Arbitration, PAGA: First District, Div. 1 Affirms Order Denying Lyft’s Petition To Arbitrate PAGA Claims
Iskanian Is Still Good Law In California.
Once more unto the breach, dear friends, once more! Henry V, Act III, Scene I.
Employers continue to seek to enforce contractual waivers of the right to litigate in court, and employees continue to punch back, insisting on the right to litigate Private Attorneys General Act of 2004 (PAGA) claims in court. Thus far, California courts have followed Iskanian, refusing to enforce the waiver of the right to pursue PAGA claims in court.
In Brandon Olson v. Lyft, Inc., No. A156322 (1/2 10/29/20) (Richman, Stewart, Miller), the court again addresses whether Iskanian is still good law, and whether it has been impliedly overruled by SCOTUS in Epic Systems Corp. v. Lewis, which liberally applied Federal Arbitration Act preemption to enforce an arbitration agreement with an employee.
The short answer is that Iskanian, a California Supreme Court case, has not been overruled, and is still good law in California state court. Nor does Epic Systems, which involves different facts, change the legal analysis. Iskanian held that a PAGA claim is like a qui tam claim, in which the plaintiff acts on behalf of the state. And therefore the plaintiff's contractual waiver of the right to litigate is not enforceable, because the plaintiff is acting on behalf of the state, which did not waive the right to arbitrate. Epic Systems did not involve a qui tam or PAGA representative claim in which the plaintiff acted as a representative of the state.
Olson v. Lyft, Inc. relies heavily on the legal analysis in Correia v. NB Baker Electric, Inc., 32 Cal.App.5th 602 (2019), about which we posted on February 26, 2019. If you read the earlier post about Correia, you'll get a pretty fair summary of the argument in Olson v. Lyft. The later/latest case gathers the authority supporting the continuing viability of Iskanian.
Arbitration: First District, Div. 1 Rules State Regulatory Law Did Not Allow Plaintiff To Avoid Arbitration
In Which We Create A New Side Bar Category– Arbitration: State Regulatory Law
Nearly every new post on this blog links to one of our many sidebar categories. This post, however, addresses an arbitration issue that required the creation of a new sidebar category: "Arbitration: State Regulatory Law." The issue presented was whether an optometrist who entered into a "Network Doctor Agreement" with his vision care insurer in California, VSP, could rely on state regulatory law to avoid having to arbitrate a dispute with VSP after VSP concluded that Epstein had purchased lenses from an unapproved supplier and terminated his provider agreement. Gordon Epstein v. Vision Service Plan, A155219 (1/1 10/22/20) (Banke, Margulies, Sanchez).
Epstein's provider agreement described a two-step dispute resolution process: (1) a "Fair Hearing" with an internal review process; (2) if the first step did not resolve the dispute, then "Binding Arbitration" requiring arbitration pursuant to the FAA. Seeking to avoid going to the second step, Epstein instead filed an administrative mandamus proceeding. As Justice Banke explained, "he maintained the second step of the dispute resolution process was contrary to state regulatory law requiring certain network provider contracts to include a procedure for prompt resolution of disputes and expressly stating arbitration 'shall not be deemed' such 'a provider dispute resolution mechanism.'"
Well might you ask, why wouldn't such a regulatory law unfairly burden an agreement to arbitrate, and thus be preempted by the Federal Arbitration Act? Here, Epstein argued that the state law was not preempted by virtue of the McCarran-Ferguson Act, "which generally exempts from federal law, state laws enacted to regulate the business of insurance."
While that may sound like a pretty good argument, the Court of Appeal concluded that the state regulatory law did not make the second step of the dispute resolution process requiring arbitration unenforceable, because the state regulatory law only applied to the initial step, which did not require binding arbitration.
Because Epstein had failed to exhaust administrative remedies requiring him to ask for arbitration, the trial court's judgment rejecting his writ petition was AFFIRMED.
