Friday, October 7, 2011

Central District Finds PAGA Waiver Unconscionable, Post-Concepcion: Urbino v. Orkin Services of California

On October 5, 2011, Central District Court Judge, Cormac J. Carney, denied a motion to compel arbitration of a PAGA claim brought by Orkin Services of California, Inc. and Rollins, Inc. (“Defendants”) on the grounds that the arbitration agreement contained an unconscionable PAGA arbitration waiver, rendering the agreement unenforceable under California law. See Urbino v. Orkin Servs. of Cal., 2011 U.S. Dist. LEXIS 114746 (C.D. Cal. Oct. 5, 2011).  As reasoned by the Court, the U.S. Supreme Court's analysis in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) was inapplicable, as PAGA embodies “representative” and “public right” aspects which are fundamental and inseparable features of a PAGA claim, and as such, cannot be set aside by private agreement:
[A]s Plaintiff correctly notes, AT&T concerned the enforceability of a consumer class action arbitration waiver, rather than a representative PAGA claim waiver. (Pls.' Opp. at 21 (citing Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489, 500 (2011); Plows v. Rockwell Collin, Inc., No. SACV 10-01936, 2011 U.S. Dist. LEXIS 88781, at *14–*15 (C.D. Cal. Aug. 9, 2011)).) In Brown, the California appellate court refused to extend AT&T to a PAGA action in light of the fundamental nature and purpose of a PAGA claim. Brown, 197 Cal. App. 4th at 500-03; see also Plows, 2011 U.S. Dist. LEXIS 88781, at *14–*15. Specifically, the Brown court explained that the purpose of PAGA "contrasts with the private individual right of a consumer to pursue class action remedies in court or arbitration, which right, according to AT&T may be waived by agreement so as not to frustrate the FAA – a law governing private arbitration. AT&T does not provide that a public right, such as that created under the PAGA, can be waived if such a waiver is contrary to state law." Brown, 197 Cal. App. 4th at 500. Furthermore, as noted by the Brown court, the Quevedo court failed to take into account that there are no separate individual claims in a PAGA action; rather, the individual must bring a PAGA claim as a representative action on behalf of himself and other aggrieved employees. See id. at 503 n.8.n13 The Court finds the reasoning offered by the Brown court persuasive. See also Plows, 2011 U.S. LEXIS 88781, at *14–*15 (agreeing with the Brown court's reasoning of why class action waivers in arbitration agreements may not be used to divest plaintiffs of their right to bring representative actions under PAGA and denying defendant's motion to compel arbitration of plaintiffs' PAGA claims). Because the PAGA arbitration waiver in the Agreement is unconscionable, and the waiver taints the entirety of the Agreement with illegality, the Court deems the Agreement unenforceable.
See Urbino, 2011 U.S. Dist. LEXIS 114746, at 39-40.

The Court's decision joins a growing list of opinions finding Concepcion inapplicable in the wage and hour context.  (See previous post here)

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