Automobiles, Nonsignatories: Hyundai Is Unable To Piggback Onto Dealership’s Arbitration Agreement
California Court of Appeal, 3rd District, Disagrees With California Court of Appeal, 3rd District.
A Third District California Court of Appeal panel composed of Justices Renner, Earl, and Hull, disagrees with an earlier Third District panel composed of Justices Hoch, Robie, and Murray. The issue is whether an automobile manufacturer can rely on an arbitration agreement between a dealership and a customer to compel the customer to arbitrate a breach of warranty claim with the nonsignatory automobile manufacturer. The earlier case, Dina C. Felisilda et al., v. FCA US LLC, 53 Cal.App.5th 486 (2020), held that the manufacturer could rely, because the customer had to rely on the contract with the dealer to sue the manufacturer. We posted about the Felisilda case on 8/29/20.
In light of developing case law, Justice Renner, writing for the court, disagrees with Felisilda. The customer's claim that the manufacturer breached its warranty does not rely on the customer's contract with the dealership. The manufacturer's warranty is not part of the dealership contract. Mark Kielar v. Superior Ct. of Placer County (Hyundai Motor America, Real Party in Interest), C096773 (3rd Dist. 8/16/23).
PAGA: California Courts Will Now Hold PAGA Plaintiffs Arbitrating Their Claims Have Standing To Litigate Representative Claims Of Others
The Issue Was Resolved By The California Supreme Court In July 2023, And Lower Courts Are In-Step.
Earlier this year the California Supreme Court addressed the following question: "[W]hether an aggrieved employee who has been compelled to arbitrate claims under PAGA that are 'premised on Labor Code violations actually sustained by' the plaintiff . . . maintains statutory standing to pursue 'PAGA claims arising out of events involving other employees' . . . in court." The Court held that the answer is "yes". Adolph v. Uber Technologies, Inc., S274671 (Cal. Sup. Ct. 7/17/23) (Liu; Guerrero, Corrigan, Kruger, Groban, Jenkins, Evans).
This conclusion is contrary to the explanation provided by Justice Samuel Alito writing for the majority in Viking River Cruises, Inc. v. Moriana. Alito opined that once the individual PAGA plaintiff was compelled to arbitrate individual claims, the plaintiff lacked standing to litigate representative PAGA claims. However, Justice Liu explained that the California Supreme Court, in accord with Justice Sonia Sotomayor's concurrence in Viking River Cruises, was the final interpreter of a California statute. He concluded that under the California PAGA statutory framework, the individual PAGA plaintiff had standing to bring representative claims.
The latest California case recognizing that Adolph has resolved the representative standing issue for now is Barrera v. Apple American Group LLC, A165445 (1/2 8/31/23).
In a Daily Journal article earlier this year I presented the disagreement between the California courts and the US Supreme Court regarding standing of an individual PAGA plaintiff to pursue representative claims. Though I resisted the temptation to guess how the California Supreme Court would rule on the issue, I am not in the least bit surprised by the result.
FAA, Appealability, Discovery: 9th Circuit Holds That Non-Reviewable Order Does Not Become Reviewable When Combined With Reviewable Order Denying Arbitration
Two Orders Combined In One Document Did Not Metamorphose Into Single Appealable Order.
Metamorphosis of butterfly. Wikipedia article "Metamorphosis".
The district court denied a motion to compel arbitration brought by the defendant and denied a motion to dismiss for lack of jurisdiction brought by the defendant based, in part on defendant's claim of Section 230 immunity, part of the Communications Decency Act. Both orders were included in a single document labeled as a single "Order". Defendant PeopleConnect, Inc. appealed. John Boshears v. People Connect, Inc. (9th Cir. 8/3/22) (Bea, Bennett, Thomas).
On appeal, PeopleConnect argued that because the district court issued a single Order, and because an order denying a motion to compel arbitration is immediately reviewable under 9 U.S.C. § 16(a), the district court's order denying the motion to grant immunity and dismiss the case was also reviewable. As Judge Bea explains, this conflates order with document. Yes, there was one document labeled "Order", but it contained two orders. As Judge Bea says, "This all seems fairly commonsensical." If there are two orders here, the conclusion is obvious: the order denying immunity under § 230 is not reviewable at this stage, given the general principle that the federal court of appeal only reviews final judgments. However, the order denying the motion to compel arbitration is reviewable under 9 U.S.C. 16(a).
If the legal principles are obvious, why do we have a published opinion? Apparently the panel could not find a case on point, that spotted calf, deciding whether there was jurisdiction in the Court of Appeal to consider the denial of immunity when there was jurisdiction to review the order denying the motion to compel arbitration. The answer is that jurisdiction to consider the order to deny arbitration did not confer jurisdiction to consider the order denying immunity.
For now, PeopleConnect does not get the immunity that would result in dismissal of the case. However, in a concurrent unpublished Memorandum, the panel holds that the district court abused discretion by denying the motion to compel arbitration without allowing some arbitration-related discovery first. Thus, PeopleConnect gets another bite of the apple. Depending on the results of discovery, the parties could still end up in arbitration.
