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.,

Petitioner,

v.

ANGIE MORIANA,

Respondent.

____________________

On Writ of Certiorari

to the California Court of Appeal

____________________

BRIEF OF THE CALIFORNIA NEW CAR

DEALERS ASSOCIATION AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

____________________

ANNA-ROSE MATHIESON

Counsel of Record

SUSAN YORKE

CALIFORNIA APPELLATE

LAW GROUP LLP

96 Jessie Street

San Francisco, CA 94105

(415) 649-6700

annarose@calapplaw.com

Counsel for Amicus CNCDA

i

TABLE OF CONTENTS

Page

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

INTRODUCTION AND SUMMARY OF

ARGUMENT ......................................................... 2

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

I.

PAGA gives plaintiffs carte blanche to sue

businesses for even minor employment

violations. ...................................................... 3

II. Since Iskanian, plaintiffs routinely use

PAGA to avoid their promises to

arbitrate......................................................... 6

III. The proliferation of PAGA cases harms

individuals and businesses. ........................ 11

IV. This Court should reverse. ......................... 17

CONCLUSION ........................................................ 20

ii

TABLE OF AUTHORITIES

Page

CASES

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

570 U.S. 228 (2013)............................................ 11

Armendariz v. Foundation Health Psychcare

Services, Inc.,

24 Cal. 4th 83 (2000).......................................... 19

AT&T Mobility LLC v. Concepcion,

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

Bautista v. Fantasy Activewear, Inc.,

52 Cal. App. 5th 650 (2020) ............................... 10

Cuccia v. Superior Court,

153 Cal. App. 4th 347 (2007) ............................... 5

Epic Sys. Corp. v. Lewis,

138 S. Ct. 1612 (2018)...................................11, 19

Gentry v. Superior Ct.,

42 Cal. 4th 443 (2007)........................................ 19

Herrera v. CarMax Auto Superstores

California, LLC,

No. EDCV-14-776-MWF (VBKx), 2014

WL 12567154 (C.D. Cal. Aug. 27, 2014) ........... 10

Huff v. Securitas Security Services USA, Inc.,

23 Cal. App. 5th 745 (2018) ................................. 5

Iskanian v. CLS Transportation Los Angeles,

LLC,

59 Cal. 4th 348 (2014)................................. passim

Kelly v. Kiewit Infrastructure W. Co.,

No. CV 18-5807-MWF (AGRx), 2018 WL

6566555 (C.D. Cal. Sept. 12, 2018) ................... 10

iii

TABLE OF AUTHORITIES

(continued)

Page

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

999 F.3d 668 (9th Cir. 2021)...........................4, 18

McElhannon v. Carmax Auto Superstores W.

Coast, Inc.,

No. 3:19-CV-00586-WHO, 2019 WL

2354879 (N.D. Cal. June 4, 2019) ..................... 10

OTO, L.L.C. v. Kho,

8 Cal. 5th 111 (2019).......................................... 19

Perry v. Thomas,

482 U.S. 483 (1987)............................................ 20

Preston v. Ferrer,

552 U.S. 346 (2008)............................................ 20

Rivas v. Coverall North America, Inc.,

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

pet. pending, No. 20-55140)............................... 11

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

803 F.3d 425 (9th Cir. 2015).........................12, 16

Sanchez v. Gruma Corp.,

No. 19-CV-02015-WHO, 2019 WL

2716539 (N.D. Cal. June 28, 2019) ................... 10

Sonic-Calabasas A, Inc. v. Moreno,

51 Cal. 4th 659 (2011)........................................ 19

Southland Corp. v. Keating,

465 U.S. 1 (1984)................................................ 20

Stolt-Nielsen S.A. v. Animal Feeds

International Corp.,

559 U.S. 662 (2010)............................................ 15

iv

TABLE OF AUTHORITIES

(continued)

Page

Wesson v. Staples The Office Superstore,

LLC,

68 Cal. App. 5th 746 (2021) ................................. 4

STATUTES

Cal. Lab. Code § 22 ................................................... 3

California’s Private Attorneys General Act

Cal. Lab. Code §§ 2698 et seq. .................... passim

Federal Arbitration Act

9 U.S.C. §§ 1 et seq. .................................... passim

OTHER AUTHORITIES

Baker & Welsh, LLC, California Private

Attorneys General Act of 2004: Outcomes

and Recommendations Oct. 2021),

available at

https://cabiafoundation.org/app/uploads/

2021/11/CABIA_PAGA-Report-2021.pdf ... passim

Salvatore U. Bonaccorso, State Court

Resistance to Federal Arbitration Law,

67 Stan. L. Rev. 1145 (2015) ..........................5, 12

California Business and Industrial Alliance,

PAGA Lawsuit Data,

https://www.cabia.org/firm/

(last visited February 3, 2022) .......................... 16

v

TABLE OF AUTHORITIES

(continued)

