Arbitration/Standard of Review: Arbitrator Acted Within Power Under Arbitration Clause In Awarding Fees, But Sanctions Award Is Denied As Appeal Was Not Wholly Frivolous
Standard Of Review Pretty Much Ordained The Result Here, And Nothing Was Changed By Appealing
This is one of those “Cain v. Abel” disputes, in which beneficiaries/brothers (Douglas and Martin Buser), fought over their parents’ family trust. It appears Douglas fought tooth and nail, but unsuccessfully, getting hit with attorney’s fees assessed against his share of the trust estate, and monetary sanctions for his pursuit of an unmeritorious renewed motion or reconsideration petition. Buser v. Buser, D63381 (4th Dist. Div. 1 July 3, 2014) (Huffman, McIntyre, Aaron) (unpublished). Nothing was changed by Douglas’ appeal, except that Martin failed to get appellate sanctions, because the Court could not say that Douglas’ appeal was wholly frivolous.
The battling brothers had agreed to a settlement that included a broad arbitration provision, which settlement the trial court enforced, sending the disputed matters to arbitration. Because the brothers’ dispute was resolved with an arbitration award, the losing brother, Douglas, had a tough row to hoe to try and show the arbitrator exceeded his powers. As the Court made clear:
"’Our review of an arbitration award requires us to extend to it every intendment of validity and the party claiming error has the burden of supporting his contention.’ (Ibid., citing Cobler v. Stanley, Barber, Southard, Brown & Associates (1990) 217 Cal.App.3d 518, 526 (Cobler).) It is well accepted ‘ “ ‘[t]he powers of an arbitrator are limited and circumscribed by the agreement or stipulation of submission.’”’”
Arbitration/Class Action/Waiver: Two Ninth Circuit Opinions Hold Class Action Waivers In Arbitration Agreements Are Valid
Yesterday, June 23, 2014, the California Supreme Court agreed that an arbitration class action waiver in Iskanian v. CLS Transportation Los Angeles was enforceable. See my June 23 post. On the same day, the Ninth Circuit Court of Appeals agreed that class action waivers are valid – at least in the circumstances of the two cases decided that day. One case involved an opportunity to “opt out” of arbitration. The other case concluded that the employer had given employees reasonable notice of a change in its arbitration policy.
Johnmohammadi v. Bloomingdale’s, Inc., No. 12-55578 (9th Cir. June 23, 2014) (Judge Watford, author).
The panel in Johnmohammadi addressed, then ducked, an issue raised by Justice Werdegar’s dissent yesterday in Iskanian: whether the class-action waiver, enforceable under California law, is nevertheless unenforceable under the Norris-LaGuardia Act, and the National Labor Relations Act, making it illegal for an employer “to interfere with, restrain, or coerce employees in the exercise” of certain rights, including certain “concerted activities” protected by the Norris-LaGuardia Act. While the panel concluded that “[t]here is some judicial support for her position,” the plaintiff failed to show interference, restrain, or coercion. Why? Because the employer, Bloomingdale’s, offered plaintiff an opportunity to “opt out” of arbitration, and she did not take that opportunity. Had she opted out, explained Judge Watford, “she would be free to pursue this class action in court.”
Davis v. Nordstrom, Inc., No. 12-17403 (9th Cir. June 23, 2014) (Judge Smith, author).
In an opinion penned by Judge Smith, the panel reversed the district court’s order denying Nordstrom’s motion to compel arbitration of an employee’s claims brought as a putative class action. The key issue here was whether Nordstrom’s complied with a provision requiring it to give employees 30 days written notice of any substantive changes to the arbitration provision – and the change in arbitration policy, precluding most class action lawsuits, was substantive. Here, sending a letter to Davis and other employees “informing them of the modification, and not seeking to enforce the arbitration provision during the 30 day notice period,” constituted reasonable notice of a change.
Arbitration/Employment/Class/Waiver/FAA/Public Policy: California Supreme Court Rules in Iskanian: Yes On Waiver Of Class Action, No On Waiver Of PAGA Claims
Iskanian Decision Yields Opinion Of Four, Plus Justice Chin, Concurring, Plus Justice Werdegar, Concurring And Dissenting
In a much-awaited decision, the California Supreme Court has ruled that a state’s refusal to enforce a class action waiver on grounds of public policy or unconscionability is preempted by the Federal Arbitration Act (FAA), but that the FAA does not preempt a state law that prohibits waiver of Labor Code Private Attorneys General Act of 2004 (PAGA) representative actions in an employment contract. Iskanian v. CLS Transportation Los Angeles, LLC, No. S204032 (Sup. Ct. June 23, 2014).
Class Action Waiver
In a majority opinion penned by Justice Lui, with Chief Justice Cantil-Sakauye and Justices Corrigan and Kennard concurring, the court holds that Gentry v. Superior Court, 42 Cal.4th 443 (2007) has been abrogated by SCOTUS precedent. The Justices reject the argument that the employee class action waiver is unlawful under under the National Labor Relations Act.
PAGA Representative Action.
In March 12, and March 16, 2014 posts, I wrote that we are,
"in a somewhat fuzzy area regarding FAA preemption of California statutory rights to file a court action – especially in those instances where the beneficiary of the statutory right may include the public, and not just the individual who is a party to the arbitration agreement. Example: Private Attorney General Act (PAGA) employment claims.”
Not so fuzzy anymore with respect to PAGA.
The Iskanian majority explains that “an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.” The PAGA action is analogous to a qui tam action, brought by an individual, but benefitting the public. Furthermore, the majority concludes that a PAGA action does not frustrate the FAA’s objectives:
“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.”
Concurrences and Dissent.
Justice Chin agrees that Gentry is inconsistent with SCOTUS precedent interpreting the FAA, while disagreeing with some of the majority’s reasoning. He does not agree that the approach to unconsionability of a majority of the court “may ‘be’ squared’ with the high court’s FAA decisions.” While agreeing the PAGA waiver is unenforceable, Justice Chin takes a different route to get there: he believes that “the conclusion that the arbitration agreement here is invalid insofar as it forbids Iskanian from asserting his statutory right under PAGA in any forum does not run afoul of the FAA.”
Justice Werdegar agrees that Iskanian’s PAGA claims are not foreclosed by his employment contract or by the FAA. But she believes that “[t]oday’s class waivers are the descendants of last century’s yellow dog contracts.” She believes that the enforcement of class waivers in employment contracts violates the employees’ rights to collective action, and thus constitutes an unfair labor practice.
BLAWG BONUS: Justice Werdegar explains that employment contracts prohibiting collective action date to the 19th century, and were first known as “ironclads,” also as “yellow-dog contracts.” Wikipedia explains:
“A yellow-dog contract . . . is an agreement between an employer and an employee in which the employee agrees, as a condition of employment, not to be a member of a labor union. In the United States, such contracts were, until the 1930s, widely used by employers to prevent the formation of unions, most often by permitting employers to take legal action against union organizers. In 1932, yellow-dog contracts were outlawed in the United States under the Norris-LaGuardia Act.”
Further note: Before the Norris-LaGuardia Act, SCOTUS declared an act banning yellow-dog contracts unconstitutional in Adair v. United States, 208 U.S. 161 (1908).
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. |
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