94 | 2024 Cal-Peculiarities ©2024 Seyfarth Shaw LLP www.seyfarth.com In a similar 2020 decision, the Court of Appeal likewise rejected a post-Epic challenge to Iskanian. The Court of Appeal reasoned that Epic—which addressed whether the NLRA renders unenforceable arbitration agreements containing class action waivers that interfere with workers’ right to engage in “concerted activities”—did not address the same issue raised in Iskanian, which addressed a private attorneys general law.121 And in yet another 2020 repudiation of employer efforts to direct PAGA claims to arbitration, the Court of Appeal held that a PAGA action is not subject to arbitration even for the limited purpose of determining whether the plaintiff has standing to sue. The employer, noting that the plaintiff alleged he was misclassified as an independent contractor, moved to compel arbitration under an arbitration agreement, arguing that since only “aggrieved employees” can bring PAGA claims, an arbitrator must decide whether the plaintiff was an employee, instead of an independent contractor, before a PAGA action could proceed. The trial court rejected this argument, as did the Court of Appeal, which held that requiring the plaintiff to arbitrate whether he is an “aggrieved employee” would require splitting his single action into two components: (1) an arbitrable “individual” claim and (2) a nonarbitrable representative claim. Such case-splitting would run contrary to the law holding that a PAGA action is not an individual action at all, but is instead an indivisible claim belonging solely to the state. The employer thus could not require the plaintiff to submit any part of his PAGA action to arbitration.122 The landscape changed significantly with the United States Supreme Court’s 2022 decision in Viking River Cruises, Inc. v. Moriana. The Supreme Court held that when the Federal Arbitration Act applies to an arbitration agreement and that agreement provides for the arbitration of disputes on an individual basis, a PAGA claim can be split into an individual component that is subject to arbitration and a non-individual representative component that will proceed in court.123 California’s invalidation of agreements to arbitrate claims for public injunctive relief. Another example of hostility to arbitration is California’s “Broughton-Cruz Rule,” which makes arbitration provisions unenforceable as against public policy if they require arbitration of injunctive claims brought for the public’s benefit.124 Thus, a plaintiff, alleging that Citibank’s “Credit Protector” insurance plan violated the UCL and other statutes, invoked the Broughton-Cruz Rule in an effort to disregard an arbitration agreement and seek judicial injunctive relief against deceptive practices. The Court of Appeal rebuffed this effort, holding that the plaintiff must arbitrate because the Broughton-Cruz Rule conflicts with the FAA.125 The Court of Appeal declined to extend Iskanian’s reasoning to create a PAGA-like exception for the Broughton-Cruz Rule. The Court of Appeal reasoned that in a PAGA action, unlike a UCL action, the state retains “primacy over private enforcement efforts,” with the PAGA plaintiff being required to give advance notice to the state and to await state action before suing.126 In a UCL action, by contrast, the state is not the “real party in interest,” and so the PAGA exception set forth in Iskanian was not a precedent for saving the Broughton-Cruz Rule from FAA preemption. The Court of Appeal explained: the FAA “preempts all state-law rules that prohibit arbitration of a particular type of claim because an outright ban, no matter how laudable the purpose, interferes with the FAA’s objective of enforcing arbitration agreements according to their terms.”127 But the California Supreme Court took review of the case and, in 2017, reversed the Court of Appeal128. The high court ruled that an arbitration agreement’s waiver of injunctive relief is contrary to California public policy where that relief would be to prohibit unlawful acts that threaten future injury to the general public. Moreover, the high court concluded, a state rule forbidding such a waiver is not preempted by the FAA, because the Broughton-Cruz Rule applies to all contracts and is not limited to arbitration agreements.129 The Broughton-Cruz Rule encouraged employment plaintiffs to evade arbitration agreements by using the UCL to seek “public injunctions” against Labor Code violations. But a 2019 Court of Appeal decision, Clifford v. Quest Software, Inc., rebuffed this tactic:
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