Amicus Curiae Brief — Coverall North America, Inc., Petitioner v. Carlos Rivas

No. 21-268

In the Supreme Court of the United States

COVERALL NORTH AMERICA, INC.,

v.

Petitioner,

CARLOS RIVAS, IN HIS CAPACITY AS

PRIVATE ATTORNEY GENERAL REPRESENTATIVE,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the

Ninth Circuit

BRIEF OF THE CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICA AND

NATIONAL RETAIL FEDERATION AS

AMICI CURIAE IN SUPPORT OF PETITIONER

DARYL JOSEFFER

JENNIFER B. DICKEY

U.S. Chamber

Litigation Center

1615 H Street, NW

Washington, DC 20062

(202) 463-5337

STEPHANIE A. MARTZ

National Retail

Federation

1101 New York Ave, NW

Suite 1200

Washington, DC 20005

ANDREW J. PINCUS

Counsel of Record

ARCHIS A. PARASHARAMI

DANIEL E. JONES

Mayer Brown LLP

1999 K Street, NW

Washington, DC 20006

(202) 263-3000

apincus@mayerbrown.com

i

TABLE OF CONTENTS

Page

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

INTEREST OF THE AMICI CURIAE .......................1

INTRODUCTION AND SUMMARY OF

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

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

I. The Preemption Question Is Exceptionally

Important And Impacts Countless

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

II. Sakkab And The Decision Below Conflict

With The FAA And This Court’s

Precedent. ............................................................ 12

CONCLUSION .......................................................... 19

ii

TABLE OF AUTHORITIES

Page(s)

Cases

14 Penn Plaza LLC v. Pyett,

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

Amey v. Cinemark USA Inc.,

2015 WL 2251504 (N.D. Cal. May 13,

2015) ....................................................................... 9

AT&T Mobility LLC v. Concepcion,

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

Chu v. Wells Fargo Invs., LLC,

2011 WL 672645 (N.D. Cal. Feb. 16,

2011) ....................................................................... 8

Circuit City Stores, Inc. v. Adams,

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

DIRECTV, Inc. v. Imburgia,

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

Driscoll v. Granite Rock Co.,

2011 WL 10366147 (Cal. Super. Ct.

Sept. 20, 2011) ...................................................... 16

EEOC v. Waffle House, Inc.,

534 U.S. 279 (2002) .............................................. 12

Epic Sys. Corp. v. Lewis,

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

Franco v. Ruiz Food Prods., Inc.,

2012 WL 5941801 (E.D. Cal. Nov. 27,

2012) ....................................................................... 8

Garcia v. Gordon Trucking, Inc.,

2012 WL 5364575 (E.D. Cal. Oct. 31,

2012) ....................................................................... 8

iii

TABLE OF AUTHORITIES—continued

Page(s)

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

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

Kilby v. CVS Pharmacy, Inc.,

739 F.3d 1192 (9th Cir. 2013) .............................. 18

Kim v. Reins Int’l Cal., Inc.,

459 P.3d 1123 (Cal. 2020) .................................... 14

Lamps Plus, Inc. v. Varela,

139 S. Ct. 1407 (2019) ...................................... 3, 12

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

999 F.3d 668 (9th Cir. 2021) ................................ 15

McKenzie v. Fed. Express Corp.,

2012 WL 2930201 (C.D. Cal. July 2,

2012) ....................................................................... 8

Nordstrom Comm’n Cases,

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

Perry v. Thomas,

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

Preston v. Ferrer,

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

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

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

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

2017 WL 4620746 (Cal. Sup. Ct. July 6,

2017) ....................................................................... 9

Southland Corp. v. Keating,

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

iv

TABLE OF AUTHORITIES—continued

Page(s)

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

Corp.,

559 U.S. 662 (2010) .............................................. 12

Wesson v. Staples the Office Superstore,

LLC,

--- Cal. Rptr. 3d ----, 2021 WL 4099059

(Sept. 9, 2021) ............................................ 5, 15, 16

Williams v. Super. Ct.,

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

Statutes

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

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

Cal. Labor Code § 2699(i) ............................................ 7

Other Authorities

Robyn Ridler Aoyagi & Christopher J.

