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.,

Petitioner,

V.

CARLOS RIVAS,

Respondent.

─────  ─────

On Petition for a Writ Of Certiorari

to the United States Court Of Appeals

for the Ninth Circuit

─────  ─────

BRIEF OF AMICI CURIAE

ATLANTIC LEGAL FOUNDATION &

WASHINGTON LEGAL FOUNDATION

IN SUPPORT OF PETITIONER

─────  ─────

WASHINGTON LEGAL

FOUNDATION

CORY L. ANDREWS

JOHN M. MASSLON II

2009 MASS. AVE. NW

WASHINGTON, DC 20036

(202) 588-0302

candrews@wlf.org

ATLANTIC LEGAL

FOUNDATION

LAWRENCE S. EBNER

Counsel of Record

1701 PENN. AVE. NW

WASHINGTON, D.C. 20006

(202) 729-6337

lawrence.ebner@atlanticlegal.org

HORVITZ & LEVY LLP

PEDER K. BATALDEN

FELIX SHAFIR

JOHN F. QUERIO

3601 WEST OLIVE AVENUE, 8TH FLOOR

BURBANK, CALIFORNIA 91505

(818) 995-0800

pbatalden@horvitzlevy.com

Counsel for Amici Curiae

Atlantic Legal Foundation & Washington Legal Foundation

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES…………………………..iii

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

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

ARGUMENT ...............................................................6

I.

REVIEW IS NECESSARY TO HARMONIZE THE

DIVERGENT VIEWS OF STATE AND FEDERAL

JUDGES ON WHETHER PAGA CLAIMS ARE

SUBJECT TO THE FAA. ........................................6

II.

A.

Iskanian held that PAGA claims

fall outside the FAA’s coverage. ............6

B.

Ninth Circuit judges have

questioned or disagreed with

Iskanian and Sakkab. ............................8

CALIFORNIA COURTS’ DEFENSE OF THE

ISKANIAN RULE HAS EXPOSED OTHER

TENSIONS IN THE CASE LAW, CEMENTING

THE NEED FOR REVIEW. ....................................11

A.

California courts dispute whether

this Court has already held that

“public” claims are subject to the

FAA. .....................................................11

ii

B.

California courts deny that qui

tam claims are subject to the

FAA, in tension with federal

decisions. ..............................................15

CONCLUSION ..........................................................21

iii

TABLE OF AUTHORITIES

Page(s)

Cases

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

570 U.S. 228 (2013)..........................................2, 14

Amalgamated Transit Union, Loc. 1756,

AFL-CIO v. Superior Ct.,

209 P.3d 937 (Cal. 2009) ......................................18

Arias v. Superior Ct.,

209 P.3d 923 (Cal. 2009) ........................................4

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011).................................. 3, 4, 7, 19

Bradford v. Pro. Tech. Sec. Servs. Inc.,

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

(N.D. Cal. May 27, 2020) .....................................16

Collie v. Icee Co.,

266 Cal. Rptr. 3d 145 (Ct. App. 2020) .................11

Correia v. NB Baker Elec., Inc.,

244 Cal. Rptr. 3d 177

(Ct. App. 2019) ......................................... 11, 15, 16

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

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

(S.D. Ohio Jan. 31, 2013) .....................................16

DIRECTV, Inc. v. Imburgia,

577 U.S. 47 (2015)..............................................2, 4

iv

EEOC. v. Waffle House, Inc., 534 U.S.

