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

Court of Appeal of California,

Second Appellate District

__________________

BRIEF OF TRACY CHEN,

IN HER REPRESENTATIVE PROXY CAPACITY

ON BEHALF OF THE STATE OF CALIFORNIA,

AS AMICUS CURIAE IN SUPPORT

OF RESPONDENT

__________________

MARK F. HUMENIK

Counsel of Record

POLK KABAT, LLP

423 South Estate Drive

Orange, CA 92869

(949) 636-5754

mhumenik@polkkabat.com

Counsel for Amicus Curiae,

Tracy Chen

March 9, 2022

Becker Gallagher · Cincinnati, OH · Washington, D.C. · 800.890.5001

i

TABLE OF CONTENTS

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . iii

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

SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . 2

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

I.

PAGA claims are administrative enforcement

actions, and the FAA does not preempt

California’s sovereign right to enforce its

Labor Code via delegated private proxies . . 11

A. PAGA actions serve the public

interest, not the individual interests of

aggrieved employees . . . . . . . . . . . . . . . . 12

B. PAGA’s public service incentive

structure and minimal procedural

controls following administrative

exhaustion do not subject PAGA

claims to FAA preemption . . . . . . . . . . . . 16

C. PAGA enforcement actions are

fundamentally different from

individual class actions . . . . . . . . . . . . . . 21

D. California’s sovereign interest in

Labor Code enforcement must be

respected in the absence of manifest,

contrary Congressional intent . . . . . . . . . 23

II.

The writ of certiorari should be dismissed for

having been improvidently granted . . . . . . . 26

ii

III.

Congress never intended for the FAA and

private arbitration agreements to be used as

a weapon against state law enforcement

measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

iii

TABLE OF AUTHORITIES

CASES

14 Penn Plaza LLC v. Pyett,

556 U.S. 247 (2010). . . . . . . . . . . . . . . . . . . . . . . 10

ASARCO Inc. v. Kadish,

490 U.S. 605 (1989). . . . . . . . . . . . . . . . . . . . . . . 13

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011). . . . . . . . . . . . . . . . . . . . . . . 11

Alfred L. Snapp & Son, Inc. v. Puerto Rico

ex rel. Barez, 458 U.S. 592 (1982). . . . . . . . . . . 1, 4

Allied-Bruce Terminix Companies, Inc.

v. Dobson, 513 U.S. 265 (1995). . . . . . . . . . 2, 6, 31

Altria Grp., Inc. v. Good,

555 U.S. 70 (2008). . . . . . . . . . . . . . . . . . . . . . . . 10

Amalgamated Transit Union, Loc. 1756

v. Superior Ct., 209 P.3d 937 (Cal. 2009). . . 19, 29

Arias v. Superior Ct.,

209 P.3d 923 (Cal. 2009). . . . . . . . . . . . . . 5, 11, 17

Barnhart v. Sigmon Coal Co.,

534 U.S. 438 (2002). . . . . . . . . . . . . . . . . . . . . . . 10

Baumann v. Chase Inv. Servs. Corp.,

747 F.3d 1117 (9th Cir. 2014). . . . . . . . . . 7, 22, 23

Brown v. Ralphs Grocery Co.,

128 Cal.Rptr.3d 854 (Ct. App. 2011) . . . . . . . . . 15

iv

Californians For Safe and Competitive Dump

Truck Transp. v. Mendonca,

152 F.3d 1184 (9th Cir. 1998). . . . . . . . . . . . . . . 23

Canela v. Costco Wholesale Corp.,

971 F.3d 845 (9th Cir. 2020). . . . . . . 5, 6, 7, 12, 22

Curtis v. Irwin Industries, Inc.,

913 F.3d 1146 (9th Cir. 2019). . . . . . . . . . . . . . . 10

Epic Systems Corp. v. Lewis,

138 S.Ct. 1612 (2018) . . . . . . . . . . . . . . . . . . 11, 27

Fleetwood Enters., Inc. v. Gaskamp,

280 F.3d 1069 (5th Cir. 2002). . . . . . . . . . . . . . . 26

Gade v. Nat’l Solid Wastes Mgmt. Ass’n,

505 U.S. 88 (1992). . . . . . . . . . . . . . . . . . . . . . . . 25

Graham v. R.J. Reynolds Tobacco Co.,

857 F.3d 1169 (11th Cir. 2017). . . . . . . . . . . . . . . 3

Granite Rock Co. v. Int’l Bhd. of Teamsters,

561 U.S. 287 (2010). . . . . . . . . . . . . . . . . . . . . . . 26

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). . . . . . . . . . . . . . passim

