After recently hearing oral argument in Lamps Plus Inc. v. Varela, the United States Supreme Court is set to decide whether the Federal Arbitration Act forecloses a state-law interpretation of an arbitration agreement that would result in permitting class arbitration. Arbitration is a function of contract, and therefore parties may agree to aggregated arbitrations in theory, though many questioned their practicality given the principal aims of arbitration – efficiency, speed, and finality. The question before the Court, however, is whether state-law contract interpretative principles should control when arbitration agreements are silent on the issue of class arbitration.

In the underlying decision, the Ninth Circuit held that, under California law, when an arbitration agreement is silent on the issue of class arbitration, it may be ambiguous, and therefore subject to interpretation against the drafter, i.e., interpreted to permit class arbitration. Lamps Plus, however, argues that federal law demands clearer language before a party can be required to arbitrate on an aggregated basis.

This case follows the heels of Stolt-Nielsen, where the United States Supreme Court held that a party may not be compelled to submit to class arbitration under the Federal Arbitration Act, unless there is a contractual basis for concluding that the party agreed to do so. As a practical matter, the Court’s ruling in Lamps Plus Inc. v. Varela may have limited practical impact because of the ever-growing prevalence of class action waiver clauses in arbitration agreements, the use of which the Court has repeatedly affirmed as legally enforceable.

Seyfarth Synopsis: A somewhat bizarre event – even by this year’s standard of unusual current events – hit the news stream earlier this week, as two “Acting Directors” showed up to work on Monday morning at the U.S. Government’s Consumer Financial Protection Bureau, also known as the CFPB. In today’s vlog, Partner Jerry Maatman of Seyfarth Shaw, LLP gives our readers an explanation of the situation at the CFPB, discusses the agency’s significance for employers, and forecasts potential class action implications based on these developments.


The Consumer Financial Protection Bureau (“CFPB”) has been a controversial government agency since its authorization under the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2011. Formed out of a post-2008 recession by then-Harvard Law Professor and current U.S. Senator Elizabeth Warren, the CFPB is designed – per its legislative history – to “protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law.” As of January 2017, this consumer-friendly agency had secured nearly $12 billion to 29 million consumers.

On Monday, November 27th, both Leandra English and Mick Mulvaney sent out emails to CFPB staff members claiming to be the Acting Director of the agency. This conflict stemmed from Richard Cordray, longtime Director of the CFPB, relinquishing his duties effective November 24 at midnight. Upon his departure, Cordray named English as the Deputy Director, on the assumption that she would assume leadership as Acting Director (and Cordray would block the White House from interfering). However, at the same time, President Trump used his federal appointment power under the Federal Vacancies Reform Act (FVRA) to name Mick Mulvaney as Acting Director. English subsequently filed a lawsuit seeking an injunction against President Trump and Acting Director Mulvaney in the U.S. District Court for the District of Columbia, but Judge Timothy Kelly ruled in favor of Trump and Mulvaney.

This week’s leadership debacle was not the only time the CFPB has been in the news recently. Last month, the U.S. Senate voted to repeal the CFPB’s Arbitration Rule by a narrow 51-50 vote. The existence of this broad rule effectively barred financial institutions from including a class action ban in their arbitration agreements with consumers. Similar to the agency itself, the Arbitration Rule was a strictly partisan issue. The Republican Party claimed that the rule allowed trial lawyers to “line their pockets” off unnecessary customer class actions and hurt American business. On the other side, Democrats argued that the repeal of this rule and ensuing limitations to the CFPB placed too much power in the hands of big business and hurt consumers.

As the vlog outlines, potential class action implications of this controversial agency are yet to be seen. Assuming that Acting Director Mulvaney remains in control at the CFPB, it is safe to say the agency he once called a joke “in a sick, sad way” is headed for a limitation in institutional reach and power. More importantly, though, the upcoming U.S. Supreme Court decisions regarding class action waivers in NLRB v. Murphy Oil USA, Inc. (No. 16-307), Epic Systems Corp. v. Lewis (No. 16-285), and Ernst & Young LLP v. Morris (No. 16-300) will have a profound impact on future class action litigation. One takeaway from this situation that cannot be debated, though, is Jerry’s final thought of the vlog. “We are living in interesting times these days.”

