Mediation: Ninth Circuit Orders Mediation Of Dispute Concerning Conditions For Holding Gun Shows At The Alameda County Fairgrounds
But Chief Judge Alex Kozinski “Wants No Part Of It”
An en banc panel of the Ninth Circuit Court of Appeals, believing that the parties should attempt to settle their long-running dispute concerning the conditions for holding gun shows at the Alameda County fairgrounds, has ordered the dispute to mediation. Nordyke v. King, No. 07-15763 (9th Cir. April 4, 2012) (for publication).
Judge Milan D. Smith, Jr., concurred, but “would have attached a copy of a proposed disposition in this case so that the parties would know what they would face in the event mediation fails.”
Chief Judge Alex Kozinski, joined by Judge Ronald M. Gould, dissented. We can only describe the dissent as “classic Kozinski”, expressed in his inimitable voice. We reprint it, without further comment, in full:
“The parties have not asked for mediation; they have said nothing that suggests mediation would be fruitful; when asked about it in court, they displayed obvious distaste for the idea. We overstep our authority by forcing the parties to spend time and money engaging in a mediation charade. Our job is to decide the case, and do so promptly. This delay serves no useful purpose; it only make us look foolish. I want no part of it.”
Arbitration/Class Actions/Waiver/Unconscionability: Second District, Division 7, Agreeing That Class Action Waiver Is Unconscionable, Affirms Trial Court
No Need To Decide Whether Concepcion Overrules Gentry Here – Because "This Is Not A Close Case"
These proceedings began in 2004 when Ralphs Grocery Company employees sued Ralphs for alleged violations of the Labor Code and Unfair Competition law. The proceedings moved up and down the appellate ladder. Eventually, after a remand, the trial court refused to enforce Ralphs’ arbitration policies with class action waivers, based on an examination of the factors in Gentry v. Superior Court, 42 Cal.4th 443 (2007). Ralphs appealed, arguing that AT&T Mobility LLC v. Concepcion, 563 U.S. __ ,131 S.Ct. 1740 (2011), conclusively establishes that Gentry has been preempted by the Federal Arbitration Act (FAA). Massie v. Ralphs Grocery Company, B224196 (2nd Dist. Div. 7 April 2, 2012) (Woods, J.) (not for publication)
Applying a multi-factor Gentry analysis to the arbitration policies, the trial court found that anticipated recoveries in the plaintiffs’ cases are modest, a risk of retaliation would deter individual actions, plaintiffs were ill-informed of their rights under overtime laws, real world obstacles existed to individual vindication of rights through individual arbitration, and, crucially, federal preemption did not preclude invalidating Ralphs’ class arbitration waiver. Therefore, the trial court found Ralphs’ arbitration policies containing class action waivers to be unenforceable.
But the United States Supreme Court held in Concepcion that California’s rule in Discover Bank v. Superior Court, 36 Cal.4th 148 (2005) that class actions waivers in consumer arbitration agreements may be unenforceable or unconscionable is preempted by the FAA.
No need to determine whether Concepcion overrules Gentry here, said the Court of Appeal in Massie, because "this is not a close case." There were plenty of reasons for finding the employer’s arbitration policies procedurally and substantively unconscionable. The agreements here were "take it or leave it", satisfying a finding of procedural unconscionability. And the policies were overreaching in various respects, satisfying a finding of substantive unconscionability.
It is a basic rule of appellate review "that a ruling or decision, itself correct in law, will not be disturbed on appeal merely because given for the wrong reason." Therefore, there was no need to decide whether Gentry survives Concepcion, because it wouldn’t make a difference in Massie, even if the rule in Gentry has been gutted. Massie was decided as it was on its own facts, and not simply because the arbitration policy included a class action waiver.
As we have said in other posts (see our February 28 post on Wisdom v. AccentCare, Inc., No. C065744 (3rd Dist. January 3, 2012) (certified for publication) and March 4, 2012 post on Ajamian v. CantorCO2e , L.P., Case No. A131025 (1st Dist. Div. 5 Feb. 16, 2012) (certified for publication)) employers who want to enforce arbitration provisions would do well to draft provisions that do not appear to overreach, because under the FAA, unconscionability remains a valid state law defense to enforcement of a contract.
