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Date: 04-12-2020

Case Style:

Anthony Brooks v. Amerihome Mortgage Company, LLC

Case Number: B298132

Judge: Tangeman, J

Court: California Court of Appeals Second Appellate District, Division Six on appeal from the Superior Court, County of Ventura

Plaintiff's Attorney: Douglas HanNancy

Defendant's Attorney: Nancy Nicole Lubrano, Todd Robin Wulffson and Rachel L. Capler

Description: Brooks was an employee at AmeriHome. His
employment contract included an arbitration clause. It states
that “any dispute or controversy arising out of or relating to this
Agreement or your employment . . . will be settled exclusively by
arbitration . . . in accordance with, and pursuant, to the National
Rules of Resolution of Employment Disputes of the American
Arbitration Act.”
In January 2019, Brooks filed a written notice of
wage violation claims with the Labor and Workforce
Development Agency (LWDA) pursuant to the Private Attorneys
General Act of 2004 (PAGA). (Lab. Code,1 § 2698 et seq.) Brooks
alleged he and other AmeriHome employees were “entitled to
penalties and wages as allowed under [§ 2698 et seq.]” and “will
seek [them] on his own behalf and on behalf of other similarly
situated” employees.
In response, AmeriHome filed a demand for
arbitration with the American Arbitration Association (AAA). It
sought “final and binding arbitration of Brooks’[s] individual
claims,” including: that AmeriHome “failed to pay all wages to
him, . . . failed to provide meal and rest breaks, failed to pay all
wages timely, failed to provide accurate wage statements, failed
to maintain payroll records, and failed to reimburse him for
business related expenses.” AmeriHome alleged that the
“California Labor Code violation claims at issue” were “dispute[s]
or controvers[ies] arising out of Brooks’[s] employment with
AmeriHome,” which the parties agreed to arbitrate pursuant to
the employment contract. AAA initiated arbitration proceedings.
Following the expiration of the required notice period
giving LWDA an opportunity to investigate and file the claim
(§ 2699.3, subd. (a)(2)(A)), Brooks filed a first amended complaint
“on behalf of himself and other current and former aggrieved
[AmeriHome] employees” in Ventura County Superior Court. He
alleges a single cause of action under PAGA. The first amended
1 Further unspecified statutory references are to the Labor
complaint alleges AmeriHome violated various Labor Code
sections, including failure to pay minimum wage and overtime
wages, provide meal periods and rest breaks, timely pay wages
during employment, timely pay wages upon termination, provide
complete and accurate wage statements, and reimburse business
expenses.2 Unlike the LWDA notice, Brooks’s first amended
complaint does not seek individual recovery for unpaid wages.
The “prayer for relief” seeks only “civil penalties,” “costs and
attorney[’s] fees,” and “other and further relief the court may
deem just and proper.”
Brooks filed a motion for a preliminary injunction to
enjoin arbitration. AmeriHome filed a motion to stay proceedings
pending arbitration. The trial court issued the preliminary
injunction and denied the stay request. The court found that
“allowing the arbitration to proceed would split a pure PAGA
claim between the trial court and an arbitration forum. A PAGA
claim is made on behalf of the State and, . . . the State cannot be
compelled to go to arbitration.” The court further stated that
whether Brooks is the “proper plaintiff to bring this matter on
behalf of the State is a question for this [c]ourt, not an
AmeriHome argues the trial court erred when it
issued the preliminary injunction. We disagree.
In determining whether to issue a preliminary
injunction, the trial court must weigh two inter-related factors:
2 The first amended complaint alleges violations of the
following: Labor Code sections 201, 202, 203, 204, 226,
subdivision (a), 226.2, 226.3, 226.7, 510, 512, subdivision (a),
1174, 1194, 1197, 1197.1, 1198, 2800, and 2802.
(1) the likelihood the plaintiff will prevail on the merits, and (2)
the relative interim harm the parties would suffer from the
issuance or nonissuance of the injunction. (People ex rel. Gallo v.
Acuna (1997) 14 Cal.4th 1090, 1109.) We review the trial court’s
ruling for abuse of discretion. (Ibid.) We may affirm the trial
court’s decision on any grounds which appear in the record.
(D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 19.)
1. Likelihood of Prevailing on the Merits
The trial court did not abuse its discretion when it
found that Brooks demonstrated a likelihood he would prevail on
the issue of whether his claim was arbitrable.
A PAGA action is fundamentally an action designed
to protect the public, not to benefit a private party. (Zakaryan v.
The Men’s Wearhouse, Inc. (2019) 33 Cal.App.5th 659, 669
(Zakaryan), disapproved on other grounds in ZB, N.A. v. Superior
Court (2019) 8 Cal.5th 175, 196.) Under PAGA, an “aggrieved
