What Happens to the “Non-individual” PAGA Claims Now that Viking River Cruises Compels Arbitration of the “Individual” PAGA Claim?

The U.S. Supreme Court’s 2022 decision in Viking River Cruises v. Moriana was widely seen as a victory for California employers seeking to enforce PAGA waivers contained in arbitration agreements.[1] Since that time, a number of California courts have weighed in on the impact of the Viking River Cruises decision in the context of PAGA claims. On May 9, 2023, the California Supreme Court heard oral arguments in Adolph v. Uber Technologies to determine whether a plaintiff lacks standing to pursue a non-individual PAGA action based on Labor Code violations against other employees after the plaintiff is compelled to arbitrate their individual claims.  We expect the Court to issue its opinion in Adolph v. Uber Technologies by August 7, 2023.

What Happened in Viking River Cruises?

Last summer, the U.S. Supreme Court held that the Federal Arbitration Act (“FAA”) preempts California law’s prohibition of the division of an individual PAGA claim from a non-individual PAGA claim through a valid arbitration agreement.^[i]  The Court also held that once individual claims are compelled to arbitration, the non-individual PAGA claims must be dismissed for lack of standing.^[ii]  However, Justice Sotomayor’s concurrence invited California courts and Legislature to decide whether their interpretation of PAGA standing is correct.^[iii]  Shortly after, the California Supreme Court granted review of Adolph.^[iv]

What are California Trial Courts Doing in The Meantime?

California courts have followed the U.S. Supreme Court’s holding that individual PAGA claims can be compelled to arbitration.  Most state trial courts are staying the non-individual PAGA claims (1) to await the adjudication of the individual PAGA claims in arbitration and/or (2) to wait guidance from the California Supreme Court’s review of Adolph.

Some of these courts explain that a stay is appropriate because the arbitration will determine whether the plaintiff is an “aggrieved employee.” ^[v]  These courts underscore that under the statute, an “aggrieved employee” is (1) “any person who was employed by the alleged violator” and (2) “against whom one or more of the alleged violations was committed.”^[vi]  Therefore, if an arbitrator decides that a plaintiff cannot prove the alleged Labor Code violations, the plaintiff is not “aggrieved” and does not have standing to move forward with the non-individual claims.^[vii]

In February 2023, the Second District applied this reasoning in Rocha v. U-Haul.^[viii]  However, Rocha is at odds with Gavriiloglou v. Prime Healthcare Management, Inc., holding that a plaintiff who loses on their individual claims in arbitration nevertheless sustains representative PAGA standing because “a party bound by issue preclusion must have been a party to the previous action in the same capacity.”^[ix]  The Rocha court disagreed, stressing that issue preclusion does not require “identical capacity.”^[x]  Therefore, where employers win arbitration of the individual PAGA claims, non-individual PAGA claims may be dismissed, but such outcome is not guaranteed at this time, given the budding split among the state appellate courts.

Other trial courts have stayed the non-individual PAGA claims pending the Adolph decision.^[xi]  In some cases, trial courts have issued stays citing both the impending Adolph decision and awaiting the conclusion of arbitration.^[xii]

Have the California Court of Appeals Weighed In?

Six California Court of Appeals have disagreed with Viking River on the standing issue.^[xiii]  Five of these decisions bind state trial courts: Galarsa v. Dolgen Cal., LLC, Piplack v. In-N-Out Burgers, Gregg v. Uber Techs., Inc., Seifu v. Lyft Inc., Nickson v. Shemran, Inc.  The most recent decision, Quintero v. Dolgen Cal., LLC, concluded the same in an unpublished opinion.^[xiv]  The appellate courts anchored their standing analysis on PAGA’s statutory language of “aggrieved employee.”  Central to their analysis is also the California Supreme Court’s holding in Kim v. Reins Int’l Cal., Inc., which holds that a plaintiff has standing to pursue PAGA claims even if the plaintiff settles the underlying non-PAGA claims.^[xv]

After Viking River Cruises, the Galarsa court declined to follow the U.S. Supreme Court’s interpretation of standing, stating that “PAGA standing does not evaporate when an employer chooses to enforce an arbitration agreement.”^[xvi]  The Galarsa court predicted that the California Supreme Court will reach the same conclusion.^[xvii]  Likewise, the Fourth District’s decision in Piplack reiterated the statutory language and explained that it “could not reconcile” Viking River Cruises with Kim.^[xviii]  Similarly, in Gregg, the Second District ordered the plaintiff to arbitrate the individual PAGA claims and stayed the non-individual claims pending arbitration.^[xix]  Later, in Seifu, the Second District concluded “that a plaintiff is not stripped of standing to pursue non-individual PAGA claims simply because his or her individual PAGA claim is compelled to arbitration.”^[xx]  The Fourth District reached the same conclusion in Nickson, but left “management of the superior court litigation during the pendency of arbitration to the trial court’s sound discretion.”^[xxi]

What Did the Parties Argue in Adolph v. Uber?

