American Express Co. v. Italian Colors Restaurant: SCOTUS Grants Certiorari in Class Action Waiver Case

In In re American Express Merchants' Litigation, 667 F.3d 204 (2d Cir. 2012), the Second Circuit Court of Appeals invalidated an arbitration clause in a credit card agreement where it found that the clause would effectively preclude the plaintiffs from pursuing claims under the federal antitrust law. The court distinguished Concepcion on grounds that Concepcion addressed the relationship between the FAA and state law, while the case before it raised federal statutory claims. The court cited several cases invalidating arbitration clauses where it was shown that a class action waiver would preclude the plaintiffs from pursuing individual federal statutory actions. The Second Circuit found that Concepcion did not overrule those decisions. 

The Supreme Court granted cert. on November 9, sub nom American Express Co. v. Italian Colors Restaurant (Case No. 12-133).  The issue presented is as follows:  

Whether the Federal Arbitration Act permits courts, invoking the “federal substantive law of arbitrability,” to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim.   

The Court's docket is here.  The Second Circuit opinion is here, and SCOTUSblog has a web page for the case here.  I have added the case to our Watch List and we will do a webinar on it when the Court issues its decision next year.  

U.S. Airways v. McCutchen: SCOTUS Hears Oral Argument in ERISA Action

The Supreme Court of the United States on November 27 heard oral argument in U.S. Airways, Inc. v. McCutchen (Case No. 11-1285) which raises the following issue: 

Whether the Third Circuit correctly held -- in conflict with the Fifth, Seventh, Eighth, Eleventh, and D.C. Circuits -- that Section 502(a)(3) of the Employee Retirement Income Security Act (ERISA) authorizes courts to use equitable principles to rewrite contractual language and refuse to order participants to reimburse their plan for benefits paid, even where the plan’s terms give it an absolute right to full reimbursement. 

The Supreme Court's web page for the case is here.  The oral argument transcript is here.  Reuters covered the argument here. 

Vance v. Ball State University: SCOTUS Hears Oral Argument in Title VII Supervisor Liability Action

On November 26, 2012, the Supreme Court of the United States heard oral argument in Vance v. Ball State University (Case No. 11-556). The question in Vance is whether, "as the Second, Fourth, and Ninth Circuits have held, the Faragher and Ellerth 'supervisor' liability rule (i) applies to harassment by those whom the employer vests with authority to direct and oversee their victim’s daily work, or, as the First, Seventh, and Eighth Circuits have held (ii) is limited to those harassers who have the power to 'hire, fire, demote, promote, transfer, or discipline' their victim."

The transcript is here. SCOTUSblog reported on oral argument here. SCOTUSblog concludes that the Court may DIG the case (deny certiorari as improvidently granted) because the plaintiff could not show under either test that the alleged harasser was her supervisor.  

Franco v. Arakelian Enterprises: Court of Appeal Holds That Gentry Remains Good Law After Stolt-Nielsen and Concepcion

This is the second time that this case has resulted in a published appellate decision. The first time, in Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277, the Court of Appeal held: 

1. Gentry v. Superior Court (2007) 42 Cal.4th 443, invalidated a class action waiver in an action for meal and rest period compensation; and 
2. Gentry invalidated an arbitration clause prohibiting an employee from acting as a private attorney general under the Labor Code Private Attorneys General Act (PAGA). 

On remand, the defendant again moved to compel arbitration, arguing that Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) 559 U.S. ___ and AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ overruled Gentry. The trial court denied the petition, and the Court of Appeal affirmed, holding: 

We conclude that Gentry remains good law because, as required by Concepcion, it does not establish a categorical rule against class action waivers but, instead, sets forth several factors to be applied on a case-by-case basis to determine whether a class action waiver precludes employees from vindicating their statutory rights.  And, as required by Stolt-Nielsen, when a class action waiver is unenforceable under Gentry, the plaintiff's claims must be adjudicated in court, where the plaintiff may file a putative class action. 

