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.

Petitioner,

ANGIE MORIANA,

Respondent.

On Petition for a Writ of Certiorari to the

California Court of Appeal

BRIEF OF THE CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICA

AS AMICUS CURIAE IN SUPPORT

OF PETITIONER

DARYL JOSEFFER

JENNIFER B. DICKEY

U.S. Chamber

Litigation Center

1615 H Street, NW

Washington, DC 20062

(202) 463-5337

ANDREW J. PINCUS

Counsel of Record

ARCHIS A. PARASHARAMI

DANIEL E. JONES

CARMEN N. LONGORIA-GREEN

Mayer Brown LLP

1999 K Street, NW

Washington, DC 20006

(202) 263-3000

apincus@mayerbrown.com

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES....................................... ii

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

INTRODUCTION AND SUMMARY OF

ARGUMENT .........................................................3

ARGUMENT ...............................................................7

I. The Preemption Question Is Exceptionally

Important And Impacts Countless

Arbitration Agreements........................................7

II. This Court’s Review Is Necessary Because

Neither The California Courts Nor The

Ninth Circuit Will Correct The Iskanian

Rule .....................................................................12

A. The FAA forbids California from

refusing to enforce bilateral arbitration

agreements with respect to

representative PAGA claims ..........................12

B. Iskanian’s attempt to shield PAGA

claims from the FAA conflicts with this

Court’s precedents ..........................................18

CONCLUSION ..........................................................24

ii

TABLE OF AUTHORITIES

Page(s)

Cases

14 Penn Plaza LLC v. Pyett,

556 U.S. 247 (2009) .............................................. 10

Am. Express Co. v. Italian Colors Rest.,

570 U.S. 228 (2013) .............................................. 20

Amey v. Cinemark USA Inc.,

2015 WL 2251504

(N.D. Cal. May 13, 2015) ..................................... 10

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011) ...................................... passim

Chu v. Wells Fargo Invs., LLC,

2011 WL 672645

(N.D. Cal. Feb. 16, 2011) ....................................... 8

Circuit City Stores, Inc. v. Adams,

532 U.S. 105 (2001) ........................................ 10, 11

Cline v. Kmart Corp.,

2013 WL 2391711

(N.D. Cal. May 13, 2013) ..................................... 10

DIRECTV, Inc. v. Imburgia,

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

Driscoll v. Granite Rock Co.,

2011 WL 10366147

(Cal. Super. Ct. Sept. 20, 2011) ........................... 16

EEOC v. Waffle House, Inc.,

534 U.S. 279 (2002) ...................................... passim

Epic Sys. Corp. v. Lewis,

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

iii

TABLE OF AUTHORITIES—continued

Page(s)

Franco v. Ruiz Food Prods., Inc.,

2012 WL 5941801

(E.D. Cal. Nov. 27, 2012) ....................................... 8

Garcia v. Gordon Trucking, Inc.,

2012 WL 5364575

(E.D. Cal. Oct. 31, 2012) ........................................ 8

Iskanian v. CLS Transp. L.A., LLC,

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

Kilby v. CVS Pharmacy, Inc.,

739 F.3d 1192 (9th Cir. 2013) .............................. 17

Kim v. Reins Int’l California, Inc.,

459 P.3d 1123 (Cal. 2020) .................................... 15

Lamps Plus, Inc. v. Varela,

139 S. Ct. 1407 (2019) ...................................... 3, 13

Magadia v. Wal-Mart Assocs., Inc.,

--- F.3d ----, 2021 WL 2176584

(9th Cir. May 28, 2021) .............................. 6, 15, 21

Mastrobuono v. Shearson Lehman

Hutton, Inc.,

514 U.S. 52 (1995) ................................................ 23

McKenzie v. Fed. Express Corp.,

2012 WL 2930201

(C.D. Cal. July 2, 2012) .......................................... 8

Nordstrom Comm’n Cases,

186 Cal. App. 4th 576 (2010) ................................. 8

iv

TABLE OF AUTHORITIES—continued

Page(s)

O’Bosky v. Starbucks Corp.,

2015 WL 2254889

(Cal. Super. Ct. May 4, 2015) .............................. 10

Ortiz v. CVS Caremark Corp.,

2014 WL 2445114

(N.D. Cal. Jan. 28, 2014) ..................................... 10

Perry v. Thomas,

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

Preston v. Ferrer,

552 U.S. 346 (2008) .......................................... 3, 19

Rivas v. Coverall N. Am., Inc.,

842 F. App’x 55 (9th Cir. 2021) ............................. 6

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

803 F.3d 426 (9th Cir. 2015) ........................ passim

Sanchez v. McDonald’s Rests. of Cal., Inc.,

2017 WL 4620746

(Cal. Sup. Ct. July 6, 2017).................................. 10

Southland Corp. v. Keating,

465 U.S. 1 (1984) .................................................... 3

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

681 F. App’x 592 (9th Cir. 2017).......................... 21

Williams v. Super. Ct.,

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

Statutes and Rules

31 U.S.C. § 3730(b)-(c) ............................................... 21

Alaska Stat. § 09.17.020(j) ........................................ 23

v

TABLE OF AUTHORITIES—continued

Page(s)

Cal. Labor Code § 2699(a) ........................................... 4

Cal. Labor Code § 2699(f)(2) ..................................... 15

Cal. Labor Code § 2699(i) ............................................ 8

Cal. Labor Code § 2699(l)(2) ..................................... 20

Cal. Labor Code § 2699.3(a) ...................................... 19

Ga. Code Ann. § 51-12-5.1(e)(2) ................................ 23

Ill. Comp. Stat. Ann. 5/2-1207 .................................. 23

Ind. Code Ann. § 34-51-3-6(c).................................... 23

Iowa Code Ann. § 668A.1(2)(b) ................................. 23

Or. Rev. Stat. Ann. § 31.735(1) ................................. 23

Utah Code Ann. § 78B-8-201(3)(a)............................ 23

Other Authorities

Robyn Ridler Aoyagi & Christopher J.

