Ferguson v. Corinthian Colleges: Ninth Circuit Rejects Broughton-Cruz Rule

California's Broughton-Cruz rule prohibits arbitration of "public injunction" cases that are brought for the benefit of the general public rather than just the party bringing the action. Back in April, in Kilgore v. Keybank, N.A., ___ F.3d ___ (4/11/13) (discussed here), we thought that an en banc panel of the Ninth Circuit was going to give us its view of the continued viability of the rule in the wake of Concepcion. The Ninth Circuit did not address the issue in Kilgore, but addressed it directly in Ferguson v. Corinthian Colleges, Inc., ___ F.3d ___ (10/28/13), holding that the Federal Arbitration Act (FAA) preempts Broughton-Cruz. 

The Court started with the rule, stated in Concepcion, that “[w]hen state law prohibits outright the arbitration of a particular type of claim ... [the] conflicting rule is displaced by the FAA.” Slip op. at 11-12. The Court continued: 

That rule resolves this case. By exempting from arbitration claims for public injunctive relief under the [Consumer Legal Remedies Act], [Unfair Competition Law], and [False Advertising Law], the Broughton-Cruz rule similarly prohibits outright arbitration of a particular type of claim.

Slip op. at 12. 

The decision appears to leave a number of open questions: 

We decline to resolve in advance the question of what, if any, court remedy Plaintiffs might be entitled to should the arbitrator determine that it lacks the authority to issue the requested injunction. That is beyond the scope of this appeal. If the arbitrator comes to that conclusion, Plaintiffs may return to the district court to seek their public injunctive relief. We express no opinion on any question that might arise at that time. Similarly, we decline to resolve now questions that could arise if a motion is brought in court to confirm an arbitration award that includes injunctive relief, or whether it might be necessary for a court to enforce a public injunction awarded by an arbitrator. Those questions can be better addressed in the context of an actual case, with arguments directed more specifically to the questions raised in that case. 

Slip op. at 17. 

Ferguson v. Corinthian Colleges is available here. 

D.R. Horton v. NLRB: Fifth Circuit Overturns Ruling on NLRA Preemption of Class Action Waivers

A little more information on the Fifth Circuit's decision in D.R. Horton, Inc. v. NLRB, ___ F.3d ___ (5th Cir. 12/3/13).

In In re DR Horton, Inc., 357 NLRB 184 - 2012 (discussed here), the National Labor Relations Board (Board or NLRB) held that an employer violated section 8 of the National Labor Relations Act (NLRA) by requiring its employees to sign an arbitration policy. Horton appealed the decision to the Fifth Circuit Court of Appeals, which overturned the Board's decision.

After discussing a number of procedural and jurisdictional issues, the Court got to the heart of the analysis. The Court began with the premise that the Federal Arbitration Act (FAA) requires courts to enforce arbitration agreements according to their terms, then noted two exceptions to the rule: (1) an arbitration agreement may be invalidated on any ground that would invalidate a contract under the FAA’s “saving clause,” or (2) application of the FAA may be precluded by another statute’s contrary congressional command.

The Court held that under Concepcion, the Board’s rule "does not fit within the FAA’s saving clause." Slip op. at 19. "While the Board's interpretation [invalidating class action waivers] is facially neutral – requiring only that employees have access to collective procedures in an arbitral or judicial forum – the effect of this interpretation is to disfavor arbitration." Slip op. at 20. 

The Court then held that neither the text of the NLRA nor its legislative history evidences a "congressional command to override the FAA." Slip op. at 22. 

Finally, the Court affirmed the Board's holding that the arbitration language at issue violated the NLRA because it would lead employees to a reasonable belief that they were prohibited from filing unfair labor practice charges with the Board. Slip op. at 26-28.  

According to the Court, every Circuit Court of Appeals to consider D.R. Horton "has either suggested or expressly stated that [it] would not defer to the NLRB’s rationale, and held arbitration agreements containing class waivers enforceable." See Richards v. Ernst & Young, LLP, – F.3d — , No. 11-17530, 2013 WL 4437601, at *2 (9th Cir. Aug. 21, 2013); Sutherland v. Ernst & Young LLP, 726 F.3d 290, 297-98 n.8 (2d Cir. 2013); Owen v. Bristol Care, Inc., 702 F.3d 1050, 1055 (8th Cir. 2013). 

The Fifth Circuit's opinion is available here. 

Angelica Textile Services v. Park: Employer Could State Non-Trade Secret Claims Against Former Officer

In Angelica Textile Services, Inc. v. Park (10/15/13) --- Cal.App.4th ---, an employer, Angelica, sued a former officer, Park, and his new employer for misappropriating trade secrets, violating the Unfair Competition Law (Cal. Bus. & Prof. Code 17200), interfering with business relationships, breaching his employment contract, converting documents, and breaching his fiduciary duties. Angelica alleged that Park disparaged it to a local bank and, in negotiating new contracts with two of its large customers, gave the customers cancellation rights that are not customary in the industry and that permitted those customers to shortly thereafter take their business to Park's new employer.

Before trial, the court dismissed Angelica's claims, other than its claim for violation of the Uniform Trade Secret Act (UTSA). Cal. Civil Code section 3426 et seq. The Court found that all non-UTSA claims were based on the alleged misappropriation of trade secrets and were therefore preempted by UTSA. A jury then found for the defendants on the trade secret claim.

The Court of Appeal reversed the judgment as to the non-UTSA causes of action. It held:

The UTSA did not preempt Angelica's non-UTSA claims. Slip op. at 10-16.

Breach of contract claims, even when they are based on misappropriation or misuse of a trade secret, are not displaced by UTSA. Slip op. at 15. Angelica's breach of contract claim was not based on any misappropriation of a trade secret but on Park's violation of a noncompetition agreement and was outside the scope of UTSA displacement on that basis as well. Ibid.

Angelica's claims for breach of fiduciary duty, unfair competition, and interference with business relations also alleged Park's violation of a noncompetition agreement and were outside the scope of UTSA displacement. Slip op. at 16. Angelica's conversion claim alleged that Park took non-trade secret documents and was not displaced by the UTSA. Slip op. at 16.  

Business and Professions Code section 16600, which limits the use of non-competition agreements, "does not affect limitations on an employee's conduct or duties while employed." Slip op. at 17. As a corporate officer, Park owed Angelica "broad fiduciary duties" while employed there, and section 16600 did not apply. Ibid. 

The opinion is available here. 

MacDonald v. State of California: Cal. Supreme Court Depublishes Decision That Employee Must Exhaust Administrative Remedies Before Filing Retaliation Action

In MacDonald v. State of California (8/27/13) 219 Cal.App.4th 67 (discussed here), the Court of Appeal affirmed dismissal of an action for retaliatory discharge in violation of Labor Code section 1102.5 and retaliatory and discriminatory discharge in violation of Labor Code section 6310, holding that an employee must exhaust administrative remedies under Labor Code section 98.7 before filing suit in Court.

