Clear and Unmistakeable Intent Gives Arbitrator Decision of Arbitrability of Class Claims

In Universal Protection Service, LP v. Superior Court (2015 Cal. App. LEXIS 189), employer Universal sought a writ of mandate challenging the superior court’s order granting employee Franco’s demand for arbitration and ruling that the arbitrator decides the arbitrability of class action claims. In 2008, Franco signed an arbitration agreement pursuant to her employment with Universal.  The agreement provided arbitration of “any and all disputes or claims” related to the employment and that it be conducted “in accordance with the National Rules for the Resolution of Employment disputes set forth by the American Arbitration Association.”  In 2014, Franco filed a class action suit against Universal for various Labor Code and wage orders violations.  Universal sought declaratory judgment regarding the decision-maker for arbitrability of class claims and on the grounds that the agreement required arbitration on an individual basis only.  The trial court agreed with Franco that reference to the AAA rules placed the question of class arbitrability in the hands of the arbitrator and granted Franco's petition to compel arbitration.

The Court of Appeals held that the order compelling arbitration based on Garcia v. DIRECTV, Inc (115 Cal.App.4th 297) was an error.  The court in Garcia cited to Green Tree Financial Corp. v. Bazzle, where the Supreme Court held (in a nonbinding, plurality decision) that the arbitrator must decide whether an agreement prohibits or permits class arbitrations.   Although improperly based on Garcia, the trial court was nevertheless correct.

The Court stated that in deciding whether parties’ agreed to arbitrate certain claims, ordinary state-law principles governing contract formation should be applied, subject to the qualification that courts should not assume an agreement to arbitrate without clear and unmistakable evidence of the parties’ intent.  Here the parties referred to the AAA rules in the arbitration agreement, including specifically, AAA rules for class action arbitration.  In addition to the reference to the specific rules, the AAA Employment Rules include the Supplementary Rules for Class Arbitrations.  These rules place the question of arbitrability in the hands of the arbitrator.  The Court also held the decision to be consistent with general contract law principles.

The Court denied Universal’s petition.