Today the Senate struck down a new Consumer Financial Protection Bureau (“CFPB”) rule which would have prohibited providers of financial products and services from including class action waivers in their arbitration agreements with consumers. The action is a win for the financial services industry.


Way back in March 2015 we blogged about the CFPB’s study of pre-dispute arbitration contracts in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The CFPB’s study culminated in a Report to Congress which found that arbitration clauses were ubiquitous in consumer financial products and services agreements, that consumers were not aware and did not understand them and that such clauses were generally detrimental to consumers. Specifically, the CFPB found that the availability of class actions served to deter companies from engaging in potentially illegal activities, consumers tended to get more relief more often in class actions rather than in individual arbitration proceedings, and there was no evidence that arbitration and class action waiver provisions lowered costs for consumers.

In May 2016, the CFPB proposed a rule that would (1) “prohibit covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action;” and (2) require such providers to submit arbitral records to the CFPB. See Arbitration Agreements, 81 Fed. Reg. 100, 32830 (May 24, 2016) (to be codified at 12 C.F.R pt. 1040). The proposed rule would have covered financial products or services offered or provided for use by consumers primarily for personal, family or household purposes, or they are delivered, offered, or provided in connection with such products or services, such as debt collection. 81 Fed. Reg. 100, 32927.

Congressional Action

In July 2017, the House of Representatives voted 231-190 on a resolution to prevent the CFPB rule from taking effect. On October 24, 2017, the resolution came before the Senate for a vote and passed 51-50. Vice President Pence cast the tie breaking vote. The resolution now goes to President Trump for signature and, based on comments by the White House, he is expected to sign.


The death of the CFPB’s rule returns providers of financial services and products to the status quo. Providers are free to continue to include and enforce arbitration agreements and class action waivers in agreements with consumers. For more information, please reach out to a Seyfarth attorney or see our One Minute Memo.

On Monday, the U.S. Supreme Court issued its highly-anticipated opinion in  DirecTV, Inc. v. Imburgia et al., 577 U.S. ___ (2015), which reaffirmed its ruling in AT&T Mobility LLC v. Concepcion, 56 U.S. 333 (2011), dealing yet another blow to California Courts’ attempts to invalidate class action waivers.


The plaintiffs in Imburgia filed their lawsuit in 2008, arguing that class action arbitration waivers were per se unenforceable in California under Discover Bank v. Super. Ct., 36 Cal. 4th 148, 162-163 (2005).  Under the Discover Bank rule, California courts were free to find such provisions, when contained consumer contracts of adhesion, unconscionable and to rule that they should not be enforced. Id.

The DirecTV service agreement at issue in Imburgia provided for arbitration of customer disputes and included a class action waiver but also stated that “[i]f . . . the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire [arbitration waiver] is unenforceable.”  While the Imburgia case was pending, the Supreme Court issued its decision in Concepcion, which ruled that the Discover Bank rule was preempted by the Federal Arbitration Act (“FAA”).  Despite Concepcion, the California Court of Appeals still found the class action waiver provision in the DirecTV service agreement unenforceable under the theory that the parties had chosen the law of California to govern at the time of drafting and, absent federal preemption, California law would not enforce such provisions.


Justice Breyer delivered the opinion of the Court, which began with this “elementary” lesson:  “The Federal Arbitration Act is the law of the United States, and Concepcion is an authoritative interpretation of that Act.  Consequently, the judges of every State must follow it.”  (Slip Op. at 5). Unsurprisingly, the Supreme Court went on to rule that the California Court’s failure to do so indicated that it was not placing arbitration contracts “on equal footing with other contracts” and had therefore run afoul of the FAA.  (Id. at 10-11).

Justice Ginsburg and Justice Sotomayor dissented, opining that, given the specific language of the service agreement and the fact that it was drafted before Concepcion, the state court was free to interpret the contract as it had, and to find the class action arbitration waiver unenforceable.  (See Ginsburg Dissent at 3).  They also lamented that the Court’s recent decisions in Concepcion and Italian Colors had effectively deprived “consumers’ rights to seek redress for losses” and “insulated powerful economic interests.”  (Id. at 10-11).


Imburgia eliminates any doubt as to the enforceability of class action arbitration waivers.  Retailers and service providers wishing to avoid class action claims are encouraged to include them in their contracts and to be aggressive in enforcing them in litigation, even in the face of arguably ambiguous language.

