As we await Thursday's oral argument before the California Supreme Court in Iskanian v. CLS Transportation of Los Angeles, in Part 3 of our series of posts, we'll take a look at the amici curiae supporting plaintiffs. To read all the briefs in Iskanian, both merits and amici, check out the National Chamber Litigation Center’s page on the case here.

The California Rural Legal Assistance Foundation describes itself as a "non-profit legal services provider that represents low income families in rural California and engages in regulatory and legislative advocacy to promote the interests of low wage workers." The CRLAF’s brief argues that the FAA compels enforcement of arbitration clauses only insofar as they relate to claims arising from the employment contract itself. While Iskanian has asserted a number of different causes of action arising from his employment, the CRLAF argues, his claim under the Private Attorney General Act is not one of them. The PAGA claim is the result of a delegation by the State of California of its sovereign power to enforce the Labor Code and collect civil penalties for violations.  Since the FAA is limited to claims arising under the contract, PAGA claims cannot be forced into arbitration. Besides, Civil Code § 3513 specifically bars waiver of laws established for a public reason.

The argument under Section 3513 is interesting, but it seems to me ultimately doesn't hold water. Substantive rights are (in at least some cases) unwaivable. For example, it’s unlikely that a court would enforce an employment contract calling for payment of less than the minimum wage. But there's a material difference between such a substantive claim for relief and a right to sue. Of course a right to sue is waivable: one waives it by not suing. Why, then, shouldn't an employee be free to trade away for value that which he or she can surrender for nothing?

The Sandquist amicus brief was sponsored by the named plaintiff in a pending class action under the Fair Employment and Housing Act, as well as a group of nonprofit public interest associations -- the AARP, which advocates primarily for older workers and senior citizens; Equal Rights Advocates, which is "dedicated to protecting and expanding economic justice and equal opportunities for women and girls"; and the Impact Fund, which funds, trains and acts as co-counsel to public interest litigators.

The Sandquist brief focuses on the impact of authorizing class waivers on FEHA enforcement. Class waivers would mean "not only that plaintiffs . . . will be unable to vindicate their own FEHA rights, but also that they cannot fulfill the role entrusted to them under the statute" of acting as private attorneys general, amici argue.

The plaintiffs' amicus briefs were filed several months before Italian Colors squarely took on the effective vindication theory, so understandably, many place significant emphasis on Mitsubishi and what other support arguably existed for the theory. The Sandquist amici quote Judge Richard Posner's comment in Carnegie v. Household Int'l, Inc.: "The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30." According to the Sandquist group, the effective vindication theory sweeps even more broadly than merely outlawing straightforward waivers of substantive statutory rights. To be permissible, "arbitration must be structured in a manner that enables the parties to 'effectively' vindicate their statutory rights." Far from being workarounds from the pro-arbitration mandate of the FAA, Armendariz and Gentry were examples of the California Supreme Court "following the U.S. Supreme Court's lead," the Sandquist amici argue.

There's less than meets the eye to Concepcion, the Sandquist amici insistBecause the arbitration provisions in Concepcion were "highly favorable to consumers," the agreement probably would have been enforceable under the effective vindication theory. After all, the amici argue, the question presented in Concepcion specifically acknowledged that class arbitration was not necessary to effective vindication there.

Nor were Discover Bank and Gentry closely related, the brief continues. First, Discover Bank is about unconscionability; Gentry is about effective vindication. Second, Discover Bank adopted a blanket rule barring class waivers in consumer cases, while Gentry requires a fact-specific balancing test.

Like the Sandquist amici, the Consumer Attorneys of California focuses on trying to limit Concepcion and Discover Bank and preserve Gentry. Discover Bank, the CAOC argues, created a categorical ban on class action waivers in consumer contracts, while Gentry revolved around procedural unconscionability. Moreover, Gentry involved a challenge to an entire agreement to arbitrate, where Concepcion only addressed a class arbitration waiver clause. The mere fact that Concepcion eliminated the Discover Bank rule does not mean that "generally applicable state law unconscionability defenses" are preempted "across the board." Rather, the Supreme Court was intending to mandate a "case-by-case approach" to unconscionability and other state-law defenses. The California unconscionability doctrine "has numerous variables giving rise to near infinite variations . . . that were neither discussed nor mentioned in Concepcion," the CAOC claims; accordingly, "Concepcion is limited to the facts in that one case."

The United Policyholders amicus brief addresses a different topic: the Court of Appeal's finding that the defendants in Iskanian hadn't waived any right to arbitrate. UP argues that whether or not an arbitration clause has been waived is an issue of California law, regardless of whether the contract falls within the purview of the FAA (this raises the interesting question of whether a state's waiver law could be preempted by the FAA if it were interpreted in such a way as to become an obstacle to the accomplishment of Congress' purposes). The Court of Appeal erred at the outset, UP argues, by declining to find waiver based on "futility," since California doesn't recognize futility as a defense to waiver. Indeed, even if federal law applied to the waiver question, the UP argues, the Court of Appeal got it wrong, since Federal waiver law allegedly limits futility to situations where a new case has created a right which didn’t exist previously. Since certain courts had enforced arbitration clauses before Concepcion, the defendants' motion to compel arbitration in Iskanian wouldn't have been futile. A separate amicus brief filed by the California Association of Public Insurance Adjusters raises similar arguments.

Finally, the Service Employees International Union and the California Employment Lawyers Association filed a brief in support of the plaintiff. The SEIU/CELA brief focuses on yet another aspect of the case: the D.R. Horton decision and the supposed conflict between a class waiver in employment law and the National Labor Relations Act. According to the amici, the proposition that "the filing and pursuit of employment claims on a joint, class, representative, or other concerted action basis constitutes protected 'concerted' activity under federal labor law" is "unassailable." (We'll see about that once we reach the respondent's brief.) Citing D.R. Horton, they argue that the right to engage in collective action must include "collective legal action" - presumably regardless of what agreements individual employees enter into. The "CLS Policy/Agreement by its express terms prohibits its employees from engaging in concerted legal action," the amici write. "That prohibition violates federal labor law. End of story." Concepcion was distinguishable, the amici write, because "[n]o federal statutory rights were at issue." 

Even if a conflict existed between the FAA's preference for arbitration and the purported right to engage in concerted legal activity, the amici argue, the FAA would have to give way since "the Section 7 right is far more central to national labor policy than any preference for 'streamlined' arbitration is to the FAA."

Of course, the legal landscape has continued to develop since the SEIU/CELA brief was filed. First, the Supreme Court handed down Italian Colors, where "federal statutory rights" were squarely at issue, and most recently, the Fifth Circuit reversed the NLRB's decision in D.R. Horton.

Join us back here shortly for Waiting for Iskanian, Part 4: Friends of the Defendant.

Image courtesy of Flickr by Steve Slater.

Topics:  American Express v Italian Colors Restaurant, Arbitration Agreements, AT&T Mobility v Concepcion, Class Action Arbitration Waivers, Discover Bank Rule, FAA, Gentry, Iskanian, PAGA, Preemption, Section 7, SEIU

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