Pallanch, The PAGA Problem: The

Unsettled State of PAGA Law Isn’t Good

for Anyone, 2013-7 Bender’s California

Labor & Employment Bulletin 01 (2013) .............. 8

Cal. Dep’t of Industrial Relations, Budget

Change Proposal – PAGA Unit Staffing

Alignment (Apr. 2, 2019)...................................... 10

Michael Delikat & Morris M. Kleiner, An

Empirical Study of Dispute Resolution

Mechanisms: Where Do Plaintiffs Better

Vindicate Their Rights?,

58 Disp. Resol. 56 (Nov. 2003 – Jan. 2004) ......... 11

vi

TABLE OF AUTHORITIES—continued

Page(s)

Tim Freudenberger et al., Trends in

PAGA claims and what it means for

California employers, Inside Counsel

(Mar. 19, 2015) ....................................................... 9

Matthew J. Goodman, Comment, The

Private Attorney General Act: How to

Manage the Unmanageable,

56 Santa Clara L. Rev. 413 (2016) ...... 8, 16, 17, 18

Emily Green, State law may serve as

substitute for employee class actions,

L.A. Daily J. (Apr. 17, 2014) .................................. 9

Lyra Haas, The Endless Battleground:

California’s Continued Opposition to

the Supreme Court’s Federal

Arbitration Act Jurisprudence,

94 B.U. L. Rev. 1419 (2014) ................................... 3

Jathan Janove, More California Employers

Are Getting Hit With PAGA Claims,

Society for Human Resource Management

(Mar. 26, 2019) ....................................................... 9

Suzy Lee, “We’ve Received A PAGA Notice,

Now What?” An Employer’s 10-Step Guide,

Fisher Phillips (July 1, 2019) ................................ 9

Lewis L. Maltby, Private Justice:

Employment Arbitration and Civil Rights,

30 Colum. Hum. Rts. L. Rev. 29 (1998)............... 12

vii

TABLE OF AUTHORITIES—continued

Page(s)

Nam D. Pham & Mary Donovan, Fairer,

Better, Faster: An Empirical

Assessment of Employment Arbitration,

NDP Analytics (2019) .......................................... 11

Theodore J. St. Antoine, Labor and

Employment Arbitration Today: MidLife Crisis or New Golden Age?,

32 Ohio St. J. on Disp. Resol. 1 (2017) ................ 12

INTEREST OF THE AMICUS CURIAE

The Chamber of Commerce of the United States of

America (Chamber) is the world’s largest business

federation. It represents approximately 300,000 members and indirectly represents the interests of more

than three million companies and professional organizations of every size, in every industry sector, and

from every region of the country. An important function of the Chamber is to represent the interests of its

members in matters before Congress, the Executive

Branch, and the courts. To that end, the Chamber

regularly files amicus curiae briefs in cases, like this

one, that raise issues of concern to the Nation’s business community.1

Many of the Chamber’s members regularly employ arbitration agreements. Arbitration allows them

to resolve disputes promptly and efficiently while

avoiding the costs associated with traditional litigation. Arbitration is speedy, fair, inexpensive, and less

adversarial than litigation in court. Based on the

principles embodied in the Federal Arbitration Act

(FAA) and this Court’s consistent affirmation of the

legal protections that the FAA provides for arbitration

agreements, the Chamber’s members have structured

millions of contractual relationships around arbitration agreements.

Pursuant to Rule 37.6, the Chamber affirms that no counsel

for a party authored this brief in whole or in part and that no

person other than the Chamber, its members, or its counsel made

a monetary contribution to its preparation or submission. Counsel of record for all parties received notice of the Chamber’s intention to file this brief over 10 days prior to the due date and all

parties have consented to the filing of this brief.

1

2

The Chamber has a strong interest in this Court’s

review and reversal of the decision below to ensure

that the FAA’s pro-arbitration mandate applies uniformly nationwide. Currently, California courts and

the Ninth Circuit are flouting the FAA’s protection of

agreements to arbitrate on an individualized basis.

In Iskanian v. CLS Transportation L.A., LLC, 327

P.3d 129 (Cal. 2014), the California Supreme Court

held that any arbitration agreement requiring the individualized arbitration of claims brought under California’s Private Attorneys General Act of 2004

(PAGA) is unenforceable as contrary to California’s

public policy. The court went on to say that the FAA

is not implicated because (in that court’s view) PAGA

claims are the equivalent of qui tam actions, and

therefore belong to the State rather than the aggrieved employees. Id. at 148-53. Then in Sakkab v.

Luxottica Retail North America, Inc., 803 F.3d 426

(9th Cir. 2015), a divided panel of the Ninth Circuit

agreed that the Iskanian rule is not preempted by the

FAA.

The decisions in Iskanian and Sakkab have precluded the application of countless arbitration agreements—significantly eroding the benefits of bilateral

arbitration as an alternative to litigation—and will

continue to do so absent this Court’s intervention. Indeed, the Iskanian rule’s practical consequences are

enormous: PAGA filings have increased dramatically

in recent years as plaintiffs invoke the statute in order

to evade enforcement of their arbitration agreements.

The result is that, in California, workplace arbitration

agreements are increasingly becoming a nullity.

