Arbitration, Unconscionability: First District, Div. 1 Affirms Order Denying MoneyGram’s Petition To Compel Arbitration
Inconspicuous Arbitration Provision In Consumer Adhesion Contract Is Unconscionable.
"We conclude the arbitration provision is unconscionable largely because it was hidden on the back side of a money transfer order form, in tiny 6-point print that we deem virtually illegible . . . . MoneyGram's Arbitration Provision shows every sign of having been designed to take unfair advantage of its customers." Fisher v. MoneyGram International Inc., A158168 (1/4 7/27/21) (Streeter, Tucher, Brown).
The plaintiff, Jonathan Fisher, is described as a 63-year-old Vietnam War-era veteran in 2016, with poor eyesight. Fisher alleged that MoneyGram was regularly used by scammers to transfer funds, that he had been scammed while using MoneyGram to transfer funds, and that MoneyGram was on notice, having been the subject of an earlier FTC permanent injunction requiring MoneyGram "to establish, implement, and maintain a comprehensive anti-fraud program to protect its consumers. . . But Fisher claims MoneyGram failed to abide by the injunction."
The opinion states that "[E]ven if he had tried to read the tiny print, he would not have been able to do so — even wearing his trifocal glasses — at least not without a magnifying glass." For the edification of our readers, we have reproduced 8-point print in the comment below. Our blogging platform does not allow us to go down any further to 6-point print.
COMMENT: According to my Typepad blog platform, this is 8 point type.
Arbitration, Celebrities, : Second Circuit Rejects Efforts By Trump Organization To Compel Arbitration
Effort To Compel Arbitration Failed Because Trump And Company Were Nonsignatories Who Distanced Themselves From Contract.
"A full-sized figure of then-President Donald Trump inside the doorway of an abandoned building in Marble Hill, the surviving name of what were the neighboring rural towns of Lutesville and Marble Hill in Bollinger County, Missouri." Carol Highsmith, photographer. 11/20/20. Library of Congress.
While we generally limit our posts to California, Ninth Circuit, and SCOTUS cases, we sometimes stray when a celebrity is involved. In Doe v. The Trump Corporation, Donald J. Trump, Donald J. Trump Jr., Eric Trump, Ivanka Trump, Docket Nos. 20-1228-cv/20-1278-cv (2d Cir. 7/28/21) (Sack, Chin, and Lohier), the celebrity was, well, you know.
In a Politico article, Josh Gerstein writes, "A federal appeals court has rejected an attempt by former President Donald Trump and three of his children to force arbitration in a class-action lawsuit accusing him of fraud during the decade he spent as a pitchman for ACN, a business services company featured on 'Celebrity Apprentice.'"
Plaintiffs alleged Trump and family members induced them with false information to enter into business relationships with non-party appellant, ACN, a "multi-level marketing" company that enlists individuals to work as "Independent Business Owners." While purportedly independent of ACN, Trump and family allegedly accepted large, secret payments to pitch ACN.
The effort to compel arbitration failed because defendants were not signatories to the arbitration agreement. Claiming they were independent of ACN, Trump and family were unable to benefit from ACN's arbitration clause.
Arbitration, Public Policy, PAGA: First District, Div. 3 Affirms Order Denying Motion To Compel Arbitration Of PAGA Claim
Once Again, A California Court Of Appeal Affirms That Iskanian Is Still Good Law.
In Winns et al. v. Postmates Inc., A155717 (1/3 7/20/21) (Petrou, Fujisaki, Jackson), Postmates argued its couriers had waived the right to bring representative PAGA claims, and that the California Supreme Court's Iskanian opinion holding such waivers to be invalid had been impliedly overruled by SCOTUS cases.
Justice Petrou explains California courts must follow the rulings of the California Supreme Court, and SCOTUS has not ruled on the issue presented by Iskanian, namely, whether a waiver of a representative action is enforceable. SCOTUS has ruled that a waiver of a class action is enforceable, but that is a different issue, because PAGA claims are in the nature of qui tam claims brought on behalf of California. The state is not a party to the arbitration agreement, and has not waived the right to litigate PAGA claims.
