Filed 8/30/07
IN THE SUPREME COURT OF CALIFORNIA
ROBERT GENTRY,
Petitioner,
S141502
v.
Ct.App.
2/5
B169805
THE SUPERIOR COURT OF
LOS ANGELES COUNTY,
Los Angeles County
Respondent;
Super. Ct. No. BC280631
CIRCUIT CITY STORES, INC.,
Real Party in Interest.
In this case we consider whether class arbitration waivers in
employment arbitration agreements may be enforced to preclude class
arbitrations by employees whose statutory rights to overtime pay pursuant to
Labor Code sections 500 et seq. and 11941 allegedly have been violated. We
conclude that at least in some cases, the prohibition of classwide relief would
undermine the vindication of the employees’ unwaivable statutory rights and
would pose a serious obstacle to the enforcement of the state’s overtime laws.
Accordingly, such class arbitration waivers should not be enforced if a trial
1
All statutory references are to this code unless otherwise indicated.
1
court determines, based on the factors discussed below, 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.
Another issue posed by this case is whether a provision in an arbitration
agreement that an employee can opt out of the agreement within 30 days
means that the agreement is not procedurally unconscionable, thereby
insulating it from employee claims that the arbitration agreement is
substantively unconscionable or unlawfully exculpatory. As explained below,
a finding of procedural unconscionability is not required to invalidate a class
arbitration waiver if that waiver implicates unwaivable statutory rights. But
such a finding is a prerequisite to determining that the arbitration agreement as
a whole is unconscionable. Plaintiff in this case argues that other terms of the
arbitration agreement were substantively unconscionable and that the entire
agreement should not be enforced. Contrary to the Court of Appeal, we
conclude the present agreement has an element of procedural unconscionability
notwithstanding the opt-out provision, and therefore remand for a
determination of whether provisions of the arbitration agreement were
substantively unconscionable.
I. STATEMENT OF FACTS
The facts are for the most part not in dispute. On August 29, 2002,
Robert Gentry filed a class action lawsuit in superior court against Circuit City
Stores, Inc. (Circuit City), seeking damages for violations of the Labor Code
and Business and Professions Code, as well as for conversion. Gentry filed
suit on behalf of salaried customer service managers such as himself whom
2
Circuit City had allegedly “illegally misclassified” as “exempt
managerial/executive employees” not entitled to overtime pay, when in fact,
they were “ ‘non-exempt’ non-managerial employees” entitled to be
compensated for hours worked in excess of eight hours per day and 40 hours
per week.
When he was hired by Circuit City in 1995, Gentry received a packet
that included an “Associate Issue Resolution Package” and a copy of Circuit
City’s “Dispute Resolution Rules and Procedures,” pursuant to which
employees are afforded various options, including arbitration, for resolving
employment-related disputes. By electing arbitration, the employee agrees to
“dismiss any civil action brought by him in contravention of the terms of the
parties’ agreement.” The agreement to arbitrate also contains a class
arbitration waiver, which provides: “The Arbitrator shall not consolidate
claims of different Associates into one proceeding, nor shall the Arbitrator
have the power to hear arbitration as a class action . . . .” As will be explained
at greater length below, the arbitration agreement also contained several
limitations on damages, recovery of attorney fees, and the statute of limitations
that were less favorable to employees than were provided in the applicable
statutes. The packet included a form that gave the employee 30 days to opt out
of the arbitration agreement. Gentry did not do so.
At that time, there was a split of authority in California on the
enforceability of class action waivers in consumer contracts. (See Szetela v.
Discover Bank (2002) 97 Cal.App.4th 1094 [waivers unconscionable];
Discover Bank v. Superior Court (2003) 105 Cal.App.4th 326 [waivers must be
upheld under the Federal Arbitration Act], overruled by Discover Bank v.
Superior Court (2005) 36 Cal.4th 148 (Discover Bank).) Circuit City moved to
3
compel arbitration. The court acknowledged that the governing case law was
“conflicting and in a state of flux,” and elected to follow the Court of Appeal
decision in Discover Bank v. Superior Court. The court did hold two
provisions of the agreement (cost splitting and limitation of remedies
provisions) substantively unconscionable based on federal case law. (Morrison
v. Circuit City Stores, Inc. (6th Cir. 2003) 317 F.3d 646.) The court severed
those provisions from the agreement, ordered Gentry to “arbitrate his claims on
an individual basis and submit to the class action waiver,” and stayed the
superior court action.
Gentry filed a mandate petition on September 9, 2003. The Court of
Appeal denied the petition, noting that the issue of the enforceability of the
class action waiver was before this court in Discover Bank. We granted
Gentry’s petition for review and deferred briefing pending our decision in
Discover Bank. On June 27, 2005, we issued our decision in Discover Bank,
supra, 36 Cal.4th 148. As discussed at greater length below, we held that “at
least under some circumstances, the law in California is that class action
waivers in consumer contracts of adhesion are unenforceable” as
unconscionable. (Discover Bank, supra, 36 Cal.4th at p. 153.) We remanded
this case for reconsideration in light of Discover Bank.
On remand, the Court of Appeal again denied Gentry’s petition for writ
of mandate. It distinguished the class arbitration waiver in this case from the
one found unconscionable in Discover Bank on two principal grounds. First,
the court held that the agreement was not unconscionable because of the 30-
day opt-out provision. Because of this provision, “the agreement at issue here
does not have that adhesive element and therefore is not procedurally
unconscionable.”
4
Second, for reasons elaborated on below, it found the class arbitration
waiver here was distinguishable from the one in Discover Bank and not
substantively unconscionable because the present case, unlike Discover Bank,
did not involve “predictably . . . small amounts of damages.” (Discover Bank,
supra, 36 Cal.4th at p. 162.)
We granted review to clarify our holding in Discover Bank.
II. DISCUSSION
A. Class Arbitration Waiver in Overtime Cases May Be Contrary
to Public Policy
In
Discover Bank, the plaintiff sought to prosecute a class action against
a credit card company that had allegedly defrauded a large number of
customers for small amounts of money, as low as $29 in the plaintiff’s case.
(Discover Bank, supra, 36 Cal.4th at p. 154.) The credit card company had
inserted into its agreement with its customers an amendment by sending a
notice to its customers and informing them that continued use of the account
would constitute acceptance of the terms of the amendment. The amendment
required arbitration of all disputes and prohibited classwide arbitration. (Id., at
pp. 153-154.) In finding such agreements generally unconscionable under
California law, we started out reviewing the policies in favor of class actions
and class arbitration2 in consumer actions, quoting Vasquez v. Superior Court
(1971) 4 Cal.3d 800, 808 (Vasquez): “ ‘Frequently numerous consumers are
exposed to the same dubious practice by the same seller so that proof of the
prevalence of the practice as to one consumer would provide proof for all.
2
For the sake of economy, this opinion will sometimes refer to class
action litigation and class arbitrations generically as “class actions.”
5
Individual actions by each of the defrauded consumers is often impracticable
because the amount of individual recovery would be insufficient to justify
bringing a separate action; thus an unscrupulous seller retains the benefits of its
wrongful conduct. A class action by consumers produces several salutary by-
products, including a therapeutic effect upon those sellers who indulge in
fraudulent practices, aid to legitimate business enterprises by curtailing
illegitimate competition, and avoidance to the judicial process of the burden of
multiple litigation involving identical claims. The benefit to the parties and the
courts would, in many circumstances, be substantial.’ ” (Discover Bank,
supra, 36 Cal.4th at p. 156.)
Because of the importance of class actions in consumer litigation, we
concluded that “at least some class action waivers in consumer contracts are
unconscionable under California law. First, when, a consumer is given an
amendment to its cardholder agreement in the form of a ‘bill stuffer’ that he
would be deemed to accept if he did not close his account, an element of
procedural unconscionability is present. [Citation.] Moreover, although
adhesive contracts are generally enforced [citation], class action waivers found
in such contracts may also be substantively unconscionable inasmuch as they
may operate effectively as exculpatory contract clauses that are contrary to
public policy. As stated in Civil Code section 1668: ‘All contracts which have
for their object, directly or indirectly, to exempt anyone from responsibility for
his own fraud, or willful injury to the person or property of another, or
violation of law, whether willful or negligent, are against the policy of the
law.’. . .
“Class action and arbitration waivers are not, in the abstract,
exculpatory clauses. But because, as discussed above, damages in consumer
6
cases are often small and because ‘ “[a] company which wrongfully exacts a
dollar from each of millions of customers will reap a handsome profit” ’
[citation], ‘ “the class action is often the only effective way to halt and redress
such exploitation.” ’ [Citation.] Moreover, such class action or arbitration
waivers are indisputably one-sided. ‘Although styled as a mutual prohibition
on representative or class actions, it is difficult to envision the circumstances
under which the provision might negatively impact Discover [Bank], because
credit card companies typically do not sue their customers in class action
lawsuits.’ [Citation.] Such one-sided, exculpatory contracts in a contract of
adhesion, at least to the extent they operate to insulate a party from liability
that otherwise would be imposed under California law, are generally
unconscionable.” (Discover Bank, supra, 36 Cal.4th at pp. 160-161, italics
omitted.)
We clarified that “[w]e do not hold that all class action waivers are
necessarily unconscionable. But when the waiver is found in a consumer
contract of adhesion in a setting in which disputes between the contracting
parties predictably involve small amounts of damages, and when it is alleged
that the party with the superior bargaining power has carried out a scheme to
deliberately cheat large numbers of consumers out of individually small sums
of money, then, at least to the extent the obligation at issue is governed by
California law, the waiver becomes in practice the exemption of the party
‘from responsibility for [its] own fraud, or willful injury to the person or
property of another.’ (Civ. Code, § 1668.) Under these circumstances, such
waivers are unconscionable under California law and should not be enforced.”
(Discover Bank, supra, 36 Cal.4th at pp. 162-163.)
7
We also concluded in Discover Bank that it was unnecessary to abandon
the arbitration forum in order to address the claims of a class of consumers.
Rather, class arbitration was a well-accepted alternative to class litigation on
the one hand and individual arbitration on the other. (Discover Bank, supra, 36
Cal.4th at pp. 157-158.) We noted that class arbitration has been in use for the
last 20 years and that rules concerning such arbitration have been incorporated
into various dispute resolution services. (Id., at p. 172.)
In
Discover Bank, before discussing the general principles of
unconscionability on which that decision was based, we noted that the Court of
Appeal in America Online, Inc. v. Superior Court (2001) 90 Cal.App.4th 1
(AOL), had invalidated a Virginia choice-of-law provision in a consumer
contract with no arbitration agreement that effectively would have disallowed
the pursuit of a class action. The plaintiff sought class relief pursuant to
California’s Consumer Legal Remedies Act (CLRA) (Civ. Code, § 1750 et
seq.), which specifically authorizes such class actions (Civ. Code, § 1781), and
which further provides in Civil Code section 1751 that “ ‘[a]ny waiver by a
consumer of the provisions of this title is contrary to public policy and shall be
unenforceable and void.’ ” (Discover Bank, supra, 36 Cal.4th at p. 158.) We
noted that the plaintiff in Discover Bank did “not plead a CLRA cause of
action and so does not invoke its antiwaiver provision; nor does he seek
recovery under any other California statute as to which a class action remedy is
essential” (id., at p. 160, fn. omitted) apparently because the plaintiff sought to
pursue a national class action suit and had made a strategic decision not to rely
on a California statute. (Discover Bank, supra, 36 Cal.4th at p. 160, fn. 2.)
Accordingly, we had no occasion in Discover Bank to consider whether a class
8
action or class arbitration waiver would undermine the plaintiff’s statutory
rights.
In the present case, Gentry’s lawsuit is pursuant to statute. Section 510
provides that nonexempt employees will be paid one and one-half their wages
for hours worked in excess of eight per day and 40 per week and twice their
wages for work in excess of 12 hours a day or eight hours on the seventh day
of work. Section 1194 provides a private right of action to enforce violations
of minimum wage and overtime laws.3 That statute states: “Notwithstanding
any agreement to work for a lesser wage, any employee receiving less than the
legal minimum wage or the legal overtime compensation applicable to the
employee is entitled to recover in a civil action the unpaid balance of the full
amount of this minimum wage or overtime compensation, including interest
thereon, reasonable attorney’s fees, and costs of suit.” (§ 1194, subd. (a),
italics added.) By its terms, the rights to the legal minimum wage and legal
overtime compensation conferred by the statute are unwaivable. “Labor Code
section 1194 confirms ‘a clear public policy . . . that is specifically directed at
the enforcement of California’s minimum wage and overtime laws for the
benefit of workers.’ ” (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34
Cal.4th 319, 340 (Sav-On Drug Stores).) Although overtime and minimum
wage laws may at times be enforced by the Department of Labor Standards
Enforcement (DLSE), it is the clear intent of the Legislature in section 1194
3
Although Gentry pleads causes of action under Business and
Professions Code section 17200 et seq. as well as for common law conversion,
these actions are based on Circuit City’s alleged violation of the overtime laws,
which section 1194 is intended to enforce. We therefore focus on the ability of
employees to vindicate their rights pursuant to section 1194.
9
that minimum wage and overtime laws should be enforced in part by private
action brought by aggrieved employees. (See Bell v. Farmers Ins. Exchange
(2004) 115 Cal.App.4th 715, 746 (Bell) [noting declaration of former chief
counsel of DLSE indicating that without private enforcement through class
actions department’s resources to resolve claims would be overtaxed].)
The public importance of overtime legislation has been summarized as
follows: “An employee’s right to wages and overtime compensation clearly
have different sources. Straight-time wages (above the minimum wage) are a
matter of private contract between the employer and employee. Entitlement to
overtime compensation, on the other hand, is mandated by statute and is based
on an important public policy. . . . ‘The duty to pay overtime wages is a duty
imposed by the state; it is not a matter left to the private discretion of the
employer. [Citations.] California courts have long recognized [that] wage and
hours laws “concern not only the health and welfare of the workers themselves,
but also the public health and general welfare.” [Citation.] . . . [O]ne purpose
of requiring payment of overtime wages is “ ‘to spread employment throughout
the work force by putting financial pressure on the employer . . . .’ ”
[Citation.] Thus, overtime wages are another example of a public policy
fostering society’s interest in a stable job market. [Citation.] Furthermore . . .
the Legislature’s decision to criminalize certain employer conduct reflects a
determination [that] the conduct affects a broad public interest . . . . Under
Labor Code section 1199 it is a crime for an employer to fail to pay overtime
wages as fixed by the Industrial Welfare Commission.’ ” (Earley v. Superior
Court (2000) 79 Cal.App.4th 1420, 1430.)
