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 Jing Jing Dan v. Rambla Vista Enterprises, LLC, B252050 (2/1 Nov. 25, 2014) (Rothschild, Chaney, Miller) (unpublished).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.
Arbitration/Gateway Issues: Judge, Not Arbitrator, Gets To Decide Whether Agreement To Arbitrate Authorizes Class Arbitration When Contract Is Silent – And That Goes For Representative Arbitration Too
PAGA Is A Representative, Not A Class Action, And So Judge Gets To Decide Whether PAGA Action Is Subject To Arbitration.
Defendant and employer Garden Fresh Restaurant Corporation petitioned for a writ of mandate seeking a writ directing the trial court to vacate part of an order leaving it to the arbitrator to determine whether the plaintiff employee and defendant employer had agreed to class or representative arbitration. “The question that Garden Fresh’s petition presents is: who decides whether an agreement to arbitrate disputes between the parties to the agreement authorizes class and/or representative arbitration when the contract is silent on the matter – the arbitrator or the court?” Garden Fresh Restaurant Corporation v. Superior Court, D066028 (4/1 Nov. 17, 2014) (Aaron, Huffman, McIntyre).
Answer: the court does.
This is the second recent California decision rejecting the plurality conclusion in the SCOTUS case Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003) (plurality opinion) (Bazzle) that the availability of class arbitration is not a question of arbitrability, and thus not a “gateway issue” for judges to decide. Garden Fresh Restaurant Corporation is thus consistent with Network Capital Funding Corporation v. Papke, which also rejected the non-binding plurality reasoning in Bazzle. I posted about Network Capital Funding Corporation on October 13, 2014.
Regarding the arbitrability “gateway” issue, Garden Fresh Restaurant Corporation does not distinguish between class actions, and representative PAGA actions. Therefore, a judge also gets to decide as a “gateway” issue whether the parties agreed to arbitrate representative claims, such as a PAGA claim, in the face of a silent arbitration provision. (We note that the Court also drops a footnote 3, suggesting that based on language in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014), “one might reasonably conclude that a court could never compel arbitration of a PAGA claim unless the state, as opposed to the individual plaintiff, had entered into an arbitration agreement with the defendant.”)
COMMENT: If the reasoning in Iskanian and Garden Fresh Restaurant Corporation continues to be good law, it could have far-reaching consequences, not just for the courts, but also for the Legislature. For example, by creating consumer statutes that provide for more “representative” actions in which the private party acts for the state as a private attorney general, the Legislature might be able to expand consumers’ opportunities to litigate rather than arbitrate their claims – leaving it to the courts to decide whether the representative action allows for bilateral arbitration. This could lead to an end-run around the growing body of law that permits class action waivers in arbitration agreements.
Arbitration/Collective Bargaining/Federal Arbitration Act: Court of Appeal Finds That Individual Arbitration Agreement Not Inconsistent With Collective Bargaining Agreement Is Enforceable
Where Federal Preemption Applies, The Employee’s Contract Cannot Deprive The Employee Of A Benefit – Such As The Right to File a Lawsuit Instead Of Arbitrating – If The Collective Bargaining Agreement Provides The Benefit.
Denying employer’s motion to compel arbitration, and both parties’ sanction motions, the trial judge explained: “It’s clear to me both subjectively and objectively that counsel are just on different planets on this case.”
1905. Library of Congress.
Defendant/employer appealed the denial of its petition to compel arbitration, and Plaintiff/employee appealed the denial of her sanctions motion. Willis v. Prime Healthcare Services, Inc., B253712 (2/5 Nov. 14, 2014) (Turner, Kriegler, Mink) (certified for partial publication).
The gravamen of Plaintiff’s wage and hour claim was that, “she and other potential members did not receive proper pay because an electronic system rounded the number of hours worked to their detriment.”
Critical to the outcome of the case are the relationships between the employee/employer collective bargaining agreement, the employee’s individual employment agreement with an arbitration clause, and federal preemption, discussed in the published part of the opinion.
Plaintiff argued that the employer’s collective bargaining agreement was inconsistent with her individual employment agreement that did not require arbitration, rendering the arbitration agreement inapplicable. Defendant argued that the employee was bound by the arbitration clause in her individual employment agreement.
