Heslop vs. U-HAUL CO. OF CALIFORNIA

Also, the arbitrator or a court may sever any part of the EDR procedures that do not comport with the Federal Arbitration Act or applicable case law.

(Id. at pp. 1-2.)

The Agreement to Arbitrate provides, in relevant part:

I agree that it is my obligation to make use of the EDR and to submit to final and binding arbitration any and all claims and disputes . . . that are related in any way to my employment or the termination of my employment with U- Haul Co. of California. I understand that, unless otherwise required by law or contract, final and binding arbitration will be the sole and exclusive remedy for any such claim or dispute against U-Haul Co. of California . . . (“U-Haul”) . . . .

Unless otherwise prohibited by law, U-Haul and I additionally agree to forego and waive any right to bring an action or claim in a private attorney general capacity.

...

If a court or the arbitrator finds any provision of the EDR unenforceable, that provision may be severed without affecting this agreement to arbitrate.

(Id. at pp. 2-3.)

Interpretation In its opening brief, Defendants simply contend that because the agreement to arbitrate broadly covers “all disputes relating to or arising out of employment . . . or termination of that employment,” including “other claims under the Labor Code,” the arbitration agreement covers Plaintiff’s individual PAGA claims. (ROA #17 [Mot. P&A].)

In opposition, Plaintiff takes a much more nuanced approach to interpreting the agreement. In sum, Plaintiff contends that although the agreement broadly requires arbitration of employment disputes, the agreement also “separately addresses claims brought in a private-attorney-general capacity. Rather than requiring arbitration of such claims, the EDR states that the parties agree to ‘forego and waive’ any right to bring them. Thus, the only provision specifically directed at PAGA claims is an unenforceable waiver—not an agreement to arbitrate.” (ROA #54 [Opp.], p. 1,)

Plaintiff characterizes Defendants’ interpretation of the agreement as “ask[ing] the Court to take the invalid waiver, sever it, and then replace it with a new contractual term requiring arbitration of a category of claims the parties never agreed to arbitrate” in the first place. (Id.) Plaintiff’s logic is as follows:

• Since the PAGA waiver is unenforceable, it should be severed (as the Court previously held in ruling on the motion to compel arbitration in the related class action). (Id. at p. 8.)

• “Severance may remove an unenforceable provision, but it cannot create a new agreement where none existed,” as “courts may not ‘rewrite agreements and impose terms to which neither party has agreed.’” (Id. at p. 1.)

• Therefore, after severing the PAGA waiver, Plaintiff “remains free to pursue PAGA,” since “[n]othing in the EDR affirmatively states that a PAGA claim, or any component of one must proceed in arbitration.” (Id. at p. 8.)

• The Court may not reform or rewrite the agreement to “insert[] a new provision stating that the employee-specific PAGA component shall be arbitrated,” as that would not be “severance” but “augmentation.” (Id.)

Plaintiff’s argument lacks merit because even after severing the agreement’s waiver of “any right to bring an action or claim in a private attorney general capacity” as an unenforceable PAGA waiver, the agreement nevertheless provides, as a starting point, that the parties will arbitrate “any and all claims and disputes . . . that are related in any way to [Plaintiff’s] employment or the termination of [that] employment. . . .” (Agreement, pp. 2-3.) These claims “include, but are not limited to . . . claims under the Labor Code.” (Id. at p. 1.) Thus, if PAGA claims are not completely waived, then they are subject to arbitration.

Plaintiff contends that the PAGA waiver “is not an agreement to arbitrate private-attorney-general claims. It is an attempted agreement not to bring them at all.” (Opp. at p. 4.) But this argument improperly focuses on only the PAGA waiver and ignores the primary purpose of the agreement as a whole, which is an agreement to arbitrate any and all claims relating to Plaintiff’s employment.

Plaintiff also relies on Perez v. U-Haul Co. of California (2016) 3 Cal.App.5th 408 to support her interpretation of the subject arbitration agreement, contending that in that case, “the Court of Appeal interpreted materially identical U-Haul arbitration language and held that PAGA claims fell outside the parties’ agreed arbitral scope.” (Opp. at p. 1.)

