Rutan, LLP Client Successfully Enforces Arbitration Agreement To Defeat Class Action, Setting Legal Precedent Useful To Employers

COSTA MESA, Calif., November 5, 2012 – The California Supreme Court declined to hear a case involving a former property manager with Legacy Partners Residential, Inc., who wanted to bring a wage-and-hour class action, but was ordered to pursue arbitration instead.

Rutan represented Legacy Partners when its former employee, Lorena Nelsen, filed a class action for alleged wage and hour violations. Specifically, Nelsen sought allegedly unpaid wages, penalties, injunctive relief and attorneys’ fees on behalf of all current and former property managers who had worked for Legacy Partners during the past four years.

Legacy Partners argued at the outset that Nelsen could not press her claims in court as a class action because she had agreed to resolve all employment disputes in arbitration. The trial court agreed with Legacy Partners and ordered Nelsen to arbitrate her claims on an individual basis. This order effectively defeated Nelsen’s attempt to press her claims on a class-wide basis.

Neslen appealed, but the California Court of Appeal upheld the trial court’s order compelling Nelsen to arbitrate her individual claims. Nelsen’s arbitration agreement did not expressly exclude class-wide relief, but the Court of Appeal agreed with Legacy Partners that the language of the agreement showed that it applied only to disputes between Nelsen and Legacy Partners, not to disputes involving other employees or groups of employees. The Court of Appeal published a well-reasoned opinion that endorses the strong public policy favoring enforcement of arbitration agreements, according to their terms, and explains why an employee cannot avoid her commitment to resolve disputes in arbitration by framing her claims as a class action. Nelsen then asked the California Supreme Court to review the case. On October 31, 2012, the State’s highest court declined to review the case.

According to Rutan Partner Mark Payne, who represents Legacy Partners, the court’s denial of review means that employers in California and elsewhere can cite the Court of Appeal’s published opinion as sound legal precedent to enforce valid arbitration agreements with their employees and to defeat class actions that circumvent an employee’s agreement. The published decision is Lorena Nelsen v. Legacy Partners Residential, Inc., 207 Cal. App. 4th 1115 (2012). 

About Rutan LLP 
With offices in Costa Mesa and Palo Alto, Rutan is California’s largest full-service law firm headquartered in Orange County, California. Primary practice areas include business and real estate litigation, corporate and securities law, labor and employment law, intellectual property, real estate, municipal and government agency law, land use law, bankruptcy, condemnation and property valuation, environmental law, and taxation and estate planning. Detailed information about the firm is available at www.rutan.com.