CORDY, J.
The plaintiffs are individuals who have entered into contracts, called "local franchise agreements," with defendants System4 LLC (System4) and NECCS, Inc. (NECCS) (collectively, defendants), for the provision of commercial janitorial services to third-party customers.
Following the decision of the United States Supreme Court in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1746 (2011) (Concepcion), which held that the Federal Arbitration Act (FAA) preempted a California rule that "classif[ied] most
This case, which was paired for argument with Feeney v. Dell Inc., ante 470 (2013) (Feeney II), presents two questions: whether Feeney I survives Concepcion and, if so, whether our ruling in Feeney I may apply to invalidate a class action waiver in an arbitration clause of an employment contract. In light of our interpretation of Concepcion and its impact on Feeney I, as set forth in Feeney II, supra, we conclude that because Massachusetts public policy in favor of class proceedings in certain contexts may no longer serve, in and of itself, as grounds to invalidate a class waiver in an arbitration agreement, and because the plaintiffs here are unable to demonstrate that they lack the practical means to pursue their relatively substantial claims on an individual basis, we must reverse the order invalidating the arbitration clause.
1. Background. At this stage in the proceedings, the facts are not particularly well developed.
Plaintiffs Edson Teles Machado, Jocilene da Silva, Poliane Santos, and Luiz Santos entered into franchise agreements with the defendants.
In his order denying the defendants' motion to stay the proceedings pending arbitration and invalidating the arbitration agreement, the motion judge stated simply that "[t]he arbitration clause ..., which precludes class actions under [G. L. c. 93A] and the wage/hour laws [G. L. c. 149, § 150] and multiple damages[,] is contrary to public policy and therefore invalid," citing Feeney I for support. The defendants' motion for reconsideration in light of Concepcion was similarly denied without any findings of fact or analysis. Although the motion judge relied, at least in part, on public policy considerations outlined in Feeney I that he presumed were also applicable to Wage Act claims, he did not decide whether the plaintiffs were in fact misclassified and are thus entitled to the protections of the Wage Act. Although the parties contest the misclassification issue in their briefs, it is not before us on appeal. Therefore, to the extent our analysis depends on the plaintiffs' status as employees and the resultant applicability of the Wage Act, we assume for the purposes of this appeal that they are in fact employees under the Wage Act.
2. Discussion. a. Class waiver. Our interpretation of Concepcion and its impact on Feeney I is set forth in detail in Feeney II, supra at 485-507, and does not require extensive recitation here. Feeney I survives Concepcion to the extent that a consumer plaintiff "can demonstrate that he or she effectively cannot pursue a claim against [a] defendant in individual arbitration according to the terms of the [arbitration] agreement." Feeney II, supra at 472. On such a demonstration, a court may invalidate
We see no principled reason to limit Feeney I (as refined by Feeney II) to consumer claims under G. L. c. 93A, because many of the same public policy arguments apply equally well to claims by employees under the Wage Act. Pursuant to Feeney II, it is clear that a plaintiff must demonstrate that he or she lacks the practical means to pursue a claim in individual arbitration or, put differently, that the class waiver, when combined with the other terms of the arbitration agreement, "effectively denies [the plaintiff] a remedy and insulates the defendant from private civil liability for violations of State law." Feeney II, supra at 471. If a plaintiff bringing a claim under the Wage Act could make such a showing, we would not hesitate to apply Feeney II to claims under the Wage Act.