LaFace v. Ralphs Grocery Co.,

___ Cal.Rptr.3d ____,

2022 WL 498847 (Ct. App. 2022) . . . . . 5, 7, 17, 18

Magadia v. Wal-Mart Associates, Inc.,

999 F.3d 668 (9th Cir. 2021). . . . . . . . . . . . passim

v

Medtronic, Inc. v. Lohr,

518 U.S. 470 (1996). . . . . . . . . . . . . . . . . . . . 10, 25

Met. Life Ins. Co. v. Massachusetts,

471 U.S. 724 (1985). . . . . . . . . . . . . . . . . . . . . . . 23

Mormon Church v. United States,

136 U.S. 1 (1890). . . . . . . . . . . . . . . . . . . . . . . . . . 1

Munro v. University of Southern California,

896 F.3d 1088 (9th Cir. 2018). . . . . . . . . . . . 10, 29

Nevada v. Bank of Am. Corp.,

672 F.3d 661 (9th Cir. 2012). . . . . . . . . . . . . . . . 24

New State Ice Co. v. Liebmann,

285 U.S. 262 (1932). . . . . . . . . . . . . . . . . . . . . . . . 3

New York State Conference of Blue Cross &

Blue Shield Plans v. Travelers Ins. Co.,

514 U.S. 645 (1995). . . . . . . . . . . . . . . . . . . . . 2, 24

Nicosia v. Amazon.com, Inc.,

834 F.3d 220 (2d Cir. 2016) . . . . . . . . . . . . . . . . 26

Nike, Inc. v. Kasky,

539 U.S. 654 (2003). . . . . . . . . . . . . . . . . . . . . . . . 6

People v. Pacific Land Research Co.,

569 P.2d 125 (1977) . . . . . . . . . . . . . . . . . . . . . . 11

Preston v. Ferrer,

552 U.S. 346 (2008). . . . . . . . . . . . . . . . . . . . . . . 25

Printz v. United States,

521 U.S. 898 (1997). . . . . . . . . . . . . . . . . . . . . . . 23

vi

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

803 F.3d 425 (9th Cir. 2015). . . . . . . . . . . . . 12, 17

Saucillo v. Peck,

___ F.4th ___,

2022 WL 414692 (9th Cir. 2022) . . . . . . . . passim

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

559 U.S. 662 (2010). . . . . . . . . . . . . . . . . . . . . . . 26

TransUnion LLC v. Ramirez,

141 S.Ct. 2190 (2021) . . . . . . . . . . . . . . . . . . 13, 14

U.S. Fid. and Guar. Co. v. Lee Investments LLC,

641 F.3d 1126 (9th Cir.2011) . . . . . . . . . . . . . . . 27

United States v. Locke,

529 U.S. 89 (2000). . . . . . . . . . . . . . . . . . . . . . . . 25

United States ex rel. Welch v. My Left Foot

Children’s Therapy, LLC,

871 F.3d 791 (9th Cir. 2017). . . . . . . . 9, 27, 28, 29

Vt. Agency of Nat. Res. v. U.S. ex rel. Stevens,

529 U.S. 765 (2000). . . . . . . . . . . . . . . . . . . . . . . 13

Wesson v. Staples the Off. Superstore, LLC,

283 Cal.Rptr.3d 846 (Ct. App. 2021) . . . . . . . . . 17

West Virginia ex rel. McGraw v. CVS

Pharmacy, Inc., 646 F.3d 169 (4th Cir. 2011) . . 24

Williams v. Super. Ct.,

398 P.3d 69 (Cal. 2017). . . . . . . . . . . . . . . . . . . . 14

Wyeth v. Levine,

555 U.S. 555 (2009). . . . . . . . . . . . . . . . . . . . . . . 10

vii

Younger v. Harris,

401 U.S. 37 (1971). . . . . . . . . . . . . . . . . . . . . . . . 24

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

448 P.3d 239 (Cal. 2019). . . . . . . . . . 14, 18, 20, 22

STATUTES

False Claims Act (FCA), 31 U.S.C. § 3729 et. seq . . . 13

Federal Arbitration Act (FAA). . . . . . . . . . . . 1, 16, 25

Fed. R. Civ. P. 17(a)(1) . . . . . . . . . . . . . . . . . . . . . . . 18

Cal. Civ. Code § 1542 . . . . . . . . . . . . . . . . . . . . . 27, 30

Cal. Civ. Code § 1668 . . . . . . . . . . . . . . . . . . . . . . . . . 6

Cal. Civ. Code § 3513 . . . . . . . . . . . . . . . . . . . . . . . . . 6

Cal. Code Civ. Pro. § 367 . . . . . . . . . . . . . . . . . . . . . 18

Cal. Lab. Code § 2698, et. seq. (PAGA) . . . . . . . . . . . 1

Cal. Lab. Code § 2699(a) . . . . . . . . . . . . . . . . . . . . . . 5

Cal. Lab. Code § 2699(f) . . . . . . . . . . . . . . . . . . . . . . . 4

Cal. Lab. Code § 2699(g)(1) . . . . . . . . . . . . . . . . 15, 18

Cal. Lab. Code § 2699.3(a)(1)(A) . . . . . . . . . . . . . . . 22

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

1

INTEREST OF AMICUS CURIAE1

The “‘prerogative of parens patriae’” is “‘inherent in

the supreme power of every state’” and allows each

State to enact and enforce laws aimed at protecting

“the well-being of its populace.” Alfred L. Snapp & Son,

Inc. v. Puerto Rico ex rel. Barez, 458 U.S. 592, 600, 602

(1982) (quoting Mormon Church v. United States, 136

U.S. 1, 57 (1890)). California’s Private Attorneys

General Act, Cal. Lab. Code § 2698, et. seq. (PAGA), is

a quintessential use of California’s parens patriae

authority to enact and enforce a set of laws under its

police powers for the welfare of its citizens. California’s

Iskanian rule -- prohibiting contractual waivers of

private attorney general enforcement authority before

the State deputizes an aggrieved employee to act on its

behalf -- reinforces the State’s sovereign right to

enforce its Labor Code through mechanisms and

incentives that the Legislative and Executive branches

of government (not the federal judiciary) determined

best serve the local public interest. Iskanian v. CLS

Transportation Los Angeles, LLC, 327 P.3d 129, 152-53

(Cal. 2014). Iskanian’s anti-waiver rule is correct,

because a state’s parens patriae authority should not be

neutralized by private agreement. And the Federal

Arbitration Act (FAA) is agnostic concerning this issue.

It does not authorize claim waivers or displace state

law enforcement mechanisms.

1

No counsel for a party authored this brief in whole or in part and

no one other than the amicus and her counsel made a monetary

contribution to fund the preparation or submission of this brief. All

parties to this case filed consents allowing submission of amicus

briefs.

2

Tracy Chen, a proxy of the State of California’s

Labor and Workforce Development Agency (LWDA)

pursuant to PAGA and appellant in a case before the

United States Court of Appeals for the Ninth Circuit,

Harvey v. Morgan Stanley Smith Barney LLC, Case

Nos. 19-16955, 20-15510, and 20-15548, has an interest

in the outcome of this case. Any decision in Viking

River Cruises, Inc. v. Moriana will implicate “core

principles of federalism” and potentially “displace state

law,” Allied-Bruce Terminix Companies, Inc. v. Dobson,

513 U.S. 265, 292 (1995) (Thomas, J., dissenting),

including whether the FAA overrides the “starting

presumption” and traditional deference to the “historic

police powers of the State” which is embodied in PAGA,

New York State Conference of Blue Cross & Blue Shield

Plans v. Travelers Ins. Co., 514 U.S. 645, 654–55

(1995).

As a proxy of the LWDA, Chen – like every other

current and future aggrieved employee in California –

has a keen interest in defending the LWDA’s statutory

authority to enforce its public police powers and

exercise its parens patriae authority under California’s

Labor Code, through delegated private citizen proxies

like her. This Court should affirm.

SUMMARY OF ARGUMENT

Respondent’s brief thoroughly explains the many

reasons why the FAA’s text and purpose do not require

the enforcement of agreements that prospectively

extinguish claims (and bypass the arbitral forum

altogether) by prohibiting a PAGA claim in any forum.

Amicus Chen highlights additional reasons why this

PAGA law enforcement claim, prosecuted by a proxy of

3

LWDA in state court, does not meet the “high bar”

required for implied FAA preemption. Graham v. R.J.

Reynolds Tobacco Co., 857 F.3d 1169, 1186 (11th Cir.

2017) (en banc).

“It is one of the happy incidents of the federal

system that a single courageous state may, if its

citizens choose, serve as a laboratory; and try novel

social and economic experiments without risk to the

rest of the country.” New State Ice Co. v. Liebmann, 285

U.S. 262, 386–87 (1932) (Brandeis, J., dissenting).

PAGA is the tool crafted by the California legislature to

maximize Labor Code enforcement via “delegation of

California’s power to enforce its labor law to private

parties.” Saucillo v. Peck, ___ F.4th ___, 2022 WL

414692 at *6 (9th Cir. 2022).

Judicial embrace of Petitioner’s exoneration clause

and waiver of private attorney general enforcement

activity under state law would upend federal-state

comity principles and circumvent state law

enforcement measures. Finding FAA preemption in

these circumstances would override California’s

determination that a particular statutory scheme and

mode of law enforcement will serve the public interest.

