Wage Law

Ralphs Arbitration Agreement Struck Down

The Fourth District Court of Appeal has invalidated the arbitration agreement used by Ralphs Grocery Co. in California. In Metters v. Ralphs Grocery Co. (2008) __ Cal.App.4th __ (originally issued as an unpublished opinion, and but ordered published in April), the trial court found evidence that the employee had not been aware that he was agreeing to mandatory arbitration, and thus could not be bound by a "dispute form" used by Ralphs Grocery for its dispute resolution process.

The company's policy provides an agreement to arbitrate as part of the request for dispute resolution. The form is entitled "Notice of Dispute and Request for Resolution Form." Among other things, the court noted, the form does not resemble a contract, and its title does not alert employees to the nature of the document; it does not clearly warn employees to pay special attention to the arbitration provisions; no one tells employees they are signing an arbitration agreement. For these and other reasons, the trial court found no meeting of the minds, and therefore no contract to arbitration.

The court was not persuaded by language in the form which clearly stated that employees were not required to sign do so in order for their complaints to be investigated. "A transactional attorney sitting in an office somewhere…[could] figure out what it meant," but it wasn't likely that an employee would.

The court observed, “It could be that a transactional attorney sitting in an office somewhere could have this form, start kind of pulling on the string and follow it back somehow and maybe figure out what it meant, if that is possible. . . . [¶] . . . [¶] [I]t does appear to be an attempt to sort of backdoor . . . this employee through this kind of ambiguous, nebulous form and say, well, if you want your . . . complaint investigated, just sign this and life will be good. [¶] I don’t think I can find there is . . . in the real world a meeting of the minds between Mr. Metters and Ralphs based on this.”

Thus,

The record contains substantial evidence to support the trial court’s finding that there was no valid agreement to arbitrate Metters’ discrimination claim. The order denying the motion to compel arbitration is affirmed.

You can download the full opinion of Metters v. Ralphs Grocery Co. here in pdf or word format.

You Can't Compel Arbitration Without Alleging an Agreement to Arbitrate

Code of Civil Procedure § 1281.2 requires a party moving to compel arbitration to allege the existence of a written agreement to arbitrate. Must a trial court deny a petition to compel arbitration where the moving party fails to allege the existence of a written agreement containing an arbitration clause? Of course. Brodke v. Alphatec Spine, Inc. (2008) __ Cal.App.4th __.

The gist of the case: it's not enough to merely point out that the plaintiffs allege such an agreement exists.

the evidence offered by defendants to prove the existence of a written agreement to arbitrate consisted solely of counsel's declaration attaching a copy of plaintiffs' complaint, which in turn attached a copy of the Brodke agreement. In short, defendants did not allege, or attempt to prove, that defendants contended an agreement to arbitrate existed - only that plaintiffs alleged the existence of an agreement.

If you want to read the whole thing, you can get a pdf or word version of the opinion from the court's website.

Other Arbitration-Related Petitions to the U.S. Supreme Court

Several emails have asked what we meant on Wednesday by "other cases" with arbitration issues pending. We were talking about two, in particular:

1. In T-Mobile v. Laster (9th Cir. 2007) 252 Fed.Appx. 777 (2007 U.S. App. LEXIS 25265, 2007 WL 3194117), (S.Ct. No. 07-976), the issue presented is whether, under the FAA, a federal court may refuse to enforce the terms of an agreement to arbitrate based upon a state-law policy that individual arbitration is unconscionable in cases involving small claims by a consumer.

2. In IBEW, Local Union No. 21 v. Illinois Bell (7th Cir. 2007) 491 F.3d 685, the petititioners seek to reverse an opinion upholding an order to compel arbitration of a dispute over new employee performance evaluation guidelines.

If you want to follow the SCOTUS without waiting for the information to turn up in blogs or the Daily Journal, you can access the Court's orders here.

Supreme Court Denies Certiorari in Gentry v. Superior Court

The US Supreme Court has denied certiorari in Circuit City Stores, Inc. v. Gentry, No. 07-998 (U.S. Mar. 31, 2008, cert. denied) on a petition filed to review the California Supreme Court's ruling in Gentry v. Superior Court (Circuit City Stores) (2007) 42 Cal.4th 443. We previously discussed the case is several posts, including this post regarding the argument and this post regarding the opinion:

In a 4-3 decision, the Supreme Court has reversed an appellate decision upholding a ban on class actions in wage and hour arbitrations, holding that, in certain cases, class action waivers/bans are unenforceable, even if the arbitration agreement itself was not procedurally unconscionable as a whole. The key part of the holding in Gentry v. Superior Court provided that:

[C]lass arbitration waivers should not be enforced if a trial court determines, based on [certain] factors ... that class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration. We therefore reverse the judgment of the Court of Appeal upholding the class arbitration waiver and remand for the above determination.

The questions presented by the petition were:

1.  Whether the Federal Arbitration Act permits a court to refuse to enforce an agreement calling for individual arbitration based on state labor law policies that do not apply generally to "any contract." 9 U.S.C. § 2.

2.   Whether the Federal Arbitration Act permits a state court to refuse to enforce an agreement to arbitrate based upon an unconscionability analysis "that takes its meaning precisely from the fact that a contract to arbitrate is at issue." Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987).

For employers, this certainly looked like the best chance they had to get the SCOTUS to come to their rescue on this issue, using the Federal Arbitration Act. The court is currently packed with as pro-business and pro-arbitration a panel as we've seen in many decades, there were amicus briefs filed by the Chamber of Commerce of the United States, Ace American Insurance Company, et al., and the Pacific Legal Foundation. Circuit City was represented by veteran Supreme Court advocate Carter G. Phillips.

Gentry v. Superior Court looks like it will be the controlling law in California for the foreseeable future. The other arbitration-related petitions pending in the U.S. Supreme Court are procedurally and substantively distinguishable.