On March 30, 2022, the U.S. Supreme Court heard oral argument in Viking River Cruises, Inc. v. Moriana, Case No. 20-1573. At issue was a rule announced by the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014), declaring that arbitration agreements purporting to waive the right to bring a Private Attorneys General Act (PAGA) claim are unenforceable under California law. The petitioner in Viking River Cruises argued that the Iskanian rule is preempted by the Federal Arbitration Act (FAA). Several U.S. Supreme Court precedents, including Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), have held that the FAA requires that agreements to arbitrate claims on an individual basis only be enforced according to their terms. These precedents have upheld arbitration agreements that purport to waive the right to bring class or collective actions, and have held that state law rules to the contrary, are preempted by the FAA. (To read more about Epic Systems and similar cases, click here. To read more about the Iskanian rule, click here.)
Notably, seven of the nine justices currently on the Court participated in the Epic Systems decision, with four justices (Roberts, Gorsuch, Thomas and Alito) joining the majority and three justices (Breyer, Sotomayor and Kagan) joining the dissent. Six of those justices (all but Gorsuch) also took part in similar, earlier cases and split along the same lines.
Nothing in oral argument suggested that the justices will align any differently in Viking River Cruises. Justice Breyer pointed out many differences between PAGA actions and class actions (suggesting that precedents like Epic Systems are distinguishable), while Chief Justice Roberts asked whether these differences reduce procedural protections designed to protect defendants (suggesting that PAGA interferes with fundamental attributes of arbitration as least as much as class actions). Justice Kagan asked pointed questions about whether the petitioner really seeks to preclude a PAGA cause of action in any forum. Justice Alito appeared to reject the respondent’s contention that PAGA was a bilateral dispute between the state and an employer, opining that a PAGA action resembles the joinder of a number of employees’ claims.
If these seven justices vote along the same lines as in Epic Systems, one vote from either Justice Kavanaugh or Justice Barrett will tip the scale in favor of abrogating Iskanian. Neither justice asked many questions, although Justice Barrett asked whether the FAA would preempt a hypothetical cause of action that could only be vindicated in a class proceeding. This may suggest that she views the Iskanian rule as an end run around the FAA.
Perhaps the most interesting comment came from Justice Alito, who wondered aloud, why California had not simply passed a statute permitting any resident to bring a PAGA action, instead of limiting standing to “aggrieved employees.” While employers can insist that their employees enter into mandatory arbitration agreements, they could not insist on the public at large doing the same. The question may have come as an ominous warning to employers hoping that Viking River Cruises would prove to be PAGA’s death knell, by illustrating one way that the California legislature may attempt to preserve the private attorney general model if Viking River Cruises abrogates Iskanian.