The California Supreme Court last week denied review of that decision, but ordered the Reporter of Decisions not to publish it in the Official Appellate Reports. In other words, the case has been depublished. As is typical, the Court did not explain its decision. 

Happy Nails v. Su: Supreme Court Depublishes Labor Commissioner Decision

In Happy Nails & Spa of Fashion Valley, L.P. v. Su (7/19/13) --- Cal.App.4th --- (discussed here), the Court of Appeal found that a determination by the Unemployment Insurance Appeals Board that cosmetologists were independent contractors barred the Labor Commissioner from finding that they were employees.  

The Labor Commissioner did not seek review, but she did ask the California Supreme Court to depublish the decision, which it did this week.  

Visendi v. Bank of America: Ninth Circuit Clarifies Rules for Removal and Joinder in Mass Action

Visendi v. Bank of America (9th Cir. 10/23/13) ___ F.3d ___, is an interesting case on removal and joinder of mass actions under the Class Action Fairness Act (CAFA). 

In 2011, 137 named plaintiffs sued 25 financial institutions in Superior Court. They alleged that the institutions’ deceptive mortgage lending and securitization practices decreased the value of their homes, impaired their credit scores, and compromised their privacy. 

One defendant, Bank of America, removed the case to the district court. Relying on CAFA, it argued that the action was a removable “mass action” because it was a “civil action . . . in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact . . . .” 28 U.S.C. § 1332(d)(11)(B)(i). 

The plaintiffs filed a first amended complaint, adding some parties, dismissing others, and changing their theories of liability. Defendants moved to dismiss, asserting misjoinder and failure to state a claim. The district court then remanded, finding that the Defendants conceded that the action was not removable when they argued that it did not present common questions of law or fact under Rule 20(a) and that the court thus lacked jurisdiction under CAFA. 

The Ninth Circuit reversed, holding: 

CAFA’s "mass action" provisions apply to civil actions in which "monetary relief claims of 100 or more persons are proposed to be tried jointly." Because the plaintiffs proposed a joint trial in state court, this provision applied, and the defendants properly removed the case. 

Whether Plaintiffs’ claims ultimately proceed to a joint trial is irrelevant. It is well settled that “post-filing developments do not defeat jurisdiction if jurisdiction was properly invoked as of the time of filing.” 

Slip op. at 8. 

CAFA's numerosity requirement was satisfied because the original complaint named more than 100 plaintiffs. Slip op. at 9-10.

CAFA's "local controversy" exception is not jurisdictional, and the plaintiffs could not raise it for the first time on appeal. Slip op. at 10-11.

Joinder of the more than 100 plaintiffs was improper because (1) the plaintiffs did not assert a "right to relief arising out of the same transaction and occurrence" and (2) no "question of law or fact common to all the plaintiffs" would arise in the action. Slip op. at 12-14. Although the plaintiffs alleged that the defendants' misconduct was “regular and systematic,” the case involved "over 100 distinct loan transactions with many different lenders," and the factual disparities alleged were too great to support permissive joinder.

The Ninth Circuit remanded to the district court with instructions with instructions to dismiss without prejudice the claims of all plaintiffs but the one first named in the action.

The opinion is available here.

Williams v. Chino Valley Independent Fire District: Supreme Court To Review Decision That Prevailing FEHA Defendant May Recover Ordinary Costs Without Showing That Action Was Frivolous, Unreasonable, or Groundless

In Williams v. Chino Valley Independent Fire District (7/23/13) --- Cal.App.4th --- (discussed here), the Court of Appeal held that a defendant in a FEHA action need not show that the claim was frivolous, unreasonable, or groundless in order to recover its "ordinary costs" under California Code of Civil Procedure section 1032.

The California Supreme Court granted review on 10/16/13. Williams is Case No. S213100, and the Court's web page for it is here.  

Mendiola v. CPS Security Solutions: Supreme Court Grants Review of Security Guard Wage and Hour Case Raising On Call and Sleep Time Issues

In Mendiola v. CPS Security Solutions, Inc. (7/3/13) --- Cal.App.4th --- (discussed here), the Court of Appeal held:

1. Security guards who remain on the work site 16 hours per day during the week (eight hours "on duty" and eight hours "on call") and 24 hours per day on the weekends (16 hours "on duty" and eight hours "on call") must be compensated for their "on call" time; but 
2. The employer could deduct up to eight hours of regularly scheduled "sleep time" when the trailer guards worked 24 hour shifts because the employer and trailer guard employees had entered into an agreement to exclude eight hours of sleep time from the guards' compensable time. 

The California Supreme Court granted review on 10/16/13. Mendiola is Case No. S212704, and the Court's web page for it is here.

Concepcion and the California Supreme Court (Updated 11/19/13)

The Center for Civic Mediation and LA County Bar are presenting a program tonight on the law of arbitration: "Will California Arbitration Law Survive the United States Supreme Court?" The panel includes Judge Daniel Buckley of the LASC, Richard Chernick, and my friend Debbie Saxe. I'm sure it will be entertaining and interesting.

So this seems like an appropriate time to update my list of cases in which the California Supreme Court has either granted or denied review of issues raised in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___. Clicking on the case name will bring you to my discussion of it. I have listed the cases in chronological order, with their key rulings. The most recent cases are at the bottom.

Brown v. Ralphs Grocery Co. (7/12/11) 197 Cal.App.4th 489, review denied 10/19/2011:

• Wage and hour class action and PAGA representative action.
• Did not decide whether Concepcion overrules Gentry v. Superior Court (2007) 42 Cal.4th 443. 
• Concepcion does not apply in cases brought under the Labor Code Private Attorneys General Act (PAGA). 

Sanchez v. Valencia Holding Co., LLC (11/23/11) 201 Cal.App.4th 74, review granted 3/21/12 (Case No. S199119):

• Putative consumer class action under the Consumers Legal Remedies Act (CLRA), the Unfair Competition Law (UCL), and other California statutes. 
• Concepcion does not prevent courts from applying unconscionability analysis. 
• The arbitration agreement at issue was unconscionable and unenforceable. 
• Did not address enforceability of class action waiver. 

Wisdom v. AccentCare, Inc. (1/3/12) 202 Cal.App.4th 591, review granted 3/28/12 (Case No. S200128), dismissed 7/24/13:

• Multi-plaintiff wage and hour case (not class or representative PAGA action). 
• Without addressing Concepcion, held that arbitration agreement at issue was unconscionable and unenforceable. 
• Review apparently limited to issue of whether certain language is unconscionably unilateral or creates a mutual obligation to arbitrate. 
• Dismissed after settlement. 

