Sakkab v. Luxottica Retail N. Am.

The Federal Arbitration Act will preempt a state rule that is not a generally applicable contract defense and that conflicts with the purposes of the Federal Arbitration Act.

A putative class action was brought against Luxottica Retail North America, Inc. (“Luxottica”) by Shukri Sakkab for various employment violation allegations, including misclassifying some employees as supervisors to avoid paying overtime wages. Luxottica motioned to compel arbitration pursuant to the dispute resolution clause in its Retail Associate Guide. Sakkab argued that the portion of the arbitration clause that prevented him from bringing any representative claims under the Private Attorneys General Act (“PAGA”) was unenforceable. The district court found that the Federal Arbitration Act (“FAA”) “would preempt a state rule barring waiver of PAGA claims.” After the district court granted the motion to compel arbitration and dismissed Sakkab’s complaint, Sakkab appealed. Meanwhile, the California Supreme Court laid out a rule in Iskanian v. CLS Transportation Los Angeles, LLC which barred waivers of representatives claims under PAGA. On appeal, the Ninth Circuit reviewed whether the FAA preempted the Iskanian rule. The panel found that as long as the rule does not conflict with the FAA’s purposes, the Iskanian rule will be “generally applicable” as a contract defense preserved under the FAA’s § 2 savings clause. The panel determined that the rule and FAA purposes do not conflict because the Iskanian rule did not prohibit arbitration of any type of claim, but rather, it says that representative PAGA claims cannot be waived. Also, a broad interpretation of the FAA’s purposes would require strict enforcement of arbitration agreements, even those not enforceable under state law. The panel therefore found that the FAA does not preempt the Iskanian rule. REVERSED and REMANDED.