The UCL Practitioner

New opinion declines to enforce arbitration clause: Imburgia v. DirecTV, Inc. (Updated)

In Imburgia v. DirecTV, Inc., ___ Cal.App.4th ___ (Apr. 7, 2014), the Court of Appeal (Second Appellate District, Division One) wrote as follows:

After briefing in this appeal was completed, the United States Court of Appeals for the Ninth Circuit decided a similar case concerning the enforceability of the arbitration provision and class action waiver in DIRECTV’s customer agreement under Concepcion.  (See Murphy v. DIRECTV, Inc. (9th Cir. 2013) 724 F.3d 1218 (Murphy).)  The court held that “the arbitration agreement is enforceable under Concepcion,” which preempts any state law to the contrary.  (Id. at p. 1228.)  The court reasoned that “the parties’ various contract interpretation arguments”—which included both the argument that the specific reference to state law controlled over the general reference to the FAA and the argument that ambiguities should be construed against the drafter—“are largely irrelevant to our analysis,” because under the Supremacy Clause of the United States Constitution, and the related doctrine of federal preemption, federal law is the law of every state.  (Ibid.; see also id. at p. 1226 [“Section 2 of the FAA, which under Concepcion requires the enforcement of arbitration agreements that ban class procedures, is the law of California and of every other state”]; see generally id. at pp. 1225-1228.)

We find the analysis in Murphy unpersuasive.  On the one hand, insofar as the court’s reasoning is a matter of contract interpretation, it means that when the parties used the phrase “the law of your state,” they meant “federal law plus (nonfederal) state law.”  Murphy provides no basis for concluding that the parties intended to use the phrase “the law of your state” in such a way, and we are aware of none.  On the contrary, a reasonable reader of the customer agreement would naturally interpret the phrase “the law of your state” as referring to (nonfederal) state law, and any ambiguity should be construed against the drafter. On the other hand, insofar as the court reasoned that contract interpretation is irrelevant because the parties are powerless to opt out of the FAA by contract, we are aware of no authority for the court’s position.  Rather, as we have already observed, if the customer agreement expressly provided that the enforceability of the class action waiver “shall be determined under the (nonfederal) law of your state without considering the preemptive effect, if any, of the FAA,” then that choice of law would be enforceable; Murphy cites no authority to the contrary.  Consequently, the dispositive issue is whether the parties intended to make that choice.  As a result, “the parties’ various contract interpretation arguments” are not “largely irrelevant.”  (Murphy, supra, 724 F.3d at p. 1228.)

To summarize:  Section 9 of the 2007 customer agreement provides that “if . . . the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire Section 9 is unenforceable.”  The class action waiver is unenforceable under California law, so the entire arbitration agreement is unenforceable.  The superior court therefore properly denied the motion to compel arbitration.

Slip op. at 9-10 (footnotes omitted).  (This was my original, brief, blog post on Murphy.)

Scott Leviant has a more detailed post on Imburgia over at The Complex Litigator.

UPDATE:  On March 23, 2015, the U.S. Supreme Court granted cert. in this case.  DIRECTV, Inc. v. Imburgia, Case No. 14-462. 

U.S. Supreme Court takes up another CAFA case: Dart Cherokee Basin Operating Co. v. Owens

On Monday, the U.S. Supreme Court granted cert. in a CAFA case, Dart Cherokee Basin Operating Co. v. Owens, No. 13-719.  This is the question presented, according to the cert. petition:

Whether a defendant seeking removal to federal court is required to include evidence supporting federal jurisdiction in the notice of removal, or is alleging the required “short and plain statement of the grounds for removal” enough?

The defendant's removal petition was predicated on CAFA, but the district court remanded because the petition contained only allegations, and not evidence, that the requirements for federal removal jurisdiction -- namely, the $5 million amount-in-controversy requirement -- had been satisfied.  Owens v. Dart Cherokee Basin Operating Co., 2013 WL 2237740 (D. Kan. May 21, 2013).  The Tenth Circuit denied permission to appeal. 

Four judges dissented from the ensuing order denying en banc rehearing.  Dart Cherokee Basin Operating Co. v. Owens, 730 F.3d 1234 (10th Cir. 2013).  The dissenting opinion by Judge Hartz begins:

This court owes a duty to the bench and bar to provide guidance regarding the procedural requirements of the Class Action Fairness Act of 2005 (CAFA). Yet it has let stand a district-court decision that will in effect impose in this circuit requirements for notices of removal that are even more onerous than the code pleading requirements that I had thought the federal courts abandoned long ago.