Moreover, the overtime laws also serve the important public policy goal of
protecting employees in a relatively weak bargaining position against “ ‘the
10
evil of “overwork.” ’ ” (Barrentine v. Arkansas-Best Freight System (1981)
450 U.S. 728, 739 [commenting on overtime provision of the federal Fair
Labor Standards Act].)
In short, the statutory right to receive overtime pay embodied in section
1194 is unwaivable. In Armendariz v. Foundation Health Psychcare Services,
Inc. (2000) 24 Cal.4th 83 (Armendariz), we held that when an employee is
bound by a predispute arbitration agreement to adjudicate unwaivable statutory
employment rights (in that case, rights conferred by the Fair Employment and
Housing Act (FEHA)), the arbitration will be subject to certain minimal
requirements. As we summarized in a subsequent case: “(1) the arbitration
agreement may not limit the damages normally available under the statute
(Armendariz, supra, 24 Cal.4th at p. 103); (2) there must be discovery
‘sufficient to adequately arbitrate their statutory claim’ (id. at p. 106); (3) there
must be a written arbitration decision and judicial review ‘ “sufficient to ensure
the arbitrators comply with the requirements of the statute” ’ (ibid.); and (4) the
employer must ‘pay all types of costs that are unique to arbitration’ (id. at p.
113).” (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076 (Little).) Our
imposition of these requirements was based on the recognition that while “a
party compelled to arbitrate such rights does not waive them, but merely ‘
“submits to their resolution in an arbitral, rather than a judicial, forum” ’
[citation], arbitration cannot be misused to accomplish a de facto waiver of
these rights.” (Little, supra, 29 Cal.4th at p. 1079.) “[T]he above requirements
[are] necessary to enable an employee to vindicate . . . unwaivable rights in an
arbitration forum.” (Id. at p. 1077.)
We have not yet considered whether a class arbitration waiver would
lead to a de facto waiver of statutory rights, or whether the ability to maintain a
11
class action or arbitration is “necessary to enable an employee to vindicate . . .
unwaivable rights in an arbitration forum.” (Little, supra, 29 Cal.4th at p.
1077.) We conclude that under some circumstances such a provision would
lead to a de facto waiver and would impermissibly interfere with employees’
ability to vindicate unwaivable rights and to enforce the overtime laws.
In arguing the contrary, Circuit City focuses on the language in
Discover Bank stating that we were not holding all class action waivers to be
necessarily unconscionable, but that waivers in consumer contracts of adhesion
involving “predictably . . . small amounts of damages,” that are part of a
“scheme to deliberately cheat large numbers of consumers out of individually
small sums of money,” will be held to be unconscionable and unenforceable.
(Discover Bank, supra, 36 Cal.4th at pp. 162-163.) Circuit City argues, as the
Court of Appeal concluded, that this is not such a case.
Yet the above quoted passage in Discover Bank was not intended to
suggest that consumer actions involving minuscule amounts of damages were
the only actions in which class action waivers would not be enforced. Rather,
Discover Bank was an application of a more general principle: that although
“[c]lass action and arbitration waivers are not, in the abstract, exculpatory
clauses” (Discover Bank, supra, 36 Cal.4th at p. 161), such a waiver can be
exculpatory in practical terms because it can make it very difficult for those
injured by unlawful conduct to pursue a legal remedy. Gentry argues
persuasively that class action waivers in wage and hour cases and overtime
cases would have, at least frequently if not invariably, a similar exculpatory
effect for several reasons, and would therefore undermine the enforcement of
the statutory right to overtime pay.
12
First, individual awards in wage and hour cases tend to be modest. In
addition to the fact that litigation over minimum wage by definition involves
the lowest-wage workers, overtime litigation also usually involves workers at
the lower end of the pay scale, since professional, executive, and
administrative employees are generally exempt from overtime statutes and
regulations. (See Cal. Code Regs., tit. 8, § 11070, subd. I(A); Ramirez v.
Yosemite Water Co. (1999) 20 Cal.4th 785, 798, fn. 4.) According to the
DLSE’s report in response to Gentry’s Public Records Act request, the average
award from its wage adjudication unit for 2000-2005 was $6,038. (See also
Asian Pacific American Legal Center et al., Reinforcing the Seams:
Guaranteeing the Promise of California’s Landmark Anti-Sweatshop Law, An
Evaluation of Assembly Bill 633 Six Years Later (Sept. 2005) p. 2 [average
claim for overtime and minimum wage violations submitted to DLSE ranged
from $5,000-$7,000, and settlement ranged from $400-$1,600].)
Indeed, the Court of Appeal in Bell, supra, 115 Cal.App.4th 715,
rejected the argument that even an award as large as $37,000 would be “ample
incentive” for an individual lawsuit for overtime pay, and would obviate the
need for a class action, pointing to the expense and practical difficulties of such
individual suits. “[T]he size of the average claim in part reflects the accrual of
unpaid overtime over the five-year duration of this lawsuit prior to trial. When
the complaint was first filed in October 1996, the average claim would have
been smaller and a large portion of the claims may not have been reasonably
adequate to fund the expense of individual litigation. The length of this
litigation in fact underscores the practical difficulties vindicating claims to
unpaid overtime. Employees will seldom have detailed personal records of
hours worked. Their case ordinarily rests on the credibility of vague
13
recollections and requires them to litigate complex overtime formulas and
exemption standards. For current employees, a lawsuit means challenging an
employer in a context that may be perceived as jeopardizing job security and
prospects for promotion. If the employee files after termination of
employment, the costs of litigation may still involve travel expenses and time
off from work to pursue the case, and the value of any ultimate recovery may
be reduced by legal expenses.” (Id. at p. 745.)4
It is true that section 1194 permits employees to recover reasonable
attorney fees if they prevail in an overtime litigation suit. (See Bell v. Farmers
Ins. Exchange (2001) 87 Cal.App.4th 805, 831.) Even assuming that such
attorney fees were equally available in arbitration, employees and their
attorneys must weigh the typically modest recovery, and the typically modest
means of the employees bringing overtime lawsuits, with the risk of not
prevailing and being saddled with the substantial costs of paying their own
attorneys. Moreover, the award of “reasonable” fees and costs are at the
discretion of the trial court. Assuming that the arbitrator had similar discretion,
there is still a risk that even a prevailing plaintiff/employee may be
4
How much is at issue in Gentry’s claim in the present case is unclear.
Circuit City contends that the claim must be for over $25,000 because the
“unlimited” jurisdiction box was checked on the civil case cover sheet
accompanying the complaint. Cases alleging less than $25,000 are considered
“limited civil cases.” (Code Civ. Proc., § 86, subd. (a)(1).) However, as
Gentry points out, cases will be classified as unlimited in jurisdiction if
injunctive relief is sought (Code Civ. Proc., § 580, subd. (b)(2)), as Gentry did
in the present case. Therefore, the designation of “unlimited jurisdiction” on
the cover sheet of the complaint does not inform us of the minimum amount of
damages being sought.
14
undercompensated for such expenses. Given these risks and economic
realities, class actions play an important function in enforcing overtime laws by
permitting employees who are subject to the same unlawful payment practices
a relatively inexpensive way to resolve their disputes. We have acknowledged
as much in a case involving overtime litigation similar to that at issue in the
present case. “ ‘ “By establishing a technique whereby the claims of many
individuals can be resolved at the same time, the class suit both eliminates the
possibility of repetitious litigation and provides small claimants with a method
of obtaining redress for claims which would otherwise be too small to warrant
individual litigation.” ’ ” (Sav-On Drug Stores, supra, 34 Cal.4th at p. 340.)
Although we agree at least in theory with Circuit City that arbitration can be a
relatively quick and inexpensive method of dispute resolution, the requirement
that numerous employees suffering from the same illegal practice each
separately prove the employer’s wrongdoing is an inefficiency that may
substantially drive up the costs of arbitration and diminish the prospect that the
overtime laws will be enforced.
The Court of Appeal in the present case, in upholding the class
arbitration waiver, pointed to our discussion in Discover Bank of the statement
in Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 32, that a
plaintiff’s Age Discrimination in Employment Act (ADEA) claim should be
arbitrated notwithstanding the lack of classwide relief. “At most, the Gilmer
court can be understood to mean that a party can still vindicate his or her rights
under the ADEA even if no class action remedy is available.” (Discover Bank,
supra, 36 Cal.4th at p. 168.) In so concluding, we cited an article reporting
that the median award for employee age discrimination suits was $269,000.
15
(Ibid.) Our discussion of Gilmer clearly does not apply to the much more
modest awards generally available in overtime compensation cases.
A second factor in favor of class actions for these cases, as noted in
Bell, is that a current employee who individually sues his or her employer is at
greater risk of retaliation. We have recognized that retaining one’s
employment while bringing formal legal action against one’s employer is not
“a viable option for many employees.” (Richards v. CH2M Hill, Inc. (2001)
26 Cal.4th 798, 821; see also Mullins v. Rockwell Internat. Corp. (1997) 15
Cal.4th 731, 741.) Richards and Mullins involved high-level managerial and
professional employees. The difficulty of suing a current employer is likely
greater for employees further down on the corporate hierarchy. As one court
observed: “ ‘Although there is only plaintiff’s suggestion of intimidation in
this instance, the nature of the economic dependency involved in the
employment relationship is inherently inhibiting.’ ” (O’Brien v. Encotech
Const. Services, Inc. (2001) 203 F.R.D. 346, 351.)
Indeed, federal courts have widely recognized that fear of retaliation for
individual suits against an employer is a justification for class certification in
the arena of employment litigation, even when it was otherwise questionable
that the numerosity requirements of rule 23 (Fed. Rules Civ. Proc., rule 23, 28
U.S.C.) were satisfied.5 (See, e.g., Mullen v. Treasure Chest Casino, LLC (5th
5
“Rule 23(a) states four threshold requirements applicable to all class
actions: (1) numerosity (a ‘class [so large] that joinder of all members is
impracticable’); (2) commonality (‘questions of law or fact common to the
class’); (3) typicality (named parties’ claims or defenses ‘are typical . . . of the
class’); and (4) adequacy of representation (representatives ‘will fairly and
adequately protect the interests of the class’).” (Amchem Products, Inc. v.
Windsor (1997) 521 U.S. 591, 613.)
16
Cir. 1999) 186 F.3d 620, 625 [it is “reasonably presumed” that potential class
members still employed by employer “might be unwilling to sue individually
or join a suit for fear of retaliation at their jobs”]; see also Horn v. Associated
Wholesale Grocers, Inc. (10th Cir. 1977) 555 F.2d 270, 275; Arkansas
Education Ass’n v. Board of Education of Portland, Ark. (8th Cir. 1971) 446
F.2d 763, 765; Scott v. Aetna Servs., Inc. (D.Conn. 2002) 210 F.R.D. 261, 267;
Adames v. Mitsubishi Bank, Ltd. (E.D.N.Y. 1989) 133 F.R.D. 82, 89 [“[s]ince
here a number of putative members [of the class] are current employees, the
concern for possible employer reprisal action exists and renders the alternative
of individual joinder less than practicable”]; Simmons v. City of Kansas City
(D.Kan. 1989) 129 F.R.D. 178, 180; Slanina v. William Penn Parking Corp.
(W.D.Pa. 1985) 106 F.R.D. 419, 423-424 [indications that if individual joinder
were required, “most, if not all, of the current employees will be hesitant to
join’ ”].) “[I]t needs no argument to show that fear of economic retaliation
might often operate to induce aggrieved employees quietly to accept
substandard conditions.” (Mitchell v. Robert DeMario Jewelry, Inc. (1960)
361 U.S. 288, 292.)
Circuit City points out that retaliation by the employer against an
employee who files an overtime claim or other wage and hour claims is
unlawful under section 98.6.6 It further points to DLSE reports showing that
6
Section 98.6, subdivision (a) states in pertinent part: “No person shall
discharge an employee or in any manner discriminate against any employee or
applicant for employment because . . . the employee or applicant for
employment has filed a bona fide complaint or claim or instituted or caused to
be instituted any proceeding under or relating to his or her rights, which are
under the jurisdiction of the Labor Commissioner . . . .”
17
the number of complaints made pursuant to section 98.6 in the years 2000-
2004 ranged from 446 to 808 annually. (See DLSE, Annual Discrimination
Complaint Reports, <http://www.dir.ca.gov/dlse/DLSEreports.htm> [as of
Aug. 30, 2007].) It argues from these statistics that the enforcement
mechanism to sanction such retaliation is working. We agree with Gentry,
however, that these statistics are supportive of his position that retaliation
against employees for asserting statutory rights under the Labor Code is
widespread. Given that retaliation would cause immediate disruption of the
employee’s life and economic injury, and given that the outcome of the
complaint process is uncertain, we do not believe the existence of an
antiretaliation statute and an administrative complaint process undermines
Gentry’s point that fear of retaliation will often deter employees from
individually suing their employers.
Third, some individual employees may not sue because they are
unaware that their legal rights have been violated. The New Jersey Supreme
Court recently emphasized the notification function of class actions in striking
down a class arbitration waiver in a consumer contract: “[W]ithout the
availability of a class-action mechanism, many consumer-fraud victims may
never realize that they may have been wronged. As commentators have noted,
‘often consumers do not know that a potential defendant’s conduct is illegal.
When they are being charged an excessive interest rate or a penalty for check
bouncing, for example, few know or even sense that their rights are being
violated.’ ” (Muhammad v. County Bank of Rehoboth Beach, Delaware (N.J.
2006) 912 A.2d 88, 100.) Similarly, it may often be the case that the illegal
employer conduct escapes the attention of employees. Some workers,
particularly immigrants with limited English language skills, may be
18
unfamiliar with the overtime laws. (See Ha, An Analysis in Critique of KIWA’s
Reform Efforts in the Los Angeles Korean-American Restaurant Industry
(2001) 8 Asian L.J. 111, 122-123.) Even English-speaking or better educated
employees may not be aware of the nuances of overtime laws with their
sometimes complex classifications of exempt and nonexempt employees. (See
Ramirez v. Yosemite Water Co., supra, 20 Cal.4th at pp. 796-798.) The
likelihood of employee unawareness is even greater when, as alleged in the
present case, the employer does not simply fail to pay overtime but
affirmatively tells its employees that they are not eligible for overtime.
Moreover, some employees, due to the transient nature of their work, may not
be in a position to pursue individual litigation against a former employer.
