Opinion
F085519
09-19-2023
ERNESTO OROSCO, Plaintiff and Appellant, v. AEROTEK, INC., et al., Defendants and Respondents
Sottile Baltaxe, Michael F. Baltaxe; Narayan Law and Santosh Narayan for Plaintiff and Appellant. Epstein Becker & Green and Michael S. Kun for Defendant and Respondent Aerotek, Inc. Fishman Larsen & Callister and Doug M. Larsen for Defendant and Respondent DMM Packaging Inc.
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court Fresno County No. 21CECG03250 Kristi C. Kapetan, Judge.
Sottile Baltaxe, Michael F. Baltaxe; Narayan Law and Santosh Narayan for Plaintiff and Appellant.
Epstein Becker & Green and Michael S. Kun for Defendant and Respondent Aerotek, Inc.
Fishman Larsen & Callister and Doug M. Larsen for Defendant and Respondent DMM Packaging Inc.
OPINION
THE COURT [*]
After the California Supreme Court issued Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104 (Adolph), the parties stipulated to remanding this matter to the superior court with directions (1) to vacate the order dismissing the claim to recover civil penalties under the Labor Code Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698 et seq.) for Labor Code violations suffered by employees other than plaintiff Ernesto Orosco and (2) to stay judicial proceedings on that PAGA claim until the arbitration of the remaining claims was completed.
Unlabeled statutory references are to the Labor Code, except for "section 128(a)(8)," which refers to Code of Civil Procedure section 128, subdivision (a)(8).
As explained below, the requirements of Code of Civil Procedure section 128, subdivision (a)(8) (hereafter section 128(a)(8)) for reversal of a judgment by stipulation have been met. Therefore, the order dismissing a portion of Orosco's PAGA claim is reversed and the matter remanded.
BACKGROUND
Defendant Aerotek, Inc., a Maryland corporation (Aerotek), is a temporary staffing company with more than 200 branches and offices throughout the United States, including California. Aerotek hires temporary employees-sometimes referred to as contract employees-for its clients. One such client is defendant DMM Packaging, Inc., a California corporation that does business as Design Machine &Manufacturing (DMM). DMM manufactures packaging equipment, and its principal place of business is in Kingsburg.
Since November 2015, Aerotek has used a software system called "Onboarding Automation" to handle preemployment paperwork. Onboarding Automation is webbased and delivers new-hire forms electronically to individuals hired for assignment. The forms include payroll forms, federal and state tax forms, Aerotek's personnel forms, and a copy of the employee handbook and corresponding acknowledgement. The onboarding process also requires the individual to provide personal information. An individual may complete the onboarding documents at home on their personal computers or at an Aerotek office using an Aerotek computer.
In 2018, Orosco electronically signed documents relating to an assignment to an employer other than DMM. The documents included a mutual arbitration agreement and an electronic disclosure acknowledgement.
Later, Orosco received an assignment at DMM set to commence on February 10, 2020. He completed his onboarding documents for the assignment at DMM on February 2, 2020, which included another electronic disclosure acknowledgement and a second mutual arbitration agreement. The arbitration agreement, which is broadly worded, states:
"Except as expressly set forth in the section, 'Claims Not Covered by this Agreement,' all disputes, claims, complaints, or controversies ('Claims') that I may have against Aerotek, Inc and/or any of its subsidiaries, affiliates, officers, directors, employees, agents, and/or any of its clients or customers (collectively and individually the 'Company'), or that the Company may have against me, including contract claims; tort claims; discrimination and/or harassment claims; retaliation claims; claims for wages, compensation, penalties or restitution; and any other claim under any federal, state, or local statute, constitution, regulation, rule, ordinance, or common law, arising out of and/ or directly or indirectly related to my application for employment with the Company, and/or my employment with the Company, and/or the terms and conditions of my employment with the Company, and/or termination of my employment with the Company (collectively 'Covered Claims'), are subject to confidential arbitration pursuant to the terms of this Agreement and will be resolved by Arbitration and NOT by a court or jury. The parties hereby forever waive and give up the right to have a judge or a jury decide any Covered Claims."
Aerotek assigned Orosco to work as a temporary employee for DMM from February 2020 until September 2020, at which time DMM hired him directly. Orosco worked as a heavy industrial assembler and the machinery he helped assemble was ultimately shipped throughout the United States. Orosco worked in that position until April 6, 2021.
In June 2021, Orosco sent a letter to the Labor and Workforce Development Agency (LWDA) and to Aerotek and DMM (collectively, Employers) setting forth various Labor Code violations and information supporting those violations. The statutory waiting period expired without a response. (See § 2699.3, subd. (a)(2)(A) [65 calendar days].) Thus, by operation of law, Orosco became a representative or proxy of the State of California with the authority to "commence a civil action pursuant to Section 2699." (§ 2699.3, subd. (a)(2)(A).)
