Mediation, Confidentiality: Is Your Mediation Confidential?
Mediator Jeff Kichaven Spoke About Whether Mediation Is Confidential To The Orange County Bar.
On Friday, October 2, 2020, mediator Jeff Kichaven presented a Zoom webinar to the Orange County Bar on the subject: "Guess What? Your Online Mediation Is Not Confidential." Jeff's presentation was jointly sponsored by the ADR section and the Business Litigation section of the OC Bar. (Your blogger chairs the ADR section).
In his fascinating, and provocative presentation, Jeff contrasted the extremes of mediation confidentiality, of which the antipodes are New York, where there is little protection, and California, where mediation confidentiality is nearly absolute. Online mediation, more important since the onset of COVID-19, often brings together attorneys and parties in different locations. And this opens up conflict of laws issues: does the law govern where the arbitrator, the courts, the attorneys, or the parties are located? Jeff provided a war story in which the attorneys in a mediation were themselves divided over which laws governed mediation confidentiality.
Jeff is a severe critic of California's "absolute confidentiality" rules, which he views as a lowering of professional standards, since mediators and attorneys cannot be successfully sued for wrongdoing that occurs during the course of the mediation, for the simple reason that evidence of communications will be inadmissible. Perhaps more controversially, Jeff does not make representations of confidentiality to participants in mediations that he conducts.
COMMENT: Mediation is a voluntary process. Is there a drafting solution for parties voluntarily seeking mediation confidentiality in high-stakes litigation? Could the parties simply enter into a confidentiality agreement with a choice of law provision, and have the court enter it as a protective order? It would seem that this would help the parties protect confidentiality of mediation in their lawsuit, but even so they might not be protected if a time came when a third party sought discovery of, for example, a settlement agreement that the parties had entered into. For readers who are interested in learning more about Jeff Kichaven's thoughts about the confidentiality of mediation, check out this article linked to his website.
Arbitration, Contract Interpretation, FAA: 9th Circuit Holds California’s “Absurd Results” Rule Of Contract Interpretation Is Not Preempted By FAA
Provisions Requiring Arbitration With AT&T's Affiliates Did Not Apply To A Future Affiliate.
Plaintiff contracted with AT&T for service, and sued an affiliate DIRECTV acquired later by AT&T. The Court of Appeal had to "decide whether a satellite television company, which became an affiliate years after the agreement was signed, may use the wireless services agreement to compel arbitration in a suit brought against it under the Telephone Consumer Protection Act." Jeremy Revitch v. DIRECTV, LLC, No. 18-16823 (9th Cir. 9/30/20) ( O’Scannlain, McKeown; conc. O'Scannlain; dsst, Bennett).
The service agreement required arbitration with AT&T and its affiliates. However, both the district court and the 9th Circuit held that "affiliates" did not include DIRECTV, LLC, an affiliate acquired by AT&T after the service agreement was signed. The interesting part of the opinion is the analysis of California's "absurd results" rule of contract interpretation, providing, "The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” (Cal. Civ. Code section 1639). The majority opinion explained that if "affiliates" was interpreted to include after-acquired affiliates, then Revitch could be required to arbitrate with a party who had not contracted with him, and who was acquired later, regardless of the affiliate's connection to the dispute.
Judge Bennett dissenting disagreeing that such an interpretation of the contract resulted in an absurd result. Judge Bennett argued that the word "affiliates" was clear and included DIRECTV, that if there was any ambiguity, it had to be interpreted to favor arbitration, and that agreeing to a broadly worded arbitration agreement was not an absurd result.
COMMENT: California's "absurd results" rule of contract interpretation is not preempted by the FAA, because the rule would apply to contracts in general, and thus would not unduly burden arbitration agreements.
Arbitration, Class, Waiver, FINRA: FINRA Rules Preventing Arbitration Of Class Actions Do Not Apply When There Is A Class Action Waiver
The Class Action Waiver Is Enforceable.
When a financial advisor brought a putative class action against Credit Suisse for deferred compensation, Credit Suisse moved successfully to dismiss based on an arbitration requirement in its Employee Dispute Resolution Program. The financial advisor appealed, arguing that Financial Industry Regulatory Authority (FINRA) rule Rule 13204(a)(4) barred arbitration of his claim. Cristopher M. Laver v. Credit Suisse Securities (USA) LLC, No. . 18-16328 (9th Cir. 9/18/20) (Feinerman, Gould, Murguia).
The FINRA rule provides in part, "A member or associated person may not enforce any arbitration agreement against a member of a certified or putative class action with respect to any claim that is the subject of the certified or putative class action" until certain conditions are met, for example, until there is a denial of class certification.
So why didn't the FINRA rule apply to bar arbitration of Mr. Laver's class action claim? Because there was also a class action waiver, and the FINRA rules do not make a class action waiver unenforceable. Because the class action waiver is effective, there can be no class action, thus making the FINRA rule barring arbitration of class action claims inapplicable.
Arbitrability: 9th Circuit Holds Court Decides Arbitrability Of Collective Bargaining Agreement Silent About Arbitrability
Commercial Arbitration And Labor Arbitration Agreements Are To Be Analyzed The Same Way.
American Nurses somewhere in England, November 2018. Library of Congress.
