APPEAL from an order of the Superior Court of Los Angeles County, John Kronstadt, Judge. (Los Angeles County Super. Ct. No. BC369201)
The opinion of the court was delivered by: Mallano, P. J.
CERTIFIED FOR PUBLICATION
In Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry), our Supreme Court held that, in arbitration agreements governing employment, class action waivers may be unenforceable in "some circumstances [because they] . . . would lead to a de facto waiver [of employees' statutory rights] and would impermissibly interfere with employees' ability to vindicate [those] rights" (id. at p. 457, italics added).
More specifically, Gentry addressed the enforceability of class action waivers in the context of a claim for overtime compensation. The court grounded its decision on the conclusion that an employee's right to overtime compensation is an unwaivable statutory right. (Gentry, supra, 42 Cal.4th at pp. 455-457.) In determining the validity of class action waivers, the court stated: (1) "individual awards in wage-and-hour cases tend to be modest" (id. at p. 457); (2) "a current employee who individually sues his or her employer is at greater risk of retaliation" (id. at p. 459); (3) "some individual employees may not sue because they are unaware that their legal rights have been violated" (id. at p. 461); (4) "'class actions may be needed to assure the effective enforcement of statutory policies'" (id. p. 462); and (5) there may be "real world obstacles to the vindication of class members' rights to overtime through individual arbitration" (id. at p. 463).
Gentry concluded that, when an employee alleges that an employer has systematically denied proper overtime pay to a class of employees, and a trial court finds, based on the foregoing factors, that a class action "is likely to be a significantly more effective practical means of vindicating the rights of the affected employees than individual litigation or arbitration, and finds that the disallowance of the class action will likely lead to a less comprehensive enforcement of overtime laws for the employees alleged to be affected by the employer's violations, it must invalidate the class arbitration waiver to ensure that these employees can 'vindicate [their] unwaivable [statutory] rights . . . .'" (Gentry, supra, 42 Cal.4th at p. 463, italics added.)
In Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277 (Franco I), we concluded that Gentry invalidated a class action waiver where an employee alleged that his employer had violated the laws regarding employees' rights to rest and meal periods -- statutory rights that are also unwaivable. (Franco I, at pp. 1290-1294, citing Lab. Code, §§ 512, 226.7; undesignated section references are to that code.) We further concluded that, with respect to a claim under the Labor Code Private Attorneys General Act of 2004 (PAGA) (§§ 2698-2699.5), Gentry invalidated an arbitration clause prohibiting an employee from acting as a private attorney general (see Franco I, at pp. 1299-1302).
After we decided Franco I, the employer filed a second petition to compel arbitration, arguing that a change in the law rendered the class action waiver enforceable. The trial court denied the petition. That ruling is now before us. The question on appeal is whether Gentry was overruled by Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) 559 U.S. ___ [130 S.Ct. 1758] (Stolt-Nielsen) and AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ [131 S.Ct. 1740] (Concepcion). We conclude that Gentry remains good law because, as required by Concepcion, it does not establish a categorical rule against class action waivers but, instead, sets forth several factors to be applied on a case-by-case basis to determine whether a class action waiver precludes employees from vindicating their statutory rights. And, as required by Stolt-Nielsen, when a class action waiver is unenforceable under Gentry, the plaintiff's claims must be adjudicated in court, where the plaintiff may file a putative class action. Accordingly, we affirm.
The facts in this appeal are taken from our prior opinion and the record in Franco I and the exhibits filed in connection with the second petition to compel arbitration.
On April 9, 2007, plaintiff Edixon Franco filed a class action complaint against "Athens Disposal Company, Inc., dba Athens Services" (Athens [Services]). The complaint alleged as follows.
"Franco [was] employed by Athens [Services] as a nonexempt, hourly employee . . . . He brought this suit individually and on behalf of other similarly situated current and former employees. The potential class is significant in size such that individual joinder would be impractical. Athens [Services] engaged in a systematic course of illegal payroll practices and policies in violation of the Labor Code . . . . Athens [Services] subjected all of its hourly employees to the identical violations.
