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On the Alert

US Supreme Court will decide whether
FAA requires individual arbitration of
Private Attorney General Act claims

Viking River Cruises v. Moriana (US Supreme Ct cert granted 12/15/2021)
Sent to Custom Alerts™ subscribers on 12/15/2021

The US Supreme Court has agreed to decide whether the Federal Arbitration Act (FAA) requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise representative claims, including under California's Private Attorney General Act (PAGA).

Moriana sued under PAGA on behalf of the state and all other similarly situated employees, alleging various California Labor Code violations.

Moriana had agreed to submit any dispute to arbitration and the agreement required her to waive any right to bring a class, collective, representative, or private attorney general action.

The trial court denied the employer's motion to compel arbitration; the California Court of Appeal affirmed. Moriana v. Viking River Cruises (California Ct App 09/18/2020) [Unpublished opinion].

There is definitely a clash between what the US Supreme Court has said and what the California Supreme Court has said.

In Epic Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018) [PDF], an employee had signed an arbitration agreement that provided for individualized, one-on-one arbitration proceedings. He sought to litigate on behalf of a nationwide class under the Fair Labor Standards Act collective action provision, 29 U. S. C. 216(b). The employer replied with a motion to compel arbitration. The US Supreme Court sided with the employer in a 5-4 decision, saying, "courts may not allow a contract defense to reshape traditional individualized arbitration by mandating class-wide arbitration procedures without the parties’ consent. *** The policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written."

Yet the California Supreme Court had already decided 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," and that "the FAA does not preempt a state law that prohibits waiver of PAGA representative actions in an employment contract." Iskanian v. CSL Transportation, 59 Cal.4th 348 (Cal. 2014) [PDF]. In part this is because the California court reasoned that a PAGA suit involves a dispute between the employer and the state rather than between the employer and the employee. California courts have followed the Iskanian rule even after the US Supreme Court decided Epic Systems.

The employer's view, expressed in its petition for a writ of certiorari, is that this is a "transparent effort to avoid the FAA's preemptive effect," and "conflicts with this Court's cases, which squarely hold that states may not categorically place specific claims beyond the FAA's reach by conceptualizing them as particularly intertwined with state interests."

The US Supreme Court is expected to decide this case before summer 2022.

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