279 (2002). ............................................................17

Epic Sys. Corp. v. Lewis,

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

Goodwin v. Elkins & Co.,

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

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) ................................8, 17

Lamps Plus, Inc. v. Varela,

139 S. Ct. 1407 (2019)......................................4, 10

Magadia v. Wal-Mart Associates, Inc.,

999 F.3d 668 (9th Cir. 2021)...................... 9, 17, 20

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

362 F. Supp. 3d 850 (S.D. Cal. 2019) ..................13

Mikes v. Strauss,

889 F. Supp. 746 (S.D.N.Y. 1995) .......................17

Murphy Oil USA, Inc. & Hobson,

361 NLRB 774 (2014) ....................................12, 13

Murphy Oil USA, Inc. v. NLRB,

808 F.3d 1013 (5th Cir. 2015).................. 12, 13, 14

NAACP v. Button, 371 U.S. 415

(1963). ............................................................. 19

v

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

568 U.S. 17 (2012)................................................14

Olson v. Lyft, Inc.,

270 Cal. Rptr. 3d 739 (Ct. App. 2020) .................14

Perry v. Thomas,

482 U.S. 483 (1987)..........................................3, 14

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

854 F.3d 1057 (9th Cir. 2017)..........................9, 20

Preston v. Ferrer,

552 U.S. 346 (2008)................................................4

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

803 F.3d 425 (9th Cir. 2015)........................ passim

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

554 U.S. 269 (2008)..............................................16

State of Wisconsin v. J.C. Penney Co.,

311 U.S. 435 (1940). ...................................... 19

United States ex rel. Eisenstein v.

City of New York,

556 U.S. 928 (2009)........................................15, 16

United States v. Bankers Ins. Co.,

245 F.3d 315 (4th Cir. 2001)................................16

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

681 F. App’x 592 (9th Cir. 2017) ...................16, 20

vi

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

ex rel. Stevens,

529 U.S. 765 (2000)..............................................15

Wesson v. Staples The Office Superstore, LLC, 283 Cal. Rptr. 3d 846

(Ct. App. 2021), petition for review filed (Cal. Oct. 19, 2021)...................... 18

Williams v. Superior Ct.,

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

Miscellaneous

Mathew Andrews, Whistling in Silence:

The Implications of Arbitration

on Qui Tam Claims Under the

False Claims Act,

15 Pepp. Disp. Resol. L.J. 203 (2015) ..................16

Supreme Court Rule 10(c) ........................................12

Victor E. Schwartz & Christopher E. Appel, Setting the Record Straight

About the Benefits of Pre-Dispute Arbitration, WLF Legal Backgrounder

(June 7, 2019), https://bit.ly/2R0AcZi ...................2

1

INTEREST OF AMICI CURIAE 1

Established in 1977, the Atlantic Legal Foundation (ALF) is a national, nonprofit, nonpartisan,

public interest law firm whose mission is to advance

the rule of law and civil justice by advocating for individual liberty, free enterprise, property rights, limited

and efficient government, sound science in judicial

and regulatory proceedings, and school choice. With

the benefit of guidance from the distinguished legal

scholars, corporate legal officers, private practitioners, business executives, and prominent scientists

who serve on its Board of Directors and Advisory

Council, ALF pursues its mission by participating as

amicus curiae in carefully selected appeals before the

Supreme Court, federal courts of appeals, and state

supreme courts.

Washington Legal Foundation (WLF) is a nonprofit, public interest law firm and policy center with

supporters nationwide. WLF promotes free enterprise, individual rights, limited government, and the

rule of law.

ALF and WLF regularly appear as amici curiae

to support the rights of parties to enter into binding

arbitration agreements as an expedient, inexpensive,

and efficient alternative to civil litigation. See, e.g.,

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

part. No one, other than Atlantic Legal Foundation and Washington Legal Foundation, their members, or their counsel contributed money to prepare or submit this brief. After timely notice, all parties consented in writing to the filing of this brief.

1

2

Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018); DIRECTV, Inc. v. Imburgia, 577 U.S. 47 (2015); Am. Express Co. v. Italian Colors Rest., 570 U.S. 228 (2013).

Both amici have addressed in particular the hostility

of California courts to the Federal Arbitration Act

(FAA) and the enforceability of arbitration agreements. And WLF’s publishing arm often produces articles and other educational materials on arbitration.

See, e.g., Victor E. Schwartz & Christopher E. Appel,

Setting the Record Straight About the Benefits of PreDispute Arbitration, WLF Legal Backgrounder (June

7, 2019), https://bit.ly/2R0AcZi.

