PAGA: Fourth District, Div. 1 Holds Employee Has Standing To Litigate Representative Claims In Superior Court, Notwithstanding Agreement To Arbitrate
Individual PAGA Claims Must Be Arbitrated.
One more California Court of Appeal follows the US Supreme Court in Viking Cruises v. Moriana, holding that arbitration of individual PAGA claims can be arbitrated. But the court also concludes that the employee "has standing to litigate nonindividual PAGA claims in the superior court notwithstanding his agreement to arbitrate individual PAGA claims." Nickson v. Shemran, Inc., No. D080914 (4/1 4/7/23) (Dato, Huffman, Buchanan).
Justice Dato explains in footnote 11: "As Justice Sotomayor made clear, the Supreme Court was opining on what it conceded could be a mistaken view of California law. (Viking River, at p. 1925 (conc. opn. of Sotomayor, J.) [“[I]f this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word.”]." Justice Dato relies on the California Supreme Court's opinion in Kim v. Reins, 9 Cal.5th 73 (2020): "As Kim explained, 'the Legislature did not intend to link PAGA standing to the maintenance of individual claims when such claims have been alleged' and '[t]his expansive approach to standing serves the state’s interest in vigorous enforcement.'”
COMMENT: Nickson joins other California decisions concluding that arbitration of individual PAGA claims can be compelled, but that the plaintiff has standing to pursue representative claims in court. See 3/30/23 post for references to other cases. But note that the Nickson also states: "We leave management of the superior court litigation during the pendency of arbitration to the trial court’s sound discretion." If trial courts stay litigation pending the outcome of arbitration, it remains to be seen how much this will dilute the strength of PAGA.
MFAA: Losing Trial De Novo After Mandatory Fee Arbitration Award Can Lead To Serious Reversal Of Fortune
Mandatory Fee Arbitration Act Fee Provisions Prevailed Over Contract Fee Provisions.
Oscar Wilde. c1882. N. Sarony. Library of Congress.
Oscar Wilde is credited with the paraprosdokian, "One would have to have a heart of stone to read the death of Little Nell without laughing." Our next case provokes similar sentiments. Surjit P. Soni v. Cartograph, B316270 (2/5 4/5/23) (Moor, Baker, Kim). File this one under, "Be careful what you ask for."
Soni, an attorney, got into a billing dispute with a client Tierney. All California attorneys are required to offer their clients the option of Mandatory Fee Arbitration in case of a fee dispute, and Tierney exercised the option. This procedure is governed by California Bus. & Prof. Code, § 6200 et seq., which has its own timing requirements and attorney fee provisions.
The arbitrator awarded attorney Soni $2.50. Evidently displeased with the outcome, Soni filed a complaint for a trial de novo in Superior Court. Disagreeing with the arbitrator, the trial judge entered judgment in Soni's favor in the amount of $2,890. Soni requested fees in the amount of $281,191.65, which the trial court reduced to $79,898. Tierney appealed, and the Court of Appeal reversed the trial court judgment, ordering the judge to confirm the $2.50 award. We previously blogged about this portion of the case. (Soni blew the 30-day deadline for filing his complaint for a trial de novo, because the deadline is not extended by mailing). But wait, there's more!
On remand, the trial court confirmed the $2.50 arbitration award. Soni filed a motion to recover attorney's fees, arguing that he prevailed in the trial court with an award of $2,890, and $79,898 in fees. Soni now sought fees of $543,365. Tierney, who may have litigated more efficiently, sought fees of $339,603. The trial judge denied Soni's motion for fees, and awarded Tierney fees of $328,166.50. Tierney prevailed.
The problem with Soni's argument is that he was not the prevailing party. There is a single final judgment, and at the end of the day, Soni had done worse with his trial de novo (0) than with his arbitration award ($2.50). Furthermore, the Court of Appeal held that the fee provisions in the MFAA governed the fee award, rather than contractual provisions. Under the MFAA fee rules, Soni's unsuccessful trial de novo entitled Tierney to fees.