Pallanch, The PAGA Problem: The

Unsettled State of PAGA Law Isn’t Good

for Anyone, 2013-7 Bender’s California

Labor & Employment Bulletin 01 (2013) .............. 7

Cal. Dep’t of Industrial Relations, Budget

Change Proposal – PAGA Unit Staffing

Alignment (Apr. 2, 2019)........................................ 9

Michael Delikat & Morris M. Kleiner, An

Empirical Study of Dispute Resolution

Mechanisms: Where Do Plaintiffs Better

Vindicate Their Rights?, 58 Disp. Resol.

J. 56 (Nov. 2003 – Jan. 2004) .............................. 11

v

TABLE OF AUTHORITIES—continued

Page(s)

Tim Freudenberger et al., Trends in PAGA

claims and what it means for California

employers, Inside Counsel (Mar. 19,

2015) ....................................................................... 8

Matthew J. Goodman, Comment, The

Private Attorney General Act: How to

Manage the Unmanageable,

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

Emily Green, State law may serve as

substitute for employee class actions,

L.A. Daily J. (Apr. 17, 2014) .................................. 8

Lyra Haas, The Endless Battleground:

California’s Continued Opposition to the

Supreme Court’s Federal Arbitration Act

Jurisprudence,

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

Jathan Janove, More California Employers

Are Getting Hit With PAGA Claims,

Society for Human Resource

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

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

Now What?” An Employer’s 10-Step

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

Lewis L. Maltby, Private Justice:

Employment Arbitration and Civil

Rights,

30 Colum. Hum. Rts. L. Rev. 29 (1998)............... 11

vi

TABLE OF AUTHORITIES—continued

Page(s)

Nam D. Pham & Mary Donovan, Fairer,

Better, Faster: An Empirical Assessment

of Employment Arbitration,

NDP Analytics (2019) .................................... 10, 11

Theodore J. St. Antoine, Labor and

Employment Arbitration Today: MidLife Crisis or New Golden Age?, 32 Ohio

St. J. on Disp. Resol. 1 (2017) .............................. 11

INTEREST OF THE AMICI CURIAE

The Chamber of Commerce of the United States of

America (Chamber) is the world’s largest business

federation. It represents approximately 300,000

members and indirectly represents the interests of

more than three million companies and professional

organizations of every size, in every industry sector,

and from every region of the country. An important

function of the Chamber is to represent the interests

of its members in matters before Congress, the Executive Branch, and the courts. To that end, the Chamber regularly files amicus curiae briefs in cases, like

this one, that raise issues of concern to the Nation’s

business community.1

Established in 1911, the National Retail Federation (NRF) is the world’s largest retail trade association. Retail is by far the largest private-sector employer in the United States. It supports one in four

U.S. jobs—approximately 52 million American workers—and contributes $3.9 trillion to annual GDP.

NRF regularly files amicus curiae briefs in cases that

raise issues of substantial importance to the retail industry.

Many of amici’s members regularly employ arbitration agreements. Arbitration allows them to resolve disputes promptly and efficiently while avoiding

Pursuant to Rule 37.6, amici affirm that no counsel for a party

authored this brief in whole or in part and that no person other

than amici, their members, or their counsel made a monetary

contribution to its preparation or submission. Counsel of record

for all parties received notice of the intention to file this brief over

10 days prior to the due date and all parties have consented to

the filing of this brief.

1

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the costs associated with traditional litigation. Arbitration is speedy, fair, inexpensive, and less adversarial than litigation in court. Based on the principles

embodied in the Federal Arbitration Act (FAA) and

this Court’s consistent affirmation of the legal protections that the FAA provides for arbitration agreements, amici’s members have structured millions of

contractual relationships around arbitration agreements.

