California Labor Law Compliance:
Agreements and Contracts
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Improper Arbitration Agreements
Chris Garner v. Inter-state Oil Company
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA, THIRD APPELLATE DISTRICT
Modified and Certified for Publication (7/23/2020)
NO. C088374, 2020 WL 4218302
CERTIFIED FOR PUBLICATION:
July 23th, 2020
CHRIS GARNER, Plaintiffs and Appellant,
INTER-STATE OIL COMPANY,
Defendant and Respondent.
(Super. Ct. No. 34-2018-
OPINION AND GRANTING
REQUEST TO PUBLISH
[NO CHANGE IN
THE COURT: The opinion in the above-entitled matter filed on June 26, 2020, was not certified for publication in the Official Reports. For good cause it now appears that the opinion should be published in the Official Reports and it is so ordered. It is also ordered that the opinion filed in this case on June 26, 2020, be modified as follows: At page 2, first full paragraph, remove “(1)” and “(2)” from the only sentence, so that the paragraph now reads: “We conclude the arbitration agreement requires arbitration of Garner’s class claims, and Inter-State Oil did not waive reliance on the arbitration agreement.” This modification does not change the judgment.
Chris Garner sued Inter-State Oil Company (Inter-State Oil), alleging employment claims and seeking certification of a class action. Based on an arbitration agreement between Garner and Inter-State Oil, the trial court granted Inter-State Oil’s petition to compel arbitration of individual claims only, effectively denying Garner the ability to pursue class action claims. The trial court relied on language in the arbitration agreement stating that Garner waived his right to participate in class action lawsuits.
On appeal from the order granting the motion to compel arbitration, Garner contends (1) the plain language of the arbitration agreement gives him the right to pursue 2 his class claims in arbitration, and (2) Inter-State Oil waived reliance on the arbitration agreement.
We conclude (1) the arbitration agreement requires arbitration of Garner’s class claims, and (2) Inter-State Oil did not waive reliance on the arbitration agreement.
We will modify the trial court’s order to require arbitration of both individual and class claims, and affirm the order as modified.
During Garner’s employment with Inter-State Oil, Garner signed a 2014 arbitration agreement. There is no dispute that the 2014 agreement superseded an earlier arbitration agreement.
Garner subsequently filed a class action complaint against Inter-State Oil, asserting a cause of action for unfair business practices (Bus. & Prof. Code, § 17200) and alleging that Inter-State Oil engaged in various illegal employment practices related to wages, breaks, and reimbursement of business expenses. Inter-State Oil filed a petition to compel arbitration, asserting that Garner agreed to arbitrate all claims arising out of his employment with Inter-State Oil and that Inter-State Oil had asked Garner to arbitrate his dispute but Garner refused. Garner acknowledged Inter-State Oil’s petition to compel arbitration and offered to stipulate to arbitration of the class claims, but Inter-State Oil would agree only to arbitrate Garner’s individual claims. Consequently, Garner opposed the petition to compel arbitration, asserting that Inter-State Oil breached the arbitration agreement by refusing to arbitrate the class claims and that the breach waived its rights under the agreement and excused Garner’s duty to arbitrate.
The trial court granted Inter-State Oil’s petition to compel arbitration only as to Garner’s individual claims. It relied on language in the arbitration agreement stating that Garner waived his right to participate in class action lawsuits*. Garner appealed the trial court’s order granting Inter-State Oil’s motion to compel arbitration, citing Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277, 1288 [an order to arbitrate individual claims is appealable if it constitutes the “death knell” for class litigation].
*At the hearing on the petition to compel arbitration, Garner orally requested a statement of decision. The trial court took the request under submission and later denied It, issuing a detailed minute order. In a footnote in his opening brief, Garner asserts that the failure to issue a statement of decision was reversible error per se. However, Garner failed to raise the issue properly on appeal. Points raised in the opening brief must be set forth separately under an appropriate heading, showing the nature of the question to be presented and the point to be made. (Cal. Rules of Court, rule 8.204(a)(1)(B); Opdyk v. California Horse Racing Bd. (1995) 34 Cal.App.4th 1826, 1830, fn. 4.) An assertion in a footnote does not meet that standard. Therefore, we need not consider the assertion.
Garner contends the plain language of the arbitration agreement gives him the right to pursue his class claims in arbitration.
We interpret arbitration agreements using the plain meaning rule, seeking to give effect to the mutual intention of the parties. (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 176-177.) Our review of the contract language is de novo. (Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 707.)
Here, resolution hinges on two sentences in the arbitration agreement. The first relevant sentence appears under the admonition to read the agreement carefully, and provides: “To resolve employment disputes in an efficient and cost-effective manner, you and Inter-State Oil Co. agree that any and all claims arising out of or related to your employment that could be filed in a court of law, including but not limited to, claims of unlawful harassment or discrimination, wrongful demotion, defamation, wrongful discharge, breach of contract, invasion of privacy, or class action shall be submitted to final and binding arbitration, and not to any other forum.” The second relevant sentence appears in bold lettering just above the signature lines, and states: “This Arbitration Agreement Is A Waiver Of All Rights To A Civil Jury Trial Or Participation In A Civil Class Action Lawsuit For Claims Arising Out Of Your Employment.”
Garner acknowledges that the second relevant sentence constitutes a waiver. But he disputes the extent of the waiver. He argues that although he waived the right to present his class claims in court, he did not waive the right to submit the class claims to arbitration. Inter-State Oil counters that the arbitration agreement contains a waiver of class claims.
The arbitration agreement at issue here contains an express agreement to arbitrate class action claims. As noted, it provides: “To resolve employment disputes . . . , you and Inter-State Oil Co. agree that any and all claims . . . that could be filed in a court of law, including but not limited to . . . class action shall be submitted to final and binding arbitration, and not to any other forum.”
Inter-State Oil argues “[t]here is no agreement between [Inter-State Oil] and [Garner] to arbitrate class claims. In fact, the express language of the Arbitration Agreement states that [Garner] waives his right to ‘participation in a class action.’ ” In making this argument, Inter-State Oil takes the language of the agreement out of context and ignores the express agreement to arbitrate class claims. The waiver sentence referred to by Inter-State Oil states that the arbitration agreement waived his right to “participation in a civil class action lawsuit,” not to participation in any class action claim. (Italics added.) Inter-State Oil does not account for the word “lawsuit” in its argument. Lawsuits generally refer to court actions. (See Roberts v. Packard, Packard & Johnson (2013) 217 Cal.App.4th 822, 839 [noting the difference between an arbitration claim and a lawsuit (court action)]; see also Mission Beverage Co. v. Pabst Brewing Co., LLC (2017) 15 Cal.App.5th 686, 697 [recognizing the difference between a lawsuit and an arbitration].) There is no indication in the arbitration agreement that the word “lawsuit” was intended to apply, uncharacteristically, to both court actions and arbitration claims. Indeed, the only sentence in the arbitration agreement referring to arbitration of class claims requires arbitration. Thus, read as a whole, this is an agreement to arbitrate all claims, including class claims, with a notice at the end of the agreement that it is a waiver of all jury trials and class action lawsuits. The agreement functions as a waiver of participation in a class action lawsuit because those class claims must be submitted to arbitration.
Inter-State Oil relies on the holding in Lamps Plus, Inc. v. Varela (2019) __ U.S. __ [203 L.Ed.2d 636]. That case, however, is distinguishable. It held that a court may not compel class arbitration when the arbitration agreement does not provide for such arbitration and that an ambiguity about whether class claims may be arbitrated does not constitute consent to arbitrate class claims. (Id. at pp. __ [203 L.Ed.2d at pp. 645-657].) As we have explained, however, when reading the arbitration agreement in this case as a whole, the language of the arbitration agreement provides for arbitration of class claims. Therefore, the parties consented to arbitrate class claims.
Accordingly, we conclude this arbitration agreement provides for arbitration of class claims.
Garner further contends Inter-State Oil breached the arbitration agreement by refusing to arbitrate the class claims and therefore waived reliance on the arbitration agreement, thus allowing Garner to pursue his remedies in court. Based on this reasoning and the assertion that the arbitration agreement lacked consideration, Garner claims he is entitled to proceed in court on his class action claims.
“[T]he term ‘waiver’ has a number of meanings in statute and case law. [Citation.] While ‘waiver’ generally denotes the voluntary relinquishment of a known right, it can also refer to the loss of a right as a result of a party’s failure to perform an act it is required to perform, regardless of the party’s intent to relinquish the right. [Citations.] In the arbitration context, ‘[t]he term “waiver” has also been used as a shorthand statement for the conclusion that a contractual right to arbitration has been lost.’ [Citation.]” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195, fn. 4.)
Federal and state law favor arbitration. Therefore, “waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof. [Citations.]” (St. Agnes Medical Center v. PacifiCare of California, supra, 31 Cal.4th at p. 1195.) “Both state and federal law emphasize that no single test delineates the nature of the conduct that will constitute a waiver of arbitration. [Citations.] ‘ “In the past, California courts have found a waiver of the right to demand arbitration in a variety of contexts, ranging from situations in which the party seeking to compel arbitration has previously taken steps inconsistent with an intent to invoke arbitration [citations] to instances in which the petitioning party has unreasonably delayed in undertaking the procedure. [Citations.] The decisions likewise hold that the ‘bad faith’ or ‘wilful misconduct’ of a party may constitute a waiver and thus justify a refusal to compel arbitration. [Citations.]” ’ [Citation.]” (Id. at pp. 1195-1196.)
Here, there is no evidence of bad faith or willful misconduct. The parties simply had a disagreement over the meaning of the arbitration agreement, which is not a model of clarity, and took the disagreement to court. That we have resolved the disagreement against Inter-State Oil is not evidence of bad faith or willful misconduct. We have found no case holding that conduct similar to Inter-State Oil’s rose to the level of waiver of the right to arbitrate. Therefore, giving effect to the public policy favoring arbitration, we conclude that the arbitration agreement must be enforced.
Finally, Garner asserts Inter-State Oil’s conduct showed “a lack of mutuality of consideration that renders the [arbitration agreement] null and void.” Garner states: “The [arbitration agreement] lacks consideration because [Inter-State Oil] refused to perform its obligation under the agreement . . . .” For this proposition, Garner cites only to a case which held that, to create a contract with sufficient consideration, “the promises must be mutual in obligation. . . .” (Mattei v. Hopper (1958) 51 Cal.2d 119, 122.) Here, the parties made mutual, obligating promises to arbitrate. The dispute over the meaning of the arbitration agreement did not change those mutual, obligating promises. Adequacy of consideration is in the formation of the contract, not in its performance. (Meyer v. Benko (1976) 55 Cal.App.3d 937, 945.) We therefore reject Garner’s contention that Inter-State Oil’s conduct rendered the arbitration agreement null and void because of lack of consideration.
The trial court’s order compelling arbitration is modified to require arbitration of both individual and class claims, and, as modified, the order is affirmed. Garner is awarded his costs on appeal. (Cal. Rules of Court, rule 8.278(a).)
Arbitrator lacked authority to issue a pre-hearing discovery subpoena.Aixtron, Inc. v. Veeco Instruments Inc.
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT
Modified and Certified for Publication (7/16/2020)
Nos. H045126, H045464, 2020 WL 4013981 (Cal. Ct. App. July 16, 2020)
CERTIFIED FOR PUBLICATION:
July 16th, 2020
Plaintiff and Appellant
VEECO INSTRUMENTS INC. et al.,
Defendants and Respondents.
(Santa Clara County Super.
Ct. No. 17CV311362)
(Santa Clara County Super.
Ct. No. 17CV315493)
Miguel Saldana is a former employee of respondent Veeco Instruments, Inc. (Veeco). In 2017, Saldana resigned from his position at Veeco and went to work for a competitor, appellant Aixtron, Inc. (Aixtron). Veeco initiated arbitration proceedings against Saldana pursuant to an arbitration clause in his employee confidentiality agreement, alleging causes of action for breach of contract, breach of the duty of loyalty, and conversion, including alleged data theft. Aixtron was not a party to the arbitration. The arbitrator granted Veeco's application for a pre-hearing discovery subpoena for Aixtron's business records, which included a demand that Aixtron produce any computers that Saldana had used for forensic examination by "an agreed-upon third-party neutral expert." Over Aixtron's objections, the arbitrator granted Veeco's motion to compel and ordered Aixtron to comply with the subpoena. Aixtron initiated a special proceeding in the superior court seeking judicial review of the arbitrator's discovery order. The superior court denied that petition. Veeco filed a separate petition in the superior court to enforce the arbitrator's discovery order, which the court granted. Aixtron appeals both orders.
On appeal, we reject Veeco's contention that the superior court's orders are not appealable. We find it unnecessary to resolve the parties' dispute over whether this case is governed by the Federal Arbitration Act (FAA) or the California Arbitration Act (CAA), since we conclude that under either statutory scheme, the arbitrator did not have the authority to issue a discovery subpoena to Aixtron in the circumstances of this case. We agree with federal appellate cases that hold there is no right to pre-hearing discovery under the FAA. As part of our analysis, we construe Code of Civil Procedure section 1282.6 and address, as an issue of first impression, whether it granted the arbitrator broad powers to issue pre-hearing discovery subpoenas. We conclude that it did not and hold that the arbitrator's discovery subpoena to Aixtron was not authorized under the CAA since the parties to the arbitration did not provide for full discovery rights in their arbitration agreement (§ 1283.1). Since we conclude the arbitrator did not have the authority to issue the discovery subpoena, we reverse the superior court's orders.
I. Facts and Procedural History
A. Parties & Saldana's Employment with Veeco and Aixtron
Aixtron is a global technology company that manufactures equipment for use in the semiconductor industry; its headquarters are in Herzogenrath, Germany, with an office in Sunnyvale, California. Veeco is a global electronics, semiconductor and data storage company; it is a Delaware corporation with offices in New York, New Jersey, California, and other locations. Aixtron and Veeco are competitors with respect to a technology known as the Metal Organic Chemical Vapor Deposition (MOCVD) process, which involves layering atoms on a semiconductor wafer to create materials used to manufacture LED's, sensors, compound semiconductors, and other products.
Miguel Saldana worked for Veeco from September 2, 2014, until May 6, 2016, as its Senior Director of Hardware Engineering in Somerset, New Jersey. Weeks before starting his employment with Veeco, he signed an Employee Confidentiality and Inventions Agreement (Veeco Confidentiality Agreement), which contained an arbitration clause. Saldana decided to leave Veeco because of alleged discriminatory acts by Veeco in its hiring process. Around March 8, 2016, Saldana accepted an offer of employment from Aixtron. He resigned from Veeco seven weeks later, on April 25, 2016.
B. Text of Arbitration Clause
The arbitration clause provided in its entirety: "Arbitration of Disputes.Except as provided under `Equitable Remedies' above, any claim or controversy arising out of my employment or the cessation thereof, including any claim relating to this Agreement, shall be settled by binding arbitration, in accordance with the National Rules for Resolution of Employment Disputes of the American Arbitration Association, to be held in the county and state in which my place of employment is located, or any other location mutually agreed upon by the parties. In such arbitration, each party shall bear its own legal fees and related costs, except that the parties shall share equally the fee of the arbitrator, provided that my portion of the arbitrator's fee shall not exceed the amount of the filing fee for commencing an action in the court of general jurisdiction in the judicial district in which my place of employment is located. The decision or award of the arbitrator shall be final and binding upon the parties. The arbitrator shall have the power to award any type of legal and/or equitable relief available in a court of competent jurisdiction, including, but not limited to, the costs of arbitration and attorney's fees, to the extent such damages are available under law. Any arbitral award may be entered as a judgment or order in any court of competent jurisdiction. [¶] To the extent that any claim between the parties is found not to be subject to arbitration and with respect to claims described under `Equitable Remedies' above, such claim shall be decided either by the U.S. District Court or the state court of general jurisdiction in and for the judicial district in which my place of employment is located." (We shall hereafter refer to this clause as the "Arbitration Clause.")
C. Dispute Between Saldana and Veeco
When Saldana submitted his resignation to Veeco, he made it effective May 6, 2016. Saldana's declaration suggests he traveled back and forth between California and New Jersey between the time he accepted the job at Aixtron and the day he resigned from Veeco. After he resigned, someone at Veeco directed him to return to New Jersey to return Veeco's physical property, including a laptop and a tablet computer.
According to Saldana, before submitting his resignation, "with the sole intention of continuing to contribute to Veeco" as part of his continuing employment, he stored and used relevant work information on his personal electronic devices, including a laptop and a cloud storage account, so that he could work remotely from his home in California, as he had done several times before. He declared that such use of personal computing devices was a "common practice" that was "sanctioned by Veeco." Around the time he resigned, Saldana shipped his personal property, including his electronic devices, to California. Veeco alleges Saldana "deliberately and purposefully concealed the fact that he had accepted employment with Aixtron for over a month" to have continued access to Veeco's confidential information.
On May 3, 2016, Saldana went through the first phase of his exit interview from Veeco in Plainview, New York, where he met with Greg Robbins (Veeco's general counsel) and Robert Bradshaw (Veeco's senior vice president for human resources). According to Bradshaw, during that interview, Saldana initially stated that he had not copied any Veeco data. But after they confronted him with forensic evidence that he had retained data on at least one device, Saldana admitted that he had copied Veeco data onto several personal electronic storage devices that were in the process of being shipped to California. He promised to return them immediately. According to Saldana, he did not admit to stealing any company data during his exit interview; he contends he told Bradshaw he backed up data with the sole intention of continuing to work for Veeco remotely until May 6, his last day at work. He also told them he would allow Veeco to access his personal computing devices. Bradshaw later characterized Saldana's statement as an "outright lie" and an "after-the-fact alibi." Veeco alleges that "after months of plotting and disloyal conduct," Saldana went to "its largest competitor . . ., while in possession of significant amounts of stolen . . . confidential data."
The day after his exit interview, Saldana asked Veeco's human resources director what to do about the data on his electronic devices. She told him to follow the instructions on his exit interview forms, which required him to confirm in writing that all Veeco confidential information had been deleted from his personal electronic devices. In a declaration, Saldana stated that on May 7 and May 8, 2016—before he started working for Aixtron—he followed those instructions and deleted any remaining Veeco data from his personal electronic storage devices, laptop, and online accounts.
Saldana started working for Aixtron on May 9, 2016. When hired, Aixtron required Saldana to sign its Confidential Information and Inventions Assignment Agreement, in which Saldana represented that "during his employment with Aixtron, he would not improperly make use of, or disclose, any information or trade secrets of any former employer" bring any former employer's property onto Aixtron's premises, or use any former employer's unpublished documents. Saldana also met with Aixtron's general manager, Bill Bentinck, and assured him that he would not bring any information belonging to Veeco to Aixtron and would abide by his continuing obligations to Veeco.
