Employment Law Commentary - June 2012

Iskanian v. CLS Transportation: Second Time's the Charm for California Class Action Waivers in Arbitration Agreements By Neil D. Perry

In early June, Division Two of the California Court of Appeal released an employer-friendly decision, Iskanian v. CLS Transportation Los Angeles, LLC, 2012 Cal. App. LEXIS 650 (Jun. 4, 2012), that adds another wrinkle to the uncertainty surrounding the enforceability of arbitration agreements and class action waivers in California. This case is of particular interest, as the Court of Appeal panel first reviewed the Iskanian/CLS arbitration agreement following the California Supreme Court's decision in Gentry v. Superior Court, 42 Cal. 4th 44 (2007) and granted a writ of mandate instructing the trial court to reconsider its decision to compel arbitration. Now, the same Court of Appeal panel has reviewed the Iskanian/CLS agreement in light of AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), and this time the court came to a very different conclusion.

A Little Background

A few months into his employment with CLS Transportation, Arshavir Iskanian signed a "Proprietary Information and Arbitration Policy/ Agreement." This agreement required both Iskanian and CLS to submit all claims arising from Iskanian's employment to binding arbitration. Costs unique to the arbitration were to be paid by CLS and the agreement allowed for reasonable discovery, a written award, and judicial review of the award. Most importantly, the agreement included a robust waiver of the parties' rights to assert class or representative claims.

In August 2006, a year after his separation from CLS, Iskanian filed a putative class action lawsuit alleging a failure to pay overtime and other related claims. CLS moved to compel arbitration. The trial court found the parties' arbitration agreement neither procedurally nor substantive unconscionable and granted CLS's motion. Shortly thereafter, the California Supreme Court released Gentry, in which the court held that a class action waiver in an arbitration provision is unenforceable if it can be shown that class arbitration would be "a significantly more effective way of vindicating the rights of affected employees than individual arbitration." In light of this new authority, the California Court of Appeal issued a writ of mandate directing the trial court to reconsider its ruling.

On remand, CLS withdrew its motion to compel arbitration, believing the motion to be futile given Iskanian's low burden under Gentry. Litigation in the case continued and in 2009, the trial court certified a class. In April 2011, the U.S. Supreme Court issued its ruling in Concepcion, which reiterated the Federal Arbitration Act's (FAA) liberal policy of enforcing arbitration agreements (including those that contain class action waivers) as they are written. Given this new precedent, CLS renewed its motion to compel arbitration. The trial court subsequently dismissed Iskanian's class claims and ordered the case to arbitration.

Iskanian appealed the trial court's order and the California Court of Appeal panel that had issued the earlier...