Amicus Curiae Brief — Viking River Cruises, Inc., Petitioner v. Angie Moriana

No. 20–1573

In The

Supreme Court of the United States

─────  ─────

VIKING RIVER CRUISES, INC.,

V.

ANGIE MORIANA,

Petitioner,

Respondent.

─────  ─────

On Petition For A Writ Of Certiorari

to the California Court of Appeal

─────  ─────

BRIEF OF AMICUS CURIAE

WASHINGTON LEGAL FOUNDATION

IN SUPPORT OF PETITIONER

─────  ─────

HORVITZ & LEVY LLP

PEDER K. BATALDEN

Counsel of Record

FELIX SHAFIR

JOHN F. QUERIO

3601 WEST OLIVE AVENUE

8TH FLOOR

BURBANK, CALIFORNIA 91505

(818) 995-0800

pbatalden@horvitzlevy.com

WASHINGTON LEGAL

FOUNDATION

CORY L. ANDREWS

JOHN M. MASSLON II

2009 MASS. AVE. NW

WASHINGTON, DC 20036

(202) 588-0302

Counsel for Amicus Curiae

Washington Legal Foundation

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .................................... III

INTEREST OF AMICUS CURIAE ............................1

SUMMARY OF ARGUMENT.....................................3

ARGUMENT ...............................................................5

I.

REVIEW IS NECESSARY TO HARMONIZE THE

DIVERGENT VIEWS OF STATE AND FEDERAL

JUDGES ON WHETHER PAGA CLAIMS ARE

SUBJECT TO THE FAA. ........................................5

II.

A.

Iskanian held that PAGA claims

fall outside the FAA’s coverage. ............5

B.

Ninth Circuit judges have

questioned or disagreed with

Iskanian. ................................................7

CALIFORNIA COURTS’ DEFENSE OF THE

ISKANIAN RULE HAS EXPOSED OTHER

TENSIONS IN THE CASE LAW, CEMENTING

THE NEED FOR REVIEW. ....................................10

A.

California courts dispute whether

this Court has already held that

“public” claims are subject to the

FAA. .....................................................10

ii

B.

California courts deny that qui

tam claims are subject to the

FAA, in tension with federal

decisions. ..............................................13

CONCLUSION ..........................................................18

iii

TABLE OF AUTHORITIES

Page(s)

Cases

Am. Express Co. v. Italian Colors Restaurant,

570 U.S. 228 (2013)..............................................12

Amalgamated Transit Union, Loc. 1756,

AFL-CIO v. Superior Ct.,

209 P.3d 937 (Cal. 2009) ......................................17

Anderson v. Celebrezze,

460 U.S. 780 (1983)..............................................13

Arias v. Superior Ct.,

209 P.3d 923 (Cal. 2009) ........................................3

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011)........................................2, 3, 6

