Arbitration

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On May 21, 2018, the United States Supreme Court upheld the legality of arbitration agreements containing class action waivers. In a 5-4 decision written by Justice Gorsuch, the Court held that arbitration agreements providing for individualized proceedings were valid, and neither the Federal Arbitration Act’s (“FAA”) savings clause, nor the National Labor Relations Act (“NLRA”) suggest otherwise.
Continue Reading U.S. Supreme Court Upholds Enforceability of Mandatory Employment Class Action Waivers

The 9th Circuit Court of Appeals ruled that a non-party online behavioral advertising firm could not benefit from the arbitration clause in the agreement between Verizon and its customers because it was not a party to that agreement.
Continue Reading Behavioral Advertising Company That Dropped “Zombie” Cookies Can’t Use Verizon’s Arbitration Clause To Avoid Class Action Lawsuit

As expected, and with few changes, the Consumer Financial Protection Bureau adopted its proposed rule barring financial companies regulated by the agency from including class action waivers in arbitration agreements. Arbitration clauses in new contracts offering a consumer financial product or service will need to include specified language indicating that arbitration cannot be used to stop the consumer from pursuing a class action.
Continue Reading The Consumer Financial Protection Bureau Adopts New Rule Barring Class Action Waivers in Arbitration Agreements

On April 6, 2017, the California Supreme Court struck another blow in its contentious battle with the United States Supreme Court on the enforceability of consumer arbitration clauses subject to the Federal Arbitration Act (FAA).  In McGill v. Citibank, N.A., No. S224086, Slip Op. at 1 (Cal. Apr. 6, 2017), the Court held that an arbitration clause in Citibank’s credit card  agreement purporting to waive the plaintiff’s right to seek public injunctive relief under the Consumers Legal Remedies Act (CLRA), the Unfair Competition Law (UCL), or the False Advertising Law (FAL) in any forum was unenforceable as against California public policy.  The Court further held that, notwithstanding the U.S. Supreme Court’s decisions on the subject, including in AT&T Mobility v. Concepcion, 131 S. Ct. 1740, 1747 (2011), the FAA did not preempt California’s policy.  As discussed below, these holdings are troubling and likely inconsistent with federal law.
Continue Reading Dancing On Their Own: The California Supreme Court’s Decision in McGill v. Citibank, N.A. that Class Action Waivers Do Not Apply to Claims for Public Injunctive Relief under California’s Consumer Protection Laws

In DirecTV v. Imburgia, No. 14-462, 2015 U.S. LEXIS 7999 (December 14, 2015) the United States Supreme Court reversed a California Court of Appeal decision interpreting, and invalidating, an arbitration clause containing a class arbitration waiver, holding that the Court of Appeal’s interpretation was preempted by the Federal Arbitration Act (the “FAA”).  The Court then ordered the Court of Appeal to enforce the arbitration agreement at issue.  The Court’s opinion, which was decided 6-3 with two dissenting opinions, reinforces earlier Supreme Court precedent holding that state courts cannot avoid the preemptive effect of the FAA by applying facially neutral state contract principles in a way that disfavors arbitration. 
Continue Reading U.S. Supreme Court Holds California Court of Appeal’s Interpretation of Arbitration Clause Preempted by FAA

On August 3, 2015, the California Supreme Court issued its long-awaited arbitration decision in Sanchez v. Valencia Holding Co., LLC, No. B228027.  The Court held that the arbitration provision found in a standard form auto finance and sales contract widely used by auto dealerships and lenders throughout California is not unconscionable.  Not surprisingly, the Court acknowledged the recent U.S. Supreme Court authority holding that the Federal Arbitration Act (“FAA”) preempts conflicting state law, and affirmed that California law must now recognize the enforceability of class action waivers contained in arbitration provisions under the FAA.  Nevertheless, arbitration provisions can be rendered unenforceable, depending on a fact intensive analysis of unconscionability.  The Court refused to apply a uniform, bright-line standard.  The ruling is unlikely to stem the tide of litigation over the enforceability of arbitration provisions in high stakes class action litigation.
Continue Reading The California Supreme Court Holds Consumer Class Action Waivers In Arbitration Provisions Are Enforceable Under Federal Law

On May 11, 2015, in an opinion written by Judge Posner, the Seventh Circuit reversed an order denying Sprint’s motion to compel arbitration in a class action allegation violations of the Telephone Consumer Protection Act (“TCPA”).  The thrust of the dispute was not whether there was a valid agreement to arbitrate between Sprint and the plaintiffs, but whether that agreement was broad enough to apply to conduct that occurred after the termination of the agreement.  In Andermann v. Sprint Spectrum L.P., __ F.3d __, 2015 WL 2167846 (7th Cir. May 11, 2015), the Seven Circuit said it was.
Continue Reading In Sprint Victory, Judge Posner and the Seventh Circuit Hold That Arbitration Is Required in a TCPA Class Action Even Though the Alleged Violation Occurred After the Termination of the Contract

On March 7, 2012, the Ninth Circuit held that the Federal Arbitration Act preempts California’s rule prohibiting the arbitration of claims for public injunctions. Kilgore v. KeyBank, Nat’l Ass’n, — F.3d —-, 2012 WL 718344, *10 (9th Cir. March 7, 2012). Referring to this as the “Broughton-Cruz rule,” after the California Supreme Court’s decisions in Broughton v. Cigna Healthplans of California, 21 Cal. 4th 1066 (1999), and Cruz v. Pacificare Health Systems, Inc., 30 Cal. 4th 303 (2003), the Ninth Circuit unanimously held that “the Broughton-Cruz rule does not survive” the United States Supreme Court decision in AT&T Mobility, Inc. v. Concepcion, 131 S. Ct. 1740 (2011) (FAA preempts California law refusing to enforce class action waivers in arbitration provisions).
Continue Reading Federal Law Preempts State Law Barring Arbitration Of Claims For Public Injunction

On July 12, 2011, California’s Second Appellate District Court of Appeal issued a decision in Brown v. Ralphs Grocery Company regarding the enforceability of arbitration agreements in the employment context that limit employees’ rights to assert class and representative actions. This was the first published state court decision in California regarding employment arbitration agreements since the United States Supreme Court’s groundbreaking decision in AT&T Mobility, LLC v. Concepción (“AT&T Mobility“), where the Supreme Court held that California case law invalidating class action waivers in consumer arbitration agreements is preempted by the Federal Arbitration Act (“FAA”).  (For a detailed analysis of the AT&T decision, please visit Sheppard Mullin’s labor and employment blog dated April 27, 2011.)
Continue Reading California Appellate Court Analyzes Employment Arbitration Agreement after Supreme Court’s AT&T Decision

On April 27, 2011, the Supreme Court held that the Federal Arbitration Act “preempts California’s rule classifying most collective arbitration waivers in consumer contracts as unconscionable.” AT&T v. Concepcion, 563 U.S. ____, majority at 5, 18 (2011). The Court referred to this rule as the “Discover Bank rule,” after the California Supreme Court’s decision in Discover Bank v. Superior Court, 36 Cal.4th 148 (2005), though variations of this public policy-based rule have been articulated by many other court decisions in California and elsewhere. Writing for the majority in a 5 to 4 opinion, Justice Scalia concluded that state laws that undermine the enforceability of class action waivers in consumer arbitration agreements improperly obstruct the FAA.
Continue Reading Discover Bank Is Dead: The U.S. Supreme Court Rules That Federal Law Preempts State Laws That Obstruct The Enforcement Of Class Action Waivers In Arbitration Agreements