Adolph v. Uber Techs.

ERIK ADOLPH, Plaintiff and Respondent, v. UBER TECHNOLOGIES, INC., Defendant and Appellant.

G059860

California Court of Appeals, Fourth District, Third Division

April 11, 2022

NOT TO BE PUBLISHED

Appeals from orders of the Superior Court of Orange County No. 30-2019-01103801 Kirk H. Nakamura, Judge.

Littler Mendelson, Andrew Spurchise, Sophia Behnia, and Anthony Ly for Defendant and Appellant.

Desai Law Firm, Aashish Y. Desai, Maria Adrianne De Castro Goldstein, Borgen, Dardarian & Ho, Andrew Paul Lee and Mengfei Sun for Plaintiff and Respondent.

OPINION

O'LEARY, P. J.

Introduction

A claim under the Labor Code Private Attorneys General Act of 2004, Labor Code section 2698 et seq. (PAGA), may only be brought by an "aggrieved employee." (Lab. Code, § 2699, subd. (a).) Plaintiff Erik Adolph contends that Uber Technologies, Inc. (Uber) misclassified employees as independent contractors and seeks civil penalties against Uber under PAGA. Before he began working for Uber, Adolph signed an arbitration agreement, under the terms of which all disputes between them are to be resolved in arbitration and which purported to waive Adolph's right to assert a PAGA claim. The California Supreme Court has held, however, that PAGA claims are not subject to arbitration and that an agreement waiving the right to bring a representative claim under PAGA violates public policy and is unenforceable. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 384 (Iskanian).) Based on Iskanian and the cases following it, the trial court denied Uber's petition to compel arbitration.

Uber contends on appeal that the initial question of whether Adolph is an employee-who may bring a representative PAGA claim-or an independent contractor-who may not-must be determined in arbitration. We disagree. California case law is clear that the threshold issue of whether a plaintiff is an aggrieved employee in a PAGA case is not subject to arbitration. Therefore, we affirm.

Facts and Procedural History

Adolph was a driver for UberEATS, a meal delivery service. The company through which drivers are connected with those in need of UberEATS' services is owned by Uber. Before he began making deliveries for UberEATS in March 2019, Adolph created an account to use the UberEATS app. In creating his account, Adolph accepted an arbitration agreement, which "is governed by the Federal Arbitration Act," and which "applies to any dispute, past, present or future, arising out of or related to this Agreement or formation or termination of the Agreement and survives after the Agreement terminates." The parties do not dispute the terms of the arbitration agreement or that Adolph accepted the arbitration agreement.

The arbitration agreement contains a waiver of all representative PAGA claims, whether in court or in arbitration. It also provides that the validity of the PAGA waiver may only be resolved in court, not through arbitration, and that if the PAGA waiver is found to be unenforceable, the litigation of PAGA claims must be stayed pending the outcome of arbitrable individual claims.

In October 2019, Adolph filed a putative class action complaint against Uber, claiming that Uber had misclassified employees as independent contractors, and had therefore failed to reimburse the class members for necessary work expenses. The complaint alleged two causes of action: (1) violation of Labor Code section 2802, and (2) violation of Business and Professions Code section 17200. Uber filed a petition to compel arbitration of Adolph's individual claims, strike the class action allegations, and stay all court proceedings. The parties stipulated to allow Adolph to file a first amended complaint adding a third cause of action for civil penalties under PAGA.

After the amended complaint was filed, Uber filed a renewed petition to compel arbitration. The trial court granted the petition compelling arbitration of Adolph's individual claims in the first two causes of action, found that the class claims on the first two causes of action were waived, and stayed the PAGA cause of action.

Adolph then filed a motion for leave to file a second amended complaint, which would include only the PAGA cause of action, and a motion for preliminary injunction to prevent the arbitration from proceeding. The trial court granted both motions. Uber filed a notice of appeal from the order granting the preliminary injunction, appeal No. G059860.

Adolph filed the second amended complaint alleging a single cause of action under PAGA. Uber filed a petition to compel arbitration of Adolph's independent contractor status and of all issues of enforceability or arbitrability. The petition requested that the PAGA claim be stayed pending arbitration on the threshold issue of whether Adolph was an aggrieved employee entitled to assert the PAGA claim. Adolph both opposed and moved to strike the petition. The trial court denied the petition to compel arbitration, and Uber filed a notice of appeal, appeal No. G060198.

