Filed 8/16/21 Pote v. Handy Technologies CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
PATRICK POTE, B302770
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC723965)
v.
HANDY TECHNOLOGIES,
INC.,
Defendant and Appellant.
APPEAL from an order of the Superior Court of
Los Angeles County, C. Edward Simpson, Judge. Affirmed.
Manatt, Phelps & Phillips, Robert H. Platt, Andrew L.
Satenberg and Benjamin G. Shatz for Defendant and Appellant.
Gibbs Law Group, Steven M. Tindall and Amanda M. Karl
for Plaintiff and Respondent.
_____________________________________
Handy Technologies, Inc. (Handy) appeals the denial of its
motion to compel arbitration of Patrick Pote’s claims brought
under the Labor Code Private Attorneys General Act of 2004
(PAGA) (Lab. Code, § 2698 et seq.). Handy primarily contends its
motion should have been granted and Pote ordered to arbitrate as
an individual because Iskanian v. CLS Transportation
Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian), on which the
superior court relied to deny Handy’s motion, is irreconcilable
with the subsequent United States Supreme Court decision in
Epic Systems Corp. v. Lewis (2018) ___ U.S. ___ [138 S.Ct. 1612]
(Epic Systems). We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1. Pote’s Complaint and First Amended Complaint
On October 3, 2018 Pote filed a complaint and on
November 19, 2018 the operative first amended complaint
alleging causes of action against Handy under PAGA and for
declaratory relief. Pote alleged he had been employed as a house
cleaner for Handy since April 2018; he and other service
providers cleaned and repaired clients’ houses for flat rates per
job; and Handy’s flat rate payment policy resulted in Pote and
other providers not being paid for overtime, missed rest and meal
breaks, expenses and travel time to and between jobs in violation
of various Labor Code provisions. He sought civil penalties under
PAGA for those alleged Labor Code violations, which affected
Pote and other California service providers.
Pote also alleged that, at the time he was hired and as a
mandatory condition of his employment, Handy had required him
to agree to a Service Professional Agreement containing
provisions purporting to prohibit the pursuit of a representative
2
PAGA action for underpaid wages in any forum. Pote sought a
declaration those provisions were void as against public policy.
2. Handy’s Motion To Compel Arbitration
On March 26, 2019 Handy moved to compel arbitration and
to stay litigation pursuant, in part, to Code of Civil Procedure
section 1281.2 and the Federal Arbitration Act (FAA) (9 U.S.C.
§ 1 et seq.).
a. The Carson declaration and Handy’s Independent
Contractor Acknowledgment
In support of its motion Handy filed the declaration of
Bailey Carson, a Handy senior vice-president. Carson averred
Handy was a New York-based technology company offering an
online platform allowing individuals seeking cleaning services to
connect with professionals providing those services. Gaining
access to Handy’s platform required a cleaning professional to
agree to Handy’s Independent Contractor Acknowledgment
(Acknowledgment) and the Service Professional Agreement.
Carson’s review of Handy’s business records showed that on
April 9, 2018 Pote logged into Handy’s application for mobile
devices that he had downloaded to his phone. By checking boxes
and selecting “Confirm” or “Accept” buttons, Pote accepted the
Acknowledgment, which was comprised of nine bullet points, and
the Service Professional Agreement.
Carson’s declaration included images of what he described
as screenshots depicting how the Acknowledgment’s nine bullet
points appeared in Handy’s mobile device application. One of the
nine bullet points stated, “I understand that the Handy Service
Professional Agreement contains a Mandatory and Exclusive
3
Arbitration provision which requires Handy and me to submit
disputes to final and binding arbitration.”
b. The April 9, 2018 Service Professional Agreement
Carson explained Pote could not have gained access to
Handy’s online platform without checking the box that states, “I
agree to the Service Professional Agreement” or without selecting
the “Accept” button in Handy’s mobile device application. Carson
stated Pote had accepted the Service Professional Agreement on
April 9, 2018 (the April 9, 2018 agreement) and attached the
April 9, 2018 agreement as an exhibit to his declaration.
Section 12.2 of the April 9, 2018 agreement, which was
titled “Mutual Arbitration Provision,” provided in part, in
typeface containing all capital letters, “Handy and Service
Professional mutually agree to waive their respective rights to
the resolution of disputes in a court of law by a judge or jury and
agree to resolve any dispute in arbitration . . . . [¶] . . . [¶]
Except as expressly provided below, all disputes and/or claims
between you and Handy shall be exclusively resolved in binding
arbitration on an individual basis; class arbitrations and class
actions are not permitted.” Section 12.2 also provided, “This
Mutual Arbitration Provision is governed by the Federal
Arbitration Act (9 U.S.C. [§§] 1-16) and shall survive the
termination of this Agreement.”
