Filed 9/13/13 Arroyo v. Riverside Auto Holdings, Inc. CA4/2
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IN THE COURT OF
APPEAL OF THE STATE OF CALIFORNIA
FOURTH
APPELLATE DISTRICT
DIVISION TWO
ROBERT
ARROYO,
Plaintiff and Respondent,
v.
RIVERSIDE
AUTO HOLDINGS, INC.,
Defendant and Appellant.
E056256
(Super.Ct.No. RIC1200257)
OPINION
APPEAL from the Superior
Court
of
Riverside
County. Daniel A.
Ottolia, Judge. Reversed.
Fine, Boggs & Perkins, John P.
Boggs, David J. Reese, and Ian G. Robertson for Defendant and Appellant.
Fernandez & Lauby, Brian J.
Mankin, and Marisa L. Kautz for Plaintiff and Respondent.
Riverside
Auto Holdings, Inc. (Riverside) appeals the
denial of its petition to compel arbitration of wage and hour claims asserted
in a complaint filed by respondent Robert Arroyo, a former employee.
Since
the case was filed as a class action, the petition also requested an order that
the plaintiff’s claims are to be heard individually and not on a class basis.
I
FACTS AND PROCEDURAL HISTORY
Arroyo
is a former employee of Riverside Auto Holdings, Inc. doing business as Singh
Chevrolet. On January 5, 2012, Arroyo filed
a class action complaint against Riverside under Code of
Civil Procedure section 382.
name="_ftnref1" title="">[1] The class was defined as “[a]ll current and
former hourly, non-exempt automobile mechanic employees employed by Riverside
Auto Holdings Inc. in California within the
four years prior to the filing of [the] complaint to the present.†The complaint generally alleged that Riverside engaged in a
number of wage and hour practices that violated the California Labor Code.
Specifically,
seven causes of action were alleged: (1) failure to pay regular and overtime
wages; (2) failure to pay minimum wages; (3) failure to indemnify employees for
hand tools and equipment; (4) failure to make payments within the required
time; (5) failure to provide itemized wage statements; (6) failure to maintain
records; and (7) unfair and unlawful competition.
On
February 23, 2012, Riverside responded by
filing a petition to compel arbitration.
The petition alleged that Riverside had a dispute
resolution program to resolve all employment related claims, disputes, or
controversies. All employees were required
to use the program. The petition also
alleged that Arroyo executed a written agreement that provided that any
employment-related dispute would be submitted to, and decided by, binding arbitration. The agreement stated that the arbitration would
be controlled by the Federal Arbitration Act (FAA) in conformity with the
procedures of the California Arbitration Act.
A copy of the agreement signed by Arroyo was attached to the petition. A declaration by the office manager
authenticated the alleged arbitration agreement.
Riverside’s petition sought
an order compelling Arroyo to arbitrate all claims arising from his
employment. It also requested “[a]n
Order confirming that – consistent with U.S. Supreme Court jurisprudence –
because the arbitration agreement does not provide for class or representative
actions, the Arbitrator must hear Plaintiff’s claims individually and not on
any class or representative basis.â€
In
support of its petition, Riverside reviewed the
applicable law and argued that Arroyo’s individual arbitration agreement must
be enforced and that class claims could not be arbitrated because they were not
expressly or impliedly contained in the arbitration agreement.
In
opposition to the petition, Arroyo submitted a declaration stating that he was
directed to apply for the job online, that he was verbally hired, and that he
was not directed to sign any document before beginning work. He had no recollection of signing the
arbitration agreement. He also stated
that he did not receive an employee handbook or instruction on company
policies. He was not aware of any policy
or rule requiring arbitration of disputes.
Arroyo’s
accompanying memorandum of points and authorities argued that (1) unfair
competition claims could not be ordered to arbitration; (2) the arbitration
agreement was not enforceable because it violated federal law; (3) the
arbitration agreement was unenforceable because it was unconscionable; and (4)
there was no agreement to arbitrate.