(Ansoumana v. Gristede’s Operating Corp. (S.D.N.Y. 2001) 201 F.R.D. 81,
86-87.)
For these reasons, a federal district court recently concluded that an
arbitration agreement with a class arbitration waiver was inconsistent with the
minimum wage and overtime provisions of the federal Fair Labor Standards
Act (FLSA). “In this case, the imposition of a waiver of class actions may
effectively prevent . . . employees from seeking redress of FLSA violations.
The class action provision thereby circumscribes the legal options of these
employees, who may be unable to incur the expense of individually pursuing
their claims. In this respect, the class action waiver is not only unfair to . . .
employees, but also removes any incentive for [the employer] to avoid the type
of conduct that might lead to class action litigation in the first instance. The
class action clause is therefore substantively unconscionable.” (Skirchak v.
Dynamics Research Corp., Inc. (D.Mass. 2006) 432 F.Supp.2d 175, 181.)
Similarly, in another FLSA suit for minimum wage and overtime violations,
19
the trial court stated, interpreting the rule 23(a)(1) requirement that “the
proposed class be ‘so numerous that joinder of all members is impracticable’ ”:
“I also find it fair to consider that the members of this group would not be
likely to file individual suits. Their lack of adequate financial resources or
access to lawyers, their fear of reprisals (especially in relation to the immigrant
status of many), the transient nature of their work, and other similar factors
suggest that individual suits as an alternative to a class action are not practical.
[Citation.]” (Ansoumana v. Gristede’s Operating Corp., supra, 201 F.R.D. at
pp. 85-86.)
We also agree with the Bell court that “class actions may be needed to
assure the effective enforcement of statutory policies even though some claims
are large enough to provide an incentive for individual action. While
employees may succeed under favorable circumstances in recovering unpaid
overtime through a lawsuit or a wage claim filed with the Labor
Commissioner, a class action may still be justified if these alternatives offer no
more than the prospect of ‘random and fragmentary enforcement’ of the
employer’s legal obligation to pay overtime.” (Bell, supra, 115 Cal.App.4th at
p. 745, quoting Vasquez, supra, 4 Cal.3d at p. 807.) “By preventing ‘a failure
of justice in our judicial system’ (Linder v. Thrifty Oil Co. [(2000)] 23 Cal.4th
429, 434), the class action not only benefits the individual litigant but serves
the public interest in the enforcement of legal rights and statutory sanctions.”
(Bell, supra, at p. 741.) In other words, absent effective enforcement, the
employer’s cost of paying occasional judgments and fines may be significantly
outweighed by the cost savings of not paying overtime.
We cannot say categorically that all class arbitration waivers in
overtime cases are unenforceable. As Circuit City points out, some 40
20
published cases over the last 70 years in California have involved individual
employees prosecuting overtime violations without the assistance of class
litigation or arbitration. (See, e.g., Ramirez v. Yosemite Water Co., supra, 20
Cal.4th 785; Sequeira v. Rincon-Vitova Insectaries, Inc. (1995) 32 Cal.App.4th
632; Monzon v. Schaefer Ambulance Service, Inc. (1990) 224 Cal.App.3d 16.)
Not all overtime cases will necessarily lend themselves to class actions, nor
will employees invariably request such class actions. Nor in every case will
class action or arbitration be demonstrably superior to individual actions.
Nonetheless, when it is alleged that an employer has systematically
denied proper overtime pay to a class of employees and a class action is
requested notwithstanding an arbitration agreement that contains a class
arbitration waiver, the trial court must consider the factors discussed above:
the modest size of the potential individual recovery, the potential for retaliation
against members of the class, the fact that absent members of the class may be
ill informed about their rights, and other real world obstacles to the vindication
of class members’ right to overtime pay through individual arbitration. If it
concludes, based on these factors, that a class arbitration is likely to be a
significantly more effective practical means of vindicating the rights of the
affected employees than individual litigation or arbitration, and finds that the
disallowance of the class action will likely lead to a less comprehensive
enforcement of overtime laws for the employees alleged to be affected by the
employer’s violations, it must invalidate the class arbitration waiver to ensure
that these employees can “vindicate [their] unwaivable rights in an arbitration
21
forum.” (Little, supra, 29 Cal.4th at p. 1077.)7 The kind of inquiry a trial
court must make is similar to the one it already makes to determine whether
7
The dissent claims our holding is inconsistent with Little’s predecessor,
Armendariz, because here “[n]o finding is made that a class remedy is
essential, as a practical matter, to vindication of the ‘unwaivable’ statutory
right” (Dis. opn., post, at p. 3.) Armendariz did not use the dissent’s italicized
word “essential” in its formulation, and it is unclear what that word means in
this context. Rather, in holding for example that employers must pay most of
the costs when they mandate arbitration of unwaivable rights for their
employees, we concluded that the imposition of such costs would burden
employees’ rights by “pos[ing] a significant risk that employees will have to
bear large costs to vindicate their statutory right against workplace
discrimination.” (Armendariz, supra, 24 Cal.4th at p. 110.) So, too, in the
present case, although it is still possible for employees to individually vindicate
their rights to overtime pay, the class arbitration waiver may, practically
speaking, significantly burden the ability of employees to do so. Armendariz
makes clear that for public policy reasons we will not enforce provisions
contained within arbitration agreements that pose significant obstacles to the
vindication of employees’ statutory rights. The Legislature has amended the
California Arbitration Act (CAA) several times since Armendariz (Stats. 2002,
ch. 176, § 1; Stats. 2002, ch. 1158, § 1; Stats. 2005, ch. 607, § 1; Stats. 2006,
ch. 357, § 1) but has not overturned or modified the holdings in that case.
Moreover, the dissent’s contention that Gentry as an individual has not
shown himself to be burdened by the class arbitration waiver is off the mark.
First, questions of the value of his claim and the appropriateness of a class
arbitration in this case will be determined on remand. More fundamentally, as
suggested above, one of the advantages of class action litigation or arbitration
is precisely the fact that the class representative spearheading the litigation is in
a more advantageous position — e.g., is better informed, is less likely to be
intimidated — than the class as a whole, and the class benefits from the
representative’s advantages. Given this reality, and given that our primary
concern is ensuring that the state’s overtime laws be effectively enforced and
that class arbitration waivers not thwart that enforcement, it makes little sense
to focus only on whether the class representative himself or herself would be
stymied in the pursuit of an individual arbitration remedy (see dis. opn., post,
at p. 8), rather than considering as well the difficulties for the class of
employees affected by Circuit City’s allegedly unlawful practices.
22
class actions are appropriate. “[T]rial courts are ideally situated to evaluate the
efficiencies and practicalities of permitting group action . . . .” (Linder v.
Thrifty Oil, Co., supra, 23 Cal.4th at p. 435.) Class arbitration must still also
meet the “community of interest” requirement for all class actions, consisting
of three factors: “(1) predominant common questions of law or fact; (2) class
representatives with claims or defenses typical of the class; and (3) class
representatives who can adequately represent the class.” (Sav-On Drug Stores,
supra, 34 Cal.4th at p. 326.)
Of course, in cases like the present, the trial court would be comparing
class arbitration with the individual arbitration methods the employer offers,
rather than comparing individual with classwide litigation. We do not
foreclose the possibility that there may be circumstances under which
individual arbitrations may satisfactorily address the overtime claims of a class
of similarly aggrieved employees, or that an employer may devise a system of
individual arbitration that does not disadvantage employees in vindicating their
rights under section 1194. But class arbitration waivers cannot, consistent with
the strong public policy behind section 1194, be used to weaken or undermine
the private enforcement of overtime pay legislation by placing formidable
practical obstacles in the way of employees’ prosecution of those claims.
Circuit City makes a number of arguments that we have already
concluded lack merit. As in Discover Bank, we again reject the “unsupported
assertions [of some courts] that, in the case of small individual recovery,
attorney fees are an adequate substitute for the class action or arbitration
mechanism. Nor do we agree . . . that small claims litigation, government
prosecution, or informal resolution are adequate substitutes.” (Discover Bank,
supra, 36 Cal.4th at p. 162.) In particular, we reject Circuit City’s argument
23
that the availability of enforcement by the Labor Commissioner is an adequate
substitute for classwide arbitration. It is true that an employee may seek
administrative relief from overtime violations with the Labor Commissioner
through a “Berman” hearing procedure pursuant to sections 98 to 98.8. (Added
by Stats. 1976, ch. 1190, §§ 4-11, pp. 5368-5371.) But a losing employer has a
right to a trial de novo in superior court, where the ruling of the Labor
Commissioner’s hearing officer is entitled to no deference. (§ 98.2, subds. (b),
(c); Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1116
(Murphy).) Thus, Berman hearings may result in no cost savings to the
employee. Moreover, in Bell, in rejecting the same argument, the court
considered a declaration by a former chief counsel of the DLSE, who stated
that “ ‘[r]equiring two thousand or so class members to go through individual
“Berman” hearings would obviously be extremely inefficient as compared to a
single class action. Also, a deluge of claims would simply outstrip the
resources of the DLSE . . . impacting not only these claimants but others
unrelated to this suit.’ ” (Bell, supra, 115 Cal.App.4th at p. 746.) In short,
Berman hearings are neither effective nor practical substitutes for class action
or arbitration.
Nor do we accept Circuit City’s argument that a rule invalidating class
arbitration waivers discriminates against arbitration clauses in violation of the
Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.). We considered at great
length and rejected a similar argument in Discover Bank. (Discover Bank,
supra, 36 Cal.4th at pp. 163-173.) The principle that in the case of certain
unwaivable statutory rights, class action waivers are forbidden when class
actions would be the most effective practical means of vindicating those rights
is an arbitration-neutral rule: it applies to class waivers in arbitration and
24
nonarbitration provisions alike. (See AOL, supra, 90 Cal.App.4th at pp. 17-18;
see also Armendariz, supra, 24 Cal.4th at pp. 99-102 [imposition of minimal
requirements on arbitration necessary to vindicate statutory rights not a
violation of the FAA].) “The Armendariz requirements are . . . applications of
general state law contract principles regarding the unwaivability of public
rights to the unique context of arbitration, and accordingly are not preempted
by the FAA.” (Little, supra, 29 Cal.4th at p. 1079.) We also continue to reject
Circuit City’s suggestion that class actions are incompatible with arbitration
and that compelling class arbitration in the appropriate case violates the FAA.
(Discover Bank, supra, 36 Cal.4th at pp. 171-172.)8
8
The dissent declares that we “may not elevate a mere judicial affinity
for class actions as a beneficial device for implementing the wage laws above
the policy expressed by both Congress and our own Legislature that voluntary
individual agreements to arbitrate . . . should be enforced according to their
terms.” (Dis. opn., post, at p. 6.) What is at issue in this case, however, is not
a “judicial affinity for class actions” but the enforcement of an unwaivable
statutory right to overtime pay. What happens when a class action waiver
significantly interferes with that right? Although the dissent claims that our
concerns about the effect of class arbitration waivers are exaggerated, based on
its own questionable assumptions about class arbitration and litigation, it also
appears to adopt the position that even if we are correct that such waivers will
substantially interfere with the ability of employees to enforce overtime laws in
some cases, the waiver should nonetheless be given effect. The dissent thus
articulates its preference that in this case the statutory policy in favor of
enforcing arbitration agreements as written overrides the statutory policy in
favor of vigorously enforcing overtime laws.
There is no indication, however, that the Legislature shared or shares the
dissent’s preference, or even that it has favored the arbitration of wage and overtime
claims at all. Indeed, the evidence is to the contrary. Section 1194 provides, as
discussed, that an employee is entitled to recover “in a civil action” overtime or
minimum wage compensation. It seems doubtful that the Legislature contemplated,
when that statute was originally enacted in 1937 (Stats. 1937, ch. 90, § 1194, p. 217),
that employer-mandated arbitration could serve as a substitute to “civil actions”
(footnote continued on next page)
25
Accordingly, we will remand this case to the Court of Appeal with
directions to remand to the trial court to determine in light of the above
discussion whether, in this particular case, class arbitration would be a
significantly more effective means than individual arbitration actions of
vindicating the right to overtime pay of the group of employees whose rights to
(footnote continued from previous page)
authorized by the statute. In fact, the forerunner of the CAA, Code of Civil Procedure
former section 1280, in operation at the time section 1194 was originally enacted,
specifically excluded “contracts pertaining to labor” from the scope of enforceable
arbitration agreements. (Stats. 1935, ch. 52, § 9, p. 388.) Moreover, at the time of the
CAA’s enactment in 1961 (Stats. 1961, ch. 461, § 2, p. 1540), the United States
Supreme Court’s construction of the FAA indicated that arbitration statutes would not
be used to enforce agreements to arbitrate unwaivable statutory rights. (See Wilko v.
Swan (1953) 346 U.S. 427, 435-437, overruled by Rodriguez de Quijas v.
Shearson/Am. Exp. (1989) 490 U.S. 477.) Outright legislative hostility to arbitrating
wage claims was further manifested in Labor Code section 229, passed two years
before the CAA went into effect. (Stats. 1959, ch. 1939, § 1, p. 4532.) That section,
which involves judicial actions to collect unpaid wages, provides that such actions
“may be maintained without regard to the existence of any private agreement to
arbitrate.” Thus, if we can discern any legislative policy toward employee wage
claims, it is that employees should have direct access to a judicial forum to enforce
their rights. Nor is there any sign that the Congress that enacted the FAA
contemplated that it be used to compel arbitration of statutory wage claims. (See
Leroy & Feuille, Judicial Enforcement of Predispute Arbitration Agreements: Back to
the Future (2003) 18 Ohio St. J. Disp. Resol. 249, 279 [legislative history indicates
“Congress’s main concern was with businesses who wanted to . . . resolve their
commercial disputes privately.”].) The United States Supreme Court has since held
that the FAA does not permit states to legislatively prohibit arbitration of wage
disputes. (Perry v. Thomas (1987) 482 U.S. 483.) But both the FAA and the CAA
permit arbitration-neutral rules that limit enforcement of specific provisions of
arbitration agreements on public policy grounds. (See Armendariz, supra, 24 Cal.4th
at p. 99; 9 U.S.C. § 2; Code Civ. Proc., § 1281.) It is perfectly consistent with the
evident intent of the Legislature to refuse to enforce, under some circumstances and
in an arbitration-neutral manner in accord with the FAA and the CAA, provisions of
arbitration agreements that significantly undermine the ability of employees to
vindicate their statutory right to overtime pay.
