I posted in detail about Iskanian v. CLS Transportation here. (This is one of the post-Concepcion cases that address arbitration. ) The California Supreme Court just granted review here. The Court eventually will explain how Concepcion affects California arbitration law. But that could take some time... Unfortunately for employers, the Court's grant of review means the Iskanian decision is uncitable going forward.
DGV
Showing posts with label concepcion. Show all posts
Showing posts with label concepcion. Show all posts
Court of Appeal: No Waiver of Arbitration and No Class Action Either
The Court of Appeal overturned a trial court's denial of the employer's motion to compel arbitration. Here are some key points:
1. The Court of Appeal expressly recognized that an arbitration agreement that is silent regarding class actions cannot be read to require classwide arbitration.
3. Like pretty much every other court, the court here refused to follow the National Labor Relations Board's decision in DR Horton (holding that arbitration agreements cannot require class action waivers unless the employee can bring a class action in court).
The decision is Reyes v. Liberman Broadcasting and the opinion is here.
DGV
1. The Court of Appeal expressly recognized that an arbitration agreement that is silent regarding class actions cannot be read to require classwide arbitration.
[A] party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so. . . . As the Arbitration Agreement explicitly covers the type of claims that are the subject of Reyes‘s lawsuit and provides only for bilateral arbitration, there is no contractual basis for concluding the parties agreed to submit to class arbitration. Therefore, we conclude that the Arbitration Agreement does not authorize class arbitration.2. The court held that the employer did not waive the right to arbitrate, even though it did not cite the arbitration agreement in the answer, and though it conducted lots of discovery in court. The reason is that the employer likely would not have prevailed on a motion to compel arbitration until the U.S. Supreme Court issued its decision in AT&T Mobility v. Concepcion (2011) 563 U.S. ___ [131 S.Ct. 1740, 179 L.Ed.2d 742]. Therefore, the employer did not "waive" the right to arbitrate, when seeking arbitration would have been futile.
3. Like pretty much every other court, the court here refused to follow the National Labor Relations Board's decision in DR Horton (holding that arbitration agreements cannot require class action waivers unless the employee can bring a class action in court).
The decision is Reyes v. Liberman Broadcasting and the opinion is here.
DGV
Court of Appeal Upholds Arbitration Agreement
Nelsen v. Legacy Partners (opinion here) is the latest decision from the court of appeal to address the validity of arbitration agreements in California, after recent federal developments (Concepcion, DR Horton, etc.).
The issues, as usual, are whether the arbitration agreement is "unconscionable," or violates public policy, and therefore is unenforceable as a contract.
The arbitration agreement was located at the end of a long handbook. Not surprisingly, the court first found that the agreement was "procedurally unconscionable," because
However, the court then turned to "substantive" unconscionability, which must also exist for an arbitration agreement to be invalidated. In this case, though, the arbitration agreement was pretty much lifted verbatim from a California Supreme Court decision. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064.) So, the Court did not find substantive unconscionability.
But Nelsen then argued that, regardless of unconcsionability, the arbitration agreement violated "public policy" under the California Supreme Court's decision in Gentry v. Superior Court (2007) 42 Cal.4th 443. In particular, Nelsen argued that the arbitration agreement barred her from bringing a class claim in arbitration because the agreement was silent as to class claims.
The court of appeal held that, indeed, the silent agreement did not encompass class-based claims.
However, the court then decided that Gentry did not invalidate the arbitration agreement because Nelsen did not adequately support the argument to the trial court. That is, Gentry does not invalidate "all" class action waivers, so you have to establish the Gentry "factors," which Nelsen did not do. In ruling this way, the court sidestepped whether Gentry remains good law.
Finally, the court decided that the National Labor Relations Board's decision in DR Horton was not binding and that the court would not follow it. The court noted that the decision was issued by just 2 Board members and that the issue of whether class action waivers are enforceable are beyond the Board's normal expertise.
So, another arbitration agreement survives.
The issues, as usual, are whether the arbitration agreement is "unconscionable," or violates public policy, and therefore is unenforceable as a contract.
