Arbitration/Class Actions/Waiver/Unconscionability: Second District, Division 7, Agreeing That Class Action Waiver Is Unconscionable, Affirms Trial Court

 

No Need To Decide Whether Concepcion Overrules Gentry Here – Because "This Is Not A Close Case"

     These proceedings began in 2004 when Ralphs Grocery Company employees sued Ralphs for alleged violations of the Labor Code and Unfair Competition law. The proceedings moved up and down the appellate ladder. Eventually, after a remand, the trial court refused to enforce Ralphs' arbitration policies with class action waivers, based on an examination of the factors in Gentry v. Superior Court, 42 Cal.4^th 443 (2007). Ralphs appealed, arguing that AT&T Mobility LLC v. Concepcion, 563 U.S. __ ,131 S.Ct. 1740 (2011), conclusively establishes that Gentry has been preempted by the Federal Arbitration Act (FAA). Massie v. Ralphs Grocery Company, B224196 (2^nd Dist. Div. 7 April 2, 2012) (Woods, J.) (not for publication)

     Applying a multi-factor Gentry analysis to the arbitration policies, the trial court found that anticipated recoveries in the plaintiffs' cases are modest, a risk of retaliation would deter individual actions, plaintiffs were ill-informed of their rights under overtime laws, real world obstacles existed to individual vindication of rights through individual arbitration, and, crucially, federal preemption did not preclude invalidating Ralphs' class arbitration waiver. Therefore, the trial court found Ralphs’ arbitration policies containing class action waivers to be unenforceable.

     But the United States Supreme Court held in Concepcion that California's rule in Discover Bank v. Superior Court, 36 Cal.4^th 148 (2005) that class actions waivers in consumer arbitration agreements may be unenforceable or unconscionable is preempted by the FAA.

     No need to determine whether Concepcion overrules Gentry here, said the Court of Appeal in Massie, because "this is not a close case." There were plenty of reasons for finding the employer's arbitration policies procedurally and substantively unconscionable. The agreements here were "take it or leave it", satisfying a finding of procedural unconscionability. And the policies were overreaching in various respects, satisfying a finding of substantive unconscionability.

     It is a basic rule of appellate review "that a ruling or decision, itself correct in law, will not be disturbed on appeal merely because given for the wrong reason." Therefore, there was no need to decide whether Gentry survives Concepcion, because it wouldn't make a difference in Massie, even if the rule in Gentry has been gutted. Massie was decided as it was on its own facts, and not simply because the arbitration policy included a class action waiver.

     As we have said in other posts (see our February 28 post on Wisdom v. AccentCare, Inc., No. C065744 (3^rd Dist. January 3, 2012) (certified for publication) and March 4, 2012 post on Ajamian v. CantorCO2e , L.P., Case No. A131025 (1^st Dist. Div. 5 Feb. 16, 2012) (certified for publication)) employers who want to enforce arbitration provisions would do well to draft provisions that do not appear to overreach, because under the FAA, unconscionability remains a valid state law defense to enforcement of a contract.