Outland v. Macy’s Department
Stores
Filed 1/16/13
Outland v. Macy’s Department Stores CA1/1
OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits
courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION ONE
JENNIFER OUTLAND et al.,
Plaintiffs and
Appellants,
v.
MACY’S DEPARTMENT STORES, INC.,
Defendant and
Respondent.
A133589
(San Francisco City &
County
Super. Ct. No.
CGC-09-486259)
Plaintiff filed a class action
against her former employer, defendant Macy’s Department Stores, Inc. (Macy’s),
challenging its classification of her employment and seeking compensation. Because plaintiff’s employment agreement
contained an arbitration provision precluding class relief, the trial court
dismissed her class claims and ordered arbitration under the
States Supreme Court’s decision in AT&T
Mobility, LLC v. Concepcion (2011) 131 S.Ct. 1740 (Concepcion), which holds that the Federal Arbitration Act (9 U.S.C.
§ 1 et seq.) (FAA) preempts California decisional law holding certain class action waivers
unenforceable. We affirm.
In March 2009, plaintiff filed a
class action on behalf of all California residents who had been employed as group sales managers for Macy’s
during the prior four years. The
complaint alleged plaintiff had worked as a Macy’s group sales manager for over
27 years before leaving in 2008. Although
she typically worked 50 or more hours per week, she was never paid overtime and
was not compensated when she missed meal and rest periods because her position
was classified by Macy’s as exempt from the applicable wage orders. Plaintiff contended the position was, in
fact, subject to these orders and sought, on behalf of the class, compensation
for overtime and meal and rest breaks, penalties, and attorney fees.
In June 2011, following issuance of
compel arbitration of plaintiff’s individual claim and dismiss her class
claims. The motion was based on a
four-step employee dispute resolution program called “InSTORE,†implemented by
Macy’s in 2003. The first three steps
involved internal procedures; the fourth was binding arbitration. Participation in the fourth step was
voluntary, although employees were required affirmatively to opt out of this
step. Because plaintiff had not opted out,
Macy’s argued, she had effectively agreed to binding arbitration of any work-related
disputes. Macy’s also argued plaintiff
was precluded from acting as a class representative, since the terms of the
InSTORE program included a clause stating, “The Arbitrator shall not
consolidate claims of different Associates into one (1) proceeding, nor shall
the Arbitrator have the power to hear an arbitration as a class action (a class
action involves representative members of a large group, who claim to share a
common interest seeking relief on behalf of the group).â€
In opposing the motion, plaintiff
did not dispute that she was bound by the terms of the InSTORE program as a
result of her failure to opt out of the fourth step, nor did she dispute that
the class action waiver clause, if enforced, precluded her from serving as
class representative. Instead, she
argued the court should hold the class action waiver unenforceable in the
context of wage and hour litigation. The
trial court rejected the argument and granted the motion to compel arbitration,
finding plaintiff “entered into an enforceable arbitration agreement†with
Macy’s that precluded class relief.
Plaintiff was granted three weeks to locate a class representative who
had opted out of the fourth step of the InSTORE program.
Plaintiff contends
her class claims, relying on Gentry v.
Superior Court (2007) 42 Cal.4th 443 (Gentry)
and the decision of the National Labor Relations Board (Board) in
357 NLRB No. 184 (Horton).
factual circumstances underlying Macy’s motion, we review the trial court’s
decision de novo. (Omar v. Ralph’s Grocery Co. (2004) 118 Cal.App.4th 955, 959.)
The issues raised by plaintiff are
now before the California Supreme Court by virtue of its grant of review in
LLC (2012) 206 Cal.App.4th 949, review granted September 6, 2012, S204032 (
(2012) 207 Cal.App.4th 1115 (Nelsen). Our discussion will therefore be relatively
brief.
