Arbitration/Vacatur: Arbitrator Whose Power Is Contractually Limited To That Of A Superior Court Judge Enforcing California Law Is Subject To Ripeness Doctrine
But Arbitration Panel Did Not Exceed Power In Panoche Energy Center v. PG&E.
RIPENESS
Advertisement. c1869. Library of Congress.
Under California law, parties to an arbitration can contractually limit an arbitrator’s powers, creating opportunities for vacating arbitration awards when the arbitrator exceeds the arbitrator’s powers – something not to attempt under federal law.
Panoche Energy Center, LLC v. Pacific Gas and Electric Company, A140000 (1/4 May 5, 2016) (Streeter, Ruvolo, Reardon) (unpublished) involves an arbitration in “a long-running dispute” between an electricity producer and a utility over which of them should bear costs to comply with a legislatively mandated program to reduce greenhouse gas. The arbitration panel stuck Panoche with the costs of implementing green house gas reduction, and Panoche petitioned to vacate the arbitration award under 1286.2(a)(5), “alleging its rights were ‘substantially prejudiced’ by the arbitrators’ refusal to ‘postpone’ the hearing ‘upon sufficient cause being shown’ (i.e., until regulatory proceedings were completed so that the outcome of those proceedings could be considered in the arbitration).” The trial court agreed that the arbitration was premature and vacated the award. PG&E appealed.
The parties had agreed: “The Parties are aware of the decision in Advanced Micro Devices, Inc. v. Intel Corp., 9 Cal.4th 362 (1994), and, except as modified by this Agreement, intend to limit the power of the arbitrator to that of a Superior Court judge enforcing California Law.”
Because Superior Court judges cannot adjudicate unripe cases, the Court of Appeal concluded that the arbitrator’s roles were contractually limited to the adjudication of justiciable controversies. However, the Court of Appeal then concluded that the controversy was neither unripe nor moot, reversing the court’s order vacating the arbitration award, and directing that the award be confirmed.
Arbitration/Scope: Ninth Circuit Holds That Antitrust Claims Fell Outside Scope Of Agreement To Arbitrate Fishermen’s Opposition To Marketing Arrangement Of Seafood Companies
Fish Story Weighed On Scales Of Justice Results In 2-1 Opinion.
New Orleans writer and television personality Ronnie Virgets is served the house specialty, ice-cold oysters on the half shell, by Alma Griffin at Casamento’s Seafood Restaurant in Uptown New Orleans, Louisiana. Carol M. Highsmith, photographer. Between 1980 and 2006. Library of Congress.
Motions to compel arbitration often turn on the scope of the arbitration clause – and “Scope” is one of this blawg’s sidebar categories. Federal courts look to “general state-law principles of contract interpretation, while giving due regard to the federal policy in favor of arbitration by resolving ambiguities as to the scope of arbitration in favor of arbitration.” Boardman v. Pacific Seafood Group, Nos. 15-35257/15-35504 (9th Cir. May 3, 2016) (Tashima, author; Bea, conc., Gilman, conc. and dissenting in part), quoting Wagner v. Stratton Oakmont, Inc., 83 F.3d 1046, 1049 (9th Cir. 1996)..
In Boardman, Judge Tashima, writing for the majority, concluded that the claims of plaintiffs/fishermen were not within the scope of an earlier resolution agreement, providing that claims about any new agreement requiring Pacific Seafood Group to act as the exclusive marketer of any seafood product produced by Ocean Gold Seafoods would be submitted to a federal district court judge or magistrate for resolution. The new claims were antitrust claims arising from Pacific Seafood’s plan to acquire Ocean Gold’s stock, and Judge Tashima saw a difference between purchase plans and marketing plans.
Judge Gilman agreed with the majority opinion’s holding that the district court’s granting of a preliminary injunction was not an abuse of discretion, but believed that the majority’s conclusion that the fishermen’s claims “clearly and ambiguously fall outside the scope” of the agreement contravened the “emphatic federal policy in favor of arbitral dispute resolution,” citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614.
Mediation Confidentiality: Second District, Division Four, Affirms That There Is No “Attorney Malpractice” Exception To Mediation Confidentiality
Mediation Confidentiality Survived End Of Mediation.
![[Two girls whispering]](http://cdn.loc.gov/service/pnp/jpd/02100/02150r.jpg)
Above: Whispering. Masanobu Okumura. 1743. Library of Congress.
Based on the confidentiality of communications made in the course of mediation, the Court of Appeal affirms a judgment dismissing a complaint for legal malpractice and breach of fiduciary duty. Biller v. Faber, No. B244232 (2/4 April 27, 2016) (Epstein, J.) (unpublished). In so doing, the Court follows Evid. Code, section 1119, and Cassel v. Superior Court, 51 Cal.4th 113 (2011).
Plaintiff Biller, an in-house counsel for Toyota, had earlier sued his employer, Toyota, claiming he had been hired by Toyota to commit litigation fraud. The employment dispute was submitted to a mediator. Biller received $4M from Toyota, and his attorney Faber received $950K as attorney fees.