Section 12.2(c), which was titled “Representative Action
Waiver—Please Read” in typeface that was underlined and in
bold and all capital letters, provided, “Handy and Service
Professional mutually agree that by entering into this agreement
to arbitrate, both waive their right to have any dispute or claim
brought, heard or arbitrated as a representative action, including
but not limited to, a private attorney general action, and an
4
arbitrator shall not have any authority to arbitrate a
representative action, including, but not limited to, a private
attorney general action (‘Representative Action Waiver’). Private
attorney general representative actions brought on behalf of the
state under the California Labor Code are not arbitrable, not
within the scope of this Agreement and may be maintained in a
court of law, but any claim brought by Service Professional for
recovery of underpaid wages (as opposed to representative claims
for civil penalties) under the California Labor Code shall be
arbitrable, and must be brought, if at all, on an individual basis
in arbitration as set forth in this Mutual Arbitration Provision.”
Section 12.2(i), which was titled “Service Professional’s
Right to Opt Out of Arbitration,” provided, “Arbitration is not a
mandatory condition of Service Professional’s contractual
relationship with Handy . . . . In order to opt out, Service
Professional must notify Handy of Service Professional’s
intention to opt out by submitting to Handy . . . a signed and
dated written notice stating that Service Professional is opting
out of this Mutual Arbitration Provision. Service Professional
also may opt out by sending an email . . . . In order to be
effective, Service Professional’s opt out notice must be provided
within 30 days of the date this Agreement is electronically signed
by Service Professional (‘Effective Date’).” The April 9, 2018
agreement provided the mailing and email addresses for any opt-
out notice to be sent. In his declaration Carson explained Pote
did not exercise his right to opt out of the April 9, 2018
agreement or any subsequent agreements.
c. The October 26, 2018 Service Professional Agreement
Carson averred that, any time Handy makes changes to the
Acknowledgement or Service Professional Agreement, the service
5
professional must confirm and accept the new terms in Handy’s
mobile application. According to Carson, on October 26, 2018
Pote confirmed and accepted an updated version of the
Acknowledgment, as well as of the Service Professional
Agreement (October 26, 2018 agreement), both of which Carson
attached to his declaration.
Carson stated the October 26, 2018 agreement was
“substantially similar” to the April 9, 2018 agreement but with
“minor changes” to the arbitration provision. Specifically,
section 12.2(c) of the October 26, 2018 agreement, which again
was titled “Representative Action Waiver—Please Read” in
typeface that was underlined and in bold and all capital letters,
was modified from the April 9, 2018 version and provided,
“Handy and Service Professional mutually agree that by entering
into this agreement to arbitrate, both waive their right to have
any dispute or claim brought, heard or arbitrated as a
representative action, and an arbitrator shall not have any
authority to arbitrate a representative action (‘Representative
Action Waiver’). Notwithstanding the foregoing, private attorney
general representative actions brought prior to the effective date
of this Agreement on behalf of the state under the California
Labor Code are not arbitrable, not within the scope of this
Agreement and may be maintained in a court of law, but any
claim brought by Service Professional for recovery of underpaid
wages (as opposed to representative claims for civil penalties)
under the California Labor Code shall be arbitrable, and must be
6
brought, if at all, on an individual basis in arbitration as set forth
in this Mutual Arbitration Provision.”1
d. Handy’s arguments in support of its motion
In support of its motion to compel arbitration Handy
argued the parties’ mutual agreement to arbitrate was valid and
enforceable and required Pote’s claims for unpaid wages under
PAGA and for PAGA civil penalties to be arbitrated on an
individual (non-representative) basis. Specifically, relying on
Esparza v. KS Industries, L.P. (2017) 13 Cal.App.5th 1228,
which, as Handy explained, ruled that an employee’s PAGA
claims seeking victim-specific unpaid wages, as opposed to civil
penalties, were not exempt from arbitration under Iskanian,
supra, 59 Cal.4th 348, Handy contended the Representative
Action Waiver (in both the April 9, 2018 agreement and the
October 26, 2018 agreement) was enforceable as to, and required
individual arbitration of, Pote’s PAGA claims seeking victim-
specific unpaid wages. As for Pote’s PAGA claims for civil
penalties, Handy asserted the Representative Action Waiver was
also enforceable as to, and required individual arbitration of,
those claims because “Iskanian’s prohibition of individual
arbitration of PAGA civil-penalty claims is irreconcilable with
Epic Systems[, supra, 138 S.Ct. 1612].” In the alternative Handy
argued, if the superior court were to decline to enforce the
Representative Action Waiver in its entirety, the court should
sever and stay Pote’s PAGA claims for civil penalties pending
1 The quoted provisions of section 12.2 in the April 9, 2018
agreement (including section 12.2(i)) were otherwise nearly
identical to the corresponding provisions in the October 26, 2018
agreement.