The FAA requires courts to enforce arbitration

agreements strictly according to their terms. This

case is the latest in a long line of decisions from California state and federal courts refusing to follow the

FAA’s directive requiring arbitration contracts to be

enforced as written. The Ninth Circuit declined to enforce a representative-action waiver in the parties’ arbitration agreement based on Iskanian v. CLS Transportation Los Angeles, LLC, 327 P.3d 129 (Cal. 2014),

and Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d

425, 429, 431 (9th Cir. 2015). Iskanian held that representative claims under California’s Private Attorneys General Act (PAGA) are not subject to the FAA

because they are considered qui tam actions in which

individual workers pursue public (not private) claims

for relief, and therefore courts need not enforce PAGA

representative-action waivers. Sakkab agreed that

the FAA did not preempt the Iskanian rule. California

courts and the Ninth Circuit have refused to revisit

these determinations—despite this Court’s intervening decision in Epic, which eroded the foundation on

3

which Iskanian and Sakkab rest. In other words, by

repackaging a class or collective action as one under

PAGA, employees evade this Court’s FAA precedent

in Epic and AT&T Mobility LLC v. Concepcion, 563

U.S. 333 (2011), which requires the enforcement of an

arbitration agreement’s representative-action waiver.

The Ninth Circuit’s refusal to apply the FAA to enforce the PAGA representative-action waiver here

flouts the Supremacy Clause and conflicts with this

Court’s precedent and many lower court decisions

that afford the FAA preemptive effect, including in

cases involving public claims.

The FAA “establish[ed] a uniform federal law

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

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

and WLF seek uniform application of the FAA nationwide to ensure that arbitration achieves its basic purpose: resolving disputes efficiently, predictably, individually, and cost-effectively. The decision below

thwarts these goals. ALF and WLF have a significant

interest in whether the underlying state law is

preempted by the FAA, much as the FAA has negated

many other state-law rules and policies evincing California state and federal courts’ deep hostility to arbitration.

─────  ─────

SUMMARY OF ARGUMENT

California state and federal courts have long

exhibited hostility to arbitration. See, e.g.,

Concepcion, 563 U.S. at 342. Again and again—in a

line of cases stretching back decades, e.g., Perry v.

4

Thomas, 482 U.S. 483 (1987); Preston v. Ferrer, 552

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

577 U.S. 47; Epic, 138 S. Ct. 1612; Lamps Plus, Inc. v.

Varela, 139 S. Ct. 1407 (2019)—this Court has

rebuffed rules and policies adopted by state or federal

courts in California that impede arbitration or

otherwise frustrate the objectives of the FAA.

This case involves the interplay between the

FAA and California’s PAGA, which permits an

“aggrieved employee” to “bring a civil action

personally and on behalf of other current or former

employees to recover civil penalties for Labor Code

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

(Cal. 2009).

In Iskanian, the California Supreme Court

held that California public policy precludes the

enforcement of an arbitration agreement’s PAGA

representative-action waiver. Iskanian concluded

that the FAA did not preempt this prohibition because

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

interpreted by this Court. The Iskanian court

analogized PAGA claims to qui tam actions in which

individual workers pursue public (not private) claims

belonging to the State. Shortly after, in Sakkab, the

Ninth Circuit agreed that the FAA did not preempt

the Iskanian rule. Applying Iskanian and Sakkab, the

district court here refused to enforce the PAGA

representative-action

waiver

in

Petitioner’s

arbitration agreement with Respondent. The Ninth

Circuit affirmed.