Bradford v. Pro. Tech. Sec. Servs. Inc. (Protech),

No. 20-CV-02242-WHO, 2020 WL 2747767

(N.D. Cal. May 27, 2020) .....................................15

Collie v. Icee Co.,

266 Cal. Rptr. 3d 145 (Ct. App. 2020) .................10

Correia v. NB Baker Elec., Inc.,

244 Cal. Rptr. 3d 177

(Ct. App. 2019) ............................. 10, 14, 15, 16, 18

Deck v. Miami Jacobs Bus. Coll. Co.,

No. 3:12-cv-63, 2013 WL 394875

(S.D. Ohio Jan. 31, 2013) .....................................15

iv

DIRECTV, Inc. v. Imburgia,

577 U.S. 47 (2015)..................................................3

Epic Sys. Corp. v. Lewis,

138 S. Ct. 1612 (2018).................................. passim

Goodwin v. Elkins & Co.,

730 F.2d 99 (3d Cir. 1984) .....................................2

Iskanian v. CLS Transportation

Los Angeles, LLC,

327 P.3d 129 (Cal. 2014) .............................. passim

Kim v. Reins Int’l Cal., Inc.,

459 P.3d 1123 (Cal. 2020) ................................7, 16

Lamps Plus, Inc. v. Varela,

139 S. Ct. 1407 (2019)........................................3, 9

Magadia v. Wal-Mart Associates, Inc.,

___ F.3d ___, 2021 WL 2176584

(9th Cir. May 28, 2021)................................8, 9, 16

McGovern v. U.S. Bank N.A.,

362 F. Supp. 3d 850 (S.D. Cal. 2019) ..................12

Mikes v. Strauss,

889 F. Supp. 746 (S.D.N.Y. 1995) .......................16

Murphy Oil USA, Inc. & Hobson,

361 NLRB 774 (2014) ....................................11, 12

Murphy Oil USA, Inc. v. NLRB,

808 F.3d 1013 (5th Cir. 2015).................. 11, 12, 13

v

Nitro-Lift Techs., L.L.C. v. Howard,

568 U.S. 17 (2012)................................................12

Olson v. Lyft, Inc.,

270 Cal. Rptr. 3d 739 (Ct. App. 2020) .................13

Perry v. Thomas,

482 U.S. 483 (1987)..........................................3, 12

Porter v. Nabors Drilling USA, L.P.,

854 F.3d 1057 (9th Cir. 2017)................................8

Preston v. Ferrer,

552 U.S. 346 (2008)................................................3

Rivas v. Coverall North America, Inc.,

842 F. App’x 55 (9th Cir. 2021) .............................9

Sakkab v. Luxottica Retail N. Am., Inc.,

803 F.3d 425 (9th Cir. 2015)........ 7, 8, 9, 13, 16, 17

Sprint Commc’ns Co. v. APCC Servs., Inc.,

554 U.S. 269 (2008)..............................................14

United States ex rel. Eisenstein v.

City of New York,

556 U.S. 928 (2009)..............................................14

United States v. Bankers Ins. Co.,

245 F.3d 315 (4th Cir. 2001)................................15

Valdez v. Terminix Int’l Co. Ltd. P’ship,

681 F. App’x 592 (9th Cir. 2017) .........................15

vi

Vt. Agency of Nat. Res. v. United States

ex rel. Stevens,

529 U.S. 765 (2000)..............................................14

Williams v. Superior Ct.,

398 P.3d 69 (Cal. 2017) ........................................17

ZB, N.A. v. Superior Ct.,

448 P.3d 239 (Cal. 2019) ......................................16

Statutes

California Labor Code § 98.3 (West 2020) ...............16

California Labor Code § 2699(a) (West 2020) ..........16

California Labor Code § 2699(h) (West 2020) ..........16

Rules

Supreme Court Rule 10(c) ........................................10

Miscellaneous

Mathew Andrews, Whistling in Silence:

The Implications of Arbitration

on Qui Tam Claims Under the

False Claims Act,

15 Pepp. Disp. Resol. L.J. 203 (2015) ..................15

1

INTEREST OF AMICUS CURIAE 1

Washington Legal Foundation is a nonprofit,

public-interest law firm and policy center with supporters nationwide. WLF promotes free enterprise,

individual rights, limited government, and the rule of

law. WLF regularly appears as amicus curiae to support the rights of parties to enter into binding arbitration agreements as an expedient, inexpensive, and efficient alternative to civil litigation. See, e.g., Epic

Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018). And WLF’s

publishing arm often produces articles and other educational materials on arbitration. See, e.g., Victor E.

Schwartz & Christopher E. Appel, Setting the Record

Straight About the Benefits of Pre-Dispute Arbitration, WLF Legal Backgrounder (June 7, 2019),

https://bit.ly/2R0AcZi.

The Federal Arbitration Act (FAA) requires

courts to enforce arbitration agreements strictly according to their terms. This case is the latest in a long

line of decisions from California refusing to follow the

FAA’s directive requiring arbitration contracts to be

enforced as written. The California Court of Appeal

declined to enforce a representative-action waiver in

the parties’ arbitration agreement based on Iskanian

v. CLS Transportation Los Angeles, LLC, 327 P.3d

129 (Cal. 2014). Iskanian held that claims under California’s Private Attorneys General Act (PAGA) are

No party’s counsel authored this amicus brief in whole or in

part. No one, other than Washington Legal Foundation, its members, or its counsel contributed money to prepare or submit this

brief. After timely notice, all parties consented in writing to the

filing of this brief.

