In Practice: The Slow Death of 'Gentry'

California law favors arbitration. But its courts have been traditionally hostile to the Federal Arbitration Act. Especially that part about the FAA requiring that “private agreements to arbitrate are enforced according to their terms,” and barring any state rule that “stands as an obstacle to the accomplishment and execution of the full purposes and objectives” of the FAA. AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011). Time and time again the state’s courts have carved out exceptions to the FAA’s enforcement mandate where they perceived it as hostile to important state policies, even though the FAA requires enforcement of the terms of an arbitration agreement and preempts any state rules that stand in the way.

Gentry v. Superior Court, 42 Cal.4th 443 (2007), is the most recent of a long line of decisions evincing this hostility. In Gentry, the California Supreme Court established a four-factor test to determine when a waiver of class arbitration in an employment agreement is unenforceable: (1) whether the “potential individual recovery” is “modest”; (2) whether there is a “potential for retaliation against members of the class”; (3) whether “absent members of the class may be ill-informed of their rights”; and (4) whether there exist other “real world obstacles to the vindication of class members’ rights … through individual arbitration.” In doing so, it summarily rejected any suggestion that such a rule runs afoul of the FAA.