D. Veeco's Complaint in Superior Court (Case No. 16CV294921)
On May 10, 2016, the day after Saldana started work at Aixtron, Veeco filed a civil complaint against Saldana (Veeco Instruments, Inc. v. Miguel Saldana (Super. Ct. Santa Clara County, 2016, No. 16CV294921)) "in furtherance of arbitration" (§ 1281.8) for injunctive relief based on causes of action for breach of written contract and conversion. Veeco also filed an ex parte application for "evidence preservation" and a "non-use order," directing Saldana not to access, use, copy, destroy, or modify any evidence, including metadata, related to the action. The superior court granted the ex parte application.
On May 11, 2016, Veeco's counsel sent a letter to Aixtron, advising it of the lawsuit and the court's order on the ex parte application. After receiving that letter, Bentinck met with Saldana and told him that Aixtron did not want any Veeco information on its systems and to use only Aixtron-issued devices to do his work. Saldana reaffirmed to Bentinck that he had not brought any Veeco information to Aixtron and that he would abide by his continuing obligations to Veeco.
Two weeks later, Veeco filed a notice of claim and demand for arbitration with the Judicial Arbitration and Mediation Services (JAMS) pursuant to the Arbitration Clause in the Veeco Confidentiality Agreement. Veeco's arbitration demand alleged causes of action for breach of contract, breach of the duty of loyalty, and conversion against Saldana. Saldana presumably agreed that the matter was subject to arbitration, and a retired superior court judge with JAMS was appointed arbitrator. Aixtron was not a party to the superior court action or the arbitration.
On May 20, 2016, pursuant to the superior court's non-use and evidence preservation order, Saldana produced his personal computer and other devices to Veeco's computer forensic expert Bruce Pixley. Pixley imaged Saldana's devices and found eight files, which Veeco identified as containing "highly confidential Veeco data," on Saldana's laptop and cloud storage account. Pixley's declarations identified those files by file names. Pixley stated that "because those files resided in [Saldana's] cloud storage account, the data could be accessed from any computer or device connected to the internet, including any of Saldana's Aixtron computer media." Saldana later asserted that the files that Veeco claimed were "highly confidential" were "automatically generated systems files [that were] left over," and that he did not know about them prior to the search. He argued that he made "every reasonable effort as a common place user of [his] personal computer to delete the files [he] felt contained any Veeco data" and had offered to have the forensic expert remove those files from [his] devices, if relevant and if deemed necessary, after the nature of the file's content was assessed." As of June 2017, Veeco still had "care, custody, and control" of Saldana's personal computer.
E. Proceedings in Arbitration Related to Discovery Subpoena
Early in the arbitration proceeding, Veeco "announced that it would be seeking pre-hearing discovery" from Aixtron "regarding Veeco's claim that Saldana had improperly shared Veeco confidential information with Aixtron." On January 17, 2017, counsel for Veeco, Aixtron, and Saldana had a telephone conference in which counsel for Veeco asked Aixtron to provide "concrete assurances . . . that no Veeco data was retained, used, or disclosed by Saldana." Veeco's counsel stated that Veeco was looking for assurances that Aixtron had conducted an investigation, reviewed its computer systems regarding things that only Saldana had touched, and done its due diligence to confirm that Saldana was not withholding a thumb drive containing Veeco data and had not accessed Veeco's confidential information in connection with his work for Aixtron. Aixtron's counsel stated that Saldana had signed Aixtron's confidentiality agreement, which prohibits used of third-party data, that Aixtron's executives had reminded Saldana of his obligations to Veeco on multiple occasions, and that Aixtron had found no evidence that Saldana had brought Veeco data into Aixtron.
At an arbitration management conference with Veeco and Saldana in January 2017, the arbitrator set the arbitration hearing for August 30, 2017 and made orders regarding discovery consistent with the parties' agreements, which included "a process under which Veeco would advise Saldana of any proposed subpoena to Aixtron and Saldana would have an opportunity to object" before the arbitrator issued the subpoena. Aixtron did not participate in that conference.
The attorneys for Aixtron and Veeco spoke again on February 2, 2017. Aixtron's counsel asked if Veeco had a list of the files Saldana allegedly took and offered to have Aixtron run a targeted search for those files to determine whether they existed on Aixtron's computer systems. Veeco's counsel said he would provide a list of items that would provide reasonable assurances to Veeco.
Four days later, Veeco's counsel sent Aixtron's counsel an e-mail, demanding that Aixtron (1) hire a forensic expert of Veeco's choosing to run searches on all of Aixtron's computer media to which Saldana had had access, as well as Saldana's personal devices, for Veeco-specific terms and files; (2) interview Saldana about specified topics; and (3) provide a "high-level description of Saldana's work for Aixtron" to be used in further discussions between Veeco and Aixtron. Veeco's demands included that its expert would have the right to delete files from Aixtron's computer systems and would report back to Veeco, and that Aixtron would pay for the expert.
Aixtron rejected Veeco's demands, stating that they were "neither reasonable nor unburdensome," "extremely costly," "would interfere with Aixtron's daily business activities," and "put Aixtron's highly sensitive, confidential, and proprietary information at risk" by allowing "a competitor's forensic expert access to its most confidential and proprietary information," to run searches, delete information, and report its findings to Veeco, "without Aixtron having any•control over what is disclosed to its competitor or what is done with its own information." Aixtron stated that Veeco's "offer to enter into a protective order [was] insufficient to protect the exposure and risk these actions pose to [its] confidential information." Aixtron stated that while it "understands and respects Veeco's legitimate interest in protecting its confidential information, these requested actions extend far beyond these legitimate interests" and that Veeco was "trying to place the burden of its own costs and discovery onto a third party [that] has no involvement with the dispute" against Saldana. Aixtron argued that the "requests reveal a much more nefarious apparent intent by Veeco, to improperly gain access to the confidential and proprietary information of its competitor." Aixtron said it had spoken to Saldana multiple times about his duties to Veeco, had not solicited Veeco data from Saldana, had done its own internal review, and was confident that Saldana had not brought any confidential Veeco information onto its premises.
On February 20, 2017, Veeco circulated a proposed subpoena for the production of Aixtron's business records, which demanded 16 different categories of documents and the production of certain Aixtron computers. Saldana objected the following day.
On March 3, 2017, Veeco filed a motion with the arbitrator to enforce the subpoena. It argued that "Saldana's theft of highly confidential Veeco data immediately prior to leaving for Veeco's chief competitor Aixtron, his material deception to Veeco's General Counsel and Senior Vice President of Human Resources, the nature of the highly valuable MOCVD technology in a two-player market where Veeco leads and Aixtron competes, and his possession of Veeco data while employed with Aixtron—in addition to . . . Aixtron's conduct—warrant the discovery sought against Aixtron. Aixtron's complete refusal to assist Veeco in this matter has undermined Aixtron's credibility and furthered the urgency of this subpoena. Saldana's claim that he has not used or disclosed the stolen Veeco data at Aixtron cannot be taken on `scout's honor' . . . as he has lied, among other things, about retaining, returning, and deleting the stolen data, and has made multiple false certifications under oath—all while secretly starting his employment at Aixtron in possession of the stolen Veeco data. . . ."
In opposition, Saldana argued that Veeco had "gloss[ed] over the threshold procedural question" whether the arbitrator "can even order pre-hearing discovery on a nonparty." He argued that arbitrators do not have the power to enforce nonparty discovery subpoenas; that the subpoena was overbroad and sought access to highly confidential information; that the subpoena was invalid because, to the extent that it sought Saldana's employment records, it did not comply with the requirements of section 1985.6. As noted, in a declaration, Saldana stated that the "`highly confidential' files" Veeco sought were "left over," "automatically generated systems files" that he did not know about prior to the search of his computer, that he made "every reasonable effort as a common place user of [a] personal computer to delete the files [he] felt contained any Veeco data, and had "offered to have the forensic expert remove those files from [his] devices, if relevant and if deemed necessary, after the nature of the file's content was assessed." (Aixtron refers to these files as "Binary Files.") Saldana added that Veeco had not proven that the files that remained on his computer contained Veeco data and that Veeco had taken his "cooperation and turned it into additional exaggerated, unfounded, and unreasonable claims."
In reply, Veeco argued that the arbitrator did have the power to enforce the subpoena, the subpoena was not overbroad and did not seek Aixtron's confidential information, and Saldana had waived his objection as to his employment records because he had not previously lodged that objection with the arbitrator.
On March 15, 2017, the arbitrator held a telephone hearing with counsel for Veeco and Saldana—but not Aixtron—regarding the subpoena. The arbitrator modified the language of two of Veeco's demands and approved the subpoena, as modified, for service on Aixtron. The arbitrator found that the revised subpoena was "reasonable as to subject matter and scope," and that he had "the authority, including under JAMS Employment Arbitration Rule 21, to order issuance of third party subpoenas for discovery purposes." The arbitrator signed the subpoena, ordered that it may be served on Aixtron through its counsel, and encouraged Aixtron, in the event it objected to the subpoena, to meet and confer with Veeco to determine if an agreement could be reached on a protective order and the "identity of a third party neutral and the protocols to be followed with respect to Demand No. 15." Veeco served its discovery subpoena on Aixtron on or about March 17, 2017.
F. Aixtron's Objections to the Subpoena and Veeco's Motion in Arbitration to Compel Aixtron's Compliance with the Subpoena
On April 10, 2017, Aixtron filed written objections to the subpoena in arbitration, arguing that (1) the subpoena was impermissible because Aixtron was not a party to the arbitration; (2) the requests were overbroad and irrelevant; (3) the requests sought confidential, trade secret information; and (4) and the subpoena was procedurally deficient. In addition, Aixtron made separate objections directed to each of Veeco's 16 demands. Aixtron told Veeco's counsel that, given its objections, it would not produce any documents.
On April 27, 2017, Veeco filed a motion with the arbitrator to compel Aixtron to respond to the subpoena. Aixtron filed opposition to the motion in arbitration, arguing that under California law, the arbitrator lacked authority to issue and enforce nonparty discovery subpoenas for two reasons. First, the dispute between Veeco and Saldana was not a personal injury or wrongful death action to which the discovery provisions of the California Arbitration Act (§ 1280 et seq.) are deemed to apply under section 1283.1, subdivision (a). Second, the parties had not incorporated the discovery provisions of section 1283.05 into their arbitration agreement or made them applicable to their arbitration agreement as required by section 1283.1, subdivision (b) for the discovery provisions to apply. As before, Aixtron argued that the subpoena was invalid because the requests were overbroad and irrelevant; the subpoena sought Aixtron's confidential, proprietary, and trade secret information; and the subpoena was procedurally deficient. Veeco filed a reply, arguing that Aixtron could not relitigate issues the arbitrator had already decided regarding his authority to enforce the subpoena and the scope of the subpoena, that Veeco sought only its own data, not Aixtron's trade secrets; and that Aixtron's arguments regarding procedural deficiencies were without merit.
In mid-May 2017, after conducting a telephone hearing on Veeco's motion to compel, the arbitrator ordered Aixtron to comply with the subpoena within twenty days. The arbitrator stated that the "discovery provisions in the arbitration statutes provide the `default mode' that applies in the absence of an agreement between the parties as to discovery" and that the parties are free to agree on discovery beyond that minimum, up to the full panoply of discovery rights authorized by the Code of Civil Procedure. He stated that the parties had agreed to arbitrate this case under the JAMS Employment Arbitration Rules and Procedures (JAMS Rules) and that Rule 1 of the JAMS Rules provides that the parties "shall be deemed to have made" the JAMS Rules a part of their arbitration agreement. The arbitrator found that the "incorporated Rules allow for subpoenas directed to third parties, both at the arbitration hearing and prior to the hearing," citing Rule 21; that the subpoena was well within the parties' agreement as to allowable discovery; and that he had the authority and duty to enforce the parties' agreement. (Original italics.) The arbitrator's order stated, without citation to authority, that the "limitations on discovery as found in the arbitration acts was not intended to shield third parties from unwanted discovery; they were intended to put reasonable limits [on] the parties' discovery efforts, in the absence of the parties' agreement otherwise." The arbitrator overruled Aixtron's other objections, stating that they "can be addressed by the use of privilege logs, protective orders, and designation of a neutral third party to oversee any sensitive discovery inquiries." The arbitrator encouraged Aixtron to meet and confer with Veeco regarding a protective order and use of a third party neutral.
G. Aixtron's Petition in the Superior Court for Protective Order and Rehearing on the Arbitrator's Discovery Order (Case Nos. 17CV311362 & H045126)
On June 5, 2017, Aixtron filed a "petition for protective order and for rehearing on arbitrator's discovery order" in the superior court (Aixtron, Inc. v. Veeco Instruments, Inc. (Super. Ct. Santa Clara County, 2017, No. 17CV311362)). Aixtron requested judicial review of the arbitrator's order on the subpoena and a protective order allowing it to refrain from responding to the subpoena. In a declaration, Aixtron general manager Bentinck stated that Aixtron developed its MOCVD technology in Germany over 30 years, that the work done in Sunnyvale on its MOCVD technology was with respect to market segments where Aixtron and Veeco do not compete, and that its main areas of product development in the United States "relate to techniques and technologies other than MOCVD, in areas where Aixtron and Veeco do not compete." Bentinck declared that Aixtron had not uncovered any evidence that Saldana had transferred any Veeco information to Aixtron, that he is knowledgeable about Aixtron's trade secrets, and that the subpoena sought materials that Aixtron considered "nonpublic, confidential, and proprietary," citing Veeco's demands Nos. 4 and 5. He provided additional facts that supported Aixtron's trade secrets claim, including a description of the steps Aixtron took to insure its proprietary data remained confidential. Aixtron asked the superior court to vacate the arbitrator's discovery order, quash the subpoena, and enter a protective order excluding Aixtron's confidential information from the subpoena.
In its opposition, Veeco argued that the petition should be dismissed or denied because the court lacked authority to grant any relief. First, it argued Aixtron was not entitled to relief under section 1285, which authorizes a petition to vacate an arbitrator's award, because only parties to the arbitration may seek relief under that section and Aixtron was not a party to the arbitration. Second, it contended that the court lacked authority to order rehearing under either the JAMS Rules or the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and that Berglund v. Arthroscopic & Laser Surgery Center of San Diego, L.P. (2008) 44 Cal.4th 528 (Berglund), which held that persons who are not parties to an arbitration are entitled to full judicial review of an arbitrator's discovery order, did not apply because it was decided under the California Arbitration Act. Third, it argued Aixtron was not entitled to a protective order because it never requested one from the arbitrator and waited until after the subpoena was issued to object.
Veeco asserted that the arbitrator had twice considered Aixtron's arguments and rejected them and argued that Aixtron's purported trade secrets were not exempt from discovery, given Veeco's repeated offers to enter into a protective order. Veeco asserted that when Saldana deleted Veeco's data from his personal devices, he deleted metadata that showed when he accessed the data and whether he copied it, and that Veeco needed to know whether its data sits on Aixtron's computers and whether Saldana had used his Aixtron computer to access the Veeco data in his cloud storage.
On August 15, 2017, without explanation, the superior court denied Aixtron's petition for a protective order and for rehearing. (We shall refer to this order as the August Order.) Three weeks later, Aixtron filed a notice of appeal from the August Order in Aixtron, Inc. v. Veeco Instruments, Inc. (H045126).
H. Veeco's Petition in the Superior Court to Enforce the Arbitrator's Discovery Order (Case Nos. 17CV315493 & H045464)
Less than an hour after Aixtron filed its notice of appeal, Veeco filed a petition against Aixtron and Saldana in the superior court to enforce the arbitrator's discovery order (Veeco Instruments, Inc. v. Aixtron, Inc. (Super. Ct. Santa Clara County, 2017, No. 17CV315493)). Veeco complained that Aixtron had not produced a single document, argued that Aixtron was not entitled to object further since the matter had been fully adjudicated by the arbitrator and the superior court had denied Aixtron's petition, and asserted that the court's "intervention was necessary to ensure Aixtron's compliance." Veeco analogized the arbitrator's discovery order to an arbitration award on the merits and argued that it was final and enforceable like any other arbitration award.
Three weeks later, Veeco advised the superior court that Aixtron had filed a notice of appeal from the August Order. Veeco told the court the parties disputed whether the August Order was appealable and whether the appeal stayed further proceedings in the superior court in both cases and asked the court to determine whether proceedings on its petition were stayed pending Aixtron's appeal.
Aixtron filed opposition to Veeco's petition. Aixtron argued that as a nonparty to the arbitration, it was entitled to "full judicial review" of the arbitrator's discovery order, which included the right to appeal; that the superior court's order on its petition (the August Order) was appealable; and that Veeco's petition violated the automatic stay on appeal (§ 904.1(a)(2)) since the matters raised in Veeco's petition are embraced in and affected by Aixtron's appeal. Aixtron also reargued the merits of the dispute over the discovery subpoena and reiterated its request that if discovery is ordered, it be subject to a protective order. Veeco filed a reply.
In December 2017, without explanation, the superior court granted Veeco's petition to enforce the arbitrator's discovery order and ordered Aixtron to produce its documents within 20 days subject to a protective order that the parties to the arbitration—but not Aixtron—had stipulated to in June of 2016 in Veeco Instruments, Inc. v. Miguel Saldana (Super. Ct. Santa Clara County, 2016, No. 16CV294921). (We shall refer to this order as the December Order.) Aixtron filed a timely appeal from the December Order in Veeco Instruments, Inc. v. Aixtron, Inc. (H045464).
In February 2018, this court denied Aixtron's motion to consolidate the two appeals, but ordered the appeals considered together for briefing, oral argument, and disposition.
A. Parties' Contentions on Appeal
Aixtron makes three arguments on appeal. First, it contends that the superior court erred in ordering it to comply with the discovery subpoena because under the plain language of both the CAA and the FAA, an arbitrator does not have the authority to compel a nonparty to the arbitration to produce documents in response to a discovery subpoena for business records issued by an arbitrator. According to Aixtron, the "central issue before this Court is whether the arbitrator is authorized by federal or state statute to issue a deposition subpoena for the production of business records to a [nonparty] outside the context of the arbitration hearing." Second, Aixtron argues that the court erred in ordering it to comply with the subpoena because Veeco failed to make the requisite showing that the information it seeks, which includes Aixtron's confidential information and trade secrets, is both necessary to a claim or defense and essential to a fair resolution of the dispute in arbitration. Third, it argues that Veeco's document requests are overly broad, unduly burdensome, and harassing.
Veeco raises a threshold question of appealability. It argues that Aixtron's first appeal is improper and should be dismissed because the August Order denying Aixtron's petition for a protective order and rehearing on the arbitrator's discovery order is not appealable. In its brief, Veeco apparently concedes, however, that the December Order granting Veeco's petition to enforce the discovery subpoena is appealable. Before addressing the parties' contentions, we shall discuss two issues with the record in these appeals.
