In the California Court of Appeal’s first major statement on the reach of the U.S. Supreme Court’s recent decision concerning Federal Arbitration Act (FAA) preemption in Concepcion v. AT&T, 131 S.Ct. 1740 (2011), the Court of Appeal for the Second Appellate District today held that Concepcion does not apply to representative actions brought pursuant to PAGA, the California Labor Code’s Private Attorneys General Act of 2004. In Brown v. Ralph’s Grocery Co. (opinion available here), the Court of Appeal held unequivocally that Concepcion “does not apply to representative actions under the PAGA.” Slip. Op. at 2. Consequently, “the trial court correctly ruled that the waiver of plaintiff’s right to pursue a representative action under the PAGA was not enforceable under California law.” Id.
The Brown v. Ralph’s panel had specifically requested supplemental briefing following the Supreme Court’s issuance of Concepcion, and its decision to designate its opinion as a published decision was likely made in light of this being a ruling with considerable implications for numerous pending and still-to-be filed cases. The panel noted that Concepcion “provided that ‘at least under some circumstances, the law in California is that class action waivers in consumer contracts of adhesion are unenforceable, whether the consumer is being asked to waive the right to class action litigation or the right to classwide arbitration’ and that ‘the FAA [does not preempt] California law in this respect.’” Slip. Op. at 9, quoting Concepcion, 131 S.Ct. at 153. After then undertaking an extensive analysis that identified PAGA’s purpose as a statute that deputizes citizens to assist the State with the collection of civil penalties and not a statute aimed at recovering damages (see Slip. Op. at 10-12), the Brown v. Ralph’s court concluded that “representative actions under the PAGA do not conflict with the purposes of the FAA.” Slip. Op. at 12.
Striking a pragmatic note, the panel also observed that “[i]f the FAA preempted state law as to the unenforceability of the PAGA representative action waivers, the benefits of private attorney general actions to enforce state labor laws would, in large part, be nullified.” Id.
A team of attorneys from Initiative Legal Group, APC represented the plaintiffs both before the trial court and on appeal, and will continue to represent the plaintiffs as the action is remanded to the trial court pursuant to the Court of Appeal’s direction. Apart from its direct application to nearly identical factual circumstances in other PAGA actions, the Brown v. Ralph’s decision is also expected to be influential with federal courts considering motions to remand PAGA actions to state court, as the same concerns would arise about the purposes of PAGA being vitiated if the unique procedural posture of PAGA actions is not heeded.