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N.D.Cal.: Agreement to Shorten Statute of Limitations to Six Months Procedurally and Substantively Unconscionable Under California Law
Bowlin v. Goodwill Industries of Greater East Bay, Inc.
This case was before the court on the plaintiff’s motion for partial summary judgment as to the defendant’s twenty-sixth affirmative defense, which asserted that the claims were barred based on the six-month limitations provision contained in an agreement between the parties that the plaintiff was required to sign as part of his employment with the defendant. The plaintiff argued that the clause in the agreement between the parties shortening the time in which the plaintiff had to bring his claims was unconscionable, rendering the agreement unenforceable, and his claims timely. The court granted the plaintiff’s motion holding that the six-month limitations period was in fact unconscionable under California law.
Initially the court held the agreement was procedurally unconscionable, because the agreement was a contract of adhesion. Discussing this issue, the court reasoned:
The threshold inquiry in California’s unconscionability analysis is whether the … agreement is adhesive.” Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1281 (9th Cir.2006) (quoting Armendariz, 99 Cal.Rptr.2d 745, 6 P.3d at 689). A contract of adhesion is “a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” Armendariz, 99 Cal.Rptr.2d 745, 6 P.3d at 689. A finding that a contract is adhesive is essentially a finding of procedural unconscionability. Nagrampa, 469 F.3d at 1281;Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 893 (9th Cir.2002) (“The [contract] is procedurally unconscionable because it is a contract of adhesion….); Flores v. Transamerica HomeFirst, Inc., 93 Cal.App.4th 846, 113 Cal.Rptr.2d 376, 382 (Cal.Ct.App.2001). The critical factor for determining both adhesion and procedural unconscionability is whether the contract “was presented on a take-it-or-leave-it basis” and “oppressive due to an inequality of bargaining power that result[ed] in no real negotiation and an absence of meaningful choice.” Nagrampa, 469 F.3d at 1281.
Goodwill’s senior human resources administrator, Grizelda Guzman, states that “all employees were presented with [agreement at issue] in 2008.” Dkt. No. 32–1 ¶ 5. This suggests that the agreement was a standard contract, drafted by Goodwill. As the moving party, however, it is Bowlin’s burden to show that there is no genuine factual dispute that the manner in which the contract was presented to him renders it procedurally unconscionable. To this end, Bowlin submits a declaration and avers that “a manager presented [him] with a copy of the agreement … to initial and sign while [he] was working,” that no one “reviewed the terms or content of the agreement with [him],” and that he “was not able to discuss, negotiate or modify any of the terms or content of the agreement.” Dkt. No. 29–1 ¶¶ 2–4… Accordingly, the Court finds that as a matter of law, the agreement is procedurally unconscionable.
The court then held that the agreement was also substantively unconscionable, holding that, as a matter of law, applying a six-month limitations period to wage and hour claims is unduly harsh.
Because the court held that the agreement was both procedurally and substantively unconscionable, it struck the six-month limitations period from the parties’ agreement and granted the plaintiff’s motion for partial summary judgment.
Click Bowlin v. Goodwill Industries of Greater East Bay, Inc. to read the entire Order Granting Motion for Partial Summary Judgment.
S.D.N.Y.: Collective Action Waiver Unenforceable Because It Would Prevent Employees From Vindicating Their Substantive Statutory Rights Under the FLSA
Raniere v. Citigroup Inc.
In an issue appearing more and more these days, this case was before the court on the defendant’s motion to compel arbitration on an individualized basis. Although the plaintiffs raised several issues regarding the enforceability of the arbitration agreement at issue, as discussed here, the case is significant because it held that- as a matter of law- purported waivers of the right to participate in an FLSA collective action are unenforceable, because they prevent employees from vindicating their substantive statutory rights (that are not waivable).