1

2

not subject to the FAA because they are considered

qui tam actions in which individual workers pursue

public (not private) claims for relief, and therefore

courts need not enforce PAGA representative-action

waivers—despite this Court’s intervening decision in

Epic, which eroded the foundation on which Iskanian

rests. In other words, by repackaging a class or collective action as one under PAGA, employees evade this

Court’s FAA precedent in Epic and AT&T Mobility

LLC v. Concepcion, 563 U.S. 333 (2011), which requires the enforcement of an arbitration agreement’s

representative-action waiver. The Court of Appeal’s

refusal to apply the FAA flouts the Supremacy Clause

and conflicts with this Court’s precedent and many

lower court decisions that afford the FAA preemptive

effect, including in cases involving public claims.

The FAA “establish[ed] a uniform federal law

over contracts which fall within its scope.” Goodwin v.

Elkins & Co., 730 F.2d 99, 108 (3d Cir. 1984). WLF

seeks uniform application of the FAA nationwide to

ensure that arbitration achieves its basic purpose: resolving disputes efficiently, predictably, individually,

and cost-effectively. The decision below thwarts these

goals. WLF has a significant interest in whether the

underlying state law is preempted by the FAA, much

as the FAA has negated many other state-law rules

and policies evincing California courts’ deep hostility

to arbitration.

─────  ─────

3

SUMMARY OF ARGUMENT

California courts have long exhibited hostility

to arbitration. See Concepcion, 563 U.S. at 342. Again

and again—in a line of cases stretching back decades,

e.g., Perry v. Thomas, 482 U.S. 483 (1987); Preston v.

Ferrer, 552 U.S. 346 (2008); Concepcion, 563 U.S. 333;

DIRECTV, Inc. v. Imburgia, 577 U.S. 47 (2015); Epic,

138 S. Ct. 1612; Lamps Plus, Inc. v. Varela, 139 S. Ct.

1407 (2019)—this Court has rebuffed rules and

policies adopted by state or federal courts in

California that impede arbitration or otherwise

frustrate the objectives of the FAA.

This case involves the interplay between the

FAA and California’s PAGA, which permits an

“aggrieved employee” to “bring a civil action

personally and on behalf of other current or former

employees to recover civil penalties for Labor Code

violations.” Arias v. Superior Ct., 209 P.3d 923, 930

(Cal. 2009).

In Iskanian, the California Supreme Court

held that California public policy precludes the

enforcement of an arbitration agreement’s PAGA

representative-action waiver. Iskanian concluded

that the FAA did not preempt this prohibition because

PAGA claims are not subject to the FAA as it has been

interpreted by this Court. The Iskanian court

analogized PAGA claims to qui tam actions in which

individual workers pursue public (not private) claims

belonging to the State. Applying Iskanian, the Court

of Appeal refused to enforce the PAGA

representative-action

waiver

in

Petitioner’s

arbitration agreement with Respondent.

4

Petitioner catalogs how California courts deploy Iskanian to defeat arbitration agreements they

perceive as undesirable. In Iskanian and its progeny,

California courts have reshaped state law to obstruct

“traditional individualized arbitration.” (Pet. 1–2

(quoting Epic, 138 S. Ct. at 1623).) First, though

PAGA claims are brought by individuals, Iskanian

conceptualized a PAGA claim as one for purely public

(not private) relief. Second, by analogizing a PAGA

claim to a federal qui tam action, Iskanian insisted

that PAGA claims belong to the State and are brought

on its behalf. Iskanian relied on these twin rationales

to conclude that PAGA claims are not subject to the

FAA.

Petitioner is understandably dubious that Iskanian properly characterized PAGA as creating a

“public” claim belonging to the State. (Pet. 22–25.)

The petition debunks Iskanian’s twin rationales as a

“transparent effort to avoid the FAA’s preemptive effect.” (Pet. 22.) “[W]hile California may be free to embrace the legal fiction that PAGA plaintiffs are state

actors and to create special state-law rules . . . , it

may not rely on that characterization to refuse to enforce a plaintiff’s agreement to resolve employment

disputes via individualized, bilateral arbitration consistent with the FAA.” (Pet. 25 (citation omitted).)

