Arbitration/Class Action Waivers: Supreme Court Has Granted Cert To Hear Cases Addressing Whether National Labor Relations Act Prohibits Class Action Waivers
Ninth Circuit Case of Morris v. Ernst and Young Is One Of The Three Cases.
On December 9, 2016, I linked my article on "The Politics of Arbitration" to this blog. In that article, I predicted, "Morris [v. Ernst and Young] could serve as a springboard for sending divergent opinions about the enforceability of arbitration provisions used to prevent 'concerted activity' by employees to the Supreme Court for review." It has now happened.
Mediator and arbitrator Ross Runkel reports today that SCOTUS agreed on January 13, 2017 to hear three cases relating to arbitration class action waivers: Morris v. Ernst and Young, NLRB v. Murphy Oil, and Epic Systems Corp. v. Lewis.
Arbitration/Appealability: Ninth Circuit Dismisses Appeal Of Order Denying Motion To Compel Arbitration Because Appellants Invoked California Arbitration Act Rather Than Federal Arbitration Act
A Trap For The Unwary . . .
Kum Tat Limited v. Linden Ox Pasture, LLC, No. 14-17472 (9th Cir. 1/13/17) (Hurwitz, Lucero, Graber) presents a trap for the unwary.
Plaintiff Kum Tat Limited sued in California state court in connection with its attempted purchase of residential property for approximately $40M, after its attempted purchase went sideways. Defendant Linden Ox Pasture removed to federal court. Plaintiff then moved unsuccessfully to compel arbitration and to stay the action pursuant to California Code of Civil Procedure sections 1281.2 and 1281.4. The trial court denied the motion, concluding the parties failed to form a contract.
Under the California Arbitration Act, California Code of Civil Procedure, section 1294, a party whose motion to compel arbitration has been denied can appeal. Similarly, under the Federal Arbitration Act, 9 U.S.C. section 16(a)(1), one can file an interlocutory appeal from an order denying a petition to order arbitration. So, given that the district court denied Kum Tat’s motion to compel arbitration, should the Ninth Circuit have entertained an interlocutory appeal?
No. The reason is that Kum Tat invoked the California Code of Civil Procedure as the basis for an appeal, rather than the Federal Arbitration Act. So the Ninth Circuit dismissed the appeal for lack of federal jurisdiction. Gotcha.
Ironically, Linden Ox’s answering brief did not contest jurisdiction. But of course the federal court gets to exercise its “independent obligation to ensure jurisdiction.”
COMMENT. Kum Tat’s motion to compel arbitration was explicitly brought under California arbitration law, and Kum Tat later emphasized that the motion was not made under the FAA. Suppose the arbitration motion had been more ambiguous, and failed to cite state or federal arbitration law? Could such a motion have been brought “under” the FAA for purposes of the interlocutory appeal? The Ninth Circuit expressly states that it does not decide that question. Kum Tat, footnote 3. Generally, parties seeking to compel arbitration find themselves in a stronger position when they proceed under the FAA. Apparently Kum Tat’s motion to compel arbitration sought to distinguish some unfavorable case law interpreting the FAA, explaining why Kum Tat was at pains to stake the position that it was proceeding under state law. Kum Tat, footnote 1.
Mediation: A Court’s Impassioned Plea: Please, Please Try To Mediate
The Setting: Dispute Is More Than Ten Years Old, This Is Second Appeal, And There's Still Plenty Of Fight Left In the Old Boys . . .
