Arbitration, Employment: Ninth And Fifth Circuits Split On Whether Arbitration Agreements With Collective/Class Action Waivers Violate The NLRB.
In The Fifth Circuit, D.R. Horton Inc. v. NLRB, 737 F.3d 344, Is Dispositive.
In an unpublished opinion, Citigroup Technology, et al. v. NLRB, 15-60856 (5th Cir. 12/8/16) (per curiam), the Fifth Circuit grants Citigroup’s Petition for Review, and reverses the NLRB’s decision adverse to Citigroup, which seeks to enforce arbitration of an employee’s claims.
As pointed out recently in my August 23, 2016 post about Morris v. Ernst & Young (No. 13-16599 (9th Cir. 8/22/16), the Ninth Circuit and Fifth Circuit are not on the same page when it comes to enforcing arbitration agreements containing collective/class action waivers. The Ninth Circuit held an employer violates sections 7 and 8 of the National Labor Relations Act by requiring employees to sign an agreement precluding them from bringing, in any forum, a concerted legal claim regarding wages, hours, and terms of conditions of employment.
In Citigroup Technology, supra, Citigroup specifically argued that the NLRB erred in concluding the employee “was engaged in protected concerted activity when she joined the demand for arbitration . . . “ Citigroup prevailed in the Fifth Circuit.
Whether collective/class action waivers embedded in arbitration clauses violate the NLRB’s rule against prohibiting concerted activity by employees is the subject of petitions to SCOTUS.
PAGA: Employer’s Effort To Compel Employee To First Arbitrate Whether She Was An “Aggrieved Party” Under PAGA Fails
Hernandez v. Ross Stores Lines Up With Other California Cases Refusing To Split PAGA Claims Into Arbitrable And Non-Arbitrable Parts.
In Hernandez v. Ross Stores, Inc., No. E064026 (4/2 12/7/16) (Miller, Hollenhorst, Slough) (unpublished), the Court of Appeal upholds the trial court’s denial of an employer’s motion to compel arbitration of whether an employee is an “aggrieved person” who has standing to sue under the Private Attorney General Act of 2004 (PAGA) for Labor Code violations.
In batting back employers’ creative efforts to avoid litigating PAGA claims in court, California state courts have found Williams v. Superior Court, 237 Cal.App.4th 642 (2015) and Iskanian v. CLS Transportation Los Angeles LLC, 59 Cal. 4th 348 (2014) to be dispositive. Those cases view PAGA claims as representative actions that the employee brings on behalf of the state, which is not a party to the arbitration agreement. The Court explains that forcing the employee to litigate PAGA claims in multiple forums “would thwart the public policy of PAGA to ‘empower employees to enforce the Labor Code’ on bhealf of the state.” Ross Stores, Inc. sought to distinguish Williams, pointing out that the arbitration clause in Williams referred to claims rather than disputes. However, the Court of Appeal concluded that this “is really a distinction without a difference.”
NOTE: On November 30, 2016, I posted about another unpublished opinion, Irving v. Solarcity Corporation, that also concluded the employee couldn’t be forced to arbitrate the “aggrieved person” standing issue under PAGA.
Settlement Agreements: Written Agreement To Dismiss Case And Enforce Settlement Agreement Is Enforceable, Though Agreement Was Not Filed With The Court
Court Describes Appeal As “A Tempest In A Teapot.”
Teapot with cherry or plum blossoms. Between 1750 and 1850. Library of Congress.
California has a convenient procedure for enforcing settlement agreements: Code of Civil Procedure, section 664.6. This allows a court to retain jurisdiction of a dismissed case for the purpose of enforcing a settlement agreement. A request to dismiss must be made orally on the record, or in writing signed by the parties, while the case is pending. The advantage of the procedure is that the party seeking enforcement need not file a new lawsuit to do so.
In Fidelity National Title Insurance Company v. Zuckerman, B265557 (2/3 12/7/16) (Stratton, Edmon, Aldrich) (unpublished), the written Settlement Agreement signed by the parties, and providing for the court’s retention of jurisdiction, was not filed with the court. And — you guessed it — when plaintiff Fidelity moved in 2015 to enforce the settlement, the defendants objected that the court lacked jurisdiction. Defendants argued there was no evidence in the record that there was an oral request to retain jurisdiction, nor was a writing signed by all the parties presented to the court before dismissal occurred in 2008.
The Court of Appeal disagreed. True, a fully executed settlement requesting retention of jurisdiction had not been filed with the court because the agreement was to be kept confidential. However, a filed Stipulation for Judgment, referring to previous entry of dismissals, did state the court would retain jurisdiction. The Court of Appeal refused to construe the requirement that a “request” be made during the pendency of the case to mean that the request had to be filed as an actual pleading with the court before dismissal. Here, the request had indeed been fully executed prior to the dismissal. Also, a Stipulation for Dismissal of Action and Reservation of Jurisdiction by the Court, signed by counsel, referenced the Settlement Agreement, stating that its terms were confidential, and that it provided for the Court’s retention of jurisdiction, had been filed. That was enough. For good measure, the Court of Appeal added that because Defendants filed an ex parte application for dismissal and reservation of the court’s jurisdiction, they were estopped from arguing that the court lacked jurisdiction.
