Jackson Lewis P.C

Transcription

1 1 2 Discover Bank had a class action waiver in its arbitration agreements with credit card holders Court of Appeal upheld the class action waiver, holding that California rule prohibiting class action waivers was preempted by the Federal Arbitration Act (the FAA ) California Supreme Court reversed, holding that when a class action waiver is found in a consumer contract of adhesion, the agreement is unconscionable under California law and this decision was not preempted by the FAA 3 Jackson Lewis P.C

2 Circuit City had a class action waiver in its arbitration agreements with employees Employee filed suit for violations of the California Labor Code Court of Appeal upheld the class action waiver California Supreme Court reversed, holding that at least in some cases, such class action waivers undermine the vindication of employees unwaivable statutory rights and pose an obstacle to enforcement of overtime laws. Factors to consider: o Modest size of potential individual recovery; o Potential for retaliation against class members; o Fact that absent class membersmay be ill informed about their rights; and o Other real world obstacles to vindication of class members rights. California Supreme Court noted that it had rejected FAA preemption in Discover Bank 4 Shipping companies entered into arbitration agreements with their customers Customers filed antitrust claims, which were submitted to arbitration. Parties stipulated that arbitration clause was silent with respect to class arbitration United States Supreme Court held that arbitration panel had exceeded its powers by concluding that arbitration clause allowed for class claims Party cannot be compelled under the FAA to submit to class arbitration absent a contractual basis for concluding that the party had agreed to do so Differences between bilateral and class arbitration were too great to allow arbitration panel to presume that parties silence on issue constituted consent to arbitrate class claims 5 6 Jackson Lewis P.C

3 Vincent and Liza Concepcion entered into a cell phone contract with AT&T in California which guaranteed them a free phone The Concepcions filed a class action in California state court alleging that AT&T was liable for false advertising and fraud 7 The arbitration clause required that all disputes be resolved through arbitration The arbitration clause prohibited participation in class or representative actions only individual cases allowed AT&T made several amendments to the arbitration provisions which the clause permitted 8 The U.S. Supreme Court addressed the California Supreme Court s Discover Bank holding that class waivers in consumer arbitration agreements are not enforceable 9 Jackson Lewis P.C

4 The Supreme Court held the FAA preempts the Discover Bank Rule the FAA mandates that arbitration agreements be enforced as they are written o The Court also emphasized that, parties are free to structure their arbitration agreements as they like; parties may agree to limit the issues subject to arbitration, to arbitrate according to specific rules, and to limit with whom [they] will arbitrate. o Consequently, state laws that override the parties express agreement are preempted because they interfere with the FAA s agreement enforcement mandate. The Court did not expressly overrule or even reference Gentry 10 Sonic-Calabasas had a class action waiver in its arbitration agreements with employees Employee filed suit for violations of the Labor Code Parties agreed that wage claim was within scope of arbitration agreement, but disagreed as to whether it contained a right to a hearing before the DLSE prior to commencement of arbitration proceedings 11 California Supreme Court ultimately held that the FAA preempts state law rule categorically prohibiting waiver of a DLSE hearing in a pre-dispute arbitration agreement Also held that states may continue to enforce unconscionability rules that do not interfere with fundamental attributes of arbitration Remanded case to trial court to determine whether the arbitration agreement at issue was unreasonable 12 Jackson Lewis P.C

5 13 Limo driver filed a putative class action for alleged wage and hour violations, including claims for penalties under the PAGA. Arbitration agreement included a class and representative action waiver. 14 After the U.S. Supreme Court decided Concepcion and after the trial court already had granted Plaintiff s motion for class certification, CLS moved to compel arbitration and to dismiss the class claims arguing that Concepcion overruled Gentry (which found class action waivers unenforceable). The trial court found in favor of CLS and entered an order requiring individual arbitration and dismissing the class claims. The Court of Appeal affirmed that ruling in all respects. In doing so, the Court of Appeal held that Concepcion not only overruled Discover Bank, but it also held that Concepcion conclusively invalidates the Gentry test. 15 Jackson Lewis P.C

6 CA Supreme Court accepted review to decide the following issues: Did the U.S. Supreme Court s decision in Concepcion impliedly overrule Gentry? Does Concepcion permit arbitration agreements to override the statutory right to bring an action under the Labor Code Private Attorneys General Act of 2004 (the PAGA ) Does a class action waiver violate the NLRA? 16 On June 23, 2014, the California Supreme Court issued its decision finding that: o The FAA preempts California law holding waivers of class claims to be unenforceable finding that Concepcion overruled Gentry o The FAA does not preempt the PAGA and employers may not contract around an employee s right to maintain a representative action under the PAGA. o Class action waivers do not violate the NLRA Jackson Lewis P.C