26
such pay have been allegedly violated by Circuit City. If the trial court
invalidates the waiver on public policy grounds, then the parties may proceed
to class arbitration or, if the parties wish, have the matter brought in court (see
Discover Bank, supra, 36 Cal.4th at p. 173, fn. 8), unless the trial court
invalidates the arbitration agreement altogether for reasons discussed in the
next section of this opinion. Generally speaking, when an arbitration
agreement contains a single term in violation of public policy, that term will be
severed and the rest of the arbitration agreement enforced. (Little, supra, 29
Cal.4th at pp. 1074-1075.) We believe that severance is particularly
appropriate in the case of class arbitration waivers because, unlike limitations
on remedies or other limitations that are invalid on their face (see Armendariz,
supra, 24 Cal.4th at pp. 103-104), such waivers will only be invalidated after
the proper factual showing, as discussed above. The presence of a class
arbitration waiver in an employee arbitration agreement therefore does not by
itself “indicate a systematic effort to impose arbitration on an employee not
simply as an alternative to litigation, but as an inferior forum that works to the
employer’s advantage.” (Id. at p. 124.)
B. The Opt-out Provision and Procedural Unconscionability
The Court of Appeal concluded, and Circuit City argues, that the fact
that an employee had 30 days to opt out of the arbitration agreement means
that the terms of the agreement, including the class arbitration waiver, are not
procedurally unconscionable and are therefore enforceable. But the validity of
a class arbitration waiver was analyzed in the previous part of this opinion in
terms of unwaivable statutory rights rather than unconscionability. (See
Armendariz, supra, 24 Cal.4th at p. 113.) Because the statutory rights under
27
section 1194 at issue in this case are not waivable, the minimal requirements
imposed on arbitration agreements to ensure their vindication cannot be waived
by the employee in a prelitigation agreement. (Armendariz, supra, 24 Cal.4th
at p. 103, fn. 8.) As we clarified in Armendariz, such waiver could only occur
“in situations in which an employer and an employee knowingly and
voluntarily enter into an arbitration agreement after a dispute has arisen. In
those cases, employees are free to determine what trade-offs between arbitral
efficiency and formal procedural protections best safeguard their statutory
rights. Absent such freely negotiated agreements, it is for the courts to ensure
that the arbitration forum imposed on an employee is sufficient to vindicate his
or her rights . . . .” (Ibid., italics added.) There was no freely negotiated
postdispute agreement, nor for that matter a postdispute agreement of any kind,
in the present case. Therefore, if the trial court on remand finds the class
arbitration waiver invalid using the factors set forth in the previous part of this
opinion, that waiver will not be enforced.9
Gentry does challenge provisions of the arbitration agreement other than
the class arbitration waiver, however, and argues that the entire arbitration
agreement is unconscionable and unenforceable. Should the trial court on
remand find the class arbitration waiver in the present case to be void, it is
unclear whether the issue of the unconscionability of the arbitration agreement
as a whole will become moot, because it is unclear whether Gentry will
9
We note that if an employee believes individual arbitration to be as
advantageous as the dissent suggests, nothing in this opinion, nor in any
subsequent trial court ruling, precludes him or her from entering into an
individual postdispute arbitration agreement with Circuit City.
28
continue to resist arbitration or whether Circuit City will continue to seek it.
Nonetheless, because this issue may remain viable on remand, we will address
the Court of Appeal’s holding that the arbitration agreement was not
unconscionable because Gentry had a 30-day period to opt out of the
agreement. As noted above, the Court of Appeal stated that because of the opt-
out provision, “the agreement at issue here does not have [an] adhesive
element and therefore is not procedurally unconscionable.”
As a threshold matter, Gentry argues that the arbitration agreement was
ineffective because his failure to opt out of the agreement cannot constitute
assent to that agreement. Gentry bases his argument on the well-established
principle “that an offeror has no power to cause the silence of the offeree to
operate as an acceptance when the offeree does not intend it to do so.” (1
Corbin on Contracts (rev. ed. 1993) § 3.19, p. 407.) As one court cited in the
above treatise has stated: “ ‘[W]here the recipient of an offer is under no duty
to speak, silence, when not misleading, may not be translated into acceptance
merely because the offer purports to attach that effect to it. [Citations.]’ ”
(Albrecht Chemical Co. v. Anderson Trading Corp. (N.Y. 1949) 84 N.E.2d
625, 626; see also Leslie v. Brown Brothers Incorporation (1929) 208 Cal. 606,
621.) On the other hand, silence can constitute acceptance when “the conduct
of the party denying a contract has been such as to lead the other reasonably to
believe that silence, without communication, would be sufficient” to create a
contract. (1 Corbin on Contracts, supra, § 3.21, p. 414.)
In this case, Gentry signed an easily readable, one-page form that
accompanied receipt of the Associate Issue Resolution Package. The form
stated in part: “I understand that participation in the Issue Resolution Program
is voluntary. If I do not wish to participate in the arbitration component of the
29
Program, however, I must send the completed ‘Circuit City Arbitration Opt-
Out Form,’ which is included with this package. I must send the Opt-Out
Form via U.S. mail . . . to the above address within 30 calendar days of the
date on which I signed below. I understand that if I do not mail the Form
within 30 calendar days, I will be required to arbitrate all employment-related
legal disputes I may have with Circuit City.” (Original boldface.)
Although Gentry contends his signature was merely an
acknowledgement of receipt of the Associate Issue Resolution Package, it was
also an acknowledgment of his assent to the opt-out provision. The opt-out
provision of the acknowledgment agreement was neither inconspicuous or
difficult to understand. Thus, in signing the above form, Gentry manifested his
intent to use his silence, or failure to opt out, as a means of accepting the
arbitration agreement. Having thus indicated his intent, he may not now claim
that the failure to opt out did not constitute acceptance of the arbitration
agreement. (1 Corbin on Contracts, supra, § 3.21, p. 414.) The question is not
whether the acknowledgement form itself is a valid contract — it is not — but
rather whether Gentry’s signature on that form reasonably led Circuit City to
believe that his failure to opt out constituted acceptance of the arbitration
agreement. We conclude under the circumstances of this case that it did.
The question whether an arbitration agreement has been validly formed
is of course different from whether that agreement was unconscionable. In
order to evaluate the Court of Appeal’s conclusion that the 30-day opt-out
provision meant that Circuit City’s arbitration agreement was not procedurally
unconscionable, we first review some general principles. “ ‘To briefly
recapitulate the principles of unconscionability, the doctrine has “ ‘both a
“procedural” and a “substantive” element,’ the former focusing on
30
‘ “oppression” ’ or ‘ “surprise” ’ due to unequal bargaining power, the latter on
‘ “overly harsh” ’ or ‘ “one-sided” ’ results.” [Citation.] The procedural
element of an unconscionable contract generally takes the form of a contract of
adhesion, “ ‘which, imposed and drafted by the party of superior bargaining
strength, relegates to the subscribing party only the opportunity to adhere to the
contract or reject it.’ ” . . . [¶] Substantively unconscionable terms may take
various forms, but may generally be described as unfairly one-sided.’ ”
(Discover Bank, supra, 36 Cal.4th at p. 160.)
As we have further explained: “ ‘The prevailing view is that
[procedural and substantive unconscionability] must both be present in order
for a court to exercise its discretion to refuse to enforce a contract or clause
under the doctrine of unconscionability.’ [Citation.] But they need not be
present in the same degree. ‘Essentially a sliding scale is invoked which
disregards the regularity of the procedural process of the contract formation,
that creates the terms, in proportion to the greater harshness or
unreasonableness of the substantive terms themselves.’ [Citations.] In other
words, the more substantively oppressive the contract term, the less evidence
of procedural unconscionability is required to come to the conclusion that the
term is unenforceable, and vice versa.” (Armendariz, supra, 24 Cal.4th at p.
114, italics omitted.)
As the above suggests, a finding of procedural unconscionability does
not mean that a contract will not be enforced, but rather that courts will
scrutinize the substantive terms of the contract to ensure they are not
manifestly unfair or one-sided. (See, e.g., Little, supra, 29 Cal.4th at p. 1071.)
As also suggested above, there are degrees of procedural unconscionability. At
one end of the spectrum are contracts that have been freely negotiated by
31
roughly equal parties, in which there is no procedural unconscionability.
Although certain terms in these contracts may be construed strictly, courts will
not find these contracts substantively unconscionable, no matter how one-sided
the terms appear to be. (See, e.g., Nunes Turfgrass, Inc. v. Vaughan-Jacklin
Seed Co. (1988) 200 Cal.App.3d 1518, 1538-1539 [liability limitation
negotiated by two commercial entities upheld].) Contracts of adhesion that
involve surprise or other sharp practices lie on the other end of the spectrum.
(See, e.g., Ellis v. McKinnon Broadcasting Co. (1993) 18 Cal.App.4th 1796,
1804 [party told that signing contract was “mere formality” to conceal
oppressive forfeiture provision].) Ordinary contracts of adhesion, although
they are indispensable facts of modern life that are generally enforced (see
Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 817-818), contain a degree
of procedural unconscionability even without any notable surprises, and “bear
within them the clear danger of oppression and overreaching.” (Id., at p. 818.)
Thus, a conclusion that a contract contains no element of procedural
unconscionability is tantamount to saying that, no matter how one-sided the
contract terms, a court will not disturb the contract because of its confidence
that the contract was negotiated or chosen freely, that the party subject to a
seemingly one-sided term is presumed to have obtained some advantage from
conceding the term or that, if one party negotiated poorly, it is not the court’s
place to rectify these kinds of errors or asymmetries. Accordingly, if we take
the Court of Appeal in this case at its word that there was no element of
procedural unconscionability in the arbitration agreement because of the 30-
day opt-out provision, then the logical conclusion is that a court would have no
basis under common law unconscionability analysis to scrutinize or overturn
even the most unfair or exculpatory of contractual terms.
32
We conclude that the Court of Appeal erred in finding the present
agreement free of procedural unconscionability. It is true that freedom to
choose whether or not to enter a contract of adhesion is a factor weighing
against a finding of procedural unconscionability. (See, e.g., Dean Witter
Reynolds, Inc. v. Superior Court (1989) 211 Cal.App.3d 758, 769-771
[agreement between brokerage house and sophisticated consumer of financial
services that included a $50 termination fee on an IRA account was not
unconscionable where competing IRA’s without the challenged fee were freely
available].) But there are several indications that Gentry’s failure to opt out of
the arbitration agreement did not represent an authentic informed choice.
First and foremost, the explanation of the benefits of arbitration in the
Associate Issue Resolution Handbook was markedly one-sided. The Court of
Appeal thought otherwise, stating: “The ‘Associate Issue Resolution
Handbook,’ written in straightforward language, does point out the advantages
of electing arbitration (notably, that the procedure is cost effective and the
employee’s claim is resolved ‘in a matter of weeks or a few months rather than
years’). However, it also notes the disadvantages (for example, the lack of a
right to a jury trial and limited discovery). The employee is then free to decide
whether or not the advantages of arbitration outweigh the disadvantages.”
But what the Court of Appeal’s discussion entirely neglected is that
although the handbook alluded to some of the shortcomings of arbitration in
the general sense, it did not mention any of the additional significant
disadvantages that this particular arbitration agreement had compared to
litigation. These included the following: First, the agreement provided for a
one-year statute of limitations as opposed to the three-year statute for
recovering overtime wages provided under Code of Civil Procedure section
33
338 (see Murphy, supra, 40 Cal.4th at p. 1099) and a four-year statute of
limitations for the unfair competition claim under Business and Professions
Code section 17208. Second, the agreement provided a limitation of remedies
to backpay “only up to one year from the point at which the [employee] knew
or should have known of the events giving rise to the alleged violation of the
law,” whereas an employee filing suit could potentially recover backpay for a
three-year period from the date the cause of action actually accrued. Third, the
agreement imposed a maximum of $5,000 in punitive damages. Although
exemplary damages are not available in overtime suits (see § 1194.2
[“liquidated damages” equal to the amount of wages recovered available in
minimum wage litigation but not overtime litigation]), Circuit City’s
agreement applied to “any and all employment-related legal disputes,”
including violation of the FEHA and discharges in violation of public policy,
for which punitive damages without any such limitation would be available.
(See Commodore Home Systems, Inc. v. Superior Court (1982) 32 Cal.3d 211,
220-221.) Fourth, the agreement contained a provision that parties will
“generally” be liable for their own attorney fees, with the arbitrator having the
“discretion” to award the employee attorney fees, as opposed to section 1194’s
provision that a prevailing employee “is entitled to” reasonable attorney fees
and costs. (§ 1194, subd. (a).)
The fact that Circuit City’s explanation of the arbitration agreement
emphasized that the arbitration is “much less expensive” and that “the
arbitrator can award monetary damages to compensate you for the harm you
may have suffered,” without mentioning the many disadvantages to the
employee that Circuit City had inserted into the agreement, meant that the
employee would receive a highly distorted picture of the arbitration Circuit
34
City was offering. Although an employee who read Circuit City’s nine-page
single-spaced document entitled Circuit City’s “Dispute Resolution Rules and
Procedures” would have encountered the above provisions, only a legally
sophisticated party would have understood that these rules and procedures are
considerably less favorable to an employee than those operating in a judicial
forum. As has been observed, even “ ‘experienced but legally unsophisticated
businessmen may be unfairly surprised by unconscionable contract terms.’ ”
(Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1535 [finding
unconscionability in a corporate manager’s arbitration agreement with his
employer].) The same would be even more true for the nonexecutive
employees who would be the likely plaintiffs in suits about overtime pay. And
notwithstanding the statement in the documents provided Gentry that
employees “may consult with an attorney” about their legal rights, and contrary
to the dissenting opinion’s contention otherwise, it is unrealistic to expect
anyone other than higher echelon employees to hire an attorney to review what
appears to be a routine personnel document.
Moreover, it is not clear that someone in Gentry’s position would have
felt free to opt out. The materials provided to Gentry made unmistakably clear
that Circuit City preferred that the employee participate in the arbitration
program. The “Associate Issue Resolution Handbook” distributed with the
opt-out form touted the virtues of arbitration, including use of the all-caps
subheading — WHY ARBITRATION IS RIGHT FOR YOU AND CIRCUIT
CITY — that left no doubt about Circuit City’s preference. The fact that the
arbitration agreement was structured so that arbitration was the default dispute
resolution procedure from which the employee had to opt out underscored
Circuit City’s pro-arbitration stance. Given the inequality between employer
35
and employee and the economic power that the former wields over the latter
(see Armendariz, supra, 24 Cal.4th at p. 115), it is likely that Circuit City
employees felt at least some pressure not to opt out of the arbitration
agreement. The lack of material information about the disadvantageous terms
of the arbitration agreement, combined with the likelihood that employees felt
at least some pressure not to opt out of the arbitration agreement, leads to the
conclusion that the present agreement was, at the very least, not entirely free
from procedural unconscionability.10
To reiterate, the fact that some degree of procedural unconscionability is
present does not mean necessarily that the arbitration agreement is
unenforceable. But it does mean that the agreement is not immune from
judicial scrutiny to determine whether or not its terms are so one-sided or
oppressive as to be substantively unconscionable.
