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.
Arbitration, Agents: Residential Care Facility Failed To Establish That Father Was Bound By Son’s Signature To Arbitrate
Based On Generally Applied Principles Of Agency, The Care Facility Failed To Establish Son Acted As Father's Agent.
An elder care facility argued that aged father, who died of severe sunstroke while in care of facility, was bound to arbitrate by son's signature on Residency Agreement. The basic problem was that, though it was uncontested that the son signed the Residency Agreement with the arbitration provision, the elder care facility failed to establish that the son was acting as an agent for his father. Agency is ordinarily established by the words and acts of the principal, not the agent. And here, there was no power of attorney, and no evidence that the father, who had mild cognitive problems, had given authority to the son to enter into a binding arbitration agreement. The signature block did not show the capacity in which the son was signing. And the representative of the care facility did not discuss the Residency Agreement with the father. So the trial court's order denying a petition to compel arbitration was affirmed. Rogers v. Roseville SH, LLC, et al., No. C089561 (3d Dist. 3/4/22) (Mauro, Robie, Krause).
Mediation, Confidentiality, Settlement Agreement: CCA 1/2 Agrees Plaintiff Suing Doctor Failed To Perform Settlement Agreement After Mediation
Including Confidentiality Provision In Settlement Of Malpractice Lawsuit Did Not Violate Public Policy, Because Provision Did Not Prevent Reporting To State Medical Board.
In Pappas v. Chang and Chang v. Pappas, Nos. A159792 and A160293 (1/2 3/3/22) (Richman, Miller; Kline, conc.), the Court of Appeal affirms the trial court in separate consolidated appeals. In Pappas v. Chang, the court affirms the trial court's denial of Pappas's efforts to enforce a settlement agreement, agreeing that Pappas failed to perform her part of a bargain by executing a confidentiality agreement in return for payment to her of $100,000. And in Chang v. Pappas, the Court of Appeal affirms the trial court's denial of Chang's request to recover attorneys fees, based on Pappas's denial of two requests for admission.
Helena Pappas sued Dr. Carolyn Chang, a SF plastic surgeon, for malpractice, and settled in mediation for payment to her of $100,000. However, the settlement agreement provide for execution of further settlement documents to include a waiver of Civil Code § 1542, and a confidentiality provision. Chang was to pay $70,000.01, and her carrier was to pay $29,999.99. Attorneys, judges, and mediators will know that $30,000 is a magic number in malpractice actions, because settlements greater than $30K trigger a requirement to report to the California Medical Board. Pappas believed Chang was trying to use confidentiality to prevent her from reporting to the Medical Board, and that would have violated Business and Professions Code §§ 2220.7 and 801.01. Pappas refused to executed a confidentiality provision unless paid an additional $425,000.
The Court of Appeal reasoned that the way the settlement agreement was written, a confidentiality provision would not have prevented reporting to the Medical Board; that the settlement amount was $100,000; and that as worded, the settlement agreement did not hinder legal reporting obligations. Therefore, the settlement agreement agreement was enforceable, and Pappas failed to perform her part, so she could not enforce the settlement agreement. Nor was the confidentiality provision severable, since it was agreed to and material.
Because the requests for admission went to ultimate questions and Pappas denied them in good faith, Chang was properly denied attorney's fees.
Justice Kline concurred, because in the end, the law had not been stymied. But he wrote separately, "because I feel my colleagues have not adequately described Chang’s and her lawyer’s repeated attempts to violate the Business and Professions Code and the whitewashing of those efforts by the trial judge."
BONUS: "Blepharoplasty (Greek: blepharon, "eyelid" + plassein "to form") is the plastic surgery operation for correcting defects, deformities, and disfigurations of the eyelids; and for aesthetically modifying the eye region of the face." (Wikipdedia).
COMMENT: Pappas might have spared some trouble by signing the confidentiality agreement, and receiving the $100,000. Perhaps she felt that she achieved some measure of victory by making her unhappiness with Chang a matter of public record in a published opinion. The concurring opinion gives her some measure of vindication. At the same time, it is now a matter of public record that Pappas may be unhappy about the outcome of her cosmetic surgery.
Miscellaneous: We Just Exceeded 1000 Posts On This Blog
Blogging About California Mediation And Arbitration Since 2012.
I started this blog on California Mediation And Arbitration in 2012. I just noticed that the number of posts recently passed 1000. That's about 100 per year.
Readers may have noticed that the formatting of this blog is similar to that of California Attorneys Fees. That's a blog started by my colleague Mike Hensley and me in 2008. Both blogs share in common that they are "hard law" no-frills blogs, and that we have not included advertising.
