DOJ switches teams in NLRB v. Murphy Oil

The DOJ announced on Friday, June 16, 2017, that it was reversing its position on the validity of class action waivers in arbitration agreements and would file an amicus brief in support of the employer's position in NLRB v. Murphy Oil.  I get that a change in administration can bring with it a change in policy, but this is unfortunate in that it overtly politicizes a legal analysis that should at least attempt to be a textual analysis that doesn't depend on which way the wind blows.  I suppose Judge Posner has the right of it when he argues that all the supposedly dispassionate judicial reasoning is just a veneer over personal preference and wanting anything as significant as this issue to be decided apolitically is laughably naive.  Still, I think the better approach for the DOJ would have been to undertake the equivalent of a noisy withdrawal, officially retracting its position and choosing to take a neutral position in the case.

Source: http://www.politico.com/story/2017/06/16/j...

The Proposed Arbitration Regulations from the CFPB

If you have insomnia or just want to test the lower bounds of your will to live, you can view the text of the proposed rules from the Consumer Financial Protection Bureau (along with about 350 pages of commentary before you actually get to the proposed rules - it's a lot like the longest law review article you've ever read).

The Proposed Rules

Source: http://files.consumerfinance.gov/f/documen...

Chamber of Commerce concerned over proposed regulation that would prohibit class action bans in consumer agreements

Nothing says Cinco de Mayo like arbitration. I have no idea what that means, so don't ask.  Anyhow, the Consumer Financial Protection Bureau will propose a regulation today that will ban contract terms that prohibit consumers from filing class action lawsuits.  And the Chamber of Commerce is none to happy about this development.  You can read the details at politico.com, which posted an opinion piece by Lisa A.Rickard, the president of the U.S. Chamber of Commerce's Institute for Legal Reform and David Hirschmann, the president and CEO of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness.  If you don't have time to read the article, allow me to paraphrase: "Damn trial lawyers! Get off my lawn!"

Source: http://www.politico.com/agenda/story/2016/...

Second Appellate District concludes that Gentry remains good law, despite Concepcion

While it may not last much longer than it takes the ink to dry on the opinion, the Court of Appeal (Second Appellate District, Division One), in Franco v. Arakenian Enterprises, Inc. (November 26, 2012) considered a significant question: "The question on appeal is whether Gentry was overruled by Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) 559 U.S. ___ [130 S.Ct. 1758] (Stolt-Nielsen) and AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ [131 S.Ct. 1740] (Concepcion)."  Slip op., at 3.  Summarizing a 65-page opinion, the Court said:

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. Accordingly, we affirm.

Slip op., at 3.

The decision follows an earlier opinion in the matter, Franco v. Athens Disposal Co., Inc., 171 Cal. App. 4th 1277 (2009) (Franco I).  That procedural and factual history is extensive, and I won't summarize it.  The opinion also contains a footnote indicating that it invited comment on D.R. Horton, but because Franco did not respond to the request, the Court declined to address the impact of that matter.

 The decision also has an exhaustive review of arbitration decisions in the context of statutory claims.  After that history, the Court examined the reach of the Concepcion.  An extended portion of the Court's analysis cited approvingly to a law review analysis: Gilles & Friedman, After Class: Aggregate Litigation in the Wake of AT&T Mobility v. Concepcion (2012) 79 U.Chi. L.Rev. 623.

Ultimately, after looking at the Question Presented in Concepcion, the Court concluded that, in this case, Franco lacked the means, not the incentive, to pursue his claims.  That distinction, the Court held, justified the trial court's decision to deny the petition to compel arbitration.

Then, tucked right into the end of the opinion, the Court offered a monumental observation that would have had great significance if the Court had considered D.R. Horton:

Which brings us to the subject of Concepcion's effect, if any, on PAGA claims. We have already concluded that Athens Services's arbitration agreement — the MAP — contains two unenforceable clauses: the class action waiver and the prohibition on acting as an attorney general. (See Franco I, supra, 171 Cal.App.4th at pp. 1297–1300, 1303; fn. 2, ante.) Those clauses operate independently of each other: One restricts Franco‘s pursuit of his rest and meal period claims while the other prohibits his recovery under the PAGA. Together, they render the MAP tainted with illegality, making it unenforceable and permitting Franco to adjudicate his claims in a judicial forum. (See Franco I, at p. 1303; fn. 2, ante.) Concepcion does not preclude a court from declaring an arbitration agreement unenforceable if the agreement is permeated by an unlawful purpose.

Slip op., at 64.  See that?!  Right there?!  This Court gets it!  If you impose a contract that violates the law (e.g., the NLRA), then the contract is unenforcable in Court on the general ground of illegality.  Any contract that violates the NLRA, not just arbitration agreements, is void and unenforceable.  How hard is this, really?  And here we finally see a Court clearly articulate the illegality defense analysis, but the Court declined to address the NLRA argument because one of the parties was too busy to answer.  Wonderful.

Of course, this case may vanish for years when it gets sucked up into the California Supreme Court's Gentry re-examination.

