Clifford v. Quest Software Inc.
Clifford v. Quest Software Inc.
Opinion of the Court
*747The question posed in this appeal is whether an employee's claim against his employer for unfair competition under Business and Professions Code section 17200
*748We reverse that portion of the trial court's order. Assuming Cruz remains good law - a question we need not answer here - Cruz at most stands for the proposition that UCL claims for "public" injunctive relief are not arbitrable. ( Cruz, supra , at pp. 315-316,
*273I.
FACTS
In 1995, Daniel Clifford began working for Quest Software Inc. (Quest). In 2012, Dell Inc. acquired Quest to form its software division, Dell Software Inc., which hired Clifford as an employee.
In 2015, Clifford participated in Dell's online "Code of Conduct" training course. According to Quest, when Clifford completed the training, he acknowledged that he read and agreed to the terms of Dell's Arbitration Agreement and Dispute Resolution Program.
The arbitration agreement establishes arbitration as the exclusive method for resolving any employment-related disputes Clifford may have with either his employer or his employer's subsidiaries, which includes Quest. The arbitration agreement expressly applies to claims regarding pay, wages, overtime, meal and rest breaks, and expense reimbursements; claims for unfair competition; and requests for "final injunctive ... relief" related to those claims.
In 2017, Clifford filed a complaint against Quest for: (1) failure to pay overtime; (2) failure to provide meal periods; (3) failure to provide rest periods; (4) failure to provide accurate wage statements; (5) failure to reimburse for business expenses; and (6) unfair business practices under section 17200. He bases his complaint on his allegation Quest misclassified him as an exempt employee. He did not assert any putative class claims and instead sued Quest solely in an individual capacity.
Quest moved to compel arbitration of Clifford's claims. The trial court found Quest had established the existence of a binding and enforceable *749arbitration agreement, and it compelled arbitration of Clifford's first through fifth causes of action. However, it denied the motion on the sixth cause of action - his UCL claim - citing without discussion our Supreme Court's decision in Cruz, supra ,
II.
DISCUSSION
A. Appealability and Standard of Review
Because an order denying a petition to compel arbitration is appealable, we may review the portion of the trial court's order denying Quest's motion to compel arbitration of Clifford's UCL cause of action. ( Code Civ. Proc., § 1294, subd. (a).)
"When a trial court's order [denying a petition to compel arbitration] is based on a question of law, we review the denial de novo. [Citation.] Decisions on issues of fact are reviewed for substantial evidence. [Citation.]" ( Performance Team Freight Systems, Inc. v. Aleman (2015)
B. The Arbitrability of UCL Claims and the Broughton-Cruz Rule
The UCL addresses "unfair competition," which "mean[s] and include[s]
*274any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by [the false advertising law, section 17500]." ( § 17200.) Although the UCL's "purpose 'is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services' " ( McGill v. Citibank, N.A. (2017)
*750The arbitrability of UCL claims depends on the type of relief the plaintiff seeks. Our Supreme Court held in Cruz that UCL claims for restitution "are fully arbitrable" ( Cruz , supra , 30 Cal.4th at pp. 318, 320,
In concluding UCL claims for "public" injunctive relief cannot be arbitrated, the Cruz court relied in large part on its earlier holding in Broughton v. Cigna Healthplans (1999)
The Broughton court explained there is an " 'inherent conflict' " between the underlying purpose of the CLRA's injunctive relief remedy and private arbitration: injunctive relief under the CLRA "is for the benefit of the general public rather than the party bringing the action," and private arbitration is not well suited to issuing or enforcing public injunctions. ( Broughton , supra , 21 Cal.4th at pp. 1081-1082,
Four years later, in Cruz , our Supreme Court extended that same reasoning to claims for "public" injunctive relief under the UCL. ( Cruz, supra , 30 Cal.4th at pp. 315-316,
These two cases generated what is often called the Broughton - Cruz rule: "[a]greements to arbitrate claims for public injunctive relief under the CLRA, the UCL, or the false advertising law are not enforceable in California." ( McGill,
Importantly, the Broughton - Cruz rule distinguishes between public injunctive relief and private injunctive relief, and it only bars arbitration of claims for public injunctive relief. ( McGill,
Because the Broughton - Cruz rule does not apply to claims for private injunctive relief, a plaintiff's request for private injunctive relief under the UCL is arbitrable, assuming the arbitration agreement is otherwise valid and enforceable. ( Kilgore v. KeyBank, Nat. Ass'n (9th Cir. 2013)
In recent years, several courts have concluded the Federal Arbitration Act (FAA) (
C. Application
We must decide what impact, if any, Broughton - Cruz has on the arbitrability of Clifford's UCL cause of action, which seeks both injunctive relief and restitution. As noted, the trial court concluded Cruz renders the entire UCL claim inarbitrable. According to Quest, Clifford's injunctive relief claim only seeks private injunctive relief, so Broughton - Cruz does not render his injunctive relief claim inarbitrable. Quest further contends Broughton - Cruz mandates at a minimum arbitration of Clifford's UCL claim for restitution. Alternatively, Quest argues the FAA applies and preempts Broughton - Cruz . Clifford contends the injunctive relief portion of his UCL claim seeks "public" injunctive relief and thus is inarbitrable under Broughton - Cruz , and Quest waived any argument that the restitution portion of his UCL claim is severable from the inarbitrable portion of his UCL claim by failing to make that argument below.
*753We need not decide whether the FAA applies or whether it preempts Broughton - Cruz because, even if Broughton - Cruz is still viable, it would not bar the arbitration of any portion of Clifford's UCL claim. As we explain below, Clifford's UCL claim seeks only private injunctive relief and restitution, and thus does not fall within the purview of Broughton - Cruz 's restriction on the arbitrability of UCL claims for public injunctive relief.
