From Casetext: Smarter Legal Research

Olmsted v. Mercury Ins. Servs.

California Court of Appeals, Sixth District
Aug 25, 2023
No. H050566 (Cal. Ct. App. Aug. 25, 2023)

Opinion

H050566

08-25-2023

DOUGLASS OLMSTED, Plaintiff and Appellant, v. MERCURY INSURANCE SERVICES, LLC, Defendant and Respondent.


NOT TO BE PUBLISHED

Santa Clara County Super. Ct. No. 21-CV-376878

Grover, J.

Plaintiff Douglass Olmsted commenced a representative action against his former employer, defendant Mercury Insurance Services, under California's Labor Code Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698 et seq.). The suit alleged that defendant violated the California Labor Code by failing to reimburse plaintiff and other employees for certain business expenses. Following the United States Supreme Court's decision in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. (Viking River Cruises), the trial court issued an order compelling arbitration of plaintiff's individual claims against defendant and dismissing plaintiff's non-individual claims for lack of standing. Plaintiff appealed, challenging the portion of the order dismissing his non-individual claims. While this appeal was pending, the California Supreme Court held in Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104 (Adolph) that PAGA plaintiffs whose individual claims against their employers are subject to arbitration agreements retain standing to pursue non-individual claims in court. The parties, having briefed this appeal before Adolph was decided, have now stipulated to reversal. We will accept the stipulation.

I. BACKGROUND

Plaintiff is a former employee of defendant. When plaintiff was hired in 2017, he signed a "Mutual Dispute Resolution Agreement" requiring him to arbitrate certain claims against defendant. In Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian), the California Supreme Court had held that an employee's right to bring representative PAGA claims against an employer "on behalf of himself or herself and other current or former employees" (Lab. Code, § 2699, subd. (a)) could not be waived by an arbitration agreement.

In 2021, plaintiff sued defendant for civil penalties under PAGA. He alleged that defendant had failed to reimburse him and other employees for necessary expenses incurred while working from home, including portions of their home internet and electricity bills.

While the case was pending in the trial court, the United States Supreme Court decided Viking River Cruises. It held that the Federal Arbitration Act (9 U.S.C. § 1 et seq.) partially preempted the rule set forth in Iskanian insofar as that rule prevented PAGA claims from being severed into waivable "individual" claims and nonwaivable "non-individual" claims. (Viking River Cruises, supra, 142 S.Ct. at p. 1924.) It further stated that, based on its understanding of California law, an employee who waives the right to bring individual PAGA claims against an employer would no longer have standing to bring non-individual PAGA claims on behalf of other employees. (Id., at p. 1925.)

Based on the Viking River Cruises decision and the parties' arbitration agreement, the trial court ordered plaintiff's individual claims to arbitration and dismissed plaintiff's non-individual claims for lack of standing. Plaintiff timely appealed the dismissal of his non-individual claims. The California Supreme Court has since decided Adolph, holding that PAGA plaintiffs who waive the right to bring individual claims retain standing to bring non-individual claims. (Adolph, supra, 14 Cal.5th at p. 1114.)

II. DISCUSSION

"California law closely regulates the working conditions of employees and the payment of their wages." (Huff v. Securitas Security Services USA, Inc. (2018) 23 Cal.App.5th 745, 752.) An employee can sue to recover wages owed and for statutory damages, or file an administrative complaint with the labor commissioner, who may recover penalties in addition to wages owed and do so in an administrative proceeding or in court. (Ibid.) Some Labor Code violations also may be prosecuted as criminal offenses. (Ibid.) Despite those statutory protections, the Legislature found state labor laws were not being effectively enforced. As a remedy, PAGA was enacted in 2003 to authorize private parties to sue under the Labor Code for the civil penalties previously only recoverable by the state. (Huff, at p. 753.) PAGA thus created a type of qui tam action incentivizing a private party to seek penalties on behalf of the government and receive part of the recovery as compensation. (Huff, at p. 753.) An employee bringing a representative action under PAGA does so" 'as the proxy or agent of the state's labor law enforcement agencies, not other employees.'" (Huff, at p. 753.) Under the current statutory scheme, civil penalties for Labor Code violations are recoverable "through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees pursuant to the procedures specified in Section 2699.3." (Lab. Code, § 2699, subd. (a).)

In Viking River Cruises, the United States Supreme Court held that PAGA claims brought by an employee on behalf of himself or herself ("individual" claims) can be severed from those brought on behalf of other current or former employees ("nonindividual" claims) and compelled to arbitration. (Viking River Cruises, supra, 142 S.Ct. at p. 1924.) It also suggested that a plaintiff whose individual claims were "pared away from a PAGA action" would be "no different from a member of the general public" with respect to the remaining non-individual claims and would therefore lack statutory standing to pursue those claims. (Id., at p. 1925.) But Justice Sotomayor noted in a concurring opinion that, "in an appropriate case," California courts would "have the last word" on the question of statutory standing. (Id., at p. 1925 (conc. opn. of Sotomayor, J.).) The California Supreme Court has since addressed the issue in Adolph, concluding that "an order compelling arbitration of the individual claims does not strip the plaintiff of standing as an aggrieved employee to litigate claims on behalf of other employees under PAGA." (Adolph, supra, 14 Cal.5th at p. 1114.) The parties correctly agree that the Adolph decision mandates reversal in this case, and we accept their stipulation.

The requirements of Code of Civil Procedure section 128, subdivision (a)(8) for reversal of a judgment by stipulation are satisfied here. We see no reasonable possibility that the interests of nonparties or the public will be adversely affected by a reversal based on new and dispositive Supreme Court precedent. (See Code Civ. Proc., § 128, subd. (a)(8)(A).) Proceeding with this appeal where the Supreme Court's recently decided precedent is directly on point would waste judicial resources. And any risk that allowing this stipulated reversal would reduce the incentive for pretrial settlement in future cases of this nature is extremely low given that Adolph was decided after the challenged order, making it unlikely that this situation will arise in the future. (See Code Civ. Proc., § 128, subd. (a)(8)(B).)

III. DISPOSITION

We accept the parties' stipulation to reverse and remand the matter with instructions to vacate the portion of the order dismissing plaintiff's non-individual PAGA claims. The trial court may exercise its discretion to stay the non-individual claims pending the outcome of the arbitration under section 1281.4 of the Code of Civil Procedure. Costs in the amount of $1,712.29 are awarded to appellant by stipulation of the parties.

WE CONCUR: Greenwood, P. J. Lie, J.


Summaries of

Olmsted v. Mercury Ins. Servs.

California Court of Appeals, Sixth District
Aug 25, 2023
No. H050566 (Cal. Ct. App. Aug. 25, 2023)
Case details for

Olmsted v. Mercury Ins. Servs.

Case Details

Full title:DOUGLASS OLMSTED, Plaintiff and Appellant, v. MERCURY INSURANCE SERVICES…

Court:California Court of Appeals, Sixth District

Date published: Aug 25, 2023

Citations

No. H050566 (Cal. Ct. App. Aug. 25, 2023)