Arbitration/Award: 9th Circuit Rules Decision Arbitrator Decision To Award Interest On Contract Damages Does Not Foreclose District Court From Awarding Interest On Remaining Portions Of Award
Ninth Circuit Instructs District Court To Award Plaintiff/Appellant Interest On Non-Contract Damages In Arbitration Award
Above: Frenchman’s Flat, Nevada. Atomic cannon test. 1953. Library of Congress.
Judge Duffy’s wry comment upfront signaled where the Ninth Circuit panel was going on this one: “Lloyd’s pussyfooted for years only to eventually deny the claim . . . “ Pussyfooted. After its policyholder Dr. Lagstein, a Nevada nuclear cardiologist, filed suit, Lloyd’s had moved to arbitrate a major disability claim with him, only to get whacked with a total damages award of over $6M, including $4M in punitive damages. “Illustrating the maxim ‘be careful what you ask for’,” wrote Judge Duffy. Lagstein v. Certain Underwriters at Lloyd’s of London, Nos. 11-17369; 11-17460 (9th Cir. August 5, 2013) (Duffy, D.J., sitting by designation) (published).
The arbitrators had awarded interest on $900,000 in contract damages. Did this preclude the district court from awarding interest on the non-contract damages? No. “Courts do not lack authority to award interest where an arbitration award is silent.” [citations omitted].
The district court’s calculation of interest is reviewed de novo, where as here, it turned on issues of statutory interpretation. In diversity cases, such as this one, “the court looks to state law to determine the rate of pre-judgment interest, while federal law determines the rate of post-judgment interest.”
A bit of judicial jujitsu was still necessary to determine the right to prejudgment interest here, because the leading Nevada case had stated, “absent statutory or contractual authority, a district court in a confirmation proceeding may not add prejudgment interest to the arbitration award . . . “ Mausbach v. Lemke, 866 P.2d 1146 (Nev. 1994). Not to worry, says the Ninth Circuit – Mausbach really meant to say pre-award interest is not allowed in Nevada; it just used the wrong words. So Dr. Lagstein gets post-award pre-judgment interest.
Additionally, post-judgment interest on a district court judgment is mandatory. 28 U.S.C. section 1861. But since it wasn’t until the date of the 9th Cir. opinion that Dr. Lagstein’s “unconditional legal entitlement to pre[-]judgment interest was initially established,” Dr. Lagstein gets to collect post-judgment interest on the post-award, prejudgment interest as of the date of the 9th Cir. opinion.
Arbitration/Employment: Labor Arbitration Award Pursuant To Collective Bargaining Agreement Precludes Bringing Common Law Claim For Wrongful Termination
Court Refuses To Extend Camargo v. California Portland Cement Co. To Avoid Preclusive Effect Of Arbitration Award
Camargo v. California Portland Cement Co., 86 Cal.App.4th 995 (2001) holds a labor arbitration pursuant to a collective bargaining agreement (CBA) has no preclusive effect on a claim pursuant to the Fair Employment and Housing Act (FEHA), unless the parties expressly agreed to arbitrate the FEHA claims. Does this holding also extend to common law claims related to FEHA, such as a claim for wrongful termination in violation of public policy? No,says the Court of Appeal in Wade v. Ports America Management Corp., Case No. B238224 (2nd Dist. Div. 4 August 2, 2013) (Manella, J., author 3:0) (published). The Court in Wade holds a labor arbitration award pursuant to a CBA may preclude nonstatutory employment discrimination claims, reasoning that without preclusion, a plaintiff could benefit from the FEHA statutory scheme without complying with its prerequisites.
The only remaining issue was whether the cause of action was the same in both the arbitration and superior court proceedings, such that the arbitration award had res judicata effect. On the record, “appellant asserted a single primary right: his right not to be discharged for wrongful reasons.” The sole injury for which he sought relief was termination. One right, one remedy — res judicata did apply here. Thus, plaintiff’s common law claims were precluded by the res judicata effect of the arbitration award, because the Court refused to extend Camargo to preclude such common law claims.
Arbitration/Nonsignatories/Equitable Estoppel/Agency/Third Party Beneficiaries: Ninth Circuit Holds Parties Remain Bound By Agreements They Made And Not By Agreements They Didn’t Make
Many “Imaginative Arguments” Rejected To Get To Simple Conclusion
I’ve had the unpleasant experience of purchasing electronic equipment, only to discover later that the seller had booked the sale as a lease. Therefore, our next case, Murphy v. DirectTV, Inc., No. 11-57163 (9th Cir. July 30, 2013) (Wardlaw, J. author 3:0) (published) struck a familiar chord (except that I solved my problem without a lawsuit).
Plaintiffs bought DirectTV service equipment through Best Buy, and sued because transactions plaintiffs understood to be sales were treated by defendants as lease transactions, rather than as outright sales. Plaintiffs sued for state law violations, claiming a scheme to deceive customers, and defendants sought to arbitrate. DirectTV’s Customer Agreement required arbitration, but Best Buy was not a party to that agreement. The district court ordered plaintiffs to arbitrate with DirectTV and with Best Buy. Plaintiffs appealed.