Petitioner catalogs how California state and

federal courts deploy Iskanian to defeat arbitration

5

agreements they perceive as undesirable. In Iskanian

and its progeny, including Sakkab, courts in California have reshaped the law to obstruct traditional individualized arbitration. Pet. 17-18. First, though

PAGA claims are brought by individuals, Iskanian

conceptualized a PAGA claim as one for purely public

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

claim to a federal qui tam action, Iskanian insisted

that PAGA claims belong to the State and are brought

on its behalf. Iskanian relied on these twin rationales

to conclude that PAGA claims are not subject to the

FAA. Sakkab accepted this characterization of PAGA

claims at face value and relied on it to conclude that

the Iskanian rule is a generally applicable contract

defense protected from preemption by the FAA’s saving clause.

Federal courts, however, are not bound by the

California Supreme Court’s insistence that PAGA creates a “public” qui tam claim belonging to the State.

While California courts are free to apply this “public”

qui tam label to PAGA claims as a matter of state law,

federal courts must look beyond such labels to assess

whether, under the Supremacy Clause, the FAA

preempts the Iskanian rule. An examination of how

PAGA claims operate in practice confirms they are

wholly controlled by the named plaintiffs (and their

counsel) rather than the State. Given that the plaintiff employee, rather than the State, is the undisputed

master of a PAGA claim, the FAA requires the enforcement of the PAGA representative-action waiver

in that plaintiff’s arbitration agreement.

Moreover, even assuming that the California

Supreme Court’s characterization of a PAGA claim as

6

a public qui tam claim is genuine, it does not follow

that a PAGA claim is free from scrutiny under the

FAA when parties choose to arbitrate their disputes.

Public claims that belong to a government are

subject to the FAA; this Court held as much in Epic,

though that holding has been widely misunderstood

in California. So too, qui tam claims are subject to the

FAA; in holding otherwise, California state courts

have broken from federal decisions and reasoning

that apply the FAA to qui tam actions under the federal False Claims Act. The Ninth Circuit’s acceptance

of the qui tam label California courts have affixed to

PAGA claims has exacerbated this conflict. In sum,

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

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

court believed. Without this Court’s intervention, the

divisions among lower court judges will undermine

the FAA’s uniform application.

─────  ─────

ARGUMENT

I.

REVIEW IS NECESSARY TO HARMONIZE THE DI-

VERGENT

VIEWS

OF

STATE

AND

FEDERAL

JUDGES ON WHETHER PAGA CLAIMS ARE SUBJECT TO THE FAA.

A.

Iskanian held that PAGA claims fall

outside the FAA’s coverage.

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

7

on a classwide or representative basis for a PAGA

claim. The court held the FAA did not preempt this

rule.

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

employees, as well as a representative PAGA claim.

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

signed an arbitration agreement in which all parties

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

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

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

135–37. But the court treated the representative

PAGA claim differently. The court determined that

enforcing the arbitration agreement as to the PAGA

claim would frustrate state public policy. The court

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

waivers because the FAA was inapplicable. Id. at

149–51.

The California Supreme Court advanced two

related justifications for this view that “a PAGA claim

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

the court distinguished private claims (subject to the

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

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

claim as “fundamentally a law enforcement action de-

8

signed to protect the public”—“a type of qui tam action” like those under the federal False Claims Act

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

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

dispute between an employer and the state Labor and

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

claim seeks neither individual nor classwide relief.

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

2020).)

B.

Ninth Circuit judges have questioned or disagreed with Iskanian

and Sakkab.

The next year, a Ninth Circuit panel held that

the FAA does not preempt Iskanian’s rule barring

PAGA representative-action waivers in arbitration

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

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

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

to this Court’s precedent requiring the enforcement of

class-action waivers. Id. at 436–39. The court arrived

at this conclusion by accepting Iskanian’s characterization of PAGA claims as qui tam actions brought by

the named plaintiff as a proxy for the State’s labor law

enforcement agencies. Id. at 435-36, 439-40 (relying

on this characterization to distinguish between PAGA

and class proceedings). But the Ninth Circuit did not

speak with one voice in Sakkab, and tensions have

bubbled up in later cases.

