Wednesday, August 6, 2014

Death Knell on Class Claims

Sandquist v. Lebo Automotive, No. B244412 (D2d7 July 22, 2014)

In this putative employment class action, the trial court in this case granted defendant’s motion to compel arbitration. In the process of doing so, it also struck plaintiff’s class allegations without prejudice because a class action waiver provision in the employment agreement ostensibly precluded litigation on a classwide basis.  In a later order, the court dismissed the class claims with prejudice. 

The court first holds that, although an order compelling arbitration is generally not appealable, the second order here is. Under the “death knell doctrine,” an order that is tantamount to a dismissal of the claims of the absent class members can be appealed. The trial court’s order striking plaintiffs’ class allegations did not meet that test—claims dismissed without prejudice are not effectively terminated. But the later order did. And even though plaintiff’s notice of appeal cited only the first order, the court construes the notice liberally to find that plaintiff was effectively appealing both orders.

As to the merits, the trial court should not have struck the class allegations. That issue, which required the court to interpret the agreement, should have been reserved for the arbitrator to decide. Although the precedent is split on the issue, the majority rule is that whether class-wide arbitration is barred is a procedural issue that falls within the arbitrator’s purview, as opposed to a more fundamental question of whether the parties actually agreed to arbitrate, which is reserved for the court to decide. The court here follows that rule.


**Note: The Supreme Court granted review on November 12, 2014. Given the similar grant in Network Capital Funding, it would seem that the court will resolve the split referenced above.

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