Riverside’s
reply brief argued that (1) there was a written arbitration agreement; (2) the
FAA preempted state laws hostile to the enforcement of arbitration agreements:
(3) each of plaintiff’s claims were subject to arbitration; (4) a National
Labor Relations Act decision could not change the strong federal policy to
enforce arbitration agreements; and (5) the arbitration agreement was not
unconscionable.
A
second office manager declaration stated that Arroyo applied for employment on
the date the arbitration agreement was digitally signed. A copy of the arbitration clause was attached
to the declaration. Although virtually
unreadable, it appears to be a different arbitration agreement than the one
submitted previously.
Further
supplemental briefing was submitted by both parties after the April 3, 2012 hearing.
II
THE TRIAL COURT DECISION
The
petition was heard on April 3, 2012. The trial court noted that the law was in a
state of flux on the issues presented.
It chose to follow Brown v. Ralphs
Grocery (2011) 197 Cal.App.4th 489 instead of AT&T Mobility LLC v. Concepcion (2011) ___ U.S. ___ [131 S.Ct.
1740, 179 L.Ed.2d 742] (AT&T Mobility).
The
trial court therefore denied Riverside’s petition to
compel arbitration pursuant to the arbitration agreement.
III
STANDARD OF REVIEW
“‘“The
right to arbitration depends upon contract; a petition to compel arbitration is
simply a suit in equity seeking specific performance of that contract. [Citations.]†[Citation.]’
[Citation.] Code of Civil
Procedure sections 1281.2 and 1290.2 provide for the resolution of motions to
compel arbitration in summary proceedings in which ‘[t]he petitioner bears the
burden of proving the existence of a valid arbitration agreement by the preponderance
of the evidence, and a party opposing the petition bears the burden of proving
by a preponderance of the evidence any fact necessary to its defense. [Citation.] In these summary proceedings, the trial court
sits as a trier of fact, weighing all the affidavits, declarations, and other
testimony received at the court’s discretion, to reach a final determination. [Citation.] No jury trial is available for a petition to compel
arbitration. [Citation.]’ [Citation.]
‘We will uphold the trial court’s resolution of disputed facts if
supported by substantial evidence. [Citation.]
Where, however, there is no disputed
extrinsic evidence considered by the trial court, we will review its arbitrability
decision de novo.’ [Citation.]†(Giuliano
v. Inland Empire Personnel, Inc. (2007)
149 Cal.App.4th 1276, 1284.)
In
Gorlach v. Sports Club Co. (2012) 209 Cal.App.4th 1497, a case
relied on by Arroyo, the court said, “[W]here the trial court’s denial of a
petition to arbitrate presents a pure question of law, we review the order de
novo. [Citation.]†(Id.
at p. 1505.)
Such
is the case here. The trial court did
not decide any factual issues, and decided the petition based solely on legal
determinations. Our standard of review
is therefore a de novo standard of review.
Arroyo
argues that some issues require application of an abuse of discretion standard
of review. We will discuss Arroyo’s
argument as the need arises.
IV
ISSUES
A.
Riverside contends the
arbitration agreement is valid and enforceable.
Arroyo contends the agreement is unconscionable and unenforceable.
B.
Arroyo contends there is an implied
agreement to permit class arbitration. Riverside contends there
is no such agreement.
C.
Riverside contends that
the rule of FAA preemption governs interpretation of the agreement in this
case. Arroyo contends that there is no
FAA preemption and that California law governs.
D.
Arroyo contends that
443
cases, such as the present case, to invalidate a class waiver where the
implementation of such a waiver would pose significant obstacles to the
vindication of the employees’ statutory rights.
[Citation.]†Arroyo further
contends that Gentry remains good law
after AT&T Mobility,
Riverside contends there
is no class waiver in this case; the Gentry
rule is preempted by the FAA, as held by AT&T
Mobility; and, in any event, the factual showing required by
V
IS THERE AN EXPRESS OR IMPLIED ARBITRATION
AGREEMENT?
