Arbitration/Agents/Nonsignatories/Scope: Executives Sued As Agents Of Company Entitled To Take Advantage Of Arbitration Provision In Contract Between Company And Shareholder
Plaintiff Alston, the founder of GB, brought a private equity firm into GB in exchange for the firm’s investment in GB to help build the company. Fast forward — Alston is terminated by GB as a director, and sues GB and two executives, alleging misrepresentation, declaratory relief, defamation, interference, and wrongful termination. Because Alston has an arbitration agreement with GB, defendants successfully move to compel arbitration. Arbitration does not go well for Alston, who unsuccessfully petitions to vacate an adverse award. Alston timely appeals from judgment, arguing the trial court erred by sending the entire case to arbitration. Alston v. Hoge, A139778 (1/1 July 29, 2014) (Margulies, Dondero, Banke) (unpublished).
Alston’s chief argument on appeal is that the executives, who are not signatories to his agreement with GB, cannot enforce the arbitration agreement. However, the Court of Appeal disagrees, relying on the principle, “that agents of a signatory party, sued in that capacity by another party to an agreement, are entitled to the benefit of the agreement’s arbitration provisions.”
The remaining issue was whether the scope of the arbitration agreement was sufficiently broad to cover all of Alston’s claims. Yes: “The arbitration agreement in this case covered all claims, disputes, and controversies of any nature arising out of or relating to (1) the Agreement; (2) the interpretation, enforcement, breach, performance, or execution of the Agreement; and (3) Alston’s ‘relationship’ with GB or the termination of that relationship.”
A simple affirmance of the judgment.
Arbitration/Employment/Unconscionability/Severance: Court Affirms Order Denying Employer’s Petition To Compel Arbitration
Permeated With Unconscionability, Agreement Did Not Require Severance.
Mr. Ryan, an employee in the construction industry, claimed that he was fired in a retaliatory move by his employer. The employer petitioned to compel arbitration. The trial court denied the request, finding the mandatory employment arbitration agreement contained unconscionable provisions, and refusing to sever those provisions. Employer appealed. Barnum v. Paul Ryan Associates, Inc., A138345 (1/2 July 30, 2014) (Kline, Richman, Brick) (unpublished).
Affirmed.
Here, the employment agreement incorporated, but did not attach applicable AAA rules. The Court of Appeal acknowledged that whether that renders the agreement unconscionable “turns heavily on the circumstances.” As is common, the employment contract was adhesive. But the real zinger here was that the agreement incorporated a pre-arbitration internal dispute resolution mechanism within the control of the employer, and not requiring use of a neutral mediator, resulting in a procedure that “even the most diligent employees could not learn of or anticipate at the time they agreed to arbitrate.” Thus, the circumstances added up to procedural unconscionability.
Lack of mutuality resulted in substantive unconscionability. Claims likely to be brought by the employee, concerning hiring, employment, or termination, had to be arbitrated, whereas equitable or injunctive relief claims likely to be brought by the employer could be brought in court. In addition, the pre-arbitration internal dispute resolution procedure added to the lack of mutuality by giving the employer a “free peek” at the employee’s case, without giving the employee the benefit of a neutral mediator.
The Court held that “the trial court did not abuse its discretion in determining that the agreement is permeated with unconscionability and cannot be enforced.”
Arbitration/Employment/Class/Waiver: Second District, Div. 1 Follows Supreme Court Iskanian Precedent Holding That Right To Bring A Representative Action Under The Private Attorneys General Act (PAGA) Can’t Be Waived
Waiver Is Contrary To Public Policy And PAGA Dispute Is Between Employer And The State.
“The sole issue presented on appeal is the enforceability of a waiver of the right to bring a representative action . . . under PAGA . . . That issue has recently been resolved against Pep Boys by the Supreme Court’s decision in Iskanian v. CLS Transportation Los Angeles, LLC (June 23, 2014, S204032) ___ Cal.4th ___ (Iskanian). We therefore affirm.” Venegas v. The Pep Boys Manny Moe & Jack of California, B249579 (2/1 July 30, 2014) (Rothschild, Chaney, Miller) (unpublished).
In my June 23, 2014 post on Iskanian, I quoted from the majority opinion:
“Simply put, a PAGA claim lies outside the FAA’s coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between an employer and the state, which alleges directly or through its agents . . . that the employer has violated the Labor Code.”
That seems to succinctly explain why the class action waiver need not be enforced. In Venegas, because “the parties agreed that representative actions must be litigated if the representative action waiver is found unenforceable,” the Court of Appeal ordered Venegas’s PAGA claim to proceed in court, not in arbitration.
Mediation/Confidentiality/Family Law/Settlement Agreement: Affirming Trial Court, Second District, Division 1 Agrees Stipulated Judgment Reached Through Mediation Is Enforceable, Despite Failure To File It In Dissolution Proceedings, And Dismissal Of Mari
Stipulated Judgment May Not Have Contained Magic Words, But It Was Sufficient To Express Parties’ Intent To Waive Confidentiality And Allow Enforcement
Daly v. Oyster, B249255 (2/1 July 29, 2014) (Chaney, Johnson, Wiley) (published) deals with that nettlesome situation that sometimes arises after mediation when papers are not filed with the court, the case is eventually dismissed, and one of the parties then seeks to enforce the settlement. Does the confidentiality of mediation prevent introduction of the stipulated judgment into evidence? Has a party simply waited too long to enforce the agreement? Has the court lost jurisdiction to enforce?