Id. at 1234.

SCOTUSblog's case page has links to the cert. petition and other filings.

Recent Ninth Circuit opinion touches on the "unlawful" prong: In re Late Fee and Overlimit Fee Litig.

In In re Late Fee and Overlimit Fee Litigation, 741 F.3d 1022 (9th Cir. Jan. 21, 2014), the Ninth Circuit affirmed dismissal of the UCL claim: 

California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq., makes violations of other state and federal laws "independently actionable as unfair competitive practices." CRST Van Expedited, Inc. v. Werner Enters., Inc., 479 F.3d 1099, 1107 (9th Cir. 2007) (citation omitted). Because we conclude that the issuers' conduct did not violate the National Bank Act or the DIDMCA, there is no derivative liability under the Unfair Competition Law.

Id. at 1027.

From that language, it appears that the plaintiffs did not allege that the defendant's conduct was "unfair," but only that it was "unlawful." 

This is an interesting case.  It challenges the late fees charged by credit card companies.  The theory is that these fees are analogous to punitive damages, and that the fees are charged in amounts that exceed the constitutional due process limits set forth in  BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996) and the single-digit ration established in State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003). 

The concurring opinion of Judge Reinhardt is worth a read:

This is a constitutional case of first impression. It is an attempt by a group of cardholders to have a new constitutional doctrine applied even-handedly. Their proposed rule would protect consumers from excessive penalties just as the current rule protects corporate and business entities from excessive punitive damages. Constitutional evolution requires continuous evaluation of newly established principles to ensure that changes occur within the framework of fairness and equality. Such must be the case here.

Id. at 1029.

More thoughts on Iskanian as well as Ayala

I have not seen any news or blog coverage of the oral argument last Thursday in Ayala v. Antelope Valley Newspapers, No. S206874, but I have heard from more than one source that the justices had no questions about the class certification issues that the case raises.  Instead, the questioning apparently focused solely on the question of what legal standard governs in determining whether the newspaper carriers are employees or independent contractors. 

The Court ordered the parties to submit supplemental briefing on this question last year, and if the reports are accurate, the Court is much more interested in this question than on the class certification issues that appeared to have prompted the grant of review.  Bryan Schwartz has more thoughts on Ayala on his blog (which is called simply Bryan Schwartz Law).

I have received additional impressions on Iskanian from attorney Eric Kingsley of Kingsley & Kingsley in Encino.  Eric graciously allowed me to share them here:

****

I attended the argument in Iskanian v. CLS on April 3, 2014.  It was exhilarating.  What fun to be there as part of this historic day.  To start the day Justice Baxter gave a very moving tribute to Justice Kennard and honored her 25 years of service on the court. The argument itself was as expected, but so much better.  While many prognosticated about the likely result in the case, hearing the Justices ask very robust questions was fascinating.  All the Justices except Justice Baxter participated in the questioning, but as expected Justice Liu dominated the proceedings. 

Many defense lawyers have attacked and argued that Gentry died in 2011 the same day that Concepcion invalidated Discover Bank.  Many Court of Appeal decisions have held off pronouncing the time of death until they were sure the patient was actually dead.  They did not want to be the ones to do it, but rather thought the parents (CA Supreme Court) should be the ones to put her to rest.  Well, Thursday’s argument made it clear that the patient did not survive.  My condolences.

I believe this was a wise decision by Justice Liu and a necessary sacrifice to ensure SCOTUS does not wade into these waters.  Justice Liu came out hard and strong, so it appears Gentry’s death will unequivocal.  He swatted away Glen Danas’s arguments and his attempt to fashion an alternative Gentry test fell completely flat.  Gentry was not to be saved and it was for the plaintiff’s lawyer’s own good.  If Gentry survived, it was a certainty that Iskaniain would be taken up.  Even without a Gentry survival we don’t know if SCOTUS will still seek to crush our hopes.

While the passion to kill Gentry should’ve dampened my spirits, the passion to save PAGA was equally so.  Justice Liu at one point compared PAGA to a Qui Tam action, seemed convinced it was at its core a “law enforcement action.”  Further, he argued that the employee had no ability to waive the states claim comparing it to the case of EEOC v. Waffle House.  Even, the sometimes conservative Justice Corrigan attacked Andrew Pincus (attorney for amicus Chamber of Commerce) because of her perception that his line of reasoning “could insulate them [companies] from liability.”  This could not be so.  His response was just FAA trumps all.  That was the theme of the day for defense, FAA is the trump card.

