Internet Commerce: Ninth Circuit Agrees Online Ticket Purchasers Were Bound By Agreement To Arbitrate
CONSPICUOUS NOTICE.
In a putative antitrust class action, plaintiffs sued Live Nation Entertainment, Inc./Ticketmaster LLC for charging "supra-competitive fees" for tickets to events. Defendants moved successfully to compel arbitration in the trial court, and the Ninth Circuit affirmed. Oberstein et al v. Live Nation Entertainment, Inc. et al (9th Cir. 2/13/23) (Boggs, Wardlaw, Ikuta).
Two BigLaw firms squared off against one another in the appeal to address an issue that will be familiar to readers of this blog: whether an agreement on the internet that fell somewhere between a click-wrap and a browserwrap was sufficient to create an agreement between the consumer and the seller. As a refresher, see our post dated 3/26/2016: Internet contracts “come primarily in two flavors: ‘clickwrap’ (or ‘click-through’) agreements, in which website users are required to click on an ‘I agree’ box after being presented with a list of terms and conditions of use; and ‘browsewrap’ agreements, where a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen,” quoting from Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2014)."
Here, the court concluded that the agreement sufficiently noticed the consumer that the consumer was agreeing to arbitrate: the font was conspicuous, in color other than the rest of the text, near buttons the consumer had to click on, and by clicking on buttons and proceeding through the process of purchasing the ticket, the consumer evidenced consent.
COMMENT: The keys to a binding agreement in internet commerce are reasonably conspicuous notice of the arbitration agreement and action by the consumer to unambiguously manifest consent. That's enough to impart constructive notice.
Waiver: Ninth Circuit Holds Waiver Of Right To Arbitrate Did Not Occur Despite Delay In Bringing Motion To Compel
Defendant Consistently Asserted Right To Arbitrate And Litigation Conduct Was De Minimis.
The Supreme Court case Morgan v. Sundance, Inc. (2022) has made it easier to argue that a party has waived its right to arbitrate for two reasons: first, while the party resisting arbitration bears the burden of establishing a waiver of the right to arbitrate, it no longer bears a "heavy burden." Second, the party resisting arbitration no longer needs to show that it will be prejudiced if the court were to order arbitration. Despite the greater ease with which a waiver of the right to arbitrate has been waived, the Ninth Circuit agreed with the trial court that defendant had not waived its right to arbitrate. Teresa Armstrong v. Michaels Stores, Inc., 21-15397 (9th Cir. 2/13/23) (McKeown, Fletcher, Bennett).
Waiver of the right to arbitrate cases tend to be pretty fact-specific. The plaintiff in Armstrong filed her complaint against her employer in state court in October 2017. Defendant removed the case to federal court, and an amended complaint was filed. Some small amount of discovery was conducted. The Epic Systems case was decided by the Supreme Court in 2018, holding that an agreement requiring individual arbitration was enforceable and did not violate the National Labor Relations Act of 1935 provision allowing employees to engage in collective action. After Epic Systems was decided, Defendant moved to compel arbitration in 2018. Under those circumstances, the panel held that Michaels Stores had not waived its right to arbitrate.
We posted about the Morgan v. Sundance decision on 5/24/22. We have also written two articles in the Daily Journal about waiver of the right to arbitrate and the discrepancy between federal law, which no longer requires a showing of prejudice to prove waiver, and California state law.
First District, Div. 1 Affirms Order Denying Petition To Compel Arbitration Because Defendant Failed To Establish Existence Of Arbitration Agreement
No Evidence Of Signed Agreement.
Bruno Fleming sued Oliphant Financial for allegedly violating the California Rosenthal Fair Debt Collection Practices Act. Oliphant unsuccessfully petitioned the trial court to compel arbitration. The Court of Appeal affirmed the trial court's order denying Oliphant's petition to compel arbitration. Fleming v. Oliphant Financial, LLC, A165837 (1/1 1/31/23) (Devine, Humes, Margulies).
