Statutorily Mandated Arbitration, Disclosures: Fourth Dist. Div. 3 Reverses Order Denying Petition To Confirm Arbitration, Because The Arbitration Was Contractual, Not Statutory
And The Attack On Arbitrator's Bias Came Too Late.
The trial judge in Rivera v. Shivers et al., G057919 (4th Dist. Div. 3 8/31/20) (Bedsworth, Thompson, Goethals) sua sponte ordered the unlawful detainer action to mandatory statutory arbitration. What could go wrong? For one thing, unlawful detainer actions are exempt from mandatory statutory arbitration.
The parties advised the trial judge they had stipulated to an arbitrator. However, after further proceedings, the attorneys stipulated to another arbitrator, but the parties did not sign the stipulation. The trial judge noted in a minute order: "Pursuant to stipulation of parties, arbitration is proceeding as a binding arbitration." The case was arbitrated, leading to an adverse result for the plaintiff/landlord. The defendants petitioned to confirm the award, and the trial judge denied the motion, expressing "concern that the stipulation for arbitration was entered into by counsel rather than the parties and concluded the arbitration had been nonbinding."
The Court of Appeal reversed, finding that the statutory proceeding had morphed into a binding contractual proceeding. Why? First, the trial court had no authority to send an unlawful detainer action to mandatory statutory arbitration. Furthermore, the attorneys and the parties acted all along as if they intended to achieve a binding result. Though the parties had not signed a stipulation to binding arbitration, they did not object to the binding arbitration, nor did they object to binding arbitration during the course of the arbitration. While it is true that the right to a jury trial is not easily relinquished, and it would certainly have been better practice to place the parties' agreement to binding arbitration on the record, everyone's conduct, consistent with binding arbitration (as explained in greater detail in the Court of Appeal's unanimous published opinion), ratified the binding nature of the arbitration. "[E]ven an unauthorized act by an attorney concerning substantial rights can be later ratified by the client and thus bind him or her."
A secondary issue was that the disgruntled landlord attacked the arbitrator's credibility because at the time the arbitrator took on the arbitration, he failed to disclose that as a young attorney, the opposing counsel' father had been the arbitrator's mentor. The arbitrator did not realize the connection until the commencement of the arbitration hearing, at which time he disclosed the relationship, and nobody objected. Plaintiff also failed to object within 10 days of the filing the petition to confirm the award, and thus plaintiff's objection was untimely.
COMMENT: The dramatis personae will be familiar to longtime Orange County practitioners who can read the opinion if they are interested. Oh what a difference it made that the ultimate determination was that the arbitration was contractual. Contractual arbitration is binding, whereas a statutorily mandated arbitration might lead to a trial de novo in Superior Court.
Interestingly, the Court of Appeal never tells us whether the disclosure that would have allegedly revealed the arbitrator's bias was material– to wit, the arbitrator's mentorship decades ago by the father of one of the attorneys. However, we note that the information was not concealed, because it was disclosed when the arbitrator became aware of it. And whether or not the information was material, it certainly was proper and appropriate for the arbitrator to disclose the relationship, leaving it to the parties and counsel to determine whether they considered it to be important. And if someone considered the information important enough to object, they should have done so at the time. The dispositive issue was the failure to timely object — at the time of the arbitration, compounded by failure to object within ten days of the filing of the petition to confirm. Might not judges look with a jaundiced eye at untimely objections about arbitrator bias made only after a party finds itself on the receiving end of an unfavorable arbitration award?
Arbitration, Employment, Unconscionability: Second District Div. 8 Reverses Order Denying Arbitration, Because Unconscionable Provision Was Severable
Employer Had No Duty To Call Arbitration Agreement To Attention Of Employee.
When Michael Conyer became employed by Hula Media, the employer's handbook did not have an arbitration clause. Several months later, Conyer signed the "receipt and acknowledgment" page, which was the final page of a revised employee handbook that did include an arbitration clause. Conyer sued the employer for sexual harassment, and claimed he would never have signed an arbitration agreement if he knew it existed. The trial court denied a motion by the employer to compel arbitration, and defendant Hula Media appealed. Michael Conyer v. Hula Media Services, LLC, et al., B296738 (2/8 8/26/20) (Grimes, Bigelow, Wiley). Reversed.
The Court of Appeal held "the employee demonstrated his assent to the arbitration clause by signing the acknowledgment, and the employer had no duty to call the arbitration agreement to the employee's attention."