Section
1281 provides: “A written agreement to
submit to arbitration an existing controversy or a controversy thereafter
arising is valid, enforceable and irrevocable, save upon such grounds as exist
for the revocation of any contract.â€
Section
1281.2 provides, in relevant part: “On
petition of a party to an arbitration agreement alleging the existence of a
written agreement to arbitrate a controversy and that a party thereto refuses
to arbitrate such controversy, the court shall order the petitioner and the
respondent to arbitrate the controversy if it determines that an agreement to
arbitrate the controversy exists, unless it determines that [one of three conditions
is applicable].â€
Since
there is no contention that the exceptions apply, Riverside contends that
section 1281.2 required the trial
court to grant the petition. It also
argues that the court should have dismissed the class action claims and required
Arroyo to proceed on his individual claims.
“‘[T]he
trial court’s first task is to determine whether the parties have in fact
agreed to arbitrate the dispute. [¶] We apply general California contract law
to determine whether the parties formed a valid agreement to arbitrate.’†(Gorlach
v. Sports Club Co., supra, 209 Cal.App.4th at p. 1505.)
Unfortunately,
the trial court did not make an initial determination that there was an
enforceable arbitration agreement.
Accordingly, there are no findings that there was a valid agreement to
arbitrate or which of the two versions of the arbitration agreement governs. However, the trial court impliedly found such
an agreement by finding that it was unenforceable.
Riverside attempts to
remedy any defect by arguing that the allegations of its petition, including
the allegation that there was an express arbitration agreement, were factually accepted
because Arroyo did not file a timely response to the petition. It cites section 1290, which states, “A
proceeding under this title in the courts of this State is commenced by filing
a petition. Any person named as a
respondent in a petition may file a response thereto. The allegations of a petition are deemed to
be admitted by a respondent duly served therewith unless a response is duly
served and filed. The allegations of a
response are deemed controverted or avoided.â€
Riverside then points
out that section 1290.6, in relevant part, provides, “A response shall be
served and filed within 10 days after service of the petition . . . .†The record shows that the petition and other
documents were mailed on February 24,
2012,
and the response was not mailed until March
20, 2012. Under these facts,
the response was not timely served, and the allegations of the petition were
deemed admitted.
Arroyo
responds by arguing that Riverside waived the
issue by not raising it in the trial court.
He cites Truly Nolen of America v.
Superior Court (2012) 208 Cal.App.4th 487, 513-514 (Truly Nolen), Franco v.
Athens Disposal Co., Inc. (2009) 171
Cal.App.4th 1277, 1288, and Atlas
Plastering, Inc. v. Superior Court (1977) 72 Cal.App.3d 63, 68.
We
need not resolve the issue as it involves factual questions that were not
addressed by the trial court. However,
since the trial court decided the arbitration agreement was unenforceable on
other grounds, we will accept its implied finding that there was an arbitration
agreement.
VI
IS THE ARBITRATION AGREEMENT UNENFORCEABLE?
As
previously stated, section 1281 provides, “A written agreement to submit to
arbitration an existing controversy or a controversy thereafter arising is
valid, enforceable and irrevocable, save upon such grounds as exist for the
revocation of any contract.â€
In
Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th 83
(Armendariz),
Court held that an agreement to arbitrate may be unenforceable if it is found
to be unconscionable under general principles of contract law. The court said, “[U]nder both federal and California law, arbitration
agreements are valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract. [Citations.] In other words, under California law, as under
federal law, an arbitration agreement may only be invalidated for the same
reasons as other contracts.†(
at p. 99.)
validity of a mandatory employment arbitration agreement, i.e., an adhesion agreement
imposed on an employee or prospective employee as a condition of employment. (Armendariz,
supra, 24 Cal.4th at p. 90.) It found that the agreement at issue was
unconscionable and therefore unenforceable.
