The hostility of some California courts to arbitration—and their resistance to preemption under the Federal Arbitration Act (FAA)—has produced nearly three decades of U.S. Supreme Court reversals. The most recent is AT&T Mobility LLC v. Concepcion, which held that the FAA preempted the Discover Bank rule, under which the California Supreme Court had blocked
Donald Falk has an extensive appellate practice in which he presents oral arguments, briefs, and motions in the US Supreme Court, and many other federal and state appellate and trial courts. His work involves a wide range of constitutional, statutory, patent, securities, administrative, criminal and common law issues. Don has successfully argued before the United States Supreme Court and the highest courts of California, New York, Maryland and Texas, and has briefed winning appeals in the Delaware and Nevada Supreme Courts. Don frequently briefs and argues cases in the federal and California state appellate courts. He has substantial experience with California's broad unfair competition law (Business & Professions Code Â§ 17200), and many of his recent matters have involved class certification issues and preemption under the Federal Arbitration Act.
To remove a civil action from state court to federal court, the defendant must “file … a notice of removal … containing a short and plain statement of the grounds for removal.” 28 U.S.C. § 1446(a). Today, the Supreme Court granted certiorari in Dart Cherokee Basin Operating Co. v. Owens, No. 13-719, to…
Back in 2008, the Supreme Court held in Hall Street Associates, L.L.C. v. Mattel, L.L.C. that parties to an arbitration agreement subject to the Federal Arbitration Act (FAA) cannot agree to empower a federal court with more searching judicial review than section 10 of that Act specifies. According to the Ninth Circuit, just as the…
The Ninth Circuit’s decision last year in Mazza v. American Honda Motor Co. [666 F.3d 581] (a case I argued) made it more difficult to sustain a nationwide class action under California consumer protection laws. Applying California “governmental interest” choice-of-law principles, the Mazza court held that the jurisdiction having the greatest interest in supplying the…
A New Jersey district judge has certified a nationwide class to pursue claims under the New Jersey Consumer Fraud Act (NJCFA) (pdf), in conflict with the decisions of other courts that have refused to permit nationwide classes to proceed under the law of a single state. The plaintiffs in Kalow & Springut, LLP v. Commence Corp., 2012 WL 6093876 (D.N.J. Dec. 7, 2012), contend that Commence, a New Jersey software company, intentionally inserted a “time bomb” that caused its software to stop working in 2006 in order to force users to buy a software fix or upgrade.
Most of the plaintiffs bought the software and were allegedly injured in states other than New Jersey, and it was in those states that they would have received and relied on any misrepresentations by omission. And the district court recognized that the consumer laws of the 51 jurisdictions differed in material respects. Nonetheless, based on its application of New Jersey choice-of-law principles (which follow the Restatement’s most-significant-relationship test), the court concluded that New Jersey’s interests in preserving the reputations of its local merchants outweighed the interests of other states in regulating business transactions that occurred within their borders and were claimed to injure their citizens. Because the NJCFA is one of the strictest consumer laws in the nation, the court found that other states’ interests in applying their own laws to in-state transactions would not be impaired. In effect, the court held (as I see it) that the most plaintiff-friendly rule is always acceptable everywhere else.…
A California appellate court weighed in last week with another effort to circumvent the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion. In Franco v. Arakelian Enterprises, Inc. (pdf), a panel of the Court of Appeal in Los Angeles affirmed an order refusing to enforce an employee’s agreement to arbitrate disputes with his employer, holding that Concepcion does not abrogate the California Supreme Court’s decision in Gentry v. Superior Court.
Gentry held that a court could refuse to enforce a provision requiring individual arbitration of a claim involving “unwaivable statutory rights”—which include all wage-and-hour claims—if the court determines that (1) the complaint alleged a systematic denial of overtime pay (as any class action complaint would), (2) a class action is “likely to be a significantly more effective practical means of vindicating the rights of the affected employees” than individual arbitration would be, and (3) disallowing a class action “will likely lead to a less comprehensive enforcement of overtime laws” for the allegedly affected employees (i.e., absent class members). That is, under Gentry, a court could refuse to enforce an agreement to arbitrate individually whenever it believes that the absent class members in a putative wage-and-hour class action would collectively be more likely to recover than they would be if each employee had to comply with her agreement and arbitrate any complaint she might have.
The panel concluded that Gentry was not preempted by Concepcion, which the panel took to apply only to categorical prohibitions on class actions. In reaching that conclusion, the panel relied heavily on plaintiff-friendly law review articles, and reasoned that the Supreme Court’s opinion earlier this year in Marmet summarily reversing an explicitly categorical exception to arbitration supported limiting the reach of Concepcion to similar categorical prohibitions.
The panel concluded that Gentry was not such a categorical prohibition. But it is difficult to see how Gentry—which purported to clarify the California Supreme Court’s earlier Discover Bank decision—imposes a less categorical rule than Discover Bank, which applied to consumer class actions alleging systematically deceptive conduct producing damages in amounts too small to make individual actions likely (and which was overruled by Concepcion). Gentry says, in essence, that individual arbitration cannot be compelled whenever the court concludes on balance that the class device will make it more likely that plaintiffs’ lawyers will bring more claims on behalf of a greater number of employees. It is hard to imagine any wage-and-hour class action in which the plaintiffs’ lawyers would not allege “systematic” violations of the wage-and-hour laws, or would not contend that class actions are “significantly more effective” than individual arbitration.
For years, the California Supreme Court was one of the strongest forces against arbitration in the country. A disproportionate number of the U.S. Supreme Court’s decisions addressing preemption under the Federal Arbitration Act have reversed decisions of the California state courts or of federal courts applying California law. A recent pro-arbitration decision (Pinnacle Museum Tower Ass’n v. Pinnacle Market Development (US), LLC, 54 Cal.4th 223, 145 Cal.Rptr.3d 514 (2012)) suggests that the tide may be turning.
We will soon find out. The court this week granted review in another major arbitration case, Iskanian v. CLS Transportation of Los Angeles, No. S204032. The new grant gives the court the opportunity to weigh in on several issues in the wake of AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). Concepcion held that the Federal Arbitration Act (FAA) preempted a California-law doctrine refusing enforcement to arbitration clauses that required individual arbitration and precluded class-wide dispute resolution.
Three issues in Iskanian are most prominent.