Mediation/Confidentiality: Court Of Appeal Upholds Denial Of JNOV Because Motion To Overturn JNOV Relied Heavily On Inadmissible Evidence Subject To Mediation Privilege
Parties’ Agreement To Extend Mediation Beyond Ten-Day Period Following Communication With Mediator Made Evidence Inadmissible
Boy, does this case, involving a dispute between client (Porter) and attorneys (Wyner) have a history. After the California Supreme Court ruled in Simmons v. Ghaderi, 44 Cal.4th 570 (2008) that waivers of mediation confidentiality by either implication or estoppel were not permitted because the applicable statute allowed only express waivers by all (or in some cases fewer than all) mediation participants, Wyner moved for a new trial, on the grounds that the jury had improperly relied on inadmissible evidence subject to the mediation privilege, which privilege could not be orally waived. The trial court agreed, granting a new trial.
Porter appealed, resulting in a first appellate decision holding Simmons v. Ghaderi did not apply to implied waivers of mediation confidentiality as to communications between a party and its own attorney. Porter v. Wyner, 183 Cal.App.4th 989 (Porter I).
However, the narrow interpretation of the mediation privilege in Porter I was rejected in Cassel v. Superior Court, 51 Cal.4th 113 (2011), holding that mediation confidentiality applies to all communications during or pursuant to a mediation, even those between a client and his or her attorney. That led to Porter II, in which the Court of Appeal affirmed the order granting Wyner a new trial and remanded the matter with directions that the trial court rule on Wyner’s JNOV motion. Porter v. Wyner, B211398 (July 27, 2011) (nonpublished). The trial court denied Wyner’s JNOV, prompting the present appeal. Wyner v. Porter, B242025 (2nd Dist. Div. 8 Dec. 18, 2013) (unpublished).
While the exclusion of information properly subject to mediation confidentiality, but improperly admitted at trial, helped Wyner obtain a new trial, the exclusion of evidence did not help Wyner with its JNOV motion, because the motion relied on evidence eventually determined to be inadmissible.
A threshold issue for the Court of Appeal was determining when mediation ended, and thus, when mediation confidentiality ended. Wyner took the position that mediation ended ten days after the last communication with the parties, pursuant to Evid. Code section 1125(a). However, as I have explained in a post dated March 26, 2012, mediation confidentiality may be extended if the parties agree to extend the 10-day period set out in Evidence Code section 1125(a)(5). Porter took the position that the parties had agreed in writing to extend the 10-day period, at least until settlement. If Porter was right, then evidence relied upon by Wyner in its JNOV motion was inadmissible.
To answer the threshold question, the Court had to address the admissibility of the mediation confidentiality agreement in which the parties waived section 1125, subdivision (a)(5). In other words, was the agreement to extend the mediation period, and hence, confidentiality, itself confidential? Here, the Court pragmatically ruled that “[i]t would stand the mediation confidentiality scheme on its head to prohibit the trial court from examining a written agreement that arguably contained such a waiver. . . . the trial court could examine the confidentiality agreement for the sole purpose of making a finding as to when mediation ended in order to consider the applicable time period of confidentiality.”
The Court affirmed the order denying Wyner’s JNOV motion, and affirmed the order granting a new trial.
DRAFTING TIP: Make sure all the parties and the mediator sign the mediation confidentiality agreement, and if the ground rules set by a mediation confidentiality agreement may become relevant in the future, include a provision expressly making the confidentiality agreement admissible.
