Arbitration, Existence Of Agreement: Second District, Div. 5 Holds Employee Is Bound By Arbitration Agreement He Did Not Sign–He Acknowledged Receipt And Kept On Working
Nor Was The Agreement Illusory Just Because The Agreement Provided The Employer Could Change It At Any Time.
In Harris v. Tap Worldwide, LLC, B262504 (2/5 6/22/16) (Turner, Kriegler, Kumar) (certified for partial publication, except part III(C) covering unconscionability), the Court determined that, notwithstanding that the arbitration agreement was unsigned, there was a validate agreement to arbitrate, the agreement to arbitrate was not illusory notwithstanding the employer’s ability to unilaterally change the Employee Handbook, and in an unpublished part of the opinion, the agreement was not unconscionable. Therefore, the trial court’s order denying defendants’ motion to compel arbitration was reversed.
Plaintiff asserted that under Sparks v. Vista Del Mar Child and Family Services, 207 Cal.App.4th 1511 (2012), merely acknowledging receipt of an Employee Handbook was insufficient to demonstrate a valid arbitration agreement existed. Addressing that argument, the Court distinguished Sparks: First, the acknowledgment form plaintiff signed “included acknowledging both the Employee Handbook and the attached arbitration agreement.” Second, the agreement to arbitrate could also be implied-in-fact, as it was here, where the employee continued to work and accept consideration.
The Court also made short shrift of the additional argument that the agreement was illusory, because the employer could change the terms at any time. Actually, that provision only applied to the Employment Handbook, not to the arbitration provision, which could only be modified by a writing, signed by both parties. And even as to the Employment Handbook, the employer’s ability to make unilateral changes to the terms is reigned in by the covenant of good faith and fair dealing.
Unconscionability: Arbitration Agreement Between Indiana Based Distance-Learning Partnership And California Licensed Vocational Nurses Determined To Be Unconscionable
Indiana Forum Clause Was Important Factor In Finding Of Substantive Unconscionability.
The Fourth District, Division One, concludes the trial court correctly determined the arbitration provision between an Indiana-based company soliciting business in California, and California residents, who were Licensed Vocational Nurses seeking to become Registered Nurses, was unconscionable. Magno v. The College Network, Inc., D067687 (4/1 6/14/16) (McConnell, Nares, O’Rourke) (unpublished).
The finding of procedural unconscionability was based on evidence that the Plaintiffs were young, rushed through the signing process, had no ability to negotiate, and did not see arbitration language buried on a back page in preprinted forms.
The finding of substantive unconscionability was chiefly based on the insertion of a forum selection clause providing for binding arbitration in Indiana, before an arbitrator selected by TCN.
The court found it necessary to distinguish Carnival Cruise Lines v. Shute, 499 U.S. 585 (1991), “which upheld a forum selection clause requiring Washington State residents to pursue litigation in Florida.” Whereas the plaintiffs in Carnival conceded notice of the forum selection clause, here there was substantial evidence that the plaintiffs were unaware of the arbitration provision altogether as well as the forum-selection clause. Moreover, unlike Carnival, “this dispute [is] an essentially local one inherently more suited to resolution in the State of [California] than in [Indiana].”
Affirmed.
Arbitration, Scope, Enforceability, Construction: Employees Get To Litigate Class Action Claims, Because Arbitration Agreement Excluded Class Action Claims From Its Scope
Court Looks At Evolution Of Class Action Waiver Law In California For Help Construing Meaning Of The Contractual Language.
In 2011, AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) held the Discover Bank rule, invalidating a class arbitration waiver, had been preempted by the Federal Arbitration Act. After Concepcion, employers frequently insert class arbitration waivers in their employment agreements and dispute resolution policies.
But that’s not what happened in Licon v. Wish-I-Ah Skilled Nursing & Wellness Centre LLC, F070304 (Fifth Dist. 6/15/16) (Hill, Kane, Franson) (unpublished), where the Employment Dispute Resolution (EDR) Program was written before Concepcion was decided. Instead, the EDR Program provided that it “covers only claims by individuals and does not cover class or collective actions.” (italics in the Court’s opinion). Construing the plain meaning of the words, the Court of Appeal agreed with the trial judge that the arbitration agreement excluded class and collective actions from its scope, so plaintiffs were not required to arbitrate class or private attorney general claims.
Of course, the employer argued “other language in the EDR program booklet demonstrates an intent to arbitrate all claims on an individual, nonclass basis . . . “
The Court found it helpful to consider the extrinsic evidence of how the employer’s EDR policy had evolved from before to after Concepcion, for after Concepcion, the employer changed the wording of its EDR policy to take advantage of Concepcion’s evisceration of the Discover Bank rule. The Court concluded that the pre-Concepcion ERP, which governed the situation, meant what it said, because it had been drafted at a time when the employer “had to be concerned with the possibility a court would invalidate a class action or class arbitration waiver.”
Arbitration, Waiver, Record: “Woefully Inadequate” Record Fails To Support Employer’s Appeal From Trial Court’s Order Concluding Employer Waived Right To Enforce Arbitration Agreement
Employer Claimed Appeal Was Based On Entire Record, But Failed To Provide Court With Entire Record.
Employer ICC Collision Centers, Inc. appealed the trial court’s order denying its motion to compel its employee Ogannesian to arbitrate his wage/hour claims. The trial court had concluded that the employer waived its right to arbitrate by delaying too long and taking actions inconsistent with asserting the right to arbitrate. Ogannesian v. ICC Collision Centers, Inc., G049836 (4/3 6/14/16) (Ikola, Moore, Thompson) (unpublished).
