Construction/Existence Of Agreement: CCA 4/1 Affirms Order Denying Motion To Compel Arbitration Because There Was No Agreement
Acknowledgment Of Employee Handbook Is Not Necessarily Agreement To All Its Contents.
Courts apply the rule requiring resolution of ambiguities against the drafting party “with peculiar force in the case of a contract of adhesion.” That’s what happened in Rollins v. Stack & Associates, CPAs, No. D069390 (4/1 11/30/16) (Nares, Benke, Huffman) (unpublished), in which the trial court denied an employer’s motion to compel arbitration of claims asserted by its former employee, and the Court of Appeal affirmed.
The employee signed an acknowledgment that she received the employee handbook, and that it contained important information on policies, procedures, and practices. The handbook contained the arbitration provision.
The problem was ambiguous language. It was not clear here that acknowledging receipt of the handbook meant agreement to a contract. In fact, the acknowledgment explained “that the policies described in the handbook are intended as a guide only and do not constitute a contract of employment.” Whether the signatures on the acknowledgment expressed the mutual intent of the parties to be contractually bound by the policies in the handbook – including the arbitration policy – was at best ambiguous. And that was the employer’s problem, because ambiguity is interpreted against the drafter.
COMMENT: A stronger approach if binding arbitration is desired is to have a separate, conspicuous, signed arbitration provision. Of course, there could still be problems of substantive and procedural unconscionability, but it would be more difficult to say that an agreement to arbitrate did not exist.
Automobiles, Consumers: Buyer’s Arbitration Award Exceeded $100K, And Auto Dealer Gets A “Do-Over” If Not Exactly An Appeal
Dealer Wanted To Go To Three-Arbitrator Panel After Receiving Adverse Arbitration Award, And Everyone Agreed That ADR Arbitral Forum Lacked “Appellate” Rules. So?
Plenty of arbitration disputes arise from arbitration clauses in auto sales contracts and leases – hence our sidebar category, “Automobiles.”. Here’s an unusual one, based on fairly common arbitration provisions. Condon v. Daland Nissan, Inc., No. A145613 (1/1 filed 11/4/16, order to pub. 11/29/16) (Banke, Humes, Dondero).
Many auto sales agreements now contain an arbitration provision allowing a party to request a new arbitration under the rules of the arbitration organization if the arbitration award for a party is $0, or against a party in excess of $100K, or includes an award of injunctive relief against a party. Here, the buyer, Mr. Condon, received an award in excess of $100K (based on attorney’s fees and costs), and the defendants, which were the dealership, the insurer, and the entity acquiring the sales contract, sought a new arbitration with the arbitral forum, ADR, in accordance with the terms of the parties’ arbitration provision.
The prevailing party, Mr. Condon, objected, and ADR punted, concluding “it lacked authority to resolve the parties’ disagreement over whether a new arbitration was proper,” absent a court order. We surmise that ADR and the parties could not agree as to whether a “new arbitration” was an “appeal,” and whether deciding that issue by ADR was within the scope of the arbitration clause.
The trial court concluded that ADR lacked “a process by which a new arbitration may be had before a three-arbitrator panel,” and denied a request for an order to further arbitrate with a three-member panel. This was a bit of a head-scratcher, because in fact, ADR does have a process for appointing a three-arbitrator panel following an initial arbitration.
The way to make sense of this dispute is to note that the parties and the Court of Appeal addressed whether the arbitration clause provided for “an appeal” – because everyone agreed that ADR did not have rules providing for an appeal. The Court made sense of the dealership’s request by explaining that the dealership was really asking for a “do-over” or “repeat” of the arbitration with a three-member panel, and that the arbitration clause reference to the “appealing party” in the arbitration context simply meant a do-over of the arbitration with a three-person panel.
COMMENT: If the arbitration clause had referred to the “party requesting new arbitration in the arbitral forum” rather than to the “appealing party requesting new arbitration,” perhaps some confusion would have been avoided.
PAGA: Agreement To Arbitrate “Aggrieved Person Status” Under PAGA Does Not Enable Employer To Enforce Arbitration Of Any Portion Of Representative Claim
Employer Sought To Distinguish Its Case Based On Specific Language Of Arbitration Clause . . . No Go.
Williams v. Superior Court, 237 Cal.App.4th 642 (2015) recognizes that a representative action waiver of a PAGA claim is ineffective because the PAGA claim is not divisible into separate individual and representative claims. Because a representative PAGA claim cannot be split into an arbitrable individual claim and a nonarbitrable representative claim, an employee with a representative PAGA claim cannot be forced to arbitrate whether he or she is an “aggrieved person” with standing under PAGA.
