A different other day, another arbitration decision: Gentry maybe not preempted

This is also a day of the week ending in the letter "Y."  Hence, a new arbitration opinion to discuss.  In Truly Nolen of America v. Superior Court (August 13, 2012), the Court of Appeal (Fourth Appellate District, Division One) examined several arbitration issues in a putative class action wage & hour matter.  Adding to the miasma of conflicting aribtration opinions in California, this Court concluded that Gentry was not preempted by Concepcion and must be followed under principles of stare decisis.  However, the Court also found that, on the factual record in the trial court, the Gentry test was not satisfied.  Instead, the Court directed the trial court to permit briefing on the issue of whether the parties' agreement includes an implied agreement to permit class arbitration.

In the trial court, defendant moved to compel arbitration.  The arbitration agreements did not contain a specific provision pertaining to the availability or unavailability of classwide arbitration.  The court granted the motion to compel arbitration, but rejected defendant's request that the court order individual arbitration, relying on Gentry v. Superior Court, 42 Cal. 4th 443 (2007).  Defendant petitioned for review.

The Court set forthan extensive history of arbitration law in California, beginning with cases before Stolt-Neilsen and Concepcion.  It is very exiting, so I will not spoil it by summarizing it here.  Then the Court discussed the impact of Concepcion on Discover Bank and Gentry.  Having concluded the history lesson, the Court had to choose from the conflicting decisions as to whether Gentry remains valid law.

Exercising caution, the Court threaded the eye of the needle, concluding that it doubted the analysis of cases finding Genry valid but agreeing with the plaintiffs that it was nevertheless obligated to follow decisions of the California Supreme Court until expressly invalidated: "On federal statutory issues, intermediate appellate courts in California are absolutely bound to follow the decisions of the California Supreme Court, unless the United States Supreme Court has decided the same question differently."  Slip op., at 23.

Having so concluded, the Court then considered whether the evidentiary record was sufficient to support a finding that the Gentry factors were present.  The Court concluded that the plaintiffs failed to connect attorney declarations with the facts of the case.  Based on an insufficient evidentiary record, the Court reversed the trial court's finding that Gentry required a class arbitration.

Next, the Court examined other contentions.  First, the Court agreed that an arbitartion agreement may include an implied agreement to class arbitration:  "Relying on Stolt-Nielsen, the courts have recognized that an implied agreement may be sufficient to support class arbitration."  (Slip op., at 33.)  Although plaintiffs did not raise the issue in the trial court, the Court concluded that they were not precluded from doing so on remand.  The Court left it to the trial court to develop the record as to whether the parties' agreement includes an implied agreement to class arbitrations.  Notably, the Court recognized that California contract law would govern the analysis of whether an implied agreement permitting arbitration agreements exists.

Next, as with several other Courts of Appeal, the Court, in cursory fashion, rejected the contention that the NLRA protects employees from the enforcement of contract provisions that would impede their right to undertake concerted activity, including class actions.  I have commented elsewhere on the paucity of analysis supplied by other Courts in California (Iskanian and Nelsen), and this Court did nothing to advance the analysis beyond more than something akin to bare assertion based on skepticism.  As an aside, even if the Court believes that its scant analysis is correct, the existence of the NLRA and the many decisions protecting class actions as concerted activity should, at minimum, supply the requisite implied intent to permit class arbitrations.  After all, the defendant could not have intended to violate the NLRA, could it?

With every class-related arbitration decision issued in California, the need for comprehensive, detailed holdings from the California Supreme Court grows.  I urge the California Supreme Court to assist parties in consumer and employment class actions by sweeping up all of these decisions and rendering a number of much needed rulings as quickly as possible.