Lyft cannot invoke arbitration agreement in state PAGA cases, appeals court rules

Lyft cannot enforce a provision in its arbitration agreement that bans drivers from bringing state Private Attorney General Act claims against the company, despite a U.S. Supreme Court opinion that allows for waivers banning collective actions, a three-justice state Court of Appeal panel ruled.

The U.S. Supreme Court's opinion in Epic Systems Corporation v. Lewis, 138 S. Ct. 1612 (2018) held that under the Federal Arbitration Act, private employment agreements that require individual arbitration are enforceable. The opinion also upheld waivers banning collective actions.

But the federal case does not apply to PAGA actions in California since Epic Systems did not specifically address whether the Federal Arbitration Act applied to PAGA, according to an opinion written last week by Acting Presiding Justice James A. Richman in the 1st District Court of Appeal.

Richman quoted an opinion by Justice Judith L. Haller in the 4th District Court of Appeal, which referenced a case in the state Supreme Court, Iskanian v. CLS Transportation LLC, 59 Cal. 4th 348, 383 (2014).

"Iskanian held that a ban on bringing PAGA actions in any forum violates public policy and that this rule is not preempted by the FAA because the claim is a governmental claim," Haller wrote. "Epic did not consider this issue and thus did not decide the same question differently."

In his opinion last week, Richman noted there are "numerous federal court decisions that hold Iskanian remains sound after Epic Systems."

Justices Therese M. Stewart and Marla J. Miller affirmed. Olson v. Lyft, A156322 (Cal. App. 1st Dist. Jan 11, 2019).

Christian Schreiber, who represents the plaintiff and is a founding partner at Olivier Schreiber & Chao LLP, said while the 4th District Court of Appeal has written multiple opinions on whether Epic Systems applies to Iskanian, this was the first time the 1st District court had taken a position on the issue.

Among defendants, Schreiber said, "I think ... there is a hope that the various districts in the Court of Appeal will see things differently, and sometimes they do. But I certainly think [last week's opinion] signals a uniformity of opinion on this particular arbitration issue."

The opinion may "end the inquiry about Iskanian's viability going forward, unless and until the U.S. Supreme Court says something different," he added.

An attorney from Keker, Van Nest & Peters LLP who represents Lyft did not return a request for comment.

In his opinion, Richman noted Lyft argued in its opening brief, "California courts must follow intervening United States Supreme Court decisions, instead of prior California Supreme Court decisions, when they address similar issues differently."

Lyft's brief continued, "Courts of Appeal are not bound by California State Supreme Court decisions that are in conflict with subsequent United States Supreme Court decisions."

Schreiber said he wasn't entirely expecting the Court of Appeal to rule the way it did. "What was probably the most surprising here was just how utterly the Court of Appeal rejected Lyft's position and reasserted the California Supreme Court's authority to interpret PAGA," he said.