Early on the Court's opinion oozes frustration: "As much as we are loathe to drag on this protracted litigation any longer, we conclude we must reverse and remand for a more detailed statement of decision on certain issues." La Melza v. Lindsay, No. G051506, G051514 (4/3 1/13/17) (unpublished). Evidently, this case is one of those cases for associates yet unborn. I won't even bother to recite the gnarly facts. What caught my attention was the impassioned plea by Justice Moore that the parties try and mediate their differences:
"This case has been dragging on for more than a decade. As the Gilroy defendants' counsel noted in a motion for calendar preference, all of the principals are now in their 70's or 80's. We urge both the parties and the court to take all practical steps to reach a judgment in the trial court as quickly as possible. In the same vein, we also urge the parties to set aside what are obviously long-held and deep-seated emotions about this matter and work with an experienced mediator to settle this case. The alternative, even in the best case scenario, is another two or three years spent in the trial court and in our gracious company, resulting in thousands upon thousands of dollars in fees and costs. The parties would be far better served, and would probably find the ultimate outcome far more satisfactory, if they reached a resolution among themselves."
Adding to the overwhelming sense that the parties are lost in a Dickensian quagmire located near the ruins of Bleak House is that the majority opinion, penned by Justice Moore with Justice Thompson concurring, draws a dissenting opinion! Justice Aronson, dissenting, "would invite the parties to brief whether we can correct our earlier opinion and retrace our steps to a proper path so the trial court may perform its factfinding function and enter a new judgment consistent with its findings." Justice Aronson in turn quotes from the dissent by a frustrated Justice Frankfurter: "Wisdom too often never comes, and so one ought not to reject it merely because it comes too late."
To which I add a few additional words of legal wisdom gleaned from dead practitioners:
"About half the practice of a decent lawyer consists of telling would-be clients that they are damned fools and should stop." — Elihu Root.
"An incompetent attorney can delay a trial for years or months. A competent attorney can delay one even longer." — Evelle J. Younger.
But Charles Dickens gets the last word, with the characters in Bleak House explaining the end to the seemingly interminable, intractable, and ridiculous case of Jarndyce and Jarndyce:
"Mr Kenge," said Allan, appearing enlightened all in a moment. "Excuse me, our time presses. Do I understand that the whole estate is found to have been absorbed in costs?"
"Hem! I believe so," returned Mr Kenge. "Mr Vholes, what do you say?"
"I believe so," said Mr Vholes.
"And that thus the suit lapses and melts away?"
"Probably," returned Mr Kenge. "Mr Vholes?"
"Probably," said Mr Vholes.
Pending Cases: Hernandez v. Ross, A PAGA Arbitration Case, Is Now Published
Employer Cannot Compel Employee To Arbitrate Individual Aspects Of PAGA Claim While Maintaining Representative Claim In Court.
We blogged about Hernandez v. Ross, E064026 (4/2 1/3/17) on December 8, 2016. Hernandez is one more California case holding that a court cannot split a representative PAGA claim into arbitrable and non arbitrable parts. We can now report that the case was ordered to be published on January 3, 2017.
Existence Of Agreement To Arbitrate: Fourth District, Division 3 Affirms Order Denying Petition To Compel Arbitration, Because Employer Failed To Establish Existence Of Agreement
Just Because There Is An Arbitration Provision, Don’t Take The Existence Of An Arbitration Agreement For Granted . . .
The mere existence of a contractual provision requiring arbitration does not mean that the parties have established the existence of an agreement to arbitrate the claims between the parties. At a minimum, a checklist would include: is the agreement signed; are the parties correctly identified; are the claims within the scope of the agreement; is the agreement properly authenticated. Flores v. Nature’s Best Distribution, LLC, No. G052410 (4/3 filed 12/2; order pub. 12/27/16) (Fybel, O’Leary, Moore) (published) affirms an order denying an employer’s petition to compel arbitration, because the employer failed to establish the existence of an arbitration agreement, even though there was an arbitration provision.
The problems here with the employer/employee agreement included: (1) the arbitration provision, while stating it was between employee and employer, failed to identify either term; (2) the agreement failed to identify which disputes would be arbitrated before the AAA and which would be subject to a collective bargaining agreement grievance procedure; (3) the agreement failed to identify which set of AAA rules applied, with the employer attaching rules that became effective 12 years after the employment relationship began. Here, the authentication of the agreement was also questioned by the employee, but the Court didn’t even need to address the issue in order to affirm the order denying the petition to arbitrate.