7
completion of individual arbitration of his claims for victim-
specific relief.
4. Pote’s Opposition and Handy’s Reply
On April 8, 2019 Pote filed an opposition to Handy’s motion
to compel arbitration and to stay litigation. As procedural
background Pote in his opposition explained that on
September 14, 2018, pursuant to Labor Code section 2699.3, he
(through his attorney) submitted notice to the California Labor
and Workforce Development Agency (LWDA) and to Handy of
Handy’s alleged violations of specific provisions of the Labor
Code. The notice also informed the LWDA and Handy of Pote’s
intent to file an action under PAGA against Handy. Pote’s
opposition stated the LWDA, pursuant to Labor Code
section 2699.3, had 65 days to respond to his PAGA notice and
when the 65-day period expired without any action by the LWDA,
Pote amended his complaint to add a cause of action under PAGA
for those alleged Labor Code violations. In support of his
opposition Pote filed his attorney’s declaration attaching a copy of
the September 14, 2018 PAGA notice. Pote’s opposition also
stated he filed his action on October 3, 2018 against Handy,
initially seeking declaratory relief regarding enforceability of
provisions of Handy’s Service Professional Agreement, and later
amended his complaint to add a single cause of action under
PAGA.2
As for Pote’s arguments, he contended the Representative
Action Waiver was unenforceable under Iskanian, supra,
2 In its motion to compel arbitration Handy similarly
explained Pote “for the first time” brought a PAGA representative
action in his first amended complaint filed on November 19, 2018.
8
59 Cal.4th 348. He presented various arguments why Epic
Systems, supra, 138 S.Ct. 1612 did not overrule Iskanian.
Pote also argued Handy’s contention the Representative
Action Waiver should be enforced as to Pote’s victim-specific
claims failed, among other reasons, because he made no victim-
specific claims and only sought penalties under PAGA. In his
supporting declaration Pote’s attorney averred Pote was limiting
his claims to PAGA representative claims seeking civil penalties,
including unpaid wages, on behalf of the State of California.
Subsequently, on October 10, 2019, Pote filed a notice of new
authority stating that, on September 12, 2019, the California
Supreme Court decided ZB, N.A. v. Superior Court (2019)
8 Cal.5th 175, in which the Court held representative plaintiffs
could not recover unpaid wages under PAGA. Pote’s notice of
new authority explained Pote thus no longer sought to recover
unpaid wages as part of his representative PAGA action and
agreed to dismiss that portion of his complaint.
On October 10, 2019 Handy filed its reply in support of its
motion to compel arbitration. Handy argued, even assuming
Iskanian, supra, 59 Cal.4th 348 remained good law, the case only
held a predispute waiver of the right to assert a PAGA claim on a
representative basis was unenforceable but the Representative
Action Waiver was a postdispute waiver: Pote, while represented
by counsel, agreed to the Representative Action Waiver on
October 26, 2018 after Pote initiated the dispute and reaffirmed
his assent to that waiver on November 25, 2018, the expiration
date of the 30-day window to opt out.
5. The Superior Court’s Order
The superior court issued a tentative ruling denying
Handy’s motion. The court rejected Handy’s argument that
9
Pote’s claims for civil penalties under PAGA should be compelled
to individual arbitration based on the Representative Action
Waiver. Among other matters the court cited authority for the
proposition a single representative PAGA claim could not be split
into an arbitrable individual claim and a nonarbitrable
representative claim; determined Epic Systems, supra, 138 S.Ct.
1612 did not invalidate the California Supreme Court’s holding in
Iskanian, supra, 59 Cal.4th 348 that an employee’s right to bring
a representative PAGA action is unwaivable; and, because it was
still bound by Iskanian, concluded the Representative Action
Waiver was unenforceable. The court declined to consider
Handy’s contention the Representative Action Waiver was a
postdispute waiver and thus enforceable, on the ground Handy
raised that argument for the first time in its reply brief and thus
to consider it would deprive Pote of the opportunity to respond.
