Arbitration, PAGA: Third District Says Whether Representative PAGA Claims Can Be Subject To Mandatory Arbitration Remains Unsettled, And Doesn’t Settle It
Unlike The Arbitration Agreement In Iskanian, The Agreement Here Did Not Include A Waiver Of The Right To Bring A PAGA Representative Claim.
The Court in Eaton v. Big League Dreams Manteca, LLC, C079374 (Third District 11/2/16) (Renner, Nicholson, Murray) (unpublished) addresses an issue that some may have thought was settled after Iskanian: whether PAGA representative claims can be the subject of mandatory arbitration. Relying on Iskanian, the trial court in Eaton concluded that PAGA representative claims cannot be arbitrated. However, the Court of Appeal concludes that the issue is not settled – without settling it.
“On the one hand. . . on the other hand,” says the Court of Appeal. On the one hand, it is plausible that PAGA representative claims cannot be arbitrated, because Iskanian treats PAGA claims as a dispute between the State of California and the employer – and the State never signed an arbitration agreement. But on the other hand, in Iskanian, the arbitration clause included a waiver of representative PAGA claims – something the court would not countenance. So perhaps arbitration claims can be arbitrated if they are not waived, because arbitration would provide a forum for deciding the substantive rights.
Instead of deciding the issue, the Court of Appeal concludes that other issues must be addressed first: the trial court “must determine whether the parties’ arbitration agreement encompasses representative PAGA claims and whether incorporation of the AAA Employment Rules constitutes clear and unmistakable evidence of their intent to delegate questions of arbitrability to the arbitrator.” If the answer is yes, then the case gets stayed and the arbitrator must determine the scope of the arbitrator’s jurisdiction to decide the PAGA claims.
If the arbitrator concludes that there is a lack of arbitral jurisdiction because PAGA claims are really between the State and the employer, does the can then get kicked back to the trial judge?
BONUS TRIVIA from Wikipedia article (“Kick the Can”): “Play scholar Rodney Carlisle notes that: ‘As outdoor and unstructured play of children continues to dwindle, the game of Kick the Can is becoming less and less known to each generation… At one point in time, teenagers played Kick the Can with younger children, and the game and its variations were passed on from child to child. Past generations remember this game fondly, and it was enough of a cultural phenomenon that it was a central player in a 1962 episode of The Twilight Zone and was incorporated later in the 1983 film of the same name.’"
Arbitration, Employment, FAA, Class, Waiver: Petition For Certiorari To SCOTUS Filed In NLRB v. Murphy Oil USA, Inc.
The Circuits Disagree About Class Action Waivers In Arbitration, The NLRA, And Prohibition Of “Concerted Activities” In Pursuit Of Employees’ “Mutual Aid Or Protection”.
On October 11, 2016, I blogged that on September 8, a petition for a writ of certiorari had been filed by the accounting firm in Morris v. Ernst & Young, presenting the issue: ““Whether the collective-bargaining provisions of the National Labor Relations Act prohibit the enforcement under the Federal Arbitration Act of an agreement requiring an employee to arbitrate claims against an employer on an individual, rather than collective basis.”
The same source for my earlier post, Kate Howard’s Petition of the Day in SCOTUSBlog, reported on November 2 that on September 9, a petition for a writ of certiorari was filed in National Labor Relations Board v. Murphy Oil USA, Inc.,16-307, presenting the issue: ”Whether arbitration agreements with individual employees that bar them from pursuing work-related claims on a collective or class basis in any forum are prohibited as an unfair labor practice under 29 U.S.C. § 158(a)(1), because they limit the employees’ right under the National Labor Relations Act to engage in “concerted activities” in pursuit of their “mutual aid or protection,” 29 U.S.C. § 157, and are therefore unenforceable under the savings clause of the Federal Arbitration Act, 9 U.S.C. § 2.
So now we have a collision between the Ninth Circuit in Morris v. Ernst & Young and the Fifth Circuit in NLRB v. Murphy Oil USA. And the arbitration class action waiver/”concerted activities” issue has been squarely presented to the Supreme Court in dueling petitions for writ of certiorari.
Review, Arbitration, Disclosures, MFAA: The Message From Baxter v. Rock
“Vet Your Fee Arbitrator Early.”
In May 2016, I posted on the then unpublished case Baxter v. Rock, and posted later that the case was partially published. 247 Cal.App.4th 775 (2016). Relying on the case, I pointed out that an arbitrator’s mistake about an attorney’s fees award was no basis for overturning the award under California’s Mandatory Fee Arbitration Act, but that a judge’s error in assigning different hourly rates to two attorneys, without a reasonable basis for doing so, was subject to a different standard of review, and could be more easily reversed – as it was.
The case, however, was also important for what it said about arbitrator disclosures. The arbitrator who failed to disclose prior experience auditing attorney’s fees, could not be later disqualified in an attorney fee arbitration held under the MFAA. Just because the arbitrator had experience auditing attorney’s fees did not necessarily mean that the arbitrator was biased for or against the attorney or the client.
Mary A. Dannelley, Esq. has written an article about the disclosure requirements discussed in Baxter v. Rock, published in Orange County Lawyer (November 2016), and entitled, “The Message from Baxter v. Rock: Vet Your Fee Arbitrator Early.”
