From FOI Imre Szalai:
Yesterday, the Supreme Court added yet another arbitration case to its docket, Viking River Cruises v. Moriana, No. 20-1573, which deals with the clash between the FAA and California’s Private Attorney General Act (PAGA). Under PAGA, California courts have allowed workers to pursue representative claims in court against employers on behalf of other workers, even if the workers were bound by bilateral arbitration agreements. These PAGA cases treat the state of California as the real party in interest, and because the state is not bound by a private arbitration agreement, these state cases tend to treat the representative claims as not subject to arbitration under the FAA.
If the Supreme Court conceptualizes PAGA claims as claims brought by the state, where the dispute is really between the state and the employer for violations of the state’s labor code, then the Supreme Court can rely on its Waffle House case from 2002 and find that the PAGA representative claims are not covered by an individual employee’s arbitration agreement. But I am concerned the Supreme Court may conceptualize PAGA claims differently, as explained below.
Numerous PAGA-related cert petitions have been filed over the last several years, but the Supreme Court, until yesterday, had not granted cert in these cases. I am wondering if yesterday’s cert grant may be somewhat related to the Texas abortion statute. I don’t think it is sound to compare PAGA with the Texas abortion statute, but I believe that some Justices may be tempted to view PAGA through the following lens: where a state cannot directly regulate or ban certain practices (like abortions or guns or arbitration), the state may indirectly attempt to accomplish a similar result and attempt to insulate itself from challenges by shifting enforcement to private individuals. In other words, will some Justices view PAGA as a mere back-door attempt by the state of California to indirectly do what it cannot directly do: limit the use of arbitration for employment claims? A state cannot directly ban the use of arbitration for employment claims under the rationale of the Supreme Court’s Southland decision. But by re-packaging such a ban as part of a private attorney general statute, California in effect can accomplish a similar result. (I believe a similar dynamic existed, but from the judicial perspective and not the legislative perspective, in the Supreme Court’s Directv v. Imburgia case – where some Justices perceived the California judiciary as trying to repackage or conceal a mistrust of arbitration within a facially-neutral judicial ruling). In the current political climate, it seems that more states, governors, and state legislatures are considering or have adopted statutory schemes that shift enforcement of questionable policies to private parties. The Justices may view PAGA through this broader lens, and that’s why I suspect cert may have been granted yesterday even though similar PAGA cert petitions have been filed and denied for several years. But I don’t think the comparison or this particular lens is appropriate. A state, through its attorney general, may legitimately and constitutionally enforce state labor provisions, and arbitration agreements cannot block such enforcement under the Waffle House case. However, if a state’s goal or purpose is unconstitutional, the state should not be able to avoid challenge through the use of a private enforcement scheme.
Imre Stephen Szalai, Judge John D. Wessel Distinguished Professor of Social Justice,
Loyola University New Orleans College of Law