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SUPREME COURT OF THE UNITED STATES
_________________
No. 20–1573
_________________
VIKING RIVER CRUISES, INC., PETITIONER
v. ANGIE MORIANA
on writ of certiorari to the court of appeal
of california, second appellate district
[June 15, 2022]
Justice Alito delivered the opinion of the
Court.[
1]*
We granted certiorari in this case to decide
whether the Federal Arbitration Act (FAA), 9 U. S. C. §1
et seq., preempts a rule of California law that
invalidates contractual waivers of the right to assert
representative claims under California’s Labor Code Private
Attorneys General Act of 2004. Cal. Lab. Code Ann. §2698
et
seq. (West 2022).
I
A
The California Legislature enacted the Labor
Code Private Attorneys General Act (PAGA) to address a perceived
deficit in the enforcement of the State’s Labor Code. California’s
Labor and Workforce Development Agency (LWDA) had the authority to
bring enforcement actions to impose civil penalties on employers
for violations of many of the code’s provisions. But the
legislature believed the LWDA did not have sufficient resources to
reach the appropriate level of compliance, and budgetary
constraints made it impossible to achieve an adequate level of
financing. The legislature thus decided to enlist employees as
private attorneys general to enforce California labor law, with the
understanding that labor-law enforcement agencies were to retain
primacy over private enforcement efforts.
By its terms, PAGA authorizes any “aggrieved
employee” to initiate an action against a former employer “on
behalf of himself or herself and other current or former employees”
to obtain civil penalties that previously could have been recovered
only by the State in an LWDA enforcement action. Cal. Lab. Code
Ann. §2699(a). As the text of the statute indicates, PAGA limits
statutory standing to “aggrieved employees”—a term defined to
include “any person who was employed by the alleged violator and
against whom one or more of the alleged violations was committed.”
§2699(c). To bring suit, however, an employee must also exhaust
administrative remedies. That entails providing notice to the
employer and the LWDA of the violations alleged and the supporting
facts and theories. §2699.3(a)(1)(A). If the LWDA fails to respond
or initiate an investigation within a specified timeframe, the
employee may bring suit. §2699.3(a)(2). In any successful PAGA
action, the LWDA is entitled to 75 percent of the award. §2699(i).
The remaining 25 percent is distributed among the employees
affected by the violations at issue.
Ibid.
California law characterizes PAGA as creating a
“type of
qui tam action,”[
2]
Iskanian v.
CLS Transp. Los Angeles, LLC,
59 Cal. 4th 348, 382, 327 P.3d 129, 148 (2014). Although the
statute’s language suggests that an “aggrieved employee” sues “on
behalf of himself or herself and other current or former
employees,” §2699(a), California precedent holds that a PAGA suit
is a “ ‘representative action’ ” in which the employee
plaintiff sues as an “ ‘agent or proxy’ ” of the State.
Id., at 380, 327 P. 3d, at 147 (quoting
Arias v.
Superior Court,
46 Cal. 4th 969, 986, 209 P.3d 923, 933 (2009)).
As the California courts conceive of it, the
State “is always the real party in interest in the suit.”
Iskanian, 59 Cal. 4th, at 382, 327 P. 3d, at
148.[
3] The primary function of
PAGA is to delegate a power to employees to assert “the same legal
right and interest as state law enforcement agencies,”
Arias, 46 Cal. 4th, at 986, 209 P. 3d, at 933. In other
words, the statute gives employees a right to assert the State’s
claims for civil penalties on a representative basis, but it does
not create any private rights or private claims for relief.
Iskanian, 59 Cal. 4th, at 381, 327 P. 3d, at 148; see
also
Amalgamated Transit,
46 Cal. 4th 993, 1002, 209 P.3d 937, 943 (2009). The code
provisions enforced through the statute establish public duties
that are owed to the State, not private rights belonging to
employees in their “individual capacities.”
