©2023 Seyfarth Shaw LLP www.seyfarth.com 2023 Cal-Peculiarities | 83 5.2.1 The U.S. Supreme Court’s repeated rejections of California hostility to arbitration The U.S. Supreme Court repeatedly had invoked the FAA to strike down California-erected obstacles to arbitration. In 1984, Southland Corp. v. Keating overturned the California Supreme Court and held that franchisees suing under California’s Franchise Investment Law must abide by their contractual agreement to arbitrate.26 In 1987, Perry v. Thomas held that the FAA preempts California Labor Code section 229, which authorizes non-union employees to sue for unpaid wages “without regard to the existence of any private agreement to arbitrate.”27 In 2008, Preston v. Ferrer reversed a California Court of Appeal decision that empowered the Labor Commissioner, instead of an arbitrator, to decide the validity of an arbitration agreement signed by entertainment workers suing under the California Talent Agencies Act.28 In 2011, AT&T Mobility v. Concepcion29 held that the FAA preempts California’s Discover Bank rule, which invalidated class action waivers in arbitration agreements.30 Later in 2011, Sonic-Calabasas A, Inc. v. Moreno vacated a California Supreme Court decision that had found an arbitration agreement contrary to public policy and unconscionable because it required employees to waive their right to a Berman hearing.31 The U.S. Supreme Court directed the California Supreme Court to reconsider its decision in light of AT&T Mobility v. Concepcion.32 In 2015, DirecTV, Inc. v. Imburgia reversed a California Court of Appeal decision that had affirmed a refusal to enforce an arbitration agreement containing a class-action waiver. The Court of Appeal, in interpreting the arbitration agreement, had failed to follow general contract principles and instead had followed a rule of contractual interpretation uniquely hostile to arbitration. This approach failed to give “due regard … to the federal policy favoring arbitration.”33 In 2019, Lamps Plus v. Varela applied the FAA to correct a Ninth Circuit decision involving California law.34 Lamps Plus employees had filed a class action against their employer for compromising their private data. When Lamps Plus moved to enforce the employees’ agreement to arbitrate “all disputes … arising out of … the employment relationship,” the district court ordered arbitration but said the arbitration could include class claims.35 The Ninth Circuit approved class arbitration because “ambiguous” agreement language could be read to authorize class arbitration. The U.S. Supreme Court reversed the Ninth Circuit because ambiguity, like silence, is an insufficient basis to conclude that parties agreed to a class arbitration that would sacrifice the principal advantages of individual arbitration contemplated by the FAA.36 In 2022, Viking River Cruises, Inc. v. Moriana held that PAGA claims can be split into individual and nonindividual components, with the individual component subject to arbitration under the FAA. Prior to Viking River Cruises, California courts consistently held that pre-dispute arbitration agreements do not apply to PAGA claims and rejected so-called “claim splitting.” 5.2.2 Unconscionability doctrine used to invalidate arbitration agreements In the United States generally, employers make arbitration agreements a condition of employment. Such agreements have certain common features: they waive court and jury trial while reserving the employer’s right to seek judicial relief for trade secret violations; they limit discovery; they share the costs of arbitration between the
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