The court also rejected Handy’s argument that Pote’s
PAGA claims seeking damages on behalf of affected workers,
such as victim-specific unpaid wages, should be compelled to
individual arbitration, finding Pote had not brought any victim-
specific claims. Finally, it denied Handy’s request for a stay of
the litigation pending arbitration of victim-specific or any other
claims because it ordered no part of the action to arbitration.
At the hearing on its motion Handy’s attorney asked the
court to allow Pote to provide supplemental briefing on the
postdispute waiver argument so that the court could entertain
the issue. Pote’s counsel told the court it was inappropriate for
Handy to raise a completely new issue on reply. The superior
court agreed with Pote’s attorney and adopted as its order the
tentative ruling denying Handy’s motion to compel arbitration
and to stay litigation.
10
DISCUSSION
1. Standard of Review
Code of Civil Procedure section 1281.2 requires the trial
court to order arbitration of a controversy “[o]n petition of a party
to an arbitration agreement alleging the existence of a written
agreement to arbitrate a controversy and that a party to the
agreement refuses to arbitrate such controversy . . . if it
determines that an agreement to arbitrate the controversy
exists.”3 The party seeking to compel arbitration bears the
burden of proving an agreement to arbitrate exists. (Pinnacle
Museum Tower Assn. v. Pinnacle Market Development (US), LLC
(2012) 55 Cal.4th 223, 236 (Pinnacle). If an agreement to
arbitrate exists, the burden shifts to the party refusing
arbitration to demonstrate the agreement is unenforceable.
(Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th
951, 972; Rosenthal v. Great Western Fin. Securities Corp. (1996)
14 Cal.4th 394, 413; see AT&T Mobility LLC v. Concepcion (2011)
3 Even where the FAA applies, the question whether an
agreement to arbitrate a particular controversy exists is governed
by state law. (See First Options of Chicago, Inc. v. Kaplan (1995)
514 U.S. 938, 944 [“[w]hen deciding whether the parties agreed to
arbitrate a certain matter . . . courts generally . . . should apply
ordinary . . . principles that govern the formation of contracts”];
McGill v. Citibank, N.A. (2017) 2 Cal.5th 945, 961-962 [rejecting
argument that FAA preempts state contract principles; the
question whether an agreement has been formed to arbitrate a
particular dispute is one of contract interpretation under state
law]; see generally EEOC v. Waffle House, Inc. (2002) 534 U.S.
279, 289 [FAA simply reverses judicial hostility to arbitration
agreements by placing them on same footing as any other
contract].)
11
563 U.S. 333, 339 [section 2 of the FAA “permits arbitration
agreements to be declared unenforceable ‘upon such grounds as
exist at law or in equity for the revocation of any contract’”].)
Absent conflicting extrinsic evidence, the validity of an
arbitration clause is a question of law subject to de novo review.
(Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1468;
Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267,
1277.) We also review de novo the interpretation of an
arbitration agreement, including the scope of the agreement,
when that interpretation does not depend on the resolution of
conflicting extrinsic evidence. (Pinnacle, supra, 55 Cal.4th at
p. 236; see Thomas v. Westlake (2012) 204 Cal.App.4th 605, 619,
fn. 11 [absent conflicting extrinsic evidence, the “determination
whether FINRA’s arbitration rules cover a particular dispute” is
a question of law subject to de novo review]; Valentine Capital
Asset Management, Inc. v. Agahi (2009) 174 Cal.App.4th 606, 613
[same].)
2. This Court Remains Bound by Iskanian
As the trial court accurately stated, the California Supreme
Court in Iskanian, supra, 59 Cal.4th 348, held representative
PAGA action waivers are unenforceable. The United States
Supreme Court’s decision in Epic Systems, supra, 138 S.Ct. 1612
did not address that question and did not overrule or disapprove
Iskanian. Handy’s argument the analysis underlying Iskanian is
incompatible with that in Epic Systems is properly addressed to
the California Supreme Court or the United States Supreme
Court,4 not to this court: “On federal questions, intermediate
4 A petition for writ of certiorari, currently pending in the
United States Supreme Court in Viking River Cruises, Inc. v.
12
appellate courts in California must follow the decisions of the
California Supreme Court, unless the United States Supreme
Court has decided the same question differently.” (Correia v.
NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 619; accord,
Contreras v. Superior Court (2021) 61 Cal.App.5th 461, 470;
Olson v. Lyft, Inc. (2020) 56 Cal.App.5th 862, 870; see generally
Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450,
455.) Iskanian remains controlling authority.
a. Iskanian
Iskanian concerned an employee who sought to bring a
class action on behalf of himself and similarly situated employees
for the employer’s alleged failure to compensate its employees for
overtime and meal and rest breaks. The employee had entered
into an arbitration agreement waiving the right to class actions.