CFPBOne of the largest issues to loom over the class action battlefield in the past decade has been the use of arbitration clauses in consumer contractual relationships.  As many know, and as discussed in our sister blog, Workplace Class Action Blog, the United States Supreme Court’s seminal 2011 decision in AT&T Mobility v. Concepcion became a guiding light for many businesses on how, and when, to utilize arbitration provisions in their agreements.   More recently, as discussed in a previous post, in 2013, the Court provided further guidance regarding waiver of class arbitration in American Express Co. v. Italian Colors Restaurant.  The debate since has raged between consumer advocacy groups and businesses that requiring consumers to arbitrate favors businesses and artificially limits recovery for consumers.  Silent in that debate, however, has been any empirical data to support the claim– until know.  On March 10, 2015, the CFPB released the final results of its consumer arbitration study.  Not surprisingly, the report is heavily critical of the arbitration process and supportive of allowing consumers to pursue claims in federal court using the Rule 23 class vehicle.

The Study

Section 1028 of the Dodd-Frank Act authorizes the Consumer Financial Protection Bureau (“CFPB”) to regulate or even eliminate arbitration provisions from consumer financial products and services agreements, if it determines such action is “in the public interest and for the protection of consumers.”  To that end, starting in 2012, the CFPB set about compiling data to support this goal.  The 728-page report analyzed nearly 850 consumer finance agreements, 1,800 consumer arbitration disputes, 3,400 individual federal court lawsuits, 42,000 credit card cases filed in small claims court and 420 class action settlements filed in federal courts.   The results, again heavily sloped in favor of meeting the initial objective, include the following findings:

  • Tens of millions of consumers are covered by mandatory arbitration agreements
  • Arbitration clauses were present in 53 percent of credit cards studied, 92 percent of prepaid cards and 86 percent of private student loan lenders
  • Approximately 600 arbitration were filed per year between 2010 and 2012 in six different consumer finance markets
  • There is no evidence that arbitration clauses lead to lower prices for consumers
  • Over 90 percent of the arbitration agreements studied contained class action waivers
  • Class action settlement provide substantially more relief to consumers than arbitration awards
  • Over 75% of consumers surveyed said they were not aware of arbitration clauses in their agreements
  • Less than 7% of consumers surveyed knew that arbitration clauses prevent them from suing


 In his “Chapters from My Autobiography,” Mark Twain wrote “Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: ‘There are three kinds of lies: lies, damned lies, and statistics.'”

While the CFPB’s omnibus study appears to be an extensive work, compiling years of data and thousands of data points, it must be remembered that the genesis of this study was to support the CFPB’s charge of regulating or even eliminating arbitration provisions from consumer financial products and service agreements.  Nonetheless, with this data, it seems inevitable that the next word we can expect to hear from the CFPB will be rulemaking efforts to effectuate this goal.  While it is unclear whether the CFPB intends to severely limit the use of arbitration provisions in consumer financial agreements or propose an outright ban of such provisions, it is certain that the landscape for consumer arbitration agreements and class action waivers will change significantly in the near future.

As always, we will continue to keep you abreast of these events as they unfold.


On June 26, 2013, in Brown v. DirecTV, LLC, et al., Case No. 2:12-cv-08382, Judge Gee, sitting in the Central District of California, granted DirecTV’s motion to compel arbitration, rejecting two efforts by the Plaintiff to keep the matter in federal court: (1) that TCPA claims did not “arise under or relate to” the agreement or service provided; and (2) an exception clause should be read to preclude claims under both the Communications Act of 1934 and a separate portion identified in that section, 47 U.S.C.  605.

Factual Background

Plaintiff ordered his DirecTV satellite service online, requiring him to review and accept the terms and conditions of service.  Id. at * 2.  One of the terms of the contract contained an arbitration provision stating that “You and DIRECTV agree that any dispute arising under or relating to your agreement or service with DIRECTV, which cannot be resolved informally, will be resolved through binding arbitration as fully set forth in the DIRECTV Customer Agreement (a copy is sent with your first bill but may also be viewed at  Arbitration means you waive your right to a jury trial.”    Id. at * 3.  He also signed a form during installation related to the DIRECTV Equipment Lease containing a similar arbitration provision. Id. at *4.  Finally, the Customer Agreement also contained a clause that excluded certain statutory claims, stating: “Notwithstanding the foregoing… any dispute involving a violation of the Communications Act of 1934, 47 U.S.C. 605, the Digital Millennium Copyright Act, 17 U.S.C. 1201, the Electronic Communications Privacy Act, 18 U.S.C. 2510-2521 or any other statement or law governing theft of service, may be decided only a court of competent jurisdiction.”  Id. at * 5.  After failing to make payments on the contract, DirecTV, through a third party, began making collection calls to Brown.  In turn, Brown brought suit under the Telephone Consumer Protection Act (“TCPA”) and the California UCL.

