Semprini v. Wedbush Sec. Inc.

320 Cal.Rptr.3d 338

Joseph SEMPRINI, et al, Plaintiffs and Respondents,

v.WEDBUSH SECURITIES INC., Defendant and Appellant.

G062622

Court of Appeal, Fourth District, Division 3.

Filed April 18, 2024

Appeal from an order of the Superior Court of Orange County, Randall J. Sherman, Judge. Affirmed. Motion to dismiss denied, (Super. Ct. No. 30-2015-00776114)

Loeb & Loeb, Michelle M. La Mar, Terrance D. Garnett, Devin A. Donohue, Los Angeles, and Andrew M. Hutchison, San Francisco, for Defendant and Appellant.

Callahan, Thompson, Sherman & Caudill, Robert W. Thompson, and Charles S. Russell, Irvine, for Plaintiffs and Respondents.

OPINION

GOETHALS, ACTING P. J.

This is an appeal from an order denying an employer’s motion to compel certain claims and parties to arbitration in a certified wage and hour class action. Finding the employer waived its right to arbitrate those claims by unreasonably delaying its motion to compel, we affirm.

Joseph Semprini filed this lawsuit against his employer, Wedbush Securities, Inc. (Wedbush), in March 2015, alleging 11 causes of action unique to him (e.g., for wrongful termination and discrimination) and seven putative class claims for alleged wage and hour violations. In April 2015, Semprini amended his complaint to add a representative cause of action under the Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.). In May 2015, Semprini and Wedbush stipu- lated that Semprini’s 11 personal claims would be arbitrated, while the remaining eight causes of action would proceed in the trial court. The class was certified in 2017, and the parties litigated Semprini’s class and PAGA claims in the trial court over the next several years, conducting extensive discovery, motion practice, and trial preparation.

Two events occurred in 2022 that, according to Wedbush, afforded it a new right to compel certain claims to arbitration, notwithstanding its 2015 stipulation. First, in June 2022, the United States Supreme Court issued its decision in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 142 S.Ct. 1906, 213 L.Ed.2d 179 (Viking River), holding that, contrary to prior California Supreme Court authority, an employer may enforce an employee’s agreement to arbitrate individual PAGA claims. Second, in the wake of Viking River, Wedbush asked its workforce to sign arbitration agreements, and two dozen class members, including the second named plaintiff, Bradley Swain, agreed to do so in September and October 2022.

In March 2023, just five months before trial, Wedbush filed a motion to (1) compel the named plaintiffs to arbitrate their individual PAGA claims under Viking River, and (2) compel to arbitration Swain and the 23 other class members who signed arbitration agreements in the fall of 2022. The trial court denied Wedbush’s motion, finding it had waived its right to compel arbitration by entering into the 2015 stipulation.

Although we rely on a different analysis than that relied on by the trial court, we affirm. As we explain below, even if Viking River or the fall 2022 arbitration agreements gave Wedbush a new right to move to compel certain claims to arbitration, Wedbush waited too long to make its motion, particularly in light of the looming trial date. Viking River was decided in June 2022; the 24 class members signed arbitration agreements in September and October 2022; but Wedbush waited until March 2023 to file its motion to compel arbitration. During that interim period Wedbush propounded discovery and filed other motions. Wedbush did not attempt to enforce its alleged arbitration rights until nine months post-Viking River and five to six months after select class members signed the new arbitration agreements. The record therefore supports the trial court’s finding that Wedbush waived its right to compel arbitration.

FACTS

Wedbush is a securities broker-dealer firm that provides financial planning and investment products through its financial advisors. It classifies its California financial advisors as exempt.

In March 2015, Joseph Semprini, a Wedbush financial advisor, filed a complaint against Wedbush individually and on behalf of a proposed class. In causes of action one through seven, Semprini alleged Wedbush misclassified him and his fellow employees as exempt and therefore committed various Labor Code violations, including failure to pay minimum wage, failure to pay overtime, and failure to provide meal and rest periods. In causes of action eight through 18, Semprini asserted claims that were personal to him, such as disability discrimination, failure to accommodate, retaliation, and wrongful termination.

One month later, before Wedbush had filed a responsive pleading, Semprini filed a first amended complaint adding a 19th cause of action under PAGA. PAGA is a 2004 statute that permits private plaintiffs to sue their employers on behalf of the State of California and collect civil penalties for Labor Code violations committed against them and other aggrieved employees. Semprini brought his PAGA claim both as an individual and as a representative.