7 Concepcion and Stolt-Nielsen hold that absent an agreement authorizing class arbitration, the parties cannot be compelled to submit their dispute to class arbitration. However, where there is no express class action waiver in an arbitration agreement, class action arbitration is not prohibited if both parties have agreed to the procedure explicitly or implicitly. (Truly Nolen.) In the cases of Kinecta v. Superior Court and Nelsen v. Legacy Partners, the California Court of Appeal found no agreement to permit classwide arbitration where the explicit language of the arbitration agreements was inconsistent with an intent to allow class arbitration. 19 A credit union employee filed a lawsuit in Los Angeles County Superior Court against her employer for alleged wage and hour violations on behalf of herself and a putative class. The arbitration agreement between the parties stated: Both the Credit Union and I agree that any claim, dispute, and/or controversy that either I may have against the Credit Union (or its owners, directors, officers, managers, employees, agents, and parties affiliated with its employee benefit and health plans) or the Credit Union may have against me, arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with the Credit Union shall be submitted to and determined exclusively by binding arbitration The arbitration agreement was silent on the issue of class arbitration. It did not expressly authorize or prohibit such a procedure. 20 The trial court compelled arbitration but denied the employer s request to dismiss the class claims, compelling class arbitration. The employer appealed this order denying the request to dismiss the class claims. The issue before the court was whether a party to an arbitration provision which neither authorizes nor prohibits class arbitration can be compelled to arbitrate class arbitration. 21 Jackson Lewis P.C

8 In following Stolt-Nielsen and Concepcion, the Court of Appeal analyzed and interpreted the language of the arbitration agreement and held there was no contractual basis for finding the agreement authorized class arbitration. o The language of the arbitration agreement was inconsistent with an intent to allow class arbitration. o Specifically, the Court of Appeal noted that the agreement contemplated only an individual action, made no reference to employee groups or to other employees... and instead refer[ed] exclusively to [the plaintiff]. 22 Arbitrations usually cost less than trials Arbitrations avoid runaway jury verdicts No more class actions? 23 Contract formation Necessary components Unconscionability doctrine 24 Jackson Lewis P.C

9 Employee Handbook vs. Stand-Alone Agreement Length of the Agreement, Font Statements to include: o The parties understand they are agreeing to waive their right to a jury trial o The parties have read the agreement and understand it o The parties have been given an opportunity to review the agreement with legal counsel Signature of Employee 25 Employer had Dispute Resolution Policy in Employee Handbook Distributed to all employees Plaintiff-employee signed acknowledgement form, but the acknowledgement form did not mention the arbitration policy Handbook stated, This Handbook is not intended to create a contract of employment and does not in any way alter the at-will employment relationship between [defendant] and its Employees. 26 The Court did not enforce the dispute resolution policy. Why not? The policy was an obscure clause in a lengthy employee handbook The handbook was for informational purposes only The handbook specifically stated that it was not meant to create a contract 27 Jackson Lewis P.C

10 Employees who do not read English: Samaniego v. Empire Today, LLC (2012) 205 Cal.App.4th 1138, rev. denied, 2012 Cal. LEXIS 6596 (Cal., July 11, 2012) Contract was take it or leave it 11 single-spaced pages Complex legal terminology Plaintiff-employees could not read English and requested Spanish translations Employer refused to provide translations or allow the employees to take the agreements home 28 Armendariz Factors Neutral arbitrator Adequate discovery Allows all relief which would be available in court No cost-shifting Written arbitration award Mutuality Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th To be invalid in California, a contract must be both procedurally and substantively unconscionable Procedural unconscionability focuses on whether there existed any oppression or surprise in the manner in which the contract was negotiated, and the circumstances of the parties at the time of negotiation Substantive unconscionability focuses on whether the terms of the contract are so one-sided as to shock the conscience Unconscionability determined on a sliding scale 30 Jackson Lewis P.C

11 Mandatory, non-negotiable agreement take it or leave it Failing to describe, provide, or attach arbitration rules Small print Lengthy agreement Buried in a stack of documents or at the end of an employee handbook Surprise or hidden terms Failing to explain that arbitration means waiver of a jury trial Use of legalese Providing the agreement in English only? 31 When the Armendariz factors aren t met and more 32 Employer and employee must submit their claims to arbitration One-sided language Claims likely to be brought by the employer are carved out Signature of employer representative necessary? 33 Jackson Lewis P.C