"The first cause of action alleges that Athens [Services] violated Labor Code sections 510 and 1194 by failing to pay overtime. . . . In the second cause of action, Franco alleges that Athens [Services] violated section 226.7 and the applicable Industrial Welfare Commission wage order, No. 9-2001 (Wage Order) . . . , codified at California Code of Regulations, title 8, section 11090. More specifically, Athens [Services] allegedly failed to provide meal periods and to pay an additional hour of compensation per workday to employees who missed a meal period. The third cause of action alleges a separate violation of section 226.7 and the Wage Order by failing to provide rest periods and to pay an additional hour of compensation per workday to employees who missed a rest period. In the fourth cause of action, the complaint asserts violations of sections 226, 1174, and 1174.5, as well as the Wage Order, by failing to provide necessary payroll information to employees and failing to maintain records on each employee showing all hours worked and all meal periods taken. The fifth cause of action seeks civil penalties authorized by the PAGA for violating the Labor Code as to Franco and other current and former employees; Franco alleges he exhausted the requisite administrative remedies under the act. (See §§ 2699.3, 2699.5.)" (Franco I, supra, 171 Cal.App.4th at p. 1283.)
On June 22, 2007, Athens Services, represented by Hill, Farrer & Burrill (the Hill firm), "filed a petition to compel arbitration and to dismiss or stay the civil action. The petition stated that Athens [Services] was in the business of trash removal, hauling, disposal, and recycling and was engaged in interstate commerce within the meaning of the Federal Arbitration Act . . . (9 U.S.C. §§ 1-16). Athens [Services] alleged that arbitration was required under the [August 2005] arbitration agreement signed by Franco -- written in Spanish -- which was attached as an exhibit." (Franco I, supra, 171 Cal.App.4th at pp. 1283-1284.)
Franco was employed by Athens Services from May 20, 2005, to May 12, 2006. In August 2005, he signed an "Employee Agreement to Arbitrate" that stated: "I acknowledge that I have received and reviewed a copy of the Athens Services' Mutual Arbitration Policy ('MAP'), and I understand that it is a condition of my employment. I agree that it is my obligation to make use of the MAP and to submit to final and binding arbitration any and all claims and disputes that are related in any way to my employment or the termination of my employment with Athens Services . . . or its parent, subsidiary, sister or affiliated companies or entities, and each of its and/or their employees, officers, directors or agents ('the Company') and that . . . both the Company and I agree to forego any right . . . to bring claims on a representative or class basis. I also agree that such arbitration . . . will be conducted under the Federal Arbitration Act and the applicable procedure rules of the American Arbitration Association ('AAA'). [¶] . . . [T]he Company also agrees to submit all claims and disputes it may have with me to final and binding arbitration, and the Company further agrees that if I submit a request for binding arbitration, my maximum out-of-pocket expenses for the arbitrator and the administrative costs of the AAA will be an amount equal to the local civil court filing fee and the Company will pay all of the remaining fees and administrative costs of the arbitrator and the AAA. If any provision of the MAP is found unenforceable, that provision may be severed without affecting this agreement to arbitrate. . . ."
The "Mutual Arbitration Policy" (MAP) read: "Athens Services ('the Company') has adopted and implemented a new arbitration policy, requiring mandatory, binding arbitration of disputes, for all employees, regardless of length of service. . . . [The MAP] will govern all existing or future disputes between you and the Company that are related in any way to your employment. [¶] . . . [¶] The MAP . . . covers all disputes relating to or arising out of an employee's employment with the Company or the termination of that employment. . . . [¶] . . . Likewise, the Company agrees to be bound by the MAP. This mutual obligation to arbitrate claims means that both you and the Company are bound to use the MAP as the only means of resolving any employment-related disputes. . . . [B]oth you and the Company forego and waive any right to join or consolidate claims in arbitration with others or to make claims in arbitration as a representative or as a member of a class or in a private attorney general capacity . . . . No remedies that otherwise would be available to you individually or to the Company in a court of law, however, will be forfeited by virtue of this agreement to use and be bound by the MAP. [¶] . . . [¶] The Company and you will share the cost of the AAA's filing fee and the arbitrator's fees and costs, but your share of such fees and costs shall not exceed an amount equal to your local court civil filing fee. . . . You and the Company will be responsible for the fees and costs of your own respective legal counsel, if any . . . ." (Italics added.) The MAP permitted the company and its employees to sue in small claims court subject to that court's jurisdictional monetary limit.