In 1981 Joanne Daly and David Oyster married. In 2004 they separated. In 2005, Daly filed a marital dissolution petition. In June 2006, the parties entered into a stipulated judgment following mediation. In May 2011, the superior court dismissed Daly’s petition for lack of prosecution. In June 2011, Daly filed a second dissolution petition to enforce the stipulated judgment. Apparently wanting to open up the proceedings and seek modifications, Oyster objected to admission of the stipulated judgment on the ground it was protected by the mediation privilege, Evid. Code section 1119.
The Court of Appeal, however, disagreed with Oyster. One exception to mediation confidentiality is a written settlement agreement providing “that it is admissible or subject to disclosure or that it is enforceable or binding, or words to that effect.” That little tail — “words to that effect” – means that magic words are not necessary. It is enough if the terms unambiguously signify the parties’ intent to disclose the agreement or be bound by it. Such was the case here: “The parties agreed the court would enforce the document, which it could not do unless the document was disclosed to it.”
Did the time to enforce the stipulated settlement run out, given that the divorce took longer than five years, and the underlying case was dismissed after five years? No – there was no authority that the statute of limitations for asserting breach of the agreement created a deadline for seeking to enforce it. But for good measure, even if a statute of limitations was running, Daly could have filed the stipulation until the case was dismissed in June 2011, after which she would have had four years to sue for breach of a written agreement.
PRACTICE TIP: Include language that your settlement agreement, achieved through mediation, is admissible, subject to disclosure to the court, enforceable, and binding, and you eliminate one problem encountered by Daly.
Arbitration/Employment/Waiver: Employer Did Not Waive Right To Enforce An Arbitration Agreement By Waiting Until Employee’s Wage Claim Had Been Heard In A Berman Hearing
Employer Did Not Waive Its Right To Arbitrate Wage Claim And So Trial Court’s Order Denying Employer’s Motion To Compel Arbitration Is Reversed
Fremont Automobile Dealership, LLC, A137266 (1/2 July 23, 2014) (Richman, Kline, Brick) (unpublished) addresses the still somewhat murky relationship between the interaction of an arbitration agreement and the statutory right to a Division of Labor Enforcement hearing under Labor Code section 98 – a so-called “Berman Hearing.” “As an alternative to an ordinary civil action for unpaid wages, an employee may file a wage claim with the Labor Commissioner pursuant to Labor Code section 98, et seq. This is commonly known as the ‘Berman’ hearing procedure.” Fremont Automobile Dealership, n.2.
The issue here was that employee’s claim was successfully resolved in favor of employee through a Berman hearing, with the employer, just before the hearing, seeking to enforce an arbitration agreement. The Court of Appeal seemed to think that the employee had not preserved the issue of “waiver” of the employer’s right to arbitration below. However, even if waiver was an issue that had been preserved for the appeal, a critical issue in determining whether the right to compel arbitration has been waived is the presence or absence of prejudice. Because Kim’s employer Fremont Toyota “was entitled to a de novo review by the trial court of Kim’s claim” pursuant to Labor Code section 98.2(a), the Court of Appeal found that the employer “did not gain any advantage for the arbitration that it would not hav e had in the trial court’s de novo review.” No prejudice, no waiver here.
The trial court’s order denying employer’s petition to compel arbitration was reversed.
Arbitration: Arbitrator Did Not Exceed His Powers Nor Did Trial Court Err By Failing To Issue Statement Of Decision
Here, the landlord-tenant dispute arose because the tenant’s husband tragically died in an automobile accident, sometime after which rent payments ceased. The parties arbitrated their claims, and the arbitrator awarded $180,000 to landlord, discounting landlord’s claims of nearly $1.3M in damages chiefly because landlord failed to properly mitigate damages. The trial court confirmed the award, and tenant appealed. Gardyn v. Sangha, A134558 (1/3 July 21, 2014) (Siggins, Pollak, Jenkins) (unpublished.)
First, the tenant argued that arbitrator exceeded his powers, because he had taken equity into account, despite the fact that the arbitration clause required disputes between the parties to be decided “in accordance with substantive California law.” The Court of Appeal, however, believed that the arbitrator, in considering fairness and equity, properly took into account the landlord’s mitigation efforts and other factors, so as not to depart from substantive California law. For good measure, the Court added: “’Even where application of a particular law or body of law is required by the parties’ arbitration agreement, an arbitrator’s failure to apply such a law is not in excess of an arbitrator’s powers within the meaning of section 1286.2, subdivision [(a)(4)],” citing Marsch v. Williams, 23 Cal.App.4th 238,244 (1994). (Evidently the arbitration agreement needs a tighter drafting solution for the arbitrator to exceed his powers!).
Second, the Court rejected the argument that the trial court erred by failing to issue a statement of decision. Findings of fact are not required in arbitration matters if the issues presented and determined raise only questions of law – as was the case here.
Affirmed.