LuxotticaConcepcion in question

Last week, the Ninth Circuit found a way around the U.S. Supreme Court’s ruling in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011). The panel held, 2-1, that a qui tam-like claim differs enough from a state-law class action claim to take it beyond Concepcion‘s preemptive reach.

The ruling means, in the Ninth Circuit, that Concepcion will not allow defendants to use arbitration clauses to defeat claims that private plaintiffs bring on behalf of the state and that defendants may therefore face individual cases, in court or arbitration, that put far more than the individuals’ claims at stake.

Labor Code violations

The case arose from the employment of  Shukri Sakkab by LensCrafters, a Luxottica company that sells glasses and other eyewear. Sakkab brought suit against Luxottica under the California Labor Code for treating him and other workers as “supervisors” and thus denying him and them overtime pay and meal and rest breaks. Sakkab relied in part on the California Private Attorney General Act of 2004, which allows individuals to pursue claims for civil penalties under the Labor Code on behalf of the Golden State.

Arbitration clause bars class and any other representative actions

Luxottica moved to compel individual arbitration of Sakkab’s claim under a clause in its Retail Associates Guide. The district court obliged, holding that under the terms of the arbitration clause Sakkab waived any right to pursue a PAGA claim in arbitration. The court rejected Sakkab’s argument that California law bars waiver of PAGA rights, holding the Concepcion bars the bar of Iskanian v. CLS Transp. Los Angeles, LLC, 327 P.3d 129 (Cal. 2014).

A 2-1 reversal

The Ninth Circuit reversed. The majority disagreed with the district court on Concepcion‘s scope. It observed:

Because representative PAGA claims do not require any special procedures, prohibiting waiver of such claims does not diminish parties’ freedom to select the arbitration procedures that best suit their needs. Nothing prevents parties from agreeing to use informal procedures to arbitrate representative PAGA claims. This is a critically important distinction between the Iskanian rule and the rule at issue in Concepcion.

Sakkab v. Luxottica Retail N. Am., Inc., No. 13-55184, slip op. at 22 (9th Cir. Sept. 28, 2015).

The dissent disagreed about the rationale of Concepcion and therefore its effect on the “Iskanian rule”. Enforcing the rule against Luxottica, the dissenter urged, would make arbitration slower and more complex and would raise the stakes beyond what Luxottica intended.

Uncertainty ensues

Sakkab raises uncertainty around the enforceability in the Ninth Circuit of class action waivers under Concepcion. The majority’s main distinction — between quasi-qui tam claims that focus on the defendant’s violations of law and class action claims that aim to compensate non-party class members — strikes me as plausible but unlikely to satisfy a majority on the Court that issued Concepcion.

The case may not get that far. The Ninth Circuit granted Luxottica an extension to file a motion for rehearing en banc until November 11. An en banc panel of the court of appeals thus may reexamine the issues while weighing the odds of review — and reversal — by the Supreme Court.

The Supreme Court also has before it a case that involves a similar issue — DIRECTV v. Imburgia (hat tip to my friends at SCOTUSBLOG). Yes, Imburgia also originated in California.

In the meantime, plaintiffs should cite Sakkab where appropriate as authority for refusing to enforce bans on PAGA and similar qui tam-like claims. Defendants should note their objections, including those that the Sakkab dissent identified.