In so holding, the court reasoned:
“Plaintiffs make two arguments to the effect that the collective action waiver is unenforceable because it would prevent Plaintiffs from vindicating their substantive statutory rights. The first, and broader, of these arguments is that if the waiver is given effect, the FLSA will not serve both its remedial and deterrent functions. Plaintiffs’ second, narrower, contention is that to give effect to the collective action waiver and arbitration agreement here would have the practical effect of precluding Plaintiffs from pursuing the enforcement of their statutory rights due to the costs involved.
It is well recognized that employees cannot release their substantive rights under the FLSA by private agreement. See Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707, 65 S.Ct. 895, 89 L.Ed. 1296 (1945) (“No one can doubt but that to allow waiver of statutory wages by agreement would nullify the purposes of the Act.”); see also Bormann v. AT & T Commc’ns, Inc., 875 F.2d 399 (2d Cir.1989) (“[P]rivate waiver of claims under the [FLSA] has been precluded by such Supreme Court decisions as Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 65 S.Ct. 895, 89 L.Ed. 1296 (1945), and D.A. Shulte, Inc. v. Gangi, 328 U.S. 108, 66 S.Ct. 925, 90 L.Ed. 1114 (1946).” (citations omitted)).
It is likewise well established that “ ‘[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.’ “ Circuit City, 532 U.S. at 123 (quoting Gilmer, 500 U.S. at 26); see also Desiderio, 191 F.3d at 205–06. Arbitration of a claim of statutory rights will only be compelled if that claim can be effectively vindicated through arbitration. See Mitsubishi, 473 U.S. at 637 n. 19 (noting that if arbitration clause and other contractual provisions “operated in tandem as a prospective waiver of a party’s right to pursue statutory remedies,” “we would have little hesitation in condemning the agreement as against public policy”); Green Tree, 531 U.S. at 90 (noting that “even claims arising under a statute designed to further important social policies may be arbitrated because so long as the prospective litigant effectively may vindicate his or her statutory cause of action in the arbitral forum the statute serves its functions.” (citations and internal quotation marks and brackets omitted)).
Federal substantive law of arbitrability requires federal courts to declare otherwise operative arbitration clauses unenforceable when enforcement would prevent plaintiffs from vindicating their statutory rights. American Express II, 634 F.3d at 199; see also Kristian v. Comcast Corp., 446 F.3d 25, 47–48 (1st Cir.2006); Hadnot v. Bay, Ltd., 344 F.3d 474, 478 n. 14 (5th Cir.2003); Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054, 1062 (11th Cir.1998); Sutherland v. Ernst & Young LLP, 768 F.Supp.2d 547, 549 (S.D.N.Y.2011); Chen–Oster v. Goldman, Sachs & Co., 785 F.Supp.2d 394 (S.D.N.Y.2011); DeGaetano v. Smith Barney, Inc., 983 F.Supp. 459, 469 (S.D.N.Y.1997).
The Second Circuit addressed this issue in American Express I, 554 F.3d 300. The Court concluded that the class action waiver in that case was unenforceable because plaintiffs had demonstrated that they otherwise would not be able to vindicate their statutory rights “in either an individual or collective capacity,” id. at 314 (emphasis in original), due to the great expense of pursuing that antitrust litigation and the small individual recovery each plaintiff could expect. As such, the waiver would have the practical effect of ensuring no claims would be brought at all, granting the defendant “de facto immunity from … liability.” Id. at 320. The Supreme Court vacated American Express I and remanded for reconsideration in light of Stolt–Nielsen S.A. v. AnimalFeeds Int’l Corp., ––– U.S. ––––, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010). American Express Co. v. Italian Colors Rest., ––– U.S. ––––, 130 S.Ct. 2401, 176 L.Ed.2d 920. On remand, the Circuit again found the arbitration provision unenforceable because “the class action waiver in this case precludes plaintiffs from enforcing their statutory rights” due to the prohibitive cost of litigating on an individual basis. American Express II, 634 F.3d at 197–99.