The MAP was described as a "new" arbitration policy because, at the time of hire on May 20, 2005, Franco was given the "Athens Services Employee Guide," which required arbitration in simple, concise terms: "Any claim or controversy that arises out of or relates to the interpretation, application or enforcement of this agreement or any other matter concerning or relating to the employment relationship between the Employer and Employee shall be submitted to final and binding arbitration in accordance with the Labor Arbitration Rules of the American Arbitration Association." The arbitration provision in the employee guide did not prohibit an employee from consolidating claims, pursuing a class action or other representative action, being a class representative or a member of a class, or acting as a private attorney general. The arbitration provision was silent as to those issues. Franco signed an acknowledgment form, indicating he had been given a copy of the employee guide and that a company representative had explained its contents to him in detail. Both the employee guide and the acknowledgment form were in Spanish.
In support of the petition to compel arbitration, the president of "Athens Disposal Company, doing business as Athens Services," submitted a declaration stating that the company had complied with the Labor Code and the applicable wage order. The payroll manager submitted a declaration, stating: "I have been employed by Athens Services for 8 years . . . . [¶] . . . [¶] . . . I am familiar with Edixon Franco's personnel file. He was employed by Athens [Services] as a waste hauling driver. In that position, Edixon Franco held a commercial driver's license and operated one of the company's waste hauling vehicles (i.e. a trash truck), which is a three axle commercial vehicle weighing more than 10,000 pounds. As a driver operating such a vehicle, Edixon Franco, like all of [Athens Services's] waste hauling drivers, was exempt from California's overtime wage laws and regulations . . . ."
In opposition to the petition, Franco "submitted evidence showing that, based on his hourly wage, his estimated damages for the alleged denial of meal and rest periods totaled $7,750; he would also be entitled to approximately $2,500 in civil penalties [under the PAGA]. . . . Franco filed a declaration in which he stated that, during his employment with Athens [Services] (1) he did not know he was entitled to an hour's pay if Athens [Services] did not give him a meal or rest period; (2) he was not aware of all of his rights under the Labor Code or other labor law; (3) in his experience, employees who complained about working conditions were 'looked down on' by management and 'often los[t] their jobs or [were] treated in ways that force[d] them to quit'; and (4) he 'did not feel secure enough to complain about anything [he] may have felt was wrong . . . . [He] felt that if [he] complained about anything [he] would be fired.'" (Franco I, supra, 171 Cal.App.4th at p. 1285.)*fn1
Franco filed declarations from three attorneys who discussed the necessity of bringing his wage and hour claims as a class action, whether in court or arbitration. One declaration, from Attorney Matthew J. Matern, read: "Based on my experience and knowledge of Labor Code cases, it would be extremely difficult for the class member employees to obtain representation for their cases because of the relatively small amounts [of] damages each employee suffers if they are required to litigate each of their cases separately. That is assuming . . . each class member knew [his or her] rights under the Labor Code were being violated, each had the ability to find an attorney to separately litigate [his or her] individual case in arbitration and had no fear of being fired for doing so. Typically, these employees come into my office with no knowledge of the Labor Code. Moreover, they rarely have worked for the employers for a substantial period of time, in some cases only a year or two, as is the case for the Plaintiffs in this case. In fact, we have potential clients come into our office who worked for an employer less than a year and most assuredly many members of a class will have shorter times of employment with the employer, with correspondingly lower damages.
". . . Without the ability to litigate these cases as a class proceeding, my firm could not represent the individual class members especially if we had [to] arbitrate each one separately because of the low damages present in many of these cases, including this one. Moreover, if the entire class were to come into my office, we could not . . . litigate each case separately, either in court or in arbitration.
". . . As to the argument that attorneys fees are available in these types of cases, because of the small amount of damages for each individual, the small amount of attorney's fees that would be considered 'reasonable' in relation to any individual's claim would not be sufficient to permit me to invest my time. Moreover, paying the claims of each individual employee who happens to walk into my or another attorney's office will not deter the employer from continuing to deny rest and meal periods or force the employer to pay its employees the wages due. Rather, preventing class proceedings from occurring will only allow this and other employers to pay the claims of a few employees, if any, and continue violating the Labor Code unabated.
". . . The penalties sought under the PAGA are not damages and are apportioned seventy-five percent to the State of California and twenty-five percent to the individual class members, not the Named Plaintiff. Based on the hourly wages paid to Plaintiff Franco, we estimate damages for him for denial of rest and meal breaks to be approximately $7,750.00. We estimate that penalties in this case for the individual named plaintiffs [under the PAGA] could reach approximately $10,000.00 for Plaintiff for [rest and meal period] violations . . . , with [Franco] retaining about approximately $2,500.00." (Italics added.)