Amici have a strong interest in this Court’s review

and reversal of the decision below to ensure that the

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

state courts are flouting the FAA’s protection of agreements to arbitrate on an individualized basis.

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

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

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

(PAGA) is unenforceable as contrary to California’s

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

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

claims are the equivalent of qui tam actions, and

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

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

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

agreed that the Iskanian rule is not preempted by the

FAA.

The decisions in Iskanian and Sakkab have precluded the application of countless arbitration agreements to PAGA claims—significantly eroding the benefits of bilateral arbitration as an alternative to litiga-

3

tion—and will continue to do so absent this Court’s intervention. Indeed, the practical consequences of Iskanian and Sakkab are enormous: PAGA filings have

increased dramatically in recent years as plaintiffs invoke the statute in order to evade enforcement of their

arbitration agreements. The result is that, in California, workplace arbitration agreements are increasingly becoming a nullity.

INTRODUCTION AND

SUMMARY OF ARGUMENT

The case brings before the Court one of the most

significant chapters in the long and well-documented

history of California courts inventing new “devices

and formulas” aimed at circumventing arbitration

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

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

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

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

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

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

The FAA directs courts to “enforce arbitration

agreements according to their terms—including terms

providing for individualized proceedings.” Epic Sys.

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

Court has repeatedly made clear in recent years, the

FAA “protect[s] pretty absolutely” agreements calling

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

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

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

4

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

Notwithstanding these clear holdings, the Ninth

Circuit and the California state courts have allowed

enterprising plaintiffs to circumvent their arbitration

agreements by asserting claims against their employers under PAGA. That state law authorizes an “aggrieved employee” to recover civil penalties from his

current or former employer on a representative basis

by raising alleged violations of California’s Labor

Code experienced by “himself or herself” and “other

current or former employees.” Cal. Labor Code

§ 2699(a).

The California Supreme Court in Iskanian refused

to enforce bilateral arbitration agreements with respect to representative PAGA claims brought on behalf of groups of employees. It analogized PAGA lawsuits to qui tam actions on behalf of the State—and

held for that reason that an arbitration agreement’s

requirement of individualized arbitration was unenforceable notwithstanding this Court’s determination

in Concepcion that the FAA protects agreements requiring one-on-one arbitration. Iskanian, 327 P.3d at

152-53.

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

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

provide for any meaningful control of PAGA actions

by the State), the divided panel in Sakkab declared

Concepcion inapplicable by relying on formal distinctions between representative PAGA actions and class

actions under Rule 23. Sakkab, 803 F.3d at 436. But

in fact, the relevant features of the claims are the

5

same—they are brought by employees against their

employers on behalf of not only themselves, but also

others similarly situated. And PAGA claims have the

same complexity and high stakes as the class actions

addressed in Concepcion.

Iskanian and Sakkab defy this Court’s precedents

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

Court’s decision in Epic makes that defiance all the

more clear, explaining that Concepcion stands for the

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

But as Judge Bumatay explained in his concurring opinion in this case, the holding in Sakkab

“clearly does” just that, paving the way for an employee to “always sidestep an arbitration agreement

simply by filing a PAGA claim” on a representative

basis. Pet. App. 7, 10.

The California Court of Appeal recently confirmed

that PAGA claims can often prove “unmanageable.”

Wesson v. Staples the Office Superstore, LLC, --- Cal.

Rptr. 3d ----, 2021 WL 4099059, at *11 (Sept. 9, 2021).

Affirming the trial court’s decision to strike a PAGA

claim that would have required a years-long trial to

resolve, the court recognized that “PAGA claims may

well present more significant manageability concerns

than those involved in class actions.” Ibid. (emphasis

added). That is because a PAGA claim may “cover a

vast number of employees, each of whom may have

markedly different experiences relevant to the alleged

violations,” resulting in “dozens, hundreds, or thousands of minitrials involving diverse questions.” Ibid.

