Defendant Waived Its Right to Compel Arbitration Because of Delay, Taking Actions Inconsistent with the Right to Arbitrate, and the Prejudice to Plaintiff.

Garcia v. Haralambos Beverage Co., 2021 WL 22015 (Jan. 4, 2021)

Defendant sought to compel Plaintiffs, truck drivers, to arbitrate their individual claims. The trial court denied the motion to compel, holding Defendant had waived its right to compel arbitration because it had unreasonably delayed in bringing the motion and had acted in a manner inconsistent with the right to arbitrate. Defendant contended that the trial court’s finding that it had waived its right to compel was not supported by sufficient evidence.

The Second Appellate District affirmed, noting that in the two years that had passed between the time Plaintiffs filed their lawsuit and Defendant demanded arbitration Defendant had: stipulated to transfer the action from Ventura County Superior Court to Los Angeles County Superior Court; filed an answer in which it asserted its right to arbitrate as an affirmative defense; represented to the trial court one year into litigation, “At the moment, Defendant does not intend to raise [jurisdiction or contractual arbitration;] however it reserves the right to do so at a later time”; entered into a protective order to facilitate the informal production of classwide data and produced 1,182 responsive documents, including Plaintiffs’ personnel files; participated in a classwide mediation in which the parties did not resolve their dispute; again represented to the trial court 16 months into litigation that it did not intend to pursue arbitration “At this time”; produced 2,131 documents in response to formal class discovery requests, some of which it previously had produced informally; responded to further class discovery but did not object that the parties had agreed to arbitrate their claims; and met and conferred extensively regarding the details of a Belaire-West privacy notice and regarding disputes over Defendant’s responses to written discovery. Only after Plaintiffs had filed a motion to compel further discovery responses did Defendant file its motion to compel arbitration.

Defendant submitted a declaration from its former human resources managers in which she stated that she had not found any arbitration agreements signed by Plaintiffs (even in their personnel files) until 19 months into litigation, at which point she “immediately provided them to [defense] counsel.” Yet defense counsel admitted in open court that Defendant had a mandatory arbitration policy in effect when Plaintiffs were hired, and that Defendant knew of such policy at the time Plaintiffs filed their lawsuit. The appellate court rejected Defendant’s argument it had timely filed its motion to compel upon “discovering” Plaintiffs’ signed arbitration agreements, finding that Defendant could have filed a copy of the arbitration agreements or simply “recite[d] the terms of the governing provision.”[i]

In addition to unreasonable delay, the Court of Appeal found that engaging in classwide discovery, representing in two status conferences that it did not intend to arbitrate, and participating in a mediation in which the parties attempted to resolve the matter on a classwide basis was inconsistent with arguing that Plaintiffs had agreed to arbitrate their individual claims against Defendant. Further, the Garcia court found that substantial evidence showed Defendant had continued to act in a manner inconsistent with arbitration even after it supposedly found the signed arbitration agreements when it met and conferred extensively regarding class discovery and the Belaire notice.

The Garcia court also found substantial evidence showed Defendant’s delay had prejudiced Plaintiffs’ “ability to realize the benefits and efficiencies of arbitration” and had forced Plaintiffs to incur needless expenses, including pursuing classwide discovery and retaining experts to evaluate Defendant’s ability to pay a settlement on a classwide basis.

PAGA Notice is Sufficient, PAGA Claim Contains Multiple Causes of Action.

Rojas-Cifuentes v. Super. Ct., 2020 WL 7488653 (Dec. 21, 2020)

Plaintiff brought a PAGA claim along with class action allegations and an individual claim, and the trial court dismissed the PAGA claim on summary adjudication (with leave to amend the civil complaint) for failure to properly allege the facts and theories supporting his notice to the Labor and Workforce Development Agency (“LWDA”) and therefore failure to exhaust his administrative remedies. Specifically, the trial court found that: five of the eight paragraphs in the PAGA notice were merely recitations of the statute or statements “which ‘mimic’ the statute”; Plaintiff did not specify who was harmed by the supposed Labor Code violations; and Plaintiff did not allege whether he was Defendant’s employee or give any indication of his employment status.

The Third Appellate District issued a writ of mandate setting aside the order, following the logic of Williams v. Super. Ct. (2017) 3 Cal.5th 531 and its progeny that the “facts and theories” requirement of a PAGA notice did not need to “satisfy a particular threshold of weightiness” and merely needed to put the employer and LWDA on notice of the potential need for an investigation[ii] and finding that Plaintiff had alleged sufficient facts (both ultimate facts as well as supporting evidentiary facts, even if not exhaustive) and theories to support at least some of the alleged violations. Moreover, Plaintiff had identified that all of Defendant’s “current and former California non-exempt employees” were affected, which, while broad, was enough to give notice of the aggrieved employees. And while the Court acknowledged that Plaintiff could have done better than noting he, too, was an “aggrieved employee” to clarify his employment status, such omission was not fatal; the Court compared that missing datum to a civil complaint that does not plead the exact date the alleged misconduct occurred (“And we see nothing in section 2699.3 suggesting that factual allegations in PAGA notices must exceed those normally found sufficient in complaints”). Thus, summary adjudication – which disposes of the entire cause of action – was inappropriate here.