Franco v. Arakelian Enterprises, Inc. (11/26/12) --- Cal.App.4th ---, slip op. at 3.  With regard to the second point, the Court explained: 

Stolt-Nielsen held that class arbitration is not permitted unless the parties have expressly or implicitly agreed to it.  Gentry, on the other hand, concerned the enforceability of class action waivers that prevent the vindication of unwaivable statutory rights and that constitute exculpatory clauses.  Nevertheless, Gentry concluded that, if a class action waiver is unenforceable, the court should invalidate the waiver and send the case to arbitration, where the plaintiff may attempt to certify a class. But under Stolt-Nielsen, class arbitration is not permitted unless the parties agree to that procedure.  Plainly, in a case where Gentry applies — to invalidate a class action waiver — the parties have not agreed in any fashion to allow class arbitration.  Consequently, under Stolt-Nielsen, the remedy under Gentry should be the denial of the motion or petition to compel arbitration, permitting the case to be heard in court, where the plaintiff may seek to certify a class.  

Slip op. at 47 (citations omitted). 

The decision includes a thorough discussion of the Supreme Court's development of arbitration law, slip op. at 17-27, and the law on vindication of statutory rights.  Slip op. at 27-45. It also includes an interesting discussion of Concepcion and post-Concepcion decisions and commentary.  Slip op. at 47-64. 

I assume that the defendant will petition the California Supreme Court for review. As discussed here, the Supreme Court on 9/19/12 granted review in Iskanian v. CLS Transportation L.A., LLC (6/4/12) 206 Cal.App.4th 949, which held that Concepcion overruled Gentry and that Concepcion applies to PAGA actions. It will be interesting to see whether the Court grants review in Franco pending Iskanian. 

The opinion is available here.  

Aryeh v. Canon Business Solutions: Cal. Supreme Court Calendars Oral Argument

In Aryeh v. Canon Business Solutions (discussed here), the California Supreme Court will decide the following issues:  

1. May the continuing violation doctrine, under which a defendant may be held liable for actions that take place outside the limitations period if those actions are sufficiently linked to unlawful conduct within the limitations period, be asserted in an action under the Unfair Competition Law (Bus. & Prof. Code section 17200 et seq.)? 
2. May the continuous accrual doctrine, under which each violation of a periodic obligation or duty is deemed to give rise to a separate cause of action that accrues at the time of the individual wrong, be asserted in such an action? 
3. May the delayed discovery rule, under which a cause of action does not accrue until a reasonable person in the plaintiff's position has actual or constructive knowledge of facts giving rise to a claim, be asserted in such an action? 

The Supreme Court has scheduled oral argument for December 4, 2012, at 9:00 a.m.  Los Angeles oral arguments are at the Ronald Reagan State Office Building, 300 South Spring Street, 3rd Floor, Los Angeles.  In the afternoon session, the Court will hear argument on Harris v. City of Santa Monica (discussed here) another of our Watch List cases.  

Fahlen v. Sutter: Cal. Supreme Court Grants Review in Whistleblower Action

The California Supreme Court on November 14 granted review in Fahlen v. Sutter Central Valley Hospitals (8/14/12) (discussed here), in which the Court of Appeal held that a doctor claiming he lost his hospital privileges as a form of whistleblower retaliation need not exhaust his judicial remedy of pursuing review, via writ of mandate, of the hospital's action before he can file a whistleblower lawsuit under California Health and Safety Code section 1278.5. 

The Court web page for Fahlen is here.  The Court has not yet formally stated the issues on review.  I have added the case to our Watch List of Pending Cases.  

Sorry for the Lack of New Posts

I've got mediations every day this week -- for which I am very grateful, of course.  I will catch up this weekend and have new material for you next week.  

Watch List Webinars on Pending Cases of Interest

Beginning in 2013, the State Bar of California Labor and Employment Law Section will present a series of webinars on the most recent cases of interest to employment lawyers. Organized by mediator Steven G. Pearl, the State Bar will present the webinars as soon as possible – typically within one or two weeks – after a decision is issued.  Speakers will include the attorneys who make the oral arguments and promise to be lively and informative. 

