Sonic-Calabasas A, Inc. v. Moreno
51 Cal. 4th 659
| Cal. | 2011Background
- Moreno filed a wage claim with the Labor Commissioner under Labor Code §98 et seq. seeking unpaid vacation wages following his employment with Sonic-Calabasas A, Inc.
- Sonic's employment agreement required binding arbitration under the FAA and California Arbitration Act and allegedly waived Moreno's right to pursue a Berman hearing, with limited enumerated exceptions.
- The Labor Commissioner intervened; the trial court denied Sonic's petition to compel arbitration as premature pending a Berman hearing; the Court of Appeal upheld the waiver precluding a Berman hearing.
- Preston v. Ferrer held that the FAA preempts state law granting a Labor Commissioner primary jurisdiction over disputes that contracting parties intend to arbitrate; the briefing period overlapped with this decision.
- The California Supreme Court reversed the Court of Appeal, holding that a Berman hearing waiver is contrary to public policy and unconscionable, but held that arbitration may proceed after a Berman hearing, and that the FAA does not preempt the state rule under the facts here; the matter was remanded to reinstate the trial court’s order.
- The judgment was remanded with directions to reinstate the superior court’s order denying arbitration pre-Berman hearing, reinforcing that the Berman hearing protections cannot be waivable as a condition of employment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of Berman hearing violates public policy | Moreno argues Berman waiver is public policy violation | Sonic contends waiver does not undermine statutory rights and is permissible | Yes; waiver is contrary to public policy |
| Berman hearing and arbitration compatibility | Labor Commissioner argues Berman precedes arbitration is compatible | Sonic argues waiver prevents Berman, incompatible with arbitration structure | Yes; Berman and arbitration are compatible when sequenced properly |
| FAA preemption by Preston/Buckeye | Preston preempts state rules that displace arbitration with administrative forum | Preston is distinguishable; state public policy should govern | Not preempted; FAA does not require waivers to be allowed when public policy disfavors them |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. 2000) (public policy limits on arbitration for unwaivable statutory rights; minimum requirements)
- Gentry v. Superior Court, 42 Cal.4th 443 (Cal. 2007) (public policy limits on class arbitration; balance of rights in arbitration)
- Preston v. Ferrer, 552 U.S. 346 (Supreme Court 2008) (FAA preemption of Labor Commissioner primary jurisdiction under TAA)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (Supreme Court 2006) (arbitration clause severability and contract validity under FAA)
- Rodriguez de Quijas v. Shearson/Am. Express, 490 U.S. 477 (Supreme Court 1989) (presumption in favor of arbitration where contract evidence supports arbitration)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (Supreme Court 1991) (predispute arbitration of statutory claims permissible under ADEA framework)
- Discover Bank v. Superior Court, 36 Cal.4th 148 (Cal. 2005) (arbitration enforcement subject to generally applicable contract defenses; public policy limits)