Arbitration/Employment/Waiver/FAA: First District, Div. 1, Affirms Judgment Compelling Employee To Arbitrate, Alone, With Macy’s Department Stores, Inc.
Court of Appeal Is Skeptical About Gentry, But Avoids Addressing Gentry Factors, Because Record Was Lacking
Macy’s Department Store’s Flagship location in Manhattan, New York. Carol M. Highsmith Collection. Library of Congress.
The issue of the enforceability of class action waivers and compulsory arbitration in employment disputes is before the California Supreme Court by virtue of its grant of review in Iskanian v. CLS Transportation Los Angeles, LLC, 206 Cal.App.4th 949 (2012) (review granted Sept. 6, 2012, S204032). See my June 5, 2012 post on Iskanian. Meanwhile, the Courts of Appeal must still deal with cases that present those issues, sometimes skirting the issues. Our next case, Outland v. Macy’s Department Stores, Inc., A133589 (1st Dist. Div. 1 January 16, 2013) (Margulies, J., author) (unpublished), concerns a class action brought on behalf of California residents employed as group sales managers for Macy’s, alleging they were not compensated for overtime and for missed meal and rest periods, because they were improperly classified as exempt.
The trial court granted Macy’s motion to enforce an arbitration agreement with a class action waiver. Plaintiff appealed, contending that AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740 (2011) was distinguishable, and that dismissal of her class claims could be avoid by relying upon Gentry v. Superior Court, 42 Cal.4th 443 (2007), and D.R. Horton, Inc., a decision of the National Labor Relations Board (NLRB).
Courts that take the position that Gentry is still good law point out Gentry did not establish “a categorical rule that invalidates class action waivers – the type of rule that Concepcion condemned.” Franco v. Arakelian Enterprises, Inc., 211 Cal.App.4th 314, 368 (2012). See my November 27, 2012 post on Franco. Unfortunately for plaintiff here, however, “plaintiff did not submit any evidence to the trial court concerning the Gentry factors.” Thus, there was no basis on the record for finding the class action waiver unconscionable.
The Court also says, somewhat cryptically, that notwithstanding another decision, Truly Nolen of America v. Superior Court, 208 Cal.App.4th 487 (2012), recognizing that Concepcion was inconsistent with Gentry, “we conclude we must follow Concepcion.” See my August 13, 2012 post on Truly Nolen. It is unclear how following Gentry is necessarily inconsistent with Concepcion, because Concepcion does not abolish unconscionability as a defense to arbitration. In Outland, the Court explains that there is no basis in the record “for finding the class action waiver unconscionable.” But if application of the Gentry factors, based on evidence, had led to a finding that the class action waiver was unconscionable, how would that be inconsistent with Concepcion?
Finally, like a number of other courts (including the Iskanian court) that have considered the issue, the Court of Appeal was not persuaded by the ruling in D.R. Horton., a case that held that the NLRA barred mandatory waivers of class arbitration over wages, hours, and working conditions. A ruling by the NLRB was not binding on the California courts. Nor did the Court of Appeal believe that the NLRB has any special expertise in the area of arbitration and class action waivers.
Judgment affirmed.
Arbitration/Employment: Second District, Division 5 Reverses Trial Court’s Refusal To Enforce Arbitration Agreement In Employment Handbook
Law Of The Case Allows Court To Duck More Interesting Issues Concerning Arbitrability Of PAGA And UCL Claims
Lewis v. 24 Hour Fitness USA, Inc., Case No. B239912 (2nd Dist. Div. 5 January 15, 2013) (Turner, P.J., author) (unpublished), involved the second appeal from the trial court’s refusal to enforce an arbitration agreement between employee plaintiffs and employer 24 Hour Fitness USA, Inc. The first time around, the Court of Appeal reversed the trial court’s order denying the employer’s motion to compel arbitration.
On remand from the first appeal, the trial court severed Private Attorneys General Act (PAGA) and Unfair Competition Law (UCL) claims from the arbitration, and once again, the employer appealed, leading to the present decision.
