Arbitration, Award, Finality, Correction, Vacatur: 4th Dist Div 4 Holds Arbitrator’s Amendment Of Final Award Did Not Exceed Her Powers
Arbitrator Acted Within Nonstatutory Power To Amend Award and Also Exercised Equitable Powers.
Starr v. Mayhew, G060277 (4/2 9/1/22, cert for pub. 9/28/22) (Moore, Goethals, Moteike) involved a dispute among members of an LLC as to their respective ownership interests and as to whether Mayhew, who managed the LLC, had a right to be fully indemnified for legal fees and damages in an arbitration he lost to Starr and another LLC member. The "final award" did not fully clear up the issues, and the arbitrator issued an amended award, at the behest of Mayhew, that did clarify the issues, but not to Mayhew's satisfaction. The trial judge confirmed the award and Mayhew appealed.
Ordinarily an award can only be corrected for limited statutory reasons, such as a miscalculation of figures, misdescription of a person, thing, or property, or imperfect form that does not affect substance. See Cal. Code Civ. Proc., §§ 1284 (correction) and 1286.6 (vacatur). But did you know that, in addition to the limited statutory grounds for correcting an award or vacating it, a final award can be amended based on nonstatutory law? Well, it's a possibility.
And nonstatutory amendment of the award worked here. In an amended award, the arbitrator clarified that damages were to be paid by Mayhew, and that he was entitled to limited indemnity, but not full indemnity. The Court of Appeal explained that the arbitrator had acted upon equitable grounds. And she had not exceeded her powers, because the issues had been presented to the arbitrator for resolution. In any case, she had reached legal and factual conclusions, and if she was mistaken, that would not be a basis for overturning an arbitration award.
COMMENT: The case is a reminder that an arbitration is an equitable proceeding. Thus, here an arbitrator was able to limit indemnity, though the indemnification clause seemed to provide for full indemnity, because she thought that given the conduct of Mayhew, limiting but not eliminating indemnity would be fair. The case is also a reminder that a seemingly final award can sometimes be amended on nonstatutory grounds. But beware: there is a split of authority as to whether the party seeking amendment has 30 days from the time the final award is served, or up to the time of confirmation of the award to obtain an amendment of the award. See note 3 of the Starr opinion.
Arbitration, Employment, FAA Preemption: Employers Must Strictly Comply With Requirement To Pay Arbitration Fees By Statutory Deadline
Substantial Compliance With CCP § 1281.97 Just Won't Cut It.
In July 2022, the California Court of Appeal ruled in Sunny Gallo v. Wood Ranch that Cal. Code of Civ. Proc. § 1281.97 is not preempted by the Federal Arbitration Act. The court reasoned that 1281.97, which requires the drafting party — usually the employer — to pay arbitration fees and costs within 30 days after the due date, does not thwart arbitration, but rather encourages promptly proceeding with arbitration. See our post dated 8/1/22 on Gallo. In Rosa Espinoza v. Superior Court, B314914 (2/1 9/27/22) (Bendix, Rothschild, Chaney), the court, agreeing with Gallo, held there was no federal preemption of California's statutory rule.
However, the court went one step further in Espinoza. The court held that substantial compliance, unintentional nonpayment, and absence of prejudice did not excuse the employer from making timely payment. Thus, it is not enough to pay fees and costs. Rather, fees and costs must be paid within the statutory deadline, or else the employer will waive the right to enforce the arbitration agreement.
COMMENT. Here's one consequence that the employer may not have thought about. If failure to pay within the statutory deadline constitutes a material breach of the agreement, the employer might also get stuck paying the employee's attorney fees.
Arbitration, PAGA: 4th Dist. Div. 2 Holds That Losing Non-PAGA Claims In Arbitration Does Not Preclude Litigation Of PAGA Claims
Modified Opinion Addresses Viking River Cruises v. Moriana.
In a partially published and modified opinion, the Court of Appeal holds that an employee's loss of Labor Code violation claims in arbitration does not preclude her from bringing a PAGA claim that the trial court had stayed. The basis for this ruling is that the plaintiff was acting in different capacities, bringing Labor Code claims on her own behalf in arbitration, and acting in a different and representative capacity in the PAGA action. The PAGA action, which seeks civil penalties as a remedy, "is fundamentally a law enforcement action designed to protect the public and not to benefit private parties." Eleni Gavriiloglou v. Prime Healthcare Management, Inc., No. E076832 (4/2 9/20/22) (Ramirez, Slough, Fields).
COMMENT: The original opinion did not address Viking River Cruises v. Moriana, the subject of our 6/19/22 post. The modified opinion seems to suggest that in Viking River, SCOTUS didn't really understand California law: "It . . . held that the Federal Arbitration Act preempts a state-law rule that precludes the arbitration of an individual PAGA claim separately from a representative PAGA claim. …. In Prime’s view, Viking River 'explicitly recognizes an individual claim under PAGA . . . .' This is mere wordplay. What the Supreme Court called, as shorthand, an 'individual PAGA claim' is not actually a PAGA claim at all. It would exist even if PAGA had never been enacted. It is what we are calling, more accurately, an individual Labor Code claim."