Even assuming that the California Supreme

Court’s twin justifications are genuine, it does not follow that PAGA claims are free from scrutiny under

the FAA when parties choose to arbitrate their disputes.

5

California courts (as here) have recently extended Iskanian’s twin justifications to their logical

endpoints, creating conflicts and tensions with federal

decisions that demand this Court’s intervention. Public claims that belong to a government are subject to

the FAA; this Court held as much in Epic, though that

holding has been widely misunderstood in California.

So too, qui tam claims are subject to the FAA; in holding otherwise, California courts have broken from federal decisions and reasoning that apply the FAA to

qui tam actions under the federal False Claims Act.

In sum, Petitioner’s case offers this Court an ideal opportunity to explain that public and qui tam claims do

not occupy a unique FAA-free zone, as the Iskanian

court believed. Without this Court’s intervention, the

divisions among lower court judges will undermine

the FAA’s uniform application.

─────  ─────

ARGUMENT

I.

REVIEW IS NECESSARY TO HARMONIZE THE DI-

VERGENT

VIEWS

OF

STATE

AND

FEDERAL

JUDGES ON WHETHER PAGA CLAIMS ARE SUBJECT TO THE FAA.

A.

Iskanian held that PAGA claims fall

outside the FAA’s coverage.

In Iskanian, the California Supreme Court refused to enforce a provision in an arbitration agreement that waived the plaintiff’s ability to seek relief

on a classwide or representative basis for a PAGA

claim. The court held the FAA did not preempt this

rule.

6

The employee in that case had brought class action claims on behalf of himself and similarly situated

employees, as well as a representative PAGA claim.

Iskanian, 327 P.3d at 133. And the employee had

signed an arbitration agreement in which all parties

“expressly intend[ed] and agree[d] that class action

and representative action procedures shall not be asserted.” Id.

Applying the FAA and Concepcion, the California Supreme Court enforced the arbitration agreement as to the class claims. Iskanian, 327 P.3d at

135–37. But the court treated the representative

PAGA claim differently. The court determined that

enforcing the arbitration agreement as to the PAGA

claim would frustrate state public policy. The court

ultimately held that the FAA did not preempt California’s prohibition against PAGA representative-action

waivers because the FAA was inapplicable. Id. at

149–51.

The California Supreme Court advanced two

related justifications for this view that “a PAGA claim

lies outside the FAA’s coverage.” Id. at 151. First, believing that “the FAA aims to ensure an efficient forum for the resolution of private disputes,” id. at 149,

the court distinguished private claims (subject to the

FAA) from public claims (not subject to the FAA), id.

at 149–50. Second, the court characterized a PAGA

claim as “fundamentally a law enforcement action designed to protect the public”—“a type of qui tam action” like those under the federal False Claims Act

(FCA)—that was therefore “unwaivable.” Id. at 147–

48. In the Iskanian court’s view, “a PAGA action is a

dispute between an employer and the state Labor and

7

Workforce Development Agency.” Id. at 149. (The California Supreme Court later explained that a PAGA

claim seeks neither individual nor classwide relief.

Kim v. Reins Int’l Cal., Inc., 459 P.3d 1123, 1131 (Cal.

2020).)

B.

Ninth Circuit judges have questioned or disagreed with Iskanian.

The next year, a Ninth Circuit panel held that

the FAA does not preempt Iskanian’s rule barring

PAGA representative-action waivers in arbitration

agreements. Sakkab v. Luxottica Retail N. Am., Inc.,

803 F.3d 425, 429, 431 (9th Cir. 2015). In doing so, the

Ninth Circuit reasoned that PAGA representative actions differ from class actions and thus are not subject

to this Court’s precedent requiring the enforcement of

class-action waivers. Id. at 436–39. But the Ninth Circuit did not speak with one voice, and tensions have

bubbled up in later cases.

Judge Randy Smith dissented in Sakkab: “the

Iskanian rule interferes with the fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” Id. at 444 (N. Randy Smith, J.,

dissenting). He questioned Iskanian’s dichotomy between class and PAGA claims—the root of the publicprivate distinction—since both claims allow individuals to sue on behalf of other people and entities. Id. at

442–43. Ultimately, he concluded that Iskanian’s invocation of “state policy grounds to support its decision” was “an obstacle to the objectives of the FAA.”