In fact the lawyer for CLS, Faustman, refused to answer Justice Liu’s questions to the  point that it seemed he was doing an Abbott & Costello routine. 

(Paraphrased and abbreviated based on my notes)

Liu:  FAA and NLRA are in conflict, how do you reconcile?

F: FAA trumps

Liu: Why?

F: Congress needs to say.

Liu: Reason? Text, order, specificity, How do you reconcile?

F: Reconciliation,  NLRA says nothing about arbitration.

Liu:  FAA says nothing about collective activity.

This went on for many a minute or more.

This brings up the DR Horton/NLRA arguments, and before I address that, let me say Michael Rubin was absolutely an amazing advocate.  He was poised and unbelievably prepared to the point that answers to questions that would scare even the most seasoned advocate were at this fingertips.  For example, Liu asked him when class actions began and he knew the modern class action was recognized in 1966 but that early century there was some other vehicle which I did not entirely follow.  [Editor’s Note:  See Justice Werdegar’s concurring opinion in Arias.]  He advocated in a way that was smart on the issues and made you incredibly proud to be a plaintiff’s lawyer.  He advocated on behalf of employees everywhere in that if they have the right to picket and strike, then they should equally have the right to band together to fight to enforce the labor laws of this state.

Where the court comes down on the Horton question is hard to predict.  I would think not based on the argument but based on Liu’s wisdom that he may not take the bait.  A Horton victory would undoubtedly bring the ire of SCOTUS.  While it might feel great now, in 2015 the hangover might set in and everything will be gone.  If Horton and Gentry die, and PAGA is saved, you would think SCOTUS would leave California alone. 

****

My sincere thanks to Eric for sharing his thoughts.

Oral argument report #2 on Iskanian v. CLS Transportation

Report #2 on the Iskanian oral argument comes to us from attorney Edie Mermelstein of the Law Offices of F. Edie Mermelstein in Huntington Beach.  Thank you, Edie!

***

Thursday the California Supreme Court heard oral argument in the much anticipated Iskanian v. CLS Transportation case.  This post-Concepcion case is the second of three lead cases to be heard regarding arbitration.  The first, Sonic-Calabasas v. Moreno was decided October 17, 2013, with Justice Liu authoring the opinion that the FAA preempts state-law rule requiring a Berman hearing prior to arbitration and the trial court could consider waiver of Berman protections when considering whether arbitration provision is unconscionable due to the forced waiver by the employee of affordable and accessible dispute resolution forum.

In a packed Los Angeles appellate courtroom and equally packed overflow room, Justice Liu opened questioning by requesting Appellant-Employees’ Counsel Glenn A. Danas give his best argument on why Concepcion has not preempted Gentry. Justice Kennard also wanted a quick overview of whether Gentry survived the SCOTUS decision in Concepcion, while Chief Justice Cantil-Sakauye inquired as to whether there could be a two-step modified Gentry rule, although Justice Liu seemed to disfavor a modified Gentry rule post-Concepcion and American Express v. Italian Colors.  Justice Liu also noted the Berman waiver at issue in Sonic II is very different than the class action waiver at issue here, but Justice Chin’s inquiry focused on whether PAGA is a “representative” action with Justice Werdegar following suit by requesting counsel address the waiver of a representative action.  Danas cited to the SCOTUS decision in Mitsubishi and argued that waiver of statutory rights is against public policy and this has been reaffirmed in Italian Colors.

Michael Rubin representing amici Service Employees International Union and the California Employment Lawyers Association took to the lectern and immediately addressed the procedural and substantive private right of action under the labor codes which confer civil penalties and attorneys fees and are inherently “representative.”  Justice Werdegar raised SCOTUS decision in Kaiser Steel which stated the general rule that federal courts do not have jurisdiction over activity which is arguably subject to §7 of the National Labor Relations Act and inquired on whether amici was in favor or against the holding in Kaiser Steel.  Then Justice Liu launched into a §7/PAGA/Class initiated inquiry into the timing of the statutes and class actions and what pre-existed Rule 23.  Rubin eloquently laid out legislative history concluding that an opt-out system has been created which deprives individual employees of protections enshrined in the labor code. 

