Mondragon v. Santa Ana Healthcare & Wellness Ctr.

RUBYANN MONDRAGON, Plaintiff and Respondent, v. SANTA ANA HEALTHCARE & WELLNESS CENTRE, LP, et al., Defendants and Appellants.

B307872

California Court of Appeals, Second District, First Division

September 28, 2021

NOT TO BE PUBLISHED

APPEAL from an order of the Superior Court of Los Angeles County No 19STCV26878, Rupert A. Byrdsong, Judge. Affirmed.

Fisher & Phillips, Grace Y. Horoupian, Christopher M. Ahearn and Raymond W. Duer for Defendants and Appellants.

Cohelan Khoury & Singer, Michael D. Singer, Kristina De La Rosa; Hekmat Law Group and Joseph M. Hekmat for Plaintiff and Respondent.

CRANDALL, J. ^[*]

Plaintiff Rubyann Mondragon (Mondragon) sued her former employer, Santa Ana Healthcare & Wellness Centre (Santa Ana), seeking civil penalties under the Labor Code Private Attorneys General Act of 2004 (PAGA; Lab Code, § 2698 et seq.) for various wage, meal break and rest period violations. Santa Ana moved to compel “individual” arbitration under the parties' arbitration agreement, which provides that arbitration shall be the exclusive forum for any dispute, and which prohibits employees from joining or bringing a “representative action” or “acting as a private attorney general or representative of others.”

The trial court denied Santa Ana's motion, concluding that it was bound by the California Supreme Court decision in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian), which held that agreements to waive the right to bring PAGA representative actions were unenforceable. It rejected Santa Ana's contention that several intervening United States Supreme Court cases rendered the Iskanian rule invalid.

On appeal, Santa Ana renews its assertion that Iskanian was wrongly decided and conflicts with controlling United States Supreme Court authority. However, the specific issues before the Iskanian court have not been decided by the United States Supreme Court and we too remain bound by Iskanian. As such, Mondragon's PAGA waiver remains unenforceable.

We also reject Santa Ana's suggestion that Mondragon's PAGA action can be split off into an individual arbitrable claim. As explained in Iskanian, forcing a plaintiff to arbitrate a PAGA claim for penalties as a single-claimant procedure would frustrate the core objectives of the PAGA.

As there is nothing in Mondragon's PAGA-only complaint to compel arbitration, we affirm the trial court's order.

BACKGROUND

From December 18, 2017 to April 3, 2019, Mondragon was employed by Santa Ana as a nurse and medication technician. Throughout her employment Mondragon worked at Country Villa Plaza, a skilled nursing facility operated by Santa Ana.^[1] On December 18, 2017, as a condition of her employment, Mondragon signed an agreement to be bound by an alternative dispute resolution (ADR) policy (the Arbitration Agreement).^[2]

A. The Arbitration Agreement

The ADR policy states, in relevant part: “The ADR [p]olicy will be mandatory for ALL DISPUTES ARISING BETWEEN EMPLOYEES, ON THE ONE HAND, AND YOUR EMPLOYER, AND/OR ITS EMPLOYEES AND OFFICERS... ON THE OTHER HAND.... [¶] For parties covered by this [ADR] [p]olicy, alternative dispute resolution, including final and binding arbitration, is the exclusive means for resolving covered disputes.... [¶]... [¶] Covered disputes include any dispute arising out of or related to my employment, the terms and conditions of my employment and/or the termination of your employment....”

The ADR policy also contained a class action waiver: “I understand and agree this ADR [p]rogram prohibits me from joining or participating in a class action or representative action, acting as a private attorney general or representative of others, or otherwise consolidating a covered claim with the claim of others. Under this Policy, no arbitrator shall have the authority to order such class action or representative action.”

The separate document signed by Mondragon entitled “agreement to be bound by [ADR] policy, ” reiterated that the “ADR [p]olicy is understood to apply to all disputes relating to my employment, the terms and conditions of my employment, ” and also reiterated the class/representative action waiver, stating: “I agree this ADR policy prohibits me from joining or participating in a class action or representative action acting as a private attorney general or representative of others, or otherwise consolidating a covered claim with the claims of others.”