Iskanian, 59
Cal. 4th, at 381, 327 P. 3d, at 147. Other, distinct
provisions of the code create individual rights, and claims arising
from violations of those rights are actionable through separate
private causes of action for compensatory or statutory damages.
Id., at 381–382, 327 P. 3d, at 147–148; see also
Kim v.
Reins Int’l California, Inc., 9 Cal. 5th 73,
86, 459 P.3d 1123, 1130 (2020) (“[C]ivil penalties recovered on the
state’s behalf are intended to remediate present violations and
deter future ones, not to redress employees’ injuries” (internal
quotation marks omitted; emphasis deleted)). And because PAGA
actions are understood to involve the assertion of the government’s
claims on a derivative basis, the judgment issued in a PAGA action
is binding on anyone “who would be bound by a judgment in an action
brought by the government.”
Arias, 46 Cal. 4th, at 986, 209
P. 3d, at 933.
California precedent also interprets the statute
to contain what is effectively a rule of claim joinder. Rules of
claim joinder allow a party to unite multiple claims against an
opposing party in a single action. See 6A C. Wright, H. Miller,
& E. Cooper, Federal Practice and Procedure §1582 (3d ed. 2016)
(Wright & Miller). PAGA standing has the same function. An
employee with statutory standing may “seek any civil penalties the
state can, including penalties for violations involving employees
other than the PAGA litigant herself.”
ZB, N. A. v.
Superior Court, 8 Cal. 5th 175, 185, 448 P.3d 239, 243–244
(2019). An employee who alleges he or she suffered a single
violation is entitled to use that violation as a gateway to assert
a potentially limitless number of other violations as predicates
for liability. This mechanism radically expands the scope of PAGA
actions. The default penalties set by PAGA are $100 for each
aggrieved employee per pay period for the initial violation and
$200 for each aggrieved employee per pay period for each subsequent
violation. Cal. Lab. Code Ann. §2699(f )(2). Individually,
these penalties are modest; but given PAGA’s additive dimension,
low-value claims may easily be welded together into high-value
suits.
B
Petitioner Viking River Cruises, Inc.
(Viking), is a company that offers ocean and river cruises around
the world. When respondent Angie Moriana was hired by Viking as a
sales representative, she executed an agreement to arbitrate any
dispute arising out of her employment. The agreement 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.”
After leaving her position with Viking, Moriana
filed a PAGA action against Viking in California court. Her
complaint contained a claim that Viking had failed to provide her
with her final wages within 72 hours, as required by §§101–102 of
the California Labor Code. But the complaint also asserted a wide
array of other code violations allegedly sustained by other Viking
employees, including violations of provisions concerning the
minimum wage, overtime, meal periods, rest periods, timing of pay,
and pay statements. Viking moved to compel arbitration of Moriana’s
“individual” PAGA claim—here meaning the claim that arose from the
violation she suffered—and to dismiss her other PAGA claims. The
trial court denied that motion, and the California Court of Appeal
affirmed, holding that categorical waivers of PAGA standing are
contrary to state policy and that PAGA claims cannot be split into
arbitrable individual claims and nonarbitrable “representative”
claims.
This ruling was dictated by the California
Supreme Court’s decision in
Iskanian. In that case, the
court held that pre-dispute agreements to waive the right to bring
“representative” PAGA claims are invalid as a matter of public
policy. What, precisely, this holding means requires some
explanation. PAGA’s unique features have prompted the development
of an entire vocabulary unique to the statute, but the details, it
seems, are still being worked out. An unfortunate feature of this
lexicon is that it tends to use the word “representative” in two
distinct ways, and each of those uses of the term “representative”
is connected with one of
Iskanian’s rules governing
contractual waiver of PAGA claims.
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’ ” and “[t]here is no individual component to a
PAGA action,”
Kim, 9 Cal. 5th, at 87, 459 P. 3d, at
1131 (quoting
Iskanian, 59 Cal. 4th, at 387, 327 P. 3d,
at 151), 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,” on the
theory that resolving victim-specific claims in separate
arbitrations does not serve the deterrent purpose of PAGA. 59 Cal.