Another attorney, Victor L. George, declared: "In February of this year[, 2007,] I was named a 'Top 100 Southern California Attorney' in 'Southern California Super Lawyers.' I have been listed as a 'Super Lawyer' each of the four (4) years the magazine has been in existence (2004, 2005, 2006, 2007). According to the publishers of Law Politics magazine, Super Lawyers are the top 5% of attorneys in their practice field. [¶] . . . [¶]
"All my cases are Plaintiff's cases. All have substantial risks. I advance all costs and all of our firm's time. I am extremely selective about picking my cases; [trying] to help those that are (a) the most clearly in need and (b) that might have a chance to prevail. Even so, I recognize that often any financial remuneration will not be forthcoming until years and years after I initially begin to pursue a case. I litigate Labor Code cases similar to this case on a class basis and would not take a case from any of the absent class members if I had to litigate it on an individual basis because of the moderate damages and because these cases are labor intensive. Additionally, it makes no sense to bring these cases individually because the employer can simply pay the small damages and not be forced to correct its unlawful behavior.
". . . Based on my experience and knowledge of wage and hour cases, it would be extremely difficult for an employee to obtain representation for their Labor Code cases if they needed to either arbitrate or litigate in court individually. Many cases such as this one have damages significantly lower than your typical harassment or discrimination case. . . . These [Labor Code] cases involve many hours of attorney work and despite the possibility of obtaining attorneys fees upon a successful arbitration, the chances that an arbitrator will award the attorney the full amount of hours worked are not great.
". . . In my experience, the employees that come into my office have little knowledge of their rights under California law and rarely do they come in while still working for the employer who wronged them. Many times the employees who come into my office have worked for the employer for less than one year.
". . . Many of the cases that involve short term employees could not be litigated at all in superior court because of the low amount of damages. If one of the purported class members in this case came into my office after working for only a few months and not receiving any breaks, I would have to decline. Without the ability to litigate these cases as a class proceeding, my firm could not represent the individual class members, especially if we had [to] arbitrate each one separately because of the low damages present in many of these cases." (Italics added.)
Franco argued that, under Gentry, supra, 42 Cal.4th 443, the MAP's class action waiver and the prohibition on acting as a private attorney general were invalid. Athens Services countered that Gentry was "not . . . a blanket rule invalidating all class action waivers in employment arbitration agreements." Rather, Gentry applied only in cases where a class action waiver constituted a "disadvantage [to] employees in vindicating their rights." (Id. at p. 464, italics added.) According to Athens Services, Franco had not made such a showing or satisfied the Gentry factors. Athens Services also asserted that Franco's overtime claim was meritless because he was exempt from the state's overtime compensation laws.
The trial court, Judge Elizabeth A. Grimes presiding, granted the petition to compel arbitration, reasoning that although Gentry applied to overtime claims, Franco's claim for overtime compensation lacked merit. The court also stated that, assuming Gentry applied to Franco's nonovertime claims, classwide arbitration would not be significantly more effective than individual arbitrations because of the preponderance of individualized issues, the need for specific inquiries into the merits of each employee's claims, and the varying extent of liability. The court opined that "[Athens Services's] arbitration program would not disadvantage any employee who pursued claims through individual arbitration." (Franco I, supra, 171 Cal.App.4th at p. 1287.)
