SCOTUS Denies Cert in CA Representative Arbitration Case
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The US Supreme Court denied certiorari in CLS Transportation v. Iskanian, which dealt with a “representative” rather than class arbitration in the California State Courts. In the case below (327 P.3d 129 (Ca. 2014)), the Supreme Court of California had allowed a large-scale representative action under the California Private Attorney Generals Act (PAGA) to go forward, although a class action under the National Labor Relations Act was barred due to the existence of a waiver of class arbitration.
In its opinion, the Supreme Court of California distinguished between “representative” actions under PAGA and standard class actions. Among other things, the Supreme Court of California held that representative actions under PAGA were not waivable and that various US Supreme Court precedents concerning class arbitration under the FAA were not applicable in the current case because:
a PAGA claim lies outside the FAA’s coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between an employer and the state, which alleges directly or through its agents—either the Labor and Workforce Development Agency or aggrieved employees—that the employer has violated the Labor Code. Through his PAGA claim, Iskanian is seeking to recover civil penalties, 75 percent of which will go to the state’s coffers. We emphasized in Arias that “an action to recover civil penalties ‘is fundamentally a law enforcement action designed to protect the public and not to benefit private parties’ ”; that “[i]n a lawsuit brought under the [PAGA], the employee plaintiff represents the same legal right and interest as state labor law enforcement agencies”; and that “an aggrieved employee’s action under the [PAGA] functions as a substitute for an action brought by the government itself.” The fact that any judgment in a PAGA action is binding on the government confirms that the state is the real party in interest. It is true that “a person may not bring a PAGA action unless he or she is ‘an aggrieved employee’”, but that does not change the character of the litigant or the dispute. As Justice Chin correctly observes, “every PAGA action, whether seeking penalties for Labor Code violations as to only one aggrieved employee—the plaintiff bringing the action—or as to other employees as well, is a representative action on behalf of the state.” (citations omitted)
Given that the US Supreme Court has declined to hear this matter, the decision from the Supreme Court of California will stand. Notably, federal district courts in California have come to a different conclusion about the application of PAGA in the face of class and representative waivers. See, e.g.,
Langston v. 20/20 Companies, Inc., No. EDCV 14-13360 JGB (SPx) (C.D. Cali. Oct. 17, 2014).
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