The impact of the California Court of Appeal’s recent opinion in Brown v. Superior Court, 216 Cal. App. 4th 1302 (Cal. Ct. App. 2013) is on hold, at least for now. Last week, the California Supreme Court indicated it would grant review in the case that has drawn the attention of employment lawyers and those who regularly deal with arbitration disputes. As discussed in a previous post, Brown was California’s latest exception to the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion. Concepcion held that the Federal Arbitration Act (FAA) preempted a state law disfavoring arbitration agreements, even where the state law was desirable for unrelated reasons. Brown—adopting similar reasoning as another California Court of Appeal case—potentially narrowed the scope of Concepcion in California, holding that an arbitration clause waiving the right to bring a representative Private Attorneys General Act (PAGA) claim was unenforceable. Although Concepcion contained no public purpose exception in its ruling, the Brown court held that a class action waiver could not be enforced as to the PAGA claim because it “wholly prevents the exercise of a [state] statutory right intended for a predominantly public purpose.”
Both the labor and employment bar and courts alike have been struggling to determine the effect of Brown and to reconcile it with the high court’s ruling in Concepcion. By granting review, the California Supreme Court took a step toward resolving these lingering issues. The court will defer further action in Brown pending disposition of the same issue in Iskanian v. CLS Transportation of Los Angeles, 206 Cal. App. 4th 949 (Cal. Ct. App. 2012). In Iskanian, the Court of Appeal (Second District) reached the opposite result as Brown, finding that the FAA preempted state law that rendered representative PAGA waivers in arbitration agreements unenforceable. Iskanian held that “following Concepcion, the public policy reasons underpinning the PAGA do not allow a court to disregard a binding arbitration agreement,” even if it included a representative PAGA waiver. The California Supreme Court granted review in Iskanian on September 19, 2012.
The practical impact of the California Supreme Court’s decision to grant review in Brown is that—for now—pursuant to Rule of Court 8.1105(e), the Court of Appeal’s decision in Brown can no longer be cited as precedent. This gives employees one less tool for opposing the complete arbitration of disputes by attacking the enforceability of a representative PAGA waiver. In cases where the employee is relying on Brown to oppose arbitration, the court should be alerted of Brown’s new status. Where the outcome is in doubt, management-side attorneys may also consider requesting a stay of decision on the arbitrability of the PAGA action pending the Supreme Court’s ruling resolving the Court of Appeals’ split on this issue.