We note one difference between Gavriiloglou case and Viking River. In Gavriiloglou, the issue in the published part of the opinion is whether the arbitrator's award denying non-PAGA claims precluded the PAGA claims, and the court held that it did not. In Viking River, the issue was different. SCOTUS held that the employee could be compelled to arbitrate PAGA individual claims (which Justice Ramirez now says are really better described as Labor Code claims).
Look forward to ongoing confusion about standing to bring representative PAGA claims in California in cases where there are mandatory arbitration provisions.
Arbitration, PAGA, Collective Bargaining: A PAGA Lawsuit Is Barred By A Collective Bargaining Agreement In The Construction Industry
A Statutory Route In California Avoids A Private Attorney General Act Of 2004 (PAGA) Lawsuit In The Construction Industry: Labor Code § 2699.6.
The issue presented in Jerome Oswald v. Murray Plumbing and Heating Corporation, B312736 (2/2 9/2/22) (Lui, Chavez, Hoffstadt), is whether an arbitration clause in a construction industry collective bargaining agreement bars a PAGA lawsuit. While the recent SCOTUS opinion in Viking River Cruises, Inc. v. Moriana (see our 6.19/22 post) limits the ability of employees to avoid arbitrating PAGA claims wherever federal preemption under the Federal Arbitration Act is involved, California has created its own statutory exception to bringing a PAGA lawsuit: Labor Code § 2699.6.
Section 2699.6 generally provides that the right to bring a civil action under PAGA shall not apply to an employee in the construction industry with respect to work performed under a valid collective bargaining agreement providing for wage and hour issues and conditions of work. The states legislative intention behind this legislation is to commit PAGA claims in the building and construction trades to the grievance and arbitration machinery in the building trades to CBAs that provide expressly for key coverage of issues. This was intended to allay "significant legal abuse" by limiting "class action type lawsuits over minor employment issues."
In Oswald, the Court of Appeal concluded that the CBA met the requirements of § 2699.6. There, it reversed the trial court's order that had denied a motion to compel arbitration under the CBA.
COMMENT: Perhaps application of the Supreme Court's Viking Cruises decision would have led to the same result. But the Court of Appeal did not discuss Viking Cruises, because California law provided an answer that would not have been incompatible with Viking Cruises.
Settlement: Conditional Acceptance Of A Settlement Offer Does Not Result In A Settlement Using Section 998 Procedure
An Offeree's Acceptance Of A Section 998 Offer Must Be "Absolute And Unqualified" To Form A Binding Settlement.
"Absolute and unqualified" did not describe the offeree Says Siri's acceptance of Sutter Home Winery's offer in Says Siri v. Sutter Home Winery [Trinchero Family Estates], A161923 (1/4 8/25/22) (Pollak, Streeter, Goldman). Instead, Siri accepted Trinchero's settlement offer on the condition that the trial court resolve issues relating to how much interest Siri could recover on the judgment. Invoking Section 998 procedure, the trial court ordered judgment be entered pursuant to Section 998, and ultimately denied the claim for prejudgment interest. Because Siri's acceptance was not absolute and unqualified, the Court of Appeal reversed the judgment of dismissal, remanding "for further proceedings consistent with this opinion."
COMMENT: Justice Pollak explains, "Treating Siri’s conditional acceptance as a counteroffer that Trinchero accepted by agreeing to have the court rule on Siri’s motion for an award of interest, the court might find that an enforceable settlement agreement had been reached. . . . Such an issue is not now before us; we hold only that Siri’s conditional acceptance did not create an agreement enforceable under section 998."
Justice Pollak is a very clever judge and this is a clever opinion. But we are a bit puzzled. Did Justice Pollak simply give the trial judge a roadmap to reach the same result as before? Or are there going to be further stumbling blocks that prevent reaching the same result?
Pending Cases: Viking Cruises Is No Longer “Pending” And 9th Circuit Withdraws Opinion Re AB 51 And Mandatory Arbitration
Catching Up From Last Week . . .
Viking Cruises v. Moriana, PAGA, And Federal Preemption.
We posted on June 19, 2022 about the Viking Cruises case, in which SCOTUS ruled individual PAGA claims can be arbitrated. In a concurrence, Justice Sotomayor wrote, "As a whole, the Court’s opinion makes clear that California is not powerless to address its sovereign concern that it cannot adequately enforce its Labor Code without assistance from private attorneys general." She so much as invited the California Supreme Court and the Legislature to address the interpretation of state law, and to clarify the issue of standing to bring representative claims. SCOTUS denied a request for rehearing of Viking Cruises on August 22, 2022. See the August 24, 2022 post by attorneys Mia Farber and Scott P. Lang.
Chamber of Commerce v. Bonta. California, ABA 51, And Federal Preemption.
We posted on September 19, 2021 about Chamber of Commerce v. Bonta, the 9th Circuit case holding the Federal Arbitration Act does not preempt AB 51, the California legislation forbidding employers from requiring agreement to mandatory arbitration as a condition of employment. The majority opinion drew a dissent from Judge Ikuta.
As we wrote in our post at the time, "The Ninth Circuit has probably set up a conflict between federal circuits in Chamber of Commerce v. Bonta, and with Judge Ikuta's dissent, there is a reasonable probability that the majority opinion will not be the last word on the subject." That turns out to have been an understatement, as the 9th Circuit took the unusual step of withdrawing the opinion and granting a panel rehearing. See August 23, 2022 post by attorneys Mia Farber, Scott P. Lang, and Cecilie E. Read.