It would give employers throughout California the

ability to write themselves “get out of Labor Code

enforcement free” cards simply by conditioning

employment on a reciprocal “arbitration agreement”

that includes a promise to never serve as a private

attorney general for the public’s benefit. This would

directly undermine the incentive structure that

California’s Legislature adopted to promote Labor Code

enforcement, a result that could not be achieved in a

4

stand-alone waiver, uncoupled from an “arbitration”

agreement. Viking thus asks the Court to place its

arbitration agreement on unequal footing over other

contracts and elevate it above state sovereignty itself -a result that Congress never intended when it enacted

the FAA nearly a century ago.

The doctrine of parens patriae recognizes that a

sovereign state maintains “the power to create and

enforce a legal code, both civil and criminal,” which

“extends to individuals and entities within the relevant

jurisdiction” to protect the interests of its residents.

Alfred L. Snapp & Son, 458 U.S. at 601. Relying on its

parens patriae authority, California enacted a

comprehensive Labor Code that regulates many

aspects of the employer-employee relationship within

its borders, including numerous statutes “designed to

protect the health, safety, and compensation of

workers.” Kim v. Reins Int’l Cal., Inc., 459 P.3d 1123,

1126 (Cal. 2020).

Before PAGA’s enactment in 2003, California’s

Labor Code was critically underenforced because most

violations went unpunished. Recognizing the grave risk

to citizens and the State’s economy caused by systemic

underenforcement, California’s Legislature responded

in two ways. First, the Legislature added civil penalties

for Labor Code violations that did not previously

provide for them. Cal. Lab. Code § 2699(f). Second, in

furtherance of its parens patriae charge to “achieve

maximum compliance with state labor laws,” the

Legislature declared that it was “in the public interest”

to authorize “aggrieved employees, acting as private

attorneys general, to recover civil penalties for Labor

5

Code violations, with the understanding that labor law

enforcement agencies were to retain primacy over

private enforcement efforts.” Arias v. Superior Ct., 209

P.3d 923, 929-930 (Cal. 2009); see also, Cal. Lab. Code

§ 2699(a).

PAGA actions, prosecuted by private informant

citizen proxies of the government “as an alternative” to

LWDA enforcement of the Labor Code, belong to the

State. Id. “PAGA plaintiffs stand in the shoes of the

administrative agency and possess the same right and

interest as it does. The nature of that right is

administrative regulatory enforcement.” LaFace v.

Ralphs Grocery Co., ___ Cal.Rptr.3d ____, 2022 WL

498847 at *5 (Ct. App. 2022). The right is

administrative (and not personal) because the State’s

PAGA claim does not arise out of the contractual

relationship between the employer and the aggrieved

employees; it arises separately from the employer’s

violation(s) of the Labor Code stemming from the

employer’s relationship with the State and

corresponding privilege to do business within it. Id.;

Iskanian, 327 P.3d at 149.

The only injury at issue in a PAGA action is a

sovereign one: the underlying violation(s) of

California’s Labor Code committed within the State’s

borders. The only available redress is a civil penalty

paid to the State. The residual 25% portion of that

penalty award, shared with all aggrieved employees

post-suit, is “an incentive to perform a service for the

state,” not redress for any personal injury or damages

suffered by them. Saucillo, 2022 WL 414692 at *6

quoting Canela v. Costco Wholesale Corp., 971 F.3d

6

845, 852 (9th Cir. 2020). And because a PAGA action

has “no individual component,” aggrieved employees

and proxies like Moriana have no individual stake in

the State’s enforcement suit. Id., quoting Kim, 459 P.3d

at 1131.2

Private parties’ attempts to thwart the State’s

parens patriae authority by private contract pre-date

the FAA. Since 1872 (53 years before the FAA’s

enactment) those efforts were ineffective under

California law. Contractual waivers of violations of a

public law are void ab initio. Cal. Civil Code §§ 1668

and 3513.

California’s anti-waver rule does not discriminate.

Exculpatory terms are equally unlawful whether

2

As a state law enforcement vehicle with only sovereign injuries

at stake, PAGA actions are not bound by the confines of Article III.

PAGA actions are properly litigated in California’s own courts,

under its own laws, for conduct occurring within its own borders.

Because this PAGA action was initiated in state court under state

law, there is no occasion for this Court to decide (1) the thorny

issues raised by implied preemption of state law enforcement

statutes, judicial rules grounded in state sovereignty, or whether

the FAA applies at all in these circumstances, see e.g., AlliedBruce, 513 U.S. at 283 (O’Connor, J., concurring) (“I continue to

believe that Congress never intended the [FAA] to apply in state

courts”), 513 U.S. at 284-85 (Scalia, J., dissenting) (similar), and

513 U.S. at 285 (Thomas, J., dissenting) (same); or (2) whether

proxies like Moriana have Article III standing to prosecute PAGA

actions in a representative capacity in federal court, see, e.g., Nike,

Inc. v. Kasky, 539 U.S. 654, 661 (2003) (Stevens, J., concurring in

dismissal of certiorari as improvidently granted) (recognizing that

private attorney generals lacked Article III standing in a case

brought by an uninjured private citizen on the public’s behalf

under California’s unfair competition and false advertising laws).

7

located in a standalone employment agreement without

an arbitration clause, or in a pre-dispute waiver styled

as an “arbitration” agreement.

The Iskanian rule is neutral rather than hostile to

arbitration. The rule allows for resolution of PAGA

claims in a judicial or arbitral forum. There is no right

to a jury trial under PAGA, primarily because PAGA

actions are not analogs of common law breach of

contract actions between the proxy/aggrieved employee

and the employer. LaFace, 2022 WL 498847 at *5, n.9.

Procedurally, there is no material difference whether

the State’s PAGA claim is litigated in a bench trial or

arbitrated before a single arbitrator. The Iskanian rule

neutrally prohibits only the waiver of PAGA claims in

all forums, which is Petitioner’s admitted goal.

Contrary to Petitioner’s and their amici’s

mischaracterizations, a PAGA action is not an artfully

mislabeled class claim, the leg of the class action dog

masquerading as the tail. (Civil Justice Ass’n of Cal.’s

amicus, p. 26). As the California Supreme Court and

Ninth Circuit consistently recognize, PAGA is a

different animal altogether, lacking the key attributes

of the class action: adequacy, typicality, commonality,

and predominance; with the two representative action

types being more dissimilar than alike. Baumann v.

Chase Inv. Servs. Corp., 747 F.3d 1117, 1121 (9th Cir.

2014); Kim, 459 P.3d at 1130. “[T]hese two actions are

distinct, with different parties and procedures.”

Saucillo, 2022 WL 414692 at *5; see also, Canela, 965

F.3d at 700 (“PAGA causes of action [are] nothing

like Rule 23 class actions.”).

