Arbitration/Waiver/Employment: Substantial Evidence Supported Finding That Employer Waived Right To Arbitrate
Substitution Of New Named Plaintiff To Represent Class Didn’t “Restart The Clock”.
In Jacoby v. Islands Restaurants, L.P., No. B250886 (2nd Dist. Div. 5 June 20, 2014) (Turner, Kriegler, Mink) (unpublished), the Court of Appeal ruled that substantial evidence supported the trial court’s finding that defendant employer had waived its right to arbitrate.
As readers of this blawg know, findings of waiver are usually very fact specific. Here, Islands Restaurants filed a demurrer, two motions to strike, a mandate petition, and a review petition in the Supreme Court, and the parties engaged in class-wide discovery. The case was over two years old and there was a pending class certification motion when defendant filed its motion to compel. That was “substantial evidence” to support a finding of waiver.
The one wrinkle is that Chambless, not Jacoby, was the original named plaintiff. Defendant contended that plaintiff’s substitution as class representative “’reset the clock for purposes of waiver’ jurisprudence.” Not so, said the Court of Appeal. Plaintiff Jacoby had always been a putative class member.
Arbitration/Unconscionability: Court of Appeal Concludes That One-Sided “Take It Or Leave It” Agreement With Financially Battered Spanish Speaking Parties Is Unconscionable
Dissenting Justice Would Have Waited For Further Guidance From Supreme Court On Pending Cases
Nine plaintiffs sued their mortgage foreclosure consultant and others for fraud, breach of contract, and other claims, alleging they were duped into signing their agreements and lost money when they paid for services that were never rendered. Defendants successfully petitioned to compel arbitration in the trial court, and plaintiffs appealed. Sabia v. Orange County Metro Realty, Inc., No. B243141 (2nd Dist. Div. 8 June 18, 2014) (published).
Justice Rubin, who penned the Court of Appeal decision, concluded:
“[T]he Home Defender contract is unfairly one-sided in two significant respects: by allowing only Home Defender unfettered access to the courts for any claims it might have against its clients, and by limiting plaintiffs’ access to the courts to only small claims actions, thus cutting off civil actions involving substantial damage claims. We believe this places it somewhere beyond the middle of the sliding scale.
The level of procedural unconscionability sits somewhere below the middle of that scale, but not toward the bottom. Plaintiffs were effectively steered away from examining the contracts and other documents and were not given Spanish language versions even though the negotiations were conducted in Spanish. Plaintiffs were also in economic distress at the time.”
Thus, the scales tipped in favor of finding unconscionability, leading to reversal. Justice Bigelow concurred.
“I am unable to set aside my doubts,” wrote Justice Grimes, dissenting. “I would have preferred to stay this case to obtain the benefits of the opinions in cases now pending decision in our Supreme Court . . . “
Stay tuned to hear what the California Supreme Court will say in pending cases addressing enforcement of arbitration, such as Sanchez v. Valencia Holding Co. (review granted March 21, 2012, S199119).
Arbitration/Enforcement: Lack Of Written Arbitration Agreement Proves Fatal To Funeral Director/Embalmer’s Appeal Of Order Denying Petition To Compel
DOA: Neither Appellant Nor Respondents Were Able To Discover Copy Of A Written Agreement To Arbitrate
It was undisputed that in the ordinary course of business, respondents required all employees to sign an arbitration agreement, and it was not clear why the appellant, Mr. Corselli “might have been an exception to this rule.” Apparently, the employer’s general business practice was the hook upon which plaintiff/appellant hung his petition to arbitrate. The trial court found that Mr. Corselli had not carried his burden to prove the existence of an agreement to arbitrate — and the Court of Appeal agreed. Corselli v. Service Corporation International, Case No. E056131 (4th Dist. Div. 2 June 13, 2014) (Hollenhorst, Richli, Miller) (unpublished). “In short,” wrote Justice Hollenhorst, “Mr. Corselli’s evidence shows that it is possible that he entered into an agreement to arbitrate with his employers, but it does not compel such a finding as a matter of law.”
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| Embalming. Library of Congress. |
Posted with BlogsyArbitration/Waiver: Litany Of Facts Supported Trial Court’s Finding Of Waiver
Waiver Of Right To Arbitrate Does Not Require Voluntary Relinquishment Of Known Right
Plaintiff sued 1-800-GET THIN and several other parties, after undergoing an endoscopic screening procedure for gastric band surgery and allegedly suffering injury. The trial court denied defendants’ petition to arbitrate, noting “delay and denial of discovery”, and that Plaintiff “will suffer prejudice if the petition is granted.” Defendants appealed. Prewitt v. 1-800 GET THIN, Case No. B246574 (2nd Dist. Div. 7 June 10, 2014) (Woods, Perluss, Segal) (unpublished).
The Court of Appeal had no trouble affirming the trial court, on the ground that substantial evidence supported the finding of waiver. Often no one factor is dispositive in deciding whether waiver has occurred. In fact, the leading case, St. Agnes Medical Center v. PacifiCare of California, 31 Cal.4th 1187 (2003), sets forth a six factor test for waiver – factors that often overlap.
