Arbitration, PAGA, FAA, Waiver, Deadlines: Fourth District, Div. 1 Rules California Courts Are Still Bound By Iskanian, Despite SCOTUS Arbitration Cases
Case Contains Rich Discussion Of Arbitration, PAGA, Federal Preemption, And Divergence Of State And Federal Law.
Plaintiffs sued their former employer, alleging wage and hour violations and seeking civil penalties under California's Private Attorney General Act of 2004 (PAGA). Employer successfully petitioned to arbitrate, with one exception: the trial court held that under Iskanian v. CLS Transportation Los Angeles, LLC (2014), the PAGA claim could not be arbitrated, without the consent of the state. A PAGA claim is in the nature of a qui tam action, and the state has a stake in the outcome. Employer appealed the adverse PAGA ruling. Correia v. NB Baker Electric, Inc., D073798 (4/1 2/25/19) (Haller, McConnell, Nares).
The Court of Appeal affirmed. Notwithstanding SCOTUS cases such as Epic and Concepcion, finding that the Federal Arbitration Act (FAA) has broad preemptive scope, the Court of Appeal holds that Iskanian is still good law, because the federal cases did not address the precise question presented by Iskanian, because Iskanian involves a claim for civil penalties brought on behalf of the state, and the enforceability of an agreement barring a PAGA representative action in any forum.
The Court notes that some federal cases have found that, even if an agreement barring a representative action in any forum is unenforceable under Iskanian, Iskanian does not prevent a court from directing a representative action to arbitration. As the Court explains, however, California appellate courts have reached a different conclusion, based on the fact that in a PAGA action, the State of California plays a role.
COMMENT: The Court acknowledges, "[T]here are different ways of viewing a qui tam lawsuit regarding the true claim owner and whether the state and the employee can both be considered to be real parties in interest in the lawsuit for purposes of evaluating an employee's authority to waive rights to bring claims in court." The PAGA claim seems to have a mixed nature, because state authority is required, explicitly or implicitly, for the employee to proceed with the claim, and the state gets 75% of the penalty. On the other hand, the employee brings the claim, and the state does not supervise the litigation. However, the Court explains that at the time of the predispute waiver, the state still retains authority over the claim. Under the Court's reasoning, the state could waive rights to a court forum at the time the dispute arises. Of course, there is no reason to expect that to ever happen.
The opinion also points out a deadline trap for the unwary. The employer argued that plaintiffs' response to its arbitration petition was untimely. Plaintiffs treated the petition as a motion to which a response would be due nine court days before the hearing, but a response is due 10 days after the arbitration moving papers are served. (Code Civ. Proc., section 1290.6). Fortunately for plaintiffs, the Court of Appeal said that it was not clear whether the arbitration petition statute or the general motions statute governed, but in either case, the deadline was not jurisdictional. The safe solution for the practitioner is to calendar the earlier response date.
Arbitration, Conflicts, Stay & Celebrities: Second District, Div. 7 Rules That Disqualification Motion Was Premature While Motion To Compel Arbitration And To Stay Were Pending
The Code Of Civil Procedure 1281.4 Stay Is Mandatory.
Top Kick Productions, Inc., Chuck Norris's production company, sued CBS Broadcasting Inc. over allegations of what might be characterized as Hollywood Accounting. CBS moved to compel arbitration, and to stay the litigation pursuant to CCP 1281.4, while Top Kick had a pending motion to disqualify CBS's attorneys based on conflict of interest. In true kick-ass Walker, Texas Ranger style, Top Kick convinced the trial court to hear the disqualification motion first, and to deny the stay request. Next, CBS obtained a temporary stay in the Court of Appeal, and the Court issued an OSC to determine whether the trial court had abused its discretion by denying the stay. CBS Broadcasting Inc., et al., Petitioners, v. Superior Court of Los Angeles County, Respondent; Top Kick Productions, Inc., et al., Real Parties in Interest, No. B292277 (2/7 2/21/19) (Zelon, Segal, Feuer) (not for publication).
The Court held that the trial court erred, because the 1281.4 stay is mandatory, once a petition to compel arbitration is brought. So now the stay will go into effect, the motion to compel arbitration will be heard, and if the motion is granted, then the arbitrator would get to rule on the disqualification motion.
The Court acknowledged that there are New York state law cases and federal law Second Circuit cases providing disqualification is not a matter for arbitrators to determine, but explains those cases are contrary to California law where disqualification motions have been decided by arbitrators. Furthermore, the Court acknowledges a situation might arise where the issue of disqualification is intertwined with the issue of arbitrability "so that the potentially disqualified lawyer should not be permitted to argue the motion to compel". However, because Top Kick conceded the disqualification motion had nothing to do with arbitrability, the Court did not need to address the issue.