In Ragone, 595 F.3d 115, the Court of Appeals again confirmed the importance of the statutory rights analysis, indicating its willingness, if in dicta, to hold unenforceable an arbitration agreement containing a shortened statute of limitations and a fee-shifting provision that would “significantly diminish a litigant’s rights under Title VII.” 595 F.3d at 125–26. The Court of Appeals discussion in Ragone demonstrates “that the holdings of American Express apply not only to ‘negative value’ class action claims, that is, claims that are so small in value that it is not economically viable to pursue them as individual claims.” Chen–Oster, 785 F.Supp.2d at 408.
Defendants are incorrect that the Supreme Court’s decision in AT & T, –––U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742, overrules American Express and Ragone. AT & T addressed only whether a state law rule holding class action waivers unconscionable was preempted by the FAA. ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742. The holdings of both the American Express cases and Ragone were based, in contrast and as this decision must be, on federal arbitral law, and AT & T in no way alters the relevance of those binding circuit holdings. See Chen–Oster v. Goldman, Sachs & Co., 2011 WL 2671813 (S.D.N.Y. July 7, 2011) (holding that AT & T does not abrogate American Express or Ragone and noting that “it remains the law of the Second Circuit that an arbitration provision which precludes plaintiffs from enforcing their statutory rights is unenforceable.” Id. at *4). Moreover, while the dissent in AT & T noted with concern that “agreements that forbid the consolidation of claims can lead small-dollar claimants to abandon their claims rather than to litigate,” 131 S.Ct. at 1760, AT & T involved the vindication of state, not federal, rights. Thus, even if AT & T is read broadly to acquiesce to the enforcement of an arbitral agreement that as a practical matter would prevent the vindication of state rights in the name of furthering the strong federal policy favoring arbitration, that would not alter the validity of the federal statutory rights analysis articulated in Mitsubishi, Green Tree, American Express and Ragone. The Court accordingly analyses the present issues under the reasoning articulated in those cases.
i. The Right to Proceed Collectively Under the FLSA Cannot be Waived
The Second Circuit has not determined whether the collective action provisions of the FLSA are integral to its structure and function, and, as such, whether an agreement waiving that right can be enforced.
The First Circuit has expressly reserved decision on this question. Skirchak v. Dynamics Research Corp., 508 F.3d 49, 62 (1st Cir.2007) (“We do not need to decide if class actions under the FLSA may ever be waived by agreement…. We also do not reach the question of whether such waivers of FLSA class actions are per se against public policy under either the FLSA or the Massachusetts Fair Wage Law”). And while a number of other Circuits have accepted that, at least in principle, arbitration agreements containing waivers of the right to proceed collectively under the FLSA are enforceable, those decisions were either based upon a premise rejected by the Second Circuit or did not reach the question here. See Horenstein v. Mortgage. Mkt., Inc., 9 F. App’x 618, 619 (9th Cir.2001); Carter v. Countrywide Credit Indus. ., Inc., 362 F.3d 294, 297–98 (5th Cir.2004); Vilches v. Travelers Co., Inc., 413 Fed. App’x 487, 494 n. 4 (3d Cir.2011); Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1378 (11th Cir.2005); Adkins v. Labor Ready, Inc., 303 F.3d 496, 503 (4th Cir.2002).
Specifically, the court in Caley did not address whether the right to proceed collectively under the FLSA may be waived as a matter of federal law. Instead, it addressed whether such waivers were unconscionable under Georgia state law principles. See Caley, 428 F.3d at 1377–79.
The Second Circuit has rejected the reasoning relied on in Horenstein, Adkins, Carter, and Vilches. In American Express, the Second Circuit noted that the issue of whether statutorily granted collective action rights under the ADEA, which incorporates by reference the collective action rights granted in the FLSA, could be waived was not decided by Gilmer, 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26, because “because a collective and perhaps a class action remedy was, in fact, available in that case.” American Express II, 634 F.3d at 195–96; American Express I, 554 F.3d at 314 (same). Countrywide, Adkins, Horenstein, and Vilches, the latter three relying on Johnson v. West Suburban Bank, 225 F.3d 366, 377 (3d Cir.2000), assumed that Gilmer resolved whether collective enforcement rights were waivable. See Vilches, at 494 n. 4 (citing Adkins, 303 F.3d at 503 (citing Johnson, 225 F.3d at 377)); Adkins, 303 F.3d at 503 (citing Johnson, 225 F.3d at 377); Countrywide, 362 F.3d at 298 (citing Gilmer, 500 U.S. at 32). Under the Second Circuit’s precedents, Gilmer does not. See American Express II, 634 F.3d at 195–96. Accordingly, the issue presented by Plaintiffs here, namely whether the right to proceed collectively under the FLSA is unwaivable—beyond such a clause being unenforceable were Plaintiffs to demonstrate that to do so would have the practical effect of denying them their substantive rights—is an open question in this Circuit.
