In Caron v. Mercedes-Benz Financial Services USA LLC (7/30/12) --- Cal.App.4th ---, the Court of Appeal has held that the Federal Arbitration Act (FAA) preempts the Consumer Legal Remedies Act (CLRA) prohibition on class action waivers.
Plaintiff sued defendants, alleging various class and individual claims, including claims under the CLRA. Defendants petitioned to compel individual arbitration and to stay the class proceedings.
Relying on Fisher v. DCH Temecula Imports LLC (2010) 187 Cal.App.4th 601 (discussed here), the trial court held that (1) the arbitration provision was unenforceable because it waived the plaintiff's right to bring a class action under the CLRA; and (2) the FAA did not preempt the CLRA's prohibition against class action waivers.
The Court of Appeal reversed, holding:
1. The trial court did not err in implicitly overruling plaintiff's objection to introduction of the arbitration agreement because, among other things, plaintiff attached the same document to her complaint and alleged that it was a true and correct copy of the parties' agreement. Slip op. at 6-8.
2. The FAA preempts the CLRA's prohibition of class action waivers because the antiwaiver rule "stands as an obstacle" to the FAA's purpose of enforcing arbitration agreements according to their terms. Slip op. at 14-19.
3. The Court remanded to the trial court to decide (1) whether the arbitration agreement is unconscionable and (2) whether to sever any unconscionable provisions. Slip op. at 19-22. The trial court did not rule on this issue, instead finding the CLRA's antiwaiver provision to be dispositive.
1. The trial court did not err in implicitly overruling plaintiff's objection to introduction of the arbitration agreement because, among other things, plaintiff attached the same document to her complaint and alleged that it was a true and correct copy of the parties' agreement. Slip op. at 6-8.
2. The FAA preempts the CLRA's prohibition of class action waivers because the antiwaiver rule "stands as an obstacle" to the FAA's purpose of enforcing arbitration agreements according to their terms. Slip op. at 14-19.
No meaningful difference exists between the CLRA's class action prohibition and the Discover Bank rule. Both are state law rules that prevent enforcement of an arbitration agreement according to its terms. As in AT&T Mobility, Caron and Defendants' arbitration agreement not only required them to arbitrate all of their disputes, but also prohibited Caron from asserting any class claims or joining any other parties in the arbitration. By limiting the arbitration to Caron's individual claims, the agreement ensured the parties would receive the benefits of contractual arbitration to which they agreed: “‘lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes.’ [Citation.]”Slip op. at 15. The Court distinguished Fisher on grounds that it was decided before Concepcion and improperly found that the CLRA's antiwaiver provision was a "generally available contract defense" that was subject to the FAA's "savings clause." 9 U.S.C. section 2. Slip op. at 16-17.
3. The Court remanded to the trial court to decide (1) whether the arbitration agreement is unconscionable and (2) whether to sever any unconscionable provisions. Slip op. at 19-22. The trial court did not rule on this issue, instead finding the CLRA's antiwaiver provision to be dispositive.
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