California Supreme Court Grants Review in Reyes v. Liberman

Last month, yet another case was granted review pending the California Supreme Court’s decision in Iskanian v. CLS Transport: Reyes v. Liberman Broadcasting, Inc., 146 Cal. Rptr. 3d 616 (Cal. Ct. App. 2012). In Reyes, the plaintiff worked as a security officer for the defendant. After the plaintiff’s employment ended, he filed both a class action and PAGA representative action alleging wage and hour violations. The trial court denied the defendant’s attempt to compel arbitration, ruling that it had waived any entitlement to arbitration by delaying before bringing a petition to compel arbitration. The California Court of Appeal reversed, however, holding that the defendant had not in fact waived its right to compel arbitration.

Iskanian is shaping up to be a lynchpin post-Concepcion decision on the issue of waiver. In addition to the grant and hold issued in Reyes, the Ninth Circuit is also hearing an appeal in Kilgore v. KeyBank, with the en banc panel contemplating issuing a stay of Kilgore pending a result in Iskanian. The California Supreme Court has the opportunity to use its decision in Iskanian to define the extent to which class actions remain available to enforce wage and hour violations.

In Reyes, the plaintiff contended that the defendant had waived any right to arbitrate through delay, as the defendant did not file its motion to compel arbitration until over a year after the original complaint was filed. Reyes at 620. The defendant, and subsequently the Court of Appeal, embraced a “futility” theory, arguing that prior to the U.S. Supreme Court’s ruling in AT&T Mobility v. Concepcion, the defendant perceived moving to compel arbitration to be futile. “LBI reasonably perceived that it likely would have been futile to seek to compel arbitration in light of Gentry . . . and California authority applying Gentry to invalidate class arbitration waivers.” Reyes at 629. The theory of futility as an excuse for delay is also an issue in Iskanian, and so will likely be addressed by the California Supreme Court.