Opinion
F082404
11-19-2021
TRICIA GALARSA, Plaintiff and Respondent, v. DOLGEN CALIFORNIA, LLC, Defendant and Appellant.
McGuire Woods, Mathew C. Kane, Amy E. Beverlin, Sabrina A. Beldner and Travis Gunn for Defendant and Appellant. Robins Kaplan, Glenn A. Danas; The Bainer Law Firm, and Matthew R. Bainer for Plaintiff and Respondent.
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Kern County No. BCV-19-102504. Thomas S. Clark, Judge.
McGuire Woods, Mathew C. Kane, Amy E. Beverlin, Sabrina A. Beldner and Travis Gunn for Defendant and Appellant.
Robins Kaplan, Glenn A. Danas; The Bainer Law Firm, and Matthew R. Bainer for Plaintiff and Respondent.
OPINION
THE COURT[*]
Plaintiff Tricia Galarsa sued her former employer to recover civil penalties under the Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698 et seq.) for various Labor Code violations. The employer filed a motion to compel arbitration pursuant to an agreement signed by plaintiff when she began her employment. The superior court denied the motion, concluding plaintiff could not be compelled to arbitrate any portion of her PAGA representative claim.
Unlabeled statutory references are to the Labor Code.
We again conclude that (1) a former employee who is authorized to pursue PAGA representative claims cannot be compelled to arbitrate those claims pursuant to a predispute arbitration agreement and (2) this rule of state law is not preempted by federal law. (Herrera v. Doctors Medical Center of Modesto, Inc. (2021) 67 Cal.App.5th 538, 549-550 (Herrera).) Also, employer has not demonstrated the superior court was compelled as a matter of law to find that (1) the state assumed the obligation to arbitrate, (2) the state is bound by principles of agency to the arbitration agreement made before plaintiff became the state's authorized agent, or (3) plaintiff, as the state's agent, is equitably estopped from denying the arbitrability of the PAGA claim.
We therefore affirm the order denying the petition to compel arbitration.
FACTS
In March 2016, plaintiff applied for employment with Dolgen California, LLC (Dollar General). As part of the application and hiring process, plaintiff accessed Dollar General's Express Hiring system, which allows persons to receive, review, and acknowledge documents related to their hiring and employment. It is undisputed that on March 30, 2016, plaintiff electronically signed Dollar General's arbitration agreement.
This entity is a Tennessee limited liability company and a wholly owned subsidiary of Dollar General Corporation, a publicly traded company. Dollar General operates over 200 retail stores in California.
The arbitration agreement stated Dollar General "has a process for resolving employment related legal disputes with employees that involves binding arbitration." It also stated:
"You agree that, with the exception of certain excluded claims described below, any legal claims or disputes that you may have against Dollar General … arising out of your employment with Dollar General or termination of employment with Dollar General ("Covered Claim" or "Covered Claims") will be addressed in the manner described in this Agreement. You also understand that any Covered Claims that Dollar General may have against you related to your employment will be addressed in the manner described in this Agreement.
"Class and Collective Action Waiver: You and Dollar General may not assert any class action, collective action, or representative action claims in any arbitration pursuant to the Agreement or in any other forum. You and Dollar General may bring individual claims or multi-plaintiff claims joining together not more than three plaintiffs, provided that the claims are not asserted as a class, collective or representative action. Non-representative, multi-plaintiff arbitrations (up to the three-plaintiff limit) may only be filed if each of the plaintiff's claims: (1) arises out of the same transaction, occurrence, or series of transactions or occurrences; (2) arises out of the same work location; and (3) presents a common question of law or fact. A challenge to a multi-plaintiff action can be initiated by any party by filing a motion to dismiss or sever one or more parties. The arbitrator shall rule upon the motion to dismiss or sever based upon the standards set forth in this Paragraph. NOTE: This waiver does not apply to claims under the National Labor Relations Act."
