Existence Of Agreement, Unconscionability: First District, Div. 4 Concludes Arbitration Agreement Was Signed, Not Unconscionable, And Reverses
Proof Of Handwritten Signature May Be Easier Than Proof Of Electronic Signature.
The trial court found that the employer failed to prove employees had signed an arbitration agreement, that the agreement was unconscionable, and the court rejected the employer's efforts to compel arbitration. The Court of Appeal reversed. Leroye Iyere et al. v. Wise Auto Group, A163967 (1/4 1/19/23) (Pollak, Brown, Goldman).
In the trial court, the employees provided declarations that they had been given many documents to hurriedly sign, that they had not read them, and that if they had read them, they would not have signed them, knowing that they were giving up rights by agreeing to arbitrate. But they did not squarely deny that handwritten signatures of their names were their signatures. While the trial court refused under those circumstances to find that the employees had signed, Justice Pollak explained: "It is hornbook law that failing to read an agreement before signing it does not prevent formation of a contract."
The panel disagrees with Gamboa v. Northeast Community Clinic, 72 Cal.App.5th 158. (2021), which cited cases rejecting proof of electronic signatures under similar circumstances in order to reject proof of a handwritten signature. Justice Pollak explains: "Authenticating an electronic signature if challenged can be quite daunting. . . If a party confronted with his or her handwritten signature on an arbitration agreement is unable to allege that the signature is inauthentic or forged, the fact that that person does not recall signing the agreement neither creates a factual dispute as to the signature’s authenticity nor affords an independent basis to find that a contract was not formed."
The employees argued that the arbitration provision, which was governed by the Federal Arbitration Act, was unconscionable, because California Labor Code § 925 provides that an employer cannot require an employee who resides and works in California, as a condition of employment, to agree to adjudicate a claim arising in California outside of California. But the FAA does not displace state substantive law, which can be asserted in arbitration, so this argument failed.
The employees also argued that the contract, which allowed the party against whom a claim was made to choose between two arbitration providers, and that this would benefit the employer as the party against whom a claim was more likely to be made. But the panel believed this would not provide a significant advantage to the employer, as both dispute resolution providers were well recognized and respected dispute resolution providers.
Existence Of Arbitration Agreement: Arbitration Agreement For Website Did Not Apply To In-Store Purchases
Existence Versus Scope Of Arbitration Agreement — See How It Makes A Difference.
Tire recapping. A service attendant points out a worn tire that may be recapped under a new plan which removes restrictions on reclaimed camelback rubber for passenger tires. The plan to recap passenger car tires with reclaimed rubber camelback, approved by rubber director William M. Jeffers, was put into effect in February 1943 to reduce the demand for replacement tires and still keep civilian cars in service. Library of Congress. Alfred T. Palmer, photographer. February, 1943.
A label can make a difference. Doubts concerning the scope of an arbitration agreement are generally resolved in favor of arbitration. That's the presumption in favor of arbitration at work. But that presumption does not apply when there are doubts as to the existence of an arbitration agreement. The panel deciding Kevin Johnson v. Walmart, Inc., 21-16423 (9th Cir. 1/10/23) (Sessions, Tashima, Paez), agreed that the issue concerned the existence of an arbitration agreement, rather than its scope, making their decision a bit easier, since application of the label "existence" rather than "scope" meant the panel did not have to deal with a presumption in favor of arbitration.
Kevin Johnson used a Walmart website that included an arbitration agreement to purchase tires. When he went to the store to have the tires installed, he purchased a lifetime tire balancing and rotation agreement. The in-store purchase did not come with an arbitration agreement. At some point, Walmart allegedly stopped balancing and rotating tires for Johnson, so he sued on behalf of a putative class. Despite broad language in the arbitration agreement that “. . . all disputes arising out of or related to these Terms of Use or any aspect of the relationship between you and Walmart . . . will be resolved through final and binding arbitration", the court held that the arbitration agreement did not apply to the in-store purchase.
Language introducing the arbitration provision stated: “These Terms of Use govern your access to and use of all Walmart Sites.” The court interpreted this to mean that the arbitration agreement did not apply to the in-store purchase. And since the opinion explained this was a question of the existence rather than the scope of an agreement, it did not need to deal with a presumption in favor of arbitrability.
So: two separate contracts, one with an arbitration agreement, one without, both contracts involving tires, both contracts involving the same parties, but one contract applying to Walmart [online] sites, and the other contract applying to in-store purchases. Conclusion: no arbitration agreement existed for the in-store purchase.
Waiver: Fourth District Div. 2 Holds Lengthy Delay And Failure To Timely Take Affirmative Steps To Arbitrate Results In Waiver Of Right To Arbitrate
Thirty-Nine Page Slip Opinion Hinges On Issue Of Waiver.
The Court of Appeal addresses a variety of issues in the context of a complicated procedural history in Desert Regional Medical Center v. Leah Miller and Desert Regional Medical Center v. Lynn Fontana, E076058 and E076069 (4/2 1/6/23) (Codrington, Ramirez, Raphael).