First, because Defendant received reimbursement from Medicare payments, and other aspects of interstate commerce were involved, the individual arbitration agreement was subject to the Federal Arbitration Act.
Second, federal common law – specifically, J.I. Case Co. v. NLRB, 321 U.S. 332 (1944), requires that an individual employee contract cannot waive any benefit to which an employee otherwise would be entitled under a collective bargaining agreement, in an industry affecting commerce as defined in the Labor Management Relations Act of 1947. Applying that principle here, the individual contract requiring arbitration could not deprive the employee of the right to file a lawsuit, if such right was a benefit available in the collective bargaining agreement.
Third, however, the J.I. Case decision did not invalidate the arbitration provision in Plaintiff’s individual agreement, which provision covered “any dispute,” and thus covered Plaintiff’s statutory wage and hour claims. However, the collective bargaining agreement specifically covered “grievances.” Under the collective bargaining agreement, a grievance was defined, “as a dispute as to the interpretation, meaning or application of a specific provision of this Agreement.” And there was nothing in the collective bargaining agreement, “about the use of an electronic system to calculate hours and rounding those calculations in a manner detrimental to an employee.” Hence, there was no inconsistency between Plaintiff’s individual agreement and the collective bargaining. In other words, the necessary predicate for federal preemption purposes requiring application of the collective bargaining agreement – inconsistent benefits in the individual and collective bargaining agreements – was lacking. Therefore, the individual agreement with its binding arbitration provision, rather than the collective bargaining agreement, applied.
And the sanctions? The trial judge said: “This is just counsel, very able counsel, in good faith who are looking at opposite ends of the telescope.” The Court of Appeal found no abuse of discretion in denying the sanctions motion.
![[Telescope?]](http://cdn.loc.gov/service/pnp/hec/40100/40145r.jpg)
1936. Library of Congress.
Arbitration/Enforceability/Consumers: Reasonable Person Wouldn’t Understand Purchasing A Vehicle Would Simultaneously Bind To Contract With Satellite Radio Service And Require Arbitration
Lack Of Consent Is The Problem With The Arbitration Agreement Here.
In an opinion authored by Judge Pregerson, the Ninth Circuit reverses the district court’s order dismissing a putative class action and granting Sirius XM Radio Inc.’s motion to compel arbitration. Knutson v. Sirius XM Radio Inc., No. 12-56120 (9th Cir. Nov. 10, 2014) (Pregerson, Murphy, Berzon).
The customer purchased a vehicle from Toyota, and received unwanted solicitation calls from Sirius XM. He sued Sirius XM Radio Inc., alleging the unwanted telemarketing calls were violations of the Telephone Consumer Protection Act. Sirius XM Radio Inc. successfully petitioned to compel arbitration, and plaintiff appealed.
The Ninth Circuit panel held Sirius XM failed to prove the existence of an agreement to arbitrate. A reasonable person could not be expected to understand that purchasing the vehicle would simultaneously bind him to a contract with Sirius XM, and that the contract would require arbitration. The fact that the plaintiff received some benefit by listening to the radio did not manifest consent to an agreement the plaintiff didn’t know about.
COMMENT: I have asked on other occasions whether “consent” is something of a fiction in the arbitration context, given that a procedurally unconscionable agreement involving surprise and ambush, but that is not substantively unconscionable, can nevertheless survive scrutiny. Let’s just say that being able to apply the label “lack of consent” can still effectively kill an arbitration agreement, whereas applying the label “procedurally unconscionable” is not dispositive. The line between “lack of consent” and “procedurally unconscionable” is not necessarily a bright line.
Also, note that Judge Pregerson dissented in 2013 in Kilgore v. Keybank, attaching as an Appendix to his dissent, “the dense, small print, and blurry nine-page contract that Silver State thrust on the students at career fairs and open houses.” [Kilgore is the subject of my April 12, 2013 post]. The Kilgore case rejected an argument that the arbitration clause at issue was procedurally unconscionable. However, in the Knutson case, the Court of Appeals did not address substantive unconscionability, because its analysis hinged instead on lack of consent. This time, Judge Pregerson, rather than being the dissenter, penned the opinion.