The second time around, plaintiffs/employees found themselves impaled by the law of the case doctrine: “’[t]he decision of an appellate court, stating a rule of law necessary to the decision of the case, conclusively establishes that rule and makes it determinative of the rights of the same parties in a subsequent retrial or appeal in the same case.’” Morohoshi v. Pacific Home, 34 Cal.4th 482, 491 (2004). And the first time around, the Court of Appeal’s opinion adjudicated the arbitrability of plaintiffs claims under the PAGA and UCL Law. Plaintiffs never raised the issue of the arbitrability of “any individual cause of action” and thus forfeited that issue on the first appeal. The ruling in the first appeal became the law of the case, leading to reversal of the trial court’s later order seeking to sever the PAGA and UCL claims from arbitration. Thus, the Court of Appeal avoided the substantive issues concerning arbitrability of PAGA and UCL claims.
Arbitration/Automobiles/Appealability: Order Compelling Arbitration Is Not Appealable, Nor Is It “Death Knell” Of Plaintiff’s Case
Second District, Division 2 Decision Motivates Us To Create New Sidebar Category – Arbitration: Automobiles
Our California car economy has spawned a plethora of decision concerning automobiles and arbitration. I have posted on these over the past year. Rather than link now to all the previous posts involving automobiles, I have simply created a new sidebar category – Arbitration: Automobiles. I am confident that we will see more such cases.
In the second appeal in DeSiqueira v. Toyota Motor Insurance Services, Inc., Case No. B237534 (2nd Dist. Div. 2 January 14, 2013) (Boren, P.J., author) (unpublished), the Court of Appeal addressed the argument of an automobile purchaser that the trial court erred by staying his lawsuit and ordering contractual arbitration. Toyota successfully challenged appellate jurisdiction, because an intermediate order compelling arbitration is not a final judgment, and thus is not appealable.
Plaintiff contended that the “death knell” doctrine applied, allowing him to appeal from a trial court’s order that effectively terminated his class claims. However, the “death knell doctrine only applies ‘when it is unlikely the case will proceed as an individual action.’” Szetela v. Discover Bank, 97 Cal.App.4th 1094, 1098 (2002). Here, plaintiff’s argument that he might recover $1,145, coupled with the right to recover fees and costs, undercut any argument that the individual action would not proceed. The death knell did not toll for Weber DeSiqueira.
That left plaintiff with one remaining argument: the Court should treat the purported appeal as a petition for writ of mandate because of exceptional or unusual circumstances. But the Court said that there was nothing exceptional here. Why? “Multiple cases are pending before the Supreme Court involving the issue presented in this appeal, i.e., the effect on state law of the federal decision in Concepcion.”
Appeal dismissed.
Mediation/Attorney’s Fees/Pending Cases: Fifth District Orders Publication Of Case Allowing Homeowners To Recover Pre-Litigation Mediation Fees From HOA
Grossman v. Park Fort Washington Association Is Ordered Published
On December 19, 2012, I posted about Grossman v. Park Fort Washington Association, Case No. F063125 (5th Dist. Dec. 19, 2012) (Franson, J.), a case in which the Court of Appeal held that the trial court correctly awarded fees for pre-litigation mediation to homeowners involved in a tussle with their homeowners association over construction of a backyard cabana and fireplace. Today, January 15, 2013, the Court of Appeal ordered the case to be published with minor changes that do not affect the judgment.
Arbitration/Consumers/Class Actions/FAA: Second District, Division 8 Rules That Consumer Legal Remedies Act’s Prohibition Against Class Waivers Is Preempted By The Federal Arbitration Act
“Saving Clause” of the FAA Doesn’t Save Consumer’s Unwaivable Statutory Rights Here
A hot arbitration topic is whether in various circumstances the Federal Arbitration Act (FAA) preempts “unwaivable statutory rights” under state law. That was an important question in Flores v. West Covina Auto Group, Case No. B238265 (2nd Dist. Div. 8 January 11, 2013) (Flier, J., author) (unpublished). The lawsuit arose from the purchase of a previously owned automobile from West Covina Auto Group, LLC (WCT). WCT successfully moved to compel arbitration based on an arbitration provision in the auto sales contact, and the consumer appealed.
