Arbitration/Deadlines/Correction: Arbitrator Did Not Exceed Powers By Awarding Post-Termination Royalties After License Agreement Ended And Appellant Missed Deadline To Seek Correction Of Award
Post-Termination Of License Royalties Were Part Of $128.3M Arbitration Award.
In Amkor Technology, Inc. v. Tessera, Inc., A139596 (1/3 Nov. 25, 2014) (Pollak, Siggins, Jenkins) (unpublished), the Court of Appeal affirmed part of a larger arbitration award for $128.3M.
Procedural hurdle.
Appellant Amkor stumbled on a procedural hurdle: Its petition to correct the award was untimely. A petition to correct an award must be served and filed not later than 100 days after the date of the service of a signed copy. Cal. Code Civ. Proc., section 1288. Amkor’s problem was that it appealed 236 days after “Partial Award No. 3” – the award that it was attacking. Amkor argued a new 100-day period ran when the arbitration panel issued an addendum to the “partial award.” Amkor’s petition, however, did not seek to correct the addendum, which addendum was not even attached to the petition. The critical issue, concerning damages, had been decided in the earlier Partial Award No. 3, and subsequent briefing and the addendum merely confirmed the award.
COMMENT: When in doubt, appeal an original “partial award”, and a later award. Better safe than sorry. And “superfluity does not vitiate.” (Maxim of Equity).
Substantive hurdle.
Amkor argued the arbitration panel exceeded its powers by awarding royalties for the continued use of a patent after Tessera terminated the license agreement with its licensee Amkor. (There was no question Tessera could recover royalties for the period after Amkor breached and before Tessera terminated the license). Amkor further argued another lawsuit for patent infringement would be necessary to recover damages after the license agreement terminated, because once Tessera elected to terminate the license agreement upon Amkor’s breach, the obligation to pay future royalties ceased.
Relying on broad language in the arbitration clause, and the equitable powers of the arbitrator, the Court of Appeal concluded the license agreement contemplated the licensee would not continue to use the patented technology after the license expired and the arbitrator did have the authority to award royalties for the “improper use of patented technology.” Thus, the remedy was authorized by California law, and if there was an error of law, it was not a basis for holding the arbitration panel exceeded its authority.
COMMENT: At the end of the opinion, the Court states: “The court did not select a remedy not authorized by California law. Whether the court made an error of law in awarding royalties in this particular case is precisely the type of analysis prohibited under section 1286.6.” (italics added). Query whether the Court of Appeal meant to refer to the “arbitrator” rather than to the “court”? Arbitrators do not exceed their powers, “merely by erroneously deciding a contested issue of law or fact.” Advanced Micro Devices, Inc. v. Intel Corp., 9 Cal.4th 362, 366 (1994).
Scope Of Arbitration: Dispute Was Outside Scope Of Arbitration Provision Relating To Conflicts Of Interest, As Court Of Appeal Refuses To “Handcuff” Parties To Position Taken In Discovery
Plaintiffs Manage To Distance Themselves From Discovery Response, Allowing Them To Avoid Having To Arbitrate Their Malpractice Claims.
By a deft interrogatory, Defendant tried to corner Plaintiffs into having to arbitrate their malpractice claims in LADT, LLC v. Greenberg Traurig, LLP, B246649 (2/1 Nov. 25, 2014) (Miller, Rothschild, Johnson) (unpublished).
The gravamen of Plaintiffs’ claim was that Greenberg Traurig drafted real estate documents “in a sloppy, ambiguous, inconsistent, incomprehensible manner that led to costly litigation and multimillion-dollar judgments against some of the plaintiffs.”
Greenberg, Traurig zinged Plaintiffs with an interrogatory, asking if they contended the law firm “had an unwaived conflict of interest in its representation”. Plaintiffs swallowed the bait and answered, “Yes.” Plaintiffs’ answer set them up for Greenberg Traurig’s motion to compel arbitration, because Plaintiffs had signed a Conflict Waiver and Arbitration Letter including an arbitration clause. The trial court, however, denied the motion to compel, and the law firm appealed.
Affirmed.
Why? The arbitration provision only applied to claims arising from or relating to the Conflict Disclosure and Waiver Agreement. Even though Plaintiffs answered the interrogatory by contending that there was an unwaivable conflict, Plaintiffs were able to nimbly distance themselves from their discovery response, “saying in essence that, even though such a conflict existed, they were not pursuing any claim based on any conflict of interest.”
