Arbitrator To Decide Whether Arbitration Agreement Provides For Class Arbitration

A majority of the United States Supreme Court has never reached agreement on whether the court or an arbitrator should decide the issue of whether an agreement allows or precludes class arbitration. In Sandquist v. Lebo Automotive, Inc., B244412, 2014 WL 3590152 (Cal. Ct. App. June 25, 2014), the California Court of Appeal followed the reasoning of a Supreme Court plurality opinion to rule that the arbitrator, not the court, should decide the issue.

Facts

In 2000, Timothy Sandquist began working in sales for Manhattan Beach Toyota. On his first day, Sandquist was told to fill out the new employee paperwork quickly so that he could get out on the sales floor.  Due to this rush, Sandquist did not review the paperwork consisting of approximately 100 pages. Within the 100 pages of paperwork were three separate arbitration agreements, all of which Sandquist signed. All three contained provisions providing that any claim, dispute, or controversy arising from, related to, or having any relationship or connection whatsoever with his employment with the company would be submitted and determined exclusively by binding arbitration. The agreements were silent regarding class action suits.

In 2011, Sandquist resigned from his position. A year later, he filed a suit asserting individual and class action claims for hostile work environment and discrimination against his former employer. On August 14, 2012, the trial court compelled individual arbitration, but dismissed the class action claims finding no contractual basis to compel arbitration. Sandquist appealed. 

On appeal, Sandquist argued that the trial court erred by deciding the issue of whether the agreement provided for class arbitration.  According to Sandquist, the issue should have been left to an arbitrator. Sandquist also argued that the trial court incorrectly interpreted the agreement to include a class action waiver.   

Decision

In 2003, the United States Supreme Court decided Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (2003) in a plurality opinion. In that opinion, the plurality held that an arbitrator is the appropriate decision-maker of whether an agreement allows or precludes class arbitration. Subsequent decisions called Bazzle into doubt because the court spoke with only four votes, however. For example, in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (2010), the court emphasized that the holding in Bazzle is not binding authority.

The California Court of Appeal relied upon Bazzle as persuasive authority to conclude that the arbitrator, not the court, appropriately decides whether an arbitration agreement allows or precludes class arbitration. The court explained that a class action is a procedural device, and it noted that procedural questions arising out of the dispute are presumptively for an arbitrator to decide.  On this basis, the court concluded that the trial court improperly decided a procedural question and reversed its decision. The court of appeal did not decide the correct interpretation of the agreement, leaving the interpretation to an arbitrator.

Topics:  Arbitration Agreements, Arbitrators, Class Action, Class Arbitration, Employer Liability Issues, SCOTUS

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, Civil Rights Updates, General Business Updates, Labor & Employment 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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