(Id. at p. 91.)
Addressing
this issue, the Armendariz court
applied the general rule that contract law principles govern the question of
unconscionability. (Armendariz, supra, 24
Cal.4th at p. 99; see, generally, 3 Cal. Civil Procedure Before Trial
(Cont.Ed.Bar 4th ed. 2012) Alternative
Dispute Resolution, § 45.28A-C, pp. 2200-2204.)
Under
those principles, “[u]nconscionability analysis begins with an inquiry into
whether the contract is one of adhesion.†(Armendariz,
supra, 24 Cal.4th at p. 113.) The
court went on to define procedural and substantive unconscionability and their
relationship. (Ibid.)
The
arbitration agreement in Armendariz
was a procedurally unconscionable contract of adhesion because it was imposed
on employees as a condition of employment and there was no opportunity to
negotiate. (Armendariz, supra, 24
Cal.4th at pp 114-115.) The same is true
of the arbitration agreement in this case.
The
court also found substantive unconscionability, primarily because there was a
lack of mutuality in the agreement. (
In other words, substantive unconscionability focuses on “‘“overly harshâ€â€™â€
or “‘“one‑sidedâ€â€™â€ results. (
refused to enforce the arbitration agreement.
Finally,
the court discussed the question of whether the unconscionable provisions could
be severed from the other provisions of the arbitration agreement. (Armendariz,
supra, 24 Cal.4th at pp.
121-125.) The court found Civil Code
section 1599 applies to this determination, and that the agreement in
at pp. 125-127.) The Supreme Court
therefore reversed the appellate court and upheld the trial court’s decision,
which refused to enforce the arbitration agreement.
because the trial court did not make any factual findings of procedural or substantive
unconscionability. In other words, Arroyo
did not parse the arbitration agreements to submit evidence or factual argument
that the agreements were substantively unconscionable, and the trial court heard
no evidence and made no findings on the issue.
Accordingly,
we cannot find that the implied arbitration agreement is unconscionable. Arroyo has simply not met his
at p. 1284.) The arbitration agreement
is valid and enforceable.
VII
WAS THERE AN IMPLIED AGREEMENT TO PERMIT
ARBITRATION
OF CLASSWIDE CLAIMS?
Neither
party contends there was an express provision in the arbitration agreement which
allowed, or expressly disallowed, arbitration of class action claims. The agreement was simply silent on the
subject.
However,
Arroyo contends there was an implied agreement to permit class arbitration. He cites Civil Code section 1636: “A contract must be so interpreted as to give
effect to the mutual intention of the parties as it existed at the time of
contracting, so far as the same is ascertainable and lawful.†(See also Civil Code §§ 1635,
1643.)
From
these basic principles, Arroyo argues that “[g]iven the state of the law
applicable to arbitration agreements at the time the parties entered into the
agreement, the fact that an express waiver of class claims was not included in
the agreement gives rise to the necessary conclusion that the agreement
intended to permit class arbitration.â€
The
argument is not sustainable. The only
evidence as to the intent of Riverside was the office manager’s declaration
that all employees were required to follow the dispute resolution program,
including the signing of the arbitration agreement. No intent to allow, or disallow, class action
litigation can be gleaned from the declaration.
Arroyo’s
declaration is equally unhelpful. The
gist of his declaration is that he was unaware he had signed an arbitration
agreement, that no one informed him of company policies, and that no one
mentioned arbitration to him. It cannot
be said that he negotiated, agreed to, or intended any particular provisions in
an agreement he was not even aware of.
We
therefore agree with Riverside that the express written arbitration agreement cannot
reasonably be interpreted to provide that class action claims can be
arbitrated.