B. Veeco's Respondent's Appendix
Veeco has filed a respondent's appendix that consists entirely of documents filed in Veeco's civil complaint against Saldana (Veeco Instruments, Inc. v. Miguel Saldana (Super. Ct. Santa Clara County, 2016, No. 16CV294921)) or before the JAMS arbitrator. But Aixtron has not appealed any of the court's orders in case No. 16CV294921. An appendix may contain only accurate copies of documents filed with the superior court in the matter or matters under appeal. (In re Steroid Hormone Product Cases (2010) 181 Cal.App.4th 145, 151, fn. 6 [inclusion of portions of deposition transcript that were not filed with the trial court is improper].) By filing an appendix, counsel represent, under risk of sanctions, that the appendix "consists of accurate copies of documents in the superior court file" in the matter under review. (Cal. Rules of Court, rule 8.124(g); Perez v. Grajales (2008) 169 Cal.App.4th 580, 592, fn. 11 [inclusion of unfiled documents in an appendix is improper].)
Copies of some of the documents in Veeco's appendix were filed as exhibits to the pleadings and papers filed in Aixtron, Inc. v. Veeco Instruments, Inc. (Super. Ct. Santa Clara County, 2017, No. 17CV311362) and Veeco Instruments, Inc. v. Aixtron, Inc. (Super. Ct. Santa Clara County, 2017, No. 17CV315493) and are therefore properly before us in this appeal since they are in the record in those cases. But some of the documents in Veeco's appendix were not filed in either of the cases before us. They include the May 9, 2016 declaration of Veeco's forensic expert, which Veeco cites three times in its brief on appeal. Since that declaration and other documents in Veeco's appendix were not before the superior court, we shall not consider them, except as described in the next paragraph.
A court may judicially notice the "record of . . . any court of this state." (Evid. Code, § 452, subd. (d).) "We may take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached—in documents such as orders, statements of decision, and judgments—but cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact." (Williams v. Wraxall (1995) 33 Cal.App.4th 120, 130, fn. 7.) On our own motion, we shall take judicial notice of the court documents from Veeco Instruments, Inc. v. Miguel Saldana (Super. Ct. Santa Clara County, 2016, No. 16CV294921) in Veeco's appendix for the purpose of providing background information regarding the dispute between Veeco and Saldana and for the facts that the documents were filed in that case and that the court issued a preservation order. (Evid. Code, §§ 452, subd. (d); 459.) But we shall not consider any of the documents in Veeco's appendix that were not part of the record in the cases on appeal, including its expert's May 2016 declaration, for the truth of the matters stated therein. (Lindsey v. Conteh (2017) 9 Cal.App.5th 1296, 1302, fn. 2 [judicial notice of the existence, but not the contents, of the document is proper].)
C. Aixtron's Request for Judicial Notice
Aixtron has filed a motion for judicial notice, asking this court to judicially notice two declarations that were signed months after the superior court made the orders at issue: (1) the declaration of Randy Singh, Aixtron's chief financial officer, who helped coordinate a forensic examination of two Aixtron computers by Kivu Consulting, Inc. (Kivu), a computer forensics consulting firm; and (2) the declaration of Adam Demonaco, the senior director of Kivu, who supervised the forensic analysis of the two computers. Aixtron's request for judicial notice was based on Evidence Code section 452, subdivision (h), which permits a court to judicially notice "[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonable indisputable accuracy."
Reviewing courts generally do not take judicial notice of evidence that was not presented to the trial court. (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 76, fn. 3.) In addition, the subject matter of these declarations is reasonably subject to dispute since Aixtron's and Veeco's experts might disagree regarding Kivu's search protocols, as well as the expert's qualifications and bias. This court therefore denied Aixtron's motion for judicial notice in August 2018. We shall not consider these declarations further and will disregard any reference to them in the briefs.
D. Both orders are appealable.
1. Parties' Contentions Regarding Appealability
Veeco argues that Aixtron's first appeal is improper because the superior court's August Order, which denied Aixtron's petition for a protective order and rehearing, is not appealable. Veeco analogizes the August Order to an order denying a motion to vacate an arbitration award and argues that such an order is not appealable under section 1294. Alternatively, Veeco argues that even if the August Order is characterized as an order denying a protective order, it is not appealable.
In its reply brief, Aixtron asserts that the August Order is appealable under the authority of Berglund, supra, 44 Cal.4th 528. Alternatively, it argues that the appealability of the August Order is moot, since Veeco's petition raised the same issues as Aixtron's petition and since Veeco concedes that the December Order is appealable. Aixtron argues that the August Order is appealable because it finally resolved the discovery issue between a party to the arbitration and a nonparty.
In its respondent's brief, Veeco challenges only the appealability of the August Order and does not challenge the appealability of the December Order. Shortly before oral argument, we asked the parties to be prepared to discuss Uber Technologies, Inc. v. Google LLC (2018) 27 Cal.App.5th 953, 959-960 (Uber), which was not final until after briefing in this case was completed. At oral argument, Veeco argued that neither order is appealable under the one final judgment rule or section 1294 and that this case is procedurally distinguishable from Uber. While we might otherwise deem the question of the appealability of the December Order forfeited because it was not raised until oral argument, we will exercise our discretion to consider it.
"`"[N]o appeal can be taken except from an appealable order or judgment, as defined in the statutes and developed by the case law. . . ." [Citation.]'" (City of Gardena v. Rikuo Corp. (2011) 192 Cal.App.4th 595, 601, italics omitted.) "The existence of an appealable order or judgment is a jurisdictional prerequisite to an appeal." (Canandaigua Wine Co., Inc. v. County of Madera (2009) 177 Cal.App.4th 298, 302 (Canandaigua).)
"Section 904.1, subdivision (a), governs the right to appeal in civil actions. It codifies the `one final judgment rule,' which provides that `"`an appeal may be taken only from the final judgment in an entire action.'" [Citation.]' [Citation.] A judgment is final, and therefore appealable, when it embodies `the final determination of the rights of the parties in an action or proceeding' (§ 577.) A judgment constitutes the final determination of the parties' rights `"where no issue is left for future consideration except the fact of compliance or noncompliance with [its] terms. . . ." [Citation.]' [Citation.]" (Kaiser Foundation Health Plan, Inc. v. Superior Court (2017) 13 Cal.App.5th 1125, 1138 (Kaiser Foundation).) "The one final judgment rule is a `fundamental principle of appellate practice that prohibits review of intermediate rulings by appeal until final resolution of the case.' [Citation.] `[A]n appeal cannot be taken from a judgment that fails to complete the disposition of all . . . causes of action between the parties. . . .'" (C3 Entertainment, Inc. v. Arthur J. Gallagher & Co. (2005) 125 Cal.App.4th 1022, 1025.) An appeal from a judgment or order that is not appealable must be dismissed. (Canandaigua, supra, 177 Cal.App.4th at p. 302.)
There are statutes, apart from section 904.1, that more specifically confer a right of direct appeal. Veeco cites section 1294, which confers a statutory right to appeal certain arbitration orders, including: "(a) An order dismissing or denying a petition to compel arbitration. [¶] (b) An order dismissing a petition to confirm, correct or vacate an award. [¶] (c) An order vacating an award unless a rehearing in arbitration is ordered. [¶] (d) A judgment entered pursuant to [(the CAA)]. [¶] (e) A special order after final judgment." Veeco argues that the August Order denying Aixtron's petition for protective order and for rehearing on the arbitrator's discovery order does not fit any of these categories. Aixtron does not contend otherwise and argues that Veeco's arguments and citation to authority are inapposite since Aixtron did not appeal from such an order.
Aixtron relies on the authority of Berglund, supra, 44 Cal.4th 528, the Supreme Court's decision regarding the scope of judicial review of an arbitrator's discovery order, to assert that the August Order is appealable. Berglund was an action for personal injuries based on alleged negligent medical treatment. The case was eventually ordered to arbitration. (Id. at p. 532.) The plaintiff in Berglund served a discovery subpoena for the production of documents on a nonparty, which asserted that the documents were privileged and moved for a protective order in the superior court. While that motion was pending, the plaintiff filed a motion with the arbitrator to compel production of the documents. The arbitrator concluded that he had jurisdiction to rule on the motion and ordered the nonparty to produce the documents for his in-camera review. (Id. at p. 533.) The superior court subsequently denied the nonparty's motion for a protective order, reasoning that "the arbitrator, not the court, had jurisdiction over [the] discovery subpoena and thus was empowered to compel . . . production of the subpoenaed documents." (Ibid.) The nonparty filed a notice of appeal and filed a motion for a stay, or alternatively a petition for writ of supersedeas, prohibition, or other relief in the Court of Appeal. The appellate court denied the request for a stay and denied the writ petition but allowed the appeal of the superior court's order denying the nonparty's motion for a protective order to proceed. The appellate court held that the arbitration proceeding was the proper forum for the nonparty to challenge the discovery sought by a party to the arbitration and that the limitations on judicial review of arbitration decisions do not apply to an arbitrator's discovery orders against a nonparty. The appellate court reversed the superior court and remanded for further proceedings. (Ibid.) The Supreme Court granted review and affirmed the Court of Appeal judgment, concluding that (1) a discovery dispute involving a nonparty to an arbitration proceeding "must be submitted first to the arbitral, not the judicial, forum"; and (2) a "nonparty is entitled to full judicial review of the arbitrator's discovery order" and is not subject to the same statutory limitations on judicial review of an arbitrator's order as the parties to the arbitration. (Id. at pp. 532, 536-539.)
In reaching its conclusions, the Supreme Court explained: "Generally, an arbitrator's decision in a dispute between parties to an arbitration agreement is subject to only limited judicial review. This is why: An `arbitration decision is final and conclusive because the parties have agreed that it be so.' [Citation.] Arbitration by agreement is often a `process in which parties voluntarily trade the safeguards and formalities of court litigation for an expeditious, sometimes roughshod means of resolving their dispute.' [Citation.] Because `arbitral finality is a core component of the parties' agreement to submit to arbitration' [citation] and because arbitrators are not required to make decisions according to the rule of law, parties to an arbitration agreement accept the risk of arbitrator errors [citation], and arbitrator decisions cannot be judicially reviewed for errors of fact or law even if the error is apparent and causes substantial injustice [citations]. `"As a consequence, arbitration awards are generally immune from judicial review."' [Citation.]" (Berglund, supra, 44 Cal.4th at p. 534, citing Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10-12 & Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 831-832.)
The court also noted that under section 1283.05, subdivision (c), an arbitrator's discovery order is "`as conclusive, final and enforceable as an arbitration award on the merits.'" (Berglund, at p. 536.) The Berglund court held that nonparties "cannot be compelled to arbitrate a dispute" and "are not bound by an arbitrator's decision because the arbitrator's authority is derived from the parties' consent and, . . ., nonparties have not consented to arbitration." (Id. at pp. 536, 537.) The court stated that "giving arbitrator discovery orders the same deference normally given arbitration awards would substantially compromise the legal rights of nonparties against whom erroneous discovery orders may be made" and observed that the "normal limitations on judicial review of arbitrator decisions mean that arbitrators need not follow the law and, apart from some narrow exceptions, their errors are not subject to judicial review and correction." (Id. at pp. 537, 538.) The court concluded that absent their consent, nonparties were entitled to full judicial review of any adverse discovery order issued by an arbitrator, which was necessary to protect the legal rights of nonparties who had "not consented to arbitration and consequently have not agreed to the finality of arbitrator decisions." (Id. at p. 539.)
On its facts, Berglund established that a nonparty dissatisfied with an arbitrator's discovery order may seek "full judicial review" by a superior court of that order. It is reasonable to conclude that the Supreme Court's repeated use of the phrase "full judicial review" (Berglund, supra, 44 Cal.4th at pp. 532, 534, 538, 539) also suggests a right to appellate review of the superior court's order. Thus, Aixtron argues that the August Order is appealable because, as in Berglund, its appeal stems from the superior court's denial of a petition for a protective order after a nonparty was served with a subpoena for the production of documents in arbitration. But the Berglund court did not address the question whether a nonparty or a party to the arbitration that is dissatisfied with the superior court's decision has a right of direct appeal. (See Uber, supra, 27 Cal.App.5th at pp. 959-960 [Berglund" did not determine whether a party to the arbitration dissatisfied with the superior court decision then has a right of direct appeal"; italics added].) The Supreme Court noted without comment in its recitation of the procedural status of the case that the appellate court had denied the nonparty's request for a stay and denied its petition for writ of supersedeas but allowed the nonparty's appeal of the superior court's order to proceed. But the court did not discuss the appealability of that order. (Berglund, supra, 44 Cal.4th at p. 533.) "It is axiomatic that cases are not authority for propositions not considered." (People v. Ault (2004) 33 Cal.4th 1250, 1268, fn. 10.) Berglund thus does not provide clear authority for Aixtron's contention that the August Order is appealable.
Generally, discovery orders are not appealable. (Good v. Miller (2013) 214 Cal.App.4th 472, 475.) Instead, the challenge to a discovery order must await appeal from a final judgment. (Nickell v. Matlock (2012) 206 Cal.App.4th 934, 940; see also Marriage of Economou (1990) 224 Cal.App.3d 1466, 1474-1476.) But courts have recognized two general exceptions to the one final judgment rule. Even though issues remain for further determination, a direct appeal may be taken from (1) a collateral final judgment or order, or (2) a judgment that is final as to a party. (Eisenberg, et al., Cal. Practice Guide: Civil Appeals & Writs (The Rutter Group 2017) ¶¶ 2:76, 2:77, 2:91, pp. 2-54, 2-66.) The latter exception has been applied to find a right to appeal discovery orders involving nonparties. (See e.g., Brun v. Bailey (1994) 27 Cal.App.4th 641, 649-650 [nonparty deponent became a party by moving for a protective order; denial of that motion was appealable as a final determination of the litigation as to the nonparty].)
In Uber, supra, 27 Cal.App.5th 953, 958-962, the appellate court addressed the appealability of a superior court order in a special proceeding to vacate an arbitrator's discovery order and held that a party to an arbitration that is dissatisfied with a superior court order vacating an arbitrator's discovery order in favor of a nonparty has a right of direct appeal based on the one final judgment rule (§ 904.1, subd. (a)). In the underlying dispute in Uber, Google, Inc. (Google) initiated arbitration proceedings against two of its former employees for breach of their employment contracts, breach of fiduciary duty, and other claims. Google, a party to the arbitration, issued a discovery subpoena for the production of documents to Uber, a nonparty. (For ease of reference, we shall sometimes use the terms "party" and "nonparty" instead of the parties' names.) The nonparty objected that the documents were privileged, and the party moved in arbitration to compel production of the documents. The arbitration panel rejected the nonparty's privilege claims, granted the motion, and ordered the nonparty to produce the documents. The nonparty filed a special proceeding in the superior court to vacate the arbitrators' discovery order. Unlike the court here, the superior court in Uber granted the nonparty's petition and vacated the arbitrators' discovery order. (Uber, at p. 957.)
The party appealed, asserting that the superior court's order was final, conclusive, and appealable as an order vacating an arbitration award under section 1294, subdivision (c). "Days later, in an effort `to accelerate adjudication of the issues raised [in the] appeal,' [the party] petitioned for a writ of mandate, prohibition, and/or other appropriate relief" and asked the appellate court to direct the superior court to vacate the order. (Uber, supra, 27 Cal.App.5th at p. 958.) The appellate court summarily denied the writ. Shortly thereafter, the nonparty moved to dismiss the appeal, arguing that the superior court's order was not appealable. The appellate court disagreed and denied the motion to dismiss "because the superior court's order determined all the pending issues in the special proceeding between Google and Uber and was thus a final appealable order." (Id. at p. 957.) The court held that a right of direct appeal existed "based on the one final judgment rule," reasoning that the superior court's order was "the final resolution of the special proceeding initiated by [the nonparty] for the sole purpose of vacating" the arbitration panel's discovery order, that the superior court's order resolved the discovery dispute between the party and the nonparty with finality since it relieved the nonparty of any obligation to produce the documents and conclusively determined its obligations to the party, and there was nothing left for the superior court to determine as between them and disposed of all the issues raised in the special proceeding. (Id. at p. 960.)
The Uber court concluded that the superior court's order also had the finality required under section 1294. The court explained that "`[u]nder section 1294, appealable arbitration orders require finality. . . . ". . . [T]he Legislature's philosophy and intent in drafting section 1294 was that there should be no appellate consideration of intermediate rulings in arbitration disputes if the superior court was of the view that there should be initial or further proceedings in arbitration. . . ." An intermediate ruling in an arbitration dispute that contemplates further proceedings in arbitration is not appealable. [Citations.] Requiring finality in appealable arbitration orders is consistent both with the language of section 1294 and the general prohibition of appeals from interlocutory nonfinal judgments in section 904.1, subdivision (a). [Citations.]" (Uber, supra, 27 Cal.App.5th at p. 960, quoting Vivid Video, Inc. v. Playboy Entertainment Group, Inc. (2007) 147 Cal.App.4th 434, 442-443.) The court concluded that the superior court's order was appealable under section 1294 since it contemplated no further proceedings between Uber and Google and completely resolved their dispute since Uber was not a party to the arbitration. (Uber, at p. 960.) The court noted that Uber involved "a nonparty to the underlying arbitration, and the single dispute involving the nonparty was conclusively determined by the superior court." (Id. at p. 962.) The court held that because the superior court's order was "a final determination of the discovery rights between Uber and Google in the special proceeding commenced for the sole purpose of resolving this discovery dispute, the order is appealable." (Ibid.)
We agree with the analysis in Uber and conclude that because the superior court's August Order was "a final determination of the discovery rights [between Aixtron and Veeco] in the special proceeding commenced for the sole purpose of resolving this discovery dispute, the order is appealable" under the one final judgment rule and section 904.1. (Uber, supra, 27 Cal.App.5th at p. 962.) Like the nonparty in Uber, Aixtron filed a special proceeding in the superior court for the express purpose of challenging the arbitrator's discovery order. The superior court finally determined Aixtron's and Veeco's rights as to the discovery order when it denied Aixtron's petition. The August Order embodied the final determination of Aixtron's and Veeco's rights in the special proceeding (§ 577).
At oral argument, Veeco argued that neither the August Order on Aixtron's petition nor the December Order on Veeco's separate petition is appealable under the one final judgment rule or section 1294 and that this case is distinguishable from Uber. Veeco argued that unlike the order in Uber, the orders here are not final because the superior court ordered the parties to return to arbitration for further discovery proceedings before the arbitrator. But Veeco has mischaracterized the superior court's orders. The August Order summarily denied Aixtron's petition for a protective order, and the December Order granted Veeco's petition to enforce the arbitrator's discovery order and ordered Aixtron to produce the responsive documents within 20 days pursuant to the protective order that the parties to the arbitration had already stipulated to in Veeco Instruments, Inc. v. Miguel Saldana (Super. Ct. Santa Clara County, 2016, No. 16CV294921). Contrary to Veeco's assertions, the superior court did not order further discovery proceedings before the arbitrator on either occasion.