4th, at 383, 327 P. 3d, at 149; see also
Kim, 9 Cal.
5th, at 88, 459 P. 3d, at 1132 (noting that based on
Iskanian, California courts have uniformly “rejected efforts
to split PAGA claims into individual and representative
components”).
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. ___ (2021), and now reverse.
II
The FAA was enacted in response to judicial
hostility to arbitration. Section 2 of the statute makes
arbitration agreements “valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revocation
of any contract.” 9 U. S. C. §2.[
4] As we have interpreted it, this provision contains
two clauses: An enforcement mandate, which renders agreements to
arbitrate enforceable as a matter of federal law, and a saving
clause, which permits invalidation of arbitration clauses on
grounds applicable to “any contract.” See
AT&T Mobility
LLC v.
Concepcion,
563 U.S.
333, 339–340 (2011);
Epic Systems Corp. v.
Lewis,
584 U. S. ___, ___–___ (2018) (slip op., at 5–6). These
clauses jointly establish “an equal-treatment principle: A court
may invalidate an arbitration agreement based on ‘generally
applicable contract defenses’ like fraud or unconscionability, but
not on legal rules that ‘apply only to arbitration or that derive
their meaning from the fact that an agreement to arbitrate is at
issue.’ ”
Kindred Nursing Centers L. P. v.
Clark, 581 U.S. 246, 251 (2017) (quoting
Concepcion,
563 U. S., at 339). Under that principle, the FAA “preempts
any state rule discriminating on its face against arbitration—for
example, a law ‘prohibit[ing] outright the arbitration of a
particular type of claim.’ ”
Kindred Nursing, 581
U. S., at 251 (quoting
Concepcion, 563 U. S., at
341).
But under our decisions, even rules that are
generally applicable as a formal matter are not immune to
preemption by the FAA. See
Lamps Plus, Inc. v.
Varela, 587 U. S. ___, ___ (2019) (slip op., at 6);
Concepcion, 563 U. S., at 343. Section 2’s mandate
protects a right to enforce arbitration agreements. That right
would not be a right to
arbitrate in any meaningful sense if
generally applicable principles of state law could be used to
transform “traditiona[l] individualized . . .
arbitration” into the “litigation it was meant to displace” through
the imposition of procedures at odds with arbitration’s informal
nature.
Epic Systems, 584 U. S., at ___ (slip op., at
8). See also
Concepcion, 563 U. S., at 351. And that
right would not be a right to arbitrate based on an
agreement if generally applicable law could be used to
coercively impose arbitration in contravention of the “first
principle” of our FAA jurisprudence: that “[a]rbitration is
strictly ‘a matter of consent.’ ”
Granite Rock Co. v.
Teamsters,
561 U.S.
287, 299 (2010) (quoting
Volt Information Sciences, Inc.
v.
Board of Trustees of Leland Stanford Junior Univ.,
489 U.S.
468, 479 (1989)); see also
Lamps Plus, 587 U. S.,
at ___ (slip op., at 7);
Stolt-Nielsen S. A. v.
AnimalFeeds Int’l Corp.,
559 U.S.
662, 685 (2010).
Based on these principles, we have held that “a
party may not be compelled under the FAA to submit to class
arbitration unless there is a contractual basis for concluding that
the party
agreed to do so.”
Id., at 684. See also
Lamps Plus, 587 U. S., at ___ (slip op., at 1);
Epic
Systems, 584 U. S., at ___–___ (slip op., at 6–8);
Concepcion, 563 U. S., at 347–348. The “ ‘shift
from bilateral arbitration to class-action arbitration’ ”
mandates procedural changes that are inconsistent with the
individualized and informal mode of arbitration contemplated by the
FAA.
