Muro v. Cornerstone Staffing Solutions, Inc.
229 Cal. Rptr. 3d 498
Cal. Ct. App. 5th2018Background
- Tony Muro, a truck driver for Cornerstone Staffing, signed an employment agreement requiring arbitration and containing a class-action waiver. The policy stated it was governed by the Federal Arbitration Act (FAA).
- Muro worked routes that frequently crossed state lines and sued Cornerstone (as a proposed class) for multiple California wage-and-hour and UCL violations.
- Cornerstone moved to compel individual arbitration under the FAA; Muro argued he was a "transportation worker" exempt from the FAA and thus California law governed.
- The trial court relied on Garrido to hold the FAA inapplicable under 9 U.S.C. §1, applied the California Gentry four-factor test, found the class-waiver unenforceable, and denied the motion to compel arbitration.
- On appeal, the court affirmed: (1) §1 exempts Muro’s contract because he is a transportation worker who crossed state lines; (2) the trial court did not abuse its discretion in finding the Gentry factors satisfied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §1 of the FAA exempt Muro's employment agreement? | Muro: as a truck driver engaged in interstate commerce, §1 exemption applies and the FAA does not govern. | Cornerstone: §1 should apply only when the employer is in the "transportation industry" (Hill), so no exemption here. | The court held §1 applies to transportation workers like Muro regardless of whether the employer's primary business is "transportation." |
| If FAA does not apply, is the class-waiver enforceable under California law? | Muro: under Gentry, the four-factor test shows class arbitration is necessary to vindicate rights; waiver is unenforceable. | Cornerstone: class waiver is enforceable and FAA principles should control; alternatively, Gentry factors not met. | The court held the trial court reasonably found the first three Gentry factors satisfied and denied enforcement of the class-waiver. |
| Was the trial court’s factual finding on the Gentry factors supported? | Muro: submitted evidence on modest recovery, retaliation risk, and lack of notice to other employees. | Cornerstone: challenged sufficiency of that evidence and probative value. | The court found substantial evidence supported the trial court’s factual findings, and no abuse of discretion occurred. |
| Should the FAA preempt application of California’s Gentry framework here? | Muro: FAA inapplicable due to §1 exemption; state law governs analysis. | Cornerstone: FAA governs and requires enforcing the arbitration agreement as written. | The court held FAA does not apply to Muro; therefore California law (Gentry) governs the enforceability of the class-waiver. |
Key Cases Cited
- Garrido v. Air Liquide Industrial, U.S. LP, 241 Cal.App.4th 833 (Cal. Ct. App. 2015) (interpreting §1 exemption to cover transportation workers and applying Gentry when FAA inapplicable)
- Gentry v. Superior Court, 42 Cal.4th 443 (Cal. 2007) (establishing four-factor test for invalidating class-waivers under California law)
- Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (U.S. 2001) (construing §1 of the FAA to exempt contracts of employment of transportation workers)
- Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265 (U.S. 1995) (discussing the FAA’s applicability to contracts "involving commerce")
- Bell v. Farmers Ins. Exchange, 115 Cal.App.4th 715 (Cal. Ct. App. 2004) (discussing what constitutes a "modest" individual recovery for Gentry analysis)