This issue is fundamentally distinct, and more nuanced, than that presented in Gilmer, which addressed whether ADEA claims are arbitrable at all. Here, Plaintiffs do not contest that individually filed FLSA claims are generally arbitrable or that were the agreement to permit proceeding as a collective in arbitration, as the parties could in Gilmer, see American Express II, 634 F.3d at 195–96, that such a provision would be enforceable. Accordingly, this case does not oppose the strong federal policy favoring arbitration with the rights granted in the FLSA, but instead only questions whether the right to proceed collectively may be waived.
There are good reasons to hold that a waiver of the right to proceed collectively under the FLSA is per se unenforceable—and different in kind from waivers of the right to proceed as a class under Rule 23. Collective actions under the FLSA are a unique animal. Unlike employment-discrimination class suits under Title VII or the Americans with Disabilities Act that are governed by Rule 23, Congress created a unique form of collective actions for minimum-wage and overtime pay claims brought under the FLSA.
The Fair Labor Standards Act of 1938, and its original collective action provision, was a product of the forces that gave rise to what has been termed the constitutional revolution of 1937, marking a high point in the clash of the federal courts with President Roosevelt and New Deal legislators. The original FLSA collective action provision, passed in the wake of the “switch in time that saved nine,” provided that
[a]ny employer who violates the provisions of section 6 or section 7 of this Act shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages. Action to recover such liability may be maintained in any court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated, or such employee or employees may designate an agent or representative to maintain such action for and in behalf of all employees similarly situated. The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant and costs of the action.
Fair Labor Standards Act, 75 Cong. Ch. 676, § 16(b), 52 Stat. 1060, 1069 (1938). As the Supreme Court has noted, this provision appeared for the first time in the bill reported by a Conference Committee of both Houses. See Brooklyn Sav. Bank, 324 U.S. at 705 n. 15 (citing H. Rep. No. 2738, 75th Cong.3d Sess., at 33). The bill that later became the FLSA took over thirteen months to become law and went through a variety of iterations, creating a veritable raft of legislative history. Within this, however, “[t]he only reference to Section 16(b) was by Representative Keller….” Id. at 705 n. 16. Representative Keller stated in relevant part:
Among the provisions for the enforcement of the act an old principle has been adopted and will be applied to new uses. If there shall occur violations of either the wages or hours, the employees can themselves, or by designated agent or representatives, maintain an action in any court to recover the wages due them and in such a case the court shall allow liquidated damages in addition to the wages due equal to such deficient payment and shall also allow a reasonable attorney’s fees and assess the court costs against the violator of the law so that employees will not suffer the burden of an expensive lawsuit. The provision has the further virtue of minimizing the cost of enforcement by the Government. It is both a common-sense and economical method of regulation. The bill has other penalties for violations and other judicial remedies, but the provision which I have mentioned puts directly into the hands of the employees who are affected by violation the means and ability to assert and enforce their own rights, thus avoiding the assumption by Government of the sole responsibility to enforce the act. Id. (citing 83 Cong. Rec. 9264).
