The California Supreme Court’s decision in Iskanian v. CLS Transp. Los Angeles, LLC, (discussed here), held that class action waivers in arbitration agreements are enforceable under the Federal Arbitration Act (FAA) except as to claims that were made pursuant to the Private Attorneys General Act (PAGA). PAGA allows aggrieved employees to represent other current and former employees and recover civil penalties on behalf of the State of California for purported Labor Code violations.
CLS Transportation has since filed a writ to the US Supreme Court seeking review of this ruling arguing that an employee who signs an arbitration agreement is equally bound to litigate his or her PAGA claims in arbitration as he is with any other claim. Plaintiffs’ response is due on October 24, 2014.
In the interim, at least one federal court has rejected the California Supreme Court’s holding and ordered a claimant’s PAGA claims proceed in arbitration. In Fardig et al. v. Hobby Lobby Stores Inc., Case No. 8:14-cv-561-JVS-AN (C.D. Cal.), the putative plaintiffs all signed arbitration agreements including an arbitration clause with class and representative action waivers. Defendant filed a motion to compel arbitration, which Judge James Selna granted on August 11, 2014. The court held that the US Supreme Court’s decision in Concepcion v. AT&T preempted any state law rule invalidating class or representative waivers in arbitration agreements and noted that federal district courts are not bound by state courts on questions of federal law, such as FAA preemption. The Court expressly disapproved of the California Supreme Court’s holding in Iskanian on the PAGA issue and said, “[e]ven in light of Iskanian, the Court continues to hold that the rule making PAGA claim waivers unenforceable is preempted by the FAA.”