Arbitration, Delegation, Unconscionability: AAA Rule Delegating To Arbitrator Power To Rule On Jurisdiction And Existence, Scope Or Validity Of Arbitration Agreement Is Held To Be Ambiguous
AAA Delegation Rule Did Not Preclude Trial Court From Ruling On Unconscionability, But Trial Court Is Reversed, Because The Arbitration Agreement Is Not Unconscionable.
After her criminal law professor allegedly said, “"Many women in the field look like dykes, just like you, Anna," Anna Eakins sued Corinthian Colleges, its college president, and her professor.
Corinthian Colleges moved to compel arbitration, and the trial court denied its motion, ruling that the arbitration provision was unconscionable.
Based on the wording of an AAA Rule, Corinthian Colleges argued on appeal that the trial court erred by reaching the issue of unconscionability. The AAA Rule in question, Commercial Rule R-7, provides: “The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration.” The Court of Appeal, however, concluded that the Rule is at best “ambiguous” because it gives the power to rule to the arbitrator, without saying that a trial judge lacks the same power. Eakins v. Corinthian Colleges, Inc., E058330 (4/2 Feb. 23, 2015) (Ramirez, Hollenhorst, Miller) (unpublished).
However, the Court of Appeal reversed the trial court’s order denying the petition to compel arbitration, finding that the arbitration clause was not substantively unconscionable, and to the extent that it did have defects, it was saved by a severability clause.
DRAFTING TIPS: (1) A delegation clause that provides that the power to rule on the arbitrator’s jurisdiction, and the existence, scope or validity of the arbitration, is the sole and exclusive power of the arbitrator would not contain the ambiguity identified by the Court of Appeal. (2) Severability clauses have saved many an arbitration agreement from being consigned to the scrap heap of unconscionability.
Arbitration: 1286.2 Vacatur, 1286.6 Correction By Court: Party Contending Trial Court Erred By Confirming Award Loses By Relying On Statutory Authority For Correcting An Award
Contention That There Was Error In Confirming The Award Was Not Before The Court.
To quote the late Steve “The Crocodile Hunter” Irwin, “Crikey!”.
On appeal, defendant Porter argued that the arbitrator exceeded his authority, as a result of which confirmation of the arbitration award was error, citing Cal. Code Civ. Proc., section 1286.2(a)(4). However, in the trial court, his sole theory was that the award should be corrected for miscalculation of figures, section 1286.6(a). Thus, Porter’s contention that the arbitrator had exceeded his powers was not properly before the Court. Keith v. Porter, B256524 (2/3 Feb. 20, 2015) (Edmon, Aldrich, Lavin) (unpublished).
COMMENT: The statutory scheme is as follows: section 1286.2 provides the bases for the trial court to vacate the arbitrator’s award, one of which is: “The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.” Section 1286.6 (a) provides that unless the court vacates the award pursuant to Section 1286.2, the court shall correct the award and confirm it as corrected if the court determines that there was an evident miscalculation of figures. Porter relied on correction rather than vacation of the award. As a result, vacation of the award was not properly teed up for the Court of Appeal. Covering its bases, the Court of Appeal added that it did not believe there was an evident miscalculation of figures.
Arbitration, Waiver, Scope: Court Of Appeal Affirms Orders Denying Motions To Compel Arbitration Of Right To Copy And Inspect
Arbitration Clause In Operating Agreement Did Not Cover Statutory Request To Copy And Inspect
In Sachs v. GP/T Holdings, LLC et al., B254289 (2/5 Feb. 20, 2015) (Turner, Krieger, Goodman) (unpublished) plaintiff, alleging rights to copy and inspect documents under the Corporations Code, petitioned to compel defendants to produce documents for inspection and copying. Nine months after litigation commenced, and after substantial law and motion proceedings had occurred, defendants moved to compel arbitration. Defendants’ excuse for the delay was that defense counsel had been unaware of the arbitration clause. Concluding that the delay was substantial and prejudicial, the Court of Appeal added that defense counsel’s (un)awareness of the arbitration clause is irrelevant. Thus, the orders denying motions to compel arbitration were affirmed.
Also, the demand to copy and inspect documents was statutory. The Court concluded that this demand to inspect and copy was not an operating agreement dispute covered by the arbitration clause, providing a second reason for affirmance.
