Severability: Cal Supreme Court Explains There Is No Bright Line For Severing Unconscionable Provisions
Multiple Unconscionable Provisions Does Not Necessarily Make An Arbitration Agreement Unenforceable.
In Ramirez v. Charter Communications, Inc., No. S273802 (S.Ct. 7/15/24) (Corrigan, J.), Angelica Ramirez, a former employee of Charter Communications, sued the company for employment discrimination, harassment, and retaliation. Charter sought to compel arbitration based on an agreement Ramirez signed during her onboarding. Ramirez challenged the arbitration agreement, arguing it was procedurally and substantively unconscionable.
The trial court found the agreement unconscionable and denied Charter's motion to compel arbitration. The Court of Appeal affirmed, identifying several problematic provisions, including: a lack of mutuality in the claims subject to arbitration, a shortened statute of limitations for filing claims, and restricted discovery rights that could prevent a fair hearing. Additionally, the agreement included a fee-shifting provision that violated the Fair Employment and Housing Act (FEHA), which only allows fee awards to employers if an employee's claim is frivolous.
The California Supreme Court agreed with the lower courts, holding that the arbitration agreement was unenforceable due to its unconscionable terms. The Court highlighted that the agreement unfairly disadvantaged Ramirez as an employee, lacked mutuality, and violated public policy concerning arbitration in employment disputes, particularly under FEHA.
However, the Supreme Court held that the presence of multiple unconscionable provisions does not automatically make an agreement unenforceable. Instead, the court emphasized that courts should focus on whether the central purpose of the contract is tainted with illegality. If the illegal provisions are collateral to the main purpose, the court should try to sever them and enforce the remainder of the agreement. The Supreme Court concluded that the Court of Appeal had erred by not properly considering whether the unconscionable provisions could be severed and remanded the case for further consideration on this point.
Deadlines, Vacatur: Party Challenging Arbitration Award Must Satisfy Deadlines After Service Of Petition To Confirm Or Service Of The Award
Party Seeking To Vacate Arbitration Award Must Satisfy Separate Deadlines.
The thirty-two page slip opinion in Valencia v. Mendoza, B325803 (2/7 7/1/24) (Feuer, Martinez, Segal) affirms a $432 K award in favor of plaintiffs/respondents the Valencias. The underlying dispute concerned failure to disclose defects in a home sale.
The most important point relates to deadlines to challenge an award. The challenger seeking to vacate the award must respond within 10 days to service of a petition to confirm the award, and within 100 days to service of the award. And, not or: the challenger must satisfy both deadlines. Here, Mendoza satisfied the 100-day deadline, but not the 10 day deadline, which put Mendoza behind the 8 ball.
Deadlines, Preemption: First Dist. Div. 1 Agrees That 30-Day Deadline To Pay Arbitration Fees Is Not Preempted
The California Courts Are Divided.
One more case lines up with those courts holding the 30-day deadline requirement in consumer and employment cases, set by Cal. Code of Civ. Proc. § 1281.98, for the drafting party to pay arbitration fees, is not preempted by the Federal Arbitration Act. Keeton v. Tesla, Inc., A166690 (1/1 6/26/24) (Wilson, Humes, Siggins).
COMMENT: We agree that Keeton v. Tesla, Inc. is in accord with most California cases that have addressed the subject. See our sidebar category "Deadlines". However, the law is unsettled. On 7/3/24, we blogged about Hernandez v. Sohnen Enterprises, Inc., which holds that when the agreement is governed by the Federal Arbitration Act, § 1281.98 is preempted. Justice Wiley in a dissent has staked the same preemption position in Hohenshelt v. Superior Court. See my 4/11/24 blog post.
Eventually this split of opinion will need to be decided by a higher court. That's my opinion.
Nonsignatories: Employer Could Not Take Advantage Of Arbitration Agreement In A Temporary Staffing Agency’s Contract
Equitable Estoppel, Third-Party Beneficiary, And Agency Arguments Of Employer Failed To Gain Traction.
Nelida Soltero sued her employer, which sought to compel arbitration, based on an arbitration agreement in a contract between Soltero and Real Time Staffing Services, a temporary worker staffing agency. However, the employer was not a signatory to the agreement between Soltero and Real Time Staffing Services. The trial judge denied the employer's motion to compel arbitration, the employer appealed, and the Court of Appeal affirmed. Soltero v. Precise Distribution, Inc., D083308 (4/1 6/18/24) (Buchanan, Do, Irion).
