Thursday, April 27, 2006
S.C. to Rule on Class-Action Waivers in Employment Disputes
By KENNETH OFGANG, Staff Writer/Appellate Courts
The California Supreme Court agreed yesterday to decide whether an arbitration agreement can preclude the use of class actions to resolve employment disputes.
The justices, at their weekly conference in San Francisco, voted unanimously to review a Jan. 19 ruling in favor of Circuit City Stores, Inc. by this district’s Court of Appeal.
The dispute resolution program offered by the electronics retailer to its “associates” in 1995 was not unconscionable, Justice Orville Armstrong wrote for Div. Five, because it was voluntary and did not deter employees from obtaining significant remedies for any illegal employment practices.
The panel denied a writ petition brought by Robert Gentry, who sued Circuit City in 2002, claiming that he and other customer service managers were unlawfully classified as executives and denied overtime pay.
The company, which has been involved in a great deal of state and federal litigation over its dispute resolution program, moved to compel arbitration under the 1995 agreement. It presented evidence that Gentry was presented with a packet explaining the program, which included an advisory allowing the employee to opt out of the program within 30 days.
Gentry responded that the purported agreement to arbitrate was unconscionable for a number of reasons, including the inclusion of the class-action waiver.
Then-Los Angeles Superior Court Judge Thomas L. Willhite Jr.—now a justice of the Court of Appeal—ruled that Gentry could be forced to arbitrate. The judge cited Discover Bank v. Superior Court (2003) 105 Cal.App.4th 326, which held that where there is a valid arbitration clause, governed by the Federal Arbitration Act, the trial court could not apply state substantive law to strike a class action waiver from the arbitration agreement.
Gentry’s writ petition was originally denied by the Court of Appeal, but the Supreme Court granted review pending the outcome of its review of Discover Bank. After it reversed the Court of Appeal in that case, it sent Gentry’s case back to the Court of Appeal for a decision on the merits.
Armstrong distinguished the two cases, noting that Discover Bank was a consumer class action challenging an agreement that the bank purported to form by mailing it to customers within a “bill stuffer” that the average customer was unlikely to read, which customers could not reject other than by canceling their accounts, and which was held unconscionable, in part, because the denial of a class action remedy effectively insulated the bank from liability because no individual customer would have a large enough claim to justify an action.
In contrast, Armstrong cited two rulings of the Ninth U.S. Circuit Court of Appeals holding that Circuit City’s 1995 agreement was not unconscionable due to the existence of the opt-out provision.
Rejecting Gentry’s claim that his employer attempted to “sucker unsophisticated employees into not opting out,” the justice said the explanation given to the employees was straightforward, advising them that arbitration had both advantages—such as speed and cost-effectiveness—as well as disadvantages, such as lack of jury trial and limited discovery.
Nor, Armstrong went on to say, did the denial of a class action remedy insulate Circuit City from liability, since Gentry could still gain substantial damages and penalties if he can prove his claims.
The case is Gentry v. Superior Court (Circuit City Stores, Inc.), B169805.
In other action taken at the conference, the justices:
•Agreed to decide whether a suit challenging city officials’ alleged improper expenditure of public funds in opposition to a ballot initiative attacking a utility users’ tax was properly dismissed under the anti-SLAPP statute. The Sixth District Court of Appeal ruled that it was, while the plaintiffs, backed by the open-government group Californians Aware, argue that the “public interest” exception of Code of Civil Procedure Sec. 425.17 bas the application of the anti-SLAPP law to their suit. The case is Vargas v. City of Salinas, H027693.
•Agreed to decide whether a defendant has a constitutional due process right to speak prior to the imposition of sentence. The First District’s Div. One answered that question in the negative in People v. Evans, A107822.
•Let stand a ruling by the Fourth District’s Div. Two allowing a manufacturer of after-market automotive accessories to sue a law firm that threatened to sue sellers of its products.
American Products Co., Inc. claims the Moreno Valley firm of Geller Geller, Stewart and Foley firm interfered with its relationships with Pep Boys and Kragen Auto Parts by threatening to sue those firms for selling lighting kits made by American Products. In letters to those retailers, the Geller firm threatened to sue if the companies would not settle claims that they engaged in unfair business practices by selling the lights without telling purchasers that the lights cannot be used on private vehicles on California highways.
The Court of Appeal overturned Riverside Superior Court Judge Gary Tranbarger’s ruling that the action was barred by the absolute litigation privilege of Civil Code Sec. 47(b). The panel said the privilege did not bar an action by American Products because the manufacturer was not a party to the threatened litigation against the sellers.
The case is American Products Co., Inc. v. Law Offices of Geller, Stewart & Foley, LLP, E037230.
Copyright 2006, Metropolitan News Company