Arbitration, Employment, Choice Of Law: California Choice Of Law Provision Does Not Mean Employee Gets To Avoid Arbitration
Choice-Of-Law Provision Is Interpreted To Exclude Special Rules Limiting The Authority Of Arbitrators Where The Federal Arbitration Act Governed The Agreement.
California Labor Code section 229 provides that wage disputes "may be maintained without regard to the existence of any private agreement to arbitrate." In Bravo v. RADC Enterprises, Inc., B289506 (2/8 3/29/19) (Wiley, Grimes, Adams), the trial court had interpreted a California choice-of-law provision to mean that a store manager could avoid arbitrating his wage dispute with his employer. On appeal, the Court reversed the part of the order denying arbitration of claims (except for a PAGA claim that did not need to be arbitrated).
As the Court of Appeal noted, the "first textual clue" that the parties intended to arbitrate was in the title of the parties' agreement: "'ARBITRATION AGREEMENT.' This agreement is for arbitration and not against it."
So how was California law to be applied? The Court interpreted the California choice-of-law provision to mean that California substantive law principles were to be applied, but that "special rules limiting the authority of arbitrators" were to be excluded.
Arbitration, PAGA: Second Dist., Div. 2 Sides With Courts Holding PAGA Claim Cannot Be Split
The Splitting Issue Is Also Pending Before The California Supreme Court.
Splitting log, tie-cutting camp, Pie Town, New Mexico. Russell Lee, photographer. June 1940. Library of Congress.
There are still Private Attorneys General Act of 2004 (PAGA) issues that need to be definitively resolved. One such issue is the subject of Zakaryan v. The Men's Wearhouse, Inc., B2891912 (2/2 3/28/19) (Hoffstadt, Ashmann-Gerst, Chavez):
If an employee brings a solitary PAGA claim, may a trial court split that claim — that is, may the court send the employee to arbitration (when he has agreed to it) to recover his underpaid wages but retain jurisdiction to award the additional statutorily prescribed amounts?
No, holds the Court in Zakaryan, the claim may not be split. This holding is in accord with Lawson v. ZB, N.A., 18 Cal.App.5th (2017), a case currently pending before the California Supreme Court. However, the holding is in disagreement with Esparza v. KS Indus., L.P., 13 Cal.App.5th 1228 (2017), which allowed the wage claim to go to arbitration, while retaining jurisdiction over the statutory penalties.
So why did the Court publish in Zakaryan? Perhaps because it is not in agreement with Esparza, and disagrees too with a "subsidiary holding" on which Esparza and Lawson were united. As the Court explains, "Larson . . . agreed with Esparza's subsidiary holding that the individual PAGA plaintiff (and, presumably, his coworkers) are entitled to 100 percent of the underpaid wages. . . . We . . . disagree with its subsidiary holding regarding the allocation of the 'civil penalties' recovered." PAGA is in the nature of a qui tam action, in which the private party acts as a proxy for the state's labor law enforcement agencies. PAGA offers "a singular penalty" allowing the state agency to get 75% of both the underpaid wages and the penalties. That's how the Zakaryan Court sees it, relying on the wording of the PAGA statute. Section 2699, subd. (i).
Arbitration, Gateway Issues, Delegation, Severability, FAA: Court Had Authority To Adjudicate Enforceability Of Arbitration Agreement, Where Party Specifically Challenged The Arbitration Agreement
Opinion Explains How Contract And Arbitration Agreement Are Treated As Separate Agreements.
Jackpot Harvesting, Inc. v. Applied Underwriters, H044953 (6th Dist. 3/28/19) (Danner, Greenwood, Grover), provides a detailed discussion of whether the court or the arbitrator has authority to enforce an arbitration agreement, and how the concept of "severability" helps the analysis.