12 I agree, in the event I am hired by the company, that all disputes and claims that might arise out of my employment with the company will be submitted to binding arbitration. Roman v. Superior Court (2009) 172 Cal.App.4th I hereby agree to submit to binding arbitration all disputes and claims arising out of the submission of this application. I further agree, in the event that I am hired by AccentCare, that all disputes that cannot be resolved by informal internal resolution which might arise out of my employment with AccentCare, whether during or after that employment, will be submitted to binding arbitration. I agree that such arbitration shall be conducted under the rules then in effect of the American Arbitration Association. Wisdom v. AccentCare, Inc. (2012) 202 Cal.App.4th 591, review granted, depublished (2012) 139 Cal.Rptr.3d Trade secrets violations, use of confidential or proprietary information Claims for injunctive relief Provisional remedies Other forms of theft 36 Jackson Lewis P.C

13 May the arbitrator decide his or her own jurisdiction, i.e., decide issues of enforceability of the arbitration agreement? 37 Normally, court decides gateway issues of enforceability of arbitration agreement For parties to deviate from this default, they must present clear and unmistakable evidence of an intent to have the arbitrator decide issues of enforceability Clear and unmistakable standard is a heightened standard of proof 38 Arbitration agreement provided that [t]he Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable. The United States Supreme Court upheld this provision because it was merely an agreement to arbitrate gateway issues. Rent-A-Center West, Inc. v. Jackson (2010) 130 S.Ct Jackson Lewis P.C

14 Provision giving the arbitrator exclusive authority to decide enforceability issues held unconscionable and unenforceable by at least two California courts. Why? Adhesion contract Offered on a take it or leave it basis - Unequal bargaining power Weaker party would normally expect that a court would decide gateway issues, such as the jurisdiction of the arbitrator Stronger party tends to be a repeat player in the arbitration setting Provides advantages such as knowledge of the arbitrators temperaments, procedural preferences, and styles Arbitrator has a unique self-interest in deciding that a dispute is arbitrable Ontiveros v. DHL Express (USA), Inc. (2008) 164 Cal.App.4th 494 Murphy v. Check n Go of California, Inc. (2007) 156 Cal.App.4th Ambiguity in language permitting court, tribunal, trier of fact, or fact-finder to sever unconscionable terms Agreement to arbitrate gateway issues must be clear and unmistakable In the event that any provision of this Agreement shall be determined by a trier of fact of competent jurisdiction to be unenforceable in any jurisdiction, such provision shall be unenforceable in that jurisdiction and the remainder of this Agreement shall remain binding upon the parties as if such provision was not contained herein. Ajamian v. CantorCO2e, L.P. (2012) 203 CalApp.4th 771 Hartley v. Superior Court (2011) 196 Cal.App.4th 1249 Parada v. Superior Court (2009) 176 Cal.App.4th 1554 Baker v. Osborne Development Corp. (2008) 159 Cal.App.4th Another thought: is a delegation provision desirable? 42 Jackson Lewis P.C

15 Example: This Employee Handbook may be amended, revised and/or modified by [defendant] at any time without notice. If you have any questions about this, please contact the Human Resources Department. Renders the arbitration agreement or policy illusory only one party is bound Must give notice of modifications or revocation Must exempt claims that are known or have accrued prior to the effective date of the modifications or revocation 43 Parties are entitled to adequate discovery not unfettered discovery Agreement should allow arbitrator discretion to increase the amount of discovery: o Each party shall have the right to take the deposition of one individual and any expert witness designated by another party.... Additional discovery may be had where the Arbitrator selected pursuant to this Agreement so orders, upon a showing of need. Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th Extreme discovery limitations will not be upheld: o One deposition and one document request not upheld Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107 o Three depositions and 30 total discovery requests not upheld Ferguson v. Countrywide Credit Indus. (9th Cir. 2002) 298 F.3d Jackson Lewis P.C

16 Failing to attach or include arbitration rules Shortening statutes of limitations Precluding employees from filing administrative charges or complaints Requiring employee to pay costs unique to arbitration o Filing fees Loser pays provisions Mandatory mediation or pre-dispute resolution procedures? 46 Pros: Supposedly cost-effective, streamlined procedure Informal rules of civil procedure or evidence do not necessarily apply Avoids run-away juries No class actions? Arbitrators may tend to split the difference 47 Cons: Arbitrations can become expensive very early in the process Difficult to get dispositive motions granted in arbitration Runaway arbitrators who make findings unsupported by the law and facts Arbitration decisions are virtually impossible to successfully vacate, and there are no appeals unless the agreement expressly says so Arbitrators may tend to split the difference 48 Jackson Lewis P.C

17 Decide whether an arbitration agreement is worthwhile to your organization If an arbitration agreement is desirable, decide whether to have an express class action waiver or silence Review your arbitration agreement at least annually with counsel 49 Jackson Lewis P.C

