Arbitration, Construction Of Agreement, Reference: Trial Court Properly Denied Motion To Compel Arbitration Or For A Reference
An Order Denying A Judicial Reference Is Not Appealable, Even When Coupled With An Order Denying Arbitration, Which Is Appealable.
A frequent source of confusion with motions to arbitrate is an arbitration provision that refers to both the Federal Arbitration Act (FAA) and California law. Indeed, that was the source of confusion (somewhat amplified, as the Court of Appeal ultimately determined there was no ambiguity) in J.H. Boyd Enterprises, Inc. v. Kenneth Robert Boyd, F078292 (5th Dist. 9/10/19) (DeSantos, Smith, Meehan).
Defendants/Appellants, the Boyd Trust, moved to compel arbitration after their tender of payment of a promissory note to J.H. Boyd Enterprises, Inc., was rejected. It was clear that an agreement between the Boyd Trust and J.H. Boyd Enterprises, Inc. included a broad arbitration clause that governed the dispute over the refusal to accept the tender. However, there was an exception: If California law governed a dispute that involved a promissory note secured by property, as happened to be the case here, then arbitration could not be compelled, unless J.H. Boyd Enterprises, Inc. elected to arbitrate, which it assuredly did not do. And as many arbitration agreements do, this one provided that any arbitration proceeding shall be governed by the FAA.
So was the dispute governed by California law or the FAA? Basically, the Court of Appeal concludes that even if the FAA applies to an arbitration proceeding, the parties agreed to arbitrate this particular dispute, alleged in the complaint to involve a defaulted promissory note, by applying ordinary state law principles. The term "Dispute" was defined to encompass "any dispute, claim or controversy", which encompassed a promissory note default, and forum was not included in the definition of Dispute.
Defendants/Appellants alternatively sought a reference, and that too had been denied by the trial judge. We see plenty of cases involving orders denying motions to compel arbitration, but orders denying a motion to deny a reference? Not so much. The short answer here is that orders denying a motion to compel a reference are not appealable.
However, Appellants made a rather ingenious argument. Orders denying a motion to arbitrate are appealable, and Code of Civ. Proc. section 1294.2 creates ancillary appellate jurisdiction over orders affecting appealable arbitration orders. For example, if the Court denies an order to compel arbitration and to deny a stay, ancillary jurisdiction exists to consider the denial of the stay. No go here. The ancillary jurisdiction that allows an appeal of the order denying a stay is necessary to effectuate an appellate ruling on an arbitration order. An appellate ruling allowing arbitration becomes pointless if the litigation is not stayed. But that's not the case here, where review of the order denying the reference is not necessary to effectuate the order denying arbitration. It's apples and oranges.
Settlement Agreements: Judgment Creditor’s Release Of Judgment Debtor Does Not Preclude Her Attorney From Pursuing Contingency Fee and Costs From Judgment Debtor
The Trial Judge Thought Something Didn't Seem Right.
An opinion from the Second District, Division 6, begins snappily: "Of course, on occasion, a client may not fully appreciate the excellent result achieved by her or his attorney." And of course, the author is Justice Gilbert. Mancini & Associates v. Jason Schwetz, B290498 (2/6 9/4/19).
The background is that Mancini & Associates obtained a substantial jury award for their contingency fee client Gina Rodriguez, who had sued her employer for wrongful termination, sexual harassment, sexual battery, and breach of contract, among other causes of action. The award proved to be uncollectable. Some years later, Rodriguez and her former employer, Jason Schwetz, buried the hatchet, and entered into a settlement agreement and release, without consideration.
Mancini & Associates sued Schwetz and the trial court decided Mancini "established that Schwetz intentionally interfered with the retainer agreement and . . . entered judgment for $409,351,351.81. "In ruling, the trial judge commented, 'Something about this [factual situation] doesn't seem right. It's inconsistent. Sometimes I see this happen, this sort of resolution when there is evidence of a kind of romantic relationship that's been rekindled . . . '"
Justice Gilbert asks, "Does this release preclude the attorney from pursuing his costs and fees from the defendant?" And answers: "Of course not."
Reviews: Government Regulation And Citizen Safety – Three Book Reviews By Our Blogger
The Book Reviews Are In The Current Issue Of California Litigation.
California Litigation, the journal of the California Lawyers Association, has published an article with three of my book reviews in its current issue, Vol. 32, No. 2, 2019. With the permission of California Litigation, I am making the article available if you click here. Any opinions expressed are those of the author alone, and for which the author alone, and not the California Lawyers Association, is responsible.
From the article:
"Our government has been described as an insurance conglomerate and a large army. A core function of government is identifying and managing risk to protect the public from harm. The thread tying together the three books under review is government’s ability to manage risk. Dark Tide, about a horrific industrial accident, has been reissued in time to mark the 100th anniversary of the great molasses flood of 1919 that killed 21 people and devastated the North End of Boston. The Poison Squad, about the efforts to protect the public from dangerous and adulterated food, focuses on a heroic public servant. And, The Fifth Risk is about contemporary neglect, incompetence, and short-sightedness in federal agencies."
Arbitration, Nonsignatories, Unconscionability, Standard Of Review: 4th District, Division 3 Affirms Order Denying Nursing Home’s Petition To Compel Arbitration
Daughter's Signature Did Not Bind Her Individually Or As Successor In Interest.