In Perez, the only relevant arbitration language that the court considered was as follows:

I agree that it is my obligation to ... submit to final and binding arbitration any and all claims and disputes ... that are related in any way to my employment.... [B]y agreeing to use arbitration to resolve my dispute, both U–Haul and I agree to ... forego any right to bring claims as a representative or as a member of a class or in a private attorney general capacity....

(Perez, supra, 3 Cal.App.5th at p. 413.)

In determining “whether the particular issue U-Haul seeks to arbitrate— plaintiffs’ status as ‘aggrieved employees’ with standing to bring a PAGA

claim—actually falls within the scope of the parties’ employment agreement (id. at p. 419), the court reasoned and held as follows:

In support of its assertion that plaintiffs agreed to arbitrate whether they had standing to bring a PAGA claim, U–Haul relies on a broadly-worded clause stating that the parties would arbitrate “any and all claims and disputes ... related in any way to [plaintiffs'] employment.” U–Haul contends that because plaintiffs' standing to bring a PAGA claim involves issues related to their employment, the arbitration provision necessarily applies. The agreement, however, contains an additional clause stating that the parties would not seek arbitration (or litigation) of any “claims as a representative ... or in a private attorney general capacity.”

U–Haul acknowledges that this language demonstrates neither party agreed (nor could be compelled) to arbitrate representative claims. Iskanian, in turn, held that every PAGA action, including one brought on behalf of a single employee, is a representative claim. (Iskanian, supra, 59 Cal.4th at p. 387, 173 Cal.Rptr.3d 289, 327 P.3d 129 [“every PAGA action, whether seeking penalties for Labor Code violations as to only one aggrieved employee—the plaintiff bringing the action—or as to other employees as well, is a representative action on behalf of the state” (original italics)].)

Given that the parties did not agree to arbitrate representative claims, and that a PAGA action is by definition a form of representative claim, we conclude that PAGA claims are categorically excluded from the arbitration agreement. Moreover, the agreement contains no language suggesting that despite this exclusion of representative claims, the parties did agree to arbitrate whether the complaining party had standing to initiate a representative claim in court. We fail to see how an agreement that excludes representative claims can nonetheless be reasonably interpreted to require plaintiffs to arbitrate their standing to bring a representative claim.

(Id. at p. 420, underlining added.)

Plaintiff’s reliance on Perez is misplaced, as Perez is distinguishable from the instant case for several reasons.

First, in Perez, U-Haul conceded that the waiver clause in that case demonstrated that the parties did not agree to arbitrate representative claims. But U-Haul has not made any such concession here, and in fact, points out that the language of the agreement at issue in Perez is different from the language used in the subject agreement in this case. (See Reply at pp. 4, 9- 11.)

Second, Perez’s “holding” that the plaintiff’s PAGA claims in that case fell outside the parties’ agreed arbitral scope was based on that agreement’s use of the term “representative” as well as the “holding” in Iskanian v. CLS Transportation of Los Angeles (2014) 59 Cal.4th 348, 387 that “every PAGA action, whether seeking penalties for Labor Code violations as to only one aggrieved employee—the plaintiff bringing the action—or as to other employees as well, is a representative action on behalf of the state.”

(Perez, supra, at p. 420.) However, Iskanian’s confusing “use of the word ‘representative’ in two distinct ways’” was criticized by the United States Supreme Court in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639:

In the first sense, PAGA actions are “representative” in that they are brought by employees acting as representatives—that is, as agents or proxies—of the State. But PAGA claims are also called “representative” when they are predicated on code violations sustained by other employees. In the first sense, “ ‘every PAGA action is ... representative’ ” . . . because every PAGA claim is asserted in a representative capacity. But when the word “representative” is used in the second way, it makes sense to distinguish “individual” PAGA claims, which are premised on Labor Code violations actually sustained by the plaintiff, from “representative” (or perhaps quasi-representative) PAGA claims arising out of events involving other employees.

