California Court Compels Arbitration and Dismissal of Class Claims, Invalidating Gentry Based on AT&T Mobility v. Concepcion

For many years, pursuant to Gentry v. Superior Court (2007) 42 Cal.4th 443, California courts have held that class waiver provisions in arbitration agreements should not be enforced if class arbitration would be a significantly more effective way of redressing the rights of affected employees. But that was before the U.S. Supreme Court issued its April 2011 ruling in AT&T Mobility LLC v. Concepcion, holding that the principal purpose of the Federal Arbitration Act is to ensure that arbitration agreements are enforced pursuant to their terms. Further, the Supreme Court held that “requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme consistent with the FAA.”

In Iskanian v. CLS Transportation Los Angeles, LLC, the driver-employee filed a class action complaint, alleging various wage and hour violations. The employer sought to compel the employee to arbitrate this dispute. The Court found the arbitration agreement to be neither substantively or procedurally unconscionable, and the Court compelled arbitration and dismissed the class claims. The motion to compel was ultimately withdrawn, and the employee filed an amended pleading alleging individual and representative claims under the Private Attorneys General Act of 2004 (“PAGA”). After litigation ensued, the employee successfully sought to certify the class.

In April 2011, the U.S. Supreme Court decided Concepcion, and the employer renewed its motion to compel arbitration and dismiss the class claims. The employee opposed the motion on the grounds that the Gentry ruling controlled. The trial court agreed with the employer and compelled arbitration and dismissed the class claims. The employee subsequently appealed.

The Court of Appeals carefully evaluated the FAA and California-specific statutes regarding arbitration and the enforcement of arbitration agreements, and considered the aim of Concepcion: “to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings.” The Court concluded that Concepcion “conclusively invalidates” Gentry, and in light of it being a binding authority, held that the trial court was correct to find the arbitration agreement and class action waivers to be effective and that the employee should be compelled to arbitrate his disputes and dismiss the class claims.

Employers must take caution to ensure that their arbitration agreements are compliant with California law. A properly drafted agreement has the potential to provide a successful defense to claims such as those presented in this case.