However, under an unconscionability analysis, the Court of Appeal found that the provisions in the arbitration clause concerning arbitrator's fees and costs and attorneys fees, were unenforceable. Why? A clause providing the arbitrator shall award attorney fees to the prevailing party conflicts with FEHA, since "the defendant in a FEHA case may only recover attorney fees when the plaintiff's action was frivolous, unreasonable or groundless." But that was not enough to make the arbitration clause unenforceable, because the unenforceable provision could be severed.
Arbitration, Landlord/Tenant, Waiver, Public Policy: Under California Law, Arbitration Clause In Residential Lease Is Void
Case Was Governed By State Law Rather Than The Federal Arbitration Act.
The defendant landlord in Keisa Williams et al. v. 3620 W. 102nd Street, Inc., et al., B297824 (2/8 8/24/20) (Wiley, Grimes Stratton), did not discharge the burden of establishing that the residential lease at issue involved interstate commerce, and hence California state law, rather than the FAA, was applied here. And under California law, an arbitration clause in a residential lease is void. Cal. Civ. Code section 1153(a)(4); Jaramillo v. JH Real Estate Partners, Inc., 111 Cal.App.4th 394 (2003).
COMMENT: We note that in this age of legal specialization, the plaintiffs' attorneys have found a niche practice. Their business name is MYBEDBUGLAWYER. Their trademarked war cry is, "When bed bugs start biting . . . We start fighting! "Wikipedia has an interesting article on bed bugs, with some photos of nasty looking bed bugs, and the cute 19th century advertisement for cockroach and bed bug exterminators reproduced below.
Arbitration, Standard Of Review: 1st District Div. 5 Independently Reviews Arbitrator’s Questions Of Law Under Cable Connection, Inc.
An Arbitrator's Decision Is Not Ordinarily Reviewable For Error . . . Unless The Parties Agree That It Is In California State Courts.
In Oakland-Alameda County Coliseum Authority v. Golden State Warriors, LLC, A157688 (1/5 8/18/20) (Jones, Simons, Needham), high stakes depended on whether a contract between the Oakland-Alameda County Coliseum Authority and Golden State Warriors terminated by nonrenewal or terminated by expiration. The arbitrator ruled that the contract could terminate by nonrenewal. The Golden State Warriors failed to renew the contract, the arbitrator ruled it terminated, and the dire consequence was that Golden State Warriors had to continue servicing debt incurred to renovate the arena till 2027.
Given the rule that an arbitrator's mistake of law or fact is ordinarily no basis to review or overturn it, my first question was why the Court of Appeal was reviewing whether the arbitration award had properly been confirmed by the Superior Court. The simple answer is that the parties had agreed that "either party may file an application to correct or vacate the arbitration award or an application for de novo review on all questions of law based on the arbitrator's finding[s] of fact (which are deemed for such purpose to be stipulated by the parties) . . ." The parties can "agree that legal errors are an excess of arbitral authority that is reviewable by the courts." Cable Connection, Inc. v. DIRECTV, Inc., 44 Cal. 4th 1334, 1347, 1361 (2008).
And so the Court of Appeal independently reviewed questions of law decided by the arbitrator. However, the review did not change the outcome, as the judgment was affirmed.
Arbitration, Equitable Estoppel: 9th Circuit Holds Equitable Estoppel Could Not Be Used To Compel Nonsignatories To Arbitrate, Because The Nonsignatories Did Not Allege Claims Under A Contract, But Rather Under the ADA
Plaintiffs Sued Uber Technologies Under The ADA Because It Did Not Provide Accessible Ride Sharing In New Orleans.
The interesting set of facts in Namisnak v. Uber Technologies et al., No. 18-15860 (9th Cir. 8/24/20) (Nelson, J.), is that the disabled plaintiffs who sued Uber under the ADA because Uber failed to provide an accessible ride sharing program (uberWAV) in New Orleans, failed to make use of the Uber app. And it is using the Uber app that binds the user to an arbitration agreement. By stating claims against Uber, yet not making use of the Uber app, could the plaintiffs nevertheless be bound to arbitrate by the doctrine of equitable estoppel, because it would be unfair for the nonsignatory to rely "on an agreement for one purpose while disavowing the arbitration clause of the agreement."
Here, the plaintiffs did not rely on an agreement with Uber to state their claims. Instead, they relied solely on the Americans with Disabilities Act, and thus equitable estoppel did not apply. Hence, they could not be required to arbitrate.
