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Arbitrator, Not Court, Decides Whether Arbitration Agreement Applies to Class Claims, California Court Rules

  • July 31, 2014

Whether the parties to an arbitration agreement agreed to class arbitration is a question for the arbitrator, not the trial court, the California Court of Appeal has ruled, reversing an order dismissing class claims alleging violations of California’s Fair Employment and Housing Act and Unfair Competition Act. Sandquist v. Lebo Automotive, Inc., No. B244412 (Cal. Ct. App. July 22, 2014). 

Background

Timothy Sandquist, an African-American, worked for Lebo Automotive, Inc., from September 2000 until his resignation in 2011. Upon hire, Sandquist signed an “Acknowledgment and Agreement” that provided for arbitration of employment disputes. It stated that any “claim, dispute or controversy” related to his employment would be submitted to and determined “exclusively by binding arbitration.” The agreement also stated that arbitration would be “governed by the Federal Arbitration Act (‘FAA’) in conformity with the procedures of the California Arbitration Act.” 

In 2012, Sandquist filed individual and class action claims against the employer for alleged race and national origin discrimination, harassment, and constructive discharge. The employer asked the trial court to compel arbitration. The trial court granted the motion and found the agreement was not unconscionable. 

The trial court also struck the class claims. Sandquist appealed, arguing that the trial court erred in striking the class allegations because the arbitrator should have decided whether the arbitration agreement applied to class claims.

Applicable Law

“Class arbitration is a matter of consent: [a]n arbitrator may employ class procedures only if the parties have authorized them.” Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2066 (2013). Where an arbitration agreement is silent on the issue of class claims, a plurality of the U.S. Supreme Court concluded that, where an arbitration agreement applies to “all disputes, claims, or controversies arising from or relating to this contract or the relationships which result from this contract,” the arbitrator decides whether the arbitration agreement allows or precludes class arbitration. Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 451-52 (2003). 

Arbitrator Decides

Sandquist argued the trial court erred in deciding the arbitration agreement did not apply to class claims. The appellate court agreed. It found the U.S. Supreme Court’s plurality opinion in Bazzle was persuasive on this issue. The Court noted the issue of whether Sandquist could pursue class claims in arbitration involved the procedural mechanisms available, not whether the agreement applied to the claims in the first instance. 

Accordingly, the Court reversed the dismissal of the class claims, holding “the question whether the parties agreed to class arbitration was for the arbitrator rather than the court to decide, and that the trial court erred by deciding that issue in this case.” 

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This case illustrates the desirability of an arbitration agreement that addresses all foreseeable issues. To avoid uncertainty, employers should consider specifying whether the arbitration agreement applies to class claims. If not, the agreement should include an express class action waiver.

For additional information regarding this case or arbitration agreements, please contact the Jackson Lewis attorney with whom you regularly work.

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