Arbitration: Unconscionability/Enforceability: AT&T Mobility v. Concepcion Requires Reversal of Order That Found Arbitration Agreement Unenforceable – With Court of Appeal Expressing No Opinion On Enforceability

 

Another Example of the Search for Wiggle Room Within the Concepcion Straightjacket

     California courts necessarily follow the ruling of AT&T Mobility LLC v. Concepcion, __ U.S. __ , 131 S.Ct. 1740 (2011), overruling the holding of Discover Bank v. Superior Court, 36 Cal.4^th 148 (2005) that in turn had held that class action waivers in consumer contracts of adhesion are per se unenforceable. At the same time, the courts are uncomfortable about overextending Concepcion, recognizing that there are still plenty of other reasons for finding class action waivers to be unenforceable. The tension between following the holding of Concepcion, and not following it blindly, is evident in our next case, Mohammadian v. Fry's Electronic's, Inc., Case No. D059200 (4th Dist. Div. 1 May 1, 2012) (McDonald, J., author) (unpublished).

     In Mohammadian, Plaintiffs sued their employer on behalf of themselves and others for various alleged violations: unlawful deductions from wages, illegal record keeping, failure to pay overtime compensation, unfair business practices, and civil penalties under the Private Attorneys General Act (PAGA).

     The trial court denied Defendant Fry's Electronics petition to arbitrate. It reasoned that because the employment agreement contained no specific agreement for class arbitration, class action could not be enforced by the arbitrator under Stolt-Nielsen S.A. v. AnimalFeeds International, __ U.S. __, 130 S.Ct. 1758 (2010). Further, under Discover Bank, if there could be no class arbitration, then under California law, the agreement was substantively unconscionable. Fry's appealed denial of its petition to arbitrate.

     The Court of Appeal recognized that Concepcion, which overruled Discover Bank, required a remand. The Court allowed that the holding of Concepcion applied to the employer-employee contract, even though the facts differed from the consumer adhesion contract situation in Concepcion.

     On remand, the trial court gets to consider alternative grounds for affirming its order. Those grounds could include whether the arbitration provision is still unconscionable, disregarding Discover Bank; whether the provision is unenforceable because it waived Plaintiffs' statutory right to bring a representative action under PAGA; and whether Defendant waived its right to arbitrate by acting inconsistently and litigating.

     Thus, the tension between following the holding of Concepcion and not following it blindly played itself out: Concepcion required a remand, but Plaintiffs get another chomp or two at the apple.