?Takeaway: This decision provided further support for the option of adopting an arbitration program in California to help manage the risk of wage-and-hour class litigation.
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A recent decision by a California federal district court provided California employers with more reasons to consider adopting arbitration agreements with class-action waivers.
On May 30, the U.S. District Court for the Eastern District of California granted a motion to deny class certification in a case where the vast majority of the putative class signed arbitration agreements with class waivers, but the only named plaintiff had not signed an agreement.
Under Federal Rule of Civil Procedure 23(a), a plaintiff seeking to certify a class must establish the four core requirements of class representation: numerosity, commonality, typicality and adequacy of representation.
For typicality, the plaintiff must prove that her own claims are similar enough to those of other putative members that she can be considered typical of the class. The test for typicality, as the court recognized, is whether other members of the putative class have the same or similar injury, whether the action is based on conduct that is not unique to the named plaintiff, and whether other class members have been injured by the same course of conduct.
Similarly, the named plaintiff must fairly and adequately protect the interests of the putative class. According to the court, in making this determination of typicality, courts must consider two questions:
1. Do the named plaintiff and her counsel have any conflicts of interest with other class members?
2. Will the named plaintiff and her counsel prosecute the action vigorously on behalf of the class?
The court recognized the 9th U.S. Circuit Court of Appeals’ authority that putative class members who have signed arbitration agreements with class-action waivers would have potential defenses that the named plaintiff would be unable to argue on her own behalf, and thus the named plaintiff would lack typicality.
In this case, over 97 percent of the putative class members signed arbitration agreements with the employer, which included waivers of the right to file or participate in class actions. The plaintiff was one of a small fraction of the putative class who had not signed such an agreement. The employer filed a motion to deny class certification, arguing that the plaintiff’s claims cannot be considered typical of the putative class precisely because of the arbitration agreements.
The district court agreed, holding that the plaintiff could not certify a class of employees who had signed arbitration agreements with class waivers because she cannot establish the required element of typicality. As such, the definition of the putative class had to be narrowed to exclude putative class members who signed arbitration agreements.
The named plaintiff further argued that the motion should be denied as to the putative class members who signed arbitration agreements after the class action was filed. The court denied that argument, as well, explaining that precisely because the named plaintiff did not sign the arbitration agreement, she lacked standing to challenge the applicability and enforceability of other arbitration agreements that were signed by employees, either before or after the class action was filed.
The court’s ruling provides some relief for many employers that have adopted arbitration programs with the widespread support of their employees but are subject to a putative class-action lawsuit filed by one employee who declined the arbitration agreement for themselves.
Cornejo v. Big Lots Stores Inc., E.D. Cal., No. 2:22-cv-01247 (May 30, 2023).
Michael J. Nader and Kyle A. Wende are attorneys with Ogletree Deakins in Sacramento, Calif.