Judge N. Randy Smith dissented in Sakkab:

“the Iskanian rule interferes with the fundamental

9

attributes of arbitration and thus creates a scheme inconsistent with the FAA.” Id. at 444 (N. R. Smith, J.,

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

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

Id. at 449.

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

public-private distinction is the notion that a PAGA

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

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

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

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

to the automatic bankruptcy stay when suing a debtor

under PAGA, the Ninth Circuit rejected the point.

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

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

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

Iskanian and Sakkab courts had imagined: “Porter’s

[PAGA] claim against Nabors was filed by Porter, and

it remains under his control.” Id. at 1062.

More recently, the Ninth Circuit further undermined Iskanian by distinguishing PAGA claims from

federal qui tam claims in Magadia v. Wal-Mart Associates, Inc., 999 F.3d 668, 674-78 (9th Cir. 2021). A

“PAGA [claim] represents a permanent, full assignment of California’s interest to the aggrieved employee,” while qui tam claims under the FCA involve

10

a partial assignment; PAGA also “lacks the ‘procedural controls’ necessary to ensure that California—

not the aggrieved employee (the named party in

PAGA suits)—retains ‘substantial authority’ over the

case.” Id. at 677. The court held that a “complete assignment to this degree—an anomaly among modern

qui tam statutes—undermines the notion that the aggrieved employee is solely stepping into the shoes of

the State rather than also vindicating the interests”

of the aggrieved employees implicated by the PAGA

claim. Id. Since PAGA claims “depart from the traditional criteria of qui tam statutes,” the court decided

that uninjured plaintiffs lack Article III standing to

maintain PAGA claims. Id. at 678.

Tensions surrounding the Iskanian rule were

recently exacerbated by this case. Noting this Court’s

recent applications of the FAA in Epic and Lamps

Plus, the majority in this case admitted that “tension

exists between Supreme Court case law and Sakkab.”

Pet. App. 3. Although the court concluded that Sakkab remained good law, the panel majority tacitly

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

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

Bumatay went even further: “our precedent is in serious need of a course correction.” Pet. App. 7. “The tensions between Epic Systems/Lamps Plus and Sakkab

are obvious.” Pet. App. 9. Judge Bumatay concluded

that Iskanian “clearly” undermines “parties’ choice to

engage in individual, bilateral arbitration” and therefore “runs afoul of the FAA and must be preempted.”

Pet. App. 10.

11

***

These disputes between state and federal

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

this Court can resolve them. If anything, disputes

over the relationship between PAGA and the FAA are

metastasizing as California state and federal courts

push Iskanian’s reasoning to logical endpoints that

conflict with this Court’s decisions.

II.

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

IN THE CASE LAW, CEMENTING THE NEED FOR

REVIEW.

A.

California courts dispute whether

this Court has already held that

“public” claims are subject to the

FAA.

California courts defend Iskanian’s refusal to

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

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

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

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

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

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

enforcement action,” these courts have distinguished

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

governmental claim” like a PAGA claim. Correia, 244

Cal. Rptr. 3d at 188.

12

But even indulging California courts’ view that

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

sought to resolve this issue in one of the three cases

consolidated in the Epic decision, which is yet another

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

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

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

Court affirmed the Fifth Circuit’s decision in Murphy

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

Murphy Oil was a government enforcement action

brought on behalf of the National Labor Relations

Board; it was not initiated by a private employee as

an individual or class action. The Board’s General

Counsel issued an administrative complaint accusing

an employer of violating the National Labor Relations

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

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

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

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

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

ruled that the employer had committed unfair labor

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

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

Counsel sought to vindicate rights “enforced solely by

the Board—there is no private right of action under

13

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

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

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

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

employment arbitration contracts”—the Fifth Circuit

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

The Fifth Circuit’s decision, affirmed in Epic,

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

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

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

fastened onto the same public-private distinction that

persuaded the California Supreme Court not to apply

the FAA to PAGA claims in Iskanian. But the Fifth

Circuit overturned that determination—a decision

this Court affirmed in Epic.

