Tuesday, November 28, 2017
Court Skirts Issue Over Who Decides Arbitrability
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals has sidestepped the question of whether a dispute as to what claims are arbitrable, pursuant to an arbitration agreement, should be decided in the first instance by an arbitrator.
A three-judge panel on Friday declared that the issue is “highly technical” and, under a 2015 holding, is “explicitly open in this circuit.”
It remains open, with the judges declining to decide if Judge Michael W. Fitzgerald of the Central District of California was right or wrong in determining, himself, whether the individual claims of a driver, who is suing a trucking company for alleged wage and hour violations, are subject to arbitration. Under the rules of JAMS, incorporated in the arbitration agreement, arbitrability of disputes would be decided by the arbitrator.
The driver, Roberto Aviles, asserts he was wrongfully classified by Quik Pick Express, LLC as an independent contractor, and thus denied wages and benefits to which employees are entitled. He sued on his own behalf and on behalf of the state under California’s Private Attorneys General Act of 2004 (“PAGA”).
The agreement Aviles signed requires arbitration of his own claims and purports to bar representative actions. The California Supreme Court in 2014 held in Iskanian v. CLS Transportation Los Angeles, LLC “that an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.”
In light of Iskanian, Fitzgerald held that Aviles’s action under PAGA has not been waived and, from that, reasoned that his own claims need not be arbitrated.
In its memorandum opinion on Friday, the panel—comprised of Circuit Judges Johnnie B. Rawlinson and Randy Smith, along with District Judge Edward R. Korman of the Eastern District of New York, sitting by designation—said, with respect to whether Fitzgerald properly decided the issue of arbitrability:
“There is no need to unknot the issue when we can simply cut through it in the absence of any real dispute. Aviles maintains that the district court should have decided arbitrability. Quik Pick disagrees only in the alternative, only if we affirm the arbitrability ruling. As it happens, we do not affirm, and we thus see no harm to either party in assuming that the district court could rule on whether Aviles’s claims were arbitrable.”
Chaney’s Opinion Followed
It followed the example of the California Court of Appeal in its 2015 opinion in Franco v. Arakelian Enterprises, Inc., decided on remand from the state Supreme Court, directing reconsideration in light of Iskanian. There, Justice Victoria Chaney of this district’s Div. One responded to an employee’s contention that the arbitration agreement, containing a waiver of representative actions, should be voided in its entirety.
“We need not contemplate whether such a ruling might or might not be appropriate when a party seeking to enforce a predispute arbitration agreement is found to have drafted and obtained the agreement with an intention to thwart public policy,” she wrote. “But such a remedy is not appropriate here.”
Chaney explained that the agreement in question was executed in 2005, well before the decision in Iskanian, so that that it cannot be inferred that the employer sought to “thwart public policy.” She said that by enforcing the agreement to the extent of requiring arbitration of the employee’s individual claims, the employee “is prevented from gaining undeserved relief from his agreement to arbitrate his individual claims,” while the employer “is prevented from the undeserved detriment of having its entire agreement voided due to its inclusion of a provision respecting only certain claims.”
She noted that “the parties’ contractual relationship is preserved, without condoning or accepting an illegal scheme.”
The Ninth Circuit opinion embraces Chaney’s opinion, saying:
“We do the same here.”
“The district court should grant the motion to compel arbitration on an individual basis with respect to any claim that Aviles brings on his own behalf (regardless of whether he also putatively represents class members). Enforcing the representative-action waiver except as to PAGA, the district court should decline to allow Aviles to represent any other individual, as a class representative or otherwise. Finally, the district court should stay Aviles’s PAGA claims during the pendency of the arbitration.”
If the arbitrator finds that Aviles is an “aggrieved employee,” under the state Labor Code, the district court will then entertain his PAGA claims, the opinion mandates.
The case is Aviles v. Quik Pick Express, LLC, No. 15-56951.
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