Id., at 347 (quoting
Stolt- Nielsen, 559
U. S., at 686). As a result, class procedures cannot be
imposed by state law without presenting unwilling parties with an
unacceptable choice between being compelled to arbitrate using
procedures at odds with arbitration’s traditional form and forgoing
arbitration altogether. Putting parties to that choice is
inconsistent with the FAA.
Viking contends that these decisions require
enforcement of contractual provisions waiving the right to bring
PAGA actions because PAGA creates a form of class or collective
proceeding. If this is correct,
Iskanian’s prohibition on
PAGA waivers presents parties with the same impermissible choice as
the rules we have invalidated in our decisions concerning class-
and collective-action waivers: Either arbitrate disputes using a
form of class procedure, or do not arbitrate at all.
Moriana offers a very different characterization
of the statute. As she sees it, any conflict between
Iskanian and the FAA is illusory because PAGA creates
nothing more than a substantive cause of action. The only thing
that is distinctive about PAGA, she supposes, is that it allows
employee plaintiffs to increase the available penalties that may be
awarded in an action by proving additional predicate violations of
the Labor Code. But that does not make a PAGA action a class
action, because those violations are not distinct claims belonging
to distinct individuals. Instead, they are predicates for expanded
liability under a single cause of action. In Moriana’s view, that
means
Iskanian invalidates waivers of substantive rights,
and does not purport to invalidate anything that can meaningfully
be described as an “arbitration agreement.”[
5]
We disagree with both characterizations of the
statute. Moriana is correct that the FAA does not require courts to
enforce contractual waivers of substantive rights and remedies. The
FAA’s mandate is to enforce “
arbitration agreements.”
Concepcion, 563 U. S., at 344 (emphasis added). And as
we have described it, an arbitration agreement is “a specialized
kind of forum-selection clause that posits not only the situs of
suit but also the procedure to be used in resolving the dispute.”
Scherk v.
Alberto-Culver Co.,
417
U.S. 506, 519 (1974);
Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc.,
473 U.S.
614, 633 (1985). An arbitration agreement thus does not alter
or abridge substantive rights; it merely changes how those rights
will be processed. And so we have said that “ ‘[b]y agreeing
to arbitrate a statutory claim, a party does not forgo the
substantive rights afforded by the statute; it only submits to
their resolution in an arbitral . . . forum.’ ”
Preston v.
Ferrer,
552 U.S.
346, 359 (2008) (quoting
Mitsubishi Motors Corp., 473
U. S., at 628).[
6]
But Moriana’s premise that PAGA creates a
unitary private cause of action is irreconcilable with the
structure of the statute and the ordinary legal meaning of the word
“claim.” California courts interpret PAGA to provide employees with
delegated authority to assert the State’s claims on a
representative basis, not an individual cause of action. See,
e.g.,
Amalgamated Transit, 46 Cal. 4th, at 1003, 209
P. 3d, at 943 (PAGA “is simply a procedural statute” that
“does not create property rights or any other substantive rights”).
And a PAGA action asserting multiple code violations affecting a
range of different employees does not constitute “a single claim”
in even the broadest possible sense, because the violations
asserted need not even arise from a common “transaction” or
“nucleus of operative facts.”
Lucky Brand Dungarees, Inc. v.
Marcel Fashions Group, Inc., 590 U. S. ___, ___ (2020)
(slip op., at 6) (internal quotation marks omitted).[
7]
Viking’s position, on the other hand, elides
important structural differences between PAGA actions and class
actions that preclude any straightforward application of our
precedents invalidating prohibitions on class-action waivers.
Class-action procedure allows courts to use a representative
plaintiff ’s individual claims as a basis to “adjudicate
claims of multiple parties at once, instead of in separate suits,”
Shady Grove Orthopedic Associates, P. A. v.
Allstate Ins.
Co.,
559 U.S.
393, 408 (2010). This, of course, requires the certification of
a class. And because class judgments bind absentees with respect to
their individual claims for relief and are preclusive as to all
claims the class could have brought,
Cooper v.