Page

California Chamber of Commerce, Reform

Needed to Stop Abuse Forcing Employers

into Costly Settlements (Jan. 2021),

available at

https://advocacy.calchamber.com/policy/

issues/private-attorneys-general-act/.............9, 13

California Department of Industrial

Relations, Budget Change Proposal Fiscal

Year 2019-20 (May 10, 2019), available at

https://esd.dof.ca.gov/Documents/bcp/

1920/FY1920_ORG7350_BCP3230.pdf ............... 7

California Department of Industrial

Relations, Private Attorneys General Act

(PAGA) Case Search,

https://cadir.secure.force.com/PagaSearch/ ........ 7

California Senate, The Budget Process: A

Citizen’s Guide to Participation,

available at

senate.ca.gov/sites/senate.ca.gov/files/

the_budget_process.pdf ....................................... 8

Melissa Daniels, Calif. Judge OKs $7.75M

Uber Driver Deal Over Objections,

Law360 (Jan. 16, 2018, 11:25 PM),

https://www.law360.com/articles/1002461/

calif-judge-oks-7-75m-uber-driver-dealover-objections ................................................... 13

vi

TABLE OF AUTHORITIES

(continued)

Page

Rachel Deutsch et al., California’s Hero

Labor Law (Feb. 2020), available at

https://www.labor.ucla.edu/wpcontent/uploads/2020/02/UCLA-LaborCenter-Report_WEB.pdf ...................................... 9

Andrew Elmore, The State Qui Tam to

Enforce Employment Law,

69 DePaul L. Rev. 357 (2020) .............................. 9

Colin Froment, NFIB Attorney: PAGA

Reform ‘Priority Concern’ When It Comes

to Small Business, Northern California

Record (Jul. 27, 2019),

https://norcalrecord.com/stories/

512782631-nfib-attorney-paga-reformpriority-concern-when-it-comes-to-smallbusiness .........................................................14, 15

Myriam Gilles & Gary Friedman,

Unwaivable: Public Enforcement Claims

and Mandatory Arbitration,

89 Fordham L. Rev. 451 (2020) ......................... 19

Karimah Lamar, Can an Employee Pursue

PAGA Claims for Violations He Did Not

Suffer?, 28 No. 17 Cal. Emp. L. Letter 1

(Jun. 2018) ......................................................... 12

Chris Micheli, Private Attorneys General Act

Lawsuits in California: A Review of PAGA

and Proposals for Reforming the “Sue

Your Boss” Law,

49 U. Pac. L. Rev 265 (2018) ........................12, 13

vii

TABLE OF AUTHORITIES

(continued)

Page

Ken Monroe, Frivolous PAGA Lawsuits Are

Making Some Lawyers Rich, but They

Aren’t Helping Workers or Employers,

Los Angeles Times (Dec. 6, 2018),

https://www.latimes.com/opinion/op-ed/laoe-monroe-paga-small-businesses20181206-story.html .......................................... 14

Ivan Muñoz, Has PAGA Met Its Final

Match?,

60 Santa Clara L. Rev. 397 (2020) .............6, 8, 14

Lisa Nagele-Piazza, California Employers

Face Significant Penalties for Pay Stub

Violations,

SHRM (Feb. 7, 2018),

https://www.shrm.org/resourcesandtools/

legal-and-compliance/state-and-localupdates/pages/california-employerpenalties-pay-stub-violations.aspx...................... 5

Laura Reathaford, PAGA Performance,

L.A. Law., June 2016 ........................................... 4

Order and Final Judgment Approving

Settlement Between Settlement Class

Plaintiffs and Wal-Mart Stores, Inc.,

Brown v. Wal-Mart Stores, Inc., No. 5:09cv-03339-EJD (N.D. Cal. Mar. 28, 2019) .......... 13

Order Granting Approval of PAGA

Settlement and Judgment Thereon, Price

v. Uber Technologies, Inc., No. BC554512

(Sup. Ct. Los Angeles Jan. 31, 2018) ................ 13

BRIEF OF THE CALIFORNIA NEW CAR

DEALERS ASSOCIATION AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

Amicus respectfully submits this brief in support

of petitioner Viking River Cruises, Inc. 1

INTEREST OF AMICUS CURIAE

The California New Car Dealers Association

(CNCDA) is the nation’s largest state automobile

dealer association, representing nearly 1,200 franchised new car and truck dealers throughout California. Like many businesses throughout the United

States, CNCDA’s members enter into contracts that

adopt the time- and cost-saving options afforded by

the Federal Arbitration Act (FAA) to resolve disputes

promptly. Judicial decisions that undermine the FAA

thwart these efforts to achieve a swift, economical,

and fair outcome when disagreements arise.

The ruling here frustrates the purposes of the FAA

and singles out arbitration agreements for disfavored

treatment. This Court should reverse for the reasons

explained below and in petitioner’s brief on the merits.