The consumer argued that arbitration was inappropriate: “(1) a ‘poison pill’ provision in the arbitration clause prohibits arbitration; (2) WCT waived its right to arbitration; (3) the arbitration clause is unconscionable; (4) there was no meeting of the minds or mutual consent regarding the arbitration clause; and (5) as an unexpected term in an [sic] contract of adhesion, the arbitration clause is unenforceable.” All the arguments went down in flames.
The Federal Arbitration Act provides arbitration agreements “shall be valid, irrevocable, and enforceable,” except on “such grounds as exist at law or in equity for the revocation of any contract” – the last phrase being the so-called “saving clause” of the Act. The consumers here argued, in effect, that their unwaivable statutory rights under the CLRA constituted grounds under the savings clause to avoid arbitration. But the savings clause of the Act was not enough to save them from arbitration here.
Significantly, the Court of Appeal held that the ruling in Fisher v. DCH Temecula Imports LLC, 187 Cal.App.4th 601 (2010), holding that the right to a class action lawsuit or classwide arbitration was an unwaivable statutory right under the California Consumer Legal Remedies Act, has been preempted by the Federal Arbitration Act, following the Supreme Court’s ruling in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011).
No waiver by the auto dealer of the right to arbitrate was found to have occurred, despite extensive litigation. Here, timing was important: Fisher was decided just after the plaintiffs filed their original complaint, precluding arbitration, and within two weeks after the filing of Concepcion, the auto dealer informed the trial court that it intended to compel arbitration. In concluding that the auto dealer had not waived its right to arbitrate, the Court “decline[d] to establish a rule that WCT should have done everything possible to compel arbitration, no matter how futile, expensive, or protracted the process.”
Despite the fact that the contract contained a number of clauses that other courts have found to be one-sided, prejudicial, and unconscionable, the Court here found no prejudice or unconscionability. I note the Court stated, “appellants have not shown prejudice” – and therein lies a clue as to how consumers must attack such arbitration clauses if they are to have any hope of avoiding arbitration. They must make particularized showings, based on admissible evidence, that in their case, the contractual provisions are unduly prejudicial or unconscionable. Given the post-Concepcion legal trend, a general argument that waiver of a statutory right to a class action is unconscionable, without a particularized showing based on evidence, is going to be a tough, if not impossible, argument to win.
Arbitration/Construction/Burden of Proof: Fourth District, Division 3 Affirms Contractor’s Right To Arbitrate In Decision That Hinges On The Word “Involves”
Disneyland of Construction: Involvement In Project Versus Involvement In Dispute Is The Issue Here
Carol M. Highsmith, photographer. Between 1980 and 2006. Library of Congress.
Subcontractor Pacific Westline, Inc. sued contractor C.W. Driver, alleging Driver refused to pay for additional work on a hotel at Disneyland. Driver successfully petitioned to compel arbitration, and Pacific appealed the order granting Driver’s petition. Pacific Westline, Inc. v. C.W. Driver, Inc., Case No. G046357 (4th Dist. Div. 3 January 9, 2013) (Bedsworth, J.) (unpublished).
The subcontract between Pacific and Driver, which incorporated ADR procedures adopted in the “prime contract” between Disney and Driver, mandated arbitration “for disputes not involving the acts, omissions or otherwise the responsibility of [Disney].” Thus, the requirement to arbitrate hinged on whether the dispute “involved” Disney, because if Disney was involved, then Pacific did not have to arbitrate.
Justice Bedsworth, a wordsmith himself, noted that “involve” has several meanings. But that was no help to Pacific, because “the burden must fall upon the party opposing arbitration to demonstrate that an arbitration clause cannot be interpreted to require arbitration of the dispute.” (citing Coast Plaza Doctors Hospital v. Blue Cross of California, 83 Cal.App.4th 677, 686-687). Here, the clause could be interpreted to require arbitration of the dispute.
Besides, involvement in the project was not the key to arbitration: “the clause speaks instead of involvement in the claim or the dispute.” And the evidence showed only Disney’s involvement in the project, not in the dispute with Driver.
Affirmed.