On appeal, we concluded that, in ruling on the petition, the trial court had erred in considering the merits of Franco's overtime claim and treating the claim as if it had been dismissed. (See Franco I, supra, 171 Cal.App.4th at pp. 1287, 1288-1290.) As to Franco's claims alleging rest and meal period violations, we held that the pertinent laws (§§ 512, 226.7) conferred unwaivable statutory rights on employees and that Franco had satisfied the Gentry factors. (See Franco I, at pp. 1290-1299.) We reached the same conclusion as to Franco's claim for civil penalties under the PAGA. (See id. at pp. 1299-1302.) We stated that Athens Services's evidence concerning whether it had complied with the Labor Code was premature: "[T]his type of evidence goes to the merits of Franco's claims and is not to be considered on a petition to compel arbitration . . . ." (Id. at p. 1298.) We ultimately decided that, under Gentry, the class action waiver was unenforceable. (See id. at pp. 1297-1299.) We also concluded that the MAP's prohibition on acting as a private attorney general was unenforceable as to Franco's claim under the PAGA, which authorizes "an aggrieved employee [to recover civil penalties] on behalf of himself or herself and other current or former employees." (§ 2699, subd. (a); see Franco I, at pp. 1299-1300, 1303.)*fn2
Finally, we determined that a class proceeding was likely to be a significantly more effective practical means of vindicating the rights of the affected employees than individual litigation or arbitration: "We conclude the record does not support the trial court's determination that the employees' claims would be so individualized as to render class . . . treatment significantly less effective than individual arbitrations. At this early stage in the litigation, we know that Athens [Services] uses a computer and an electronic timecard system to keep track of its employees' work hours. By law, an employer must maintain time records showing an employee's (1) 'total daily hours worked' and (2) meal periods, unless 'operations cease' during meals. . . . Further, Athens [Services] allegedly engaged in a systematic course of illegal payroll practices and policies in violation of the Labor Code and subjected all of its hourly employees to the same unlawful conduct. As a result, common questions of law and fact predominate over individualized issues." (Franco I, supra, 171 Cal.App.4th at pp. 1298-1299.)
Accordingly, we found the MAP unenforceable, explaining: "'If the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced. . . . [¶] . . . [M]ultiple defects indicate a systematic effort to impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum that works to the employer's advantage.'" (Franco I, supra, 171 Cal.App.4th at p. 1299.) "Because the [MAP] contains a class arbitration waiver and also precludes Franco from seeking civil penalties . . . , contrary to the PAGA, we conclude that the agreement as a whole is tainted with illegality and is unenforceable. . . . Athens [Services's] petition to compel arbitration should therefore be denied, and this case should proceed in a court of law." (Id. at p. 1302, citation omitted.) We reversed the trial court.
Athens Services filed a petition for review in the California Supreme Court, which declined to hear the case (June 17, 2009, S172223). Athens Services then filed a petition for a writ of certiorari in the United States Supreme Court, which denied the petition on January 11, 2010 (Athens Disposal Co., Inc. v. Franco (2010) ___ U.S. ___ [130 S.Ct. 1050]). The case returned to the trial court.
On January 22, 2010, the trial court, Judge John A. Kronstadt presiding, conducted a status conference. Counsel for Athens Services -- the Hill firm -- stated that Franco had sued the wrong corporation: Athens Disposal Company, Inc., doing business as Athens Services, was not his employer; Arakelian Enterprises, Inc. (Arakelian), doing business as Athens Services, was his actual employer. In subsequent responses to special interrogatories, the Hill firm indicated that Athens Disposal Company, Inc., had never employed Franco, nor had it employed anyone during the relevant time period. On March 25, 2010, Franco amended the complaint, adding Arakelian as a Doe defendant.
On May 17, 2010, Arakelian filed a petition to compel arbitration, relying -- as had the first petition -- on the MAP, adopted in August 2005. In its memorandum of points and authorities, the Hill firm argued that our decision in Franco I had been overruled by Stolt-Nielsen, supra, 130 S.Ct. 1758, making the MAP enforceable. In the alternative, the Hill firm asserted that if Stolt-Nielsen had not overruled Franco I , the trial court should compel arbitration based on the arbitration provision in the Athens Services Employee Guide, which Franco acknowledged receiving when he was hired on May 20, 2005.
In opposition to the petition, Franco relied on his opposition to the first petition to compel arbitration. He filed supplemental papers contending that (1) under the law of the case doctrine, Arakelian was bound by Franco I because it was in privity with Athens Disposal Company, Inc., (2) Stolt-Nielsen did not constitute a change in the law, and (3) if the MAP was unenforceable, the arbitration provision in the employee guide did not provide a basis for arbitration because it had been superseded by the MAP, and there was no legal grounds for reviving it.
With respect to Arakelian's late appearance in the case, Franco pointed out that on May 24, 2005 -- around two years before he filed suit -- the Hill firm appeared on behalf of "Arakelian Enterprises, Inc., dba Athens Services" in a different employment case (Flores v. Arakelian Enterprises, Inc. (Super. Ct. L.A. County, 2005, No. BC333940)). In Flores, the Hill firm successfully petitioned the superior court to compel arbitration. Arakelian prevailed on the merits. On July 22, 2010, judgment was entered in Flores, confirming the arbitration award in favor of Arakelian. Thus, the entire time the Hill firm was representing "Athens Disposal Company, Inc., dba Athens Services" in this case, the firm knew from its work in Flores that Arakelian, not Athens Disposal Company, Inc., was the corporation doing business as Athens Services. Yet the firm did not disclose that Arakelian was Franco's employer until after (1) we reversed the order granting the first petition to compel arbitration and (2) Athens Services had exhausted all appeals.