Federal
Reserve Bank of Richmond,
467 U.S.
867, 874 (1984), “class representatives must at all times
adequately represent absent class members, and absent [class]
members must be afforded notice, an opportunity to be heard, and a
right to opt out of the class.”
Concepcion, 563 U. S.,
at 349. And to “ensur[e] that the named plaintiffs are appropriate
representatives of the class whose claims they wish to litigate,”
the adjudicator must decide questions of numerosity, commonality,
typicality, and adequacy of representation.
Wal-Mart Stores,
Inc. v.
Dukes,
564 U.S.
338, 349 (2011).
PAGA actions also permit the adjudication of
multiple claims in a single suit, but their structure is entirely
different. A class-action plaintiff can raise a multitude of claims
because he or she represents a multitude of absent individuals; a
PAGA plaintiff, by contrast, represents a single principal, the
LWDA, that has a multitude of claims. As a result of this
structural difference, PAGA suits exhibit virtually none of the
procedural characteristics of class actions. The plaintiff does not
represent a class of injured individuals, so there is no need for
certification. PAGA judgments are binding only with respect to the
State’s claims, and are not binding on nonparty employees as to any
individually held claims.
Arias, 46 Cal. 4th, at 986, 209
P. 3d, at 933–934. This obviates the need to consider adequacy
of representation, numerosity, commonality, or typicality. And
although the statute gives other affected employees a future
interest in the penalties awarded in an action, that interest does
not make those employees “parties” in any of the senses in which
absent class members are, see
Devlin v.
Scardelletti,
536 U.S. 1
(2002), or give those employees anything more than an inchoate
interest in litigation proceeds. See
Vermont Agency of Natural
Resources v.
United States ex rel. Stevens,
529 U.S.
765, 773 (2000) (The “ ‘right’ ” to a share of the
proceeds of a
qui tam action “does not even fully
materialize until the litigation is completed and the relator
prevails”).
Because PAGA actions do not adjudicate the
individual claims of multiple absent third parties, they do not
present the problems of notice, due process, and adequacy of
representation that render class arbitration inconsistent with
arbitration’s traditionally individualized form. See
Concepcion, 563 U. S., at 347–348. Of course, as a
practical matter, PAGA actions
do have something important
in common with class actions. Because PAGA plaintiffs represent a
principal with a potentially vast number of claims at its disposal,
PAGA suits “greatly increas[e] risks to defendants.”
Id., at
350. But our precedents do not hold that the FAA allows parties to
contract out of
anything that might amplify defense risks.
Instead, our cases hold that States cannot coerce individuals into
forgoing arbitration by taking the individualized and informal
procedures characteristic of traditional arbitration off the
table. Litigation risks are relevant to that inquiry because one
way in which state law may coerce parties into forgoing their right
to arbitrate is by conditioning that right on the use of a
procedural format that makes arbitration artificially unattractive.
The question, then, is whether PAGA contains any procedural
mechanism at odds with arbitration’s basic form.
Viking suggests an answer. Our FAA precedents
treat bilateral arbitration as the prototype of the individualized
and informal form of arbitration protected from undue state
interference by the FAA. See
Epic Systems, 584 U. S.,
at ___–___ (slip op., at 8–9); see also
American Express Co.
v.
Italian Colors Restaurant,
570 U.S.
228, 238 (2013);
Concepcion, 563 U. S., at 347–349;
Stolt-Nielsen, 559 U. S., at 685–686. Viking posits
that a proceeding is “bilateral” in the relevant sense if—but only
if—it involves two and only two parties and the arbitration
“ ‘is conducted by and on behalf of the individual named
parties only.’ ”
Wal-Mart, 564 U. S., at 348
(quoting
Califano v.
