Court Of Appeal Affirms Order Denying Employee’s Petition To Compel Arbitration And Lays Out Framework For Determining Who Decides Class Arbitration Question And Whether Class Arbitration Is Appropriate

 

Fourth District, Division Three Disagrees With U.S. Supreme Court Decision That Found Class Arbitration Question Is A Procedural Issue For Arbitrators To Decide

     Affirming a trial court’s order denying an employee’s petition to compel class arbitration of his wage and hour claims, the Court of Appeal in Network Capital Funding Corporation v. Papke, G049172 (4/3 Oct. 9, 2014) (Aronson, Bedsworth, Fybel) (published) lays out a neat framework for answering the “Who Should Decide Question” and the “Class Arbitration Question.”

     The Who Should Decide Question. 

     The Court explains that the judge decides “arbitrability” gateway issues, whereas the presumption is that the arbitrator gets to decide “procedural” issues.  The Court rejects the reasoning of a non-binding plurality decision in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003) that the question of whether class arbitration is prohibited is procedural in nature.  Absent a “clear and unmistakable agreement to the contrary,” explains the Court of Appeal, relying on other SCOTUS cases, “it is presumed the parties intended courts, not arbitrators, to decide whether the parties agreed to submit a particular dispute to arbitration.”

     In Network Capital Funding Corporation, the very broad arbitration provision did not “clearly and unmistakably” delegate the gateway issue to the arbitrator, and thus it was for the judge to decide.

     The Class Arbitration Question.

     Under Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662 (2010), “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.”  Unfortunately for Papke, the employment agreement with Network Capital Funding Corporation was silent about class action arbitration, and Papke was unable to point to another contractual basis requiring contractual arbitration.

     So here the trial judge correctly decided the “who should decide question” and correctly decided the ultimate issue, whether the the parties’ arbitration agreement allowed Papke to pursue class and representative claims in arbitration (it did not).