PROCEEDINGS
In November 2021, Orosco sued Employers, alleging they were liable for (1) violations of section 2802, which relates to reimbursement of expenses incurred by an employee while using and maintaining his own tools on the job; (2) violations of section 226's requirement to furnish timely and accurate wage and hour statements; (3) waiting time penalties under section 203; and (4) civil penalties under PAGA for violations of sections 2802, 201, 202, 203, 226, and 226.3 suffered by him and other aggrieved current and former employees. Orosco's prayer for relief included a request for "[a]ll appropriate civil penalties pursuant to PAGA, but not limited to: $100 for each employee per pay period for the initial violation and $200 for each employee per pay period for each subsequent violation."
In June 2022, the United States Supreme Court filed Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. ___ (Viking River), which concluded that (1) the Federal Arbitration Act (FAA; 9 U.S.C. § 1, et seq.) preempted a rule of California law that "PAGA actions cannot be divided into individual and non-individual claims" where the parties' predispute arbitration agreement covers the so-called individual claims and (2) the FAA compels enforcement of the arbitration agreement as to the so-called individual claims. (Viking River, supra, 142 S.Ct. at pp. 1913, 1924.) Addressing a question of state law, the United States Supreme Court also stated 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 PAGA claims and would therefore lack statutory standing to pursue the remaining PAGA claims in court. (Id. at p. 1925.) The court concluded "the correct course is to dismiss her remaining claims." (Ibid.) Justice Sotomayor's concurring opinion stated that, "in an appropriate case," California courts would "have the last word" on the state law question of standing under PAGA. (Ibid. (conc. opn. of Sotomayor, J.).)
This statement does not accurately describe California law because a plaintiff is easily distinguished from a member of the general public by the fact the plaintiff has been authorized by operation of law to "commence a civil action" as a representative of the State of California. (§ 2699.3, subd. (a)(2)(A); see Duran v. EmployBridge Holding Company (2023) 92 Cal.App.5th 59, 68 [United States Supreme Court's mischaracterization of California law] (Duran).)
In September 2022, Employers filed a motion to compel individual arbitration and to dismiss the non-individual, representative claim relating to violations suffered by other employees. Orosco filed an opposition asserting the arbitration agreement was not enforceable and, even if the PAGA claim based on violations he suffered was sent to arbitration, he retained standing to pursue the PAGA claim based on violations suffered by other employees. Orosco also argued that if part the PAGA claim was sent to arbitration, the remaining part of the PAGA claim "should be stayed pending resolution of the arbitration."
On November 3, 2022, the motion was argued and submitted. The superior court granted the motion to compel arbitration of the claims involving Labor Code violations suffered by Orosco and, relying on statements in Viking River about standing under state law, dismissed the claim to recover civil penalties under PAGA for Labor Code violations suffered by employees other than Orosco. Orosco appealed.
Post-Appeal Proceedings
In February 2023, about three months after the superior court's order, this court resolved the standing question differently than the United States Supreme Court and the superior court. We concluded "a plaintiff's PAGA standing does not evaporate when an employer chooses to enforce an arbitration agreement." (Galarsa v. Dolgen California, LLC (2023) 88 Cal.App.5th 639, 653 (Galarsa).) In that decision, we designated the two types of PAGA claims as "Type A" and "Type O." (Galarsa, supra, at pp. 648-649.) A Type A claim is brought by a plaintiff as a representative of the State and seeks to recover civil penalties under PAGA for Labor Code violations suffered by the plaintiff. (Galarsa, supra, at p. 648.) Type A claims are arbitrable (thus, the designation "A"), provided they are covered by an arbitration agreement subject to the Federal Arbitration Act (9 U.S.C. § 1 et seq.). A Type O claim is brought by a plaintiff as a representative of the State and seeks to recover civil penalties under PAGA for Labor Code violations suffered by employees other than the plaintiff. (Galarsa, supra, at p. 649.) The civil penalties recovered on a PAGA claim, whether Type A or Type O, are distributed 75 percent to the LWDA and 25 percent to the employee aggrieved by the Labor Code violation. (Galarsa, supra, at p. 649.) For the remainder of this opinion, we use the terms "Type A" and "Type O" as defined in Galarsa .
The California Supreme Court adopted the usage of the United States Supreme Court and referred to Type A claims as "individual claims" and Type O claims as "nonindividual claims." (Adolph, supra, 14 Cal.5th at p. 1114; see Viking River, supra, 142 S.Ct. at pp. 1924-1925.)
In Galarsa, we also addressed the application of California's rule against splitting a cause of action and concluded "that California law does not prohibit an aggrieved employee from pursuing Type O claims in court once the Type O claims are separated from the Type A claims ordered to arbitration." (Galarsa, supra, 88 Cal.App.5th at p. 654.)
