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Private Attorney General and Class Action Waivers

A recent case alleging Labor Code violations by Ralphs Grocery Co. discusses the current state of the law regarding waivers of the right to pursue class actions and private attorney general claims. The arbitration policy at issue in Brown v. Ralphs Grocery Co., Case No. B222689 (2nd Dist. Ct. App. Jul. 12, 2011) provided for arbitration of all employment-related disputes. It also stated that there was no right for such disputes “to be heard or arbitrated on a class action basis, as a private attorney general, or on bases involving claims or disputes brought in a representative capacity on behalf of the general public, of other Ralphs employees (or any of them), or of other persons alleged to be similarly situated. . . . [T]here are no judge or jury trials and there are no class actions or Representative Actions permitted under this Arbitration Policy.”
The California Supreme Court has frequently refused to enforce arbitration clauses that are invoked to interfere with rights for the benefit of individual citizens. See, e.g.Armendariz v. Foundation Health Psychcare, 24 Cal.4th 83 99 Cal.Rptr.2d 745, 6 P. 3d 669 (2000) (refusing to require arbitration of FEHA claims because arbitration procedure interfered with public interest). Just about as frequently, the United States Supreme Court has overturned such decisions for violating the Federal Arbitration Act. See Southland Corp. v. Keating, 465 U.S. 1 (1984) (California could not bar arbitration of claims under the Franchise Investment Law); Perry v. Thomas, 482 U.S. 483 (1987) (California could not refuse to enforce arbitration of wage disputes); Preston v. Ferrer, 552 U.S. 346 (2008) (California Labor Commissioner’s authority could not supplant that of the arbitrator). Most recently, in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the Court overturned the Discover Bankrule, which had called class action waivers in consumer arbitration agreements into question.
In Brown, the Second District Court of Appeal enforced the class action waiver, but ruled that the attempted private attorney general waiver was invalid. The plaintiff had asserted a claim under the Private Attorney General Act of 2004, which allows actions to recover civil penalties brought by employees on his or her own behalf and on behalf of current or former employees. According to the Court of Appeal, AT&T Mobility did not apply because an employee brings a PAGA action as a proxy for the state.
In dissent, Justice Kriegler opined that AT&T Mobility required the court to uphold the entirety of the arbitration agreement.