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July 26, 2011 5:08 PM

Judge Compels Arbitration in Secretary's Suit Against O'Melveny

Posted by Nate Raymond

From The Am Law Litigation Daily

After the U.S. Supreme Court ruled in April in AT&T Mobility v. Concepcion ruled that class action plaintiffs couldn't escape individual consumer arbitration clauses by invoking a California statute, defense lawyers quickly predicted that companies would use the decision to swat down employee class actions as well. But a handful of recent decisions show that Concepcion's reach has limits when it comes to employee class actions.

The latest evidence comes from an unlikely source: a ruling by San Francisco federal district judge Edward Chen granting a motion by O'Melveny & Myers to compel arbitration with a former employee. The employee, Paulina Kanbar, brought both individual and class claims against O'Melveny, alleging that she was sexually harassed and that the firm forced employees to sign an unreasonable arbitration agreement. Judge Chen ruled Thursday that Kanbar must arbitrate her individual harassment claims because she had initially invoked the arbitration clause, waiving her right to sue. The judge rejected O'Melveny's arguments that Concepcion precluded a class challenge to its arbitration agreement, however, concluding that the Supreme Court's ruling didn't trump a finding that the agreement was unconscionable.

"[A]rbitration agreements are still subject to unconscionability analysis" in the wake of Concepcion, Judge Chen ruled. "The doctrine of unconscionability can override the terms of an arbitration agreement and the parties' expectations in connection with them."

In their motion to compel arbitration, O'Melveny's lawyers at Paul, Hastings, Janofsky & Walker pointed to rulings by other district court judges that have cited Concepcion in upholding arbitration clauses. (We wrote about two such decisions here.)

But Judge Chen's decision isn't the first to point out that Concepcion hardly offers employers a free pass to compel arbitrations. In a case involving Kroger Co.'s Ralphs Grocery Company, a state appellate court in California concluded earlier this month that Concepcion did not trump a state statute that allows people to sue their employers over labor code violations on behalf of fellow employees. And, as we've reported, a federal district court judge in Manhattan this month denied a motion by Goldman Sachs to compel arbitration with an ex-employee in a high-profile discrimination case, concluding that Title VII trumps the Federal Arbitration Act.

"While many people thought Concepcion was the end of the line, now we're seeing the reaction to Conception with district courts distinguishing it on various grounds," said John Lewis of Baker & Hostetler. Gerald Maatman, an employment partner at Seyfarth Shaw, said Judge Chen's ruling in the O'Melveny case could be useful as employers seek to strengthen their class action waiver clauses and arbitration contracts post-Concepcion. "This is a roadmap for what employers should or shouldn't do in crafting arbitration agreements," he said.

O'Melveny declined to comment. A lawyer for Kanbar, Pamela Price of Price and Associates, did not respond to a request for comment.

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