In Johnson v. Lowe’s Home Centers, LLC, the Ninth Circuit sided with the California Supreme Court’s ruling in Adolph v. Uber Techs. Inc., 14 Cal. 5th 1104 (2023), and held that the district court was correct to send the individual plaintiff’s Private Attorneys General Act (“PAGA”) claims to arbitration, but reversed the dismissal of the representative PAGA claims, holding they must remain in court.  Although whether PAGA representative claims should remain in court after the plaintiff has been compelled to arbitrate his or her individual claims remains unsettled under the Federal Arbitration Action (“FAA”), and ultimately will be decided by the U.S. Supreme Court, the Ninth Circuit ruling wasn’t particularly surprising.  What is more interesting is the concurrence by Judge Kenneth Lee, who noted some tension between the FAA and Adolph. 

Previously, the U.S. Supreme Court in Viking River Cruises, Inc. v. Moriana, held that under the FAA, a plaintiff could be required to arbitrate individual PAGA claims, and suggested that once compelled to individual arbitration, the plaintiff would lose standing to pursue the representative PAGA claims in court.  (See here.)  Relying on state law standing principles, the California Supreme Court in Adolph held that, even if a plaintiff’s individual claims were compelled to arbitration, the plaintiff retained standing to represent other aggrieved employees in court.  (See here.) The Ninth Circuit has now followed Adolph. 

The concurrence identifies the friction created by the FAA and Adolph’s bifurcation of individual and representative claims (those brought on behalf of other employees) as a conflict caused by some significant differences in the two types of proceedings.  Arbitration usually is a “low-stakes” informal affair that is meant to be an efficient resolution of claims as contemplated between the individual parties to the arbitration agreement.  In comparison, representative PAGA cases proceeding in court can be “high-stakes” litigation with a more substantial monetary impact for the defendant.  Judge Lee questions whether the arbitrator’s legal conclusions and factual findings should bind the district court when there is such a disparity, and if so, would this lessen the efficiency and informality of arbitration by causing parties to go all out in arbitration?

Judge Lee tries to reconcile this tension by raising the question of issue preclusion.  If issue preclusion were to apply, the arbitrator’s finding that, for instance, the plaintiff is an “aggrieved employee” under PAGA, would bind the court on that issue for the representative action.  The concurrence muses that determinations made in individual arbitrations, which generally involve small monetary amounts and are often attended by non-lawyers and paralegals, should not necessarily affect the decision of whether a plaintiff is an aggrieved employee under PAGA for the representative action.  The concurrence points out that if the employer did not have a “full and fair opportunity to litigate” this issue, then issue preclusion should not apply.  Thus, the employer would be able to re-litigate this question of whether the plaintiff has standing as an aggrieved employee (or other issues litigated in the arbitration) if it did not have an “adequate opportunity or incentive to obtain a full and fair adjudication” in the individual PAGA arbitration. 

The concurrence also noted that the plaintiff would still have to show he or she has standing under Article III of the Constitution, which is a more rigorous requirement.  Interesting arguments that likely will play out in future cases, no doubt.