Buzenes v. Nuvell Financial Services (1/25/12) review granted 5/9/12 (Case No. S200376) and briefing deferred pending Sanchez v. Valencia Holding Co.: 

• Individual consumer action under the Unfair Competition Law (UCL), and other California statutes and common law theories. 
• Concepcion does not prevent courts from applying unconscionability analysis. 
• The arbitration agreement at issue was unconscionable and unenforceable. 

Mayers v. Volt Management Corp. (2/2/12) 203 Cal.App.4th 1194, review granted 6/13/12 (Case No. S200709):

• Individual action under the California Fair Employment and Housing Act (FEHA). 
• Concepcion does not prevent courts from applying unconscionability analysis. 
• The arbitration agreement at issue was unconscionable and unenforceable. 

Samaniego v. Empire Today LLC (4/5/12) 205 Cal.App.4th 1138, review denied 7/11/12:

• Putative wage and hour class action. 
• Concepcion does not prevent courts from applying unconscionability analysis. 
• The arbitration agreement at issue was unconscionable and unenforceable. 

Kinecta Alternative Financial Solutions, Inc. v. Superior Court (4/25/12) 205 Cal.App.4th 506, review denied 7/11/12:

• Putative wage and hour class action. 
• The Court did not decide whether Concepcion overrules Gentry. 
• Assuming that Gentry is still good law, the plaintiff did not meet her burden of proving the Gentry factors. 
• Class arbitration was not authorized, citing Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. ___ (2010), so the class claims should have been dismissed. 

Hoover v. American Income Life Ins. Co. (6/13/12) 206 Cal.App.4th 1193, review denied 09/12/12:

• Putative wage and hour class action. 
• Defendant waived right to arbitrate by delaying motion. 
• Defendant failed to show that the contract at issue involved interstate commerce, the FAA did not apply, Labor Code section 229 was not preempted, and the defendant could not compel arbitration. 
• Claims for public injunctive relief are not subject to arbitration. 

Iskanian v. CLS Transportation L.A., LLC (6/4/12) 206 Cal.App.4th 949, review granted 9/19/12 (Case No. 204032): 

• Putative wage and hour class action. 
• Concepcion overruled Gentry. 
• The NLRB incorrectly decided D.R. Horton. 
• Concepcion applies to PAGA actions. 
• Contrary to Reyes v. Macy’s Inc. (2011) 202 Cal.App.4th 1119, the plaintiff could pursue individual PAGA claims in arbitration. 

Nelsen v. Legacy Partners Residential, Inc. (7/18/12) 207 Cal.App.4th 1115, review denied 11/2/12:

• Assuming (without deciding) that Gentry is still good law, the plaintiff did not make the factual showing required by Gentry. 
• The NLRB incorrectly decided D.R. Horton, and in any case the NLRB likely did not apply to the plaintiff, who was an apartment manager. 
• Concepcion abrogates California's Broughton-Cruz rule that actions for public injunctive relief are not subject to arbitration. 

Caron v. Mercedes-Benz Financial Services USA LLC (7/30/12) 208 Cal.App.4th 26, review granted 10/24/12 (Case No. 205263) and briefing deferred pending Iskanian:

• Putative consumer class action under the Consumers Legal Remedies Act (CLRA), the Unfair Competition Law (UCL), and other California statutes. 
• The FAA preempts the CLRA's prohibition of class action waivers. 

Truly Nolen of America v. Superior Court (Miranda) (8/9/12) 208 Cal.App.4th 487, no petition for review filed.

• Putative wage and hour class action. 
• Concepcion "implicitly disapproved the reasoning of the Gentry," but lower courts should adhere to Gentry until the Supreme Court rules on the issue. 
• Even if Gentry still is good law, the plaintiffs failed to establish the Gentry factors. 
• Remanded to the trial court to determine whether the parties had an implied agreement to engage in class arbitration. 
• Declined to follow D.R. Horton. 
• The plaintiffs waived their argument that the arbitrator, rather than the trial court, should determine whether the matter could proceed as a class arbitration. 

Goodridge v. KDF Automotive Group, Inc. (8/24/12) 209 Cal.App.4th 325, review granted 12/19/12 (Case No. S206153) and briefing deferred pending Sanchez v. Valencia Holding Co.:

• Consumer class action under the Consumers Legal Remedies Act (CLRA), the Unfair Competition Law (UCL), and other California statutes. 
• The arbitration agreement at issue was unconscionable and unenforceable. 
• Did not address presence or enforceability of class action waiver. 

Reyes v. Liberman Broadcasting Inc. (8/31/12) --- Cal.App.4th ---, review granted 12/12/12 (Case No. 205907) and briefing deferred pending Iskanian:

• Putative wage and hour class action and PAGA representative action. 
• Given the possibility that California law prior to Concepcion barred enforcement of the arbitration agreement, the defendant did not waive its right to arbitration by not making its motion sooner. 
• The NLRA does not prohibit enforcement of arbitration agreements that do not provide for class arbitration. 

Phillips v. Sprint PCS (9/26/12) --- Cal.App.4th ---, review denied 12/19/12:

• Putative consumer class action. 
• Trial court did not abuse discretion in allowing defendant to renew petition to compel arbitration after Concepcion. 
• The trial court correctly determined that the arbitrator should decide whether the contract as a whole, rather than just its class action waiver clause, was unconscionable and unenforceable. 

Elijahjuan v. Superior Court (10/17/12) 210 Cal.App.4th 15, review denied 1/16/13:

• Putative wage and hour class action alleging misclassification of independent contractors. 
• Alleged misclassification of petitioners as independent contractors did not fall within relatively narrow scope of arbitration agreement. 

Franco v. Arakelian Enterprises, Inc. (11/26/12) 211 Cal.App.4th 314, review granted 2/13/13 (Case No. S207760) and briefing deferred pending Iskanian:

• Putative wage and hour class action. 
• Gentry remains good law after Concepcion and invalidated the class action waiver. 
• Because the class action waiver was invalid, Stolt-Nielsen required that the action remain in court, where plaintiff could pursue class certification. 

Baltazar v. Forever 21, Inc. (12/20/12) 212 Cal.App.4th 221, review granted 3/20/13 (Case No. S208345), briefing originally deferred pending Wisdom v. Accentcare, briefing ordered on 8/28/13:

• Individual discrimination action. 
• Unconscionability analysis survives Concepcion. 
• The defendant did not offer evidence to show that the agreement evidenced "a transaction involving commerce," so the California Arbitration Act (CAA) applied, rather than the Federal Arbitration Act (FAA). 
• Because the CAA allows parties to seek provisional remedies in court, arbitration agreement allowing parties to do so was not substantively unconscionable. 

Flores v. West Covina Auto Group (1/11/13) 212 Cal.App.4th 895, review granted 4/10/13 (Case No. S208716) and briefing deferred pending Iskanian:

• Putative consumer class action under the Consumers Legal Remedies Act (CLRA), Automobile Sales Finance Act (ASFA), and Unfair Competition Law (UCL). 
• FAA preempts the CLRA's prohibition on class action waivers. 
• Arbitration agreement was somewhat procedurally unconscionable, but not substantively unconscionable. 

