California Court Holds That Concepcion Invalidates Gentry

June 4, 2012 - 1:39 PM
Topics: Arbitration Agreements, Class Actions, Court Decisions

Today a California court issued the first published state court decision addressing whether the United States Supreme Court's decision in AT&T Mobility v Concepcion invalidates the California Supreme Court's decision in Gentry v. Superior Court, addressing the enforceability of class action waivers in employment arbitration agreements.   In a very favorable ruling for employers, the court in Iskanian v. CLS Transportation Los Angeles held that the employer's motion to compel arbitration was properly granted and that the plaintiff had to pursue his wage and hour and PAGA claims individually in arbitration and that all class and representative allegations had to be dismissed from the case. 

The plaintiff was a former driver for CLS.  In the course of his employment, he signed an agreement providing that any all claims arising out of his employment would be resolved by binding arbitration.  The agreement included a provision stating that class and/or representative actions could not be pursued in arbitration. 

Disregarding the arbitration agreement, the plaintiff employee filed a class action lawsuit in court against CLS, alleging run of the mill wage and hour claims (overtime, meal and rest break claims, wage statement claims, and a PAGA claim).  CLS moved to compel arbitration, which the trial court granted.  Plaintiff appealed, and during the pendency of the appeal the California Supreme Court issued its decision in Gentry v. Superior Court, holding that class action waivers in employment arbitration agreements are unenforceable if certain factors are present that  effectively preclude the plaintiff from vindicating statutory rights.  Based on Gentry, CLS withdrew its motion to compel arbitration and the parties proceeded to litigate the case in court, during which time class certification was ordered.  After all this, the tide turned and the United States Supreme Court issued its decision in Concepcion, holding that the FAA preempts state laws that impose special limitations on arbitration.  Based on Concepcion, CLS renewed its motion to compel individual arbitration and to dismiss the class and representative claims.  The trial court granted the motion and the plaintiff again appealed.

The appellate court agreed with the trial court's ruling compelling arbitration and dismissing both the class and representative claims.  The court held that Concepcion invalidates Gentry's limitation on enforcing class action waivers and that parties cannot be compelled to arbitrate claims on a classwide basis.  Going a step further, the court also held that the representative action (PAGA) waiver was also enforceable, disagreeing with another recent California case, Brown v. Ralphs Grocery.  If that were not enough, the court further addressed whether the NLRB's recent decision in D.R. Horton (holding that class action waivers violate the NLRA) was a basis for invalidating the class action waiver.  The court disagreed with the NLRB's analysis in D.R. Horton and declined to follow it.   Finally, the court rejected the plaintiff's argument that CLS had waived its right to compel arbitration by withdrawing its motion and litigating the case for some period of time after Gentry was issued.  The court held that CLS had not waived its right to compel arbitration because it originally timely pursued arbitration and only changed course after Gentry came out and Gentry would have led to denial of the motion.  When Concepcion was issued, CLS again timely pursued arbitration.  As a result, there was no waiver.

In sum, the Iskanian v. CLS case is a very favorable case for employers trying to compel arbitration in putative class actions in California.  Employers should bear in mind that there is still some disagreement among courts on the breadth of Concepcion and the degree to which it invalidates California law on enforceability of employment arbitration agreements, particularly in the area of enforceability of PAGA representative action waivers.  Stay tuned as there will certainly be continuing developments in this area. 

Blog Editor

Cal Labor Law

Robin E. Largent is a Partner in CDF’s Sacramento office and may be reached at 916.361.0991 or BIO »

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