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Tuesday, September 18, 2012

Truly Nolen v. Superior Court: Court of Appeal Finds That Concepcion Disapproved of Gentry, Reverses Class Arbitration Order

Truly Nolen of America v. Superior Court (Miranda) (8/9/12) --- Cal.App.4th --- is one of the more interesting post-Concepcion arbitration decisions.  

Plaintiffs filed a class action complaint against defendant alleging California wage and hour violations. Defendant petitioned to compel individual arbitration, based on agreements that did not contain a specific provision pertaining to the availability or unavailability of classwide arbitration. The trial court ordered that the matter proceed in arbitration as a class action. The Court of Appeal granted defendant's petition for writ of mandate and reversed.

The Court began by stating that it was undisputed that the arbitration agreements at issue were governed by the Federal Arbitration Act ("FAA").  Slip op. at 9-10.  The Court then reviewed California arbitration law: Keating v. Superior Court (1982) 31 Cal.3d 584; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83; Discover Bank v. Superior Court (2005) 36 Cal.4th 148; and Gentry v. Superior Court (2007) 42 Cal.4th 443.  Slip op. at 10-16.  The Court then discussed the Supreme Court's decisions in Stolt-Nielsen v. AnimalFeeds Internat. Corp. (2010) 559 U.S. __, 
130 S.Ct. 1758 (discussed here) and AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __,  131 S.Ct. 1740 (discussed here) and the reaction of California appellate courts to those decisions.  Slip op. at 17-20.  

The Court then held that Concepcion "implicitly disapproved the reasoning of the Gentry," but held that it should continue to adhere to Gentry until the California Supreme Court rules on the issue.  Slip op. at 21-24.  

The Court next held that even if Gentry is still good law, the plaintiffs failed to establish the four factors needed to preclude enforcement of the arbitration agreement: (1) "the modest size of the potential individual recovery;" (2) "the potential for retaliation against members of the class;" (3) "the fact that absent members of the class may be ill informed about their rights;" and (4) "other real world obstacles to the vindication of class members' rights to overtime pay through individual arbitration."  Slip op. at 24-31.  The plaintiffs had relied on declarations of their attorneys, but had not introduced specific facts "pertinent to their claims in this case, or the relevant employment conditions."  Slip op. at 25-28.  

The Court then ruled a number of non-Gentry arguments made by the plaintiffs.  First, the Court held that parties can have an implied agreement to class arbitration and remanded to the trial court to determine whether that was the case here.  Slip op. at 32-35.  The Court distinguished Stolt-Nielsen, in which the parties had stipulated that their agreement did not include an express or implied agreement to class arbitration.  Ibid.  

Second, the Court declined to follow D.R. Horton.  Slip op. at 35-36, citing CompuCredit Corp. v. Greenwood (2012) 565 U.S. __, __, 132 S.Ct. 665, 668-669] (discussed here).  

Third, the Court held that the plaintiffs had waived their argument that the arbitrator, rather than the trial court, should determine whether the matter could proceed as a class arbitration.  Slip op. at 36-37.  

The opinion is available here.

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