Yamasaki,
442 U.S.
682, 700–701 (1979)). PAGA actions necessarily deviate from
this ideal because they involve litigation or arbitration on behalf
of an absent principal. Viking thus suggests that
Iskanian’s
prohibition on PAGA waivers is inconsistent with the FAA because
PAGA creates an intrinsically representational form of action and
Iskanian requires parties either to arbitrate in that format
or forgo arbitration altogether.
We disagree. Nothing in the FAA establishes a
categorical rule mandating enforcement of waivers of standing to
assert claims on behalf of absent principals. Non-class
representative actions in which a single agent litigates on behalf
of a single principal are part of the basic architecture of much of
substantive law. Familiar examples include shareholder-derivative
suits, wrongful-death actions, trustee actions, and suits on behalf
of infants or incompetent persons. Single-agent, single-principal
suits of this kind necessarily deviate from the strict ideal of
bilateral dispute resolution posited by Viking. But we have never
held that the FAA imposes a duty on States to render all forms of
representative standing waivable by contract. Nor have we suggested
that single-agent, single-principal representative suits are
inconsistent the norm of bilateral arbitration as our precedents
conceive of it. Instead, we have held that “the ‘changes brought
about by the shift from bilateral arbitration to
class-action
arbitration’ ” are too fundamental to be imposed on
parties without their consent.
Concepcion, 563 U. S.,
at 347–348 (quoting
Stolt-Nielsen, 559 U. S., at 686;
emphasis added). And we have held that §2’s saving clause does not
preserve defenses that would allow a party to declare “that a
contract is unenforceable
just because it requires bilateral
arbitration.”
Epic Systems, 584 U. S., at ___ (slip
op., at 9).
These principles do not mandate the enforcement
of waivers of representative capacity as a categorical rule.
Requiring parties to decide whether to arbitrate or litigate a
single-agent, single-principal action does not produce a shift from
a situation in which the arbitrator must “resolv[e] a single
dispute between the parties to a single agreement” to one in which
he or she must “resolv[e] many disputes between hundreds or perhaps
even thousands of parties.”
Stolt-Nielsen, 559 U. S.,
at 686. And a proceeding in which two and only two parties
arbitrate exclusively in their individual capacities is not the
only thing one might mean by “bilateral arbitration.” As we have
said, “[t]he label ‘party’ does not indicate an absolute
characteristic, but rather a conclusion about the applicability of
various procedural rules that may differ based on context.”
Devlin, 536 U. S., at 10. Our precedents use the phrase
“bilateral arbitration” in opposition to “class or collective”
arbitration, and the problems we have identified in mandatory class
arbitration arise from procedures characteristic of multiparty
representative actions.
Epic Systems, 584 U. S., at ___
(slip op., at 24); see also
Italian Colors, 570 U. S.,
at 238;
Concepcion, 563 U. S., at 347–349;
Stolt-Nielsen, 559 U. S., at 685–686. Unlike these
kinds of actions, single-principal, single-agent representative
actions are “bilateral” in two registers: They involve the rights
of only the absent real party in interest and the defendant, and
litigation need only be conducted by the agent-plaintiff and the
defendant. This degree of deviation from bilateral norms is not
alien to traditional arbitral practice,[
8] and our precedents have never suggested otherwise. See,
e.g.,
Marmet Health Care Center, Inc. v.
Brown,
565 U.S.
530 (2012) (
per curiam) (invalidating rule categorically
barring arbitration of wrongful-death actions).
Nor does a rule prohibiting waiver of
representative standing declare “that a contract is unenforceable
just because it requires bilateral arbitration.”
