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Date: 06-23-2020

Case Style:

Yassin Olabi v. Neutron Holdings, Inc.

Case Number: A156990

Judge: Burns, J.

Court: California Court of Appeals First Appellate District, Division Five on appeal from the Superior Court, City and County of San Francisco

Plaintiff's Attorney: Gay C. Grunfeld, Michael L. Freedman and Jenny Snay Yelin

Defendant's Attorney: Joshua S. Lipshutz, Dennis M. Brown, Andrew M. Spurchise, Michael J. Holecek and Stephanie Victoria Balitzer

Description: The Legislature enacted the Private Attorney General Act in
September 2003 after determining that law enforcement agencies lacked the
resources to enforce adequately California’s labor laws. (Iskanian v. CLS
Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 379.) In a PAGA
action, an aggrieved employee—acting as a proxy for state enforcement

1 Undesignated statutory references are to the Labor Code.
agencies—may sue an employer on behalf of herself and other aggrieved
employees for Labor Code violations. (Id. at p. 381.) When the parties have
a preexisting arbitration agreement, California law blocks the employer from
enforcing the agreement with respect to representative PAGA claims for civil
penalties; however, the agreement may be enforceable with respect to other
claims, including claims for victim-specific relief (like unpaid wages). (Id. at
pp. 384-389, 391-392; ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 198.)
Lime rents electric bicycles and scooters in metropolitan areas. In
August 2018, Olabi entered into an agreement with Lime to locate, recharge,
and redeploy its scooters. The agreement contains an “Arbitration Provision”
that required Olabi and Lime to arbitrate “any and all disputes between or
among them,” including Olabi’s classification as an independent contractor.
However, the same section contains an exception for PAGA representative
actions: “this Arbitration Provision . . . shall [not] apply to a representative
action brought on behalf of others under [PAGA]; any representative action
brought under PAGA on behalf of others must be litigated in a court of
competent jurisdiction.”
In the fall of 2018, Olabi filed a complaint alleging Lime intentionally
misclassified him and others as independent contractors, resulting in the
violation of various Labor Code provisions, such as the right to a minimum
wage. (§ 558.) Olabi’s operative first amended complaint included causes of
action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.)
and PAGA (§ 2698 et seq.). Olabi brought the PAGA claim on behalf of
himself and others.
In response, Lime petitioned to compel arbitration and stay the
proceedings, arguing Olabi was required to arbitrate independent contractor
classification disputes. Lime further argued the exception for representative
actions did not cover the unfair competition claim or the PAGA claim to the
extent that Olabi sought victim-specific relief.
Several weeks before the hearing on Lime’s petition, Olabi voluntarily
dismissed his unfair competition claim with prejudice. During the hearing,
Olabi disavowed any claim for victim-specific relief, and he requested leave to
file an amended complaint. The trial court denied Lime’s petition without
prejudice and granted Olabi leave to amend. That day, Olabi filed a second
amended complaint, omitting the already-dismissed Unfair Competition
claim and explicitly pleading he was not seeking victim-specific relief under
Because the facts are undisputed, we review de novo the trial court’s
denial of Lime’s motion to compel arbitration. (Nunez v. Novell Group, Inc.
(2019) 35 Cal.App.5th 838, 845.)
Preliminarily, Lime mischaracterizes the trial court’s order by
suggesting that it improperly deferred ruling on the petition so that Olabi
could amend his complaint to eliminate Lime’s right to arbitration.
That is not what happened. Olabi voluntarily dismissed the unfair
competition claim weeks before the hearing. (Code Civ. Proc., §§ 581, subds.
(b)-(d) [parties may voluntarily dismiss with prejudice any part of an action
before trial commences and is effective immediately], 581d [dismissal is
effective for all purposes].) During the hearing, Olabi’s counsel further
clarified that Olabi abandoned all victim-specific claims. (See, e.g., Diamond
Springs Line Co. v. American River Constructors (1971) 16 Cal.App.3d 581,
607 [counsel abandoned claim in open court].) This left only a single cause of
action—a representative PAGA action for civil penalties, which Olabi argued
is not arbitrable. The court denied the petition. It is inapposite that the
court also granted Olabi leave to amend his complaint or that it suggested
the parties negotiate a solution to the arbitration issue.
2 The question is
whether, on the merits, the court correctly denied the petition.
Limes’ main argument is that the agreement requires the parties to
arbitrate the substantive dispute underlying the PAGA claim—whether Lime
misclassifies employees. We disagree.
Lime argues as follows. The parties agreed to arbitrate “any and all
disputes,” including whether Lime misclassifies its employees, and Lime
wants to arbitrate that dispute. Lime concedes that a representative PAGA
claim for civil penalties is not arbitrable under Iskanian v. CLS
Transportation Los Angeles, LLC, supra, 59 Cal.4th 348. But it says that the
court must stay the PAGA claim while the parties arbitrate the underlying
misclassification dispute, and afterwards they would return to court to
litigate the PAGA claim (unless Olabi loses the arbitration, leaving nothing
left to litigate). The parties dispute whether a representative PAGA claim
may be split in this manner.

2 Lime obliquely suggests that the Federal Arbitration Act (9 U.S.C. § 1
et seq.) preempts state procedural rules allowing a party to “modify” a
complaint to avoid arbitration but fails to provide any cogent analysis. We
deem the contention forfeited. (Associated Builders & Constructors, Inc. v.
San Francisco Airport Com. (1999) 21 Cal.4th 352, 366, fn.2.)
We need not decide the issue because Lime’s argument falls at the first
hurdle: the agreement. Section 13 of the agreement contains the “Arbitration
Provision,” which does indeed require the parties to arbitrate “any and all
disputes” between them, including potential employee misclassification. But
later in the same section, the agreement carves out PAGA representative
Neither this Arbitration Provision nor the Class Action Waiver shall
apply to a representative action brought on behalf of others under
[PAGA]; any representative action brought under PAGA on behalf of
others must be litigated in a court of competent jurisdiction.
The term “action” generally means “suit” and refers to the entire judicial
proceeding, from complaint to judgment. (See Nassif v. Municipal Court
(1989) 214 Cal.App.3d 1294, 1298; Code Civ. Proc., § 22.) Thus, the plain
language of the carve-out removes a PAGA lawsuit from the “disputes”
otherwise arbitrable under the Arbitration Provision and requires the lawsuit
to be litigated in court.
Although Olabi specifically points to the carve-out in his brief, Lime
does not explain how it can invoke the “dispute” language in the Arbitration
Provision when the carve-out says—without qualification—that the entire
Arbitration Provision “shall [not] apply” to a representative PAGA action.
Nor does it explain how it may litigate the substance of the PAGA action in
an arbitration when the carve-out says—again, without qualification—that
the PAGA action “must be litigated in a court.” Lime simply insists that the
parties agreed to arbitrate all “disputes,” which is pure sophistry.
Finally, Lime forfeits its argument the trial court was required to
delegate to an arbitrator the issue of whether Olabi’s complaint alleges
claims that fall outside of PAGA. It did not make that argument below.
(P&D Consultants, Inc. v. City of Carlsbad (2010) 190 Cal.App.4th 1332,
The trial court did not err.

Outcome: The trial court’s order denying Lime’s petition to compel arbitration is
affirmed. Olabi’s request to dismiss the appeal as frivolous is denied.

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