Arbitration/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 Div. 7 June 10, 2014) (Woods, Perluss, Segal) (unpublished).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 June 9, 2014) (unpublished).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.”
Ninth Circuit Punts On Existence Of Federal Mediation Privilege
Maricopa County Waived Argument That Evidence Admitted To Show Settlement Should Be Privileged Under Federal Law
87 Yard Punt . . .
In Wilcox v. Arpaio, No. 12-16418 (9th Cir. Feb. 2, 2014) (Tashima, Farris, Reinhardt), the Ninth Circuit avoids having to “determine whether a mediation privilege should be recognized under federal common law and, if so, the scope of such a privilege.” The panel punted on the issue when it determined that Maripoca County, which did not want a settlement agreement enforced, had failed to argue that evidence of settlement should be privileged under federal law, by instead staking the erroneous position that state law governed.
Here are the points about the “privilege” that we can glean from the opinion:
- Federal common law generally governs a claim of privilege. Federal Rule of Evidence 501.
- In a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision. Id.
- The admissibility of evidence of settlement reached during mediation of federal and state law claims is governed by federal privilege law.
How did these rules play out here?
Plaintiffs brought claims against Maricopa County and certain officials alleging wrongful investigation, prosecution, harassment, and retaliation — federal claims pleaded under 42 U.S.C. section 1983, and supplemental state law claims. Therefore, the admissibility of evidence that plaintiffs reached a settlement with defendants will be decided under federal law. Under federal law, there is no statutory mediation privilege – leaving the murky status of the privilege to be decided under federal common law. But here, the Court of Appeal did not have to decide the interesting question.
Because Maricopa County staked the (incorrect) position that the privileged status of the evidence had to be decided under Arizona state law, it forfeited the argument that the evidence was privileged under federal law.
And so the district court did not err by admitting evidence of settlement and enforcing the settlement. Affirmed.
NOTE: On February 24, 2012, I blogged about Facebook, Inc. v. Pac. New. Software, Inc., 640 F.3d 1034 (9th Cir. 2011), a case now described in Wilcox v. Arpaio as:
“applying state contract law to determine in mediation the parties reached an enforceable settlement of plaintiffs’ federal and state law claims, but applying federal privilege law to determine what evidence from mediation was admissible in support of that determination.”
Miscellaneous Practice Tip: No Liens On Human Beings
Quotation of the day
I know, I know, this has nothing whatsoever to do with the subject of my blawg. And yet I couldn’t resist passing on this tidbit to you from one of yesterday’s unpublished cases decided by our local Court of Appeal:
“There is one matter that requires minor modification of the judgment. The judgment includes an order that, literally, imposes a lien on a human being. In this case, the trial judge put a constructive trust lien on Tran’s father, Tom Tran. We can find no authority for a lien on a human being so we hereby strike from the judgment the provision putting a constructive trust lien on Tom Tran personally.”
Vu v. Tran, Case No. G04587 (4th Dist. Div. 3 May 29, 2014) (Bedsworth, Rylaarsdam, Moore) (unpublished).
Reviews/Disclosures/Confidentiality: Articles Highlight Problems With Post-Award Investigation Unearthing Arbitrator’s Bias, and Problems With Holes In Mediation Confidentiality Privilege
Recommended Reading:
Post-Arbitral Award Investigation Of Bias.
Paul J. Dubow, an arbitrator and mediator in San Francisco, asks whether post-award investigation can vacate arbitration awards in “ADR Update”, California Litigation (Vol. 27, No. 1 2014), p. 37. It is easy for an unhappy client’s attorney to do a Google search about an arbitrator after the arbitration award has already been made – and sometimes, facts relevant to arbitrator bias will be discovered. On January 26, 2014, I posted about the leading case in which, to quote Mr, Dubrow, “[t]he aggrieved attorney for plaintiffs . . . conjured internet magic.” Mt. Holyoke Homes LP v. Jeffer Mangels Butler & Mitchell LLP, 219 Cal.App.4th 1299 (2013) (arbitrator’s reliance on reference from name partner at defendant’s law firm raised reasonable suspicion of bias, resulting in vacation of arbitration award).
Of course, it may be just as easy to do the same Google search for information publicly available on the internet before commencing arbitration. And therein lies a dilemma, according to Mr. Dubrow. On the one hand, the integrity of the system would be undermined by an arbitrator who withholds information, hoping that the parties will not discover it. On the other hand, there is the possibility of abuse, if the party obtains information of bias before the disclosures are due, decides to retain the arbitrator, and then exploits the information the arbitrator failed to disclose only after receiving an adverse award.
Mediation Confidentiality Privilege.
Hanna B. Raanan, a litigation attorney and mediator, writes about exceptions to the confidentiality protection of mediation in “Things Your Mediator Didn’t Tell You About The Mediation Confidentiality Privilege,” Orange County Lawyer (April 2014), p. 36. She reminds us: 1) discoverable material doesn’t become confidential just because it is used in mediation; 2) execute confidentiality agreements before exchanging information – or else you may not be covered by mediation confidentiality; 3) mediation confidentiality will terminate if there are no communications with the mediator ten days following the mediation – unless you draft around this problem; 4) there are situations in which mediation confidentiality may be weighed against other policies, and found not to be absolute; and (5) if the ADR procedure is not within the definition of “mediation”, then mediation confidentiality may not exist. Her solutions: address the problem of confidentiality before engaging in mediation, and use a savvy mediator aware of the issues.
Ms. Raanan’s admonitions are a useful antidote for the mediator who announces: “Everything said here will be confidential.”
NOTE: My blawg has sidebar categories for Arbitration: Disclosures, and for Mediation: Confidentiality, where you can read more about those topics.