Epic
Systems, 584 U. S., at ___ (slip op., at 9). Indeed, if
the term “bilateral arbitration” is used to mean “arbitration in an
individual capacity between precisely two parties,” a rule
prohibiting representative-capacity waivers
cannot
invalidate agreements to arbitrate on a “bilateral” basis. An
agreement that explicitly provided for “arbitration on a strictly
bilateral basis” would, under that definition of the term
“bilateral,” categorically exclude representative-capacity claims
from its coverage. Such claims, after all, necessarily involve the
representation of an absent principal, and thus cannot be
arbitrated in a strictly bilateral proceeding. A rule prohibiting
waivers of representative standing would not
invalidate any
agreements that contracted for “bilateral arbitration” in Viking’s
sense—it would simply require parties to choose whether to litigate
those claims or arbitrate them in a proceeding that is not
bilateral in every conceivable sense. And while this consequence
only follows because it is
impossible to decide
representative claims in an arbitration that is “bilateral” in
every dimension, nothing in our precedent suggests that in enacting
the FAA, Congress intended to require States to reshape their
agency law to ensure that parties will never have to arbitrate in a
proceeding that deviates from “bilateral arbitration” in the
strictest sense. If there is a conflict between California’s
prohibition on PAGA waivers and the FAA, it must derive from a
different source.
III
We think that such a conflict between PAGA’s
procedural structure and the FAA does exist, and that it derives
from the statute’s built-in mechanism of claim joinder. As we noted
at the outset, that mechanism permits “aggrieved employees” to use
the Labor Code violations they personally suffered as a basis to
join to the action any claims that could have been raised by the
State in an enforcement proceeding.
Iskanian’s secondary
rule prohibits parties from contracting around this joinder device
because it invalidates agreements to arbitrate only “individual
PAGA claims for Labor Code violations that an employee suffered,”
59 Cal. 4th, at 383, 327 P. 3d, at 149.
This prohibition on contractual division of PAGA
actions into constituent claims unduly circumscribes the freedom of
parties to determine “the issues subject to arbitration” and “the
rules by which they will arbitrate,”
Lamps Plus, 587
U. S., at ___ (slip op., at 7), and does so in a way that
violates the fundamental principle that “arbitration is a matter of
consent,”
Stolt-Nielsen, 559 U. S., at 684. The most
basic corollary of the principle that arbitration is a matter of
consent is that “a party can be forced to arbitrate only those
issues it specifically has agreed to submit to arbitration,”
First Options of Chicago, Inc. v.
Kaplan,
514 U.S.
938, 945 (1995). This means that parties cannot be coerced into
arbitrating a claim, issue, or dispute “absent an affirmative
‘contractual basis for concluding that the party
agreed to
do so.’ ”
Lamps Plus, 587 U. S., at ___ (slip op.,
at 8) (quoting
Stolt-Nielsen, 559 U. S., at 684); see
also
Concepcion, 563 U. S., at 347–348.
For that reason, state law cannot condition the
enforceability of an arbitration agreement on the availability of a
procedural mechanism that would permit a party to expand the scope
of the arbitration by introducing claims that the parties did not
jointly agree to arbitrate. Rules of claim joinder can function in
precisely that way. Modern civil procedure dispenses with the
formalities of the common-law approach to claim joinder in favor of
almost-unqualified joinder. Wright & Miller §1581. Federal Rule
of Civil Procedure 18(a), which permits a party to “join, as
independent or alternative claims, as many claims as it has against
an opposing party,” is typical of the modern approach. But the FAA
licenses contracting parties to depart from standard rules “in
favor of individualized arbitration procedures of their own
design,” so parties to an arbitration agreement are not required to
follow the same approach.
Epic Systems, 584 U. S., at
____ (slip op., at 14). And that is true even if bifurcated
proceedings are an inevitable result. See,
e.g., Dean
Witter Reynolds Inc. v.
Byrd,
470
U.S. 213, 220–221 (1985);
Moses H. Cone Memorial
Hospital v.
Mercury Constr. Corp.,
460 U.S.
1,
103
(1983).