A. Gentry
In Discover Bank v. Superior Court (2005) 36 Cal.4th 148 (
that a waiver of class action arbitration is unenforceable under the unconscionability
doctrine “when the waiver is found in a consumer contract of adhesion in a
setting in which disputes between the contracting parties predictably involve
small amounts of damages,†since “the waiver becomes in practice the exemption
of the party ‘from responsibility for [its] own fraud, or willful injury to the
person or property of another.’ †(
arbitration waiver unenforceable in an employment agreement, the court
reasoning “such a provision would lead to a de facto waiver and would
impermissibly interfere with employees’ ability to vindicate unwaivable rights
and to enforce the overtime laws.†(
p. 457.) The Gentry court noted both Discover
Bank and its decision were based on the “more general principle: that although ‘[c]lass
action and arbitration waivers are not, in the abstract, exculpatory clauses’
[citation], such a waiver can be exculpatory in practical terms because it can
make it very difficult for those injured by unlawful
conduct to pursue a legal remedy.†(
In Concepcion, the United States Supreme Court effectively overruled
conflicted with section 2 of the FAA, which states: “A written provision in any . . .
contract . . . to settle by arbitration a controversy thereafter
arising out of such contract or transaction . . . shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or in equity for
the revocation of any contract.â€
(9 U.S.C. § 2; Concepcion,
supra, 131 S.Ct. at pp. 1745,
1750.) According to Concepcion, the ruling of Discover
Bank was preempted by the FAA because “[r]equiring the availability of
classwide arbitration interferes with fundamental attributes of arbitration and
thus creates a scheme inconsistent with the FAA.†(Concepcion,
at pp. 1748, 1753.) The court
rejected the argument that the use of the unconscionability doctrine in
for refusing enforcement of the class action waiver under the FAA because
unconscionability is a “grounds . . . for the revocation of any
contract.†(9 U.S.C. § 2.) While recognizing the unconscionability
doctrine’s role in the common law, the court held its use in
content-neutral with respect to arbitration.
Instead, the Discover Bank
court had “applied [the doctrine] in a fashion that disfavors
arbitration.†(Concepcion, at p. 1747.)
Plaintiff notes that
to the rule of Discover Bank and
argues Gentry remains good law. We were also presented with this argument in
Although we found it unnecessary to decide the issue, we noted several
federal decisions had rejected plaintiff’s argument.
supra, 207 Cal.App.4th at pp. 1131–1132.) We also find it unpersuasive. While it is true Concepcion did not discuss Gentry,
the court’s rationale applies equally to that case. As noted above, both Discover Bank and Gentry are
premised on the “more general principle†that class action waivers are, in
certain cases, exculpatory in effect. (
Concepcion held this
unconscionability rationale to be insufficient to overcome the mandate of the
FAA. The reasoning applies equally
whether the contract imposing classwide arbitration is a consumer contract, as
in Discover Bank, or an employment
contract, as in Gentry.
The recent decision
(2012) 211 Cal.App.4th 314 (Franco)
does not require a different result. The
Franco court, following an extended
analysis, concluded Concepcion did
not overrule Gentry because
rule that invalidates class action waivers—the type of rule that
at p. 368.) However, we find it
unnecessary to resolve the issue of Franco’s
application here. To demonstrate a class action waiver
unconscionable under the rationale of Franco,
a party must show that the waiver effectively extinguishes their statutory
remedy by providing evidence of the so-called “Gentry factors.†(
457–462; Franco, at pp. 331,
371–372.) These include “ ‘the
modest size of the potential individual recovery, the potential for retaliation
against members of the class, the fact that absent members of the class may be
ill informed about their rights, and other real world obstacles to the
vindication of class members’ rights . . . .’ †(Franco,
at pp. 355–356.) As plaintiff’s counsel
acknowledged at oral argument on this matter, plaintiff did not submit any
evidence to the trial court concerning the Gentry
factors. Accordingly, even if we
accepted the rationale and holding of Franco,
we would have no basis on this record for finding the class action waiver
unconscionable. (See Franco,
at pp. 371–372 [reviewing evidence submitted in that case regarding the
We also recognize the court in
(2012) 208 Cal.App.4th 487 (Truly
Nolen), while concluding Concepcion was
inconsistent with Gentry, nonetheless
elected to follow Gentry “until the
California Supreme Court has the opportunity to review the decision in light of
the recent United States Supreme Court decisions in Concepcion and Stolt-Nielsen [S. A.
v. AnimalFeeds Int’l Corp. (2010) 559 U.S. ___ [130 S.Ct. 1758] (
Nolen, at p. 507.)