As noted, Gentry argues that several provisions of the arbitration
agreement other than the class arbitration waiver are substantively
unconscionable, an argument that Circuit City disputes. The Court of Appeal
did not address these arguments, believing the agreement not to be
procedurally unconscionable and upholding the class arbitration waiver. As
10
We note that two Ninth Circuit cases came to the contrary conclusion.
(Circuit City Stores, Inc. v. Ahmed (9th Cir. 2002) 283 F.3d 1198; Circuit City
Stores, Inc. v. Najd (9th Cir. 2002) 294 F.3d 1104.) The Ahmed court in its
brief discussion of the unconscionability issue did not consider the
concealment of disadvantageous terms nor the reality that Circuit City clearly
favored arbitration and was in a position to pressure employees to choose its
favored option. (Ahmed, supra, 283 F.3d at pp. 1199-1200.) Najd viewed
Ahmed as binding. (Najd, supra, 294 F.3d at p. 1108.) We find neither case
persuasive.
36
stated in the previous part of this opinion, we remand the matter to the Court of
Appeal with directions to remand to the trial court to determine whether the
class arbitration waiver is void. Unless the issue is mooted, the trial court must
also determine on remand whether the original 1995 arbitration agreement or
an amended agreement controls the present case and whether the controlling
agreement has substantively unconscionable terms.11 If so, the court must
determine whether these terms should be severed, or whether instead the
arbitration agreement as a whole should be invalidated. (See Little, supra, 29
Cal.4th at pp. 1074-1076.)
11
Circuit City points to a 1998 modification of the arbitration agreement
that required that the arbitration be conducted according to the procedural rules
in effect when the arbitration request was filed. Circuit City further points to
the arbitration agreement amendments of 2001 and 2005, which it claims do
not contain the above terms, and contends that these amended agreements
would govern the conduct of Gentry’s arbitration and are not substantively
unconscionable. Gentry on the other hand argues that the 1995 rules apply and
that for various reasons the 1998 amendment is not effective. The Court of
Appeal did not address this issue, nor was it one of the issues presented in the
petition for review. Assuming the issue is not moot, it must be determined on
remand which agreement controls and whether there is substantive
unconscionability under that agreement. But for present purposes, our only
inquiry is whether the 1995 arbitration agreement, notwithstanding its opt-out
provision, contained an element of procedural unconscionability. The fact that
the 1995 agreement had substantively unconscionable terms that were not fully
disclosed to Gentry is directly pertinent to that determination.
37
III. DISPOSITION
The judgment of the Court of Appeal is reversed and the cause is
remanded for proceedings consistent with this opinion.
MORENO, J.
WE CONCUR: GEORGE, C. J.
KENNARD,
J.
WERDEGAR,
J.
38
DISSENTING OPINION BY BAXTER, J.
I respectfully dissent. I cannot join the majority’s continuing effort to limit
and restrict the terms of private arbitration agreements, which enjoy special
protection under both state and federal law.
Both the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) and the
California Arbitration Act (CAA; Code Civ. Proc., § 1281 et seq.) provide that an
agreement to resolve disputes by arbitration, rather than by court litigation, must
be enforced except upon grounds applicable to contracts generally. These statutes
are intended to override courts’ historical suspicion of arbitration as an inferior
forum for the vindication of claims, and to endorse contracts—including
employment contracts—in which parties agree to resolve their disputes by this
relatively cheap, simple, and expeditious means. (See, e.g., Circuit City Stores,
Inc. v. Adams (2001) 532 U.S. 105, 111-124; Gilmer v. Interstate/Johnson Lane
Corp. (1991) 500 U.S. 20, 30 (Gilmer); Moses H. Cone Hospital v. Mercury
Constr. Corp. (1983) 460 U.S. 1, 24 (Moses H. Cone Hospital); St. Agnes Medical
Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1204; Mercury Ins.
Group v. Superior Court (1998) 19 Cal.4th 332, 342; Moncharsh v. Heily & Blase
(1992) 3 Cal.4th 1, 9.)1
1
Section 2 of the FAA (9 U.S.C. § 2) creates “a liberal federal policy
favoring arbitration agreements, notwithstanding any state substantive or
(footnote continued on next page)
1
In all but the most exceptional cases, these laws thus demand deference to
the “fundamentally contractual nature [of private arbitration], and to the attendant
requirement that [contractual] arbitration shall proceed as the parties themselves
have agreed. [Citation.]” (Vandenberg v. Superior Court (1999) 20 Cal.4th 815,
831, first italics added; see, e.g., Volt Info. Sciences v. Leland Stanford Jr. U.
(1989) 489 U.S. 468, 478 [FAA “requires courts to enforce privately negotiated
agreements to arbitrate, like other contracts, in accordance with their terms”].) Of
course, “by agreeing to arbitrate, a party ‘trades the procedures and opportunity for
review in the courtroom for the simplicity, informality, and expedition of
arbitration.’ [Citation.]” (Gilmer, supra, 500 U.S. 20, 31.)
Because of the statutory preference that arbitration agreements be fully
implemented, past decisions have recognized but limited circumstances in which
general contract principles may render terms of such an agreement unenforceable.
The majority holds that such circumstances may be present here. In my view, the
majority thereby errs.
Real party in interest Circuit City Stores, Inc. (Circuit City) offered its
employees, including plaintiff Gentry, a voluntary program to resolve disputes by
arbitration. Consistent with the primary advantage of arbitration as a quicker,
simpler, and cheaper alternative to court litigation, the program provided, among
other things, that claims would proceed on an individual basis, and that
consolidation of the separate claims of multiple plaintiffs in a single proceeding
would not be permitted.
(footnote continued from previous page)
procedural policies to the contrary.” (Moses H. Cone Hospital, supra, 460 U.S. 1,
24.)
2
The program’s terms, including the individual arbitration provision, were
set forth in a package of written materials, which plaintiff Gentry received, and
were further explained in a video presentation, which he attended. He signed a
receipt for the written materials. The receipt advised that he should review the
materials and contact Circuit City with any questions. It even suggested that he
could consult with an attorney about his legal rights. Finally, it clearly provided
that, having done so, he could “opt out” of the arbitration program, without
penalty, by mailing the appropriate form to Circuit City within 30 days.
Gentry did not exercise his option. The majority concedes that a contract
under the program’s terms was thus validly formed.
Later, contrary to those provisions, Gentry filed a class action against
Circuit City, seeking overtime wages allegedly due both to himself and to other
employees. The superior court enforced the arbitration agreement according to its
terms, and ordered individual arbitration of Gentry’s claim. The Court of Appeal
summarily denied mandate. We directed that court to reconsider under the
intervening decision in Discover Bank v. Superior Court (2005) 36 Cal.4th 148
(Discover Bank). After doing so, the Court of Appeal again denied Gentry relief.
Now the majority reverses, finding that the individual-arbitration term in
Circuit City’s agreement with Gentry may be invalid. The majority does not reach
this result—because it cannot—by any analysis to be found in the prior case law.
No finding is made that a class remedy is essential, as a practical matter, to
vindication of the “unwaivable” statutory right (Armendariz v. Foundation Health
Psychcare Services, Inc. (2000) 24 Cal.4th 83, 100-113 (Armendariz); see Green
Tree Financial Corp.-Ala. v. Randolph (2000) 531 U.S. 79, 90-91) to overtime
wages. Nor does the majority rely, for this holding, on the public policy against
contract terms that are both procedurally and substantively oppressive, and thus
3
“unconscionable.” (See Gilmer, supra, 500 U.S. 20, 33; Armendariz, supra, at
pp. 113-121; but cf. discussion, post.)
Finally, there is no suggestion that the individual-arbitration clause in the
voluntary agreement between Gentry and Circuit City meets the test of invalid
“exculpatory” agreements (see Civ. Code, § 1668) set forth in Discover Bank,
supra, 36 Cal.4th 148. There we confronted an agreement, unilaterally imposed
by means of a “bill stuffer,” that required customers of a credit card company to
either accept nonclass arbitration of claims against the company or cease using
their accounts. The Discover Bank majority held that a waiver of class rights,
contained in such a mandatory contract, may be deemed exculpatory, and thus
unenforceable, in a setting where “disputes between the contracting parties [will]
predictably involve small amounts of damages, and . . . it is alleged that the party
with the superior bargaining power has carried out a scheme to deliberately cheat
large numbers of [persons] out of individually small sums of money.” (Id., at
pp. 162-163.) Under such circumstances, the majority reasoned, the waiver of
class treatment “becomes in practice the exemption of the party [with superior
bargaining power] ‘from responsibility for [its] own fraud, or willful injury to the
person or property of another.’ [Citation.]” (Id., at p. 163.)
Whatever the merits of Discover Bank—a decision from which I largely
dissented—we face no similar situation here. As the instant majority admits,
claims for overtime wages, unlike the minor credit card fees and charges at issue
in Discover Bank, are not necessarily and predictably “miniscule” (maj. opn., ante,
p. 11), such that the incentive to prosecute individual actions, and thus to hold the
wrongdoer to account, will rarely, if ever, be present. Obviously, an individual
claim for accumulated unpaid wages can be substantial. And there is no indication
in the record that Gentry himself—the person whose contract for individual
4
arbitration is actually before us—cannot, as a practical matter, vindicate his
statutory overtime rights except through class proceedings.
Moreover, as the instant majority acknowledges, Circuit City did not
abruptly impose on Gentry a mandatory requirement of individual arbitration.
Unlike the credit card customers in Discover Bank, Gentry was given the
opportunity to consider the terms of Circuit City’s arbitration proposal, and, after
doing so, to opt out of the arbitration program without suffering any penalty or
sanction.
Nonetheless, breaking new ground, the majority opines that, for several
reasons, an agreement to arbitrate disputes on an individual basis might make it
“very difficult” (maj. opn., ante, at p. 12) for some Circuit City employees to
pursue their unwaivable rights to unpaid overtime wages. To that extent, the
majority reasons, such a provision—even, apparently, if neither oppressive nor
mandatory—must thus be considered exculpatory and invalid. Accordingly, the
majority rules that if, on remand, the trial court decides a representative action is a
significantly better means of enforcing the statutory rights of all affected Circuit
City employees to unpaid overtime wages, the court may, at Gentry’s behest,
ignore and dishonor his agreement to arbitrate on an individual basis.
In effect, the majority holds that, despite such an agreement, the trial court
may certify a class, in an overtime-wage case, in any circumstance where it could
otherwise do so. For all practical purposes, the majority thus decrees, such
agreements are forbidden, and meaningless, in this context.2
2
The majority denies that class action waivers in arbitration agreements are
necessarily invalid in suits to vindicate overtime-wage rights, but that is the
practical effect of the majority’s holding. Even where no class action waiver is at
issue, “[a] line of California cases follows the principle of rule 23(b)(3) of the
Federal Rules of Civil Procedure (28 U.S.C.), which ‘provides that, for a class
(footnote continued on next page)
5
The majority cites no currently valid statutory provision that requires or
supports such a determination.3 On the other hand, two statutes—the FAA and the
(footnote continued from previous page)
action to be maintained, it must be “superior to other available methods for the fair
and efficient adjudication of the controversy.” This “superiority” criterion has
been held to be “manifest” in the . . . requirement that the class mechanism confer
“substantial benefits.” ’ [Citations.]” (Bell v. Farmers Ins. Exchange (2004)
115 Cal.App.4th 715, 741 (Bell); see also, e.g., Linder v. Thrifty Oil Co. (2000) 23
Cal.4th 429, 435 (Linder); Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d
318, 385.) Thus, the majority holds in effect that whenever, in an overtime-wage
case, the court could otherwise find a class proceeding appropriate, it may do so
notwithstanding a free and fair agreement for individual arbitration. Nor is there
any realistic limitation in the majority’s suggestion that its rule applies to cases
where “systematic[ ]” denial of overtime pay to a “class of employees” is alleged.
(Maj. opn., ante, at p. 20.) Such assertions would appear, by necessity, in any
complaint seeking to litigate overtime-pay claims in a class proceeding.
3
California statutes generally permit class actions (Code Civ. Proc., § 382)
and give workers the right to engage in concerted activities with respect to
workplace issues, free of employer interference or coercion (see Lab. Code,
§ 923), but nothing suggests these laws preclude noncoercive agreements between
employer and employee to arbitrate disputes on an individual basis.
As evidence of the Legislature’s hostility to the use of contractual
arbitration to vindicate wage claims, the majority points to several California
statutes that purported to render arbitration agreements unenforceable in this
context. (Maj. opn., ante, at pp. 25-26, fn. 8.) Of course, as the majority
implicitly concedes, all such laws have been superseded or invalidated by the
prevailing public policy that favors enforcement of arbitration agreements
according to their terms, as set forth in the CAA and the FAA. (See Perry v.
Thomas (1987) 482 U.S. 483 [FAA preempted California statute (Lab. Code,
§ 229) that allowed maintenance of action for unpaid wages “without regard to the
existence of any private agreement to arbitrate”].)
On the other hand, as the majority is well aware, the Legislature knows
how to provide for a right to class action relief that cannot be waived. It has made
such provision, for example, in the Consumers Legal Remedies Act. (Civ. Code,
§§ 1751, 1752, 1781; see Discover Bank, supra, 36 Cal.4th 148, 158-159; maj.
opn., ante, at p. 8.) No similar provisions appear in the wage laws at issue here.
6
CAA—strongly undermine it. I conclude that the majority may not elevate a mere
judicial affinity for class actions as a beneficial device for implementing the wage
laws above the policy expressed by both Congress and our own Legislature that
voluntary individual agreements to arbitrate—by which parties give up certain
litigation rights and procedures in return for the relative speed, informality, and
cost efficiency of arbitration—should be enforced according to their terms.
Hence, I cannot accept the majority’s reasoning, or its result.
