California Employment Lawyer

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Yesterday, in an opinion with implications for employment arbitration agreements, the California Court of Appeal for the First Appellate District reversed a trial court’s denial of a motion to compel arbitration. See Vasquez v. Greene Motors, Inc., et al., Case No. A134829, __ Cal.App.4th __ (1st Dist. Mar. 27, 2013). The arbitration agreement related to the purchase of a used car on credit from defendants. This opinion is notable for approving an arbitration agreement, despite the presence of a class waiver and the requirement to arbitration “public” claims. Id. at 25-26.

The Court described the clause as follows:

The reverse side, also dense with text, contains a number of provisions in separate boxes, many dealing with typical ―boilerplate legal matters, such as warranties, applicable law, and buyer and seller remedies. None of the provisions on the back page requires a buyer‘s signature. Toward the bottom of the page is the arbitration clause. The entire text of the clause is outlined in a black border. In all capital letters and bold type at the top is written, ―ARBITRATION CLAUSE [¶] PLEASE REVIEW— IMPORTANT—AFFECTS YOUR LEGAL RIGHTS. Immediately below, three numbered provisions, also in all capital letters, inform the buyer either party may request arbitration, this would prevent a court or class-wide proceeding, and it might limit discovery. Below these, in smaller type, are the actual terms of the clause. Pursuant to these terms, the arbitration may be conducted under the auspices of the National Arbitration Forum or the American Arbitration Association (AAA), at the election of the buyer, or by any other mutually agreeable organization; the initial arbitration will be conducted by a single arbitrator; it will occur in the federal district of the buyer‘s residence; the seller must advance up to $2,500 of the buyer‘s arbitration costs; the award is binding unless it is $0 or more than $100,000 or includes injunctive relief, in which 4 case either party can request a second arbitration before three arbitrators; and the use of self-help remedies and small claims court is exempted.

The Court validated the presence of a class action waiver and requirement to arbitrate public claims, finding the arguments against each “foreclosed” by Concepcion:

Finally, Vasquez argues the waiver of class action rights and the requirement to arbitrate ―public claims, such as the statutory violations alleged here, are impermissible. (See Discover Bank v. Superior Court (2005) 36 Cal.4th 148 (Discover Bank); Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303.) Both arguments have been foreclosed by the United States Supreme Court‘s decision in AT&T Mobility, LLC v. Concepcion (2011) 131 S.Ct. 1740 (Concepcion), which found preemption by the Federal Arbitration Act (9 U.S.C. § 1 et seq.). (See Phillips v. Sprint PCS (2012) 209 Cal.App.4th 758, 769; Nelsen v. Legacy Partners Residential, Inc. (2012) 207 26 Cal.App.4th 1115, 1136–1137.) Although Concepcion expressly considered only Discover Bank‘s judicially created ban on class action waivers as unconscionable, the same rationale would require a finding of preemption of the statutory ban on class action waivers in section 1751, which is similarly based on public policy.

You can read more about the opinion here.

Judges & Attorneys

Justice Margulies wrote the opinion for the court, and Justices Dondero and Banke concurred. The trial court judge was Hon. Robert S. Bowers of Solano County Superior Court

Toschi, Sidran, Collins & Doyle, David R. Sidran and Thomas M. Crowell for Defendants and Appellants.

Rosner, Barry & Babbitt, Hallen D. Rosner, Christopher P. Barry and Angela J. Smith for Plaintiff and Respondent.

By CHARLES H. JUNG

Tagged American Arbitration Association, Arbitration clause, California Court of Appeal, Car dealership, Concepcion, Federal Arbitration Act, National Arbitration Forum, PacifiCare Health Systems, United States Supreme Court

Mar 27 2013

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23(b)(3) Class, Certification, Class Actions, Damages Analysis, Experts

Supreme Court Issues Ruling With Implications for Federal Employment Class Actions

English: Supreme Court Associate Justice Antonin Scalia testifies before the House Judiciary Committee’s Commercial and Administrative Law Subcommittee on Capitol Hill May 20, 2010 in Washington, DC. Scalia and fellow Associate Justice Stephen Breyer testified to the subcommittee about the Administrative Conference of the United States. (Photo credit: Wikipedia)

Today, the U.S. Supreme Court issued its ruling in Comcast Corp., et al. v. Behrend, et al., No. 11-864, 569 U.S. ___ (Mar. 27, 2013), which may impact how employers attack discrimination and other employment class actions. In a 5 to 4 opinion, the Court reversed certification of a proposed antitrust class action. Justice Scalia, writing for the Court, concluded that the class was improperly certified under Rule 23(b)(3) because plaintiff’s damages model fell short of establishing that damages can be measured classwide. The District Court and Third Circuit approved certification of a class of more than 2 million current and former Comcast subscribers who sought damages for alleged violations of the federal antitrust laws.

