Kinecta Alternative Fin. Solutions, Inc. v. Superior Court of Los Angeles Cnty.

• Decision Date: 25 April 2012
• Docket Number: B236084.,Nos. B235491,s. B235491
• Citation: 12 Cal. Daily Op. Serv. 4616,205 Cal.App.4th 506,2012 Daily Journal D.A.R. 5329,140 Cal.Rptr.3d 347
• Court: California Court of Appeals Court of Appeals
• Parties: KINECTA ALTERNATIVE FINANCIAL SOLUTIONS, INC., Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent;Kim Malone et al., Real Parties in Interest.

12 Cal. Daily Op. Serv. 4616

140 Cal.Rptr.3d 347

2012 Daily Journal D.A.R. 5329

205 Cal.App.4th 506

KINECTA ALTERNATIVE FINANCIAL SOLUTIONS, INC., Petitioner,

v.The SUPERIOR COURT of Los Angeles County, Respondent;Kim Malone et al., Real Parties in Interest.

Nos. B235491

B236084.

Court of Appeal, Second District, Division 3, California.

April 25, 2012.Certified for Partial Publication.*As Modified May 1, 2012.

Jackson Lewis, Los Angeles, David G. Hoiles, Jr. and Karen D. Simpson for Petitioner.

No appearance for Respondent.

The Nourmand Law Firm, Los Angeles, Michael Nourmand and James A. De Sario for Real Parties in Interest.KITCHING, J.

I. INTRODUCTION

Defendant Kinecta Alternative Financial Solutions (Kinecta) petitions for writ of mandate or prohibition to set aside an order denying Kinecta's request for dismissal of class claims from the complaint filed by plaintiff Kim Malone. When Kinecta hired Malone, she signed a provision that Kinecta and Malone would arbitrate disputes arising out of Malone's employment. By granting Kinecta's motion to compel arbitration and denying its motion to dismiss class allegations from Malone's complaint, the trial court imposed class arbitration, even though the arbitration provision was silent on the issue of class arbitration and limited the arbitration to disputes between Malone and Kinecta. We address the issue whether a party to an arbitration provision which neither authorizes nor prohibits class arbitration can be compelled to arbitrate class arbitration.

In Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100 (overruled in AT & T Mobility LLC v. Concepcion (2011) –––U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742), the California Supreme Court states that when a consumer contract of adhesion contains a class action waiver, when disputes between the contracting parties involve small amounts of damages, and when it is alleged that the party with superior bargaining power has carried out a scheme to cheat large numbers of consumers out of individually small sums of money, then the waiver exempts the party from responsibility for its own fraud or willful injury to the person or property of another. In these circumstances, class action waivers are unconscionable and should not be enforced. ( Discover Bank v. Superior Court, at pp. 162–163, 30 Cal.Rptr.3d 76, 113 P.3d 1100.)

Gentry v. Superior Court (2007) 42 Cal.4th 443, 64 Cal.Rptr.3d 773, 165 P.3d 556 ( Gentry ) states that when a plaintiff seeks damages for his employer's alleged violations of statutes requiring overtime pay, and requests a class action even though the arbitration agreement waived class arbitration, the trial court must consider four factors: the modest size of potential individual recovery, the potential for retaliation against class members, the fact that absent class members may not be informed about their rights, and the existence of other obstacles to the vindication of class members' rights to overtime pay through individual arbitration. Gentry holds that if the trial court concludes, based on these factors, that a class arbitration is likely to be a significantly more effective practical means of vindicating the employees' rights than individual litigation or arbitration, and finds that disallowance of the class action would likely lead to a less comprehensive enforcement of overtime laws for employees affected by the employer's violations, the trial court must invalidate the class arbitration waiver. ( Id. at p. 463, 64 Cal.Rptr.3d 773, 165 P.3d 556.)

AT & T Mobility LLC v. Concepcion, supra, 131 S.Ct. 1740, however, overruled Discover Bank and held that class arbitration created by the Discover Bank rule, instead of being consensual, was inconsistent with the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.). AT & T Mobility LLC v. Concepcion, however, did not overrule Gentry.

