Class Action Waiver Ruled Unenforceable In A Non-FAA Arbitration

In Garrido v. Air Liquide Industrial U.S. LP, the Court held that a class action waiver was unenforceable in a Non-FAA arbitration. Plaintiff Mario Garrido entered into an agreement with his employer, defendant American Air Liquide, Inc. The agreement provided that all disputes arising out of Garrido’s employment with Air Liquide would be resolved by arbitration, and the agreement prohibited class arbitration. After being terminated, Garrido filed a class action complaint against Air Liquide, alleging various Labor Code violations and unfair business practices. The trial court denied a motion to compel arbitration brought by Air Liquide, finding that the agreement’s class waiver provision was improper under the test laid out in Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry). Following the trial court’s ruling, the California Supreme Court held, in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 364 (Iskanian), that Gentry’s rule against employment class waivers was preempted by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) (FAA). Thus, the Court stated in light of Iskanian, if this matter were governed by the FAA, arbitration (on an individual basis) would likely be required.   However, the Court stated the matter was not subject to the FAA, however, and therefore Gentry’s holding has not been overturned under California law in situations where the FAA does not apply. Therefore, it found that the agreement’s class waiver provision was unenforceable. Neither party asserted that class arbitration was appropriate. As such, it affirmed the trial court’s order denying the motion to compel arbitration.

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