When the agreement is silent about who decides whether a dispute is arbitrable, does the court or the arbitrator decide? The court decides. However, 9th Circuit case law created an exception in the case of collective bargaining agreements: if the arbitration provision is broad, then the arbitrator gets to decide. United Bhd. Of Carpenters & Joiners of Am., Local No. 1780 v. Desert Palace, Inc., 94 F.3d 1308 (9th Cir. 1996). And so in a case where it was undisputed that the arbitration clause was broad, the district court, analyzing the motion to compel arbitration brought by a union representing nurses with grievances, held, consistent with 9th Circuit law, that the arbitrator would get to decide. Defendant, a medical center, appealed. SEIU Local 121RN v. Los Robles Regional Medical Center, No. 19-55185 (9th Cir. 9/18/20) (Van Dyke, Callahan; Dsst. Lee).
Though district court did not believe that it could overrule 9th Circuit case law, that was not a problem for the 9th Circuit, which concluded that the district court, rather than the arbitrator, was responsible for determining whether the grievance filed by the union was arbitrable. The panel majority held that Desert Palace was no longer good law, because Desert Palace, Inc. is “clearly irreconcilable with the reasoning or theory of intervening higher authority” set forth in Granite Rock Co. v. Int’l Bhd. Of Teamsters, 561 U.S. 287 (2010), requiring that labor arbitration and commercial arbitration disputes be analyzed the same way.
Judge Lee dissented, believing Granite Rock did not impliedly overrule Desert Palace, because the two cases addressed different issues.
Arbitration, Policy, Choice of Law, FAA, Severance: McGill v Citibank Lives: Arbitration Provision Eliminating Any Forum For Public Injunctive Relief Is Unenforceable
Case Offers Primer On McGill v. Citibank, N.A.
Defendant and appellant DACM, Inc. (Del Amo) sold a motorcycle to Joseph Mejia, who paid some cash and financed the remainder of the purchase with a credit card. And, the credit card included an arbitration provision covering Del Amo. So when Mejia sued Del Amo for violation of consumer protection statutes, Del Amo sought to compel arbitration. When Del Amo's motion was denied, it appealed. Joseph Mejia v. DACM, Inc., G058112 (4/3 9/15/20) (Aronson, Moore, Ikola).
Del Amo lost the appeal, because the arbitration provision would have prevented Mejia from obtaining public injunctive relief and such a prohibition is unenforceable under McGill v. Citibank, N.A., 2 Cal.5th 945 (2017). We posted about McGill on April 6, 2017.
The arbitration provision provided for the application of Utah law. So why did California's McGill case apply? California public policy outweighs the Utah choice-of-law provision, and it is California policy, as encapsulated in McGill, that courts may invalidate arbitration clauses that waive public injunctive relief in any forum — something Utah law does not permit.
So why couldn't the unenforceable waiver provision be severed? The arbitration provision had been drafted to contain a "poison pill" restricting the right of the court to sever, once the prohibition on public injunctive relief was found to be unenforceable.
So why didn't the Federal Arbitration Act preempt McGill? McGill itself answers that question: "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.
Settlement Of A Class Action: Ninth Circuit Affirms Denial Of Claimants’ Motions To Enforce Class Action Settlement Agreement In VW “Clean Diesel” Litigation
Express Modification Provisions In Volkswagen Class Settlement Agreement Allowed For A Modifying Amendment.
Look Sharp Barber Shop sign (painted 1969 Volkswagen), Yuma, Arizona. John Margolies, photographer. Library of Congress. [No, that's not the model involved in the "Clean Diesel" Litigation, but we liked the photo].
The settlement agreement between class action plaintiffs and Volkswagen Group of America, Inc. provided for compensation to owners and lessees of diesel cars with so-called "defeat devices" that altered automobile emission profiles, concealing that diesel engines emitted excessive pollution. A nation-wide class action settlement of the civil claims was approved by the district court in October 2016, with the court retaining the jurisdiction to "enforce, administer, and ensure compliance" with it terms, and the settlement was affirmed by the 9th Circuit in 2018.
The settlement, however, excluded certain "branded title" vehicles with titles such as "Junk," "Rebuilt, or "Salvaged." Then in February 2018, the Claims Supervisor, whose role was created to administer the settlement, announced that under a "Framework", "branded title" vehicles would also include vehicles purchased from "insurance auctions."
Claimants who had purchased at insurance auctions and were not excluded by the modification tried to enforce the settlement that did not exclude them. However, the district court accepted this modification, finding that the Claimants who had acquired vehicles at insurance auctions did so after Volkswagen's fraud became public, and thus did not "unknowingly suffer harm from the auto manufacturer's actions." Furthermore, most such vehicles were already taken off road, and thus were not polluting anymore, so the additional exclusion of vehicles from the settlement did not undermine the purpose of the settlement.
The Claimants appealed the denial of their motion to enforce the settlement. In re Volkswagen "Clean Diesel" Litigation, No. 19-16361 (9th Cir. 9/10/20) (Bumatay, Schroeder, Morris). The Court of Appeals affirmed, reasoning that the district court did not abuse its discretion denying the Claimants' motion, because the district court had retained jurisdiction, and the settlement agreement included express modification provisions allowing the modification to be made.
Judge Bumatay, who authored the opinion, wrote: "It doesn't take a mechanic to understand this case."