The arbitration agreement was located at the end of a long handbook. Not surprisingly, the court first found that the agreement was "procedurally unconscionable," because
It was part of a preprinted form agreement drafted by LPI that all of LPI‘s California property managers were required to sign on a take-it-or-leave-it basis. The arbitration clause was located on the last two pages of a 43-page handbook. While the top of page 42 contains a highlighted prominent title ―TEAM MEMBER ACKNOWLEDGMENT AND AGREEMENT,‖ the title makes no reference to arbitration and the arbitration language itself appears in a small font not set off in any way to stand out from the rest of the agreement or handbook. Moreover, unless Nelsen happened to be conversant with the rules of pleading in the Code of Civil Procedure, the law and procedure applicable to appellate review, and the rules for the disqualification of superior court judges, the terms and rules of the arbitration referenced in the clause would have been beyond her comprehension.So, now the courts say that failing to attach the Code of Civil Procedure makes an agreement procedurally unconscionable. What happened to "everyone is bound to know the law?" or "ignorance is no excuse?" Also, by saying that the agreement is not in a different font, the court is imposing a requirement that does not apply to other contracts. That's not supposed to be allowed, demonstrating once again that the unconscionability doctrine is just an end run around Federal Arbitration Act preemption.
However, the court then turned to "substantive" unconscionability, which must also exist for an arbitration agreement to be invalidated. In this case, though, the arbitration agreement was pretty much lifted verbatim from a California Supreme Court decision. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064.) So, the Court did not find substantive unconscionability.
But Nelsen then argued that, regardless of unconcsionability, the arbitration agreement violated "public policy" under the California Supreme Court's decision in Gentry v. Superior Court (2007) 42 Cal.4th 443. In particular, Nelsen argued that the arbitration agreement barred her from bringing a class claim in arbitration because the agreement was silent as to class claims.
The court of appeal held that, indeed, the silent agreement did not encompass class-based claims.
However, the court then decided that Gentry did not invalidate the arbitration agreement because Nelsen did not adequately support the argument to the trial court. That is, Gentry does not invalidate "all" class action waivers, so you have to establish the Gentry "factors," which Nelsen did not do. In ruling this way, the court sidestepped whether Gentry remains good law.
Finally, the court decided that the National Labor Relations Board's decision in DR Horton was not binding and that the court would not follow it. The court noted that the decision was issued by just 2 Board members and that the issue of whether class action waivers are enforceable are beyond the Board's normal expertise.
So, another arbitration agreement survives.
Court of Appeal: Concepcion Kills Gentry
It's hard to keep up with arbitration law in California. Can you waive class actions? Must you attach the entire rule set to the arbitration agreement? Must you serve a nutritious meal when you provide the arbitration agreement? It never ends.
The tension between California case law and case law interpreting the Federal Arbitration Act causes these problems. Last year the U.S. Supreme Court decided in ATT Mobility v. Concepcion that the Federal Arbitration Act allows parties to limit arbitration agreements to single-plaintiff claims. The Court overruled the Califoria Supreme Court's decision in Discover Bank v. Superior Court. We posted about that here.
Discover Bank was about a consumer class action for small dollars / cents per claim. In Gentry v. Superior Court (2007) 42 Cal.4th 443, the California Supreme Court extended Discover Bank to wage-hour class actions. The Court held that a class waiver should not be enforced if "class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration."
The U.S. Supremes never mentioned Gentry. So what happened to it after Concepcion?
GENTRY
The Court of Appeal in Iskanian v. CLS Transportation- Los Angeles (opinion here) decided that Gentry is no more. The real news here, though, is that this decision may dispose of - or severely restrict -- the entire body of anti-arbitration case law that has been developed over the past 10 years in California. The language I've quoted below seems to sound the death knell to California courts' hostility to arbitration on "public policy" grounds (assuming this case remains on the books):
This Court then decided that Concepcion applies to PAGA claims too. The Court disagreed with
Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489. "Brown held that the Concepcion holding does not apply to representative actions under the PAGA, and therefore a waiver of PAGA representative actions is unenforceable under California law."
This Court disagreed and held that Concepcion would not allow courts to invalidate arbitration agreements merely because they preclude PAGA claims:
HORTON
The Court then went for the Tri-Fecta and disagreed with the National Labor Relations Board's decision in DR Horton, too. D. R. Horton (2012) 357 NLRB No. 184
ARMENDARIZ?
Well, all that is left is Armendariz. This Court did not touch it expressly. So, stay tuned.... The California Supreme Court is considering related issues. My bet is that the Court will take this case up as well if the parties seek review.
DGV
The tension between California case law and case law interpreting the Federal Arbitration Act causes these problems. Last year the U.S. Supreme Court decided in ATT Mobility v. Concepcion that the Federal Arbitration Act allows parties to limit arbitration agreements to single-plaintiff claims. The Court overruled the Califoria Supreme Court's decision in Discover Bank v. Superior Court. We posted about that here.