In the majority’s view, several factors suggest that the absence of a class
remedy might “under some circumstances” unduly interfere with employees’
ability to vindicate their statutory rights to overtime pay. (Maj. opn., ante, at
p. 11.) Because claims for unpaid overtime wages tend to be “modest,” the
majority asserts, the fees and costs of proceeding individually might discourage
many such actions, resulting in mere “ ‘ “random and fragmentary
enforcement” ’ ” of the wage laws. (Id., at p. 19.) The majority cites the prospect
of employer retaliation—admittedly illegal—against a worker who asserts an
individual claim without the protective coloration of collective action. An
additional issue, the majority suggests, is that many employees, especially those
low-wage workers most vulnerable to violations, may not know their rights.
Finally, the majority concludes, administrative proceedings—so-called Berman
hearings (Lab. Code, §§ 98-98.8; see Murphy v. Kenneth Cole Productions, Inc.
(2007) 40 Cal.4th 1094, 1114-1116)—are an inadequate alternative means of
vindicating smaller claims for overtime wages.
In many respects, the majority’s concerns are exaggerated. Though a credit
card customer might not sue individually to recover a minor fee or charge he
believes improper, one would expect an employee vigorously to pursue any
significant amount due as compensation for his labor. The case law supports that
hypothesis. As the majority acknowledges, “some 40 published cases over the last
7
70 years in California have involved individual employees prosecuting overtime
violations without the assistance of class litigation or arbitration. [Citations.]”
(Maj. opn., ante, at p. 20.)4
And though the majority stresses the drawbacks of individual litigation to
resolve small or modest claims (see generally, e.g., Linder supra, 23 Cal.4th 429,
435; Bell, supra, 115 Cal.App.4th 715, 741), it fails to consider that because
arbitration is relatively quick, simple, informal, and inexpensive, it may allow the
individual pursuit of claims that would be less practical if litigated individually in
court. These qualities of informality, simplicity, and expedition—advantages
largely negated by the complexities of a class proceeding—are presumably what
Gentry and Circuit City sought when they agreed to individual arbitration.
Moreover, while collective action has its place, the parties here may also
have contemplated that resolution of a dispute by the relatively simple, informal
process of individual arbitration would reduce the workplace tensions that might
otherwise arise as the result of a class battle in court. Indeed, though the majority
suggests that class proceedings may lessen the chances of retaliation against an
individual employee, I find it hard to imagine that a worker who organizes fellow
employees to mount a class assault against the employer will thereby achieve
improved standing in the employer’s eyes.
4
In the modern era, these cases include Ramirez v. Yosemite Water Co.
(1999) 20 Cal.4th 785; Rawson v. Tosco Refining Co. (1997) 57 Cal.App.4th
1520; Sequiera v. Rincon-Vitova Insectaries, Inc. (1995) 32 Cal.App.4th 632;
Monzon v. Schaefer Ambulance Service, Inc. (1990) 224 Cal.App.3d 16; Baker v.
Aubry (1989) 216 Cal.App.3d 1259; Hernandez v. Mendoza (1988)
199 Cal.App.3d 721; Swepston v. State Personnel Bd. (1987) 195 Cal.App.3d 92;
and Markman v. County of Los Angeles (1973) 35 Cal.App.3d 132.
8
But even if class relief were a “significantly more effective” way for Circuit
City employees, as a group, to establish their overtime-wage claims (maj. opn.,
ante, at pp. 2, 20, 23), this does not justify invalidating Gentry’s voluntary
agreement to resolve his claims by individual arbitration. Unless Gentry’s
contract to arbitrate individually constitutes a de facto waiver of his own statutory
rights, he should not be allowed to act, contrary to his agreement, as a
representative plaintiff.5 Otherwise, the strong public policy that arbitration
agreements are to be enforced according to their terms should prevail.
Here, as in Discover Bank, the majority insists its analysis does not
discriminate against the arbitral forum—an approach forbidden by both the FAA
and the CAA—but simply indicates the procedures necessary in any forum to
prevent the de facto waiver of statutory rights. However, there is more than one
way courts can show hostility to arbitration as a simpler, cheaper, and less formal
alternative to litigation. They can simply refuse to enforce the parties’ agreement
to arbitrate. Or, more subtly, they can alter the arbitral terms to which the parties
agreed, and defeat the essential purposes and advantages of arbitration, by
transforming that process, against the parties’ expressed will at the time they
entered the agreement, into something more and more like the court litigation
arbitration is intended to avoid.
5
As I have indicated in the text, such a finding cannot be made on this record
under the standards suggested by the majority. There is no indication that
Gentry’s own claim is too small to warrant individual legal action. He need not
fear retaliation as a Circuit City employee, because his employment ended in
March 2001, before he filed this lawsuit in August 2002. Moreover, the very fact
that he sued indicates he was, and is, aware of his legal rights.
9
Given the strong policy that arbitration agreements are to be enforced as
written, any such alteration should be employed only on a showing of the starkest
necessity. The majority has not adhered to that limitation here.
Two years ago, I noted that “the [strong prevailing weight] of decisions,
applying federal law or the law of other states, . . . hold[s] that arbitration clauses
are not invalid either because they specifically exclude class treatment or because
they preclude such treatment by failing expressly to provide for it. [Citations.]”
(Discover Bank, supra, 36 Cal.4th 148, 176, fn. 1 (conc. & dis. opn. of
Baxter, J.).) The majority does not suggest, and I have no reason to believe, that
this situation has changed.6 The majority thus moves California further along the
path away from the mainstream on the issue. Persuasive reasoning supports the
contrary, prevailing view. I must therefore disassociate myself from the
majority’s holding.
In a separate ruling, the majority concludes that the arbitration agreement
between Gentry and Circuit City is procedurally unconscionable, thus exposing
numerous other provisions of the agreement to possible invalidation on grounds
that they are substantively oppressive or unfair. (See, e.g, Armendariz, supra,
24 Cal.3d 83, 114.) Again, I cannot agree.
6
Skirchak v. Dynamic Research Corp., Inc. (D.Mass. 2006) 432 F.Supp.2d
175, the only overtime case cited by the majority in which a class waiver in an
arbitration provision was invalidated, involved a mandatory agreement unilaterally
imposed by the employer. In Skirchak, employees were advised by e-mail that
they would be required to submit to the company’s dispute resolution program.
Acceptance was a condition of continued employment. Applying principles of
procedural unconscionability under Massachusetts law, the court deemed essential
to its holding that the employees had no meaningful choice whether to accept the
provision. (Id. at pp. 179-180.)
10
As noted above, this was not a case in which one party has simply imposed
mandatory contract terms on another. Gentry was not required blindly to accept
the arbitration program and its terms as a condition of his employment. (Cf.
Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071; Armendariz, supra,
24 Cal.4th 83, 91-92, 114-115; see also Discover Bank, supra, 36 Cal.4th 148, 154
[customers of credit card company could reject arbitration term of cardholder
agreement only by ceasing to use their accounts].) On the contrary, Circuit City
provided Gentry, and other employees, with an extensive orientation about the
program, then allowed them a reasonable time to “opt out,” without penalty,
simply by mailing back a form.
The instant Court of Appeal determined on this basis that no procedural
unconscionability was present. Two Ninth Circuit decisions, applying California
law, had previously reached the same conclusion. (Circuit City Stores, Inc. v.
Najd (9th Cir. 2002) 294 F.3d 1104, 1108; Circuit City Stores, Inc. v. Ahmed
(9th Cir. 2002) 283 F.3d 1198, 1199-1200.)
The majority concedes that Gentry’s freedom to choose against the
arbitration program “weigh[s] against a finding of procedural unconscionability.
[Citation.]” (Maj. opn., ante, at p. 29.) Nonetheless, the majority discerns an
“element” of procedural oppression—thus allowing scrutiny of the agreement’s
substantive terms—by finding that Circuit City’s explanatory materials were “one-
sided.” (Ibid.) In particular, the majority asserts, the explanatory materials failed
to disclose that certain terms of the arbitration program might work to an
employee’s disadvantage in specific situations. Whatever the merits of that
premise,7 the receipt Gentry signed prominently advised that he could consult his
7
As the majority makes clear, the informational packet Gentry received
included not only the “Associate Issue Resolution Handbook,” which sought to
(footnote continued on next page)
11
own attorney about the legal “pros and cons” of the program, and he was given
ample opportunity to do so. Under these circumstances, there is no basis for a
conclusion that the process by which Circuit City sought to secure its employees’
agreement to the program was misleading.
The majority also points out that Circuit City made clear its preference for
arbitration. But even if Circuit City encouraged employees to accept the
arbitration agreement, the record is devoid of any evidence that it implied,
threatened, or imposed any sanction for an employee’s decision to opt out of the
program. I see in this situation no grounds for a finding that Circuit City unfairly
coerced or induced its employees’ agreement.
Accordingly, I would affirm the judgment of the Court of Appeal.
BAXTER, J.
WE CONCUR:
CHIN, J.
CORRIGAN, J.
(footnote continued from previous page)
explain the program, but also the “Circuit City Dispute Resolution Rules and
Procedures,” which set forth the program’s terms in full.
12
See last page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Gentry v. Superior Court
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 135 Cal.App.4th 944
Rehearing Granted
__________________________________________________________________________________
Opinion No. S141502
Date Filed: August 30, 2007
__________________________________________________________________________________
Court: Superior
County: Los Angeles
Judge: Thomas L. Willhite, Jr.
__________________________________________________________________________________
Attorneys for Appellant:
Riordan & Horgan, Dennis P. Riordan; Righetti & Wynne, Righetti Law Firm, Matthew Righetti, John
Glugoski; Law Offices of Ellen Lake and Ellen Lake for Petitioner.
Altshuler, Berzon, Nussbaum, Rubin & Demain, Michael Rubin, Dorthea Langsam; McGuinn, Hillsman &
Palefsky and Cliff Palefsky for International Brotherhood of Teamsters, Laborers International Union of
North America, Service Employees International Union, Unite-Here and California Employment Lawyers
Association as Amici Curiae on behalf of Petitioner.
Goldstein, Demchak, Baller, Borgen & Dardarian, Laura L. Ho and Jospeh E. Jaramillo for Trial Lawyers
for Public Justice, Asian Law Caucus, Asian Pacific American Legal Center, California Rural Legal
Assistance Foundation, Hastings Civil Justice Clinic, Impact Fund, The Katherine and George Alexander
Community Law Center, La Raza Centro Legal, Inc., Lawyers’ Committee for Civil Rights of the San
Francisco Bay Area, The Legal Aid Society of San Francisco-Employment Law Center and Mexican
American Legal Defense and Educational Fund as Amici Curiae on behalf of Petitioner.
Law Office of Michael H. Crosby and Michael H. Crosby as Amici Curiae on behalf of Petitioner.
Edmund G. Brown, Jr., Attorney General, Tom Greene, Chief Assistant Attorney General, Albert Norman
Shelden, Assistant Attorney General, Ronald A. Reiter and Michele R. Van Gelderen, Deputy Attorneys
General, as Amici Curiae on behalf of Petitioner.
__________________________________________________________________________________
Attorneys for Respondent:
No appearance for Respondent.
Attorneys for Real Party in Interest:
Berry & Block, Rex Darrell Berry, Scott M. Plamondon; Jones Day and Steven B. Katz for Real Party in
Interest.
Page 2 – S141502 – counsel continued
Attorneys for Real Party in Interest:
Littler Mendelson, Henry D. Lederman, Lisa C. Chagala and Harry M. Decourcy for Ralphs Grocery
Company as Amicus Curiae on behalf of Real Party in Interest.
Sheppard, Mullin, Richter & Hampton, Richard J. Simmons, Kelly L. Hensley and Melissa K. Lee for
National Retail Federation and California Retailers Association as Amici Curiae on behalf of Real Party in
Interest.
Deborah J. La Fetra and Timothy Sandefur for Pacific Legal Foundation as Amicus Curiae on behalf of
Real Party in Interest.
National Chamber Litigation Center, Robin S. Conrad; Constantine Cannon, W. Stephen Cannon,
Raymond C. Fay; Mayer, Brown, Rowe & Maw and Donald M. Falk for Chamber of Commerce of the
United States of America and Retail Industry Leaders Association as Amici Curiae on behalf of Real Party
in Interest.
Jones Day, Elwood Lui and Harry I. Johnson III for Federated Department Stores, Inc., as Amicus Curiae
on behalf of Real Party in Interest.
Fulbright & Jaworski and James R. Evans for U-Haul Co. of California as Amicus Curiae on behalf of Real
Party in Interest.
Morgan, Lewis & Bockius, Rebecca D. Eisen, Brett M. Schuman and John D. Battenfeld for Employers
Group as Amicus Curiae on behalf of Real Party in Interest.