The arbitration agreement also stated its procedures "will be the exclusive means of resolving Covered Claims relating to or arising out of your employment or termination of employment with Dollar General." The covered claims included alleged violations of wage and hour laws and alleged violations of any other state or federal laws. Plaintiff marked the box on the arbitration agreement stating she agreed to its terms and understood that by checking the box, both Dollar General and she would be bound by the agreement's terms. The agreement also contained an opt-out provision. Plaintiff did not opt out.
In April 2016, plaintiff began working for Dollar General as an hourly-paid assistant manager. Her employment ended in January 2017.
In October 2017, plaintiff's attorney mailed a written notice to the Labor and Workforce Development Agency and defendant pursuant to section 2699.3. Over 65 days passed without the agency responding to plaintiff's notice.
PROCEEDINGS
In February 2018, plaintiff filed a complaint seeking civil penalties under PAGA for violations of the Labor Code. In May 2018, plaintiff filed a first amended complaint for civil penalties under PAGA based on alleged violations of Labor Code sections 201, 202, 203, 204, 226, subdivision (a), 226.7, 510, 512, 1174, subdivision (d), 1194, 1197, 1197.1, and 1198. In June 2019, the parties stipulated to the transfer of the action from Contra Costa County Superior Court to Kern County Superior Court.
In July 2020, Dollar General filed a motion to compel arbitration and stay the proceeding pending completion of arbitration. The motion was supported by two declarations. Dollar General argued that plaintiff must individually arbitrate the alleged wage and hour violations that involved her, whether cast as a PAGA claim or otherwise.
In September 2020, the superior court held a hearing, announced a tentative ruling to deny the motion, and heard argument from counsel for Dollar General. Counsel argued that allowing plaintiff to pursue a PAGA only action enabled her to void her agreement to arbitrate all employment related disputes. The court stated that, in its view, the statutory scheme allowed an employee to avoid arbitration.
After the hearing, the superior court filed a minute order denying the motion to compel arbitration. The order concluded (1) an employee's right to bring a PAGA representative claim could not be waived, (2) the rule against waivers was not preempted by federal law, and (3) a PAGA claim could not be split into arbitrable individual claims and nonarbitrable representative claims. Dollar General appealed.
DISCUSSION
I. WAIVER OF REPRESENTATIVE CLAIMS WAS INVALID
Dollar General contends plaintiff waived her right to bring representative claims when she signed the arbitration agreement, and that waiver is enforceable under the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.). We disagree.
The California Supreme Court has adopted the rule 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." (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360 (Iskanian).) If this rule is good law, the waiver contained in Dollar General's arbitration agreement is not enforceable.
Iskanian's anti-waiver rule remains good law because it is not preempted by federal law. Our Supreme Court stated "that the FAA's goal of promoting arbitration as a means of private dispute resolution does not preclude our Legislature from deputizing employees to prosecute Labor Code violations on the state's behalf. Therefore, the FAA does not preempt a state law that prohibits waiver of PAGA representative actions in an employment contract." (Iskanian, supra, 59 Cal.4th at p. 360.) The court explained that "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 [Labor and Workforce Development] Agency or aggrieved employees-that the employer has violated the Labor Code." (Id. at pp. 386-387.)
Dollar General argues Iskanian's approach to federal preemption is no longer correct because more recent opinions of the United States Supreme Court are controlling. Dollar General contends this court can properly conclude that Epic Systems Corp. v. Lewis (2018) ___U.S. ___[138 S.Ct. 1612, 200 L.Ed.2d 889] (Epic Systems) and Lamps Plus, Inc. v. Varela (2019) ___U.S. ___[139 S.Ct. 1407, 203 L.Ed.2d 636] (Lamps Plus) impliedly abrogate the Iskanian rule banning contractual waivers of PAGA representative claims. Dollar General acknowledges that several decisions by the Court of Appeal have concluded that Iskanian remains good law and argues "those court are incorrect and this Court is not bound to follow them or Iskanian at this juncture."