This court granted the parties' joint motion to consolidate appeal Nos. G059860 and G060198.

Discussion

I. Standard of Review

Because the evidence is not in conflict, we review the order denying a petition to compel arbitration de novo. (Banc of California, National Assn. v. Superior Court (2021) 69 Cal.App.5th 357, 367.) The trial court's order granting a preliminary injunction is reviewed for abuse of discretion. (Hunt v. Superior Court (1999) 21 Cal.4th 984, 999; Olson v. Hornbrook Community Services Dist. (2021) 68 Cal.App.5th 260, 268.)

II. The Federal Arbitration Act

The Federal Arbitration Act (9 U.S.C. § 1 et seq.) (FAA) "establishes 'a liberal federal policy favoring arbitration agreements.'" (Epic Systems Corp. v. Lewis (2018) 584 U.S. (Epic).) By its terms, the FAA applies to any "written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy" and makes those provisions "valid, irrevocable, and enforceable." (9 U.S.C. § 2.) The arbitration provision in the agreement between Adolph and Uber provides that it is to be governed by the FAA, and the agreement unquestionably involves commerce. The FAA is therefore implicated in this case.

III. Under California Law, PAGA Claims Are Not Arbitrable

In California, PAGA authorizes an employee to bring an action for civil penalties against his or her employer on behalf of the state for violations of the Labor Code. The California Supreme Court has held that because a PAGA claim is brought on behalf of the state, which is not a signatory to the employment agreement, a PAGA claim is not subject to any arbitration agreement between the employee and the employer, despite the FAA's broad terms. "[A] PAGA claim lies outside the FAA's coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between an employer and the state, which alleges directly or through its agents-either the Agency or aggrieved employees-that the employer has violated the Labor Code." (Iskanian, supra, 59 Cal.4th at pp. 386-387.) "[A] PAGA representative action necessarily means that this claim cannot be compelled to arbitration based on an employee's predispute arbitration agreement absent some evidence that the state consented to the waiver of the right to bring the PAGA claim in court." (Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 624-625 (Correia).) There is no evidence or argument that the state of California has consented to arbitrate the PAGA claim in this case.

In Epic, the United States Supreme Court held that class action waivers in arbitration agreements are enforceable. (Epic, supra, 138 S.Ct. at p. 1619.) The plaintiff employee in that case was pursuing FLSA and California overtime claims on a class-wide basis. (Id. at p. 1620.) Numerous courts have held that Iskanian survives Epic because "the cause of action at issue in Epic differs fundamentally from a PAGA claim." (Correia, supra, 32 Cal.App.5th at p. 619.) "Although the Epic court reaffirmed the broad preemptive scope of the Federal Arbitration Act [citation], Epic did not address the specific issues before the Iskanian court involving a claim for civil penalties brought on behalf of the government and the enforceability of an agreement barring a PAGA representative action in any forum. We thus conclude the trial court properly ruled the waiver of representative claims in any forum is unenforceable." (Id. at p. 609; see Contreras v. Superior Court (2021) 61 Cal.App.5th 461, 471-472; Olson v. Lyft, Inc. (2020) 56 Cal.App.5th 862, 872; Tanguilig v. Bloomingdale's, Inc. (2016) 5 Cal.App.5th 665, 673.) We see no reason to diverge from clear California authority in this case.

IV. Whether Adolph Is Entitled to Assert PAGA Claims Against Uber Must Be Decided by the Court, Not an Arbitrator

California cases uniformly hold that whether a plaintiff is an aggrieved employee who may assert a PAGA claim is a matter to be decided by the court, not by an arbitrator, even if the parties signed an arbitration agreement. In Provost v YourMechanic, Inc. (2020) 55 Cal.App.5th 982, the defendant company sought to require the plaintiff to arbitrate whether he was an employee or an independent contractor before proceeding with a representative PAGA claim, based on the parties' arbitration agreement. (Id. at p. 987.) The appellate court rejected the defendant company's argument: "[T]hreshold issues involving whether a plaintiff is an 'aggrieved employee' for purposes of a representative PAGA-only action cannot be split into individual arbitrable and representative nonarbitrable components." (Id. at p. 996.) The court also held that, because the state...