Arbitration, Construction of Agreement, Scope: Law Firm’s Efforts To Compel Arbitration Of Malpractice Claim Are Doomed By Arbitration Provision That Did Not Clearly Encompass Earlier Transactional Work
Arbitration Provision Clearly Applied To Litigation, But Not To Earlier Transactional Work.
Nordman Cormany Hair & Compton, formerly in business for 75 years in Ventura County, appealed an order denying its petition to compel arbitration of a legal malpractice lawsuit. Aggeler v. Nordman Cormany Hair & Compton, B253566 (2/6 April 27, 2015) (Gilbert, Yegan, Perren) (unpublished).
The Nordman firm had done transactional work for plaintiffs in 2005 in connection with their ownership of a mobilehome park. After the owners became embroiled in a legal dispute with the residents in 2009, the Nordman firm represented the owners in litigation. The retention agreement for the litigation matter contained an arbitration provision.
In 2013 the owners sued the Nordman firm for malpractice. However, the owners’ alleged malpractice claims involved the Nordman firm’s “drafting of a contract” in 2005. Unfortunately for the law firm, it was not clear that the arbitration provision, prepared in connection with the 2009 litigation, applied retroactively to cover the 2005 transactional work that was the source of the malpractice claim.
Affirmed.
COMMENT: The Court explains, “We consider how a reasonable client would interpret the provision as well as the reasons why the client sought the professional services.” The problem here was that the agreement did not explicitly mention legal services provided in 2005, and thus a reasonable client would not necessarily know that the agreement would apply retroactively. Lawyers get saddled with the consequences of poorly drafted retention agreements “because of the fiduciary nature of the relationship.”
Arbitration, Scope, Nonsignatories, Agents: Broadly Worded Arbitration Clause Not Broad Enough To Include Labor Code Claims
But Court Of Appeal Does Reject Arguments That Nonsignatories Lacked Standing And That They Waived Right To Compel Arbitration – Before Addressing “Crucial Issue Of Scope
In Williams v. Digius, et al., D064183 (4/1 April 24, 2015) (McDonald, McConnell, Haller) (unpublished), the Court of Appeal agreed with appellants, who had not signed an arbitration agreement, that they nevertheless had standing as agents of a signatory to demand arbitration, and also agreed that, despite appellants’ conduct inconsistent with arbitration, they had not caused so much prejudice to respondent as to have waived their right to arbitrate. Then, however, the Court of Appeal addressed the “crucial issue” – the scope of the arbitration clause – and sided largely with respondent, concluding that his Labor Code section 229 claims were outside the scope of the broad arbitration clause.
This case involved an employment dispute between Williams, an on-site property manager, and parties whom he alleged were agents of his employer. A plaintiff who wishes to avoid arbitration must be careful with his allegations: “[A] plaintiff’s allegations of an agency relationship among defendants is sufficient to allow the alleged agents to invoke the benefit of an arbitration agreement executed by their principal even though the agents are not parties to the agreement.” Thomas v. Westlake, 204 Cal.Ap.4th 605, 614-615 (2012).
The arbitration provision included broad language that would include contract and tort claims — “arising out of or related to this Agreement.” However, the Court held that this language did not clearly cover statutory claims based on violations of the Labor Code that arise independently of the contract. Spared from the net of the arbitration clause were six causes of action for failure to pay minimum wage, failure to provide accurate itemized wage statements, failure to comply with the request to inspect personnel file, failure to pay wages on discharge, fees, costs and penalties for violations of the Labor Code, and unfair competition. Captured by the arbitration net were causes of action for breach of the implied covenant of good faith and fair dealing, and for conversion.
COMMENT: The Court actually offers drafting advice for requiring arbitration of Labor Code or other statutory claims: “[T]hey could have expressly provided for arbitration of any and all disputes or claims arising out of, or related to, Williams’s employment, including but not limited to claims for damages and violation of state or federal laws, including claims for violation of the Labor Code.” Even so, the Court expressly refuses to “decide whether some or all of Williams’s statutory claims may not be subject to arbitration regardless of our interpretation of the Contract’s arbitration provision . . . “ As readers of this blog know, PAGA and other statutory claims may not be subject to arbitration. This is an area of dispute “in flux.”
Arbitration, Vacatur: Death Of Party Arbitrator Provided No Basis For Panel To Continue Arbitration Hearing Date Given Party’s “Total Noncompliance With The Governing Rules And Procedures”
Court Shows No Sympathy For Circumstance Of Defendant/Appellant Whose Party Arbitrator Died.
