4 minute read | August.21.2012
In its landmark Concepcion and Stolt-Nielsen decisions, the U.S. Supreme Court made clear that courts must enforce private agreements to arbitrate according to their terms, even if doing so results in the enforcement of a class action waiver provision or otherwise compels a plaintiff to arbitrate her claims on an individual basis. Perhaps the biggest issue facing California employers since Concepcion and Stolt-Nielsen has been whether Gentry v. Superior Court – in which the California Supreme Court articulated a four-factor test for invalidating class arbitration waivers – remains viable. Thus far, California and federal courts addressing Gentry in light of Concepcion have done so in one of two diametrically-opposed ways: by upholding Gentry’s rationale and applying it, or by declaring its end.
California’s Fourth District Court of Appeal, however, recently took a very unique approach to the Gentry question in Truly Nolen of America v. Superior Court, No. D060519 (Cal. App. Aug. 13, 2012). Indeed, while the court in Truly Nolen found that the reasoning in Gentry is likely invalid in light of Concepcion, it nonetheless found that Gentry is still good law until the California Supreme Court says otherwise. Further, the court in Truly Nolen clarified the application of Gentry’s four-factor test in a way that could make it much more difficult for employees to rely on Gentry as a way to compel the class-wide arbitration of their claims.
Truly Nolen involved a putative class action in which Plaintiffs claimed that Truly Nolen, a nationwide provider of pest control services, had violated various California wage-and-hour laws. Truly Nolen moved to compel the arbitration of Plaintiffs’ claims under its employment arbitration agreement, arguing that while the agreement did not contain a class action waiver provision, its “silence” on the question of class arbitration required the individual arbitration of Plaintiffs’ claims under Stolt-Nielsen. In opposing the motion, Plaintiffs argued that under the Itest, class-wide arbitration was required because (1) the potential individual recovery was small; (2) a potential for retaliation existed that would chill employees from exercising their rights absent arbitration; (3) absent class members would be unlikely to bring their own claims due to their lack of knowledge about their rights; and (4) other real world obstacles existed that would prevent the vindication of class members’ rights. Truly Nolen in turn argued that Gentry is no longer valid law after Concepcion, and that the evidence submitted by Plaintiffs to support their showing under Gentry – a grand total of two declarations from their attorneys – was insufficient to satisfy the Gentry factors. The trial court ruled in favor of the Plaintiffs, affirming Gentry’s viability and ordering the class-wide arbitration of Plaintiffs’ claims.
On appeal, the Fourth District initially found that while Gentry’s continuing validity is in doubt, it remains the prevailing precedent in California. The court noted that Gentry followed the same “discredited” reasoning of ignoring and refusing to enforce the clear terms of arbitration agreements on the basis of judicial policy judgments. And while it agreed that “Concepcion implicitly disapproved the reasoning of the Gentry court,” it found that Concepcion did not directly address the precise issue in Gentry; therefore, the court noted, it could not disregard Gentry without specific guidance from the California Supreme Court.
Having acknowledged Gentry’s continuing but questionable validity, the court next assessed whether Plaintiffs had satisfied Gentry’s four-part test. The court found that plaintiffs’ two attorney declarations were plainly insufficient in this regard, as they provided merely general facts and were devoid of specific information regarding the plaintiffs, the putative class, the facts as they related to their claims, or relevant employment conditions. In short, the declarations were generic statements, while Gentry requires a showing of evidence that is “specific, individualized, and precise” to the case. On this basis, the court vacated the trial court’s order.
The significance of the court’s ruling cannot be overstated. By finding that the four Gentry factors could no longer be satisfied without a “specific, individualized, and precise” showing, the Truly Nolen court clarified that (1) the Gentry factors have historically been applied far too leniently; and (2) in order for Gentry to survive Concepcion, they must be applied in a much more exacting way. Indeed, without requiring such a showing, Gentry would too closely resemble the very type of general rule prohibiting class action waivers that Concepcion invalidated. But if Gentry were interpreted to require plaintiffs to make a detailed showing that individual arbitration – in their particular circumstances – would prevent them from vindicating their rights, then perhaps Gentry could survive Concepcion.
In most respects, Truly Nolen is a helpful development for California employers. Notwithstanding its begrudging acknowledgment that Gentry is still good law under principles of stare decisis, the court made clear that Gentry will likely one day be invalidated. In the meantime, Truly Nolen has made the Gentry standards much more rigorous, and has, as a result, made it less likely that Plaintiffs can successfully invoke Gentry as a basis for avoiding the individual arbitration of their claims.