Id. at 449.

8

The Ninth Circuit later cast doubt on a core aspect of Iskanian’s reasoning. Central to Iskanian’s

public-private distinction is the notion that a PAGA

claim belongs to the State, which is “always the real

party in interest in the suit.” Iskanian, 327 P.3d at

148 (emphasis added). But when, two years after Sakkab, a PAGA plaintiff raised that point as a reason to

apply the “actions ‘by a governmental unit’” exception

to the automatic bankruptcy stay when suing a debtor

under PAGA, the Ninth Circuit rejected the point.

Porter v. Nabors Drilling USA, L.P., 854 F.3d 1057,

1059, 1061 (9th Cir. 2017). The decision reveals that

a PAGA plaintiff’s claim is not truly as “public” as the

Iskanian court had imagined: “Porter’s [PAGA] claim

against Nabors was filed by Porter, and it remains under his control.” Id. at 1062.

More recently, the Ninth Circuit undermined

Iskanian by distinguishing PAGA claims from federal

qui tam claims in Magadia v. Wal-Mart Associates,

Inc., ___ F.3d ___, 2021 WL 2176584 at *5–*8 (9th Cir.

May 28, 2021). A “PAGA [claim] represents a permanent, full assignment of California’s interest to the aggrieved employee,” while qui tam claims under the

FCA involve a partial assignment; PAGA also “lacks

the ‘procedural controls’ necessary to ensure that California—not the aggrieved employee (the named

party in PAGA suits)—retains ‘substantial authority’

over the case.” Id. at *5, *7. The court held that a

“complete assignment to this degree—an anomaly

among modern qui tam statutes—undermines the notion that the aggrieved employee is solely stepping

into the shoes of the State rather than also vindicating the interests” of the aggrieved employees

9

implicated by the PAGA claim. Id. at *7. Since PAGA

claims “depart from the traditional criteria of qui tam

statutes,” the court decided that uninjured plaintiffs

lack Article III standing to maintain PAGA claims. Id.

at *8.

Tensions surrounding the Iskanian rule were

recently exacerbated by Rivas v. Coverall North

America, Inc., 842 F. App’x 55 (9th Cir. 2021), mandate stayed pending cert. petition (Apr. 15, 2021). Noting this Court’s recent applications of the FAA in Epic

and Lamps Plus, the Rivas majority admitted that

“tension exists between Supreme Court case law and

Sakkab.” Id. at 56. The panel majority tacitly

acknowledged that this Court’s cases send “strong[ ]

signals” that Sakkab and later Ninth Circuit “precedent is wrong.” Id. In a concurrence, Judge Bumatay

went even further: “our precedent is in serious need

of a course correction.” Id. at 58 (Bumatay, J., concurring). “The tensions between Epic Systems/Lamps

Plus and Sakkab are obvious.” Id. at 59. Judge Bumatay concluded that Iskanian “clearly” undermines

“parties’ choice to engage in individual, bilateral arbitration” and therefore “runs afoul of the FAA and

must be preempted.” Id.

*

These disputes between state and federal

judges in California involve an important federal statute. The disputes show no signs of abating, and only

this Court can resolve them. If anything, disputes

over the relationship between PAGA and the FAA are

metastasizing as California courts push Iskanian’s

10

reasoning to logical endpoints that conflict with federal decisions.

II.

CALIFORNIA COURTS’ DEFENSE OF THE ISKANIAN RULE HAS EXPOSED OTHER TENSIONS

IN THE CASE LAW, CEMENTING THE NEED FOR

REVIEW.

A.

California courts dispute whether

this Court has already held that

“public” claims are subject to the

FAA.

California courts defend Iskanian’s refusal to

apply the FAA on the basis that a PAGA claim “is a

governmental claim.” Correia v. NB Baker Elec., Inc.,

244 Cal. Rptr. 3d 177, 187 (Ct. App. 2019); accord, e.g.,

Collie v. Icee Co., 266 Cal. Rptr. 3d 145, 147–48 (Ct.

App. 2020) (collecting cases), review denied (Cal. Nov.