Does the result change if the arbitration clause specifically provides for arbitration of aggrieved person status under PAGA?
No, holds Irving v. Solarcity Corporation, No. A143961 (1/3 11/29/16) (Siggins, Pollak, Jenkins) (unpublished). As the Court explains, “A PAGA claim is representative and does not belong to an employee individually, and an employer should not be able to force an individual employee to arbitrate any portion of the claim.” Slip Op. at *6.
COMMENT: The twist in the case – an arbitration clause that specifically calls for the arbitration of aggrieved person status under PAGA – may be new in the case law. It was to be anticipated that resourceful employers’ counsel would employ such contract language after Iskanian and Williams. However, despite facts that may be unique, the Irving case is unpublished and therefore cannot be cited as authority.
Conflicts: Disqualification Of Conflicted Attorney Does Not Extend To Law Firm Whose Retention Attorney Facilitates And To Whom Attorney Transfers Files
Mediation Of Dispute Between Brothers Drew Our Attention To This Case.
Jogani v. Jogani, B268162 (2/1 11/25/16, mod. 11/28/16) (Chaney, Rothschild, Johnson) (unpublished) is about attorney disqualification and conflicts. The underlying dispute among the Jogani brothers appears to have been sliding up and down the California courts for fifteen years, involving a number of reversals by the Courts of Appeal. Perhaps the intensity of the brotherly dispute about how to carve up profits of a real estate portfolio has been fueled by “apartment units with a value in excess of $1 billion and equity of around $550 million.”
What caught my attention was that the transactional attorney who initially represented Shashikant and Haresh Jorgani in their real estate matters “at first attempted to mediate the dispute between the brothers, but ultimately ceased representing Haresh and continued representing only [Shashikant] Jogani by assisting Jogani’s trial attorneys . . . “ An attorney who tries to mediate a dispute between clients steps into a perilous situation. As the saying goes, “no good deed goes unpunished.” Resulting conflicts can become a quagmire.
In a prior appeal, the Court held that the transactional attorney violated the Rule of Professional Conduct governing concurrent conflicting representation, that subsequent representation of Shashikant only, violated the ethical rule against successive conflicting representation, and that as a result, the transactional attorney was disqualified from representing.
In the current appeal, the issue was whether the transactional attorney’s disqualification required that the trial attorneys to whom the transactional attorney transferred his file also had to be disqualified.
While the disqualification of the transactional attorney would have resulted in the vicarious disqualification of his own law firm, it did not lead here to the disqualification of the law firm to whom he transferred files. The record showed the transactional attorney had only assisted “to prosecute the lawsuit” by facilitating the retention of the trial attorneys and delivery of files to the law firm. While that was enough to disqualify the transactional attorney, it was not enough to disqualify an independent law firm that did not employ him. “To hold otherwise would be to disqualify not only a conflicted attorney but also any subsequent attorney to whom he delivered the client’s file.”
COMMENT: Rather than try to mediate a dispute among two existing clients, the transactional attorney could have suggested that the clients retain independent counsel and try mediating with someone other than himself. Of course, given a soured relationship among the parties, legal nuclear warfare might still have been the unhappy result.
Settlement Agreements: California Court Won’t Interfere With Texas Judge’s Ruling Allowing Discovery Of Information Subject To Confidentiality Provisions In California Settlement
There Is No Absolute Bar To Discovery Of Information Designated Confidential In A Settlement Agreement.
In 2007, Younan Properties entered into a settlement agreement with its CFO Thompson requiring confidentiality. Thompson had claimed that Younan Properties had engaged in unfair business practices, and wrongfully discharged him. In 2014, investors sued Younan Properties for fraud in Texas, and commenced to depose Thompson in Texas.
Younan Properties sought a preliminary injunction in California to prevent Thompson from violating the confidentiality provisions of the parties’ 2007 settlement agreement. After the trial court denied the request, Younan Properties appealed.
Younan Properties, Inc. v. Thompson, B266507 (2/4 11/21/16) (Epstein, Manella, Collins) (unpublished) affirms the order of the California trial court declining to interfere with Texas discovery orders, based on comity and the lack of a showing appellants were likely to prevail on the merits.
COMMENT: By the time the California Court of Appeal ruled, Thompson had already been deposed in Texas. Therefore, the Court of Appeal invoked the principle that it “may review moot issues if they are of broad public interest and likely to recur or cause another controversy among the parties.” Yet the opinion is unpublished.