Natalini v. Import Motors (1/7/13, pub. 2/5/13) 213 Cal.App.4th 587, review granted 5/1/13 (Case No. S209324) and briefing deferred pending Sanchez v. Valencia Holding Co.:

• Concepcion does not invalidate unconscionability analysis. 
• The arbitration agreement was procedurally and substantively unconscionable. 

Compton v. Superior Court (American Management Services, LLC) (3/19/13) 214 Cal.App.4th 873, review granted 6/12/13 (Case No. S210261) and briefing deferred pending Sanchez v. Valencia Holding Co.:

• Putative wage and hour class action. 
• Unconscionability analysis survives Concepcion. 
• Agreement was unenforceable as procedurally and substantively unconscionable. 

Vasquez v. Greene Motors, Inc. (3/27/13) 214 Cal.App.4th 1172, review granted 6/27/13 (Case No. S210439) and briefing deferred pending Sanchez v. Valencia Holding Co.:

• Putative consumer class action under the Consumers Legal Remedies Act (CLRA), Automobile Sales Finance Act (ASFA), and Unfair Competition Law (UCL). 
• Arbitration agreement was enforceable. It was procedurally unconscionable because presented on a take-it-or-leave-it basis, but it was not so substantively unconscionable as to "shock the conscience." 
• Under Concepcion, FAA preempts arguments that class action waiver and required arbitration of "public" claims were substantively unconscionable. 

Vargas v. SAI Monrovia B, Inc. (6/4/13) 216 Cal.App.4th 1269, review granted 8/21/13 (Case No. S212033) and briefing deferred pending Sanchez v. Valencia Holding Co.:

• As in Sanchez, arbitration provision in standard automobile retail installment sale contract was unconscionable and unenforceable. 

Leos v. Darden Restaurants, Inc. (6/4/13, pub. 6/24/13) --- Cal.App.4th ---, review granted 9/11/13 (Case No. S212511) and briefing deferred pending Baltazar v. Forever 21:

• Individual action for sexual harassment, retaliation, and wrongful termination. 
• Defendant did not present evidence that any relevant transaction "involved interstate commerce," and the Federal Arbitration Act (FAA) did not apply. 
• Arbitration agreement was substantively unconscionable, but not substantively unconscionable. 

Brown v. Superior Court (Morgan Tire & Auto, LLC) (6/4/13) 216 Cal.App.4th 1302, review granted 9/11/13 (Case No. S211962) and briefing deferred pending Iskanian:

• Representative PAGA wage and hour action. 
• Defendant did not waive its right to compel arbitration by litigating in court before Concepcion. 
• The NLRB incorrectly decided D.R. Horton. 
• All PAGA actions are representative actions. 
• FAA does not preempt California law prohibiting waiver of an employee's right to bring a PAGA representative action. 
• Trial court should have compelled individual arbitration of non-PAGA claims. 

Continue to stay tuned. I will continue to update this list every couple of months as new cases come down. And if you know of any cases that I've missed, feel free to drop me a line.

Mendez v. Mid-Wilshire Health Care Center: Court Denies Petition to Compel Arbitration Where Provision in Collective Bargaining Agreement Does Not "Clearly and Unmistakably" Waive Right to Proceed in Court

Last week I mentioned Volpei v. County of Ventura (11/7/13) --- Cal.App.4th --- (discussed here), which affirmed a trial court order denying a petition to compel arbitration of statutory discrimination claims on grounds that the collective bargaining agreement did not "clearly and unmistakably" waive the employee's right to pursue those claims in court.

Mendez v. Mid-Wilshire Health Care Center (9/23/13, pub. 10/15/13), follows along the same lines:

Under Wright [v. Universal Maritime Service Corp. (1998) 525 U.S. 70], 14 Penn Plaza LLC [v. Pyett (2009) 556 U.S. 247], and Vasquez [v. Superior Court (2000) 80 Cal.App.4th 430], the collective bargaining agreement in this case does not contain a clear and unmistakable agreement to arbitrate statutory discrimination claims. The arbitration provision in the collective bargaining agreement between Mid-Wilshire and the union contains very general language regarding grievances. It does not mention FEHA, it does not explicitly incorporate by reference any statutory anti-discrimination laws, and it does not contain an explicit waiver of the right to seek judicial redress for statutory discrimination causes of action. Nothing in the agreement makes noncompliance with FEHA subject to the arbitration provision. 

Slip op. at 11. The Court rejected the argument that AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ (discussed here) has changed this legal landscape. Slip op. at 14-15.

For the time being, arbitration agreements in collective bargaining agreements appear to represent an eddy in the post-Concepcion river of mandatory arbitration jurisprudence. It will be interesting to see whether the California Supreme Court addresses this by granting review in Volpei or Mendez.

In the mean time, Mendez v. Mid-Wilshire Health Care Center is available here.

Chavarria v. Ralphs Grocery Co.: Ninth Circuit Finds Arbitration Policy Unconscionable and Unenforceable

In Chavarria v. Ralphs Grocery Company, ___ F.3d ___(9th Cir. 10/28/13), the plaintiff filed a putative meal and rest period class action under the Unfair Competition Law (UCL), and Ralphs moved to compel arbitration of her individual claims. The district court denied the motion, holding that Ralphs’ arbitration policy was unconscionable under California law and therefore unenforceable. Ralphs appealed, and the Ninth Circuit affirmed. 

The Court found the policy procedurally unconscionable for the following reasons: acceptance of the policy was a condition of applying for employment; it was presented on a “take it or leave it” basis with no opportunity for negotiation; Ralphs did not provide the terms of the policy to Chavarria until three weeks after she had agreed to be bound by it; and the policy bound Chavarria, whether she signed it or not. Slip op. at 10-13. 

The Court found the policy substantively unconscionable for the following reasons: Ralphs would always be the party to select the arbitrator in employee-initiated arbitrations; the policy precluded institutional arbitration administrators which have "established rules and procedures to select a neutral arbitrator;" and the policy forced the employee to pay one half of the arbitration fees, "unless a decision of the U.S. Supreme Court directly addressing the issue requires that they be apportioned differently." Slip op. at 14-19. 

The Court concluded its unconscionability analysis as follows: 

Ralphs has tilted the scale so far in its favor, both in the circumstances of entering the agreement and its substantive terms, that it "shocks the conscience." Accordingly, Ralphs’ arbitration policy cannot be enforced against Chavarria under California law. 

Slip op. at 19-20. 

Perhaps more interesting is the Court's conclusion that the FAA does not preempt this unconscionability analysis.  Slip op. at 20-22. The Court rejected the argument that the Supreme Court's recent decision in American Express Corp. v. Italian Colors Restaurant, ___ U.S. ___, 133 S. Ct. 2304 (2013) (discussed here) precluded it from considering the provision requiring employees to pay half the cost of arbitration. The Court reasoned that imposing arbitration costs on employees would not just make it infeasible to prove the violations at issue, as in Italian Colors, but would "make access to the forum impracticable." The Court held that Ralphs could not do so, even in the context of the FAA.  