Both orders were final and appealable because there was no issue left for future consideration except the fact of Aixtron's compliance or noncompliance with their terms. (Kaiser Foundation, supra, 13 Cal.App.5th at p. 1138.) Veeco acknowledged as much regarding the August Order when it filed its own petition seeking enforcement of the arbitrator's order and an order directing Aixtron to comply with the order's terms. Veeco's petition initiated a separate special proceeding for the sole purpose of enforcing the arbitrator's order. In its petition, Veeco argued that Aixtron was not entitled to object to its petition, since the "matter has been fully adjudicated by the arbitrator" and Aixtron's petition to the superior court had been unsuccessful. Veeco stated that the superior court's "intervention [was] necessary to ensure Aixtron's compliance" (italics added) and that the arbitrator's order requiring Aixtron to produce documents was a "conclusive, final, and immediately enforceable award and is subject to confirmation under C.C.P. § 1285." Veeco did not assert that further discovery proceedings were contemplated before the arbitrator or ask the superior court to remand for further discovery proceedings in arbitration regarding its discovery subpoena to Aixtron. Thus, in its briefing and request for relief below, Veeco treated the superior court's August Order as final and appealable and argued there was nothing left to do but ensure Aixtron's compliance with the arbitrator's discovery order. This underscores our conclusions that the August Order was final and appealable, and there was no issue left for future consideration except the fact of Aixtron's compliance or noncompliance with the arbitrator's discovery order. (Kaiser Foundation, supra, 13 Cal.App.5th at p. 1138.)
As Veeco notes, there are procedural differences between this case and Uber. In Uber, the nonparty (Uber) that sought to vacate the arbitrator's discovery order prevailed in the superior court and the party to the arbitration (Google) appealed. In contrast here, the nonparty (Aixtron) lost in the superior court and the nonparty appealed. In Uber, the superior court vacated the arbitrator's discovery order and the nonparty was not required to produce its documents. Moreover, the superior court's order vacating the arbitrator's discovery order was final as to the privilege issue presented in Uber. Here, the superior court's August Order resolved the legal issues presented by Aixtron's petition and Veeco's response, denied nonparty Aixtron's petition for a protective order, leaving the arbitrator's discovery order in place and requiring Aixtron to produce its documents and computers.
Veeco argued at oral argument that the superior court's validation of the arbitrator's discovery order would result in further arbitration proceedings, and thus the August Order could not be considered final. We do not agree. Both the arbitrator and the superior court issued orders, and assumed compliance with those orders would be forthcoming. The arbitrator found that some of Aixtron's objections to the ordered discovery could be addressed by the use of privilege logs, protective orders, or a third party neutral, but he did not order any further proceedings in arbitration to resolve Aixtron's concerns. Rather, he urged Aixtron to meet and confer with Veeco to craft an appropriate protective order to shield Aixtron from the damage of discovery disclosure, and suggested the parties hire a neutral to oversee sensitive discovery inquiries. The arbitrator's decision was made; and he was not going to work through the gritty details of Aixtron's compliance with his discovery order. Nor did the superior court remand the case to the arbitrator for further proceedings in its August Order. In short, the superior court's August Order was a final determination of the discovery rights between Aixtron and Veeco, and thus appealable under Uber.
As noted, Veeco filed a separate proceeding in the superior court seeking an order directing Aixtron to comply with the arbitrator's discovery order. In its December Order, the superior court directed Aixtron to produce documents pursuant to an existing protective order between the parties to the arbitration, thus resolving the compliance issue raised in Veeco's petition. Since the December Order ordered compliance with the arbitrator's discovery order, and there was no further issue left for the court's consideration, it was also appealable under Uber. (See also Kaiser Foundation, supra, 13 Cal.App.5th at p. 1138.)
E. The discovery order exceeded the arbitrator's statutory authority in the circumstances of this case.
Aixtron argues that an arbitrator in a private arbitration has no authority under the FAA or California law to compel nonparty discovery. Aixtron contends that because it is not a party to the arbitration agreement between Saldana and Veeco, it has not consented to the arbitrator's authority or to be bound by the JAMS Rules. Aixtron argues that the arbitration agreement and any arbitration rules Saldana and Veeco have agreed to are insufficient to confer authority on the arbitrator to compel Aixtron to produce documents for the purposes of discovery and that such authority exists only if conferred by statute. Veeco responds that the section 1282.6 of the CAA and the JAMS Rules authorize this subpoena and that it is irrelevant that Aixtron was not a party to the arbitration.
1. Standard of Review
The question whether an arbitrator in a private, contractual arbitration can compel a nonparty to the arbitration to respond to a subpoena duces tecum for the production of business records issued by the arbitrator for the purposes of discovery is a question of law, which we review de novo. (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191.) To the extent this question requires us to construe certain statutes and written instruments for which there is no conflicting extrinsic evidence, these are also questions of law, which we review de novo. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 432 [statutory construction]; Parson v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866 [written instruments].)
2. Whether This Case is Subject to the FAA or the CAA
Generally, the first step in reviewing an arbitration dispute is to determine whether the qu
estion presented is subject to the FAA or the CAA because different rules apply under the two acts, which in some cases leads to federal preemption. (Knight, et al., Cal Practice Guide: Alternative Dispute Resolution (Rutter Group 2018) ¶ 5:47, pp. 5-40, citing Southland Corp. V. Keating (1984) 465 U.S. 1, 12 and other cases; ¶¶ 5:44-5:49.6, pp. 5-40 to 5-5-52.)
The Arbitration Clause does not specify which act applies. The parties dispute whether the FAA or the CAA applies. Aixtron contends the FAA applies because the Veeco Confidentiality Agreement involves interstate commerce. In its papers below, Veeco agreed that the FAA governs this dispute. But on appeal, Veeco argues that the CAA applies because Aixtron filed its petition under the CAA. It also argues that if we conclude that the FAA applies, then we should reject the Ninth Circuit's view in CVS Health Corp. v. Vividus, LLC (9th Cir. 2017) 878 F.3d 703 (CVS Health), which held that the FAA does not grant arbitrators the power to compel production of documents from nonparties prior to an arbitration hearing. (Id. at pp. 705, 708.) Veeco urges us to follow the contrary, minority view adopted by the Sixth and Eighth Circuit Courts of Appeals in In re Security Life Ins. Co. of America (8th Cir. 2000) 228 F.3d 865, 870-871 (Security Life), and American Fed'n of Tel. & Radio Artists v. WJBK-TV (6th Cir. 1999) 164 F.3d 1004, 1009 (TV Artists), which hold that the FAA authorizes arbitrators to compel production of documents prior to the hearing. Aixtron responds that it does not matter which arbitration act applies because the result is the same under both the FAA and the CAA.
In addressing this issue, the parties discuss the choice of law clause in the Veeco Confidentiality Agreement. Without much discussion, each side relies on a different United States Supreme Court case: Veeco quotes briefly from Volt Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468 (Volt) and Aixtron relies on Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52 (Mastrobuono). At first blush, Volt and Mastrobuono seem to state conflicting rules. Neither party discusses Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376 (Cronus), which resolves the seeming conflict. The Cronus court explained, "Under United States Supreme Court jurisprudence, we examine the language of the contract to determine whether the parties intended to apply the FAA to the exclusion of California procedural law and, if any ambiguity exists, to determine whether [the procedural law at issue] conflicts with or frustrates the objectives of the FAA." (Cronus, at p. 383.) "`Like other federal procedural rules, . . ., "the procedural provisions of the [FAA] are not binding on state courts . . . provided applicable state procedures do not defeat the rights granted by Congress." [Citation.]'" (Id. at p. 390.) As one commentator cogently explained "`[in] Volt, the state policy furthered the federal goal of encouraging arbitration, and thus . . . did not require construing ambiguities toward applying the FAA.
In Mastrobuono, however, the policy at issue would have directly impeded the FAA's goals, thus triggering the FAA preemption. As a result, it should hardly be surprising that a choice-of-law clause, in an agreement bound by the contract law and involving the arbitration rules of one state, happened to produce a different result than did a choice-of-law clause in an entirely different context.'" (Cronus, at p. 393, quoting Note, An Unnecessary Choice of Law: Volt, Mastrobuono, and Federal Arbitration Act Preemption (2002) 115 Harv. L.Rev. 2250, 2259-2260, fns. omitted.)
While the record suggests that Saldana's work may have affected interstate commerce, the parties did not develop that point below and the evidentiary support for that conclusion is thin. Neither the Arbitration Clause nor the choice-of-law clause mentions the FAA. Both clauses are silent on the issue of discovery and the scope of allowable discovery in arbitration. To ensure that we have fully reviewed this matter and foreclose any possibility of federal preemption, we shall examine both federal and state law regarding the authority of an arbitrator to issue a discovery subpoena to a nonparty. As we shall explain, we arrive at the same conclusion under both the FAA and the CAA: the discovery subpoena here was not authorized by either act. We therefore need not resolve the question whether the Arbitration Clause is subject to the FAA or the CAA.
3. Discovery from Non-Parties Under the FAA
The right to discovery under the FAA is limited. Under section 7 of the FAA (9 U.S.C. § 7), arbitrators are authorized to subpoena nonparties to appear before them and to produce documents or other evidence, and the arbitrator's subpoena is enforceable by the district court. There is a split of authority in the federal courts of appeals regarding the scope of the arbitrator's subpoena power under section 7 of the FAA. Some courts have interpreted section 7 to restrict the arbitrator's subpoena power to hearings in the physical presence of the arbitrator. (Hay Group, Inc. v. E.B.S. Acquisition Corp. (3d Cir. 2004) 360 F.3d 404, 410 (Hay Group) ["Nowhere does the FAA grant an arbitrator authority to order non-parties to appear at depositions, or to demand that non-parties provide . . . documents during pre-hearing discovery"]; Life Receivables Trust v. Syndicate 102 at Lloyd's of London (2d Cir. 2008) 549 F.3d 210, 212, 216-217; CVS Health, supra, 878 F.3d 703, 704-705 [9th Circ.]; Managed Care Advisory Grp., LLC v. CIGNA Healthcare, Inc. (11th Cir. 2019) 939 F.3d 1145, 1160.) Adhering to this view, one court has stated that an arbitration panel might be able to subpoena a nonparty for prehearing discovery "under unusual circumstances" "upon a showing of special need or hardship." (COMSAT Corp. v. National Science Foundation (4th Cir. 1999) 190 F.3d 269, 275-276.) Other federal appellate courts have held that "implicit" in the arbitrator's power under the FAA to subpoena relevant documents for production at the arbitration hearing "is the power to order the production of relevant documents for review by a party prior to the hearing." (Security Life, supra, 228 F.3d at pp. 870-871 [8th Cir.]; TV Artists, supra, 164 F.3d at p. 1009 [6th Cir].)
No California appellate court has addressed the issue. The Ninth Circuit reviewed this question in CVS Health. In that case, HMC Compounding Services (HMC) sued CVS Health, Express Scripts, and others for alleged antitrust violations. (CVS Health, supra, 878 F.3d at p. 705.) HMC's claims against CVS Health were submitted to arbitration, and its claims against Express Scripts were litigated in federal court. (Ibid.) The arbitrators issued a records subpoena to Express Scripts, which was not a party to the arbitration. Express Scripts did not respond, and HMC filed a petition in federal district court to enforce the subpoena, which the district court denied. (Ibid.) The issue on appeal was "whether the FAA allows an arbitrator to order a third party to produce documents as part of pre-hearing discovery." (Id. at p. 706.) After reviewing section 7 of the FAA and opinions from other federal appellate courts, the Ninth Circuit concluded that the FAA does not grant arbitrators that power and affirmed the district court. The court held that section 7 of the FAA gives arbitrators two powers: (1) to compel the attendance of persons to appear as witnesses at the hearing and (2) to compel such persons to bring relevant documents to the hearing. (Ibid.) The court held that a "plain reading of the text of section 7 reveals that an arbitrator's power to compel the production of documents is limited to production at an arbitration hearing," and that "section 7 grants an arbitrator no freestanding power to order third parties to produce documents other than in the context of a hearing." (Ibid., fn. omitted.)
The CVS Health court noted that in Security Life, the Eighth Circuit had reasoned that "`implicit in an arbitration panel's power to subpoena relevant documents for production at a hearing is the power to order the production of relevant documents for review by a party prior to the hearing,' "which furthered "efficient resolution of disputes by allowing parties to `review and digest' documents before hearings." (CVS Health, supra, 878 F.3d at p. 707, citing Security Life, supra, 228 F.3d at pp. 870-871.) The CVS Health court rejected this rationale, stating: "it is not absurd to restrict third-party discovery to the disclosures that can be made at a hearing; third parties `did not agree to [the arbitrator's] jurisdiction' and this limit on document discovery tends to greatly lessen the production burden upon non-parties." (CVS Health, at p. 708.) "`Under a system of pre-hearing document production, by contrast, there is less incentive to limit the scope of discovery and more incentive to engage in fishing expeditions that undermine some of the advantages of the supposedly shorter and cheaper system of arbitration.'[ ] . . . Practical constraints on document production during an arbitration hearing may often result in lower production demands upon third parties. [Citation.] Moreover, an arbitrator's power under section 7 extends only to documentary evidence `which may be deemed material . . .,' further demonstrating that under the FAA an arbitrator is not necessarily vested with the full range of discovery powers that courts possess." (Id. at p. 708.) The court rejected the proposition that the FAA grants arbitrators implicit powers to order document discovery from nonparties prior to a hearing and declined to create additional discovery powers for arbitrators. (Ibid.) We find this reasoning persuasive and adopt the holding in CVS Health.
4. Discovery from Nonparties Under the CAA (§§ 1283.05 & 1283.1)
The right to discovery in arbitration proceedings under the CAA "is generally limited" and "highly restricted." (Berglund, supra, 44 Cal.4th 528, 534; Alexander v. Blue Cross of California (2001) 88 Cal.App.4th 1082, 1088 (Alexander); Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 106, fn.11 (Armendariz) ["a limitation on discovery is one important component of the `simplicity, informality, and expedition of arbitration'"], abrogated in part on another ground as stated in ATT Mobility LLC. v. Concepcion (2011) 131 S.Ct. 1740, 1746.)
Aixtron contends that the applicable statutory authority for conducting discovery in arbitration cases is found in sections 1283.1 and 1283.05 and argues that these statutes do not authorize discovery in this case. Our State Supreme Court has said that "[s]ections 1283.1 and 1283.05, . . ., grant arbitrators authority over discovery in certain arbitration proceedings." (Berglund, at p. 535; accord Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1802, fn. 10 (Brock) ["arbitrators have authority to order discovery in certain types of arbitration proceedings"].) Sections 1283.05 and 1283.1 are both in chapter 3 of the CAA, which governs the conduct of arbitration proceedings.
Section 1283.05 describes the circumstances under which "depositions may be taken and discovery obtained in arbitration proceedings," as well as the powers of the arbitrator with regard to such discovery. Subdivision (a) of section 1283.05 incorporates the Civil Discovery Act (§§ 2016.010 et seq.) and authorizes discovery "as if the subject matter of the arbitration were pending before a superior court." This statutory grant of authority is subject to the limitation in subdivision (e) of section 1283.05, which provides that "[d]epositions for discovery shall not be taken unless leave to do so is first granted by the arbitrator or arbitrators." (§ 1283.1, subds. (a), (e).) "Section 1283.05's subdivision (b) grant arbitrators the power to enforce discovery through sanctions" similar to the power of a trial court, "`except the power to order the arrest or imprisonment of a person.'" (Berglund, supra, 44 Cal.4th at p. 535.) Subdivision (c) of section 1283.05 gives the arbitrator the power to issue discovery orders imposing "terms, conditions, consequences, liabilities, sanctions and penalties." (Ibid.)
The discovery authorized in section 1283.05 is subject to one more important limitation. Section 1283.05 begins with the phrase, "[t]o the extent provided in section 1283.1." This phrase limits the application of the deposition and discovery rules in section 1283.05 to the circumstances described in section 1283.1. The Brock court held that an arbitrator's authority to order discovery "is statutorily conferred" and applies to the types of arbitrations described in section 1283.1. (Brock, supra, 10 Cal.App.4th at p. 1802, fn.10.)
Subdivision (a) of section 1283.1 "provides that section 1283.05 is incorporated into and made part of every agreement to arbitrate any dispute arising out of a claim for wrongful death or for personal injury." (Berglund, supra, 44 Cal.4th at p. 535; italics added.) Since the dispute between Veeco and Saldana is not a claim for wrongful death or personal injury, subdivision (a) of the statute does not apply.
Subdivision (b) of section 1283.1 provides that in "all other arbitrations, the arbitrator may grant discovery `[o]nly if the parties by their agreement so provide. . . .'" (Brock, at p. 1802, fn. 10, quoting § 1283.1, subd. (b).) Thus, to determine whether the arbitrator had the authority to order discovery under the CAA, we must determine whether Veeco and Saldana provided that authority through their arbitration agreement. (§ 1283.1, subd. (b).) One treatise has opined that a "simple agreement for discovery `pursuant to the California Discovery Act' or `pursuant to CCP § 1283.05' creates enforceable discovery rights." (Knight, supra, ¶ 5:386.6, p. 5-388, citing § 1283.1, subd. (b); see e.g. OTO, LLC v. Kho (2019) 8 Cal.5th 111, 119 (OTO) [arbitration clause in acknowledgment of at-will employment provided that arbitration would be conducted pursuant to the CAA, "with full discovery permitted (see . . . § 1283.05)"]; Cox v. Bonni (2018) 30 Cal.App.5th 287, 304-305 (Cox) [arbitration agreements that "provided that discovery would be conducted pursuant to section 1283.05" "expressly granted the parties the same ability to obtain discovery that they would have had in the trial court"].) Unlike the arbitration clauses in OTO and Cox, the Arbitration Clause here does not mention the California Discovery Act or section 1283.05, or even contain the word "discovery." Since Veeco and Saldana have not provided for discovery in their arbitration agreement, we conclude that section 1283.05 does not apply in this case.
5. Interpretation of Section 1282.6
Veeco relies on a different code section and argues that section 1282.6 authorized the arbitrator to sign and issue the discovery subpoena to Aixtron. Veeco contends that section 1282.6, which governs the issuance of subpoenas in arbitration, provides that a subpoena may be issued for discovery purposes either when section 1283.05 applies or whenever a neutral arbitrator issues and signs the subpoena. Veeco argues that unlike section 7 of the FAA, the arbitrator's authority to issue subpoenas under section 1282.6 is not limited to commanding the production of records at the hearing. In reply, Aixtron argues that section 1282.6 applies to deposition subpoenas and subpoenas duces tecum for the purpose of producing documents at the arbitration hearing and not for discovery.