David Faustman representing the Respondent-Employer introduced himself, ingratiated himself to the esteemed panel and gave special mention to Justice Kennard.  Faustman’s opening statements went right to Gentry’s survival stating, “Gentry must fall.”  Justice Kennard lodged the first question asking counsel if there was a distinction between Discover Bank as a categorical rule and Gentry which sets forth factors.  Faustman quickly replied there is no distinction in the rules and that class waiver is “the center of the orbit” of Gentry and a modified test will never hold up upon SCOTUS review.   Justice Kennard asked Faustman to consider Gentry’s survival and whether it would be inconsistent with Concepcion and Italian Colors.  Faustman reiterated that there is no distinction between Discover Bank and Gentry and that unconscionability argument and facts to support unconscionability have only been raised by appellant in light of Sonic II and that the trial court below found there is absolutely no procedural unconscionability on the facts in this record.  At that point, both Justice Kennard and Liu actively paged through the briefs before them. 

Next, Justice Liu asked whether the FAA and the NLRA are in conflict.  Faustman boldly pronounced that the FAA “trumps” the NLRA.  Justice Liu aggressively challenged Faustman’s stance focusing on rules of construction culminating with Faustman’s acquiescence that “trumps” was the wrong term.  Justice Liu continued analyzing the FAA and its omission or inclusion of the term “collective activity.”  Faustman disagreed.  Chief Justice agreed with Justice Liu.  Faustman argued that a class action is a legal fiction.  Justice Liu appeared to defend the class action procedure as a form of “collective action” by definition.  Faustman vehemently disagreed stating it is not a “textual” argument.  Justice Liu asked, “[w]hy is PAGA preempted?”  Then, Liu moved to this court’s decision in Arias focusing on the employee standing as a proxy for the State and likening PAGA to a Qui Tam action.  Faustman argued that although he has “no quarrel with Arias” there is no proxy by the State.  Faustman claimed that here there are different procedural practices in play.  Justice Liu’s reliance on Arias appeared resolute.  Faustman simply claimed that the Arias argument may go to far.  However, Justice Liu continued to further develop the analysis by drawing an inverse relationship to the SCOTUS’s EEOC v. Waffle House case.  Faustman ended his time cautioning the court of SCOTUS’s power to overrule this Court as it has done previously in Discover Bank.

Andrew Pincus, amicus for the Chamber of Commerce of the United States, finished up Respondent’s argument by first addressing Justice Liu’s question regarding a modified Gentry rule.  Pincus claimed that the unconscionability reasoning in Sonic II cannot be applied here.  Justice Liu continued on the inverse Waffle House analysis questioning the permissibility of a plaintiff to file an initial complaint with the EEOC for any and all claims.   Pincus responded that the EEOC is in command of the case and it is indisputable that the employee here controls the case.  Chief Justice pointed out that under Pincus’ interpretation if an employee waives the right to bring a PAGA claim it undermines the purpose of the State.  Pincus answered that PAGA claims cannot be individual and although important public rights may be lost, Concepcion dictates that class procedures cannot be enacted if waived even if a desirable policy is at issue.

Justice Corrigan raised the issue of assignment of a State’s right to an employee and whether an arbitration agreement is binding where the employee has waived that right. Justice Corrigan ended the Respondent’s argument by pointing out that a given employer could insulate itself from PAGA claims by demanding that every employee sign an arbitration agreement with a waiver.

On rebuttal, other than reciting a few clarifying citations to the record the argument came to a natural end with Justice Kennard asking the last question which was Appellant’s take on Faustman’s comment that he had “no quarrel with Arias” and whether Arias is controlling here.  It should be noted that Justice Kennard penned Arias which held that an employee need not satisfy class action requirements to bring a representative action under PAGA.  It also held that an employee plaintiff suing under the Labor Code Private Attorneys General Act of 2004, does so as the proxy or agent of the state's labor law enforcement agencies. 

With that said, I believe this panel is going to try and salvage PAGA, and could potentially save the Cruz and Broughton line of cases.  The inverse would be a crippling defeat for employees and consumers to police bad acts where public agencies, which lack adequate resources, are unable to bring actions. This would effectively insulate corporations and employers from blatant violations simply by requiring individual arbitration with a PAGA waiver as a condition of employment.  One can only hope Faustman’s chiding of SCOTUS power does not dissuade this panel from doing the right thing.