It will be very interesting to see whether the Ninth Circuit decides to review this decision en banc or whether the United States Supreme Court takes action on it. 

The opinion is available here.  

Volpei v. County of Ventura: Public Employer May Not Compel Arbitration of FEHA Claims Unless Collective Bargaining Agreement "Clearly and Unmistakably" Waives Employee's Right To Proceed in Court

A quick word on Volpei v. County of Ventura (11/7/13) --- Cal.App.4th ---.

Mark Volpei worked as an investigator for the Ventura County District Attorney's office (County). Volpei was a member of the Ventura County Deputy Sheriffs' Association (Association), which had a memorandum of agreement (MOA) with the County.

In 2011, Volpei sued the County for retaliation, harassment, disability discrimination, and other claims under the Fair Employment and Housing Act (FEHA). In 2012, the County petitioned to compel arbitration under the MOA, which provided that a grievance, including a claim of disability discrimination, "may be submitted to arbitration by the Association...."

The trial court denied the petition, and the Court of Appeal affirmed, holding that the MOA did not "clearly and unmistakably" waive Volpei's right to proceed in court:

We conclude that the provision that an unresolved grievance "may be submitted to arbitration by the Association" is not a clear and unmistakable agreement to arbitrate Volpei's statutory claims against the County. 

Slip op. at 3. 

The opinion is available here. 

Rope v. Auto-Chlor System of Washington: Court Addresses Donation Protection Act, Associational Discrimination, and Other Discrimination and Retaliation Causes of Action

Rope v. Auto-Chlor System of Washington, Inc. (10/16/13) --- Cal.App.4th ---, deals with a unique set of facts, stated succinctly in the opinion:

When he was hired in September 2010, plaintiff Scott Rope informed his employer, defendant Auto-Chlor System of Washington, Inc. (Auto-Chlor) he planned in February 2011 to donate a kidney to his physically disabled sister, and requested that he be given leave to do so. Rope later requested that the leave be extended and paid under the then-newly enacted Michelle Maykin Memorial Donation Protection Act (DPA), Labor Code sections 1508–1513, which would become effective January 1, 2011. Rope was fired two days before the DPA became effective. He sued his former employer for violation of the DPA and other provisions of the Labor Code, violation of the Fair Employment and Housing Act, Government Code section 12940 et seq. (FEHA), and wrongful termination in violation of public policy. 

Slip op. at 2. 

The trial court sustained Auto-Chlor's demurrers without leave, Rope appealed, and the Court of Appeal affirmed in part and reversed in part. 

Rope did not state a cause of action for violation of the DPA, retaliation for requesting leave under the DPA, or retaliation for complaining about refusal to grant DPA leave. Slip op. at 5-9. Auto-Chlor terminated Rope before the DPA became effective, and the DPA was not retroactive. 

Rope did not state a cause of action under any other provision of the Labor Code. Slip op. at 9-12. He could not allege violation of Labor Code section 1102.5 because he did not claim either that he reported his suspicions of unlawful activity to any governmental agency or that he refused to violate the law. He did not allege any other Labor Code violation, and his causes of action under Labor Code sections 98.6 and the Private Attorneys General Act (Cal. Lab. Code 2698 et seq.) also failed. 

Rope did not state a cause of action for retaliation because he did not allege that he had opposed any conduct forbidden by or filed a complaint under the FEHA. Slip op. at 12-16. Merely requesting leave under the DPA did not constitute protected activity for FEHA purposes. 

Rope stated a cause of action for associational discrimination under the FEHA. Slip op. at 18-22. "The reasonable inference is that Auto-Chlor acted preemptively to avoid an expense stemming from Rope's association with his physically disabled sister," and this was sufficient to allege associational discrimination. Slip op. at 22. 

Rope did not state causes of action for discrimination based on an actual or perceived disability because he did not allege "an impairment that constitutes a physical disability" or that Auto-Chlor perceived him as having such an impairment. Slip op. at 22-23. 

For the same reasons stated with regard to his claim for associational discrimination, Rope stated causes of action for wrongful termination in violation of public policy and for failure to maintain an environment free from discrimination. Slip op. at 23-24. 

The opinion is available here. 

Cornejo v. Lightbourne: Government Claims Act Presentation Not Required for Whistleblower Protection Act Claim

Cornejo v. Lightbourne (10/22/13) --- Cal.App.4th ---, addresses a number of issues arising under the California Whistleblower Protection Act (WPA). Cal. Gov. Code § 8547 et seq.

The Government Claims Act (Cal. Gov. Code § 900 et seq.) ordinarily requires a plaintiff to present a claim to a public entity before suing the entity in court, but WPA actions are not subject to this requirement. Slip op. at 5-10. State Personnel Board (Board) proceedings under the WPA fulfill every function of the Claims Act's presentation procedure, eliminating the need for the presentation procedure. Slip op. at 9. 

Because the presentation procedure does not apply in WPA cases, the Claims Act's six-month limitations period also does not apply. Slip op. at 11-12. 

A WPA plaintiff may initiate an independent judicial action after the Board's executive officer issues initial findings on a submitted administrative complaint without needing to appeal the initial findings to the Board, and such findings have no preclusive effect on any such judicial action. Slip op. at 12-13. 

The opinion is available here. 

Benton v. Telecom Network Specialists: Court Reverses Order Denying Meal, Rest, and Overtime Certification

In Benton v. Telecom Network Specialists, Inc. (10/16/13) --- Cal.App.4th ---, the Court of Appeal reversed a trial court order denying certification of an action alleging failure to provide meal and rest periods and failure to pay overtime compensation. 

The proposed class consisted of approximately 750 cell-phone tower technicians, most of whom were hired and paid by staffing companies that contracted with the defendant, TNS. The remainder of the putative class members were hired and paid by TNS directly. The plaintiffs alleged that TNS was a joint employer of all of the technicians and that TNS failed to adopt policies to pay overtime compensation or to provide meal or rest periods. 

The trial court denied the motion to certify, holding that, even if the court assumed that TNS jointly employed all of the putative class members, the class was too diverse to certify because: (1) some of the staffing companies who were joint employers had adopted a variety of different meal and rest period policies; and (2) the physical locations at which the technicians worked differed, and some of the putative class members were free to take meal and rest periods if they wished. Slip op. at 12-14. 

The Court of Appeal reversed. After reviewing class certification principals and the holdings in Brinker v. Superior Court (4/12/12) 53 Cal.4th 1004 (discussed here), Bradley v. Networkers Internat., LLC (2012) 211 Cal.App.4th 1129 (discussed here), and Faulkinbury v. Boyd & Associates (2013) 216 Cal.App.4th 220 (discussed here), the Court held that the trial court erred in denying certification. 

