Another California Court of Appeal Struggles to Come To Grips with Arbitration

Earlier in August, we issued an Alert detailing continued hostility to arbitration of employment disputes in some corners of the California state courts, even following the U.S. Supreme Court decisions in Stolt-Nielsen v. AnimalFeeds Internat. Corp., __ U.S. __ [130 S.Ct. 1758] (2010) (“Stolt-Nielsen”) and AT&T Mobility LLC v. Concepcion, 563 U.S. __, 131 S.Ct. 1740 (2011) (“Concepcion”). On August 13, 2012, yet another California Court of Appeal weighed into the fray, but provided little clarity.

The California Court of Appeal decision in Truly Nolen of America v. Superior Court, Cal. App. 4th No. D060519 (2012) (“Truly Nolen”), underscores the unsettled state of the law. The Truly Nolen court recognized that the holding and reasoning of Stolt-Nielsen and Concepcion call into question the validity of several prior California Supreme Court decisions involving arbitration, including Gentry v. Superior Court, 42 Cal.4th 443 (2007) (“Gentry”). However, the Truly Nolen Court concluded that while Concepcion’s rationale undermines the holding of Gentry, it did not directly overrule it. Thus, the Court concluded that in the absence of California Supreme Court authority to the contrary, Gentry’s limitations on arbitration must still be applied. The Court then held that the trial court erred because it did not require the employees to provide a “specific, individualized, and precise” analysis demonstrating how their claims met Gentry’s four-factor test.

Then, in a surprising turn, the Court’s remand also directed the trial court to resolve a foundational issue of whether the parties had an implied agreement to submit to class-action arbitration. This direction suggests a reluctance to apply Stolt-Nielsen’s holding that precludes class-action arbitration absent the parties’ express agreement.

Thus, Truly Nolen reflects California courts’ schizophrenic view of arbitration of employment disputes. The Court laid the foundation for the Supreme Court to overrule the restrictions imposed by Gentry while at the same time opening a new avenue of attack on such provisions notwithstanding the U.S. Supreme Court holding in Stolt-Nielsen. One thing is certain: there is more to come.

• RELATED TOPICS
• Arbitration
• California