Universal Protection Service v. Superior Court (Parnow): Incorporation of AAA Rules into Arbitration Agreement Gives Arbitrator Power to Determine Whether Agreement Authorizes Class Arbitration

Universal Protection Service, LP v. Superior Court (Parnow) (8/18/15) --- Cal.App. 4th --- is another case addressing whether the court or arbitrator has authority to decide the arbitrability of claims.

Employees filed a class action and representative action under the Labor Code Private Attorneys General Act (PAGA) alleging wage claims against their former employer, Universal Protection Services (UPS). UPS cross-complained, seeking a declaration that (1) the trial court, not the arbitrator, should decide whether the parties' arbitration agreement barred class relief and (2) that the arbitration agreement barred class actions. UPS then moved to compel individual arbitration and stay the court proceedings. The trial court denied the petition, ruling that the arbitrator should decide the arbitrability issues. The Court of Appeal affirmed, holding as follows:

The American Arbitration Association (AAA) employment arbitration rules provide: "The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement." In addition, the AAA Supplementary Rules for Class Arbitrations give the arbitrator authority to decide "whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class."

Because the arbitration agreement incorporated the AAA rules, the arbitration agreement "clearly and unmistakably" gave the arbitrator the power to decide whether the agreement authorizes class arbitration.

The opinion is available here.