Nursing home arbitration agreements continue to generate plenty of cases. In fact, we have posted about arbitration and nursing homes a number of times. See, for example, our posts of 3/27/2012, 5/21/2012, 11/5/2013, 8/5/2016, 11/1/2016, 2/23/2017, and 7/25/2019. Why are nursing homes such a fertile ground for litigating the enforceability of arbitration agreements? Some thoughts: people die in nursing homes, sometimes from natural causes, sometimes as a result of negligence; sometimes the details of care are pretty gross; nursing homes do not want to try cases before a jury; patients and their relatives do not want to try cases to an arbitrator; the old and the sick may not be competent to authorize an agent to sign on their behalf; admission to a nursing home may occur under exigent and stressful circumstances, so i's may not be dotted and t's may not be crossed.
Our next case, Lopez v. Bartlett Care Center, LLC, et al, G056249 (4/3 8/28/19) (Aronson, O'Leary, Goethals) illustrates several of these aspects. The patient, Irene Lopez, suffered from "diabetes, dementia, end-stage renal disease, generalized muscle weakness, and other debilitating conditions." After complaining about pain in the nursing home, the mother was diagnosed with serious bedsores, wet gangrene, and sepsis, requiring a leg amputation. Three weeks later, the mother died.
Amputating the shattered leg of a wounded soldier, operating room the Military Reserve Hospital, Hiroshima, Japan. circa 1905. Library of Congress.
Her daughter, Jasmine, signed an arbitration agreement, and the nursing home argued that the daughter was bound to arbitrate in her individual capacity and as a successor in interest. However, Jasmine and the nursing home offered "a starkly different picture" of the circumstances under which the agreement was signed, with the nursing home claiming the mother was present and assented to the daughter signing, and the daughter denying that the mother was present, or that the the daughter was authorized to sign on behalf of the mother. Also, the agreement purported to bind the daughter in her individual capacity, but the agreement was supposedly a "RESIDENT-FACILITY ARBITRATION AGREEMENT." The daughter denied that the nursing home brought the arbitration agreement to her attention and explained it to her. The trial judge believed the daughter, and the Court of Appeal explained that it was guided in its assessment by the standard of review when the trial court's order is based on a decision of fact. An agent derives her authority from the principal, and substantial evidence supported the trial court's finding that Jasmine lacked authority to waive her mother's trial rights.
The Court of Appeal also held that the trial court properly found the arbitration agreement unenforceable due to unconscionability. Among other things, the agreement was substantively unconscionable, because it required the mother to arbitrate all her claims, while exempting the most likely of the nursing home's claims from arbitration, namely evictions and collections.
COMMENT: The nursing home argued the agreement was not one-sided because, "Both residents and [the Facility] might make claims pertaining to evictions and collections" . . . The Court of Appeal stated, "[t]he argument is absurd." The nursing home did succeed on one point: the Court of Appeal ordered that the word "absurd" be deleted and replaced with the word "frivolous".
Construction And Enforceability Of Arbitration Agrement: Broad Arbitration Agreement May Be Applied Retroactively
Employee's Claims Arose Before He Signed Arbitration Agreement.
Is an arbitration agreement enforceable when the employee's claim arises before he signs the arbitration agreement? Yes, says the Court of Appeal in Franco v. Greystone Ridge Condominium, et al., G056559 (4/3 8/27/19) (Fybel, Aronson, Thompson). In this case, "[t]he parties' arbitration agreement is clear, explicit, and unequivocal with regard to the claims subject to it and contains no qualifying language limiting its applicability to claims that had yet to accrue."
The employees of Greystone, including plaintiff, had been presented with an arbitration agreement to sign. Instead of signing, plaintiff consulted with an attorney, and about ten days after receiving the agreement, filed claims for employment discrimination and wage and hour claims. Two days later, he signed the arbitration agreement. The trial court, finding that the agreement could not be applied retroactively, held that the the employee could not be compelled to arbitrate. The Court of Appeal reversed, interpreting the clear and broad language of the agreement not to be limited to prospective claims.
COMMENT: Under California law, the result would be different if the employer had unilaterally made the changes, and the employee had continued to work, without expressly agreeing to the changes. Under those circumstances, the implied covenant of good faith and fair dealing would require an interpretation that the unilateral change was intended to be prospective only. In Franco, however, unilateral modification of the arbitration agreement was not involved, because it was not disputed that the plaintiff agreed to the arbitration provision.
Arbitrability: Ninth Circuit Holds That ERISA Claims Can Be Subject To Mandatory Arbitration
Intervening Supreme Court Law Means Earlier Ninth Circuit Law Is No Longer Good Law.
ERISA claims may be the subject of mandatory arbitration: that's the holding and threshold issue in Dorman v. Charles Schwab Corp., 18-15281 (9th Cir. 8/20/19) (Pearson, Gould, Ikuta). To reach this result, the panel needed to conclude that Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1984), holding that ERISA claims were not arbitrable, was no longer good law. And the panel did so conclude, based on intervening Supreme Court case law, specifically, American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013).
The Amaro panel reasoned that "ERISA mandated 'minimum standards [for] assuring the equitable character of [ERISA] plans' that could not be satisfied by arbitral proceedings." But American Express, a recent Supreme Court case, held there is nothing unfair about arbitration, even on an individual basis, as long as individuals can vindicate their statutory rights in the arbitral forum.
In an unpublished memorandum opinion, the Ninth Circuit held that the specific arbitration clause in Dorman was enforceable.
COMMENT: In American Express, Justice Kagan, dissenting, wrote: "No rational actor would bring a claim worth tens of thousands of dollars if doing so meant incurring costs in the hundreds of thousands." Her "nutshell version" of the majority opinion in American Express Co.: "Too darn bad."