Iskanian v. CLS Transp. L.A., LLC

• Decision Date: 04 June 2012
• Docket Number: No. B235158.,B235158.
• Court: California Court of Appeals Court of Appeals
• Parties: Arshavir ISKANIAN, Plaintiff and Appellant, v. CLS TRANSPORTATION LOS ANGELES, LLC, Defendant and Respondent.

142 Cal.Rptr.3d 372

19 Wage & Hour Cas.2d (BNA) 1195

12 Cal. Daily Op. Serv. 6138

2012 Daily Journal D.A.R. 7371

Arshavir ISKANIAN, Plaintiff and Appellant,

v.CLS TRANSPORTATION LOS ANGELES, LLC, Defendant and Respondent.

No. B235158.

Court of Appeal, Second District, Division 2, California.

June 4, 2012.

Background: Employee brought putative class action against employer for wage and hour violations. The Superior Court, Los Angeles County, No. BC356521,Robert Hess, J., granted employer's motion to compel arbitration and dismissed class claims. Employee appealed. The Court of Appeal issued writ of mandate, 2008 WL 2171792. The Superior Court again granted employer's motion to compel arbitration and dismissed class claims. Employee appealed.

Holdings: The Court of Appeal, Boren, P.J., held that:

(1) Federal Arbitration Act (FAA) preempts California law holding class action waivers as to employees' unwaivable rights to be contrary to public policy;

(2) FAA preempts state law as to unenforceability of waivers of employees' right to representative action under Private Attorney General Act (PAGA); and

(3) employer did not waive its right to arbitration.

Affirmed.

Limited on Preemption Grounds

West's Ann.Cal.Labor Code § 2699Initiative Legal Group, Los Angeles, Raul Perez, Glenn A. Danas, Katherine W. Kehr for Plaintiff and Appellant.

Fox Rothschild, San Francisco, David F. Faustman, Yesenia M. Gallegos, Namal Tantula for Defendant and Respondent.

BOREN, P.J.

This is the second appeal in this case. We issued our opinion on the first appeal soon after the California Supreme Court decided Gentry v. Superior Court (2007) 42 Cal.4th 443, 64 Cal.Rptr.3d 773, 165 P.3d 556( Gentry ), which held that a class waiver provision in an arbitration agreement should not be enforced if “class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration.” ( Id. at p. 450, 64 Cal.Rptr.3d 773, 165 P.3d 556.) In our prior opinion, in light of Gentry, we directed the trial court to reconsider its order granting a motion to compel arbitration and dismissing class claims.

In this appeal, we are faced with an essentially identical order—defendant's renewed motion to compel arbitration was granted and class claims were dismissed. The legal landscape, however, has changed. In April 2011, in AT & T Mobility LLC v. Concepcion (2011) ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742( Concepcion ), the United States Supreme Court, reiterating the rule that the principal purpose of the Federal Arbitration Act (FAA) is to ensure that arbitration agreements are enforced according to their terms, held that “[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” ( Id. at p. 1748.) Applying this binding authority, we conclude that the trial court properly ordered this case to arbitration and dismissed class claims.

FACTUAL AND PROCEDURAL BACKGROUND

The plaintiff in this matter, Arshavir Iskanian, worked as a driver for defendant CLS Transportation Los Angeles, LLC (CLS), from March 2004 to August 2005. In December 2004, Iskanian signed a “Proprietary Information and Arbitration Policy/Agreement” (arbitration agreement) providing that “any and all claims” arising out of his employment were to be submitted to binding arbitration before a neutral arbitrator. The arbitration agreement provided for reasonable discovery, a written award, and judicial review of the award. Costs unique to arbitration, such as the arbitrator's fee, were to be paid by CLS. The arbitration agreement also contained a class and representative action waiver, which read: “[E]xcept as otherwise required under applicable law, (1) EMPLOYEE and COMPANY expressly intend and agree that class action and representative action procedures shall not be asserted, nor will they apply, in any arbitration pursuant to this Policy/Agreement; (2) EMPLOYEE and COMPANY agree that each will not assert class action or representative action claims against the other in arbitration or otherwise; and (3) each of EMPLOYEE and COMPANY shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person.”

On August 4, 2006, Iskanian filed a class action complaint against CLS, alleging that it failed to pay overtime, provide meal and rest breaks, reimburse business expenses, provide accurate and complete wage statements, and pay final wages in a timely manner. In its March 2007 order granting CLS's motion to compel arbitration, the trial court found that the arbitration agreement was neither procedurally nor substantively unconscionable. Gentry, however, was decided soon after the trial court rendered its order, and we issued a writ of mandate directing the superior court to reconsider its ruling in light of the new authority.

