Winns v. Postmates Inc.

66 Cal.App.5th 803

281 Cal.Rptr.3d 460

Melanie WINNS et al., Plaintiffs and Respondents,

v.POSTMATES INC., Defendant and Appellant.

A155717

Court of Appeal, First District, Division 3, California.

Filed July 20, 2021

Mostafavi Law, Amir Mostafavi, Los Angeles, for Plaintiffs and Respondents.

Gibson, Dunn & Crutcher, Theane Evangelis, Los Angeles, Michele L. Maryott, Irvine, Bradley J. Hamburger, and Dhananjay S. Manthripragada, Los Angeles, for Defendant and Appellant.

Petrou, J. Postmates Inc. (Postmates) appeals from the trial court's order denying its petition to compel arbitration of a Private Attorney General Act (PAGA) claim for civil penalties brought by Plaintiffs Melanie Ann Winns, Ralph John Hickey Jr., and Kristie Logan (collectively Plaintiffs). In denying Plaintiffs’ petition with respect to their PAGA claim, the trial court followed our Supreme Court's decision in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129 ( Iskanian ), which held that representative action waivers were unenforceable. We reject Postmates’ arguments that Iskanian was abrogated by subsequent United States Supreme Court decisions and affirm the order denying the motion to compel arbitration of the PAGA claim.

FACTUAL AND PROCEDURAL BACKGROUND

Postmates is a technology company that connects customers needing delivery services with "couriers"—third-party delivery providers—through its website or smartphone app. Postmates’ website and app enable customers to arrange for the delivery of items from local businesses by placing orders electronically.

Beginning on March 1, 2017, prospective couriers seeking to offer their delivery services were presented with Postmates’ Fleet Agreement when logging onto the app for the first time. Before offering delivery services, a courier had to agree to the Fleet Agreement, which was intended to govern the relationship between Postmates and couriers.

The Fleet Agreement directs a prospective courier as follows: "Please review the mutual arbitration provision set forth below in Section 11 carefully, as it will require you to resolve disputes with Postmates on an individual basis, except as otherwise provided in Section 11, through final and binding arbitration unless you choose to opt out of the mutual arbitration provision. By digitally signing this agreement, you will be acknowledging that you have read and understood all of the terms of this agreement (including the Mutual Arbitration Provision in Section 11) and have taken time to consider the consequences of this important business decision." (Bold and block capitals omitted.)

The Mutual Arbitration Provision in Section 11 of the Agreement provides that Postmates and couriers "mutually agree to resolve any disputes between them exclusively through final and binding arbitration instead of filing a lawsuit in court." This applies to "any and all claims between the [p]arties," including but not limited to claims related to a courier's classification as an independent contractor, the delivery fees received by a courier for deliveries, and state and local wage and hour laws. Under its terms, the Provision is "governed exclusively by the Federal Arbitration Act ( 9 U.S.C. §§ 1 – 16 ) (‘FAA’)."

In addition, the Mutual Arbitration Provision includes a "Representative Action Waiver." (Bold omitted.) This waiver provision states that the parties "mutually agree that any and all disputes or claims between the [p]arties will be resolved in individual arbitration. The [p]arties further agree that by entering into this Agreement, they waive their right to have any dispute or claim brought, heard or arbitrated as a representative action, or to participate in any representative action, and an arbitrator shall not have any authority to arbitrate a representative action."

The Fleet Agreement gives couriers the right to opt out of arbitration. The opt out provision states: "Arbitration is not a mandatory condition of [the courier's] contractual relationship with Postmates, and therefore Contractor may submit a statement notifying Postmates that Contractor wishes to opt out of this Mutual Arbitration Provision." (Bold omitted.) A courier wishing to opt out does so by submitting an "Opt Out Form" to Postmates within 30 days of agreeing to the Fleet Agreement.

Plaintiffs all worked as Postmates couriers and completed deliveries through the app after March 1, 2017. In doing so, all three plaintiffs necessarily acknowledged the Fleet Agreement. Postmates did not receive opt out forms for any of them.

In December 2017, Plaintiffs filed their operative first amended complaint against Postmates as a putative class and representative action.¹ Plaintiffs alleged individual and class claims under the Labor Code and Unfair Competition Law. They alleged in part that Postmates illegally withheld wages and took gratuities given to couriers. They alleged that they and all other couriers in California who had delivered through the Postmates app had been misclassified as independent contractors instead of employees. They also alleged representative claims under PAGA for which they sought civil penalties and statutory damages for underpaid wages under Labor Code section 558.

