Arbitration, Severability, PAGA: Second District, Div. 4 Affirms Order Denying Motion To Compel Arbitration Because PAGA Claims Could Not Be Arbitrated, And PAGA Claims Were Not Severable
Court of Appeal Recognizes It Is Bound By Iskanian, Until SCOTUS Resolves Validity Of PAGA Waivers.
Montano v. The Wet Seal Retail, Inc., B244107 (2/4 Jan. 7, 2015) (Epstein, Willhite, Manella) (published) is the latest case to follow the holding in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014), that waiver of the employee’s right to litigate Private Attorneys General Act (PAGA) (Lab. Code, section 2699) representative claims is unenforceable. In Montano, this had even greater consequence, because the paragraph containing the PAGA waiver provision stated if the waiver was found to be unenforceable for any reason by a court, then the entire arbitration agreement was void and unenforceable. Thus, because the PAGA waiver was not severable, the entire arbitration provision failed.
The Court of Appeal recognizes in footnote 5 “that several federal district courts in this state have found PAGA waivers to be enforceable under the FAA and Concepcion.” However, until SCOTUS rules on the issue, the Court of Appeal is “bound to follow the California Supreme Court’s decision in Iskanian that PAGA waivers are invalid under state law.” In Iskanian, the parties filed a petition for certiorari on September 22, 2014, No. 14-341. So stay tuned!
Arbitration, CCP 1281.2, Construction Of Agreement, Scope: Plaintiff’s Equitable Claims Were Outside Scope Of Arbitration Agreement
Second District, Division 2, Rejects Appellants’ “Tortured” Reading Of Arbitration Provision And Affirms Order Denying Motion To Compel Arbitration.
Plaintiffs, investors in an independent bookstore, refused the request of defendants, the bookstore and its prior owner, to arbitrate a business dispute. The key language in the arbitration provision read: “Notwithstanding the foregoing, no arbitrator shall have the power to render equitable relief of any kind, and requests for such relief shall be referred to a court of competent jurisdiction.” The trial court denied defendants’ motion to compel arbitration, finding that plaintiffs’ equitable claims – the sole remaining claims at issue – were excluded from arbitration by the language in the arbitration provision. Appellants advanced a rather creative reading of the arbitration provision, distinguishing between the arbitrator’s ability to try any action and the court’s ability to grant equitable relief. Bachrach v. Compagno, Case No. B252454 (2/1 Jan. 6, 2015) (Johnson, Chaney, Bendix) (unpublished).
Appellants argued that under the clear language of the arbitration provision, any action to enforce or interpret the agreement had to be arbitrated, and that once the substantive issues were resolved, a party could turn to the court to obtain equitable relief. The Court of Appeal, however, rejected “a tortured conclusion that the trial court has the power only to perform the ministerial act of rubber-stamping an arbitrator’s conclusive ruling.”
Affirmed.
Arbitration, Burden Of Proof, Enforceability, Employment, CCP 1281.2: Petition To Compel Arbitration Fails Because Employer Is Unable To Authenticate Electronic Signature.
Burden Of Proof Shifted To Employer Because Employee Didn’t Remember Signing Arbitration Agreement.
Ruiz v. Moss Bros. Auto Group, Inc., E057529 (4/2 Dec. 23, 2014) (King, Hollenhorst, Codrington) is one more reminder of the pitfalls when dealing with electronic signatures. After employer Moss Bros. unsuccessfully petitioned for an order compelling arbitration of employee Ruiz’s employment-related claims based on an arbitration agreement Ruiz allegedly electronically signed, Moss Bros. appealed – also without success.
The employer’s declaration stated, in conclusory fashion, that Ruiz had signed the arbitration agreement. Indeed, Ruiz’s name had been electronically affixed to an arbitration agreement. Ruiz, however, did not remember signing the agreement. This shifted the burden to the employer to authenticate the signature, and the employer’s conclusory declaration failed to do so. The employer’s declaration failed to establish that the electronic signature was “the act of” Ruiz. Cal. Civ. Code, section 1633.9(a).
COMMENTS: Citing Condee v. Longwood Management Corp., 88 Cal.App.4th 215 (2001), the Court of Appeal explains, “Condee holds that a petitioner is not required to authenticate an opposing party’s signature on an arbitration agreement as a preliminary matter in moving for arbitration or in the event the authenticity of the signature is not challenged.” Because Ruiz failed to recall signing the 2011 agreement, the burden of authenticating the signature shifted to the employer, whose conclusory declaration failed to satisfy that burden.