After Dollar General filed is opening brief, this court issued an opinion following those Court of Appeal decisions and concluding "our Supreme Court's analysis of preemption under the FAA remains good law." (Herrera, supra, 67 Cal.App.5th at p. 550.) We cited Provost v. YourMechanic, Inc. (2020) 55 Cal.App.5th 982 (Provost) as authority for the conclusion that Epic Systems did not implicitly overrule Iskanian. (See Provost, at p. 998; Winns v. Postmates, Inc. (2021) 66 Cal.App.5th 803, 813, 814 ["several other cases that have reached the same conclusion that Epic Systems did not overrule Iskanian"; the contention that "Lamps Plus overruled Iskanian is equally unavailing"]; see also, Williams v. RGIS, LLC (2021) 70 Cal.App.5th 445, 451-454 [Correia and subsequent Court of Appeal decisions].)
Disagreeing with these decisions, Dollar General argues the United States Supreme Court created "a new, additional line of FAA preemption analysis that courts must employ-one that no California court has yet considered-which asks whether any 'devices or formulas' frustrate the FAA's objectives of enforcing private arbitration agreements." Dollar General asserts plaintiff is patently abusing the PAGA device to avoid her arbitration agreement and is utilizing the Iskanian rule to frustrate the FAA's objectives. As explained below, we reject this argument and conclude that pursuing a PAGA representative action instead of arbitrating individual causes of action is not a device or formula for frustrating the FAA. Therefore, plaintiff's pursuit of a PAGA action in a judicial forum is not preempted by federal law.
The opposite and more accurate view is that defendant is manipulating (i.e., overextending) federal arbitration law to undermine PAGA and the Legislature's public policy choices.
First, Dollar General's contention that Epic Systems and Lamps Plus contain a new line of preemption analysis misreads the decisions of the United States Supreme Court. In 2011, over three years before Iskanian was decided, the United States Supreme Court stated that "the judicial hostility towards arbitration that prompted the FAA had manifested itself in 'a great variety' of 'devices and formulas' declaring arbitration against public policy." (AT & T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 342 (Concepcion).) In Epic Systems, the court stated: "Just as judicial antagonism toward arbitration before the [FAA's] enactment 'manifested itself in a great variety of devices and formulas declaring arbitration against public policy,' Concepcion teaches that we must be alert to new devices and formulas that would achieve much the same result today. [Citation.] And a rule seeking to declare individualized arbitration proceedings off limits is, the Court held, just such a device." (Epic Systems, supra, 138 S.Ct. at p. 1623, italics added.) Therefore, contrary to Dollar General's view, the idea of striking down a state law as a device or formula that negates a private arbitration agreement predates Epic Systems, Lamps Plus and Iskanian. As a result, Dollar General's contention that the inquiry into "devices and formula" is a new, additional line of FAA preemption analysis is not convincing.
Second, the Legislature had legitimate reasons for enacting PAGA in 2003. The Legislature found and declared that (1) adequate financing of labor law enforcement was necessary to achieve maximum compliance with state labor laws; (2) in some situations the only meaningful deterrent to unlawful conduct is the vigorous assessment and collection of civil penalties; (3) staffing levels for labor law enforcement agencies had declined and were unlikely to keep pace with the future growth of the labor market; and (4) it was therefore in the public interest to allow aggrieved employees, acting as private attorneys general, to recover civil penalties for Labor Code violations, while also ensuring that labor law enforcement agencies' enforcement actions have primacy over private enforcement efforts. (Stats. 2003, ch. 906, § 1.) Thus, for purposes of federal preemption analysis, a PAGA action itself is not a "device" or "formula" that reflects judicial antagonism to the enforceability of private arbitration agreements. Furthermore, Iskanian's anti-waiver rule prevents employer from avoiding PAGA and does not directly address arbitration agreements, private or otherwise.
Third and most significantly, the FAA cannot be frustrated when the matter in question lies outside its scope. Here, the matter in question is a PAGA representative action and, as previously stated, a PAGA action "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 [Labor and Workforce Development] Agency or aggrieved employees-that the employer has violated the Labor Code." (Iskanian, supra, 59 Cal.4th at pp. 386-387.) Accordingly, an aggrieved employee's pursuit of a PAGA action in a judicial forum does not frustrate the FAA's "principal purpose of ensuring that private arbitration agreements are enforced according to their terms" (Volt Information Sciences, Inc. v. Bd. of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 478, italics added) any more than the Labor and Workforce Development Agency's pursuit of the PAGA claim in court would frustrate the FAA. (See Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 619 [the class action claim pursued in Epic Systems "differs fundamentally from a PAGA claim" because a PAGA claim is brought on behalf of the state, not on behalf of other employees].)
In sum, we conclude the rule against contractual waivers of PAGA representative claims established in Iskanian is not preempted by the analysis contained in Epic Systems or Lamps Plus. As a result, Dollar General's waiver is not enforceable in this case.
II. THE ARBITRATION AGREEMENT
A. Basic Legal Principles
1. Standards of Review
The standard of review applied to a denial of a motion or petition to compel arbitration depends on the issues raised on appeal. (Bautista v. Fantasy Activewear, Inc. (2020) 52 Cal.App.5th 650, 655 (Bautista).) For purposes of this appeal, there are three relevant standards of review.
First, the superior court's resolution of a question of law is subject to our independent or de novo review. (Bautista, supra, 52 Cal.App.5th at p. 655.) For example, where the facts are not disputed, whether a valid agreement to arbitrate was formed is reviewed de novo. (Juen v. Alain Pinal Realtors, Inc. (2019) 32 Cal.App.5th 972, 978 (Juen).) Also, in part I of this opinion, we conducted a de novo review of the legal issues raised by Dollar General's contention that the waiver of representative actions contained in its arbitration agreement was enforceable.
Second, the superior court's express or implied findings of fact must be supported by substantial evidence. (Bautista, supra, 52 Cal.App.5th at p. 655.) The third standard of review, which has not been addressed by the parties, also relates to disputed facts. The superior court's express or implied determination that an appellant did not carry its burden of proof is reviewed on appeal for whether the evidence compels a finding in the appellant's favor as a matter of law. (Juen, supra, 32 Cal.App.5th at pp. 978-979.) To prevail under this standard, the appellant's evidence must be (1) uncontradicted and unimpeached and (2) of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding. (Id. at p. 979.)
2. Proving the Existence of a Contract to Arbitrate
The party seeking arbitration bears the burden of proving the existence of an arbitration agreement by a preponderance of the evidence. (Juen, supra, 32 Cal.App.5th at p. 978.) The party opposing arbitration bears the burden of proving by a preponderance of the evidence any defense. (Ibid.) The existence of an enforceable arbitration agreement is governed by state law principles for the formation, revocation, and enforcement of contracts. (Ibid.)
Based on the foregoing principles, Dollar General had the burden of proving the essential elements of a contract, which are (1) parties capable of contracting, (2) the consent of those parties, (3) a lawful object, and (4) adequate consideration. (Civ. Code, § 1550.) The consent of the parties must be (1) free, (2) mutual, and (3) communicated by each to the other. (Civ. Code, § 1565.) Also, an arbitration agreement must be in writing to be valid and enforceable. (Code Civ. Proc., § 1281.)
A written arbitration agreement does not necessarily need to be signed because "a party's acceptance may be implied in fact [citation] or be effectuated by delegated consent [citation]." (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 (Pinnacle).) There are six theories by which a nonsignatory to a contract may be bound by the contract's arbitration provisions: (1) incorporation by reference, (2) assumption, (3) agency, (4) veil-piercing or alter ego, (5) estoppel, and (6) third-party beneficiary. (Bautista, supra, 52 Cal.App.5th at p. 657, fn. 6 [none of the theories applied to the PAGA representative action pursued by the plaintiffs; denial of arbitration affirmed]; see Comment, Nonsignatories in Arbitration: A Good-Faith Analysis (2010) 14 Lewis & Clark L. Rev. 953, 957.) In this appeal, Dollar General relies on assumption, agency, and estoppel.
B. Contentions of the Parties
Dollar General contends its arbitration agreement is worded broadly enough to reach the PAGA claim and, under California contract law principles of assumption, agency and estoppel, the state is bound by the arbitration agreement. Relying on these contract theories, Dollar General asserts "California's consent provides an alternative avenue for enforcing the arbitration agreement." Dollar General further asserts that some courts "have ruled summarily that California did not consent to arbitration, but there is no binding or reasoned decision rejecting this argument. Simply put, the premise that California never agreed to arbitrate is incorrect."
Dollar General's reference to "consent" reflects that the consent of the parties is an essential element to the formation of a contract (Civ. Code, §§ 1550, 1565) and that arbitration" 'is strictly a matter of consent.'" (Lamps Plus, supra, 139 S.Ct. at p. 1415.)
Plaintiff contends Dollar General's contract theories fail because (1) Dollar General waived the arguments by not asserting them in the superior court, (2) the contract theories are irrelevant, (3) plaintiff was not the state's agent when she signed the arbitration agreement, (4) the state did not assume plaintiff's personal obligation to arbitrate by not intervening after receiving plaintiff's notice, and (5) plaintiff and the state do not qualify as closely related parties.
C. Procedural Issues
1. Waiver of Arguments
Dollar General contends it did not waive or forfeit the argument that the state was bound by plaintiff's arbitration agreement, it addressed consent specifically, and it "set forth the factual and legal basis that supports its assumption and estoppel arguments on appeal." For purposes of this appeal, we assume that Dollar General may pursue its contractual theories.
2. What the Superior Court Decided
Dollar General's claims of superior court error raise questions about what determinations the superior court made in reaching its decision. A more fundamental issue is how an appellate court determines what disputes the superior court resolved.
Our starting point is California's constitutional doctrine of reversible error. (Herrera, supra, 67 Cal.App.5th at p. 546; see Cal. Const., art. VI, § 13.) Under the doctrine, the superior court's order is presumed correct and the appellant must affirmatively demonstrate prejudicial error. (Ibid.) All intendments and presumptions are indulged to support the superior court's order on matters as to which the record is silent. (Ibid.; Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)
A silent record may be avoided by a party seeking or opposing arbitration simply by requesting a statement of decision. (Code Civ. Proc., § 1291; see Code Civ. Proc., § 632; Cal. Rules of Court, rule 3.1590.) Here, Dollar General did not request a statement of decision and the superior court did not address the contract theories during the hearing or in its written order. Under the rules of appellate procedure, this silence requires us to indulge all presumptions that support the order denying arbitration. Because Dollar General had the burden of proving the existence of an arbitration agreement that was binding on the state, the presumption we indulge is that the superior court impliedly determined Dollar General did not carry its burden of proof.
Having determined what the superior court decided, we next identify the applicable standard of review. We review the superior court's implied failure-of-proof determination to see if the evidence compels, as a matter of law, a finding that the state consented to arbitration. (Juen, supra, 32 Cal.App.5th at pp. 978-979; see Martinez v. BaronHR, Inc. (2020) 51 Cal.App.5th 962, 966 [existence of consent to arbitrate is a question of fact].) Such a finding is compelled when the appellant's evidence is (1) uncontradicted and unimpeached and (2) of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding. (Juen, at p. 979.) As described below, Dollar General has not demonstrated a finding that the state consented to arbitration is compelled as a matter of law.
D. Contract Theories
1. Assumption
A nonsignatory "may be bound by an arbitration clause if its subsequent conduct indicates that it is assuming the obligation to arbitrate." (Thomson-CSF, S.A. v. American Arbitration Assoc. (2d Cir. 1995) 64 F.3d 773, 777 (Thomson-CSF).) For example, in Gvozdenovic v. United Airlines, Inc. (2d Cir. 1991) 933 F.2d 1100, United Airlines had a collective bargaining agreement with a union representing its flight attendants. (Id. at p. 1103.) United Airlines acquired routes and related assets from another airline and agreed to hire the flight attendants assigned to those routes. A dispute arose over the seniority rights of the incoming flight attendants and United Airlines and the union attempted to arbitrate the dispute. (Id. at p. 1105.) The incoming flight attendants argued they were not required to arbitrate the dispute because the agreement in question had been entered into before their employment with United Airlines began. The court concluded the incoming flight attendants' "conduct manifested a clear intent to arbitrate the dispute." (Ibid.) That conduct included sending a representative to act on their behalf in the arbitration process. (Ibid.) As a result, the court determined the incoming flight attendants were bound by the arbitration agreement.
In Thomson-CSF, the plaintiff was aware of an agreement that purported to bind it as an affiliate of a signing party. (Thomson-CSF, supra, 64 F.3d at p. 777.) The plaintiff, however, explicitly disavowed any obligations arising out of that agreement and filed an action seeking a declaratory judgment that it was not liable under the agreement. Consequently, the court concluded the plaintiff's conduct did not establish it assumed its affiliate's agreement to arbitrate. (Ibid.)
Here, the record contains little evidence of conduct by the state and the Labor and Workforce Development Agency after plaintiff and Dollar General entered into the arbitration agreement. Dollar General's motion to compel arbitration was supported by a declaration of its attorney and a declaration of Debbie Roach, "a senior manager, HR Shared Services," for Dollar General's parent company. Neither declaration describes any conduct by the state or its agencies. Some conduct is described in the first amended complaint. It alleges that on October 11, 2017, plaintiff provided written notice to the Labor and Workforce Development Agency of Dollar General's alleged Labor Code violations as required by PAGA and over 65 days passed without a response from the agency. For purpose of this appeal, we join the parties in accepting the truth of these allegations.
As a result, the only conduct by the state or the Labor and Workforce Development Agency before this court is the agency's inaction after receiving the plaintiff's notice. There is no evidence that the state or the agency was aware an arbitration agreement existed. Furthermore, Dollar General's assertion of fact that the state or the Labor and Workforce Development Agency completed an "extensive deliberative and investigative process to select [plaintiff] as its agent" is not supported by a citation to direct or circumstantial evidence. Thus, the assertion appears to be based on supposition, speculation, conjecture or surmise.
Consequently, we conclude Dollar General has not shown its evidence was of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding of an intent to assume the arbitration obligation. (See Juen, supra, 32 Cal.App.5th at p. 979.) Accordingly, the trial court was not compelled as a matter of law to find in favor of Dollar General on its assumption theory.
2. Agency
Dollar General contends that both contract law and common sense compel parties to comply with their contractual obligations regardless of any subsequent agency relationship with a third party. We disagree.
The party seeking enforcement of an arbitration contract has the burden of establishing the authority of a person who purportedly signed the agreement as an agent on behalf of a nonsignatory party. (Ermoian v. Desert Hospital (2007) 152 Cal.App.4th 475, 506 ["burden of proving ostensible agency is upon the party asserting that relationship"]; Pagarigan v. Libby Care Center, Inc. (2002) 99 Cal.App.4th 298, 301- 302 [skilled nursing facility failed to produce required evidence that children of deceased mother had authority to enter into an arbitration agreement on her behalf]; Oswald Machine & Equipment, Inc. v. Yip (1992) 10 Cal.App.4th 1238, 1247 ["[u]nless the evidence is undisputed, the scope of an agency relationship is a question of fact, and the burden of proof rests on the party asserting the relationship"].)
Here, Dollar General has presented no evidence that plaintiff was an actual or ostensible agent of the state when she signed the arbitration agreement. Based on allegations we and the parties have assumed to be true, plaintiff became the authorized agent of the state for purposes of pursuing the PAGA claim in late 2017 when 65 days passed without receiving a response to the PAGA notice she sent to the Labor and Workforce Development Agency.