COMMENT: The court states that "the dispositive distinction in this case", which distinguishes it from similar cases, is that Uber does not offer the uberWAV at all in New Orleans. If Uber did, it would the make sense "that a plaintiff would be required to download the Uber App so that a proper comparison of available services may be made in support of an alleged ADA claim." Under those circumstances, the plaintiff who downloaded the App would be treated as a signatory, and presumably the plaintiff who skipped the reasonable step of downloading the App would be equitably estopped from avoiding arbitration.
Arbitration, FAA: Why Does The Federal Arbitration Act Exempt Transportation Workers From Arbitration?
Rules Of Statutory Interpretation Rather Than History Of The Statute Offer The Best Explanation.
When I posted on August 31, 2020 about Rittmann v. Amazon, the case holding that AmFlex workers who carry out the "last mile" of Amazon deliveries, are exempt from arbitration under the statutory exemption found in 9 U.S.C. section 1, I wondered how that statutory interpretation came to be, and why it is interpreted to exempt transportation workers from arbitration. After all, the key language in the statute makes no mention of transportation workers: " . . . but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." Read that again: there is no reference to transportation workers.
The best answer is to be found in Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), a case in which Justice Kennedy delivered the opinion of the majority. The issue in Circuit City was whether 9 USC section 1 narrowly exempted contracts of employment of transportation workers, or whether it broadly exempted other employment contracts involving commerce, from the FAA's coverage. Justice Kennedy opted for the former, more restrictive interpretation of the statute: it exempts from arbitration transportation workers engaged in interstate commerce.
Commenting "that the legislative record on the § 1 exemption is quite sparse," Justice Kennedy arrived at this interpretation through statutory interpretation. He applied the rule of ejusdem generis to the specific reference to seamen and railroad employees, and concluded that the more general reference to "workers engaged in interstate commerce" must refer to the preceding like kind of persons, i.e., examples of transportation workers. He also explained that his reading of section 1 was consistent with case law concerning section 2, which provides for the validity, irrevocability, and enforceability of a "contract evidencing a transaction involving commerce to settle by arbitration a controversy . . ." Section 2, though it does not specifically mention employment contracts, had been interpreted expansively to include employment contracts, and the section 1 exemption for certain workers would be unnecessary and superfluous if section 2 had been interpreted narrowly to exclude employment contracts, and to only apply to commercial contracts.
So the court in Circuit City arrived at a narrow interpretation of the exemption in section 1, where transportation workers are not mentioned, so as to apply the exemption only to seamen, railroad employees, and transportation workers, and a broad interpretation of arbitration coverage in section 2, where employment is not mentioned, to include employment contracts. This is consistent with the trend in SCOTUS and other courts to support the validity and enforceability of arbitration agreements.
Justice Stevens filed a three part dissent, joined by Justices Ginsburg and Breyer, and in 2 of 3 parts, by Justice Souter. Justice Souter also filed a separate dissent. One must look to the discussion by the dissenting justices for a more extensive discussion of the legislative history of Section 1. The dissenters suggest that opposition to the drafting of the FAA came from organized labor groups concerned that an ability to compel arbitration would result in unfair bargaining situations between businesses and employees. For example, the International Seamen's Union of America raised objections. To meet the objections, the drafters carved out exceptions in an area in which the federal government had already passed a considerable amount of legislation and exercised its commerce powers. Secretary of Commerce Herbert Hoover, who supported the bill, "suggested that '[i]f objection appears to the inclusion of workers' contracts in the law's scheme, it might be well amended by stating "but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in interstate or foreign commerce."'. . . The legislation was reintroduced in the next session of Congress with Secretary Hoover's exclusionary language added to § 1, and the amendment eliminated organized labor's opposition to the proposed law."
Given that the purpose of the drafting changes may have been to meet objections of organized labor that workers engaged in interstate commerce would be compelled to arbitrate, it was perhaps not a foregone conclusion that 75 years later, Section 1 would be interpreted so as only to exempt transportation workers. However, legislative history is often discounted when judges believe they have a simpler path to a satisfactory conclusion via statutory construction. In any case, the Circuit City majority opinion and dissents shed light on how the arbitration exemption for seamen, railroad employees, and workers engaged in interstate came into being — and furthermore, how the catchall phrase came to be limited to "transportation workers."