Mcle Self-study: Galarsa v. Dolgen Narrows Viking River on Arbitrability of Paga Claims

• Jurisdiction: California,United States,Federal
• Author: Glenn A. Danas
• Publication year: 2023
• Citation: Vol. 37 No. 3

MCLE SELF-STUDY: GALARSA V. DOLGEN NARROWS VIKING RIVER ON ARBITRABILITY OF PAGA CLAIMS

AUTHORS^*

Glenn A. Danas

Katelyn Leeviraphan

The California Court of Appeal, Fifth Appellate District, recently issued the first published opinion narrowing the United States Supreme Court's decision in Viking River Cruises, Inc. v. Moriana from last term.¹ In Viking River, the Supreme Court held that the Federal Arbitration Act (FAA) partially preempted the California Supreme Court's Iskanian rule,² insofar as that rule precluded division of Private Attorneys General Act (PAGA)³ actions into "individual" and "non-individual" claims through an agreement to arbitrate.⁴ The Supreme Court reversed the California appellate court's decision, holding that the employer was entitled to enforce the agreement, thereby requiring arbitration of an employee's "individual" PAGA claim, staying the plaintiff's PAGA claim based on CAL LAB. CODE violations committed against other aggrieved employees.⁵ Rather than stopping there and remanding for the lower court to determine the fate of the non-individual

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portion of the plaintiff's PAGA claim, the Supreme Court went further. The high court determined that, as a matter of California substantive law, the plaintiff lacked statutory standing to prosecute her non-individual PAGA claims and ordered them dismissed.⁶ However, in a concurrence, Justice Sotomayor noted, "[o]f course, if this Court's understanding of state law is wrong, California courts, in an appropriate case, will have the last word."⁷

Justice Sotomayor's observation was prescient, as almost immediately after the Viking River decision issued, the California trial courts began to interpret the high court's decision. The California courts came to varying results. According to an informal survey of post-Viking River motions to compel arbitration, by the end of 2022, California state and federal trial courts deciding motions to compel arbitration had reached the following results. Fifteen percent of such motions were denied entirely. Seventy percent were denied in part—plaintiffs' "individual" PAGA claims were sent to arbitration, while plaintiffs' "non-individual" PAGA claims were stayed in court. In only 14% of such motions, plaintiffs' "individual" PAGA claims were sent to arbitration, and plaintiffs' "non-individual" PAGA claims were dismissed.⁸

California's intermediate appellate courts have likewise addressed how Viking River applies in various contexts, including in connection with a motion to compel arbitration.⁹ However, it was not until the Court of Appeal's recent decision in Galarsa v. Dolgen California, LLC, 88 Cal. App. 5th 639 (2023), that a California appellate court had addressed the applicability of Viking River. In particular, the Court's dicta regarding PAGA standing was head on. In Galarsa, the plaintiff had filed a PAGA-only suit against her former employer, Dolgen California, LLC (Dollar General), for various CAL. LAB. CODE violations suffered by her and other employees.¹⁰ Dollar General moved to compel arbitration, which was denied by the superior court under the Iskanian rule.¹¹ After the Court of Appeal affirmed the trial court's order, the United States Supreme Court granted review of Dollar General's writ of certiorari, vacated the Court of Appeal's decision, and remanded the case for further consideration in light of its recent decision in Viking River.¹²

Following Viking River's conclusion regarding Iskanian, the court in Galarsa concluded that the rule precluding waiver of the right to bring a representative action under PAGA was not preempted by the FAA.¹³ Accordingly, the court concluded that Dollar General's arbitration agreement purporting to waive "any representative action claims in any arbitration" was invalid under Iskanian.¹⁴

DEFINING PAGA CLAIMS

In analyzing Dollar General's arbitration agreement, Galarsa first defined the two types of claims authorized by PAGA according to Viking River.¹⁵The Court recognized the ambiguity surrounding the term "representative" in relation to PAGA claims—noting in one sense every PAGA claim is asserted in a representative capacity (insofar as the plaintiff represents the state's interest),¹⁶ while in another sense "representative" is often used to describe the plaintiff's ability to seek civil penalties for CAL. LAB. CODE violations committed against aggrieved employees other than the plaintiff.¹⁷ Although the Supreme Court had identified the issue of PAGA's ambiguous nomenclature in Viking River (remarking that it would "endeavor to be clear about how we are using the term 'representative'"),¹⁸ the Galarsa court observed that the high court's "efforts . . . did not achieve the desired clarity."¹⁹ The Galarsa court observed two things about Viking River's reliance on terminology. First, that "an 'individual PAGA claim' is not actually a PAGA claim at all."²⁰ Second, the Court "used the term 'non-individual claims' without explicitly defining it."²¹

In order to "break with the past and the problems of using labels that can be interpreted to mean different things,"²²the Galarsa court categorized claims based on CAL. LAB. CODE violations suffered by the plaintiff as "Type A" claims.²³The court found "A" to be an appropriate designation give that these types of PAGA claims will be ordered to arbitration if covered by an agreement subject to the FAA.²⁴ Contrastingly, the court denominated as "Type O" claims those seeking to recover civil penalties for Labor Code violations suffered by aggrieved employees other than the plaintiff.²⁵

ISKANIAN'S CORE HOLDING REMAINS GOOD LAW

In applying Viking River, the Court of Appeal held that the United States Supreme Court did not abrogate Iskanian entirely. Specifically, Galarsa found that Iskanian's prohibition on waiver of representative PAGA claims as against California public policy survived Viking River. The Galarsa court further held that Viking River's holding that the Iskanian rule is preempted by the FAA was limited to Iskanian's prohibition against dividing PAGA claims "into individual and non-individual claims through an agreement to arbitrate."²⁶ The Galarsa court's interpretation of Viking River led to the conclusion that the waiver of representative claims in Dollar General's arbitration agreement is invalid.²⁷

After invalidating the representative action waiver provision, the Court of Appeal turned to Viking River again for guidance on addressing severability provisions. In Viking

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