News: Since Thursday Last Week Typepad Has Been Besieged By A Distributed Denial-Of-Service Attack, Affecting Our Blog, And Countless Others
GRRRRRRRRR . . . .
If you are reading this post, we thank you for your loyalty!
Since last week, our internet platform, the usually very reliable Typepad, owned by SAY Media, has been subjected to a “distributed denial-of-service attack.”
A DDOS attack is intended to make a network resource unavailable to intended users. A coordinated effort is made to overwhelm the webservers – as if everyone sitting around the dinner table conspired to reach with their forks for the steak at the same moment.
As bloggers, we find the resulting chaos here and under these circumstances to be enormously frustrating and unfair. A DDOS attack allows a small number of persons to disrupt the free speech of thousands, perhaps millions, of writers and readers.
DDOS attacks have sometimes been compared to “virtual sit-ins” or “Internet Street Protests” – especially when they invade a politicized target, be it the New York Stock Exchange, or a despised bank.
But why attack Typepad, of all targets? Attacking Typepad, which is a vehicle for free speech that reaches millions, is impossible for us to see as any legitimate political protest. Do the attackers simply want to shakedown SAY Media for ransom?
Individual bloggers are powerless to do anything about such an attack, because a DDOS attack reveals a systemic problem with the use and abuse of internet resources – a problem that simply cannot be solved at the individual level.
We hope that SAY Media will invest significant resources to develop security measures that make such attacks less disruptive in the future. Such an investment is essential to preserve the extraordinary value that Typepad provides to its owners, to its customers, and to the readers of blogs hosted by Typepad.
BLOG BONUS: Wikipedia defines a DOS or DDOS attack as follows:
“In computing, a denial-of-service (DoS) or distributed denial-of-service (DDoS) attack is an attempt to make a machine or network resource unavailable to its intended users. Although the means to carry out, motives for, and targets of a DoS attack may vary, it generally consists of efforts to temporarily or indefinitely interrupt or suspend services of a host connected to the Internet. As clarification, DDoS (Distributed Denial of Service) attacks are sent by two or more persons, or bots. (See botnet) DoS (Denial of Service) attacks are sent by one person or system.”
Arbitration/Automobiles/Severability/Unconscionability/FAA: Case Is Remanded So Trial Court May Determine Whether Unconscionable Provisions In Automobile Installment Sale Contract Are Severable
Sixth District Does Agree That Federal Arbitration Act Preempts California Consumers Legal Remedies Act, So Class Action Waiver In Arbitration Clause Is Enforceable
Jalopy that has seen better days. Carol M. Highsmith, photographer. Library of Congress.
An arbitration clause that is “permeated with unconscionability” need not be enforced. Here, the scorecard in the trial court was as follows: (A) a class action waiver in an automobile installment contract was found enforceable; (B) four other provisions were unconscionable; (C) because the arbitration clause was permeated with unconscionability, the trial court refused to enforce it. Defendants appealed. Gillespie v. Svale Del Grande, Inc., H039428 (6th Dist. April 17, 2014) (Bamattre-Manoukian, Mihara, Grover) (unpublished).
In the Court of Appeal, the scorecard changed: (A) the class action waiver was found enforceable; (B) a self-help provision in the contract, allowing, for example, for repossession of a vehicle, was not found unconscionable; (C) three other provisions were found unconscionable: “(1) the exception to arbitral finality for an award in excess of $100,000, (2) the exception to arbitral finality for an award that includes injunctive relief, and (3) the requirement that the appealing party advance both parties’ costs for the second arbitration with a three-arbitrator panel”; (D) the case was remanded so that the trial court could exercise discretion and determine whether the unconscionable provisions could be severed pursuant to Cal. Civ. Code, section 1670.5(a).
COMMENTS:
First, Plaintiff’s attorney provided a convincing declaration showing that costs for a second arbitration could be onerous for the consumer. Compare my March 25, 2014 post on The McCaffrey Group, Inc. v. Superior Court, F066080 (5th Dist. March 24, 2014), in which the 5th District panel, signalling a failure of proof, stated homeowners “made no attempt to show that the mediation fees they are likely to pay would be exorbitant or place an unreasonable burden on them . . . “
Second, we are still waiting to hear from the California Supreme Court whether various clauses in automobile sales contracts are unconscionable, and whether the class action waiver in those contracts is proper. The California Supreme Court has granted review in a number of those cases.
Arbitration/Nonsignatories: Second District, Div. 2 Agrees That Appellant Failed To Establish Exception To General Rule That Nonsignatories Cannot Compel Arbitration
Simple Failure Of Proof Dictated The Outcome
Generally, a nonsignatory to an arbitration provision cannot compel arbitration. However, under certain circumstances a nonsignatory may invoke or be bound by an arbitration provision: “‘(a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing or alter ego; (e) estoppel; and (f) third-party beneficiary’”. Suh v. Superior Court, 181 Cal.App.4th 1504, 1513 (2010).