This collective action provision was amended by the Portal–to–Portal Act of 1947, the history of which has been described by the courts in the following manner:
In 1947, in response to a “national emergency” created by a flood of suits under the FLSA aimed at collecting portal-to-portal pay allegedly due employees, Congress enacted the Portal–to–Portal amendments to the FLSA. 61 Stat. 87 (1947). The original, stated purpose of the bill containing these amendments was: “To define and limit the jurisdiction of the courts, to regulate actions arising under certain laws of the United States, and for other purposes.” 93 Cong. Rec. 156 (H.R.2157). To this end, the amendments, among other things, barred unions from bringing representative actions under the FLSA. Arrington v. Nat. Broadcasting Co., Inc., 531 F.Supp. 498, 500 (D.D.C.1982) (citations omitted); see also United Food & Commercial Workers Union, Local 1564 of N.M. v. Albertson’s, Inc., 207 F.3d 1193, 1200–01 (11th Cir.2000) (noting the Arrington court’s “exhaustive survey of the legislative history of the 1947 amendments”). As amended, FLSA collective actions allow “plaintiffs the advantage of lower individual costs to vindicate rights by the pooling of resources. The judicial system benefits by efficient resolution in one proceeding of common issues of law and fact arising from the same alleged” unlawful activity. Hoffman–La Roche Inc. v. Sperling, 493 U.S. 165, 170, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989) (describing the collective action provisions under the ADEA, which are by reference those of the FLSA).
More specifically, the revised collective action provision that resulted from these amendments limited representative suits to those workers who submit written opt-in notices. See 29 U.S.C. § 216(b) (“No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought”). FLSA actions are, consequently, not true representative actions as under Rule 23, but instead those actions brought about by individual employees who affirmatively join a single suit. These collective action provisions were crafted by not one but over the course of several Congresses to balance the need to incentivize the bringing of often small claims by way of collectivization in order to ensure the statute’s function, while barring actions “brought on behalf of employees who had no real involvement in, or real knowledge of, the lawsuit.” Arrington, 531 F.Supp. at 501. The Act’s, and more specifically this provision’s, lengthy legislative history evidences Congress’ precise determination of how this balance should be struck in order to ensure the statute’s remedial and deterrent functions.
In addition, as the Supreme Court has described,
[t]he legislative history of the Fair Labor Standards Act shows an intent on the part of Congress to protect certain groups of the population from substandard wages and excessive hours which endangered the national health and well-being and the free flow of goods in interstate commerce. The statute was a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered national health and efficiency as a result of the free movement of goods in interstate commerce. Brooklyn Sav. Bank, 324 U.S. at 706–07. Although the right to sue under the FLSA is compensatory, “it is nevertheless an enforcement provision.” Id. at 709. Not the least integral aspect of this remedy is the ability of employees to pool resources in order to pursue a collective action, in accordance with the specific balance struck by Congress. The particular FLSA collective action mechanism was additionally a Congressional determination regarding the allocation of enforcement costs, as the ability of employees to bring actions collectively reduces the burden borne by the public fisc, as Representative Keller noted. See 83 Cong. Rec. 9264. Moreover, prohibition of the waiver of the right to proceed collectively accords with the Congressional policy of uniformity with regard to the application of FLSA standards, see H. Rep. No. 2182, 75th Cong., 3d Sess. at 6–7, because an employer is not permitted to gain a competitive advantage because his employees are more willing to assent to, or his human resources department more able to ascertain, collective action waivers than those of his competitors. As the Supreme Court has noted, “the purposes of the Act require that it be applied even to those who would decline its protections.” Alamo Foundation v. Secretary of Labor, 471 U.S. 290, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985). It is not enough to respond that such a waiver should be upheld in the name of the broad federal policy favoring arbitration, simply because the waiver was included in an arbitration agreement. An otherwise enforceable arbitration agreement should not become the vehicle to invalidate the particular Congressional purposes of the collective action provision and the policies on which that provision is based.
In sum, a waiver of the right to proceed collectively under the FLSA is unenforceable as a matter of law in accordance with the Gilmer Court’s recognition that “[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute.” Gilmer, 500 U.S. at 26. See also Chen–Oster v. Goldman, Sachs & Co., 785 F.Supp.2d 394 (S.D.N.Y.2011) (holding arbitral provision waiving right to proceed as a class unenforceable as to Title VII pattern and practice claims).”