Postmates made another argument, namely, that the plaintiffs had been given the right to opt out of arbitration and had not done so. Therefore, they shouldn't object to arbitrating. The court rejected that argument, explaining that it was against California public policy to waive the right to litigate PAGA claims.
COMMENT: Iskanian was decided in 2014. The case was not taken up by SCOTUS. Employers seem to be flogging a dead horse in state court. Though the internal logic of Iskanian may make sense, the decision also presents a political issue, because employers generally want to avoid arbitration, and employees generally want to preserve the ability to litigate. And since 2014, the composition of SCOTUS has changed. So perhaps it is not a foregone conclusion how SCOTUS would rule if squarely confronted with the issue of whether the Federal Arbitration Act preempts the right to litigate representative actions.
Update: A More Recent Case Reaches The Same Conclusion.
The case is Christine Herrera et al. v. Doctors Medical Center of Modesto, Inc., F080963 (5th Dist. 8/5/21) (Franson, Pena, DeSantos).
Arbitration, FAA, Construction: Second Dist. Div. 1 Holds FAA Preempts Applying Contra Proferentum Rule In Case Of Contractual Ambiguity
Trial Court Must Now Enter Order Compelling Binding Arbitration Between Western Bagel Company And Employee.
Moose figure outside the Bagels Plus store in North Conway, New Hampshire. Photographer: Carol M. Highsmith. 2017. Library of Congress.
When Jose Calderon, a Spanish speaking employee of Western Bagel Company, Inc. brought a putative class action lawsuit against his employer, the employer moved to compel binding arbitration — unsuccessfully in the trial court, but successfully in the Court of Appeal. Western Bagel Company, Inc. v. The Superior Court of Los Angeles, No. B305625 (2/1 7/16/21) (Bendix, Rothschild, Chaney).
The issue facing the trial court was whether Calderon had agreed to binding arbitration, which is what the employer wanted, or to non-binding arbitration. The employer had two versions of its employment agreement, one in English not given to Calderon, and one in Spanish given to Calderon. The English and Spanish versions had several references to binding arbitration, but the severability clause in the Spanish version created ambiguity, because it referred to non-binding arbitration. Applying the principle of contra proferentum, which requires that ambiguity must be construed against the drafter, the trial court ordered the dispute to non-binding arbitration.
Because Western Bagel engages in interstate commerce, the Federal Arbitration Act applied. The Court of Appeal held that the FAA preempts applying the contra proferentum rule, and the FAA requires the court to construe any ambiguity in favor of binding arbitration. And so the court directed the trial court to vacate its order compelling nonbinding arbitration and enter a new order compelling binding arbitration.
Arbitration, Nonsignatories, Equitable Estoppel, International, Choice Of Law: 9th Cir. Affirms District Court’s Order Denying Motion To Compel Arbitration Pursuant To NY Convention
And Judge Bea Dissents.
In Setty v. Shrinivas Sugandhalaya LLP, No. 18-35573 (9th Cir. 7/7/21) (Nelson, Rawlinson; Bea, dsst.), the court holds that the district court did not abuse its discretion by rejecting defendant SS Mumbai's argument that plaintiff SS Bangalore should be equitably estopped from avoiding arbitration. Defendant SS Mumbai was a non-signatory to an arbitration agreement contained in a partnership deed to which plaintiff SS Bangalore was a party. Because it was not a party to the arbitration agreement, which was contained in a document executed in India by Indian parties, SS Mumbai tried to rely on the doctrine of equitable estoppel to argue that if the plaintiff was claiming the benefits of the partnership deed, it could not equitably disclaim its obligation to arbitrate. (Quisensit commodum debet et sentire onus.) But the Ninth Circuit concluded plaintiff's intellectual property federal claims were not sufficiently intertwined with the partnership deed, and as a result, the court could not look to the partnership deed to determine whether Indian law should apply to decide the estoppel question. Instead, the court concluded federal common law governs, and decided under federal common law that the facts did not support equitable estoppel.