employee,” acting as a private attorney general, may bring a civil
action personally and on behalf of other current or former
employees to recover civil penalties for Labor Code violations. (§
2699, subd. (a).) “The employee may not file his or her PAGA
claim for particular labor law violations until first giving [LWDA]
the opportunity to investigate and file the claim itself [citations]
and, if [LWDA] elects not to get involved, [it] is nevertheless
legally bound by the outcome of the employee-prosecuted PAGA
claim [citations].” (Zakaryan, at pp. 669-670; § 2699.3.) If the
PAGA action results in penalties, LWDA recovers 75 percent and
the aggrieved employees recovers the remaining 25 percent of
those penalties. (§ 2699, subd. (i).)
In Iskanian v. CLS Transportation Los Angeles, LLC
(2014) 59 Cal.4th 348, 384, our Supreme Court held that an
employment agreement compelling an employee to waive the
right to bring a PAGA action “is contrary to public policy and
unenforceable as a matter of state law.” The court explained that
because a PAGA action is a representative action, a “‘singleclaimant arbitration under the PAGA for individual penalties will
not result in the penalties contemplated under the PAGA to
punish and deter employer practices that violate the rights of
numerous employees under the Labor Code.’” (Ibid.) The court
also held that the Federal Arbitration Act (FAA) does not
preempt state laws prohibiting 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].” (Ibid.)
Where an employee alleges a “single representative
cause of action under PAGA,” the claim “cannot be split into an
arbitrable individual claim and a nonarbitrable representative
claim.” (Williams v. Superior Court (2015) 237 Cal.App.4th 642,
649 (Williams).) In Williams, the employee filed a single-count
PAGA action, seeking civil penalties and/or damages against the
employer for its failure to provide off-duty rest periods pursuant
to section 226.7. (Id. at p. 645.) The employer argued the
employee must first arbitrate his individual claim to prove he
was an “aggrieved employee.” (Id. at pp. 645-646.) The Court of
Appeal disagreed, holding that because the PAGA claim was a
representative, and not an individual, claim, the employee
“cannot be compelled to submit any portion of his representative
PAGA claim to arbitration, including whether he was an
‘aggrieved employee.’” (Id. at p. 649.)
Here, Brooks’s complaint is, as the trial court
described it, a “pure PAGA claim.” Brooks alleged a single cause
of action under PAGA and did not allege an individual claim for
wage recovery in his complaint. His complaint prayed only for
“civil penalties,” “costs and attorney[’s] fees,” and “other and
further relief the court may deem just and proper.” Because he
brought a representative claim, he cannot be compelled to
separately arbitrate whether he was an aggrieved employee.
(Williams, supra, 237 Cal.App.4th at p. 649.)
AmeriHome concedes a PAGA claim is nonarbitrable,
but it argues Brooks alleged individual “victim-specific Labor
Code violations” in his LWDA notice that must be arbitrated
pursuant to the employment contract. But it is the complaint,
and not the notice, that sets forth the issues in controversy.
(Committee on Children’s Television, Inc. v. General Foods Corp.
(1983) 35 Cal.3d 197, 211-212 [complaint serves “to frame and
limit the issues” and “to apprise the defendant of the basis upon
which the plaintiff is seeking recovery”], superseded on other
grounds in Branick v. Downey Savings & Loan Assn. (2006) 39
Cal.4th 235, 242.) Therefore, Brooks would likely prevail on the
merits because he “cannot be compelled to submit any portion of
his representative PAGA claim to arbitration.” (Williams, supra,
237 Cal.App.4th at p. 649.)
2. Balance of Interim Harm
The trial court did not abuse its discretion when it
found that Brooks demonstrated that the interim harm he would
suffer if the injunction was denied outweighed the harm
AmeriHome would suffer if the injunction was granted.
Arbitration of a nonarbitrable claim would be futile.
(See PaineWebber, Inc. v. Hartmann (3d Cir. 1990) 921 F.2d 507,
515 [PaineWebber would suffer “irreparable harm” if compelled
to arbitrate a nonarbitrable claim], overruled on other grounds by
Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 85;
McLaughlin Gormley King Co. v. Terminix Intern. Co., L.P. (8th
Cir. 1997) 105 F.3d 1192, 1194 [“If a court has concluded that a
dispute is [nonarbitrable], prior cases uniformly hold that the
party urging arbitration may be enjoined from pursuing what
would now be a futile arbitration” (emphasis omitted)].) Brooks
established that he would suffer harm if he was compelled to
participate in a futile arbitration. This harm would outweigh any
harm AmeriHome would suffer from an order enjoining a futile
act. The trial court properly enjoined the arbitration.

Outcome: The order granting the preliminary injunction is affirmed. Brooks shall recover his costs on appeal.

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