6

Despite the glaring conflict between California’s

treatment of PAGA claims and this Court’s reasoning

in Epic and Concepcion, the Ninth Circuit and California courts have repeatedly refused to revisit the Iskanian rule. In this case, the Ninth Circuit declined

to reconsider Sakkab despite Judge Bumatay’s warnings that the “tensions between Epic Systems/Lamps

Plus and Sakkab are obvious” and that the Ninth Circuit’s approach to FAA preemption is in “disharmony”

with this Court’s precedents and “is in serious need of

a course correction.” Pet. App. 7, 10.2

The practical impact of the massive loophole in the

enforcement of arbitration agreements created by Iskanian and Sakkab underscores the urgent need for

this Court’s review.

PAGA claims were once an afterthought tacked

onto putative employment class actions in California.

But since the Iskanian decision seven years ago,

PAGA filings have skyrocketed as plaintiffs’ counsel

have recognized that they provide a route for evading

arbitration agreements. The result has been the effective invalidation of millions of workplace arbitration agreements that should have been protected by

the FAA and severe adverse consequences for businesses with workers in California, the nation’s most

populous state. Continued application of Iskanian

and Sakkab deprives both businesses and workers of

As another pending petition demonstrates, California’s state

courts have also refused to revisit Iskanian. See Viking River

Cruises, Inc. v. Moriana, No. 20-1573 (docketed May 13, 2021). If

this Court prefers to address the preemption issue in the context

of a case arising from the Ninth Circuit, this case would be an

appropriate vehicle for resolving the question presented.

2

7

the important benefits that traditional, bilateral arbitration provides.

This Court’s review is therefore essential.

ARGUMENT

I.

The Preemption Question Is Exceptionally

Important And Impacts Countless Arbitration Agreements.

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

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

holdings in Epic and Concepcion. The tremendous

practical importance of the issue necessitates this

Court’s intervention.

Before Iskanian and Sakkab, PAGA claims were

brought, if at all, only on “the coattails of traditional

class claims,” largely because plaintiffs did not want

to rely principally on a cause of action requiring them

to remit 75% of their recovery to the State. Robyn

Ridler Aoyagi & Christopher J. Pallanch, The PAGA

Problem: The Unsettled State of PAGA Law Isn’t Good

for Anyone, 2013-7 Bender’s California Labor & Employment Bulletin 01, at 1-2 (2013) (noting the “strong

incentive” for plaintiffs to prefer class claims over

PAGA claims because of the allocation of PAGA proceeds); see Cal. Labor Code § 2699(i) (requiring that

plaintiffs remit 75% of any penalties they recover to

the State).

Even when plaintiffs tacked on PAGA claims to

complaints asserting other claims under federal and

state labor laws, court-approved settlements in those

8

cases reveal that the parties agreed to allocate only a

tiny fraction of the recovery to the PAGA claims.3

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

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

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

prevalence of these suits.” Matthew J. Goodman,

Comment, The Private Attorney General Act: How to

Manage the Unmanageable, 56 Santa Clara L. Rev.

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

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

in PAGA claims and what it means for California employers,

Inside

Counsel

(Mar.

19,

2015),

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

The numbers speak for themselves. In 2005,

plaintiffs filed only 759 PAGA claims. Emily Green,

State law may serve as substitute for employee class

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

Iskanian and Sakkab—plaintiffs’ notices of intent to

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

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

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

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

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

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

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

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

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

settlement agreement that allocated zero dollars to the PAGA

claim).

3

9

file PAGA actions more than quadrupled, to 3,250.4

Another study found that approximately “15 PAGA

notice letters” are filed each day. Jathan Janove,

More California Employers Are Getting Hit With

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

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

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

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

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

in 2018).

California’s state labor agency itself projected in

April 2019 that over 6,000 PAGA notices would be

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

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

Dep’t of Industrial Relations, Budget Change Proposal

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

https://bit.ly/3ca0NLn.

