California District Court Rejects Shotgun Attacks on Arbitration Agreements

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Alright, we all know in the wake of Italian Colors, Concepcion, and now many other cases that the presumption of arbitrability isn’t just a doctrine to recite in the manner of saying grace before invalidating an agreement, but is actually meant to be followed, even when it might ultimately thwart a class action. But can a would-be class action plaintiff evade an arbitration provision through scattershot attacks on the arbitration agreement’s individual provisions?

That seemed to be the approach in Herrera v. CarMax Auto Superstores, Inc., Case No. CV-14-776-MWF (VBKx) (C.D. Cal., July 2, 2014), but it didn’t really work. In Herrera, the three plaintiffs brought a garden-variety wage and hour suit against the employer asserting that they were not paid for all hours worked. Each of the plaintiffs signed arbitration agreements that incorporated arbitration rules and procedures set forth in a separate booklet that was periodically updated. They raised no fewer than eleven arguments why the provisions of those agreements could not be enforced.

The District Court, in an opinion notable for its conciseness, rejected each of those arguments including finding that:

  • The defendant could enforce the agreements, even though technically they were entered into by a corporate predecessor.
  • The defendant’s right to change the rules on 30 days’ notice under a set procedure did not render the agreements illusory.
  • While the arbitration agreements were contracts of adhesion, they were only slightly procedurally unconscionable, and not enough to invalidate them solely on that basis.
  • It was not unconscionable for the agreements to use the same statute of limitations as state law.
  • The arbitration agreements required both parties to arbitrate their claims, and thus were mutual.
  • In perhaps the most interesting part of the decision, the district court rejected the view of the Ninth Circuit in Ingle v. Circuit Stores, Inc., 328 F.3d 1165, 1179 (9th Cir. 2003), on a state law issue as being superseded by a subsequent California Appellate court on the issue of whether the employer’s right to modify the rules rendered the arbitration provisions unconscionable.
  • Contrary to the plaintiffs’ arguments, the agreements bound both parties.
  • Limitations on discovery did not invalidate the agreement.
  • The fact that arbitration has claim-preclusive effect does not render the agreement unenforceable.
  • Confidentiality is not unreasonable and the alleged jeopardy to the right to select counsel was too remote to find otherwise.
  • Giving the arbitrator the power to assess sanctions absent bad faith did not invalidate the agreement.

Rejecting each of these arguments, the court granted the defendant’s motion to compel arbitration and dismissed the case.

The bottom line: In the wake of Italian Colors and Concepcion, even lots of little claimed problems with arbitration provisions will not thwart the obligation to arbitrate.

Topics:  American Express v Italian Colors Restaurant, Arbitration, Arbitration Agreements, AT&T Mobility v Concepcion, Class Action, Class Action Arbitration Waivers, Corporate Counsel

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure 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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