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Court of Appeal:
Moving Party Bears Burden to Prove Dispute Falls Under Arbitration
By a MetNews Staff Writer
Div. Four of this district’s Court of Appeal has held that the party seeking to compel arbitration bears the burden of proof to establish both the existence of an arbitration agreement between the parties and that the agreement covers the relevant dispute.
The decision comes in an action by an employee seeking civil penalties, on behalf of himself and other employees, under the Private Attorneys General Act of 2004 (“PAGA”).
Presiding Justice Brian S. Currey wrote the unpublished opinion, filed Tuesday, affirming the denial of a motion to compel arbitration by Los Angeles Superior Court Judge Lawrence P. Riff. Justice Audrey B. Collins and Justice Brian M. Hoffstadt of Div. Two, sitting by assignment, joined in the opinion.
Notes Conflict
Currey noted a division among appellate courts on the issue, and wrote:
“California appellate courts have reached different conclusions regarding who bears the burden of proving the arbitration agreement covers the dispute at issue….
“After considering both lines of authority….[w]e…conclude the burden falls upon the party moving to compel arbitration to prove the existence of an agreement to arbitrate the specific dispute at issue.”
Appealing the denial was Armstrong Garden Centers, Inc., which operates retail gardening stores at multiple California locations and in several other states. In March 2021.
Plaintiff Javier Esquivel accepted an offer of employment with Armstrong and signed an arbitration agreement with the company. In August 2022, he filed a putative class action complaint against the employer based on alleged wage and hour violations in violation of the Labor Code and the Industrial Welfare Commission wage orders.
The parties do not dispute that the agreement exempted the non-individual PAGA claims.
Armstrong acknowledged that it bears the burden to establish that a valid arbitration agreement exists, but argued that, once shown, Ezquivel bears the burden of proof as to the dispute at issue—whether Esquivel’s individual PAGA claims were covered by the arbitration agreement.
In support of its argument, Armstrong cited the 2000 Div. Four opinion by Justice Walter Croskey, now deceased, in Coast Plaza Doctors Hospital v. Blue Cross of California in which it was held that “the burden must fall upon the party opposing arbitration to demonstrate that an arbitration clause cannot be interpreted to require arbitration.”
Finding the reliance by Croskey on California’s “strong public policy in favor of arbitration” to be insufficient, Currey wrote:
“[D]ue to the conclusory nature of its supporting analysis, and the context in which the rule was articulated, we respectfully decline to follow Coast Plaza’s assignment of the burden of proof.”
Other Cases
Currey reasoned that placing the burden on the moving party is “consistent with our Supreme Court’s discussions relating to applicable burdens of proof.” Looking to cases dealing with an opposing party’s affirmative defenses, he explained:
“In neither of these cases did our Supreme Court state or otherwise suggest that the opposing party must prove the dispute does not fall within the arbitration agreement’s scope. Instead, [they] illustrate that the opposing party need only prove the facts required to establish an affirmative defense to the agreement’s enforceability…. However, these defenses—and therefore the opposing party’s burden of proving their application—only come into play after the moving party has produced ‘prima facie evidence of a written agreement to arbitrate the controversy.’”
He opined that the precedent “therefore demonstrates that the movant bears the burden at the outset of proving the dispute is covered by the arbitration agreement.”
Consistent With CCP
The jurist turned to California Code of Civil Procedure §1281.2, which provides, in relevant part:
“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists….”
Emphasizing the reference to the “controversy” in the code, Currey found that requiring the moving party to bear the burden to show that the dispute in question is governed by the agreement is consistent with the language of the statute, saying: “[The code’s] unambiguous language reflects that, before the trial court may compel arbitration, the movant must do more than simply prove the existence of any agreement to arbitrate between the parties.”
Armstrong said in its opening brief on appeal that it “indisputably established the Agreement’s existence and validity, and Esquivel never challenged either,” arguing:
“That shifted the burden to Esquivel to prove that his individual PAGA claim was outside the scope of the Agreement.”
Currey responded: “But taking this argument to its extreme would allow a moving party to satisfy its burden by presenting the trial court with any arbitration agreement signed by the parties, even if it was irrelevant to the underlying dispute. Allowing a prima facie case to be made in this manner would be absurd….”
Agreement in Question
The arbitration agreement between the parties recites that it is governed by the Federal Arbitration Act found at 9 U.S.C. §1 and purports to cover disputes relating to Esquivel’s employment. In paragraph 2, it provides:
“These claims are not covered under this Agreement:...(iii) representative actions for civil penalties filed under the California Private Attorney[s] General Act (‘PAGA’) (but to the extent permitted by applicable law, any claim by Employee on Employee’s own behalf under PAGA to recover Employee’s own unpaid wages must be arbitrated and is covered by this Agreement).”
Currey noted that California law governed the interpretation of the contract and found dispositive that Esquivel was seeking to recover civil penalties under PAGA, not “unpaid wages” as anticipated by the arbitration agreement. He opined:
“Esquivel’s PAGA action seeks civil penalties and does not endeavor to recover any unpaid wages. Accordingly, by its express terms, the Agreement reflects the parties did not intend to arbitrate any portion of Esquivel’s PAGA action, including his individual claims.”
He continued:
“[W]e conclude the trial court did not err by denying the motion to compel arbitration, as it correctly determined that Esquivel’s individual PAGA claims fall outside of the Agreement’s scope.”
The case is Esquivel v. Armstrong Garden Centers, B328406.
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