For purposes of this opinion, we will use “individual PAGA claim” to refer to claims based on code violations suffered by the plaintiff. And we will endeavor to be clear about how we are using the term “representative.”

Iskanian’s principal rule prohibits waivers of “representative” PAGA claims in the first sense. That is, it prevents parties from waiving representative standing to bring PAGA claims in a judicial or arbitral forum. But Iskanian also adopted a secondary rule that invalidates agreements to separately arbitrate or litigate “individual PAGA claims for Labor Code violations that an employee suffered”. . . .

In this case, Iskanian’s principal prohibition required the lower courts to treat the representative-action waiver in the agreement between Moriana and Viking as invalid insofar as it was construed as a wholesale waiver of PAGA standing. The agreement’s severability clause, however, allowed enforcement of any “portion” of the waiver that remained valid, so the agreement still would have permitted arbitration of Moriana’s individual PAGA claim even if wholesale enforcement was impossible. But because California law prohibits division of a PAGA action into constituent claims, the state courts refused to compel arbitration of that claim as well. We granted certiorari, 595 U.S. ––––, 142 S.Ct. 734, 211 L.Ed.2d 421 (2021), and now reverse.

(Viking River Cruises, supra, at pp. 648-649.) The Court ultimately held in Viking River Cruises:

We hold that the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non- individual claims through an agreement to arbitrate. This holding compels reversal in this case. The agreement between Viking and Moriana purported to waive “representative” PAGA claims. Under Iskanian, this provision was invalid if construed as a wholesale waiver of PAGA claims. And under our holding, that aspect of

Iskanian is not preempted by the FAA, so the agreement remains invalid insofar as it is interpreted in that manner. But the severability clause in the agreement provides that if the waiver provision is invalid in some respect, any “portion” of the waiver that remains valid must still be “enforced in arbitration.” Based on this clause, Viking was entitled to enforce the agreement insofar as it mandated arbitration of Moriana's individual PAGA claim. The lower courts refused to do so based on the rule that PAGA actions cannot be divided into individual and non-individual claims. Under our holding, that rule is preempted, so Viking is entitled to compel arbitration of Moriana's individual claim.

(Id. at p. 662.)

Accordingly, to the extent that Perez’s cited holding interpreting the agreement in that case was based on now-overruled portions of Iskanian, Perez is also no longer good law.

Third, and most importantly, either the agreement at issue in Perez did not contain or the Perez court did not consider the impact of a severability clause on the provision purporting to waive PAGA claims. Therefore, Plaintiff is incorrect that the subject language in the instant arbitration agreement is the “materially identical,” “precise contractual language [that] has already been construed against U-Haul” in Perez. (Opp. at p. 1.) Here, not only does the subject agreement contain a severability clause, but the severability clause explicitly states that if “any provision of the EDR [is] unenforceable, that provision may be severed without affecting this agreement to arbitrate.” (Agreement, p. 3, emphasis added.)

Thus, the agreement here explicitly provides that severance of the unenforceable PAGA waiver provision in the subject agreement must be done in such a way that that does not affect the rest of the agreement to arbitrate any and all claims relating to Plaintiff’s employment claims.

In this way, the subject agreement in the instant case is much more similar to the agreement analyzed by the Court in Viking River Cruises, which “contained a ‘Class Action Waiver’ providing that in any arbitral proceeding, the parties could not bring any dispute as a class, collective, or representative PAGA action. It also contained a severability clause specifying that if the waiver was found invalid, any class, collective, representative, or PAGA action would presumptively be litigated in court.

But under that severability clause, if any ‘portion’ of the waiver remained valid, it would be ‘enforced in arbitration.’” (Viking River Cruises, supra, at p. 647.) As noted above, the Supreme Court held that under this severability provision, the employer was entitled to enforce the arbitration agreement insofar as it mandated arbitration of the employee’s individual PAGA claim. (Id. at p. 662.) Likewise, here, after severing the agreement’s waiver of PAGA claims, the agreement must be construed as requiring arbitration of any and all claims relating to Plaintiff’s employment, including Plaintiff’s individual PAGA claim.