"Respondents Timothy Tierney and Cartograph, Inc., formerly known as Simplelayers, Inc., are awarded their costs on appeal."
COMMENT. Tread very carefully before rejecting an award in Mandatory Fee Arbitration and filing a complaint for a trial de novo. If you don't do better in the trial, you risk an adverse award of attorney's fees under the MFAA.
Nonsignatories, Automobiles: Ford Motor Company Could Not Rely On Dealership Agreements To Compel Arbitration With Auto Buyers
Order Denying Ford Motor Company's Motion To Compel Arbitration Is Affirmed.
In the Ford Motor Warranty Cases, No. B312261 (2/2 4/4/23) (Grimes, Stratton, Viramontes), FMC sought to compel arbitration with plaintiffs who purchased automobiles and complained about manufacturing defects. However, FMC's argument relied on dealership contracts with arbitration clauses to which FMC was not a signatory. The trial court denied the motion, and the Court of Appeal affirmed.
Justice Grimes explained: "Equitable estoppel does not apply because, contrary to FMC’s arguments, plaintiffs’ claims against it in no way rely on the agreements. FMC was not a third party beneficiary of those agreements as there is no basis to conclude the plaintiffs and their dealers entered into them with the intention of benefitting FMC. And FMC is not entitled to enforce the agreements as an undisclosed principal because there is no nexus between plaintiffs’ claims, any alleged agency between FMC and the dealers, and the agreements."
Disclosures: Second District Div. 2 Holds Arbitrator Did Not Need To Disclose In First Arbitration Later Arbitration With Same Firm And Party In First Arbitration
Different Disclosure Rules Apply To Consumer Arbitrations And This Was Not A Consumer Arbitration.
"Do the Ethics Standards require a retained arbitrator in a noncommercial [sic] case to disclose in one matter that he has been subsequently hired in a second matter by the same party and same law firm? We hold that the answer is 'no,' at least where the arbitrator has previously informed the parties—without any objection thereto—that no disclosure will be forthcoming in this scenario. Because the arbitrator’s disclosures were proper here, the trial court properly overruled an objection based on inadequate disclosure. We accordingly affirm." Sitrick Group, LLC v. Vivera Pharmaceuticals, Inc., B317546 (2/2 3/30/23) (Hoffstadt, Lui, Ashmann-Gerst). We added the "sic" only because we believe the court meant to write that this was a nonconsumer arbitration, though the opinion refers to a "noncommercial" arbitration.
The arbitrator would have been required to disclose during a pending arbitration that he was taking on another arbitration that had the same law firm and the same party (Sitrick) involved in the pending arbitration, but for disclosures that the arbitrator made at the beginning of the first arbitration pursuant to a JAMS checklist.
The arbitrator had disclosed: (1) that he “will . . . entertain offers of employment or new professional relationships . . . from a party [or] lawyer in the arbitration . . . while [the] arbitration is pending, including offers to serve as a dispute resolution neutral in another case,” and relatedly advised that “[i]f this is a nonconsumer arbitration, the arbitrator will not inform the parties if he or she subsequently receives an offer or new matter while the arbitration is pending"; that based on the submissions of the parties, it was a nonconsumer arbitration; (3) that disclosures #1 and #2 “constitute[] a waiver of any further requirement to disclose subsequent employment involving the same parties or lawyers or law firms.”
As a courtesy, the arbitrator disclosed the subsequent arbitration. Vivera argued he should have been removed as arbitrator, because he would have the beneficial relationship in the future with Sitrick and its law firm, who were in the pending arbitration. The trial court and the Court of Appeal both agreed that, given the disclosures upfront, there was no obligation to disclose the second arbitration.
Did the subsequent disclosure trigger a new opportunity to strike the arbitrator? No, the subsequent disclosures was unnecessary. Or, as we and the maxims of equity might say, superfluity does not vitiate.
