More than 7 months after hearing oral argument on an issue that will affect countless employers across the country – whether employers may implement arbitration agreements with class action waivers — the United States Supreme Court has issued what is bound to be considered a landmark decision in Epic Systems Corp. v. Lewis (a companion case to National Labor Relations Board v. Murphy Oil USA and Ernst & Young LLP v. Morris), approving the use of such agreements.

The decision will certainly have a tremendous impact upon pending wage-hour class and collective actions, many of which had been stayed while the courts and parties awaited the Supreme Court’s decision.  And it is likely to lead many more employers to implement arbitration agreements with class action waivers going forward, if only to avoid the in terrorem effect of those types actions.

In a 5-4 vote along the very lines that many commentators had predicted, with newest Supreme Court Justice Neil Gorsuch penning the majority opinion, the Supreme Court determined that the law is “clear” that class action waivers are enforceable under the Federal Arbitration Act (“FAA”) – and that they are not prohibited by the National Labor Relations Act (“NLRA”), as several Circuit Courts had concluded following the National Labor Relations Board’s (“NLRB”) DL Horton decision.

In reaching this decision, the Court took great pains to address – and reject – the various arguments presented by the former NLRB General Counsel, the related labor union and various amicus briefs submitted by the plaintiffs’ bar.  In so doing, the Court noted that for the first 77 years of the NLRA, the NLRB had never argued that class action waivers violated the Act; instead, the FAA and the NLRA had coexisted peacefully.  In fact, as the Court pointed out, as recently as 2010 the NLRB’s General Counsel had asserted that class action waivers did not violate the NLRA.

The decision is an unqualified victory for employers, particularly those who already have such arbitration agreements in place.  Given the prevalence of wage-hour class and collective actions, and the potential exposure in even the most baseless of suits, other employers would be wise to consider whether they, too, wish to implement such agreements.

Not unimportantly, the decision might give employers new grounds to argue that employees who sign such agreements are prohibited from pursuing representative claims under California’s Private Attorneys General Act (“PAGA”).  Even if those new arguments prove to be unavailing – to date, the California state courts have held that such claims cannot be compelled to arbitration because they belong to the state, not the employee –the Supreme Court’s decision could be used to require that an individual arbitrate his or her individual claims first such that he or she would not have standing to pursue the PAGA claims if the employer prevailed in arbitration.

And employers should be mindful that in some states (California again), an employer must pay virtually all of the costs of the arbitration process, a reality that has led more than a few plaintiffs’ lawyers to file multiple individual arbitrations in order to drive up employers’ costs to try to force them to the settlement table.

By Michael Kun

On Monday, June 25, 2011, the California Supreme Court issued its long-awaited decision in Coito v. Superior Court, addressing the issue of whether a party in litigation could rely upon the work product doctrine to withhold witness statements obtained by its attorneys or the identities of persons who had given such statements. 

In short, while parties in California have long relied upon dicta in the Court of Appeal decision known as  Nacht v. Lewis for the proposition that such information is protected from disclosure by the work product doctrine, case-by-case determinations will now be required to determine whether a party must provide such information to its opponent in discovery in California state court cases. 

In its decision, the Court rejected the dicta in Nacht that provided for an absolute privilege for such witness statements, holding instead that witness statements may be entitled to an absolute privilege under some circumstances. 

The Court explained, “In light of the legislatively declared policy and the legislative history of the work product privilege, we hold that the recorded witness statements are entitled as a matter of law to at least qualified work product protection. The witness statements may be entitled to absolute protection if defendant can show that disclosure would reveal its ‘attorney’s impressions, conclusions, opinions, or legal research or theories.’ (§ 2018.030, subd. (a).)  If not, then the items may be subject to discovery if plaintiff can show that ‘denial of discovery will unfairly prejudice [her] in preparing [her] claim . . . or will result in an injustice.’ (§ 2018.030, subd. (b).)” (Emphasis added.)

As for the identities of persons who provided witness statements to counsel, those will now be easier to obtain in California state court cases.  The Court explained, “As to the identity of witnesses from whom defendant’s counsel has obtained statements, we hold that such information is not automatically entitled as a matter of law to absolute or qualified work product protection. In order to invoke the privilege, defendant must persuade the trial court that disclosure would reveal the attorney’s tactics, impressions, or evaluation of the case (absolute privilege) or would result in opposing counsel taking undue advantage of the attorney’s industry or efforts (qualified privilege).” (Emphasis added.)

This decision will have a great impact on the manner in which cases are litigated in California, particularly as they relate to litigation strategy.  The decisions whether to require a party to turn over witness statements obtained by its attorneys, or disclose the identities of persons who provided statements, will generally be left to the discretion of the judge.  Of course, all judges differ.  Some judges may be more inclined to require the production of this information than others.  Accordingly, parties will have to give considerable thought to when they wish to obtain written statements, mindful that they may have to disclose them to the opposing party. 

This will be an especially important strategic decision in class actions and collective actions, where defendants often obtain a great many written statements from putative class members early in the case for use later.  A defendant must now be concerned that it may be required to turn over all of those statements early in the case, educating the plaintiff’s counsel about the defendant’s strategy in the process and, perhaps, encouraging them to contact those putative class members to try to get them to recant their statements or to try to stop other putative class members from speaking with defendant’s counsel.  It will also be an important strategic decision in those cases where attorneys seek to have witnesses sign statements early to “lock in” their testimony, with no intention of using those statements in the case unless the witness later changes his or her testimony.