Based on our conclusions about standing and the splitting of a cause of action, we reversed the lower court's order denying the motion to compel arbitration as to the Type A claims and affirmed the denial as to the Type O claims. (Galarsa, supra, 88 Cal.App.5th at p. 655.) We remanded to the superior court with directions to enter a new order requiring the plaintiff to arbitrate the Type A claims. (Ibid.) In a later case, we summarized Galarsa as concluding "that when Type A claims are subject to arbitration under a predispute arbitration agreement, the Type O claims may be pursued in court, rather than dismissed as was done by the United States Supreme Court in Viking River." (Duran, supra, 92 Cal.App.5th at p. 69.)
In February 2023, after Galarsa was filed, we sent the parties a letter advising them that, despite the mandatory calendar preference provided by Code of Civil Procedure section 1291.2, we would accept their stipulation to a stay the appeal pending the California Supreme Court's decision in Adolph.
On March 27, 2023, the parties filed a "STIPULATION AND ORDER STAYING APPEAL" from the November 2022 order (1) dismissing the Type O claim and (2) granting Employers' motion to compel arbitration of the Type A claim and Orosco's Labor Code claims seeking victim-specific relief for himself. Based on the stipulation, we stayed this appeal, except for the preparation of the record on appeal designated by the parties.
On July 17, 2023, the California Supreme Court filed Adolph and concluded 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.) As a result, PAGA plaintiffs still have standing to pursue Type O claims in court despite the Type A claims having been referred to arbitration.
A few days after Adolph was filed, this court vacated the stay and directed the appellant's opening brief to be filed on or before September 15, 2023. On September 7, 2023, the parties filed a stipulation stating their agreement that this matter should be remanded to the superior court with instructions to vacate its order dismissing the Type O claim and to stay any judicial proceedings on the Type O claim pending the disposition of the claims previously ordered to arbitration.
DISCUSSION
Appellate courts do not automatically accept a stipulation by the parties to reverse a lower court decision. Section 128(a)(8) provides:
"An appellate court shall not reverse or vacate a duly entered judgment upon an agreement or stipulation of the parties unless the court finds both of the following: [¶] (A) There is no reasonable possibility that the interests of nonparties or the public will be adversely affected by the reversal. [¶] (B) The reasons of the parties for requesting reversal outweigh the erosion of public trust that may result from the nullification of a judgment and the risk that the availability of stipulated reversal will reduce the incentive for pretrial settlement."
Accordingly, we are obligated to review the record and address the two findings specified in section 128(a)(8).
First, we find the interests of nonparties or the public will not be adversely affected by a reversal that implements the California Supreme Court's resolution of a question of state law. (§ 128(a)(8)(A).) Stated from the opposite perspective, we find the interests of nonparties and the public would be harmed by a rejection of the stipulation and requiring further proceedings before this court because those proceedings would waste resources of the parties and the judicial system. The California Supreme Court's conclusions of state law are binding on the Court of Appeal and all superior courts in California, and we have identified no legitimate basis for distinguishing the facts of this case from those presented in Adolph. Thus, Adolph is controlling precedent.
Second, we find (1) the public trust will not be eroded by the reversal of the lower court's order dismissing the Type O claim and (2) reversing that part of the lower court's order creates little, if any risk, of reducing the incentives for pretrial settlements in other cases. Now that Adolph has resolved the standing issue, it is unlikely that issue will arise in future cases and result in an order like the one being reversed here. Therefore, we find the parties' reasons for requesting reversal far outweigh the other factors included in section 128, subdivision (a)(8)(B).
We note the parties' stipulation did not address the issue of costs. Therefore, pursuant to California Rules of Court, rule 8.278(a)(2), "[t]he opinion must specify the award or denial of costs." We find Orosco prevailed in this appeal by obtaining a reversal of the dismissal order and, accordingly, award him his costs on appeal.
DISPOSITION
We accept the parties' stipulation to reverse and remand the matter with instructions to vacate the portion of the November 2022 order stating "[t]he representative portion of plaintiff's claim is dismissed," which relates only to the PAGA claim seeking to recover civil penalties for Labor Code violations suffered by employees other than plaintiff (i.e., the Type O claim). The superior court also is directed to stay further judicial proceedings on the Type O claim pending the disposition to the claims previously ordered to arbitration.
Appellant shall recover his costs on appeal. (See Cal. Rules of Court, rule 8.278(a)(5).)
Remittitur shall issue seven days after the filing of this opinion, which will provide the parties with an opportunity to object to the wording of the disposition or inform the court of their mutual understanding regarding costs that was not expressed in their stipulation.
[*] Before Franson, Acting P. J., Snauffer, J. and De Santos, J.