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Gentry v. Superior Court

Supreme Court of California

August 30, 2007, Filed

S141502

Opinion

 [**559]  [***777]   MORENO, J.—In this case we consider whether class arbitration waivers in employment arbitration agreements may be enforced to preclude  [****4] class arbitrations by employees whose statutory rights to overtime pay pursuant to Labor Code sections 500 et seq. and 1194 1 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 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 [*451]  unconscionable or unlawfully  [****5] 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

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42 Cal. 4th 443 *; 165 P.3d 556 **; 64 Cal. Rptr. 3d 773 ***; 2007 Cal. LEXIS 9376 ****; 13 Wage & Hour Cas. 2d (BNA) 722; 154 Lab. Cas. (CCH) P60,475

ROBERT GENTRY, Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; CIRCUIT CITY STORES, INC., Real Party in Interest.

Subsequent History: Time for Granting or Denying Rehearing Extended Gentry v. S.C. (Circuit City Stores), 2007 Cal. LEXIS 10080 (Cal., Sept. 19, 2007)

Rehearing denied by Gentry (Robert) v. S. C. (Circuit City Stores, Inc.), 2007 Cal. LEXIS 12512 (Cal., Oct. 31, 2007)

US Supreme Court certiorari denied by Circuit City Stores, Inc. v. Gentry, 552 U.S. 1296, 128 S. Ct. 1743, 170 L. Ed. 2d 541, 2008 U.S. LEXIS 3000 (2008)

Related proceeding at In re Circuit City Stores, Inc., 2009 Bankr. LEXIS 237 (Bankr. E.D. Va., Jan. 14, 2009)

Prior History:  [****1] Court of Appeal of California, Second Appellate District, Division Five, No. B169805. Superior Court of Los Angeles County, No. BC280631, Thomas L. Willhite, Jr., Judge.

Gentry v. Superior Court, 135 Cal. App. 4th 944, 37 Cal. Rptr. 3d 790, 2006 Cal. App. LEXIS 44 (Cal. App. 2d Dist., 2006)

Disposition: The judgment of the Court of Appeal is reversed and the cause is remanded for proceedings consistent with this opinion.

CORE TERMS

arbitration, employees, class action, arbitration agreement, unconscionable, overtime, rights, terms, waivers, consumer, vindicate, statutory right, procedural unconscionability, opt out, invalid, trial court, cases, unwaivable, circumstances, contracts, damages, overtime wages, public policy, retaliation, provisions, disputes, parties, overtime law, overtime pay, exculpatory

Contracts Law, Defenses, Public Policy Violations, Business & Corporate Compliance, Wage & Hour Laws, Scope & Definitions, Overtime & Work Periods, Labor & Employment Law, Remedies, Private Suits, Pretrial Matters, Alternative Dispute Resolution, Validity of ADR Methods, General Overview, Civil Procedure, Special Proceedings, Class Actions, Prerequisites for Class Action, Commonality, Arbitration, Federal Arbitration Act, Arbitration Agreements, Contracts Law, Contract Conditions & Provisions, Arbitration Clauses, Acceptance, Apparent Acceptance, Silence, Unconscionability