COMMENT: The case is unpublished and therefore not citable as authority. The safest approach would be to have a fully executed agreement to retain jurisdiction filed with the court prior to dismissal – and then such tempests in a teacup would be avoided.
News: Wells Fargo Makes Effective Use Of Arbitration
NYT Article Describes Bank’s Use Of Arbitration With Customers Complaining About Creation Of Sham Accounts.
Above: Wells, Fargo & Co.'s Express Office, C Street, Virginia City. 1866. Library of Congress.
The NYT, which ran a series of articles in 2015 critical about the spread of arbitration, has published an article dated December 6, 2016, by Michael Corkery and Stacy Cowley entitled, “Wells Fargo Killing Sham Account Suits by Using Arbitration.” The thrust of the article is that Wells Fargo has effectively used arbitration clauses to divert customer lawsuits from the courts to arbitral forums.
It may at first seem surprising that Wells Fargo has been so successful at enforcing arbitration clauses against customers whose complaint is that they didn’t open the accounts in question with Wells Fargo. As explained by the article’s authors, the bank’s counterargument is, “The arbitration clauses included in the legitimate contracts customers signed to open bank accounts also cover disputes related to the false ones set up in their names.”
Mediation/Condition Precedent: International Lawyers Also Worry About Consequence Of Skipping Mandatory Pre-Arbitral Step
It’s Not Exactly The Same As Skipping Mediation In A Home Sale Purchase In California . . . .
California courts have established that the consequence of not requesting mediation before suing for breach of a California Association of Realtor’s residential purchase agreement is that the plaintiff will not recover attorney’s fees even if the plaintiff prevails. That result is the logical consequence of the contractual language in the C.A.R. purchase agreement. See generally our sidebar category: Mediation: Condition Precedent. Interestingly, practitioners of international construction law must also grapple with the consequences of skipping an ADR step.
Matthias Scherer and Samuel Moss, attorneys with the international law firm Lalive, have authored a November 28, 2016 article entitled, “The consequence of skipping a mandatory pre-arbitral step.” The article focuses on a recent ruling by the Swiss Federal Supreme Court considering the consequences of failing to comply with a mandatory pre-arbitral condition – in this case, a conciliation step. The authors list potential consequences: (1) dismiss the case for lack of jurisdiction or inadmissibility; (2) suspend the proceedings; or, (3) award damages for breach and proceed with the arbitration.
Here, the court characterized the issue as one of lack of jurisdiction, resulting in suspension of the proceeding by the arbitral tribunal until the parties complied with the pre-arbitral condition.
Arbitration, Public Policy, Record: Slight Record And Failure To Show Violation Of Well-Settled Public Policy Dooms Challenge To Arbitrator’s Award
Absence Of A Record Was A Major Problem For Appellant.
Law Offices of Mark Waecker, APC v. Pius Kim, B268212 (2/5 12/1/16) (Turner, Kriegler, Kumar) (unpublished) illustrates the proposition that an arbitrator’s decision is generally not reviewable for factual or legal errors. Moncharsh v. Heily & Blase, 3 Cal.4th 1 (1992). Therefore, the Court of Appeal does not (and did not here) have to determine whether the arbitrator correctly decided the issues. However, an arbitrator’s decision may be reviewed if the arbitrator exceeds his or her powers or violates a well-settled public policy. Neither was the case here. Therefore the Court of Appeal affirmed the judgment confirming an award of $323,320.58, in favor of an attorney in a fee dispute with clients.
The individual client, Mr. Kim, made a creative argument that he had been individually included as a client along with his companies just so the attorney could recover fees from him individually, without disclosing any conflicts of interest to Mr. Kim. It was not necessary, argued Mr. Kim, to include him, as he was not a party to the cases in which the attorney represented the codefendants.
The Court of Appeal rejected the argument that there was a conflict, because a conflict, if any, was “outside the subject matter of the litigation.” The Court further explained that rule 3-300, prohibiting an attorney from entering into a business transaction with a client, did not apply to retainer letters.
We note that the appeal made no headway because, among other problems, no arbitration testimony was submitted to the trial court. Rather, the Court of Appeal had to work with “the arbitrator’s award which states that Mr. Kim was not credible.”
NOTE: Given the rule established by Moncharsh and other cases, one who challenges the arbitrator’s award faces a steep uphill battle. What’s more, with only a slight record, the outcome is usually foreordained.