Posted On: January 19, 2006 by Michael J. Hassen Email This Post

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California Class Action Defense Cases--Gentry v. Superior Court: Class Action Waiver In Employment Contract's Arbitration Provision Held Enforceable

California Court Upholds Arbitration Clause With Class Action Waiver In Employment Agreement

On January 19, 2006, the California Court of Appeal for the Second District, Division 5, addressed “the enforceability of a pre-employment arbitration agreement containing a class action waiver.” Gentry v. Superior Court, 135 Cal.App.4th 944, 37 Cal.Rptr.3d 790, 791 (Cal.App. 2006). In 1995, while employed by Circuit City, Gentry received an “Associate Issue Resolution Package” and a copy of the company’s “Dispute Resolution Rules and Procedures” setting forth various procedures for resolving employment-related disputes. The documents contained an arbitration agreement that included a class action waiver provision. The company provided each employee with 30 days to opt out of the arbitration agreement, but Gentry did not elect to do so. 37 Cal.Rptr.3d at 791-92.

In 2002, Gentry filed a putative class action against Circuit City in California state court alleging that Circuit City misclassified employees in order to avoid paying overtime. Id., at 791. Circuit City moved to compel arbitration. The trial court compelled arbitration with the class action waiver, and stayed the superior court action. The appellate court stated:

The issue in this case is a narrow one: whether the class action waiver in the Circuit City arbitration agreement is an unconscionable provision that renders the provision unenforceable. We conclude the provision is neither procedurally nor substantively unconscionable. Id., at 792.

Gentry recognized that the California Supreme Court “has found pre-employment arbitration agreements is to be adhesive where the agreement is made a condition of employment.” Id., at 793 (citations omitted). This case was different, however, because “Signing the arbitration agreement was not made a condition of Gentry’s employment; he was given 30 days to decide whether or not to opt out of the agreement, and chose not to do so.” Id. The Court also rejected Gentry’s claim that Circuit City “attempted to ‘sucker unsophisticated employees into opting out’ by touting the advantages of arbitration”; the court found that Circuit City had fairly presented both the advantages and disadvantages of arbitration. Id., at 794.

Finally, the court observed that Circuit City would not preclude litigation by means of the class action waiver: “Gentry has alleged statutory violations that could result in substantial damages and penalties should he prevail on his individual claims.” Id., at 795-96. For all of these reasons, the appellate court believed that Discover Bank v. Superior Court, 36 Cal.4th 148 (Cal. 2005), which invalidated a class action waiver provision in a consumer contract of adhesion involving a credit card company, “does not render the class action waiver in this case unenforceable.” Id., at 791.

The opinion is well worth reading. If the case remains viable, Gentry will prove extremely useful in preventing employment law class actions. Defense attorneys and in-house counsel are well advised to keep track of the status of Gentry.

Download PDF file of Gentry v. Superior Court

Posted On: January 5, 2006 by Michael J. Hassen Email This Post

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Contact California Class Action Defense Lawyer Michael Hassen

Michael J. Hassen
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Posted On: January 1, 2006 by Michael J. Hassen Email This Post

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Class Action Defense Attorney Michael Hassen - - San Francisco, Los Angeles & Orange County, California

Michael J. Hassen is a partner at Jeffer, Mangels, Butler & Mitchell LLP. For 20 years, the focus of his practice has emphasized business litigation, primarily on behalf of corporate clients, in areas such as class actions, unfair competition/unfair business practices (under section 17200 and common law), theft of trade secrets, raiding of corporate employees, interference with prospective economic advantage, libel and more.

Mr. Hassen has defended corporations successfully against numerous class actions, and often consults on class actions pending outside California. He has substantial experience representing lenders in all facets of lender litigation, ranging from class actions and unfair business practices based on alleged "predatory" lending, RESPA violations, TILA violations and Fair Debt Collection Practices Act violations, to claims alleging elder abuse or challenging the validity or priority of liens.

A few of the many class actions Mr. Hassen has defended include:

  • Alleged unauthorized use of employee names on political flyers;
  • Alleged labor law violations, including failure to pay overtime wages, failure to promptly pay and properly calculate termination wages, failure to reimburse business expenses, etc.;
  • Alleged Fair Debt Collection Practices Act violations;
  • Alleged predatory lending practices;
  • Alleged RESPA and TILA violations;
  • Alleged failure to timely reconvey deeds of trust;
  • Alleged improper calculation of prepayment penalties;
  • Alleged improper charges associated with termination of club memberships;
  • Alleged false advertising to secure club memberships;
  • Alleged imposition of improper escrow charges.

Mr. Hassen also co-chairs the appellate department of Jeffer, Mangels, Butler & Mitchell LLP. Mr. Hassen is admitted to practice before the United States Supreme Court, and his experience in appellate matters includes shouldering primary responsibility for preparing almost 100 appellate briefs. Mr. Hassen's expertise in handling appeals arises from his experience serving as a law clerk at the California Supreme Court and the Circuit Court of Appeals for the District of Columbia.