8

Viking’s chief complaint has nothing to do with class

arbitration or the ability of private parties to choose an

arbitral forum to resolve individual disputes. Seeking

to avoid the self-proclaimed “tax for doing business in

California” (Pet.Br. at p. 3) and opportunize the

shortage of government resources that led to PAGA’s

enactment in the first place, the goal of Viking and

their amici is to gut PAGA by neutralizing its putative

army of attorneys general. In truth, Viking seeks an

exculpatory ruling from this Court under the guise of

FAA preemption. Rather than preserving resort to an

arbitral forum, Viking wants to eliminate its exposure

to penalty liability and avoid governmental prosecution

for its Labor Code violations – effectively restoring the

pre-PAGA era when unscrupulous employers engaged

in profitable, but unlawful, Labor Code violations with

impunity.

Allowing employers to circumvent state law

prosecution measures by private contract weaponizes

the FAA far beyond what Congress could have

envisioned in 1925. Left unchecked, employers could

freely use their superior bargaining power to frustrate

law enforcement measures that rely on employee or

insider participation, including prospective waivers of

whistleblower reporting activity affecting other

employees (i.e., prohibitions against reporting

corporate wrongdoing to the EEOC, SEC, OSHA, and

comparable state agencies). There is no meaningful

difference between an “agreement to arbitrate” that

prohibits an employee from serving as a private

attorney general on the LWDA’s behalf versus

prohibiting an employee from filing a charge of

discrimination with a governmental agency or

9

cooperating with a governmental investigation. The

FAA does not endorse the manipulation of public

rights, by relegating all matters that arise during

employment to the resolution of “individual” claims.

As well, judicial sanction of PAGA waivers would

result in a form of federal commandeering, effectively

requiring the State to invest additional taxpayer

dollars to prosecute Labor Code violations through

other measures (i.e., increasing LWDA’s budget so it

may hire more public officials to enforce the Labor

Code in lieu of unpaid, contingency-incentivized private

citizens and attorneys). If Viking gets its way, it will

reverse the “tax for doing business in California” onto

the State’s citizens themselves.

Preemption is especially unwarranted here because

the text of the parties’ arbitration agreement does not

cover disputes between the State and Viking. While

PAGA claims are brought by aggrieved employees

(following strict administrative exhaustion

requirements), the State is the real party in interest.

The parties’ arbitration agreement is limited to

disputes between Moriana and Viking that arose out of

their employment contract. The agreement cannot be

stretched to cover disputes arising out of or relating to

“observations made” by Moriana while employed by

Viking. See, U.S. ex. rel. Welch v. My Left Foot

Children’s Therapy, LLC, 871 F.3d 791, 799 (9th Cir.

2017). Nor does the parties’ arbitration agreement

extend to the State’s civil penalty claims against

Viking, even though Moriana was the informant who

reported Viking’s alleged Labor Code violations to the

government and subsequently received authority to

10

prosecute them on LWDA’s behalf. Id. at 800 and n.3;

see also, Munro v. University of Southern California,

896 F.3d 1088, 1092-94 (9th Cir. 2018).

The relentless battle over PAGA and increasing use

of representative waivers by employers to dismantle

California’s sovereign right to exercise its police powers

and enforce its Labor Code how it sees fit should not be

waged in federal court at all. It “should be fought

among the political branches” in California, and Viking

and their employer amici “should not seek to amend

the statute by appeal to the Judicial Branch.” 14 Penn

Plaza LLC v. Pyett, 556 U.S. 247, 270 (2010) quoting

Barnhart v. Sigmon Coal Co., 534 U.S. 438, 462 (2002).

In respect of federalism and proper deference to

California’s sovereign or quasi-sovereign right to

enforce its Labor Code, this Court should affirm the

ruling of the California Court of Appeal.

ARGUMENT

A federal statue like the FAA may not supersede

the “historic police powers of the States” unless it is the

“clear and manifest purpose of Congress.” Wyeth v.

Levine, 555 U.S. 555, 565 (2009) (quoting Medtronic,

Inc. v. Lohr, 518 U.S. 470, 485 (1996)). And “[t]hat

assumption applies with particular force” when implied

preemption is being applied “in a field traditionally

occupied by the States,” Altria Grp., Inc. v. Good, 555

U.S. 70, 77 (2008), especially employment matters,

Curtis v. Irwin Industries, Inc., 913 F.3d 1146, 1152

(9th Cir. 2019).

11

I.

PAGA

claims

are

administrative

enforcement actions, and the FAA does not

preempt California’s sovereign right to

enforce its Labor Code via delegated

private proxies.

Moriana brought an action for civil penalties on the

State’s behalf in state court to enforce the Labor Code

against Viking, her former employer. Invoking federal

law, Viking insists that Moriana cannot bring suit in a

private attorney general capacity in any forum because

she clicked through a PAGA waiver that Viking nestled

into an “arbitration agreement.” See, e.g., AT&T

Mobility LLC v. Concepcion, 563 U.S. 333 (2011); Epic

Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018).

Just two years earlier, the California Supreme

Court properly concluded that an employee’s blanket

waiver of the State’s PAGA enforcement authority falls

outside of the FAA’s purview. Iskanian, 327 P.3d at

151. And to the extent such waivers implicate the FAA

when employers strategically insert them into an

unsuspecting employee’s individual arbitration

agreement, Iskanian further held that the FAA does

not preempt the State’s sovereign right to carry out its

police powers and enforce its Labor Code as it sees fit.

Id. at 152.

As the California Supreme Court recognized long

before Iskanian (or Concepcion or Epic) was decided, a

PAGA action to recover civil penalties is

“‘fundamentally a law enforcement action designed to

protect the public and not to benefit private parties.’”

Arias, 209 P.3d at 934; see also, People v. Pacific Land

Research Co., 569 P.2d 125, 129 (1977). The Iskanian

12

rule, prohibiting PAGA waivers, does not target private

arbitration. California’s anti-waiver rule furthers its

sovereign authority as a state and promotes the

public’s longstanding interest in Labor Code

enforcement, regardless of the forum where the

enforcement is achieved.

A. PAGA actions serve the public interest,

not the individual interests of aggrieved

employees.

It is true that PAGA law enforcement actions are

not considered “qui tam for purposes of [establishing]

Article III” standing for proxies seeking to litigate in a

representative capacity on the State’s behalf in federal

court. Magadia v. Wal-Mart Associates, Inc., 999 F.3d

668, 678 (9th Cir. 2021). But that observation does not

undercut the lynchpin finding in Kim, Iskanian, and

other cases that the State is always the real party in

interest in a PAGA representative action. See, Kim,

459 P.3d at 1127; Iskanian, 327 P.3d at 148; Canela,

971 F.3d at 849, n.1; Sakkab v. Luxottica Retail N. Am.,

Inc., 803 F.3d 425, 435 (9th Cir. 2015).

Precedent unequivocally establishes that aggrieved

employees and deputized proxies do not have (or own)

an individual PAGA claim “because every PAGA action

… is a representative action on behalf of the state.

Plaintiffs may bring a PAGA claim only as the state’s

designated proxy.” Kim, 459 P.3d at 1131; see also,

Canela, 971 F.3d at 851, 856. The underlying injury

and “sole purpose” that the State vindicates through a

PAGA claim is only a sovereign one stemming from the

violation of its wage and hour laws. Iskanian, 327 P.3d

at 153. “But under Article III, an injury in law is not an

13

injury in fact.” TransUnion LLC v. Ramirez, 141 S.Ct.