Wishing A Happy Holiday To All The Readers Of California Mediation And Arbitration
2012. Carol M. Highsmith Collection. Library of Congress.
Arbitration/Appealability/Vacatur/FAA/Class Action: Ninth Circuit Holds Non-Appealability Clause Relating To Arbitration Award Allocating Fees Among Class Counsel Attorneys Runs Afoul Of the Federal Arbitration Act
At Stake: Allocation of $28M in Attorney’s Fees Among Plaintiffs’ Attorneys in Wal-Mart Wage and Hour Litigation
The scenario: Plaintiffs’ class counsel prosecute wage and hour class action against Wal-Mart, plaintiffs’ counsel quarrel concerning proper allocation of $28M fee award, and the fee dispute is submitted to “binding, non-appealable arbitration” before an eminent arbitrator, the Hon. Layn Phillips (Ret.).
“This appeal presents a question of first impression in this circuit,” writes the author of the Ninth Circuit opinion, Judge Milan Smith. “Is a non-appealability clause in an arbitration agreement that eliminates all federal court review of arbitration awards, including review under section 10 of the FAA, enforceable?” The conclusion: it is not. In re: Wal-Mart, Case No. 11-17718 (9th Cir. Dec. 17, 2013).
To be sure, the grounds of review are quite limited – those enumerated in section 10 of the Federal Arbitration Act (just as the grounds for vacatur in California are limited in Cal. Code of Civ. Proc. section 1286.2). The grounds for vacatur under the FAA are serious indeed, such as “where the award was produced by corruption, fraud, or undue means.” Permitting parties to contractually eliminate all judicial review of arbitration awards would “frustrate Congress’s attempt to ensure a minimum level of due process for parties to an arbitration.”
Having found in a published opinion that it had jurisdiction to review, the Court in an unpublished Memorandum then concluded that the district court properly confirmed the award.
Affirmed.
Waiver: Second District, Division 5 Holds Trial Court, Not Arbitrator, Should Decide Merits Of Waiver Of Arbitration By Litigation Conduct
Judicial Expertise And Judicial Economy Weigh In Favor Of Letting The Trial Court Make The Call On This Waiver Issue
In a 3-0 opinion penned by Presiding Justice Turner, the Court of Appeal holds, “[t]he trial court correctly ruled it, rather than an arbitrator, should decide the merits of the waiver by litigation conduct defense to arbitration asserted by plaintiffs.” Hong v. CJ CGV America Holdings, Inc., B246945 (2nd Dist. Div. 5 Dec. 18, 2013) (partially certified for publication with exception of part III D concerning substantial evidence). In so ruling, the Court of Appeal was persuaded by four federal appellate court decisions holding issues of waiver by litigation conduct are properly decided by a court, not an arbitrator.
Waiver of the right to arbitrate may occur for a variety of reasons. However, here, judicial economy and efficiency seemed to weigh heavily in favor of letting the judge decide the issue of waiver, when waiver results from litigation conduct. In that circumstance, the parties are already in front of the judge, not the arbitrator, and the judge has observed the conduct of the parties.
I see that Ben Scheibe, a former law school classmate of mine at UCLA, represented the prevailing Plaintiffs/Respondents. Congratulations, Ben!
Unconscionability/Preemption/Class/Consumers: Ninth Circuit Upholds Denial Of Arbitration In Two Cases
Ninth Circuit Judge William Fletcher is the author of two recent Ninth Circuit opinions affirming district court denials of motions to arbitrate against class action plaintiffs. Like his mother, the distinguished late Ninth Circuit Judge Betty Binns Fletcher, W. Fletcher was born in the State of Washington, and the next two cases involve Washington law.
Beware the “Click” Signature!
The consumer in Lee v. Intelius Inc. v. Adaptive Marketing LLC v. Adaptive Marketing LLC, No. 11-35810 (9th Cir. Dec. 16, 2013) purchased a background check on the Internet from Intelius – and inadvertently purchased a “Family Safety Report” by clicking a button on the website. Plaintiff filed a state-law class action against Intelius, and Intelius then sued Adaptive, the company that actually provided the unwanted Family Safety Report. Adaptive moved to compel arbitration of Plaintiff Lee’s and Intelius’s claims, and the district court denied the motion to compel.