The issue is one of statutory interpretation. "In construing a statute, our fundamental task is to ascertain the Legislature's intent so as to effectuate the purpose of the statute. [Citation.] We begin with the language of the statute, giving the words their usual and ordinary meaning. [Citation.] The language must be construed `in the context of the statute as a whole and the overall statutory scheme, and we give "significance to every word, phrase, sentence, and part of an act in pursuance of the legislative purpose."' [Citation.] In other words, `"we do not construe statutes in isolation, but rather read every statute `with reference to the entire scheme of law of which it is part so that the whole may be harmonized and retain effectiveness.'"'" (Smith v. Superior Court (2006) 39 Cal.4th 77, 83.) The parties do not cite, and our research has not disclosed any cases that have construed section 1282.6. The issue is therefore one of first impression.
Section 1282.6 provides in its entirety: "(a) A subpoena requiring the attendance of witnesses, and a subpoena duces tecum for the production of books, records, documents and other evidence, at an arbitration proceeding or a deposition under Section 1283, and if Section 1283.05 is applicable, for the purposes of discovery, shall be issued as provided in this section. In addition, the neutral arbitrator upon his own determination may issue subpoenas for the attendance of witnesses and subpoenas duces tecum for the production of books, records, documents and other evidence. [¶] (b) Subpoenas shall be issued, as of course, signed but otherwise in blank, to the party requesting them, by a neutral association, organization, governmental agency, or office if the arbitration agreement provides for administration of the arbitration proceedings by, or under the rules of, a neutral association, organization, governmental agency or office or by the neutral arbitrator. (c) The party serving the subpoena shall fill it in before service. Subpoenas shall be served and enforced in accordance with Chapter 2 (commencing with Section 1985) of Title 3 of Part 4 of this code." (Italics added.)
Section 1282.6 describes the procedures used in arbitration for issuing "a subpoena requiring the attendance of witness, and a subpoena duces tecum for the production of books, records, documents and other evidence." (§ 1282.6, subd. (a).) The first sentence in subdivision (a) limits its application to three circumstances: (1) "at an arbitration proceeding"; (2) at "a deposition under Section 1283," and (3) "if Section 1283.05 is applicable, for the purposes of discovery. . . ." (§ 1282.6, subd. (a).) As we shall explain, none of these three circumstances applies here.
The first circumstance for which a subpoena may be used to compel the attendance of witnesses and the production of evidence is "at an arbitration proceeding." (§ 1282.6, subd. (a).) Based on its plain language, we construe this phrase to mean an arbitration hearing before an arbitrator or panel of arbitrators. The subpoena at issue here was a discovery subpoena; it did not demand that Aixtron produce documents or other evidence (its computers) for an arbitration hearing.
The second circumstance for which a subpoena may be used to compel attendance of witnesses and production of documents is at "a deposition under Section 1283." (§ 1282.6, subd. (a).) Under section 1283, an arbitrator, on application of a party, "may order the deposition of a witness to be taken for use as evidence and not for discovery if the witness cannot be compelled to attend the hearing or if exceptional circumstances exist as to make it desirable, in the interest of justice and with due regard to the importance of presenting the testimony of witnesses orally at the hearing." (Italics added.) Notably, section 1283 underscores the importance of presenting the testimony of witnesses orally at the hearing (i.e., live testimony before the arbitrator). The subpoena here was not for a deposition for evidentiary purposes under section 1283.
The third circumstance for which a subpoena may be used in arbitration to compel attendance of witnesses and production of evidence is "if Section 1283.05 is applicable, for the purposes of discovery." Thus, the procedures for issuing subpoenas described in section 1282.6 may only be used for the purposes of discovery if section 1283.05 applies. But as we have stated, section 1283.05 does not apply in this case.
Subdivisions (b) and (c) of section 1282.6 describe the procedures to be used for the issuance of subpoenas in arbitration. Subdivision (b) provides that a "neutral association" like JAMS may issue subpoenas "as of course, signed but otherwise in blank, to the party requesting them." Subdivision (c) of section 1282.6 provides that the party shall fill in the subpoena before serving it and that subpoenas shall be served and enforced in accordance with "Chapter 2 . . . of Title 3 of Part 4" of the Code of Civil Procedure, which includes sections 1985 to 1997. We construe the word "party" in section 1282.6 to mean a "party to the arbitration," which is defined in section 1280, subdivision (e). As a practical matter, in most cases, the party's attorneys will obtain and serve the subpoena.
Veeco focuses on discovery subpoenas and argues that section 1282.6, subdivision (a) authorizes the issuance of discovery subpoenas in two circumstances: (1) when section 1283.05 applies; and (2) when the neutral arbitrator signs and issues the subpoena. Veeco contends that since the arbitrator signed and issued the discovery subpoena to Aixtron, "[t]hat makes all the difference," and the arbitrator's signature was "dispositive." As we have stated, the first sentence of section 1282.6, subdivision (a) describes three circumstances in which an arbitrator may issue a subpoena. Veeco's argument and the two circumstances it identifies are not consistent with the language of section 1282.6 or our interpretation of subdivision (a) of section 1282.6. Rather than focus on the first sentence, Veeco relies on the second sentence of that subdivision, which provides: "In addition, a neutral arbitrator upon his [or her] own determination may issue subpoenas for the attendance of witnesses and subpoena duces tecum for the production of books, records, documents, and other evidence." (§ 1282.6, subd. (b).) Veeco's contention appears to be that the second sentence defines a fourth circumstance in which a subpoena may be issued in arbitration and a second circumstance in which a subpoena may be issued for the purposes of discovery: namely, when the arbitrator signs the subpoena.
In support of this assertion, Veeco cites an unpublished, tentative decision from the superior court in Los Angeles County—not even its appellate department—in an unrelated case that has no precedential value and is not citable authority. (Cal. Rules of Court, rule 8.1115(a) [unpublished appellate court or superior court appellate department opinions "must not be cited or relied on by a court or a party in any other action"]; Bolanos v. Superior Court (2008) 169 Cal.App.4th 744, 761 [citation of unrelated trial court order improper].)
Veeco also relies on the following language from the Knight treatise on alternative dispute resolution: "CAUTION—Signature of attorney v. arbitrator authorizing subpoena: Unless the parties have incorporated rules allowing for discovery under CCP § 1283.05 into their arbitration agreement . . ., attorneys are not authorized to sign the subpoena. But many attorneys assume they have such authority regardless of the agreement. If the discovery provision is not incorporated, the arbitrator must sign the subpoena." (Knight, supra, ¶ 5:390.1, p. 5-401.) The treatise does not cite any primary authority supporting this statement. In the previous paragraph, entitled "Subpoenas," the treatise states "[a]rbitrators have power to issue subpoenas for witnesses and for production of documents . . . at the hearing"; it does not mention discovery. (Id. at ¶ 5:390, p. 5-400.) While secondary sources like practice guides and treatises are not compelling authority, they may be persuasive when there is an absence of precedent. (See e.g., Kucker v. Kucker (2011) 192 Cal.App.4th 90, 95.) But such sources "certainly are not binding" (Ammerman v. Callender (2016) 245 Cal.App.4th 1058, 1086), especially when, as here, they do not cite any authority for the asserted rule. In the absence of any relevant precedent, we return to the language of the statute.
As noted, the second sentence in subdivision (a) of section 1282.6 (hereafter Second Sentence) provides: "In addition, a neutral arbitrator upon his own determination may issue subpoenas for the attendance of witnesses and subpoena duces tecum for the production of books, records, documents, and other evidence." (§ 1282.6, subd. (a).) Unlike the initial sentence in subdivision (a) of section 1282.6, which describes three circumstances in which subpoenas may be issued, the Second Sentence does not describe the circumstances in which an arbitrator may issue a subpoena "upon his own determination." Veeco contends the Second Sentence grants the arbitrator unlimited powers to issue subpoenas, both for the arbitration hearing and for the purpose of discovery, as long as the subpoena is signed by the arbitrator. But the Second Sentence says nothing about the arbitrator signing the subpoena or about discovery from which we may conclude that the statute grants the arbitrator broad authority to order discovery.
As we have noted, subdivisions (b) and (c) describe a procedure by which the parties to the arbitration may obtain a blank subpoena issued by the neutral association (or other entity listed in section 1282.6), fill out the subpoena, and serve it on the prospective deponent or records custodian, without involving the arbitrator in the process. The Second Sentence provides that in addition to the procedure outlined in subdivisions (b) and (c), which authorizes the parties to the arbitration to issue subpoenas, the arbitrator may issue subpoenas "upon his own determination." Another reasonable interpretation of the statute is that the initial sentence of subdivision (a) describes the three circumstances under which a subpoena may be issued, regardless of whether the subpoena is issued by the neutral association at the request of one of the parties or by the arbitrator. Under this interpretation, the arbitrator's authority is not unlimited. Instead, it is limited to the three circumstances described in the first sentence in subdivision (a).
Since the language of the Second Sentence is arguably subject to these two conflicting interpretations, we may resort to extrinsic evidence, including the statute's legislative history as an aid to interpretation. (Title Ins. & Trust Co. v. County of Riverside (1989) 48 Cal.3d 84, 96 ["in construing the terms of a statute we resort to the legislative history of the measure only if its terms are ambiguous"].)
Section 1282.6 was enacted in 1961 as a part of a comprehensive overhaul of the CAA. (Stats 1961, ch. 461, p. 1540.) The prior act (former Code Civ. Proc., §§ 1280-1293) was enacted in 1927 and repealed by the 1961 legislation. (Ibid.; Recommendation and Study Relating to Arbitration (Dec. 1960) 3 Cal. Law Revision Com Rep. (1960) p. G-28 (Law Revision Rep.).) The 1961 revisions to the CAA did not contain sections 1283.05 or 1283.1, the code sections discussed above that currently provide for limited discovery in arbitration. The Law Revision Commission report that lead to the 1961 revisions to the CAA noted that "[i]t would be most unwise and inappropriate in an arbitration proceeding to permit the taking of depositions . . . for discovery purposes of the parties" and opined that subpoenas duces tecum should not be used "for the purpose of a `fishing expedition.'" (Law Revision Rep., pp. G-48 to G-49.) When section 1282.6 was enacted in 1961, it provided: "Upon application of a party to the arbitration or upon his own determination, the neutral arbitrator may issue subpoenas for the attendance of witnesses and subpoenas duces tecum for the production of books, records, documents and other evidence. Subpoenas shall be served and enforced in accordance with Chapter 2 (commencing with Section 1985) of Title 3 of Part 4 of this code." (Stats 1961, ch. 461, § 2.) Based on the legislative history and the language of the statute in 1961, we conclude that the subpoena authorized by former section 1282.6 was intended to be used to compel the attendance of witnesses and the production of documents and other evidence at the arbitration hearing only and not for discovery purposes.
As originally enacted, section 1282.6 provided that only the arbitrator could issue subpoenas, either upon application of a party to the arbitration or on the arbitrator's own motion. (Former § 1282.6) Section 1282.6 was amended once, in 1982, to read as set forth above. (Stats. 1982, ch. 108, § 1.) As noted, it currently provides that subpoenas may issue in three circumstances, including for discovery if section 1283.05 applies. In addition to authorizing the arbitrator to issue subpoenas, the 1982 amendment provided a procedure whereby the parties to the arbitration may obtain a blank subpoena from the neutral association (or other enumerated entity) and fill out and serve the subpoena, without having to make an application to the arbitrator. When amended in 1982, section 1282.6 retained most of the language from the original statute in the Second Sentence, which provides that "in addition" to the procedure whereby the parties may issue subpoenas, "the neutral arbitrator upon his own determination may issue subpoenas for the attendance of witnesses and subpoenas duces tecum for the production of books, records, documents and other evidence." (§ 1282.6, subd. (a).) This was almost identical to the language of the original statute, except that it deleted the introductory phrase "[u]pon application of a party to the arbitration," which was no longer necessary because the 1982 amendment provided a mechanism for the parties to obtain and serve subpoenas without the arbitrator's involvement.
Given this legislative history, we reject Veeco's contention that the Second Sentence grants the arbitrator broad powers to issue subpoenas in arbitration for the purpose of discovery. As originally enacted, the subpoena power granted by section 1282.6 applied only to subpoenas for the arbitration hearing. When amended in 1982, the subpoena power granted by section 1282.6 was broadened to the three circumstances described in the first sentence of subdivision (a): (1) for the arbitration hearing, (2) for a section 1283 deposition, and (3) for the purposes of discovery, but only if section 1283.05 applies. (§ 1282.6, subd. (a).) We conclude these limitations on circumstances in which a subpoena may issue in arbitration apply to subpoenas issued by both a party to the arbitration and the arbitrator. Our construction is consistent with case law that describes the right to discovery in arbitration under the CAA as "limited" and "highly restricted." (Berglund, supra, 44 Cal.4th 528, 534; Alexander, supra, 88 Cal.App.4th at p. 1088.) To construe section 1282.6 as granting arbitrators unlimited power to issue discovery subpoenas as long as the subpoena is signed by the arbitrator, is inconsistent with the limitations on discovery in sections 1283.05 and 1283.1. Such an interpretation would also nullify the limits on discovery in sections 1283.05 and 1283.1, rendering both sections superfluous. For all these reasons, we reject Veeco's assertion that the Second Sentence in subdivision (a) of section 1282.6 granted the arbitrator unlimited powers to issue discovery subpoenas and authorized the discovery subpoena here. Since the arbitration agreement here does not provide for discovery or reference section 1283.05, we conclude that the arbitrator did not have the authority to issue the discovery subpoena to Aixtron in this case.
6. Discovery from Nonparties Under the JAMS Rules
Veeco argues that its arbitration agreement with Saldana provided for section 1283.05 discovery rights as required by section 1283.1, subdivision (b) "by incorporating in their Agreement arbitration rules that offer discovery rights like those that section 1283.05 confers." That assertion is not supported by a citation to the record or any legal authority.
The Arbitration Clause provided that the arbitration shall be conducted "in accordance with the National Rules for Resolution of Employment Disputes of the American Arbitration Association." The Arbitration Cause did not mention discovery, the Civil Discovery Act, or section 1283.05. In its petition below, Veeco told the court that Saldana and Veeco had agreed to arbitrate this dispute at JAMS and abide by the JAMS rules instead of the AAA rules. But the record does not contain any other written agreement between Veeco and Saldana that may have superseded the Arbitration Clause.
We nonetheless examine the JAMS Rules to see what they provide with regard to discovery. Rule 17 of the JAMS Rules, entitled "Exchange of Information," generally provides for limited discovery between the parties. But it does not incorporate the Civil Discovery Act or mention section 1283.05. JAMS Rule 17 does not provide the parties to the arbitration broad rights to discovery comparable to those in section 1283.05 or authorize discovery from nonparties.
JAMS Rule 21, which Veeco cites, is entitled "Securing Witnesses and Documents for the Arbitration Hearing." It does not contain the word "discovery." It provides that the "Arbitrator may issue subpoenas for the attendance of witnesses or the production of documents either prior to or at the Hearing pursuant to this Rule or Rule 19(c). The subpoena or subpoena duces tecum shall be issued in accordance with the applicable law." Since the discovery subpoena here was not authorized by either the FAA or the CAA, it was not authorized by JAMS Rule 21.
Moreover, only Veeco and Saldana—the parties to the arbitration—agreed to be bound by the JAMS Rules. As the Supreme Court stated in Berglund, "the arbitrator's authority is derived from the parties' consent" and "nonparties have not consented to arbitration." (Berglund, supra, 44 Cal.4th at p. 537.) Nonparties are entitled to full judicial review of arbitrator discovery orders because "arbitrators are not required to follow the law when resolving the parties' disputes, and their decisions as to parties cannot be judicially reviewed for errors of fact or law" and giving arbitrator discovery orders the same deference normally given arbitration awards would substantially compromise the legal rights of nonparties against whom erroneous discovery orders may be made." (Ibid.) The arbitration and the application of JAMS Rules obtain their legal force based on party consent as reflected in the terms of the arbitration agreement or statutes that authorize limited discovery in arbitration. Aixtron did not consent to be bound by the JAMS rules, the Arbitration Clause did not authorize discovery from nonparties, and neither the FAA nor the CAA authorize nonparty discovery in this case.
For these reasons, we reject Veeco's contention that the JAMS Rules provided it with discovery rights that are comparable to those in section 1283.05 and that those rules authorized the discovery subpoena here.
In summary, based on the language of the arbitration agreement in this case, the statutes and case law cited above, we hold that the arbitrator's pre-hearing discovery subpoena for Aixtron's business records and computers was not authorized under the FAA, the CAA, or the JAMS Rules. Since we conclude the arbitrator did not have the authority to issue the discovery subpoena to Aixtron, we shall not reach Aixtron's contention that the superior court erred in ordering it to comply with the subpoena because Veeco failed to make the requisite showing that the information it seeks is both necessary to a claim or defense and essential to a fair resolution of the dispute in arbitration and or its contentions that Veeco's document requests are overly broad, unduly burdensome, and harassing.
The superior court's August 2017 order denying Aixtron's petition and its December 2017 order granting Veeco's petition are reversed. The superior court is directed to enter new orders granting Aixtron's petition, vacating the arbitrator's discovery order, quashing the discovery subpoena to Aixtron, and denying Veeco's petition to enforce the arbitrator's discovery order. Aixtron shall recover its costs on appeal.
Bamattre-Manoukian, J. and Danner, J., concurs.
 All undesignated statutory references are to the Code of Civil Procedure.
 The Arbitration Clause provides that any arbitration shall be "in accordance with the National Rules for Resolution of Employment Disputes of the American Arbitration Association" (AAA). (Italics added.) In its petition below, Veeco told the court that Saldana and Veeco had agreed to arbitrate this dispute at JAMS and abide by the JAMS rules instead of the AAA rules.
 There is no proof of service or cover letter in the record. The arbitrator's subsequent order and other documents suggest that the proposed subpoena was sent to Saldana's counsel, and perhaps the arbitrator, but not Aixtron.
 Demand No. 15 requested: "ALL DOCUMENTS RELATING TO AIXTRON's handling of non-public third-party information which its employees possess or acquire, including, but not limited to, ALL DOCUMENTS RELATING TO AIXTRON'S acquisition, retention, disclosure, and/or use of any VEECO data."
 Veeco's demand No. 4 requested: "ALL DOCUMENTS RELATING TO any actual or potential business transaction related to [MOCVD] technology that you have closed or reasonably expect to close in the next twelve months in which SALDANA had any participation or involvement" and demand No. 5 asked for "ALL DOCUMENTS RELATING TO any development for AIXTRON of MOCVD technology and in which SALDANA had any participation or involvement."
