In California, a hotbed of wage and hour class and collective action filings, a recent appellate court opinion provides some long-awaited good news for employers attempting to enforce arbitration agreements as class waivers. In Reyes v. Liberman Broadcasting, Inc., plaintiff Jesus Reyes worked for Liberman Broadcasting, Inc. from April to September 2009. Pre-hire, Reyes executed an arbitration agreement. In May 2010, he filed a class action alleging wage and hour violations on behalf of a putative class of security officers. When it initially answered the Complaint, Liberman failed to raise the issue of arbitration. In July 2011, Liberman filed a motion to compel Reyes to arbitrate his wage and hour claims as an individual (versus holding a role as a class representative). The court denied the motion, finding that Liberman had waived its rights via the delay. This led Liberman to appeal, resulting in a decision further interpreting the U.S. Supreme Court’s April 2011 decision in AT&T Mobility v. Concepcion, which held that the Federal Arbitration Act preempts state laws that invalidate class action arbitration waivers. To date, courts have to date [delete] been split on whether Concepcion overruled the California case of Gentry v. Superior Court, which required class arbitration under certain circumstances. However, last Friday, the appellate court, in Reyes, reversed the lower court’s denial of Liberman’s motion to compel arbitration. In so ruling, the Second District Court of Appeal held, “an arbitration agreement silent on the issue of class arbitration may have the same effect as an express class waiver.” (The Second District Court of Appeal declined to decide whether the Gentry case remains good law following the Concepcion ruling, holding instead that Reyes failed to show that the Gentry factors made the arbitration agreement unenforceable.)
The Court of Appeal also held that although Liberman did not mention the arbitration agreement in its answer and had previously engaged in discovery in the case, the company did not waive its right to compel arbitration. In so holding, the appellate court found that Liberman reasonably concluded it could not enforce the arbitration agreement before the Concepcion decision, given the fact that several California decisions pre-Concepcion appeared to require class arbitration in similar contexts. The Court of Appeal opined, the “risk [of compelled class arbitration] diminished substantially when Concepcion changed the legal landscape, and Liberman promptly informed Reyes of its intent to arbitrate one month after the [Concepcion] decision and filed its motion to compel a month later.” Accordingly, the opinion stated, “Liberman did not act inconsistently with a right to arbitrate by not moving to compel until after Concepcion.”
The body of law on enforcing arbitration agreements as class waivers is still developing post-Concepcion, but perhaps Reyes v. Liberman Broadcasting, Inc. indicates that there is some relief on the horizon.