Miscellaneous: Podcast Interview Of Marc Alexander And Mike Hensley On Subject Of California Attorney’s Fees
California Appellate Law Podcast.
My colleague Mike Hensley and I have published the California Attorney's Fees Blog since 2008. Tim Kowal and Jeff Lewis, the creators of the California Appellate Law Podcast, recently interviewed us on their podcast. Here's a link to the interview on Tim and Jeff's podcast. Thanks, Tim and Jeff, for the opportunity to participate on your excellent podcast. Our interview is the 28th episode on the podcast.
Arbitration, Waiver: Second District, Div. 8 Refuses To Collapse Test For Waiver Of Right To Arbitrate Into A Single “Prejudice” Test
Suggestion: Don't Wait Two Years To Bring A Motion To Compel Arbitration.
The Court of Appeal affirmed the trial court's order denying Appellants' motion to compel arbitration. Akira Kokubu, Plaintiff, Cross-defendant and Respondent, v. Takashi Sudo et al, Defendants, Cross-defendants and Respondents; Park Rolling Hills, LLC, et al., Defendants, Cross-complainants and Appellants, No. B310220 (2/8 3/30/22) (Harutunian, Grimes, Stratton).
The leading case for determining whether a party has waived the right to arbitrate is St. Agnes Medical Center v. PacifiCare of California, 31 Cal. 4th 1187 (2003). St. Agnes (the case, that is), sets forth a six-factor test for determining whether a party has waived its right to arbitrate, and also explains that no single test delineates the conduct that will constitute a waiver of the right to arbitrate.
Appellants seemed to be urging that the Court of Appeal collapse the St. Agnes factors into a single "prejudice" test, but the Court of Appeal was having none of that. St. Agnes is a California Supreme Court case. And in any case, the court had no trouble finding prejudice as a result of appellants' conduct.
Appellants took actions inconsistent with seeking the right to arbitrate. The lawsuit was filed in November 2018. The demand to arbitrate was first made in July 2019, at which time appellants also filed a cross-complaint without seeking a stay. Then they withdrew their demand to arbitrate. Not until December 2020 did they file a motion to compel arbitration. And they participated in the litigation process, including a case management conference, motion procedure, seeking ex parte relief, and participating in discovery. While there is no single test for waiver, "you snooze, you lose," might be a good place to begin.
Arbitration, Internet Commerce: Fourth District, Div. 1 Enforces Arbitration Provision In Sign-In Wrap Contract
Sign-In Wrap Contracts Are Hybrids Of Browserwrap (Hard To Enforce) And Clickwrap (Easier To Enforce) Contracts.
B.D., a minor, and his father sued the videogame company Blizzard, contending that the game Overwatch encouraged gambling. Specifically, they alleged Overwatch used “real money” to make in-game purchases of “Loot Boxes”—items that offer “randomized chances . . . to obtain desirable or helpful ‘loot’ in the game.” The trial court denied Blizzard's motion to compel arbitration. The Court of Appeal reversed, applying the test in Sellers that the existence of a contract turns “on whether a reasonably prudent offeree would be on inquiry notice of the terms at issue.” The Court of Appeal also held that whether the contract made public injunctive relief unavailable, such that the arbitration provision could not be enforced under the McGill rule, was a gateway issue that had been clearly and unmistakably delegated to the arbitrator to decide. B.D. v. Blizzard Entertainment, Inc., D078506 (4/1 3/29/22) (Haller, Huffman, Irion).
The decision is very fact specific. It seems to this reader that a little confusion was introduced by a screenshot of a pop-up that required clicking on a "CONTINUE" button to proceed. The visible part of the screenshot refers to a Dispute Resolution provision "below". However, because the screenshot in the opinion is static, one does not see the Dispute Resolution provision "below". And presumably B.D. and his father, looking at the pop-up, would not have seen the entire license agreement unless they scrolled through the pop-up. But the pop-up allows scrolling to the end, in which case one can read the entire Blizzard license, which contains a blue hyperlink to the terms of the dispute resolution provision. The Court of Appeal believed there was a clear and unmistakable incorporation by reference of the dispute resolution provisions. The Court also observed that Sellers and other decisions take context into account, and are more likely to enforce a sign-in wrap agreement when the commercial transaction involves a "continuing, forward-looking relationship," as was the case here with a minor who continued to play the game during several updates of the agreement with Blizzard.
COMMENTS: The plaintiff was a minor, and it is hard to believe that he was capable of giving consent. However, B.D. acknowledged that a parent or guardian had reviewed and agreed to the license agreement. Of course, it is a central principle that arbitration is contractual, voluntary, and requires agreement. And that principle requires assuming responsibility for reading a contract, understanding it, following an incorporation by reference, and reading and understanding the terms of the dispute resolution provision. Like the law of contract in general, the law governing enforceability of arbitration provisions relies on legal fictions. Justices of the Court of Appeal, after proper briefing, read the contract, understand it, follow the incorporation by reference, and read and understand the terms of the dispute resolution provision. Are you a gamer and do you do that? Are you a lawyer and a gamer, and do you do that? Are you a judge and a gamer, and do you do that at home, outside the courtroom?