 Section 7 of the FAA provides in relevant part: "The arbitrators . . ., or a majority of them, may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case. . . . Said summons shall issue in the name of the arbitrator or arbitrators, or a majority of them, and shall be signed by the arbitrators, or a majority of them, and shall be directed to the said person and shall be served in the same manner as subpoenas to appear and testify before the court; if any person or persons . . . shall refuse or neglect to obey said summons, upon petition the United States district court . . . may compel the attendance of such person or persons before said arbitrator or arbitrators, or punish said person or persons for contempt in the same manner provided by law for securing the attendance of witnesses or their punishment for neglect or refusal to attend in the courts of the United States." (9 U.S.C. § 7.)
 Section 1283.1, subdivision (a) provides: "All of the provisions of Section 1283.05 shall be conclusively deemed to be incorporated into, made a part of, and shall be applicable to, every agreement to arbitrate any dispute, controversy, or issue arising out of or resulting from any injury to, or death of, a person caused by the wrongful act or neglect of another."
 The only other document in the record that Veeco has characterized as an arbitration agreement is a "Notice to All Parties" regarding the "Commencement of Employment Arbitration" issued by JAMS on June 9, 2016. That notice states: "This arbitration shall be conducted in accordance with JAMS Employment Rules" and is signed by a JAMS case manager, not the parties to the arbitration. In our view, this is not an agreement between Veeco and Saldana.
 Subdivision (a) of Rule 17 provides for a "voluntary and informal exchange of non-privileged documents and other information . . . relevant to the dispute . . . immediately after commencement of the Arbitration" and describes the types of information that must be exchanged. Subdivision (b) of the rule provides that each party "may take at least one deposition of an opposing Party or an individual under the control of the opposing Party," encourages party agreement when scheduling depositions, and authorizes the arbitrator to resolve any disputes about depositions. Subdivision (c) describes the parties' continuing obligation to exchange information and subdivision (d) sets forth procedures for resolving discovery disputes.
 JAMS Rule 19(c) authorizes the arbitrator to conduct the hearing at any JAMS location for the convenience of the parties or the witnesses.
Employee must arbitrate her discrimination suit against her employer because she consented to an arbitration agreement by continuing to work.
Diaz v. Sohnen Enters.
Erika DIAZ, Plaintiff and Respondent,
SOHNEN ENTERPRISES et al., Defendants and Appellants.
(Los Angeles CountySuper. Ct. No. BC644622)
Arbitration agreement with choice-of-law clause requiring interpretation in accordance with California law required all claims to be arbitrated despite Labor Code section 229.
Bravo v. RADC Enters., Inc.
Mel R. BRAVO,
Plaintiff and Respondent,
Bleau Fox, Martin R. Fox, Los Angeles, Megan A. Childress,
and Elizabeth M. Martin, for Defendant and Appellant.
Law Offices of Ann A. Hull, Ann A. Hull, Tarzana, and Joseph S. Socher,
Los Angeles, for Plaintiff and Respondent.
RADC ENTERPRISES, INC., Defendant and Appellant.
Mar 29, 201933
(Cal. Ct. App. 2019)
All time worked must be compensated
Rodriguez v. Nike Retail Services, Inc.
as an individual and on behalf
of all others similarly situated,
Plaintiff - Appellant,
NIKE RETAIL SERVICES,INC.,
Defendant - Appellee.
928 F. 3d 810
Court of Appeals
RAKOFF, District Judge:
Defendant Nike Retail Services, Inc. ("Nike") requires its retail employees to undergo "off the clock" exit inspections every time they leave the store. Seeking compensation for the time spent on these exit inspections, plaintiff Isaac Rodriguez brought a class action on behalf of himself and similarly situated Nike employees. The District Court granted summary judgment for Nike, holding the Rodriguez's claims were barred by the federal de minimis doctrine, which precludes recovery for otherwise compensable amounts of time that are small, irregular, or administratively difficult to record. The California Supreme Court subsequently held in Troester v. Starbucks Corp., 5 Cal.5th 829, 235 Cal.Rptr.3d 820, 421 P.3d 1114 (2018), that the federal de minimis doctrine does not apply to wage and hour claims brought under California law. Accordingly, we reverse and remand to the District Court for further proceedings consistent with Troester.
FACTUAL AND PROCEDURAL HISTORY
A. The District Court's Order Granting Summary Judgment for Nike
Nike has 34 retail stores in California. At these stores, employees (other than those exempt from applicable wage and hour laws) are required to track their hours by "punching" in and out on a time clock. Separately, these employees are required to submit to exit inspections each time they leave the store on a break or at the end of the day. These inspections can be longer or shorter depending, for example, on whether an employee needs to wait at the exit for someone to check them, whether the employee is carrying a box or bag that must be inspected, or the like. Regardless of how long the inspections take, however, they occur after the employee has punched out, such that exit inspections are "off the clock" and are thus uncompensated.
Plaintiff Isaac Rodriguez worked at Nike's Gilroy, California retail store from November 2011 to January 2012. On February 25, 2014, Rodriguez filed a class-action complaint in Santa Clara County Superior Court, and on April 1, 2014, Nike removed the case to the District Court. On December 8, 2014, Rodriguez filed his First Amended Class Action Complaint, which brings claims under: (1) California Labor Code §§ 1194 and 1197 (failure to pay minimum wages); (2) California Labor Code §§ 510 and 1194 (failure to pay overtime wages); and (3) California Business and Professions Code § 17200 et seq. (unfair business practices). On August 19, 2016, the District Court certified a class of "[a]ll current and former non-exempt retail store employees of [Nike] who worked in California during the period from February 25, 2010 to the present."
On January 31, 2017, Nike moved for summary judgment against the certified class. Nike argued that Rodriguez's claims were barred by the federal de minimis doctrine, which precludes recovery for otherwise compensable amounts of time that are small, irregular, or administratively difficult to record. See Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 692, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946); Lindow v. United States, 738 F.2d 1057, 1062-63 (9th Cir. 1984). In support of its motion, Nike put forth expert testimony from Robert Crandall, who, in response to this lawsuit, conducted a "time and motion study" to measure the length of exit inspections at Nike's California stores. Crandall randomly selected 15 of Nike's California retail locations and conducted video and in-person observations over a 30-day period. Based on his study, Crandall concluded that the average exit inspection took between 16.9 and 20.2 seconds, and that the median inspection took 4.7 seconds. Crandall also concluded that 21.5% of inspections took no measurable time, 92.2% took less than a minute, and 97.5% took less than two minutes.
In his opposition to Nike's motion, Rodriguez put forth testimony from his own expert, Brian Kriegler, who analyzed Crandall's study. Based on Kriegler's testimony, Rodriguez argued that Crandall's study was flawed in several respects, including that it: (1) covered too brief a sample to be extrapolated to the class period; (2) relied on "judgment calls" about what was happening in video observations; (3) artificially decreased inspection times by assuming that subjects who were interacting with others were not also waiting to be inspected; and (4) contained disparities between video and in-person observations. Rodriguez also put forth deposition testimony from Nike store managers who said that exit inspections regularly took several minutes.
Furthermore, Rodriguez noted that the question of whether the federal de minimis doctrine applied to California Labor Code claims was then pending before the California Supreme Court. See Troester v. Starbucks Corp., 680 F. App'x 511, 512 (9th Cir. 2016) (certifying the question). Even if the doctrine applied, Rodriguez argued, Nike failed to carry its burden because it did not show that the amounts of time at issue were small, irregular, or administratively difficult to record.
On September 12, 2017, the District Court granted Nike's motion and dismissed the case. See Rodriguez v. Nike Retail Servs., Inc., No. 14-cv-01508-BLF, 2017 WL 4005591, at *1 (N.D. Cal. Sept. 12, 2017). The court began by addressing whether the de minimis doctrine applied to Rodriguez's claims and by explaining that "Nike's motion for summary judgment hinges on this question." Id. at *6. Although the court acknowledged that the question was pending before the California Supreme Court in Troester, it stated that it "must operate in the present legal landscape and apply the law as it currently exists." Id. at *7. Under current precedent, the court held, "the de minimis doctrine is a valid defense to wage claims brought under the California Labor Code." Id. The court then applied the factors set forth in Lindow v. United States, which courts in our circuit consider when evaluating whether amounts of time are de minimis: "(1) the practical administrative difficulty of recording the additional time; (2) the aggregate amount of compensable time; and (3) the regularity of the additional work." 738 F.2d at 1063.
Before applying the Lindow factors, the District Court summarized the evidence before it. The court stated that it would not consider Kriegler's testimony insofar as it attacked the accuracy of Crandall's study because these attacks did "not supply evidence addressing any of the de minimis factors." Rodriguez, 2017 WL 4005591, at *8. Although such attacks "may be appropriate on a motion to strike expert testimony," the court reasoned, "it is not evidence that creates a factual dispute for purposes of summary judgment." Id. Moreover, the court held, to the extent that Rodriguez intended for his motion to be construed as a motion to strike, the motion was denied, as Kriegler's testimony failed to show that Crandall's study was so unreliable as to be inadmissible. Id. at *9. The court did, however, consider the depositions of Nike store managers who testified that exit inspections regularly took several minutes. On this basis, the court concluded that, "viewing the evidence in the light most favorable to" Rodriguez, "it is undisputed that an exit inspection takes between zero seconds and several minutes." Id. at *12.
Even assuming that exit inspections took several minutes, however, the court held that this time was de minimis under Lindow. The court began by noting that "[a]n important factor in determining whether a claim is de minimis is the amount of daily time spent on the additional work," and that "courts have regularly held that daily periods of up to 10 minutes are de minimis." Id. at *11 (alteration in original) (quoting Lindow, 738 F.2d at 1062). The court then turned to the first Lindow factor—the administrative difficulty involved in recording exit-inspection time—and held that Rodriguez had failed to create a triable issue by arguing that Nike should install time clocks at store exits, rather than at the back of the store. Id. at *13-14. Not only did Nike offer business reasons for having clocks at the back of the store, the court explained, but Rodriguez's proposal would also require some employees to spend more time clocking back in and out at store exits than they spent undergoing inspections. Id. at *14. This conclusion was unaltered, the court held, by the fact that other major retailers placed time clocks at the front of their stores to compensate employees for security checks. Id. at *13. The court also acknowledged, but did not address, Rodriguez's further proposals that Nike perform inspections at the back of the store before employees clock out, or that Nike add a fixed amount of time to each employee's paycheck to account for inspection time. Id.
Moving to the aggregate amount of compensable time, the court repeated the point that daily periods of 10 minutes or less are generally considered de minimis. Id. at *15. Even if each exit inspection took several minutes, the court reasoned, it would take multiple exits to meet the 10-minute threshold. Moreover, the court explained, "the Lindow court made clear that even when an aggregate claim is substantial, a claim may still be considered de minimis `because of the administrative difficulty of recording the time and the irregularity of the additional [ ] work.'" Id. at *16 (alteration in original) (quoting Lindow, 738 F.2d at 1064).
Finally, with respect to regularity, the court held that Crandall's study "demonstrates that compensable exit times lasting at least 60 seconds did not occur regularly." Id. The 60-second threshold was important, the court concluded, because Nike's systems measured time to the whole minute, and a 60-second inspection would thus have a measurable effect on wages. Although, as noted, Rodriguez had put forth testimony from Nike store managers that exit inspections could take several minutes, the court held that there was no evidence that such inspections occurred regularly. Id. at *17. Accordingly, the court concluded that each of the Lindow factors favored Nike and that no reasonable jury could find that exit inspections were compensable.
B. The California Supreme Court's Decision in Troester
Rodriguez filed his notice of appeal on September 14, 2017, and on April 20, 2018, we stayed appellate proceedings pending the California Supreme Court's decision in Troester. On July 26, 2018, the California Supreme Court issued its decision. Troester v. Starbucks Corp., 5 Cal.5th 829, 235 Cal.Rptr.3d 820, 421 P.3d 1114 (2018), as modified on denial of reh'g (Aug. 29, 2018).
Troester involved a challenge to Starbucks's practice of requiring employees to perform store-closing tasks after clocking out. Id., 235 Cal.Rptr.3d 820, 421 P.3d at 1116-17. The undisputed evidence before the District Court showed that these tasks took 4 to 10 minutes per day. Troester v. Starbucks Corp., No. CV 12-7677 GAF (PJWx), 2014 WL 1004098, at *4 (C.D. Cal. Mar. 7, 2014). Because these amounts were less than the 10-minute threshold discussed above, and because it was not administratively feasible for employees to clock out after performing store-closing tasks, the District Court granted summary judgment for Starbucks based on its de minimis defense. Id. at *4-5. The court held that summary judgment was appropriate even though employees performed store-closing tasks on a daily basis, such that the third Lindow factor, regularity, weighed in the employees' favor. Id. at *5.
On appeal, we certified the following question to the California Supreme Court: "Does the federal Fair Labor Standards Act's de minimis doctrine, as stated in Anderson v. Mt. Clemens Pottery Co. and Lindow v. United States, apply to claims for unpaid wages under the California Labor Code sections 510, 1194, and 1197?" Troester, 680 F. App'x at 512 (citations omitted). The panel explained that "[t]he federal de minimis rule could be seen as less employee-protective than California's wage and hour laws and, therefore, at odds with those laws." Id. at 515. By answering the question, the panel stated, the California Supreme Court could "either dispose of the appeal or determine how the case might proceed were we to remand this putative class action to the district court." Id.
The California Supreme Court accepted certification, and it held that the federal de minimis doctrine does not apply to California's wage and hour statutes or regulations. Troester, 235 Cal.Rptr.3d 820, 421 P.3d at 1116. The court began by observing that California labor laws are generally more protective than federal labor laws, and it reasoned that "[t]he federal rule permitting employers under some circumstances to require employees to work as much as 10 minutes a day without compensation is less protective than a rule that an employee must be paid for `all hours worked' or `[a]ny work' beyond eight hours a day." Id. 235 Cal.Rptr.3d 820, 421 P.3d at 1120 (second alteration in original) (citations omitted) (first quoting Cal. Code Regs. tit. 8, § 11050(3)(A)-(B); then quoting Cal. Lab. Code § 510(a)). The court concluded, moreover, that "[n]othing in the language of the wage orders or Labor Code shows an intent to incorporate the federal de minimis rule articulated in Anderson, Lindow, or the federal regulation" codifying the de minimis doctrine. Id.
Although the court held that the federal de minimis doctrine did not apply to wage and hour claims, it left open "whether a [California] de minimis principle may ever apply." Id. 235 Cal.Rptr.3d 820, 421 P.3d at 1121; see id. 235 Cal.Rptr.3d 820, 421 P.3d at 1116 ("We do not decide whether there are circumstances where compensable time is so minute or irregular that it is unreasonable to expect the time to be recorded."). At least on the facts of the case before it, the court held, Starbucks's de minimis defense failed. Id. 235 Cal. Rptr.3d 820, 421 P.3d at 1125. In so holding, the court explained that "[a]n employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine." Id. (emphasis added). Nor was a different conclusion compelled by the administrative difficulties involved in recording the additional time. Id. To the contrary, the court stated that "employers are in a better position than employees to devise alternatives that would permit the tracking of small amounts of regularly occurring work time." Id. For example, the court reasoned, Starbucks might adapt or develop tools to "track[ ] small amounts of time," or it might "restructure the work so that employees would not have to work before or after clocking out." Id. And even if these solutions were not practical, the court concluded, "it may be possible to reasonably estimate work time . . . and to compensate employees for that time." Id.
After the California Supreme Court issued its ruling, we reversed and remanded the District Court's order granting summary judgment for Starbucks. Troester v. Starbucks Corp., 738 F. App'x 562, 563 (9th Cir. 2018). Because the California Supreme Court had held that the de minimis doctrine did not apply to the wage and hour claims at issue, we declined to "reach alternate grounds for appeal, which challenged the correctness of the district court's application of the de minimis doctrine to the evidence presented." Id. at 563 n.1.
C. The Instant Appeal
As noted above, Rodriguez filed his appeal and opening brief before the California Supreme Court issued its decision in Troester. The parties subsequently stipulated that Rodriguez would strike his opening brief and file a revised brief in light of Troester. In his revised brief, Rodriguez argues that the District Court erred in granting summary judgment for Nike based on the federal de minimis doctrine. Nike argues that reversal is unwarranted because the amounts of time at issue here are de minimis even under Troester.
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction pursuant to 28 U.S.C. § 1291. "We review a grant of summary judgment de novo." EEOC v. Luce, Forward, Hamilton & Scripps, 345 F.3d 742, 746 (9th Cir. 2003) (en banc). "We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law." Id.
The issue on appeal is straightforward: did the District Court err in granting summary judgment for Nike based on the federal de minimis doctrine? The answer, after Troester, is equally clear: the federal de minimis doctrine does not apply to wage and hour claims brought under the California Labor Code. By applying the doctrine to Rodriguez's claims, the District Court failed—understandably, given the legal landscape at the time—to "appl[y] the relevant substantive law."
That the District Court relied on the federal de minimis doctrine is beyond question. Indeed, the court began its discussion of Nike's motion by addressing "whether the [federal] de minimis doctrine applies to claims for violations of the California Labor Code." Rodriguez, 2017 WL 4005591, at *6. The court acknowledged that "[t]he outcome of Nike's motion for summary judgment hinges on this question," and that "the California Supreme Court has not addressed" the matter. Id. The court even referenced the pending decision in Troester, noting that "this Court does not have the benefit of a ruling from California's high court that either alters or solidifies the viability of the de minimis doctrine outside of the FLSA context from which it originated." Id. at *7. "Under current law," the court concluded, "the de minimis doctrine is a valid defense to wage claims brought under the California Labor Code." Id.
The court's analysis, moreover, rested on several premises that Troester explicitly rejected. Both as a preliminary matter and in its discussion of Lindow's "aggregate amount of compensable time" factor, id. at *11, the court repeatedly invoked the federal doctrine's 10-minute daily threshold for determining whether amounts of uncompensated time are de minimis. See, e.g., id. at *12 ("Most courts have found daily periods of approximately 10 minutes de minimis even though otherwise compensable." (quoting Lindow, 738 F.2d at 1062)); id. at *15 ("Drawing all reasonable inferences in favor of Rodriguez, the daily amount of time is still well within the 10-minute de minimis threshold."). Troester made clear, however, that the 10-minute threshold is inconsistent with California labor laws, under which "an employee must be paid for `all hours worked' or `[a]ny work' beyond eight hours a day." 235 Cal.Rptr.3d 820, 421 P.3d at 1120 (alteration in original) (citations omitted) (first quoting Cal. Code Regs. tit. 8, § 11050(3)(A)-(B); then quoting Cal. Lab. Code § 510(a)). After Troester, "[a]n employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine." Id. 235 Cal.Rptr.3d 820, 421 P.3d at 1125.