PAGA: Iskanian, State and Federal
Split Between State And Federal Blanket Enforcement Of Arbitration Agreements Far From Resolved
The February 19, 2015 issue of the Los Angeles Daily Journal includes an article by John Roemer entitled “9th Circuit to test arbitration ruling.” This “test” concerns the California Supreme Court’s holding in Iskanian v. CLS Transportation Los Angeles LLC, 59 Cal.4th 348 (2014) that PAGA claims cannot be forced into arbitration, because the real dispute is between the employer and the State of California, and the State is not a party to the arbitration agreement, though the employee acts as a private attorney general for the State.
Mr. Roemer points out that the issue is now teed up for the 9th Circuit to address, citing to Sakkab v. Luxottica Retail North America Inc., 13-55184, and Sierra v. Oakley Sales Corp., 13-55891.
Meanwhile, the California state courts have been following Iskanian, as they must. See, e.g., Franco v. Arakelian Enterprises, Inc., B232583 (2/1 Feb. 26, 2015) (Chaney, Rothschild, Johnson) (certified for publication) (holding rulings in Concepcion and Iskanian require reversal and remand to trial court of orders denying employer’s petition for arbitraiton, while preserving employee’s rights to prosecute PAGA claims in a non-arbitration forum).
The issue is far from resolved, as the California courts are bound to follow the California Supreme Court, not the Ninth Circuit.
Mediation, Attorney’s Fees: Ex-Husband’s Efforts To Thwart Ex-Wife’s Efforts To Mediate Provide Substantial Justification For Award Of Section 271 Attorney’s Fees In Family Law Matter
The Parties Had Agreed To Mediate.
Efforts to avoid mediation can be costly. For example, in real estate disputes, the standard California Association of Realtors purchase and sale agreement requires mediation before litigation – and participation in mediation becomes a precondition to collecting attorneys fees for a prevailing party. In our next case, a family law case, the parties agreed to mediate their disputes concerning a martial settlement agreement, and the efforts of the ex-husband to thwart mediation resulted in a sanctions award of $10,000 under Family Code section 271. Dyer v. Dyer, H038921 (6th Dist. Feb. 20, 2015) (Mihara, Bamattre-Manoukian, Grover) (unpublished).
Most of the fee award ($50,000) was awarded under section 2030, not 271. To reach its result, the Court of Appeal first had to conclude that a fee provision in a marital settlement agreement was not so broad and exclusive as to preclude fee recovery under section 2030. See today’s post in California Attorney’s Fees.
However, there was also substantial evidence that Wayne Dyer sought to avoid mediation, and that Wayne’s claims about a lack of evidence on this point were not entirely candid: “The record is replete with evidence,” said the Court, “that Wayne repeatedly attempted to avoid mediation even after the court had ordered that it occur.” That litigation conduct resulted in $10,000 in attorney’s fees as a sanction award to Carrie Dyer.
COMMENT: The Court of Appeal notes: “Carrie’s attorney explained that ‘we finally had our mediation, and it was unsuccessful.’ Carrie had decided to dismiss her motion due to her medical condition and lack of financial resources.” Notwithstanding the fees awarded under sections 2030 and 271, will hardball litigation tactics ultimately succeed in their objective?
PAGA: Iskanian Redux –Trial Court Gets To Address Unresolved Procedural Issues
Parties Agree Trial Court Is Best Positioned to Resolve Procedural Issues.
After ruling in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014) that the Federal Arbitration Act did not preempt a state law rule prohibiting waiver of Private Attorney General Act of 2004 representative actions, the California Supreme Court left it up to the Court of Appeal to resolve a number of outstanding procedural issues. Convinced by the further briefing of the parties that the procedural issues are best addressed by the trial court, the Court of Appeal has now remanded to the trial court to decide the following issues: “(1) Will the parties agree on a single forum for resolving the PAGA claim and the other claims? (2) If not, is it appropriate to bifurcate the claims, with individual claims going to arbitration and the representative PAGA claim going to litigation? (3) If such bifurcation occurs, should the arbitration be stayed pursuant to Code of Civil Procedure section 1281.2? (4) Has CLS forfeited the contention that the PAGA claims are time-barred, and, if not, are the claims time-barred?” Iskanian v. CLS Transportation Los Angeles, LLC, Case No.B235158 (2/2 Feb. 19, 2015) (Boren, Ashmann-Gerst, Chavez) (unpublished). Have fun with that.