Iskanian v. CLS Transportation Los Angeles, LLC
59 Cal. 4th 348
| Cal. | 2014Background
- Plaintiff Arshavir Iskanian, a former driver for CLS Transportation, signed an employment arbitration agreement that waived class and "representative" actions, then sued for wage-and-hour violations (overtime, meal/rest breaks, wage statements) and sought class certification plus representative PAGA penalties.
- CLS initially moved to compel arbitration; after California Supreme Court decisions (Gentry) undermined enforcement of class waivers, CLS withdrew its motion, litigated, and the trial court certified a class; after the U.S. Supreme Court decided AT&T Mobility v. Concepcion, CLS renewed its motion and the trial court ordered individual arbitration and dismissed class claims.
- The Court of Appeal affirmed; the California Supreme Court granted review to decide (1) whether FAA preempts California’s Gentry rule invalidating class waivers in employment arbitration agreements, (2) whether the NLRA or NLRB precedent invalidates class waivers, (3) whether CLS waived the right to arbitrate by earlier withdrawal, and (4) whether PAGA representative claims can be waived and whether the FAA preempts any state rule prohibiting such waivers.
- The California Supreme Court held Gentry is preempted by the FAA under U.S. Supreme Court precedent (Concepcion and related cases) and that the NLRA does not override the FAA to invalidate class waivers; CLS did not waive its arbitration right.
- The court held, however, that predispute waivers of representative PAGA actions (qui tam–style actions enforcing state labor penalties on behalf of the state) are contrary to California public policy and unenforceable, and that the FAA does not preempt that state rule.
Issues
| Issue | Plaintiff's Argument (Iskanian) | Defendant's Argument (CLS) | Held |
|---|---|---|---|
| Whether FAA preempts Gentry rule invalidating employment class waivers | Gentry survives Concepcion because it is narrower and case‑specific; plaintiffs must show Gentry factors to invalidate a waiver | Concepcion and Supreme Court precedent preempt state rules requiring availability of class procedures in arbitration | FAA preempts Gentry; class‑waiver invalidation rule cannot be maintained under Concepcion |
| Whether NLRA or NLRB doctrine invalidates class waivers | Class/collective litigation is "concerted activity" under §7; NLRB rule (D.R. Horton) forbids mandatory class‑waiver terms | NLRA does not override FAA; Concepcion shows such rules are not arbitration neutral | NLRA does not override FAA here; courts should not give NLRB rule preemptive effect to invalidate class waivers |
| Whether CLS waived right to compel arbitration by withdrawing its earlier petition and litigating | Iskanian: CLS delayed and caused litigation expense and prejudice; waiver should be found | CLS: withdrew after Gentry made arbitration futile; promptly renewed after Concepcion; no prejudice shown | No waiver: delay was reasonable given then‑controlling law and no cognizable prejudice shown |
| Whether predispute waiver of representative PAGA claims is enforceable and whether FAA preempts a state rule forbidding such waivers | Iskanian: PAGA representative claims vindicate public enforcement and cannot be waived in advance | CLS: PAGA claims are for employee plaintiffs and thus fall within FAA; arbitration waiver enforceable | Waiver of representative PAGA claims is against California public policy and unenforceable; FAA does not preempt that rule because PAGA actions are fundamentally public‑enforcement (qui tam) actions |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preempts state rules that effectively require classwide arbitration)
- American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013) (arbitration enforceable even when class waiver makes claim impracticable)
- EEOC v. Waffle House, Inc., 534 U.S. 279 (2002) (government enforcement suits not barred by arbitration agreements the government did not sign)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (statutory claims may be subject to arbitration so long as effective vindication remains)
- D.R. Horton, Inc. v. NLRB (D.R. Horton & Cuda), 357 NLRB No. 184 (N.L.R.B. decision holding class‑waiver in mandatory employment arbitration unlawful) (administrative decision cited in opinion)
- D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013) (refused to enforce portion of NLRB’s decision re: class waivers)
- Gentry v. Superior Court, 42 Cal.4th 443 (2007) (California rule that could invalidate employment class waivers in some circumstances — held preempted)
- Sonic‑Calabasas A, Inc. v. Moreno (Sonic II), 57 Cal.4th 1109 (2013) (state unconscionability analysis about Berman protections discussed in opinion)
- Arias v. Superior Court, 46 Cal.4th 969 (2009) (PAGA actions are representative, qui tam–style suits enforcing public penalties)