The case includes discussion of the retroactivity of AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2011) (holding the Federal Arbitration Act preempts California’s rule rendering unenforceable, as unconscionable, arbitration provisions in consumer contracts that waive class action proceedings) as well as equitable estoppel, agency, and third-party beneficiary arguments typically raised by nonsignatories to arbitration agreements, such as Best Buy, who want to arbitrate.
The bottom line? “Notwithstanding the parties’ many imaginative legal arguments, in this case they remain bound by the agreements they made and not by any they did not make.” The district court’s order compelling arbitration with DirectTV was affirmed, and the order compelling arbitration with Best Buy – the nonsignatory – was reversed.
Arbitration/Fees: First District, Division 1 Overturns Fee Award Because Party Prevailing In Declaratory Judgment Action To Stay Arbitration Was Not Necessarily The Ultimate Prevailing Party
It Ain’t Over Till Its Over
Plaintiff Abbey filed two lawsuits against Fortune Drive Associates, LLC, the first lawsuit concerning his business dealings, the second lawsuit seeking declaratory relief to stay an arbitration commenced by Fortune. Abbey prevailed in the second lawsuit, successfully staying the arbitration, and before the conclusion of the first lawsuit, obtained an award of attorney’s fees in the second lawsuit. Fortune appealed. Abbey v. Fortune Drive Associates, LLC, Case No. A135062 (1st Dist. Div. 1 July 29, 2013) (Margulies, Acting P.J., author 3:0) (unpublished).
The Court agreed with Fortune: the award of attorney’s fees is available only to the prevailing party in the underlying contractual dispute. See my May 27, 2012 post on Frog Creek Partners, LLC v. Vance Brown, Inc., 206 Cal.App.4th 515 (2012) (“there may only be one prevailing party entitled to attorney fees on a given contract in a given lawsuit”). Reversed.
Arbitration/Employment/Unconscionability: Fifth District Reverses Trial Court And Orders Arbitration, Finding No Unconscionability
In Dictum, Court Suggests Armendariz Is No Longer Good Law
Mercado v. Doctors Medical Center of Modesto, Inc., Case No. F064478 (5th Dist. July 26, 2013) (Hill, P.J., author 3:0) (unpublished) offers a routine unconscionability analsysis of an employee agreement to arbitrate. Finding “some degree” of procedural unconscionability, based on an adhesive contract and the lack of a prominent heading or bold print, the Court moves on to analyze substantive unconscionability, concluding that the arbitration agreement meets the requirements of Armendariz v. Foundation Health Psychare Services Inc., 24 Cal.4th 83 (2000), and therefore is not substantively unconscionable.
Unremarkable though the case may be, the following dictum about Armendariz caught our attention:
“Refusing to enforce an arbitration agreement according to its terms because the claims involve unwaivable statutory rights and the agreement does not contain specific provisions the court believes are necessary to vindicate those statutory rights appears contrary to the decision in Concepcion [__ U.S. __, 131 S.Ct. 1740 (2011)]. Armendariz carved out a class of claims – those involving unwaivable statutory rights – and applied a special rule to agreements to arbitrate those claims – requiring them to meet its five minimum requirements – in order for them to be enforceable. That appears to be the type of state rule Concepcion condemned.”
Perhaps another way to read Concepcion is that state court defenses such as unconscionability still exist, and another way to read Armendariz is that it is a gloss on the meaning of unconscionability. In any case, the waiver of unwaivable statutory rights through an agreement to arbitrate is a battleground for future appellate decisions. That old maxim that “for every right there is a remedy” cannot happily coexist with the waiver of unwaivable statutory rights.
Arbitration/Employment/Waiver/Standard of Review: Fourth District, Division 1 Satisfied That Substantial Evidence Supports Finding Of Waiver Resulting From Delay And Considerable Discovery
Employer Didn’t Want To Arbitrate
Usually employees want their day in court, and employers try to arbitrate, but our next case presents “the unique situation where . . . the employer refuses to arbitrate, arguing the employee waived her contractual rights to arbitrate.” The Court of Appeal had no difficulty satisfying itself that “substantial evidence supports the court’s finding of waiver.” Nelson v. Service Corporation International, Case No. D061861 (4th Dist. Div. 1 July 29, 2013) (Huffman, Acting P.J., author 3:0)(unpublished).
Because the undisputed facts did not compel only one inference on the record, the Court applied a substantial evidence standard of review. The fact that plaintiff litigated over three years in various actions before demanding arbitration, and that discovery included some 60 depositions, 1,000 interrogatories and 740 answers to discovery, provided substantial evidence of waiver. Class claims were litigated in multiple courts, including one appeal. It also did not help plaintiff that her “arbitration demand coincided with Respondents’ effort to decertify the conditional class.”