The legal issue is whether there was an
implied agreement to arbitrate class action claims as a matter of law. In 2010, the United States Supreme Court
decided Stolt-Nielsen S.A. v. AnimalFeeds
Int’l Corp. (2010) ___ U.S. ___ [130 S.Ct. 1758, 176 L.Ed.2d 605]. The arbitration agreement in that case was a
charter party between a shipper and a shipping company. (Id.
at pp. 1764-1765.) It was not a typical
consumer contract. The Supreme Court
held that “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
at p. 1775.)
In
the present case, there is no suggestion that the trial court was presented
with any evidence of an agreement to submit to class arbitration, and the trial
court did not make any findings of fact.
We
therefore agree with Riverside that the class action claims were not impliedly
subject to arbitration.
VIII
FAA PREEMPTION OF CLASS ACTION CLAIMS
One
of the most volatile issues in this area of the law concerns the argument that
the FAA preempts class action claims in arbitration agreements, particularly
when statutory rights, such as the Labor Code provisions cited in this case,
are asserted.
In
2005, the California Supreme Court decided Discover
Bank v. Superior Court (2005) 36 Cal.4th 148.
provision in an arbitration agreement that prohibited classwide
arbitration. The bank sought
arbitration. Our Supreme Court concluded
“that, at least under some circumstances, the law in California is that class
action waivers in consumer contracts of adhesion are unenforceable, whether the
consumer is being asked to waive the right to class action litigation or the
right to classwide arbitration. We
further conclude that the Court of Appeal is incorrect that the FAA preempts
California law in this respect.†(
The court said, “Such one-sided,
exculpatory contracts in a contract of adhesion, at least to the extent they
operate to insulate a party from liability that otherwise would be imposed
under California law are generally unconscionable.†(Discover
Bank v. Superior Court, supra, 36 Cal.4th at p. 161.) It specifically found that “there is nothing
to indicate that class action and arbitration are inherently incompatible.†(Id.
at p. 167.) Accordingly, the court held
that “classwide arbitrations are workable and appropriate in some cases.†(Id.
at p. 172.)
However,
in April, 2011, the United States Supreme Court decided AT&T Mobility, supra, 131 S.Ct. 1740. The court said, “Although we have had little
occasion to examine classwide arbitration, our decision in Stolt-Nielsen
is instructive. In that case we held
that an arbitration panel exceeded its power under . . . the FAA by imposing
class procedures based on policy judgments rather than the arbitration
agreement itself or some background principle of contract law that would affect
its interpretation. [Citation.] We then held that the agreement at issue,
which was silent on the question of class procedures, could not be interpreted
to allow them because the ‘changes brought about by the shift from bilateral
arbitration to class-action arbitration’ are ‘fundamental.’ [Citation.]
This is obvious as a structural matter: Classwide arbitration includes absent parties,
necessitating additional and different procedures and involving higher
stakes. Confidentiality becomes more
difficult. And while it is theoretically
possible to select an arbitrator with some expertise relevant to the class-certification
question, arbitrators are not generally knowledgeable in the often-dominant
procedural aspects of certification, such as the protection of absent parties. The conclusion follows that class arbitration,
to the extent it is manufactured by Discover Bank rather than
consensual, is inconsistent with the FAA.†(Id.
at pp. 1750-1751.)
The
court therefore decided that the Discover
Bank rule was preempted by the FAA.
(AT&T Mobility,
There
is no specific class action waiver in the present case. Accordingly, as stated above, an arbitration
agreement that is silent on class action procedures cannot be interpreted to
allow class action arbitration.
In
the present case, the trial court acknowledged AT&T Mobility but declined to follow it. It explained that AT&T Mobility “applies to consumer cases and not to a complaint
such as this where plaintiff is seeking . . . wages, back wages, and order time
[sic] and things of that nature.â€
The
trial court’s decision, based on an alleged distinction between consumer and
nonconsumer arbitration, is contrary to the broad language in
arbitration under the FAA. For example,
the court said, “When state law prohibits outright the arbitration of a
particular type of claim, the analysis is straightforward: The conflicting rule
is displaced by the FAA. [Citation.] But the inquiry becomes more complex when a
doctrine normally thought to be generally applicable, such as duress or, as
relevant here, unconscionability, is alleged to have been applied in a fashion
that disfavors arbitration.†(
p. 1747.)