2190, 2205 (2021).

Unlike a traditional qui tam action under the

federal False Claims Act (FCA), 31 U.S.C. § 3729 et.

seq., a PAGA proxy does not assert a claim for damages

on the State’s behalf for any proprietary injury that the

State suffered. See, Vt. Agency of Nat. Res. v. U.S. ex

rel. Stevens, 529 U.S. 765, 773-74 (2000) (finding that

a relator in a qui tam action under the FCA had Article

III standing under a partial assignment of damages

theory flowing from the government’s proprietary

injury from fraud; but rejecting the relator’s claim to

standing stemming from the “injury to its sovereignty

arising from the violation of its laws” and the bounty

“byproduct” interest that a relator possesses in the

suit’s successful outcome). Instead, the PAGA

representative prosecutes a claim for civil penalties for

the sovereign injury that the government sustained

arising from the employer’s violations of the Labor

Code. See, Saucillo, 2022 WL 414692 at *4. PAGA is

thus akin to a statutory parens patriae action, specific

to California state courts, and to which “the constraints

of Article III do not apply.” See, ASARCO Inc. v.

Kadish, 490 U.S. 605, 617 (1989) (noting that “the

constraints of Article III do not apply to state courts.”);

Nike, Inc., 539 U.S. at 661; Magadia, 999 F.3d at 67475.

PAGA’s text and legislative history underscore the

public and sovereign interests that the statute serves.

PAGA was enacted to “augment the limited

enforcement capability” of the LWDA by “empowering

employees to enforce the Labor Code as representatives

14

of the Agency.” Kim, 459 P.3d at 1130. “By expanding

the universe of those who might enforce the law, and

the sanctions violators might be subject to, the

Legislature sought to remediate present violations and

deter future ones.” Williams v. Super. Ct., 398 P.3d 69,

79 (Cal. 2017).

True to its sovereign law enforcement purpose,

PAGA’s remedial scheme authorizes the imposition of

civil penalties that are paid mostly to the State (the

primary beneficiary of any PAGA claim), but not

injunctive relief or individual damages to aggrieved

employees. “Civil penalties are an interest of the state.

Employees could not recover them until the PAGA

authorized aggrieved employees to do so as agents of

the state.” ZB, N.A. v. Superior Ct., 448 P.3d 239, 250

(Cal. 2019). Civil penalties are “not to redress

employees’ injuries.” Kim, 459 P.3d at 1130; Iskanian

327 P.3d at 151 (PAGA suits do not seek “victimspecific relief;” they “enforce the state’s interests in

penalizing and deterring employers”). Partly for that

reason, a PAGA representative, who “is, by definition,

not seeking to remedy any harm to herself but instead

is merely seeking to ensure a defendant’s ‘compliance

with regulatory law’ (and, of course, to obtain some

money…)” lacks federal constitutional standing.

TransUnion, 141 S.Ct. at 2206 (citations omitted).

While the litigating proxy and other aggrieved

employees receive a small portion of the State’s civil

penalty recovery if a PAGA prosecution is successful,

they have no cognizable individual stake in the State’s

cause of action or in any portion of those contingencybased civil penalties. The Ninth Circuit recently

15

clarified that point post-Magadia, emphasizing that

“PAGA is a delegation of California’s power to enforce

its labor laws to private parties.” Saucillo, 2022 WL

414692 at *6. Allowing aggrieved employees to share in

the State’s penalty recovery, a “policy choice” by the

California Legislature, does not establish any

individual interest or property stake in the State’s

PAGA claim; there is no compensatory component to

any PAGA action “because of any injury” to aggrieved

employees. Id.

PAGA’s statutory framework, which authorizes

pursuit of civil penalties by proxies suffering no

individual injury and even when the proxy’s individual

injuries were remedied by other means, confirms that

the pro-rata byproduct penalty interest is payment for

a service rendered to the State, not compensation for

any injuries to aggrieved employees. Kim, 459 P.3d at

1133; Cal. Lab. Code § 2699(g)(1). Consequently, PAGA

standing under state law (i.e., in the non-Article III

sense) is unconnected to injury or redressability.

Properly examined, PAGA is a prosecutorial tool

implemented by the California Legislature to “create a

means of ‘deputizing’ citizens as private attorneys

general to enforce the Labor Code.” Brown v. Ralphs

Grocery Co., 128 Cal.Rptr.3d 854, 862 (Ct. App. 2011).

And it has proven to be an effective tool, which explains

the dogged efforts of employers to effect its repeal

through judicial fiat. But the State’s reliance on

aggrieved employees to prosecute its claims does not

convert them into private claims for compensation for

individual injuries.

16

B. PAGA’s public service incentive

structure and minimal procedural

controls following administrative

exhaustion do not subject PAGA claims

to FAA preemption.

Magadia was correct in finding that a PAGA proxy

litigating in federal court does not satisfy traditional

qui tam standing under Article III. But Petitioner and

their amici widely miss the mark in citing Magadia to

undercut Iskanian (which Magadia does not mention).

There is no tension between the California Supreme

Court’s description of PAGA as a “form of qui tam” for

implied preemption purposes, while Magadia disputes

the qui tam label in the unrelated context of Article III

standing. But whether PAGA is described as a “form of

qui tam” or perhaps more aptly as a laboratory

experiment in parens patriae lawmaking, the result is

the same: the FAA does not preempt a state’s police

powers, especially without the slightest indication that

Congress clearly intended that result.

1. No matter the judicial label attached, a PAGA

plaintiff sues in a purely representative capacity as the

“proxy or agent of the state’s labor law enforcement

agencies.” Iskanian, 327 P.3d at 147. A PAGA action

thus is not a multi-party dispute, as Petitioner

contends. It is a bilateral dispute between “an employer

and the state,” rather than between the employer and

the aggrieved employees arising out of their

contractual relationship. Id. at 151 (emphasis in

original).

As to civil penalties only, a judgment in a PAGA

action binds the State, the deputized plaintiff-proxy,

17

and any aggrieved employees. But the individual

injury claims of aggrieved employees for identical (or

related) Labor Code violations are unaffected and not

subject to claim or issue preclusion. Arias, 209 P.3d at

934. Hence, the State is always the real party in

interest to (and primary beneficiary of) any PAGA

action. Kim, 459 P.3d at 1127.

Because the individual claims of aggrieved

employees are not involved, PAGA actions do not

invoke non-party due process requirements or complex

procedures. That remains so whether the State’s

penalty claim is litigated in arbitration or in court.

Sakkab, 803 F.3d at 436-37. While high financial

stakes may be involved when the reported Labor Code

violations are widespread, litigating a bilateral PAGA

claim is procedurally straightforward, since there is no

right to a jury trial in a PAGA action. LaFace, 2022 WL

414692 at *5. Moreover, because a PAGA action is

concerned with determining the total number of Labor

Code violations committed against the State during the

one-year penalty limitations period, there is no concern

that the factfinder, whether a court or an arbitrator,

will be saddled with resolving unique, individualized

defenses (i.e., waiver, release, unclean hands, etc.) that

sometimes complicate and delay class action disputes

for individualized damages. For those PAGA actions

that present manageability issues, a private arbitrator,

no less than a state court, has inherent authority to

dismiss the claim on manageability grounds. Wesson v.