Next, Toyota sued Biller in state court for breach of a confidentiality provision in the severance agreement the parties had negotiated in mediation, and Biller sued in federal court for violations of RICO and other claims. The two lawsuits were submitted to an arbitrator, and in the joint arbitration, Toyota tagged Biller for $2.5M. The arbitrator’s award in the two actions was confirmed, and affirmed on appeal. Alas, an unfortunate outcome for Biller, who then sued his attorney Faber for malpractice in connection with the negotiation of the severance package.
There are two interesting aspects of this case.
First, the trial judge adopted a referee’s recommendation and dismissed Biller’s malpractice action based on the attorney-client privilege asserted by Toyota, reasoning that confidential attorney-client privileged documents between Biller and his employer Toyota were necessary for him to prove his “case within a case”, i.e., to prove that Biller would have obtained a more favorable severance agreement in the absence of attorney malpractice; and, that Faber needed the same documents to prove his defense. Relying, however, on the principle that a judgment can be affirmed under any applicable theory of law, including the mediation confidentiality statutes, the Court of Appeal affirmed, based on the applicability of the mediation confidentiality.
The Court of Appeal points out that it could not rely on attorney-client confidentiality for several reasons (footnote 11), among them: (1) the alleged existence of the crime-fraud exception (which might have presented a can of worms?), (2) the attorney-client privilege doesn’t apply in an action between attorney and client for a breach arising from the attorney-client relationship, (3) for Toyota “it is too late to close that door”, and (4) Toyota’s secrets “are safe with Faber” because the attorney is bound by the same rules of confidentiality and privilege as his client The takeaway here is that there can be circumstances where there are chinks in the armor of the attorney-client privilege, and mediation confidentiality provides a stronger shield.
The second interesting aspect of this case is that the employment severance agreement was signed at a time when the mediation had ended, opening the door for Biller to argue that mediation confidentiality did not apply. However, the Court distinguishes between the end of mediation (10 calendar days during which there is no communication between the mediator and any parties to the mediation, under section 1125(a)(5)), and the end of confidentiality. Because the parties accepted a mediator’s proposal and executed a written settlement agreement, the Court thought it would be “absurd” to say that mediation confidentiality ended just because the severance agreement was signed more than 10 days after the end of communication with the mediator.
Judgment AFFIRMED.
News: Consumer Financial Protection Bureau Seeks Rule On Arbitration To Restore Right To Sue Banks
Rule Would Not Apply To Consumer Sectors Outside Bailiwick Of Consumer Financial Protection Bureau
Jessica Silver-Greenberg and Michael Corkery, who have reported recently in the NYT about how arbitration clauses are spreading throughout consumer contracts, now report in the May 5, 2016 online edition of the NYT, that the Consumer Financial Protection Bureau will seek new rules to prevent lenders from forcing people to agree to mandatory arbitration clauses that bar class actions – a move that could be accomplished without Congressional action.
Vigorous opposition can be expected from the U.S. Chamber of Commerce and lenders, as well as other businesses that want mandatory arbitration clauses.
The rule can only apply to consumer financial companies the agency regulates, Therefore, “[i]t would not apply to arbitration clauses tucked into contracts for cellphone service, car rentals, nursing homes or employment.”
Recall the key case that opened up the widespread use of arbitration clauses in consumer contracts is AT&T Mobility v. Concepcion, 563 U.S. 333 (2011), and the rule would not affect cell phone companies.
Mandatory Fee Arbitration: Two New Committee On Mandatory Fee Arbitration Advisories
The Committee on Mandatory Fee Arbitration of the State Bar of California has two new Advisories on Mandatory Fee Arbitration (MFA) brought under the Business & Professions Code. Advisory 2016-01, replacing Advisory 2011-02, is about the application of the Statute of Limitations for MFAs. Advisory No. 2016-02, replacing Advisory 2003-01, is an analysis of bill padding and other billing issues. The Advisories are dated March 25, 2016.
1. Opinions Change: Statute of Limitations for Fee Arbitrations.
In a previous Advisory, the Committee “opined that the one-year statute of limitations in CCP Section 340.6 for wrongful acts or omissions by an attorney, other than for actual fraud, did not apply to fee arbitration under Bus. & Prof. Code Section 6200.” That conclusion was based on the special nature of MFA, which focuses on legal fees. The MFA arbitrators cannot award damages for legal malpractice or professional misconduct in MFA.
The new Advisory reaches a different conclusion: MFA cannot be commenced if a civil action requesting the same relief would be barred by an applicable statute of limitations set forth in the Code of Civil Procedure, and that includes Section 340.6, and recent case law, applying the one-year statute to disputes involving the propriety of the attorney’s legal services. Therefore, the Committee concludes that if the dispute over fees involves the propriety of the attorney’s legal services, the statute of limitations does apply. But there are many exceptions under Section 340.6, and Section 340.6 will not apply to claims where an attorney converted a client’s funds or defrauded the client. My advice about the Advisory: read it.
2. Over-Billing.
The new Advisory focuses on over-billing; other Advisories have more generally focuses on determining the reasonableness of attorney’s fees. I refer advisedly to “over-billing” rather than “bill padding”, because over-billing can result from billing procedures that involve no intentional effort to pad bills.
