The Ninth Circuit holds -- fairly predictably -- that the California Supreme Court did just fine when it held that individual PAGA claims may be required to go to arbitration but the non-individual PAGA claims can stay in court. So for that issue, absent anything new (like the Supreme Court stepping in and saying that its earlier dicta about the scope of state law in Viking River Cruises was correct), we pretty much know at this point how these things will go in both federal and state court.
Judge Lee adds a concurrence that has little to do with the substance of the court's holding but that he nonetheless feels is important to add just so employers don't potentially get stuck with issue preclusion from the outcome of the arbitration proceedings. He says that, in his view, even if the employer loses in arbitration, there shouldn't be issue preclusion on the PAGA claims that remain in court because the tiny amount of money at stake in the individual arbitration claim means that there's no "adequate opportunity or incentive to litigate" in arbitration. Meaning that the employer should get two bites at the apple: one in the arbitration proceeding, and another one in court.
I could say a lot about the opportunity/incentive aspect of res judicata, but my facial reaction can be summed up fairly quickly. To me, it's one thing to say that there's no incentive to litigate when a party is sued for a tiny amount (say, $500) and potentially faces issue preclusion in a much bigger suit as a result. There's nothing the defendant can do about that, since it was the plaintiffs who split up the lawsuits and raised the possibility of such issue preclusive effects.
It's quite another, it seems to me, when the defendant is the one who put himself in this position; i.e., when it was the defendant himself who (1) elected to create an arbitration provision, (2) decided that this would cover PAGA claims that he knew couldn't be arbitrated, and (3) elected to insist upon arbitration anyway once the lawsuit was filed -- typically over plaintiff's objection. If you decide to go down that path, with full knowledge of the issue preclusion consequences of your strategic choices, to me, you can hardly be heard to complain about that result. You could have avoided issue preclusion entirely by simply litigating the tiny individual claim alongside the much bigger claim in court. You chose not to. Any issue preclusion consequences of that decision are your own doing, and I find it implausible that you can be heard to complain about them.
So I understand and appreciate Judge Lee's attempt to provide an advance viewing of his position on a topic that's not at issue in the present case but that may perhaps nonetheless arise in some cases in the future. But it seems to me that he's wrong on the merits. Just as, for example, a plaintiff can't potentially assert non-mutual offensive issue preclusion when she was the one who strategically split up the two cases, so too should a defendant not be permitted to claim lack of incentive/opportunity to litigate with respect to defensive issue preclusion when he's the one who elected to split up the cases in the first place.
That's my take, anyway.
