Anthony Brooks v. Amerihome Mortgage Company, LLC

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

Code.

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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

arbitrator.”

DISCUSSION

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.

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(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

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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

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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

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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.

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