Arbitration and Class Actions - National Labor Relations Act - District Court Enforces Class Action Waiver in Employment Arbitration Agreement

Article excerpt

In AT &T Mobility LLC v. Concepcion, (1) the Supreme Court held that the Federal Arbitration Act (2) (FAA) required the enforcement of class action waivers in consumer arbitration agreements, even though the waivers at issue were deemed unconscionable under state law. (3) Commentators predicted that lower courts would extend Concepcion's reach to the employment context, (4) but confidence in that prediction dampened early last year when the National Lab or Relations Board (NLRB) ruled in D.R. Horton, In c. (5) that the National Lab or Relations Act (6) (NLRA) protects the nonwaivable right of covered employees to bring class actions against their employers. (7) Recently, in Morvant v. P.F. Chang's China Bistro, Inc., (8) the U.S. District Court for the Northern District of California confronted this altered landscape. The court held that the class action waivers at issue were enforceable under the FAA, finding that the NLRA does not constrain the reach of Concepcion. (9) In so doing, the court failed to apply the appropriate standard to the issue of congressional override. In the preemption context, Concepcion remains a bulwark against state law efforts to safe guard class actions. But in the displacement context, Concepcion actually cuts the other way: when federal law provides a substantive right to bring class actions, class action waivers maybe unenforceabl eprecisely because class actions "interfere[] with fundamental attributes of arbitration." (10)

The FAA requires that courts enforce arbitration agreements "in accordance with their terms " (11)--terms that may include class action waivers (12)--unless one of two exceptions applies. First, under the FAA's saving clause a court may decline to enforce an agreement "up on such grounds as exist at law or in equity for the revocation of any contract." (13) These grounds include " generally applicable contract defenses " (14) such as uncon-scionability, but not " defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue." (15) Second, Congress may preclude the application of the FAA through statute if "such an intent '[is] d educible from ... text or legislative history,' or from an inherent conflict between arbitration and the statute's underlying purposes." (16)

Zachary Morvant was employed by P.F. Chang's China Bistro (P.F. Chang's) as a food runner and bartender from 2005 until 2006; Jean Andrews, a food server, was employed from 2008 to 2009. (17) In 2006, P.F. Chang's implemented a Dispute Resolution Policy in which employees agreed in writing to arbitrate all disputes arising out of their employment and waived their right to bring class wide claims. (18) Morvant insisted that he never signed the agreement, and P.F. Chang's was unable to produce a copy bearing his signature, while Andrews signed the agreement o n the day she was hired. (19) Morvant filed suit in state court in 2010, alleging various state la b or law violations. (20) In 2011, Andrews was added as a plaintiff, and the lawsuit was converted to a putative class action and removed to federal district court. (21) P.F. Chang's moved to compel arbitration on an individual basis. (22)

Judge Rogers of the U.S. District Court for the Northern District of California held that Morvant had never consented to the arbitration agreement and thus could not be bound by its terms under the FAA. (23) With respect to Andrews, the parties agreed that she had consented to the agreement and Judge Rogers further concluded that it was enforceable against her. (24) She rejected Andrews's three principal arguments to the contrary, holding that the agreement did not fall within the FAA's saving clause on grounds of unconscionability or on grounds of the "public policy " contract defense, and that no act of Congress overrode the FAA in this c ontext. (25)

First, Judge Rogers concluded that the agreement did not fall within the FAA's saving clause even though the class action waiver was unconscionable under state precedent. …