Uber urged the Justices that the non-individual claims must be dismissed because the “Legislature linked the individual to the representative right to proceeding on behalf of himself and others.”  Concluding otherwise would foster “a ton of litigation.”  Uber cautioned that finding for Adolph “would put PAGA on a collision course with the Federal Arbitration Act, and it would wreak havoc on PAGA’s statutory framework.”  However, Justice Liu responded by saying, “I don’t see what the FAA problem is, that argues in favor of nonstanding here.”  Citing Robinson v. Southern Counties Oil Co., Uber explained that if Adolph’s individual claim is adjudicated in arbitration, “it will be resolved” and “after that occurs, Mr. Adolph will have received all the relief he could possibly hope to gain.”  Uber stressed that Adolph would not have “skin in the game” to pursue the non-individual claims after being compelled to arbitration.  The “no skin in the game” argument appears to be Uber’s strongest point and the court asked Adolph’s counsel to address this reading of the statute.

Adolph argued that a PAGA claim is a single claim proceeding in two forums—arbitration and court.  Adolph pointed out that neither Viking River Cruises nor the FAA uses the language of “severance” and that the California Courts of Appeal, and Justice Lui agree that a PAGA action is a single claim.  Adolph argued that a determination of an aggrieved status “is the skin in the game.”  Relying on Kim, Adolph argued that until there is a determination on whether a plaintiff is an “aggrieved employee,” the statute does not prevent a plaintiff from pursuing non-individual claims in court.  However, Adolph agreed that if, in arbitration, the plaintiff “is found not to be an aggrieved employee, that’s the end of the case.”

The Justices also invited discussion regarding whether staying non-individual PAGA claims should be required pending arbitration.  Adolph argued that a stay is not always required, but agreed that a trial court would have to accept an arbitrator’s adjudication regarding whether a plaintiff is “aggrieved.”  The Justices seemed unconvinced and a critical comment came from Justice Groban, who responded, “Your reasoning is leading us pretty hard toward a stay.”

While the court pushed back against the arguments of both parties, employers faces tough hurdles in Kim, and the recently published Courts of Appeal decisions.  Nevertheless, moving forward, arguments crafted by plaintiffs against staying non-individual claims are likely weak because arbitration would determine whether a plaintiff is “aggrieved” under PAGA.

We will stay tuned for the high court’s decision this summer and keep you posted.

[1] 142 S.Ct. 1906 (2022). For additional background, see the June 15, 2022 Meyers Nave Alert on Viking River Cruises here: https://www.meyersnave.com/supreme-court-tells-plaintiffs-to-port-individual-paga-claims-into-arbitration/

[i] Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906, 1924 (2022).

[ii] Id. at 1925.

[iii] Id. at 1925-6.

[iv] Adolph v. Uber Techs., Inc., No. G059860, 2022 WL 1073583 (Cal. Ct. App. Apr. 11, 2022), review granted (July 20, 2022).

[v] Arboleda v. Guardian Pharm. of S. Cal. LLC, No. 37-2021-00008791-CU-OE-CTL, 2022 LEXIS 54023, at *8 (Cal.Super., San Diego County Aug. 5, 2022); Lepe v. Bristol Farms, No. 21STCV05909 (Cal.Super., Los Angeles County Sept. 9, 2022); Adams v. Pacific Villa, Inc., No. 20STCV37260 (Cal.Super., Los Angeles County July 27, 2022); Gozzi v. Acadia Malibu, No. 19STCV39861, 2022 LEXIS 69347, at *8 (Cal.Super., Los Angeles County July 13, 2022).

[vi] Cal. Lab. Code, § 2698 et seq.

[vii] Hailey v. Specialty Rests. Corp., No. 30-2022-01255938, LEXIS 59899, at *9 (Cal.Super., Orange County Sept. 30, 2022).

[viii] Rocha v. U-Haul Co. of California, 88 Cal. App. 5th 65, 77-78 (2023).