3

INTRODUCTION AND

SUMMARY OF ARGUMENT

The case brings before the Court one of the most

significant chapters in the long and well-documented

history of California courts inventing new “devices

and formulas” aimed at circumventing arbitration

agreements and the liberal federal policy favoring arbitration embodied by the FAA. AT&T Mobility LLC

v. Concepcion, 563 U.S. 333, 342 (2011) (quotation

marks omitted); see also, e.g., DIRECTV, Inc. v. Imburgia, 577 U.S. 47 (2015); Preston v. Ferrer, 552 U.S.

346 (2008); Perry v. Thomas, 482 U.S. 483 (1987);

Southland Corp. v. Keating, 465 U.S. 1 (1984); Lyra

Haas, The Endless Battleground: California’s Continued Opposition to the Supreme Court’s Federal Arbitration Act Jurisprudence, 94 B.U. L. Rev. 1419, 143340 (2014).

The FAA directs courts to “enforce arbitration

agreements according to their terms—including terms

providing for individualized proceedings.” Epic Sys.

Corp. v. Lewis, 138 S. Ct. 1612, 1619 (2018). As this

Court has repeatedly made clear in recent years, the

FAA “protect[s] pretty absolutely” agreements calling

for “one-on-one arbitration” using “individualized

* * * procedures.” Id. at 1619, 1621; see also Lamps

Plus, Inc. v. Varela, 139 S. Ct. 1407, 1416 (2019) (the

Act “envision[s]” an “individualized form of arbitration”) (citing Epic, 138 S. Ct. at 1622-23). And the

FAA’s protection of traditional bilateral arbitration

means that “courts may not allow a contract defense

to reshape traditional individualized arbitration.”

Epic, 138 S. Ct. at 1623.

4

Notwithstanding these clear holdings, the California appellate courts and the Ninth Circuit have allowed enterprising plaintiffs to circumvent their arbitration agreements by asserting claims against their

employers under PAGA. That state law authorizes an

“aggrieved employee” to recover civil penalties from

his current or former employer on a representative basis by raising alleged violations of California’s Labor

Code experienced by “himself or herself” and “other

current or former employees.” Cal. Labor Code

§ 2699(a).

The California Supreme Court in Iskanian refused

to enforce bilateral arbitration agreements with respect to representative PAGA claims. It analogized

PAGA lawsuits to qui tam actions on behalf of the

State—and held for that reason that an arbitration

agreement’s requirement of individualized arbitration

was unenforceable notwithstanding this Court’s determination in Concepcion that the FAA protects

agreements requiring one-on-one arbitration. Iskanian, 327 P.3d at 152-53. The state court reached

that conclusion even though it recognized that PAGA

claims typically seek class-wide relief, with the aggrieved employee suing on behalf of himself or herself

and hundreds or thousands of other employees. And

it drew that conclusion even though the State lacks

the power to control a PAGA claim: if a plaintiff

wishes to pursue (or to settle) his PAGA claim over the

State’s objection, PAGA allows him to do so.

One year later, the Ninth Circuit adopted a similarly flawed reading of the FAA. Rather than embrace

the Iskanian court’s misguided qui tam analogy (perhaps because it recognized that the statute does not in

reality provide for any meaningful control by the

5

State), the divided panel in Sakkab declared Concepcion inapplicable by relying on formal distinctions between representative PAGA actions and class actions

under Rule 23. Sakkab, 803 F.3d at 436. But the relevant features of the claims are the same—they are

brought by employees against their employers on behalf of not only themselves, but also others similarly

situated.

Iskanian and Sakkab defy this Court’s precedents

by interfering with parties’ agreements to resolve disputes through individual, bilateral arbitration. This

Court’s decision in Epic makes that defiance all the

more clear, explaining that Concepcion stands for the

“essential insight” that “courts may not allow a contract defense to reshape traditional individualized arbitration.” Epic, 138 S. Ct. at 1623 (emphasis added).

But that is exactly the effect of the Iskanian rule. It

allows individuals to circumvent their arbitration

agreements and instead pursue class-wide relief under PAGA. That rule impermissibly “reshape[s] traditional individualized arbitration.” Ibid.

Nor does the Iskanian court’s attempt to analogize

PAGA claims to qui tam actions justify its rule. Even

assuming that the interest of the State in the litigation were relevant, the unique features of PAGA confirm that private PAGA litigation far more closely resembles a class or collective action than a qui tam one.

Unlike in qui tam actions where a private party may

step in to represent the State’s interests subject to the

oversight and control of the State, the PAGA plaintiff—not the State—has control over the case. Also

unlike in qui tam actions, the PAGA plaintiff is representing the interests of other third parties—the other

aggrieved employees.

6

Although the Ninth Circuit in Sakkab defended

the Iskanian rule from FAA preemption on other (misguided) grounds, another panel of that court recently

explained that these differences between PAGA and

qui tam actions “undermine[] the notion that the aggrieved [PAGA plaintiff] is solely stepping into the

shoes of the State rather than also vindicating the interests of other aggrieved employees.” Magadia v.

Wal-Mart Assocs., Inc., --- F.3d ----, 2021 WL 2176584,

at *6-7 (9th Cir. May 28, 2021) (Bumatay, J.).

Despite the glaring conflict between California’s

treatment of PAGA claims and this Court’s reasoning

in Epic and Concepcion, the California courts and the

Ninth Circuit have made crystal clear that they will

not revisit the Iskanian rule. In this case, like so

many others, the California Court of Appeal considered itself bound by Iskanian, Pet. App. 5, and the

California Supreme Court denied review, see Pet. 2829.