The Court’s Decision

In addition to other typical arguments raised related to arbitration clauses (lack of knowledge, unconscionability), Brown also argued that the TCPA claims should not be covered because they do not arise under or relate to the Agreement or services and/or the matter was excepted, as the clause should be read to exclude claims under both the Communications Act of 1934 and 47 U.S.C. 605.  In rejecting the first argument, the court noted that under Ninth Circuit law, a court should interpret “arising under” narrowly, while interpreting “relating to” more broadly.  The court held that the “relating to” language was narrowly tailored, and further observed that the contract specifically contemplated collection calls as part of the contract.  Id. at * 9-11.  In rejecting the second argument, the court opined that taking Plaintiff’s interpretation would render the exceptions “nonsensical,” as it would read as a highly broad exclusion, followed by an extremely narrow exclusion contained within the previously broad exclusion.  Id. at *11.


As the law continues to evolve related to arbitration clauses in consumer contracts, companies should take time to review the language of their agreements in light of decisions such as Brown.  Specifically, they should review whether their consumer contracts contain appropriate limiting language  and whether any exclusions noted could be read broadly enough, in a sensible way, to exclude TCPA claims.

In American Express Co. v. Italian Colors Restaurant, the Supreme Court held in a 5-3 decision that class waivers in arbitration agreements are enforceable, even if the plaintiff’s cost of arbitrating her federal statutory claim exceeds her potential recovery.


Italian Colors brought a class action against American Express for alleged federal antitrust violations under the Sherman Act.  American Express sought to enforce an agreement to arbitrate all disputes individually, with no “class arbitration.”  The restaurant argued that enforcing the class arbitration waiver would bar the “effective vindication” of its federal statutory rights.  The costs to prove its antitrust claim would require several hundred thousand dollars in expert witness fees, while her maximum recovery totaled less than $40,000.  Essentially, the restaurant argued that it would not be economically feasible for plaintiffs to pursue their claims on an individual basis.

The Second Circuit sided with the merchants and found the class waiver unenforceable, but the Supreme Court reversed.


In an opinion authored by Justice Scalia, the Supreme Court ruled that the arbitration agreement must be enforced according to its terms under the Federal Arbitration Act absent a “contrary congressional command.”  Scalia wrote, “the antitrust laws do not evince an intent to preclude a class action waiver.”  The Court continued and said that although effective vindication concerns arise where there is a provision in an arbitration agreement “forbidding the assertion of certain statutory rights,” and “would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable . . . . the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.”

In other words, a class waiver in an arbitration agreement cannot be found unenforceable under the Federal Arbitration Act merely because it would be too expensive for a party to prove her claims on an individual basis.  Absent exorbitantly expensive filing and administrative fees, this decision should foreclose the use of the “effective vindication” or “economic feasibility” argument that plaintiffs’ lawyers have used to circumvent the Supreme Court’s seminal class-waiver decision, AT&T Mobility LLC v. Concepcion.  Indeed, the Italian Colors majority found that its decision in Concepcion, “all but resolves this case” because the Court there “specifically rejected the argument that class arbitration was necessary to prosecute claims that might otherwise slip through the legal system.”

In her dissent, Justice Kagan (joined by Justices Ginsberg and Breyer) criticized the majority for an unwarranted attack on class actions and undue deference toward individual arbitration as an alternative.  As she put it, “To a hammer, everything looks like a nail.  And to a Court bent on diminishing the usefulness of Rule 23, everything looks like a class action, ready to be dismantled.”  Justice Sotomayor took no part in the consideration of the case because she was on a Second Circuit panel that heard the case.


Italian Colors sends the clear message that an arbitration agreement should be enforced according to its terms, even when it is not economically feasible for a plaintiff to pursue her claims through individual arbitration.  Although the decision arose in the antitrust context, it has a direct impact on all consumer class actions, and should allow companies to compel individual arbitration – and avoid class arbitration – if the agreement at issue clearly prohibits class procedures.