The Iskanian Court held state law precluding enforcement of
such class action waivers on the grounds of unconscionability or
public policy was preempted by the FAA. (Iskanian, supra,
59 Cal.4th at pp. 359-360.) The Court also rejected the argument
the National Labor Relations Act (NLRA)—which at section 7
provides employees have the right to engage in concerted
activities for the purpose of collective bargaining or other mutual
aid or protection and at section 8(a) states it is an unfair labor
practice for an employer to interfere with, coerce or restrain
employees in the exercise of rights under section 7 (Iskanian, at
Moriana (No. 20-1573), seeks review of an unpublished decision
from Division Three of this court and asks the Supreme Court to
decide “[w]hether the [FAA] requires enforcement of a bilateral
arbitration agreement providing that an employee cannot raise
representative claims, including under PAGA.”
13
pp. 360, 367-368)—rendered the class action waiver unlawful:
“We . . . conclude, in light of the FAA’s ‘“liberal federal policy
favoring arbitration”’ [citation], that sections 7 and 8 [of] the
NLRA do not represent ‘“a contrary congressional command”’
overriding the FAA’s mandate.” (Id. at p. 373.)
The arbitration agreement, however, required the waiver of
not only class actions but also “representative actions”; and the
employee also sought to bring a representative action under
PAGA, which “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 pp. 378, 360.) An
employment agreement compelling the waiver of representative
claims under PAGA, the Supreme Court held, “is contrary to
public policy and unenforceable as a matter of state law,” and the
FAA does not preempt such law. (Id. at pp. 360, 384.)
The Court explained a PAGA representative action is “a
type of qui tam action. . . . The government entity on whose
behalf the plaintiff files suit is always the real party in interest in
the suit.” (Iskanian, supra, 59 Cal.4th at p. 382.) Because “the
Legislature’s purpose in enacting the PAGA was to augment the
limited enforcement capability of the [LWDA] by empowering
employees to enforce the Labor Code as representatives of the
[LWDA],” “an agreement by employees to waive their right to
bring a PAGA action serves to disable one of the primary
mechanisms for enforcing the Labor Code”; “has as its ‘object, . . .
indirectly, to exempt [the employer] from responsibility for [its]
own . . . violation of law’”; and thus is “against public policy and
may not be enforced.” (Id. at p. 383.)
14
The Court rejected the argument the FAA preempts the
state law rule against PAGA waivers 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 [LWDA].” (Iskanian, supra, 59 Cal.4th at p. 384.) Relying
on the statutory text and the legislative history of the FAA, the
Court stated, “There is no indication that the FAA was intended
to govern disputes between the government in its law
enforcement capacity and private individuals.” (Id. at p. 385.)
“Simply put, a PAGA claim lies outside the FAA’s coverage
because it is not a dispute between an employer and an employee
arising out of their contractual relationship. It is a dispute
between an employer and the state, which alleges directly or
through its agents—either the [LWDA] or aggrieved employees—
that the employer has violated the Labor Code. . . . ‘[E]very
PAGA action, whether seeking penalties for Labor Code
violations as to only one aggrieved employee—the plaintiff
bringing the action—or as to other employees as well, is a
representative action on behalf of the state.’ [Citation.] [¶]
. . . Representative actions under the PAGA, unlike class action
suits for damages, do not displace the bilateral arbitration of
private disputes between employers and employees over their
respective rights and obligations toward each other. Instead,
they directly enforce the state’s interest in penalizing and
deterring employers who violate California’s labor laws.” (Id. at
pp. 386-387.) The Court concluded, “California’s public policy
prohibiting waiver of PAGA claims, whose sole purpose is to
vindicate the [LWDA’s] interest in enforcing the Labor Code, does
not interfere with the FAA’s goal of promoting arbitration as a
forum for private dispute resolution.” (Id. at pp. 388-389.)
15
b. Epic Systems
Epic Systems, supra, 138 S.Ct. 1612 did not involve waiver
of a right to bring a representative action like a PAGA claim. An
accounting firm and one of its accountants had agreed to
arbitrate any disputes that might arise between them, with
arbitration to be individualized so that claims concerning
different employees would be heard in separate proceedings.
