Arbitrability of FEHA Claims/Minimum Requirements/Unconscionability/Severability/Employment
Leading Case of Armendariz v. Foundation Health Psychare Services, Inc. Sets Forth Minimum Requirements for Valid Arbitration Provision
The leading case Armendariz v. Foundation Health Psychare Services, Inc., 24 Cal.4th 83 (2000), was authored by the late great Justice Stanley Mosk (1912 to 2001). The opinion is important because it provides that FEHA claims may be arbitrated, if arbitration meets certain minimum standards described in the case:
“In this case, we consider a number of issues related to the validity of a mandatory employment arbitration agreement, i.e., an agreement by an employee to arbitrate wrongful termination or employment discrimination claims rather than filing suit in court, which an employer imposes on a prospective or current employee as a condition of employment. The employees in this case claim that employees may not be compelled to arbitrate antidiscrimination claims brought under the California Fair Employment and Housing Act (FEHA) (Gov.Code, § 12900 et seq.) We conclude that such claims are in fact arbitrable if the arbitration permits an employee to vindicate his or her statutory rights. As explained, in order for such vindication to occur, the arbitration must meet certain minimum requirements, including neutrality of the arbitrator, the provision of adequate discovery, a written decision that will permit a limited form of judicial review, and limitations on the costs of arbitration.
The employees further claim that several provisions of the arbitration agreement are unconscionable, both because they fail to meet these minimum requirements and because the arbitration agreement is not bilateral. We conclude that the agreement possesses a damages limitation that is contrary to public policy, and that it is unconscionably unilateral.
Finally, the employees contend that the presence of these unconscionable provisions renders the entire arbitration agreement unenforceable. The employer argues that even if some of the provisions are unconscionable or contrary to public policy, the proper remedy is to strike or restrict those clauses pursuant to Civil Code section 1670.5, and to enforce the rest of the arbitration agreement. The trial court chose the employees’ preferred solution of refusing to enforce the arbitration agreement, but the Court of Appeal sided with the employer and enforced the agreement minus the one provision it found unconscionable. We conclude . . . that the arbitration agreement is unenforceable and that therefore the Court of Appeal’s judgment must be reversed.” (italics added for emphasis).
Mediation/Confidentiality: Confidentiality of Communications in Mediation Does Not Mandate Disqualification of Attorney Who Learns Confidential Information in Mediation from Litigating Later Cases Against the Same Party
Dire Implications for Mediation Would Follow from Disqualification
Plaintiff’s attorney became involved in two related lawsuits against the same defendant, a builder of an apartment building severely damaged by the Northridge earthquake and subsequently demolished. In the first lawsuit the attorney represented the builder’s lender and attended mediation. In the second lawsuit, the same attorney represented the tenants of the apartment building against the builder. The trial judge disqualified the attorney from the second representation, reasoning that otherwise the confidentiality of mediation communications would be destroyed. After losing a motion for reconsideration, the attorney appealed. Barajas v. Oren Realty and Development Company, 57 Cal.App.4th 209 (1997).
California Code of Civil Procedure section 1152.5 provides that evidence of anything said in a mediation is generally not discoverable or admissible, that documents prepared for mediation are generally not discoverable or admissible, and that “all communications, negotiations, settlement discussions” in a mediation “shall remain confidential.” In Barajas, an opinion authored by Justice Zebrowski, the court held that an attorney who mediates one case is generally not disqualified from litigating later cases against the same party. The Court of Appeal was troubled by the implications of the trial court’s ruling, believing that vulnerability to disqualification would make it more difficult for parties (especially plaintiffs) to get representation in products liability, employment, insurance coverage, civil rights, lender liability, and construction cases. The court also believed that disqualification could become problem in cases where mediation was unsuccessful and an attorney involved in mediation went on to try the case after being exposed to confidential information in the mediation.
The imperfect solution is that in mediation a party must make its own decisions about disclosures in mediation.