Notwithstanding Truly Nolen,
we conclude we must follow Concepcion.
undercuts Gentry’s rationale. We are bound by the United States Supreme
Court’s rulings with respect to federal questions, such as preemption. (Elliot
v. Albright (1989) 209 Cal.App.3d 1028, 1034.)
B. Horton
Plaintiff also argues we should
follow Horton and hold federal labor
law trumps the FAA in the context of wage and hour litigation. We rejected that argument in
pp. 514–515.) We quote and adopt our
ruling from Nelsen: “In Horton,
the Board determined it was a violation of the National Labor Relations Act (NLRA)
(29 U.S.C. § 151 et seq.) to require employees as a condition of employment to
waive the filing of class action or other joint or collective claims regarding
wages, hours, or working conditions in any forum, arbitral or judicial.[
[supra, 357 NLRB No. 184,] at p.
1.) According to the Board, such a
requirement violates the substantive rights vested in employees by section 7 of
the NLRA to ‘engage in . . . concerted activities for the purpose of
collective bargaining or other mutual aid or protection.’ (29 U.S.C. § 157.) Such mutual aid or protection, the Board
asserted, had long been held—with judicial approval—to encompass ‘employees’
ability to join together to pursue workplace grievances, including through
litigation.’ (Horton, at p. 2.)
“The Board further found in
NLRA to bar mandatory waivers of class arbitration over wages, hours, and
working conditions did not conflict with the FAA or with the Supreme Court’s
decisions in Concepcion and
involved a conflict between the FAA and state
law which, under the supremacy clause, had to be resolved in favor of the
FAA. (Horton, supra, 357 NLRB No. 184, at p. 12.) By contrast, the NLRA reflected federal
substantive law, removing supremacy clause considerations from the
equation. The Board reasoned that the
strong federal policy embodied in the NLRA to protect the right of employees to
engage in collective action trumped the FAA.
(Horton, at pp.
8–12.) Further, the Board opined it was
not in fact mandating class arbitration, contrary to Concepcion and Stolt-Nielsen,
but holding employers may not, consistent with the NLRA, require individual
arbitration without leaving a judicial
forum open for class and collective claims.
(Horton, at pp. 8–12.)
“For a number of reasons, we decline
to follow Horton here. Since we are not bound by the decisions of
lower federal courts on questions of federal law, it follows we are also not
bound by federal administrative interpretations. (See Etcheverry
v. Tri-Ag Service, Inc. (2000) 22 Cal.4th 316, 320–321, overruled in part
by Bates v. Dow Agrosciences LLC
(2005) 544 U.S. 431, 436-437; Debtor
Reorganizers, Inc. v. State Bd. of Equalization (1976) 58 Cal.App.3d 691,
696.) Although we may nonetheless
consider the Horton decision for
whatever persuasive value it has, several factors counsel caution in doing
so. Only two Board members subscribed to
it, and the subscribing members therefore lacked the benefit of dialogue with a
full board or dissenting colleagues. The
subject matter of the decision—the interplay of class action litigation, the
FAA, and section 7 of the NLRA—falls well outside the Board’s core expertise in
collective bargaining and unfair labor practices. The Board’s decision reflects a novel
interpretation of section 7 and the FAA.
It cites no prior legislative expression, or judicial or administrative
precedent suggesting class action litigation constitutes a ‘concerted
activit[y] for the purpose of . . . other mutual aid or protection’
(29 U.S.C. § 157), or that the policy of the FAA favoring arbitration must
yield to the NLRA in the manner it proposes.
