California Employers Pervert Arbitration Law, AG Private Plaintiffs Tell SCOTUS

A view of the U.S. Supreme Court on Capitol Hill in Washington, U.S., February 22, 2022. REUTERS/Tom Brenner

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(Reuters) – Employers are misusing federal arbitration law as a tool to weed out representative actions aimed at addressing violations of California’s labor code, according to a brief filed in the US Supreme Court on Wednesday. United in a case that will decide the future of California’s private attorney general. Act – and could have unforeseen litigation implications ranging from False Claims Act qui tam lawsuits to shareholder derivative cases.

Lawyers for Angie Moriana, a former sales representative for Viking River Cruises Inc, who sued the company in California state court over numerous alleged labor code violations, have warned U.S. judges that employers are not asking not simply the court to allow them to force employees to arbitrate PAGA cases, in which a worker representative stands in for the state to seek civil penalties for violations of labor regulations.

Instead, Moriana’s attorney wrote, Viking and his business-friendly amici are counting on the Supreme Court to allow them, in the name of federal arbitration law, to demand that employees forfeit all rights. under California State law to assert representative claims.

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But attorneys for Moriana from the law firms of Kevin T. Barnes, Altshuler Berzon and the Public Citizen Litigation Group told the Supreme Court that nothing in the statutory language or historical context of federal arbitration law does not support Viking River’s claim that the FAA is moving California. law that prohibits waiver of PAGA rights.

The main argument of the brief is that the FAA was only intended to allow the parties to dictate the forum in which complaints can be heard. Pro-arbitration law can trump procedural rights, as we have seen in recent Supreme Court decisions upholding mandatory arbitration provisions that include class action waivers. But the FAA does not allow employers, Moriana said, to force employees to waive a substantive right of state law. (Indeed, the brief notes, it is unclear whether the FAA even has a preventative effect in a state court proceeding like the Moriana trial. Judge Clarence Thomas said in a series of dissents dating back to the 1990s that he does not believe the FAA applies in state courts.)

“Viking’s arguments amount to a request that this court transform the FAA from a vehicle to protect the parties’ arbitration agreements into one to prevent individuals from submitting claims for resolution in court or arbitration, an outcome contrary the FAA’s pro-arbitration policies.”

Viking lawyer Paul Clement of Kirkland & Ellis did not respond to my email. Moriana’s attorneys, Michael Rubin of Altschuler and Scott Nelson of Public Citizen, declined to comment.

Moriana told the judges that Viking and his amici wrongly characterized the PAGA lawsuits as de facto class actions. As I told you last month, employers and business groups claimed in amicus briefs in the Viking case that the wily California plaintiffs’ attorneys are using the PAGA lawsuits as a way to circumvent the Supreme Court precedent allowing employers to impose class action waivers on employees. According to Viking and its amici, plaintiffs’ attorneys have shifted from filing class action lawsuits on behalf of named plaintiffs whose claims can be compelled to arbitration to filing cookie-cutter PAGA lawsuits that under the law current state of California and the 9th Circuit, may remain in court. These PAGA lawsuits then become leverage, according to Viking’s amici, that compels companies to agree to class action settlements.

But PAGA’s claims, according to Moriana’s brief, are completely separate from employee class actions. PAGA lawsuits are not brought on behalf of employees seeking damages, but on behalf of the state, seeking civil penalties for labor code violations. (California gets 75% of any recovery, with the remaining 25% split among employees.) It is therefore “fundamentally wrong,” according to the brief, to attempt to equate two classes of cases that “seek entirely different remedies at the name of different reals”. interested parties”.

The false equivalence between class actions and PAGA claims has at least two implications, according to the brief. First, the employers’ assertion that PAGA lawsuits are subject to arbitration clauses signed by employees ignores the true nature of PAGA claims, according to Moriana’s brief. Claims belong to California, not the individual employee pursuing a PAGA case on behalf of the state. And California has never agreed to arbitrate claims against Viking. The Supreme Court, Moriana said, could uphold the lower court’s decision allowing the PAGA case to proceed, on that basis alone.

The representative nature of PAGA claims also means that they can be arbitrated without encountering the due process issues that can arise from class arbitration involving absentee party rights. There are only two parties with interests in PAGA cases, according to Moriana’s brief: the employer and California, albeit through an employee representative. So if companies really wanted to arbitrate PAGA cases as representative actions, they could do so, taking advantage of all the supposed benefits of arbitration. But, according to Moriana, companies don’t really want to arbitrate PAGA claims as representative actions: they want to eliminate PAGA claims.

Moriana’s lawyers countered the political arguments of Viking and his amici with their own doomsday predictions about the potential fallout from the Supreme Court case. If the judges were to adopt Viking’s view that the FAA allows companies to ban representative actions, they said, it’s a safe bet that “opportunistic companies” would test the outer limits of this proposition by attempting bar other representative suits, such as the ERISA litigation. filed by individual employees on behalf of other plan beneficiaries or shareholder derivative suits filed on behalf of the company. Even state and federal qui tam lawsuits, in which a private whistleblower asserts allegations of fraud on behalf of the government, could be at risk, according to the brief, because qui tam whistleblowers are often employees.

“The FAA,” Moriana said, “does not grant potential defendants such absolute power to choose the claims that may be brought against them.”

Read more:

California’s Private AG Act is a plague, employers tell SCOTUS

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Alison Frankel

Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A graduate of Dartmouth University, she worked as a journalist in New York covering the legal industry and law for more than three decades. Before joining Reuters, she was an editor and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.