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.