As in Faulkinbury, the plaintiffs' "theory of legal liability" -- that TNS violated the law by failing to adopt compliant meal and rest period policies -- was susceptible to class treatment. Slip op. at 25-32. Neither evidence that some putative class members worked under conditions that permitted them to take meal and rest periods, nor evidence that the staffing companies had diverse meal and rest period policies constituted a sufficient basis on which to deny certification. 

The trial court did not identify a proper basis on which to deny certification of the plaintiffs' overtime claims, but assuming that it applied the same reasoning above, it erred in doing so. Slip op. at 32-34. 

The opinion is available here. 

Abdullah v. U.S. Security Associates: Ninth Circuit Affirms Order Certifying Meal Period Class

Abdullah v. U.S. Security Associates, Inc., ___ F.3d ___ (9th Cir. 9/27/13), is the first Ninth Circuit case that I'm aware of dealing with certification of meal or rest period claims in the wake of Brinker v. Superior Court. 

The putative class members in Abdullah were security guards, the vast majority of whom worked alone, with no other guards on duty at the same time.  The employer, USAA, required them to sign "on duty" meal period agreements as a condition of employment. Slip op. at 4-6. The district court certified a meal period class, USAA appealed, and the Ninth Circuit affirmed.  

First, the Court found that there was a common legal question, the resolution of which was "apt to drive the resolution of the litigation." Slip op. at 9, citing Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011). The Court described this issue as whether USAA's "single guard post staffing model" satisfied the requirement found in Wage Order No. 4-2001 that an "on duty" meal period is permitted "only when the nature of the work prevents an employee from being relieved of all duty..." 

After reviewing DLSE opinion letters regarding on-duty meal periods and the holdings in Brinker v. Superior Court (2012) 53 Cal.4th 1004 (discussed here), and Faulkinbury v. Boyd & Associates, Inc. (2013) --- Cal. App. 4th --- (discussed here), the Court concluded that USAA had not demonstrated that some class members would qualify for on duty meal periods, while others would not. Slip op. at 21-22. 

[W]e conclude that the merits inquiry will turn on whether USSA is permitted to adopt a single-guard staffing model that does not allow for off-duty meal periods— namely, whether it can invoke a "nature of the work" defense on a class-wide basis, where the need for on-duty meal periods results from its own staffing decisions. Such an inquiry is permissible under Brinker and Faulkinbury; the latter clarified that an employer may be held liable under state law "upon a determination that [its] uniform on-duty meal break policy [is] unlawful," with the "nature of the work" defense being relevant only to damages. Thus, the legality of USSA's policy is a "significant question of law," that is "apt to drive the resolution of the litigation" in this case. We therefore hold that the district court did not abuse its discretion in concluding that Rule 23(a)(2) was satisfied.

Slip op. at 23.

Second, the Court held that this common question predominated over any questions affecting only individual class members, satisfying Federal Rule of Civil Procedure 23(b)(3). Slip op. at 23-30. USAA's "nature of the work" defense would be a common inquiry, "focused on the legality of a single-guard staffing model, 'rather than a site-by-site' inquiry," and the district court did not abuse its discretion by finding that common issues of law or fact would predominate. Slip op. at 24-30.  

The opinion is available here. 

State of Arizona v. ASARCO: Court Reduces $300,000 Punitive Damage Award in Title VII Action

In State of Arizona v. ASARCO LLC (9th Cir. 10/24/13), the Ninth Circuit considered whether a $300,000 punitive damage award in a Title VII sexual harassment suit violated constitutional limits where the jury awarded no compensatory damages and only one dollar in nominal damages. 

Angela Aguilar worked for ASARCO at a copper mining and refining facility in Arizona. She alleged that two supervisors harassed her, and management failed to remedy the situation. At trial, the jury awarded her no compensatory damages, one dollar in nominal damages, and $868,750 in punitive damages. The district court reduced the punitive damages to $300,000, the statutory maximum under Title VII for an employer of ASARCO’s size. 42 U.S.C. § 1981a(b)(3)(D). 

The Court of Appeal reversed after examining the "guideposts" for determining excessiveness of a punitive damage award: (1) “the degree of reprehensibility of the defendant’s conduct”; (2) “[the] ratio to the actual harm inflicted on the plaintiff”; and (3) “civil or criminal penalties that could be imposed for comparable misconduct.” BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996). 

First, the Court held that the district court did not err in finding that ASARCO's conduct was reprehensible and would support "a very large punitive award." Slip op. at 9-13. 

Second, the Court considered whether the punitive damage award bore "a reasonable relationship to compensatory damages." Slip op. at 13-16. The Court found that this requirement "suggested" that the damages should be reduced. Slip op. at 16. 

Third, the Court held that Title VII's $300,000 punitive damage cap is a "civil penalty" that gives defendants "fair notice . . . of the severity of the penalty that a State may impose" and supports a $300,000 punitive damage award. Slip op. at 16-17. 

The Court concluded that the Constitution did not bar the imposition of a "substantial punitive award," but that the 300,000 to one ratio was excessive. Slip op. at 18-20. Finding no discrimination case upholding a ratio greater than 125,000 to one, the Court held that $125,000 was the highest award that would maintain a "reasonable relationship" between compensatory and punitive damages.  Slip op. at 20. 

The Court remanded and ordered that the district court could order a new trial unless the plaintiff accepts a remittitur to this level. 

The opinion is available here. 

Davis v. Kiewit Pacific Co.: Court Finds Triable Issue as to Managing Agent Status, Overturns Summary Adjudication of Punitive Damages

In Davis v. Kiewit Pacific Co. (9/18/13, pub. 10/8/13) --- Cal.App.4th ---, the trial court entered a judgment for plaintiff Lisa Davis after a jury found defendant Kiewit Pacific Co. liable for gender discrimination, hostile work environment harassment, retaliation, and failure to prevent harassment, gender discrimination, or retaliation. However, before trial, the trial court granted Kiewit's motion for summary adjudication on Davis's claim for punitive damages, concluding there were no triable issues of material fact whether a managing agent of Kiewit had engaged in or ratified any oppressive, malicious and/or fraudulent conduct against her. The Court of Appeal reversed, finding triable issues of material fact on managing agent status. 

Davis worked for Kiewit on a construction project. She alleged that she complained of harassment to the project manager, Kyle Preedy, and Kiewit's EEO officer, John Lochner. On Kiewit's motion for summary adjudication of punitive damages, she argued that Preedy and Lochner were its managing agents. 