The Ninth Circuit recently declined to revisit Sakkab despite Judge Bumatay’s warnings that the “tensions between Epic Systems/Lamps Plus and Sakkab

are obvious” and that the Ninth Circuit’s approach to

FAA preemption is in “disharmony” with this Court’s

precedents and “is in serious need of a course correction.” Rivas v. Coverall N. Am., Inc., 842 F. App’x 55,

58-59 (9th Cir. 2021) (Bumatay, J., concurring).2

The defendant in Rivas has indicated that it plans to seek this

Court’s review. See Dkt. No. 46, Rivas v. Coverall N. Am., Inc.,

No. 20-55140 (9th Cir. Apr. 15, 2021) (staying mandate pending

disposition of a petition for a writ of certiorari). This Court may

wish to address the preemption issue presented here in the context of a case arising from the Ninth Circuit; if so, Rivas would

present an excellent vehicle.

2

7

The practical impact of the massive loophole in the

enforcement of arbitration agreements created by the

Iskanian rule underscores the urgent need for this

Court’s review.

PAGA claims were once an afterthought tacked

onto putative employment class actions in California.

But since the Iskanian decision seven years ago,

PAGA filings have skyrocketed as plaintiffs’ counsel

seek to evade their clients’ arbitration agreements.

The results have been the effective invalidation of millions of workplace arbitration agreements that should

have been protected by the FAA and severe adverse

consequences for businesses with workers in California, the nation’s most populous state. Continued application of the Iskanian rule deprives both businesses

and workers of the important benefits that traditional, bilateral arbitration provides.

This Court’s review is therefore essential.

ARGUMENT

I.

The Preemption Question Is Exceptionally

Important And Impacts Countless Arbitration Agreements.

The large number of PAGA actions that have engulfed the California courts since Iskanian and Sakkab powerfully illustrate how plaintiffs’ lawyers have

seized on PAGA as a means of evading this Court’s

holdings in Epic and Concepcion. The tremendous

practical importance of the issue necessitates this

Court’s intervention.

PAGA claims formerly were brought, if at all, only

on “the coattails of traditional class claims,” largely

because plaintiffs did not want to rely principally on a

cause of action requiring them to remit 75% of their

8

recovery to the State. Robyn Ridler Aoyagi & Christopher J. Pallanch, The PAGA Problem: The Unsettled

State of PAGA Law Isn’t Good for Anyone, 2013-7

Bender’s California Labor & Employment Bulletin 01,

at 1-2 (2013) (noting the “strong incentive” for plaintiffs to prefer class claims over PAGA claims because

of the allocation of PAGA proceeds); see Cal. Labor

Code § 2699(i) (requiring that plaintiffs remit 75% of

any penalties they recover to the State).

Even when plaintiffs tacked on PAGA claims to

complaints asserting other claims under federal and

state labor laws, court-approved settlements in those

cases reveal that the parties agreed to allocate only a

tiny fraction of the recovery to the PAGA claims.3

But the volume of PAGA claims increased dramatically after the Iskanian and Sakkab decisions—and

the reason is clear. “The fact that [representative]

PAGA claims cannot be waived by agreements to arbitrate” despite the FAA “contributes heavily to the

prevalence of these suits.” Matthew J. Goodman,

Comment, The Private Attorney General Act: How to

Manage the Unmanageable, 56 Santa Clara L. Rev.

See, e.g., Franco v. Ruiz Food Prods., Inc., 2012 WL 5941801,

at *2 (E.D. Cal. Nov. 27, 2012) ($10,000 allocated to PAGA claim

out of $2.5 million settlement); Garcia v. Gordon Trucking, Inc.,

2012 WL 5364575, at *7 (E.D. Cal. Oct. 31, 2012) ($10,000 allocated to PAGA claim out of $3.7 million settlement); McKenzie v.

Fed. Express Corp., 2012 WL 2930201, at *4 (C.D. Cal. July 2,

2012) ($82,500 allocated to PAGA claim out of $8.25 million settlement); Chu v. Wells Fargo Invs., LLC, 2011 WL 672645, at *1

(N.D. Cal. Feb. 16, 2011) ($10,000 allocated to PAGA claim out

of $6.9 million settlement); see also Nordstrom Comm’n Cases,

186 Cal.App.4th 576, 589 (2010) (upholding multimillion dollar

settlement agreement that allocated zero dollars to the PAGA

claim).

3

9

413, 415 (2016). PAGA is thus “a particularly attractive vehicle for plaintiffs’ attorneys to bring claims

against employers that instituted mandatory arbitration agreements.” Tim Freudenberger et al., Trends

in PAGA claims and what it means for California employers,

Inside

Counsel

(Mar.

19,

2015),

https://perma.cc/X3N7-LN4A.

The numbers speak for themselves. In 2005,

plaintiffs filed only 759 PAGA claims. Emily Green,

State law may serve as substitute for employee class

actions, L.A. Daily J. (Apr. 17, 2014). By 2017—after

Iskanian and Sakkab—plaintiffs’ notices of intent to

file PAGA actions more than quadrupled, to 3,250.4

Another study found that approximately “15 PAGA

notice letters” are filed each day. Jathan Janove,

More California Employers Are Getting Hit With

PAGA Claims, Society for Human Resource Management (Mar. 26, 2019), http://bit.ly/2Zb1zP1; see also

Suzy Lee, “We’ve Received A PAGA Notice, Now

What?” An Employer’s 10-Step Guide, Fisher Phillips

(July 1, 2019), https://bit.ly/2LWR7cK (reporting that

“over 5,700” PAGA notices were filed with the LWDA

in 2018).

California’s state labor agency itself projected in

April 2019 that over 6,000 PAGA notices would be

filed with the agency in the 2019/2020 fiscal year and

Since September 2016, plaintiffs in PAGA cases have been required to file PAGA notices with the California Labor and Workforce Development Agency (LWDA) through an online platform.

