Sandquist v. Lebo Automotive, Inc., 1 Cal. 5th 233

Background

Timothy Sandquist, an employee of Lebo Automotive, signed three employer-drafted arbitration agreements as a condition of employment; he later sued alleging race discrimination and sought class relief.
Lebo moved to compel individual arbitration; the trial court compelled arbitration and struck class allegations, concluding the court must decide availability of class arbitration and that the agreements did not permit it.
The Court of Appeal reversed as to the class dismissal, holding the question whether the agreements permit class arbitration is for the arbitrator in the first instance.
The California Supreme Court granted review to decide whether the parties or a court should decide availability of class arbitration and whether federal law (FAA) imposes a presumption favoring court resolution.
The Court analyzed the arbitration clauses under California contract law (applying state law as the default for contract interpretation) and federal FAA presumptions about who decides arbitrability.
Holding: under state contract principles (construe ambiguities against the drafter and favor arbitration) and federal precedents, the agreements here allocate the question of class arbitration availability to the arbitrator; the Court of Appeal was affirmed and remand ordered for arbitrator consideration.

Issues

Issue	Plaintiff's Argument (Sandquist)	Defendant's Argument (Lebo)	Held
Who decides whether an arbitration agreement permits class arbitration?	The parties’ agreements delegate that question to the arbitrator.	Courts should presumptively decide class availability absent explicit delegation; FAA supports a pro-court presumption.	Who decides is determined by the parties’ agreement interpreted under state contract law; here the agreements allocate the issue to the arbitrator.
What choice of law governs interpretation of who decides arbitrability?	State contract law (California) should apply to resolve what the parties agreed.	FAA/federal law should control the allocation question.	Ordinary state-law contract principles govern initial inquiry into what the parties agreed; FAA presumptions are considered after applying state law.
Does the FAA create a presumption that courts (not arbitrators) must decide class availability?	No; FAA distinguishes gateway arbitrability questions (courts) from procedural matters (arbitrators); class-availability is presumptively for arbitrators absent clear evidence otherwise.	Yes; Supreme Court cases and policy concerns indicate class availability is a gateway question for courts.	The FAA does not impose a universal anti-arbitrator presumption; class-availability often falls with procedural/contract-interpretation matters for arbitrators; doubts resolved in favor of arbitration.
Was the trial court’s adjudication of class availability harmless error?	Sandquist: trial court’s taking the issue was reversible because the arbitrator should decide; remand required.	Lebo: even if the court erred procedurally, its substantive ruling against class arbitration should be upheld as harmless.	Error was not harmless; remand is required so the arbitrator can decide the question the parties agreed to have decided.

Key Cases Cited

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (contracting parties decide who decides arbitrability unless clear evidence otherwise)
Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (plurality) (interpreting delegation of class-availability question to arbitrator under contract language)
Stolt-Nielsen S. A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (class arbitration changes arbitration’s nature; parties must consent to class procedures)
Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (discusses who decides class-availability and treats certain aspects as for arbitrators when parties so agree)
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (procedural questions arising from dispute presumptively for arbitrator)
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (class arbitration undermines arbitration’s informality; FAA preempts state rules that forbid enforcement of class-waiving arbitration provisions)
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (challenges to entire contract’s enforceability are for arbitrator if attack is not to the arbitration clause itself)
Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (fraud-in-the-inducement challenges to the contract as a whole are for arbitrator)
City of Los Angeles v. Superior Court, 56 Cal.4th 1086 (recognizes courts typically determine arbitrator jurisdiction absent clear delegation)