In the News: Los Altos School District Cancels Closed-Session Mediation With Charter School Because of Brown Act Considerations
Collision Between Mediation and Open Meeting Requirements
L.A. Chung reports in the Los Altos Patch March 6, 2012 edition that the Los Altos School District abruptly cancelled a closed-door mediation with the Bullis Charter School 90 minutes before the session was to occur because of concerns about the Ralph M. Brown Act (Gov. Code sections 54950.5 et seq).
The facts of the dispute involving the charter school are somewhat obscure, at least to an outsider. What caught our attention is the inherent conflict between the confidentiality demands of mediation and the Brown Act requirement of open meetings of local government bodies. As Justice Louis Brandeis famously said, “sunlight is the best disinfectant.”
For those of our readers who are interested, there actually is plenty of law on about local government bodies in California meeting to settle lawsuits with litigants, and whether such meetings have been conducted in such circumstances as would constitute a violation of the Brown Act. See Page v. MiraCosta Community College Dist., 180 Cal. App. 4th 471 (2009) (holding public is entitled to monitor and provide input on the Board’s collective acquisition and exchange of facts in furtherance of a mediation or resolution of a litigant’s claims).
There is an important exception to the open meeting requirement: local government bodies can meet with their counsel concerning litigation. But it becomes a problem when local bodies meet in closed session and intermediaries start conducting shuttle diplomacy outside the room – which of course is typical of mediation.
In Page, the court explained that the Brown Act:
“prohibits a legislative body from using "`personal intermediaries’" to exchange facts so as to reach a "`collective concurrence’" outside the public forum. (Wolfe v. City of Fremont, 144 Cal.App.4th 533, 544-547 (2006); see also 84 Cal.Ops.Atty.Gen. 30, 31, 32 (2001) [use of e-mails by a majority of board members to "`"exchange . . . facts,"’" "`advance or clarify a member’s understanding of an issue,’" or "`advance the ultimate resolution of an issue’" regarding an agenda item violates § 54952.2].) "To prevent evasion of the Brown Act, a series of private meetings (known as serial meetings) by which a majority of the members of a legislative body commit themselves to a decision concerning public business or engage in collective deliberation on public business would violate the open meeting requirement." (216 Sutter Bay Associates v. County of Sutter, 58 Cal.App.4th 860, 877 (1997)).”
Based on Brown Act considerations, the Los Altos School District acted with prudence.
Slate Magazine Offers "Negotiation Academy" – Ten Podcasts About the Art of Negotiation
Entertaining, Instructive, and Free
Slate, the online magazine, introduces a series of 10 entertaining and free podcasts about the art of negotiating, You can download these podcasts to your iPod, iPad, iTouch, iPhone, or PC, from iTunes where they are found under the rubric "Negotiation Academy." The series is presented by journalists Jill Barshay and Seth Stevenson. Thus far, topics include: (1) negotiating the price; (2) schmoozing and other starting tricks; (3) the art of persuasion; (4) the ticking clock; (5) dealing with jerks; (6) closing the deal; (7) the gender divide; (8) haggling over real estate; (9) negotiating with kids; and (10) negotiating your salary.
Arbitration/FAA: 9th Circuit Affirms District Court’s Order Affirming Arbitration Award and Permanent Injunction Against Employer and In Favor of Employer
Court Highlights Limited Scope of Review of the Final Award Under the FAA – As Compared to Under California Law
Appellant Biller worked as an in-house attorney for Toyota Motor Sales (TMS). In 2007, Biller presented TMS with a claim of constructive wrongful discharge related to TMS’s alleged unethical discovery practices. The dispute resulted in a settlement and a Severance Agreement requiring Biller to release claims and to protect Toyota’s “Confidential Information.” The Severance Agreement provided for Dispute Resolution in the form of arbitration of “all known and unknown” claims relating to the interpretation, application, or alleged breach of the Severance Agreement. Biller v. Toyota Motor Corporation, et al., No. 11-55587 (9th Cir. Feb. 3, 2012) (opinion by Judge Gould). You probably know where this is going.
Biller set up his own consulting business. TMS sued, claiming that he had misappropriated Confidential Information. Various claims and cross-claims were filed, and the parties ended up in arbitration before the Hon. Gary L. Taylor (ret.), himself a former federal judge. The arbitration provision was governed by the Federal Arbitration Act (FAA).
“The Arbitrator awarded TMS $2.5 million in liquidated damages and $100,000 in punitive damages.” TMS was also awarded injunctive relief. The Arbitrator concluded Biller’s “unprecedented ethical violations” were unjustified. Ouch.
The opinion holds an important lesson for practitioners. The FAA offers very limited review of the final award. Because the grounds on which a federal court may vacate, modify, or correct an arbitral award are very limited under the FAA, the parties do not have the ability, under the FAA, to contract to a broader scope of judicial review on the merits.
And that is different from California law. Cable Connection, Inc. v. DirectTV, Inc., 44 Cal.4th 1334 (2008). In Cable Connection, the California Supreme Court considered an arbitration agreement under the California Arbitration Act (CAA), and concluded that under the CAA, the parties may contract in the arbitration agreement for review of the merits of the final award. Id., 44 Cal.4th at 1364. While the parties may choose to have review of the final award governed by the CAA rather than the FAA, if they chose the latter, they cannot then contractually enlarge the scope of review. That’s something to ponder when drafting arbitration clauses.
Given the very limited scope of review under the FAA, the result was perhaps ordained: affirmance of the district court’s order affirming the arbitration award and permanent injunction against appellant Biller.
