Arbitration, Public Injunctive Relief: 9th Circuit Holds Arbitration Provision Allowing For Public Injunctive Relief, While Prohibiting Private Attorneys General, Is Enforceable
Arbitration Provision Allowing For Public Injunctive Relief Does Not Violate McGill Rule.
The so-called McGill rule states California’s legal requirement that contracts allow public injunctive relief. So what happens if a contract requires arbitration of disputes, provides for all remedies in arbitration, and further provides that the claimant cannot act as a private attorney general? Put another way, can a claimant request public injunctive relief in California, without acting as a private attorney general? If the answer is yes, the arbitration clause is enforceable. If the answer is no, the arbitration clause is not enforceable. Yes, says the Ninth Circuit in DiCarlo v. MoneyLion, Inc., et al., No. 20-55058 (9th Cir. 2/19/21) (Thapar, Bea, Collins).
Plaintiff DiCarlo brought claims under unfair competition law, false advertising law, and the Consumers Legal Remedies Act law against a lender being accused of predatory practices. The lender MoneyLion successfully moved to compel arbitration, and the Ninth Circuit affirmed. The key to enforcing the arbitration provision is that it provided for all remedies, including public injunctive relief: "In California, litigants proceeding in individual lawsuits may request public injunctive relief without becoming private attorneys general. That means that public injunctive relief is available to DiCarlo in arbitration with MoneyLion. Since the arbitration provision does not violate the McGill rule, it is valid."
COMMENT: What happens to attorneys fees if the claimant, who is prohibited by the contract from suing as a private attorney general, is entitled to obtain relief under the UCL, FAL, or CLRA? Technically, this case may not answer the question, because Judge Thapar points out that the plaintiff did not ask for attorneys fees. Thus, any comments about attorneys fees would be dictum. "In any case, we have no reason to think that the availability of public injunctive relief could hinge on whether those fees are up for grabs," writes Judge Thapar, adding, "Nor do we read the Agreement to bar any claims that could support fee shifting in court." And so?
Another Tip On Using Videoconferencing For Remote Mediations . . . Beware Of Errant Cat Filters
An Addition To My February 4, 2021 Post About Videoconferencing: Tips For Using Zoom For Remote Mediations.
In what could have been an Abbott and Costello routine, had those comedians been born into the Age of the Internet and Zoom, a Texas judge and a hapless attorney had to grapple with the vagaries of a cat filter during a court call. So now we have one more tip for our profession's use of videoconferencing: beware the use of cat filters.
Here's a link to the viral video demonstrating the infelicitous peril of feline interference:
Above: Sketch of Edward Lear at age 73 1/2 and his cat Foss, age 16.
According to Wikipedia, Foss is also mentioned in Lear's poem "How Pleasant to Know Mr Lear":
He has many friends, lay men and clerical,
Old Foss is the name of his cat;
His body is perfectly spherical,
He weareth a runcible hat.
Arbitration, Public Policy: An Arbitration Provision Purporting To Waive Consumer’s Right To Seek Public Injunctive Relief Is Invalid And Unenforceable
McGill Is Still Good Law.
The action in Joe Maldonado v. Fast Auto Loans, Inc., G058645 (4/3 2/8/21) (O'Leary, Aronson, Thompson) centered on whether McGill v. Citibank, N.A., 2 Cal.5th 945 (2017) is still good California law and whether it has been preempted by the Federal Arbitration Act. McGill, which we posted about on April 6, 2017, held that an arbitration provision was invalid and unenforceable because it required consumers to waive their right to pursue public injunctive relief. See also the September 29, 2020 post on Mejia v. DACM Inc., 54 Cal.App.5th 691 (2020).
Maldonado and others brought a putative class action alleging Fast Auto Loans, Inc. charged unconscionable interest rates on loans in violation of the Financial Code. Fast Auto Loans moved to compel arbitration, based on a broad arbitration provision that would have resulted in a waiver of class actions and the plaintiffs' ability to bring an action for public injunctive relief. The trial court held that the McGill rule made the arbitration provisions unenforceable, and the Court of Appeal affirmed the order denying the motion to compel arbitration.
The Court of Appeal concluded that McGill is good law. Fast Auto Loans' argument that FAA preemption applied foundered, because SCOTUS recently denied review of Ninth Circuit cases applying McGill, leaving the Court of Appeal to apply McGill, a case decided by the California Supreme Court.