***

That's the end of Edie's report.  Again, the opinion is due by July 2, 2014.

Oral argument report: Iskanian v. CLS Transportation

Many thanks to attorney Matthew B. Butler of The Butler Firm in San Diego, who attended yesterday's oral argument in Iskanian v. CLS Transportation, No. S204032, and provided the following report.

***

I attended the oral argument in the Iskanian v. CLS Transportation matter today. Overall, the court appeared unpersuaded that Gentry v. Superior Court, 42 Cal.4th 443 (2007) remains viable law post-AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1742 (2011) but reluctant to extend a class action waiver to PAGA claims or to rule on the federal question of what constitutes acting in concert for the National Labor Relations Act. 

 

1.  Is Gentry still viable law given Concepcion?

 

Justice Liu led the questioning, immediately challenging Iskanian's attorney, Glenn Danas, with questions like "Why isn't Gentry preempted by the FAA after Concepcion?" and pointedly arguing that Gentry's sole focus was the class action waiver within the arbitration provision -- falling squarely within Concepcion, while Sonic-Calabasas A, Inc. v. Moreno, 57 Cal.4th 1109, 1124 (2013) focuses on other procedural issues. Justice Liu did not hide his analysis, going as far as to say that Gentry is "endangered" after Concepcion. Glenn Danas did the best he could to argue that the procedural issues identified in Gentry are tied to a de facto waiver of substantive rights -- that employees in a weaker bargaining position are required to sign an arbitration agreement as a term of employment, and are in fear of retaliation when attempting to enforce statutory rights individually.  He argued that without an affordable forum for the statutory rights to be heard, an arbitration agreement with a class action waiver is unconscionable and the appropriate forum is in court.  Without Gentry, there is too much risk that substantive rights will slip through the cracks.  He drew the comparison to a waiver of Berman hearing rights but Justice Liu was not persuaded.  

 

Justice Liu continued, identifying Concepcion's logic that even if claims slip through the cracks, the Federal Arbitration Act preempts Gentry.  Mr. Danas countered that Concepcion did not specifically address the issue of waiver of statutory rights.  Justice Kennard joined Justice Liu at that point, directly saying "You try to distinguish Gentry," "Gentry is still inconsistent with the FAA" and "I haven't heard anything to show Gentry survives."

 

The Chief Justice then asked Mr. Danas if he was advocating a modified Gentry rule, to which he replied yes, in a two step process: 1. Is there a de facto waiver of rights, and if so, 2. Does the employer have other procedures in place to ameliorate that condition.  Justice Liu was not convinced such a modified rule would survive Concepcion, because without regard for the sacrifice of other claims, the test is centralized on the class action waiver which was squarely addressed in Concepcion.   Mr. Danas argued that there are other considerations, like fear of retaliation, but did not gain traction with any other justices.  

 

David Faustman argued for CLS.  Justice Kennard greeted him with questions about Gentry's viability -- asking if it is proper to say Discover Bank v. Superior Court, 36 Cal.4th 148 (2005) was a categorical rule whereas Gentry set forth factors to avoid waiver of statutory rights?  Mr. Faustman aptly followed the justices' lead and argued that Gentry was solely about class action waivers and thus is specifically overruled by Concepcion.  Mr. Faustman repeatedly reminded the Court that any contrary finding would be quickly disposed of by the High Court.   He also criticized Iskanian's argument on unconscionability -- pointing out that Iskanian had not argued unconscionability in the lower court, but that at the trial level there was a factual finding against procedural unconscionability which was not appealed.  

 

Overall, it appeared that neither public policy nor unconscionability arguments gained traction with any of the justices.  Certainly none of the justices articulated support for the position.    

2. Private Attorney General Act

 

Mr. Danas did not have much time to address PAGA, but was asked squarely by Justice Werdeger to do so. He quickly argued that if an arbitration agreement results in total waiver of statutory rights the agreement cannot stand.  Michael Rubin later argued that PAGA provides substantive private rights of action that did not exist before the statute, and provides remedies for the state.  The express purpose of the statute was to reduce the burden of enforcement of the labor code by enlisting private individuals and their attorneys to bring and prosecute the action.  