In Hoyle v. Top Surgeons, LLC, B247375 (2nd Dist. Div. 2 April 10, 2014) (Ferns, Boren, Chavez) (unpublished), appellant Top Surgeons, LLC sought to compel arbitration of a complaint arising from lap band surgery alleged to have been negligently performed. Appellant alleged that, though it was a nonsignatory, it was a third-party beneficiary of an arbitration provision between the plaintiff and various defendants.
Conclusory allegations, however, did not cut the mustard with the Court of Appeal. “Without evidence of any relationship between
appellant and the signatories to the Agreements, the trial court properly denied the petition to compel arbitration.” A little evidence might have been helpful.
Arbitration/Vacatur/Deadlines: Too Late To Correct Arbitrator’s Award In High-Low Arbitration, Appellant Could Still Enforce “High-Low” Limit To The Award With Motion Requiring A Satisfaction Of Judgment
Once Again, Fourth Appellate District Demonstrates That Often There’s More Than One Way To Skin A Cat Where Arbitration Deadlines Are Involved
Cats. 1927. Library of Congress.
On April 4, 2014, we posted about the way a plaintiff found to get around a deadline in arbitration: after the time ran out to modify an arbitration award, the plaintiff was able to amend a judgment to add another party as a “successor corporation.” Butler v. Lyons & Wolivar, Inc., Case No. G04766 (4th Dist. Div. 3 March 3, 2014) (Fybel, Rylaarsdam, Aronson) (unpublished). As our next case also demonstrates, when it is a matter of an arbitration deadline, often, “there’s more than one way to skin a cat.” Horath v. Hess, D063124; D063709 (4th Dist. Div. 1 April 10, 2014) (McDonald, Huffman, McIntyre).
In Case No. D063124, Horath and Hess submitted to “high-low arbitration.” In such arbitration, the parties privately agree, without informing the arbitrator, on a “high-low” range to the arbitration award. In this case, the parties agreed that Plaintiff Horath would accept the award of the arbitrator or $100,000, whichever was less, but in no event less than $44,000. The arbitrator awarded $329,644.61 in damages, and $36,882.61 in costs – far outside the “high-low” range.
Let’s pause for a moment to contemplate the resulting tensions. On the one hand, an award so far outside the “high-low” range might incline a judge to find a way around the stipulation. On the other hand, a deal is a deal. Despite the stipulation, the trial judge confirmed the arbitrator’s award – and the Court of Appeal reversed.
The problem for defendant Hess in the trial court was that he encountered the 100-day deadline to move to vacate or correct an award (Cal. Code of Civ. Proc., sections 1288 and 1288.2), after filing his motion to limit the judgment amount to $100,000: Hess filed his motion more than 100 days after the date of the award. Plaintiff Horath opposed Hess’s motion, arguing that it was a motion to “correct” the award, and as such, was untimely. Agreeing with plaintiff, the trial judge confirmed the award, and denied as untimely a motion to vacate it or correct it to conform with the “high-low stipulation”. Defendant Hess’s motion for reconsideration, brought under section 473, was also denied.
In Case No. D063709, Hess filed a motion for acknowledgment of satisfaction of the judgment, arguing he had paid Horath $100,000 plus costs, and was therefore entitled to a satisfaction pursuant to the terms of the “high-low” stipulation and section 724.050. The trial court also denied this motion.
In the consolidated appeal of the two cases, the Court of Appeal concluded that the trial court erroneously denied the section 724.050 motion for acknowledgment of satisfaction of judgment, because the terms of the stipulation and the intent of the parties to submit to “high-low” arbitration was clear. Furthermore, no term could be implied in the stipulation that the defendant was required to seek enforcement of the “high-low” provision by the arbitrator, who didn’t even know about the stipulation, or that defendant had to move to vacate or correct the award or respond to a petition to confirm the award.
The motion to obtain acknowledgment of the satisfaction provided a clear route for enforcement of the stipulation that did not require vacation or correction of the award. Therefore, the Court of Appeal affirmed the judgment, but reversed the post-judgment order denying Hess’s section 724.050 motion for acknowledgment of satisfaction of judgment.