Apparently, following remand, CLS voluntarily withdrew its motion to compel arbitration, making it unnecessary for the trial court to reconsider its prior order. The parties proceeded to litigate the case. On September 15, 2008, Iskanian filed a consolidated first amended complaint, alleging seven causes of action for Labor Code violations ¹ and an unfair competition law claim (UCL) ( Bus. & Prof.Code, § 17200 et seq.). Iskanian brought his claims as an individual, as a putative class representative, and (with respect to the Labor Code claims) in a representative capacity under the Labor Code Private Attorneys General Act of 2004 (the PAGA).²

After conducting discovery, Iskanian moved to certify the class. CLS opposed the motion for class certification. By order dated October 29, 2009, the trial court granted Iskanian's motion, certifying the case as a class action.

On April 27, 2011, the United States Supreme Court decided Concepcion. Soon after, CLS renewed its motion to compel arbitration and dismiss the class claims, arguing that Concepcion was new law that overruled Gentry. CLS contended that, pursuant to Concepcion, enforcement of the arbitration agreement on its terms was required, and therefore the class and representative action waivers were effective. Iskanian opposed the motion, arguing among other things that Gentry was still good law and, in any event, that CLS had waived its right to seek arbitration by withdrawing the original motion. The trial court found in favor of CLS. On June 13, 2011, it entered an order requiring the parties to arbitrate their dispute and dismissing the class claims.

DISCUSSION

[1][2] Iskanian appeals from the June 13, 2011 order. Although an order compelling arbitration ordinarily is not appealable (see Melchor Investment Co. v. Rolm Systems (1992) 3 Cal.App.4th 587, 591, 4 Cal.Rptr.2d 343), the order here dismissed class claims. It therefore constitutes a “death knell” for the class claims, and accordingly is appealable. ( Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277, 1288, 90 Cal.Rptr.3d 539;In re Baycol Cases I & II (2011) 51 Cal.4th 751, 757, 122 Cal.Rptr.3d 153, 248 P.3d 681.)

[3][4] In the absence of material, conflicting extrinsic evidence, we apply our independent judgment to determine whether an arbitration agreement applies to a given controversy. ( Amalgamated Transit Union Local 1277 v. Los Angeles County Metropolitan Transportation Authority (2003) 107 Cal.App.4th 673, 685, 132 Cal.Rptr.2d 207.) If the trial court's decision on arbitrability depended on resolution of disputed facts, we review the decision for substantial evidence. ( Ibid.) The party opposing arbitration has the burden of showing that an arbitration provision is invalid. ( Franco v. Athens Disposal Co., Inc., supra, 171 Cal.App.4th at p. 1287, 90 Cal.Rptr.3d 539.)

Here, the dispute is largely a question of whether the subject arbitration agreement—including its prohibition of class and representative claims—is enforceable under the law. We therefore must independently review the applicable law to determine whether the trial court's order was correct.

I. The FAA and California arbitration law

[5][6] Section 2 of the FAA makes agreements to arbitrate “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2) This provision reflects a “ ‘liberal federal policy favoring arbitration,’ ... and the ‘fundamental principle that arbitration is a matter of contract.’ ” ( Concepcion, supra, 131 S.Ct. at pp. 1742, 1745.) Arbitration agreements, accordingly, are enforced according to their terms, in the same manner as other contracts. ( Ibid.) Not all arbitration agreements are necessarily enforceable, however. Section 2's “saving clause” permits revocation of an arbitration agreement if “generally applicable contract defenses, such as fraud, duress, or unconscionability” apply. ( Concepcion, at p. 1746.)

[7] California law similarly favors enforcement of arbitration agreements, save upon grounds that exist at law or in equity for the revocation of any contract, such as unconscionability. (Code Civ. Proc., § 1281; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113–114, 99 Cal.Rptr.2d 745, 6 P.3d 669.) Under California law, unconscionability, in the context of arbitration agreements as well as contracts in general, “ ‘has both a “procedural” and a “substantive” element,’ the former focusing on ‘ “oppression” ’ or ‘ “surprise” ’ due to unequal bargaining power, the latter on ‘ “overly harsh” ’ or ‘ “one-sided” ’ results.” ( Id. at p. 114, 99 Cal.Rptr.2d 745, 6 P.3d 669.)

II. Concepcion

In Concepcion, supra, 131 S.Ct. 1740, the United States Supreme Court examined the validity of the “Discover Bank rule,” a rule enunciated in the case Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 153, 30 Cal.Rptr.3d 76, 113 P.3d 1100( Discover Bank ), in which the California Supreme Court held: “at least under some...