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Court of Appeal Allows Arbitrator to Decide Class Waiver Issue; Excludes Unfair Competition Claims

by D. Gregory Valenza | | August 12, 2019

There are a great deal of court opinions issued about arbitration agreements. Each case is a potential jewel, which must be polished and buffed to reveal the sparkle. Put another way, it is important to draft your arbitration agreement right, or you will be stuck with the one you have.  Every published case provides valuable tools to employment lawyers, or injurious pitfalls. 

Just ask Catalina Restaurant Group.  Their arbitration agreement provided for the following:

“Claims Not Covered by the Agreement.” ****Upon a showing of reasonable cause, either party to this Agreement may petition a court of competent jurisdiction for immediate injunctive and/or equitable relief for unfair competition and/or the use and/or unauthorized disclosure or trade secrets or confidential information.” 

In this case, the trial court refused to order to arbitration claims based on California’s Unfair Competition Law or UCL.  The plaintiffs in the case asserted eight causes of action based on wage-hour theories. The eighth cause of action was under California’s UCL, in essence seeking an injunction and restitution of lost wages from unlawful wage-hour practices. 

Now, I’m pretty sure that Catalina wanted to carve out claims based on confidential information, non-disclosure agreements, trade secrets, and such.  But their agreement said “unfair competition,” AND/OR trade secrets etc.  So, the trial court stayed the UCL cause of action pending arbitration of the other claims. The Court of Appeal agreed that the arbitration agreement excluded UCL claims, such as those wage hour claims that can be asserted under the UCL.  (Claims for penalties, and penalties as “damages,” are not available under the UCL, which permit only restitution of property that the plaintiff wants restored).  

The Court of Appeal also held in this case that the trial court properly ordered the plaintiff’s claims to arbitration, but allowed the arbitrator to decide whether the arbitration agreement contained a class action waiver.  That is because the arbitration agreement permitted the arbitrator to make that decision.  Again, that is a drafting decision.  The Court of Appeal would not entertain the appeal from the trial court’s order, because the employer did not petition for a “writ” rather than taking an appeal.  

And this concludes are most recent installment of “courts will not bail out employers who enforce lawful arbitration agreements.” 

This case is Lacayo v. Catalina Restaurant Group and the opinion is here


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