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Employer moves to compel arbitration after 13 months. Court of Appeal finds “no waiver”, enforces arbitration agreement

Reyes v. Liberman Broadcasting, Inc. (2012) 146 Cal.Rptr.3d 616

Background: Plaintiff Jesus Reyes (Reyes) worked as a security officer for Defendant Liberman Broadcasting, Inc. (LBI). Reyes signed an arbitration agreement through which he had agreed to submit to final and binding arbitration of all claims; the agreement did not contain an express class arbitration waiver. However, it did provide that “each party to the arbitration may represent itself/himself/herself, or may be represented by a licensed attorney.” On May 27, 2010, Reyes filed a putative class action against LBI alleging wage and hour violations. LBI answered, conducted limited discovery and agreed to class wide mediation. Approximately, 13 months after the original complaint being filed, On June 2, 2011, LBI moved to compel arbitration.

Court History: Trial court denied the motion on the ground that LBI had waived its right to arbitration by its “failure to properly and timely assert it.” LBI appealed.

Pertinent Issues addressed: The Court of Appeal reversing the trial court’s ruling, made the following relevant findings, among others:

a.  Citing Stolt–Nielsen S.A. v. AnimalFeeds Int’l Corp. (2010) 130 S.Ct. 1758 and Kinecta Alternative Financial Solutions, Inc. v. Superior Court (2012) 205 Cal.App.4th 506, 140 Cal.Rptr.3d 347 (Kinecta) the Court of Appeal noted that, “[A] party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” Court of Appeal observed that, the arbitration agreement language only provides for bilateral arbitration and does not mention of class action claims, accordingly, the arbitration agreement did not authorize class arbitration.

b.  Prior to the decision of the Supreme Court of the United States in AT & T Mobility v. Concepcion (2011) 131 S.Ct. 1740 (Concepcion), the California Supreme Court decisions in Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 30 Cal.Rptr.3d 76 (Discover Bank) and Gentry v. Superior Court (2007) 42 Cal.4th 443, 64 Cal.Rptr.3d 773 (Gentry) potentially barred enforcement of the Arbitration Agreement, hence, any attempt by LBI to compel arbitration had been futile. However, Concepcion changed the legal landscape by explicitly overruling Discover Bank and impliedly overruling Gentry. Court of Appeal found that since, LBI promptly informed Reyes of its intent to arbitrate one month after the Concepcion decision and filed its motion to compel a month later.LBI did not waive its right to compel arbitration. Court of Appeal further noted that, even if Gentry remain remains good law, Reyes failed to show the Gentry factors.

c.  Similar to the recent findings of Court of Appeal in Iskanian v. CLS Transportation Los Angeles, LLC (2012) 206 Cal.App.4th 949, 142 Cal.Rptr.3d 372 (discussed here); Nelsen v. Legacy Partners Residential, Inc. (2012) 207 Cal.App.4th 1115, 144 Cal.Rptr.3d 198 (discussed here); and Truly Nolen of America v. Superior Court (2012) 208 Cal.App.4th 487, 507, 145 Cal.Rptr.3d 432 (discussed here) the Court declined to follow NLRB’s decision in D.R. Horton, Inc. (2012) 357 NLRB No. 184.

Pointers:

  • The case is a favorable one for employers moving to compel arbitration; however employers should be vigilant on delay to move to compel arbitration. Employers should consult their legal counsel when reviewing the enforceability of arbitration agreements.
  • The case reaffirms the rejection of D.R. Horton. It seems unlikely, that a court would refute the arguments of the Court of Appeal in rejecting Horton.