Here, the arbitration panel proceeded with arbitration after the death of defendant/appellant Mitchell’s party arbitrator, refusing to continue the hearing to permit Mitchell to select another party arbitrator. That sounds pretty harsh, but read on: “As troublesome as this circumstance may appear at first blush, the record fully supports the finding of the panel that Mitchell had ‘evinced his unwillingness to participate in [the arbitration] proceedings repeatedly during the scheduling of this matter . . . ‘“ Perhaps we should add that Mitchell is an attorney, and that the arbitration involved a fee dispute between Mitchell and his own attorneys who represented him in marital dissolution proceedings. Schapiro-Thorn, Inc. v. Mitchell, A140800 (1/3 April 21, 2015) (Pollak, McGuiness, Siggins) (unpublished).
The Court suggested AAA rules “reflect the fundamental policy that a recalcitrant party should not be permitted to obstruct the expeditious resolution of disputes submitted to arbitration.” The Court concluded the decision of two panel members to proceed in the absence of Mitchell’s party arbitrator, who had died, “given Mitchell’s total compliance with the governing rules and procedures, was in full accord with this policy and neither an abuse of discretion nor beyond the arbitrators’ authority.”
Moral: Parties – especially attorneys – who wish to take advantage of the rules, do well to play by the rules. Live by the sword, die by the sword.
Review: The Perils Of Blogging
Daily Journal Publishes My April 17, 2015 Article On The Perils Of Blogging
Published by The Daily Journal on April 17, 2015, my article on the legal perils of blogging will interest those of you who blog, or who are considering blogging. With the permission of the Daily Journal, I am making it available to my readers. Click here if you wish to read it. Note you may have to rotate the article in your viewer or enlarge the text to make it easier to read.
Arbitration, Scope, Unconscionability: First District, Div. 3 Holds Oakland Raiders’ Asst. Football Coach Was Properly Required To Arbitrate With Raiders And Its Head Coach
Scope Of Arbitration Provision Was Broad And Unconscionability Was Lacking.
This case will be of interest to football fans, and maybe even to lawyers. Hanson v. Cable, A138208 (1st Dist. Div. 3 April 15, 2015) (Jenkins, McGuiness, Pollak) (unpublished).
Plaintiff/appellant Randy Hanson sued The Oakland Raiders and its former head coach Tom Cable, alleging Cable attacked him at the Raiders’ training camp, causing him physical injuries.
The beginning of the cock fight. Edwin Rosskam, photographer. 1937. Library of Congress.
Respondents/defendants successfully move to compel arbitration pursuant to Hanson’s employment agreement. Arbitration awards denied most of Hanson’s claim. He petitioned unsuccessfully to vacate the arbitration awards, and then appealed from a judgment dismissing his complaint after confirmation of the arbitration awards.
Hanson’s appeal mounted two challenges. First, he argued the arbitration clause was not broad enough to encompass his tort claims. However, the arbitration clause included “arising out of” type language – and claims arising out of a contractual relationship have been held to include tort claims.
Second, he argued the arbitration agreement was unconscionable. His most compelling, albeit unsuccessful argument, was that the arbitration clause contained built-in bias, because it required the dispute be referred to the NFL Commissioner, whose salary is paid for by the NFL teams, and who might therefore be expected to have a pro-team, anti-player bias. Unfortunately for Hanson, however, the arbitration provision also offered him an opportunity to seek an arbitration conducted in a “manner [as the NFL Commissioner] deems appropriate, and in a matter designed to reach a fair and prompt outcome, consistent with the circumstances of the particular dispute.” The Court interpreted this provision to create “a contractual obligation to arbitrate or to propose alternative methods of arbitrating the dispute.” And Hanson did not pursue an alternative method.
COMMENT: We cannot know if Hanson’s alternative of seeking an unbiased arbitrator would have proved to be illusory. However, if Hanson had requested an unbiased arbitrator, only to find that door slammed shut, perhaps his unconscionability argument would have then gained more traction.
NOTE: The on-line biography of Justice Jenkins, who penned the opinion, states he entered law school, “after a brief period of employment with the Seattle Seahawks Professional Football Team.”
Arbitration Stay: “Settled Principles Of Law” Justify Peremptory Writ Staying Action While Application To Compel Arbitration Remains “Undetermined”
And Application To Compel Arbitration Remains “Undetermined” As Long As Dissatisfied Party Is Pursuing Appellate Review.
The Fourth District, Division 2 made short shrift of this case, issuing a peremptory writ of mandate directing the Superior Court of Riverside County to vacate its order denying petitioner Carmax’s motion to stay the action for Labor Code violations while its appeal of the denial of its application to compel arbitration remains “undetermined.” Carmax Auto Superstores California, LLC v. Superior Court, E062879 (4/2 April 15, 2015) (King, Ramirez, Hollenhorst) (unpublished).