U.S. High Court Grants Petition, Remands Class Waiver Suit

U.S. High Court Grants Petition, Remands Class Waiver Suit

 WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court this morning granted a petition for a writ of certiorari in a lawsuit over the validity of class action waivers in employment arbitration agreements and remanded the case to the Second District California Court of Appeal for further consideration in light of its ruling in American Express Co. v. Italian Colors Restaurant, 2013 U.S. LEXIS 4700 (2013) [an enhanced version of this opinion is available to lexis.com subscribers]  (CarMax Auto Superstores California, LLC, et al. v. John Wade Fowler, et al., No. 13-439, U.S. Sup.).

Employment Agreement

John Fowler and Wahid Areso applied for employment with CarMax Auto Superstores California LLC and CarMax Auto Superstores West Coast Inc.  As a condition of their applications, both men were required to sign the CarMax dispute resolution agreement, which provided that any claims arising out of employment with CarMax be “settle[d] . . . exclusively by final and binding arbitration before a neutral Arbitrator” and that any arbitration “will be conducted in accordance with the CarMax Dispute Resolution Rules and Procedures.”  Fowler signed the agreement on Aug. 5, 2006, and Areso signed it on May 17, 2006.

The arbitration agreement allowed each party up to 20 interrogatories or document requests and allowed each party to take up to three depositions.  The arbitrator had the discretion to permit additional discovery under certain circumstances.  The arbitration agreement also prohibited class arbitration.

Wage Claims

In April 2008, Fowler, who was employed by CarMax as a sales consultant, filed a putative class action in the Los Angeles County Superior Court on behalf of himself and other nonexempt CarMax employees.  He alleged that CarMax failed to provide meal and rest periods, comply with wage statement requirements and timely pay wages due at termination and violated California’s unfair competition law.

Areso’s wife, Leena, who also was employed at CarMax as a sales consultant, filed a wage class complaint against her employer.  In July 2008, she amended her complaint and added Areso as a named plaintiff.  The amended complaint alleged failure to provide meal breaks and violations of the unfair competition law.  It also included a claim for civil penalties pursuant to the Private Attorneys General Act of 2004 (PAGA).  Areso filed a notice of related cases, and his and Fowler’s were assigned to the same judge.

Discovery ensued,  and in January 2009, CarMax filed two motions for summary adjudication:  one as to Leena and Wahid Areso’s claim of failure to pay overtime and another as to Fowler’s claim of failure to provide itemized wage statements.  The court granted both motions on June 16, 2009.  That day, pursuant to a stipulation by the parties, the trial court stayed the cases pending a California Supreme Court decision in Brinker Restaurant Corp. v. Superior Court.  In the meantime, Leena Areso appealed the summary adjudication of her overtime claim and dismissed her other claims.  The Second District Court of Appeal affirmed, leaving Fowler’s and Wahid Areso’s failure to provide meal periods claim, Fowler’s rest periods claim and derivative claims.

Arbitration Requested

On June 2, 2011, while the stay was still in effect, counsel for CarMax sent a letter to plaintiffs’ counsel requesting that the plaintiffs submit their cases to arbitration and dismiss their class claims in light of the U.S. Supreme Court’s decision in AT&T Mobility, LLC v. Concepcion ([2011] 563 U.S. __ [179 L.ED.2d 742, 131 S.Ct. 1740]). 

The plaintiffs’ counsel refused, responding that CarMax had taken steps inconsistent with the intent to invoke arbitration and had waived its right to compel arbitration.  The plaintiffs also argued that the agreement was substantively and procedurally unconscionable and therefore unenforceable.

On June 17, 2011, CarMax moved to vacate the stay and compel arbitration on an individual basis.  The trial court granted the motion on Nov. 9, 2011.  The plaintiffs appealed.

On March 26, 2013, the Second District Court of Appeal panel reversed and remanded for a determination as to whether the factors in Gentry v. Superior Court ([2007] 42 Cal.4th 443) existed so as to allow Fowler to proceed in court with a class action.

Employer’s Petition

CarMax petitioned the U.S. Supreme Court on Oct. 8.

Michael K. Kellogg of Kellogg, Huber, Hansen, Todd, Evans & Figel in Washington represents CarMax.  Eric B. Kingsley of Encino, Calif., represents Fowler Areso. 

John P. Boggs of Fine, Boggs & Perkins in Long Beach, Calif., filed an amicus curiae brief on behalf of California New Car Dealers Association.  Rae T. Vann of Norris, Tysse, Lampley & Lakis of Washington filed an amicus brief on behalf of the Equal Employment Advisory Council, U.S. Chamber of Commerce and the Retail Litigation Center Inc.

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