Accordingly,
the court held that “[t]he overarching purpose of the FAA, evident in the text
of §§ 2, 3, and 4, is to ensure the enforcement of arbitration agreements
according to their terms so as to facilitate streamlined proceedings. Requiring
the availability of classwide arbitration interferes with fundamental
attributes of arbitration and thus creates a scheme inconsistent with the FAA.â€
(AT&T
Mobility, supra, 131 S.Ct. at p.
1748, italics added.) Thus, FAA
preemption is not limited to consumer agreements. In fact, as noted above, Stolt-Nielsen involved an arbitration clause in a charter party,
not a typical consumer contract.
The
trial court in the present case opted to interpret AT&T Mobility narrowly by limiting it to consumer cases. Instead, it chose to follow
Cal.App.4th 489.
name="_ftnref7" title="">[7] Brown filed a class action under the Private
Attorneys General Act of 2004
for alleged violations of the Labor Code.
The
applicable arbitration agreement in Brown
provided that there was no authority to arbitrate class action or private
attorney general disputes. (
Cal.App.4th at p. 495.) The trial court
found both provisions unconscionable. (
the effect of the AT&T Mobility
preemption issue, the appellate court decided it did not have to determine the
FAA preemption issue because a factual showing had not been made as required by
Gentry v. Superior Court, supra, 42
Cal.4th 443.
title="">[9] (Brown,
at pp. 497-498.)
We
therefore conclude that Brown is not
authority on the FAA preemption issue because it did not address it. The trial court therefore erred in failing to
apply the holdings of AT&T Mobility to
this case.
We also conclude that the trial court
erred in interpreting AT&T
attempting to make a distinction based on consumer and nonconsumer arbitration
agreements. (Lewis v. UBS Fin. Servs. (2011)
818 F.Supp.2d 1161, 1167.)
IX
DOES GENTRY
v. SUPERIOR COURT SURVIVE AT&T
MOBILITY?
In
Gentry v. Superior Court, supra, 42
Cal.4th 443, our Supreme Court summarized the case as follows: “In this case we consider whether class
arbitration waivers in employment arbitration agreements may be enforced to
preclude class arbitrations by employees whose statutory rights to overtime pay
pursuant to Labor Code sections 500 et seq. and 1194 allegedly have been
violated. We conclude that at least in
some cases, the prohibition of classwide relief would undermine the vindication
of the employees’ unwaivable statutory rights and would pose a serious obstacle
to the enforcement of the state’s overtime laws. Accordingly, such class arbitration waivers
should not be enforced if a trial court determines, based on the factors
discussed below, that class arbitration would be a significantly more effective
way of vindicating the rights of affected employees than individual
arbitration. We therefore reverse the
judgment of the Court of Appeal upholding the class arbitration waiver and remand
for the above determination.†(
Arroyo
cites Truly Nolen, supra, 208
Cal.App.4th 487. In that case, as here,
the arbitration agreements were silent on the issue of classwide
arbitration. The trial court granted the
motion to compel arbitration but allowed class arbitration, citing
(Truly Nolen, at pp. 492-493.)
Truly
Nolen filed a petition for writ of mandate challenging the trial court’s
refusal to order individual arbitration.
The petition contended that AT&T
Mobility had overruled Gentry. (Truly Nolen, supra, 208 Cal.App.4th at p. 493.)
The
court responded, “Although Concepcion’s reasoning strongly suggests that
Gentry’s holding is preempted by federal
law, the United States Supreme Court did not directly rule on the class
arbitration issue in the context of unwaivable statutory rights and the
California Supreme Court has not yet revisited Gentry. Thus, we continue to be bound by
principles. However, we conclude the
trial court’s application of the Gentry elements was unsupported on the
factual record before it.†(
The
opinion continues with a comprehensive examination of the cases and a thorough
discussion of the issue presented here.