Unconscionability is still alive and well (for now) as Court (4/1) affirms refusal to enforce arbitration clause in Goodridge v. KDF Automotive

The back and forth of arbitration rulings that dominate the topic of conversation in class actions could make one seasick.  Or at least sick and tired.  The latest contribution to the discussion comes to us compliments of Goodridge v. KDF Automotive Group, Inc. (Ord. pub. Sept. 19, 2012), in which the Court of Appeal (Fourth Appellate District, Division One) affirmed a trial court order denying a motion to compel arbitration.  The trial court concluded that the provision was unconscionable, and thus unenforceable.

There two points of interest here.  First, the Court engaged in a straightforward unconscionability analysis, agreeing with the trial court that the agreement was designed to force car buyers into an inferior forum.  Evidently unconscionability analysis is not as dead as defendant now argue after Concepcion.

Second, the Court noted that "the circumstances (e.g., preprinted contract and arbitration clause) and issues in this case are virtually identical to those in Sanchez v. Valencia Holding Co., LLC (2011) 201 Cal.App.4th 74, review granted Mar. 21, 2012, S199119 (Sanchez)."  As the Court observed, the issues it addressed will likely be decided by the California Supreme Court.

Employment arbitration agreement upheld by Second Appellate District; employee claims must proceed on individual basis

And the war rages on without an end in sight.  In Reyes v. Liberman Broadcasting, Inc. (August 31, 2012), the Court of Appeal (Second Appellate District, Division One) reversed a trial court order denying a petition to compel arbitration.  Along the way, the Court rejected a barrage of challenges to the enforceability of the arbitration agreement or the viablity of an implied class action bar.  Here's a time-saving hint: it doesn't go well for the employee Respondent.

The Court summarized the issue like so:

The Arbitration Agreement is expressly governed by the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.). The Arbitration Agreement provides that LBI and Reyes "agree to submit to final and binding arbitration all claims, disputes and controversies arising out of, relating to or in any way associated with" Reyes's employment or its termination. Specific claims identified in the Arbitration Agreement include wage claims, unfair competition claims, and claims for violation of federal, state, local, or other governmental law. (Ibid.) The Arbitration Agreement does not contain an express class arbitration waiver. However, the Arbitration Agreement does provide that "each party to the arbitration may represent itself/himself/herself, or may be represented by a licensed attorney." The Arbitration Agreement provides for "discovery sufficient to adequately arbitrate [the parties'] claims,"but authorizes the "arbitrator to impose . . . appropriate limits on discovery." Reyes signed an acknowledgment of his receipt of the Arbitration Agreement stating that he could read the Arbitration Agreement in both English and Spanish.

Slip op., at 2.  The case was litigated for just over one year before the employer indicated an intention to move to compel arbitration.

First, the Court examined whether the arbitration agreement allowed for class arbitration agreements, concluding that it did not:

Like the arbitration provision in Kinecta, the Arbitration Agreement in the instant case makes no reference to any parties other than plaintiff and defendant. It provides only for the "final and binding arbitration" of "all claims, disputes and controversies arising out of" Reyes's employment or its termination. The plain language of the Arbitration Agreement further states that each party may only represent "itself/himself/herself" or "may be represented by a licensed attorney." There is no mention of class action claims in the Arbitration Agreement. (As in Kinecta, class actions are not listed among the expressly excluded claims.) Furthermore, Reyes has not presented any evidence showing any intent by the parties to provide for class arbitration in the Arbitration Agreement. Therefore, we hold that because the plain language of the Arbitration Agreement provides only for the bilateral arbitration of Reyes's claims, the Arbitration Agreement does not authorize class arbitration. The Arbitration Agreement, like the arbitration provision in Kinecta, bars class arbitration because the parties did not agree to class arbitration.

Slip op., at 6.

Next, the Court concluded that the employer did not waive the right to petition to compel arbitration because, prior to doing so, the law in California appeared to require a class arbitration.

The Court also noted a difference of opinion as to whether Gentry was overruled by Concepcion.  However, after an extensive discussion, the Court then concluded that even if Gentry remains good law, as was the ruling in Brown v. Ralphs, the plaintiff did not meet the burden of showing all Gentry factors.

The Court then wrapped up its waiver discussion with a detailed discussion of the various factors considered in the waiver context, including delay, extent that litigation machinery was invoked, and other factors.  The Court easily concludes that waiver did not occur.

Finally, the Court discusses the NLRB's D.R. Horton decision.  While the opinion gets roughly two full pages of opninion space, there is little in the way of full analysis of the underlying premise from D.R. Horton, namely, that the NLRA renders illegal any agreement that interferes with concerted activity.  Instead, like other California appellate panels, this Court simply repeats the observation that the NLRB lacks the specific agency expertise to receive deference in its analysis of the FAA.  That may be, but no effort is made to tackle the underlying analysis supplied by the NLRB.  For example, the United States Supreme Court has held that illegal contract provisions are void. Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 77-78, 102 S. Ct. 851, 856 (1982).  In Kaiser Steel, the U.S. Supreme Court held that courts need not defer to the exclusive competence of the NLRB when asked to enforce an agreement that would violate sections 7 or 8 of the NLRA.  Enforcement of an arbitration agreement that precludes class actions is enforcement of an agreement that interferes with the concerted activity right protected by the NLRA.  That application of the FAA is void due to illegality.  Illegality is a contractual defense of general application unaffected by Concepcion or the FAA.  Until a Court of Appeal directly answers this argument, supported by authority well above the NLRB's pay grade, then the lip service given to D.R. Horton is meaningless and holdings resting on that lip service rest on nothing.