Mediation/Confidentiality: Do The Special Confidentiality Requirements For Mediation Apply To Mandatory Settlement Conferences?
Special Confidentiality Provisions In The Evidence Code For Mediations Expressly Do Not Apply To MSCs
California practitioners are aware that the court, on its own motion, or at the request of any party, may set a Mandatory Settlement Conference requiring the personal attendance of trial counsel, parties, and persons with full authority to settle. Rule 3.1380, California Rules of Court. MSCs are not voluntary settlement conferences. But does the formal “mediation privilege” under Evidence Code section 1119 apply? No.
Rule 3.1380 states that a court must not “[a]point a person to conduct a mediation under this rule.”
The Advisory Committee Note for California Rule of Court 3.1380 explains that the mediation privilege expressly does not apply:
[Rule 3.1380] Subdivision (d) This provision is not intended to discourage settlement conferences or mediations. However, problems have arisen in several cases, such as Jeld-Wen v. Superior Court of San Diego County (2007) 146 Cal.App.4th 536, when distinctions between different ADR processes have been blurred. To prevent confusion about the confidentiality of the proceedings, it is important to clearly distinguish between settlement conferences held under this rule and mediations. The special confidentiality requirements for mediations established by Evidence Code sections 1115-1128 expressly do not apply to settlement conferences under this rule. This provision is not intended to prohibit a court from appointing a person who has previously served as a mediator in a case to conduct a settlement conference in that case following the conclusion of the mediation.
Comment: Even though the formal mediation privilege does not apply, it may be better for all concerned to act as if it did apply (while remembering that it does not apply!).
News: Federal District Court Strikes Down Delaware Chancery Court Experiment In Private Arbitration
Lost Opportunity to Use Outstanding Sitting Judges in Private Arbitration?
"Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman." – Louis D. Brandeis
Steven M. Davidoff reports on August 31, 2012 in the New York Times, about “The Life and Death of Delaware’s Arbitration Experiment.” Thanks to the Delaware legislature’s amendment of its laws, the Delaware Chancery Court, acknowledged by many to be an excellent forum for adjudicating corporate disputes, was empowered to engage in private arbitration.
The idea was that private companies, never eager to air their dirty linen in public, would seek out the expertise of the Chancery Court in private arbitration. Arbitrations would also generate arbitration fees ($6,000 a day) and a $12,000 filing fee. However, the secrecy of the proceedings was challenged in federal district court. As described by Mr. Davidoff, “the federal court found that the arbitration proceedings were effectively a civil trial” and thus “required to be open.”
An appeal to the Third Circuit is likely to follow.
Arbitration/Waiver: Employer That Quickly Asserted Right To Arbitrate After Concepcion Was Decided Did Not Waive Right To Arbitrate
Timing Is Everything
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Plaintiff Reyes, a security officer, filed a class complaint alleging wage and hour violations against Liberman Broadcasting, Inc. (LBI). The trial judge denied a motion by LBI to compel arbitration, on the grounds that the employer failed to properly and timely assert its right to arbitrate. LBI appealed the trial court’s order denying its motion to compel arbitration. Reyes v. Liberman Broadcasting, Inc., Case No. B235211 (2nd Dist. Div. 1 August 31, 2012) (Johnson, J., author) (published).
Reyes filed his complaint on May 27, 2010. LBI answered on August 5, 2010, asserting 22 affirmative defenses, but leaving out the existence of the arbitration agreement as an affirmative defense. Reyes propounded discovery, LBI took a session of Reyes’ deposition, the parties engaged in lengthy meet and confer efforts, and the parties scheduled a class-wide mediation for July 1, 2011. LBI did not file its motion to compel arbitration until July 5, 2011, more than a year after Reyes filed his complaint. Aren’t the delay, the discovery, and the scheduling of class-wide mediation inconsistent with an intention to mediate?
Not so much here, said the Court of Appeal. Timing was critical. At the end of April 2011, the Supreme Court overruled California’s Discover Bank case in AT&T Mobility v. Concepcion, 563 U.S. __ , 131 S.Ct. 1740 (2011). The court held in Concepcion that “a court may not ‘rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable.’” Id. at 1747. “Before Concepcion,” explained the Court of Appeal in Reyes, “LBI reasonably concluded that it could not enforce the Arbitration Agreement.” But after Concepcion was decided in April 2011, LBI promptly informed Reyes that LBI would move to compel, and filed its motion promptly in July 2011.