Arbitration, Internet Commerce: Ninth Circuit Agrees Website Did Not Provide Sufficient Notice Of Agreement To Arbitrate
Clickwrap? Browserwrap? Scrollwrap? Sign-in Wrap?
When does one's use of a website result in an agreement to arbitrate? Concurring with the majority, Judge M. Miller Baker candidly observes that this is an "evolving and fact-bound area." Here, Judge Paul J. Watford, writing for the majority, and Judge Baker, concurring, agreed that the facts didn't add up to a binding agreement to arbitrate. Berman et al v. Freedom Financial Network, LLC, et al, No. 20-16900 (9th Cir. 4/5/22) (Watford, Hurwitz; Baker, International Trade Judge). The notice "in fine print stating, 'I understand and agree to the Terms & Conditions which includes mandatory arbitration'" wasn't conspicuous. And one could browse through the website without having to click and clearly manifest that one had read and understood the arbitration agreement.
Judge Baker's concurring opinion provides an analysis of choice-of-law and concludes that California law applies. The majority did not spend time on a choice-of-law analysis, concluding instead that the parties agreed California or New York law applied, and that the result would be the same regardless of which state's law was chosen.
The concurring opinion is also useful because it reviews the evolving typology of internet commerce agreements: clickwrap (presumptively enforceable); browser wrap (per se unenforceable); scrollwrap (presumptively enforceable) and sign-in wrap1 (falling in a gray area). Here, the agreement best fit into the "sign-in wrap" gray zone, requiring conspicuous textual notice that completing a transaction or registration signifies consent to the site’s terms and condition in order to be enforceable. And Baker agreed that the notice here was insufficient.
COMMENT: Two of the leading California cases on the typology of internet agreements, and formation, as applied to arbitration, are Sellers v. JustAnswer LLC (2021) and Long v. Provide Commerce, Inc. (2016). We previously posted about the Sellers case on 1/13/22, and posted about the Long case on 3/26/16.
1 "'Sign-in wrap' agreements are those in which a user signs up to use an internet product or service, and the sign-up screen states that acceptance of a separate agreement is required before the user can access the service. While a link to the separate agreement is provided, users are not required to indicate that they have read the agreement’s terms before signing up."
Arbitration, Jurisdiction: SCOTUS Holds That Federal Courts Do Not Get To Look Through To Underlying Dispute To Determine Jurisdiction When A Motion To Vacate An Award Is Brought
The Rule SCOTUS Applies To Petitions To Confirm Or Vacate Is Different Than The Rule It Applies To Motions To Compel Arbitration.
In an 8-1 decision, Justice Elena Kagan, writing for the court majority, explains that federal courts, when determining whether federal jurisdiction exists to decide a petition to vacate an arbitration award, should not look to the underlying dispute. Badgerow v. Walters et al, No. 20-1143 (S.Ct. 3/31/22). This is different from the jurisdictional approach taken by SCOTUS when a motion to compel arbitration is brought in federal court under the Federal Arbitration Act, 9 USC § 4. Vaden v. Discover Bank, 556 U. S. 49 (2009).
In Vaden, the court explained that a motion to compel arbitration was brought under a statutory provision that required the court to look at the underlying dispute, based on the statutory language of § 4. The first sentence of that section provides: "A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement." (italics added). The court interpreted the "save for" language to mean that the court analyzed jurisdiction as if an arbitration agreement did not exist, and therefore looked instead at whether there was a basis for federal jurisdiction, e.g., diversity jurisdiction or a federal question. Merely because the FAA is invoked does not mean there is a basis for jurisdiction.
Badgerow v. Walters was a wrongful employment case in which the employee Badgerow brought a lawsuit for unlawful termination against her employer in state court. She received an adverse award and moved in state court to vacate the award. The employer removed the case, which had included federal claims in the arbitration, to federal court, Badgerow sought to remand. Assessing its jurisdiction under the Vaden analysis, the district court held on to jurisdiction, and it was affirmed by the court of appeals. However, Justice Kagan saw the matter differently, because the provisions of the FAA governing motions to confirm and vacate an award (§§ 9 & 10) do not include "save for" language and do not necessitate looking at the underlying dispute to determine whether jurisdiction exists. On its face, the application to the district court did not establish federal jurisdiction.
COMMENT: This is an 8-1 decision, with only Justice Stephen Breyer dissenting. There is a boring slab of business-as-usual cases in which the Supreme Court does its work without brouhaha. This case is one example.