Settlement, Costs, Fees: First District, Div. 3 Emphasizes Primacy Of Employee-Protective Statutes Over General Cost-Shifting Provisions
Labor Code Sections Prohibiting Cost-Shifting To Employees Prevailed Over Section 998 Cost-Shifting.
The next case does not involve ADR. We blog about it because it does involve settlement offers and cost-shifting.
Employees sued California Collision LLC (CCL) and its owner for labor law violations. The case involved several settlement offers under California Code of Civil Procedure section 998. Jorge Chavez, et al. v. California Collision, LLC et al., A167658 (1/3 12/10/24) (Petrou, Fujisaki, Rodriguez).
The appellate court reversed the trial court’s award of post-offer costs to CCL. It held that Labor Code sections 1194 and 218.5, which prohibit cost-shifting to employees absent bad faith, override section 998 in wage claims.
The court found no abuse of discretion in the trial court’s award of significantly reduced attorney fees to the plaintiffs. It upheld the trial court’s reasoning that the attorney's submitted billing records were inadequately segregated by plaintiff and claim, and his hourly rate was appropriately set at $200 based on the evidence.
Second District CCA Reverses Two Trial Court Rulings That Had Denied Requests To Arbitrate
Stephnie Trujillo v. J-M Manufacturing Company, Inc., B327111 (2/8 12/2/24) (Stratton, Grimes, Wiley).
This case involves an employer's obligation to make timely payment to the arbitrator, as required by statute, or face the prospect of losing the right to arbitrate. The facts are unusual.
Stephnie Trujillo filed a complaint against her former employer, J-M Manufacturing Company (JMM), and four coworkers alleging sexual/gender discrimination, harassment, retaliation, and other claims. The parties entered into a post-dispute arbitration stipulation, which was court-approved. JMM made timely payments to the arbitrator for over a year but failed to pay an invoice within the required 30-day grace period under California Code of Civil Procedure section 1281.98. Despite promptly paying the overdue amount upon notice, Trujillo sought to withdraw from arbitration, citing JMM’s late payment as a material breach under section 1281.98.
The trial court granted Trujillo’s motion to withdraw. On appeal, JMM argued section 1281.98 did not apply because the arbitration was based on a post-dispute stipulation, not a pre-dispute agreement, and JMM was not the “drafting party” as defined in the statute.
The Court of Appeal agreed with JMM, holding section 1281.98 applies exclusively to pre-dispute arbitration agreements where the employer or business is the drafting party. Since the arbitration arose from a negotiated post-dispute stipulation primarily drafted by Trujillo, the statute was inapplicable. The appellate court reversed the trial court’s order and directed reinstatement of arbitration proceedings.
Edgar Gonzalez v. Nowhere Beverly Hills LLC et al., B328959 (2/1 12/3/24) (Kline, Rothschild, Bendix).
In this case, an employee finds himself required by equitable estoppel to arbitrate.
Edgar Gonzalez, a former employee of Nowhere Santa Monica (one of the 10 Nowhere entities operating Erewhon markets in Los Angeles), filed a lawsuit alleging violations of California labor laws, including unpaid wages and failure to provide required breaks. Gonzalez signed an employment agreement with Nowhere Santa Monica that included an arbitration clause. However, his claims were against all 10 Nowhere entities, which he alleged were joint employers.
The trial court compelled arbitration against Nowhere Santa Monica but denied the motion for the other entities, ruling there was no evidence to show equitable estoppel applied. Gonzalez later dismissed his claims against Nowhere Santa Monica.
On appeal, the court reversed the trial court's decision, holding that Gonzalez’s claims against the non-Santa Monica entities were so intertwined with his employment agreement that he could not avoid arbitration. The appellate court found Gonzalez equitably estopped from denying arbitration with the non-signatory entities because his joint-employer theory relied on shared obligations stemming from the employment agreement with Nowhere Santa Monica.
BONUS. Nowhere Beverly Hills LLC operates the Erewhon organic products markets in Los Angeles. Erewhon is an anadrome derived from nowhere — it is nowhere spelled backswards (almost, since the wh did not get reversed). Erewhon: Or, Over the Range, is also the title of Samuel Butler's 1872 novel about a satirical utopia.
Happy Thanksgiving And A Toast To All Our Readers
Happy Thanksgiving!