What about the discovery? “Very limited,” said the Court of Appeal. Discovery had been propounded, but no discovery had actually been exchanged, as the parties bogged down in “extensive meet and confer efforts.” True, one session of a deposition had been taken of the named plaintiff – but depositions can also be taken in discovery under the rules of the American Arbitration Association. So no prejudice here.
The Court of Appeal distinguished Hoover v. American Income Life Ins. Co., 206 Cal. App.4th 1193 (2012), a case we posted about on June 14, 2012. In Hoover, the defendant “actively litigated.” How? “[B]y twice trying to remove the case to federal court, availing itself of ‘discovery mechanisms like depositions not available in arbitration,’ and soliciting putative class members ‘in an effort to reduce the size of the class.’”
Showing just how fact-oriented waiver inquiries become, the Court of Appeal found “more problematic” the fact that LBI agreed to a private mediation on a class-wide basis. Such a mediation could only have been fruitful if a settlement of class-claims had been blessed by a court. However, rather than emphasizing that defendant’s actions were inconsistent with the right to arbitrate, the Court of Appeal instead decided to emphasize the lack of resulting prejudice: “The agreement to mediate did not guarantee the parties would reach a class-wide agreement. Therefore, we do not find prejudice from LBI’s agreement to nonbinding class-wide private mediation.”
The trial court’s order denying the motion to compel arbitration was reversed.
Comment: St. Agnes Medical Center v. PacifiCare of California, 31 Cal.4th 1187 (2003) sets forth the multi-factor test to apply for determining whether a waiver has occurred. We note that a certain amount of “play” exists in the multi-factor test – depending, for example, on whether the court chooses to emphasize actions “inconsistent with the right to arbitrate” or prejudice.
Arbitration: Second District Division 1 Construes 3 Separate Agreements And Concludes Parties Did Not Agree To Arbitrate
Incorporation By Reference Argument Fails
Freedom Films, LLC sued Nu Image, Inc., and M3 Media, Inc. for breach of contract, accounting, and fraud, adding doe defendants later as alleged alter egos. Defendants moved to compel arbitration under an arbitration provision. The trial court denied the motions on the ground that the parties had not agreed to arbitrate Freedom Film’s rights as to the picture entitled The Mechanic. The original named defendants and the doe defendants appealed. Freedom Films, LLC v. Nu Image, Inc., et al., Case Nos. B236216, B236765 (2nd Dist. Div. 1 August 30, 2012) (Rothschild, J., author) (unpublished.).
The problem for defendants was that there were three different agreements knocking about, rather than working smoothly together – and because an agreement to arbitrate the rights at issue could not be incorporated by reference, both the trial court and the Court of Appeal concluded that there was no agreement to arbitrate.
Freedom Films sued upon a January 23, 2009 letter agreement entered into with Nu Image and Home of the Brave Productions. But the letter agreement did not contain an arbitration provision.
A 2006 distribution agreement between MGM, and Nu Image did contain a dispute resolution provision. Furthermore, a February 10, 2009 settlement agreement entered into by MGM, Nu Image, Home of the Brave Productions, and Freedom Films, incorporated the dispute resolution provision in the distribution agreement. So why didn’t that result in a binding agreement to arbitrate? Two problems here.
First, Freedom Films sued on the letter agreement, not the settlement agreement, and the settlement agreement did not exist at the time of the letter agreement.
Second, though the letter agreement did refer back to audit rights in the 2006 distribution agreement, it failed to clearly incorporate the 2006 arbitration provision that was incorporated in the February 2009 settlement agreement. See Amtower v. Photon Dynamics, Inc., 158 Cal.App.4th 1582, 1608 (2008) (“subject document must contain some clear and unequivocal reference to the fact that the terms of the external document are incorporated”)..
Defendants made the additional argument that it was for the arbitrator to decide whether the dispute was subject to arbitration. Here the court distinguished between deciding whether there was an agreement to arbitrate (decision for the court) and whether the dispute was within the scope of the arbitration provision (maybe a decision for the arbitrator, but not at issue).
The orders denying motions to compel arbitration were affirmed.
Comment: the lesson for practitioners is that one must be very careful with incorporations by reference. The incorporation should be clear and unambiguous to be effective. A further problem arises when the document one would have liked to incorporate doesn’t yet exist.
Blawg Bonus: “Hollywood accounting (also known as Hollywood bookkeeping) refers to the opaque accounting methods used by the film, video and television industry to budget and record profits for film projects.” Wikipedia entry, “Hollywood accounting.”
