Pending Cases: Baxter v. Bock Is Now Partially Published
Case Involved The Mandatory Fee Arbitration Act.
We just posted on Baxter v. Bock on May 22, 2016, a case involving the MFAA and an acknowledged arbitrator’s error that was not a basis for vacating an award, as well as disclosure requirements. We can now report that the case is partially published as of May 24, 2016.
Collective Bargaining/Public Policy Exception: Ninth Circuit Reverses District Court’s Decision That Vacated Arbitrator’s Award On Erroneous Grounds Arbitrator’s Interpretation Of Agreement Was Not “Plausible” And Was Contra
Opinion Clarifies Limited Role Played By Courts In Reviewing Labor Arbitration Awards.
In Southwest Regional Council of Carpenters v. Drywall Dynamics, Inc., No. 14-55250 (9th Cir. May 19, 2016) (Berzon, Owens, Marbley), the Ninth Circuit reverses a district court order vacating an arbitration award in a labor case, along the way criticizing use of “plausibility” as a guide to review, and pointing out that the so-called “public policy exception” allowing for review of an arbitrator’s award, is in fact a limited exception requiring violation of an “explicit, well-defined, and dominant public policy.”
Perhaps the facts troubled the district court judge. Respondent Drywall Dynamics, Inc., (“Drywall”) entered into a labor agreement with petitioner Southwest Regional Council of Carpenters (“SWRCC” or “Union) by which Drywall assigned to a contractors’ association authority to bargain on its behalf. Drywall attempted to terminate the agreement, but the Union and association had executed a Memorandum of Understanding (“MOU”) extending the agreement before Drywall could terminate it – something that happened more than once. The arbitrator found in favor of the Union, in particular finding that the termination was not timely.
The district court ruled that the arbitration panel’s interpretation of the contracts was not “plausible” – the first problem. The Ninth Circuit has now clarified that “plausibility” is not the standard of review, to the extent that “plausibility” requires looking at the merits of the decision. Instead, the question is “whether [the arbitrator] made any interpretation or application of the agreement at all,” adding: “If so, the court’s inquiry ends.” Another formulation of this is: “Did the arbitrator look at and construe the contract, or did he not?”
The second problem arose when “the district court determined that the arbitrator’s award violated ‘a clear public policy in favor of voluntary relationships among employers and multi-employer bargaining units’.” The district court had in mind “the voluntary nature of multiemployer bargaining.” However, the Ninth Circuit found no such clear public policy, but rather competing interests that include the right to withdraw from a multiemployer unit and the stability of multiemployer units. With competing policies, no clear public policy exists, thus, no violation of a clear public policy, thus, no exception allowing for review of the arbitrator’s award. Query whether Drywall is in a sort of Catch-22 situation — stuck with outcomes it does not like, and unable to find a simple way to extricate itself from multiemployer bargaining.
Arbitration/Standard Of Review/MFAA: Arbitrator’s Error In Stating Amount Of Fees Paid By Client Not A Reason To Overturn Arbitrator’s Award In Attorney-Client Fee Dispute
But Court’s Decision On Fee Award Is Vacated, Because There Was No Reasonable Basis For Assigning Different Hourly Rates To Two Attorneys.
Baxter v. Bock, A142372, A142984, A143689 (1/1 May 18, 2016) (Margulies, Humes, Dondero) (unpublished) rather starkly illustrates the application of different standards of review to the arbitration award in an attorney’s fees dispute, and to the trial judge’s award of attorney’s fees to the client who successfully defended against the attorney’s efforts to collect more.
Although the parties acknowledged that the arbitrator erred in stating the amount of fees paid by the clients when calculating the amount in dispute in fees between attorney and client, that was no basis for the trial court, which confirmed the award, to vacate the award. As we know, mistakes of law or fact are ordinarily not a basis for overturning an arbitrator’s award.
However, when the clients then moved the trial court successfully for an award of attorney’s fees expended defending against the attorney’s claims, a different standard of review applied – an abuse of discretion standard when reviewing a trial court order awarding attorney fees. Here, the Court of Appeal found no reasonable basis in the record for applying different rates to two of the client’s attorneys. therefore, the matter was remanded to the trial court solely for reconsidering the lodestar compensation rate for one of the attorneys.
Another issue involved in this case is whether the arbitrator should have made an additional disclosure relating to bias, because part of his business involved auditing attorney client bills. The Court of Appeal concluded that the general disclosure requirements of the MFAA and the California Arbitration “are, for practical purposes, the same, and decisions under the ‘impartiality’ disclosure requirements of the CAA may be applied in evaluating arbitrator disclosure obligations under the MFAA.” However, the arbitrator’s practice was not devoted exclusively to one side of fee disputes; his law firm’s expertise was “in reviewing attorney bills, rather than in representing one side or the other in fee disputes.” So the disclosures were adequate.
Arbitration/Existence Of Agreement: Fourth District, Div. 1 Affirms Order Denying Arbitration Based Appellant’s Failure To Show Arbitration Agreement Existed
Authenticity Of Agreement To Arbitrate Was Called Into Question.
