Arbitration, Existence Of Agreement: CCA 2/7 Holds Employer Failed To Carry Burden Of Proof Agreement To Arbitrate Existed
After Employee Questioned The Agreement To Arbitrate, Burden Of Proof Shifted To Employer.
Hope Gamboa sued Northeast Community Clinic for employment-related claims. The employer moved to arbitrate. The trial court denied the motion. Affirmed. No agreement to arbitrate existed. Gamboa v. Northeast Community Clinic, No. 394833 (2/7 11/30/21) (Ibarra, Perluss, Feuer).
Why couldn't the employer prove an agreement to arbitrate existed? The employer provided a signed contract and a statement by the HR manager that the employee had signed the agreement. This shifted the burden of proof to the employee, who testified she didn't remember the agreement, and wouldn't have signed it if she had known what it was. This amounted to a denial of the existence of the agreement. Unfortunately for the employer, the declaration it provided did not provide foundation that the declarant had personal knowledge that the employee signed.
Reviews: Your Blogger Had Two Articles Recently Published In The Daily Journal
The articles are:
Outsourcing the violation of constitutional rights to private parties, Sept. 8, 2021.
NOTE: While I have provided links, they tend to be of limited benefit, because the Daily Journal is behind a paywall.
Arbitration: Fourth District Div. 2 Addresses Issues Of Unconscionability, Delegation, Severability, And Fraud In Employee Arbitration Agreement
Ineffective Delegation Clauses, Fraud In The Execution, And Unconsciconability Result In Reversals.
In Najarro v. Sup. Ct. of the County of San Bernardino; Horizon Personnel Services Inc., et al, E076328 (4/2 10/22/21) (Raphael, Codrington, Slough), the court does plenty of slicing and dicing, because there are two arbitration agreements, two sets of employees, employees who read Spanish, employees who don't read Spanish, a valid delegation clause, an ineffective delegation clause, evidence of unconscionability, and undecided issues of procedural unconscionability. It's a lengthy opinion, and here is the court's own summary: "Because the first version [of the arbitration agreement] does not clearly and unmistakably delegate questions of arbitrability to the arbitrator, we grant the writ petition as to the employees who signed that version. As to two of these employees, the trial court must decide whether this first version is unconscionable, guided by our discussion below. As to the other two employees who signed this version, we find that the arbitration agreement is unenforceable for the separate reason of fraud in the execution. We also find that fraud in the execution voids the agreement for two of the employees who signed the other, second version of the arbitration agreement."
COMMENT: One interesting takeaway is that a delegation clause that delegates issues to the arbitrator to decide may stumble and become ineffective if it is coupled with a severability clause allowing a court to decide some issues. So delegation clauses and severability clauses can interact and must therefore be drafted with care. A second takeaway is that when, as here, there was evidence as to some employees of fraud in the execution that was not rebutted, the court can decide there was no agreement to arbitrate, and need not move on to decide other defenses such as unconscionability. And a third takeaway is that when the employees speak a foreign language (here, Spanish), or are illiterate, the courts have heightened awareness of the issue of procedural unconscionability.
Arbitration, PAGA: Third District Agrees With Other California Appellate Courts That PAGA Representative Actions Are Not Waivable
Court Declines Invitation To Treat Iskanian As Overruled Sub Silentio.
The Third District Court of Appeal joins other California appellate courts ruling that PAGA representative actions are not waveable, and affirms the trial court's order denying employer's motion to compel arbitration. Carllie Williams v. RGIS, LLC, No. C091253 (3rd Dist. 10/18/21). In reaching that result, the Court notes that the Ninth Circuit has ruled that Iskanian is still good law. The California court refused to speculate how SCOTUS might rule if confronted with PAGA representative claims and a motion to compel arbitration.
The Court noted that the reason it published its opinion, despite its agreement with a multitude of other cases, was because the issue was one of first impression for the Third District.
Employment Arbitration: AAJ Reports Employees Won 1.6% Of Cases Against Employers In Arbitration Last Year
Mandatory Pre-Dispute Arbitration Provisions Are At Issue.
Abha Bhattarai, National Retail Reporter for the Washington Post, reports that 1.6% of employees won in arbitration against employers last year. See "As closed-door arbitration soared last year, workers won cases against employers just 1.6 percent of the time" (October 27, 2021).
