Supreme Court Once Again Rejects California’s Treatment of Arbitration

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REVIEW ANALYSIS

The holding of Wednesday’s decision at Viking River Cruises vs. Moriana won’t surprise anyone. As it has done so many times before, the Supreme Court rejected California’s treatment of the arbitration under California law, in this case the California Attorney General Act. The most surprising thing about the decision is how close it came to unanimity. Eight of nine justices agreed on the result, with the only dissent coming from Justice Clarence Thomas, who has long argued that the relevant federal law (the Federal Arbitration Act) does not apply to cases in state courts. .

The Private Attorneys General Act, PAGA, allows any individual employee to sue their employer and assert claims against the employer on behalf of all employees for any violation by the employer of any provision of the (long) Labor Code from California. California employers (such as Viking River Cruises) routinely obtain pre-dispute arbitration agreements from their employees; these agreements always include (and in this case) an explicit waiver of the employee’s right to pursue such aggregate claims under PAGA. The California state courts (predictably) rejected this waiver as inconsistent with PAGA. The opinion of Judge Samuel Alito, in turn, rejected this decision, validating the employer’s ability to submit the employee to bilateral arbitration limited to the employee’s own claims.

Alito begins by repeating the court’s longstanding view that Congress passed the FAA “in response to judicial hostility to arbitration.” He discusses two lines of cases under the FAA. First, citing previous decisions, it sums up “a principle of equal treatment… [that] prevails over any state rule that is prima facie discriminatory against arbitration. This principle of equal treatment has included most court cases under the FAA, several of which have overturned decisions of the Supreme Court of California and the United States Court of Appeals for the 9th Circuit (the federal court of appeals that covers California).

More recently, the court has begun to add substantial content to the FAA, reversing decisions that apply unbiased rules if, in the words of an earlier case cited by Alito, they ‘could be used to transform’ individualized arbitration traditional’ in ‘litigation which it was supposed to displace’ by the imposition of procedures contrary to the informal nature of arbitration” (cleaned up). Alito explains that this second principle led the court to conclude, in the words of an earlier case, that “a party cannot be compelled under the FAA to submit to class arbitration unless it there is a contractual basis for concluding that the party agreed do this.”

In the end, Alito finds “a conflict between the procedural structure of PAGA and the FAA”, because PAGA “allows ‘aggrieved employees’ to use the Labor Code violations they have personally experienced as a basis for joining the action the claims that could have been raised by the State in an enforcement proceeding”. Thus, for Alito, the PAGA “unduly limits the freedom of the parties to determine ‘the questions submitted to arbitration’ and ‘the rules under which they will arbitrate'”, which the court will not tolerate. Therefore, the employee is free to arbitrate his claim against the employer, but he cannot raise the PAGA claim on behalf of other employees in this arbitration.Because Employee cannot raise the individual Claim in any court proceeding, Employee is unable to raise the Representative Party of the PAGA Claim in any forum.

Prior to the outright condemnation of PAGA quoted in the previous paragraph (Part III of Alito’s opinion), Alito oddly includes a multi-page speech that seems oddly remote from PAGA. The general point of this section is that PAGA is best viewed as a “representative status” law – with the aggrieved employee pursuing claims as a California labor agency representative – and that the FAA does not need not require the application of all “waivers of standing”. assert rights on behalf of absent principals. The discussion mentions such broad examples as “derivative shareholder suits, wrongful death suits, trustee suits and infant suits.” I discuss this passage – clearly irrelevant to the decision – because it caused considerable disagreement among the judges.

To explain, Judge Sonia Sotomayor (who often dissents in FAA cases), concurred with Alito’s entire opinion, explaining in a separate opinion that she particularly approved of the discussion in part II of all the things Alito said the FAA didn’t anticipate. Conversely, three of the justices who are typically in the majority in FAA cases supporting arbitration (Judge Amy Coney Barrett, joined by Chief Justice John Roberts and Justice Brett Kavanaugh), wrote separately to distance themselves. of Part II of the Opinion, limiting their agreement to the brief analytical discussion of Part III. Perhaps these seemingly pointless squabbles are evidence of a mild anger in the court in June.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to SCOTUSblog in various capacities, was counsel on an amicus brief in support of Viking River Cruises in this case. The author of this article is not affiliated with the firm.]

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