After his employment ended, the accountant sued the firm in
federal court, alleging violations of the federal Fair Labor
Standards Act (FLSA) and California law, and sought to pursue
his federal claim on behalf of a nationwide class under the
FLSA’s collective action provision and his state claim as a class
action. The firm brought a motion to compel arbitration, which
the district court granted. The Ninth Circuit reversed: The
FAA’s saving clause (9 U.S.C. § 2), the Ninth Circuit determined,
removed the general obligation to enforce arbitration agreements
as written if the agreement violates some other federal law; and
an agreement requiring individualized arbitration proceedings
violated the NLRA by precluding employees from engaging in the
concerted activity of pursuing claims as a class or collective
action. (Epic Systems, at pp. 1619-1620.) The United States
Supreme Court disagreed, concluding the FAA and the NLRA,
“[f]ar from conflicting,” “have long enjoyed separate spheres of
influence and neither permits this Court to declare the parties’
agreements unlawful.” (Id. at p. 1619.)
The decision in Epic Systems, which parallels the class
action portion of Iskanian, did not address whether an employee
may waive a right to bring a representative action on behalf of a
state government or even consider the underlying premise of
Iskanian that a PAGA action is not an individual dispute
16
between private parties but an action brought on behalf of the
state by an aggrieved worker designated by statute to be a
representative of the state. Accordingly, Handy’s contention
Iskanian cannot be reconciled with Epic Systems is simply
incorrect.5 As observed by Division One of the Fourth District in
Correia v. NB Baker Electric, Inc., supra, 32 Cal.App.5th at
page 620, “Epic did not reach the issue regarding whether a
governmental claim of this nature is governed by the FAA, or
consider the implications of a complete ban on a state law
enforcement action. Because Epic did not overrule Iskanian’s
holding, we remain bound by the California Supreme Court’s
decision.”
5 The same or substantially similar arguments urging courts
of appeal to decline to apply Iskanian’s anti-PAGA waiver rule
have been uniformly rejected. (See, e.g., Winns v. Postmates Inc.
(2021) 66 Cal.App.5th 803; Rosales v. Uber Technologies, Inc.
(2021) 63 Cal.App.5th 937, 943-945; Contreras v. Superior of
Los Angeles County, supra, 61 Cal.App.5th at pp. 471-472; Olson
v. Lyft, Inc., supra, 56 Cal.App.5th at pp. 867-868, 872; Correia v.
NB Baker Electric, Inc., supra, 32 Cal.App.5th at pp. 619-620; see
also Kim v. Reins International California, Inc. (2020) 9 Cal.5th
73, 86-87 [stating a PAGA claim “is different from a class action”
and relying on Iskanian for the proposition “[t]here is no
individual component to a PAGA action”]; ZB, N.A. v. Superior
Court, supra, 8 Cal.5th at pp. 197-198 [“Iskanian established an
important principle: employers cannot compel employees to
waive their right to enforce the state’s interests when the PAGA
has empowered employees to do so”; “[a]n employee’s predispute
agreement to individually arbitrate her claims is unenforceable
where it blocks an employee’s PAGA claim from proceeding”].)
17
3. Handy’s Remaining Arguments Do Not Compel a
Different Result
Handy, relying on an unpublished 2009 federal district
court decision, asserts the state’s ownership of PAGA claims is a
“legal fiction.” Handy’s cryptic argument does not change the fact
“the state is the real party in interest.” (Iskanian, supra,
59 Cal.4th at p. 387; see id. at p. 388 [“importantly, a PAGA
litigant’s status as ‘the proxy or agent’ of the state [citation] is not
merely semantic; it reflects a PAGA litigant’s substantive role in
enforcing our labor laws on behalf of state law enforcement
agencies”]; see also Kim v. Reins International California, Inc.
(2020) 9 Cal.5th 73, 86 [“a PAGA claim is an enforcement action
between the LWDA and the employer, with the PAGA plaintiff
acting on behalf of the government”; “civil penalties recovered on
the state’s behalf are intended to ‘remediate present violations
and deter future ones,’ not to redress employees’ injuries”].)
Advancing a different argument, but again citing federal
decisions, including Valdez v. Terminix International Co. Limited
Partnership (9th Cir. 2017) 681 Fed. Appx. 592, Handy contends
individual employees can pursue PAGA claims in arbitration
because they are acting with the state’s consent, as evidenced by
the state’s decision not to pursue the PAGA claim itself.6 In
6 The party seeking enforcement of an arbitration contract
has the burden of establishing the authority of a person who
purportedly signed the agreement as an agent on behalf of a
nonsignatory party. (See, e.g., Ermoian v. Desert Hospital (2007)
152 Cal.App.4th 475, 506 [“burden of proving ostensible agency is
upon the party asserting that relationship”]; Pagarigan v. Libby
Care Center, Inc. (2002) 99 Cal.App.4th 298, 301-302 [skilled
nursing facility failed to produce required evidence that children
of deceased mother had authority to enter into an arbitration
18
Valdez, the Ninth Circuit concluded, “[A]n individual employee,
acting as an agent for the government, can agree to pursue a
PAGA claim in arbitration. Iskanian does not require that a
PAGA claim be pursued in the judicial forum; it holds only that a
complete waiver of the right to bring a PAGA claim is invalid.”