See Cal. Dep’t of Industrial Relations, Private Attorneys General

Act (PAGA) Case Search, https://cadir.secure.force.com/PagaSearch/.

4

10

that the number would continue to increase each fiscal year, topping 7,200 in fiscal year 2022/2023. Cal.

Dep’t of Industrial Relations, Budget Change Proposal

– PAGA Unit Staffing Alignment 7 (Apr. 2, 2019),

https://bit.ly/3ca0NLn.

In addition, each PAGA claim can involve hundreds, thousands, or even tens of thousands of absent

employees.5 That reality underscores the immense

burdens associated with representative litigation of

thousands of PAGA claims.

This flood of PAGA claims has undermined the

“real benefits to the enforcement of arbitration provisions” calling for traditional, bilateral arbitration, including “allow[ing] parties to avoid the costs of litigation.” Circuit City Stores, Inc. v. Adams, 532 U.S. 105,

122-23 (2001); see also, e.g., 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, 257 (2009) (“Parties generally favor

arbitration precisely because of the economics of dispute resolution.”). Indeed, this Court has been “clear

in rejecting the supposition that the advantages of the

arbitration process somehow disappear when transferred to the employment context.” Circuit City, 532

See, e.g., Sanchez v. McDonald’s Rests. of Cal., Inc., 2017 WL

4620746, at *2 (Cal. Sup. Ct. July 6, 2017) (nine-day bench trial

for claims on behalf of approximately 10,000 employees at 119

restaurants); Amey v. Cinemark USA Inc., 2015 WL 2251504, at

*17 (N.D. Cal. May 13, 2015) (PAGA claim with “more than

10,000 class members”); see also Compl., O’Bosky v. Starbucks

Corp., 2015 WL 2254889, at *2 (Cal. Super. Ct. May 4, 2015) (approximately 65,000 employees); Defs.’ Mot. to Strike, Ortiz v.

CVS Caremark Corp., 2014 WL 2445114, at *4 (N.D. Cal. Jan.

28, 2014) (more than 50,000 employees across 850 stores); Def.’s

Opp. to Class Certification, Cline v. Kmart Corp., 2013 WL

2391711, at *1, 12 (N.D. Cal. May 13, 2013) (13,000 cashiers at

101 stores statewide).

5

11

U.S. at 123. On the contrary, this Court emphasized

that the lower costs of arbitration compared to litigation “may be of particular importance in employment

litigation, which often involves smaller sums of money

than disputes concerning commercial contracts.” Ibid.

Empirical evidence supports these observations.

Arbitration typically is more efficient than litigation,

allowing employees to resolve their claims more

quickly than they would in court. See, e.g., Nam D.

Pham & Mary Donovan, Fairer, Better, Faster: An

Empirical Assessment of Employment Arbitration,

NDP Analytics 5, 11–12 (2019), https://instituteforlegalreform.com/research/fairer-faster-better-an-empirical-assessment-of-employment-arbitration (“Employee-plaintiff arbitration cases that were terminated with monetary awards averaged 569 days * * * .

In contrast, employee-plaintiff litigation cases that

terminated with monetary awards required an average of 665 days * * * .”); Michael Delikat & Morris M.

Kleiner, An Empirical Study of Dispute Resolution

Mechanisms: Where Do Plaintiffs Better Vindicate

Their Rights?, 58 Disp. Resol. J. 56, 58 (Nov. 2003 –

Jan. 2004) (reporting findings that arbitration was

33% faster than analogous litigation).

In addition, employee claimants obtain outcomes

in arbitration equal to—if not better than—the outcomes in litigation. A recent study released by the

Chamber’s Institute for Legal Reform found that employees were three times more likely to win in arbitration than in court. Pham, supra, at 5-7 (surveying

more than 10,000 employment arbitration cases and

90,000 employment litigation cases resolved between

2014 to 2018). The same study found that employees

12

who prevailed in arbitration “won approximately double the monetary award that employees received in

cases won in court.” Id. at 5-6, 9-10.

As another scholar found, “there is no evidence

that plaintiffs fare significantly better in litigation

[than in arbitration].” Theodore J. St. Antoine, Labor

and Employment Arbitration Today: Mid-Life Crisis

or New Golden Age?, 32 Ohio St. J. on Disp. Resol. 1,

16 (2017) (quotation marks omitted; alterations in

original). Rather, arbitration is generally “favorable

to employees as compared with court litigation.” Ibid.;

see also Lewis L. Maltby, Private Justice: Employment

Arbitration and Civil Rights, 30 Colum. Hum. Rts. L.

Rev. 29, 46 (1998).

In short, the arbitration of workplace disputes

substantially benefits businesses and workers alike.

But if the Iskanian rule is allowed to stand, Californians will lose these benefits—to the detriment of employees, businesses, and the state’s entire economy.

II. This Court’s Review Is Necessary Because

Neither The California Courts Nor The

Ninth Circuit Will Correct The Iskanian

Rule.

A. The FAA forbids California from refusing

to enforce bilateral arbitration agreements with respect to representative

PAGA claims.

1. Congress enacted the FAA to “reverse the

longstanding judicial hostility to arbitration agreements,” “to place [these] agreements upon the same

footing as other contracts,” and to “manifest a liberal

federal policy favoring arbitration agreements.”

13

EEOC v. Waffle House, Inc., 534 U.S. 279, 289 (2002)

(quotation marks omitted).

Just two Terms ago, this Court made clear that

the Act “envision[s]” an “individualized form of arbitration.” Lamps Plus, 139 S. Ct. at 1416 (citing Epic,

138 S. Ct. at 1622-23; Concepcion, 563 U.S. at 349;

Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S.