Put another way, the gravamen of Plaintiffs’ claim – malpractice – was simply outside the scope of the narrow arbitration agreement once Plaintiffs clarified that they were not pursuing a claim based on conflict of interest.
Mediation/Settlement Agreement: No Explanation As To How Defendant’s Alleged Hearing Loss Impaired His Ability To Read And Understand A Written Settlement Agreement
Court Enforces The Settlement Agreement.
Plaintiff Jing Jing Dan sued Rambla Vista Enterprises, LLC and Joichi Gushiken alleging sexual harassment and unwelcome sexual advances by Gushiken, followed by termination of employment after she objected to her treatment. Four days after a mediation, the parties entered into a stipulation for settlement, whereby defendants agreed to pay Dan $420K in consideration for a general release and a dismissal with prejudice. After defendants refused to pay or recognize the settlement, Dan filed a successful motion to enforce the settlement pursuant to CCP section 664.6. Defendants appealed. Jing Jing Dan v. Rambla Vista Enterprises, LLC, B252050 (2/1 Nov. 25, 2014) (Rothschild, Chaney, Miller) (unpublished).
The Court of Appeal shot down defendants’ three arguments for setting aside the settlement on appeal.
First, the Court of Appeal disagreed that a stipulation calling for payment in exchange for a full and complete general release of claims and a dismissal with prejudice was not definite and certain. Also, the stip provided that it was an enforceable settlement and contained all material terms.
Second, the Court rejected the argument that the stipulation was unenforceable because defendants’ counsel did not sign it. Cases supporting that argument were distinguishable, because they involved attorneys of record who were bypassed in the settlement process – not the case here.
Third, the Court rejected the argument the settlement should be scrapped because the defendant was old, hearing impaired, and exhausted by stress. None of that explained why he couldn’t understand a document he signed four days after the mediation. In any case, the trial court did not abuse its discretion.
DRAFTING TIP: The stipulation for settlement contained language that it was binding on the parties and admissible pursuant to Evid. Code section 1123 – important if you want to get around mediation confidentiality. Also, we like the following “plain language”: “that ‘[w]hile there may be additional, minor, usual and customary settlement provisions, there are no other material terms (deal breakers) beyond those which are described in this memorandum and the lack of any specificity in that regard will not prevent the parties from being bound by the terms of the agreement.’”
Federal Arbitration Act Preemption/Burden Of Proof/Employment: Employer Failing To Sustain Burden Of Showing FAA Preemption Fails To Enforce Arbitration Agreement
Labor Code Section 229 Expressly Provides Wage Claims Were Not Subject To Arbitration.
When state law provides a statutory exemption from arbitration, it’s not enough to assert Federal Arbitration Act preemption: “A party seeking to enforce an arbitration agreement has the burden of showing FAA preemption.” Lane v. Francis Capital Management LLC, 224 Cal.App.4th 676, 687 (2014). That means showing the activities are involved in interstate commerce. Defendant/employer failed to meet that burden in Tito v. Lotus Property Services, Inc., B249999 (2/8 Nov. 21, 2014) (Bigelow, Flier, Grimes) (unpublished).
The Titos, who worked as residential apartment managers for Defendants, alleged numerous Labor Code wage and hour violations against Defendants. Because the Titos had signed a contract with an arbitration provision, Defendants moved to compel arbitration.
Labor Code section 229 expressly provided wage claims such as those alleged by the Titos were not subject to arbitration. “In many case,” the Court of Appeal observed, “parties do not dispute that an agreement at issue involves interstate commerce and that the FAA applies.” But here the Titos did dispute that their employment agreement involved interstate commerce.
The Court of Appeal held that the employer simply did not make a showing, with evidence, that the parties’ contractual relationship involved interstate commerce, as consistent with Lane, supra, and other cases. And so the order denying the motion to compel arbitration was affirmed.
Gateway Issues: A Primer On Arbitrability
Richard Chernick, Esq. of JAMS Has Written “A Primer On Arbitrability”.
I have posted frequently about “gateway” arbitrability issues, including recent developments concerning gateway arbitrability issues in class and representative actions, and distinctions between substantive and procedural gateway arbitrability issues. See my posts of November 17, 2014, and October 13, 2014. In fact, “Gateway Issues” is one of this blawg’s sidebar categories.
Richard Chernick, Vice President and Managing Director of JAMS’ arbitration practice, has a concise Primer on Arbitrability available on line. Here is the link.