Murphy v. The Finish Line, Inc.

Background

Zachary Murphy filed a class action against The Finish Line, Inc. in Alameda County Superior Court. He alleged seven wage-and-hour violations, including failure to pay minimum and overtime wages, failure to provide meal periods and rest breaks, inaccurate wage statements, failure to pay all wages due at separation, and a violation of California Business and Professions Code section 17200. He later added a claim under California’s Private Attorneys General Act, commonly called PAGA.

Finish Line removed the action to federal court. The court previously found that the parties had entered into an enforceable arbitration agreement covering Murphy’s individual claims. It ordered those claims to arbitration and stayed, or paused, the remaining PAGA claim until the arbitration was resolved.

Murphy then asked to voluntarily dismiss his individual claims without prejudice and remand, or return, the PAGA claim to state court.

Legal standard and analysis

The court explained that Federal Rule of Civil Procedure 41 generally applies to dismissing all claims against a particular defendant, not to dismissing fewer than all claims. Because Murphy sought to withdraw only some claims, Rule 15 governed the request to amend the complaint, and granting leave to amend was within the court’s discretion.

The court focused on section 3 of the Federal Arbitration Act, which requires a court to stay an action involving an issue that has been referred to arbitration until the arbitration has occurred under the parties’ agreement. Relying on decisions from the Northern District of California, the court concluded that the statute did not permit it to lift the stay so Murphy could dismiss the arbitrable individual claims and litigate the non-arbitrable PAGA claim first.

The court reasoned that dismissing the individual claims without prejudice could allow Murphy to litigate the PAGA claim and later pursue the individual claims in arbitration. That sequence would circumvent the Federal Arbitration Act’s requirement that the arbitrable claims be resolved first. The court also stated that, even if it had discretion to lift the stay, it would decline to exercise that discretion because the circumstances had not changed and maintaining the stay promoted efficient proceedings and enforcement of the arbitration agreement.

The court distinguished a decision allowing dismissal of arbitrable claims because, in that case, all remaining claims were subject to arbitration after the court declined supplemental jurisdiction over a PAGA claim. Here, the court had already determined that some of Murphy’s claims were arbitrable and that the PAGA claim was not.

Ruling

Judge William H. Orrick denied Murphy’s motion to voluntarily dismiss the individual claims and remand the PAGA claim. The previously ordered stay remained in effect pending resolution of the arbitration.