B. The Complaint for Civil Penalties under the PAGA

1. The Complaint

On July 31, 2019, after the requisite 65-day notice period, ^[3] Mondragon filed a “representative PAGA action” against Santa Ana, seeking civil penalties on behalf of herself and other aggrieved employees for a variety of wage, meal break, and rest period violations. The complaint pled nine causes of action, each stating that Mondragon was proceeding “as a representative of the general public, ” and was seeking “to recover any and all penalties for each and every violation, in an amount according to proof, as to those penalties that are otherwise only available in public agency enforcement actions.”

In her prayer for relief, Mondragon again stated that she sought “[m]aintenance of this claim as a [r]epresentative [a]ction under the PAGA” and prayed for judgment “only as to those remedies which are permissible... pursuant to the PAGA.”

2. Background on the PAGA

The California Legislature enacted the PAGA in 2003 after deciding that lagging labor law enforcement resources made additional private enforcement necessary “ ‘to achieve maximum compliance with state labor laws.' ” (Iskanian, supra, 59 Cal.4th at p. 379, quoting Arias v. Superior Court (2009) 46 Cal.4th 969, 980.)

“The purpose of the PAGA is not to recover damages or restitution, but to create a means of ‘deputizing' citizens as private attorneys general to enforce the Labor Code.” (Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 501.) Seventy-five percent of any penalties collected by a PAGA representative are distributed to the LWDA, while the remaining 25 percent are distributed to the aggrieved employees. (Lab. Code, § 2699, subd. (i).)

C. The motion to Compel Individual Arbitration

On July 24, 2020, Santa Ana moved to compel “individual (and not collective or representative) arbitration” arguing that the California Supreme Court's holding in Iskanian-that California public policy bars the waiver of PAGA representative claims-was wrongly decided and has since been further undermined by United States Supreme Court precedent defining the broad preemptive scope of the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.).^[4]

On August 17, 2020, the court denied the motion at a hearing with the parties, stating “the Iskanian case is still the good-to-go authority on this issue.” Later that day, the trial court issued a minute order and statement of decision summarizing its ruling.

The trial court pointed out that several intermediate appellate courts have held that the United States Supreme Court's broad view of the FAA's preemptive scope in Epic Systems Corp. v. Lewis (2018) 584 U.S. __ [138 S.Ct. 1612, 200 L.Ed.2d 887] (Epic Systems) (one of the cases cited by Santa Ana) did not undermine Iskanian's reasoning or holding. The trial court further noted that the recent PAGA decisions issued by the California Supreme Court have continued to cite to Iskanian without any indication that the United States Supreme Court authority has effected any change. The court concluded that it would therefore not enforce the provision of the Arbitration Agreement that prohibits Mondragon “from joining or participating in a... representative action” or “acting as a private attorney general or representative of others.”

On September 11, 2020, Santa Ana timely appealed the trial court's order.

DISCUSSION

A. Standard of Review

Where, as here, the trial court's order denying a motion to compel arbitration “rests solely on a decision of law, ” we review that decision de novo. (Robertson v. Health Net of California, Inc. (2005) 132 Cal.App.4th 1419, 1425.)

B. The FAA

In 1925, the FAA was enacted in response to widespread judicial hostility to arbitration agreements. (AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339 [131 S.Ct 1740, 179 L.Ed.2d 742] (Concepcion).) Section 2 of the FAA-its primary substantive provision-states in relevant part: “A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.)

The final clause of section 2, the FAA's savings clause, “permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,' but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” (Concepcion, supra, 563 U.S. at p. 339.) Moreover, even if a state-law rule is “generally applicable, ” it is preempted if it conflicts with the FAA's objectives. (Concepcion, supra, at p. 341.)

For example, in Concepcion, the United States Supreme Court held that the FAA preempted California's rule classifying class action or collective action waivers in consumer contracts of adhesion as unconscionable. (Concepcion, supra, 563 U.S. at pp 340-352.) The Concepcion court noted that although California's rule did not explicitly discriminate against arbitration (see id. at pp. 341-343), it “interfer[ed] with fundamental attributes of arbitration” (id. at p. 344), by effectively imposing...