With Adolph v. Uber Technologies, Inc. in the books, it is now clear that Private Attorneys General Act (PAGA) plaintiffs do not lose standing to pursue representative claims in court when their individual PAGA claims are sent to arbitration. In Adolph’s wake, disputes may arise regarding whether the representative court action should be stayed pending the individual arbitration. Adolph strongly suggested a stay is appropriate in that circumstance.
The recent U.S. Supreme Court decision in Coinbase, Inc. v. Bielski provides further support for that approach. Coinbase concerned the circumstance where a party takes an interlocutory appeal from an order denying a motion to compel arbitration, which the Federal Arbitration Act permits as a matter of right. 9 U.S.C. § 16(a). The Court considered the question of “whether the district court must stay its pre-trial and trial proceedings while the interlocutory appeal is ongoing,” and concluded, “The answer is yes.” Slip op. at 1.
The similarities between the circumstance in Coinbase and the PAGA situation described above are striking. A stay pending an appeal of an order denying arbitration is appropriate because if the appellant prevails on appeal, there will be no court action. Similarly, a stay of non-individual PAGA claims in court pending the arbitration of individual PAGA claims is appropriate because only an “aggrieved employee” has standing to bring a PAGA claim. Cal. Lab. Code § 2699(a). Therefore, if the plaintiff loses in arbitration, she has no standing to pursue a court action.
Accordingly, while the Coinbase ruling would not bind courts when a PAGA claim is compelled to arbitration, the reasons underpinning it are compelling and apply equally to PAGA cases:
- Avoiding unseemly conflicts between tribunals: “[I]t makes no sense for trial to go forward while the court of appeals cogitates on whether there should be one.” Slip op. at 4 (quoting Apostol v. Gallion, 870 F.2d 1335, 1338 (7th Cir. 1989)). Similarly, it makes no sense for a non-individual PAGA case to proceed while an arbitrator decides the threshold question of whether the plaintiff has standing to bring PAGA claims.
- Preserving the contracted-for benefits of arbitration: “If the district court could move forward with pre-trial and trial proceedings while the appeal on arbitrability was ongoing, then many of the asserted benefits of arbitration (efficiency, less expense, less intrusive discovery, and the like) would be irretrievably lost—even if the court of appeals later concluded that the case actually had belonged in arbitration all along.” Slip op. at 6. Similarly, if a defendant were forced to defend non-individual PAGA claims in court, the benefits of arbitration would be lost of the arbitrator decided the plaintiff had no standing to bring PAGA claims.
- Avoiding “blackmail settlements”: “Absent a stay, parties also could be forced to settle to avoid the district court proceedings (including discovery and trial) that they contracted to avoid through arbitration. That potential for coercion is especially pronounced in class actions, where the possibility of colossal liability can lead to what Judge Friendly called ‘blackmail settlements.’” Slip op. at 6 (quoting H. Friendly, Federal Jurisdiction: A General View 120 (1973)). “Blackmail settlements” are equally concerning in PAGA actions, given the potential for statutory penalties of as much as $100 or more per pay period.
- Preserving scarce judicial resources: “From the Judiciary’s institutional perspective, moreover, allowing a case to proceed simultaneously in the district court and the court of appeals creates the possibility that the district court will waste scarce judicial resources—which could be devoted to other pressing criminal or civil matters—on a dispute that will ultimately head to arbitration in any event,” which “represents the ‘worst possible outcome’ for parties and the courts[.]” Slip op. at 6 (quoting Bradford-Scott Data Corp. v. Physician Computer Network, Inc., 128 F.3d 504, 506 (7th Cir. 1997)). Similarly, judicial resources are wasted if a trial court proceeds with PAGA claims that the arbitrator ultimately rules lack standing.