The private nature of Clifford's UCL claim is immediately evident from *277the face of his complaint. In describing Quest's alleged acts of unfair competition, Clifford's complaint repeatedly refers to wage and hour violations directed at Clifford only , such as Quest's "failures to pay Plaintiff all earned overtime and premium-pay wages," Quest's failure "to reimburse Plaintiff for all necessary expenditures or losses incurred by Plaintiff ," Quest's failure "to provide Plaintiff suitable lockers, closets, or equivalent," Quest's "underreporting to federal and state authorities wages earned by Plaintiff ," and Quest's act of "exploiting Plaintiff by taking his labor without lawful compensation." (Italics added.) Clifford does not allege Quest directed similar conduct at other employees, much less the public at large.
Clifford's requests for injunctive relief under the UCL are similarly limited to him as an individual. He alleges Quest's "unfair business practices entitle Plaintiff to seek preliminary and permanent injunctive relief, including but not limited to orders that [Quest] account for, disgorge, and restore to Plaintiff all compensation unlawfully withheld." (Italics added.) He "further requests that a receiver be appointed to control and monitor all of the business affairs of [Quest] to ensure compliance with applicable wage-and[-]hour-laws of the State of California and to ensure that full restitution is made to Plaintiff of his owed and unpaid compensation." (Italics added.) Finally, he "requests that the Court issue a preliminary injunction against [Quest] to prevent [it] from committing further violations of the Labor Code and the unfair business practices alleged herein." The only express beneficiary of Clifford's requested injunctive relief is Clifford, and the only potential beneficiaries are Quest's current employees, not the public at large.
These allegations confirm Clifford's UCL claim for injunctive relief is private in nature. As our Supreme Court recently explained, injunctive relief that "primarily 'resolve[s] a private dispute' between the parties" and " 'rectif[ies] individual wrongs' " is private, not public, relief. ( McGill,
Clifford contends his UCL claim is public in nature because his complaint alleges Quest "reaped unfair benefit, illegal competitive advantage, and illegal profit at the expense of Plaintiff and other current and former employees, competitors, and the general public " and "should be made to disgorge [its] ill-gotten gains and restore such monies to Plaintiff and to those other current and former employees as restitution." (Italics added.)
There are several flaws with Clifford's argument. First, the complaint's references to Quest's other employees appears in the portion of Clifford's UCL claim seeking restitution , not the part seeking injunctive relief, so it does not render his claim for injunctive relief "public" in nature. Our review of Clifford's complaint discloses no request for injunctive *278relief that would impact the public. Second, even if Clifford's requested injunctive relief would benefit Quest's current employees, it is not "public" injunctive relief as defined in Broughton and Cruz. As the Supreme Court recently observed in McGill , "[r]elief that has the primary purpose or effect of redressing or preventing injury to an individual plaintiff-or to a group of individuals similarly situated to the plaintiff -does not constitute public injunctive relief" under Broughton - Cruz . ( McGill, supra , 2 Cal.5th at p. 955,
Clifford also contends his intent to add a PAGA claim confirms his UCL claim is public in nature. This argument is also without merit. First, the record discloses no such amendment to his complaint. Second, the addition of a PAGA claim would not impact Clifford's existing UCL claim. PAGA enables an aggrieved employee to bring a representative action on behalf of himself, other employees, and the State to recover civil penalties for an employer's Labor Code violations. ( Lab. Code, § 2698, et seq. ; see Iskanian v. CLS Transportation Los Angeles, LLC (2014)
Finally, Clifford cites to his complaint's allegation that he "acts in the public interest by exposing [Quest's] unfair business practices and seeking *755injunctive relief to remedy those practices" as further evidence his UCL injunctive relief claim is public in nature. (Italics added.) We are not persuaded. The public certainly has an interest in securing an employer's compliance with wage and hour laws. (See Dynamex Operations West, Inc. v. Superior Court (2018)
To summarize, Clifford's claim for injunctive relief under the UCL falls outside the Broughton - Cruz restriction on arbitrability because Clifford only seeks private injunctive relief, not "public" injunctive relief as defined in Broughton, Cruz , and McGill. The portion of his UCL claim seeking injunctive relief therefore is arbitrable, even if Broughton - Cruz remains good law and is not preempted by the FAA (a point we do not decide here).
The portion of Clifford's UCL claim seeking restitution is also arbitrable because the Broughton - Cruz bar on arbitrability only applies to claims for public injunctive relief, not to UCL claims for restitution. ( Cruz , supra , 30 Cal.4th at pp. 318, 320,
*279Accordingly, Clifford's entire UCL claim is subject to arbitration along with his other causes of action.
III. DISPOSITION
We reverse the portion of the trial court's order denying Quest's motion to compel arbitration of Clifford's sixth cause of action and staying the prosecution of that cause of action pending the completion of the arbitration. The court is directed to compel the sixth cause of action to arbitration. The order *756is otherwise affirmed. Quest shall recover its costs on appeal. ( Cal. Rules of Court, rule 8.278(a)(1).)
WE CONCUR:
O'LEARY, P. J.
GOETHALS, J.
All further undesignated statutory references are to this code.
Clifford denies having consented to the arbitration agreement, but assumes for this appeal only that he did so.
Although Clifford's complaint alleges he "intends to amend the complaint to add claims under the Labor Code Private Attorneys General Act of 2004 (PAGA)," the record includes no such amendment or motion to amend.
Reference
- Full Case Name
- Daniel Paul CLIFFORD, and v. QUEST SOFTWARE INC., and
- Cited By
- 31 cases
- Status
- Published