Likewise, in its discussion of "the practical administrative difficulty" of recording exit-inspection time, the District Court assumed that Nike was required to prove "only that it would be administratively difficult to [record inspection time] given its timekeeping system." Rodriguez, 2017 WL 4005591, at *13-14. But Troester expressly "decline[d] to adopt a rule that would require the employee to bear the entire burden of any difficulty in recording regularly occurring work time." 235 Cal.Rptr.3d 820, 421 P.3d at 1125. To the contrary, Troester held that "employers are in a better position than employees to devise alternatives that would permit the tracking of small amounts of regularly occurring work time." Id. And Troester explained that "even when neither a restructuring of work nor a technological fix is practical, it may be possible to reasonably estimate work time . . . and to compensate employees for that time." Id. Rodriguez proposed such an alternative, pursuant to which fixed amounts of time would be added to employees' paychecks. He also proposed an alternative whereby employees would undergo inspections at the back of the store before clocking out. Cf. id. ("One such alternative, which it appears Starbucks eventually resorted to here, was to restructure the work so that employees would not have to work before or after clocking out."). Although the court acknowledged that Rodriguez had made these proposals, it did not explain why they failed to create a triable issue. Rodriguez, 2017 WL 4005591, at *13.
On appeal, Nike essentially concedes that the District Court applied the wrong legal standard when it relied on the federal de minimis doctrine. Nike nevertheless argues that we should affirm the grant of summary judgment on the alternative ground that the exit inspections at issue are de minimis even under Troester. As Nike notes, Troester left open "whether there are circumstances where compensable time is so minute or irregular that it is unreasonable to expect the time to be recorded," and "decline[d] to decide whether a de minimis principle may ever apply to wage and hour claims" under California law. 235 Cal.Rptr.3d 820, 421 P.3d at 1116, 1121. Citing Troester's admonition that employers must compensate employees who "work minutes off the clock on a regular basis or as a regular feature of the job," id. 235 Cal.Rptr.3d 820, 421 P.3d at 1125, Nike argues that Troester "rejected the de minimis defense as applied to a matter of minutes worked `off the clock,' not a matter of seconds." Because "only 3.3% of the exits [measured by Crandall] lasted more than 60 seconds," Nike contends, "the occurrences where exits were more than mere seconds were irregular."
To the extent Nike urges us to interpret Troester as replacing the federal de minimis doctrine's 10-minute daily threshold with a state-law 60-second analogue, we hereby decline to do so. Not only would this interpretation read far too much into Troester's passing mention of "minutes," but it would also clash with Troester's reasoning, which emphasized the requirement under California labor laws that "employee[s] must be paid for all hours worked or any work beyond eight hours a day." 235 Cal.Rptr.3d 820, 421 P.3d at 1120 (quotations and alteration omitted). We doubt that Troester would have been decided differently if the closing tasks at issue had taken only 59 seconds per day.
Instead, we understand the rule in Troester as mandating compensation where employees are regularly required to work off the clock for more than "minute" or "brief" periods of time. Id. 235 Cal. Rptr.3d 820, 421 P.3d at 1116, 1125. This rule does not require employers to "account for `[s]plit-second absurdities,'" id. 235 Cal.Rptr.3d 820, 421 P.3d at 1123 (alteration in original) (quoting Anderson, 328 U.S. at 692, 66 S.Ct. 1187), and it might not apply in cases where work is so "irregular that it is unreasonable to expect the time to be recorded," id. 235 Cal. Rptr.3d 820, 421 P.3d at 1116. But where employees are required to work for more than trifling amounts of time "on a regular basis or as a regular feature of the job," id. 235 Cal.Rptr.3d 820, 421 P.3d at 1125, Troester precludes an employer from raising a de minimis defense under California law.
Applying this rule to the instant case, we hold that the District Court's grant of summary judgment cannot be affirmed on the record below. As the District Court noted, the undisputed facts show only "that an exit inspection takes between zero seconds and several minutes." Rodriguez, 2017 WL 4005591, at *12. And the evidence before the court indicated that employees frequently exited multiple times per day, although it did "not indicate how many times an employee leaves the store each day, or if an employee ever leaves more than twice in a single day." Id. at *15. Moreover, while Crandall found that 69.0% of exit inspections took less than 15 seconds, and that 81.4% of inspections took less than 30 seconds, multiple Nike store managers testified, to the contrary, that longer inspections were common. See, e.g., id. at *4 ("90% of the time an employee was required to wait for some period of time for a manager to be available to perform the exit inspection," and "60-65% of the time that period of waiting time was at least a minute." (quotations omitted)); id. ("40-50% of the time . . ., the employee had to wait at least one full minute before the check was performed."); id. at *12 ("[A]bout 45 percent of the time an employee would be required to wait a minute or two for a manager to become available and perform a security check." (quotations omitted)).
Given this evidence, we cannot conclude that exit inspections qualify as "split-second absurdities." Nor do they appear so "irregular that it is unreasonable to expect the time to be recorded." Even according to Crandall's study, the vast majority of inspections took measurable amounts of time, and there is a genuine dispute between the parties as to whether these amounts were more than "minute," "brief," or "trifling." As such, the record below does not support affirmance of the District Court's grant of summary judgment, and we reverse and remand for further proceedings consistent with Troester.
Each party shall bear its own costs on appeal.
REVERSED AND REMANDED.
California’s anti-SLAPP statute can be used to screen claims alleging discriminatory or retaliatory employment actions.
Wilson v. Cable News Network, Inc.
Supreme Court of California
NO. S239686, 7 Cal.5th 871 (Cal. 2019)
Plaintiff and Appellant,
CABLE NEWS NETWORK, INC., et al.,
Defendants and Respondents.
SUPREME COURT OF CALIFORNIA
Jul 22, 2019
7 Cal.5th 871 (Cal. 2019)
Law Offices of Lisa L. Maki, Lisa L. Maki, Santa Monica, Jennifer Ostertag ; Shegerian & Associates, Jill P. McDonnell and Carney R. Shegerian, Santa Monica, for Plaintiff and Appellant.
Representative actions brought under the California Private Attorneys General Act cannot be brought as a “class action” under the Class Action Fairness Act of 2005Canela v. Costco Wholesale Corp.
LILIANA CANELA, individually and on behalf of all others similarly situated,
COSTCO WHOLESALE CORPORATION,
Diversity Jurisdiction/Class Action Fairness Act
The panel vacated the district court's summary judgment with instructions to remand to state court because the district court lacked subject matter jurisdiction at the time the action was removed to federal court.
Plaintiff, a Costco Wholesale Corporation employee, filed a state class action complaint alleging that Costco violated California Labor Code § 1198 by failing to provide her and other employees suitable seating. Plaintiff's only claim arose under California's Private Attorney General Act ("PAGA"). Costco removed the case to federal court based on the federal diversity statute, 28 U.S.C. § 1332(a), and the Class Action Fairness Act ("CAFA").
Concerning traditional diversity jurisdiction, the panel held that the amount in controversy did not meet the statutory threshold at the time of removal. Because the named plaintiff's pro-rata share of civil penalties, including attorney's fees, totaled $6,600 at the time of removal, and the claims of other employees could not be aggregated with hers under Urbino v. Orkin Services of California, Inc., 726 F.3d 1118 (9th Cir. 2013), the requisite $75,000 jurisdictional threshold was not met. Accordingly, the district court lacked diversity jurisdiction at the time of removal.
The panel held that the district court also lacked subject matter jurisdiction under CAFA because plaintiff's stand-alone PAGA lawsuit was not, and could not have been, filed under a state rule similar to Rule 23 of the Federal Rules of Civil Procedure. The panel held that the holding in Baumann v. Chase Investment Services Corp., 747 F.3d 1117, 1122 (9th Cir. 2014), that "PAGA actions are  not sufficiently similar to Rule 23 class actions to trigger CAFA jurisdiction," controlled the outcome of this appeal. The panel rejected Costco's argument that because the named plaintiff originally sought class status in her complaint, her case was filed as a class action within the meaning of CAFA. The panel also rejected Costco's argument that the decisions in Mississippi ex rel. Hood v. AU Optronics Corp., 571 U.S. 161 (2014), and Hawaii ex rel. Louie v. HSBC Bank Nevada, N.A., 761 F.3d 1027 (9th Cir. 2014), compelled a different result.
ORDER AND AMENDED OPINION
The opinion in Canela v. Costco Wholesale Corporation, 965 F.3d 694 (9th Cir. 2020), is amended as follows:
Page 697, final sentence: Replace Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008) (citations omitted).> with Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008) (citation omitted); see also Ehrman v. Cox Commc'ns, Inc., 932 F.3d 1223, 1227 (9th Cir. 2019).> The panel has unanimously voted to deny the petition for panel rehearing. Judge Friedland voted to deny the petition for rehearing en banc, and Judge Wallace and Judge Hillman so recommend. The full court has been advised of the petition for rehearing en banc and no judge has requested a vote on whether to rehear the matter en banc. Fed. R. App. P. 35. The petition for panel rehearing and the petition for rehearing en banc are DENIED. No further petitions for panel rehearing or rehearing en banc will be considered.
WALLACE, Circuit Judge.
Costco Wholesale Corporation appeals from the district court's summary judgment in favor of Liliana Canela. We have appellate jurisdiction under 28 U.S.C. § 1292(b). Because the district court lacked subject matter jurisdiction at the time of removal, we vacate the district court's summary judgment with instructions to remand the case to state court.
Costco is a nationwide retail chain that sells merchandise and offers services to registered members. To verify that those entering its warehouses are members, Costco hires greeters to stand near the entrance where customers display their membership card. Costco also hires exit checkers to stand near the exit and check customers' purchases against their receipts. Costco classifies its greeters and exit checkers as "member service" employees.
Canela worked as a greeter and exit checker at two of Costco's warehouses in California. She sued Costco in a state trial court in California, alleging that Costco had violated California Labor Code section 1198 by failing to provide her and other member service employees who worked as greeters and exit checkers with "suitable seat[ing]" under section 14 of California's Wage Order 7-2001. Cal. Code Regs. tit. 8 § 11070. Because a violation of Labor Code section 1198 confers a cause of action under California's Private Attorneys General Act of 2004 (PAGA), Canela's only claim arises under PAGA. Cal. Labor Code § 2698. Canela's Complaint said "Class Action Complaint" on its cover page and included references to the lawsuit as a class action.
Relying on both the federal diversity statute, see 28 U.S.C. § 1332(a), and the Class Action Fairness Act of 2005 (CAFA), see id. § 1332(d), Costco removed the case to federal court. About a year later, Canela notified the district court that she no longer planned to seek class status. Canela suggested that the district court lacked jurisdiction because her PAGA claim was always a "representative action" and could have never been brought as a "class action" under CAFA. In light of Canela's submission, the district court ordered the parties to brief the issue of its jurisdiction. Because Canela had denominated her lawsuit as a "class action" and had sought class status on her PAGA claim as of the time the case was removed from state court, the district court concluded that it had retained CAFA jurisdiction even though Canela had later decided not to pursue class certification.
Costco then moved for partial summary judgment, contending that without a certified class, Canela lacked Article III standing to represent absent aggrieved employees and could not represent absent "aggrieved employees" under Federal Rule of Civil Procedure 23. The district court denied Costco's motion.
Costco swiftly moved to certify an interlocutory appeal under 28 U.S.C. § 1292(b), raising two questions: (1) "Whether, absent class certification, a PAGA plaintiff in federal court has Article III standing to represent absent aggrieved employees[?]" and (2) "Whether a PAGA plaintiff in federal court can represent absent aggrieved employees without qualifying for class certification under Rule 23[?]" Canela v. Costco Wholesale Corp., No. 13-cv-03598-BLF, 2018 WL 3008532, at *1 (N.D. Cal. June 15, 2018). Concluding that they presented controlling issues of law over which there was a substantial ground for difference in opinion, the district court certified both questions. Id. at *4. We agreed and granted Costco permission to appeal. Costco timely appealed.
"Section 1292(b) authorizes appeals from orders, not questions, so `our review of the present controversy is not automatically limited solely to the question deemed controlling by the district court.'" Baumann v. Chase Inv. Servs. Corp., 747 F.3d 1117, 1120 (9th Cir. 2014), quoting In re Cinematronics, Inc., 916 F.2d 1444, 1449 (9th Cir. 1990). The district court's order on its jurisdiction led to and was discussed in the district court's summary judgment from which Costco now appeals. Because the district court's subject matter jurisdiction is "material" to the summary judgment before us, we address it here. In re Cinematronics, Inc., 916 F.2d at 1449 (citation omitted; emphasis in original). We must do so before we may turn to the merits. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998). To that end, we ordered the parties to submit briefing on the jurisdictional question.
"We review de novo a district court's denial of a motion to remand to state court for lack of federal subject matter jurisdiction." Chapman v. Deutsche Bank Nat'l Tr. Co., 651 F.3d 1039, 1043 (9th Cir. 2011) (citation omitted). We review the "construction, interpretation, or applicability" of CAFA de novo. Bush v. Cheaptickets, Inc., 425 F.3d 683, 686 (9th Cir. 2005) (citation omitted). A "defendant seeking removal has the burden to establish that removal is proper." Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008) (citation omitted); see also Ehrman v. Cox Commc'ns, Inc., 932 F.3d 1223, 1227 (9th Cir. 2019).
In removing the case, Costco invoked two independent bases for federal subject matter jurisdiction: diversity under section 1332(a) and CAFA jurisdiction. We address each in turn.
Traditional diversity jurisdiction requires complete diversity of citizenship and an amount in controversy greater than $75,000. 28 U.S.C. § 1332(a). Where, as here, "a plaintiff's state court complaint does not specify a particular amount of damages, the removing [party] bears the burden of establishing, by a preponderance of the evidence, that the amount in controversy exceeds" the threshold at the time of removal. Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996).
We hold that the amount in controversy did not meet the statutory threshold at the time of removal. Our decision in Urbino v. Orkin Services of California, Inc., 726 F.3d 1118 (9th Cir. 2013), controls.
In Urbino, the plaintiff employee had brought a representative PAGA cause of action in state court. Id. at 1121. The defendants removed the case to federal court, submitting evidence that the alleged labor code violations involved over 800 other employees and over 17,000 paychecks, thereby establishing that the aggregated claims exceeded $75,000. Id. If the claims could be aggregated among all employees with potential claims, the civil penalties for the alleged violations exceeded $9,000,000, well above the $75,000 threshold. Id. However, with no aggregation, the action fell short of the $75,000 threshold because the named plaintiff's pro rata share was only a little over $11,000. Id.
The question before us was therefore whether the penalties of all employees could be aggregated to satisfy the amount in controversy requirement. Id. We concluded that PAGA civil penalties could not be aggregated for this purpose, and therefore that the district court lacked diversity jurisdiction. Id. at 1122-23.
For the same reason, diversity jurisdiction is lacking here. In its Notice of Removal, Costco said that the 968 employees collectively sought $5,324,000 in civil penalties. Costco also said that it could be liable for $1,064,800 in attorney's fees. Because Canela's pro-rata share of civil penalties, including attorney's fees, totaled $6,600 at the time of removal, and the claims of other member service employees may not be aggregated under Urbino, the $75,000 jurisdictional threshold was not met. See id. at 1122; Gibson v. Chrysler Corp., 261 F.3d 927, 942 (9th Cir. 2001) (explaining that we consider a successful party's pro rata share of attorney's fees in assessing whether her claim meets the jurisdictional threshold). Thus, the district court lacked diversity jurisdiction at the time of removal.
We next turn to the question whether the district court had CAFA jurisdiction. CAFA "relaxed" the diversity requirements for putative class actions. Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 84 (2014). Under CAFA, federal courts have jurisdiction over a "class action" when the parties are minimally diverse, i.e., any member of a class of plaintiffs is a citizen of a state different from that of any defendant, and the amount in controversy exceeds $5,000,000, see 28 U.S.C. § 1332(d)(2)(A), and when the proposed class has at least 100 members, see id. § 1332(d)(5)(B).
The proposed "class" here is made up of at least 100 members and Canela's citizenship (California) is diverse from Costco's (Washington). Although the parties dispute whether the amount in controversy exceeded $5,000,000 at the time of removal, see 28 U.S.C. § 1332(d)(6), we need not resolve that issue here, because we hold that the Complaint was not filed as a "class action" under CAFA.
CAFA defines a "class action" as "any civil action filed under Rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action." 28 U.S.C. § 1332(d)(1)(B). Because Canela sued in California state court, the suit was not "filed under Rule 23 of the Federal Rules of Civil Procedure." Id. The only issue before us is whether Canela filed her PAGA cause of action under a "similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action." Id.
In resolving this issue, we do not write on a clean slate. We have observed that there is "no ambiguity in CAFA's definition of class action." Washington v. Chimei Innolux Corp., 659 F.3d 842, 848 (9th Cir. 2011). If Congress had "intended CAFA to apply to any representative actions demonstrating sufficient similarity to class actions under Rule 23, it would not have also included an explicit requirement that the suit be brought `as a class action.'" Id., quoting 28 U.S.C. § 1332(d)(1)(B). Applying the plain meaning of CAFA, we have held that parens patriae suits are not "class actions" when they "lack statutory requirements for numerosity, commonality, typicality, or adequacy of representation that would make them sufficiently `similar' to actions brought under Rule 23, and [other] certification procedures." Id. at 850.
CAFA therefore requires "that the state statute authorize the suit `as a class action'" and that the suit meet "the central requirements of class actions." Id. Although "suits [that] lack the defining attributes of true class actions" may be "representative actions," they are not "class actions" under CAFA. Id. at 848, 850.
We expounded on this language a few years later in Baumann. 747 F.3d 1117 (9th Cir. 2014). We explained that a state statute or rule is similar to Rule 23 if it "closely resembles" it "or is like Rule 23 in substance or in essentials." Id. at 1121, quoting W. Va. ex rel. McGraw v. CVS Pharmacy, Inc., 646 F.3d 169, 174 (4th Cir. 2011) (emphasis added).
Our holding in Baumann that "PAGA actions are  not sufficiently similar to Rule 23 class actions to trigger CAFA jurisdiction" controls the outcome of this appeal. Id. at 1122. In reaching this conclusion, we explained exactly why PAGA causes of action were nothing like Rule 23 class actions.