"The Watch List: Pending Cases of Interest" are posted on this blog on the lower right.  To date, seven of these cases have been argued or scheduled for oral argument: 

Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds (SCOTUS) - Argued 11/5/12

Comcast Corp. v. Behrend (SCOTUS) - Argued 11/5/12

Genesis HealthCare Corp. v. Symczyk (SCOTUS)  - To be argued 12/3/12 

Harris v. City of Santa Monica (Cal.) - To be argued 12/4/12 

Ralphs Grocery v. UFCWU (Cal.) - Argued 10/3/12 

U.S. Airways, Inc. v. McCutchen (SCOTUS) - To be argued 11/27/12 

Vance v. Ball State University (SCOTUS) - To be argued 11/26/12 

We likely will have a decision in Ralphs Grocery before the end of the year (it is due no later than 1/3/13).  The others we anticipate in the early Spring.  Watch this space for more information.  

Harris v. City of Santa Monica: Supreme Court Schedules Oral Argument in FEHA "Mixed-Motive" Case

The California Supreme Court today announced that it will hear oral argument in Harris v. Superior Court on Tuesday, December 4, 2012, at 2:00 p.m. in Los Angeles.  Harris presents the following issue: 

Does the "mixed-motive" defense apply to employment discrimination claims under the Fair Employment and Housing Act (Gov. Code, section 12900 et seq.)?

The Court's case summary is here.  

Los Angeles oral arguments are at the Ronald Reagan State Office Building, 300 South Spring Street, 3rd Floor, Los Angeles.  

Steven G. Pearl to Address Employment Round Table of Southern California

I am speaking today at the Employment Round Table of Southern California's Annual Conference entitled, "Tides of Change: Surfing New Waves in the Workplace." I am speaking with Kimchi Bui, District Manager at the United States Department of Labor, and we are addressing emerging trends and new developments in wage and hour law.

Thank you to Paula Pearlman of Loyola Law School and the Disability Rights Legal Center for inviting me to speak.

SCOTUS Hears Oral Argument in Two Class Action Cases

The Supreme Court of the United States yesterday heard oral argument in two cases that address class certification requirements in federal court.  

Comcast Corp. v. Behrend (Case No. 11-864), presents the following issue: 

Whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.

The Court's docket is available here. Transcripts of the argument are available here. 

Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds (Case No. 11-1085) presents the following issues: 

(1) Whether, in a misrepresentation case under Securities and Exchange Commission Rule 10b-5, the district court must require proof of materiality before certifying a plaintiff class based on the fraud-on-the-market theory; and 

(2) Whether, in such a case, the district court must allow the defendant to present evidence rebutting the applicability of the fraud-on-the-market theory before certifying a plaintiff class based on that theory. 

The Court's docket is here, and transcripts are here. 

The State Bar of California's Labor and Employment Section will present webinars on these decisions within one to two weeks after the Supreme Court issues them.  Stay tuned for more information.  

Grey v. American Management Services: Court of Appeal Holds That Employment Agreement Did Not Compel Arbitration of Discrimination Claims

Just a short note on this arbitration decision, which I missed earlier this year. In Grey v. American Management Services (3/28/12) 204 Cal.App.4th 803, the Court of Appeal reversed a judgment entered on an arbitration award, holding that the trial court should not have compelled the employee/plaintiff to arbitrate his claims for sexual orientation discrimination.

When he applied for a position, the plaintiff had signed an "issue resolution agreement" (IRA), which included an arbitration clause. On being hired, he signed an employment contract, which included a more limited arbitration clause and an integration clause.

The Court first construed the employment agreement's integration clause "to mean that the parties intended the contract to be the final and exclusive embodiment of their agreement." Id. at 807-809. As an integrated agreement, it superseded the earlier IRA.

The Court then held that the employment agreement's limited arbitration clause did not require the plaintiff to arbitrate his discrimination claims, because it applied only to disputes "arising out of the alleged breach of any other provision of this Agreement."