It
summarizes the discussion as follows: “Based on Concepcion’s expansive
language and its clear mandate that arbitration agreements must be enforced
according to their terms despite a state’s policy reasons to the contrary, and
the United States Supreme Court’s recent holding that this principle extends to
federal statutory claims [citation], we agree with those courts that have
questioned the continuing validity of the Gentry
standard to invalidate an express arbitration waiver contained in an
employment arbitration agreement governed by the FAA. This same conclusion applies to employment
arbitration agreements that do not contain an express or implied agreement to
permit class arbitration. Under the
reasoning of Concepcion and
mutual consent, it is questionable whether courts can validly invoke Gentry
to require an objecting party to engage in classwide arbitration.†(Truly
Nolen, supra, 208 Cal.App.4th at
p. 506.)
Nevertheless,
the court follows Gentry: “Plaintiffs
argue that we should adhere to 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. We find this
argument persuasive. On federal statutory issues,
intermediate appellate courts in California are absolutely bound to follow the
decisions of the California Supreme Court, unless the United States Supreme
Court has decided the same question differently. [Citations.]
Although we agree with Truly Nolen that Concepcion implicitly disapproved the reasoning of the Gentry
court, the United States Supreme Court did not directly address the precise
issue presented in Gentry. Under
the circumstances, we decline to disregard the California Supreme Court’s
decision without specific guidance from our high court. [Citation.]â€
(Truly Nolen,
We
agree with the Truly Nolen analysis. Although many other cases
results on the scope of AT&T Mobility,
v. Ralph’s Grocery, supra, 197 Cal.App.4th at p. 494; Kinecta Alternative Financial Solutions, Inc. v. Superior Court (2012)
205 Cal.App.4th 506, 516.)
that an employer has systematically denied proper overtime pay to a class of
employees and a class action is requested notwithstanding an arbitration
agreement that contains a class arbitration waiver, the trial court must
consider the factors discussed above: 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 to overtime pay through individual arbitration. If it concludes, based on these factors, that
a class arbitration is likely to be a significantly more effective practical
means of vindicating the rights of the affected employees than individual
litigation or arbitration, and finds that the disallowance of the class action
will likely lead to a less comprehensive enforcement of overtime laws for the
employees alleged to be affected by the employer’s violations, it must
invalidate the class arbitration waiver to ensure that these employees can ‘vindicate
[their] unwaivable rights in an arbitration forum.’ [Citation.]â€
(Gentry v. Superior Court,
omitted.)
The
problem Arroyo faces is that he made no factual showing on the
memorandum of points and authorities emphasized the continuing viability of
Accordingly, Arroyo now argues that we should remand for a determination
of whether the application of the Gentry factors
invalidates the waiver provision.
We
decline the invitation. Arroyo was well
aware of the Gentry issue, and his
failure to present the necessary factual evidence to the trial court means that
he failed to meet his burden of proof to show that the petition for arbitration
should be denied.
Secondly,
as we have found, the arbitration agreement was silent on the question of class
arbitration. Accordingly,
cannot be arbitrated unless there is “a contractual basis for concluding that
the party agreed to do so.†(Stolt-Nielsen
S.A. v. AnimalFeeds International Corp., supra, 130 S.Ct. at p. 1775.) There was no such contractual basis here, and
it is clear from Arroyo’s own declaration that one could not be shown on
remand.
Third,
in Truly Nolen, the court did remand
for a determination of the threshold issue of whether there was an implied
agreement to authorize class arbitration, but it did not remand for further
consideration of the Gentry factors. (Truly
Nolen, supra, 208 Cal.App.4th at p. 516.)