On April 5, 2022, we posted about the 9th Circuit decision holding a sign-in wrap agreement did not result in binding arbitration, Berman v. Freedom Financial Network. Because these cases concerning wrap contracts are fact-specific, we can expect to see more of them unless and until commerce uses standardized clauses that pass muster with the courts.
Arbitration, Award: Arbitrator Awards $175M To Monster Energy And Orange Bang
Los Angeles Arbitrator Awards $175M Plus Attorney's Fees Plus Royalty.
Daily Journal Staff Writer Federico Lo Giudice reported the award on April 7, 2022 in an article entitled, "Arbitrator awards $175M to Monster in energy drink dispute." The arbitrator is Bruce A. Isaacs. The law firm representing the successful parties Monster Energy Co. and Orange Bang is Hueston Hennigan LLP. The award also is reported to include an additional $10M in attorney's fees, and a 5% royalty on future drinks sold.
Next step? Presumably Monster Energy and Orange Bang will move to confirm the monster award, and Vital Pharmaceuticals will oppose confirmation, arguing that the award is monstrous.
Arbitration Costs: Court Has Jurisdiction To Lift Stay On Litigation If Party In Arbitration Is Indigent
The Problem To Be Solved Is How To Achieve Equal Access To Justice.
"Does a trial court that granted a defendant’s petition to compel arbitration have jurisdiction to lift the stay of trial court proceedings where a plaintiff demonstrates financial inability to pay the anticipated arbitration costs? If so, may the court require defendant either to pay plaintiff’s share of arbitration costs or to waive the right to arbitration? We answer both questions in the affirmative . . . " Gerald Aronow v. Superior Court of San Francisco (Respondent); Emergent LLP, et al (Real Parties in Interest), No. A162662 (1/4 3/28/22) (Ross, Streeter, Brown).
The problem presented in Aronow occurs when a party to an arbitration cannot afford to pay for the arbitration. In this case, Aronow sued his former attorneys for legal malpractice. They responded by compelling arbitration and staying legal proceedings. Aronow sought to lift the stay, arguing he was in forma pauperis. The trial court, noting that authority was divided over whether it had jurisdiction to remove the stay, did not do so, and certified the question to the Court of Appeal. The arbitration statutes do not address the scope of jurisdiction the trial judge has to terminate a stay on arbitration because of a party's failure to pay.
The Court of Appeal in Aronow takes the position that, in the case of an indigent party, the trial court should give the party seeking arbitration the choice of paying plaintiff's share of costs or waiving the right to arbitration. Otherwise, a person like Aronow who claims to be without financial resources would not have access to justice and would be unable to air his grievances.
We note (as did the opinion), that there are numerous instances in which the courts waive fees for an indigent party. Examples include filing fees, court reporter fees, jury fees, fees for a court ordered reference, and bonds. What is different in the case of private arbitration is that there is no way to compel the private arbitrator to waive fees. So instead, the court in Aronow gives the party seeking arbitration the choice of paying fees or waiving arbitration.
Is this inconsistent with requirements in the California and Federal Arbitration Acts that courts must allow arbitrations to be had according to the terms of the arbitration agreement? Depends on how one interprets "had." If an arbitration is had when a claim to arbitrate is filed, and then it does not proceed in normal fashion because a party cannot pay, the court can conclude that an arbitration has been had.
In Aronow, the court provides some help to the party seeking arbitration, Emergent, for it recognizes that limited discovery into the financial condition of may be appropriate. If limited discovery into financial condition takes place, the court assures Emergent that it will not waive its right to arbitrate. Such discovery should occur early, before arbitration is compelled (well, not in this case). Also, the person claiming inability to pay may be able to establish financial condition with a declaration, exhibits, or a limited evidentiary hearing.
Arbitration, Discovery, Appealability: In An Uninsured Motorist Arbitration, The Only Way To Challenge A Discovery Order Before Judgment Is With A Writ
A Case Of First Impression.
Unless you practice in this area, you may not know that in an uninsured motorist arbitration between the motorist with uninsured motorist coverage and her insurance company, discovery disputes are addressed to the court, not to the arbitrator. State Farm Mutual Automobile Insurance Company v. Cora Robinson, A158467 (1/1 3/14/22) (Humes, Margulies, Banke). "The question of first impression here is whether trial court discovery orders in these proceedings are reviewable on appeal from a judgment confirming the arbitration award. We hold that they are not."
The bases for vacating a judgment are found in California Code of Civ. Proc. § 1286.2 (vacatur). And unhappiness with the trial judge's discovery order is not among the bases. Here, the insured argued that 1286.2(a)(4) provided a reason for vacatur. That section allows vacatur when the arbitrator exceeded the arbitrator's power, and the award cannot be corrected without affecting the merits of the decision. However, the insured's complaint here was not addressed to the arbitrator, but rather to the judge's discovery order. So there was no statutory route for vacating the arbitrator's decision.
The insured alternatively argued that her appeal should be considered as a writ. But that was not possible, once a judgment had already been rendered.
COMMENT: Suppose the arbitrator, rather than the judge, had issued a discovery order, as arbitrators routinely do in other types of proceedings. How easy would it be to attack the arbitrator's order in an appeal of a judgment confirming the award? Not easy. The arbitrator's discovery order would be scrutinized under the same standard as the award, and awards are not set aside just because the arbitrator makes a mistake of law or fact.