The Rojas court agreed with Defendant that a PAGA claim contains multiple potential causes of action[iii] but declined to apply that to the writ at issue because Defendant had not moved for summary adjudication as to each of the eight parts of the PAGA claim but rather treated the PAGA claim as one cause of action and sought to dismiss the PAGA claim in its entirety. Because a motion seeking summary adjudication of a cause of action may not be granted unless it “completely disposes of [the] cause of action,”[iv] since at least some of Plaintiff’s allegations were properly alleged in the PAGA notice the PAGA claim properly survived.

Class Action Tolling Rules Depend on Analyzing the Pleadings, Not Factual Inquiries.

Hildebrandt v. Staples the Office Superstore, LLC, 2020 WL 7090204 (Dec. 4, 2020)

Plaintiff filed the third of three wage and hour class actions against Defendant on behalf of general managers at Defendant’s California stores, alleging Defendant misclassified them as exempt. The trial court previously had denied class certification in the second action for failure to show common proof, finding too much individualized inquiry. The Second Appellate District found the trial court improperly applied the class action tolling rules stated in Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103 to this action and reversed summary judgment on that basis.

Plaintiff’s employment ended on June 20, 2013 but he did not filed suit until June 22, 2017, outside of the four-year period of the longest limitations’ statute. Plaintiff argued his claims were tolled by the prior two actions. Defendant argued the other actions could not have tolled Plaintiff’s claims because as to the first action Defendant contended the plaintiff there was a different type of general manager than Plaintiff here and as to the second action Defendant contended the denial of class certification on commonality grounds raised a “presumption” that Plaintiff’s claims should not be tolled, particularly since it should not have been unforeseeable that a misclassification claim would turn on individualized inquiry.[v] Plaintiff responded the tolling doctrine should be applied to protect the class action device’s efficiency and economy.[vi]

The trial court agreed the Batze presumption should apply and reasoned Defendant would be prejudiced if the tolling doctrine were applied because the claims in this action were sufficiently distinct from the claims in the prior two actions such that Defendant would not have been put on notice it needed to preserve evidence as to the general managers in all its stores. The trial court further held Plaintiff had failed to show that denial of certification was unforeseeable.

The Court of Appeal began its analysis with the Jolly case, in which the California Supreme Court adopted the holding in the United States Supreme Court’s rule articulated in Amer. Pipe & Constr. Co. v. Utah (1974) 414 U.S. 538. The Jolly court noted the two major policy considerations animating the American Pipe rule were (1) protecting the class action device, and (2) giving purpose to the statute of limitations. The first factor is often determined by whether the claims asserted in the class action were sufficiently similar to the individual claims of putative class members such that the members reasonably relied upon the class action in electing to postpone filing their own individual actions. The second factor was designed to protect defendants from plaintiffs “sleeping on their rights” and filing stale claims; the key issue in that instance is whether the defendant has received adequate notice of the substance of the claims and the number and generic identities of potential plaintiffs who might be affected by the class action. Under the American Pipe rule, trial courts must focus on the class action pleading.

By contrast, Batze focused on factual inquiries – whether the defendant could predict which absentee class members would believe they were injured to the point of wanting to file a lawsuit, or whether members had previously filed individual claims – rather than the notice requirement of the American Pipe rule. Given the class definitions of the first two actions, Defendant here could readily determine the number and generic identities of the general managers of its California stores and could do so without any individual review of damages, causation, or any of Defendant’s affirmative defenses. Moreover, both Batze and the Hildebrandt trial court improperly focused on the burden on a defendant to preserve evidence or gather witness statements relating to each managerial employee, which neither Jolly nor American Pipe held was a basis for refusing to toll the applicable statutes of limitations. Instead, the Second District held, the relevant consideration should have been the burden placed on the courts, i.e., the protection of the class action device as a means of efficient and economic disposition of potentially large numbers of claims; without a tolling rule, putative class members might feel compelled to file protective motions to intervene. Thus, the appellate court held, it was irrelevant whether Plaintiff had knowledge that the class certification had been “vigorously contested” before he filed his lawsuit – the only relevant analysis should have been the similarity between the Hildebrandt claims and those of the previous two class actions and whether Defendant had sufficient notice of who the putative class members might be in this action.

[i] Sprunk v. Prisma, LLC (2017) 14 Cal.App.5th 785, 793.

[ii] Williams, supra, 3 Cal.5th at 545.

[iii] Silva v. See’s Candy Shops, Inc. (2016) 7 Cal.App.5th 235, 257.

[iv] Cal. Code Civ. Proc. § 437c(f)(1).

[v] Batze v. Safeway, Inc. (2017) 10 Cal.App.5th 440.

[vi] Jolly, supra, 44 Cal.3d at 1121.

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