 

CLS' counsel, Mr. Faustman, tried to carry momentum from the Gentry argument into the PAGA argument.  Justice Liu asked him directly why PAGA is preempted by the FAA.  Despite the court's finding in Arias v. Superior Court, 46 Cal.4th 969 (2009)  and the recent Ninth Circuit cases such as Baumann v. Chase Inv. Services Corp., ___ F.3d ___, 2014 WL 983587 (9th Cir. Mar. 14, 2014) and Urbino v. Orkin Services of California, Inc., 726 F.3d 1118 (9th Cir. 2013).  Mr. Faustman asserted that there is no principle distinction between PAGA and class actions.  

 

Justice Liu challenged such a proposition, asking "haven't we said in Arias that the individual is a proxy for the state in PAGA claims?" Justice Liu asked if Arias is controlling for the propositions that PAGA is not a dispute arising from employment relations, but rather is like Qui Tam.  The individual is collecting primarily for the state.  Mr. Faustman did not agree that Arias had such a broad finding, and distinguished Qui Tam from PAGA -- asserting that Qui Tam cases are run by the state to collect damages to the state whereas PAGA claims are run by individuals to collect penalties for both the state and the individual.  

 

Justice Liu read language from Arias to Mr. Faustman -- indicating that a PAGA action is a substitute for government action, and opined that, in effect, PAGA acts as an assignment of the state's claims to the employee.  Justice Liu then relied upon E.E.O.C. v. Waffle House, Inc., 534 U.S. 279 (2002), where an employee filed an EEOC claim, and the EEOC investigated and filed an action against the company.  The employee was not a party to the litigation, but the employee's individual damages were at issue.  Justice Liu repeatedly pressed Mr. Faustman as to why an individual could bring an EEOC claim and not run afoul of the FAA or an arbitration provision.  Justice Liu pushed until Mr. Faustman acknowledged that an EEOC's own claim is not impacted by the arbitration agreement between the employee and the employer.  

 

Andrew Pincus, counsel for amicus U.S. Chamber of Commerce, argued that PAGA is a hybrid of individual claims and state claims.  "An odd duck."  He argued that if it is like an assignment, then the employee's agreement with the employer governs the forum in which that employee can bring the assigned claims.  He did not cite case or statutory support for this position.  He did respond to Justice Liu's reliance on Waffle House, indicating it was instructive because the EEOC was in charge of the litigation, whereas here the employee is in charge of the litigation.  

 

Justice Corrigan further challenged the employer's position on PAGA, walking Mr. Pincus down a series of questions to make the point that an arbitration agreement can be craftily drafted to completely insulate the employer from PAGA penalties, thus eviscerating the statute.  Mr. Pincus argued that PAGA can be brought by one employee for just that individual's rights under PAGA, and therefore the statute can be read consistent with the FAA.

 

From the questioning by the justices, it appears the Court is friendly to PAGA claims remaining outside of any waiver in an arbitration agreement.  No justices asked questions appearing fascially in opposition to this view.

 

3. Employee Rights under National Labor Relations Act

 

Iskanian's counsel divided the oral argument, and Michael Rubin handled the argument for amici. Specifically he addressed the federal issues such as the right of employees to organize and act collectively. He argued that the arbitration provision strips employees of the right to collectively bring an action to enforce the labor code, in violation of the Norris LaGuardia Act and the NLRA.  Justice Werdeger quickly raised the 5th Circuit overturning the NLRB's ruling in D.R. Horton v. NLRB, 737 F.3d 344 (5th Cir. 2013), and Justice Liu picked up with "Has any court of appeal supported your position?"  Mr. Rubin had to concede the point, but not without the caveat that several decisions are pending further appeal.  

 

Justice Liu expressed concern with the intersection of the FAA and the NLRA and the fact that these representative actions came after the enactment of both.  Mr. Rubin agreed, but identified that 70 years of NLRB decisions have interpreted the right to organize, and specifically to extend that right to the level of litigation.  Mr. Rubin eloquently articulated that employees are powerless to effect change in the workplace on an individual level, reinforcing the public policy of the United States to allow employees to organize and act in concert.  As the CLS agreement currently stands, an opt-out system is created -- leaving the employees to effectively waive statutory rights.  

 

Justice Werdeger asked if Amici argues there is no viable class action waiver in the employment context, and if so wouldn't such a rule interfere with the FAA?  Mr. Rubin reiterated that any waiver of a class action violates the NLRA and Norris LaGuardia.  This does not run afoul of the FAA, because as the NLRB articulated, the employer can continue to demand individual claims be asserted in arbitration and class claims must be heard in court.   