On September 13, 2010, the trial court heard Arakelian's petition to compel arbitration. By minute order of the same date, the trial court denied the petition. On April 11, 2011, the trial court issued a more comprehensive order denying the petition on two grounds: (1) the law of the case doctrine and (2) Arakelian's failure to identify itself as Franco's true employer until after the Hill firm had filed the first petition to compel arbitration and exhausted the appeals process.
On April 21, 2011, Arakelian filed a notice of appeal. Six days later, on April 27, 2011, the United States Supreme Court issued its decision in Concepcion, supra, 131 S.Ct. 1740.
The material facts are not in dispute. The question on appeal -- whether Gentry, supra, 42 Cal.4th 443, has been overruled -- presents an issue of law we review de novo. (See Nickell v. Matlock (2012) 206 Cal.App.4th 934, 940; W.M. Barr & Co., Inc. v. South Coast Air Quality Management Dist. (2012) 207 Cal.App.4th 406, 423.)
Arakelian argues that Gentry was overruled by Stolt-Nielsen, supra, 130 S.Ct. 1758, and Concepcion, supra, 131 S.Ct. 1740. We disagree. Gentry held that, based on certain factors, a class action waiver may be unenforceable if it prevents employees from vindicating unwaivable statutory rights. Stolt-Nielsen, on the other hand, held that if an arbitration agreement does not expressly or implicitly authorize a class action, a plaintiff cannot pursue claims on a class basis in an arbitral forum. (See Stolt-Nielsen, at pp. 1775-1776; Truly Nolen of America v. Superior Court (2012) 208 Cal.App.4th 487, 512.) Concepcion held that California's Discover Bank rule (Discover Bank v. Superior Court (2005) 36 Cal.4th 148 (Discover Bank)) did not provide a basis for revoking an arbitration agreement because it constituted a categorical rule against class action waivers in consumer contracts, thereby disfavoring arbitration. (See Concepcion, at pp. 1747, 1750.) Concepcion did not address or question prior Supreme Court cases recognizing that an arbitration agreement may be unenforceable if it prevents a plaintiff from vindicating his or her statutory rights.
A. Issues Not Raised in Franco I
In Franco I, the Hill firm represented a corporation named Athens Disposal Company, Inc., doing business as Athens Services. After we reversed the trial court's order compelling arbitration and held that Franco was entitled to a court trial, the Hill firm unsuccessfully sought review in the California Supreme Court and the United States Supreme Court.
Approximately 11 days after the United States Supreme Court denied certiorari, the Hill firm announced at a status conference in the trial court that Franco had sued the wrong corporation. According to the Hill firm, Franco should have filed suit against Arakelian. In its opening brief on this appeal, the Hill firm maintains that Athens Disposal Company, Inc., was "an inactive corporate entity." Yet in Franco I, the Hill firm submitted a declaration from the president of "Athens Disposal Company" in support of Athens Services's petition to compel arbitration.
After the Hill firm announced that Franco had sued the wrong corporation, he added Arakelian as a Doe defendant. The Hill firm then filed a second petition to compel arbitration based on the same arbitration agreement -- the MAP -- we held unenforceable in Franco I. Simply put, the Hill firm attempted to enforce the same arbitration agreement again.
"'The law of the case doctrine states that when, in deciding an appeal, an appellate court "states in its opinion a principle or rule of law necessary to the decision, that principle or rule becomes the law of the case and must be adhered to throughout its subsequent progress, both in the lower court and upon subsequent appeal."'" (ABF Capital Corp. v. Grove Properties Co. (2005) 126 Cal.App.4th 204, 212.) "'Absent an applicable exception, the doctrine "requir[es] both trial and appellate courts to follow the rules laid down upon a former appeal whether such rules are right or wrong." . . . As its name suggests, the doctrine applies only to an appellate court's decision on a question of law; it does not apply to questions of fact.'" (Gunn v. Mariners Church, Inc. (2008) 167 Cal.App.4th 206, 213.)