Discover Bank was about a consumer class action for small dollars / cents per claim. In Gentry v. Superior Court (2007) 42 Cal.4th 443, the California Supreme Court extended Discover Bank to wage-hour class actions. The Court held that a class waiver should not be enforced if "class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration."
The U.S. Supremes never mentioned Gentry. So what happened to it after Concepcion?
GENTRY
The Court of Appeal in Iskanian v. CLS Transportation- Los Angeles (opinion here) decided that Gentry is no more. The real news here, though, is that this decision may dispose of - or severely restrict -- the entire body of anti-arbitration case law that has been developed over the past 10 years in California. The language I've quoted below seems to sound the death knell to California courts' hostility to arbitration on "public policy" grounds (assuming this case remains on the books):
Now, we find that the Concepcion decision conclusively invalidates the Gentry test. . . . Concepcion thoroughly rejected the concept that class arbitration procedures should be imposed on a party who never agreed to them. ... This unequivocal rejection of court-imposed class arbitration applies just as squarely to the Gentry test as it did to the Discover Bank rule.
Second, Iskanian argues that the Gentry rule rested primarily on a public policy rationale, and not on Discover Bank‟s unconscionability rationale. While this point is basically correct, it does not mean that Gentry falls outside the reach of the Concepcion decision. ....PAGA
Third, the premise that Iskanian brought a class action to "vindicate statutory rights" is irrelevant in the wake of Concepcion. As the Concepcion court reiterated, "States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons." (131 S.Ct. at p. 1753.) ....
This Court then decided that Concepcion applies to PAGA claims too. The Court disagreed with
Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489. "Brown held that the Concepcion holding does not apply to representative actions under the PAGA, and therefore a waiver of PAGA representative actions is unenforceable under California law."
This Court disagreed and held that Concepcion would not allow courts to invalidate arbitration agreements merely because they preclude PAGA claims:
Respectfully, we disagree with the majority‟s holding in Brown. We recognize that the PAGA serves to benefit the public and that private attorney general laws may be severely undercut by application of the FAA. But we believe that United States Supreme Court has spoken on the issue, and we are required to follow its binding authority.
HORTON
The Court then went for the Tri-Fecta and disagreed with the National Labor Relations Board's decision in DR Horton, too. D. R. Horton (2012) 357 NLRB No. 184
In D.R. Horton, the NLRB held that a mandatory, employer-imposed agreement requiring all employment-related disputes to be resolved through individual arbitration (and disallowing class or collective claims) violated the National Labor Relations Act (NLRA) because it prohibited the exercise of substantive rights protected by section 7 of the NLRA.The Court decided that it was not bound to follow DR Horton:
We decline to follow D.R. Horton. In reiterating the general rule that arbitration agreements must be enforced according to their terms, Concepcion (which is binding authority) made no exception for employment-related disputes. Furthermore, the NLRB‟s attempt to read into the NLRA a prohibition of class waivers is contrary to another recent United States Supreme Court decision. In CompuCredit Corp. v. Greenwood (2012) __ U.S. __, __ [132 S.Ct. 665, 668] (CompuCredit), plaintiff consumers filed suit against a credit corporation and a bank, contending that they had violated the Credit Repair Organizations Act (CROA) (15 U.S.C. § 1679 et seq.).5 The plaintiffs brought the matter as a class action, despite having previously agreed to resolve all disputes by binding arbitration. The Supreme Court rejected their efforts to avoid arbitration, finding that unless the FAA‟s mandate has been "„overridden by a contrary congressional command,‟" agreements to arbitrate must be enforced according to their terms, even when federal statutory claims are at issue. (CompuCredit, at p. 669, citing (1987) 482 U.S. 220, 226.) The Supreme Court held: "Because the CROA is silent on whether claims under the Act can proceed in an arbitrable forum, the FAA requires the arbitration agreement to be enforced according to its terms." (CompuCredit, at p. 673.)
The D.R. Horton decision identified no "congressional command" in the NLRA prohibiting enforcement of an arbitration agreement pursuant to its terms. D.R. Horton’s holding—that employment-related class claims are "concerted activities for the purpose of collective bargaining or other mutual aid or protection" protected by section 7 of the NLRA, so that the FAA does not apply—elevates the NLRB‟s interpretation of the NLRA over section 2 of the FAA. This holding does not withstand scrutiny in light of Concepcion and CompuCredit.
ARMENDARIZ?
Well, all that is left is Armendariz. This Court did not touch it expressly. So, stay tuned.... The California Supreme Court is considering related issues. My bet is that the Court will take this case up as well if the parties seek review.
DGV
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