This is really Good news for small businesses in the once-Golden state.
RedState has reported on the case of Viking River Cruises v. Moriana, and the Supreme Court oral arguments which occurred at the end of March. In particular, the California Business and Industrial Alliance (CABIA), submitted an amicus brief for the case, as well as rallied on the Supreme Court steps in support of this case and PAGA’s repeal.
The Supreme Court granted certiorari (opted to review the case) to decide whether the Federal Arbitration Act (FAA) preempts California’s Private Attorneys General Act (PAGA) law.
In the piece, IN MY ORBIT: The California Private Attorneys General Act (PAGA) Gets the SCOTUS Treatment, I outlined exactly WHY this case was important for the removal of PAGA:
The case of Viking River Cruises, Inc. v. Moriana seeks to cut PAGA off at the knees by answering whether the Federal Arbitration Act (FAA) and any decisions that have supported it can be used to enforce these agreements and prevent an employee from raising representative claims under PAGA.
In the Viking case, plaintiff Angie Moriana had signed an arbitration agreement which included a “Class Action Waiver.” This is one of the ways that California companies make efforts to protect themselves against the vagaries of the PAGA law. CABIA has helped small businesses with this type of agreement in the past, and Wednesday launched a website that allows employers to prepare a customized arbitration agreement with just a few clicks.
For those unfamiliar with PAGA and why it is so egregious, the law allows employees to bring a lawsuit against their employer on behalf of themselves. and their fellow employees for violating even the smallest provision of the California Labor Code – a 1,100-plus page behemoth. It could be an incidental or accidental violation, but the employer is still liable and every employee is swept in under the law, whether they agree with the lawsuit or not. For large corporations that have a division of labor law attorneys, it’s just another day at brunch. For the small business with revolving revenues and tighter margins? This can be devastating.
Here is language from Justice Samuel Alito’s opinion:
PAGA actions also allow the adjudication of multiple claims in a single suit, but their structure is entirely different. A class-action plaintiff can raise a multitude of claims because he or she represents a multitude of absent individuals; a PAGA plaintiff, by contrast, represents a single principal, the LWDA, that has a multitude of claims. As a result of this structural difference, PAGA suits exhibit virtually none of the procedural characteristics of class actions. The plaintiff does not represent a class of injured individuals, so there is no need for certification. PAGA judgments are binding only with respect to the State’s claims, and are not binding on nonparty employees as to any individually held claims.
Moriana’s arbitration agreement included that class action waiver mentioned above, stating that if Moriana decided to engage in any arbitral proceeding, she could not bring a separate class-action suit or PAGA action. Moriana left her employment with Viking, and soon after filed a PAGA claim, in direct violation of the arbitration agreement.
Moriana wanted to claim individual status against Viking, but also maintain her PAGA suit. The decision that came down on Wednesday added another layer on already established precedent from the 2011 AT&T Mobility LLC v. Concepcion and the 2006 Iskanian v. CLS Transp. Los Angeles SCOTUS decisions.
The Supreme Court’s 8-1 decision essentially states that Viking is allowed to compel arbitration of Moriana’s individual claim. In other words, the FAA supersedes PAGA. Thanks to this SCOTUS ruling, businesses and employees can agree to quickly and fairly arbitrate potential claims that might fall under PAGA, rather than the costly and time-consuming, class-action-style trial litigation that is being waged currently.
Here are some key takeaways from the ruling:
This Court disagrees with both characterizations of the statute. Moriana’s premise that PAGA creates a unitary private cause of action is irreconcilable with the structure of the statute and the ordinary legal meaning of the word “claim.” A PAGA action asserting multiple violations under California’s Labor Code affecting a range of different employees does not constitute “a single claim” in even the broadest possible sense. Viking’s position, on the other hand, elides important structural differences between PAGA actions and class actions. A class-action plaintiff can raise a multitude of claims because he or she represents a multitude of absent individuals; a PAGA plaintiff, by contrast, represents a single principal, the LWDA, that has a multitude of claims. As a result, PAGA suits exhibit virtually none of the procedural characteristics of class actions.
SCOTUS has established that PAGA and a class-action suit are irreconcilable and not interchangeable. You cannot wage a class-action suit without the class being vetted, nor can you participate in said class-action while holding on to your individual claims. It’s an either / or proposition, and Moriana’s attorneys wanted it both ways.
PAGA’s built-in mechanism of claim joinder is in conflict with the FAA.
If you as an employee signed an arbitration agreement under the terms of the FAA, the FAA supersedes any claims made under PAGA.
Consistently holding to Constitutional federalism, Justice Clarence Thomas offered this pithy dissent:
JUSTICE THOMAS, dissenting.
I continue to adhere to the view that the Federal Arbitration Act (FAA), 9 USC §1 et seq., Does not apply to proceedings in state courts. See Allied-Bruce Terminix Cos. v. Dobson, 513 US 265, 285–297 (1995) (THOMAS, J., dissenting); see also Kindred Nursing Centers LP v. Clark, 581 US 246, 257 (2017) (THOMAS, J., dissenting) (collecting cases). Accordingly, the FAA does not require California’s courts to enforce an arbitration agreement that forbids an employee to invoke the State’s Private Attorneys General Act. On that basis, I would affirm the judgment of the California Court of Appeal.
Despite some naysayers in the legacy California press dismissing the decision as not much to see herethis is a huge victory for California employers — particularly the small businesses — which have been targeted by plaintiff’s lawyers under the cudgel of PAGA.
RedState contacted CABIA Founder and President Tom Manzo, who issued this statement:
“PAGA is a toxic policy that leaves both employers and employees with less while trial attorneys make more,” Manzo said.
“The financial impacts of PAGA have devastated businesses of all sizes in California, and we are grateful to the Court for hearing our arguments and rightfully ruling that businesses and employees should be allowed to resolve their disputes bilaterally and through arbitration, rather than through abusive. and often frivolous PAGA lawsuits. ”
Straight from the mouth of an organization that has ably represented small businesses in this fight. The decision in Viking paves the way even further for the repeal of PAGA.