Friday, April 27, 2012

Second District (Division 3) Declines to Weigh-in on Gentry Issue: Kinecta Alternative Financial Solutions, Inc. v. Superior Court

On April 25, 2012, the Second District (Division 3) issued an opinion concluding that a trial court erred by denying a motion to dismiss class allegations from the plaintiff’s complaint (filed concurrently with a motion to compel arbitration) when the  at issue arbitration provision neither authorized nor prohibited class arbitration.  See Kinecta Alternative Financial Solutions, Inc. v. Superior Court, 2012 Cal. App. LEXIS 487 (2012).  In making this ruling, however, the Court left open the possibility that the Gentry framework continued to survive the U.S. Supreme Court’s ruling in Concepcion [as was concluded by its sister Division in Brown v. Ralphs Grocery Co., 197 Cal.App.4th 489, 498 (2011) previously discussed in posts here and here].  As was explained by the Court, satisfaction of the Gentry factors could potentially render an arbitration agreement unenforceable in the employment context, but such a determination could not be made here because the plaintiffs had not submitted any supporting evidence:
A question exists about whether Gentry survived the overruling of Discover Bank in Concepcion, but it is not one we need to decide. (Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 498 [128 Cal. Rptr. 3d 854].) Gentry decided a different issue from Discover Bank. In contrast to the unconscionability analysis in Discover Bank, the rule in Gentry concerns “the effect of a class action waiver on unwaivable statutory rights regardless of unconscionability.” (Arguelles-Romero v. Superior Court (2010) 184 Cal.App.4th 825, 836 [109 Cal. Rptr. 3d 289] (Arguelles-Romero).) Specifically, Gentry addresses whether a class arbitration “is a significantly more effective practical means of vindicating unwaivable statutory rights[.]” (Arguelles-Romero, at p. 841.) Discover Bank and Gentry established two different tests of whether to enforce a class arbitration waiver, which should be considered separately. (Arguelles-Romero, at pp. 836–837.) Since it has not been expressly abrogated or overruled, Gentry appears to remain the binding law in California. (Brown v. Ralphs Grocery Co., at pp. 498, 505.) 
Even if Gentry has not been overruled, in opposing Kinecta's motion to compel arbitration and to dismiss class claims, Malone had to provide evidence of the four Gentry factors. Plaintiff has the burden of establishing that the arbitration provision (here, limiting arbitration to bilateral arbitration) is invalid by making a factual showing of the four Gentry factors. (Brown v. Ralphs Grocery Co., supra, 197 Cal.App.4th at p. 497.) The record shows that Malone provided no evidence as to any of the four Gentry factors required to support a trial court's determination that the arbitration should proceed as a class action arbitration. Thus there is no evidence, and no substantial evidence, that plaintiff had established a factual basis that would require a declaration that the arbitration agreement was unenforceable. (Ibid.)
Because there are no grounds to declare the arbitration agreement unenforceable and because the arbitration provision contained no agreement to classwide arbitration, Kinecta  argues that Concepcion and Stolt-Nielsen require reversal of the order denying its request to dismiss class claims from Malone's complaint. We agree.
See Kinecta, 2012 Cal. App. LEXIS 487, at 17-20

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