Ybarra v. Aimco: Following Iskanian, CA Ct. of Appeal Revives PAGA Action

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In Ybarra, the California Court of Appeal reconsidered its previous pre-Iskanian decision to compel arbitration of an apartment complex manager’s Private Attorney General Act (“PAGA”) claims against her employer, Apartment Investment and Management Company (“Aimco”). Ybarra v. Apartment Investment and Management Co., No. B245901 (2nd Dist. Div. 2 Oct. 7, 2014) (slip op. available here). Ultimately, the court of appeal reversed its prior holding and held that the state high court’s ruling in Iskanian meant the plaintiff’s PAGA claims could stay in court.

The plaintiff alleged three claims against her former employer, Aimco: (1) a class claim under Labor Code section 1194 for unpaid overtime and minimum wages; (2) a PAGA claim for various violations of the Labor Code, including, but not limited to, unpaid overtime (sections 510 and 1198), late final pay (201 and 202), and improper wage statements (226(a)); and (3) a claim under Bus. & Prof. Code 17200 for the same alleged violations of the Labor Code. The parties had signed an arbitration agreement that provided that the parties agreed to arbitrate all disputes between them and prohibited either party from bringing class or representative actions. Aimco unsuccessfully tried to remove the case to federal court, while the plaintiff voluntarily dismissed all claims except the PAGA claim. Then, Aimco filed a motion to compel arbitration, but the trial court denied it, finding that Ybarra had demonstrated some procedural unconscionability due to the arbitration agreement’s having been presented as a condition of employment, and had shown substantive unconscionability because the PAGA waiver was unenforceable.

Aimco appealed the trial court’s ruling and the court of appeal reversed. Following the court of appeal’s decision, the plaintiffs filed a petition for review to the California Supreme Court. The high court granted the petition and held the case pending its decision in Iskanian. Following the Iskanian decision, the high court sent the case back to the court of appeal to decide in light of Iskanian.

Citing the holding in Iskanian, the panel stated that it was bound to find that the PAGA waiver in the parties’ arbitration agreement is “unenforceable as a matter of law.” Slip op. at 4. Because she was not bringing the PAGA claims on an individual basis, the court applied the Iskanian exception for PAGA claims, noting, “The dispute here involves the legal question of whether the parties’ arbitration agreement—specifically, its prohibition of representative claims—is enforceable. Iskanian has now answered this question, and the answer is no.” Slip op. at 4 (emphasis added).