At the trial court level, plaintiffs proposed four theories of antitrust impact, only one of which–the “overbuilder” theory–the trial court accepted. To establish damages, plaintiffs relied solely on the testimony of Dr. James McClave, who designed a regression model comparing actual cable prices in one area with hypothetical prices that would have prevailed but for defendant’s allegedly anticompetitive practices. Dr. McClave acknowledged that the model did not isolate damages resulting from any one theory of antitrust impact. Id. at 4.

The Supreme Court held that the class was improperly certified.

By refusing to entertain arguments against respondents’ damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination, the Court of Appeals ran afoul of our precedents requiring precisely that inquiry. And it is clear that, under the proper standard for evaluating certification, respondents’ model falls far short of establishing that damages are capable of measurement on a classwide basis. Without presenting another methodology, respondents cannot show Rule 23(b)(3) predominance: Questions of individual damage calculations will inevitably overwhelm questions common to the class.

The Court reasoned that the “model failed to measure damages resulting from the particular antitrust injury on which petitioners’ liability in this action is premised.” Id. at 8. Justice Scalia emphasized that “it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question, . . . Such an analysis will frequently entail overlap with the merits of the plaintiff ’s underlying claim.” Id. at 6 (internal quotations omitted).

By CHARLES H. JUNG

Tagged Antonin Scalia, Appellate court, Class action, Comcast, Competition law, Plaintiff, Supreme Court, Supreme Court of the United States

Mar 25 2013

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Arbitration

Press Quotes About Analysis of Compton v. Superior Court

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The author’s analysis of the Compton v. Superior Court, No. B236669, — Cal.Rptr.3d —-, 2013 WL 1120619 (2d Dist. Mar 19, 2013), was quoted in legal press today:

“In both cases, the First and Second districts applied Armendariz and invalidated arbitration agreements for lack of mutuality,” said Charles Jung, a Nassiri & Jung LLP attorney. “At least as far as California courts are concerned, Armendariz is alive and well, and it appears that this is going to continue to be the case until the California Supreme Court overrules it.”

In light of the latest ruling, plaintiffs and their attorneys looking to defeat mandatory arbitration agreements will keep an eagle eye out for any type of one-sidedness, according to Jung.

“The Compton ruling creates an avenue for employees to argue that mandatory agreements are unlawfully one-sided and that under Armendariz, they should be stricken,” he said. “For employers, it suggests the way to make arbitration agreements enforceable is by making them simple and even-handed. Employers can’t have their cake and eat it too.”

“The California Supreme Court really has its work cut out for it,” Jung said. “The challenge for the California Supreme Court is to try to preserve what it can of California’s public policy, yet not fall afoul of and directly contradict or simply ignore the U.S. Supreme Court. It’s a very tricky position for the court to be in.”

Tagged Appeal, Armendariz, California, California Court of Appeal, California Supreme Court, Compton, Law, Los Angeles, Los Angeles County, Los Angeles County Superior Court, Superior court, United States Supreme Court

Mar 20 2013

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Arbitration, Waiver

California Court of Appeal Reverses Arbitration Order in Wage Case, Citing Viability of Armendariz Bilateriality Rule

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Yesterday, the California Court of Appeal for the Second District reversed the lower court’s order granting a petition to compel arbitration in a putative wage & hour class action. Compton v. Superior Court of Los Angeles County, No. B236669, — Cal.Rptr.3d —-, 2013 WL 1120619 (2d Dist. Mar 19, 2013). Plaintiff was a property manager who was required to sign an arbitration agreement that also barred arbitration of class claims. The trial court granted defendants’ petition to compel arbitration.