10, 2020). By describing a PAGA claim as “a state law

enforcement action,” these courts have distinguished

Epic as applying the FAA to class claims and Fair Labor Standards Act collective claims, rather than to “a

governmental claim” like a PAGA claim. Correia, 244

Cal. Rptr. 3d at 188.

But even indulging California courts’ view that

PAGA claims are governmental claims, it does not follow that the FAA is inapplicable. Indeed, this Court

sought to resolve this issue in one of the three cases

consolidated in the Epic decision, which is yet another

reason that certiorari is appropriate. See Sup. Ct. R.

10(c) (“a state court . . . has decided an important federal question in a way that conflicts with relevant decisions of this Court”).

11

In Epic’s final sentence, 138 S. Ct. at 1632, this

Court affirmed the Fifth Circuit’s decision in Murphy

Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015).

Murphy Oil was a government enforcement action

brought on behalf of the National Labor Relations

Board; it was not initiated by a private employee as

an individual or class action. The Board’s General

Counsel issued an administrative complaint accusing

an employer of violating the National Labor Relations

Act by asking employees to agree to individual arbitration of any employment disputes. Murphy Oil, 808

F.3d at 1016. The General Counsel pursued NLRA

claims only the government could prosecute—statutory public rights to collective action that are “enforced one way: by the Board, through its processes.”

Murphy Oil USA, Inc. & Hobson, 361 NLRB 774, 774–

75, 780–82 (2014). Applying the NLRA, the Board

ruled that the employer had committed unfair labor

practices by inducing employees to waive representative proceedings through its arbitration agreements.

See id. Nothing in the FAA compelled a contrary conclusion, the Board thought, because the General

Counsel sought to vindicate rights “enforced solely by

the Board—there is no private right of action under

the [NLRA].” Id. at 781–82. The Fifth Circuit reviewed the Board’s decision, applied the FAA, and reversed: the employer “did not commit unfair labor

practices by requiring employees to sign its arbitration agreement or seeking to enforce that agreement

in federal district court.” Murphy Oil, 808 F.3d at

1015. In construing the FAA and NLRA harmoniously—to “have ‘equal importance in our review’ of

employment arbitration contracts”—the Fifth Circuit

12

unmistakably applied the FAA to a government-initiated enforcement action. Id.

The Fifth Circuit’s decision, affirmed in Epic,

138 S. Ct. at 1632, cannot be squared with the reasoning in Iskanian and its progeny—that the FAA does

not govern an arbitration agreement’s representativeaction waiver because a PAGA claim is a public lawenforcement action. In refusing to abide by the FAA’s

mandate because no private right of action was implicated, Murphy Oil, 361 NLRB at 781–82, the Board

fastened on the same public-private distinction that

persuaded the California Supreme Court not to apply

the FAA to PAGA claims in Iskanian. But the Fifth

Circuit overturned that determination—a decision

this Court affirmed in Epic.

It is true that Murphy Oil concerned claims belonging to the federal government, while PAGA

claims belong to a state government. But this distinction cannot support an argument that state claims

evade FAA scrutiny while federal claims do not. See

McGovern v. U.S. Bank N.A., 362 F. Supp. 3d 850, 862

n.5 (S.D. Cal. 2019), reconsidered on other grounds,

No. 18-CV-1794-CAB-LL, 2020 WL 4582687, at *1–*2

(S.D. Cal. Aug. 10, 2020). Epic affirmed applying the

FAA to an enforcement action brought by the federal

government, so the FAA must apply with even greater

force to enforcement actions brought on behalf of a

state government. After all, state law “must give way”

to the FAA, Perry, 482 U.S. at 491, which is supreme

federal law, Nitro-Lift Techs., L.L.C. v. Howard, 568

U.S. 17, 21–22 (2012); see Am. Express Co. v. Italian

Colors Restaurant, 570 U.S. 228, 252 (2013) (Kagan,

J., dissenting) (“We have no earthly interest (quite the

13

contrary) in vindicating [state] law.”); Sakkab, 803

F.3d at 433 n.9 (“The ‘effective vindication’ exception,

which permits the invalidation of an arbitration

agreement when arbitration would prevent the ‘effective vindication’ of a federal statute, does not extend

to state statutes.”).

