Arbitration, Civil Rights: “Predispute” Arbitration Agreement Relates To Date Of Dispute, Not Injury
The Date Of A Dispute And An Injury May Not Be The Same.
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act invalidates predispute arbitration agreements in certain circumstances. In Kader v. Southern California Medical Center, Inc., B326830 (2/5 1/29/24) (Moor, Rubin, Kim), the key issue was whether the arbitration agreement executed by the alleged victim, Omar Kader, was a "predispute" arbitration agreement. Mr. Kader alleged a number instances of sexual abuse by a superior, starting before the arbitration agreement with his employer had even been inked. In moving to compel arbitration, defendants argued that the alleged sexual abuse predated the arbitration agreement and the effective date of the Act, and therefore, the arbitration agreement was not "predispute".
Justice Carl H. Moor, who penned the court's opinion, explained that in dictionary usage, a dispute is not the same as an injury. "A dispute arises when one party asserts a right, claim, or demand, and the other side expresses disagreement or takes an adversarial posture." Determining the date of the dispute will depend on the facts.
Under the circumstances here, the date of the actual "dispute" (as opposed to the earlier date of injury) arose late enough so that the arbitration agreement was not "predispute." Furthermore, the dispute arose after the the effective date in May 2022 of the Act.
The trial court's order denying the motion to compel arbitration was affirmed.
Arbitration, Deadlines: Once Again, Requirement In Employment And Consumer Arbitration To Pay Fees In 30 Days Is Strictly Interpreted
California Courts Have Posted Plenty Of Warnings About The 30-Day Deadline To Pay The Arbitration Fees Or Lose The Right To Arbitrate.
And we have posted plenty of times about those warnings about this particular deadline. The latest warning that the 30-day deadline found in Cal. Code of Civ. Proc. § 1281.97 will be strictly interpreted is to be found in an employment law case, Suarez v. Superior Court of San Diego; Real Party in Interest, Rudolph & Sletten, Inc., D082429 (4/2 1/24/24) (Dato, O'Rourke, Do).
JAMS issued an e-mail invoice on December 2, 2022 marked "due upon receipt." It was undisputed that the employer did not pay its share before January 4, 2023, more than 30 days after the amount was due. The employer argued that its time to pay was extended for two reasons. First, January 1 was a Sunday and January 2 was a holiday. Second, the employer argued it should get two more days on top of the holiday, based on § 1010.6, pertaining to electronic filing of court documents. However, neither argument had traction, because the 30-day deadline provision for paying arbitration fees does not relate to motions or to documents filed with the court.
COMMENT: It is surprising that parties miss the strict deadline by only a few days in reported cases. The lesson here, for employers and providers of consumer products who want to arbitrate, is do not wait till the last moment to pay fees.
At the end of the opinion, the court lets drop, "[W]aiver and material breach do not automatically remove a matter from arbitration. Instead, the employee is given the option of resolving the stagnant dispute in an action before the court." Evidently the Court of Appeal is concerned that the strict deadline, if interpreted to impose an extra burden on arbitration, could result in an FAA preemption argument.
Arbitration, Enforceability: Minor’s Right To Disaffirm Contract Makes Arbitration Delegation Provision Unenforceable
Defendant Electronic Arts (EA) Fails To Shoot Down Plaintiff J.R.
J.R., a minor, sued video game producer EA. J.R. "alleged that EA deceptively induced players of Apex Legends, 'especially impressionable minors,' to purchase digital game-specific currency in order 'to purchase cosmetic items, characters, lootboxes, and other items within the Apex Legends virtual world.'” The trial court denied EAs motion to compel arbitration and EA appealed. J.R. v. Electronic Arts, Inc. E080414 (4/2 1/1724) (Menetrez, Fields, Raphael).
EA argued that the arbitration agreement clearly and unmistakably delegated the decision as to whether to arbitrate to the arbitrator. Indeed, the trial court did not disagree with the clarity of the delegation provision. However, the trial judge concluded that J.R., invoking his right to do so under Family Code § 6170, effectively disaffirmed the entire contract, including the delegation clause.
EA argued that the disaffirmance was ineffective, because J.R. failed to specifically refer to the delegation provision.
The Court of Appeal, however, disagreed. It held that the following language was effective to disaffirm the contract and every part thereof, which logically included the delegation clause: "J.R. 'disaffirm[s] the entirety of any [user agreement], contract or agreement that was accepted through [his] EA account.' J.R. II thereby unequivocally disaffirmed 'any . . . contract or agreement' that he entered into with EA through his EA account. (Italics
added.)"
1Family Code. 6710. "Except as otherwise provided by statute, a contract of a minor may be disaffirmed by the minor before majority or within a reasonable time afterwards or, in case of the minor's death within that1 period, by the minor's heirs or personal representative."
BONUS. Dallas episode: the big reveal. Who shot J.R.?
