September 12, 2013

Washington Supreme Court affirms it doesn’t like arbitration clauses

By Anastasia P. Boden Attorney

Today the Washington Supreme Court issued an opinion in Hill v. Garda, which, unsurprisingly, demonstrated the lasting contempt among courts for arbitration agreements.  In Hill, a group of Garda employees brought a lawsuit against Garda for purported wage and hour violations.  Garda asked the district court to compel arbitration pursuant to an arbitration provision in the employees’ employment contract.  The provision did not specify whether class arbitration was permitted, but nevertheless the district court determined that the case should move forward in the form of class arbitration.  The appellate court, relying on Stolt-Nielsen v. AnimalFeeds International Corp., held that, absent any evidence the parties consented to class arbitration, only individual arbitration was permitted.  The plaintiffs appealed to the state Supreme Court.

In our amicus brief, we argued that requiring class arbitration without the clear consent of the parties jeopardizes the due process rights of absent class members.  While class-action litigation is governed by rules designed to protect the rights of absent class members, arbitration does not afford class members the same protections.  Arbitration is designed to provide speedily resolution of disputes.  Accordingly, the procedural protections necessary to safeguard the rights of absent class members—such as notice of all class members, rigorous class certification, and judicial oversight—are at odds with convenient aspects of arbitration, including the presumption of confidentiality, efficiency, and avoidance of the courts.  Because electing class arbitration entails waiving these protections, we argued that class arbitration can only be imposed when the parties expressly agree to it.  Silence will not suffice.

The Court issued a very narrow holding, invalidating the arbitration provision entirely on the grounds that it was unconscionable.  Thus, the Court never reached the class-adjudication issue.  The Court took issue with the contracts’ reduced limitations period, limits on back pay damages, and cost-sharing provision.  Garda argued that the state’s unconscionability doctrine was governed by U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion.  But the Washington Supreme Court took a narrow reading of Concepcion and deemed it inapplicable.  The Court remanded the case to be litigated accordingly.

Arbitration is a speedy and efficient dispute resolution mechanism.  Yet courts continue to show contempt for them.  We will stay tuned to see if Garda plans to petition for cert.

 

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