The Court of Appeal has affirmed the trial court’s denial of a petition to compel arbitration, concluding “that the trial court did not err in finding that appellants failed to establish that [respondent] signed the employment agreement.” Joyce v. Volt Management Corp., D067867 (4/1 May 17, 2016) (Aaron, Prager, Huffman) (unpublished). The employee presented enough evidence such as that there was a substantial basis for the trial court’s conclusion that the employer had not established the authenticity of the agreement. Among other things, the employee did not remember receiving the agreement, and when he requested his personnel file, he did not receive the employment agreement, and the employer failed to submit an affidavit from an employee who might have authenticate the agreement.
There were additional problems beyond establishing the authenticity of a signed employment agreement. While the employee handbook contained an arbitration agreement, it could not be enforced b4ecause it was expressly superseded by a separate employee orientation guide. Furthermore, because later documentation expressly called for a signature to be effective, but did not have one, merely continuing to work was not enough to validate the arbitration agreement.
Mediation: California Labor Code Section 1164.9, Which Limited Judicial Review Of Agricultural Labor Relations Board’ Action On Collective Bargaining Agreement Following “Mandatory Mediation And Conciliation”, Is Unconstitutional
Mandatory Mediation And Conciliation Is A Curio.
The reason I post on this case is I thought it a curiosity, for those of use who do not practice in the area of union negotiations, that the California Labor Code, sections 1164 et seq., enables a process of “mandatory mediation and conciliation” (MMC) between a union, such as the United Farm Workers (UFW), and an agricultural employer, that is a binding process, in which the “mediator” takes evidence, hears arguments from the parties, and submits a “report” to the Agricultural Labor Relations Board. This is a rather specialized application of the term “mediator”!
![Interview with Cesar Chavez. 4/20/1979. [Chavez talking and pointing downwards]](http://cdn.loc.gov/service/pnp/ppmsca/40900/40912r.jpg)
Above: Interview with Cesar Chavez. April 20, 1979. Library of Congress.
In Gerawan Farming, Inc. [Appellant] v. Agricultural Labor Relations Board et al. [Respondents] & Garcia [Intervener] v. Agricultural Labor Relations Board et al. [Respondents], No. F069896/F070287 (5th Dist. May 9, 2016) (Kane, Hill, Levy) (certified for partial publication), Garcia, an employee of Gerawan, requested the Board’s permission to attend and observe the MMC process between Gerawan and the UFW. The Board rejected Garcia’s request, and Gerawan and Garcia, as intervener, sought declaratory relief in the superior court. Here’s the rub: Labor Code section 1164.9 limits all judicial review of the Board’s ruling to the Court of Appeal or Supreme Court. Therefore, the the superior court sustained the Board’s demurrers to Gerawan’s and Garcia’s complaint seeking a declaration that the Board’s no right of public access ruling violated the federal and state Constitutions.
Held: Section 1164.9 is unconstitutional, because it divests the Superior Court of its original jurisdiction, even though there is no “other constitutional provision that would expressly or impliedly grant to the Legislature the power to divest the superior court of its original jurisdiction in such matters.”
Removing the obstacle of section 1164.9 is not the end of the matter. Instead, the Court remands to the trial court so the Board will have an opportunity to assert procedural and other defenses, and to more fully develop the record. Having corrected legal error committed in the trial court, the Court of Appeal’s work is done – for now.
Arbitration/Bankruptcy: Ninth Circuit Holds Bankruptcy Court Properly Exercised Its Discretion When It Denied Motion To Compel Arbitration In Core Bankruptcy Proceedings
A Matter Of Discretion.
In the Matter of EPD Investment Co., No. 14-56478 (9th Cir. May 9, 2016) (Silverman, Graber, Dorsey) teaches that a core bankruptcy proceeding can take precedence over an arbitration agreement.
The Trustee in a Chapter 7 bankruptcy filed an adversary proceeding against defendant Kirkland, an attorney who acted as counsel for EPD, claiming that Kirkland transferred assets from EPD, a purported Ponzi scheme, to a family trust named the “Bright Conscience Trust.” Kirkland moved the bankruptcy court to compel arbitration of the bankruptcy proceeding, and the bankruptcy court denied Kirkland’s motion. Kirkland appealed the bankruptcy court’s decision to the district court, the district court affirmed, and an appeal followed to the Ninth Circuit.
Above: Charles Ponzi in 1920 while still working as a businessman in his office in Boston. Wikipedia.
The bankruptcy court has jurisdiction over “core proceedings”, the duties and issues reserved to the bankruptcy judge, tautologically speaking. In a core proceeding, “a bankruptcy court has discretion to decline to enforce an otherwise applicable arbitration provision only if arbitration would conflict with the underlying purposes of the Bankruptcy Code.” In re Thorpe Insulation Co., 671 F.3d 1011, 1021 (9th Cir. 2012).
Here the Ninth Circuit panel agreed with the bankruptcy court “that the Trustee’s fraudulent conveyance, subordination, and disalowance causes of action were core proceedings, thereby giving the bankruptcy court discretion to weigh the competing bankruptcy and arbitration interests at stake.” The bankruptcy court applied Thorpe, and did not exceed its discretion by determining that the arbitration provisions conflicted with Bankruptcy Code purposes of centralizing resolution of the dispute and protecting parties from piecemeal litigation. The bankruptcy court had supervised debtors’ cases for nearly three years, during which time the Trustee filed more than 100 other adversary proceedings.
Affirmed.