Mediation/Settlement/CCP Section 664.6: Those Who Signed The Settlement Agreement Could Enforce It, And Those Who Didn’t Couldn’t
Enforcing Settlement Agreement Under CCP 664.6 Requires Strict Compliance With Statute
The next case teaches us about the need to strictly comply with Cal. Code Civ. Proc. section 664.6 in order to enforce a settlement agreement under that provision. Hampton-Mitchell v. Mitchell, Case No. B228988 (2nd Dist. Div. 7 June 20, 2012) (Zelon, J., author) (not for publication).
The case started out as a lawsuit between wife (Hampton-Mitchell) and ex (Mitchell). A property dispute concerning their house, which was found to be a community asset, resulted in a mediation involving the wife, the buyer of the house, the buyer’s lender lender, the broker, and the agent. This resulted in a stipulation for settlement reached through mediation that the trial court enforced, at the request of the defendants who mediated, under CCP section 664.6. However, the wife wanted to set aside the settlement agreement, and appealed.
The broker and agent signed the stipulation ten days after the mediation. The buyer and lender, however, had not personally signed the stipulation, though they too wished to enforce it.
Mitchell’s counsel conceded that the agreement was enforceable by the broker and agent, as they signed before it was revoked. That was dispositive in favor of the broker and the agent’s effort to enforce the stipulation.
The buyer and the buyer’s lender, however, had not personally signed the stipulation. Section 664.6 requires that the parties to pending litigation either stipulate in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case.
Buyer and lender argued that their attorney at the mediation was authorized to sign for them. Not good enough: "the term ‘parties’ as used in section 664.6 . . . means the litigants themselves, and does not include their attorneys of record." Levy v. Superior Court, 10 Cal.4th 578, 586 (1995). There is policy behind this: "The litigants’ direct participation tends to ensure that the settlement is the result of their mature reflection and deliberate assent." Id. at 585. (Note the difference between enforcement of a contract and enforcement under section 664.6. Having the signature of the person against whom a contract is to be enforced often suffices; not so in the case of section 664.6.)
COMMENT: If the parties really don’t want the stipulation for settlement to take effect until all parties have signed it, they could say so explicitly in the stipulation. If such language had been included in the stipulation, then all the parties would have had a tough time enforcing the stipulation, as two parties did not sign it.
Arbitration/Enforceability/Employment: Requiring Employee To Agree To Arbitration Provision Is Not By Itself Wrongfully Coercive, Despite Loss Of Right To A Jury
Labor Code Section 206.5 Prohibits Employer From Obtaining Release of Claim For Wages Under Specified Circumstances, But Does Not Preclude Employee From Waiving Right to Jury By Agreeing To Arbitrate
The scenario is familiar: Employee (Pulli) sues employer (Pony International, LLC), for wrongful termination and other claims. Because employee signed an arbitration provision, employer moves to compel arbitration. The twist: Does Labor Code section 206.5 void the employment agreement and the arbitration provision by precluding employer from requiring employee to give up a right to a jury trial as a condition for future employment and future wages? Yes, concluded the trial court, denying the motion to compel arbitration. Employer appealed. Pulli v. Pony International, LLC , Case No. D059137 (4th Dist. Div. 1 June 19, 2012) (Aaron, J., author) (certified for publication).
No, concluded the Court of Appeal.
Labor Code section 206.5 provides in part:
“(a) An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. . . . ”
After reviewing the plain language of the statute, related code sections, the purpose of section 206.5, and legislative history, the Court concluded, “section 206.5 merely prohibits an employer from requiring an employee to execute a release of a claim for wages due, and places no limitations on the enforceability of arbitration provisions.”
Furthermore, the language of the statute was interpreted narrowly, so an invalid release of a wage claim only renders the release itself “null and void” – it does not “render unenforceable the arbitration provision. . . “
Thus, the Court of Appeal concluded the arbitration provision was valid and enforceable. The agreement did not require the employee to release a claim for wages due, but even if it had done so, such a release would not have invalidated the arbitration clause. The Court of Appeal reversed the order denying the motion to compel arbitration.
Arbitration/Fees/Rules/Scope: Trial Court Affirmed in Case Involving Arbitrator’s Authority, Rules, Sanctions, and Fees
Plus We Learn Some Legal Arcana
The next case, though unpublished, covers several interesting issues concerning the arbitrator’s authority, rules, sanctions, and fees. Prime Associates Group, LLC v. NAMA Holdings, LLC, Case No. B226167 (2nd Dist. Div. 4 June 19, 2012) (Suzukawa, J., author) (not for publication).
The case involved a messy dispute arbitrated among participants in a real estate project. After 26 days of arbitration, the panel ordered, among other things, that Claimant Alliance Network pay NAMA $12,750,405. NAMA was also granted monetary relief against Claimants Alliance Network, Alliance Holdings, and Network as sanctions for discovery misconduct. Another party, Crescent, prevailed against NAMA, entitling it to recover fees, costs, and expenses in the amount of $350,000 from NAMA. Appeals followed How did it all shake out?
First, the Court of Appeal held that the arbitration panel did have authority to order Alliance Network to pay damages to NAMA, though Alliance was not named as a counterrespondent. Alas, Alliance forfeited its argument by failing to raise it with the arbitration panel.