Oliphant failed to meet its burden of establishing the existence of an arbitration agreement. Fleming had signed a credit card application, but apparently there was a lack of evidence that he had signed an arbitration agreement or that he had received one.
This is pretty basic stuff. Rejecting Oliphant's efforts to finesse the threshold issue, the court addresses a few points.
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- As the party moving to compel arbitration, Oliphant had the burden of proof of establishing that the parties agreed to arbitrate.
- An argument that the arbitration agreement delegates the question of arbitrability to the arbitrator fails if the arbitration agreement doesn't exist.
- Contract formation will be addressed under state law.
- The court, not the arbitrator, gets to decide whether an agreement to arbitrate exists.
- Oliphant's choice-of-law argument that the arbitration agreement requires the application of Delaware law fails if there is no arbitration agreement.
Unable To Apply “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act” Retroactively, Fourth Dist. Div. 3 Nevertheless Finds Arbitration Provisions Unconscionable
Panel Is Very Critical Of Confidentiality Provisions In Sexual Harassment Dispute With Arbitration Provision.
Some California Appellate panels and justices make it a practice to neatly summarize the opinion in the first paragraph. I like that practice. Our next case, in which the Court of Appeal issued a peremptory writ of mandate issue directing the trial court to vacate its order compelling arbitration and enter a new order denying the motion to compel arbitration, made excellent use of that practice in a 36-page slip opinion. Cassandra Murrey v. Orange County Superior Court; General Electric Company et al (real parties in interest), G061329 (4/3 1/30/23) (O'Leary, Bedsworth, Marks). So let's let the panel, in an opinion penned by Justice O'Leary, speak:
"In March 2022, President Joseph R. Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the Act) (9 U.S.C. §§ 401, 402), representing the first major amendment of the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) since its inception nearly 100 years ago. This legislation, having bipartisan support, voids predispute arbitration clauses in cases, such as the one before us now, involving sexual harassment allegations. We regret that this new legislation does not apply retroactively to Casandra Murrey’s complaint filed in March 2021. Nevertheless, we will consider Murrey’s writ petition because the highly secretive and one-sided provisions of her arbitration agreement make it both procedurally and substantively unconscionable. The agreement is factually distinguishable from existing case authority upholding employment adhesion contracts and exemplifies why the legislature drafted House Bill No. 4445. We conclude the trial court erred by enforcing an unconscionably void arbitration agreement."
This case is particularly interesting for its critical analysis about confidentiality language in arbitration agreements in sexual harassment disputes. In this case, "Murrey was forced to agree she would not 'publish or disseminate' the arbitration award." Justice O'Leary wrote, " GE’s confidentiality provision serves no purpose other than to benefit GE. Future employees cannot take advantage of findings in past arbitrations or prove a pattern of discrimination and/or retaliation." Here, the confidentiality provision weighed heavily in finding the arbitration agreement "substantively unconscionable." Ordinarily confidentiality agreements are upheld, but it is clear that the court viewed such requirements to be onerous in the circumstances of a sexual harassment dispute.
We note California Code of Civil Procedure § 1001 prohibits a provision within a settlement agreement that prevents or restricts the disclosure of factual information related to a claim filed in a civil action or a complaint filed in an administrative action. The Murrey case does not involve a settlement agreement.
Non-Signatories’ Efforts To Compel Arbitration Based On Equitable Estoppel, Agency, and Third-Party Bene Theories All Failed
The Trial Judge Said He Had An Issue Of First Impression.
Jessica Hernandez sued Meridian Management Services, LLC and other entities for employment violations. The defendants sought to piggyback on to an arbitration agreement that Ms. Hernandez had entered into with her employer Intelex in order to compel her to arbitrate. Her lawyer, however, was careful with the pleadings, for Hernandez apparently did not name Intelex as a party, nor did she claim that Intelex and her other employers, the defendants (Other Firms) were joint employers. The trial judge denied the motion of the Other Firms to compel arbitration based on a contract with an arbitration agreement they had not signed. And the Court of Appeal held that the trial judge was right. Hernandez v. Meridian Management Services, LLC, B312814 (2/8 1/30/23) (Wiley, Stratton, Grimes).