On June 10, 2013, the Supreme Court issued an arbitration decision underscoring the importance of including express class waivers in arbitration agreements.  In a unanimous decision, the Supreme Court upheld an arbitrator’s ruling that an arguably ambiguous arbitration provision permitted class arbitration.  Oxford Health Plans, LLC v. Sutter, No. 12-135, 2013 WL 2459522, 569 U.S. ___ (2013). 

Factual Background

In Oxford Health, a doctor sued health insurance company Oxford Health Plans (“Oxford”) on behalf of himself and a proposed class of other similarly situated medical providers over a payment dispute.  The trial court sent the matter to arbitration and, importantly, the parties agreed that the arbitrator should decide whether their contract authorized class arbitration. Id. at *2.  The arbitration provision broadly provided that “[n]o civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration in New Jersey, pursuant to the rules of the American Arbitration Association with one arbitrator.”  The arbitrator interpreted this provision to permit class arbitration.  Id. at *2. 

Oxford moved to vacate the arbitrator’s decision on the ground that, contrary to the Supreme Court’s holding in Stolt-Nielson S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 130 S. Ct. 1758, 176 L.Ed.2d 605 (2010), the arbitrator exceeded his authority under § 10(a)(4) of the Federal Arbitration Act by imposing class arbitration where no sufficient contractual basis existed.  Oxford Health, at *3.  The district court denied Oxford’s motion and the Third Circuit affirmed.  Id.

The Supreme Court Decision

The Supreme Court unanimously affirmed, holding that the arbitrator did not act outside the scope of his powers.  Id.  Justice Kagan, writing for the Court, distinguished Stolt-Nielson, where the contract lacked any contractual basis for ordering class arbitration and the parties stipulated that they had never reached an agreement on class arbitration.  Id. at *5.  Here, on the other hand, the arbitrator exercised his delegated authority and interpreted the language of the contract to permit class arbitration.  Id.

Significantly, because Oxford agreed that the arbitrator should determine whether the contract authorized class procedures, the issue of whether the arbitrator made a mistake in interpreting the agreement was not before the Court, and the “arbitrator’s construction holds, however good, bad, or ugly.”  Id. at *6.  The Court noted that that it would face a different issue if Oxford had argued that the availability of class arbitration was a question of arbitrability, in which case the Court could review the arbitrator’s determination de novo.  Id. at *4 n.2.

What Oxford Health Means

The take away is simple–if you don’t want class arbitration, make sure the contract says so.  Companies can proactively avoid the troubles in Oxford Health by including express class waivers with their arbitration agreements.  Furthermore, if there is any question as to whether an arbitration agreement permits class relief, the company should refuse to agree to allow an arbitrator to decide the issue in order to allow a court to decide the issue or be willing to accept an arbitrator’s interpretation.

Notwithstanding the U.S. Supreme Court’s 2011 decision in AT&T Mobility v. Concepcion, California courts continue to muddle through whether a court can mandate classwide arbitration, particularly in the context of arbitration agreements between employer and employee.  Truly Nolen of America v. Superior Court, decided this week by California’s Fourth District Court of Appeal, may at first blush appear to be just one more contradictory opinion on this issue.  However, while the Truly Nolen court declined to follow the broad precedential scope of Concepcion, it gave the California Supreme Court a clear road map for overturning Gentry v. Superior Court.  At the same time, the court raised the evidentiary bar for employees seeking classwide arbitration.

Case Background

Alvaro Miranda and Danny Luna filed a wage and hour class action against their former employer, Truly Nolen, a nationwide provider of pest control services.  Truly Nolen moved to compel individual arbitration of the plaintiffs’ claims on the grounds that both Miranda and Luna had signed agreements to arbitrate their employment-related claims.

The one-page arbitration agreement provided four mandatory dispute resolution steps: (1) discussions with employee’s immediate manager; (2) HR involvement; (3) mediation; and (4) binding arbitration.  The agreement granted the arbitrator wide latitude to award any remedy, including all remedies that would be available if the matter were heard in court.  The agreement forbade Truly Nolen from retaliating against employees for reporting to a governmental agency or requesting arbitration.  Truly Nolen agreed to bear all administrative costs of the arbitration, including arbitrator fees.  Finally, the agreement stated that if an employee opted not to have legal counsel at the arbitration hearing, then Truly Nolen would forgo legal representation as well.  The agreement was silent as to whether class arbitrations were permissible.

