California Supreme Court Provides Sweeping Class Waiver Guidance: Accepts Concepcion, Overturns Gentry; Rejects D.R. Horton Theory; Leaves Private Attorney General Act (PAGA) Loophole
On June 23, 2014, the California Supreme Court issued its much-anticipated arbitration decision in Iskanian v. CLS Transportation Los Angeles, LLC (Iskanian). In a far-reaching opinion, the Court accepted the decision of the U.S. Supreme Court in AT&T Mobility LLC v. Concepcion (Concepcion) holding class action waivers in arbitration agreements are enforceable under the Federal Arbitration Act (FAA). This part of the opinion was a victory for California employers in that it overturned a prior California Supreme Court decision, Gentry v. Superior Court that had gone the other way. The Court also rejected arguments based upon the NLRB’s decision in D.R. Horton. As we have reported previously, the Fifth Circuit refused to enforce the NLRB’s D.R. Horton. The NLRB, however, continues to rely upon D.R. Horton in current cases.
However, it was not a complete win for employers. In a holding that could see a continuation of mass action litigation in California, the Iskanian Court held that waivers of the right to bring representative actions under California’s Private Attorneys General Act (PAGA) are contrary to public policy. As such, the Court created a carve-out for such “representative actions” which likely means that such actions will remain active for at least the near term in California.