1 No counsel for any party authored this brief in whole or in

part, and no person other than amicus or its counsel have made

any monetary contribution intended to fund the preparation or

submission of this brief. Counsel for both parties granted consent to the filing of this brief.

2

INTRODUCTION AND

SUMMARY OF ARGUMENT

Angie Moriana signed a contract promising to arbitrate—not litigate—any claims arising out of her

employment. She then sued her employer, asserting

just such claims on behalf of herself and hundreds of

other employees. Should she be able to do that? The

answer seems obvious: No.

But California says it’s fine. Why? Because California has decided that employment claims under

California’s Private Attorneys General Act (PAGA)

can’t be waived. So even employees who agreed to bilateral arbitration of employment-related claims can

still sue their employer under PAGA for almost any

violation of California’s 800+ page Labor Code.

That result can’t be right—and it isn’t. More than

100 years ago, Congress passed the Federal Arbitration Act (FAA) to combat judicial hostility to arbitration. But California has repeatedly tried to circumvent the FAA, and its no-waiver-for-PAGA-claims

rule is just the latest attempt.

In the five years after California announced the

rule in Iskanian v. CLS Transportation Los Angeles,

LLC, 59 Cal. 4th 348 (2014), the average number of

PAGA notices more than doubled compared to the

five-year period before Iskanian. The total value of

PAGA claims went up even more, rising 600% in those

five years. These numbers are still increasing. And

these increases aren’t just coincidental; many plaintiffs who at first asserted only class action claims

hastily added PAGA claims after the defendant

pointed out they had signed an arbitration agreement

waiving all class and representative claims.

3

The Iskanian rule—and the explosion of PAGA

cases it engendered—hurts businesses and individuals. It exposes companies to potentially catastrophic

liabilities and makes them vulnerable to opportunistic plaintiffs’ lawyers. It encourages employees to

breach their contracts and ignore arbitration agreements they signed. And it is not necessarily better for

employees, who may wait years for resolution of their

claims and end up recovering very little while their

lawyers reap the benefits. In fact, the lawyers are the

only ones that gain from the inefficiency and increased costs in the current system. Meanwhile, both

employers and employees lose the benefits of the private dispute resolution to which they agreed. That

result contravenes the FAA and this Court’s precedent.

This Court should reverse the decision below and

require California courts to follow federal law.

ARGUMENT

I.

PAGA gives plaintiffs carte blanche to sue

businesses for even minor employment violations.

California’s Private Attorneys General Act of 2004

(PAGA), Cal. Lab. Code §§ 2698 et seq., allows employees in California to file suit for nearly any violation of the California Labor Code. Id. §§ 22, 2699(a). 2

2 PAGA provides that “any provision of this code that provides for a civil penalty to be assessed and collected by the Labor

and Workforce Development Agency . . . for a violation of this

code, may, as an alternative, be recovered through a civil action

brought by an aggrieved employee on behalf of himself or herself

4

Although employees ostensibly file such suits on

behalf of the California Attorney General, the employee controls the litigation. See Magadia v. WalMart Assocs., Inc., 999 F.3d 668, 677 (9th Cir. 2021).

The employee drafts the complaint, handles motions

practice, and decides which witnesses to call at trial.

See Cal. Lab. Code § 2699(l)(1). 3 The employee can

decide whether to settle or dismiss the suit. Cal. Lab.

Code §§ 2699(a), (g)(1), (h), 2699.3(b)(4). And the employee shares in any verdict or settlement proceeds.

Id. § 2699(i).

PAGA allows suit for virtually any employment

claim that a plaintiff could bring, and the statute also

allows suit for many technical violations of the Labor

Code that wouldn’t normally provide a basis for a civil

suit. Cal. Lab. Code § 2699(a). And while PAGA

doesn’t allow the employee to collect the same types

of damages as a regular suit or class action, the penalties can be as high or higher, with a statutory $100

penalty per employee per pay period for the first

and other current or former employees . . . .” Cal. Lab. Code

§ 2699(a). The code defines a “violation” as “a failure to comply

with any requirement of the code.” Id. § 22. The employee must

notify California’s Labor and Workforce Development Agency

(LWDA) of the violation, and if the agency fails to respond or

declines to pursue the issue the employee may bring suit. Id.

§ 2699.3(a)(1)(A), (a)(2).

3 See also Laura Reathaford, PAGA Performance, L.A. Law.,

June 2016, at 18, 20 (discussing PAGA plaintiffs’ various litigation choices, including which Labor Code violations to allege,

how to define the group of “aggrieved employees,” and whether

to use statistical sampling to attempt to prove their claims); Wesson v. Staples The Office Superstore, LLC, 68 Cal. App. 5th 746

(2021) (discussing PAGA plaintiff’s pleading decisions and trial

plan).

