Tag Archives: Supreme Court

Supreme Court Issues Ruling With Implications for Federal Employment Class Actions

English: Supreme Court Associate Justice Anton...

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

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

English: own work

English: own work (Photo credit: Wikipedia)

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

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

albanian car dealer

albanian car dealer (Photo credit: gabork)

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

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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

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Second District Holds that Federal Choice of Law Provision in Arbitration Agreement Requires Application of Vacatur Provisions of FAA

CALABASAS, CA - JULY 18:  The Countrywide Fina...
Image by Getty Images via @daylife

In a 3-0 opinion, the Second District held that while California state courts do not apply the FAA vactur provisions, because of the choice of law provision in the arbitration agreement, the trial judge was required to utilize the vacatur provisions of the FAA in passing on the amended petition to vacate the partial arbitration awards.

In Countrywide Financial Corp. v. Bundy, — Cal.Rptr.3d —-, 2010 WL 3064481 (Cal. Ct. App. 2d Dist. August 06, 2010), Defendants, Thomas Bundy, Misty Sanchez, Kevin Prevost and David Godina, appealed from an order vacating partial arbitration awards against plaintiffs, Countrywide Financial Corporation and Full Spectrum Lending, Inc.

The underlying case involved two arbitrations that were ultimately consolidated. The Bundy-Sanchez-Prevost arbitration demand sought classwide arbitration of claims for unpaid wages including incentive compensation, waiting penalties, costs and attorney fees pursuant to Labor Code section 200 et seq., Business and Professions Code section 17200 et seq., and common law principles.  The Godina arbitration demand alleged many of the same matters in terms of plaintiffs’ operations.

The arbitrator issued partial arbitration awards in favor of defendant.  Judge Elizabeth A. White vacated the partial arbitration awards on the ground the arbitrator committed a number of legal errors.  The Second District concluded that because of the unambiguous choice of law language in the agreements to arbitrate, “we must apply the vacatur provisions applicable before a United States District Court in a case subject to the Federal Arbitration Act. (9 U.S.C. § 1 et seq.)”  Applying the vacatur provisions of the Federal Arbitration Act, the Court of Appeal reversed, finding “no grounds permitted the partial awards to be vacated.”

The Court expressed doubt regarding whether the “manifest disregard of the law standard” survives Hall Street Associates L.L.C., but it chose to evaluate the interim awards under both title 9 United States Code section 10(a)(4) and the manifest disregard of the law test.  ; the course chosen by the Supreme Court in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., supra, 559 U.S. at page —- [130 S.Ct. at page 1768].”  The Court described the manifest disregard standard as follows:

The first element is the arbitrator must know the governing rule of law and refuse to apply it or ignore it. The second element is that the law ignored by the arbitrator is well-defined, explicit, and clearly applicable to the case.

Presiding Justice Paul A. Turner wrote the opinion.  Hon. Sandy R. Kriegler and Hon. Richard M. Mosk concurred.

Defendants and appellants were represented by Caryl L. Boies, Sigrid S. McCawley and Lauren E. Fleischer of Boies, Schiller & Flexner.

Plaintiffs and Respondents were represented by Andrew M. Paley, Gregg A. Fisch and Jennifer Sloane Abramowitz of Seyfarth Shaw.

By CHARLES H. JUNG

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