In May 2015, Semprini and Wedbush stipulated that Semprini’s personal claims would be arbitrated in accordance with an earlier agreement between Wedbush and Semprini, and Semprini’s remaining claims (i.e., his wage and hour claims and PAGA claim) would proceed in the trial court.¹ The stipulation recited that "there is a written agreement between [Semprini and Wedbush] whereby they agreed that nonclass and non-putative class disputes between them shall be resolved by arbitration before the [FINRA]." The parties stipulated (1) Semprini’s "purely individual claims (causes of action 8-18) shall be resolved by FINRA arbitration," (2) Semprini’s "purely individual claims (causes of action 8-18) in this action should be stayed, pursuant to California Code of Civil Procedure section 1281.4, pending the resolution of the FINRA arbitration," and (3) "all other causes of action will proceed before this Court." The trial court signed the stipulation as an order in June 2015.

Semprini initiated the FINRA arbitration of his personal claims in July 2015. Several years later, a three-member arbitration panel issued an award in favor of Semprini on some claims and in favor of Wedbush on others.

Meanwhile, back in the trial court, the parties litigated Semprini’s wage and hour claims. Semprini moved to certify a class in 2016; in June 2017, the court certified a class of about 105 current and former Wedbush employees who were paid once per month and who earned commissions. Notice of the class action was sent to persons identified as meeting the class definition.

In November 2017, with Semprini’s health in decline, Bradley Swain joined the action as a second named plaintiff.² The second amended complaint filed by Semprini and Swain (collectively, Plaintiffs) alleged the same 19 causes of action alleged in the first amended complaint.

Wedbush raised the administrative exemption as an affirmative defense to Plaintiffs' wage and hour claims. This white collar exemption from overtime and related wage and hour laws only applies if the employee earns "a monthly salary equivalent to no less than two (2) times the state minimum wage for full-time employment." (Cal. Code Regs., tit. 8, § 11040, subd. 1(A)(2)(g).) The parties disputed whether Wedbush’s compensation structure for class members met the salary basis test.

The trial court held a bench trial on that issue in 2019. After finding in favor of Wedbush, the court entered a judgment for Wedbush and dismissed Plaintiffs’ wage and hour claims, including the PAGA claims. Plaintiffs appealed. This court reversed the judgment, holding Wedbush’s compensation structure does not satisfy the salary basis test and the administrative exemption does not apply. (Semprini v. Wedbush Securities, Inc. (2020) 57 Cal. App.5th 246, 248, 270 Cal.Rptr.3d 918.)

On remand, with leave of court, Wedbush filed an amended answer in April 2021, asserting a new affirmative defense based on the commissioned employee exemption. The parties then engaged in additional discovery on the applicability of that exemption.

Meanwhile, Wedbush identified additional potential class members, and the parties stipulated a second notice should be sent. As a result, the class grew to about 180 members.

In June 2022, while the parties were engaged in discovery, the United States Supreme Court announced its decision in Viking River, holding that an employer may enforce an employee’s agreement to arbitrate individual PAGA claims and then seek a dismissal in court of any remaining non-individual, representative PAGA claims based on lack of standing. (Viking River, supra, 596 U.S. at pp. 662-663, 142 S.Ct. 1906.)

Following that change in the law, in the fall of 2022, Wedbush asked its workforce to sign arbitration agreements agreeing that all claims against Wedbush (including individual PAGA claims) would be resolved through binding FINRA arbitration, and waiving any right to pursue a PAGA claim on a representative basis. Out of the entire certified class, 24 class members, including Swain, signed such arbitration agreements in September and October 2022.

In the months that followed, despite the approaching May 1 trial date, Wedbush did not advise Plaintiffs of its intent to move to compel arbitration pursuant to either Viking River or the newly signed arbitration agreements. Instead, Wedbush filed a motion to decertify the class in October 2022, and a motion to exclude certain class members from the class in November 2022. In January and February 2023, it propounded further written discovery on each named plaintiff, including additional requests for production of documents, special interrogatories, requests for admissions, form employment interrogatories, and deposition notices.

On March 17, 2023, the trial court continued the trial date from May 1, 2023 to August 21, 2023. On March 22, 2023, Wedbush filed its motion (1) to...