The trial court granted Truly Nolen’s motion to compel arbitration.  But, relying on Gentry (holding that class-action waivers in arbitration agreements should not be enforced if certain factors indicate that class arbitration would be more effective than individual arbitration), the trial court refused to order that the arbitration proceed on an individual, rather than class, basis.  Truly Nolen filed a petition for a writ of mandate on the issue of classwide arbitration.

The Court of Appeal’s Holding

The Court of Appeal vacated the trial court’s denial of Truly Nolen’s motion to order individual arbitration and ordered the trial court to consider whether the parties had a mutual intent to permit classwide arbitration.

The Court of Appeal comprehensively reviewed state and federal laws affecting arbitration agreements in California.  The Court of Appeal discussed the split among the California courts regarding whether Gentryremains viable after Concepcion, which expressly overruled the California “Discover Bank Rule” that class-action waivers in arbitration agreements are unenforceable in some contexts.  The Court of Appeal sided with the majority of courts which recognize that Concepcion implicitly overruled Gentry, in that Discover Bank and Gentry rely on the same discredited rationale.  Under Concepcion, courts must not disregard the clear terms of the parties’ arbitration agreement.  But the Court of Appeal nonetheless held that it was obliged to follow Gentry because Concepcion did not expressly repudiate Gentry and the California Supreme Court has not yet held that Gentry is no longer good law.

The Court of Appeal then applied Gentry, concluding that the plaintiffs had failed to produce enough evidence to satisfy Gentry’s four-factor test.  Gentry permits the trial court to order class arbitration only if it would be a more effective means of vindicating employee rights in light of four factors: (1) modest potential recovery amount, (2) potential for retaliation, (3) extent to which absent class members are informed of their rights, and (4) “real world obstacles” to individual arbitration.  The plaintiffs here, rather than presenting evidence regarding their individual circumstances, simply submitted attorney declarations that generally discussed how similar cases satisfied the Gentry factors.  Indeed, the protective provisions of the arbitration agreement – the prohibition against retaliation, Truly Nolen’s assumption of arbitration costs, and the aggrieved employee’s option to exclude lawyers from the hearing – negated the concerns reflected in the Gentry factors.  The Court of Appeal held if Gentry continues to survive, it requires a “specific, individualized and precise” factual analysis, and that the plaintiffs had failed to show the Gentry factors were satisfied.

The Court of Appeal then addressed the trial court’s failure to determine whether the parties had implicitly agreed to class arbitration despite the agreement’s silence on the issue.  The Court of Appeal held that the trial court must address this issue before applying Gentry, in a case where the arbitration agreement is silent as to class-action waiver.  The Court of Appeal reasoned that Gentry would apply only if the parties did not agree to contract for class arbitration because if there is agreement to arbitrate on a classwide basis, then the court need not look to Gentry to effectuate the same result.

In remanding this issue, the Court of Appeal provided explicit instructions.  Applying the principles set forth by the U.S. Supreme Court in Stolt-Nielsen v. AnimalFeeds International Corp., the Court of Appeal held that if the trial court found mutual agreement to classwide arbitration, then the trial court should deny Truly Nolen’s motion to preclude class arbitration and refer the matter to arbitration, where the arbitrator will decide whether to certify the class.  But, if there is no mutual agreement to classwide arbitration, then the trial court should order the matter to arbitration on an individual basis.

What Truly Nolen Means

Until the California Supreme Court or the U.S. Supreme Court expressly resolves the continuing validity ofGentry, expect to see Truly Nolen frequently cited.  The case presents both sides of the argument as to whether and how Gentry applies in a post-Concepcion world.  The Court of Appeal’s discussion, in dicta, as to why Concepcion should overturn Gentry provides a well-articulated roadmap for a future Supreme Court opinion on the issue.

Truly Nolen also clarifies the evidentiary hurdle that employees face in seeking classwide relief under Gentry.  Mere generalities will no longer suffice; now plaintiffs invoking Gentry must present evidence that specifically addresses the circumstances of their case.  Moreover, Truly Nolen teaches that an effective defense to a Gentry argument includes provisions within the arbitration agreement itself that take Gentry concerns into account.