News: Roger D. Fisher, Co-Author of “Getting to Yes,” Dies at 90
Mediation Approach Addressed Mutual Interests
On August 27, 2012, Leslie Kaufman reported in the New York Times, that Harvard law professor Roger D. Fisher died at the age of 90. Professor Fisher was a co-author with William Ury and Bruce Patton, of the mediation ur-text, “Getting to Yes.” Professor Fisher also co-founded the Harvard Negotiation Project. He also advised on resolving conflicts around the globe.
His New York Times obituary included the following:
“His emphasis was always on addressing the mutual interests of the disputing parties instead of what separated them.”
And, on the occasion of his 80th birthday, his colleague John Kenneth Galbraith toasted him:
“Whenever I thought ‘Someone should do something about this,’ it eased my conscience to learn that Roger was already working on it.”
Arbitration/Employment/Waiver/Burden of Proof/Construction: Because Collective Bargaining Agreement Did Not “Clearly And Unmistakably” Waive Plaintiffs’ Right to Bring Statutory Claims In Judicial Forum, Employees Did Not Waive Their Rig
Denial of Motion to Compel Arbitration Hinges on Burden of Proof and Existence of Statutory Rights
One of the “hot topics” we have posted about is whether the right to sue in court can be waived when the rights at issue are statutory rights. See our June 5, 2012 post on Iskanian v. CLS Transportation Los Angeles, LLC, Case No. B235138 (2nd Dist. Div. 2 June 4, 2012) (certified for publication) (interpreting AT&T Mobility v. Concepcion broadly to hold that the Federal Arbitration Act “conclusively invalidates the Gentry test” for finding that a statutory right is unwaivable and cannot be arbitrated); and our June 14 post on Hoover v. American Income Life Insurance Company, Case No. E052864 (4th Dist. Div. 2 May 16, 2012) (certified for publication) (underscoring a split in the law, concerning the arbitrability of state statutory labor claims). Ordinarily arbitrability turns on contractual interpretation and contract defenses.
Our next case, however, is important because of its particular focus on the burden of proof. In Bartoni v. American Medical Response West, A130333 (1st Dist. Div. 2 August 24, 2012) (Kline, P.J.) (unpublished), the trial court refused “to compel arbitration of plaintiffs’ wage and hour claims, where it determined the collective bargaining agreements (CBAs) between the union and defendant did not contain a ‘clear and unmistakable’ waiver of plaintiffs’ right to a judicial forum for their statutory claims.” The employer appealed.
The opinion is notable for its extensive review of cases applying the “clear and unmistakable” standard to determine whether there has been a waiver of a judicial forum. Wright v. Universal Maritime Service Corp., 525 U.S. 70 (1998) established the standard. In Wright, though the CBA contained an arbitration provision, a longshoreman filed suit in district court under the Americans With Disabilities Act of 1990. The district court dismissed the case because the employee failed to pursue grievance procedures in the CBA, the Fourth Circuit Affirmed, and the Supreme Court reversed, because the CBA did “not contain a clear and unmistakable waiver of the covered employees’ rights to a judicial forum for federal claims of employment discrimination.” Id. at 82. The rationale for the “clear and unmistakable” standard is that where the employee’s rights are created by statute, the ultimate question for the arbitrator will not be contractual interpretation, but an interpretation of what federal law requires – an issue for judicial determination, unless there is a “clear and unmistakable” waiver of the right to have a judge decide.
The court explains in Bartoni: “In applying the Wright analysis to determine whether there has been a sufficient explicit waiver, courts look to the generality of the arbitration clause, explicit incorporation of statutory requirements, and the inclusion of specific statutory provisions.”
Applying the Wright analysis in Bartoni, the Court of Appeal found that the arbitration provision was “too general”, ambiguous, and failed to incorporate specific statutory provisions regarding wage and hour disputes. It treated the use of the word “dispute” as too general in context, and borrowed the scorn heaped upon the ambiguous phrase “and/or” by legal writer Bryan A. Garner: “A legal and business expression dating from the mid-19th century, and/or has been vilified for most of its life – and rightly so.” (Bartoni, footnote 3).
The court’s extensive review of federal and state cases analyzing a CBA waiver of a statutory right led it to observe few cases hold a CBA waiver of a statutory right was clear and unmistakable, whereas, “numerous California cases have concluded CBAs failed to clearly and unmistakably require arbitration of statutory claims.”
The order denying the motion to compel arbitration was affirmed.
Labor strategists confer. 1937. From the left: Sidney Hillman, member of the CIO; Homer L. Martin, President of the U.A.W.; Leo Pressman, CIO General Counsel; John L. Lewis, President of the United Mine Workers; and John Brophy, Director of the CIO.