On December 31, 2014, I posted on another electronic signature case, J.B.B. Investment Partners, Ltd. v. Fair, Case Nos. A140232, A141228 (1/2 Dec. 30, 2014), in which the Court failed to enforce a settlement agreement under CCP 664.6, due to problems with the electronic signature. The analysis was quite different, however, than the analysis in Ruiz. The problem in Ruiz was that the employer failed to authenticate the electronic signature as the act of Ruiz. The problem in J.B.B. Investment Partners, Ltd. was different – the party relying on the signature failed to show that the parties agreed to conduct business with electronic signatures under the California Uniform Electronic Transactions Act (UETA).
The lesson here is that relying on electronic signatures can be tricky business, because electronic signatures present problems of compliance with the UETA and problems of authentication.
Arbitration, Waiver, Standard of Review: Awareness Of Right To Arbitrate, Actions Inconsistent With Arbitration, And Prejudice Add Up To Waiver Of Right To Arbitrate
Court Distinguishes Recent Cases Finding No Waiver Of Right To Arbitrate.
In Bower v. Inter-Con Security Systems, Inc., Case No. A135940 (1/3 Dec. 31, 2014) (McGuiness, Pollack, Siggins), the Court of Appeal held that substantial evidence supported the trial court’s finding that defendant waived its right to arbitrate individual claims with plaintiff in a putative class action wage lawsuit. Therefore the Court affirmed the trial court’s order denying the petition to compel.
Preliminarily, the Court makes an interesting observation about the substantial evidence standard of review. Waiver is usually a question of fact, and therefore the substantial evidence standard is typically appropriate. Here, even though the parties did not appear to contest the facts, the substantial evidence standard was still appropriate. “Independent review is appropriate only when the facts permit just one reasonable inference,” explained the Court, adding: “Here, the facts do not ineluctably lead to one conclusion on the issue of waiver.” Therefore, the Court applied the substantial evidence standard.
The Court found substantial evidence that defendant was aware of its right to arbitrate, because defendant acknowledged as much by pleading the right to arbitrate as an affirmative defense. Additionally, defendant acted inconsistently with its right to arbitrate only individual claims, by participating in class action discovery, by propounding discovery, and by participating in class action settlement discussions. As for the element of prejudice necessary to establish waiver, the Court explained:
“The crux of the prejudice suffered by Bower is that he suffered delay and incurred costs in litigating and attempting to settle class claims that Inter-Con led him to believe would be encompassed within the litigation. As a result of Inter-Con reversing course and choosing to pursue arbitration limited to Bower’s individual claims, Bower suffered prejudice in that much of the expense incurred and effort expended would have no value in arbitration.”
Along the way to concluding that defendant waived its right to arbitrate, the Court distinguished two recent cases. In Gloster v. Sonic Automotive, Inc.,
226 Cal.App.4th 438 (2014) [blawg post May 21, 2014] the claim of prejudice was based solely on legal expenses largely incurred as a result of plaintiff’s own discovery efforts, whereas in Bower, defendant propounded discovery. The Court also distinguished Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014) [blawg post June 23, 2014], in which a finding of waiver was reversed, because in that case, defendant timely filed a petition to compel arbitration.
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The Old And The New. Puck. Library of Congress.
Section 664.6: Court Of Appeal Refuses To Enforce Settlement Because Email Failed Electronic Signature Test
Dot I’s and Cross T’s When Relying On An Electronic Signature!
In J.B.B. Investment Partners, Ltd. v. Fair, Case Nos. A140232, A141228 (1/2 Dec. 30, 2014) (Kline, Richman, Stewart), the Court of Appeal reversed a trial court’s enforcement of a settlement agreement under CCP section 664.6, because email and voicemail messages failed to satisfy the electronic signature requirements. And because the settlement agreement could not be enforced by plaintiff, plaintiff could not recover attorney’s fees. This case is must reading for attorneys and their clients conducting business by electronic transactions under the California Uniform Electronic Transactions Act (UETA).
The parties briefed whether the email complied with the the UETA provision: “If the law requires a signature, an electronic signature satisfies the law.” Civ. Code, section 1633.7(d). That was too simplistic for the Court of Appeal, which pointed out that the plaintiffs failed to demonstrate that the parties agreed to conduct transactions by electronic means or that defendant intended with his printed name at the end of his email to sign electronically plaintiff’s offer. See Civ. Code, sections 1633.2 and 1633.5(b). Under a separate common law contractual analysis, the Court also failed to find that the parties intended to form a contract, given that further settlement documents were not signed.
As we have blogged before, relying on important electronic transactions without dotting all the I’s and crossing all the t’s is risky business. See April 30, 2014 blog post.