations omitted). Employees can bind government agencies because they “represent[ ] the same legal right and interest” as the government in PAGA proceedings. Id. at 380 (quoting Arias v. Superior Court, 46 Cal. 4th 969, 986 (2009)). Indeed, “[a]n employee plaintiff suing ․ under the PAGA does so as the proxy or agent of the state's labor law enforcement agencies.” Id. (emphasis added) (quoting Arias, 46 Cal. 4th at 986). Accordingly, an individual employee, acting as an agent for the government, can agree to pursue a PAGA claim in arbitration. Iskanian does not require that a PAGA claim be pursued in the judicial forum; it holds only that a complete waiver of the right to bring a PAGA claim is invalid. See, e.g., id. at 391 (concluding that “Iskanian must proceed with bilateral arbitration on his individual damages claims, and CLS must answer the representative PAGA claims in some forum” (emphasis added)).

Sakkab likewise recognized that individual employees may pursue PAGA claims in arbitration. See, e.g., Sakkab, 803 F.3d at 436 (“[T]here is no need to protect absent employees' due process rights in PAGA arbitrations.”); id. at 438 (“[W]hether arbitration of representative PAGA actions is likely to ‘generate procedural morass' depends, first and foremost, on the procedures the parties select.”). We have also upheld district court decisions compelling arbitration of PAGA claims. See, e.g., Wulfe v. Valero Ref. Co.-Cal., 641 F. App'x 758, 760 (9th Cir. 2016) (“The district court did not err in compelling arbitration of Wulfe's [PAGA] claim.”).

Given that PAGA claims are eligible for arbitration, we must decide if the PAGA claim here falls within the scope of the arbitration clause. It does. The parties mutually agreed “to arbitrate covered Disputes.” That clause of the parties' agreement applies even after the representative action waiver is severed. See ER 114 (stating that, in the event that a Plan provision is severed, “[a]ll remaining provisions shall remain in full force and effect”). Additionally, since the PAGA claim “relat[es] to [Valdez's] employment relationship with the Company,” and arises under a “state” “employment related law[ ],” it constitutes a covered dispute. See ER 111. The district court therefore erred by denying the motion to compel arbitration of the PAGA claim.2



1.   We note that the district court did not have the benefit of our opinion in Sakkab when it decided this case.

2.   Valdez's request for judicial notice is denied. See Dkt. No. 18.