Dissenting, Judge Bea wrote: "I would hold, simply, that whether a particular contract is governed by the New York Convention or not, a nonsignatory's equitable estoppel claim to compel arbitration is brought pursuant to the FAA, which requires that state contract law (or in the case of a foreign contract, perhaps the foreign state's contract law, depending on the state's choice of law rules) govern the issue."
Comment: This case has a lively procedural history. In a prior opinion, the Ninth Circuit held that SS Mumbai, the defendant and non-signatory to a partnership deed that contained an arbitration provision, could not equitably estop plaintiff SS Bangalore from avoiding arbitration. (See my 1/23/21 post on this case). The Supreme Court granted cert, remanding for further consideration in light of GE Energy Power Conversion Power France SAS v. Outokumpu Stainless USA, LLC, 140 S. Ct. 1637 (2020). GE Energy held the New York Convention does not conflict with enforcing arbitration agreements by non-signatories under domestic-law equitable estoppel doctrines. The Ninth Circuit took up the case again, leading to the current majority opinion and dissent. Given the lengthy dissent, might the procedural history still have legs?
Arbitration, Disclosures: Ninth Circuit Reins In Monster
Ninth Circuit Panel Refuses To Extend Reach Of Monster Energy.
Boris Karloff in Bride of Frankenstein (1935). Wikipedia. Public domain.
Monster Energy Co. v. City Beverages, LLC, 940 F.3d 1130 (9th Cir. 2019) concluded that "[G]iven the Arbitrator's failure to disclose his ownership in JAMS, coupled with the fact that JAMS had administered 97 arbitrations for Monster over the past five years, . . . vacatur of the Award is necessary on the ground of evident partiality." The majority opinion in Monster Energy drew a dissent from Judge Friedland. (See my 12/23/19 post). And a California Court of Appeal opinion distinguished the facts of Monster Energy, and also pointed out that it did not need to apply Monster Energy in a state court proceeding. (See my 4/29/21 post).
The Ninth Circuit again confronts the application of disclosure requirements to JAMS, addressing the rule in Monster Energy. EHM Productions, Inc., DBA TMZ, v. Starline Tours of Hollywood, No. 20-55426 (9th Cir. 6/24/21) (VanDyke, Gould, Lee).
First, it applies the rule in Monster Energy again to JAMS disclosures. The court summarizes the holding in Monster Energy: "prior to performing arbitrations, 'arbitrators must disclose their ownership interests, if any, in the arbitration organizations with whom they are affiliated in connection with the proposed arbitration, and those organizations' nontrivial business dealings with the parties to the arbitration.'" (my emphasis). Thus, it is the arbitrator's ownership interest and the organization's nontrivial business dealings that require disclosure.
Second, the court refuses to extend the rule to require disclosure of JAMS' nontrivial business dealings with the attorney, as opposed to the client. The court also refuses to extend the rule to require disclosure of nontrivial business dealings with the client alone, absent the arbitrator's ownership interest in JAMS.
Third, the court applies the Monster Energy rule retroactively, as long as the time (90 days) to challenge an arbitration award has not expired. The Monster Energy decision was issued after a final award was made by the arbitrator in EHM Productions, but before the time limit allowing for challenge of the award. Thus, the time had not expired to apply the Monster Energy disclosure rule.
Fourth, the court did not like JAMS' response, after receiving a request for further disclosures, that it had nothing further to disclose. "But saying you have nothing further to disclose is markedly different than simply refusing to provide any further disclosures based on the shifty reasoning that the Arbitrators no longer have jurisdiction over the case, which is deliberately evasive on the key question of whether they have something to disclose or not." As a result, the court remanded the disclosure issue so the district court could consider "how the parties can obtain from JAMS the information required by Monster Energy."
Fifth, a concurring opinion, sharing reservations about the Monster Energy decision, encourages reconsideration of Monster Energy en banc.
COMMENT: The panel opinion was authored by Judge VanDyke and joined by Judges Gould and Lee. The concurring opinion suggesting en banc reconsideration of Monster Energy, was authored by Judge VanDyke, joined by Judges Gould and Lee!