Here are three takeaways from this helpful article:
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“arbitrators are required to disclose: (a) connections to the parties, the facts, or the events at issue in the fee dispute; and (b) business activities of an attorney arbitrator (including the nature of his or her law practice) that would create an economic incentive to rule in favor of one party over the other.”
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the arbitrator should disclose the arbitrator’s practice as an attorney if it is focused on a particular area related to the subject matter of the litigation such that it would provide the arbitrator with an incentive to rule in favor of one side rather than the other.
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vet your arbitrator early, because post-arbitration challenges to the sufficiency of disclosures will be viewed by the courts with a gimlet eye.
Arbitration, FAA, Pending Cases: SCOTUS Grants Cert Petition In Kindred Nursing Centers Limited Partnership v. Clark
Petitioner And Respondent Frame Issue Quite Differently.
I wrote about Kindred Nursing Centers Limited Partnership v. Clark in an August 5, 2016 post, stating that the nursing company petitioning from the Kentucky Supreme Court to SCOTUS presented the issue thusly:
”Whether the FAA preempts a state-law contract rule that singles out arbitration by requiring a power of attorney to expressly refer to arbitration agreements before the attorney-in-fact can bind her principal to an arbitration agreement.”
I can now report that the Supreme Court granted Kindred Nursing Center’s petition for a writ of certiorari on October 28, 2016, and also add that Respondent Clark frames the issue rather differently:
“Whether the Kentucky Supreme Court’s routine application of interpretive principles to an instrument of Agency, e.g., a power-of-attorney, is preempted by the Federal Arbitration Act.”
FAA, Pending Cases: Tamko Building Products v. Hobbs Cert Petition Presents FAA Preemption Issue To SCOTUS
Is There A Meaningful Distinction Between Contract Enforcement And Contract Formation For Purposes Of FAA Preemption?
Kate Howard’s October 26, 2016 post about “Petitions To Watch” in Scotusblog notes that an arbitration case, Tamko Building Products, Inc. v. Hobbs, No. 15-1318, is up for consideration at the conference of October 28, 2016.
According to the petition, signed by Paul D. Clement, the issue presented is: “Whether a state court can evade the preemptive force of the Federal Arbitration Act by framing its refusal to enforce an arbitration agreement as a product of supposed defects in “contract formation” that would not prevent the formation of any other contract.”
Petitioner Tamko is trying to come within the rule of Concepcion, which held that courts must place arbitration agreements on “equal footing” with other contracts. In other words, the courts can’t place burdens on arbitration agreements that they couldn’t place on other agreements, absent clear congressional intent to do so.
Respondent frames the issue differently: “Does the Federal Arbitration Act preempt the lower court’s application of this rule1 to a case where the evidence suggests that the arbitration clause was not presented in a way that would give the consumer notice of its existence or the fact that keeping the product would supposedly constitute agreement to arbitration?”
1 In context, “this rule” means, “unless a party has actual knowledge of
the contract terms, the party’s conduct does not signify assent unless there was reasonable notice of the terms and the conduct that would be deemed to manifest assent
to them.”
Mediation, Confidentiality, Family Law: Lacking Mediation Privilege, Unmediated Spousal Settlement Is Set Aside Because Presumption Of Undue Influence Applied
Here’s A Good Example Of Why It Is Harder To Set Aside A Mediated Spousal Settlement Than An Unmediated, Negotiated Settlement.
In Marriage of Cooke, B257791 (2/7 10/17/16) (Segal, J.) (unpublished), the wife moved for entry of a stipulation for judgment that she and her husband signed. The opinion rather vividly describes the the scene in which the distraught, unfocused, weepy, and unrepresented husband met with his wife and signed the stipulation for judgment. A month later, the husband changed his mind, and responded to the petition for marital dissolution, requesting other arrangements.
The trial court vacated the stipulation, based on undue influence, and the wife appealed.
The Court of Appeal explains that a presumption of undue influence applied to the stipulation for judgment, because the stipulation unfairly advantaged the wife, and the fiduciary relationship between husband and wife means that the advantage “presumes such transactions to have been induced by undue influence.”
However, the presumption of undue influence does not apply to mediated settlements. Therefore, the wife argued that the negotiated settlement should be treated like a mediated settlement. The Court disagreed, pointing out: “Divorce mediators generally work to balance the negotiating power between the parties.”
Whether or not that is empirically true, the parties can also take advantage of the mediation privilege to exclude evidence when there is a genuine mediation.
Here, there was no mediation, just an unmediated, negotiated settlement. Unable to rely on the mediation privilege, the wife fell back on the settlement negotiation privilege in Evid. Code sections 1152 and 1154, to argue that she would be unfairly prevented by the Evidence Code from introducing evidence to rebut the presumption of undue influence. However, the protection of settlement negotiations only prevents the introduction of evidence to prove a defendant’s liability, or to preclude evidence of an injured party’s offer to discount a claim to prove the claim’s invalidity. Those protections would not have prevented the wife from introducing evidence that the parties did not reach a binding contract.
Affirmed.
COMMENT: If the parties had hired a mediator, the stipulation would almost certainly have been enforced. The presumption of undue influence would not have applied, and the wife could have taken advantage of the mediation privilege.