Scope, Equitable Estoppel: 9th Circuit Holds Discrimination Claims Were Outside Scope Of Arbitration, And Equitable Estoppel Prevented Bank From Arguing Borrower Couldn’t Opt Out
There Were Two Agreements To Arbitrate And Neither Worked.
Iliana Perez entered into two arbitration agreements: one, with Citibank in 2010 in connection with a student loan, the second, with Discover Bank in 2018, in connection with a consolidation loan for her student loan. She sued Discover Bank after her application for a consolidation loan was denied in, based on her undocumented immigration status. Discover Bank moved unsuccessfully in the trial court to compel arbitration under the two arbitration agreements, a result that was affirmed on appeal. Perez v. Discover Bank, 22-15322 (9th Cir. 7/24/23) (S.R. Thomas, Holly Thomas, Rakoff).
The dispute centered around the denial of the consolidation loan, which occurred some eight years after Perez entered into the arbitration agreement relating to the student loan. The consolidation loan was not within the scope of the earlier agreement.
As for the second agreement, Perez argued that it was unconscionable. However, in court, Discover Bank's attorney argued that it could not be unconscionable, because Perez still had 30 days to opt out. After the hearing, Perez did opt out of arbitration under the second agreement. After Perez opted out, the court addressed the matter again. Now Discover Bank's attorney argued that Perez's exercise of her opt out only applied to future discrimination, not past discrimination. But that position was inconsistent with the earlier representation to the court, and the Ninth Circuit invoked the doctrine of equitable estoppel to reject Discover Bank's argument that Perez could not opt out of arbitration for past discrimination. Indeed, Discover Bank's argument that the second agreement was not unconscionable relied, at least in part, on its representation to the court that Perez could still opt out. So it would have been unfair not to hold the bank to a representation upon which the court had earlier relied.
FAA, Transportation Workers: Domino’s Pizza Drivers Involved In “Last-Leg” Of Interstate Commerce Are Exempt From Arbitration
Ninth Circuit Explains Drivers Inside California May Be Engaged In Interstate Commerce.
The ingredients for Domino's pizzas are delivered from out-of-state to warehouses in California where they are weighed, redistributed, packaged, and delivered by truck drivers in California to Domino's Pizza franchisees located in California. Do the California drivers qualify as a class of transportation workers exempt from the Federal Arbitration Act under 9 USC § 1? That is the question addressed in Edmond Carmona, et al. v. Domino's Pizza, LLC, 21-55009 (9th Cir. 7/21/23) (Hurwitz, Wardlaw, Parker, Jr.).
Yes, answers Judge Andrew D. Hurwitz, who authored the panel's opinion. So long as the so-called "last-leg" driver is engaged in an unbroken stream of interstate commerce, the driver qualifies as a transportation worker exempt from the coverage of the FAA. It doesn't matter here that the pizza ingredients are repackaged in the California warehouse and ordered by the California franchisees, because the ingredients are unaltered and travel through a continuous stream of interstate commerce. Judge Hurwitz relies on Rittmann v. Amazon.com, Inc., 971 F.3d 904 (9th Cir. 2020), which he does not find to be incompatible with the Supreme Court's opinion in Southwest Airlines Co. v. Saxon, 142 S. Ct. 1783 (2022). In Saxon, the Supreme Court, focusing on the actual work performed by the class of workers, exempted from the FAA “workers who physically load and unload cargo on and off airplanes.”
Delegation: Ninth Circuit Concludes That Delegation Clause Is Enforceable, Regardless Of Whether Arbitration Clause Is Found To Be Enforceable
Nesting dolls (Matryoshka dolls). Wikipedia. Published under GNU Free Documentation License, Version 1.2, and any subsequent versions.
We can analogize the next case to a nesting doll problem. The delegation clause in an arbitration agreement (Agreement) is a mini-agreement nested in the Agreement. The Agreement is nested in an employment contract, consumer contract, or some other contract. The different contracts can be analyzed separately, and their relationship to one another must be considered.
Here, a district court judge found the nested delegation clause to clearly and unmistakably delegate arbitrability issues to the arbitrator. However, the judge also found the delegation clause to be substantively and procedurally unconscionable, and therefore unenforceable. This conclusion was based on the fact that the Agreement contained a pre-dispute jury trial waiver. The waiver, however, only kicked in if the Agreement was found to be unenforceable. Having determined that the delegation clause was unenforceable, the judge then concluded that the Agreement itself was unenforceable, based on the same pre-dispute jury waiver. The defendant employer, seeking to compel arbitration, appealed the adverse ruling. Kenneth Holley-Gallegly v. TA Operating, LLC, 22-55950 (9th Cir. 7/21/23) (Smith, Hamilton, Collins).
The Court of Appeals reversed, directing the district court to order the arbitrator to decide the arbitrability issue. The reason? The pre-dispute waiver of a jury trial did not infect the nested delegation clause. The arbitrator could still decide the issue of arbitrability. If the arbitrator decided that the case was arbitrable, then the waiver of a jury trial became irrelevant, because the case would never be litigated in court, and there could not be a jury trial. Thus, the jury waiver could only possibly have effect if the arbitrator decided the Agreement was unenforceable — i.e., reached the same conclusion as the district court judge. Under the delegation clause, the arbitrator might conclude that the Agreement was unenforceable or enforceable, and either way, the delegation clause could be operable.