Staples the Off. Superstore, LLC, 283 Cal.Rptr.3d 846,

859 (Ct. App. 2021).

18

Relatedly, because non-party aggrieved employees

are not parties to the PAGA action and not officially

notified of it, they may pursue their individual Labor

Code claims for victim-specific relief regardless of a

PAGA suit’s outcome. Indeed, PAGA provides that

employees – even the proxy bringing the State’s claim

-- retain all rights “to pursue or recover other remedies

available under state or federal law, either separately

or concurrently with an action taken under this part.”

Cal. Lab. Code § 2699(g)(1); ZB, N.A., 448 P.3d at 245.

Here, too, this is because “PAGA plaintiffs stand in the

shoes of the administrative agency and possess the

same right and interest as it does. The nature of that

right is administrative regulatory enforcement.”

LaFace, 2022 WL 414692 at *5.

That PAGA proxies bring suit in their own name

does not alter the State’s identity as the only real party

in interest to every PAGA claim. Kim, 459 P.3d at 1127.

PAGA authorizes a proxy to bring suit in her own name

after administrative exhaustion requirements with

LWDA are satisfied, without expressly identifying the

administrative agency as the real party in interest.

See, e.g., Cal. Lab. Code § 2699(g)(1) and Cal. Code Civ.

Pro. § 367 (“Every action must be prosecuted in the

name of the real party in interest, except as otherwise

provided by statute); cf. Fed.R.Civ.P.17(a)(1).

2. The Ninth Circuit’s narrow holding in Magadia

that PAGA actions do not satisfy the qui tam exception

to Article III standing does not render PAGA claims

subject to FAA preemption, as Petitioner and their

amici argue. As Magadia recognizes, PAGA is both

like, and unlike, traditional qui tam actions. 999 F.3d

19

at 675-77. But the differences do not change the

statutory foundation that is crucial to California’s antiwaiver rule – a PAGA claim is a law enforcement

mechanism to protect the public, not to benefit private

parties. Amalgamated Transit Union, Loc. 1756 v.

Superior Ct., 209 P.3d 937, 943 (Cal. 2009).

PAGA “does not create property rights, or any other

substantive rights” for aggrieved employees. Id. It is a

procedural statute authorizing private citizens (injured

or not) to seek civil penalties that a state agency

otherwise would recover. Thus, aggrieved employees

have no cognizable individual property interests,

including any assignable interest, in the State’s PAGA

claim. Id. at 943-944.

Procedurally, “PAGA operates as an assignment

from California” of the State’s civil penalty claims to

the deputized PAGA representative. Magadia, 999 F.3d

at 675. This “permanent, full assignment” of the State’s

legal right in Labor Code enforcement, id. at 677,

occurs “only after” (1) the proxy satisfies PAGA’s notice

requirements, and (2) LWDA indicates “it does not

intend to investigate the alleged violation” or does not

timely respond, Cal. Lab. Code §2699.3(a). The

employee is deputized to serve as a LWDA proxy,

authorized to prosecute the specific penalty claims

identified in her written notice to the administrative

agency, only after crossing this proxy demarcation line.

Iskanian, 327 P.3d at 146-47.

The assignment of police power from the LWDA to

the deputized aggrieved employee is a “full

assignment” to control the penalty claims identified in

the employee’s written notice in subsequent litigation

20

(or in arbitration if the proxy and the employer so

choose), but the proxy’s prosecutorial authority is

limited in scope to the specific facts and theories stated

in the employee’s notice. Magadia, 999 F.3d at 667.

That is, a proxy’s PAGA authority derives solely from

her own written notice to LWDA and the proxy’s

informant reporter role as a witness to the Labor Code

violations, which is independent of any contractual

relationship with the proxy’s employer or the existence

of any unredressed injury from the violation(s)

identified.

Of course, if the California Legislature wanted to

expand the number of private citizens authorized to

enforce the Labor Code on its behalf even further (for

example by authorizing any licensed California

attorney to bring suit rather than only aggrieved

employees), it could deputize any private citizen to act

in the LWDA’s stead. Kim, 459 P.3d at 1130. That the

California Legislature chose not to legislate in such

sweeping fashion as a means to prevent private

plaintiff abuse shows sensible restraint, rather than

hostility toward arbitration.

Before becoming deputized to serve as a LWDA

proxy, aggrieved employees have no legal right or

interest in or ability to control the State’s PAGA claim.

This is because the assignment of the State’s sovereign

interest in labor code enforcement has not taken place

(yet) and the aggrieved employees have other

mechanisms to vindicate their individual rights under

the Labor Code. ZB, N.A., 448 P.3d at 244-45. The

LWDA initially has sole authority to investigate and

prosecute penalty claims, and LWDA maintains a

21

“right of first refusal” over them before assigning its

prosecutorial authority to a PAGA representative

proxy. Magadia, 999 F.3d at 677. If LWDA takes

enforcement action, the employee cannot bring a

separate PAGA claim. Id.

Despite surface similarities to traditional qui tam

statutes, “PAGA differs in significant respects.”

Magadia, 999 F.3d at 676. These differences, coupled

with precedent finding no Article III standing under

comparable private attorney general schemes, undercut

the Magadia plaintiff’s Article III standing to bring his

PAGA claim in federal court. Because “standing in

federal court is a question of federal law, not state law,”

the PAGA meal-break claim was properly remanded to

state court. Id. at 675, 678. Magadia has no bearing on

FAA preemption.

C. PAGA

enforcement

actions

are

fundamentally different from individual

class actions.

Magadia rejected Vermont Agency’s qui tam

analysis as a basis for Article III standing in PAGA

cases because of the “significant” and “atypical (if not

wholly unique)” features of PAGA that distinguish it

from traditional qui tam statutes. 999 F.3d at 676.

Those same “atypical” features distinguish PAGA

claims from a traditional Rule 23 class action. PAGA

actions and Rule 23 class actions “are distinct, with

different parties and procedures.” Saucillo, 2022 WL

414692 at *5.