The scope of the arbitration clause in the employment contract only applies to claims arising from a breach of that contract and does not encompass all claims an employee may have against AMS. All of Grey's claims are for statutory violations, and none arises from a breach of the employment contract. We agree with both parties that Grey is not required to arbitrate his claims under these terms.

Id. at 810. The opinion is available here. 

U.S. Airways v. McCutchen: SCOTUS to Hear ERISA Case

I recently came across this case and realized that we should add it to the Watch List of Pending Cases.  

In U.S. Airways v. McCutchen (Case No. 11-1285), the Supreme Court of the United States will decide the following issue:

Whether the Third Circuit correctly held -- in conflict with the Fifth, Seventh, Eighth, Eleventh, and D.C. Circuits -- that Section 502(a)(3) of the Employee Retirement Income Security Act (ERISA) authorizes courts to use equitable principles to rewrite contractual language and refuse to order participants to reimburse their plan for benefits paid, even where the plan’s terms give it an absolute right to full reimbursement.

The Supreme Court's web page for the case is here.  Oral argument is on calendar for November 27, 2012.  

Nelsen v. Legacy Partners: Supreme Court Denies Review of Arbitration Decision

In Nelsen v. Legacy Partners Residential, Inc. (7/18/12) 207 Cal.App.4th 1115 (discussed here) the plaintiff filed a putative class action alleging violations of California wage and hour laws and the UCL. The trial court granted the defendant's motion to compel individual arbitration and stayed the putative class action. The Court of Appeal affirmed, making the following points, among others:

• Assuming (without deciding) that Gentry v. Superior Court (2007) 42 Cal.4th 443 is still good law after AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___, the plaintiff had not made the factual showing required by Gentry; 
• The NLRB incorrectly decided D.R. Horton (discussed here), and in any case the NLRB likely did not apply to the plaintiff, who was an apartment manager; and 
• Concepcion abrogates California's Broughton-Cruz rule that actions for public injunctive relief are not subject to arbitration. 

The California Supreme Court today announced its decision to deny review in Nelsen. This seems somewhat inconsistent with earlier decisions to grant or deny review. First, the Nelsen Court cited to Iskanian v. CLS Transportation Los Angeles, LLC (2012) 206 Cal.App.4th 949, review granted 9/19/12 (discussed here), to support its position that the NLRB incorrectly decided D.R. Horton. Second, the Court distinguished Hoover v. American Income Life Insurance Co. (2012) 206 Cal.App.4th 1193, review denied 09/12/12 (discussed here) with regard to Broughton-Cruz.  

It is entirely possible that the Supreme Court agrees with the Nelsen Court's positions on these issues, in other words that D.R. Horton is wrong and that Hoover is distinguishable on Broughton-Cruz for the reasons stated in Nelsen.  On the other hand, it is also possible, as I have suggested before, that the Supreme Court is lacking direction in employment law cases since the departure of Justices George and Moreno. However, if that were the case, I would have expected the Court to grant review in a case like Nelsen while they figured out where they're headed in this area of law.  

Banner Health System: NLRB Holds That Employer Cannot Prohibit Employee from Discussing Complaints with Co-Workers During Investigation

In Banner Health System d/b/a Banner Estrella Medical Center and James A. Navarro, 358 NLRB No. 93 (7/30/12), the National Labor Relations Board held that an employer violated section 8(a)(1) of the National Labor Relations Act by routinely asking employees who made work-related complaints not to discuss their complaints with their coworkers while the employer's investigations were ongoing. Slip op. at 2.

To justify a prohibition on employee discussion of ongoing investigations, an employer must show that it has a legitimate business justification that outweighs employees’ Section 7 rights.... the [employer's] generalized concern with protecting the integrity of its investigations is insufficient to outweigh employees’ Section 7 rights. Rather, in order to minimize the impact on Section 7 rights, it was the [employer's] burden “to first determine whether in any give[n] investigation witnesses need[ed] protection, evidence [was] in danger of being destroyed, testimony [was] in danger of being fabricated, or there [was] a need to prevent a cover up.” The [employer's] blanket approach clearly failed to meet those requirements. 

Ibid. The decision is available here on the NRLB's web site.