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

employees.5 That reality underscores the immense

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

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

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

4

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

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

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

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

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

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

5

10

burdens associated with litigating thousands of PAGA

claims in which one individual asserts claims on behalf of a huge number of workers.

This flood of PAGA claims has undermined the

“real benefits to the enforcement of arbitration provisions” that provide for traditional, bilateral arbitration, which include “allow[ing] parties to avoid the

costs of litigation.” Circuit City Stores, Inc. v. Adams,

532 U.S. 105, 122-23 (2001); see also, e.g., 14 Penn

Plaza LLC v. Pyett, 556 U.S. 247, 257 (2009) (“Parties

generally favor arbitration precisely because of the

economics of dispute resolution.”). For the reasons

just discussed, representative PAGA actions inflict gigantic litigation costs.

Moreover, the use of PAGA claims to avoid arbitration of employment-related disputes deprives employees and employers of the benefits of arbitration.

Arbitration typically is more efficient than litigation, allowing employees to resolve their claims more

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

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

Empirical Assessment of Employment Arbitration,

NDP Analytics 5, 11-12 (2019), https://instituteforlegalreform.com/research/fairer-faster-better-an-empirical-assessment-of-employment-arbitration (“Em-

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

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

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

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

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

101 stores statewide).

11

ployee-plaintiff arbitration cases that were terminated with monetary awards averaged 569 days * * * .

In contrast, employee-plaintiff litigation cases that

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

Kleiner, An Empirical Study of Dispute Resolution

Mechanisms: Where Do Plaintiffs Better Vindicate

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

Jan. 2004) (reporting findings that arbitration was

33% faster than analogous litigation).

In addition, employee claimants obtain outcomes

in arbitration equal to—and often not better than—

the outcomes in litigation. A recent study released by

the Chamber’s Institute for Legal Reform found that

employees were three times more likely to win in arbitration than in court. Pham, supra, at 5-7 (surveying more than 10,000 employment arbitration cases

and 90,000 employment litigation cases resolved between 2014 to 2018). The same study found that employees who prevailed in arbitration “won approximately double the monetary award that employees received in cases won in court.” Id. at 5-6, 9-10.

As another scholar found, “there is no evidence

that plaintiffs fare significantly better in litigation

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

and Employment Arbitration Today: Mid-Life Crisis

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

16 (2017) (quotation marks omitted; alterations in

original). Rather, arbitration is generally “favorable

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

see also Lewis L. Maltby, Private Justice: Employment

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

Rev. 29, 46 (1998).

12

In short, the arbitration of workplace disputes

substantially benefits businesses and workers alike.

But if Iskanian and Sakkab are allowed to stand, Californians will lose these benefits—to the detriment of

employees, businesses, and the state’s entire economy.

II. Sakkab And The Decision Below Conflict

With The FAA And This Court’s Precedent.

1. Congress enacted the FAA to “reverse the

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

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

federal policy favoring arbitration agreements.”

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

(quotation marks omitted).

In recent years, this Court has repeatedly made

clear that the FAA “envision[s]” an “individualized

form of arbitration.” Lamps Plus, 139 S. Ct. at 1416

(citing Epic, 138 S. Ct. at 1622-23; Concepcion, 563

U.S. at 349; Stolt-Nielsen S.A. v. AnimalFeeds Int’l

Corp., 559 U.S. 662, 686-87 (2010)).

Thus, the FAA “seems to protect pretty absolutely” arbitration agreements that require “one-onone arbitration” using “individualized * * * procedures.” Epic, 138 S. Ct. at 1619, 1621. These characteristics ensure that “individual arbitration” is a proceeding in which “‘parties forgo the procedural rigor

and appellate review of the courts in order to realize

the benefits of private dispute resolution,’” including

“‘lower costs’” and “‘greater efficiency and speed.’”