5

violation and $200 per employee per period for any

later violations. 4 Cal. Lab. Code § 2699(f)(2). Plus, of

course, attorney’s fees. Id. § 2699(g)(1).

Not only can any employment claim be repackaged

as a PAGA claim, but once a plaintiff asserts a single

PAGA claim they can assert all other conceivable

claims by any other employee under PAGA, even if the

plaintiff wasn’t affected by the other alleged violations

at all. Huff v. Securitas Security Services USA, Inc.,

23 Cal. App. 5th 745, 750-51 (2018) (any plaintiff who

brings a PAGA claim may seek penalties not only for

the Labor Code violation that affected them but also

for different violations that affected other employees). 5 This means that PAGA suits can snowball into

catastrophic liabilities for businesses—especially

small ones—even when brought by minimally aggrieved plaintiffs.

While the general scope of the PAGA statute might

be a matter of state policy, whether it can override an

arbitration agreement is not. Yet since the California

4 See also Salvatore U. Bonaccorso, State Court Resistance to

Federal Arbitration Law, 67 Stan. L. Rev. 1145, 1164 (2015)

(“The civil penalties imposed by PAGA are cumulative and

hefty[.]”); Lisa Nagele-Piazza, California Employers Face Significant Penalties for Pay Stub Violations, SHRM (Feb. 7, 2018),

https://www.shrm.org/resourcesandtools/legal-and-compliance/state-and-local-updates/pages/california-employer-penalties-pay-stub-violations.aspx (explaining how penalties under

PAGA can quickly add up).

5 Under California’s court hierarchy, any appellate decision

binds every trial court in the state, so throughout the state

plaintiffs need only have standing for one PAGA claim to bring

every other possible PAGA claim against their employer. See

Cuccia v. Superior Court, 153 Cal. App. 4th 347, 353-54 (2007).

6

Supreme Court’s 2014 decision in Iskanian, plaintiffs

can bring a PAGA suit despite having signed an arbitration agreement promising not to do so. 59 Cal. 4th

at 360, 382-87. Under the Iskanian rule, California

courts refuse to enforce PAGA waivers in bilateral arbitration agreements.

Taken together, this means that California plaintiffs can sue their employer in court despite having

promised to arbitrate any and all claims arising out of

their employment. They can sue even for very minor

employment-related violations, and add claims on behalf of hundreds or thousands of others. And they can

seek massive statutory penalties that result in devastating liability for businesses.

II.

Since Iskanian, plaintiffs routinely use

PAGA to avoid their promises to arbitrate.

Since the June 2014 decision in Iskanian, California has seen a dramatic surge in PAGA claims as strategic plaintiffs seek to avoid the arbitration agreements they signed. 6

In the five years after Iskanian, the average number of PAGA notices more than doubled compared to

the five years before Iskanian:

6 Ivan Muñoz, Has PAGA Met Its Final Match?, 60 Santa

Clara L. Rev. 397, 399 n.7, 422 n.202 (2020) (using data provided

by the California Department of Industrial Relations, see note

7).

7

7000

PAGA Notices, 2004-20207

Iskanian

(June 2014)

6000

5000

4000

3000

2000

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

0

2004

1000

YEAR

7

And the Department of Industrial Relations predicts the number of notices will keep on rising, estimating that plaintiffs will file over 7,000 notices in

fiscal year 2022-23. 8 Not only did the sheer number

of PAGA claims skyrocket after Iskanian, but the

amount that businesses were forced to pay for PAGA

7 Chart created using publicly available data from the Cali-

fornia Department of Industrial Relations, Private Attorneys

General

Act

(PAGA)

Case

Search,

https://cadir.secure.force.com/PagaSearch/ (last visited Feb. 2, 2022). Data

points reflect the total number of PAGA Notices filed for that

calendar year (January 1 through December 31).

California Department of Industrial Relations, Budget

Change Proposal Fiscal Year 2019-20 7 (May 10, 2019), available

at https://esd.dof.ca.gov/Documents/bcp/1920/FY1920_ORG7350

_BCP3230.pdf.

8

8

suits increased by more than 600% in the five years

after Iskanian. 9 In fiscal year 2013-2014, the state

collected approximately $5 million from PAGA suits;

by fiscal year 2017-2018 that figure was nearly $35

million: 10 11

PAGA Dollar Amount Collected

Per Fiscal Year11

$40,000,000

$35,000,000

Iskanian

(June 2014)

$30,000,000

$25,000,000

$20,000,000

$15,000,000

$10,000,000

$5,000,000

$0

9 Muñoz, supra note 6, at 422.

10 Id.

11 Chart adapted from Muñoz, supra note 6, at 399 n.7, 422

(using data provided by the California Department of Industrial

Relations, see note 7). The California state government’s fiscal

year runs from July 1 to June 30. See California Senate, The

Budget Process: A Citizen’s Guide to Participation 15, available

at

senate.ca.gov/sites/senate.ca.gov/files/the_budget_process.

pdf.