[ix] Gavriiloglou v. Prime Healthcare Mgmt., Inc., 83 Cal. App. 5th 595, 606 (2022), as modified on denial of reh’g (Sept. 20, 2022), review denied (Jan. 11, 2023).

[x] Rocha, 88 Cal. App. 5th at 80-81.

[xi] Lopez v. P.R. Perneky Mgmt. Corp., No. 22AHCV00578, 2023 LEXIS 15712, at *12-14 (Cal.Super., Los Angeles County Feb. 2, 2023); Bobbitt v. Aurora Vista Del Mar LLC, No. 56202200563179CUOEVT, 2022 WL 17970744, at *1 (Cal.Super. Ventura County Dec. 15, 2022); Mendoza v. Streamline Finishes, No. 30-2021-01207462-CU-OE-CXC, 2022 LEXIS 82839, at *7 (Cal.Super., Orange County Dec. 1, 2022); Lynch v. Snp Pharm., No. 22PSCV00139, 2022 LEXIS 85667, at *17 (Cal.Super., Nov. 22 2022); Castro v. Clay Lacy Aviation, Inc., No. 21VECV00304, 2022 LEXIS 78750, at *10 (Cal.Super., Los Angeles County Nov. 17, 2022); Salazar v. Epiphany Care Homes Inc., No. 56202200562790CUOEVT, 2022 WL 4232874, at *1 (Cal.Super., Ventura County Aug. 25, 2022); Flores v. Amwest, Inc., No. 21STCV16066, 2022 LEXIS 56779, at *5 (Cal.Super., Los Angeles County Oct. 4, 2022).

[xii] Garcia v. St Paul’s Episcopal Home, No. 2022-22641, 2023 LEXIS 6021, at *8 (Cal.Super., San Diego County Jan. 27, 2023); Kunsman v. Patriot Environmental Servs., No. 34-2021-310042, 2022 LEXIS 69628, at *9 (Cal.Super., Sacramento County Oct. 25, 2022); Harden v. Staffing Solutions, Inc., No. HG21103640, 2022 WL 4348674, at *4-5 (Cal.Super., Alameda County Sep. 14, 2022); Jacobs v. Best Buy Stores, L.P., No. RG19001196, 2022 WL 4348676, at *4–5 (Cal.Super., Alameda County Sep. 14, 2022); Applegate v. Seed Beauty LLC, No. 56202100555658CUOEVT, 2022 WL 4595046, at *6 (Cal.Super. Ventura County Sep. 13, 2022); Mendoza v. Laguna Cookie Co., No. 19-1107762, 2022 LEXIS 55903, at *9-10 (Cal.Super., Orange County Aug. 12, 2022).

[xiii] Galarsa v. Dolgen California, LLC, 88 Cal. App. 5th 639 (2023), as modified on denial of reh’g (Feb. 24, 2023); Piplack v. In-N-Out Burgers, 88 Cal. App. 5th 1281 (2023), review filed (Apr. 17, 2023); Gregg v. Uber Techs., Inc., 89 Cal. App. 5th 786 (2023), review filed (Apr. 28, 2023); Seifu v. Lyft, Inc., 89 Cal. App. 5th 1129 (2023), review filed (May 9, 2023); Nickson v. Shemran, Inc., 90 Cal. App. 5th 121 (2023); Quintero v. Dolgen California, LLC, No. F083769, 2023 WL 1878201 (Cal. Ct. App. Feb. 10, 2023), as modified (Mar. 7, 2023), review granted (Apr. 26, 2023).

[xiv] Quintero v. Dolgen California, LLC, No. F083769, 2023 WL 1878201 (Cal. Ct. App. Feb. 10, 2023), as modified (Mar. 7, 2023), review granted (Apr. 26, 2023).

[xv] Kim v. Reins Int’l California, Inc., 9 Cal. 5th 73, 80 (2020).

[xvi] Id. at 643, 653

[xvii] Id. at 654 (“We predict that the California Supreme Court will conclude that California law does not prohibit an aggrieved employee from pursuing Type O claims in court once the Type O claims are separated from the Type A claims ordered to arbitration.”).

[xviii] Piplack, 88 Cal. App. 5th at 1285.

[xix] Gregg, 89 Cal. App. 5th at 792.

[xx] Seifu, 89 Cal. App. 5th at 1134.

[xxi] Nickson, 90 Cal. App. 5th at 121.