662, 686-87 (2010)). “In individual arbitration, ‘parties forgo the procedural rigor and appellate review of

the courts in order to realize the benefits of private

dispute resolution,’” including “‘lower costs’” and

“‘greater efficiency and speed.’” Ibid. (quoting StoltNielsen, 559 U.S. at 685).

Accordingly, the FAA “seems to protect pretty absolutely” arbitration agreements that have two essential features. Epic, 138 S. Ct. at 1619. Agreements

that (1) require the resolution of claims in arbitration,

rather than through litigation in court, and (2) require

“one-on-one arbitration” using “individualized * * *

procedures.” Id. at 1619, 1621.

Yet the Iskanian rule declares such agreements

unenforceable, as against California public policy, to

the extent that they prevent employees from asserting

representative PAGA claims. The result is that any

California employee can sidestep his or her agreement

to individualized arbitration, and bring a lawsuit in

court, simply by filing a representative PAGA action.

Employers, in turn, are deprived of the benefits of

their bilateral arbitration agreements and saddled

with representative litigation entailing the same burdens that accompany class or collective actions.

2. Iskanian—and the continued adherence to it

by California courts and the Ninth Circuit—represents a thinly veiled effort to circumvent this Court’s

14

holdings, which prohibit States from conditioning the

enforceability of arbitration agreements on the availability of class or collective actions.

The FAA preempts state-law rules that “interfere[]” with the “traditionally individualized and informal nature of arbitration.” Epic, 138 S. Ct. at 162223. A State therefore may not invalidate an arbitration agreement on the ground that it fails to permit

class or collective actions, because such a rule would

“reshape traditional individualized arbitration.” Id.

at 1623.

Epic, which involved collective actions, makes

clear that this FAA principle is not limited to class actions under Rule 23 or its state equivalents. Rather,

this “essential insight” governs regardless of the garb

in which a contract defense is dressed: “Just as judicial antagonism toward arbitration before the Arbitration Act’s enactment ‘manifested itself in a great variety of devices and formulas declaring arbitration

against public policy,’ Concepcion teaches that we

must be alert to new devices and formulas that would

achieve much the same result today.” Epic 138 S. Ct.

at 1623 (quoting Concepcion, 563 U.S. at 342).

3. For several reasons, the Iskanian rule is just

such an impermissible “device,” because it disregards

bilateral arbitration agreements when employees present representative PAGA claims—thus plainly overriding the parties’ choice, protected by the FAA, of

one-on-one arbitration.

First, representative PAGA claims, by their very

nature, are about, and seek relief on behalf of, third

party employees other than the named plaintiff. The

California Supreme Court recently confirmed that the

continuing viability of the PAGA plaintiff’s own Labor

15

Code claim is not necessary to adjudication of her representative PAGA action. In Kim v. Reins International California, Inc., 459 P.3d 1123 (Cal. 2020), that

court held that an employee who completely resolves

her own wage-and-hour claims against her employer

through a settlement remains an “aggrieved employee” who may still serve as a representative PAGA

plaintiff and pursue remedies for alleged Labor Code

violations on behalf of other employees. Id. at 112832. Kim makes clear that representative PAGA actions focus on the claims of third parties who are not

before the court. The Ninth Circuit recently came to

the same conclusion, explaining that “PAGA explicitly

* * * implicates the interests of nonparty aggrieved

employees.” Magadia, 2021 WL 2176584, at *6.

Second, and relatedly, resolving a representative

PAGA action is inherently far slower and more costly

than the individual, one-on-one arbitration envisioned

and protected by the FAA (and to which the parties

agreed). See Epic, 138 S. Ct. at 1623. Remedies in a

representative PAGA action are assessed against the

employer on a “per pay period” basis for each “aggrieved employee” affected by each claimed violation

of the California Labor Code proven by the representative plaintiff. Cal. Labor Code § 2699(f)(2).

Thus, in contrast to an individual wage-and-hour

dispute in which the arbitrator focuses solely on the

individual circumstances of the claimant, resolving

representative PAGA actions requires “specific factual determinations regarding (1) the number of other

employees affected by the labor code violations, and

(2) the number of pay periods that each of the affected

employees worked.” Sakkab, 803 F.3d at 445 (N.R.

Smith, J., dissenting). “Because of the high stakes involved in these determinations, both of these issues

16

would likely be fiercely contested by parties.” Ibid.

And resolving them requires “individual factual determinations regarding * * * hundreds or thousands of

employees.” Ibid.

Experience already proves that resolving representative PAGA claims is an unwieldy process that

bears no resemblance to traditional individualized arbitration. In Driscoll v. Granite Rock Co., 2011 WL

10366147 (Cal. Super. Ct. Sept. 20, 2011), for example, a bench trial on representative PAGA claims

lasted 14 days and involved 55 witnesses and 285 exhibits, including expert witnesses to prove violations

as to each employee. Id. at *1. Cases like Driscoll

illustrate the “inherent manageability problems” that

representative PAGA actions inevitably raise. See

Goodman, supra, at 441.

Indeed, Driscoll understates the complexity of

most PAGA actions, because that case involved a relatively small group of 200 current and former employees. See 2011 WL 10366147, at *1. The burdens can

multiply exponentially for larger PAGA actions,

which often balloon to include thousands if not tens of

thousands of absent employees. See page 10 & note 5,

supra.

Third, the procedures needed to resolve a representative PAGA action are necessarily far more complicated than those in bilateral arbitration. “In an individual arbitration, the employee already has access

to all of his own employment records”; “[h]e knows

how long he has been working for the employer”; and

he “can easily determine how many pay periods he has

been employed.” Sakkab, 803 F.3d at 446 (N.R.