Mediation/Attorney’s Fees: Prevailing Parties Are Barred From Recovering Attorney Fees Because They Refused to Mediate
Standard Form Residential Agreement Typically Provides That Prevailing Party in Litigation or Arbitration Who Refused a Request to Mediate Before Commencement of Such Proceedings is Barred From Recovering Fees
Buyers sued home sellers for specific performance and lost the lawsuit. Sellers filed two motions for attorney’s fees, both of which were granted. The buyers appealed the order awarding attorney’s fees. Frei v. Davey, 124 Cal.App.4th 1506, 22 Cal.Rptr.3d 429 (2004), arguing that the sellers had refused to mediate.
In an opinion authored by Justice Fybel, the Fourth District, Division 3, ruled that, “[t]he new provision barring recovery of attorney fees by a prevailing party who refuses a request for mediation means what it says and will be enforced.” Also, the court found that there was a lack of substantial evidence to support the trial court’s finding that the sellers did not refuse to mediate. They had refused to mediate, improvidently, and as a consequence, even though they prevailed, they lost their award of attorney’s fees on appeal.
Mediation/Statute of Limitations: Submitting Action to Mediation May Toll Statute of Limitations Under Proper Circumstances
California Code of Civil Procedure section 1775.7 Allows for Tolling When Case is Submitted to Mediation During Last Six Months of the Five Years Litigants Have to Bring a Case to Trial.
A civil action must be brought to trial within five years after it is commenced. “If an action is . . . submitted to mediation . . . more than four years and six months after the plaintiff has filed the action, then the time beginning on the ate four years and six months after the plaintiff has filed the action and ending on the date on which a statement of nonagreement is filed . . . shall not be included in computing the five-year period . . . . “ Exactly how the tolling period is computed is addressed in an opinion authored by Justice Mallano, Gonzalez v. County of Los Angeles, 122 Cal.App.4th 1124, 19 Cal.Rptr.3d 381(2004). The key point, which saved plaintiff from having her case tossed out, is that the tolling commences at the 4 ½ year mark if the case is submitted to mediation during the last six months of the five year period during which trial must commence. Here, the last six months of the five-year period began on November 14, 2002. On February 26, 2003, the trial court ordered the case to mediation. Thus, the tolling commenced on November 14, 2002, not on February 26, 2003, as the trial court had incorrectly reasoned. The earlier date saved plaintiff from having her case thrown out for failing to timely bring the case to trial.
Mediation/Expenses: Trial Court in Its Discretion May Award Successful Litigants Their Share of the Cost of Unsuccessful Court-Ordered, Privately Conducted Mediation
The Mediation Was Reasonably Necessary to the Conduct of the Litigation
An award of costs for mediation is not statutorily proscribed, and costs may be awarded in the court’s discretion so long as they re “reasonably necessary to the conduct of the litigation rather than merely convenient or beneficial to its preparation.” Gibson v. Bobroff, 49 Cal.App.4th 1202 (1996); Cal. Code Civ. Proc. section 1033.5, subd. (c)(4).
Mediation: Court of Appeal Rules that Court Cannot Force Mediation Upon Parties or Sanction Party for Failure To Mediate
Party Timely Sought to Withdraw from Mediation Prior to Appointment of Mediator
The “take away” of this case comes in its opening paragraph:
“Petitioners (defendants below and their attorney) seek a writ to vacate an order sanctioning them for failing to personally attend a mediation session and requiring them to participate in further mediation. Plaintiffs, real parties in interest, respond by urging us to rule that once an attorney orally agrees to mediate a dispute neither that attorney nor the client may withdraw consent absent court approval upon a showing of good cause; we hold otherwise. We grant relief because (1) the court had no authority to mandate mediation, (2) there was no enforceable agreement to mediate; and (3) in any event, there was no failure to comply with the court’s mediation order.” Kirschenman v. Superior Court of Contra Costa County [Hammons et al., real parties in interest], 30 Cal.App.4th 832, 833-834, 36 Cal.Rptr.2d 166 (1994).
Distinctions matter. In Lu v. Sup. Ct., 55 Cal.App.4th 1264 (1997), the court refused to extend the holding of Kirschenman: “[W]e do not think it appropriate to extend Kirschenman to complex litigation to hold that, absent express statutory authorization, courts are powerless to devise procedures to expedite and facilitate the management of complex cases.” Id. at 1290-91. Lu involved complex litigation, a referee rather than a mediator, and a settlement conference that was mislabeled as “mediation.”