While this Court’s brief disposition of Murphy

Oil amounted to a summary affirmance, it binds lower

courts no less than a longer decision. See Anderson v.

Celebrezze, 460 U.S. 780, 784 n.5 (1983). Perhaps because of its brevity, however, the legal effect of this

Court’s disposition of Murphy Oil has eluded California courts’ understanding. See Olson v. Lyft, Inc., 270

Cal. Rptr. 3d 739, 748–49 (Ct. App. 2020) (“Murphy

Oil did not involve the ‘enforcement rights’ of the

NLRB”; “Nor is it correct to characterize Murphy Oil

as a ‘government enforcement action’”; “the NLRB

was not pursuing public claims”).

In sum, while the Fifth Circuit applied the FAA

to claims brought by a governmental unit (and was

affirmed), California courts hold that the FAA is inapplicable to PAGA claims that belong to the State

government. Only this Court can resolve the apparent

confusion in the lower courts over this Court’s disposition in Murphy Oil. Iskanian’s fate hangs in the balance.

B.

California courts deny that qui tam

claims are subject to the FAA, in

tension with federal decisions.

As explained, California courts will not apply

the FAA to PAGA claims—even a willing employee

14

and a willing employer could not reach an agreement

to bilaterally arbitrate a pending PAGA action. The

California Supreme Court has justified this state of

affairs by comparing PAGA claims to FCA qui tam actions and suggesting the FAA does not supplant the

qui tam mechanism. Iskanian, 327 P.3d at 148, 151–

52. Based on this qui tam analogy, California courts

insist that PAGA claims “fall outside the FAA’s purview.” Correia, 244 Cal. Rptr. 3d at 185.

But lower courts are divided on whether the

FAA requires arbitration of qui tam and analogous

PAGA claims. The division stems from a disagreement about whether there are one or two “real parties

in interest” entitled to steer qui tam litigation. Id. at

179, 189–91.

When a relator files an FCA qui tam claim, the

government is a real party in interest because of its

underlying stake in redressing the alleged fraud.

United States ex rel. Eisenstein v. City of New York,

556 U.S. 928, 932–34 (2009). But the government is

not the only real party in interest. As this Court has

explained, the FCA effectively assigns part of the government’s claim to the relator, making the relator an

interested party with a right to pursue the claim. Vt.

Agency of Nat. Res. v. United States ex rel. Stevens,

529 U.S. 765, 773–74 (2000). Given this partial assignment, the government and the relator are “both

real parties in interest,” Eisenstein, 556 U.S. at 934,

meaning that each may assert “legal rights of their

own,” Sprint Commc’ns Co. v. APCC Servs., Inc., 554

U.S. 269, 290 (2008) (emphasis omitted).

15

Applying this logic, some courts hold that a relator who has agreed to arbitration can be compelled

to arbitrate his qui tam claim. E.g., Deck v. Miami Jacobs Bus. Coll. Co., No. 3:12-cv-63, 2013 WL 394875,

at *6–*8 (S.D. Ohio Jan. 31, 2013). Translating this

approach to PAGA, the Ninth Circuit has concluded

that “an individual employee can pursue a PAGA

claim in arbitration” and “can bind the state to an arbitral forum.” Valdez v. Terminix Int’l Co. Ltd. P’ship,

681 F. App’x 592, 594 (9th Cir. 2017); see, e.g., Bradford v. Pro. Tech. Sec. Servs. Inc. (Protech), No. 20-CV02242-WHO, 2020 WL 2747767, at *6 n.6 (N.D. Cal.

May 27, 2020) (applying this approach after Iskanian

and Correia); see also Mathew Andrews, Whistling in

Silence: The Implications of Arbitration on Qui Tam

Claims Under the False Claims Act, 15 Pepp. Disp.

Resol. L.J. 203, 207–08 (2015) (acknowledging a split

of authority, but concluding that “qui tam claims are

arbitrable under prevailing Supreme Court precedent”); cf. United States v. Bankers Ins. Co., 245 F.3d

315, 325 (4th Cir. 2001) (“Statutory civil claims are

subject to the arbitration process”; there is “no valid

basis for placing the FCA claim in a different category”).

