Another California Court of Appeal Rules That Concepcion Discredits Gentry's Rule Invalidating Most Class Action Waivers In Arbitration Provisions

On August 13, 2012, another California Court of Appeal recognized that Gentry v. Superior Court, 42 Cal.4th 443 (2007) has been “discredited” by the U.S. Supreme Court’s expansive landmark decision in AT&T Mobility, Inc. v. Concepcion, 131 S. Ct. 1740 (2011) holding the Federal Arbitration Act preempts state laws refusing to enforce arbitration agreements with class action waivers. See Truly Nolen of America v. Superior Court, D060519, 2012 Cal. App. LEXIS 871 (2012). Gentry, a pre-Concepcion opinion, established a rule effectively invalidating most class action waivers contained in arbitration provisions based on certain state statutory rights. The Truly Nolen decision expressly joined the emerging “majority view” in recognizing that the FAA preempts Gentry, “Based on Concepcion’s expansive language and its clear mandate that arbitration agreements must be enforced according to their terms despite a state’s policy reasons to the contrary.”

In Truly Nolen, the plaintiffs were employees who brought a putative class action against their employer for alleged wage and hour violations. One month after the U.S. Supreme Court issued Concepcion, the defendant moved to compel arbitration under the plaintiffs’ employment agreements. The trial court determined the agreements were enforceable and compelled arbitration. Citing Gentry, however, the trial court further ordered arbitration to proceed on a class-wide basis even though the arbitration agreements were silent on the issue of class-wide arbitration.

The Court of Appeal did not disturb the trial court’s order compelling arbitration of the plaintiffs’ individual claims, but reversed the order granting class-wide arbitration. The Truly Nolen court agreed with “most federal courts and at least one state court” which “have concluded that Concepcion’s broad language and reasoning undermines Gentry’s rationale.” According to the court, “absent a showing of mutual consent, it is questionable whether courts can validly invoke Gentry to require an objecting party to engage in classwide arbitration.” Although the court allowed that some aspects of Gentry might remain in effect until the California Supreme Court has the opportunity to review its decision in light of Concepcion, the Truly Nolen court determined that, “to the extent the Gentry decision would permit such a generalized showing to negate the parties’ contractual intentions, that conclusion is no longer valid.” The Truly Nolen court remanded the case for further proceedings consistent with its rulings, and to determine whether the parties had implicitly agreed to class-wide arbitration.

 

Published In: Alternative Dispute Resolution (ADR) Updates, General Business Updates, Conflict of Laws Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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