Second, the Court held that the $12M award to NAMA did not exceed the scope of the panel’s authority pursuant to the rules under which it was operating. The issue here was that the panel was proceeding under the rules of the International Centre for Dispute Resolution (ICDR), which rules provide: “The tribunal shall not decide as amiable compositeur or ex aequo et bono unless the parties have expressly authorized it to do so.” “Ex aequo et bono” means “according to what is just and good.” Arbitrators, acting as “amiables compositeurs”, are authorized to disregard legal technicalities and strict constructions, and not required to hew closely to the contract. We note, as did the Court of Appeal, that generally “arbitrators are not bound to award on principles of dry law” – unless the rules require otherwise.However, if the panel strayed from the cold and harsh ground of law into the warm and fuzzy domain of equity, this issue too had been forfeited.
Third, the Court held that the award of sanctions for discovery misconduct was not subject to judicial review, citing Moncharsh v. Heily & Blase, 3 Cal.4th 1 (1992): “Absent a clear expression of illegality or public policy undermining this strong presumption in favor of private arbitration, an arbitral award should ordinarily stand immune from judicial scrutiny.” Id. at 32.
Fourth, the fact that NAMA did not fully prevail in the arbitration was irrelevant to its claim of post-arbitration fees to correct or vacate the award. The arbitration provision was broadly written to include the post-arbitration fees, and the determination of the prevailing party in a post arbitration proceeding is a judicial function distinct from the arbitrator’s decision to award fees in the arbitration.
The judgment was affirmed.
Arbitration/Waiver/Burden of Proof: Substantial Evidence Supported Waiver of FINRA Arbitration
St. Agnes Factors Weighted In Favor of Finding of a Waiver
The leading California case for determining whether a waiver of the right to arbitrate has occurred is St. Agnes Medical Center v. PacifiCare of California, 31 Cal.4th 1187 (2003). St. Agnes provides a multi-factor test that the court handily applied in Alspaugh v. Dunham, Case No. D09673 (4th Dist. Div. 1 June 14, 2012) (McDonald, J.) (author) (not for publication).
In Alspaugh, Plaintiffs sued Defendants claiming investment fraud. Defendants moved to compel arbitration, losing that motion in the trial court. Defendants appealed the denial, claiming the trial court erred by finding they were not required to arbitrate pursuant to the written agreements, and that they had waived any rights to enforce arbitration.
What were the critical facts resulting in a finding of waiver? Plaintiffs filed their case in February, 2009. Defendants did not file their motion to compel arbitration and stay litigation until March 23, 2011, and their actions were inconsistent with arbitration. Defendants filed multiple substitutions of attorney, bankruptcy filings, requests to continue trial, counter claims, multiple demurrers, took 40 depositions, and propounded thousands of discovery requests.
True, St. Agnes states that “the party seeking to establish a waiver bears a heavy burden of proof.” 31 Cal.4th at 1195. But a finding of waiver will usually be fact-based. Therefore, the standard of review will be whether there is substantial evidence to support the trial court’s finding of waiver.
Here, the Court of Appeal affirmed the order based on the trial court’s finding of waiver. Therefore, the court did not need to address the merits of alternative grounds for the order denying defendants’ motion to compel arbitration.
Arbitration/Waiver: Cinel v. Barna Is Now Certified For Publication
Failure to Pay Arbitrator’s Fees Led to Waiver of Right to Arbitrate in Cinel v. Barna
On May 20, 2012, we blogged about Cinel v. Barna, Case No. B232380 (2nd Dist. Div. 1 May 18, 2012) (Johnson, J.) an unpublished case at the time. As of today, the case is certified for publication.
Mediation/Condition Precedent/Fees: Listing Agreement Required Mediation Before Commencing Litigation – But Promissory Note Did Not Have That Requirement
. . . And So Party Suing and Prevailing On the Promissory Note Could Recover Fees Without Initiating Mediation
We have a sidebar category, "Mediation: Condition Precedent," reflecting the fact that many contracts, such as real estate purchase and sale agreements, and listing agreements, now require a party to mediate before filing a lawsuit, as a condition precedent to the recovery of attorney’s fees. File the next case under: "condition precedent: not." Keith v. Shuttleworth, Case No. D058881 (4th Dist. Div. 1 June 14, 2012) (McConnell, P.J., author) (not for publication).
Plaintiff sued defendant for breach of a promissory note, and defendant cross-complained for breach of a listing agreement. The trial court awarded plaintiff $71,721 for breach of the note, $219,171.18 for fees, and $19,205.34 for other costs. Defendant/cross-complainant lost its cross-claim to recover a commission, and appealed.
One of defendant’s arguments was that the listing agreement required mediation first in order for plaintiff to be able to recover attorney’s fees later. But you already know the answer to that: plaintiff sued on the promissory note, not the listing agreement, and the promissory note, though it did have an attorney’s fees provision (lucky for the plaintiff), did not require mediation (lucky again for the plaintiff).
But didn’t the promissory note "arise from" the listing agreement transaction? Issue forfeited because not timely raised. Besides, said the court, we are satisfied that the "complaint for breach of the promissory note is not an action under the Listing Agreement."
Judgment affirmed.