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Gentry still binding until the California Supreme Court rules on the issue of preemption by Concepcion

Truly Nolen of America v. Superior Court (2012) 208 Cal.App.4th 487, 145 Cal.Rptr.3d 432

Background: Plaintiff Alvaro Miranda and Danny Luna filed a class action complaint against Defendant employer Truly Nolen of America (Truly Nolen), a nationwide provider of pest control services, alleging violations of California’s wage and hour laws. Truly Nolen moved to compel arbitration. The arbitration agreement was silent on the arbitration of class action claims.

Court History: The trial court granted Truly Nolen’s motion to compel arbitration, but relying on Gentry v. Superior Court (2007) 42 Cal.4th 443, 64 Cal.Rptr.3d 773 (Gentry) refused to order individual arbitration. Truly Nolen filed a writ of mandate petition challenging the court’s refusal to order individual arbitration.

Pertinent Issues addressed: The Court of Appeal made the following relevant findings:

a.  Even though Court of Appeal supported the “majority view” of (most federal courts and at least one state court) Concepcion disapproving Gentry, it nonetheless followed the principles of stare decisis, and agreed with Plaintiff’s argument that the court should adhere to Gentry until the California Supreme Court has the opportunity to review the decision in light of the United States Supreme Court decisions in AT & T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740, 179 L.Ed.2d 742 (Concepcion) and Stolt–Nielsen v. AnimalFeeds Internat. Corp. (2010) 130 S.Ct. 1758, 176 L.Ed.2d 605 (Stolt–Nielsen). The Court stated as follows: “On federal statutory issues, intermediate appellate courts in California are absolutely bound to follow the decisions of the California Supreme Court, unless the United States Supreme Court has decided the same question differently.”

b.  Plaintiff failed to present evidence with respect to the application of Gentry factors to the circumstances of the case, and it was not clear that it would be cost-prohibitive for employees to arbitrate their claims on an individual basis. Under Gentry, before a class action waiver can be held unenforceable, it requires a predicate showing that (1) potential individual recoveries are small; (2) there is a risk of employer retaliation; (3) absent class members are unaware of their rights; and (4) as a practical matter, only a class action can effectively compel employer overtime law compliance.

c.  Following the recent analysis in Nelsen v. Legacy Partners Residential, Inc. (2012) 207 Cal.App.4th 1115, 144 Cal.Rptr.3d 198 (discussed here) and Iskanian v. CLS Transp. Los Angeles, LLC (2012) 206 Cal.App.4th 949, 142 Cal.Rptr.3d 372 (discussed here) the Court of Appeal declined to follow NLRB’s decision in D.R. Horton, Inc. (2012) 357 NLRB No. 184.

Accordingly, the Court of Appeal reversed and remanded and directed the trial court to (1) vacate the portion of the order denying Truly Nolen’s motion to order individual arbitration; and (2) allow parties additional briefing and argument on the implied agreement issue.

Pointers:

  • The Court’s decision is welcome benchmark for other lower courts to follow until the California Supreme Court issues an authoritative ruling as to Gentry.
  • The Court’s summary of arbitration law in California is A GOOD READ FOR COUNSELS.