Arbitration/Stays: Is There An Automatic Stay Pending Appeal When Arbitration is Denied in Federal Court?
Corporate Counsel Article Points Out That There Is A Split Among The Federal Circuits
In an April 2, 2012 article in Corporate Counsel online, entitled “In Arbitration, a Right to an Automatic Stay Pending Appeal?”, authors Elbert Lin and J. Andrew Law point out that there is a split among the federal circuits. The majority holds that appeal of the denial of a motion to compel arbitration automatically stays district court proceedings. But the 9th, 5th, and 2nd circuits reject the majority view, making it possible for litigants to battle on in district court while the issue concerning the right to arbitrate is being appealed.
The authors explain:
“The split turns on the application of Griggs v. Provident Consumer Discount Co., 459 U.S. 56 (1982). In Griggs, the Supreme Court held that ‘[t]he filing of a notice of an appeal is an event of jurisdictional significance—it confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved in the appeal.’ Id. at 58 (emphasis added). The courts of appeals have disagreed over what is ‘involved in’ an appeal of an order denying arbitration.”
The authors argue that the minority view is an anachronism evincing a resistance to arbitration that the Federal Arbitration Act was intended to overcome, and that review may be “on the horizon” by a Supreme Court majority that has underscored the benefits of private arbitration.
Arbitration/Fees: Fourth District, Division 3 Rules That Trial Court Erred By Denying Plaintiffs’ Motion For Post Arbitration Attorney Fees
It’s Possible To Recover Post-Arbitration Fees, Without Being A Prevailing Party In the Arbitration
This dispute, concerning the sale of a house, has been knocking around in the courts and in arbitration for several years. Toal v. Tardif, G044823 (4th Dist. Div. 3 March 29, 2012) (Ikola, J.) (not to be published). The arbitrator awarded plaintiffs $65,284, but found they were not entitled to attorney fees because there was no prevailing party in the arbitration. However, in Toal I, the Court of Appeal reversed the judgment confirming the award and remanded to determine whether the arbitration was binding. Other post-arbitration proceedings followed, and eventually, judgment was entered and affirmed in Toal II.
Plaintiffs moved in the trial court for an award of about $32,000 in attorney fees they incurred to obtain confirmation of the judicial award. Relying on the arbitrator’s finding that there was no prevailing party for purposes of the arbitration, the trial court denied the motion for postarbitration fees.
The Court of Appeal reversed, because the trial court’s analysis “fails to account for the plaintiffs’ status as prevailing parties in the postarbitration judicial proceedings (which resulted in the granting of their petition for judicial confirmation of the arbitration award and which were greatly prolonged by defendants’ allegation they never consented to or ratified the arbitration agreement).”
Though the Court of Appeal does not belabor the point, we think the language of the contractual fee provision may be relevant: “In any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement, the prevailing Buyer or Seller shall be entitled to reasonable attorney fees and costs . . . .” No wonder that the Court of Appeal concluded that the plaintiffs were the prevailing parties “in those proceedings” as a matter of law.
Would the result have been less clear-cut if the word “proceeding” had been left out of the fee provision? ”The most effective way of shortening law language,” wrote the late Prof. David Mellinkoff, “is for judges and lawyers to stop writing.” However, sometimes the “contagious verbosity” that Prof. Mellinkoff so entertainingly railed against, seems to save us lawyers from ourselves.
Undoubtedly the tedious proceedings must have taken their toll, but eventually Toal succeeded in ringing the bell for attorney’s fees.
Arbitration/Section 1281.2/Equitable Estoppel: 4th District, Division 2 Applies Section 1281.2 and Equitable Estoppel To Reverse Trial Court’s Orders That Had Stayed Arbitration And Had Denied Petition To Arbitrate
Inland Empire Dustup Presented Unique Procedural Issue – But The Court Didn’t Resolve It
The Court of Appeals noted at the outside that “we have not found a case that involves the same procedural facts as those presented here, namely, a case in which a party to an ongoing contractual arbitration files a lawsuit that names as defendants the other party to the arbitration as well as purported third parties, and alleges claims in its complaint that could have been but were not asserted in the arbitration, and then moves to stay the arbitration based on the new lawsuit.” PrimeCare of Corona, Inc. v. Hemet Community Medical Group, Inc., E051306 & E052577 (4th Dist. Div. 2 March 26, 2012) (McKinster, J.) (not for publication).
