## Facts

- Stephanie Prasad worked for Pinnacle Property Management Services, LLC as a property manager beginning in May 2016.
- During online onboarding, Prasad clicked through an “Issue Resolution Agreement” containing an arbitration clause, a class and collective action waiver, cost provisions, a one-year limitations period, and a unilateral modification/termination clause for the employer.
- Prasad alleged she had type I diabetes, required accommodations, took medical leave, returned to a lower-paid position, and was later terminated.
- Prasad filed a putative class action asserting California wage-and-hour claims and individual claims including disability discrimination and intentional infliction of emotional distress.
- Pinnacle moved to compel arbitration under the agreement and to stay the court action; the court previously found Prasad assented to the arbitration agreement through the electronic onboarding process.
- Proceedings were stayed pending the U.S. Supreme Court’s decision in *Epic Systems Corp. v. Lewis*; after that decision, Prasad moved to amend to add a representative claim under California’s Private Attorneys General Act (PAGA).

## Issues

1. Whether leave to amend should be granted to add a representative PAGA claim.
2. Whether the arbitration agreement required arbitration of, or waived, a representative PAGA claim.
3. How the court action should proceed once individual claims are compelled to arbitration but a PAGA claim remains in court.

## Decision

- The court granted Prasad leave to amend to add a PAGA claim.
- The court held the representative PAGA claim could proceed in court and was not subject to mandatory arbitration under the agreement.
- The court stayed litigation of the PAGA claim while Prasad’s individual claims proceeded in arbitration.

## Legal Principles

- Leave to amend under Federal Rule of Civil Procedure 15(a) is generally granted absent undue delay, prejudice, bad faith, or futility.
- A representative PAGA claim is prosecuted on behalf of the State of California for civil penalties and is not treated as a purely private, bilateral dispute.
- Predispute agreements that require waiver of representative PAGA claims are unenforceable under California law, and federal arbitration law does not require enforcement of such waivers.
- *Epic Systems* supports enforcement of arbitration agreements requiring individualized adjudication of private claims with class/collective waivers, but does not mandate arbitration of representative PAGA claims.
- Courts may stay a court-based PAGA action while related individual claims are arbitrated to promote efficient case management and avoid inconsistent results.

## Conclusion

The court permitted Prasad to add a representative PAGA claim, ruled that claim was not compelled to arbitration despite an employment arbitration agreement, and stayed the PAGA proceedings pending arbitration of Prasad’s individual claims.


Prasad v. Pinnacle Prop. Mgmt. Servs., LLC, No. 5:17-cv-02794-VKD (N.D. Cal. Sept. 25, 2018)