Thursday, August 20, 2015
Court of Appeal Rules:
Arbitrator, Not Court, Must Decide Dispute Over Class-Action Claim
By KENNETH OFGANG, Staff Writer
An arbitration agreement’s incorporation of American Arbitration Association rules requires that an arbitrator, rather than a court, determine the applicability of the agreement to class-wide claims, the Third District Court of Appeal has ruled.
The panel said Tuesday that Universal Protection Service, a security firm whose clients include the Yolo Superior Court, must allow an arbitrator to decide all issues in its dispute with courthouse security guards, including whether their claims can be heard on a class-wide basis.
Five guards sued UPS, with all five contending that they were not paid their wages and that they were not reimbursed for mandatory equipment expenses. Four of the guards also claimed they were illegally terminated in retaliation for filing an administrative complaint under the Labor Code Private Attorney Generals Act of 2004.
Last year, following the ruling in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348—that an employment agreement may preclude class actions and class-wide arbitration claims, but not representative actions under PAGA—the employees filed an amended complaint under PAGA. They also requested arbitration of their claims on behalf of two classes, one made up of workers who were not reimbursed for training and equipment expenses and one of those who they claim were improperly fired.
They cited the arbitration clause, drafted by UPS, in which each plaintiff agreed that “any controversy, claim or dispute between me and the Company . . . relating to or arising out of my employment or the cessation of that employment will be submitted to final and binding arbitration before a neutral arbitrator . . . for determination in accordance with the American Arbitration Association’s [AAA] National Rules for the Resolution of Employment Disputes as the exclusive remedy for such controversy, claim or dispute.”
UPS responded that class claims were barred by the agreement, and brought a cross-claim seeking a judicial declaration to that effect. Yolo Superior Court Judge Timothy L. Fall took judicial notice of the AAA rules and held it would be up to the arbitrator to decide whether the arbitrable claims could proceed on behalf of a class.
In denying the company’s petition for a writ of mandate, the Court of Appeal, which had stayed the arbitration, said the employer was bound by the agreement that it drafted to submit the issue of class arbitration to the arbitrator.
The AAA rules, Justice Elena J. Duarte noted, grant arbitrators the right to rule on “any objections with respect to the existence, scope, or validity of the arbitration agreement.” They also provide that if a claim is brought on behalf of or against a class, “the arbitrator shall determine as a threshold matter, in a reasoned, partial final award on the construction of the arbitration clause, whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class” and shall then stay the action for at least 30 days to permit an aggrieved party to seek judicial review of the ruling.
She distinguished cases in which courts ruled on the scope of arbitration in the absence of a provision in the arbitration agreement committing such issues to the arbitrator, or where the agreement referred to AAA rules but was ambiguous as to whether they were binding.
There were no ambiguities in the clause relied on by the plaintiffs in this case, Duarte said.
The jurist also distinguished contrary federal cases, noting they “did not fully apply he contractual incorporation rule” that is clearly part of California law, and which federal courts in California have applied.
The case is Universal Protection Service, L.P. v. Superior Court (Parnow), 15 S.O.S. 4258.
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