The opening theme to Walker, Texas Ranger, is available on YouTube:
Existence Of Arbitration Agreement: First District, Div. 3 Finds Substantial Evidence Supports Court’s Ruling That Binding Arbitration Took Place
Either Defendants Authorized Their Attorney To Agree To Binding Arbitration Or They Ratified The Agreement.
Defendants and Plaintiffs arbitrated their dispute, the arbitrator's award was in favor of Plaintiffs, and Defendants appealed the judgment confirming the award. Dean v. Amado, A147660 (1/3 2/20/19) (Jenkins, Siggins, Pollak) (not for publication).
Defendants' argument rested on the fact that their attorney, while agreeing in writing to arbitrate, did not believe he was agreeing to binding arbitration, and on Toal v. Tardif, 178 Cal.App.4th 1208 (2009), "in which the attorney's signed agreement to arbitrate, 'standing alone,' was not enough."
However, here, there was more. The parties had previously mediated, so it didn't make much sense to treat the arbitration as another attempt at ADR. The Defendants' attorney had indicated that the parties would not move forward with a trial, because they were going to "binding arbitration." The Defendants paid for the arbitration, and participated in the arbitration. The arbitrator told the parties he would act as a judge and issue a decision, and thereafter issued a final award.
And there was what the trial court characterized as a "credibility gap." If the Defendants' attorney always believed the arbitration was non-binding, he never said so, until Defendants received an unfavorable ruling.
In short, substantial evidence supported the ruling of the Superior Court judge. Affirmed.
Mediation, Miscellaneous: A Century After The Neutral Conference For Continuous Mediation And Henry Ford’s “Peace Ship”
A Century After A Failed Attempt At International Mediation . . .
1916, February? "Photograph shows members of the neutral European nations who met with the Henry Ford Peace Expedition in Stockholm, Sweden probably in February, 1916 and formed the Neutral Conference for Continuous Mediation." Library of Congress.
Without a case to post about today, I decided to post this photo of participants in the Neutral Conference for Continuous Mediation. The Jane Addams Digital Exhibition describes the Conference: "The Neutral Conference for Continuous Mediation began in Stockholm on February 10, 1916. It was organized by members of Henry Ford's 'Peace Ship' with the goal of encouraging the governments of neutral nations to negotiate a peaceful end to World War I."
The mission of the Peace Ship ultimately failed, but not before the press weighed in. A 1915 cartoon from Punch is below:
Arbitration, Unconscionability, Employment: Second District, Div. 7 Reverses Order Denying Motion To Compel Arbitration, Finding No Substantive Unconscionability
Arbitrator's Discretion To Limit Discovery Did Not Amount To Substantive Unconscionability.
Finding "some procedural unconscionability", but not substantive unconscionability, the Court of Appeal reversed Judge Michael L. Stern's order denying defendants' motion to compel arbitration. Spaulding v. PJCA-2, LP et al., B285996 (2/7 2/11/19) (Segal, Zelon, Feuer) (unpublished). The Court held that the arbitration agreement, which gave discretion to the arbitrator to limit discovery according to the needs of the case, did not create substantive unconscionability. And since both procedural and substantive unconscionability must be present to hold the arbitration agreement unenforceable, the agreement was enforceable.
COMMENT: The employee alleged that he was compelled to sign the arbitration agreement if he wanted to continue to work. He scribbled his name illegibly, and wrote "UD", intending to mean "under duress." "Some procedural unconscionability"? What does that mean? A tittle, a smidgeon, a whit, a lot? The Court finessed analytical precision by finding an absence of substantive unconscionability.
Miscellaneous: Folk Singer John Kirkpatrick Sings “The Farmers And The Cow”
In Praise Of Mediation? . . .
You may have seen the famous print of the farmers fighting over a cow. One pulls the head, the other the tail, while the lawyer sitting on a stool milks the cow. The folk singer John Kirkpatrick sang the song "The Farmers and the Cow", and his rendition is available on YouTube by clicking here.
The chorus goes:
One Farmer pulled its head and the other one pulled its tail,
And over it they had a jolly row, hello,
And both to law they went, and all their money spent,
Whilst the lawyer kept a-milking of the cow, cow, cow,
Whilst the lawyer kept a-milking of the cow.
A copy of the print that inspired the song is available from Wildy & Sons Ltd., law booksellers: