Opinion
A160556
08-12-2021
CHRISTIAN MALASPINA, Plaintiff and Respondent, v. MAPLEBEAR INC. dba INSTACART, Defendant and Appellant.
NOT TO BE PUBLISHED
San Francisco County Super. Ct. No. CGC-19-574194
Petrou, J.
Maplebear Inc. dba Instacart (Instacart) appeals from the trial court's order denying its petition to compel arbitration of a Private Attorney General Act (PAGA) action brought by Instacart shopper Christian Malaspina. In denying the petition, the trial court followed our Supreme Court's decision in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian), which held that a worker's right to bring a representative action under PAGA cannot be waived and that this state law rule is not preempted by the Federal Arbitration Act (FAA). We reject Instacart's arguments that Iskanian was overruled by subsequent U.S. Supreme Court decisions and affirm the order denying the motion to compel arbitration.
Factual and Procedural Background
Instacart operates a communications and logistics platform through its website and smartphone application (“the Instacart app”) which facilitates grocery shopping and delivery services in certain areas throughout the United States. Through the Instacart app, Instacart connects “shoppers” with consumers seeking grocery shopping and delivery services. Before offering these services, a shopper must download the Instacart app and complete the registration process. This includes signing the Independent Contractor Agreement (Agreement).
In June 2017, Malaspina completed the registration required to be a shopper and signed the Agreement. Section 7 of the Agreement, entitled “MUTUAL AGREEMENT TO ARBITRTATE DISPUTES (‘Arbitration Provision')” (bold omitted), contains several provisions regarding dispute resolution between Instacart and Malaspina, respectively referred to in the Agreement as Company and Contractor.
The Arbitration Provision states that, unless first resolved amicably between the parties, “all disputes, claims or controversies arising out of or relating to this Agreement or the Services performed by Contractor shall be resolved by final and binding arbitration by a neutral arbitrator.” (Bold omitted.) Claims subject to arbitration include disputes under the California Labor Code and the California Wage Orders. The Arbitration Provision further states, “The Parties agree that the enforceability of this Arbitration Provision [is] governed by the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq.”
Additionally, the Arbitration Provision contains the following provision: “Waiver of Representative Action Claims: By signing this Agreement, the Company and Contractor agree that each may bring and pursue claims against the other only in their individual capacities, and may not bring, pursue or act as a plaintiff or representative in any purported representative proceeding or action or otherwise participate in any such representative proceeding or action other than on an individual basis except to the extent this provision is unenforceable as a matter of law. Notwithstanding any other provision in this Agreement, if the waiver set forth in this paragraph is found to be unenforceable, the Parties agree that any representative action claims will be litigated in a court of competent jurisdiction and not as a representative arbitration.” (Bold omitted.)
Malaspina filed a putative class action complaint against Instacart alleging the company systemically violated the employment rights of shoppers through unlawful compensation and payroll policies. In December 2019, he filed the operative second amended complaint asserting only a single cause of action for civil penalties under PAGA.
Instacart moved to compel Malaspina to arbitrate his PAGA claim on an individual basis and to stay the court proceedings pending arbitration on the basis that the Arbitration Agreement required all disputes or claims relating to Malaspina's services to be arbitrated and contained a representative action waiver governed by the FAA and applicable to his claim. While Instacart recognized that “the California Supreme Court in [Iskanian] held that PAGA waivers in arbitration agreements [were] unenforceable on public policy grounds, ” it argued that subsequent U.S. Supreme Court decisions in Epic Systems Corp. v. Lewis (2018) 138 S.Ct. 1612 (Epic Systems), and Lamps Plus, Inc. v. Varela (2019) 139 S.Ct. 1407 (Lamps Plus), affirmed the enforceability of Malaspina's waiver under the FAA and overruled Iskanian.
The trial court denied Instacart's petition to compel arbitration, and Instacart timely appealed.
Discussion
Instacart argues the trial court erred in resting its decision on Iskanian, which the company contends cannot survive the U.S. Supreme Court decisions in Epic Systems and Lamps Plus. Based on our de novo review (Julian v. Glenair, Inc. (2017) 17 Cal.App.5th 853, 864), we reject these contentions and conclude the trial court properly denied Instacart's petition to compel arbitration.
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.) The Legislature enacted PAGA “to remedy systemic underenforcement of many worker protections” (Williams v. Superior Court (2017) 3 Cal.5th 531, 545) 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). 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.) 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.)
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.) First, the court held that pre-dispute waivers requiring employees to relinquish the right to assert a PAGA claim on behalf of other employees were prohibited, as such waivers violate public policy and “harm the state's interests in enforcing the Labor Code and in receiving the proceeds of civil penalties used to deter violations.” (Id. at p. 383.) Second, the court held the FAA did not preempt this rule invalidating PAGA waivers in arbitration agreements because “the FAA aims to ensure an efficient forum for the resolution of private disputes, whereas a PAGA action is a dispute between an employer and the state [Labor and Workforce Development] Agency.” (Id. at p. 384.) PAGA actions “directly enforce the state's interest in penalizing and deterring employers who violate California's labor laws.” (Id. at p. 387.) The FAA, which “aims to promote arbitration of claims belonging to the private parties to an arbitration agreement, ” “does not aim to promote arbitration of claims belonging to a government agency.” (Id. at p. 388.) This “is no less true when such a claim is brought by a statutorily designated proxy for the agency as when the claim is brought by the agency itself. The fundamental character of the claim as a public enforcement action is the same in both instances.” (Ibid.)
In its opening brief, Instacart acknowledges that California courts must follow California Supreme Court decisions unless intervening U.S. Supreme Court decisions “address similar issues differently.” Malaspina asserts that it is “axiomatic that ‘intermediate appellate courts in California must follow the decisions of the California Supreme Court unless the [U.S.] Supreme Court has decided the same question differently.' ” Indeed, when determining whether U.S. Supreme Court decisions have overruled California Supreme Court decisions on issues of federal law, this “same question” standard has been cited and applied in Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 619 (Correia) and Truly Nolen of America v. Superior Court (2012) 208 Cal.App.4th 487, 507. We now apply it to the case before us.
Instacart argues that Epic Systems and Lamps Plus addressed the same question as Iskanian-enforceability of a PAGA waiver-but decided it differently. We disagree that either Epic Systems or Lamps Plus addressed the same PAGA waiver issue decided in Iskanian and find Iskanian controls the outcome of this appeal.
Decided four years after Iskanian, Epic Systems involved employees opposed to arbitration on the ground that the arbitration agreement prohibiting class actions was illegal and unenforceable under a provision of the National Labor Relations Act that guarantees workers the right to engage in “concerted activities.” (Epic Systems, supra, 138 S.Ct. at p. 1622.) The U.S. Supreme Court rejected any NLRA exception to the FAA and reiterated that the FAA instructs federal courts to enforce arbitration agreements according to their terms. (Id. at pp. 1610, 1624.)
Analogizing the FLSA's private remedial function and public law enforcement function to PAGA, Instacart contends that the same principles set forth in Epic Systems regarding waiver of the right to bring a collective action under the FLSA “apply in equal measure to bar a PAGA claim.” Not so. As the U.S. Supreme Court explained, the question in Epic Systems was whether employees and employers should “be allowed to agree that any disputes between them will be resolved through one-on-one arbitration? Or should employees always be permitted to bring their claims in class or collective actions, no matter what they agreed with their employers?” (Epic Systems, supra, 138 S.Ct.at p. 1619, italics added.) In addressing these questions, the U.S. Supreme Court did not decide or consider whether a worker may waive a right to bring a representative action on behalf of a state government. Thus, the Court's reasoning in Epic Systems did not address the basis for our Supreme Court's decision in Iskanian, namely, that a PAGA action is not an individual dispute between private parties but an action brought on behalf of the state by an aggrieved worker designated by statute to be a proper representative of the state to bring such an action. Accordingly, Epic Systems did not consider the same issue concerning PAGA waivers decided in Iskanian, much less reach a contrary conclusion on that issue.
It is therefore not surprising that California courts have uniformly rejected the argument that Epic Systems overruled Iskanian. In Correia, the court rejected the employer's argument that Iskanian was no longer binding in light of Epic Systems. (Correia, supra, 32 Cal.App.5th at p. 609.) Noting that Epic Systems “reaffirmed the broad preemptive scope of the [FAA], ” the court explained the case still “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.” (Ibid.) Correia further added that the claim at issue in Epic Systems differed “fundamentally from a PAGA claim” because the employee in Epic Systems was “asserting claims on behalf of other employees, ” whereas a plaintiff who brings a PAGA action has “been deputized by the state” to act “ ‘as “the proxy or agent” of the state' ” to enforce the state's labor laws. (Id. at pp. 619-620.) Because Epic Systems did not “decide the same question differently, ” the Correia court concluded its “interpretation of the FAA's preemptive scope [did] not defeat Iskanian's holding or reasoning for purposes of an intermediate appellate court applying the law.” (Id. at p. 620.) The Correia court further decided that “[w]ithout 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.” (Id. at pp. 621-622.)
In Collie v. Icee Company (2020) 52 Cal.App.5th 477 (Collie), review den. Nov. 10, 2020, S264524, the employer's argument that Iskanian was no longer good law after Epic Systems was again rejected. (Id. at p. 482.) The Collie court noted Epic Systems did not address “the unique nature of a PAGA claim” and therefore did not undermine Iskanian's “characterization of PAGA claims as law enforcement actions in which plaintiffs step into the shoes of the state.” (Id. at p. 483.) The court also held the predispute PAGA waiver remained unenforceable without a showing that the state-which is the real party in interest in PAGA actions-consented to the waiver. (Ibid.)
We join the courts in Correia, Collie, and several other cases that have reached the same conclusion that Epic Systems did not overrule Iskanian. (See, e.g., Provost v. YourMechanic, Inc. (2020) 55 Cal.App.5th 982, 998 (Provost), rev. denied Jan. 20, 2021, S265736 [reaffirming decision in Correia that Epic Systems did not overrule Iskanian]; Olson v. Lyft, Inc. (2020) 56 Cal.App.5th 862, 872 [joining Correia, Collie, and Provost in holding that Epic Systems did not undermine Iskanian]; Contreras v. Superior Court of Los Angeles County (2021) 61 Cal.App.5th 461, 471-472 [joining Correia and Olson in concluding that Epic Systems did not undermine Iskanian's validity].)
The other intervening U.S. Supreme Court decision relied on by Instacart likewise does not overrule Iskanian. In Lamps Plus, a hacker impersonated a company official and tricked an employee into disclosing personal information of about 1, 300 other employees. (Lamps Plus, supra, 139 S.Ct. at p. 1412.) Varela, a Lamps Plus employee, had signed an arbitration agreement when he started work at the company, but sued Lamps Plus in federal district court to bring state and federal claims on behalf of a putative class of employees whose tax information had been compromised as a result of the breach. (Id. at p. 1413.) The district court granted Lamps Plus's motion to compel individual arbitration but, rather than ordering individual arbitration, it granted arbitration on a classwide basis. (Ibid.) The Ninth Circuit found the arbitration agreement was ambiguous as to whether the parties had agreed to a class arbitration waiver, but construed the agreement against Lamps Plus (the drafter of the agreement) and approved the classwide arbitration. (Id. at pp. 1413-1415.)
The U.S. Supreme Court reversed the Ninth Circuit. (Lamps Plus, supra, 139 S.Ct. at p. 1419.) The Court observed that the FAA requires courts to enforce arbitration agreements according to their terms and preempts state law “to the extent it ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives' of the FAA.” (Id. at p. 1415.) Noting the foundational FAA principle that “ ‘[a]rbitration is strictly a matter of consent,' ” the Court held that the FAA preempts California's contra proferentum rule-requiring ambiguities in a contract to be construed against the drafter-when the rule is used “to impose class arbitration in the absence of the parties' consent.” (Id. at pp. 1415, 1418.) It specifically concluded that “[c]ourts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis. The doctrine of contra proferentem cannot substitute for the requisite affirmative ‘contractual basis for concluding that the part[ies] agreed to [class arbitration].' ” (Id. at p. 1419.)
Instacart's contention that Lamps Plus overrules Iskanian is unavailing. In Lamps Plus, the Court considered “whether the FAA... bars an order requiring class arbitration when an agreement is not silent, but rather ‘ambiguous' about the availability of such arbitration.” (Lamps Plus, supra, 139 S.Ct. at p. 1412.) Lamps Plus did not decide or consider whether a worker may waive a right to bring a representative action on behalf of a state government. Lamps Plus, which involves class claims, does not mention PAGA or similar laws in other states. Nor did the reasoning in Lamps Plus address the basis for our Supreme Court's decision in Iskanian, namely, that a PAGA action is not an individual dispute between private parties but an action brought on behalf of the state by an aggrieved worker designated by statute to be a proper representative of the state to bring such an action. Accordingly, like Epic Systems, Lamps Plus did not consider the same question concerning PAGA waivers decided in Iskanian, much less reach a contrary conclusion on that issue.