The Court found that Preedy's declaration in support of the motion "simply parroted" the managing agent standard set forth in White v. Ultramar, Inc. (1999) 21 Cal.4th 563, and did not state "sufficient evidence to make a prima facie showing that there was no triable issue regarding whether Preedy was a managing agent of Kiewit." Slip op. at 16. Even if Kiewit had introduced such evidence, Davis met her burden to raise a triable issue of material fact on the issue. Specifically:

Preedy, as the Project's manager, was Kiewit's top on-site manager. He had the responsibility to oversee and manage the $170 million project, including over 100 Kiewit employees working on the site. Preedy's duties included interfacing with stakeholders on the Project, contract administration, operations and personnel oversight, and making sure the Project was completed according to the contract. In performing those duties, a trier of fact could reasonably infer he exercised substantial authority and discretion regarding a broad range of issues involving the Project, including compliance with Kiewit's policies and the hiring, supervision, and laying off of Project employees. Absent evidence showing that management of a $170 million project with supervision of 100 employees is an insignificant part of Kiewit's business, a trier of fact could reasonably infer from the above evidence that Preedy "exercised substantial discretionary authority over significant aspects of [Kiewit's] business" and therefore was a managing agent of Kiewit.

Slip op. at 17-18. 

Lochner's declaration also failed in that it stated conclusions of law, rather than factual evidence. Slip op. at 20. In any event, Davis met her burden of raising a triable issue based on the following facts: 

Lochner, as Kiewit's EEO officer, had the duties and responsibilities to enforce its policies against discrimination, retaliation, and harassment based on gender and other protected classes. A trier of fact could therefore reasonably infer he had the authority and discretion regarding enforcement of those policies because he did not conduct, or direct anyone else to conduct, an investigation regarding the [alleged harassment]. In his declaration, Lochner stated, as Kiewit's district EEO officer, he was responsible for administering Kiewit's policies that prevent discrimination, retaliation, and harassment based on gender and other protected groups for the Northwest District. Lochner stated he "conducted training for staff employees (supervisory personnel); took and responded to employee complaints about EEO and other issues; and conducted or oversaw investigations regarding a variety of employee relations issues including alleged discrimination, retaliation and/or harassment." ... [A] a trier of fact could reasonably infer he had authority and discretion in making, interpreting, and applying Kiewit's EEO policies on a corporation-wide basis and therefore had authority and discretion to make decisions that ultimately determine corporate policy.

Slip op. at 21-22. 

The opinion is available here. 

City of Bell v. Superior Court (Rizzo): City Need Not Indemnify Former Official In Actions Alleging Theft of City Funds

Robert Rizzo deserves to have his picture in the dictionary next to the word "chutzpah." 

Robert Rizzo, the former Chief Administrative Officer of the City of Bell (City), has been sued by the City, as well as the Attorney General acting on behalf of the City, for restitution for his alleged looting of the City's coffers. He has also been criminally charged with multiple counts of misappropriation of public funds. Rizzo, by complaint for declaratory relief, seeks a judgment that the City is contractually obligated to provide him with a defense to these civil and criminal actions. We conclude that, as a matter of law, the City does not owe Rizzo such a defense. 

City of Bell v. Superior Court (Rizzo) (10/4/13) --- Cal.App.4th ---, slip op. at 2.  

The opinion is available here.  

Steven G. Pearl to Discuss Settling Wage and Hour Cases

I am presenting "Increasing the Chance of Success in Settling Wage & Hour Litigation" at the Bridgeport Continuing Education 2013 Wage and Hour Conference on December 13, 2013, at the Loews Hollywood Hotel. More information here.

American Corporate Security v. Su: Employer May Not Seek Writ of Mandate To Review Labor Commissioner Determination that Employer Retaliated Against Employee

A quick note on this case. 

In American Corporate Security, Inc. v. Su (9/10/13, pub. 9/27/13) --- Cal.App.4th ---, the Labor Commissioner found that an employer (ACS) terminated an employee in retaliation for complaints about alleged Labor Code violations. ACS petitioned for a writ of mandate, and the trial court sustained the Labor Commissioner's demurrer. The Court of Appeal affirmed, finding as follows: 

A Labor Commissioner order finding retaliation is not self-executing. Slip op. at 6-8. If the employer refuses to comply with such an order, the Labor Commissioner must bring an action in court to enforce it. Ibid. Nothing prevents the employer from raising defenses in such an action. Slip op. at 8-9. Because it could defend the retaliation action in court, ACS had an adequate remedy at law and the demurrer to its mandate action was properly sustained. Slip op. at 10-11. 

The opinion is available here. 

Peng v. First Republic Bank: Failure to Provide AAA Arbitration Rules to Employee Does Not Render Arbitration Policy Unconscionable

In Peng v. First Republic Bank (8/29/13, pub. 9/26/13), --- Cal.App.4th ---, the trial court denied an employer defendant's petition to compel arbitration in an action alleging discrimination and related claims. The Court of Appeal reversed, holding: 

Failure to attach the AAA arbitration rules to the arbitration policy, by itself, did not render the policy procedurally unconscionable. Slip op. at 6-9.

A provision in the policy allowing the employer to modify it unilaterally was not substantively unconscionable. Slip op. at 10-12. Because the covenant of good faith and fair dealing limits an employer's right to modify an arbitration policy, such a right is not "so one-sided as to 'shock the conscience.'" Slip op. at 12. 

Peng v. First Republic Bank is available here. 

Pacific Shores Properties v. City of Newport Beach: Ninth Circuit Reverses Summary Judgment in Action Alleging Discrimination Against Sober Living Group Homes

This is an interesting case on discrimination in the housing context. In Pacific Shores Properties, LLC v. City of Newport Beach (9th Cir. 9/20/13), the Ninth Circuit reversed an order granting summary judgment in a case alleging that a City ordinance violated the Fair Housing Act, the Americans with Disabilities Act, the California Fair Employment and Housing Act, and the Equal Protection Clause by having the practical effect of prohibiting new group homes for recovering alcoholics and drug users from opening in most residential zones and requiring existing group homes to undergo a permitting process.  

The Ninth Circuit held that the district court erred in disregarding evidence that the City’s sole objective was to discriminate against persons deemed to be disabled under state and federal housing discrimination laws. The plaintiffs, who were operators and residents of sober living homes,  were not required to identify similarly situated individuals who were treated better than themselves in order to survive summary judgment. Where there is direct or circumstantial evidence that the defendant has acted with a discriminatory purpose and has caused harm to members of a protected class, such evidence is sufficient to permit the protected individuals to proceed to trial under a disparate treatment theory.

The district court erred in concluding that the plaintiffs failed to create a triable issue of fact as to whether the losses that their businesses suffered were caused by the enactment and enforcement of the ordinance when the plaintiffs presented evidence that they experienced a significant decline in business after the ordinance’s enactment, that the publicity surrounding the ordinance reduced referrals, and that current and prospective residents expressed concern about whether the homes would close. In addition, costs borne by the plaintiffs to present their permit applications and to assure the public that they were still operating despite the City’s efforts to close them were compensable. 

The opinion is available here.  

