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The California Court of Appeal upheld an arbitration agreement that barred class-wide proceedings in a case where the claimant failed to prove that the dispute with his former employer involved a predictably small amount of damages.
In Konig v. U-Haul Co. of California, No. B190547, 2006 WL 3720248 (Cal. Ct. App. Dec. 19, 2006), Konig brought a putative class action against U-Haul, his former employer, alleging that U-Haul withheld overtime pay and engaged in other unfair employment practices.
U-Haul moved to compel arbitration pursuant to an arbitration agreement that Konig signed during his employment at U-Haul. In opposing the motion, Konig argued that agreement’s bar on class-wide proceedings rendered it substantively unconscionable under Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005).
The trial court upheld the arbitration agreement because Konig had not proven that his dispute with U-Haul involved a predictably small amount of damages as required by Discover Bank.
On appeal, the Court affirmed the trial court’s order compelling arbitration. Specifically, the Court concluded that Konig could not prove that the bar on class-wide proceedings was unconscionable under Discover Bank without proving that disputes between U-Haul and its employees “predictably involve small amounts of damages.”
Konig failed to meet that evidentiary burden because he presented no evidence that the damages payable to prospective class members were predictably small. In fact, as the Court noted, Konig sought individual damages in excess of $25,000.
This case is the second California decision upholding a bar on class-wide proceedings in the employment context. See also Gentry v. Superior Court, 37 Cal.Rptr.3d 790 (Cal. Ct. App. 2006). Gentry is currently on appeal to the California Supreme Court.
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