Arbitration, PAGA, Delegation: Second District, Div. 5 Holds That Question Of Whether Plaintiff Is “Aggrieved Employee” Under PAGA Cannot Be Delegated To Arbitrator
Efforts By Employers To Have An Arbitrator Decide A Dispositive Part Of A PAGA Claim Continue To Founder.
The wreck of the Atlantic. c1873. Currier and Ives. Library of Congress.
The Court of Appeal holds that the delegation of the question whether plaintiffs are "aggrieved employees" to an arbitrator frustrates the purpose of the Private Attorneys General Act of 2004, and is therefore prohibited under California Law. Robina Contreras et al. v. Superior Court of Los Angeles, Respondent; Zum Services, Inc., Real Party in Interest, B307025 (2/5 3/1/21) (Rubin, Baker, Moor).
Contreras and Ets-Hokin alleged Zum misclassified them as independent contractors rather than employees, and committed PAGA violations. Zum, however, argued that an arbitration agreement required the parties to arbitrate, and that under applicable JAMS rules, the parties were required to arbitrate the issue of arbitrability. Zum further argued that the issue of arbitrability turned on whether the plaintiffs were "aggrieved employees." If the arbitrator determined plaintiffs were aggrieved employees, then the case could be litigated in court. But if the arbitrator decided the plaintiffs were not "aggrieved employees", because the plaintiffs were independent contractors instead, then there would be no need to litigate the PAGA claim. The trial court agreed with Zum that the issue of whether plaintiffs were "aggrieved parties" was an issue of arbitrability that had been delegated to the arbitrator to decide.. Plaintiffs sought a writ of mandate, and the Court of Appeal issued a peremptory writ directing the trial court to vacate its order granting the motion to compel arbitration, and issue a new order denying the motion.
California courts have held that employees cannot be forced to arbitrate PAGA claims, unless the state consents, because PAGA claims are like qui tam claims, and the ultimate holder of the claim is the state, which is not a party to the agreement to arbitrate. Like efforts to split a PAGA claim, Zum's effort to delegate to the arbitrator the narrow issue of whether the plaintiffs were "aggrieved employees" is an effort to delegate a dispositive issue of the entire PAGA claim to an arbitrator. Just as California Courts of Appeal have not allowed the splitting of PAGA claims, the court in Contreras would not allow the delegation of a narrow issue that was in fact dispositive of the entire PAGA claim to the arbitrator. "We agree with the chorus that in California, a PAGA plaintiff may not be compelled to arbitrate whether he or she is an aggrieved employee."
Section 998: Fourth District, Div. 3 Holds Later Offer To Enter Into Stipulated Judgment On Only One Cause Of Action Extinguished 998 Offer On All Causes Of Action
A Case Of First Impression.
Section 998 offers belong to the armamentarium of litigators engaged in settling cases, because the potential of such offers to shift costs can be a source of negotiating leverage. Hence, our blog about ADR has a sidebar category "Section 998 (Settlements)".
In Varney Entertainment Group, Inc. v. Avon Plastics, Inc., No. G058903 (4/3 2/23/21) (Goethals, Aronson, Fybel), the court had to decide whether defendant/appellant Avon's second offer to settle extinguished its pending section 998 offer. "Section 998 is silent about the revocability of statutory offers to compromise, but our Supreme Court has held that section 998 offers are fully revocable prior to acceptance." That would seem to make this an easy case to decide (and perhaps it was easy to decide). However, the case had unusual facts that made it a case of first impression.
Plaintiff Varney alleged two causes of action, one for breach of contract, and one alleged in an amended complaint after a year of litigation, for unauthorized use of Varney's name and likeness in violation of Civil Code section 3344. Defendant Avon offered to settle the entire lawsuit for $250,000 for a stipulated judgment pursuant to section 998. Defendant then offered to settle just the contract cause of action for $191,626.03. Plaintiff Varney accepted the offer as to the single contract cause of action, and on the eve of trial, dismissed the section 3344 cause without prejudice, later filing a new complaint for unauthorized commercial use of name, voice, signature, photograph, and likeness in Tennessee.
So now you see the twist: Varney would claim the stipulated judgment on one cause of action completely superseded Avon's 998 offer to settle the entire lawsuit, and thus no cost shifting should be permitted to Avon under section 998. Avon would claim that the voluntary dismissal of Varney's second cause of action meant that Avon had bested its $250,000 998 offer, entitling Avon to attorney fees it incurred after serving its section 998 offer.
Justice Goethals presented the issue: "does a later offer to enter into a stipulated judgment on only one cause of action extinguish an earlier pending section 998 offer covering all causes of action?" The answer is yes, the stipulated judgment did extinguish the earlier 998 offer. A different result would inject uncertainty into the 998 process.
Arbitration, Disclosures, Vacatur: Second District, Div. 7 Holds That Party Cannot Waive Right To Timely Object To Appointment Of An Arbitrator
Years Earlier, The Parties Had Agreed To The Appointment Of A Particular Arbitrator.
Brothers Harry and Ted Soussos fought over control of family business interests. Harry moved to compel arbitration, and Ted timely objected. The arbitrator refused to recuse himself, and Harry obtained an award in his favor. The rub here is that several years earlier, Ted and Harry had agreed that in case future disputes arose, they would not object to the appointment of Judge John P. Shook (ret.) as the arbitrator. After the arbitrator issued the award, Ted unsuccessfully sought to vacate it in the trial court. Did the earlier agreement not to contest the appointment of Judge Shook mean that Ted had waived the right to object?
The right to timely object to the appointment of an arbitrator cannot be waived, holds the court in Soussos v Soussos, No. B293358 (2/7 2/15/21) (Feuer, Perluss, Segal).
Arbitration, Automobiles, FAA, Public Policy: A “Satellite Service Facility” Agreement With Subaru Was Not Subject To Statutory Exception To Arbitration That Would Apply To Manufacturer-Dealer Franchise Agreements
Automobile Dealerships Are Subject To A Narrow Exception To Arbitration — But The Exception Did Not Apply Here.
1958 Subaru 360. Licensed under the Creative Commons Attribution-Share Alike 3.0 Unported, 2.5 Generic, 2.0 Generic and 1.0 Generic license. Author: Mytho88.
Who knew? Automobile dealer franchises are subject to a narrow statutory exception to arbitration under the Motor Vehicle Franchise Arbitration Fairness Act, 15 USC section 1226. The key issue in Subaru of America, Inc. v. Putnam Automotive, Inc., No. A159686 (1/2 2/10/21) (Kline, Stewart, Miller) was whether Putnam's "Satellite Service Facility" agreement to service Subarus was part of Putnam's franchise agreement as an automobile dealer with Subaru. Because the arbitrator construed the two agreements to be separate, rather than a single integrated agreement, Putnam did not fall under a statutory exception that would have allowed it to escape arbitration.
Putnam also argued that forcing it to arbitrate was contrary to the public policy protecting dealers from mandatory arbitration. However, since the arbitrator and the court concluded the service agreement was not a dealer franchise agreement, this argument did not prevail.
COMMENT: The statutory exemption that allows dealers to avoid having to arbitrate with distributors or manufacturers of motor vehicles is a narrow exception. Apparently it exists to level the playing field between the dealers and economically more powerful manufacturers and distributors. We surmise that, though they may have less economic clout than manufacturers and distributors, dealers nevertheless had enough influence in the legislative process to obtain the narrow carve-out from arbitration. While the same "level the playing field" logic might apply to consumers and borrowers seeking an escape hatch from mandatory arbitration, evidently they have been less successful obtaining legislative carve-outs from arbitration.
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.