Internet Commerce: 9th Circuit Rules Change-Of-Terms Provision Did Not Exempt Website Visitor From Arbitration Where Visitor Was Unaware Of The Contract Terms
Original Contract Required Arbitration Of Dispute, New Terms Exempted Consumer Claim From Arbitration, And Website Visitor Was Not Aware Of New Contract Terms.
Rachel Stover attempted to prosecute a class action complaint against Experian, alleging that Experian had provided her with a credit reporting score represented to be useful, but essentially useless, because the score was based on a formula that lenders would not rely upon. Two contracts were involved: an original 2014 contract that she entered into with Experian, and that included an arbitration provision, as well as a "change-of-terms" provision purporting to bind her to contract changes, and a 2018 contract that exempted certain claims (including her claims) from arbitration. Each time she accessed the website, she would manifest assent to the changes to the then current terms of the agreement. Or would she?
The district court required her to arbitrate, finding that her claims were not covered by the 2018 agreement, and she appealed. Stover v. Experian Holdings, Inc., et al., 19-55204 (9th Cir. 10/21/20) (Smith, Owens, Cardone). The 9th Circuit affirmed the order requiring arbitration, but on another ground, namely, that the parties were not bound by the terms of the 2018 contract that could have exempted Stover's claims from arbitration.
"This case. . . requires us to address whether a mere website visit after the end of a business relationship is enough to bind parties to changed terms in a contract pursuant to a change-of-terms provision in the original contract," write Judge Smith. And the panel holds "it does not."
COMMENT: Compare and contrast the the internet contract with a paper contract. If a paper contract with changes in 2018 had been drafted by Experian and handed to the customer in 2018, could the customer have enforced it against Experian? Generally, a contract can be enforced against the signatory, even by the recipient who has not signed the contract, and generally, the recipient of the contract is presumed to be charged with its contents and to have read it, even if the recipient has bad eyesight and is not wearing glasses. But the situation here is a little different, because the change-of-terms provision does not create a requirement that Stover read the 2018 contract, the new contract was presented in the form of a browserwrap rather than a click-wrap, making it uncertain Stover received actual notice of the terms. And apparently Stover did not allege she knew the terms of the 2018 contract. So here, based on specific facts, there was a lack of contract formation. It was not enough that the drafting party, Experian, knew the terms of the contract, to create a meeting of the minds.
Arbitration, PAGA: Fourth District, Div. 1 Denies Employer’s Effort To Split PAGA Cause Of Action, Affirming Denial Of Motion To Compel Arbitration
The Ruling Is Consistent With Other California Cases Denying Efforts To Split PAGA Cause Of Action.
YourMechanic sought to compel plaintiff to arbitrate whether he was an "aggrieved employee" before he could proceed under the Private Attorneys General Act of 2004 (PAGA). The trial court denied the motion, and YourMechanic appealed. Jonathan Provost v. YourMechanic, Inc., D076569 (4/1 10/15/20) (Benke, Aaron, Dato).
As Justice Benke explains, "requiring Provost to arbitrate whether he was an 'aggrieved employee' with standing to bring a representative PAGA action would require splitting that single action into two components: an arbitrable 'individual' claim (i.e., whether he was an independent contractor or employee under either the parties' written arbitration provision or section 226.8 . . . making it unlawful to willfully misclassify an individual as an independent contractor); and a nonarbitrable representative claim."
As a case subheading summarizes, "Case Law Prohibits the Splitting of a Single Representative PAGA Action into 'Individual' Arbitrable and Representative Nonarbitrable Components in Deciding whether an Individual Has Standing under PAGA.'
But that doesn't keep employers from continuing to try to split PAGA claims, and arbitrate first whether the plaintiff is an "aggrieved employee." The employer's logic is that if the employer could get an arbitration award holding that the plaintiff is an independent contractor rather than an employee, then the plaintiff would not have standing to adjudicate the PAGA claim, since only an employee would have a PAGA claim. Thus far, this strategy has not worked, because the plaintiff brings a claim on behalf of him or herself, and as a representative, and prevailing California law does not require the plaintiff to split the individual and representative claims and arbitrate the individual claims first.
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.