It was not as if there was no relationship between Intelex and the Other Firms. After all, Ms. Hernandez worked for both. Moreover, though the Other Firms were separate legal entities from Intelex, they were "functionally related." Hernandez "alleged the Other Firms shared the same legal and physical address; the same human resources person; the same controller; the same payroll department; the same risk management and legal services; and the same centralized information technology." But whatever the functional relationships, they were not enough for defendants to compel arbitration based on theories of equitable estoppel, agency, or third party beneficiary.
Equitable estoppel. This is the issue that led the trial judge to state he had an issue of first impression on his hands: “[t]ypically the doctrine of equitable estoppel is applied where a signatory has sued both another signatory and certain non-signatories on identical claims. . . . [¶] But what happens if the other party to the contract is not also a party to the case, and never was?" Intelex, the party with the arbitration agreement in its contract, was not a party to the case, yet it was the Intelex agreement that the Other Firms wished to take advantage of. In any case, the Court of Appeal concluded that equitable estoppel could not apply because there was no evidence Hernandez was trying to take advantage of anything she had done wrong.
Agency. The Other Firms offered no evidence that they were empowered to act on behalf of Intelex.
Third-party beneficiary. There was no evidence that it was a motivating purpose of Intelex and Hernandez to provide a benefit for a third party.
Affirmed.
Deadlines: Deadlines To Vacate Or Correct Arbitration Award Are Strictly Applied By Second District, Div. 2
Darby v. Sisyphian, LLC, B314968 (2/2 1/26/23) (Hoffstadt, Ashmann-Gerst, Chavez), Helpfully Lays Out Deadlines To Confirm, Vacate, Or Correct Award.
#/media/File:Punishment_sisyph.jpg "image from en.wikipedia.org")
Sisyphus. Titian. Public Domain. Wikipedia.
Aisha Darby, an exotic dancer, arbitrated wage and hour claims with her employer Sisyphian, LLC. After robust advocacy in arbitration, she eventually received an award of $105,109.75 — less than she and her attorney sought, more than the respondent thought they were entitled to. She petitioned to confirm the award. Respondent had a 10 day window to respond and seek to vacate or correct the award, but waited 32 days. Respondent's untimely response meant the award was successfully confirmed. The Court of Appeal further held that Sisyphian's failure to timely respond to vacate or correct in the trial court deprived the Court of Appeal of the ability to consider arguments to vacate or correct.
BONUS:
The Court of Appeal summarizes key deadlines:
— Four years to petition to confirm an award from the date the award is served. Cal. Code of Civ. Proc. § 1288.
— The shorter of: (1) 100 day rule. A petition to vacate an award or to correct an award shall be served and filed not later than 100 days after the date of the service of a signed copy of the award on the petitioner. 1288; (2) 10 day rule. A response to vacate or correct an award shall be served and filed within 10 days after service of the petition to confirm. 1290.6.
— The 100 day rule is jurisdictional. The 10 day rule is jurisdictional, but it can be extended by agreement of the parties, or by the court for good cause if no one will be prejudiced.
COMMENT: The economics of this case are hard to fathom. While it may seem at first blush that the employer got socked with a $105,109.75 award — not chump change — that's not the whole story. Darby's award included $82,800 in attorney's fees and $23,347.25 in compensation, minus $1,037.50 in costs for which she was responsible. She had requested $283,941.25 in attorney's fees. So she prevailed, but someone took a haircut.
Mike Hensley's and my blog, California Attorney's Fees, makes the point that sometimes attorney's fees are the tail that wags the dog. Darby v. Sisyphian, LLC is such a case. Readers can also find a post about this case on our attorney's fees blog.