Lamps Plus, 139 S. Ct. at 1416 (quoting Stolt-Nielsen,

559 U.S. at 685).

13

But the Iskanian rule declares such agreements

unenforceable, as against California public policy, to

the extent that they prevent employees from asserting

representative PAGA claims. The result is that any

California employee can sidestep his or her agreement

to individualized arbitration, and bring a lawsuit in

court, simply by filing a representative PAGA action—because state and federal courts in California

hold such claims non-arbitrable when the parties’

agreement requires individualized arbitration. Employers, in turn, are deprived of the benefits of their

bilateral arbitration agreements and saddled with

representative litigation entailing the same burdens

that accompany class or collective actions.

2. The Iskanian rule upheld in Sakkab—and the

continued adherence to it by the Ninth Circuit and the

California courts—represents a thinly veiled effort to

circumvent this Court’s holdings, which prohibit

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

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

class or collective actions, because such a rule would

“reshape traditional individualized arbitration.” Id.

at 1623.

Epic, which involved collective actions, makes

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

this “essential insight” governs regardless of the garb

in which a contract defense is dressed: “Just as judi-

14

cial antagonism toward arbitration before the Arbitration Act’s enactment ‘manifested itself in a great variety of devices and formulas declaring arbitration

against public policy,’ Concepcion teaches that we

must be alert to new devices and formulas that would

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

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

3. The Iskanian/Sakkab rule is just such an impermissible “device,” because it invalidates the parties’ agreement to engage in bilateral arbitration

when employees present representative PAGA

claims—thus plainly overriding the parties’ choice,

protected by the FAA, of one-on-one arbitration. Representative PAGA claims bear no resemblance to individualized disputes; rather, they closely resemble the

class and collective actions that this Court has held

are not individualized.

First, representative PAGA claims, “by their very

nature,” involve, and seek relief on behalf of, third

party employees other than the named plaintiff. Pet.

App. 5 (Bumatay, J., concurring). The California Supreme Court recently confirmed that fact by holding

that a plaintiff who has no Labor Code claim of her

own may nonetheless maintain a PAGA action on behalf of others.

In Kim v. Reins International California, Inc., 459

P.3d 1123 (Cal. 2020), that court determined that an

employee who completely resolves her own wage-andhour claims against her employer through a settlement nevertheless remains an “aggrieved employee”

and may still serve as a representative PAGA plaintiff

and pursue remedies for alleged Labor Code violations

on behalf of other employees. Id. at 1128-32. Kim

thus makes clear that representative PAGA actions

inherently involve the claims of third parties who are

15

not before the court. The Ninth Circuit recently came

to the same conclusion, explaining that “PAGA explicitly * * * implicates the interests of nonparty aggrieved employees.” Magadia v. Wal-Mart Assocs.,

Inc., 999 F.3d 668, 676 (9th Cir. 2021).

Second, and relatedly, resolving a representative

PAGA action is inherently far slower and more complex than the individual, one-on-one arbitration envisioned and protected by the FAA (and to which the

parties agreed). See Epic, 138 S. Ct. at 1623. Remedies in a representative PAGA action are assessed

against the employer on a “per pay period” basis for

each “aggrieved employee” affected by each claimed violation of the California Labor Code proven by the representative plaintiff. Cal. Labor Code § 2699(f)(2).

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

dispute in which the arbitrator focuses solely on the

individual circumstances of the claimant, resolving

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

employees affected by the labor code violations, and

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

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

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

would likely be fiercely contested by parties.” Ibid.

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

employees,” ibid., “each of whom may have markedly

different experiences relevant to the alleged Labor

Code violations,” Wesson, 2021 WL 4099059, at *11

(emphasis added).

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

16

bears no resemblance to traditional individualized arbitration. In Wesson, for example, the “parties agreed

that individualized litigation” of the alleged Labor

Code violations—which were asserted on behalf of 346

employees, including the defendant’s affirmative defenses to each employee’s claim, “would require a trial

spanning several years with many hundreds of witnesses.” 2021 WL 4099059, at *15 (emphasis added).

