Nelsen v. Legacy Partners Residential, Inc. - Court of Appeal Not Persuaded by D.R. Horton - Arbitration Agreements Precluding Class Arbitration O.K.


[author: Noemi Blasutta]

Breaking with the National Labor Relations Board’s ruling that arbitration agreements containing class waivers can violate federal labor law, the California Court of Appeal recently held that an arbitration agreement precluding class arbitration was not unconscionable, nor would enforcing it violate California state law, federal law or public policy.

After Plaintiff Lorena Nelsen filed a putative class action against her former employer, Legacy Partners Residential, Inc. (“LPR”), alleging various violations of the California Labor Code, LPR moved to compel Nelsen to submit her individual claims to arbitration based on an arbitration agreement Nelsen signed when she joined LPR. Nelsen appealed the trial court’s decision granting LPR’s motion. The Court of Appeal affirmed the trial court’s decision.

The Court cited a number of reasons for its decision not to follow the NLRB’s decision in D.R. Horton, Inc. (discussed here) including the fact that the Court, not bound by the decisions of lower federal courts on questions of federal law, is similarly not bound by federal administrative interpretations. Nor did the Court find Horton particularly persuasive. The Court noted that the Horton decision was subscribed to by only two NLRB Board members and the subject matter of the decision fell well outside the Board’s core expertise. The Court also noted that the NLRB’s decision in Horton reflected a novel interpretation of the law and cited no prior legislative expression, or judicial or administrative precedent. What’s more, at least two federal district court cases had rejected the reasoning set forth in Horton since its publication.

Even if the Court had found Horton persuasive, the Court found that the decision would have been inapplicable because Nelsen, who held a managerial position, would not be covered by the National Labor Relations Act.

Read the Court’s full opinion here.

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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