Plaintiff also relies on Mondragon v. Sunrun, Inc. (2024) 101 Cal.App.5th 592 for the proposition that “Viking River ‘has nothing to say about whether

there was an agreement’ to arbitrate the employee-specific component of a PAGA action.” (Opp. at pp.1-2, quoting Mondragon, supra, at p. 613.) But the court in Mondragon found that this was so because the relevant language at issue in Mondragon was materially different from the language analyzed in Viking River. More specifically, the arbitration agreement in Mondragon defined “CLAIMS COVERED BY THIS AGREEMENT” as “any and all existing or future disputes or claims between or among [the parties] that arise out of or relate to Employee’s ... employment,” and then explicitly defined “CLAIMS NOT COVERED BY THIS AGREEMENT” as including “claims brought by Employee in state or federal court as a representative of the state of California as a private attorney general under the PAGA (to the extent applicable).” (Mondragon, supra, 101 Cal.App.5th at p. 599, internal quotes & bolding omitted.)

As the Mondragon court explicitly stated:

Viking River has nothing to say about whether there was an agreement to arbitrate Mondragon’s individual PAGA claim. In Viking River the arbitration agreement had a broad provision requiring the employee to arbitrate all disputes arising out of her employment; it did not include a carve-out for PAGA claims like the agreement here. (See Viking River, supra, 596 U.S. at p. 647, 142 S.Ct. 1906.) The agreement in Viking River also included a provision waiving the employee’s right to bring a PAGA action— again, unlike the agreement here. (Ibid.)

The United States Supreme Court held that, although the latter provision remained unenforceable under Iskanian “if construed as a wholesale waiver of PAGA claims,” the employer could still compel the employee to arbitrate her individual PAGA claims under the terms of the agreement. (Id. at p. 662, 142 S.Ct. 1906.) But nothing in Viking River suggests a party must arbitrate individual PAGA claims where, as here, the arbitration agreement specifically carves out PAGA claims and does not distinguish between individual and nonindividual claims.

(Id. at p. 613-614.)

Here, again, the relevant language of the arbitration agreement is much more similar to Viking River than to Mondragon, as PAGA claims are not explicitly carved out as “CLAIMS NOT COVERED BY THIS AGREEMENT.” Therefore, Plaintiff’s reliance on Mondragon to contend that Plaintiff’s PAGA claim here is not covered at all by the agreement is misplaced.

Similarly, Plaintiff relies on Ford v. The Silver F, Inc. (2025) 110 Cal.App.5th 553 to contend that Plaintiff’s claims here fall outside of the parties’ agreed arbitral scope. (Opp. at p. 1.) But Ford, like Mondragon, also involved an arbitration provision that “expressly” stated that it “does not apply” to “representative claims under PAGA.” (Ford, supra, at p. 558, internal quotes & brackets omitted.) Thus, Ford, like Mondragon, is distinguishable from the instant case, and Ford’s analysis of whether Viking River applies to the language in that case is also inapposite.

Plaintiff further relies on LaCour v. Marshalls of CA, LLC (2025) 117 Cal.App.5th 505 to contend that the parties’ agreement must be construed

based upon the parties’ “intent . . . determined as of the time of formation.” (Opp. at p. 7, also citing Civ. Code, § 1636.) Although Plaintiff “does not contend that Viking River lacks retroactive effect as a statement of federal law,” Plaintiff nevertheless contends that because the parties here executed the operative arbitration agreement on October 3, 2012—approximately ten years before Viking River Cruises was decided, the parties could not have intended their agreement to include “the terminology of ‘individual’ and ‘non-individual’ PAGA claims for purposes of FAA preemption.” (Opp. at p. 7.)

