The Court addresses arbitration of class and collective actions in Viking River Cruises, Inc. v. Moriana and Coinbase, Inv. V. Bielski.”

Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (2022)

US Supreme Court Narrows Ability of Employees to Pursue Representative Actions under California PAGA Statute

Angie Moriana worked at Viking River Cruises, Inc. (Viking) as a sales representative. When she was hired, Moriana executed an agreement that included a binding arbitration clause and a “class action waiver,” which provided that Moriana could not bring class or collective actions in arbitral proceedings.

The agreement also had a severability clause, specifying that “if the waiver was found invalid,” any class or collective action “would presumptively be litigated in court” while the portions of the agreement that remained valid would proceed in arbitration. Id. at 1916.

After leaving her position with Viking, Moriana filed suit in California Superior Court under California’s Private Attorneys General Act of 2004 (PAGA), which permits employees to act as “private attorneys general to enforce California labor law[.]” Id. at 1913. Under PAGA, employees can assert individual and “representative” claims against their former employer. Id. at 1914. As part of her suit, Moriana asserted not only individual claims under the California Labor Code, but also “a wide array of other code violations allegedly sustained by other Viking employees[.]” Id. at 1915.

Viking moved to compel arbitration of Moriana’s individual claims, and to dismiss her representative PAGA claims. The Superior Court denied Viking’s motions and the California Court of Appeals affirmed, holding that under California precedent “PAGA claims cannot be split into arbitrable individual claims and nonarbitrable ‘representative’ claims.” Id. at 1916–17.^[1]

The US Supreme Court, noting that there was a conflict between PAGA’s procedural structure and the Federal Arbitration Act (FAA), held that the FAA preempts California law “insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” Id. at 1924. Since Moriana’s employment agreement contained a severability clause, Viking was entitled to force Mariana to arbitrate her individual claims even though her waiver of class or collective claims was unenforceable under PAGA. Id. at 1925. However, the Court continued, PAGA “provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding.” Id. As a consequence, once Viking was successful in compelling Moriana to arbitrate her individual claims, she lacked standing to pursue her representative claims and the “correct course” was to dismiss them.

The Viking decision weakens the ability of employees to pursue collective actions for labor violations in California. As long as employees can be compelled to arbitrate their individual PAGA claims, they lack standing to pursue class-wide, representative claims under the Act. Although Viking was, in one sense, a narrow opinion focusing on PAGA, it reflects an ongoing struggle between employees’ rights to pursue collective actions and employers’ use of arbitration agreements to compel arbitration of individual claims and waive class or collective claims.

This past November, for example, Twitter moved to compel arbitration in a case filed in the Northern District of California by four employees. See Cornet et al v. Twitter, Inc., 3:22-CV-06857-JD, Dkt. No. 18 (Nov. 22, 2022). Twitter maintains in its motion that the FAA and applicable precedent “dictate that where, as here, a plaintiff has entered into an arbitration agreement with a class action waiver, their individual claims must be compelled to arbitration and the putative class claims dismissed.” Id. at 8. District Judge James Donato set hearing on that motion for January 2023.

Coinbase, Inc. v. Bielski

US Supreme Court Grants Certiorari in Case Concerning Stays of Arbitration

On December 9, 2022, the US Supreme Court granted certiorari in Coinbase, Inc. v. Bielski.^[2] The Coinbase case joins before the Court two underlying putative class actions brought in the Northern District of California, Bielski v. Coinbase, Inc., 3:21-cv-07478-WHA (N.D. Cal. 2021) and Suski v. Coinbase, Inc. et al., 3:21-cv-04539-SK (N.D. Cal. 2021).

The District Court actions involve different substantive claims, but they share two important characteristics. First, both are putative class actions. Second, in both cases Coinbase moved to compel arbitration, the District Court denied the motion, and Coinbase appealed that denial pursuant to § 16(a) of the FAA, which permits interlocutory appeal of a district court’s order denying a motion to compel arbitration. In its petition, Coinbase asks the Court to consider “whether an appeal from the denial of a motion to compel arbitration requires that further proceedings in the district court be stayed until the appeal is resolved, or whether courts have discretion to deny a stay under the traditional stay factors and thus require the parties to litigate in court during the pendency of the appeal.” Pet. App. at 2.

Circuit Courts are split on this issue. The Third, Fourth, Seventh, Tenth, Eleventh, and DC Circuits have held that an appeal of a district court’s order denying a motion to compel arbitration “divests the district court of jurisdiction,” automatically staying the trial court proceedings. Id. The Second, Fifth, and Ninth Circuits have held to the contrary — that the appealing party must obtain a stay or, if it fails to do so, continue with litigation in the district court. Id.

Though Coinbase does not address an issue particular to class or collective actions, it may have a significant impact on how these cases are litigated. The decision will also impact settlement leverage, as an automatic stay pending resolution of an appeal creates another hurdle for class action plaintiffs.

FOOTNOTES

[1] The California Supreme Court declined to exercise its discretionary review, so the case came to the US Supreme Court on certiorari from the California Court of Appeals.

[2] No. 22-105, 2022 WL 17544994 (US Dec. 9, 2022).

Nadav S. Pearl also contributed to this article.