In considering whether intervening U.S. Supreme Court precedent decided the same question as the California Supreme Court, Instacart discourages us from “taking too narrow a lens when deciding whether to apply intervening U.S. Supreme Court law to issues of federal preemption.” Noting that the U.S. Supreme Court “has yet to address the particular question of whether the FAA requires the enforcement of PAGA waivers specifically (as opposed to other, analogous collective-action waivers), ” the company says we should recognize the “clear instruction” provided by Epic Systems and Lamps Plus to enforce arbitration provisions based on the terms to which the parties agree as required by the FAA. We shall not adopt Instacart's expansive reading of these U.S. Supreme Court authorities, neither of which address the basis for the Iskanian decision and therefore are not clearly instructive in the context of an employer seeking to compel arbitration of a representative PAGA claim. Unlike the claims in Epic Systems and Lamps Plus, the state is the owner of the claim in the instant action but is not a party to the arbitration agreement. (Iskanian, supra, 59 Cal.4th at pp. 387-388; see also Correia, supra, 32 Cal.App.5th at p. 622 [“Under state and federal law, an arbitration agreement applies only to the parties who agreed to its terms and a party cannot be compelled to arbitrate a dispute that it has not elected to submit to arbitration.”].)
In its reply brief, Instacart contends that the “same question” standard is “too narrow a reading of this Court's authority” and that a California Supreme Court decision is effectively overruled when an intervening U.S. Supreme Court decision “ ‘erode[]s the analytical foundations of the old rule or make[s] clear that the rule is substantially out of step with the broader body of relevant federal law.' ” According to Instacart, this “ ‘eroded foundations/out of step' ” standard provides the proper measure for deciding when U.S. Supreme Court decisions have overruled California Supreme Court decisions on question of federal law, and the company urges us to “reject the blinkered ‘same question' approach to evaluating intervening U.S. Supreme Court precedent.”
Instacart has forfeited this argument for an “ ‘eroded foundations/out of step' ” standard. “It is well settled that ‘ “issues not raised in the trial court cannot be raised for the first time on appeal.”' ” (Honig v. San Francisco Planning Dept. (2005) 127 Cal.App.4th 520, 530.) We see no indication in the record before us that Instacart's argument was raised in the trial court and none of the parties' trial court briefs discussed these competing standards. At oral argument, Instacart argued against forfeiture on the grounds that it applied the “eroded foundation” legal standard in the trial court, and in so doing referred to multiple citations in its trial court briefs. While these references speak of the Epic Systems and Lamps Plus decisions as “effectively overrul[ing], ” “undermin[ing], ” or being “wholly inconsistent” with Iskanian, none presents the “eroded foundation/out of step” legal standard by name or as a legal standard distinct from the “same question” standard to guide the trial court's analysis. Moreover, Instacart's trial court briefs proffer no comparative analysis of the two legal standards. We therefore decline to address Instacart's arguments for an alternative legal standard in the first instance on appeal as Instacart failed to raise the issue in the trial court.
While not the basis for our finding the argument forfeited, we take this opportunity to note Instacart's minimal and far from fully developed presentation of this issue in its opening brief. (See Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 685 [issues must be adequately raised in opening brief].) It is only belatedly in the reply brief that Instacart first advances any developed argument attacking the “same question” standard with citation to several authorities for the first time to which Malaspina had no opportunity to respond.
In its reply brief, Instacart also cites the concurrence in Rivas v. Coverall North America, Inc. (9th Cir. 2021) 842 Fed. App'x 55 (Rivas) (Bumatay, J., concurring), which was issued after Instacart filed its opening brief, to support its view that “Epic Systems and Lamps Plus have left Iskanian without a leg to stand on.” The concurring opinion in Rivas is not an intervening U.S. Supreme Court decision that we are to consider. Further, the majority in Rivas affirmed the district court's denial of a motion to compel arbitration of an employee's PAGA claim based on Sakkab v. Luxottica Retail North America, Inc. (9th Cir. 2015) 803 F.3d 425, which concluded that the FAA did not preempt the Iskanian rule. (Id. at p. 431.) Sakkab remains good law.
Because we conclude the U.S. Supreme Court's decisions in Epic Systems or Lamps Plus did not decide the same PAGA waiver question differently than our Supreme Court did in Iskanian, there is no conflict to reconcile and we need not address Instacart's arguments that we are bound by those U.S. Supreme Court decisions. Accordingly, we follow the decision of our Supreme Court in Iskanian and conclude the PAGA waiver in the Agreement between Instacart and Malaspina was unenforceable.
Disposition
The trial court's order denying Instacart's petition to compel arbitration and stay proceedings is affirmed. Malaspina shall recover his costs on appeal.
WE CONCUR: Fujisaki, Acting P.J. Chou, J. [*]
[*] Judge of the Superior Court of San Mateo County, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.