The Advisory, which does provide an analysis of potential bill padding and other issues, proposes that arbitrators do at least the following four things:
This Advisory provides many useful tips for investigating whether a bill is inflated, and is useful reading not just for persons involved in MFA, but for anyone who wants to probe deeper into the propriety of a legal bill.
Recommended: Paul Dubow’s California Litigation Review Of Alternative Dispute Resolution Cases
San Francisco-Based Mediator And Arbitrator Paul Dubow Has Reported On 18 California And Ninth Circuit Cases Related To ADR.
In the 2015 Edition of the California Litigation Review, published by the Litigation Section of the State Bar of California, Paul Dubow has reported on “interesting and significant opinions relating to ADR particularly in the area of arbitration.” Having blogged for several years now on California mediation and arbitration cases, I note that the courts write far more opinions about arbitration than about mediation, a fact reflected by Mr. Dubow’s excellent report. Here are the 18 cases that Paul Dubow has reported about, with links to my blog posts on 14 of the cases:
1. DirectTV, Inc. v. Imburgia, ___ U.S. ___, 136 S. Ct. 463 (2015) (“law of your state” meant valid law after considering FAA preemption, resulting in enforcement of arbitration provisions.) December 15, 2015 post.
2. Garrido v. Air Liquide International US LLP, 241 Cal.App.4th 833 (2015) (FAA does not apply to truck drivers who are transportation workers involved in interstate commerce; CAA governs).
3. Khalatian v. Prime Time Shuttle, Inc., 237 Cal.App.4th 651 (2015) (14-month delay in bringing motion to compel, absent showing of prejudice, did not result in waiver of right to arbitrate). June 9, 2015 post.
4. Brinkley v. Monterey Financial Services, Inc., 242 Cal.App.4th 314 (2015) (FAA applied to contract involving interstate commerce, even though the contract did not reference FAA). November 29, 2015 post.
5. Franco v. Arakelian Enterprises, Inc., 234 Cal.App.4th 947 (2015) (rulings in Concepcion and Iskanian require reversal and remand to trial court of orders denying employer’s petition for arbitration, while preserving employee’s rights to prosecute PAGA claims in a non-arbitration forum.) February 26, 2015 post.
6. Sakkab v. Luxottica Retail North America, Inc., 803 F.3d 425 (9th Cir. 2015) (agreed with Iskanian that FAA does not preempt rule against employee PAGA waivers). October 8, 2015 post.
7. Williams v. Superior Court, 237 Cal.App.4th 642 (2015) (right to bring representative PAGA claim cannot be waived). June 23, 2015 post.
8. Securitas Securities Service, Inc., 234 Cal.App.4th 1109 (2015) (employee’s right to bring representative PAGA claim cannot be waived). March 5, 2015 post.
9. Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (2015) (arbitration provision in automobile sales contract held not to be unconscionable). October 4, 2015 post.
10. Carlson v. Home Team Pest Defense, 239 Cal.App.4th 619 (2015) (affirming order denying employer’s motion to compel arbitration, on grounds that the arbitration provisions were procedurally and substantively unconscionable.) October 20, 2015 post.
11. Brennan v. Opus Bank, 796 F.3d 1125 (9th Cir. 2015) (incorporation of AAA rules meant there was a clear delegation of authority to arbitrator to decide arbitrability questions).
12. Sussex v. United States District Court for the District of Nevada, 781 F.3d 1065 (9th Cir. 2015) (district court’s mid-arbitration intervention because arbitrator failed to disclose he bought and sold lawsuits to investors had too remote a connection to arbitrator bias to justi
fy disqualifying the arbitrator).13. Richey v. Autonation, Inc., 60 Cal.4th 909 (2015) (possibility that defendant violated plaintiff’s statutory rights did not require vacating arbitrator’s award, because defendant legitimately fired plaintiff for violating company policy). January 29, 2015 post.
14. SingerLewak LLP v. Gantman, 241 Cal.App.4th 610 (2015) (accounting firm’s award against departing partner for violating covenant not to compete did not violate public policy where arbitrator found implicit geographical limitation) (ordered published by Supreme Court). October 22, 2015 post.
15. Ramos v. Westlake Services, Inc., 242 Cal.App.4th 674 (2015) (fraud in execution of arbitration agreement where car dealer provided misleading translation of service agreement to Spanish speaker). November 29, 2015 post.
16. Miranda v. Anderson Enterprises, Inc., 241 Cal.App.4th 196 (2015) (“death knell” exception allowing for immediate appeal of order granting motion to compel arbitration, applied to PAGA representative claims).
17. Cobb v. Ironwood Country Club, 233 Cal.App.4th 960 (2015) (retroactive effort by country club to compel arbitration by including arbitration clause in bylaws after suit was filed against it fails). February 1, 2015 post.
18. Amis v. Greenberg Traurig LLP, 235 Cal.App.4th 331 (2015) (malpractice claim fails because attorney’s advice was given in context of mediation and is inadmissible; even inference that settlement agreement was signed based on attorney’s advice was inadmissible). March 19, 2015 post.