In LaCour, the court interpreted the following language in an arbitration agreement that the parties executed in March 2014:

Among the provisions in the Arbitration Agreement is paragraph 5, a “Class Action, Collective Action, and Private Attorney General Waiver,” which states in pertinent part: “[LaCour and Marshalls] agree to bring any dispute in arbitration on an individual basis only and not on a class, collective, or private attorney general representative action basis. [¶] ... [¶] (c) There will be no right or authority for any dispute to be brought, heard or arbitrated as a private attorney general representative action (‘[PAGA Waiver]’).

The [PAGA Waiver] shall be severable from this Agreement in any case in which a civil court of competent jurisdiction finds the [PAGA Waiver] is invalid, unenforceable, revocable, unconscionable, void or voidable. In such instances and where the claim is brought as a private attorney general claim, such private attorney general claim must be litigated in a civil court of competent jurisdiction.” A concluding proviso to this provision, set off as an additional subparagraph applicable to the entire paragraph and all subparagraphs, states, “The ... [PAGA Waiver] shall be severable in any case in which the dispute is filed as an individual action and severance is necessary to ensure that the individual action proceeds in arbitration.”

(LaCour, supra, 117 Cal.App.5th at p. 508.) The court held that because the severability clause stated that, when it is applied to sever the PAGA waiver, “such private attorney general claim must be litigated in a civil court,” the provision states exactly what it means and cannot be interpreted to incorporate Viking River Cruises’ later distinction between individual and non-individual PAGA claims such that only plaintiff’s non-individual claims must be litigated in court while plaintiff’s individual claims must be arbitrated. (Id. at pp. 521-522.)

The LaCour court held that for it to interpret the agreement to require arbitration of plaintiff’s individual PAGA claim while litigating in court plaintiff’s non-individual PAGA claim, “the words in Paragraph 5(c) would have to read, ‘[i]n such instances, and where the claim is brought as a non-individual private attorney general claim, such private attorney general claim must be litigated in a civil court of competent jurisdiction’; and the Paragraph 5 proviso to have read, ‘... severance is necessary to ensure that the individual PAGA action proceeds in arbitration.’” (Id. at p. 511, italics original.)

Here, again, the relevant language of the parties’ arbitration agreement is materially different and contains none of the language analyzed by the court in LaCour to determine the parties’ intent at the time of formation in that case. First, the PAGA waiver here includes limiting language (e.g., “[a]s permitted by applicable law” and “[u]nless otherwise prohibited by law”), whereas the PAGA waiver in LaCour did not. This language indicates intent to follow the law as it develops—including any differentiation between “individual” and “non-individual” PAGA claims.

Second, unlike the severance clause in LaCour, the severance clause here does not explicitly state that if the PAGA waiver were severed, “such private attorney general claim must be litigated in a civil court.” Instead, the agreement generally provides for arbitration of all employment-related claims and for waiver of PAGA claims only “[a]s permitted by applicable law” or “[u]nless otherwise prohibited by law,” along with a severability clause providing that once a provision is severed, the remaining agreement is not to be affected.

Read together, the intent of the parties is to require arbitration of all employmentrelated claims, while enforcing or prohibiting the PAGA waiver to the extent permitted by law—which, under Viking Rivers, means that while the PAGA waiver cannot be enforced as a wholesale waiver, the Court must enforce the parties’ agreement to arbitrate any and all claims relating to Plaintiff’s employment, including Plaintiff’s individual PAGA claim. Therefore, LaCour also does not help Plaintiff.

Conclusion

In sum, the Court finds that the arbitration agreement is enforceable, except the PAGA waiver, which may be appropriately severed without affecting the rest of the agreement to arbitrate, which includes arbitrating any and all claims relating to Plaintiff’s employment claim, including Plaintiff’s individual PAGA claim.

Accordingly, Plaintiff is ORDERED to arbitrate her individual PAGA claim against Defendants. Plaintiff’s non-individual PAGA claim is STAYED until the arbitration is had pursuant to Code of Civil Procedure section 1281.4.

An ADR review hearing is scheduled for March 4, 2027 at 9:30AM in Department CX102. The parties shall submit a joint status report 10 days in advance of the hearing.

Defendants shall give notice of this ruling.