9

And the numbers are still on the rise: in fiscal year

2019-2020, the total hit $43 million. 12 Estimates for

fiscal years 2020-2021 and 2021-2022 are $50 million. 13 Moreover, because these numbers include only

the state’s portion of the PAGA proceeds, they dramatically underestimate the total costs to employers. 14

Real-world examples from California courts reveal

the extent of the gamesmanship at work here. Countless plaintiffs have strategically added a PAGA claim

to avoid arbitration after the defendant invoked the

parties’ arbitration agreement. Viking River’s brief

12 Baker & Welsh, LLC, California Private Attorneys General

Act of 2004: Outcomes and Recommendations 1, 3 (Oct. 2021),

available at https://cabiafoundation.org/app/uploads/2021/11/

CABIA_PAGA-Report-2021.pdf; see also Andrew Elmore, The

State Qui Tam to Enforce Employment Law, 69 DePaul L. Rev.

357, 372 (2020) (“Private enforcer recovery of penalties via

PAGA has grown dramatically since 2012, from about $4.5 million to over $41 million per year.”).

Other estimates for 2019 are even higher. See Rachel

Deutsch et al., California’s Hero Labor Law 8 (Feb. 2020), available at https://www.labor.ucla.edu/wp-content/uploads/2020/02/

UCLA-Labor-Center-Report_WEB.pdf (according to a report by

the UCLA Labor Center, the state collected $88 million in PAGA

penalties, including filing fees, in 2019); Elmore, supra, 69 DePaul L. Rev. at 372 n.66 (“California reports $63.7 million in

PAGA penalties collected in the six months from July 2019 to

January 2020.”).

13 Baker & Welsh, supra note 12, at 1, 3.

14 Cal. Chamber of Commerce, Reform Needed to Stop Abuse

Forcing Employers into Costly Settlements (Jan. 2021), available

at https://advocacy.calchamber.com/policy/issues/private-attorneys-general-act/. Plaintiffs’ attorneys often try to structure settlements to maximize their fee recovery—a significant cost to

employers that is not included in the figures above. See id.

10

cites several examples, Merits Br. at 43-45, and there

are many more. E.g., Kelly v. Kiewit Infrastructure

W. Co., No. CV 18-5807-MWF (AGRx), 2018 WL

6566555, at *1 & Dkt. 19, at 9 (C.D. Cal. Sept. 12,

2018) (plaintiff first brought putative class action, but

after defendant sought to compel arbitration plaintiff

amended the complaint to include PAGA claim);

McElhannon v. Carmax Auto Superstores W. Coast,

Inc., No. 3:19-CV-00586-WHO, 2019 WL 2354879, at

*1 (N.D. Cal. June 4, 2019) (after defendants moved

to compel arbitration, two plaintiffs filed an amended

complaint stating they would “forego their remaining

claims in order to pursue only the PAGA claims”).

In many other cases, plaintiffs simply filed a new

action seeking relief under PAGA when faced with a

motion to compel arbitration. E.g., Sanchez v. Gruma

Corp., No. 19-CV-02015-WHO, 2019 WL 2716539, at

*1 (N.D. Cal. June 28, 2019) (after motion to compel

arbitration of state law employment claims granted,

plaintiff filed second suit alleging PAGA claim based

on same facts); Herrera v. CarMax Auto Superstores

California, LLC, No. EDCV-14-776-MWF (VBKx),

2014 WL 12567154, at *1 (C.D. Cal. Aug. 27, 2014)

(federal court compelled arbitration and dismissed

original suit; two months later plaintiff filed a second

action in state court that “makes the same factual allegations as the Complaint in the First Action, but

only seeks remedies under” PAGA); see also Bautista

v. Fantasy Activewear, Inc., 52 Cal. App. 5th 650, 653

(2020) (defendant moved to compel arbitration, plaintiffs dismissed class action and kept only PAGA

claims, and arbitration of those claims was denied).

This strategic use of PAGA to avoid arbitration

flows directly from the California Supreme Court’s ill-

11

considered Iskanian decision. Plaintiffs and their

lawyers can avoid arbitration agreements simply by

bringing PAGA representative claims instead of class

claims. 15 And as shown in the charts above, this risk

is far from theoretical—the non-waivability of PAGA

claims has spawned an explosive increase in litigation

of employment claims that were, by contract, supposed to be arbitrated. This subverts the policies Congress sought to protect in passing the FAA. See, e.g.,

Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1619 (2018);

Am. Express Co. v. Italian Colors Rest., 570 U.S. 228,

233 (2013). And, as explained below, it harms individuals and companies throughout the country.

III.

The proliferation of PAGA cases harms individuals and businesses.

The increase in PAGA claims hurts businesses and

individuals. Businesses may be exposed to significant

liability—even for minor or technical violations—and

are deprived of their bargained-for agreements to arbitrate. Meanwhile, the costs of litigating PAGA

claims are substantial, and the litigation process is

long and inefficient. When courts resolve PAGA

claims, everyone loses (except the lawyers).