COMMENT: What is the reasoning that explains why McGill is not preempted by the FAA? "The contract defense at issue here—'a law established for a public reason cannot be contravened by a private agreement' (Civ. Code, § 3513)—is a generally applicable contract defense, i.e., it is a ground under California law for revoking any contract. . . . It is not a defense that applies only to arbitration or that derives its meaning from the fact that an agreement to arbitrate is at issue." McGill v. Citibank, N.A., 2 Cal. 5th 945, 962 (2017). In short, the defense does not unduly burden an arbitration agreement, because it would also apply to another contract.
Arbitration, Unconscionability: An Appellate Arbitral Review Provision Is Held Substantively Unconscionable, But Severable
Motion To Compel Arbitration Should Have Been Granted, And One Substantively Unconscionable Provision Was Severable.
In Erendira Cisneros Alvarez v. Altamed Health Services Corp., B305155 (2/8 2/4/21) (Stratton, Bigelow, Grimes), the Court of Appeal reversed a trial court's order denying a motion to compel arbitration. The arbitration provision, which is part of an employer-employee contract, is found to be enforceable, while a provision requiring a second level of arbitral review is found to be substantively unconscionable but severable.
Most interesting is the Court of Appeal's conclusion about the unfairness in the employer-employee context of a provision allowing for arbitral review of the arbitrator's award. Why unfair? Because it was likely that only the employer would take advantage of this additional review, in case of a large award in favor of the employee; because it would add a layer of expense for the employee; because it would delay the ability of the employee to confirm an award; and because it was ambiguous, since it was unclear what rules for appellate arbitral review would apply. But since this was the only example of substantive unconscionability, the offending provision could be severed, and the arbitration provision could be enforced.
COMMENT: The trial court held that the employee had not knowingly waived her right to a jury trial, and that in fact the word "jury" had not been mentioned in the relevant document. The Court of Appeal explained this was clear error, because "[t]he arbitration agreement does contain the word 'jury' and it uses the word as part of an express waiver provision …." Twisting the knife, the Court added, "We are surprised by the trial court’s inability to find the word 'jury' or the jury provision in the arbitration agreement." Did this slip up motivate the Court of Appeal to review the case in considerable detail?
Videoconferencing: Tips For Using Zoom For Remote Mediation
Tips For Using Zoom For Remote Mediation
Since the beginning of the pandemic, I have been conducting remote mediations with Zoom. Based on my experience with Zoom, I have collected tips for mediators, attorneys, clients, and other persons who will be participating in remote mediations conducted via Zoom. While a number of other platforms have been used, Zoom still appears to be the one most commonly used by mediators in Southern California. Many of the tips, though based on my experience with Zoom, are applicable to other platforms. I invite readers to add to my list of "Tips" either by emailing me at malexander@alvaradosmith.com, or by adding a comment to this post.
Mediation, Attendance, And Settlement: Parties Failing To Attend Probate Court-Ordered Mediation Could Not Complain About Settlement Reached By Participating Parties
Potential Beneficiaries Of Trust Received Notice, But Failed To Participate.
After Don Kirchner died in 2018, the successor trustee of Kirchner's living trust found a document listing 24 charities with handwritten notes appearing to be percentages for distributing the estate. The probate court confirmed the successor trustee and ordered mediation among interested parties. Apparently the parties received notice, but several parties, designated as the "Pacific parties," did not attend the mediation. The participating parties reached a settlement, the non-participating Pacific parties objected to the petition to confirm the settlement, and the probate court confirmed the settlement. The Pacific parties appealed. Breslin v. Breslin, B301382 (2/6 1/26/21) (Gilbert, Yegan, Tangeman).
Affirmed. "The probate court has the power to order the parties into mediation. (See Prob. Code, section 17206 . . . .)" The dispositive case is Smith v. Szeyller, 31 Cal.App.5th 450 (2019), holding that "a party who chooses not to participate in the trial of a probate matter cannot thereafter complaint about a settlement reached by the participating parties." True, the Breslin case involved a mediation, not a trial, but the mediation was court-ordered, and parties receiving notice could not blow it off without consequences.
COMMENT: An online obituary for Don Kirchner states, "Don was a generous man who loved God, loved his wife, loved his country, and his dogs (especially Lola, who was with him through his retirement years)."