PAGA’s atypical features diverge from Rule 23’s

quartet of due process-based requirements, as well as

22

Article III’s triad requirements of injury-in-fact,

causation, and redressability. Inconsistent with Rule

23 class action representative (and Article III standing)

requirements, PAGA proxies (1) have no individual

claims and cannot seek individual relief [Canela, 971

F.3d at 856]; (2) need not be injured because PAGA

standing is based on violations, not injury [Kim, 459

P.3d at 1129]; (3) represent the LWDA’s rights and

seek only to vindicate the public interest, not private

rights [ZB, 448 P.3d at 250-51]; (4) may receive a

contingent fraction of civil penalties as an incentive

payment, not as compensation for individualized

damages or personal property rights [Canela, 971 F.3d

at 856]; (5) must exhaust strict administrative

exhaustion requirements under PAGA as a condition to

receiving authority to act in a representative capacity

on the State’s behalf, Cal. Lab. Code § 2699.3(a)(1)(A),

whereas a putative class action representative has no

pre-suit exhaustion obligation under Rule 23; (6) are

unaffected by res judicata after settlement/dismissal of

related individual Labor Code claims [Kim, 459 P.3d at

1129-30]; (7) are not obligated to satisfy Rule 23

requirements of adequacy, typicality, commonality, and

predominance; and, (8) have no due process limitations,

no opt-out mechanism, no class certification obstacles,

no formal notice requirements, and no fiduciary

obligations to absent interested parties, while class

action plaintiffs operate under all of those procedural

and substantive constraints.

In all material respects, a PAGA action is

“fundamentally different” than a class action.

Baumann v. Chase Inv. Servs. Corp., 747 F.3d 1117,

1121 (9th Cir. 2014). “In the end, Rule 23 and PAGA

23

are more dissimilar than alike. A PAGA action is at

heart a civil enforcement action filed on behalf of and

for the benefit of the state, not a claim for class relief.”

Id. at 1124.

D. California’s sovereign interest in Labor

Code enforcement must be respected in

the absence of manifest, contrary

Congressional intent.

Principles of federal-state comity dictate that “state

laws dealing with matters traditionally within a state’s

police powers are not to be preempted unless

Congress’s intent to do so is clear and manifest.”

Californians For Safe & Competitive Dump Truck

Transp. v. Mendonca, 152 F.3d 1184, 1186 (9th Cir.

1998). Labor law enforcement measures are

traditionally matters left to the state to regulate

pursuant to its police powers. Metro. Life Ins. Co. v.

Massachusetts, 471 U.S. 724, 756 (1985) (“States

possess broad authority under their police powers to

regulate the employment relationship to protect

workers within the State.” (citation omitted)). And a

state’s authority over its own law enforcement

methods, especially those exercised within its own

borders, is central to state sovereignty. Printz v. United

States, 521 U.S. 898, 928 (1997) (“It is an essential

attribute of the States’ retained sovereignty that they

remain independent and autonomous within their

proper sphere of authority.”).

It would be an affront to California’s sovereign

dignity if private parties could hinder the state’s ability

to enforce its Labor Code through the backdoor

mechanism of an arbitration agreement (with a waiver

24

of the State’s rights) to which the State did not consent.

The offense is even more acute here because Moriana’s

PAGA action, brought on the state’s behalf, merely

seeks to enforce state law, not federal law. As the

Fourth Circuit observed, concerning the improper

removal of a parens patriae action from state court to

federal court under CAFA’s mass action provision, a

determination that a “state was not entitled to pursue

its action in its own courts” would “inappropriately

transform what is a state matter into a [federal] case.”

West Virginia ex. rel. McGraw v. CVS Pharmacy, Inc.,

646 F.3d 169, 178 (4th Cir. 2011). Sanctioning such

behavior under the auspices of federal preemption

would “trample the sovereign dignity of the State” that

authorized a proxy to bring the civil enforcement claim

on its behalf under state law in its own forum. Id.; see

also, Nevada v. Bank of Am. Corp., 672 F.3d 661, 67071 (9th Cir. 2012).

Comity concerns encourage federal courts to avoid

undue interference with state activities and to promote

“proper respect for state functions.” Younger v. Harris,

401 U.S. 37, 44 (1971). And “despite the variety of ...

opportunities for federal preeminence,” this Court has

“never assumed lightly that Congress has derogated

state regulation, but instead have addressed claims of

preemption with the starting presumption that

Congress does not intend to supplant state law.”

Travelers, 514 U.S. at 654-55.

The question presented here is whether Congress

intended the anomalous result of preempting

California’s anti-waiver rule, developed from statutes

in California’s inaugural civil code adopted in 1872.

25

State sovereignty and comity play a critical role in that

analysis, as this Court has cited these considerations

as bedrock principles that must be afforded

considerable deference. See, United States v. Locke, 529

U.S. 89, 108 (2000) (finding that where Congress

legislates “in a field which the States have traditionally

occupied,” the starting assumption is “that the historic

police powers of the States were not to be superseded

by the Federal Act unless that was the clear and

manifest purpose of Congress”); Medtronic, Inc., 518

U.S. at 485 (“[B]ecause the States are independent

sovereigns in our federal system, we have long

presumed that Congress does not cavalierly pre-empt

state-law causes of action.”); Gade v. Nat’l Solid Wastes

Mgmt. Ass’n, 505 U.S. 88, 110 (1992) (holding “a high

threshold must be met if a state law is to be preempted for conflicting with the purposes of a federal

Act”). And those factors must take on heightened

importance when the State is the real party in interest

to, and primary beneficiary of, the law enforcement

claim that is potentially subject to preemption.

Nothing in the FAA’s text or its legislative history

shows a clear and manifest intent to disable

enforcement of one of California’s police powers

traditionally held by the State. Nor does the FAA’s

fundamental purpose promote the misuse of arbitration

agreements to extinguish a party’s substantive rights

under state law. See, Preston v. Ferrer, 552 U.S. 346,

359 (2008).

California’s police powers would be supplanted and

adversely affected by FAA preemption. PAGA’s two

primary objectives – enhancing labor law enforcement

26

and efficiently deploying taxpayer resources and

unique incentives to address a problem that costs

California billions of dollars each year -- address issues

of great public concern. Iskanian, 327 P.3d at 145-46.

Undoubtedly, FAA preemption of California’s antiwaiver rule would violate comity and “disable one of

the primary mechanisms for enforcing the Labor Code.”

Id. at 149.

II.

The writ of certiorari should be dismissed

for having been improvidently granted.

Notwithstanding the FAA’s embodiment of a

“national policy favoring arbitration” [Nicosia v.

Amazon.com, Inc., 834 F.3d 220, 228 (2d Cir.

2016) (alterations in original)], “a court may order

arbitration of a particular dispute only where the court

is satisfied that the parties agreed to arbitrate that

dispute.” Granite Rock Co. v. Int’l Bhd. of Teamsters,

561 U.S. 287, 297 (2010) (emphasis in original). The

“interpretation of an arbitration agreement is generally

a matter of state law.” Stolt-Nielsen S.A. v.

AnimalFeeds Int’l Corp., 559 U.S. 662, 681 (2010).

One potentially dispositive question here is whether

the State (the non-contracting real party in interest) is

bound by the arbitration agreement and PAGA waiver.

Under these circumstances, “[o]rdinary contract

principles determine who is bound.” Fleetwood Enters.,

Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002).

Given their equal footing, arbitration agreements

should be interpreted like any other contract under

state law.

27

The interpretation of PAGA, whether an underlying

agreement to arbitrate exists between the real parties

in interest, and the enforceability of PAGA waivers are

questions of California state law, U.S. Fid. & Guar. Co.

v. Lee Investments LLC, 641 F.3d 1126, 1133 (9th

Cir.2011).