Stroock & Stroock & Lavan, Julia B. Strickland, James W. Denison and Andrew W. Moritz for California
Bankers Association, American Bankers Association, Consumer Bankers Association and American
Financial Services Association as Amici Curiae on behalf of Real Party in Interest.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Michael Rubin
Altshuler, Berzon, Nussbaum, Rubin & Demain
177 Post Street, Suite 300
San Francisco, CA 94108
(415) 421-7151
Cliff Palefsky
McGuinn, Hillsman & Palefsky
535 Pacific Avenue
San Francisco, CA 94133
(415) 421-9292
Rex Darrell Berry
Berry & Block
2150 River Plaza Drive, Suite 415
Sacramento, CA 95833
(916) 564-2000
Opinion Information
| Date: | Docket Number: |
| Thu, 08/30/2007 | S141502 |
Parties
| 1 | Gentry, Robert (Petitioner) Represented by Dennis P. Riordan Riordan & Horgan 523 Octavia Street San Francisco, CA |
| 2 | Gentry, Robert (Petitioner) Represented by Ellen Lake Attorney at Law 4230 Lakeshore Avenue Oakland, CA |
| 3 | Gentry, Robert (Petitioner) Represented by Matthew Righetti Righetti & Wynne 466 Montgomery Street, Suite 1400 San Francisco, CA |
| 4 | Gentry, Robert (Petitioner) Represented by Michael Rubin Altshuler Berzon Nussbaum 177 Post Street, Suite 300 San Francisco, CA |
| 5 | Superior Court Of Los Angeles County (Respondent) |
| 6 | Circuit City Stores, Inc. (Real Party in Interest) Represented by Rex D. Berry Berry & Block, LLP 2150 River Plaza Drive, Suite 415 Sacramento, CA |
| 7 | Circuit City Stores, Inc. (Real Party in Interest) Represented by Steven B. Katz Thelen Reid Brown Raysman & Steiner 333 S. Hope St., Ste. 2900 Los Angeles, CA |
| 8 | Circuit City Stores, Inc. (Real Party in Interest) Represented by Scott Michael Plamondon Berry & Block, LLP 2150 River Plaza Drive, Suite 415 Sacramento, CA |
| 9 | Strange & Carpenter (Pub/Depublication Requestor) Represented by Gretchen Arlene Carpenter Strange & Carpenter 12100 Wilshire Boulevard, Suite 1900 Los Angeles, CA |
| 10 | Brown, Edmund G. (Amicus curiae) Represented by Michele Robin Vangelderen Office of the Attorney General 300 S. Spring Street, Suite 500 Los Angeles, CA |
| 11 | Ralphs Grocery Company (Amicus curiae) Represented by Henry D. Lederman Littler Mendelson 2175 N. California Boulevard, Suite 835 Walnut Creek, CA |
| 12 | Pacific Legal Foundation (Amicus curiae) Represented by Deborah Joyce Lafetra Pacific Legal Foundation 3900 Lennane Drive, Suite 200 Sacramento, CA |
| 13 | Pacific Legal Foundation (Amicus curiae) Represented by Timothy Mason Sandefur Pacific Legal Foundation 3900 Lennane Drive, Suite 200 Sacramento, CA |
| 14 | National Retail Federation (Amicus curiae) Represented by Melissa Kathryn Lee Sheppard Mullin Richter & Hampton, LLP 333 S. Hope Street, 48th Floor Los Angeles, CA |
| 15 | National Retail Federation (Amicus curiae) Represented by Richard J. Simmons Sheppard Mullin Richter & Hampton, LLP 333 S. Hope Street, 48th Floor Los Angeles, CA |
| 16 | Trial Lawyers For Public Justice (Amicus curiae) Represented by Laura Luo-Yao Ho Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 17 | Trial Lawyers For Public Justice (Amicus curiae) Represented by Joseph E. Jaramillo Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 18 | Employers Group (Amicus curiae) Represented by Brett Michael Schuman Morgan Lewis & Bockius LLP 1 Market Street, Spear Street Tower San Francisco, CA |
| 19 | International Brotherhood Of Teamsters (Amicus curiae) Represented by Michael Rubin Altshuler Berzon Nussbaum 177 Post Street, Suite 300 San Francisco, CA |
| 20 | International Brotherhood Of Teamsters (Amicus curiae) Represented by Cliff Palefsky McGuinn Hillsman & Palefsky 535 Pacific Avenue San Francisco, CA |
| 21 | Federated Department Stores, Inc. (Amicus curiae) Represented by Elwood Lui Jones Day Reavis & Pogue 555 S. Flower Street, 50th Floor Los Angeles, CA |
| 22 | U-Haul Company Of California (Amicus curiae) Represented by James R. Evans Fulbright & Jaworski, LLP 555 S. Flower Street, 41st Floor Los Angeles, CA |
| 23 | Law Office Of Michael H. Crosby (Amicus curiae) Represented by Michael H. Crosby D. F. Garrettson House 2366 Front Street San Diego, CA |
| 24 | Chamber Of Commerce Of The United States Of America (Amicus curiae) Represented by Robin S. Conrad National Chamber Litigation Center, Inc. 1615 "H" Street, N.W. Washington, DC |
| 25 | Chamber Of Commerce Of The United States Of America (Amicus curiae) Represented by Donald M. Falk Mayer Brown Rowe & Maw, LLP Two Palo Alto Square, Suite 300 3000 El Camino Real Palo Alto, CA |
| 26 | California Retailers Association (Amicus curiae) Represented by Melissa Kathryn Lee Sheppard Mullin Richter & Hampton, LLP 333 S. Hope Street, 48th Floor Los Angeles, CA |
| 27 | California Retailers Association (Amicus curiae) Represented by Richard J. Simmons Sheppard Mullin Richter & Hampton, LLP 333 S. Hope Street, 48th Floor Los Angeles, CA |
| 28 | Laborers International Union Of North America (Amicus curiae) Represented by Michael Rubin Altshuler Berzon Nussbaum 177 Post Street, Suite 300 San Francisco, CA |
| 29 | Laborers International Union Of North America (Amicus curiae) Represented by Cliff Palefsky McGuinn Hillsman & Palefsky 535 Pacific Avenue San Francisco, CA |
| 30 | Service Employees International Union (Amicus curiae) Represented by Michael Rubin Altshuler Berzon Nussbaum 177 Post Street, Suite 300 San Francisco, CA |
| 31 | Service Employees International Union (Amicus curiae) Represented by Cliff Palefsky McGuinn Hillsman & Palefsky 535 Pacific Avenue San Francisco, CA |
| 32 | Unite-Here (Amicus curiae) Represented by Michael Rubin Altshuler Berzon Nussbaum 177 Post Street, Suite 300 San Francisco, CA |
| 33 | Unite-Here (Amicus curiae) Represented by Cliff Palefsky McGuinn Hillsman & Palefsky 535 Pacific Avenue San Francisco, CA |
| 34 | California Employment Lawyers Association (Amicus curiae) Represented by Michael Rubin Altshuler Berzon Nussbaum 177 Post Street, Suite 300 San Francisco, CA |
| 35 | California Employment Lawyers Association (Amicus curiae) Represented by Cliff Palefsky McGuinn Hillsman & Palefsky 535 Pacific Avenue San Francisco, CA |
| 36 | California Bankers Association (Amicus curiae) Represented by Julia B. Strickland Stroock & Stroock & Lavan 2029 Century Pk East, #1800 Los Angeles, CA |
| 37 | American Bankers Association (Amicus curiae) Represented by Julia B. Strickland Stroock & Stroock & Lavan 2029 Century Pk East, #1800 Los Angeles, CA |
| 38 | American Financial Services Association (Amicus curiae) Represented by Julia B. Strickland Stroock & Stroock & Lavan 2029 Century Pk East, #1800 Los Angeles, CA |
| 39 | Retail Industry Leaders Association (Amicus curiae) Represented by Robin S. Conrad National Chamber Litigation Center, Inc. 1615 "H" Street, N.W. Washington, DC |
| 40 | Retail Industry Leaders Association (Amicus curiae) Represented by Donald M. Falk Mayer Brown LLP 2 Palo Alto Sq #300, 3000 El Camino Real 3000 El Camino Real Palo Alto, CA |
| 41 | Asian Law Caucus (Amicus curiae) Represented by Laura Luo-Yao Ho Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 42 | Asian Law Caucus (Amicus curiae) Represented by Joseph E. Jaramillo Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 43 | Asian Pacific American Legal Center (Amicus curiae) Represented by Laura Luo-Yao Ho Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 44 | Asian Pacific American Legal Center (Amicus curiae) Represented by Joseph E. Jaramillo Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 45 | California Rural Legal Assistance Foundation (Amicus curiae) Represented by Laura Luo-Yao Ho Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 46 | California Rural Legal Assistance Foundation (Amicus curiae) Represented by Joseph E. Jaramillo Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 47 | Hastings Civil Justice Clinic (Amicus curiae) Represented by Laura Luo-Yao Ho Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 48 | Hastings Civil Justice Clinic (Amicus curiae) Represented by Joseph E. Jaramillo Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 49 | Impact Fund (Amicus curiae) Represented by Laura Luo-Yao Ho Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 50 | Impact Fund (Amicus curiae) Represented by Joseph E. Jaramillo Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 51 | Katherine & George Alexander Community Law Center (Amicus curiae) Represented by Laura Luo-Yao Ho Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 52 | Katherine & George Alexander Community Law Center (Amicus curiae) Represented by Joseph E. Jaramillo Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 53 | La Raza Centro Legal, Inc. (Amicus curiae) Represented by Laura Luo-Yao Ho Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 54 | La Raza Centro Legal, Inc. (Amicus curiae) Represented by Joseph E. Jaramillo Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 55 | Lawers Committee For Civil Rights Of San Francisco Bay Area (Amicus curiae) Represented by Laura Luo-Yao Ho Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 56 | Lawers Committee For Civil Rights Of San Francisco Bay Area (Amicus curiae) Represented by Joseph E. Jaramillo Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 57 | Legal Aid Society Of San Francisco (Amicus curiae) Represented by Laura Luo-Yao Ho Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 58 | Legal Aid Society Of San Francisco (Amicus curiae) Represented by Joseph E. Jaramillo Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 59 | Mexican American Legal Defense & Educational Fund (Amicus curiae) Represented by Laura Luo-Yao Ho Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| 60 | Mexican American Legal Defense & Educational Fund (Amicus curiae) Represented by Joseph E. Jaramillo Goldstein, Demchak, Baller et al. 300 Lakeside Drive, Suite 1000 Oakland, CA |
| Disposition | |
| Aug 30 2007 | Opinion: Reversed |
| Dockets | |
| Feb 28 2006 | Petition for review filed Robert Gentry, petitioner Dennis Riordan, Matthew Righetti, Ellen Lake, counsel c/a rec req |
| Mar 3 2006 | Received Court of Appeal record |
| Mar 17 2006 | Answer to petition for review filed Circuit City Stores, Inc., real party in interest. by Rex Darrell Berry, retained counsel |
| Mar 20 2006 | Request for depublication (petition for review pending) Altshuler Berzon et al. on behalf of the Service Employees International Union, the International Brotherhood of teamsters, UNITE HERE, and their combined 875,000 California members. (non-parties) |
| Mar 20 2006 | Request for depublication filed (another request pending) Strange & Carpenter, Attorneys at Law non-party Gretchen Carpenter, retained. |
| Apr 26 2006 | Petition for review granted (civil case) Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno, and Corrigan, JJ. |
| Apr 26 2006 | Letter sent to: All counsel enclosing grant order and the form for certification of interested persons and entities. |
| May 1 2006 | Certification of interested entities or persons filed by Matthew Righetti, Righetti Law Firm, counsel for petitioner (Gentry) |
| May 4 2006 | Certification of interested entities or persons filed by Rex D. Berry of Berry & Block for RPI Circuit City Stores, Inc. |
| May 19 2006 | Request for extension of time filed petitioner requesting a 30-day extension to and including June 26, 2006 to file petitioner's opening brief on the merits. Robert Gentry, petitioner by Dennis P. Riordan, counsel |
| May 23 2006 | Received: Amended proof of service to petitioner's (Gentry) motion for extension of time |
| May 23 2006 | Extension of time granted To June 26, 2006 to file petitioner's opening brief on the merits. |
| Jun 21 2006 | Request for extension of time filed to July 10, 2006 to file Petitioner's (Gentry) Opening Brief on the Merits |
| Jun 23 2006 | Extension of time granted On application of petitioner and good cause appeairng, it is ordered that the time to serve and file Petitioner Gentry's Opening Brief on the Merits is extended to and including July 10, 2006. |
| Jul 10 2006 | Opening brief on the merits filed Robert Gentry, petitioner by Ellen Lake, retained counsel and Dennis P. Riordan of Riordan & Horgan, and Matthew Righetti and John Glugoski of Righeti Law Firm, retained. |
| Jul 17 2006 | Request for judicial notice filed (granted case) Robert Gentry, petitioner, by Ellen Lake, retained counsel. |
| Jul 28 2006 | Request for extension of time filed to and including September 8, 2006, to file the RPI's Answer Brief on the Merits |
| Aug 2 2006 | Extension of time granted On application of real party in interest and good cause appeairng, it is ordered that the time to serve and file the answer brief on the merits is extended to an d including September 8, 2006. |
| Sep 5 2006 | Request for extension of time filed to September 18, 2006 to file the anwer brief on the merits. |
| Sep 6 2006 | Extension of time granted On application of real party in interest and good cause appeairng, it is ordered that the time to serve and file the answer brief on the merits is extended to and including September 18, 2006. |
| Sep 18 2006 | Answer brief on the merits filed Real Party in Interest; Circuit City Stores, Inc. |
| Sep 18 2006 | Request for judicial notice filed (granted case) Real Party in Interest; Circuit City Stores, Inc. [submitted concurrent with Answer Brief/Merits.] |
| Sep 29 2006 | Request for extension of time filed to Nov. 13, 2006 to file Petitioner's reply brief on the merits and Petitioner's opposition to request for judicial notice. |
| Oct 10 2006 | Extension of time granted On application of petitioner and good cause appearing, it is ordered that the time to serve and file the reply brief on the merits is extended to and including November 13, 2006. |
| Oct 18 2006 | Order filed The order filed October 10, 2006 is hereby amended to read as follows: On application of petitioner and good cause appearing, it is ordered that the time to serve and file petitioner's reply brief on the merits and petitioner's opposition to the request for judicial notice is extended to and including November 13, 2006. |
| Nov 13 2006 | Application to file over-length brief filed counsel for petitioner (Robert Gentry) *** Reply Brief*** |
| Nov 13 2006 | Received: from counsel for petnr. Reply Brief on the Merits |
| Nov 13 2006 | Opposition filed by counsel for petitioner to Request for Judicial Notice. |
| Nov 13 2006 | Received: from counsel for petnr. Supplemental Proof of Service |
| Nov 14 2006 | Reply brief filed (case fully briefed) counsel for petitioner Robert Gentry *** with permission *** |
| Dec 6 2006 | Request for extension of time filed to file brief as amicus curiae in support of petitioner (Gentry) Deputy Attorney General Michele R. Van Gelderen |
| Dec 6 2006 | Received: Faxed copy of the AG's request for an e.o.t. to January 15, 2007, to file the amicus curiae brief. |
| Dec 8 2006 | Received application to file Amicus Curiae Brief and brief of Ralphs Grocery Company in support of real party in interest, Circuit City Stores, Inc. |
| Dec 8 2006 | Extension of time granted On application of the Attorney General and good cause appearing, it is ordered that the time to serve and file the Attorney General's amicus curiae brief in support of petitioner (Gentry) is extended to and inculding January 15, 2007. |
| Dec 12 2006 | Received application to file Amicus Curiae Brief Pacific Legal Foundation, in support of respondent (?) by Deborah J. La Fetra and Timothy Sandefur |
