CBL is not just about Proposition 65 – it just sometimes seems that way. But the goal here is to provide out-of-state lawyers, general counsel, and other interested parties with some useful information about cutting edge issues facing litigants here in the Golden State. And today, we’re talking about the seemingly never-ending battle about contractual arbitration. There is a lot going on, resulting, no doubt, in an overly long post. Here goes.
OK, so if you haven’t been sleeping under a rock the past three years, you know this: In 2011, SCOTUS decided AT & T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). Up until then, California Courts followed the “Discover Bank rule” (Discover Bank v. Superior Court (2005) 36 Cal.4th 148) to rule that in consumer contracts with binding arbitration clauses and class action waivers, the class action waiver rendered the arbitration clause unconscionable and therefore unenforceable. But in Concepcion, SCOTUS invalidated Discover Bank, ruling that it conflicted with the Federal Arbitration Act (“FAA”), 9 U.S.C. § 2. More broadly, SCOTUS noted:
[The FAA] permits arbitration agreements to be declared unenforceable "upon such grounds as exist at law or in equity for the revocation of any contract." This saving clause permits agreements to arbitrate to be invalidated by "generally applicable contract defenses, such as fraud, duress, or unconscionability," but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.
Since Concepcion was decided, there have been scores of arbitration decisions coming out of the California Courts of Appeal, and three subject to review by Cal Supremes. Two of the three Cal Supremes cases have been decided, as follows:
Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (“Sonic I”) and Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109 (“Sonic II”) arrived on the scene, respectively, before and after Concepcion. In Sonic I, before Concepcion, the Cal Supremes considered an employee/employer contract that (a) had binding arbitration provision and (b) waived the right to a “Berman hearing,” a California administrative hearing mechanism for wage claims. The Cal Supremes held that the waiver of the Berman hearing was unconscionable, that the employee had a right to the hearing, but that if the arbitration provision was valid, arbitration would supplant the post-Berman court processes.
More after the jump.