On July 17, 2023, the California Supreme Court issued its ruling in Adolph v. Uber Technologies, Inc. (2023) 14 Cal. 5th 1104. In that opinion, the Court departed from the United States Supreme Court’s guidance in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 and, contrary to the reasoning of Viking River, found that a plaintiff suing under the Private Attorneys General Act of 2004 (“PAGA”) retains standing to pursue his or her representative PAGA claims in court, even when his or her individual PAGA claims are compelled to arbitration. (See our prior discussion on this issue here.)
On October 10, 2023, California Governor Gavin Newsom signed Senate Bill 365 (“SB 365”), further signaling California’s departure from United States Supreme Court guidance on the issue of arbitration. Effective as of January 1, 2024, SB 365 amends California Code of Civil Procedure section 1294 and provides state court judges with discretion to move forward with litigation in trial court, even while an appeal of a denial of a petition to compel arbitration is pending before the Court of Appeal. Prior to SB 365, an appeal of a denial of a petition to compel arbitration stayed the matter in the trial court pending the outcome of that appeal.
SB 365 is directly contrary to the United States Supreme Court’s June 23, 2023 decision in Coinbase, Inc. v. Bielski (2023) 143 S.Ct. 1915, in which the Court held that a district court must stay its proceedings during the pendency of an appeal on the question of arbitrability, reasoning that “[b]ecause the question on appeal is whether the case belongs in arbitration or instead in the district court, the entire case is essentially ‘involved in the appeal.’” Thus, the Court reasoned, absent an automatic stay of proceedings upon appeal, “many of the asserted benefits of arbitration (efficiency, less expense, less intrusive discovery, and the like) would be irretrievably lost”—even if the appeal were ultimately successful.
As a result of SB 365, California law—by providing state court judges with discretion to refuse to stay cases while the question of arbitrability is being appealed—will be in conflict with the United States Supreme Court’s decision in Coinbase. It remains to be seen whether SB 365 will survive preemption under the Federal Arbitration Act. However, for the time being, defendants may wish to consider removing eligible matters to federal court to avoid the potential necessity of litigating a case in trial court while an appeal of a denial of a petition to compel arbitration is pending.
We have deep experience in arbitration law, wage and hour class actions and PAGA representative actions. If you have questions about these issues, please contact us.