COMMENT: If this had been a consumer arbitration, there would have been an ongoing obligation to disclose. Perhaps then the "courtesy disclosure" would have triggered an opportunity to peremptorily strike the arbitrator, because the disclosure would have been more than a mere courtesy: it would have been a necessary disclosure.
In the pending nonconsumer arbitration, Vivera was not exactly hung out to dry. When the arbitrator disclosed that he would accept future business, Vivera could have objected at that time.
PAGA: Second District Div. 4 Holds Employee Has Standing To Bring PAGA Representative Claims After Individual Claim Is Sent To Arbitration
Court Follows Opening Provided By Justice Sonia Sotomayor's Concurrence In Viking Cruises v. Moriana.
Following the Supreme Court opinion in Viking Cruises v. Moriani, there could be no disagreement that employee Million Seifu's individual PAGA claim against Lyft for personal Labor Code violations he suffered could be arbitrated. But that left the hot issue to be decided: whether he had standing, after his individual claim had been directed to arbitration, to bring a representative claim for other employees.
In Milton Seifu v. Lyft, Inc., B301774 (2/4 3/30/23) (Collins, Currey, Stone), the court explained that Seifu did have standing: "We conclude that we are not bound by the analysis of PAGA standing set forth in Viking River. As Justice Sotomayor recognized in her concurring opinion, PAGA standing is a matter of state law that must be decided by California courts. Until we have guidance from the California Supreme Court, our review of PAGA and relevant state decisional authority leads us to conclude that a plaintiff is not stripped of standing to pursue non-individual PAGA claims simply because his or her individual PAGA claim is compelled to arbitration." The court remanded to the trial court to decide whether the representative claims should be stayed pending arbitration of the individual.
The court relied on the California Supreme Court case Kim v. Reins International, 9 Cal.5th 13 (2020) to reach its conclusion that Seifu had standing under California law. The law is remedial and given a liberal interpretation to effect the Legislature's purpose of enforcing California's labor laws. We have blogged about other California cases that reached the same conclusion about standing: Tricia Galarasa v. Dolgen California, LLC, post dated 3/8/23, and Tom Piplack v. In-N-Out Burgers, post dated 3/20/23. We're eager to see how this turns out when the California Supreme Court decides Adolph v. Uber Technologies.
Stay: Despite Plain Language Of The FAA, Ninth Circuit Holds That Judge Has Discretion To Dismiss Case Rather Than Stay It, Once All Claims Are Subject To Arbitration
Holding Is Consistent With Ninth Circuit Precedent But Not The Language Of The Federal Arbitration Act.
"The sole question before us is whether the Federal Arbitration Act (“FAA”) requires a district court to stay a lawsuit pending arbitration, or whether a district court has discretion to dismiss when all claims are subject to arbitration. Although the plain text of the FAA appears to mandate a stay pending arbitration upon application of a party, binding precedent establishes that district courts may dismiss suits when, as here, all claims are subject to arbitration. Thus, we affirm." William F. Forrest, et al v. Keith Spirrizzi et al, No. 22-16051 (9th Cir. 3/21/23) (Bennett, Graber, Desai).
Judges Graber and Desai, fully concurring in the majority opinion, nevertheless urged that the Ninth Circuit consider the matter en banc to issue an opinion consistent with the language of the FAA, and that the Supreme Court take up the issue. As Judge Graber points out, "When a party requests a stay pending arbitration of “any issue referable to arbitration under an agreement in writing,” the court “shall . . . stay the trial of the action” until the arbitration concludes or unless the requesting party is “in default in proceeding with such arbitration.” 9 U.S.C. § 3 (emphases added)." Squaring the language of the FAA with not staying the trial of the action when any issue is referred to arbitration is a bit like squaring the circle.
COMMENT: “When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean — neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master – – that’s all.” — Alice's Adventures in Wonderland.