Relying on Gentry, Malone contends that an arbitration provision that precludes effective vindication of statutory claims for overtime pay and wage and hour claims is unenforceable if the trial court determines that classwide arbitration would be a significantly more effective way of vindicating employees' rights than individual arbitration. Under Gentry, however, Malone was required to establish that the arbitration provision invalidly prohibited arbitration of class claims by making a factual showing of the four factors showing that class arbitration is likely to be a significantly more effective practical means of vindicating employees' rights than individual arbitration. Malone made no evidentiary showing on this issue, and thus there was no substantial evidence of any factual basis that would require a finding that the arbitration agreement limiting arbitration to bilateral arbitration was unenforceable.

This petition is governed by Stolt–Nielsen v. AnimalFeeds International Corp. (2010) 559 U.S. ––––, 130 S.Ct. 1758, 176 L.Ed.2d 605, which holds that under the FAA, a party may not be compelled to submit to class arbitration unless the arbitration contract provides a basis for concluding that the party agreed to do so. The arbitration provision in this case expressly limited arbitration to the arbitration of disputes between Malone and Kinecta. The arbitration agreement made no reference to, and did not authorize, class arbitration of disputes. Thus the parties did not agree to authorize class arbitration in their arbitration agreement, and the order denying Kinecta's motion to dismiss class claims must be reversed.

We therefore grant the petition, order issuance of a writ of mandate directing the trial court to vacate its order denying Kinecta's motion to dismiss class allegations from the complaint and to enter a new and different order dismissing class action allegations from the complaint.

II. FACTUAL AND PROCEDURAL HISTORY

On December 18, 2007, in connection with her employment as a branch manager by Kinecta Federal Credit Union, plaintiff Kim Malone signed a “Comprehensive Agreement Employment At–Will and Arbitration” which contained an arbitration provision.

In relevant part, the arbitration provision stated: “I further agree and acknowledge that [Kinecta] and I will utilize binding arbitration to resolve all disputes that may arise out of the employment context.” ¹

V. DISPOSITION

The petition in B236084 is granted. Let a peremptory writ of mandate issue directing the Los Angeles County Superior Court to vacate its order denying Kinecta's motion to dismiss class action allegations from the complaint and to enter a new and different order dismissing class action allegations from the complaint.

The petition in B235491 is granted. Let a peremptory writ of mandate issue directing the Los Angeles County Superior Court to vacate its order granting Malone's discovery motion compelling Kinecta to produce putative class members' confidential contact information.

The order to show cause is discharged. Our previously ordered stay of proceedings in Los Angeles Superior Court Case No. BC448676 is lifted upon issuance of the remittitur. In the interest of justice, the parties shall bear their own costs.

We concur: CROSKEY, Acting P.J., and ALDRICH, J.

* Pursuant to California Rules of Court, rules 8.1100 and 8.1110, this opinion is certified for publication with the exception of part IV(D), (E), and (F).

1. The arbitration provision further stated: “Both the Credit Union and I agree that any claim, dispute, and/or controversy that either I may have against the Credit Union (or its owners, directors, officers, managers, employees, agents, and parties affiliated with its employee benefit and health plans) or the Credit Union may have against me, arising from, related to, or having any relationship or connection whatsoever with my seeking employment with, employment by, or other association with the Credit Union shall be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act, in conformity with the procedures of the California Arbitration Act (Cal.Code Civ. Proc. sec. 1280 et seq., including section 1283.05 and all of the Act's other mandatory and permissive right to discovery). Included within the scope of this Agreement are all disputes, whether based on tort, contract, statute (including, but not limited to, any claims of discrimination and harassment, whether they be based on the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, as amended, or any other state or federal law or regulation), equitable law, or otherwise, with exception of claims arising under the National Labor Relations Act which are brought before the National Labor Relations Board, claims for medical and disability benefits under the California Workers' Compensation Act, Employment Development Department claims, or as otherwise required by state or federal law. However, nothing herein shall prevent me from filing and pursuing proceedings before the California Department of Fair Employment and Housing, or the United States Equal Employment Opportunity Commission (although if I choose to pursue a claim following the exhaustion of such administrative remedies, that claim would be subject to the provisions of this Agreement). Further, this Agreement shall not prevent either me or the Credit Union from obtaining provisional remedies to the extent permitted by Code of Civil Procedure Section 1281.8 either before the commencement of or during the arbitration process.”

On November 2, 2010, Malone, “on behalf of herself and all others similarly situated,” filed a class action complaint for damages, injunctive relief, and restitution against Kinecta and Navicert Financial, Inc. The complaint alleged that in violation of California wage and hour laws, Kinecta failed to pay overtime to branch managers and failed to provide them with rest and meal periods. The complaint further alleged that Kinecta failed to pay wages due at...