Let's review where we are on arbitration agreements and class action waivers.
- First, there was Discover Bank v. Superior Court (2005) 36 Cal.4th 148, where the Cal Supremes held 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” and that “the FAA [does not preempt] California law in this respect."
- Next, we had AT&T Mobility LLC v. Concepcion (2011) ___ US ___, overruling Discover Bank and holding that the rules it established were preempted by the FAA.
- And now we have a mad scramble in California to try to find the cracks and crevices and exceptions that will keep consumer lawsuits and employment lawsuits out of the clutches of FAA preemption and alive in the good old fashioned California court system..
First out of the box in this regard: plaintiff in Brown v. Ralph's Grocery Stores (July 12, 2011) ___Cal.App.4th ___ (2nd Dist., B222689).
(Ralph's Grocery Stores sure has been active in high profile appellate news this year.)
In this latest Ralph's case, the Plaintiff brought an action against his employer under Calfiornia's Private Attorney General Act, or "PAGA." PAGA says that an aggrieved employee who is entitled to Labor Code penalties against his or her employer can sue on his own behalf of "other current or former employees" to recover those penalties for everybody (although 75% of the penalties go the State).
Brown files a PAGA case against Ralph's. Ralph's says: "oh no you don't, you signed an arbitration agreement and class action waiver." Ralph's loses at the trial court, the case goes to the Court of Appeal, everybody briefs, argues, submits it. And then the US Supremes decide AT&T. At which point Ralph's and its lawyers are feeling pretty good. The Court of Appeal invites more briefing. And then it lowers the boom.
The purpose of the PAGA is not to recover damages or restitution, but to create a means of “deputizing” citizens as private attorneys general to enforce the Labor Code. . . . Here, the relief is in large part “for the benefit of the general public rather than the party bringing the action” . . . .
Dontcha' know, it's not a class action. It's a representative action. And AT&T doesn't say anything about representative actions.
So Ralph's comes in second in the case. So says the Court of Appeal, 2 - 1.
To which I've got two words in response.