In Massie v. Ralphs Grocery Company, another Second District Court of Appeal panel has declared invalid an arbitration agreement that purports to forbid employees from bringing class actions or representative suits. The opinion is unpublished, but the discussion in the opinion should be of interest to parties arguing this issue while we await the Supreme Court's decision in Gentry.
The arbitration agreement Ralphs uses provides, among other things, that
unless controlling legal authority requires otherwise, there will be no right or authority for any dispute to be heard or arbitrated on a class action basis, as a private attorney general, or on bases involving disputes brought in a representative capacity on behalf of the general public, of other Ralphs employees (or any of them), or of other persons similarly situated. The individual claim of any Employee bound by this Policy is subject to this Policy. Any action brought against Ralphs (or any of them) by any other person (whether an Employee bound by this Policy or not) in a representative capacity on behalf of or for the benefit of any Employee bound by this Policy will be designated as a ‘Representative Action.’ To the fullest extent permitted by law, any individual claim by an Employee for a remedy pursuant to or under the authority of a Representative Action is subject to this Policy. Thus, even though some of the Federal Rules of Civil Procedure apply as set forth above, there shall be no judge or jury trials, and there shall be no class actions or Representative Actions permitted, unless controlling legal authority requires otherwise.
¶ The Store Member must not challenge, or have challenged, the legality, validity, or enforceability of this Bonus Plan or any predecessor or successor plan(s) on behalf of the Store Member himself or herself, in any type of representative capacity on behalf of any other current or former employees of the Company, or as a participant in any type of representative action making any such challenge(s). . . .
The terms were set forth in the complany's 2003 bonus plan. The following year, Ralphs got even bolder, adding this to its 2004 Bonus Plan, in which the company violated Labor Code § 206.5 by forcing employees to forego their bonus unless they waived wage claims brought in other representative and class actions:
Acceptance of any payment under this Bonus Plan by any participant constitutes a waiver, release, relinquishment and discharge of any and all claims the participant has, had or may have against Ralphs Grocery Company (and/or its predecessor, successor, parent, subsidiary and/or affiliated entities) arising out of or related to any and all previous bonus plans (and the payments made thereunder) and/or any actual or claimed misclassification as a salaried employee rather than as an hourly employee, as previously, now or hereafter made or asserted by such participant, regardless of whether such claims were or are made or asserted by or for such participant individually, collectively, putatively, on a representative basis, or otherwise, including without limitation in connection with the following litigation: Eddy Korkiat Prachasaisoradej vs. Ralphs Grocery Company, Los Angeles County Superior Court Case No. BC254143 (commenced July 13, 2001), California Court of Appeal (Second Appellate District) Case No. B165498 (commenced March 3, 2003); David Swanson vs. Ralphs Grocery Company, Los Angeles County Superior Court Case No. BC284875 (commenced November 7, 2002), California Court of Appeal (Second Appellate District) Case No. B168257 (commenced June 30, 2003); and James Massie, Eddie Korkiat Prachasaisoradej, Teresa Lee, Jose Mendez and Jaime Rosales vs. Ralphs Grocery Company, Los Angeles County Superior Court Case No. BC321144 (commenced September 7, 2004).
The court found that the opportunity to opt out of the bonus plan was not an opportunity to opt out of the arbitration agreement, and that this was still a "take it or leave it" imposition. The court noted that:
"Without even addressing the brief (apparently 14-day) window of time in which the employees were required to exercise the “opportunity to opt out,” the obstacles presented to communicating the exercise of this purported option (given the vague reference to the registered agent for service of process without contact or other information) and other such issues, the point is the employees were merely given the opportunity to “opt out” of the Bonus Plan (after working for almost the entirety of the fiscal year on which it was based); as to the arbitration provision, the employees were still forced to “take it or leave it,” with no meaningful opportunity to negotiate the arbitration provision or class action waiver. As such, the purported “opt out” opportunity is effectively illusory. (Cf. Circuit City Stores, Inc. v. Mantor (9th Cir. 2003) 335 F.3d 1101, 1107 [in light of “Circuit City’s insistence that Mantor sign the arbitration agreement under pain of forfeiting his future with the company the fact that in 1995 Mantor was presented with an opt-out form does not save the agreement from being oppressive, for Mantor had no meaningful choice nor any legitimate opportunity, to negotiate or reject the terms of the arbitration agreement”].)"
The court found no basis for distinguishing the reasoning of Discover Bank in the employment setting, as in the consumer credit context, in that the contract is adhesive, and the “manifest onesidedness” of the class action waiver is “blindingly obvious,” since Ralphs would have no reason to use the class action device in disputes with its employees.
While the advantages to [Ralphs] are obvious, such a practice [prohibiting class or representative actions under these circumstances] contradicts the California Legislature’s stated policy of discouraging unfair and unlawful business practices, and of creating a mechanism for a representative to seek relief on behalf of the general public as a private attorney general. (See, e.g., Bus. & Prof. Code § 17200 et seq.) It provides the [employee] with no benefit whatsoever; to the contrary, it seriously jeopardizes [employees’] rights by prohibiting any effective means of litigating [Ralphs’] business practices. This is not only substantively unconscionable, it violates public policy by granting [Ralphs] a ‘get out of jail free’ card while compromising important consumer [and employee] rights.” (See also Civ. Code § 1668.)
There is a pending request to publish this opinion. If the names of the parties sound familiar, you may want to note that this Massie is different from the Massie whose suit against Ralphs led to the 2004 appellate opinion in Ralphs Grocery Co. v. Massie (2004) 116 Cal.App.4th 1031, regarding arbitration agreements and DLSE claims, that was subsequently ordered depublished.