Seyfarth Synopsis: The California Court of Appeal rejected the argument that the Federal Arbitration Act (FAA) cannot apply absent evidence of interstate commerce, emphasizing that arbitration under the FAA is a matter of consent. Thus, the Court affirmed that an arbitration agreement is governed by the FAA when the parties expressly agree to its application. Tuufuli v. West Coast Dental Administrative Services, LLC, 2nd Appellate District, Case No. B338584.
The Facts
Plaintiff Sinedou S. Tuufuli was a customer service representative for West Coast Dental Administrative Services, LLC. Upon hire, Tuufuli electronically signed an arbitration agreement requiring that any employment-related disputes be resolved through binding arbitration. The agreement expressly stated that it “shall be governed by the Federal Arbitration Act and, to the extent permitted by such Act, the laws of the State of California.”
In April 2023, Tuufuli filed a complaint asserting individual and class claims for alleged Labor Code violations. West Coast Dental moved to compel arbitration of Tuufuli’s individual claims and to dismiss her class claims, arguing that the Parties’ arbitration agreement was governed by the FAA.
The Trial Court Decision
The trial court granted West Coast Dental’s motion, concluding that the arbitration agreement was valid and enforceable under the FAA. The court relied on the agreement’s express language stating that the agreement was governed by the FAA, as well as evidence that West Coast Dental operated in interstate commerce. The court also dismissed Tuufuli’s class claims because the agreement contained a class-action waiver.
The Appellate Court Decision
The California Court of Appeal affirmed the trial court’s order, holding that the FAA governs when parties expressly agree to its application.
On appeal, Tuufuli argued that the terms of the Parties’ arbitration agreement alone cannot establish that the agreement is covered by the FAA The Appellate Court disagreed. An earlier U.S. Supreme Court decision, Allied-Bruce Terminix Co. v. Dobson, held that the FAA applies to contracts actually involving interstate commerce. Yet the Appellate Court recognized that Allied-Bruce did not limit the FAA to applying only to contracts involving interstate commerce. Indeed, because arbitration is a matter of contract and consent, the FAA applies simply because the Parties agreed to its application.
Unlike Section 1 of the FAA, Section 2 does not expressly exempt the FAA from applying to certain contracts, such as those relating to the employment of seaman or railroad workers. Because the Parties’ agreement explicitly stated it was governed by the FAA, the Court of Appeal affirmed the trial court’s order compelling arbitration and dismissing the class claims.
What Tuufuli Means for Employers
Tuufuli reinforces that employers can ensure FAA application to their arbitration agreements by expressly stating that intent in the agreements themselves. But a “belt and suspenders” approach to a motion to compel arbitration should also include presenting evidence that the agreement involves interstate commerce. Although the decision affirms that the FAA may apply to arbitration agreements that involve interstate commerce even where the agreement does not expressly reference the FAA, Employers should err on the side of caution and review their agreements to confirm clear language regarding FAA applicability.
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