US Supreme Court to review PAGA limit on arbitration

The U.S. Supreme Court on Wednesday granted review of a California Court of Appeal ruling that the state's Private Attorneys General Act does not conflict with federal law by rendering employment contracts unenforceable if they require arbitration.

Attorneys for the respondent objected to the review, writing, "California's rule that the right to bring PAGA claims cannot be waived is not an effort to 'declare individualized arbitration proceedings off-limits.'"

The case could have results beyond California, legal observers said.

The case began in 2018 when former Viking River Cruises employee Angie Moriana filed an action under PAGA against the company, alleging failure to provide meal and rest periods, pay overtime and provide accurate wage statements. In response, Viking cited an agreement Moriana signed when she was hired stipulating that any disputes arising must be arbitrated. Viking River Cruises v. Moriana, 20-1573.

While Viking noted that precedent set in Iskanian v. CLS Transportation Los Angeles, LLC, 327 P. 3d 129 (Cal. 2014) rendered such an agreement unenforceable in California, it further argued that the U.S. Supreme Court's rulings in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612, 1623 (2018) and AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 352 (2011) effectively invalidated this ruling by affirming that the Federal Arbitration Act requires the honoring of such waivers.

The 2nd District Court of Appeal, however, did not agree, rejecting the argument that Epic and Concepcion supersede Iskanian.

Viking continued to fight the decision, and in May 2021 filed a writ of certiorari asking for a high court review. The company's attorneys, Douglas A. Wickham and Ian T. Maher of Littler Mendelson PC in Los Angeles, declined to comment for this story.

"This Court's intervention is warranted, both to reaffirm the FAA and the national policy in favor of arbitration and to ensure that Concepcion and Epic actually promote bilateral arbitration, rather than simply causing representational litigation by those who agreed to arbitrate individually to migrate to PAGA," read the petition for review.

In a brief authored in part by attorneys Kevin T. Barnes and Gregg Lander of The Law Offices of Kevin T. Barnes in Los Angeles, the respondent expressed opposition to the request for review.

"Viking's petition, like those that came before it, fails to come to grips with the central fact that California's rule that the right to bring PAGA claims cannot be waived is not an effort to 'declare individualized arbitration proceedings off-limits,'" the brief read. "Rather, Viking's invocation of the FAA is an attempt to avoid bilateral resolution of the State's claim for penalties through the representative chosen by California lawmakers -- an individual aggrieved employee."

Barnes and Lander could not be reached by phone or email for comment on this story.

Since May, organizations including the Washington Legal Foundation and the Retail Litigation Center Inc. filed amicus curiae briefs in support of the cert petition.

"There is nothing but airy fluff underlying the theory that Iskanian does not conflict with the FAA because a PAGA claim is essentially 'a dispute between an employer and the state' that is litigated by the employee as an 'agent' of California," reads the amicus brief filed on behalf of the Retail Litigation Center.

"The decision in Iskanian has resulted in PAGA being used as a backdoor to avoid arbitration agreements and generate fees for the plaintiffs' bar," another amicus brief from the Restaurant Law Center read. "Interestingly, Iskanian has been abused by the plaintiffs' bar to invalidate private agreements of employees that have not even been deputized by the State of California."

Legal professionals have noted that Viking River Cruises v. Moriana could have far-reaching implications greater than other recent cases related to arbitration awards, such as Badgerow v. Walter, 20-1143.

"Viking River Cruises would be a far more significant case than Badgerow this term because its potential ramifications for the enforcement of arbitration agreements could be much more far-reaching than an appeal focused on a federal court's jurisdiction over disputes concerning the confirmation or vacatur of arbitration awards," said Felix Shafir of Horvitz & Levy LLP.