(Id. at p. 594.) Setting aside whether we agree with those federal
decisions, Handy ignores that in the case at bar the
Representative Action Waivers in both agreements purported to
waive the “right to have any dispute or claim brought, heard or
arbitrated as a representative action” and thus to effect a
complete waiver of the right to bring PAGA claims, which can
only be brought as a representative action (e.g., Kim v. Reins
International California, Inc., supra, 9 Cal.5th at pp. 86-87); they
are thus unenforceable under Iskanian.7
agreement on her behalf]; Oswald Machine & Equipment, Inc. v.
Yip (1992) 10 Cal.App.4th 1238, 1247 [“[u]nless the evidence is
undisputed, the scope of an agency relationship is a question of
fact, and the burden of proof rests on the party asserting the
relationship”].)
7 In Valdez v. Terminix International Co. Limited
Partnership, supra, 681 Fed. Appx. at page 594, the Ninth Circuit
also stated, “The parties mutually agreed ‘to arbitrate covered
Disputes.’ That clause of the parties’ agreement applies even
after the representative action waiver is severed.” If Handy is
relying on Valdez to argue the superior court erred by not
severing the unenforceable provisions of the October 26, 2018
agreement purporting to waive the right to bring a representative
action in any forum (that is, the “right to have any dispute or
claim brought, heard or arbitrated as a representative action”)
and ordering the PAGA claims to arbitration, Handy ignores that
the agreement separately provides “an arbitrator shall not have
any authority to arbitrate a representative action,” that Pote only
19
Insisting the trial court erred in ruling the argument had
been forfeited, Handy contends Iskanian does not control, in any
event, because its holding was limited to predispute waivers,
while Pote’s waiver is contained in an agreement signed after he
was aware of the claimed Labor Code violations. (Iskanian,
supra, 59 Cal.4th at p. 383 [“Of course, employees are free to
choose whether or not to bring PAGA actions when they are
aware of Labor Code violations. [Citation.] But it is contrary to
public policy for an employment agreement to eliminate this
choice altogether by requiring employees to waive the right to
bring a PAGA action before any dispute arises”].)
Handy contends Pote’s dispute with Handy arose no later
than September 14, 2018, when Pote’s attorney served Pote’s
PAGA notice alleging Handy’s Labor Code violations on Handy
and the state (LWDA). Yet Pote agreed on October 26, 2018 to
waive representative actions and failed to exercise his right to opt
out by November 25, 2018. Emphasizing the late November date,
Handy argues Pote’s PAGA waiver was postdispute and thus
enforceable because it occurred after Pote’s dispute with Handy
arose; after Pote was represented by counsel; after Pote filed his
original complaint on October 3, 2018; after the LWDA failed to
respond within 65 days of the September 14, 2018 PAGA notice;
and after Pote filed his operative amended complaint alleging a
PAGA claim on November 3, 2018. Handy asserts, during the
postdispute phase in which the state has declined to prosecute an
employee’s PAGA claim (that is, after November 18, 2018), the
employee has already been “deputized” to act on the state’s behalf
brought PAGA claims, and that PAGA claims can only be brought
as a representative action.
20
and has freedom to control how to pursue the PAGA claim,
including whether to agree to individualized arbitration of the
claim.
As explained by Division Four of this court in Julian v.
Glenair, Inc. (2017) 17 Cal.App.5th 853, 866 (Julian), “Labor
Code section 2699.3, subdivision (a), sets forth the procedures
with which an aggrieved employee must comply in order to
commence a PAGA action.” “[A]n arbitration agreement executed
before an employee meets the statutory requirements for
commencing a PAGA action does not encompass that action.
Prior to satisfying those requirements, an employee enters into
the agreement as an individual, rather than as an agent or
representative of the state. As an individual, the employee is not
authorized to assert a PAGA claim; the state—through LWDA—
retains control of the right underlying any PAGA claim by the
employee. Thus, such a predispute agreement does not subject
the PAGA claim to arbitration.” (Id. at p. 872; see also id. at
p. 870 [“Only after employees have satisfied the statutory
requirements for commencing a PAGA action are they in a
position ‘to determine what trade-offs between arbitral efficiency
and formal procedural protections best safeguard their statutory
rights.’ [Citation.] Prior to that point, the employees either have
submitted no allegations of Labor Code violations to LWDA, or
have done so, but await LWDA’s determination regarding the
extent to which LWDA itself will resolve the allegations”].)