| Dec 12 2006 | Received application to file Amicus Curiae Brief National Retail Federation and California Retailers Association in support of RPI. Richard J. Simmons of Sheppard Mullin et al., retained. Request for Judicial Notice received with appendix (1 vol) |
| Dec 14 2006 | Received application to file Amicus Curiae Brief Employers Group in support of real party in interest (Circuit City Stores, Inc.) |
| Dec 14 2006 | Received application to file Amicus Curiae Brief International Brotherhood of Teamsters, Laborers International Union of North America, Service Employees International Union, Unite-Here, and California Employment Lawyers Association in support of petitioner (Gentry) |
| Dec 14 2006 | Received application to file Amicus Curiae Brief & Brief of Federated Department Stores, Inc., under separate covers supports Circuit City Stores, Inc. |
| Dec 14 2006 | Received: concurrent with a.c. app/brief of Federated Dept. Stores, Inc. request for judicial notice. |
| Dec 14 2006 | Permission to file amicus curiae brief granted The application of Ralphs Grocery Company for permission to file an amicus curiae brief in support of real party in interest (Circuit City Stores, Inc.) is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. |
| Dec 14 2006 | Amicus curiae brief filed Ralphs Grocery Company in Support of Real Party in Interest (Circuit City Stores, Inc.) |
| Dec 14 2006 | Permission to file amicus curiae brief granted The application of Pacific Legal Foundation for permission to file an amicus curiae brief in support of real party in interest (Circuit City Stores, Inc.) is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. |
| Dec 14 2006 | Amicus curiae brief filed Pacific Legal Foundation in Support of Real Party in Interest Circuit City Stores, Inc. |
| Dec 14 2006 | Permission to file amicus curiae brief granted The application of National Retail Federation and California Retailers Association for permission to file an amicus curiae brief in support of real party in interest (Circuit City Stores, Inc.) is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. |
| Dec 14 2006 | Amicus curiae brief filed National Retail Federation and California Retailers Association In Support of Real Party in Interest Circuit City Stores, Inc. |
| Dec 14 2006 | Request for judicial notice filed (granted case) National Retail Federation and California Retailers Association. (1 vol.) Appendix of Federal Authorities (1 vol.) |
| Dec 14 2006 | Received application to file Amicus Curiae Brief California Bankers Association, American Bankers Association, Consumer Bankers Association and American Financial Services Association in support of Real Party in Interest Circuit City Stores, Inc. |
| Dec 14 2006 | Received application to file Amicus Curiae Brief Trial Lawyers for Public Justice, Asian Law Caucus, Asian Pacific American Legal Center et al. in support of petitioner (Gentry) |
| Dec 14 2006 | Received application to file Amicus Curiae Brief Chamber of Commerce of the United States of America and the Retail Industry Leaders Association. |
| Dec 14 2006 | Received application to file Amicus Curiae Brief U-Haul Co. of California [app & brief submitted under same cover] in support of Real Party in Interset Circuit City Stores, Inc., |
| Dec 15 2006 | Application to appear as counsel pro hac vice filed Robin S. Conrad of the National Chamber Litigation Center, Inc., Washington, D.C. for Amicus Curiae Chamber of Commerce of the United States of America |
| Dec 15 2006 | Application to appear as counsel pro hac vice filed W. Stephen Cannon and Raymond C. Fay of Constantine Cannon, P.C., Washington, D.C. for Amici Curiae Retail Industry Leaders Association. |
| Dec 15 2006 | Application to appear as counsel pro hac vice filed Raymond C. Fay of Constantine Cannon, P.C., Washington, D.C. for Amici Curiae The Retail Industry Leaders Association. |
| Dec 18 2006 | Received application to file Amicus Curiae Brief Law Office of Michael H. Crosby in support of petitioner by Michael H. Crosby |
| Dec 19 2006 | Request for extension of time filed Joint application of petitioners and real party in interest to February 15, 2007 within which to file each party's answer to all amicus curiae briefs filed. |
| Dec 27 2006 | Permission to file amicus curiae brief granted The application of International Brotherhood of Teamsters, Laborers International Union of North America, Service Employees International Union, Unite-Here, and California Employment Lawyers Association for permission to file an amicus curiae brief in support of petitioners is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. |
| Dec 27 2006 | Amicus curiae brief filed International Brotherhood of Teamsters, Laborers International Union of North America, Service Employees International Union, Unite-Here, and California Employment Lawyers Association in support of petitioner. |
| Dec 27 2006 | Permission to file amicus curiae brief granted The application of California Bankers Association, American Bankers Association and American Financial Services Association for permission to file an amicus curiae brief in support of Real Party in Interest Circuit City Stores, Inc. is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. |
| Dec 27 2006 | Amicus curiae brief filed California Bankers Association, American Bankers Association and American Financial Services Association in support of RPI Circuit City Stores, Inc. is hereby granted. by James W. Denison of Stroock & Stroock & Lavan LLP, retained. |
| Dec 27 2006 | Permission to file amicus curiae brief granted The application of Chamber of Commerce of the United States of America and the Retail Industry Leaders Association for permission to file an amicus curiae brief in support of real party in interest is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. |
| Dec 27 2006 | Amicus curiae brief filed Chamber of Commerce of the United States of America and the Retail Industry Leaders Association in support of real party in interest by Donald M. Falk of Mayer, Brown Rowe & Maw LLP, retained. |
| Dec 27 2006 | Permission to file amicus curiae brief granted The appilcation of Law Office of Michael H. Crosby for permission to file an amicus curiae brief in support of petitioner is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. |
| Dec 27 2006 | Amicus curiae brief filed Law Office of Michael H. Crosby in support of petitioner. by Michael H. Crosby. |
| Dec 27 2006 | Request for judicial notice filed (granted case) by Amicue Curiae Law Office of Michael H. Crosby |
| Dec 27 2006 | Permission to file amicus curiae brief granted The application of Employers Group for permission to file an amicus curiae brief in support of real party in interest (Circuit City Stores, Inc.) is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. |
| Dec 27 2006 | Amicus curiae brief filed Employers Group in support of real party in interest. by Rebecca D. Eisen, Brett M. Schuman and John D. Battenfeld of Morgan, Lewis & Bockius LLP and |
| Dec 27 2006 | Permission to file amicus curiae brief granted The application of Federated Department Stores, Inc. for permission to file an amicus curiae brief in support of real party in interest is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. |
| Dec 27 2006 | Amicus curiae brief filed Federated Department Stores, Inc. in support of real party in interest. by Elwood Lui and Harry I. Johnson, III of Jones Day, retained. |
| Dec 27 2006 | Request for judicial notice filed (granted case) Amicus Curiae Federated Department Stores, Inc. by Elwood Lui of Jones Day, retained. |
| Dec 27 2006 | Permission to file amicus curiae brief granted The application of Trial Lawyers for Public Justice, Asian Law Caucus, Asian Pacific American Legal Center, California Rural Legal Assistance Foundation, Hastings Civil Justice Clinic, Impact Fund, The Katherine and George Alexander Community Law Center, La Raza Centro Legal, Inc., Lawyers' Committee for Civil Rights of the San Francisco Bay Area, The Legal Aid Society of San Francisco - Employment Law Center, and Mexican American Legal Defense and Educational Fund for permission to file an amicus curiae brief in support of Petitioner Robert Gentry is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. |
| Dec 27 2006 | Amicus curiae brief filed Trial Lawyers for Public Justice, Asian Law Caucus, Asian Pacific American Legal Center, et al., in support of Petitioner Robert Gentry. by Laura L. Ho and Joseph E. Jaramillo of Goldstein, Demchak et al. |
| Dec 27 2006 | Permission to file amicus curiae brief granted The application of U-Haul Co. of California for permission to file an amicus curiae brief in support of real party in interest is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief. |
| Dec 27 2006 | Amicus curiae brief filed U-Haul Co. of California ion support of real party in interest. by James R. Evans, Jr. of Fulbright & Jaworski, LLP. |
| Dec 28 2006 | Extension of time granted On joint application of Petitioner Robert Gentry and Real Party in Interest Circuit City Stores, Inc., and good cause appearing, it is ordered that the time to serve and file each party's response to all amicus curiae briefs is extended to and including February 15, 2007. |
| Jan 16 2007 | Amicus curiae brief filed Attorney General in support of petitioner (Gentry) by Michele R. Van Gelderen, Deputy Attorney General - Los Angeles (Received at the Los Angeles Office) |
| Feb 7 2007 | Application to appear as counsel pro hac vice granted Robin S. Conrad's application to appear as counsel pro hac vice on behalf of amicus curiae Chamber of Commerce of the United States of America is granted. |
| Feb 15 2007 | Response to amicus curiae brief filed Real party Circuit City Stores, Inc. consolidated Reply to Amici Curiae |
| Feb 15 2007 | Motion filed (non-AA) to file Consolidated Answer to Briefs of Amici Curiae Pacific Legal Foundation, National Retail Federation, et al., Employers Group, Federated Department Stores, Inc., Ralphs Grocery Company, California Bankers Association, et al., Chamber of Commerce of the United States of America, et al., and U-Haul Company of California |
| Feb 16 2007 | Order filed Petitioner's Motion to File Consolidated Answer to Briefs of Amici Curiae Pacific Legal Foundation, National Retail Federation, et al., Employers Group, Federated Department Stores, Inc. Ralphs Grocery Company, California Bankers Association, et al., Chamber of Commerce of the United States of America, et al., and U-Haul Company of California is hereby GRANTED. |
| Feb 16 2007 | Response to amicus curiae brief filed Petitioner Gentry's Consolidated Answer to Briefs of Amici Curiae by Ellen Lake, Dennis P. Riordan of Riordan & Horgan, and Matthew Righetti John Glugoski of Righetti Law Firm, P.C. |
| Feb 16 2007 | Received: Petitioner's Opposition to Request for Judicial Notice by Federated Department Stores, Inc. |
| Feb 16 2007 | Received: Petitioner's Opposition to Request for Judicial Notice by National Retail Federation, et al. |
| Apr 26 2007 | Change of contact information filed for: Steven Bernard Katz is now with Thelen Reid Brown Raysman & Steiner LLP, counsel for Real Party in Interest Circuit City Stores, Inc." [Mr. Katz was formerly with Jones Day.] |
| May 2 2007 | Case ordered on calendar to be argued on Tuesday, June 5, at 2:00 p.m., in Los Angeles |
| May 9 2007 | Application filed to: reschedule oral argument filed by Ellen Lake, counsel for petitioner Gentry |
| May 15 2007 | Note: Application to reschedule oral argument withdrawn. |
| May 15 2007 | Filed letter from: Ellen Lake, counsel for petitioner Gentry requesting to share 10 minutes of oral argument time with counsel for amici curiae International Brotherhood of Teamsters et al. |
| May 17 2007 | Order filed The request of counsel for petitioner in the above-referenced cause to allow two counsel to argue on behalf of petitioner at oral argument is hereby granted. The request of petitioner to allocate to amici curiae International Brotherhood of Teamsters, et al. 10 minutes of petitioner's 30-minute allotted time for oral argument is granted. |
| May 25 2007 | Received: Letter dated 5-25-2007 from Ellen Lake, counsel for petitioner, re additional authority. |
| May 25 2007 | Received: Letter dated 5-24-2007 from Ellen Lake, counsel for petitioner (Gentry), re additional aurhority. |
| May 31 2007 | Request for judicial notice granted Petitioner Robert Gentry's Motion for Judicial Notice of July 17, 2006 is granted. Real party Circuit City's Request for Judicial Notice of September 18, 2006 is granted. Amici curiae National Retail Federation et al.'s Request for Judicial Notice of December 14, 2006 is granted as to exhibits A, C, F, G, and M, and is denied as to all other exhibits. Amicus curiae Federated Department Stores, Inc.'s Motion for Judicial Notice of December 14, 2006 is denied. Amicus curiae Michael H. Crosby's request for judicial notice of December 14, 2006 is denied. |
| Jun 5 2007 | Cause argued and submitted |
| Jul 11 2007 | Received: Letter dated July 10, 2007, from Rex Darrell Berry, counsel for RPI Circuit City Stores, Inc. |
| Aug 20 2007 | Received: Letter dated 8-17-2007 from Ellen Lake, counsel for petitioner, re copies of a new decision by the U. S. Court of Appeals for the Ninth Circuit. |
| Aug 22 2007 | Received: Letter dated 8-21-2007 from Berry & block LLP, counsel for real party in interest in response to 8-17-2007 letter from counsel for petitioner |
| Aug 28 2007 | Received: Notice of Name Change effective 8-31-2007 for Mayer Brown et al will be Mayer Brown LLP, the office address remains the same. E-mail address will change to mayerbrown.com |
| Aug 29 2007 | Notice of forthcoming opinion posted |
| Aug 30 2007 | Opinion filed: Judgment reversed Court of Appeal judgment is reversed and remanded. Opinion by Moreno, J. -- joined by George, C.J., Kennard, Werdegar, JJ. Dissenting opinion by Baxter, J. -- joined by Chin, Corrigan, JJ. |
| Sep 17 2007 | Rehearing petition filed Circuit City Stores, Inc., real party in interest by Steven B. Katz, Thelen Reid Brown Raysman & Steiner, LLP CRC 8.25(b) |
| Sep 19 2007 | Time extended to consider modification or rehearing to and including November 28, 2007 |
| Sep 26 2007 | Answer to rehearing petition filed Petitioner Robert Gentry et al. by Ellen Lake, Esq. |
| Oct 31 2007 | Rehearing denied Baxter, Chin and Corrigan, JJ., are of the opinion the petition should be granted. |
| Oct 31 2007 | Remittitur issued (civil case) |
| Nov 5 2007 | Received: Acknowledgment of receipt for remittitur |
| Nov 8 2007 | Returned record to Second Appellate District |
| Apr 14 2008 | Received: Letter dated March 31, 2008 from the Supreme Court of the United States, Petition for writ of certiorari denied. |
| Briefs | |
| Jul 10 2006 | Opening brief on the merits filed |
| Sep 18 2006 | Answer brief on the merits filed |
| Nov 14 2006 | Reply brief filed (case fully briefed) |
| Dec 14 2006 | Amicus curiae brief filed |
| Dec 14 2006 | Amicus curiae brief filed |
| Dec 14 2006 | Amicus curiae brief filed |
| Dec 27 2006 | Amicus curiae brief filed |
| Dec 27 2006 | Amicus curiae brief filed |
| Dec 27 2006 | Amicus curiae brief filed |
| Dec 27 2006 | Amicus curiae brief filed |
| Dec 27 2006 | Amicus curiae brief filed |
| Dec 27 2006 | Amicus curiae brief filed |
| Dec 27 2006 | Amicus curiae brief filed |
| Dec 27 2006 | Amicus curiae brief filed |
| Jan 16 2007 | Amicus curiae brief filed |
| Feb 15 2007 | Response to amicus curiae brief filed |
| Feb 16 2007 | Response to amicus curiae brief filed |
