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.
Prompt Payment: California Common Law Provides A Basis For Shifting Arbitration Fees When A Party Is Unable To Pay Its Share
Yet Another Skilled Nursing Home Case.
One of our sidebar categories is "Prompt payment" referring to statutory provisions applying to consumer and employment cases requiring the drafting party to promptly pay arbitration fees and costs or waive its right to arbitrate. But California case law, upon which the next case relied, also provides that in circumstances where a party is unable to pay, it may petition the court to have the counterparty choose between paying the expenses in arbitration or litigating in court. That's what happened in Jimmy Hang v. RG Legacy I, LLC, et al., G061265 (4/3 2/7/23) (Motoike, Goethals, Sanchez).
"Citing Roldan v. Callahan & Blaine (2013) 219 Cal.App.4th 87 (Roldan), the trial court found Daniel [plaintiff] was indigent at the time of his death and granted the petition to compel arbitration on the condition that, within 15 days, the RG Legacy parties agree to pay all arbitration fees and costs, else waive the right to arbitrate the matter." RG Legacy appealed rather than pay fees and costs, and the Court of Appeal affirmed the trial court's order.
Note that the named plaintiff is "Jimmy Hang." One twist is that the alleged victim of elder abuse and nursing home negligence, plaintiff Daniel Hang, was dead. He had been indigent, and his estate lacked assets. The remaining plaintiffs, Jimmy Hang and Daniel's widow, dropped their wrongful death suit, eliminating the issue of whether they had assets. Jimmy continued in the lawsuit solely as successor to Daniel, i.e., as successor to an indigent.
COMMENT: California case law has developed so that the contractual right to arbitrate can be trumped by the right to a forum of the indigent plaintiff unable to pay for arbitration. The leading cases relied upon in Jimmy Hang v. RG Legacy are Roldan and Weiler v. Marcus & Millichap Real Estate Investment Services, Inc., 22 Cal.App.5th 970 (2018) (Weiler). We have posted about Roldan on 8/28/13 and about Weiler on 5/1/18. The party who questions whether the indigent party really has assets could petition the court to conduct limited discovery on the issue. Apparently that was not done in the Jimmy Hang case.
PAGA, FAA Preemption: Fourth District, Div. 3 Holds Arbitration Of Individual PAGA Claims Can Be Compelled, But Not Representative Claims
Texas Longhorn.
Clinton & Charles Robertson from Del Rio, Texas & San Marcos. Wikipedia. Between Scylla and Charybdis. Wikipedia.
Between Horns Of A Dilemma And Between Scylla And Charybdis.
In a PAGA case, the Court of Appeal, employing mixed salad metaphors, explains that it is between the horns of a dilemma and between Scylla and Charybdis. Tom Piplack v. In-N-Out Burgers, G061098 (4/3 3/7/23) (Sanchez, Bedsworth, Delaney). This is a PAGA case in which the Court of Appeal held that plaintiff Piplack's individual PAGA claims could be arbitrated and plaintiff Sherrod's individual PAGA claims had to be sent back to the trial court for consideration of Sherrod's argument that Sherrod had been underage when he agreed to arbitrate. However, the Court of Appeal held that the plaintiffs' representative claims could be litigated.
Returning to horns, dilemmas, Scylla and Charybdis, quandaries, plights, puzzles, and predicaments, Justice Sanchez explains that the court must follow SCOTUS's ruling in Viking River Cruises, Inc. v. Moriana, ___ U.S. ___ [142 S.Ct. 1906] (2022) (Viking), holding that Iskanian's ruling that PAGA claims could not be forced into arbitration was preempted by the Federal Arbitration Act. But Viking only requires this result as to individual PAGA claims. Viking did not preempt the portion of Iskanian prohibiting waiver of the right to pursue representative PAGA actions. Yet Viking apparently concluded that if the individual PAGA claim was arbitrated, then no one was left with standing under California law to bring the representative claim, even if the right to litigate the representative claim was not preempted.
Standing to bring the representative claim is an issue of state law that Justice Sanchez explains was decided in Kim v. Reins International California, Inc., 9 Cal.5th 73 (Kim) (2020). Because Kim is a recent case decided by the California Supreme Court, and because SCOTUS does not decide state law, Justice Sanchez resolved the court's dilemma by following Kim on the issue of state law standing. Kim has only two requirements for a plaintiff to have standing to bring a representative action: “The plain language of [Labor Code] section 2699(c) has only two requirements for PAGA standing. The plaintiff must be an aggrieved employee, that is, someone ‘who was employed by the alleged violator’ and ‘against whom one or more of the alleged violations was committed.’” (quoting Kim).
In short, the court followed "Viking on FAA preemption and Kim on PAGA standing."