Thus,
even assuming that Gentry survives
until our Supreme Court declares otherwise, the assumption does not help
Arroyo. “Even if Gentry has not
been overruled, in opposing Kinecta’s motion to compel arbitration and to
dismiss class claims, Malone had to provide evidence of the four
the arbitration provision (here, limiting arbitration to bilateral arbitration)
is invalid by making a factual showing of the four Gentry factors. [Citation.]
The record shows that Malone provided no evidence as to any of the four Gentry
factors required to support a trial court’s determination that the arbitration
should proceed as a class action arbitration.
Thus there is no evidence, and no substantial evidence, that plaintiff
had established a factual basis that would require a declaration that the
arbitration agreement was unenforceable.
[Citation.] [¶] Because there are no grounds to declare the
arbitration agreement unenforceable and because the arbitration provision
contained no agreement to classwide arbitration, Kinecta argues that
dismiss class claims from Malone’s complaint. We agree.†(Kinecta
Alternative Financial Solutions, Inc. v. Superior Court, supra, 205
Cal.App.4th at p. 517.)
“[T]he
court in Gentry, supra, 42 Cal.4th at
page 446, required a factual showing under the four-factor test established in
that case. Plaintiff, however, made no
such showing in opposing the petition to compel arbitration. Thus, there was no evidence, much less
substantial evidence, supporting the trial court’s finding that under Gentry,
plaintiff had established a basis not to enforce the class action waiver. As a result, we reverse the trial court’s
ruling invalidating the class action waiver.†(Brown
v. Ralph’s Grocery Co., supra, 197 Cal.App.4th at p. 497.)
We
therefore agree with Riverside that Gentry
is inapplicable here because there was no evidence that the
reliance on Gentry.
X
SUMMARY
We
summarize our resolution of the issues raised by the parties as follows:
1.
While the trial court did not
expressly find the existence of a contract to arbitrate, it impliedly found
there was an arbitration agreement, albeit an unenforceable one.
2.
The arbitration agreement was not unconscionable
because, although it was clearly a contract of adhesion, the trial court did
not find substantive unconscionability. Arroyo
failed to establish substantive unconscionability and therefore failed to meet
his burden of proof. The arbitration
agreement is therefore valid and enforceable.
3.
The arbitration agreement did not
expressly provide that class action claims were arbitrable. Such claims are not impliedly arbitrable
since the parties did not specifically agree to them. (Stolt-Nielsen S.A. v. AnimalFeeds International Corp., supra, 130
S.Ct. at p. 1775.)
4.
If the arbitration agreement was
interpreted to allow class action arbitration in this case, any such provision
would be preempted by the FAA. The trial
court erred in failing to apply the holdings of AT&T Mobility, supra,
5.
Although we discern a strong
argument for preemption, we assume arguendo
that Gentry remains good law
until it is expressly overruled by our Supreme Court. Nevertheless, we agree with Riverside that Arroyo
has not met its burden of proof by making the factual showing required by
We
conclude that Riverside has shown the existence of a valid enforceable
arbitration agreement. (§ 1281.) Arroyo has not shown that the arbitration
agreement is unenforceable under general principles of unconscionability. Arroyo has also failed to show that the
parties agreed, expressly or impliedly, to arbitration of class action claims. Even assuming that Gentry survives AT&T
Mobility, as Arroyo argues, he has not met the factual burden of proof required by
The trial court therefore erred in
denying Riverside’s petition to compel arbitration.
XI
DISPOSITION
The
judgment is reversed, and the case is remanded with directions to enter an
order granting Riverside’s petition to compel arbitration on an individual
basis. Appellant shall recover its
NOT TO BE PUBLISHED IN OFFICIAL REPORTS.
RICHLI
J.
We
concur:
HOLLENHORST
Acting P. J.
KING
J.
Unless otherwise indicated,
all further statutory references are to the Code of Civil Procedure.
no statement of decision was requested under section 1291.
