The Widening California Divide: The Rejection Of Iskanian By Federal District Courts And Potential Resolution

In an October 22, 2014, posting, we addressed the growing divide between California federal district courts and the California Supreme Court over whether an arbitration agreement can waive an employee's right to pursue a representative claim under the state's Private Attorney General Act (PAGA). That divide has now widened as two more federal district courts have rejected the June 23, 2014, holding of Iskanian v. CLS Transp. Los Angeles, LLC, 327 P. 3d 129 (2014). (Discussed in a June 23, 2014, posting here). Iskanian is currently pending on certiorari before the United States Supreme Court. (See Petition in CLS Transp., L.A. LLC v. Iskanian, No. 14-341). The question presented: "Is an employee's waiver in an arbitration agreement of a collective or 'representative action' under [PAGA] so distinguishable from a 'class action' waiver that it is immune from the otherwise preemptive effective of the Federal Arbitration Act . . . as held by this Court in AT&T Mobility v. Concepcion?" [citations omitted].

Three amici briefs have weighed in on the issue, including The Pacific Legal Foundation and National Federation of Independent Business. The Petition currently is scheduled for conference on January 9, 2015. If granted, the Supreme Court could resolve the growing divide, because federal not state courts ultimately determine the scope of federal preemption. See Gade v. Nat'l Solid Waste Mgmt. Ass'n., 505 U.S. 88, 98 (1992); Kilgore v. Key Bank Nat'l Ass'n, 673 F.3d 947, 960 (9th Cir. 2012). Otherwise, the type of court deciding the waiver issue ̶ state or federal ̶ will be determinative rather than the constitutional authority of that court.

The two recent opinions, Lucero v. Sears Holding Mgmnt. Corp., Case No. 3:14-cv-01620 (S.D. Cal. Dec. 2, 2014), and Mill v. Kmart Corp., Case No. 14-cv-02749 (N.D. Cal. Nov. 26, 2014), now join Ortiz v. Hobby Lobby Stores, Inc., 2014 U.S. Dist. LEXIS 140552 (E.D. Cal. Oct. 1, 2014); Chico v. Hilton Worldwide, Inc., 2014 U.S. Dist. LEXIS 147752 (C.D. Cal. Oct. 7, 2014); and Langston v. 20/20,Companies, Inc., 2014 Wl 5335734 (C.D. Cal. Oct. 17, 2014) in rejecting the Iskanian holding. The opinion, on reconsideration after Iskanian, in Fardig v. Hobby Lobby Stores, Inc., 2014 U.S. Dist. LEXIS 139359 (C.D. Cal. Aug. 11, 2014) reached a similar conclusion.

The federal courts above uniformly agreed that the essence of the Iskanian opinion regarding PAGA waivers is hostile to arbitration and contrary to the FAA. As...