 

CLS's attorney, Mr. Faustman, argued that courts need not follow NLRB rulings, and in fact the NLRB does not have the jurisdiction to interpret the NLRA.  In response to questions from Justice Kennard and Justice Liu, Mr. Faustman initially posited that the FAA trumps the NLRA unless and until Congress acts. Justice Liu pressed him on the issue, since the two statutes are both federal statutes passed by Congress that must be given equal weight and read together.  Mr Faustman retreated, agreeing that "trump" is not the right word.  He then found respite in two other arguments -- that the FAA predates the NLRA and the FAA talks of the primacy of arbitration but the NLRA does not.  Justice Liu made quick work of these arguments, stating that the issue here is about what constitutes collective activity and the NLRA speaks specifically to that while the FAA does not, so the NLRA governs.  Mr. Faustman argued that all federal courts that have addressed this issue disagree.  Then attacked class actions directly, arguing that it is "quite a stretch" to say a class action is concerted activity, but it is rather "a legal fiction" created by one employee and his/her lawyer.  Justice Liu did not respond positively to this argument.     

 

The justices did express some hesitation to address the federal question of the scope of both the NLRA and the FAA.  

 

In retort, Mr. Rubin argued that statements in the record indicated that Iskanian acted in concert with other employees who desired that he pursue the claims, making the action a concerted effort by employees, protected by the NLRA.  Further, there is no conflict with the FAA since the FAA exempts agreements that are otherwise unenforceable on grounds that exist in law or equity and prohibits the enforcement of arbitration agreements that strip other statutory rights.  

 

The justices did not appear to lean one way or another on this issue.  Although, Justice Liu certainly questioned extensively about it.  

Overall, the argument was engaging, the justices were prepared and active.  There did not appear to be too much question left in the justices' decision making process.  Assuredly, this one-hour argument will have a vast impact on the practice of employment law in California.

***

Thank you again, Matthew, for providing such an interesting report for us.  I did not expect the NLRA issue to be the focus of so much discussion.  For another report on the argument, see this writeup by Shawn Westrick of Kawahito Shraga & Westrick, LLP in Los Angeles.  The opinion is due in 90 days, or by Wednesday, July 2, 2014.

Oral argument preview: Iskanian v. CLS Transportation and Ayala v. Antelope Valley Newspapers

Today, the Supreme Court will be hearing oral argument in two cases of interest. 

• At 9:00 a.m., the Court will hear Iskanian v. CLS Transportation, No. S204032, which involves the enforceability of a no-class-action arbitration clause in an employment contract, and the continued vitality of Gentry post-Concepcion. These are the issues on review, per the docket: 

  (1) Did AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S. Ct. 1740, 179 L.Ed.2d 742] impliedly overrule Gentry v. Superior Court (2007) 42 Cal.4th 443 with respect to contractual class action waivers in the context of non-waivable labor law rights? (2) Does the high court's decision permit arbitration agreements to override the statutory right to bring representative claims under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.)? (3) Did defendant waive its right to compel arbitration?

  The Court of Appeal, in a 2012 opinion, affirmed the trial court's order compelling arbitration.   Iskanian v. CLS Transp. Los Angeles, LLC, 206 Cal.App.4th 949 (2012).  See this blog post for more.

• At 1:30 p.m., the Court will hear argument in Ayala v. Antelope Valley Newspapers, No. S206874.  This case involves newspaper carriers who assert that their employer improperly classified them as independent contractors rather than employees.  The question on review is whether the Court of Appeal properly reversed, in large part, the trial court's order denying class certification of their wage and hour claims.  Here is the docket's description of the issues on review:

  This case presents questions concerning the determination of whether common issues predominate in a proposed class action relating to claims that turn on whether members of the putative class are independent contractors or employees.

  In Ayala v. Antelope Valley Newspapers, Inc., 210 Cal.App.4th 77 (Sept. 19, 2012; pub. ord. Oct. 17, 2012), after the trial court denied class certification, the Court of Appeal (Second Appellate District, Division Four) reversed the order as to five of the eight claims.  For more on the case, see this blog post.

Both of these arguments are happening in Los Angeles.  I am expecting to receive a report from at least one blog reader on Iskanian, which I will post here when received.  If you attended either of these arguments and would like to share your impressions, please email me.