Dollar General's agency theory also is contrary to the following rule of state law:" 'Without the state's consent, a predispute agreement between an employee and an employer cannot be the basis for compelling arbitration of a representative PAGA claim because the state is the owner of the claim and the real party in interest, and the state was not a party to the arbitration agreement.'" (Herrera, supra, 67 Cal.App.5th at p. 549.) The rationale for this rule, set forth in many cases, is that the employee was not acting as the state's agent or assignee when the employee signed the arbitration agreement. (E.g., Correia v. NB Baker Electric, Inc., supra, 32 Cal.App.5th at p. 622.) Thus, the state, in its role as principal, is not bound by unauthorized acts taken by the employee before the employee became the state's agent.
In sum, the evidence in the record does not compel, as a matter of law, a finding that the state is bound to arbitrate under an agreement that plaintiff signed before she became the state's authorized agent.
3. Equitable Estoppel and Closely Related Parties
Dollar General contends (1) equitable estoppel may be a ground for binding a nonsignatory to an arbitration agreement; (2) the closely related parties doctrine is a form of equitable estoppel; and (3) the state is a closely related party because the state's enforcement interests are intertwined with plaintiff's personal interests. As a result, Dollar General concludes plaintiff's arbitration agreement also binds the state as a closely related party.
Plaintiff contends that (1) no California case law has applied the closely related party doctrine to bind a nonsignatory to an arbitration agreement; (2) the doctrine, even if applicable in the arbitration context, cannot be applied because the state does not have the high level of involvement necessary to qualify as a closely related party; (3) the essential elements of equitable estoppel do not exist because the PAGA claim alleged is statutory and not inextricably bound up with the contractual obligations of an agreement containing an arbitration clause; and (4) Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, is distinguishable from the facts of this case because it involved a nonsignatory seeking to bind a signatory to arbitration.
First, we consider the legal question of whether the doctrine of closely related parties should be extended to arbitration agreements. We conclude it should not be extended.
The closely related party doctrine has been applied by California courts to forum selection clauses, but not to arbitration clauses. (See Bugna v. Fike (2000) 80 Cal.App.4th 229; Lu v. Dryclean-U.S.A. of California, Inc. (1992) 11 Cal.App.4th 1490, 1493-1494; Net2Phone, Inc. v. Superior Court (2003) 109 Cal.App.4th 583, 596 [nonsignatory is not bound by agreement's forum selection clause unless nonsignatory is closely related to a signatory to the agreement].) In Bancomer, S.A. v. Superior Court (1996) 44 Cal.App.4th 1450, the court explained the closely related party doctrine by stating: "For [defendant] to demonstrate that it was 'so closely related to the contractual relationship' that it is entitled to enforce the forum selection clause, it must show by specific conduct or express agreement that (1) it agreed to be bound by the terms of the purchase agreement, (2) the contracting parties intended [defendant] to benefit from the purchase agreement, or (3) there was sufficient evidence of a defined and intertwining business relationship with a contracting party." (Id. at p. 1461.)
In comparison, California courts have applied the doctrine of equitable estoppel to arbitration agreements and those published decisions have developed principles for analyzing whether estoppel compels arbitration. For example, in Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, the court described the application of equitable estoppel to prevent a nonsignatory from avoiding arbitration:
"A nonsignatory plaintiff may be estopped from refusing to arbitrate when he or she asserts claims that are 'dependent upon, or inextricably intertwined with' the underlying contractual obligations of the agreement containing the arbitration clause. [Citation.] 'The focus is on the nature of the claims asserted .... That the claims are cast in tort rather than contract does not avoid the arbitration clause.' [Citation.] Rather,' "[t]he plaintiff's actual dependence on the underlying contract in making out the claim against the nonsignatory ... is ... always the sine qua non of an appropriate situation for applying equitable estoppel."' [Citations.] '[E]ven if a plaintiff's claims "touch matters" relating to the arbitration agreement, "the claims are not arbitrable unless the plaintiff relies on the agreement to establish its cause of action."' [Citations.] 'The fundamental point' is that a party is 'not entitled to make use of [a contract containing an arbitration clause] as long as it worked to [his or] her advantage, then attempt to avoid its application in defining the forum in which [his or] her dispute ... should be resolved.'" (Id. at p. 306.)