For that reason, the court of appeal explained, the

“trial court reasonably concluded that such a trial

would ‘not meet any definition of manageability’” for

a proceeding in court. Ibid. And in Driscoll v. Granite

Rock Co., 2011 WL 10366147 (Cal. Super. Ct. Sept. 20,

2011), a bench trial on representative PAGA claims

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

as to each employee. Id. at *1.

Indeed, Wesson and Driscoll understate the complexity of most PAGA actions, because those cases involved, respectively, relatively small groups of 346

and 200 current and former employees. See Wesson,

2021 WL 4099059, at *2; Driscoll, 2011 WL 10366147,

at *1. The burdens can multiply exponentially for

larger PAGA actions, which often balloon to include

thousands if not tens of thousands of absent employees. See page 9 & note 5, supra.

Requiring resolution of an alleged Labor Code violation across a group of hundreds, thousands, or even

tens of thousands of absent employees creates a proceeding that closely resembles a class or collective action, and is dramatically different from the individualized dispute resolution protected by the FAA. Conditioning enforcement of an arbitration provision on

agreement to resolve these representative claims in

arbitration would “reshape traditional individualized

17

arbitration.” Pet. App. 9 (Bumatay, J., concurring)

(quoting Epic, 139 S. Ct. at 1418). And that is precisely what this Court prohibited in Epic and Concepcion.

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

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

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

he “can easily determine how many pay periods he has

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

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

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

potentially aggrieved employees,” and the “discovery

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

complex than discovery regarding only the employee’s

individual claims.” Id. at 446-47.

The California Supreme Court has confirmed as

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

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

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

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

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

350. The civil penalties available in a representative

PAGA action may total many millions of dollars when

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

over multiple years. “Even a conservative estimate

18

would put the potential penalties in [PAGA] cases in

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

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

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

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

“when damages allegedly owed to tens of thousands of

potential claimants are aggregated and decided at

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

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

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

possibility of a ‘blackmail settlement’ looms even

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

Finally, as Judge Bumatay noted, there are “serious doubts” about whether the Iskanian rule is a generally applicable contract defense that treats arbitration agreements the same as other contracts. Pet.

App. 10 n.2 (Bumatay, J., concurring); accord Sakkab,

803 F.3d at 442 n.1 (N.R. Smith, dissenting). After

all, the Iskanian rule has been uniquely applied to

prevent the enforcement of bilateral arbitration

agreements. The rule prevents the waiver of a single

type of claim (representative claims under PAGA) in

a single type of contract (dispute resolution agreements with employees). That type of specialized defense bears no resemblance to generally applicable

common law doctrines such as fraud, duress, or mutual mistake.

19

In sum, representative PAGA actions are every bit

as incompatible with the “fundamental attributes of

arbitration” as the class or collective actions at issue

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

And Epic leaves no doubt that States cannot displace

bilateral arbitration agreements by demanding the

availability of representative litigation, because that

result “clearly” “interfere[s] with the parties’ choice to

engage in individual, bilateral arbitration.” Pet. App.

10 (Bumatay, J., concurring).

This Court’s intervention is needed to restore uniform application of the FAA.

CONCLUSION

The petition for a writ of certiorari should be

granted.

20

Respectfully submitted.

DARYL JOSEFFER

JENNIFER B. DICKEY

U.S. Chamber

Litigation Center

1615 H Street, NW

Washington, DC 20062

(202) 463-5337

Counsel for Amicus

Curiae the Chamber of

Commerce of the United

States of America

STEPHANIE A. MARTZ

National Retail

Federation

1101 New York Ave, NW

Suite 1200

Washington, DC 20005

Counsel for Amicus

Curiae National Retail

Federation

SEPTEMBER 2021

ANDREW J. PINCUS

Counsel of Record

ARCHIS A. PARASHARAMI

DANIEL E. JONES

Mayer Brown LLP

1999 K Street, NW

Washington, DC 20006

(202) 263-3000

apincus@mayerbrown.com

Counsel for Amici Curiae