Gentry Rides Again!
Franco v. Arakelian Enterprises, Inc., Case No. B232583 (2nd Dist. Div. 1 Nov. 11, 2012) (Mallano, J.) (published) is a long, scholarly opinion, containing a probing analysis of what may now be the hottest arbitration issue: how to resolve the collision between a class action waiver in arbitration and vindication of unwaivable statutory rights. Franco involves wage and hour, meal and rest period claims brought by an employee as a putative class action.
Gentry v. Superior Court, 42 Cal.4th 443 (2007) resolved the class action waiver issue with a multi-factor test, which when satisfied, results in the unenforceability under some circumstances of an arbitration agreement class action waiver, because the waiver would interfere with the employees’ ability to vindicate statutory rights. (We note, as does Justice Mallano, that vindication of unwaivable statutory rights and unconscionability have resulted in the application of two lines of cases in California that may lead to unenforceability of a class action waiver).
In Franco, the Court concludes, “that Gentry remains good law because, as required by Concepcion, it does not establish a categorical rule against class action waivers but, instead, sets forth several factors to be applied on a case-by-case basis to determine whether a class action waiver precludes employees from vindicating their statutory rights. And, as required by Stolt-Nielsen, when a class action waiver is unenforceable under Gentry, the plaintiff’s claims must be adjudicated in court, where the plaintiff may file a putative class action.”
Because Gentry applies here to invalidate the class action waiver, it is obvious that here, “the parties have not agreed in any fashion to allow class arbitration.” And because Stolt-Nielsen held that class arbitration is not permitted unless the parties expressly or implicitly agree to it, that is why Stolt-Nielsen requires hearing the case in court.
The key to Franco is an individualized application of the multi-factor Gentry test, leading to the conclusion that under the circumstances of this case, employees could not vindicate their statutory rights. This approach is to be distinguished from a categorical prohibition of class action waivers.
Two tips, one for the class action plaintiff, the other for defendants. The plaintiff needs to be prepared to present evidence through competent declarations that the multi-factor Gentry test for invalidating a class action waiver has been satisfied – something the plaintiff did present here. The tip for employers is that to survive the Gentry tests, the arbitration provisions would have to be fairly drafted in such a way that the employee could fully vindicate statutory rights in the arbitral forum – easier said than done.
For other recent posts that relate to unwaivable statutory rights, see our November 13, 2012 post on Richey v. Autonation, Inc. and our November 20, 2012 post on American Express Company v. Italian Colors Restaurant.