A state rule imposing an expansive rule of
joinder in the arbitral context would defeat the ability of parties
to control which claims are subject to arbitration. Such a rule
would permit parties to superadd new claims to the proceeding,
regardless of whether the agreement between them committed those
claims to arbitration. Requiring arbitration procedures to include
a joinder rule of that kind compels parties to either go along with
an arbitration in which the range of issues under consideration is
determined by coercion rather than consent, or else forgo
arbitration altogether. Either way, the parties are coerced into
giving up a right they enjoy under the FAA. See
Lamps Plus,
587 U. S., at ___–___ (slip op., at 6–8);
Epic Systems,
584 U. S., at ___–___ (slip op., at 5–9);
Concepcion,
563 U. S., at 347–351;
Stolt-Nielsen, 559 U. S.,
at 684–687.
When made compulsory by way of
Iskanian,
the joinder rule internal to PAGA functions in exactly this way.
Under that rule, parties cannot agree to restrict the scope of an
arbitration to disputes arising out of a particular
“ ‘ “transaction” ’ ” or “ ‘common nucleus
of facts.’ ”
Lucky Brand, 590 U. S., at ___ (slip
op., at 6). If the parties agree to arbitrate “individual” PAGA
claims based on personally sustained violations,
Iskanian
allows the aggrieved employee to abrogate that agreement after the
fact and demand either judicial proceedings or an arbitral
proceeding that exceeds the scope jointly intended by the parties.
The only way for parties to agree to arbitrate
one of an
employee’s PAGA claims is to also “agree” to arbitrate
all
other PAGA claims in the same arbitral proceeding.
The effect of
Iskanian’s rule mandating
this mechanism is to coerce parties into withholding PAGA claims
from arbitration. Liberal rules of claim joinder presuppose a
backdrop in which litigants assert their own claims and those of a
limited class of other parties who are usually connected with the
plaintiff by virtue of a distinctive legal relationship—such as
that between shareholders and a corporation or between a parent and
a minor child. PAGA departs from that norm by granting the power to
enforce a subset of California public law to every employee in the
State. This combination of standing to act on behalf of a sovereign
and mandatory freeform joinder allows plaintiffs to unite a massive
number of claims in a single-package suit. But as we have said,
“[a]rbitration is poorly suited to the higher stakes” of
massive-scale disputes of this kind.
Concepcion, 563
U. S., at 350. The absence of “multilayered review” in
arbitral proceedings “makes it more likely that errors will go
uncorrected.”
Ibid. And suits featuring a vast number of
claims entail the same “risk of ‘in terrorem’ settlements that
class actions entail.”
Ibid. As a result,
Iskanian’s
indivisibility rule effectively coerces parties to opt for a
judicial forum rather than “forgo[ing] the procedural rigor and
appellate review of the courts in order to realize the benefits of
private dispute resolution.”
Stolt-Nielsen, 559 U. S.,
at 685; see also
Concepcion, 563 U. S., at 350–351.
This result is incompatible with the FAA.
IV
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.
The remaining question is what the lower courts
should have done with Moriana’s non-individual claims. Under our
holding in this case, those claims may not be dismissed simply
because they are “representative.”
Iskanian’s rule remains
valid to that extent. But as we see it, PAGA provides no mechanism
to enable a court to adjudicate non- individual PAGA claims once an
individual claim has been committed to a separate proceeding. Under
PAGA’s standing requirement, a plaintiff can maintain
non-individual PAGA claims in an action only by virtue of also
maintaining an individual claim in that action. See Cal. Lab. Code
Ann. §§2699(a), (c). When an employee’s own dispute is pared away
from a PAGA action, the employee is no different from a member of
the general public, and PAGA does not allow such persons to
maintain suit. See
Kim, 9 Cal. 5th, at 90, 459 P. 3d,
at 1133 (“PAGA’s standing requirement was meant to be a departure
from the ‘general public’ . . . standing originally
allowed” under other California statutes). As a result, Moriana
lacks statutory standing to continue to maintain her non-individual
claims in court, and the correct course is to dismiss her remaining
claims.
For these reasons, the judgment of the
California Court of Appeal is reversed, and the case is remanded
for further proceedings not inconsistent with this opinion.
It is so ordered.
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