Smith, J., dissenting). By contrast, in a representative PAGA action, “the individual employee does not

have access to any of this information” for “the other

17

potentially aggrieved employees,” and the “discovery

necessary to obtain these documents from the employer would be significant and substantially more

complex than discovery regarding only the employee’s

individual claims.” Id. at 446-47.

The California Supreme Court has confirmed as

much, holding that California public policy “support[s] extending PAGA discovery as broadly as class

action discovery has been extended.” Williams v. Super. Ct., 398 P.3d 69, 81 (Cal. 2017) (emphasis added).

But this Court has already held that class-wide discovery is incompatible with arbitration “as envisioned

by the FAA.” Concepcion, 563 U.S. at 351.

Finally, representative PAGA actions “greatly increase[] risks to defendants.” Concepcion, 563 U.S. at

350. The civil penalties available in a representative

PAGA action may total many millions of dollars when

sought by reference to hundreds or thousands of potentially affected employees for pay periods extending

over multiple years. “Even a conservative estimate

would put the potential penalties in [PAGA] cases in

the tens of millions of dollars.” Kilby v. CVS Pharmacy, Inc., 739 F.3d 1192, 1196 (9th Cir. 2013). Indeed, in some PAGA cases, the potential fines that an

employer faces are substantially higher than the actual damages that would have been awarded had the

suit been brought as a class action. See Goodman, supra, at 415.

These outsized civil penalties pose the same “unacceptable” risk of “devastating loss” that arises

“when damages allegedly owed to tens of thousands of

potential claimants are aggregated and decided at

once.” Concepcion, 563 U.S. at 350; see also Sakkab,

803 F.3d at 448 (N.R. Smith, J., dissenting) (“the concerns expressed in Concepcion are just as real in the

18

present case”). As one observer has explained, “[t]he

possibility of a ‘blackmail settlement’ looms even

larger in PAGA actions [than in class actions].” Goodman, supra, at 447-48.

In sum, representative PAGA actions are every bit

as incompatible with the “fundamental attributes of

arbitration” as the class or collective actions at issue

in Epic and Concepcion. Concepcion, 563 U.S. at 344.

And Epic leaves no doubt that States cannot displace

bilateral arbitration agreements by demanding the

availability of representative litigation, as California

has done through the Iskanian rule.6

B. Iskanian’s attempt to shield PAGA

claims from the FAA conflicts with this

Court’s precedents.

In a transparent effort to evade Concepcion, the

Iskanian court concluded that “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.” 327 P.3d at 151. Instead, that court said, a PAGA claim “is a dispute between an employer and the state”—with “aggrieved

employees” serving as “agents” of the state. Ibid.

But that description is dubious. As a factual matter, a PAGA claim is brought by the aggrieved employee against his or her employer concerning the

It is no answer to say that companies can carve out representative PAGA claims for litigation in court. The same was true of

the class actions at issue in Concepcion. See 563 U.S. at 346,

351. But in either setting, a regime in which companies must

choose between arbitrating representative PAGA claims or resolving those claims in a parallel litigation proceeding is a poor

substitute for “arbitration as envisioned by the FAA” and “therefore may not be required by state law.” Id. at 351.

6

19

terms or conditions of employment, so it is a “dispute

between an employer and an employee arising out of

their contractual relationship.”

A PAGA claim brought by a private plaintiff thus

bears no resemblance to the government enforcement

action at issue in Waffle House, the case from which

Iskanian attempted to draw support. See 327 P.3d at

151. Critical to Waffle House’s determination that the

employee’s arbitration agreement did not apply was

the fact that the government agency itself was pursuing the enforcement action and controlled the litigation. See 534 U.S. at 291-94; see also Preston v. Ferrer, 552 U.S. 346, 359 (2008) (observing that in Waffle

House, “the Court addressed the role of an agency * * *

as prosecutor, pursuing an enforcement action in its

own name”) (emphasis added).

This Court stressed that “the EEOC is in command of the process” and that the “statute clearly

makes the EEOC the master of its own case.” Waffle

House, 534 U.S. at 291. By contrast, the Court explained, if the publicly accountable agency had lacked

direct and exclusive control over the case—for example, “[i]f it were true that the EEOC could prosecute

its claim only with [the employee’s] consent, or if its

prayer for relief could be dictated by [the employee]”—

then the employee’s arbitration agreement could have

barred the agency from pursuing employee-specific relief. Ibid.

Under PAGA— which, of course, stands for the

Private Attorneys General Act— the plaintiff who

agreed to arbitration does exercise unfettered control

over the prosecution of the claim, subject to minimal

government oversight or control. See Cal. Labor Code

§ 2699.3(a). Among other things, the private PAGA

plaintiff:

20



controls the allegations in the complaint;



defines the set of employees that he or she

seeks to represent; and



may settle the claims without the State’s

approval.7

As Justice Chin observed in his concurrence in Iskanian, “to the extent [Waffle House] is relevant,” it

“actually does suggest that the FAA preempts the majority’s rule.” Iskanian, 327 P.3d at 158 (Chin, J., concurring) (quotation marks and alterations omitted).8

Waffle House held that the employee’s arbitration

agreement did not encompass the EEOC’s enforcement action at all because government agency

brought and controlled the action, and the employee’s

arbitration agreement could not bind the agency under those circumstances. 534 U.S. at 291-94. But Iskanian permits an aggrieved employee to “bind” the

government by pursuing PAGA claims in arbitration

if the parties so choose. See 327 P.3d at 155 (“Iskanian must proceed with bilateral arbitration on his

individual damages claims, and CLS must answer the

representative PAGA claims in some forum.”); see also

Sakkab, 803 F.3d at 440 (remanding for determination of “where Sakkab’s representative PAGA claims

7 Prior to the June 2016 amendments to PAGA, private litigants

were not even required to notify the State of a proposed PAGA

settlement. The state agency must now be given notice of a proposed settlement, but the settlement is still subject only to the

court’s approval. See Cal. Labor Code § 2699(l)(2).