This statement is based on an "AAJ report, which analyzed data reported by the nation’s two largest arbitration providers, the American Arbitration Association and JAMS." The AAJ is the American Association of Justice, formerly known as the Association of Trial Lawyers of America.
Here is a link to the AAJ report.
I invite any comments by readers on the AAJ report.
Arbitration, FAA Preemption: Ninth Circuit Holds Federal Arbitration Act Does Not Preempt AB 51, Which Forbids Employers From Requiring Arbitration As Condition Of Employment
Judge Sandra S. Ikuta Dissents.
Section 432.6 of the California Labor Code, which was added by AB 51, forbids employers from requiring an arbitration agreement as a condition of employment, or threatening to retaliate against an employee for refusing to sign an arbitration agreement. A Ninth Circuit panel, by a two person majority, holds that the Federal Arbitration Act does not preempt §432.6, except for civil and criminal penalties that were an impediment to arbitration, and which therefore were preempted. Chamber of Commerce v. Bonta, No. 20-15291 (9th Cir. 9/15/21) (Lucero, Fletcher; Ikuta, dsst.)
Judge Lucero explains that the sine qua non for arbitration agreements is that they must be voluntary and consensual. Therefore, he sees no conflict between the goal of the FAA and the California legislation, which seeks to prevent employers from foisting unwanted arbitration agreements on employees. Additionally, he draws a line between a law that would invalidate an arbitration agreement, which §432.6 does not do, and a law aimed at conduct before the arbitration agreement is entered into. He uses this two-stage analysis to attempt to distinguish Kindred Nursing Centers Ltd. Partnership v. Clark, 137 S. Ct. 1421 (2017), reversing a Kentucky court that had ruled that arbitration agreements executed by individuals holding powers of attorney for relatives were unenforceable. Section 432.6 does not actually invalidate arbitration agreements, targeting instead pre-agreement conduct. However, because civil and criminal penalties do serve as an obstacle to arbitration, they are preempted by the FAA.
Judge Ikuta finds the effort to distinguish Kindred Nursing Centers strained, because the SCOTUS case does refer to formation of arbitration agreements. She also points out that in California, the doctrine of unconscionability has been used to invalidate arbitration agreements, and that this doctrine does not hinge simply on whether the contract was one of adhesion: instead, it must be both a take-it or leave-it agreement, and it must be substantively unfair before it will be invalidated. One who signs a contract is presumed to have consented voluntarily, even if it is a contract of adhesion, and there is unequal bargaining power. Finally, she points out that the "tortuous" ruling results in a "bizarre" enforcement scheme: "the majority upholds Section 432.6 and its associated sanctions so long as they are not applied to conduct leading to executed arbitration agreements. This holding means that an employer’s attempt to enter into an arbitration agreement with employees is unlawful, but a completed attempt is lawful."
COMMENT: When Charles Bernheimer, the "Father of Commercial Arbitration", campaigned for the New York Arbitration Act and the FAA early in the 20th century, his goal was to create a quick and efficient means of resolving disputes between merchants. It is doubtful that the authors of the FAA imagined a landscape in which arbitration would swallow up employment and consumer disputes involving parties with very unequal bargaining power. Ever after, courts have had to apply the legal fiction that an arbitration agreement must be "voluntary and consensual." However, those words are now terms of art, for the person who fails to read a contract or to wear their reading glasses, has nevertheless consented by signing. And the person who must sign a "take-it or leave-it" arbitration agreement to obtain a minimum wage job has consented. Jeremy Bentham, a critic of legal fictions, said that "fictions are to law what fraud is to trade."
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.
From time to time I will note that in controversial arbitration cases, differences of opinion parallel political philosophies and parties of the judges. So I note here that Judges Lucero and Fletcher were Clinton appointees, and Judge Ikuta, a member of the Federalist Society, is a George W. Bush appointment.
BEST LINE: "Like a classic clown bop bag, no matter how many times California is smacked down for violating the Federal Arbitration Act (FAA), the state bounces back with even more creative methods to sidestep the FAA." A go-to cliche favored by jurists is a reference to the arcade game "whack-a-mole." So Judge Ikuta gets points for elegant variation. A Hat Tip:
Danny Kollaja, better known as Lanky the Clown, acting up at the Wyoming State Fair in Douglas. Carol M. Highsmith, photographer. 2015. Library of Congress.