From the employer’s point of view, there is little

distinction between class actions, collective actions,

15 See Rivas v. Coverall North America, Inc., 842 Fed. App’x

55, 58 & n.1 (9th Cir. 2021) (cert. pet. pending, No. 20-55140)

(Bumatay, J., concurring) (“We now creep closer to the day that

a party may always sidestep an arbitration agreement simply by

filing a PAGA claim. . . When we arrive there formally, we’ll be

late to the party: California courts have already said as much.”).

12

and PAGA actions. 16 All require the employer to engage in costly and complicated litigation. All include

the risk of significant liability. All can lead to substantial awards of attorney’s fees. And all deprive the

employer of the benefit of the arbitration agreement

they signed. See Sakkab v. Luxottica Retail N. Am.,

Inc., 803 F.3d 425, 447 (9th Cir. 2015) (N.R. Smith,

J., dissenting).

The post-Iskanian explosion of PAGA claims

harms companies even when cases aren’t litigated to

verdict. The possibility of massive penalties for even

inadvertent violations, combined with the cost of defending such actions, encourages early resolution. 17

And this can lead to settlement of dubious claims in

16 See Bonaccorso, supra note 4, at 1164 (Under PAGA, “a

single employee can sue as a proxy for all aggrieved employees,

functionally creating a public enforcement action that bears

many similarities to a class action without imposing the requirements of class certification.”); Chris Micheli, Private Attorneys

General Act Lawsuits in California: A Review of PAGA and Proposals for Reforming the “Sue Your Boss” Law, 49 U. Pac. L. Rev

265, 279 (2018) (“A PAGA claim is a class action in disguise that

avoids some of the pitfalls of class actions normally encountered

by plaintiffs.”).

See Karimah Lamar, Can an Employee Pursue PAGA

Claims for Violations He Did Not Suffer?, 28 No. 17 Cal. Emp. L.

Letter 1 (Jun. 2018) (“[T]he concern for employers, at a minimum, is a PAGA action being used as an end run to a class action, which has more stringent requirements for potential plaintiffs, or as a way to shake down the employer and extract an extortion-like settlement based on its fear of the cost of mounting

a defense and exposure to hefty penalties.”); Baker & Welsh, supra note 12, at 1, 3.

17

13

agreements designed mostly to line the pockets of

plaintiffs’ attorneys. 18

In a PAGA claim against Uber, for example, the

parties eventually reached a $7.75 million settlement—the Uber drivers got $1.08 each, while the

plaintiffs’ lawyers got $2.3 million. 19 In a PAGA claim

against Walmart for not providing chairs for its cashiers, the parties settled for $65 million; the employees

each received around a hundred dollars, while the

plaintiffs’ attorneys got $21 million. 20

And the costs of California’s no-PAGA-waiver rule

aren’t adequately captured by court records, since

plaintiffs’ lawyers routinely send demand letters to

scare businesses—especially small ones—into settling before the case is even filed. 21 These kinds of

18 Baker & Welsh, supra note 12, at 1, 3; see also Micheli,

supra note 16, 49 U. Pac. L. Rev at 281 (noting that PAGA “is

being over-utilized to extract excessive settlements against legitimate businesses in the State of California”); Cal. Chamber of

Commerce, supra note 14, at 85-86 (cost and risk of litigating

PAGA claims often results in settlements that mainly benefit

plaintiffs’ lawyers).

19 Order Granting Approval of PAGA Settlement and Judg-

ment Thereon, Price v. Uber Technologies, Inc., No. BC554512

(Sup. Ct. Los Angeles Jan. 31, 2018); Melissa Daniels, Calif.

Judge OKs $7.75M Uber Driver Deal Over Objections, Law360

(Jan. 16, 2018, 11:25 PM), https://www.law360.com/articles/1002461/calif-judge-oks-7-75m-uber-driver-deal-over-objections.

Order and Final Judgment Approving Settlement Between Settlement Class Plaintiffs and Wal-Mart Stores, Inc.,

Brown v. Wal-Mart Stores, Inc., No. 5:09-cv-03339-EJD (N.D.

Cal. Mar. 28, 2019).

20

21 Baker & Welsh, supra note 12,

at 1, 3.

14

out-of-court settlements don’t generate a public paper

trail, so there’s no way to know how much they cost. 22

Even perfectly compliant companies may settle in the

face of threats of litigation from unscrupulous plaintiffs or attorneys—a result that hurts businesses

while providing zero benefit to the public.