Applied Underwriters offered workers' compensation insurance to Jackpot Harvesting, Inc. and related companies through a number of agreements, one of which was entitled "Request to Bind" and which contained an arbitration agreement. Jackpot sued Applied, believing Applied mishandled claims and failed to disclose how premiums were calculated. Applied moved to compel arbitration, the trial court denied the motion, and Applied appealed. The important threshold question was whether the trial judge had the authority to decide the gateway issue of arbitrability, or whether that issue was one for the arbitrator to resolve.
The parties agreed that the Federal Arbitration Act supplied the governing law, and the FAA carries with it a strong policy in favor of enforcing arbitration provisions. Of course, the parties could have included a "delegation clause" specifying who had authority to decide gateway issues. But the arbitration provision did not include a delegation clause.
In such a situation, SCOTUS applies "the severability principle." The challenge to the validity of an arbitration agreement or delegation clause is treated separately from a challenge to the validity of the entire contract. In effect, the contract between the parties, and the arbitration provision, are analyzed as two separate contracts. "Unless a party specifically challenges the validity of the agreement to arbitrate, both sides may be required to take all their disputes — including disputes about the validity of their broader contract — to arbitration." New Prime Inc. v. Oliveira, 139 S.Ct. 532, 539 (2019).
Applied argued that the New Prime approach required an "analytically distinct" attack on the arbitration provision — in other words, an attack distinct from the attack on the contract as a whole. While conceding that there is "some support" for that position, the Court of Appeal says that it hasn't been shown a SCOTUS case requiring that the "substance of the challenge to the arbitration agreement must differ in all respects from the challenge to the underlying agreement." But this is dictum, because the Court of Appeal then found a distinct challenge to the arbitration provision in the Request to Bind: the Request to Bind was "a collateral agreement" triggering statutory filing and regulatory approval requirements under the Insurance Code and regulations, and "a contract made in violation of a regulatory statute is void."
So the arbitration provision is specifically challenged. Found to be made in violation of a regulatory statute, the arbitration provision crashes and burns, leaving the trial judge with the authority to adjudicate the enforceability of the arbitration agreement. The denial of the motion to compel arbitration is AFFIRMED.
Arbitration, Construction Of Agreement, Employment, Enforceability: Court of Appeal Remands Case To Determine If Plaintiff Was Represented By Counsel When She Signed Arbitration Agreement
Language Of Arbitration Agreement Was Sufficient To Require Arbitration, But . . . .
In Salgado v. Carrows Restaurants, Inc., B285756 (2/6 2/26/19) (Gilbert, Yegan, Tangeman), the trial court denied employer's motion to compel arbitration, on the grounds that "Defendants have failed to demonstrate that the arbitration agreement applies to a suit that was filed prior to its signature." However, the Court of Appeal reversed, concluding the language of the arbitration agreement, which covered claims "related in any way to my application for employment and/or employment" was broad enough to cover the prior dispute.
However, the Court also remanded, to determine if the employer knew when the employee signed the arbitration agreement, that she was represented by counsel. Plaintiff's attorney stated his client was "forced to sign" at a time the lawsuit had already been filed, the employer's restaurant manager had been served with the lawsuit, and the attorney was representing his client in the lawsuit.
COMMENT. We will be interested to learn if, on remand, the facts provide a basis for making the arbitration agreement unenforceable. Unconscionability? Duress? And if Defendant's counsel knew of the lawsuit, we could see a problem if an end-run was done around Plaintiff's counsel, though ordinarily the parties can deal directly.
In the first paragraph, the opinion states, "[W]e remand to determine a factual issue where time is not relative, but relevant." That, plus knowing the opinion issued from the Ventura County Court of Appeal, was all the information I needed to know that the opinion was penned by Justice Gilbert, who knows how to turn a phrase.
Federal Arbitration Act: Fifth District Holds That Truck Driver Engaged In Interstate Commerce Is Exempt From FAA Arbitration Requirement
Driver Did Not Need To Cross State Lines To Engage In Interstate Commerce.