COMMENT: We have posted before about cases in which employers have relied on an arbitration clause in a temporary staffing agency company on 7/18/16, 4/26/17, 5/17/17. In fact, the two posts in 2017 relate to Garcia v. Pexco, 11 Cal.App.5th 782 (2017), a case that also involved the staffing agency Real Time. But that case had a different result than Soltero: the employer Garcia was required to arbitrate.
Cases such as Soltero and Garcia, in which the nonsignatory seeks to take advantage of a third-party's arbitration provision, rely on theories of equitable estoppel, third-party beneficiary, or agency. The Soltero court does not follow Garcia's theory of equitable estoppel, explaining that Soltero's claims did not rely on her contract with the staffing agency. Nor was the employer an intended third-party beneficiary of the staffing agency contract. Finally, while Garcia had sued his employer Pexco, alleging that it and the staffing agency were "joint employees", Soltero did not allege joint employment or agency.
Burden Of Proof: Authority Is Split Over What Constitutes Sufficient Evidence To Dispute Handwritten Signature On Arbitration AgreementOn Arbitra
The Fifth District Rules That It Is Not Enough For The Employee To Say He Doesn't Remember Signing After The Employer Produces Employee's Handwritten Signature.
Carlos Ramirez filed a class action lawsuit against his employer Golden Queen Mining Company LLC alleging wage and hour violations. The employer moved to compel arbitration and produced an arbitration agreement with the employee's handwritten signature, satisfying the employer's initial evidentiary burden. Ramirez declared he did not recall ever being presented with an arbitration agreement; he did not recall signing an arbitration agreement; and, nobody ever informed him about an arbitration agreement. The trial court denied a motion to compel arbitration, and the employer appealed. Ramirez v. Golden Queen Mining Company, LLC, F086371 (5th Dist. mod. & cert. for pub. 6/11/24( (Franson, Levy, Poochigian).
Justice Franson, author of the opinion, explained: "There is a split of authority among the Courts of Appeal as to what constitutes sufficient evidence to create a factual dispute about the authenticity of a handwritten signature on a document agreeing to arbitration. (Cf. Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 757–758 (Iyere) with Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 164–165 (Gamboa).) We join Iyere in concluding that an individual is capable of recognizing his or her handwritten signature and if that individual does not deny a handwritten signature is his or her own, that person’s failure to remember signing the document does not create a factual dispute about the signature’s authenticity. (Iyere, supra, at p. 757.)" Because Ramirez did not deny his handwritten signature but only claimed he did not remember, the Court of Appeal reversed the order denying the motion to compel arbitration, and remanded to decide an unconscionability issue that the trial court had not needed to reach.
The Court of Appeal's opinion, initially filed on May 15, 2024, was not for publication. It was certified for publication later on July 11, 2024.
COMMENT: Justice Franson comments that the court joins Iyere in concluding that an individual is capable of recognizing his handwritten signature. If electronic signatures had been involved, the matter of authenticating could have been messier. See our July 4, 2024 post about Garcia v. Stoneledge Furniture LLC et al., A166785 (1/3 5/17/24) (Petrou, Fujisaki, Rodriguez) under the heading "Failure To Authenticate Electronic Signing Means Arbitration Agreement Is Unenforceable."
Confidentiality: Unlike Mediation, Collaborative Law Settlements Do Not Have Statutory Confidentiality Protection
The Lesson Here Is The Importance of Carefully Drafting Collaborative Law Agreements.
How's this for a setup: "Ling and Paul Mueller married in 2009 and separated in 2017. During their marriage, they cultivated cannabis and buried the proceeds on their property." What could possibly go wrong? Plenty.
The Muellers engaged in a collaborative law session, "a non-judicial alternative dispute resolution process commonly used for marriage dissolutions." Ms. Mueller made some harmful admissions during the collaborative law process regarding how much of the buried proceeds she had dug up and what she had done with it. The trial judge "found both parties had 'significant credibility gaps' but that Paul's 'testimony and differences in credibility on different days pales in connection to [Ling], whom I could not believe most of what she said." Ouch.
The trial judge adjusted the division of proceeds in favor of Mr. Mueller. Ms. Mueller argued that her statements in the collaborative law process were confidential and should not have been introduced in evidence. She appealed. Mueller v. Mueller, A166577 (1/5 6/3/24) (Burns, Jackson, Simons). Affirmed.
"We publish this case to highlight the importance of carefully drafting collaborative law agreements. Unlike mediations, our Legislature has not created an evidentiary privilege for collaborative law processes. (Compare Evid. Code, § 1119 with Fam. Code, § 2013.) If parties intend to keep the process confidential, they are responsible for drafting an enforceable contract that so provides."