The Court questioned “whether a party to an ongoing arbitration can invoke section 1281.2(c) [allowing for denial of petition to arbitrate to avoid conflicting rulings] in such circumstances.” We got the drift that the Court may have thought this was sharp practice. The Court,however, did not resolve its own question, deciding the case on somewhat different grounds – thereby allowing this case to remain “not to be published in official reports.”
The underlying dispute involved medical professionals allegedly contractually bound by restrictions on their practice, and competing independent physician associations. The trial court had stayed the arbitration of PrimeCare’s breach of contract claim against defendants and respondents Muller and Corona Family Care, Inc. [collectively “Muller”] and denied PrimeCare’s petition to arbitrate claims in Muller’s lawsuit filed against PrimeCare after arbitration began.
PrimeCare appealed the denial of its petition to arbitrate Muller’s further claims, and the stay of an existing arbitration. Result?
Arbitration/Waiver: Fourth District Division 3 Upholds Determination That Defendant Waived Right To Arbitrate After Five Month Delay.
No Single Test Delineates Conduct That Will Constitute A Waiver
Above: Mercedes-Benz U.S. International Plant, Tuscaloosa County, Alabama. Carol Highsmith, photographer. Library of Congress.
Remember the test for waiver that we learned in law school? “Voluntary relinquishment of a known right.” Well, that’s not the requirement for waiver of the right to arbitrate in California. Waiver was the chief issue in Lewis v. Fletcher Jones Motor Cars, Inc., No. G045603 (4th Dist. Div. 3 March 26, 2012) (Aronson, J.) (not for publication).
In Lewis v. Fletcher Jones Motor Cars, Inc., Plaintiff Lewis sued the car dealer after she returned her car upon the Lease’s expiration, and got billed nearly $19,000 for exceeding the Lease’s mileage allowance, missed payments, and late charges. Lewis did not avail herself of an arbitration provision in the Lease. Neither did Fletcher Jones, at least not immediately. The trial court found the Lease’s arbitration provision to be unconscionable and Fletcher Jones waived its right to arbitrate by unreasonably delaying and by litigating Lewis’s claims on the merits. Fletcher Jones appealed from an order denying its motion to compel arbitration
Citing Burton v. Cruise, 190 Cal.App.4th 939, 944 (2010), the Court of Appeal explains that the term “waiver” is really used “’”as a shorthand statement for the conclusion that a contractual right to arbitration has been lost.’” . . . . a party may be said to have “waived” its right to arbitrate by an untimely demand, even without intending to give up the remedy. In this context, waiver is more like a forfeiture arising from the nonperformance of a required act. . . . ‘”
California applies a six-factor test found in St. Agnes Medical Center v. PacifiCare of California, 31 Cal.4th 1187 (2003). In the instant case, the trial court found waiver based on (1) unreasonable delay in demanding arbitration; (2) engaging in litigation on the merits and taking other steps inconsistent with the right to arbitrate; and (3) prejudicing Lewis through the delays and litigation. The Court of Appeal affirmed the trial court, making it unnecessary to determine whether the arbitration provision was unconscionable.
Here the delay in bringing a motion to compel was only five months; yet there are other cases with comparable delay where waiver has been found. The case was litigated through two demurrers and a motion to strike. While a demurrer does not necessarily waive a right to arbitrate, demurrers may justify a waiver finding. Lewis also fully briefed three motions to compel discovery responses. She incurred approximately $45,000 in attorney fees and nearly $1,000 in costs. While costs and legal expenses alone do not necessarily show prejudice, here, given that $19,000 was at stake, the fees and costs definitely played into the mix.
St. Agnes emphasizes “that no single test delineates the nature of the conduct that will constitute a waiver of arbitration.” St. Agnes, supra, 31 Cal.4th at 1195-1196. We can even suggest that, based on the totality of circumstances, some cases actually may become more amenable to arbitration with the passage of time, as issues that could be a problem in arbitration drop out, or as some critical new piece of information emerges. But as a general rule, the best policy is not to delay making a demand to arbitrate and following through with the demand if you really want to arbitrate – for with delay, litigation on the merits, and rising costs being incurred, the risk of waiver becomes very real indeed.