The risks are particularly acute for small businesses. 23 Again, the penalties imposed under PAGA

can be substantial, even for minor violations. 24 As one

study found, “[t]he ambiguity and technical language

in the [California] labor code adds to the complexity

of achieving compliance—many employers believe

they are complying, when in fact, technical violations

expose them to devastating penalties.” 25 The litigation costs and fees for third-party settlement administrators paid by employers average $45,000—and

that doesn’t include the employers’ own legal fees. 26

This means the legal and administrative costs of

22 Id.

23 See, e.g., Colin Froment, NFIB Attorney: PAGA Reform

‘Priority Concern’ When It Comes to Small Business, Northern

California Record (Jul. 27, 2019), https://norcalrecord.com/stories/512782631-nfib-attorney-paga-reform-priority-concernwhen-it-comes-to-small-business.

24 See Muñoz, supra note 6, at 426; Ken Monroe, Frivolous

PAGA Lawsuits Are Making Some Lawyers Rich, but They Aren’t

Helping Workers or Employers, Los Angeles Times (Dec. 6, 2018),

https://www.latimes.com/opinion/op-ed/la-oe-monroe-pagasmall-businesses-20181206-story.html (“[T]hese penalties can

add up fast, easily reaching hundreds of thousands of dollars for

a small company like ours (and millions for larger businesses).”).

25 Muñoz, supra note 6, at 426.

26 Baker & Welsh, supra note 12, at

8-9.

15

litigating a PAGA case can alone ruin small businesses. 27 No wonder businesses are often pressured

to settle even dubious claims as early as possible.

But employees don’t necessarily win here either.

A recent study found that court adjudication of PAGA

claims doesn’t benefit employees, and employees actually received less on average from PAGA court cases

than they would if their claims were resolved by an

agency. 28 And PAGA claims aren’t quick—they take

an average of almost two years. 29 Moreover, when a

claim settles in response to a demand letter before the

case is filed, there is no way to know whether employees are receiving those funds properly or promptly. 30

Under the current rule, both sides lose the benefits

of the arbitration procedure they agreed to use. In

traditional bilateral arbitration, “ ‘parties forgo the

procedural rigor and appellate review of the courts in

order to realize the benefits of private dispute resolution: lower costs, greater efficiency and speed, and the

ability to choose expert adjudicators to resolve specialized disputes.’ ” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 348 (2011) (quoting Stolt-Nielsen

S.A. v. Animal Feeds International Corp., 559 U.S.

662, 685 (2010)). As this Court has noted, allowing

representative proceedings “sacrifices the principal

advantage of arbitration—its informality—and

makes the process slower, more costly, and more

likely to generate procedural morass than final

27 Froment, supra note 23.

28 Baker & Welsh, supra note 12, at

29 Id. at

9.

30 Id. at

3.

1, 8-9.

16

judgment.” Id. California’s experience bears this

out—resolving PAGA claims in court takes a long

time, and it costs a lot. 31 That’s exactly what the parties agreed to avoid by promising to resolve their disputes through bilateral arbitration. See Sakkab, 803

F.3d at 444 (Judge N.R. Smith, dissenting) (“the Iskanian rule interferes with the parties’ freedom to

craft arbitration in a way that preserves the informal

procedures and simplicity of arbitration”).

This Court has also warned that representative

actions—like PAGA cases—are likely to discourage

arbitration. “[T]here is little incentive for lawyers to

arbitrate on behalf of individuals when they may do

so for a class and reap far higher fees in the process.

And faced with inevitable class arbitration, companies would have less incentive to continue resolving

potentially duplicative claims on an individual basis.”

Concepcion, 563 U.S. at 348. This problem can prove

even more serious when the representative pursues a

PAGA claim, which can result in a far greater recovery (at least for the employee’s attorney) than a private arbitration of the employee’s personal claims.

In fact, the only clear winners in this situation are

plaintiffs’ attorneys. A handful of plaintiffs’ side

firms paper the courts with PAGA suits—thirteen law

firms have each filed more than 500 PAGA suits, and

one law firm filed over 1,000 suits. 32 And as the examples involving Uber and Walmart discussed above

show, the potential for an attorney-fee windfall is

31 Baker & Welsh, supra note 12, at 8-9.

32 California Business and Industrial Alliance, PAGA Law-

suit Data, https://www.cabia.org/firm/ (last visited February 3,

2022).

17

huge. On average, attorney fees account for 33% of

the payments made by employers in PAGA cases. 33

That breeds inefficiency and unfairness: Businesses

are saddled with huge bills, and funds are diverted

from employees to lawyers.

All of this thwarts the goals of the FAA: fairness,

efficiency, and respect for the parties’ promises to

each other. See Concepcion, 563 U.S. at 344. Under

the FAA and this Court’s precedent, if the parties

have agreed that disputes should be resolved through

individualized arbitration, then the dispute should indeed be subject to arbitration rather than some other

proceeding in a different forum. California’s rule barring arbitration waivers for PAGA actions undermines that basic premise, with disastrous results.

IV.

This Court should reverse.