"A Thanksgiving Truce"
A Thanksgiving Truce. 1905. Puck. Library of Congress description: Illustration shows Theodore Roosevelt, wearing his rough rider uniform, sharing a feast with many wild animals sitting around a large banquet table in the wilderness. A bear is making a toast. "Teddy Jr.", wearing buckskin, is sitting on a rock at a small table with a bear cub.
The bear's toast: The Bear (with deep feeling) — Here's hoping that when next we meet, we see you first.
Mass Arbitration: 9th Circuit Holds Mass Arbitration Approach Employed By Ticketmaster Is Unconscionable
Mass Arbitration Model For Batching Together Claims With Common Legal Or Factual Issues Held To Be Unconscionable.
The Ninth Circuit affirmed the district court's denial of Live Nation and Ticketmaster’s motion to compel arbitration in a Sherman Act antitrust class action. Skot Heckman et al. v. Live Nation Entertainment, Inc.; Ticketmaster, LLC, No. 23-55770 (9th Cir. 10/28/24) (Fletcher, Christen; dissenting, VanDyke). Plaintiffs alleged anticompetitive practices in online ticket sales. The arbitration agreement, involving mass arbitration through a novel entity (New Era ADR), was deemed unconscionable under California law and unenforceable. The court also ruled that the Federal Arbitration Act (FAA) does not preempt California's unconscionability principles or its Discover Bank rule prohibiting class action waivers in consumer adhesion contracts.
Judge VanDyke concurred in the judgment, arguing the FAA does not apply to New Era’s mass arbitration model because it fundamentally deviates from the bilateral arbitration Congress envisioned when enacting the FAA in 1925. Consequently, California’s Discover Bank rule applies, rendering the class action waiver in the agreement unconscionable and unenforceable.
COMMENT: The ruling underscores the difficulty devising fair mass arbitration models. And the concurrence points to the incompatibility of bilateral arbitration with multiparty mass or class arbitration.
Unconscionability, Severance: 9th Maj. Says Arb Agreement Is Unconscionable; Dissent Favors Severance
To Sever Unconscionable Provisions Or Not To Sever . . . That Is The Question.
The Ninth Circuit affirmed the district court’s decision denying USF Reddaway, Inc.’s motion to compel arbitration, finding the agreement procedurally and substantively unconscionable under California law. The court held the arbitration agreement was moderately procedurally unconscionable due to its adhesive nature and oppressive conditions under which it was signed. It also found substantive unconscionability in a one-sided preliminary injunction carve-out and a filing provision imposing notice requirements and a shortened statute of limitations exclusively on the plaintiff. The court determined the multiple unconscionable provisions rendered the agreement permeated with illegality, justifying the refusal to sever them. Jose Emilio Ronderos v. USF Reddaway Inc., No. 21-55685 (9th Cir. Sung, Foote; dissenting, Bennett).
Judge Mark J. Bennett, dissenting, argued the district court erred in declining to sever the agreement’s unconscionable provisions, asserting the agreement was minimally procedurally unconscionable and that the one-sided filing and injunction carve-out provisions were collateral to the agreement’s purpose. Judge Bennett contended these terms could be easily severed without reforming the agreement, preserving its core intent to arbitrate disputes. He emphasized California law’s strong preference for severance and the existence of a severability clause. Bennett criticized the majority’s decision as inconsistent with the FAA’s policy favoring arbitration and accused the court of improperly disfavoring arbitration agreements.
FAA, Interstate Transportation Workers: 9th Circuit Affirms Airline Fuel Technician Falls Within FAA Transportation Worker Exception
Interstate Transportation Workers Are Exempted From Arbitration Under The Federal Arbitration Act.
We have been remiss reporting on 9th Circuit cases since mid-July 2024. Now, we're doing a little catch-up.
An airline fuel technician qualifies as a transportation worker engaged in foreign or interstate commerce, and thus he is exempt from the FAA's arbitration requirements under Section 1. Danny Lopez v. Aircraft Service, Int'l, Inc., and Menzies Aviation (USA), Inc. , No. 23-55015 (9th Cir. 7/19/24) (Rawlinson, Melloy, Thomas). The case reinforces the FAA's exemption for transportation workers, emphasizing the functional role of such workers in facilitating interstate and international commerce.
COMMENT. What is the rationale behind the FAA exemption for seamen and interstate transportation workers? In 1925, when the FAA was enacted, maritime and railroad workers already had developed specialized labor dispute resolution procedures, and perhaps Congress did not want to interfere. Such workers are essential to the flow of commerce, perhaps too explaining their special treatment.