An important lesson from this case should be that a confidentiality provision in a settlement agreement cannot absolutely bar court-ordered discovery of relevant information. Information might be relevant in another lawsuit, there may be compelling reasons that override the right to privacy, and principles of comity may even be involved – as they were here.
Arbitration/CCP 1281.2: CCA 4/3 Affirms Order Denying Arbitration In Lawsuit Between Law Firm And Ex-Client Because Ex-Client’s Lawsuit Against Another Law Firm Created Possibility Of Conflicting Rulings
Key Issue: Who Is A Third Party Within The Meaning of 1281.2(c)?
Reger v. Glaser Weil Fink Howard Avchen & Shapiro, LLP, G052352 (4/3 11/22/16) (Aronson, Bedsworth, Ikola) (unpublished) shows how a party with an otherwise valid arbitration clause can be thwarted from arbitrating through the application of Cal. Code Civ. Proc., section 1281.2(c) “when pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.”
Glaser Weil had represented Mr. Coxeter in an earlier lawsuit in which Mr. Coxeter’s business partner Mr. Bisno, alleged to have embezzled funds, paid for his and Mr. Coxeter’s joint defense. Mr. Coxeter separately hired Jackson, DeMarco, Tidus & Peckenpaugh to monitor the litigation because of potential conflicts. (Disclosure: I was a shareholder at Jackson DeMarco till February 2008. The full extent of my knowledge about this case comes entirely from the Slip Opinion). In December 2008, Glaser Weil withdrew as counsel, and Jackson DeMarco became Mr. Coxeter’s counsel of record. In 2015, Mr. Reger, as trustee in Mr. Coxeter’s bankruptcy, sued Jackson DeMarco and Glaser Weil on behalf of Mr. Coxeter’s bankruptcy estate, alleging claims for legal malpractice and breach of fiduciary duty, based on conflicts of interest, and failure to properly advise and defend Mr. Coxeter.
Mr. Coxeter had an arbitration agreement with Glaser Weil, but not with Jackson DeMarco. So Glaser Weil petitioned to compel arbitration. Jackson DeMarco, which did not have an arbitration agreement, joined in the petition. The trial judged denied the petition and joinder, finding that the malpractice claims against Jackson DeMarco constituted third-party litigation under section 1281.2(c) that might result in inconsistent rulings, allowing the judge to exercise his discretion and deny the request for arbitration.
Section 1281(c) may be used to deny a petition to compel arbitration where the following applies: “A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” Here, Glaser Weil did not dispute (1) that the claims against it and Jackson DeMarco arose out of the same related transactions; (2) that there was a possibility of conflicting rulings if one set of claims was litigated and the other was arbitrated. The nub of the dispute was Glaser Weil’s challenged to the trial court’s determination that Jackson DeMarco was “a third party within the meaning of section 1281.2(c)”.
In fact, there was some connection between Glaser Weil and Jackson DeMarco. A former Glaser Weil partner, Mr. Heyman, who later went to work for Jackson DeMarco, had done tax work for Glaser Weil’s first name founding partner, Patricia Glaser. Plaintiff alleged the “undisclosed and preexisting relationship with Patricia Glaser” made it impossible for Jackson DeMarco to exercise independent judgment when monitoring Glaser Weil’s representation of Mr. Coxter. But that was nowhere near enough to establish a commonality of interest between Glaser Weil and Jackson DeMarco such that Jackson DeMarco would not be a “third party”. Jackson DeMarco was not an agent nor an alter ego of Glaser Weil. Also, Jackson DeMarco and Glaser Weil represented Mr. Coxter for different purposes, and owed separate duties to him. Bottom line: “Heyman’s previous representation of Patricia Glaser, even when combined with Reger’s allegation regarding the purported conflict of interest that relationship created, is completely unrelated to the representations at issue in this case and has no connection to Glaser Weil’s retainer agreement and its arbitration provision.”
Affirmed.
COMMENT: The case relies on section 1281.2(c) of the California Arbitration Act, and makes no reference to the Federal Arbitration Act. If interstate commerce had been involved, and Glaser Weil has been able to invoke the Federal Arbitration Act, the result would have been somewhat different. The Court would have been unable to deny Glaser Weil’s petition to arbitrate, because presumably it had a valid arbitration clause, and it would not matter that there was another lawsuit pending. However, the Court would likely still have denied Jackson DeMarco’s joinder in the petition, because Jackson DeMarco did not have an arbitration agreement. Good luck to my former colleagues at Jackson DeMarco on the ultimate outcome of the dispute.