California courts take the opposite approach by

insisting that the State is the sole real party in interest in a PAGA action. Correia, 244 Cal. Rptr. 3d at

179, 189–91. They acknowledge “that several federal

courts have reached a different conclusion.” Id. at 179,

190. But California courts consider those federal

cases to be “unpersuasive,” so they follow conflicting

decisions suggesting the federal government is the

sole real party in interest in a federal qui tam action.

16

Id. at 179, 189–91 (citing, for example, Mikes v.

Strauss, 889 F. Supp. 746, 755 (S.D.N.Y. 1995) (“Since

the government was not a party to the [arbitration]

Agreement, . . . we are not convinced that plaintiff,

suing on the government’s behalf, is necessarily

bound by its terms.”)).

California courts reason that a PAGA claim belongs to the government and that “[t]here is no individual component to a PAGA action.” Kim, 459 P.3d

at 1131; contra Sakkab, 803 F.3d at 434 (discussing

“individual PAGA claims”). This reasoning misses the

point. A PAGA plaintiff wields significant influence

over the government’s claim—far more than an FCA

relator. “PAGA represents a permanent, full assignment of California’s interest to the aggrieved employee” and “lacks the ‘procedural controls’ necessary

to ensure that California—not the aggrieved employee (the named party in PAGA suits)—retains

‘substantial authority’ over the case.” Magadia, 2021

WL 2176584, at *7; cf. ZB, N.A. v. Superior Ct., 448

P.3d 239, 241, 252 (Cal. 2019) (conceding a PAGA

plaintiff is a “real party in interest”). It makes no

sense to say the aggrieved employee receives full control over the litigation of a PAGA claim, yet cannot

elect arbitration.

The analysis should not change when a particular arbitration agreement includes a PAGA representative action waiver. Such a waiver will not immunize a lawless company from liability. If an employer has violated the law, relief may be sought in an

action by the State, see, e.g., Cal. Lab. Code §§ 98.3,

2699(a) & (h) (West 2020), or by a different PAGA

proxy (a fellow aggrieved worker) who did not consent

17

to arbitration, see Williams v. Superior Ct., 398 P.3d

69, 79 (Cal. 2017); see also Sakkab, 803 F.3d at 449

(N. Randy Smith, J., dissenting) (explaining that “any

employee not subject to an arbitration agreement

waiving such [representative PAGA] actions is free to

bring a PAGA claim,” and that nothing prevents the

State “from raising the labor violations on its own”).

Because PAGA is a purely procedural statute

allowing certain workers to recover penalties that

could otherwise be sought by state agencies, Amalgamated Transit Union, Loc. 1756, AFL-CIO v. Superior

Ct., 209 P.3d 937, 943 (Cal. 2009), the State cannot,

as a matter of its own public policy, override the FAA’s

mandate by dictating that any particular aggrieved

employee may invoke PAGA’s representative-action

procedure, Sakkab, 803 F.3d at 449 (N.R. Smith, J.,

dissenting). Thus, it violates the FAA for California to

adopt rules and procedures favoring one or more

plaintiffs by enabling them to exploit PAGA’s procedure after they enter into arbitration agreements

waiving representative actions. See Epic, 138 S. Ct. at

1621 (holding the FAA “seems to protect pretty absolutely” an agreement providing for individualized rather than representative procedures).

*

In sum, branding a PAGA claim a qui tam action should not insulate a PAGA claim from the FAA’s

mandate. Because both an aggrieved employee-plaintiff and the State have a stake—a legal interest—in a

PAGA claim, either may agree to a PAGA representative-action waiver. Yet California courts have failed

to heed these principles in concluding (erroneously)

18

that the State is the only real party in interest to consider. E.g., Correia, 244 Cal. Rptr. 3d at 189–90. That

approach has brought California into conflict with

federal decisions. This Court should resolve the conflict by granting the petition here.

─────  ─────

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted,

HORVITZ & LEVY LLP

PEDER K. BATALDEN

Counsel of Record

FELIX SHAFIR

JOHN F. QUERIO

WASHINGTON LEGAL

FOUNDATION

CORY L. ANDREWS

JOHN M. MASSLON II

Counsel for Amicus Curiae

Washington Legal Foundation

June 11, 2021