18 David G. Hoiles, Jr. Office Managing Shareholder, San Diego Office Jackson Lewis P.C. (619) DAVID G. HOILES, JR. is Office Managing Shareholder of the San Diego, California office of Jackson Lewis P.C. Mr. Hoiles represents employers and individual defendants in all types of employment litigation, including the defense of claims of sexual harassment, unlawful employment discrimination and retaliation, failure to provide reasonable accommodations, breach of contract, intentional tort, misappropriation of trade secrets and unfair competition. Mr. Hoiles also has significant experience defending employers in wage and hour litigation, including representative and class action lawsuits. Mr. Hoiles practices both in state and federal court and also before such tribunals as the United States Equal Employment Opportunity Commission, the California Department of Fair Employment and Housing and the California Department of Industrial Relations - Division of Labor Standards Enforcement. In addition to his skills as a litigator, Mr. Hoiles also has substantial experience counseling clients on a variety of employment-related issues and conducts training seminars, including sexual harassment prevention training. Mr. Hoiles is a member of the firm s Litigation; Class Actions and Complex Litigation; Trade Secrets, Non-Competes and Workplace Technology; and Wage and Hour Compliance practice groups. Mr. Hoiles is a member of the State Bar of California and also is admitted to practice in the United States District Courts, Central, Eastern and Southern Districts of California and the Ninth Circuit Court of Appeals. Mr. Hoiles is a member of the Labor and Employment Law Section of the State Bar of California, the San Diego County Bar Association and the Los Angeles County Bar Association. Mr. Hoiles received his Bachelor of Arts degree in International Relations, cum laude, and paralegal certificate from the University of San Diego in He received his Juris Doctor from Loyola Law School, Los Angeles in While in law school, Mr. Hoiles was a judicial extern for the Honorable James M. Ideman, United States District Court, Central District of California. Mr. Hoiles regularly volunteers with the Los Angeles County Bar Association s Domestic Violence Project, where he assists victims of domestic violence in their efforts to obtain restraining orders against abusive individuals with whom the victims have a relationship. Mr. Hoiles most enjoys spending time with his wife and three young children, playing basketball and rooting for his beloved San Diego Chargers. Published Decision: Kinecta Alternative Financial Solutions, Inc. (2012) 205 Cal.App.4th 506, rev. denied. Unpublished Decision: Rocha v. Kinecta Federal Credit Union (2012) 2012 Cal. App. Unpub. LEXIS 6183, rev. denied , v. 2

19 Chad D. Bernard Shareholder, San Diego Office Jackson Lewis P.C. (619) CHAD D. BERNARD is Shareholder in the San Diego, California office of Jackson Lewis P.C. Mr. Bernard has represented employers and individual defendants in all types of employment litigation, including discrimination on the basis of sex, race, age, religion, sexual orientation, disability and retaliation and wrongful termination as well as wage and hour actions. Mr. Bernard has extensive experience in class action and representative action litigations, including over 90 class actions in California alone. In addition, Mr. Bernard has handled class-wide arbitrations and mediations as well as administrative hearings before state and federal agencies. Mr. Bernard was an adjunct professor at U.C. Hastings College of the Law from 2000 to 2004, teaching Legal Writing & Research and Moot Court courses and was an adjunct professor at the University of Southern California Law School, teaching legal writing and oral advocacy from 2004 to Mr. Bernard is a member of the American Bar Association, the San Diego County Bar Association, the Los Angeles County Bar Association, and Association of Corporate Counsel. Mr. Bernard was on the boards of the Sierra Madre Little League and the Sierra Madre Community Foundation and is currently a member of the Tournament of Roses. Mr. Bernard regularly speaks on topics regarding class action litigation and arbitration actions. Prior to joining Jackson Lewis P.C., Mr. Bernard was a Deputy District Attorney for the County of Alameda, where he tried over 35 jury trials and 250 court hearings, and practiced securities and employment law at law firms in San Francisco and Walnut Creek, California. Mr. Bernard is admitted to practice in all California State Courts as well as the United States District Court for the Central, Eastern, Northern, and Southern Districts of California. Mr. Bernard received his Bachelor of Science degree with honors from San Diego State University in 1993 and received his Juris Doctor with honors from The University of the Pacific, McGeorge School of Law in While at McGeorge, Mr. Bernard was staff writer and editor for the Pacific Law Journal and was a managing editor for the Transnational Lawyer. Current Representative Clients Darden Restaurants (Red Lobster, Olive Garden) Cardinal Health The Finish Line, Inc. Hilton Hotel Corporation RockTenn Toys R Us/ Babies R Us Newell Rubbermaid Equinox Fitness Claim Jumper Guitar Centers Niagara Water Masco Corp. Brinker Restaurants Vibra Hospitals