Arbitration: 1st District, Div. 5, Finds No Error In Trial Court’s Decision Invalidating One-Sided Arbitration Clause in Employment Agreement
Delegation to the Arbitrator of the Power to Decide Whether the Arbitration Clause is Unconscionable Is “Horse of a Different Color” That Must Satisfy High Evidentiary Standard
The employer, CantorCo2e, L.P., and an executive, appealed from an order denying their petition to compel arbitration of the claims under the Federal Arbitration Act (FAA) brought by an employee who was a broker. The FAA can give some advantage to the employer seeking to compel arbitration, because arbitration provisions will be subject to invalidation only for the same grounds applicable to contractual provisions – e.g., unconscionability. Furthermore, here, the employer, who of course drafted the arbitration provision, had the beginning advantage of a broadly worded arbitration provision indicating that arbitration might be conducted under the rules of an arbitration service (AAA) giving arbitrators the power to decide the validity of arbitration agreements.
However, under all the circumstances here, that was not enough to satisfy the trial court or the Court of Appeal that the parties intended to delegate authority to the arbitrator to decide the threshold issue of whether the arbitration provision was conscionable. Ajamian v. CantorCO2e , L.P., Case No. A131025 (1st Dist. Div. 5 Feb. 16, 2012) (certified for publication).
Given the broadly worded arbitration provision, why couldn’t the arbitrator, rather than the trial court, decide whether the employment dispute had to be arbitrated? The chief reason is that ordinarily it is the expectation of the parties that a court, rather than an arbitrator, will decide whether the arbitration provision is unconscionable. Therefore, delegation of that decision – contrary to what is typically the expectation of the parties – requires “clear and convincing evidence.”
The Court of Appeal drew a distinction between the power of an arbitrator to decide substantive claims, and the power of the arbitrator to decide whether the arbitration clause itself is unconscionable. “Language such as ‘any disputes, differences or controversies’ may well be adequate and necessary for the parties to express their intention to arbitrate all substantive claims, since the number and diversity of potential future substantive claims is so great as to defy a specific enumeration of each type. But the issue of who would decide the enforceability of the arbitration clause itself is a horse of a different color.”
Arbitration: Interpretation of Arbitration Provision By Sixth District Leads to Vacating Trial Court’s Order Compelling Employee to Arbitrate
Drafting Mistake by Employer Means Employer Must Accept the Consequences
When the employer drafts an arbitration provision, and the Court of Appeal opines, “[i]t appears that there was a huge drafting mistake,” as it did in the next case, you know that the employer is going to have a bad day in court. Derr v. The Superior Court of Monterey County [Nepenthe/Phoenix Corp., Real Party in Interest], Case No. H037117 (Sixth Dist. Feb. 8, 2012) (not to be published in official reports).
Petitioner Susan Derr had worked as a server for Nepenthe for 40 years, when she was diagnosed with cancer. The employer sent her a notice by mail indicating that she had voluntarily “quit.” She sued for disability discrimination and wrongful termination in violation of public policy.
But Ms. Derr was a party to an arbitration provision, and the employer successfully moved to compel arbitration. She then sought a writ of mandate directing the trial court to vacate its order compelling her to arbitrate. (Note: Orders compelling arbitration are considered interlocutory and not directly appealable, but can be attacked with writ review: “(1) if the matters ordered arbitrated fall clearly outside the scope of the arbitration agreement or (2) if the arbitration would appear to be unduly time consuming or expensive.” Zembsch v. Superior Court, 146 Cal.App.4th 153, 160 (2006).)
The drafting mistake? “[T]here was an agreement to arbitrate disputes ‘arising from or relating to’ the arbitration agreement itself; the arbitration agreement does not describe the types of disputes that could arise from or relate to the agreement — as nonsensical as that is.” In essence, the court is distinguishing between the arbitration agreement, on the one hand, and the employment agreement on the other hand, and saying that, for whatever reason, this arbitration agreement only provided for arbitrating disputes concerning the arbitration agreement itself, not for arbitrating disputes concerning the employment agreement and the employment relationship.
Justice Elia authored the 3-0 decision.
Blawg Bonus: “Nepenthe” is the drug for forgetfulness in ancient Greek literature. From Wikipedia, three cultural references to Nepenthe:
- H.P. Lovecraft’s "The Outsider", "But in the cosmos there is balm as well as bitterness, and that balm is nepenthe."
- Edgar Allan Poe‘s poem "The Raven": "Quaff, oh quaff this kind nepenthe and forget this lost Lenore!"
- Nathaniel Hawthorne‘s "The Scarlet Letter": "I know not Lethe nor Nepenthe…" (Roger Chillingworth to Hester Prynne)
Arbitration/Costs/Deadlines/Scope/Section 998: Second District, Div. 2, Affirms Trial Court’s Denial of Costs
Look to the Scope of the Arbitration Provision to Determine Whether Costs Need to Be Addressed by the Arbitrator or the Court
The plaintiff, a patient alleging malpractice, suing through his guardian ad litem, lost a first arbitration against a doctor. Unfortunately for the doctor, his party arbitrator had an ex parte contact with the neutral arbitrator while the award was pending — leading the court to vacate the eventual award that would have helped the doctor. In a second arbitration, the patient won a significant monetary award, and then sought costs (based on an earlier cost shifting CCP section 998 offer). Costs were denied by the trial court on the grounds that costs should have been determined by the arbitrator. Maaso v. Signer, Case No. B228314 (2nd Dist., Div. 2 Feb. 7, 2012) (certified for publication).
The patient appealed the denial of costs, and the doctor appealed the vacation of the first arbitration.