Normally an order compelling arbitration is not appealable. But the Court of Appeal determined it had jurisdiction, citing the “death knell” doctrine:

An order compelling arbitration is not appealable. (Elijahjuan v. Superior Court (2012) 210 Cal.App.4th 15, 19.) The parties argue over whether this matter is appealable under the “death knell” doctrine, which applies when an order effectively terminates a class action. Rather than parse the case law on that issue, we conclude that we have jurisdiction to treat this nonappealable order as a petition for writ of mandate in this unusual case because: (1) the unconscionability issue is one of law based on undisputed facts and has been fully briefed; (2) the record is sufficient to consider the issue and it appears that the trial court would be only a nominal party; (3) if we were to dismiss the appeal, and the ultimate reversal of the order is inevitable, it would come in a post-arbitration award after the substantial time and expense of arbitrating the dispute; and (4) as a result, dismissing the appeal would require the parties to arbitrate nonarbitrable claims and would be costly and dilatory.

The Court concluded that the arbitration agreement was unconscionably one-sided because (1) it exempted from arbitration claims the employer would more likely bring, such as claims for injunctive or equitable relief from trade secret disclosures; (2) it limited the time to demand arbitration to a period shorter than the relevant statutes of limitation; (3) it retained the statute of limitations period for itself and (4) it suggested that the arbitrator had the discretion not to award mandatory attorney’s fees under the Labor Code.

The Court determined that it was not violating Concepcion by enforcing Armendariz’s bilaterality rule: Continue reading →

Tagged Arbitration, California Court of Appeal, Class action, Concepcion, Court, Death knell, Superior court, Supreme Court, Supreme Court of the United States, United States

Mar 19 2013

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CAFA Jurisdiction, Class Actions

Supreme Court Holds CAFA Jurisdiction May Not Be Defeated With Amount in Controversy Stipulation

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In a ruling today with substantial implications for California wage & hour and other employment class actions, a unanimous U.S. Supreme Court held that a putative class representative’s stipulation that he and the class would seek less than $5 million in damages does not defeat federal jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”). Standard Fire Insurance Co. v. Knowles, No. 11-1450, 586 U.S. __ (Mar. 19, 2013).

The question presented concerned a class-action plaintiff who stipulates, prior to certification of the class, that he, and the class he seeks to represent, will not seek damages that exceed $5 million in total. Does that stipulation remove the case from CAFA’s scope?

Justice Breyer writing for the Court concluded no, reasoning that stipulations must be binding, and a “plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.”

We do not agree that CAFA forbids the federal court to consider, for purposes of determining the amount in controversy, the very real possibility that a nonbinding, amount-limiting, stipulation may not survive the class certification process. This potential outcome does not result in the creation of a new case not now before the federal court. To hold otherwise would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run directly counter to CAFA’s primary objective: ensuring “Federal court consideration of interstate cases of national importance.” §2(b)(2), 119 Stat. 5. It would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5-million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute’s objective.

The Court concluded that “the stipulation at issue here can tie Knowles’ hands, but it does not resolve the amount-in-controversy question in light of his inability to bind the rest of the class.”

By CHARLES H. JUNG

Tagged $5-million, Class action, Class Action Fairness Act of 2005, Knowles, Stephen Breyer, Stipulation, Supreme Court of the United States, Wikipedia

Mar 19 2013

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Arbitration, Class Actions

California Court of Appeal for the First District Invalidates Arbitration Agreement Citing Lack of Mutuality

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In a ruling with implications for employment class action litigants, the California Court of Appeal struck down an arbitration agreement by a defendant in a putative class action, rejecting an argument that an unconscionability analysis that focuses on the lack of mutuality in an arbitration contract violates Concepcion. Natalini v. Import Motor, Inc., 213 Cal. App. 4th 587 (1st Dist., mod. February 5, 2013).

Relying on the U.S. Supreme Court’s holding in AT & T Mobility LLC v. Concepcion, 563 U.S. –––– , 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), appellant car dealer argued that an “unconscionability analysis that focuses on the lack of mutuality or bilaterality in an arbitration provision is ‘an example of applying a generally applicable contract defense in a manner which disfavors arbitration.'” The First District declined to read Concepcion so broadly, and noted that:

Recent California and federal district court decisions addressing arbitration provisions very similar to that in the present case and in the identical car purchase context have not read Concepcion so broadly. (See Trompeter v. Ally Financial, Inc. (N.D.Cal., June 1, 2012, No. C–12–00392 CW) 2012 WL 1980894 [p. *8] [nonpub. opn.] ( Trompeter ); Smith v. Americredit Financial Services, Inc. (S.D.Cal., Mar. 12, 2012, No. 09cv1076 DMS (BLM)) 2012 WL 834784 [pp. *2–*4] ( Smith ); Lau v. Mercedes–Benz USA, LLC (N.D.Cal., Jan. 31, 2012, No. CV 11–1940 MEJ) 2012 WL 370557 [pp. *6–*7] ( Lau ); see also Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 804, fn. 18, 137 Cal.Rptr.3d 773.) Continue reading →

Tagged Arbitration, AT&T Mobility v. Concepcion, California Court of Appeal, California Supreme Court, Concepcion, Federal Arbitration Act, Supreme Court, Supreme Court of the United States

Feb 21 2012

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Arbitration, Preemption

Applying Concepcion, U.S. Supreme Court Strikes Down West Virginia Rule That Held Unenforceable Certain Predispute Arbitration Agreements Claims Against Nursing Homes

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In a per curiam opinion today applying the rule in Concepcion, the U.S. Supreme Court reversed and remanded orders of the Supreme Court of Appeals of West Virginia, which held unenforceable all predispute arbitration agreements that apply to claims alleging personal injury or wrongful death against nursing homes. Marmet Health Care Center, Inc., et al. v. Clayton Brown, et al., Case Nos. 11–391 and 11–394, 565 U. S. ____ (Feb. 21, 2012).

The U.S. Supreme Court held that the “Supreme Court of Appeals of West Virginia, by misreading and disregarding the precedents of this Court interpreting the FAA, did not follow controlling federal law implementing that basic principle.” Id. “When this Court has fulfilled its duty to interpret federal law, a state court may not contradict or fail to implement the rule so established.”

Background

In each of three negligence suits, a family member of a patient requiring extensive nursing care had signed an agreement with a nursing home on behalf of the patient. Id. The agreements included arbitration clauses requiring the parties to arbitrate all disputes, other than claims to collect late payments owed by the patient. Id. In each of the three cases, a family member of a patient who had died sued the nursing home in state court, alleging that negligence caused injuries or harm resulting in death. Id.

In a decision concerning all three cases, the Supreme Court of Appeals of West Virginia held that “as a matter of public policy under West Virginia law, an arbitration clause in a nursing home admission agreement adopted prior to an occurrence of negligence that results in a personal injury or wrongful death, shall not be enforced to compel arbitration of a dispute concerning the negligence.” Id.

The state court considered whether the state public policy was pre-empted by the FAA: Continue reading →

Tagged AT&T Mobility, Concepcion, FAA, Supreme Court, Supreme Court of the United States, U.S. Supreme Court, West Virginia

Feb 17 2012

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Arbitrability, Arbitration

“Any Dispute” Language Plus Incorporation of AAA Rules Manifested Clear and Unmistakable Intent to Delegate Arbitrability Decision to Arbitrator

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In an unpublished opinion, the Second District Court of Appeal held that an arbitration clause that states that “[a]ny dispute whatsoever arising out of or referable to this Agreement, . . . as to the arbitrator’s jurisdiction, or as to the ability to arbitrate any such dispute, shall be submitted to final and binding arbitration” manifested a clear and unmistakable intent to delegate the arbitrability decision to the arbitrator. Gallo v. Youbet.com, Inc., 2012 WL 470426, No. B230274 (Feb. 14, 2012).

Background

Plaintiff Gallo is an attorney a former General Counsel of defendant Youbet.com, Inc. Id. He signed an employment agreement, which included the following arbitration clause:

Any dispute whatsoever arising out of or referable to this Agreement, including, without limitation, any dispute as to the rights and entitlements and performance of the parties under this Agreement or concerning the termination of Executive’s employment or of this Agreement or its construction or its validity or enforcement, or as to the arbitrator’s jurisdiction, or as to the ability to arbitrate any such dispute, shall be submitted to final and binding arbitration in Los Angeles, California, by and pursuant to the Labor Arbitration Rules of the American Arbitration Association with discovery proceedings pursuant to Section 1283.05 of the California Code of Civil Procedure. The arbitrator shall be entitled to award any relief, which might be available at law or in equity, including that of a provisional, permanent or injunctive nature. The prevailing party in such arbitration as determined by the arbitrator, or in any proceedings in respect thereof as determined by the person presiding, shall be entitled to receive its or his reasonable attorneys’ fees incurred in connection therewith.

