Sheen v. Lorre: PAGA Actions Not Affected by AT&T v. Concepcion

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Despite having conclusively jumped the public perception shark, Charlie Sheen has performed a remarkable reverse jump into relevance.  Just when reflexive references to “winning” and Sheen’s conspicuous zaniness had become conclusively played out, Sheen has made real, though sparsely-covered news with the Los Angeles Superior Court’s recent ruling in Sheen v. Lorre, rejecting the defendants’ motion to compel Sheen’s representative PAGA action to arbitration.  The complete ruling is available here.  In rejecting the attempt to apply the U.S. Supreme Court’s recent binge of anti-class action activity to PAGA claims, the meticulously-reasoned Sheen decision is of potentially far-reaching significance.

PAGA is the California Labor Code’s Private Attorneys General Act of 2004, a statute that authorizes “aggrieved employees” to act as the California Labor Workforce Development Agency’s (LWDA) proxy and seek civil penalties for Labor Code violations.  The civil penalties are predominantly paid to the LWDA (i.e., the state) and the California Supreme Court has expressly held that PAGA actions, though “representative” in nature, are not class actions and thus needn’t satisfy the familiar requisites of ascertainability, commonality, and superiority.  See Arias v. Superior Court, 46 Cal. 4th 969 (Cal. 2009).

The Sheen defendants, including Two and a Half Men creator Chuck Lorre and Warner Brothers, sought to seize on the Supreme Court’s AT&T v. Concepcion ruling with the contention that the federal government’s “liberal policy favoring arbitration” is equally applicable to PAGA actions as to class actions.  The court rejected defendants’ contention and refused to apply Concepcion and refer Sheen’s PAGA claim to arbitration, and stated that there are “at least three reasons” for this conclusion.  Sheen Ruling at 12.

First, “no reading of the arbitration clause in evidence supports or suggests a construction that its terms apply to a claim for collection of a penalty . . . arising under . . . PAGA.”  Second, a PAGA cause of action “seeks a remedy belonging not to any individual but to the state [LWDA].”  Third, the PAGA remedy “applies to persons who did not execute the arbitration clause at issue.”  Id

Far from the sort of cursory ruling that is occasionally generated by courts with busy calendars, this ruling elaborates on each of the stated reasons for PAGA claims not being subject to arbitration (and thus beyond the reach of AT&T v. Concepcion), a thoroughness at least partly attributable to both sides having been well-financed and submitting exhaustive, compelling briefs.  Id. at 13-18.  As such, the Sheen PAGA ruling is likely to be influential as other defendants attempt to ride the AT&T v. Concepcion wave and send PAGA claims to arbitration.  As such, when the legal history of the year 2011 is written, perhaps it will be said that Charlie Sheen was more a force for justice than the conservative majority on the Supreme Court.