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

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

evade FAA scrutiny while federal claims do not. See

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

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

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

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

14

FAA to an enforcement action brought by the federal

government, so the FAA must apply with even greater

force to enforcement actions brought on behalf of a

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

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

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

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

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

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

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

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

which permits the invalidation of an arbitration

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

to state statutes.”).

Perhaps because of its brevity, however, the legal effect of this Court’s disposition of Murphy Oil has

eluded California courts’ understanding. See Olson v.

Lyft, Inc., 270 Cal. Rptr. 3d 739, 748–49 (Ct. App.

2020) (“Murphy Oil did not involve the ‘enforcement

rights’ of the NLRB”; “Nor is it correct to characterize

Murphy Oil as a ‘government enforcement action’”;

“the NLRB was not pursuing public claims”).

In sum, while the Fifth Circuit applied the FAA

to claims brought by a governmental unit (and was

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

government. Only this Court can resolve the apparent

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

15

B.

California courts deny that qui tam

claims are subject to the FAA, in

tension with federal decisions.

As explained, California courts will not apply

the FAA to PAGA claims—even a willing employee

and a willing employer could not reach an agreement

to bilaterally arbitrate a pending PAGA action. The

California Supreme Court has justified this state of

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

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

52. Based on this qui tam analogy, California courts

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

But lower courts are divided on whether the

FAA requires arbitration of qui tam and analogous

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

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

179, 189–91.

When a relator files an FCA qui tam claim, the

government is a real party in interest because of its

underlying stake in redressing the alleged fraud.

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

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

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

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

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

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

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

16

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

meaning that each may assert “legal rights of their

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

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

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

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

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

approach to PAGA, the Ninth Circuit has concluded

that “an individual employee can pursue a PAGA

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

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

May 27, 2020) (applying this approach after Iskanian

and Correia); see also Mathew Andrews, Whistling in

Silence: The Implications of Arbitration on Qui Tam

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

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

of authority, but concluding that “qui tam claims are

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

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

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

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

California courts take the opposite approach by

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

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

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

17

190. But California courts consider those federal

cases to be “unpersuasive,” so they follow conflicting

decisions suggesting the federal government is the

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

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

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

the government was not a party to the [arbitration]

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

suing on the government’s behalf, is necessarily

bound by its terms.”)).

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

at 1131. This reasoning misses the point. A PAGA

plaintiff wields significant influence over the government’s claim—far more than an FCA relator. “PAGA

represents a permanent, full assignment of California’s interest to the aggrieved employee” and “lacks

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

party in PAGA suits)—retains ‘substantial authority’

over the case.” Magadia, 999 F.3d at 677. It makes no

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

elect arbitration. See, e.g., EEOC v. Waffle House,

Inc., 534 U.S. 279, 291 (2002) (indicating FAA may

apply to governmental claim where litigation could

have been “dictated” by individual who agreed to arbitration and government was not “the master of its

own case”); see also Iskanian, 327 P.3d at 159 (Chin,

J., concurring) (explaining that Waffle House “casts

considerable doubt on the majority’s view that the

FAA permits either California or its courts to declare

18

private agreements to arbitrate PAGA claims categorically unenforceable”).

The analysis should not change when a particular arbitration agreement includes a PAGA representative action waiver. Such a waiver will not immunize a lawless company from liability. Since PAGA

is a procedural mechanism that does not create a substantive claim, “[p]reventing a plaintiff from using

this [PAGA] procedure has no effect on the state’s

property rights” in civil penalties. Wesson v. Staples

The Office Superstore, LLC, 283 Cal. Rptr. 3d 846, 860

n.14 (Ct. App. 2021), petition for review filed (Cal. Oct.