Whatever the merits of Handy’s arguments the superior
court erred in finding forfeiture and the Iskanian holding is
limited to predispute waivers, Pote entered into a predispute, not
postdispute, waiver. As our colleagues in Julian, supra,
17 Cal.App.5th at page 870 explained, “[T]he
21
predispute/postdispute boundary is crossed when the pertinent
employee is authorized to commence a PAGA action as an agent
of the state.” Pote provided his PAGA notice to both Handy and
the LWDA on September 14, 2018. Pursuant to Labor Code
section 2699.3, subdivision (a), Pote lacked statutory
authorization to commence his PAGA action until 65 days after
that date—that is, November 18, 2018. He agreed to the waiver
of representative actions on October 26, 20188—prior to both the
November 18, 2018 date on which the 65-day waiting period to
commence his PAGA action expired and the November 19, 2018
date on which he filed his first amended complaint alleging a
cause of action under the PAGA.
Handy’s contention we should consider the waiver date to
be November 25, 2018, the last day on which he could opt out of
the Mutual Arbitration Provision in the October 26, 2018
agreement, rather than October 26, 2018 itself, lacks merit. It is
the October 26, 2018 agreement that contains the waiver, and it
8 The unambiguous language of the April 9, 2018 agreement
shows Pote did not agree to arbitrate or waive his PAGA claim
under that agreement. (See Civ. Code, §§ 1638 [“language of a
contract is to govern its interpretation, if the language is clear
and explicit, and does not involve an absurdity”]; 1639 [“[w]hen a
contract is reduced to writing, the intention of the parties is to be
ascertained from the writing alone, if possible”].) As discussed,
Section 12.2(c) of the April 9, 2018 agreement provided, “Private
attorney general representative actions brought on behalf of the
state under the California Labor Code are not arbitrable, not
within the scope of this Agreement and may be maintained in a
court of law.” In its reply brief in this court Handy refers to the
Representative Action Waiver of the October 26, 2018 agreement
as the “operative version.”
22
is that agreement Handy sought to enforce with its motion to
compel arbitration. When Pote confirmed and accepted the
October 26, 2018 agreement he was not yet authorized to
commence his PAGA action as an agent of the state; he agreed in
his individual capacity only. His corresponding right to opt out of
the arbitration agreement was similarly an individual one. Pote’s
decision not to exercise that individual right does not effect a
waiver of a claim belonging to the state. (Cf. Correia v. NB Baker
Electric, Inc., supra, 32 Cal.App.5th at pp. 622-623 [“a person
who signs an agreement in a particular capacity is not
necessarily bound when acting in a different capacity”]; Julian,
supra, 17 Cal.App.5th at pp. 871-872 [“[o]rdinarily, when a
person who may act in two legal capacities executes an
arbitration agreement in one of those capacities, the agreement
does not encompass claims the person is entitled to assert in the
other capacity”].) The provisions of the October 26, 2018
agreement, including any opt-out right, do not compel waiver of
the PAGA claim.
Finally, Handy contends Iskanian is inapposite because,
given section 12.2(i)’s opt-out provision, Pote was not compelled
as a condition of his employment to accept Handy’s arbitration
provision. (See Iskanian, supra, 59 Cal.4th at p. 360 [“we
conclude that an arbitration agreement requiring an employee as
a condition of employment to give up the right to bring
representative PAGA actions in any forum is contrary to public
policy”]; see id. at p. 384 [“[w]e conclude that where, as here, an
employment agreement compels the waiver of representative
claims under the PAGA, it is contrary to public policy and
unenforceable as a matter of state law”].) Regardless of the merit
of Handy’s contention, if any, Handy fails to establish the
23
superior court committed reversible error: Handy argued in the
superior court, and asserts on appeal, Pote’s PAGA claims must
be arbitrated on an individualized, nonrepresentative basis, but,
as discussed, “[t]here is no individual component to a PAGA
action.” (Kim v. Reins International California, Inc., supra,
9 Cal.5th at pp. 86-87.)
DISPOSITION
The order denying Handy’s motion to compel arbitration is
affirmed. Pote is to recover his costs on appeal.
PERLUSS, P. J.
We concur:
SEGAL, J.
FEUER, J.
24
Pote v. Handy Technologies CA2/7
Combined Opinion