On appeal, the chief problem identified by Justice Ikola was a “woefully inadequate record.” While the employer did include its motion to compel arbitration, which purported to be based on “the documents on file in this action,” in fact the employer did not include the entire court file on appeal.
In particular, the employer failed to include a case management statement filed by ICC’s prior counsel, and stating ICC “may file a Motion to Compel Arbitration and Stay Proceeding. . . “ This contradicted the employer’s implication on appeal that its prior counsel “was unaware the arbitration agreement even existed.” In addition, the employer opposed efforts to augment the record with the case management statement.
The employer’s opposition to the motion to augment the record seems to have left a sour taste with Justice Ikola. Troubled by the argument, he wrote, “it suggests we should be more concerned about [the employee’s] delay in designating a record than about [the employer’s] own apparent misrepresentation of fact.” Ouch! Affirmed.
Best line: “Apparently, ICC believes that what we do not know cannot hurt it.” Not so, since the “onus is on appellants” to provide a complete record!
Arbitration, Fees, Stay, FAA: Ninth Circuit Holds That Arbitration Terminated For Party’s Inability To Pay Fees, Had Nevertheless Been Had, So District Court Should Lift Stay On Litigation
What Does It Mean For An Arbitration To “Have Been Had In Accordance With The Terms Of The Agreement” When A Party Is Unable To Pay Arbitration Fees?
We revisit a recurring problem that occurs in arbitration. In federal court, a party successfully moves to compel arbitration under the FAA, and the court stays litigation. Arbitration commences. Next, one of the parties to the arbitration is unable to pay the costs of arbitration, and therefore stops paying. Under the rules of the AAA, the AAA can suspend the arbitration if the other party does not pay for the arbitration. The other party refuses to pick up the tab, and the AAA suspends the proceeding. What happens next? Are the parties definitively done, because they agreed to arbitrate, and the arbitration has not been had, or can they proceed in court? Under such circumstances, just what does it mean for an arbitration to have been had? That is the scenario the Ninth Circuit confronted in Tillman v. Rheingold Firm, No. 13-56624 (9th Cir. 6/15/16) (Berzon, Gould, Steeh) after defendant/appellant ReneeTillman stopped paying arbitration fees.
Relying on Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010 (9th Cir. 2004), the district court had erroneously held that it “lack[ed] the power to allow further litigation.” Lifescan, Inc. was a case in which, “despite Premier’s non-payment of its share of arbitration fees, there was ‘no basis for an order requiring Premier to pay the fees, or compelling arbitration.’” Compelling arbitration would have been inappropriate, because the arbitration had been had according to the agreed-upon AAA rules, allowing the AAA to suspend the proceeding in Lifescan upon non-payment. However, in Tillman, the Ninth Circuit pointed out that “Lifescan’s only conclusion was that compelling arbitration would be inappropriate. . . Nothing in the FAA requires dismissal of the litigation under Lifescan’s circumstances or the present ones.”
In Tillman too, the arbitration had been had according to the rules of the AAA, allowing for dismissal upon a non-payment of arbitration fees. Because the FAA “provides that district courts must stay pending proceedings on issues subject to arbitration until such arbitration had been had, 9 U.S.C. section 3,” the stay could now be lifted. Nor was there a basis to compel arbitration, because ReneeTillman had not failed, neglected, or refused to arbitrate.
In dictum, the panel suggests that the outcome could be different if Tillman had willfully refused to pay the arbitrator’s fees, or if Tillman was the one seeking a stay in federal court, “as that would frustrate the Rheingold firm’s attempts to have the case heard in either the court or the arbitral forum.”
NOTE: On February 29, 2012, I posted on a similar scenario in Cinel v. Christopher, in which failure to pay fees resulted in termination of an arbitration that then bounced back to federal court.
Arbitration, Vacatur, Continuances, Disclosures: Fifth District Holds Trial Court Properly Confirmed Arbitration Award, Notwithstanding Arbitrator’s Denial Of Postponement And Refusal To Disqualify Himself
Arbitrator Made Disclosures “In Abundance of Caution.”
One basis for vacating an arbitration award is when the arbitrator’s denial of a postponement results in substantial prejudice. Another basis for vacating an award is when the arbitrator is obligated to disqualify himself and fails to do so. In McElvany, Inc. v. Hassan Ahmadi et al., No. F069809 (5th Dist. 6/9/16) (Hill, Franson, Pena) (unpublished), the defendants/appellants argued that both bases justified vacating the arbitrator’s award in favor of plaintiff/respondent. The Court of Appeal disagreed, affirming the judgment confirming the award.
Here, the arbitrator denied a request for a continuance by an attorney who argued he was newly substituted, and a co-defendant was unavailable after recent surgery. The attorney’s request for a continuance was denied, and neither the defendants nor their attorneys appeared for the arbitration. Though the co-defendant had a right to appear, she did not express a desire to be present, and there was no evidence presented to the arbitrator that her presence was necessary to fairly present the case. As to the failure of the attorneys to appear, there was no evidence that the outcome would have been different if they had presented the case on the merits.
The arbitrator also refused to disqualify himself, after disclosing (a) his firm had hired an associate who had formerly worked for plaintiff’s law firm, but would be isolated from the case; (b) plaintiff’s law firm hired the sister of the arbitrator’s paralegal as a receptionist. The Court of Appeal concluded that the information disclosed by the arbitrator did not require disqualification, because it would not cause a reasonable person to believe the arbitrator was biased, and because it did not create a conflict of interest.
The panel’s view of matters may have been colored by the fact that several postponements of the arbitration had been granted, and the defendant had also used the filing of a bankruptcy petition to stave off the outcome.