In fact, before Horton was
decided, two federal district courts had specifically rejected arguments that
class action waivers in the labor context violated section 7 of the NLRA. (Grabowski
v. C.H. Robinson (S.D.Cal. 2011) 817 F.Supp.2d 1159, 1168–1169 [class
action waiver]; Slawienski v. Nephron
Pharmaceutical Corp. (N.D.Ga., Dec. 9, 2010, No. 1:10-CV-0460-JEC) 2010 WL
5186622, p. *2 [class arbitration waiver].)
“At least two federal district court
cases rejected Horton after it was
decided. (See Jasso, supra, ___
F.Supp.2d ___ at pp. ___–___ [2012 WL 1309171 at pp. *7–*10] [‘Because Congress
did not expressly provide [in the NLRA] that it was overriding any provision in
the FAA, the Court cannot read such a provision into the NLRA and is
constrained by Concepcion to enforce
the instant agreement according to its terms’]; LaVoice v. UBS Financial Services, Inc. (S.D.N.Y., Jan.
13, 2012, No. 11 Civ. 2308(BSJ) (JLC)) 2012 WL 124590, p. *6 [
as that made in Horton, that an
absolute right to collective action can be reconciled with the FAA’s
‘ “overarching purpose†of “ensuring the enforcement of arbitration
agreements according to their terms so as to facilitate streamlined
proceedings†’].) Another district court
found Horton inapposite where, as in
this case, the plaintiff’s putative class action complaint and opposition to
arbitration made no allegation his claims alleging violations of California
wage and hour laws were covered by the NLRA.
(Sanders v. Swift Transp. Co. of
Arizona, LLC, supra, [843]
F.Supp.2d at p. ___, fn. 1 [2012 WL 523527 at p. *4, fn. 1].)
“As
illustrated in the United States Supreme Court’s decision in
565 U.S. ___ [132 S.Ct. 665] (CompuCredit),
a federal statute will not be found to override an arbitration agreement under
the FAA unless such a congressional intent can be shown with clarity in the
statute’s language or legislative history.
(565 U.S. at pp. ___–___ [132 S.Ct. at pp. 672–673]; see
(or in the related Norris–LaGuardia Act) demonstrating that Congress intended
the employee concerted action rights therein to override the mandate of the
FAA.’ (Jasso, at p. ___ [2012 WL 1309171 at p. *8].)†(Nelsen, supra, 207 Cal.App.4th at pp. 1133–1135.)
III. DISPOSITION
The judgment of the trial court is
affirmed.
_________________________
Margulies,
J.
We concur:
_________________________
Marchiano, P.J.
_________________________
Banke, J.
name="_ftn1" title="">[1] See Morvant v. P.F. Chang’s
China Bistro, Inc. (N.D.Cal. 2012) 2870 F.Supp.2d 831, 839–841;
(N.D.Cal. 2012) ___ F.Supp.2d ___ [2012 WL 1309171, pp. *4–*7] (
F.Supp.2d 1033, 1037; Lewis v. UBS
Financial Services Inc. (N.D.Cal. 2011) 818 F.Supp.2d 1161, 1167 (
2:07-cv-06465-JHN-VBKx) 2011 WL 3319574, p. *4.
The reasoning of the Ninth Circuit in Coneff v. AT & T Corp. (9th Cir. 2012) 673 F.3d 1155—finding a
Washington State rule deeming class arbitration waivers unconscionable was
preempted by the FAA in light of Concepcion—would
also seem to apply equally to Gentry,
as the federal district court held in Jasso. (Jasso,
___ F.Supp.2d at p. ___ [2012 WL 523527 at p. *7].)
name="_ftn2" title="">[2] Unlike other recent appellate decisions in this area, most notably
petition for review to the Supreme Court.
There is no record of a petition for review or request for depublication
on the Supreme Court’s Web site. A
petition for review has been filed in Franco,
but as of this writing the Supreme Court has taken no action on the
petition.