Id.

Defendant moved to compel arbitration, and the trial court granted the motion except for two causes of action for alleged violation of FEHA. Id. The trial court did not issue a written rationale for its ruling or orally explain its rationale at the hearing. Id.

Discussion Continue reading →

Tagged American Arbitration Association, California, Charles L. Thompson, Dennis M. Perluss, Dispute resolution, Employment Contract, Los Angeles, Ruth Bader Ginsburg

Feb 16 2012

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Arbitration, Waiver

Engaging in Voluminous Discovery and Litigating Two Motions to Compel Sufficient to Waive Right to Arbitrate

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In an unpublished decision, the First District Court of Appeal affirmed the trial court’s denial of a motion to compel arbitration in a wage and hour class action, where defendants conducted voluminous discovery and filed and fully litigating two motions to compel further responses to discovery, a motion for sanctions and a motion for a protective order. Partridge, et al. v. Hott Wings, Inc., et al., No. A130266, 2012 WL 470458 (Feb. 14, 2012).

Discussion

The Court found that Defendants’ delay in filing their petition to compel arbitration “connotes an intent not to arbitrate”. Id. Defendants conducted substantial discovery:

Between March 2010 and the October 2010 hearing on defendants’ motion to compel arbitration, defendants engaged in voluminous written discovery to which plaintiffs responded. In addition, defendants deposed numerous plaintiffs and third party witnesses. Although plaintiffs had begun deposing witnesses, they had not yet obtained basic documents from defendants through discovery. The discovery focused on the liability of individual defendants and the franchise defendants that employ plaintiffs. As a result of defendants’ discovery requests, plaintiffs provided information regarding plaintiffs’ estimated damages, which defendants were responsible for which violations, and the liability of the individual as well as the franchise defendants. A reasonable inference is that the information gained from defendants’ discovery goes to significant issues in plaintiffs’ case.

Id.

In addition, the Court found that Defendants “substantially invoked the litigation machinery” by: Continue reading →

Tagged Arbitration, Chicken, Court, Lawyer, Montgomery Street, Motion to compel, Oakland, Plaintiff, San Francisco, Super Bowl, Trial court, United States

Feb 16 2012

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Arbitration, PAGA

Stay of PAGA Claims Pending Arbitration of Individual Claims Not Appealable

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The Court of Appeal for the First District granted plaintiff’s motion to dismiss an appeal, where the employer appellant sought review of a trial court order that did not compel an employee to arbitrate her PAGA claims. Reyes v. Macy’s, Inc., No. A133411, 202 Cal.App.4th 1119 (1st Dist. Dec. 21, 2011). The court held that the portion of the trial court’s order that failed to compel employee to arbitrate her class claims and PAGA claims was not immediately appealable; and plaintiff’s PAGA claim was not an individual claim and thus was not within the scope of arbitration request. Id. (holding that the order granting Defendant’s own motion to compel arbitration of the individual claims “is not appealable, and the remainder of the order denying the motion to dismiss representative [PAGA] claims is not a final judgment and, therefore, also is not appealable . . . .”).

Background

Plaintiff and respondent Reyes brought action against her employer Macy’s, alleging numerous class action labor code violations and a cause of action under the Labor Code Private Attorneys General Act of 2004 (“PAGA”), as well as individual claims for discrimination, harassment, and retaliation. Id.

In the trial court, Macy’s filed a “motion to compel arbitration on an individual basis, dismiss class allegations, and stay civil action,” asking the court to enforce the parties’ agreement to arbitrate, compel the plaintiff to arbitrate individual claims, dismiss class/representative claims and, if the motion were granted, stay the proceedings until arbitration is completed. Id. San Francisco Superior Court Judge Charlotte Walter Woolard held that:

All of plaintiff’s individual claims are severed and are subject to arbitration. These individual claims are to proceed to arbitration. Plaintiff’s class claims and PAGA claims, and discovery related to those claims, are stayed and shall remain in this court until the individual claims are arbitrated.

Macy’s filed a notice of appeal and plaintiff has moved to dismiss the appeal.

Discussion

Continue reading →

Tagged Class action, Court, J. C. Penney, Juniper Networks, Macy, Martha Stewart, Martha Stewart Living, New York City, PAGA, Plaintiff, San Francisco County Superior Court, William R. McGuiness