Felix Shafir

Shafir represented the advocacy group DRI – The Voice of the Defense Bar as amicus curiae in the landmark U.S. Supreme Court clash over the enforceability of arbitration clauses and class action waivers in employment contracts, Epic Systems Corp. v. Lewis. The high court’s May opinion was a solid win for employers.

“I’m a little shocked that the plaintiffs found this so surprising, given the precedence,” Shafir said. “The California Supreme Court rejected the same arguments in Iskanian.” That 2014 opinion, Iskanian v. CLS Transportation Los Angeles LLC, S204032, held that the Federal Arbitration Act preempts a state’s refusal to enforce an arbitration agreement that waived the right to class proceedings.

“The right to have an arbitration agreement is protected pretty absolutely,” Shafir said. “True, it doesn’t mean every arbitration agreement is going to be enforced. There’s still the unconscionability argument and other exceptions. But class action waivers stand. The U.S. Supreme Court’s opinion [in Epic] matches up very closely with our amicus brief.”

Nothing in labor law outweighs the Federal Arbitration Act, Shafir said, summing up Epic’s outcome. “If anything is going to override the FAA, it has to be via pretty clear congressional intent. That’s the argument we made. The FAA could have been modified, but it hasn’t been.”

Now the battle shifts to the loophole Iskanian left favoring a state law that prohibits waiver of Private Attorneys General Act representative actions as contrary to public policy.

“Epic might override Iskanian, as some employers have started to argue. You will see that argument come up over the next few months.” Indeed, Shafir — though he’s not counsel of record at the trial level — is involved in an overtime pay dispute currently in the Central District. After the complaint was filed, Epic was decided. That led the defense to argue for dismissal of the plaintiff’s PAGA claims on the theory that under Epic, the Federal Arbitration Act requires the enforcement of a representative action waiver. Lawyers at Littler Mendelson PC made the argument for their client, Ecolab Inc.; Shafir is in the wings to help with any appeal. Miner v. Ecolab Inc., 2:17-cv-02313 (C.D. Cal., filed March 24, 2017).

“Epic sent a signal that rules reshaping traditional individual arbitration are hostile to the FAA,” Shafir said. “Epic seems to protect pretty absolutely contractual arrangements for individual arbitration proceedings.”

The issue could get further high court attention soon in a petition for certiorari pending before the justices.

The case was filed before Epic was decided, but the petitioners’ June 1 reply brief contends that under the new Epic precedent, Iskanian violates the Federal Arbitration Act by discriminating against arbitration. Five Star Senior Living Inc. v. Mandviwala, 17-1357.

“This is a hot topic in this area of law, and it’s heating up further,” Shafir said.

— John Roemer