Moriana promised to arbitrate any disputes arising out of her employment with Viking. The agreement she signed foreclosed PAGA claims by name,

and it allowed her to opt out of that waiver clause, but

she did not opt out. Yet Moriana has been able to proceed in court—in direct contravention of her agreement—because California says PAGA claims can’t be

waived.

As explained fully in Viking River’s merits brief,

the California Supreme Court got this wrong. The Iskanian decision rested heavily on the claim that

PAGA waivers were different from class action waivers; the court stressed that the right to bring a PAGA

action cannot be waived because that right belongs to

33 Baker & Welsh, supra note 12, at 9.

18

the state, and the state never agreed to the waiver.

Iskanian, 59 Cal. 4th at 386-87. 34

But the state neither brings nor controls a PAGA

action. See id. at 384, 386. While the state has many

ways that it can enforce its Labor Code, PAGA gives

aggrieved employees the right to sue. Cal. Lab. Code

§ 2699(a). A PAGA claim is “an alternative” to enforcement by the state. Id. § 2699(a). An employee’s

PAGA suit can proceed only if the state declines to

proceed. Id. § 2699(h).

The employee controls all aspects of PAGA litigation. See id. § 2699(a), (g)(1), (l). Indeed, the state so

completely abdicates control over the litigation that

“PAGA represents a permanent, full assignment of

California’s interest to the aggrieved employee.”

Magadia, 999 F.3d at 677. Once the state decides not

to pursue the issue on its own, “the State has no authority under PAGA to intervene in a case brought by

an aggrieved employee. . . PAGA thus 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.

The court also stressed that California public policy required allowing PAGA suits to proceed in court.

34 This Court had previously struck down California’s policy

of refusing to enforce class action waivers in arbitration agreements. Concepcion, 563 U.S. 333. The Iskanian court acknowledged this ruling but insisted that representative actions under

PAGA were different, holding that even though the FAA

preempts state rules refusing to enforce class action waivers the

FAA does not preempt state rules refusing to enforce representative/PAGA waivers. Iskanian, 59 Cal. 4th at 360, 384.

19

Iskanian, 59 Cal. 4th at 386-88. But California generally invokes its policy interests when trying to avoid

arbitration agreements. 35 See, e.g., Armendariz v.

Foundation Health Psychcare Services, Inc., 24 Cal.

4th 83, 100-01 (2000) (holding there was “no question”

that the state’s Fair Employment and Housing Act is

an important public policy statute and so its provisions cannot be waived by arbitration agreements);

Gentry v. Superior Ct., 42 Cal. 4th 443, 456 (2007) (the

right to overtime pay “is mandated by statute and is

based on an important public policy” and thus “is unwaivable”), abrogated on other grounds in OTO,

L.L.C. v. Kho, 8 Cal. 5th 111 (2019); Sonic-Calabasas

A, Inc. v. Moreno, 51 Cal. 4th 659, 684, 689 (2011),

vacated, 565 U.S. 973 (2011).

California says its “historic police power” over “the

enactment and enforcement of laws concerning

wages, hours, and other terms of employment”

trumps federal law. Iskanian, 59 Cal. 4th at 388. But

that generalized interest can’t justify a state rule

aimed at undermining the FAA. See, e.g., Epic, 138

S. Ct. at 1623, 1632; Concepcion, 563 U.S. at 342. Nor

would it make sense to allow a state to ignore federal

law simply by claiming that state policy requires enforcement of nearly every aspect of its 800-page Labor

Code in court rather than through arbitration.

35 See also Myriam Gilles & Gary Friedman, Unwaivable:

Public Enforcement Claims and Mandatory Arbitration, 89 Fordham L. Rev. 451, 452 (2020) (exploring California’s long history

of finding laws unwaivable on public policy grounds and noting

that, “[a]s time passed, laws ‘established for a public reason’

grew to fill volumes of California’s code[.]”).

20

California’s no-waiver rule is wrong. It is a transparent attempt to circumvent the FAA, and it is not

California’s first. This Court has struck down many

of those past attempts, repeatedly reminding California that states may not apply “rules that stand as an

obstacle to the accomplishment of the FAA’s objectives.” Concepcion, 563 U.S. at 343; see also, e.g., Preston v. Ferrer, 552 U.S. 346, 353 (2008); Perry v.

Thomas, 482 U.S. 483, 491 (1987); Southland Corp. v.

Keating, 465 U.S. 1, 10 (1984). For the reasons ably

explained in the merits brief, the Court should again

do so here.

CONCLUSION

For all the reasons set out above and in the brief

on the merits, the Court should reverse.

Respectfully submitted,

ANNA-ROSE MATHIESON

Counsel of Record

SUSAN YORKE

CALIFORNIA APPELLATE LAW GROUP LLP

96 Jessie Street

San Francisco, CA 94105

(415) 649-6700

annarose@calapplaw.com

Attorneys for Amicus California New Car

Dealers Association

February 2022