In the proceedings below, Viking overlooked two

foundational state law issues in its challenge to the

Iskanian rule on federal preemption grounds post-Epic:

(1) whether an underlying agreement to arbitrate the

dispute even exists, and (2) whether California Civil

Code section 1542 provides an independent basis for

invalidating Moriana’s pre-dispute PAGA waiver.3 Both

issues are crucial.

First, the parties’ arbitration agreement (DRP) does

not cover disputes between the State and Viking; it

only covers disputes “arising out of or relating to

…[Moriana’s] employment with [her] company.” JA86.

An “unremarkable textual analysis” of the DRP shows

that it governs disputes between Moriana (but not the

State) and Viking that arose out of their employment

contract with one another, nothing more. See, Welch,

871 F.3d at 794.

Welch is instructive. It involved a comparable qui

tam statutory scheme, the FCA, and a similar (but

3

Section 1542 provides: “A general release does not extend to

claims that the creditor or releasing party does not know or suspect

to exist in his or her favor at the time of executing the release and

that, if known by him or her, would have materially affected his or

her settlement with the debtor or released party.” Cal. Civ. Code

§ 1542 (emphasis added).

28

broader) arbitration agreement between the relator

and her employer. As here, the employer moved to

compel arbitration because the relator/employee agreed

to arbitrate disputes “arising from, related to, or having

any relationship or connection whatsoever with my …

employment or other association with the company.” Id.

(emphasis added). And since Welch only learned of the

fraud through her employment, the defendant argued

her FCA claim was subject to arbitration.

Despite sweeping language in three different

arbitral clauses, the Ninth Circuit determined that the

clauses did not cover the relator’s representative

action, even though the relator based her entire suit on

information discovered while employed. Id. at 799-800

(“the fact that Welch observed the fraud while

employed is immaterial” because the arbitral clauses

could not be stretched to cover disputes “aris[ing] from

observations made while employed”).

The court emphasized that the government, not the

relator, was the real party in interest to the

representative FCA claim: “though the FCA grants the

relator the right to bring a FCA claim on the

government’s behalf, an interest in the outcome of the

lawsuit, and the right to conduct the action when the

government declines to intervene, … the underlying

fraud claims asserted in a FCA case belong to the

government and not to the relator.” Id. at 800.

Consistent with analogous PAGA precedent in

California, because the relator did not legally “own or

possess” the FCA claims, the court found the

representative claims to be non-arbitrable. Id.

29

The analysis in Welch applies with equal force to

Moriana’s narrower arbitration agreement with Viking.

Thus, on general contract interpretation grounds alone,

Moriana’s representative PAGA claim should be found

non-arbitrable too:

1. Moriana’s PAGA claim is purely representative

on behalf of the government, like the FCA claim in

Welch.

2. As in Welch, the DRP clause “arising out of

employment” does not stretch to cover disputes relating

to “observations made” by Moriana “while employed” at

Viking involving other aggrieved employees.

3. The DRP does not encompass any representative

claims “belonging to” the State, the real party in

interest to every PAGA claim under governing

California law. Moriana’s nominal party status as the

proxy bringing suit does not make her an owner of the

claim. See, Amalgamated Transit Union, Loc. 1756 v.

Superior Ct., 209 P.3d 937, 943 (Cal. 2009) (aggrieved

employees have no cognizable individual property

interests, including any assignable interest, in the

State’s PAGA claim); Munro, 896 F.3d at 892 (a class

action suit brought by plan participant-employees on

behalf of an ERISA plan against its trustees was nonarbitrable, although nine putative class representatives

had arbitration agreements with the employer,

“[b]ecause the parties consented only to arbitrate

claims brought on their own behalf, and because the

Employees’ present claims are brought on behalf of the

plans …”)

30

4. Although Moriana was the informant who

reported Viking’s Labor Code violations to the

government and was ultimately authorized to

prosecute them on LWDA’s behalf, Moriana is not the

real party in interest to the PAGA claim.

Second, to the extent Moriana has any stake in the

State’s PAGA action once under her litigation control,

she was not an aggrieved employee when she agreed to

the DRP initially, and no record evidence exists that

she was then aware of Viking’s alleged Labor Code

violations against any employee. Under California Civil

Code section 1542, a waiver or release of claims that

the releasing party does not know about, or suspect

exist, or have reason to know exist, is ineffective.

Given the potentially dispositive questions whether

an agreement to arbitrate the State’s PAGA claim

exists, especially considering the trial court’s failure to

consider whether Civil Code section 1542’s ban on

unknowing waivers should apply to Moriana’s

execution of the DRP, it is premature and

inappropriate for this Court to decide whether this

arbitration agreement (and PAGA waiver) is

preempted by the FAA. The Court should dismiss

certiorari for having been improvidently granted.

III.

Congress never intended for the FAA and

private arbitration agreements to be used

as a weapon against state law enforcement

measures.

It is debatable whether the 1925 Congress intended

for the FAA to apply in state court. See footnote 2

supra. It is far more doubtful that it envisioned private

31

parties weaponizing arbitration agreements to

frustrate state law enforcement measures to immunize

employers from civil punishment under a sovereign

state’s labor code by inserting substantive waiver terms

into what were always thought to be “forum-selection”

clauses. Allied-Bruce, 513 U.S. at 289 (Thomas, J.,

dissenting). “At the time of the FAA’s passage in 1925,

laws governing the enforceability of arbitration

agreements were generally thought to deal purely with

matters of procedure rather than substance, because

they were directed solely to the mechanics for resolving

the underlying disputes.” Id. at 286.

The consequences of allowing private parties to

circumvent innovative state law enforcement measures

like PAGA through FAA preemption maneuvers would

be dire and immediate. Two decades ago, pre-PAGA,

evidence presented to the Legislature showed that

California’s underground economy was generating “a

tax loss to the state of three to six billion dollars

annually.” Iskanian, 327 P.3d at 146. If Viking’s effort

to eviscerate PAGA enforcement succeeds, the tax

losses in today’s dollars will be many times higher.

Compounding matters, if LWDA’s army of unpaid (but

contingency-incentivized) attorney generals are

stripped of their badges, the State likely will be forced

to divert taxpayer resources from other programs and

priorities (or raise taxes) to fund new and untested

Labor Code enforcement strategies to fill the PAGA

void, increasing the overall costs and economic risks

even more.

There would be devastating non-economic losses too.

Labor Code violation rates presumably would skyrocket

32

to their pre-PAGA level. Beyond PAGA waivers,

employers could freely use their superior bargaining

power to frustrate law enforcement measures that rely

on employee or insider participation by incorporating

prospective waivers of whistleblower reporting activity

affecting other employees in their “arbitration”

agreements.

CONCLUSION

The judgment of the California Court of Appeal

should be affirmed.

Respectfully submitted,

MARK F. HUMENIK

Counsel of Record

POLK KABAT, LLP

423 South Estate Drive

Orange, CA 92869

(949) 636-5754

mhumenik@polkkabat.com

Counsel for Amicus Curiae,

Tracy Chen