Articles from March 2012

The Ninth Circuit has interpreted the U.S. Supreme Court’s decision in Concepcion as recognizing the “continued vitality” of the procedural unconscionability doctrine.  Coneff v. AT&T Corp., No. 2:06-cv-00944, 3151 (9th Cir. Mar. 16, 2012) (citing Concepcion v. AT&T Mobility, 131 S. Ct. 1740, 1747 (2011)) (available here).  The panel remanded Coneff to the district court for an evaluation of the procedural unconscionability of the at-issue arbitration clause and class action waiver.  Id. at 3151-3153.

The opinion, authored by Judge Susan P. Graber, held that Concepcion precludes a finding of substantive unconscionability, but leaves open the possibility of a finding of procedural unconscionability.  Id. at 3146-3151.  Accordingly, on remand, the district court was instructed to apply the State of Washington’s choice of law rules and determine whether the arbitration clause and class action waiver are procedurally unconscionable.  Id. at 1351-53.

Together with its recent decision in Kilgore v. KeyBank, No. 3:08-cv-02958 (9th Cir. Mar. 7, 2012), the Ninth Circuit has unmistakably confirmed that Concepcion has not nullified the unconscionability analysis.

The Ninth Circuit recently held that the analysis of an arbitration clause’s enforceability is to be governed by established unconscionability doctrines, which are not preempted by the U.S. Supreme Court’s decision in Concepcion v. AT&T Mobility.  See Kilgore v. KeyBank, No. 3:08-cv-02958 (9th Cir. Mar. 7, 2012) (available here).

In a clear and direct statement, the panel held that

Concepcion did not overthrow the common law contract defense of unconscionability whenever an arbitration clause is involved.  Rather, the Court reaffirmed that the savings clause preserves generally applicable contract defenses such as unconscionability, so long as those doctrines are not “applied in a fashion that disfavors arbitration.”

Slip op. at 2654 (citing Concepcion v. AT&T Mobility, 131 S. Ct. 1740, 1747 (2011)).

In a recent ruling, U.S. District Court Judge John G. Koeltl granted conditional certification per FLSA Section 216(b) of a nationwide class of “personal bankers” who alleged that Citibank failed to pay them overtime.  See Winfield v. Citibank, No. 10 Civ. 7304, 2012 U.S. Dist. LEXIS 16449 (S.D. N.Y. Jan. 27, 2012) (available here).

The Winfield decision augments the growing body of law rejecting the application of Dukes v. Wal-Mart to motions for conditional certification under the FLSA.  Whereas Dukes was decided under Rule 23, which requires the predominance of common questions of law or fact, FLSA Section 216(b) requires only that all employees be “similarly situated.”  In Dukes, the Supreme Court took issue with the allegations of a single employee who sought to represent a nationwide class of employees against whom Wal-Mart had allegedly discriminated, holding that a plaintiff must establish that her class claims can be proven by reference to a common policy.  By contrast, in Winfield, the plaintiffs offered testimony that regional management resisted paying overtime wages, while also enforcing sales quotas that resulted in overtime hours.  This established that the plaintiffs were subject to a “common policy or plan that violated the law” for the purposes of 216(b).  Winfield v. Citibank, 2012 U.S. Dist. LEXIS 16449 at *19-22.

In opposing conditional certification, Citibank argued that “the plaintiffs are not similarly situated to one another and to other potential opt-in plaintiffs because their testimony reveals inconsistencies regarding the plaintiffs’ motives for working overtime; how much overtime, if any, they were paid; and what job duties they performed, among other purported discrepancies.”  Id. at *16-17.  However, Judge Koeltl found that Citibank was effectively posing the wrong question, as “the relevant ‘issue . . . is not whether Plaintiffs and [potential opt-in plaintiffs] were identical in all respects, but rather whether they were subjected to a common policy to deprive them of overtime pay when they worked more than 40 hours per week.’”  Id. at *16 (citing Raniere v. Citigroup, No. 11 Civ. 2448, 2011 U.S. Dist. LEXIS 135393, at *16 (S.D.N.Y. Nov. 22, 2011)).

The decision concludes that the plaintiffs met “their minimal burden of showing that they are similarly situated to one another and to potential opt-in plaintiffs.”  Id. at *17.

A Missouri district court judge has added to the increasing body of law holding that the U.S. Supreme Court’s Concepcion decision does not require the enforcement of arbitration clauses and class action waivers in all circumstances.  In Owen v. Bristol Care, the defendant moved to compel arbitration of a Fair Labor Standards Act (FLSA) action in which the plaintiff alleged that her employer had systematically misclassified her and other employees as exempt from overtime pay.  See Owen v. Bristol Care, No. 11-04258 (W.D. Mo. Feb. 28, 2012) (available here).  However, the court ruled that “in the employment context, Concepcion . . . is not controlling.”  Slip op. at 8.

The defendant’s motion to compel arbitration was based on the plaintiff having signed a standardized employment contract, which included a mandatory arbitration agreement and class action waiver.  Slip op. at 1-2.  Guided by Missouri’s “illusory contract” analysis, which is similar to California’s unconscionability doctrine, the Owen plaintiff argued that the arbitration clause should not be enforced because the employment agreement allowed the defendant to unilaterally modify or revoke the contract; the contract’s terms were one-sided, owing to the parties’ unequal bargaining power; and the arbitration provisions covered suits brought by employees but not claims typically brought by employers.  Slip op. at 2-3.

Judge Fernando J. Gaitan, Jr. of Missouri’s Western District agreed with the plaintiff, finding that the arbitration provision effectively prohibited the plaintiff from vindicating her federal statutory right to bring a collective action pursuant to the FLSA.  Slip op. at 3.  In finding Concepcion inapplicable to employment actions, Judge Gaitan distinguished the defendant’s citation to CompuCredit Corp v. Greenwood because “[t]he arbitration waiver in CompuCredit involved a consumer contract and not an employment contract.”  Slip op. at 8, n.3 (citing CompuCredit Corp v. Greenwood, 132 S.Ct. 665 (2012)).  The court concluded that “[i]n the employment context, waivers of class arbitration are not permissible.”  Id. (citing D.R. Horton, 357 NLRB No. 184, 2012 NLRB LEXIS 11 (Jan. 3, 2012) and Chen-Oster v. Goldman, Sachs & Co., No. 10-CV-06950, 2011 U.S. Dist. LEXIS 73200 (S.D.N.Y. Jul. 7, 2011)).

Judge Gaitan’s reliance on the D.R. Horton decision follows a recent ruling by Judge Kimba Wood, who also applied D.R. Horton outside the strict confines of the National Labor Relations Act.  See Sutherland v. Ernst & Young LLP, 2012 U.S. Dist. LEXIS 5024 at *23, n.5 (S.D.N.Y. Jan. 13, 2012) (“an arbitration agreement imposed upon individual employees as a condition of employment cannot be held to prohibit employees from pursuing an employment-related class, collective, or joint action in a Federal or State court.”) (quoting D.R. Horton, 2012 NLRB LEXIS 11 at *25).