In January 2018, Postmates moved to compel arbitration of Plaintiffs’ claims for damages and underpaid wages claim pursuant to the Fleet Agreement and to strike the class allegations. They also sought to stay Plaintiffs’ claim for civil penalties under PAGA pending the outcome of arbitration, as Postmates deemed the PAGA claim derivative of Plaintiffs’ other claims.

After Plaintiffs filed their motion, the United States Supreme Court decided Epic Systems Corp. v. Lewis (2018) ––– U.S. ––––, 138 S.Ct. 1612, 200 L.Ed.2d 889 ( Epic Systems ). In supplemental briefing directed at Plaintiffs’ PAGA civil penalty claim, Postmates argued that Epic Systems implicitly overruled the California Supreme Court's opinion in Iskanian , supra , 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129, to the extent Iskanian held that PAGA waivers in arbitration agreements were unenforceable. On that basis, Postmates requested that Plaintiffs also be compelled to arbitrate their PAGA claim for civil penalties.

Following a hearing, the trial court issued an order granting in part and denying in part Postmates’ motion. After finding that a valid arbitration agreement existed between the parties, the court granted the motion to compel arbitration with respect to Plaintiffs’ individual claims, including their claim under Labor Code section 558. It stayed the class claims pending an arbitrator's determination of whether the FAA or California law governed the Fleet Agreement.

As to Plaintiffs’ PAGA civil penalty claim relevant here, the court held that it could not compel that claim to arbitration and stayed the claim pending the outcome of the arbitration of Plaintiffs’ individual claims. The court concluded that Epic Systems did not compel Plaintiffs to arbitrate that claim as Epic Systems "addressed only the question of whether class or collective action waivers were enforceable under the FAA," and "did not address the enforceability of waivers of representative actions, such as those brought under PAGA," and thus "representative action waivers remain unenforceable under Iskanian ." The court also held arbitration of Plaintiffs’ PAGA civil penalty claim was barred under a clause in the parties’ arbitration agreement stating that " ‘an arbitrator shall not have any authority to arbitrate a representative action.’ "

This appeal followed.

DISCUSSION

On appeal, Postmates seeks reversal only of the trial court's order denying Postmates’ motion to compel Plaintiffs Winns, Hickey, and Logan to arbitrate their PAGA claim.² Postmates submits it was error for the trial court to refuse to enforce the arbitration agreement according to its terms because Iskanian does not apply and was effectively overruled by Epic Systems. Based on our de novo review ( Julian v. Glenair, Inc. (2017) 17 Cal.App.5th 853, 864, 225 Cal.Rptr.3d 798 ), we reject these contentions and conclude the trial court properly denied Postmates’ petition to compel arbitration of Plaintiffs’ PAGA claim.

PAGA "authorizes an employee to bring an action for civil penalties on behalf of the state against his or her employer for Labor Code violations committed against the employee and fellow employees, with most of the proceeds of that litigation going to the state." ( Iskanian , supra , 59 Cal.4th at p. 360, 173 Cal.Rptr.3d 289, 327 P.3d 129.) The Legislature enacted PAGA "to remedy systemic underenforcement of many worker protections" ( Williams v. Superior Court (2017) 3 Cal.5th 531, 545, 220 Cal.Rptr.3d 472, 398 P.3d 69 ) and to enhance the state's enforcement of labor laws by " ‘allow[ing] aggrieved employees, acting as private attorneys general, to recover civil penalties for Labor Code violations, with the understanding that labor law enforcement agencies [are] to retain primacy over private enforcement efforts’ " ( Iskanian , at p. 379, 173 Cal.Rptr.3d 289, 327 P.3d 129 ). Although PAGA empowers employees to act as the agent of the Labor Commissioner, the governmental entity "is always the real party in interest." ( Id. at p. 382, 173 Cal.Rptr.3d 289, 327 P.3d 129.) A PAGA action is therefore "a type of qui tam action" " ‘ "designed to protect the public and not to benefit private parties." ’ " ( Id. at pp. 382, 387, 173 Cal.Rptr.3d 289, 327 P.3d 129.)

In Iskanian , the California Supreme Court examined two related questions regarding the pre-dispute waiver of PAGA claims: (1) whether arbitration agreements requiring employees to waive their right to bring PAGA actions are unenforceable under state law and, if so, (2) whether the FAA preempts that rule. ( Iskanian , supra , 59 Cal.4th at p. 378, 173 Cal.Rptr.3d 289, 327 P.3d 129.) First, the court held that pre-dispute waivers requiring employees to relinquish the right to assert a ...