California’s Private Attorneys General Act (PAGA) creates a right of action in which individual employees bring suit on behalf of the State to recover penalties from employers for violations of California’s Labor Code. In Iskanian v. CLS Transportation Los Angeles, 327 P.3d 129 (Cal. 2014), the California Supreme Court held that the right to bring a PAGA action cannot be waived prospectively, whether in an arbitration agreement or any other type of contract. In Sakkab v. Luxottica Retail North America, Inc., 803 F.3d 429 (9th Cir. 2015), the Ninth Circuit agreed with the California Supreme Court that the Federal Arbitration Act (FAA) does not preempt Iskanian’s holding, because Iskanian does not prohibit arbitration of specific types of claims or otherwise disfavor arbitration. In the years since, the U.S. Supreme Court has repeatedly denied petitions for certiorari that argued that those decisions were wrongly decided.
In this case, an employee of Viking River Cruises sued the company in state court under PAGA claiming widespread violations of California wage and hour laws. The company sought to compel arbitration based on an arbitration agreement that purports to forbid an employee from bringing any private attorney general action. The trial court and the California Court of Appeal, applying Iskanian, held that the waiver of PAGA claims was unenforceable and that the PAGA claims could proceed in court. The California Supreme Court denied review. Viking then filed a petition for certiorari, and Public Citizen, serving as co-counsel for the plaintiff in the Supreme Court, prepared the brief in opposition to the petition.
After the Court granted the petition, Public Citizen served as co-counsel at the merits stage. In a fractured decision issued in June 2022, the Court held that an arbitration agreement cannot provide for a waiver of a plaintiff’s right to bring a representative claim on behalf of the state for the violations that affected her. However, the Court treated the state’s PAGA claim for penalties involving multiple violations as multiple claims and held that an arbitration agreement can prohibit aggregating those claims. Accordingly, although it held that Viking River could not use an arbitration provision to bar a plaintiff from asserting a PAGA claim on behalf of the state for the violations directed at her, it could bar her from asserting PAGA claims on behalf of the state for violations affecting multiple employees. Thus, although the Court agreed in large part with our arguments, the bottom line was a loss for plaintiffs seeking to assert PAGA claims. Because, however, the Court’s disposition of the case rested on two issues of state law that were outside the question presented, were not briefed by the parties, were inconsistent with a definitive ruling of the state’s highest court, and could not in any event be authoritatively resolved by the Supreme Court, we petitioned for rehearing to the extent that the decision rested on those state-law issues. The Court denied the petition.
On remand, the state appellate court ordered that the individual claim be sent to arbitration. As to the non-individual claim, the court explained that the trial court could either hold that the plaintiff lacked standing to pursue it, as the Supreme Court had assumed, determine that the plaintiff had standing, or stay the case pending the outcome of another case pending in the California Supreme Court on a similar issue.