The Ninth Circuit affirmed the denial. Buttons on the website were confusing, there was “small, light grey print that did not stand out prominently from the beige background’, the text was long, and there were multiple hyperlinks. However, “Washington courts have not decided whether or under what circumstances a ‘click’ constitutes a signature.” Therefore, the Court rested its conclusion on the safer ground that the webpage insufficiently identified Adaptive as a contracting party.
As to the specific arbitration provision embedded in Adaptive’s terms and conditions, the “careful consumer would reasonably have understood . . . that the hyperlink to ‘Terms and Conditions’ was to Intelius’s rather than Adaptive’s terms and conditions.”
Court Recognizes That Plaintiffs Who Don’t Want To Arbitrate Don’t Raise The Issue In Their Complaint
Under Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), the court gets to decide whether the arbitration clause is invalid, but the arbitrator gets to decide whether the whole contract is invalid, when the complaint attacks the validity of the contract as a whole, rather than just the arbitration clause.
What happens when plaintiff doesn’t want to arbitrate, files a complaint that doesn’t address arbitration, and then opposes a motion to compel? The district court gets to consider the validity of the arbitration clause, where the arbitration clause’s invalidity is entirely distinct from the contract claims in the case. Smith v. Jem Croup, Inc., No. 11-35964 (9th Cir. Dec. 12, 2013). As Judge Fletcher notes, many contracts provide for compulsory arbitration at the choice of one or both parties, but if neither party asks for arbitration, the dispute may be brought as a lawsuit. Under those circumstances, it would be unrealistic to expect the plaintiff to challenge the arbitration clause in its complaint, but it would make sense to challenge the clause in the context of opposing a motion to compel.
Moreover, the arbitration clause here was found to be unconscionable – under Washington law. Here, I note that there appears to be a difference between Washington and California law, as Judge Fletcher writes that “[u]nder Washington law, a contractual provision is unenforceable if it is procedurally unconscionable.” Under California law, a finding of unconscionability requires procedural and substantive unconscionability.
The opinion also provides a rationale for why the Federal Arbitration Act and Concepcion do not preempt Washington procedural unconscionability law, including among other factors, that Washington law applicable to the disclosure of material terms in an attorney retainer agreement “is not specifically aimed at arbitration clauses.”
Arbitration/Unconscionability/Automobiles: Fourth District, Div. 3 Finds Arbitration Provision In Common Automobile Sales Contract To Be Unconscionable
An Opportunity To Enjoy Some Vintage Justice Bedsworth
The unconscionability issue concerning the Retail Installment Sales Contract in the next case is currently pending before the California Supreme Court In Sanchez v. Valencia Holding Co., 201 Cal.App.4th 74 (2011), review granted March 21, 2012 (S199119) and several related cases. In an opinion authored by Justice Bedsworth, he Fourth District, Division 3 sided with those courts finding the standard arbitration provision to be procedurally and substantively unconscionable. Castellanos v. Quality Nissan, Inc., Case No.G047885 (Dec. 2, 2013) (unpublished). It weighed somewhat on the scales that the purchaser spoke Spanish, and that the English version of the contract required an acknowledgment of the arbitration provision, whereas the Spanish version did not require an acknowledgment.
Justice Bedsworth, who authors the column A Criminal Waste of Space, is well-known for his wit and colorful writing style. The following passage from Castellanos is an example:
“Let’s not beat about the bush. Businesses put arbitration provisions in their adhesion contracts because they think that if they are sued they will fare better in arbitration than they will before a jury. Consumers and employees think so too; that is why they fight arbitration clauses. Arbitration clauses are in a contract to protect the company proffering the agreement, not the person signing it. The arbitration provision in this contract is designed to give OC Nissan every possible advantage if it is sued for some cause of action that could yield substantial damages, such as the statutory violations alleged in Castellanos’ complaint. OC Nissan is not concerned about being sued because a car’s heater does not work or a hubcap fell off.”