Arbitration/Deadline/Delegation/Vacatur: Fourth District, Div. 1 Affirms Trial Court’s Order Denying Plaintiffs’ Motion To Vacate Award Because Parties Agreed Arbitrators Could Decide Whether The Arbitration Was Timely — Or Not
Arbitrators Acted Within Their Powers, So It Didn’t Change Results Even If They Erred
In the underlying dispute, Plaintiffs obtained a substantial award of $150,000 compensatory and $302,784 in punitive damages, blown out when the Court of Appeal ruled that the dispute, related to lease provisions, was subject to arbitration. Defendants then moved, successfully, to compel arbitration, and the trial court set a date of November 24, 2010 as a deadline to complete arbitration. After November 24, 2010, Plaintiffs made a demand to the AAA for arbitration, and Defendants successfully argued to the arbitrators that the demand was untimely. After the trial court denied Plaintiffs’ motion to correct or vacate the arbitration award, Plaintiffs appealed. P.O.P. v. Onie O. Lively, D063550 (4th Dist. Div. 1 March 8, 2014) (Benke, Haller, McIntyre) (unpublished).
The issue as to whether the deadline to arbitrate should have been extended arose because Cal. Code of Civ. Proc. section 1283.8 permits a trial court to set a deadline to arbitrate where the agreement to arbitrate does not set a deadline, whereas the AAA rule at the time the arbitration was pending set its own deadline for rendering a decision, typically thirty days from the date of closing the hearing. If arbitration could be compelled, as it was, then arguably the trial court lacked jurisdiction to set a deadline.
The Court of Appeal chose the path of least resistance: because the record showed the parties agreed the arbitrators could decide whether the arbitration was timely, the arbitrators acted within their powers when they decided the issue. Whether the arbitrators erred was not an issued that even had to be decided, because if the arbitrators acted within their powers, then a mere mistake of law or fact was not reviewable by the trial court.
The result must have come as a double blow to Plaintiffs/Appellants, who won the underlying dispute, saw the judgment in their favor reversed, and then failed to initiate a timely arbitration. It happens.
Arbitration/Class Action Waiver/FAA/Consumers: Court of Appeal Holds That Agreement Inviting Consideration Of Unenforceability Of Class Arbitration Procedures Allowed Trial Court To Invalidate Class Action Waiver
Sticking To Its Contract Interpretation Guns, Second District, Division One, Shoots Down Federal Decisions
The Court of Appeal has upheld a trial court order denying a motion to dismiss or stay class action litigation and to compel arbitration, basing its conclusion on principles of contract interpretation. Imburgia v. DIRECTV, Inc., B239361 (2nd Dist. Div. 1 April 7, 2014) (Rothschild, Chaney, Miller).
AT&T Mobility LLC v. Concepcion, 563 U.S. __, 131 S.Ct. 1740 (2011) (Concepcion) held that the Federal Arbitration Act (FAA) preempts the rule of Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005), which case held that class action waivers in consumer contracts may be unconscionable and unenforceable. (Under California law, the Consumer Legal Remedies Act would also preclude waiver of the right to bring a class action under the CRLA).
But Concepcion does not necessarily invalidate all class action waivers. The objective of the FAA is to carry out the intent of the parties, and contract interpretation may lead to the conclusion that the parties intended to proceed under state law rules that allow for the invalidation of class action waivers. In Imburgia v. DIRECTV, Inc., the Court of Appeal concluded that here, the parties intended to proceed under California state law, allowing the trial judge to invalidate the class action waiver.
The Court of Appeal summarized: “the 2007 customer agreement provides that ‘if . . . the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire [arbitration] section is unenforceable.’ The class action waiver is unenforceable under California law, so the entire arbitration agreement is unenforceable.”
To reach its conclusion, the Court of Appeal applied two principles of contract interpretation.
First, in case of inconsistency, the specific provision takes precedence over the general provision in a contract. Here, the contract generally adopted the FAA, but specifically adopted “the law of your state” with respect to the specific issue of enforceability of class action waivers. Therefore, California state law took precedence over the FAA with respect to the specific issue of enforceability of the class action waiver.
Second, if the contract was ambiguous, then it had to be interpreted against the drafter, namely, against DIRECTV, Inc.
The Court of Appeal disagreed with two federal decisions, In re DIRECTTV Early Cancellation Fee Marketing and Sales Practices Litigation, 810 F.Sup.2d 1060, 1071 (C.D.Cal. 2011), and Murphy v. DIRECTV, Inc., 724 F.3d 1218 (9th Cir. 2013), finding that the courts that rendered those decisions failed to properly apply important principles of contract interpretation. Because “the dispositive issue” was the intent of the contracting parties, contract interpretation was highly relevant and deserved more weight than the federal courts had given to it. (See my August 4, 2013 post on Murphy.)
While consumer advocates may have found a gap in the fortress wall in Imburgia, allowing the consumers, at least for now, to beat arbitration and a class action waiver, one can count on DIRECTV, Inc. and other corporations finding drafting solutions to plug the gap in the future. And one can also count on ever imaginative consumer advocates searching for new ways to scale the fortress wall.