Further, because the arbitration agreement at issue said that if the collective action waiver were found to be unenforceable, the case(s) must be litigated in court, the court held that the case should not be remanded to arbitration, having held the collective action waiver unenforceable.
Click Raniere v. Citigroup Inc. to read the entire Opinion.
S.D.Cal.: Although Arbitration Agreement With Class Waiver Enforceable, Confidentiality Provision Stricken as Unconscionable Because Overbroad
Grabowski v. Robinson
This case was before the court on defendant’s motion to compel arbitration on an individual (rather than class) basis. Although the court noted that plaintiffs were required to sign the arbitration agreement contained in their compensation agreements, under threat of forfeiture of commissions, the court held that did not make the agreement unenforceable as entered into under duress. The court also, in large part, dismissed other arguments regarding the substantive and procedural unconscionability of the agreement. However, as discussed here, the court held that the confidentiality provision which barred any discussion of the litigation without the other party’s consent to be far too broad.
Discussing the confidentiality provision the court stated:
“Plaintiff contends: ‘[T]he Defendant’s rules impose confidentiality which unfairly favors Defendant. While arbitration normally is not open to the public, the Defendant’s rules go much further. Defendant’s rules require that the record of the proceedings be confidential under threat of a sanction order by the arbitrator.’
The Employment Dispute Mediation/Arbitration Procedure contains a provision entitled, “Confidentiality,” which states:
All aspects of the arbitration, including without limitation, the record of the proceeding, are confidential and shall not be open to the public, except (a) to the extent both Parties agree otherwise in writing, (b) as may be appropriate in any subsequent proceedings by the Parties, or (c) as may otherwise be appropriate in response to a governmental agency or legal process, provided that the Party upon whom such process is served shall give immediate notice of such process to the other Party and afford the other Party an appropriate opportunity to object to such process.
At the request of a Party or upon his or her initiative, the Arbitrator shall issue protective orders appropriate to the circumstances and shall enforce the confidentiality of the arbitration as set forth in this article.
In Davis, the Court of Appeals for the Ninth Circuit stated that, under California law, “[c]onfidentiality by itself is not substantively unconscionable,” but the employer’s “confidentiality clause … is written too broadly” and “unconscionably favors [the employer],” when the clause at issue “would prevent an employee from contacting other employees to assist in litigating (or arbitrating) an employee’s case.” Davis, 485 F.3d at 1078–79 (“The clause precludes even mention to anyone ‘not directly involved in the mediation or arbitration’ of ‘the content of the pleadings, papers, orders, hearings, trials, or awards in the arbitration’ or even ‘the existence of a controversy and the fact that there is a mediation or an arbitration proceeding.’ ”). In this case, the confidentiality provision in the Employment Dispute Mediation/Arbitration Procedure is broader than what the court in Davis indicated would be conscionable. Cf. id. at 1079 (noting that “[t]he parties to any particular arbitration, especially in an employment dispute, can always agree to limit availability of sensitive employee information (e.g., social security numbers or other personal identifier information) or other issue-specific matters, if necessary”).
The Court finds that the confidentiality provision in the arbitration agreement is substantively unconscionable under California law.”
While courts- seemingly bound by a recent slew of employer/arbitration-friendly decisions from the Supreme Court- continue to compel arbitration and enforce class and collective action provisions contained in arbitration agreements, this decision seems somewhat in line with the remedial nature of the FLSA and related state wage and hour laws. One way employees and their counsel can try to even the playing field might be to seek court-approved notice of pending litigation, notwithstanding the inability to proceed as a class/collective action. Notifying other employees of existing litigation (and their rights to be paid in accordance with wage and hour laws) would certainly be in line with the remedial purposes of the FLSA and related state wage and hour laws. In any event, the court’s holding that an employer cannot hide its alleged violations for other employees certainly seems to be a step in the right direction.
Click Grabowski v. Robinson to read the entire Opinion.