Critically however, following Concepcion, it is of no avail that a particular State statute like the Wage Act provides for a substantive right to bring a class proceeding. See G. L. c. 149, § 150 ("employee claiming to be aggrieved by a violation of [the Wage Act] may ... institute and prosecute in his own
This is so because the "`changes brought about by the shift from bilateral arbitration to class-action arbitration' are `fundamental,'" Concepcion, supra at 1750, quoting Stolt-Nielsen, supra at 1776, and therefore, "[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA." Concepcion, supra at 1748. It follows that, because nonconsensual class arbitration is forbidden by Stolt-Nielsen and Concepcion, enforcement of a substantive State statutory right to a class proceeding would be tantamount to requiring a judicial forum for a particular type of dispute, a result the FAA clearly prohibits. See Marmet Health Care Ctr., Inc. v. Brown, 132 S.Ct. 1201, 1203-1204 (2012) (per curiam) (FAA preempted State court decision holding unconscionable, as matter of public policy, clause in nursing home contract that required arbitration of personal injury claims); Perry v. Thomas, 482 U.S. 483 (1987) (FAA preempted provision of California wage law that mandated judicial forum for resolution of disputes under that law). See also Southland Corp. v. Keating, supra. The Supreme Court in Concepcion has declared that the inherent conflict between
Unlike the plaintiffs in Feeney II, whose claimed damages totaled $13.65 and $215.55, respectively, the individual plaintiffs here claim damages that, in the form of improper franchise fees alone, total $21,818.38, $17,227.93, $14,949.73, and $9,541.83, respectively. Cf. Awuah v. Coverall N. Am., Inc., 460 Mass. 484, 497-499 (2011) (on similar facts, plaintiffs entitled to recover franchise fees as type of "damages incurred" under G. L. c. 149, § 150). Other claimed but as of yet unspecified damages, in the form of unpaid wages, are subject to mandatory trebling under G. L. c. 149, § 150. See Melia v. Zenhire, Inc., 462 Mass. 164, 171 n.8 (2012). Although the magnitude of potential damages is not the sole criterion to be considered in determining whether a claim is remediable in individual arbitration according to the terms of the arbitration agreement, it may be the most important factor. Particularly given Concepcion's rejection of the notion that damages of $4,000 were sufficiently small to require class proceedings for the vindication of claims, see Concepcion, supra at 1750, citing Oestreicher v. Alienware Corp., 322 Fed. Appx. 489, 492 (9th Cir. 2009), it would be difficult for us to conclude that potential damages of approximately $10,000 or greater are so small as to preclude the bringing of claims in individual arbitration. Furthermore, for Wage Act claims, § 150 provides that "[a]n employee so aggrieved who prevails in such an action ... shall also be awarded the costs of the litigation and reasonable attorney's fees" (emphasis added). For reasons similar to those discussed in the next section,
b. Waiver of multiple damages. Although not thoroughly briefed by the parties, the motion judge cited the arbitration clause's prohibition on multiple damages as a basis for his conclusion that the agreement was unenforceable as against public policy. Accordingly, we briefly address that issue.
General Laws c. 149, § 150, provides that "[a]n employee so aggrieved [by a violation of the Wage Act] who prevails in such an action shall be awarded treble damages, as liquidated damages, for any lost wages and other benefits and shall also be awarded the costs of the litigation and reasonable attorney's fees" (emphasis added). In turn, G. L. c. 149, § 148, provides that "[n]o person shall by a special contract with an employee or by any other means exempt himself from this section or from [§ 150]." Further, "[a]n agreement to circumvent the Wage Act is illegal even when `the arrangement is voluntary and assented to.'" Melia v. Zenhire, Inc., supra at 170, quoting Camara v. Attorney Gen., 458 Mass. 756, 760-761 (2011). Accordingly, because the award of treble damages is mandatory under G. L. c. 149, § 150, and cannot be waived, that waiver must be invalidated. See Kristian v. Comcast Corp., 446 F.3d 25, 47-48 (1st Cir. 2006). The defendants argue that were this court to find that multiple damages under the Wage Act are not waivable, the offending term can be severed in accordance with the
Prior to Concepcion, the provision for class proceedings in § 150 and the prohibition on special contracts in § 148 likely would have compelled us to invalidate and sever the class waiver in the same manner as we have invalidated and severed the waiver of multiple damages today. Our analysis of the public policy rationales underlying the need for class proceedings in Feeney I, supra, supports this hypothesis. As for why, following Concepcion, the multiple damages waiver can be invalidated and severed and the class action waiver cannot, the answer lies in the relationship between the respective terms and the very nature of the arbitral forum. As previously discussed and analyzed in Feeney II, supra, the Supreme Court in Stolt-Nielsen and Concepcion declared the existence of an inherent conflict between class proceedings and "arbitration as envisioned by the FAA." Concepcion, supra at 1753. This conflict stems largely from the procedural informality of arbitration and the "fundamental" changes to the character of the proceeding that result from a shift from individual to class arbitration. See Concepcion, supra at 1750, citing Stolt-Nielsen, supra at 1776. Class waivers thus enjoy special status under the FAA. In contrast, the availability of statutorily mandated multiple damages does not impinge on any fundamental characteristic of arbitration, nor does it frustrate the purpose of the arbitral forum. The mandatory award of treble damages to a prevailing plaintiff under the Wage Act simply affects the clerical task of calculating damages. The enforcement of the mandatory multiple damages and antiwaiver provisions of the Wage Act thus in no way "stand[s] as an obstacle to the accomplishment of the FAA's objectives." Concepcion, supra at 1748. Therefore, the FAA
3. Conclusion. For the reasons stated, we decline to invalidate the class waiver but declare the waiver of multiple damages unenforceable with respect to viable Wage Act claims. We remand this case to the Superior Court for further proceedings consistent with this opinion.
So ordered.