Hoover v. American Income Life: Court of Appeal Further Limits the Enforceability of Mandatory Arbitration Clauses

California’s Fourth Appellate District has upheld a trial court’s denial of a defendant’s motion to compel arbitration of the plaintiff’s classwide wage-and-hour claims. The three-judge panel held that the defendant had, in failing to assert its arbitration clause for nearly one year, conducting discovery, and lobbying putative class members so as to reduce the size of the class, waived its right to arbitrate. See Hoover v. Amer. Income Life Ins. Co., ___ Cal. App. 4th ___ (2012), available here. The court further found that, even had the defendant not waived arbitration by first litigating the case, the result would be the same, since the lack of an “interstate” component to the plaintiff’s job rendered the FAA inapplicable. Slip op. at 17-18

Perhaps more significant than the court’s refusal to compel arbitration is its interpretation (or lack thereof) of the U.S. Supreme Court’s AT&T Wireless v. Concepcion decision and its reading of California precedent as to the circumstances in which arbitration cannot be compelled. The decision purports to not expressly interpret Concepcion, stating, “[t]he conclusions we reach here avert any dependence . . . on two recent United States Supreme Court opinions, addressing the issue of class arbitrations for antitrust claims and consumer sales contracts.” Slip op. at 3 n.2.

The two “recent cases” are of course Concepcion and Stolt-Nielsen. Yet contrary to the court’s contention that the Hoover decision does not rely on either, that “‘[Concepcion] does not provide that a public right . . . can be waived if such a waiver is contrary to state law’” is perhaps Hoover’s key legal conclusion, a conclusion that is drawn directly from Brown v. Ralphs, the Court of Appeal’s first case interpreting Concepcion. See Hoover at 3 n.2, quoting Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489, 500 (2011).

Though not initially designated for publication in California’s official reporter, Hoover has now been certified for publication. As such, Hoover vividly underscores the opposing and irreconcilable outcomes as to the scope of Concepcion’s application. Compare Brown v. Ralphs, 197 Cal. App. 4th at 489 (PAGA claims not arbitrable) with Iskanian v. CLS Transp. Los Angeles, LLC, ___ Cal. App. 4th ___ (2012) (rejecting Brown v. Ralphs). As trial court and Court of Appeal decisions continue to fall under either the Brown or Iskanian rubric, speculation is rampant that the California Supreme Court will have no choice but to take up and resolve this aspect of Concepcion’s application.

Moreover, Hoover’s citation to and reliance on Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 303 (2003), for the proposition that a claim for injunctive relief under the Unfair Business Practices Act is not arbitrable (see Hoover at 19), is notable in that in Iskanian, the Second Appellate District had arguably deemed Cruz overruled (see Iskanian slip op. at 16-17). Consequently, Hoover represents further confirmation that the ultimate resolution of Concepcion’s scope will come only with California Supreme Court review.