We observed that in a PAGA suit, "the court does not inquire into the named plaintiff's and class counsel's ability to fairly and adequately represent unnamed employees— critical requirements in federal class actions . . . ." Id. (citations omitted). In addition, "unlike Rule 23(a), PAGA contains no requirements of numerosity, commonality, or typicality." Id. at 1123, citing Purdue Pharma L.P. v. Kentucky, 704 F.3d 208, 216-17 (2d Cir. 2013) (holding that the suit was not filed as a "class action" under CAFA because it contained none of the "hallmarks of Rule 23 class actions; namely, adequacy of representation, numerosity, commonality, typicality, or the requirement of class certification"); CVS Pharmacy, Inc., 646 F.3d at 175-76 (same).
We also explained that unlike the due process protections afforded to putative class members under Rule 23, "PAGA has no notice requirements for unnamed aggrieved employees, nor may such employees opt out of a PAGA action." Baumann, 747 F.3d at 1122. As a result, the preclusive effect of PAGA judgments differs from that of class action judgments in two important ways. Id.
First, unlike a class action, a judgment from a PAGA suit "binds all those, including nonparty aggrieved employees, who would be bound by a judgment in an action brought by the government." Arias, 209 P.3d at 933. So, "with respect to the recovery of civil penalties, nonparty employees as well as the government are bound by the judgment in an action brought under" PAGA, without an opportunity to opt out. Iskanian v. CLS Transp. L.A., LLC, 327 P.3d 129, 147 (Cal. 2014).
Second, unlike class action judgments that preclude all claims the class could have brought under traditional res judicata principles, employees retain all rights "to pursue or recover other remedies available under state or federal law" in PAGA judgments. Baumann, 747 F.3d at 1123, quoting Cal. Lab. Code § 2699(g)(1). Because non-party aggrieved employees in PAGA suits are "not given notice of the action or afforded any opportunity to be heard," they are not "bound by the judgment as to remedies other than civil penalties." Arias, 209 P.3d at 934, citing Taylor v. Sturgell, 553 U.S. 880, 900-01 (2008)).
We also highlighted the different remedial schemes that exist in Rule 23 class actions and PAGA suits. "In class actions, damages are typically restitution for wrongs done to class members." Baumann, 747 F.3d at 1123. In contrast, PAGA suits "primarily seek to vindicate the public interest in enforcement of California's labor law." Id. (citations omitted). While 75 percent of the recovered civil penalties in a PAGA action is distributed to the Labor and Workforce Development Agency (Agency), only 25 percent is allocated among aggrieved employees. Id. at 1121, citing Cal Lab. Code § 2699(i). The portion of civil penalties reserved for aggrieved employees is not "restitution for wrongs done to members of the class" and "does not reduce any other claim that the employee may have against the employer." Id. at 1123. Instead, it is an "incentive to perform a service to the state." Id. PAGA is therefore a "type of qui tam action" in which the "government entity on whose behalf the plaintiff files suit is always the real party in interest in the suit." Iskanian, 327 P.3d at 148 (citation omitted).
Costco attempts to distinguish Baumann because the complaint there, unlike the one here, "did not invoke the California class action statute." Baumann, 747 F.3d at 1121. In Costco's view, because Canela originally sought class status in her Complaint, her suit was filed as a "class action" under CAFA.
We recognize that Canela titled her Complaint "Class Action Complaint for Violations of the Private Attorneys General Act of 2004." In the caption page, Canela also referred to the Complaint as "a class and representative action." The footer of her Complaint refers to the document as a "Class Action Complaint."
We also acknowledge that Canela suggested that the nature of her lawsuit was a "class action." In her Complaint, Canela stated that she sued "individually and on behalf of all others similarly situated" as "a class action . . . for the recovery of civil penalties . . . pursuant to" PAGA. Canela claimed to represent a putative "class" of all "employees of Costco who . . . within the applicable period . . . have been designated as member service and have, within California, been assigned to work either as a greeter or as an exit checker, and were not provided with a seat." Canela also alleged that her proposed class satisfied the requirements of a class in California.
But these labels and allegations do not transform her PAGA cause of action into one filed under a "similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action." 28 U.S.C. § 1332(d)(1)(B). The plain meaning of CAFA precludes the formalistic test that Costco asks us to adopt here.
We declined to adopt a formalistic test in Chimei. We explained that "it is not only that parens patriae suits are not `labeled class actions,' it is that they also lack statutory requirements for numerosity, commonality, typicality, or adequacy of representation that would make them sufficiently `similar' to actions brought under Rule 23. . . . ." Chimei, 659 F.3d at 850 (emphasis added). Thus, for a case to be removable under CAFA, the "state action must be filed under a statute that . . . authorizes an action `as a class action.'" Id. at 849, quoting 28 U.S.C. § 1332(d)(1)(B).
We also rejected a formalistic test in Baumann. We held there that the PAGA statute was not a state statute similar to Rule 23 after evaluating its "substance and essentials." Baumann, 747 F.3d at 1121. Because "a PAGA suit is fundamentally different than a class action" id. at 1123, quoting McKenzie v. Fed. Express Corp., 765 F. Supp. 2d 1222, 1233 (C.D. Cal. 2011), and "Rule 23 and PAGA are more dissimilar than alike," id. at 1124, a PAGA cause of action is not authorized as a "class action" under CAFA.
Both holdings comported with the proper "statutory construction" of CAFA. Id.; Chimei, 659 F.3d at 847. To hold otherwise would, "for CAFA jurisdictional purposes . . . exalt form over substance," which the Supreme Court has instructed us not to do. Standard Fire Ins. Co. v. Knowles, 568 U.S. 588, 595 (2013).
Costco argues that the United States Supreme Court's decision in Mississippi ex rel. Hood v. AU Optronics Corporation, 571 U.S. 161 (2014), and our decision in Hawaii ex rel. Louie v. HSBC Bank Nevada, N.A., 761 F.3d 1027 (9th Cir. 2014), compel a different result. We disagree.
In AU Optronics, the Supreme Court resolved the different question whether a lawsuit filed by a state was a "mass action" under CAFA even though the claim was based on injuries suffered by citizens who were not named plaintiffs. AU Optronics Corp., 571 U.S. at 164, quoting 28 U.S.C. §1332(d)(11)(B)(i). The Supreme Court held that it was not, interpreting CAFA's text as requiring a "mass action" to be brought by 100 or more named plaintiffs. Id. at 169-76. Because the State of Mississippi was the only named plaintiff, the action was not filed as a "mass action" under CAFA. Id.
AU Optronics did not address the district court's and court of appeal's separate "determination that Mississippi's suit is not a `class action' under CAFA" because that determination was never challenged. Id. at 167 & n.2. In fact, the Supreme Court distinguished between the "two types of cases" included in CAFA. See id. at 165 (observing that, for purposes of CAFA, "class action" is defined in section 1332(d)(1)(B) and "mass action" is defined in section 1332(d)(11)(B)(i)). The Supreme Court rejected the argument that the case was filed as a "mass action" because it was "`similar to a class action' such that it should be removed[,]" as that view "fail[ed] to recognize this key distinction" between a "mass action" and a "class action." Id. at 173. AU Optronics therefore says nothing about the meaning of a "class action" under CAFA.
Nor does the reasoning in AU Optronics support Costco's theory here. In holding that the case was not a "mass action," the Court primarily relied on the statutory text of CAFA. Id. at 168-74. By contrast, the plain meaning of a "class action" under CAFA requires that a state cause of action be authorized as a "class action" under state law.
We acknowledge that AU Optronics rejected an inquiry into the "substance of the action," and instead selected one that looks "only at the labels that the parties may attach." Id. at 174, quoting La. ex rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418, 424 (5th Cir. 2008), abrogated by AU Optronics Corp., 571 U.S. at 174. However, that rationale has no significance here.
To begin with, the plain meaning of "class action" under CAFA controls, even if a conflicting "background principle" would otherwise apply. Id. Consistent with the statutory text, we evaluate the "substance and essentials" when deciding whether a state cause of action is filed under a state law similar to a "class action" under CAFA.
The "background principle" that the Supreme Court discussed in AU Optronics—that the "real party in interest inquiry identifies what party's (or parties') citizenship should be considered in determining diversity," id. at 175— does not apply here. The question here is not whether the parties are minimally diverse. There is no dispute that they are. Instead, we are asked to decide whether this stand-alone PAGA lawsuit was filed under a state rule or statute similar to Rule 23. For the reasons we outlined in Baumann, we conclude that it was not.
We are also not persuaded by Costco's suggestion that our decision in HSBC Bank affects our analysis. We held there that a complaint that disclaimed class status was not filed as a suit similar to a class action. 761 F.3d at 1042. We declined to "ignore [the class] disclaimers and transmogrify the suits into class actions." Id. at 1039.
In explaining this point, we said that the "appropriate inquiry is . . . whether a complaint seeks class status." Id. at 1040. We also said that "a plaintiff files a class action for CAFA purposes by invoking a state class action rule, regardless of whether the putative class ultimately will be certified." Id., quoting United Steel Workers Int'l Union v. Shell Oil Co., 602 F.3d 1087, 1091-92 (9th Cir. 2010)). Costco interprets this language to suggest that what matters is whether a plaintiff formally makes class allegations. We disagree.
It is clear that, in context, we meant to convey the point that a cause of action filed as and authorized as a class action under state law is a "class action" under CAFA, even if, after discovery or litigation of the class certification question, the cause of action might not be certifiable. Here, though, the question is whether a PAGA cause of action could have ever, as a matter of law and without any need for discovery into the facts, been filed as a class action. On the face of the Complaint, we hold that it could not have been.
The cases on which we relied in the course of making these observations confirm this reading. We cited United Steel, in which we discussed whether "post-filing developments . . . defeat jurisdiction if jurisdiction was properly invoked as of the time of filing," and not whether deficiencies with the complaint could do so. 602 F.3d at 1091-92. We also relied on the proposition in Baumann that because "the plaintiff's complaint was brought under PAGA, a statute not similar to Rule 23, it was irrelevant that the action might later be converted to a class action if removed." HSBC Bank, 761 F.3d at 1040, quoting Baumann, 747 F.3d at 1124 (emphasis added).
But our holding here is wholly consistent with the principle that "if jurisdiction exists at the time an action is commenced, such jurisdiction may not be divested by subsequent events." Freeport-McMoRan, Inc. v. K. N. Energy, Inc., 498 U.S. 426, 428 (1991) (per curiam). We therefore reject Costco's argument to supplant our substantive test with one that considers only the formal labels and allegations in a complaint.
Costco next argues that even if we were to consider the "substance and essentials" of Canela's PAGA claim, we ought to hold that there is CAFA jurisdiction because a PAGA cause of action could be brought as a class action in California. Costco relies on Arias v. Superior Court, in which the California Supreme Court suggested that PAGA causes of action could possibly be brought as class actions. See 209 P.3d at 930 n.5. We disagree.
The Arias footnote on which Costco relies is dicta. In Arias, which was decided soon after PAGA was enacted, the California Supreme Court held that a PAGA cause of action need not be brought as a class action. Id. at 930. In a footnote, the California Supreme Court said that PAGA actions "may be brought as class actions." Id. at 930 n.5. In support of this proposition, the California Supreme Court cited Amaral v. Cintas Corp. No. 2, 78 Cal. Rptr. 3d 572, 583-84 (Ct. App. 2008). However, Amaral had proceeded as a class action without the parties' or California's intermediate appellate court's addressing whether the PAGA claim could be brought as a class action. Id. In context, the Arias footnote was an observation that parties had been filing PAGA claims as class actions, rather than a pronouncement that PAGA claims could actually be brought as class actions.
But even if the footnote in Arias left open the question whether there is such a thing as a PAGA class action, the California Supreme Court has since definitively rejected that view. In Kim v. Reins International California, Inc., 459 P.3d 1123 (Cal. 2020), the California Supreme Court addressed whether "aggrieved employees" lose standing to pursue a PAGA cause of action after settling their individual claims for Labor Code violations. Id. at 1126-27. Kim held that the settlement and dismissal of individual Labor Code claims did not strip an employee of standing to bring a PAGA claim as an authorized representative of the State of California. See id. In reaching this conclusion, Kim emphasized that a PAGA cause of action cannot be a class action. Id. at 1130.
Looking first at the statutory text, Kim observed that "PAGA standing is not inextricably linked to the plaintiff's own injury." Id. Examining the statutory purpose, Kim confirmed the point that "PAGA claims are different from conventional civil suits." Id.
Most significantly for our purposes, Kim then explained that a PAGA claim is different from a class action. Although a PAGA claim is "representative in nature," it "is not simply a collection of individual claims for relief, and so is different from a class action. The latter is a procedural device for aggregating claims `when the parties are numerous, and it is impracticable to bring them all before the court.'" Id., quoting Cal. Civ. Proc. Code § 382 (emphasis added). "In a class action, the `representative plaintiff still possesses only a single claim for relief—the plaintiff's own.'" Id. (internal quotation marks and citation omitted). By contrast, "a representative action under PAGA is not a class action." Id. at 1131, quoting Huff v. Securitas Sec. Servs. USA, Inc., 233 Cal. Rptr. 3d 502, 509 (Ct. App. 2018).
Kim also analyzed the statutory context of stand-alone PAGA claims, acknowledging that "many PAGA actions consist of a single cause of action seeking civil penalties." Id. at 1132. Kim observed that "courts have rejected efforts to split PAGA claims into individual and representative components." Id. (citing cases). Thus, standing for "PAGA-only cases cannot be dependent on the maintenance of an individual claim because individual relief has not been sought." Id. (emphasis added).
Kim confirms that Canela, as an aggrieved employee, has no individual claim of her own and is not seeking individual relief. See ZB, N.A. v. Superior Ct., 448 P.3d 239, 250 (Cal. 2019). Instead, Canela's PAGA suit is a type of qui tam action. As the only real party in interest, the State of California received notice from Canela, as was required by law, before she filed this suit. See Cal. Lab. Code. § 2699.3(a). If Canela's claim has merit, she will obtain a pro-rata share of the civil penalties as an incentive for bringing the suit as California's authorized representative. Finally, the essential attributes of a class action have no place in this stand-alone PAGA suit.
For these reasons, a PAGA claim cannot be brought as a "class action" under CAFA. CAFA jurisdiction was therefore lacking at the time of removal.
The district court lacked diversity jurisdiction under section 1332(a). The district court also lacked subject matter jurisdiction under CAFA because Canela's stand-alone PAGA lawsuit was not, and could not have been, filed under a state rule similar to a Rule 23 class action. The district court erred by not remanding the case to state court. Thus, the district court's summary judgment is
VACATED WITH INSTRUCTIONS TO REMAND TO STATE COURT.
[*] The Honorable Timothy Hillman, United States District Judge for the District of Massachusetts, sitting by designation.
[**] This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.
 We were also unpersuaded that the PAGA action could satisfy the complete diversity element because the State of California was the real party in interest and was not a citizen. Id. at 1123. Because the amount-in-controversy requirement was not satisfied here, we do not address the issue of whether the parties are completely diverse.
 Our logic in Gibson extends to this case. Like the statute at issue in Gibson, PAGA does not provide that attorney's fees may only be awarded to the representative who files the suit. Compare Cal. Civ. Proc. Code § 1021.5 (providing that "a court may award" attorney's fees "to a successful party" (emphasis added)), with Cal. Lab. Code § 2699(g)(1) (providing that "[a]ny employee who prevails in any action" shall be entitled to reasonable attorney's fees (emphasis added)). And like the statute at issue in Gibson, California courts have not treated only the representative or named plaintiff as a prevailing party. See Gibson, 261 F.3d at 942; Arias v. Superior Court, 209 P.3d 923, 933 (Cal. 2009) (explaining that a PAGA judgment "is binding not only on the named employee plaintiff but also on government agencies and any aggrieved employee not a party to the proceeding").
 This incentive is not awarded exclusively to the employee who files the suit. Instead, it is allocated among the aggrieved employees. See Williams v. Superior Court, 398 P.3d 69, 79 (Cal. 2017) (explaining that PAGA "deputiz[es] employees harmed by labor violations to sue on behalf of the state and collect penalties, to be shared with the state and other affected employees"); Iskanian, 327 P.3d at 148 ("The PAGA conforms to [the] traditional criteria [of a qui tam action] except that a portion of the penalty goes not only to the citizen bringing the suit but to all employees affected by the Labor Code violation."); Cal Lab. Code § 2699(i) (providing that "[c]ivil penalties recovered by aggrieved employees shall be distributed as follows: 75 percent to the . . . Agency . . . and 25 percent to the aggrieved employees" (emphasis added)); see also Moorer v. Noble L.A. Events, Inc., 244 Cal. Rptr. 3d 219, 224 (Ct. App. 2019) (interpreting Iskanian and Williams to stand for the proposition that fees should be allocated among aggrieved employees on a pro rata basis).
 We highlighted the fundamental differences between a PAGA claim and a Rule 23 action again the following year. See Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 435 (9th Cir. 2015).
 Before the Supreme Court decided AU Optronics, we had already departed from the Fifth Circuit's holding, concluding that a state suit was not filed as a "mass action" under CAFA because the real party in interest was the only named party—the State of Nevada. See Nevada v. Bank of Am. Corp., 672 F.3d 661, 671-72 (9th Cir. 2012). Before turning to the "mass action" provision of CAFA, we held that the attorney general enforcement action was not a "class action" under CAFA. Id. at 667. In so doing, we treated the two classes of cases in CAFA as the separate provisions that they are. We follow the same framework here.
 The Sixth Circuit also recently rejected a purely formalistic inquiry in interpreting the class action provision of CAFA. See Nessel ex rel. Mich. v. AmeriGas Partners, L.P., 954 F.3d 831, 837 (6th Cir. 2020).
Disclose Credit Auth
Luna v. Hansen & Adkins Auto Transp., Inc.
on behalf of themselves and all others similarly situated;
IAN HALL, Plaintiffs-Appellants,
HANSEN AND ADKINS AUTO TRANSPORT,INC.,
a California Corporation; DOES,1–10, inclusive,
File Arbitration Fast
Fleming Distrib. Co. v. Younan
ALFONS YOUNAN, Plaintiff and Respondent,
FLEMING DISTRIBUTION COMPANY, Defendant and Appellant
(Sonoma County Super. Ct. No. SCV-263702)
2 CCR § 11016
Cannot Waive Free Speech
CA Assembly Bill No. 3109
CA Senate Bill No. 707
Consumer Privacy 2020
California Consumer Privacy Act of 2020
Non-Severability Clause In Arbitration Agreement
Invalidated Entire Agreement
NICHOLE KEC, Petitioner,
THE SUPERIOR COURT OF ORANGE COUNTY, Respondent;
R.J. REYNOLDS TOBACCO COMPANY, et al., Real Parties in Interest.
(Super. Ct. No. 30-2018-01031808)
Law Offices of Natalie Mirzayan and Natalie Mirzayan for Petitioner. No appearance for Respondent. Jones Day, Steven M. Zadravecz, Nathaniel P. Garrett, Allison E. Crow, and Michael A. Carvin for Real Parties in Interest.
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