In denying the second petition to compel arbitration, the trial court stated that it would not consider any new legal arguments that could have been made in Franco I. For instance, the trial court did not resolve Arakelian's contention that, if the MAP was still unenforceable under Franco I, it should enforce the predecessor arbitration provision in the employee guide. In addition, the second petition was supported by preprinted statements signed by a number of Athens Services's employees, declaring that the company had complied with the rest and meal period laws. But as stated in Franco I, that type of evidence goes directly to the merits of Franco's claims and is not pertinent in ruling on a petition to compel arbitration. (Franco I, supra, 171 Cal.App.4th at p. 1298; see Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1023-1025.)
We agree with the trial court that, under the law of the case doctrine, legal arguments that could have been raised in Franco I will not be considered in this appeal. Athens Services, represented by the Hill firm on both petitions to compel arbitration, should have presented all colorable legal arguments in Franco I. (See Yu v. Signet Bank/Virginia (2002) 103 Cal.App.4th 298, 310.) Nevertheless, the law of the case doctrine does not apply where there has been an intervening change in the law. (See Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 727-728; People v. Stanley (1995) 10 Cal.4th 764, 786-787.) We therefore turn to Arakelian's principal issue on appeal: whether Gentry has been overruled by Stolt-Nielsen and Concepcion.*fn3
B. Arbitration of Statutory Claims
The Federal Arbitration Act (FAA) was enacted in 1925 and codified in 1947 as chapter 1, title 9 of the United States Code (9 U.S.C. §§ 1-16). (See Dumitru v. Princess Cruise Lines, Ltd. (S.D.N.Y. 2010) 732 F.Supp.2d 328, 336.)
At first, the arbitration of statutory claims under the FAA received a judicial cold shoulder. In Wilko v. Swan (1953) 346 U.S. 427 [74 S.Ct. 182] (Wilko), the Supreme Court held that claims under the Securities Act of 1933 (15 U.S.C. §§ 77a-77aa) were not subject to arbitration. As the court explained: "When the security buyer, prior to any violation of the Securities Act, waives his right to sue in courts, he gives up more than would a participant in other business transactions. The security buyer has a wider choice of courts and venue. He thus surrenders one of the advantages the Act gives him and surrenders it at a time when he is less able to judge the weight of the handicap the Securities Act places upon his adversary.
"Even though the provisions of the Securities Act, advantageous to the buyer, apply, their effectiveness in application is lessened in arbitration as compared to judicial proceedings. Determination of the quality of a commodity or the amount of money due under a contract is not the type of issue here involved. This case requires subjective findings on the purpose and knowledge of an alleged violator of the Act. They must be not only determined but applied by the arbitrators without judicial instruction on the law. As their award may be made without explanation of their reasons and without a complete record of their proceedings, the arbitrators' conception of the legal meaning of such statutory requirements as 'burden of proof,' 'reasonable care' or 'material fact,' . . . cannot be examined. Power to vacate an award is limited. . . . The United States Arbitration Act contains no provision for judicial determination of legal issues such as is found in the English law. . . . [T]he protective provisions of the Securities Act require the exercise of judicial direction to fairly assure their effectiveness . . . ." (Wilko, supra, 346 U.S. at pp. 435-437, fns. omitted.)
In Scherk v. Alberto-Culver Co. (1974) 417 U.S. 506 [94 S.Ct. 2449] (Scherk), the court distinguished Wilko and concluded that a dispute under the Securities Exchange Act of 1934 (15 U.S.C. §§ 78a-78u) is subject to arbitration where the parties' agreement implicates international concerns: "Accepting the premise . . . that the operative portions of the language of the 1933 Act relied upon in Wilko are contained in the Securities Exchange Act of 1934, [Alberto-Culver Company's] reliance on Wilko in this case ignores the significant and, we find, crucial differences between the agreement involved in Wilko and the one signed by the parties here. Alberto-Culver's contract to purchase the business entities belonging to Scherk was a truly international agreement. Alberto-Culver is an American corporation with its principal place of business and the vast bulk of its activity in this country, while Scherk is a citizen of Germany whose companies were organized under the laws of Germany and Liechtenstein. The negotiations leading to the signing of the contract in Austria and to the closing in Switzerland took place in the United States, England, and Germany, and involved consultations with legal and trademark experts from each of ...