Nelsen v. Legacy Partners Residential, Inc.
207 Cal. App. 4th 1115
| Cal. Ct. App. | 2012Background
- Nelsen, former LPI property manager in California, brought a putative class wage-and-hour action under California Labor Code and UCL against LPI.
- Nelsen signed a 43-page Team Member Handbook containing an arbitration clause stating claims would be submitted to binding arbitration under the FAA and California Arbitration Act, with two-step arbitration including a potential second-arbitrator review.
- LPI moved to compel individual arbitration based on the agreement; Nelsen opposed, arguing unconscionability, public policy against class arbitration, and wage-hour protections.
- Trial court granted the motion to compel arbitration and stayed the action; Nelsen appealed, listing Franco as basis for immediate appeal.
- Court treated the appeal as a writ petition to review the arbitration order, and held the arbitration clause was not unconscionable and did not violate public policy on class arbitration.
- Court concluded the agreement governs only disputes between Nelsen and LPI, not class claims involving other employees, thus precluding class arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the order compelling arbitration appealable or subject to mandamus? | Nelsen argues appeal under Franco death-knell theory. | LPI contends no direct appeal; typical rule is review on final judgment. | Treat as petition for writ of mandate; review granted on arbitration order. |
| Is the arbitration clause procedurally or substantively unconscionable? | Arbitration was procedurally and substantively unconscionable and overbroad. | Clause is enforceable under Armendariz and Little; not unconscionable. | Not unconscionable; agency is enforceable. |
| Does the arbitration clause permit class arbitration, or is it limited to two-party disputes? | Arbitration clause impliedly allows class arbitration to vindicate wage-hour rights. | Clause is limited to disputes between Nelsen and Legacy Partners; no class arbitration intended. | Clause precludes class arbitration; no contractual basis for implied class arbitration. |
| Does public policy (Gentry/Concepcion) require class arbitration despite the agreement? | Gentry requires class arbitration to protect unwaivable rights. | Concepcion preempts Gentry; no FAA override; absence of express class waiver forecloses implied waiver. | Gentry not controlling; Concepcion preempts to the extent applicable; no public policy requiring class arbitration here. |
| Is injunctive relief under UCL nonarbitrable under Broughton-Cruz given Concepcion/ Kilgore? | Broughton-Cruz prevents arbitration of injunctive relief claims. | Broughton-Cruz survives Concepcion; the injunctive claim may be nonarbitrable. | Injunctive relief claim must be arbitrated; Broughton-Cruz not preserved post-Concepcion and Kilgore. |
Key Cases Cited
- Franco v. Athens Disposal Co., Inc., 171 Cal.App.4th 1277 (Cal. Ct. App. 2009) (death knell doctrine for immediate appeal from arbitration order)
- Kinecta Alternative Financial Solutions, Inc. v. Superior Court, 205 Cal.App.4th 506 (Cal. Ct. App. 2012) (arbitration scope and two-party language negate class arbitration)
- Stolt-Nielsen S. A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (Supreme Court 2010) (silence on class arbitration cannot prove consent; need contractual basis)
- Concepcion v. Comcast Corp., 563 U.S. 333 (Supreme Court 2011) (FAA preempts state-law rules forcing class arbitration; governs enforceability)
- Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (Cal. 2000) (framework for unconscionability in arbitration agreements)
- Little v. Auto Stiegler, Inc., 29 Cal.4th 1064 (Cal. 2003) (one provision of arbitration rendered substantively unconscionable; severed, remainder enforceable)
- Broughton v. Cigna Healthplans, 21 Cal.4th 1066 (Cal. 1999) (injunctive relief generally nonarbitrable under CLRA/related claims)
- Cruz v. PacifiCare Health Systems, Inc., 30 Cal.4th 303 (Cal. 2003) (extends Broughton to UCL injunctive relief where relief is to prevent public harm)
- Gentry v. Superior Court, 42 Cal.4th 443 (Cal. 2007) (public policy concerns with class-action waivers in wage/hour cases)
- Horton v. NLRB, 357 NLRB No. 184 (NLRB 2012) (board held class-action waivers violate NLRA, but not controlling in FAA contexts)
- Discover Bank v. Superior Court, 36 Cal.4th 148 (Cal. 2005) (California rule allowing class arbitration despite waivers struck down by Concepcion)