U.S.S.C.: State Law Regarding Unconscionability of Class Waivers in Arbitration Agreements Preempted by the Federal Arbitration Act (FAA)
AT&T Mobility LLC v. Concepcion
There has long been talk of the pr0-business conservative majority that currently comprises the United State’s Supreme Court. However, many pundits have commented that while the Court has ruled as might be expected, largely based on their political leanings, on social issues, there has been wide agreement that other cases have not necessarily gone as some might have expected. Last term with its decision that corporations could contribute unlimited amounts of money to political campaigns (while individuals were subject to the caps put in place by campaign finance laws), it appeared that the Court was getting more comfortable in trading in a lot of the basic individual freedoms that have always been a foundation for the United States, in exchange for satiating the demands of big business who are forever seeking to tilt the playing field in its favor. Wednesday the Court handed down perhaps its biggest blow to average Americans ever, when it reversed the Ninth Circuit’s opinion in Concepcion v. AT&T Mobility, a decision that had sought to balance individual consumer rights, against those of a behemoth corporation.
As the Court stated in its Syllabus opinion, “[t]he cellular telephone contract between respondents (Concepcions) and petitioner (AT&T) provided for arbitration of all disputes, but did not permit classwide arbitration. After the Concepcions were charged sales tax on the retail value of phones provided free under their service contract, they sued AT&T in a California Federal District Court.Their suit was consolidated with a class action alleging, inter alia, that AT&T had engaged in false advertising and fraud by chargingsales tax on “free” phones. The District Court denied AT&T’s motion to compel arbitration under the Concepcions’ contract. Relying onthe California Supreme Court’s Discover Bank decision, it found the arbitration provision unconscionable because it disallowed classwide proceedings. The Ninth Circuit agreed that the provision was unconscionable under California law and held that the Federal Arbitration Act (FAA), which makes arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract,” 9 U. S. C. §2, did not preempt its ruling.”
However, the Supreme’s disagreed. Instead they held that “[b]ecause it ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,’ Hines v. Davidowitz, 312 U. S. 52, 67, California’s Discover Bank rule is preempted by the FAA. Pp. 4–18.”
Of course big business cheered the opinion as a necessary step towards giving parties the rights they had contracted for. In reality however, the Ninth Circuit’s decision was much more in line with the realities of today’s business environment. As anyone who has a cell phone can attest, the contracts we all enter into with a cell phone provider are anything but a fairly negotiated one. In order to get your phone and/or start your service, you must sign away any rights you would normally have, in a take it or leave it contract.
Although aimed at eliminating consumer class actions, those in which the size of the claims is typically a few dollars to a few thousand dollars at most, the effects of the decision will be felt throughout all types of litigation, including employment and wage and hour litigation, where individual claims are often small by themselves, by collectively worthwhile for an attorney to pursue, in order to vindicate the rights of an entire class. Given what could be a death nell for class and collective litigation for employees, pro-consumer legislators have been shaken to action.
As noted by blog thePopTort, Senator Al Franken, who actually has a great track record persuading Congress to outlaw unfair arbitration agreements, is taking the lead on this one. Responding to yesterday’s decision, “U.S. Sens. Al Franken (D-Minn.) and Richard Blumenthal (D-Conn.) and Rep. Hank Johnson (D-Ga.) said today they plan to introduce legislation next week that would restore consumers’ rights to seek justice in the courts. Their bill, called the Arbitration Fairness Act, would eliminate forced arbitration clauses in employment, consumer, and civil rights cases, and would allow consumers and workers to choose arbitration after a dispute occurred.”
Consumer and employee groups have been quick to respond as well, calling for legislation, that has been raised but stalled in prior legislative sessions in Washington, D.C. For example the National Employment Lawyers Association (NELA), who had filed an Amicus Brief in support of the Concepcions, released this press release calling for immediate action by Congress to rectify the situation. It remains to be seen how this will all end in both the short and long terms, but for now the decision is unquestionably a boon for big business, who has essentially been given the green light to ignore laws big and small to the detriment of average Americans, with the knowledge that there will be little or no repercussions for same.