Here, defendants had not proceeded expeditiously to request arbitration, they propounded discovery and obtained answers, apparently they did not provide much by way of discovery responses themselves, and they attended court appearances without mentioning arbitration.
COMMENT: The Court notes that the typical meaning of waiver – voluntary relinquishment of a known right – is different from the meaning in the context of a waiver of the right to arbitrate: “[A] party may be said to have ‘waived’ its right to arbitrate by an untimely demand, even without intending to give up the remedy. In this context, waiver is more like a forfeiture arising from the nonperformance of a required act.” Prewitt, supra, quoting Burton v. Cruise, 190 Cal.App.4th 939, 944 (2010).
Arbitration/Vacatur/Standard Of Review: Appellant, Who Failed To Appear At Arbitration, Failed To Show Sufficient Cause For Continuance
All Things Considered . . .
Appellant Akin’s opening brief stated: “All things considered . . . it was assumed that the May 30th arbitration had been cancelled.” The lesson of our next case is that one who fails to show up for a scheduled arbitration hearing had better dot i’s and cross t’s . . . or else. Akin v. Prado, No. F066482 (5th Dist. June 9, 2014) (unpublished).
Akin wanted to continue an arbitration hearing to complete discovery. However, Prado refused to do so. The arbitrator held the hearing, and entered an award in favor of Prado. The trial court confirmed the award, and denied Akin’s petition to vacate. Akin appealed.
Appellant’s fate was sealed by the “substantial evidence” standard of review. “Pursuant to the applicable standard of review, we accept the version of events as found by the trial court, not the version presented by Akin.”
Interestingly, Cal. Code of Civ. Proc., section 1286.2(a)(5) specifically provides that an award shall be vacated if the court determines “rights of a party were substantially prejudiced by the refusal of the arbitrators to postpone a hearing upon sufficient cause being shown therefor . . .” (italics in the opinion).
PRACTICE TIP: The remedy for continuance is to make a proper noticed motion, rather than to assume that the hearing has been cancelled and fail to show.
COMMENT: The Court of Appeal’s application of a “de novo standard” to review the trial court’s order (not the arbitration award), coupled with a “substantial evidence” standard to the extent that the trial court’s ruling rests on disputed factual issues, may at first seem confusing. The Court of Appeal relies on Lindenstadt v. Staff Builders, Inc., 55 Cal.App.4th 882 (1997) (Masterson, J.), a case holding that a narrow exception to the rule that a court may not set aside an arbitration award even if the arbitrator made an error in law or fact, is the situation where the entire legality of a contract is at issue: public policy requires de novo review of the trial court’s order. However, the facts of Lindenstadt seem rather afield from those in Akin.
The following comment by the Court of Appeal helps us to make sense of how it applied the standard of review: “The arguments presented by Akin on appeal are based on assertions of fact that are contrary to the findings of the trial court . . . “ In other words, the Court of Appeal is telling us that the trial court had to make findings to reach its conclusion that the rights of a party were not substantially prejudiced by the refusal of arbitrators to postpone a hearing upon sufficient cause – and those findings were supported by substantial evidence.
Arbitration/Disclosures/Vacatur: “Any Professional Relationship” Doesn’t Really Mean Any Professional Relationship With Party Is Basis To Disqualify Arbitrator
How About Two Years – Is Two Years Good For You?
Brothers appealed from a superior court order denying their petition to vacate several awards of an arbitrator with whom they were dissatisfied. They contended the arbitrator failed to disclose his professional relationship with opposing party’s counsel. In 2011, one of the appellants discovered that the arbitrator was a former member of the same law firm as the opposing party’s attorney – a professional relationship that ended in 1996. The arbitrator had been engaged in 2001, and had performed arbitration services for the parties until he resigned in 2011. Estate of Mapes, A136086 (1st Dist. Div. 2 June 3, 2014) (Kline, Richman, Brick) (unpublished).
Though Code of Civ. Proc., section 1281.9 requires disclosure of “any professional or significant personal relationship”, evolving case law doesn’t require disclosure of any professional relationship. Pointing to rules that are concerned about only two years of relationships (Ethics Stds., std. 7(d)(8)(A), Code of Civ. Proc., section 170.1(a)(2)), the Court concluded a five year old relationship did not need to be disclosed.
For good measure, the Court also concluded appellants were aware of the professional relationship, and failed to raise the issue timely. Courts do not like sandbagging – waiting “until the arbitration was over, and then [moving] to vacate the award, despite having failed to move to disqualify the proposed arbitrator before the arbitration commenced.” Dornbirer v. Kaiser Foundation Health Plan, Inc., 166 Cal.App.4th 831, 846 (2008).
Affirmed.
CAUTION: Don’t view the two year limitation as an absolute safe harbor. Section 1281.9(a) also requires that a proposed neutral arbitrator disclose “all matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial.”