We conclude the foregoing legal principles defining the application of equitable estoppel to an arbitration agreement should be applied to determine whether plaintiff, as a representative of the state, is equitably estopped from refusing to arbitrate the PAGA claim.
Next, we consider whether Dollar General has demonstrated the evidence in this case compels a finding that equitable estoppel requires the PAGA claim to be arbitrated. As described below, Dollar General has failed to make such a demonstration.
The focus of the PAGA cause of action is alleged violations of the Labor Code. Dollar General has not demonstrated that plaintiff is actually dependent upon the underlying employment contract to make out any one of the statutory violations. More specifically, Dollar General has not shown a particular provision of the employment agreement is relied upon to establish a Labor Code violation alleged by plaintiff. Thus, Dollar General has not established plaintiff's pursuit of the PAGA cause of action involves her" 'cherry-picking' the provisions of a contract that [she] will benefit from and ignoring other provisions that don't benefit [her] or that [she] would prefer not to be governed by (such as an arbitration clause)." (Invista S.A.R.L. v. Rhodia, S.A. (3d Cir. 2010) 625 F.3d 75, 85; see Comment, Nonsignatories in Arbitration: A Good-Faith Analysis, supra, 14 Lewis & Clark L. Rev. at p. 962 ["if a nonsignatory sues based on direct contractual benefits or rights, the signatory may compel arbitration"].) Accordingly, Dollar General has not demonstrated equitable estoppel applies to the PAGA claim pursued in this litigation.
E. Individual Claims
Dollar General asks this court to distinguish between the PAGA claims based on Labor Code violations involving her, which it describes as her individual PAGA claims, and the PAGA claims based on Labor Code violations involving other employees. Dollar General contends "the representative PAGA action brought on behalf of California can be limited in its scope so that the dispute is bilateral, involving an individual PAGA claims concerning only the named plaintiff's violations rather than a representative PAGA claim concerning those of other aggrieved employees." In short, Dollar General seeks arbitration only of the alleged Labor Code violations relating to plaintiff.
We reject this argument because, regardless of whether plaintiff is pursuing civil penalties for Labor Code violations involving her or other employees, (1) she is doing so as a representative of the state and (2) PAGA claims fall outside the arbitration agreement.
First, "[a]ll PAGA claims are 'representative' actions in the sense that they are brought on the state's behalf. The employee acts as 'the proxy or agent of the state's labor law enforcement agencies' and 'represents the same legal right and interest as' those agencies - 'namely, recovery of civil penalties that otherwise would have been assessed and collected by the Labor Workforce Development Agency.'" (ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 185.) When civil penalties are recovered under PAGA, 75 percent goes to the Labor and Workforce Development Agency and the remaining 25 percent goes to the aggrieved employees. (Esparza v. KS Industries, L.P. (2017) 13 Cal.App.5th 1228, 1240-1241; see § 2699, subd. (i).)
Second, a PAGA claim lies outside the scope of the agreement to arbitrate because "it is not a dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between the employer and the state, which alleges … that the employer has violated the Labor Code." (Iskanian, supra, 59 Cal.4th at p. 386-387.) Regardless of semantics, the fact some of the Labor Code violations involved plaintiff does not change the nature of the PAGA claim and cause a portion of the claim to fall within the scope of the arbitration agreement.
DISPOSITION
The order denying the petition to compel arbitration judgment is affirmed. Plaintiff shall recover her costs on appeal.
[*] Before Franson, Acting P. J., Peña, J. and Snauffer, J.