8 Justice Chin nonetheless concurred because, in his view, the

Iskanian rule was permissible under the effective-vindication exception. 327 P.3d at 157. That view is incorrect; this Court’s

precedents make clear that the effective-vindication exception

simply does not apply to state-law claims. See Am. Express Co.

v. Italian Colors Rest., 570 U.S. 228, 235 (2013).

21

should be resolved”); Valdez v. Terminix Int’l Co. Ltd.

P’ship, 681 F. App’x 592, 594 (9th Cir. 2017) (“Iskanian and Sakkab clearly contemplate that an individual employee can pursue a [representative] PAGA

claim in arbitration.”).

In other words, Iskanian holds that representative PAGA actions belong to the State just enough to

prevent application of this Court’s decision in Concepcion, but not enough to prevent the employee and employer from agreeing to arbitrate a PAGA claim. That

conclusion is untenable and amounts to little more

than a blatant misuse of Waffle House.

Nor could the Iskanian court draw support from

its analogy to qui tam actions. The analogy is flawed

from the outset: In contrast to the role that the federal government is authorized to play in federal qui

tam litigation (see 31 U.S.C. § 3730(b)-(c)), California

has little control over the conduct of a PAGA action

brought by a private plaintiff—and certainly nowhere

close to the control that would be required to satisfy

Waffle House.

In fact, the Ninth Circuit recently recognized that

PAGA actions are materially distinct from traditional

qui tam actions. Magadia, 2021 WL 2176584, at *67. Unlike traditional qui tam actions, where the State

retains partial control over the claims and can choose

to intervene, “PAGA represents a permanent, full assignment of California’s interest to the aggrieved employee.” Id. at *7. In other words, “once California

elects not to issue a citation” for the alleged Labor

Code violation, “the State has no authority under

PAGA to intervene in a case brought by an aggrieved

employee,” who may pursue her private PAGA claim

even if the State disagrees with it. Ibid. Moreover,

22

and “wholly unique” among purported qui tam actions, PAGA plaintiffs are allowed to assert not just

the interests of the State, but “the interests of other

third parties”—i.e., other aggrieved employees—who

are bound by the PAGA judgment just like members

of a class. Id. at *6-7. The Ninth Circuit concluded

that these attributes “undermine[] the notion that the

aggrieved employee is solely stepping into the shoes of

the State rather than also vindicating the interests of

other aggrieved employees.” Id. at *7.

Thus, even assuming that there were a narrow exception to valid arbitration agreements for employees

seeking to sue their employers as qui tam relators—

an exception that this Court has never recognized—

PAGA claims would not fit within that exception.

The Iskanian court acknowledged that a State

may not “circumvent the FAA by, for example, deputizing employee A to bring a suit for the individual

damages claims of employees B, C, and D”—conceding

that such an arrangement is “tantamount to a private

class action” that is incompatible with arbitration under the FAA. 327 P.3d at 152. But the calculus does

not change merely because the State asserts a generalized enforcement interest in the private litigation.

California’s policy interests in deputizing private attorneys general to aid in the enforcement of its laws

do not permit the State to render unenforceable a

plaintiff’s otherwise-applicable arbitration agreement. Under the Supremacy Clause, federal law overrides state policy, not the other way around. And this

Court could not have been more direct in holding that

“States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.” Concepcion, 563 U.S. at 351.

23

Finally, the Iskanian court’s effort to imbue PAGA

claims with the State’s authority by pointing out that

75% of the recovery goes to the State (see 327 P.3d at

146) both misses the point and proves far too much. It

misses the point because the division of civil penalties

under PAGA has nothing to do with who is controlling

the litigation—which Waffle House makes clear is the

determinative factor. 534 U.S. at 291. And it proves

far too much because the fact that the State obtains a

portion of recovered penalties is no basis for exempting private claims from arbitration.

For instance, a number of States have enacted

laws requiring that as much as 75% of a punitivedamages award won by a private plaintiff be distributed to the State or its agencies.9 Yet this Court has

long held that agreements to arbitrate punitive-damages claims are fully enforceable under the FAA. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S.

52, 58 (1995).

In short, Iskanian represents the very type of “judicial hostility to arbitration” that the FAA was designed to prevent. The Iskanian rule is irreconcilable

with Epic and Concepcion, and this Court’s intervention is needed to restore uniform application of the

FAA.

E.g., Alaska Stat. § 09.17.020(j); Ga. Code Ann. § 51-125.1(e)(2); 735 Ill. Comp. Stat. Ann. 5/2-1207; Ind. Code Ann. § 3451-3-6(c); Iowa Code Ann. § 668A.1(2)(b); Or. Rev. Stat. Ann.

§ 31.735(1); Utah Code Ann. § 78B-8-201(3)(a).

9

24

CONCLUSION

The petition for a writ of certiorari should be

granted.

25

Respectfully submitted.

DARYL JOSEFFER

JENNIFER B. DICKEY

U.S. Chamber

Litigation Center

1615 H Street, NW

Washington, DC 20062

(202) 463-5337

ANDREW J. PINCUS

Counsel of Record

ARCHIS A. PARASHARAMI

DANIEL E. JONES

CARMEN N. LONGORIA-GREEN

Mayer Brown LLP

1999 K Street, NW

Washington, DC 20006

(202) 263-3000

apincus@mayerbrown.com

Counsel for Amicus Curiae the Chamber of Commerce of the United States of America

JUNE 2021