Supreme Court Grants Review in Significant Arbitration Case Regarding PAGA 

The United States Supreme Court has granted certiorari to address the important question of whether the Federal Arbitration Act ("FAA") requires the enforcement of an arbitration agreement that would require representative action claims, including those under the California Private Attorneys General Act ("PAGA"), to be arbitrated. 

Factual Background 

Petitioner Viking River Cruises, Inc. ("Viking") sells multi-day cruises in various locations around the world. Respondent Moriana worked for Viking as a sales representative in California from late May 2016, to mid-June 2017. Before commencing her employment with Viking, Moriana signed an agreement to resolve all future employment-related disputes with Viking in arbitration. The arbitration agreement said it would apply to "any dispute arising out of or relating to [her] employment" and that "arbitration will replace going before… a court for a judge or jury trial." The agreement specifically provided that Moriana would waive class, collective, representative, and PAGA action procedures: 

There will be no right or authority for any dispute to be brought, heard or arbitrated as a class, collective, representative or private attorney general action, or as a member in any purported class, collective, representative or private attorney general proceeding, including, without limitation, uncertified class actions.

Moriana was expressly permitted to opt out of this waiver: "You may opt-out of the Class Action Waiver by clicking this box [ ] before you click below." Moriana did not select this box and instead accepted the arbitration agreement. 

Procedural Background

After her employment ended, Moriana filed a representative action against Viking, seeking penalties under California's PAGA statute for alleged wage and hour law violations. She filed the action on behalf of herself, as well as hundreds of other "aggrieved current and former [Viking] employees" with various job titles whom she claimed had similar duties.

Viking moved to compel Moriana to arbitrate her individual claims and to stay the court proceedings, citing the parties' arbitration agreement and the United States Supreme Court's holding in Epic Systems v. Lewis, 138 S. Ct. 1612 (2018), that the FAA favored enforcement of arbitration agreements. The trial court denied the motion, ruling that Moriana's "representative PAGA claims cannot be compelled to arbitration under California law." The Court of Appeal affirmed, citing the California Supreme Court's holding in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) that "an arbitration agreement that include[s] a waiver of an employee's right to bring a PAGA representative action in any forum violate[s] public policy" because "a PAGA representative action is a type of qui tam action and... the state is always the real party in interest in the suit." 

The California Supreme Court denied Viking's petition for review.

United States Supreme Court

Viking then Petitioned for a Writ of Certiorari in the United States Supreme Court, arguing that the "Iskanian rule and its obvious incompatibility with the FAA is a problem only this Court can fix ."Viking further argued that, should the United States Supreme Court not address the issues, California courts will continue "denying California employers the benefit of their bargains…" by allowing formal PAGA claims to be made at a rate of 15 a day in California. 

On December 15, 2021, the United States Supreme Court granted certiorari. It will likely hear arguments in the spring of 2022, with a decision expected as early as the summer of 2022. 

Next Steps

Since the Supreme Court may rule in favor of arbitration agreements that waive PAGA representative action claims, employers may want to review and update their arbitration agreements now to include a waiver of PAGA claims. Arent Fox will continue to be available to provide advice and counsel on how best to comply with changes in California law, including developments pertaining to arbitration agreements. If you have questions about this case or issues related to arbitration agreements, contact John P. Zaimes or Jeffrey B. Weston to discuss.


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