Arbitration, Unconscionability: 3rd District Agrees That American Automobile Association Arbitration Agreement Is Unconscionable
Court Affirms Order Denying Motion To Compel Arbitration.
"On a sliding scale, the procedural and substantive unconscionability as to this arbitration agreement is high." Hasty v. American Automobile Assn. of Northern Cal., Nev. & Utah , C097674 (3rd Dist. pub. 1/6/24) (Robie, Mauro, Krause). The order denying the AAA's petition to compel arbitration is affirmed.
COMMENT. Drafting an employee-employer arbitration agreement involves competing considerations. On the one hand, there is a natural desire on the part of employer's counsel to include provisions that advantage the client. On the other hand, there is the risk that the drafter will make the adhesion arbitration agreement too one-sided, and a court will find the arbitration agreement unconscionable.
Arbitration, PAGA, Waiver: First District, Div. 3 Holds Employee’s Waiver Of Representative PAGA Claims Is Ineffective
California Courts of Appeal Continue To Side With California Supreme Court Regarding Standing To Bring Representative PAGA Claims.
Affirming the trial court's denial of an employer's motion to compel arbitration, the Court of Appeal holds that the employees' waiver of a right to bring representative PAGA claims is unenforceable. Nicole DeMarinis et al. v. Heritage Bank of Commerce, A167091 (1/3 1/8/24) (Fujisaki, Tucher, Petrou).
Let's summarize the PAGA standing issue in California: Under Iskanian, California courts had not allowed employers to "split" PAGA claims between individual and representative claims, because Iskanian treated a PAGA claims as a dispute between the employer and the State, which did not waive the right to arbitrate, and not a dispute between an employer and an employee. However, the SCOTUS, in Viking River Cruises, Inc. v. Moriana, 596 U.S. ___ (2022) [142 S. Ct. 1906], held that precluding the splitting of PAGA causes of action into a representative and an individual cause of action was preempted by the Federal Arbitration Act, to the extent that this resulted in the inability to compel arbitration of individual PAGA claims in California. Once the individual cause was moved to arbitration, Justice Samuel Alito concluded, the employee had no standing to bring the PAGA representative action in court. Justice Sonia Sotomayor concurred, but added that California courts, which have the role of interpreting California law, might conclude instead that employees do have standing to bring PAGA representative actions. The California Supreme Court, in Adolph v. Uber Technologies, Inc., S274671 (Cal. Sup. Ct. 7/17/23) (Liu; Guerrero, Corrigan, Kruger, Groban, Jenkins, Evans), has had the last word, if not the final word, agreeing that employees have standing to bring representative PAGA claims. See our post dated 9/5/23.
Arbitration, Service: 9th Circuit Accepts Service On Foreign Party By Mail — Under The Circumstances
District Court Was Right, But For The Wrong Reasons.
The Court of Appeals decided three issues in Voltage Pictures, LLC v. Gussi, S.A., No. 23-55123 (9th Cir. 2/5/24) (M. Smith, Lee, Vandyke): subject matter jurisdiction, service, and comity. The underlying dispute, concerning rights under a Distribution and License Agreement, resulted in an arbitration award in favor of Voltage Pictures, which the district court had confirmed.
The district court held that it had jurisdiction to confirm the arbitration award because there was diversity between US-based Voltage Pictures and Gussi. While the Federal Arbitration Act enables federal courts to confirm arbitration awards, there must still be an independent basis for jurisdiction, and the Court of Appeals, doubtful that complete diversity had been established, rejected diversity as the district court's basis for accepting jurisdiction. However, 9 U.S.C. 203 "vests federal district courts with subject matter jurisdiction over motions seeking to confirm non-domestic arbitral awards." Gussi was a non-domestic party, and that provide the independent basis for jurisdiction.
Second, the district court erred in finding that California law provided the basis for service for mail on the foreign entity. However, Judge Smith found another way find that service by mail on Gussi's attorney was sufficient under the circumstances. Gussi did not reside in the Central District of California, and was not available for service in any other federal district in the US. Therefore, the FAA provisions, 9 USC § 9, governing service of residents of the district or elsewhere in the US, simply did not apply to the serving someone unavailable in the US. Relying on 9 USC § 61, Judge Smith explained that a summons was not required to confirm an arbitration award, only an application, and that notice of an application could be accomplished by the same means as providing notice of a motion: service on the party's attorney.
Third, the district court did not abuse authority by refusing to extend comity to an order from a Mexican court to enjoin the confirmation of the arbitration award. Gussi failed to properly authenticate the foreign order.
COMMENT. As Judge Smith observed, "We may affirm a district court’s decision 'on any ground supported by the record even if not explicitly relied upon by the district court.' Johnson v. Barr, 79 F.4th 996, 1003 (9th Cir. 2023)." And that's what happened here.
1"Any application to the court hereunder shall be made and heard in the manner provided by law for the making and hearing of motions, except as otherwise herein expressly provided."