Sonic-Calabasas A, Inc. v. Moreno: California Supreme Court Holds That Federal Arbitration Act Preempts California Law Prohibiting Waiver of Employee's Right to Labor Commissioner Hearing; Waiver May Be Unconscionable Depending on Totality of Circumstances

In 2011, the California Supreme Court held: (1) an employee's statutory right to a wage hearing before the Labor Commissioner, known as a Berman hearing, "with all the possible protections that follow from it, is itself an unwaivable right that an employee cannot be compelled to relinquish as a condition of employment;" (2) waiver of an employee's right to seek such a hearing is a substantively unconscionable contract term; and (3) the Federal Arbitration Act (FAA) does not preempt the Court's holdings on points one and two. Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I) (discussed here). 

The Supreme Court of the United States granted review and vacated that decision, remanding the case for further consideration in light of AT&T Mobility LLC v Concepcion 563 U.S. ___ (2011) (discussed here). 

The California Supreme Court issued its new decision last week. Reversing its earlier decision, the Court held as follows: 

Although the Berman statutes (Cal. Labor Code sections 98 to 98.8) provide important benefits to employees by reducing the costs and risks of pursuing a wage claim (slip op. at 6-10), the FAA as construed by Concepcion preempts Sonic I's holding that a waiver of Berman procedures in an arbitration agreement is, in and of itself, unconscionable and contrary to public policy. Slip op. at 23. 

Because a Berman hearing causes arbitration to be substantially delayed, the unwaivability of such a hearing, even if desirable as a matter of contractual fairness or public policy, interferes with a fundamental attribute of arbitration — namely, its objective "'to achieve "streamlined proceedings and expeditious results."'" Sonic I's rule is thus preempted by the FAA. 

Slip op. at 25-26 (internal citations omitted). 

Unconscionability remains a valid defense to petitions to compel arbitration in the wake of Concepcion, but such rules must not facially discriminate against arbitration, must be enforced evenhandedly, and "must not disfavor arbitration as applied by imposing procedural requirements that interfere with fundamental attributes of arbitration, especially its lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes." Slip op. at 28-29. For example, state law rules requiring a neutral arbitrator or requiring the employer to pay the unique costs of arbitration do not interfere with fundamental attributes of arbitration and are not preempted. Slip op. at 29. 

Although waiver of Berman hearing procedures is not unconscionable per se, "waiver of these protections in the context of an agreement that does not provide an employee with an accessible and affordable arbitral forum for resolving wage disputes may support a finding of unconscionability." Slip op. at 33. 

The Court remanded to the trial court "to examine the totality of the agreement's substantive terms as well as the circumstances of its formation to determine whether the overall bargain was unreasonably one-sided." Slip op. at 33. The Court ordered the trial court to consider "not only what features of dispute resolution the agreement eliminates but also what features it contemplates." Slip op. at 33.  The Court noted: 

The unconscionability inquiry is not a license for courts to impose their renditions of an ideal arbitral scheme. Rather, in the context of a standard contract of adhesion setting forth conditions of employment, the unconscionability inquiry focuses on whether the arbitral scheme imposes costs and risks on a wage claimant that make the resolution of the wage dispute inaccessible and unaffordable, and thereby "effectively blocks every forum for the redress of disputes, including arbitration itself."

Slip op. at 35.

The unconscionability analysis outlined is not preempted by the FAA. It does not facially discriminate against arbitration, it applies equally to arbitration and nonarbitration agreements that require employees to forgo the Berman protections in resolving wage claims, and as applied it does not pose an obstacle to the achievement of the FAA's objectives as construed in Concepcion. Slip op. at 37.

Finally, the US Supreme Court's recent holding in American Express Co. v. Italian Colors Restaurant (2013) 570 U.S. __ (discussed here) does not affect the Court's reasoning. Slip op. at 42-48. 

Italian Colors involved the harmonization of the FAA with other federal law; it did not involve preemption of state laws dealing with historical police powers. Slip op. at 44. Further, whereas the class action waiver in Italian Colors "eliminated no statutory entitlement specifically designed to help vindicate the rights at issue there, the same is not true of the waiver of statutorily provided Berman protections in this case." Slip op. at 45. 

Concepcion held that the FAA preempts a state-law rule that interferes with fundamental attributes of arbitration "even if [the rule] is desirable for unrelated reasons," such as facilitating the prosecution of "small-dollar claims that might otherwise slip through the legal system." Concepcion did not hold that the FAA preempts state-law rules designed to facilitate prosecution of small-dollar claims even when the rules do not interfere with fundamental attributes of arbitration... 

Slip op. at 47-48. 

Justice Liu, who has become a leading voice in employment law over the last year, wrote the majority opinion, joined by Chief Justice Cantil-Sakauye and Justices Kennard, Werdegar, and Corrigan. Justice Corrigan concurred in the result but expressed the opinion that unconscionability should be found only where the agreement is "so one-sided as to 'shock the conscience.'"  Justice Chin, joined by Justice Baxter, joined in part and dissented in part, arguing that the FAA preempts the Court's approach, and the Court should find the agreement at issue not unconscionable, rather than remanding to the trial court to determine the issue. 

The opinion is available here. 

Governor Brown Vetoes Bill to Amend FEHA After Harris v. Santa Monica

Governor Brown has vetoed legislation intended to address the California Supreme Court's decision in Harris v. City of Santa Monica (2013) 56 Cal.4th 203 (discussed here), which held:

A plaintiff in an action under the Fair Employment and Housing Act (FEHA) must prove that unlawful discrimination was a “substantial factor motivating” the alleged adverse employment action;  

A defendant in such an action may use a “mixed-motive” defense by proving, by a preponderance of the evidence, that it would have made the same decision absent such discrimination;  

A defendant making such a showing need not concede that unlawful discrimination played any role in its decision-making process; and  

If the defendant makes such a showing, the plaintiff may not obtain reinstatement, backpay, front pay, or noneconomic damages, but may obtain declaratory relief, injunctive relief, and reasonable attorney’s fees and costs.

In response to Harris, the California legislature passed SB 655, which would have defined "substantial motivating factor" as follows: 

For purposes of this section, “substantial motivating factor” means a factor that contributed to the employment action or decision. It shall be more than a remote or trivial factor, but need not be the only or main cause of the employment action or decision. Evidence that the person claiming to be aggrieved had a protected characteristic at the time of the employment action or decision is not, by itself, sufficient proof that the protected characteristic was a substantial motivating factor. 

SB 655 also would have provided a $25,000 civil penalty in any action in which the employee proved that discrimination was a substantial motivating factor for an adverse employment action, even if the employer proved that it would have made the same decision without considering the protected characteristic or activity.

Governor Brown vetoed SB 655 on October 10, 2013. He wrote in his veto message:

I think Supreme Court Justice Goodwin Liu got it right in his well-reasoned opinion in [Harris] and I see no reason for further legislative intervention. 

Additional information is available here.