Another California case has compelled the arbitration of a wage and hour claim in the wake of the United States Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). While the outcome is of note, the case has several other interesting features as well, among them the question of why a law firm partner would want to bring such claims against his own firm. In Degraff v. Perkins Coie LLP., Case No. 3-12-cv-02256 (N.D. Cal. July 30, 2012), a partner with the Perkins Coie law firm sought to bring California wage and hour claims he contended arose as a result of payroll deduction practices. He also sought to bring the claims on a class action basis.
Such a case itself is fraught with nettlesome issues on the merits. As a partner, the plaintiff was more than arguably not an employee and, if anything, would make a poor class representative on that basis. Further, a partner at a major law firm makes a less than sympathetic plaintiff, particularly when claiming doctrines such as unconscionability. Moreover, it appears that the case arose out of his complaints about business expense reimbursements, something even the court found to constitute a questionable wage claim. Further, if the issue arose on a class-wide basis, then it applied to all partners and thus would also dilute their partnership profits across the board or, in other words, might result in no net benefit to the proposed class.
In any case, the firm’s partnership agreement contained an arbitration provision and the firm moved to compel arbitration. The plaintiff had no argument that the arbitration provision wouldn’t apply to his claims, so he relied on a series of arguments relating to unconscionability. These arguments might have carried greater sway before Concepcion, but the district court dealt with them without difficulty. Pre-Concepcion, California state courts and the Ninth Circuit used a two-step analysis to determine unconscionability that included an examination of “procedural” unconscionability and substantive unconscionability. Both terms are misnomers and reflect those courts’ general dislike for arbitration provisions generally. Procedural unconscionability comes down to whether the employee or party is able to negotiate meaningfully to reject an arbitration term. Substantive unconscionability refers to whether the agreement contains terms the court doesn’t like including, before Concepcion, a class action waiver. A plaintiff must show both procedural and substantive unconscionability to avoid arbitration.
The court first found no need for heightened review under California law as the plaintiff’s claims did not raise sufficiently important public policies. Interestingly, although the plaintiff was a lawyer, the court found some support for the argument for procedural unconscionability as he would not have been permitted to become a partner without agreeing to arbitration. The court also found, however, that his showing in that regard was relatively weak and that the agreement was not substantively unconscionable. It rejected the plaintiff’s arguments that the agreement was unconscionable because it: (a) contained a forum selection clause; (b) provided for an arbitrator at a large law firm; (c) had a choice of law provision (the state of the law firm’s home office, Washington state); (d) provided that the parties would split the arbitrator’s fee; (e) provided for the payment of attorney’s fees of the prevailing party by the loser; and (f) did not provide for a written arbitrator’s decision. While the court did find that the contract’s confidentiality provision was unconscionable, it severed it from the contract and found that the remainder was enforceable. It therefore ordered arbitration and dismissed the case.
The bottom line: California courts are enforcing arbitration provisions in class action cases that would have been readily struck down only a year ago.