The Federal Arbitration Act contains a statutory exemption for "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. section 1 (italics added). Thus, a truck driver engaged in interstate commerce is exempted from arbitration under the FAA.
The issue in Nieto v. Fresno Beverage Company, Inc., F074704 (5th Dist. 3/22/19) (Detjen, Franson, Desantos) was whether a truck driver who did not cross state lines "engaged in interstate commerce." Here, the facts were that the driver traveled in California, while delivering beverages that arrived from out-of-state. Under those facts, the flow of the goods was in interstate commerce, and plaintiff Nieto's deliveries "although intrastate, were essentially the last phase of a continuous journey of the interstate commerce . . ." Hence, the trial court concluded that Nieto was engaged in interstate commerce, was not required to arbitrate under the FAA, and could proceed in court with wage and hour claims brought under California law. The Court of Appeal affirmed.
Ethics, Miscellaneous: Fourth District, Div. 3 Opinion Affirms Judgment Denying Attorney’s Fees And Refers Attorney To State Bar For Misconduct
Marc Alexander (This Blogger) And Mike Hensley Represented Defendants In Their Successful Response To This Appeal.
Today* we stray from our usual beat, California mediation and arbitration, to mention an appeal resulting in a partially published opinion. Why? Because this blogger, Marc Alexander, was involved, and because his long-time colleague Mike Hensley, with whom Marc contributes to the California Attorney's Fees blog, also participated. The case is Martinez v. O’Hara, et al., G054840 (4th Dist. Div. 3 February 28, 2019) (published in part). Justice Fybel, Acting. P.J., authored the opinion, joined by Justices Ikola and Thompson. In an unpublished part of the opinion, the case affirmed a judgment denying attorney's fees to the plaintiff/appellant. In the published part of the opinion, the panel referred plaintiff/appellant's attorney to the State Bar.
The opinion was partially published to send a message: "The notice of appeal signed by Mr. Pavone on behalf of plaintiff referred to the ruling of the female judicial officer as ‘succubustic.’ A succubus is defined as a demon assuming female form which has sexual intercourse with men in their sleep. We publish this portion of the opinion to make the point that gender bias by an attorney appearing before us will not be tolerated, period." The Court was also unhappy that the attorney accused the judicial officer of intentionally not following the law, without evidence.
The case has garnered some attention:
1. Kevin Underhill, the author of the "Lowering the Bar" blog, has blogged about the case under the heading, "Succubustic": Is It a Word You Should Use to Describe a Judge?
2. Debra Cassens Weiss, ABA Journal, Lawyer's 'succubustic' claim should be reported as gender bias to state bar, court concludes.
3. Bloomberg Law, California Lawyer in Hot Water for Sexist Insult of Judge.
4. Law360, Calif. Judges Slam Atty For Gender Remarks: Not OK, Period.
5. Justia, Legal Ethics Opinions.
6. Metropolitan News-Enterprise, Lawyer Who Likened Court Commission To Sex-Crazed She-Demon Is Chastised.
7. David C. Carr, California Legal Ethics, Court of Appeal Cites Lawyer to State Bar for Referring to Female Judge as "Succubistic."
8. Dane S. Ciolino, Louisiana Legal Ethics, Lawyer Sanctioned for Calling Trial Judge "Succubustic."
9. Michael J. Simkin, Legal Secrets, Professionalism Trumps Freedom of speech in the courtroom (which is a good thing) Bus. Code section 6068(b).
10. Heather Stern, Women Lawyers Association of Los Angeles, March 2019-President's Message.
11. William Vogeler, Strategist, Protip: Don't Call a Judge a 'Succubus'.
12. Edward McIntyre, Take Note — Courts Have Dictionaries.
13. 111 North Hill Street, Don't Do This.
14. Brian I. Hamblet, Martinez v. Stratton O'Hara: What you say (to the Court of Appeal) can and will be used against you.
15. California Attorney's Fees.
*This post has been updated since it originally appeared.