152 F. Supp. 3d 1243
C.D. Cal.2016Background
- Totten, a KBR employee at Molycorp’s Mountain Pass mine, signed KBR’s Dispute Resolution Program (DRP) acknowledgement at hire; DRP required arbitration of employment disputes and included class/representative action waivers.
- DRP expressly bound the company and employees, applied to disputes with third parties (e.g., Molycorp), and referenced AAA/JAMS rules (which Totten says he did not receive).
- Totten sued raising wage-and-hour, wage statement, waiting-time, UCL, and PAGA claims; defendants removed and moved to compel arbitration and dismiss class/representative claims.
- Court applied FAA framework: (1) is there a valid arbitration agreement; (2) does it cover the dispute — and considered California unconscionability doctrine and federal labor-law limits on waivers.
- Court found a valid agreement and compelled arbitration of Totten’s individual claims, but held the class-action waiver unenforceable under federal labor law (NLRB reasoning in D.R. Horton) and the PAGA representative-waiver unenforceable under California law (Iskanian/Sakkab). It severed the illusory modification clause and allowed class/PAGA claims to proceed in court.
Issues
| Issue | Totten's Argument | KBR's Argument | Held |
|---|---|---|---|
| Mutual assent | Totten says he never received the DRP/rules and thus didn’t assent | KBR points to signed acknowledgement stating he received and reviewed the DRP | Court: signature established assent; arbitration agreement exists |
| Unconscionability — procedural | DRP was imposed as condition of employment and Totten wasn’t given arbitration rules | KBR argues standard form employment arbitration is permissible | Court: found procedural unconscionability (take-it-or-leave-it and failure to provide rules) |
| Unconscionability — substantive (modification, fees, discovery, mutuality) | DRP is one-sided: unilateral modification, potential cost burdens, etc. | KBR contends provisions are mutual or consistent with court practice; fees limited to employees | Court: rejected lack-of-mutuality and fee/discovery challenges; found the unilateral modification clause illusory and unconscionable and severed it |
| Class-action waiver (NLRA conflict) | Waiver unlawfully restricts Section 7 concerted/legal activity; Horton I/NLRB supports invalidation | KBR relies on FAA and Supreme Court cases (Concepcion/Italian Colors) and appellate decisions upholding waivers | Court: follows NLRB Horton I reasoning (not Fifth Circuit Horton II); finds waiver violates NLRA and Norris-LaGuardia Act and is unenforceable under FAA §2; denies dismissal of class claims |
| PAGA representative-waiver | Waiver bars representative PAGA claims; Iskanian holds such waivers against public policy and unenforceable | KBR argues FAA preempts Iskanian | Court: follows Ninth Circuit Sakkab — Iskanian is not preempted by FAA; representative-waiver unenforceable; PAGA claims proceed in court |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (Sup. Ct.) (FAA policy favoring arbitration and limits on unconscionability defenses)
- Kilgore v. KeyBank, Nat. Ass’n, 718 F.3d 1052 (9th Cir.) (court’s role: determine existence and scope of arbitration agreement)
- J.I. Case Co. v. NLRB, 321 U.S. 332 (Sup. Ct.) (private contracts conflicting with NLRA functions must yield)
- Nat'l Licorice Co. v. NLRB, 309 U.S. 350 (Sup. Ct.) (contracts that bar employee access to grievance/representative mechanisms unlawful)
- Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348 (Cal. 2014) (PAGA representative-waiver unenforceable as against public policy)
- Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425 (9th Cir.) (Iskanian rule not preempted by the FAA; PAGA waivers may be invalid)