19, 2021). “[T]he State remains entitled to recover

civil penalties for any Labor Code violations by the

employer, subject to the applicable statute of limitations.” Id. Relief may also be sought in an action by a

different PAGA proxy (a fellow aggrieved worker) who

did not consent to arbitration. See Williams v. Superior Ct., 398 P.3d 69, 79 (Cal. 2017); see also Sakkab,

803 F.3d at 449 (N. R. Smith, J., dissenting) (explaining that “any employee not subject to an arbitration

agreement waiving such [representative PAGA] actions is free to bring a PAGA claim,” and that nothing

prevents the State “from raising the labor violations

on its own”).

Because PAGA is a purely procedural statute

allowing certain workers to recover penalties that

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

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

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

mandate by dictating that any particular aggrieved

employee may invoke PAGA’s representative-action

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

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

adopt rules and procedures favoring one or more

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

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

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

Sakkab’s acceptance of Iskanian’s “qui tam” label for PAGA claims—and the Ninth Circuit’s refusal

to revisit Sakkab in this case—further exacerbate the

conflict between state and federal courts over the interplay between the FAA and PAGA claims. Sakkab’s

majority opinion decided that the FAA’s saving clause

preserved the Iskanian rule from preemption under

Concepcion because the rule was a generally applicable contract defense. 803 F.3d at 433–40. The majority

arrived at this conclusion by relying on Iskanian’s

characterization of PAGA claims as qui tam actions

brought by the plaintiff solely as a proxy for the State.

Id. at 435-36, 439-40.

This holding conflicts with Ninth Circuit case

law examining how PAGA operates in practice. States

cannot circumvent the Constitution through mere labels, NAACP v. Button, 371 U.S. 415, 429 (1963), and

courts therefore look behind the labels affixed by

States to see how state measures operate in practice,

State of Wisconsin v. J.C. Penney Co., 311 U.S. 435,

443-44 (1940). Consistent with this principle, Ninth

Circuit decisions issued after Sakkab have looked beyond the qui tam label to ascertain how PAGA claims

20

operate in practice and concluded they materially differ from true government actions. See, e.g., Magadia,

999 F.3d at 674-78; Porter, 854 F.3d at 1059-63. These

decisions conflict with Sakkab’s uncritical reliance on

Iskanian’s qui tam label for PAGA claims as a basis

for circumventing the FAA.

Sakkab also widens the growing division between state and federal courts over whether parties

can be compelled to arbitrate PAGA claims even under Iskanian’s framework. Sakkab acknowledged that

the FAA “preempts state laws prohibiting the arbitration of specific types of claims,” but held the FAA did

not preempt the Iskanian rule on this basis because

the rule did not prohibit the arbitration of PAGA

claims. 804 F.3d at 434. The Ninth Circuit adheres to

that view to this day. E.g., Valdez, 681 F. App’x at 594.

By contrast, as Judge Bumatay emphasized below,

California courts do not permit the arbitration of

PAGA claims under Iskanian. Pet. App. 7 & n.1; see

also, e.g., Brooks v. AmeriHome Mortg. Co., LLC, 260

Cal. Rptr. 3d 428, 432 (Ct. App. 2020) (“a PAGA claim

is nonarbitrable”). There is thus serious tension regarding the soundness of the Ninth Circuit’s refusal

to recognize that the FAA preempts this categorical

prohibition.

***

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

mandate. California courts’ contrary approach conflicts with federal decisions. By accepting at face

value California courts’ qui tam label for PAGA

claims and refusing to hold that the FAA preempts

21

the Iskanian rule, Ninth Circuit decisions (including

this case) have widened this conflict in the law. This

Court should resolve the conflict by granting the petition in this case.

─────  ─────

CONCLUSION

The Petition For a Writ of Certiorari should be

granted.

Respectfully submitted,

ATLANTIC LEGAL FOUNDATION

LAWRENCE S. EBNER

Counsel of Record

WASHINGTON LEGAL

FOUNDATION

CORY L. ANDREWS

JOHN M. MASSLON II

HORVITZ & LEVY LLP

PEDER K. BATALDEN

FELIX SHAFIR

JOHN F. QUERIO

Counsel for Amici Curiae

Atlantic Legal Foundation and

Washington Legal Foundation

November 2021