The procedural history was complicated by the overlapping pendency of a collective bargaining grievance procedure and the lawsuits brought by individual employees, who were employees at the Desert Regional Medical Center (DRMC). Did the individual actions need to be stayed while the union procedure was exhausted? Did the arbitrability of these cases need to be decided by the court or the arbitrator? Did the Federal Arbitration Act or the California Arbitration Act apply? Did the Labor Commissioner have jurisdiction to hear claims brought by the employees, or did the claims need to be arbitrated? Were the employees estopped from arguing that the employer waived the right to arbitrate? Was prejudice necessary to find a waiver of the right to arbitrate? Interesting questions, but in the end the outcome hinged on whether the employer waived the right to arbitrate.
In the end, the Court of Appeal affirmed the trial court's order denying a motion to arbitrate, agreeing that the employer waived its right to arbitrate. There was an issue as to how long the employer had delayed bringing a motion to arbitrate. That delay was at least a year, possibly up to four years. The court concluded that even during a one year delay, the employer acted inconsistently with asserting a right to arbitrate by engaging in further litigation procedure.
Scope Of Arbitration Agreement Did Not Encompass Pre-Employment Disputes
Court of Appeal Also Held That Trial Court Properly Declined To Require Arbitration Of FEHA Claim For "Public Injunction."
Defendant and Appellant Tesla, Inc. — you've probably heard of the company — appealed from denial of Tesla's motion to compel arbitration as to employees Chatman and Hall, plaintiffs. Marcus Vaughn et al v. Tesla, Inc., A164053 (1/5 1/4/23) (Simons, Burns, Wiseman). Plaintiffs alleged that they and other Black employees had been discriminated and harassed while working at Tesla.
The wrinkle to this case is that, while an arbitration agreement provided all "disputes, claims, or causes of action, in law or equity, arising from or relating to your employment, or the termination of your employment, will be resolved, to the fullest extent permitted by law by final, binding and confidential arbitration . . . ", the agreement did not cover pre-employment claims. And Chatman and Hall claimed some claims arose pre-employment, at a time when a hiring agency had provided them as workers to Tesla. So the trial court concluded that Chatman and Hall were required to arbitrate claims after they became employees, but not before.
The Court of Appeal affirmed the order denying arbitration in part and allowing arbitration in part. The Court also agreed that the trial court properly declined to mandate arbitration of plaintiffs' claim for a public injunction for two reasons: "First, we hold that injunctions sought under the Fair Employment Housing Act (FEHA) (Gov. Code, §§ 12900 et seq.) may be considered 'public injunctions.' Second, we rule the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.), as interpreted in Viking River Cruises, Inc. v. Moriana (2022) ___ U.S. ___ [142 S.Ct. 1906, 213 L.Ed.2d 179] (Viking River), does not preempt the California rule prohibiting waiver of the right to seek such injunctions."
Ninth Circuit Holds Inmate Receiving Debit Card For Confiscated Cash Did Not Consent To Debit Card Agreement To Arbitrate
Once You Know The Facts, Your Going To Know How This Case Turns Out . . .
Plaintiffs in Reichert v. Rapid Investments, Inc., 21-35530 (9th Cir. 12/30/22) (Berzon, Christen, Block) (per curiam) were inmates discharged from Kitsap County Jail and given a debit card for cash confiscated by the jail earlier upon their entry. The cards, referred to as a Rapid debit card or "release card" were activated and ready to use. The cards also incurred a weekly maintenance fee of $2.50, as well as transaction costs when used to withdraw money. The cards also included an arbitration clause, and stated that use of the card would be evidence of agreement to contractual terms. The discharged inmates, in effect, were receiving their own money back in a card that they had not asked for, and that they needed to use to get back their confiscated cash.
The plaintffs brought a lawsuit alleging that the release card fees violated the Electronic Funds Transfer Act and Washington state law. And — drum roll — defendant Rapid brought a motion to compel arbitration. The district court held that retention and use of the release card did not demonstrate acceptance of the terms of the arbitration agreement. The Court of Appeals affirmed.
First, under Washington state law, inaction in response to an offer does not constitute acceptance.
Second, under the circumstances, use of the release card did not constitute acceptance. "We hold that because the money Moyer withdrew was his own, because the card he was issued came pre-activated and there was no other way to obtain immediate use of his own funds, and because Rapid structured its fees to begin deducting after three days regardless of use, Moyer’s decision to withdraw his own money cannot reasonably be understood to manifest assent to the contract."
Payment: Arbitration Prompt Payment Requirements Are Strictly Enforced
California Code of Civil Procedure Sections 1281.97 and 1281.98 Will Be Strictly Enforced.
California Code of Civil Procedure, sections 1281.97 and 1281.98 provide that if a company or business that drafts an arbitration agreement does not pay arbitration fees within 30 days of when fees are due, the company or business is in material breach of the agreement. Ann Williams v. West Coast Hospitals, Inc. (6th Dist. 12/22/22) (Lie, Greenwood, Grover) continues to strictly apply the payment requirement. We have previously posted about the application of those code sections on 12/11/22 and 10/3/22.
COMMENT: The court declined to decide whether the issue of the application of sections 1281.97 and .98 had been effectively delegated to the arbitrator to decide, holding instead that the issue had not been preserved for appeal. In order to reach that conclusion, the court also had to conclude that the code provisions were not jurisdictional, because jurisdictional issues can be reached at any time.