Vacatur: First District, Div. 1, Refuses To Vacate Award For Alleged Lack Of Opportunity To Present Evidence, Ambiguity, Or Lack Of Jurisdiction
A Textbook Example Of How Difficult It Is To Challenge An Arbitration Award.
Our next case involved a family dispute in the California wine industry, following the death of the family patriarch. Nickel v. Far Niente Wine Estates, LLC, et al., A150513 (1/1 12/29/17) (unpublished).
Affirming the trial court's denial of plaintiffs/appellants' petition to correct or vacate the award, the Court of Appeal gave short shrift to three arguments.
First, the Court rejected plaintiffs' argument that the arbitration award should be vacated or corrected because plaintiffs were denied an opportunity to respond to late evidence. The Court explained that the arbitrator did not refuse to consider evidence, and that plaintiffs also failed to make a required a showing of prejudice.
Second, the Court rejected an argument that the award needed to be vacated or corrected because an included award of injunctive relief was ambiguous. Changing the award would not have amounted to a minor correction, but rather to a substantive change — and the Court was not entitled to make such a change in connection with a request to correct the award. Nor could the award be vacated simply because there was a mistake of law or fact.
Third, the Court of Appeal deferred to the arbitrator's decision that the arbitrator had jurisdiction to decide certain water rights issues. For one thing, the parties had agreed to proceed under JAMS rules, and rule 11 provides that the arbitrator will resolve jurisdictional and arbitrability disputes. Even absent the incorporation of JAMS rules, California case law provides, "courts should generally defer to an arbitrator's finding that determination of a particular question is within the scope of his or her contractual authority." Advanced Micro Devices, Inc. v. Intel, 9 Cal.4th 362, 372 (1994).
Once again, we have an example of the considerable obstacles that a disappointed party must overcome to successfully challenge an arbitration award.
HAPPY NEW YEAR 2018 TO ALL OUR READERS !
New Year Resolutions — Till They Melt ! Punch. 1913. Library of Congress.
Arbitration, Federal Arbitration Act, Public Policy: 9th Circuit Holds That FAA Does Not Apply To Agreements Between Prosecutors And Citizens Resolving Alleged Criminal Violations
And Such An Agreement To Arbitrate Disputes Invoking The Criminal Law Would Be Contrary To Public Policy.
The context for our next case is California's Bad Check Diversion Program (Program), created to relieve California courts of the case overload caused by the criminalization of the writing of bad checks with intent to defraud. The statutory scheme allows district attorneys to contract with private parties to administer the Program, and participants who are diverted from the courts to the Program are given an opportunity to provide restitution, take a class, and pay fees. Victim Services, Inc. (VSI) is a private administrator under the Program. Defendants who elect to participate in the Program are subject to an arbitration provision purporting to be enforceable under the FAA, and entered into between the district attorneys and the private administrator.
When plaintiffs sued VSI for violations of state and federal consumer-protection laws, VSI filed an anti-SLAPP motion, and also sought to arbitrate with the only plaintiff who had elected to participate in the Program. The district court denied the anti-SLAPP motion on the grounds that the case was within the so-called "public interest exception" to an anti-SLAPP motion, and also held that the FAA did not apply to an agreement between a criminal suspect and local authorities about how to resolve a potential state-law criminal violation. VSI unsuccessfully appealed. Breazeale v. Victim Services, Nos. 15-16549 & 16-16495 (9th Cir. 12/27/17) (Schroeder, Tallman, Whaley).
We focus on the arbitration issue only.
The FAA applies to private commercial agreements. Judge Schroeder explains, "[a]gainst this historical backdrop, it is apparent that Congress never contemplated that the FAA would apply to agreements between prosecutors and citizens resolving alleged violations of a state's criminal law." Therefore, the FAA did not apply to the particular agreement here.
The Court was left to consider whether California state law required that arbitration be compelled. On this point, the Court agreed with the district court's ruling "that an agreement to arbitrate disputes invoking the criminal law would be contrary to public policy."
COMMENT: There are some situations in which the state's involvement in an arbitration agreement, and state interests, provide a reason to avoid FAA preemption and enforcement of arbitration. Breazeale is an example of a case in which the state's involvement in the criminal system, something altogether different from a normal commercial transaction, provides a reason to avoid compelling arbitration. The other outstanding example is provided by Iskanian, dealing with efforts by employers to compel arbitration of Private Attorney General Act of 2004 (PAGA) employee representative actions, brought on behalf of the state, against employers. The state has an interest in enforcing its labor laws by incentivizing private parties through the qui tam PAGA scheme to enforce the labor laws, and the California Supreme Court has viewed the state involvement and interest as a reason not to enforce an agreement between the employee and employer to arbitrate PAGA claims.
Reviews: Ari Berman’s “Give Us The Ballot”
Your Blogger Has Authored A Review Of Ari Berman's Book About The Voting Rights Act Of 1965.
I've written a review of Ari Berman's book, "Give Us The Ballot." The review, which appears in the latest issue of California Litigation, The Journal of the California State Bar, is republished here, with the permission of the State Bar.
HAT TIP to Professor Justin Levitt at Loyola Law School, Los Angeles, for providing us with a link to his excellent article, The Party Line: Gerrymandering at the Supreme Court, also appearing in California Litigation, Vol. 3, No. 3 (2017).
Arbitration, Discovery, FAA: Ninth Circuit Holds FAA Does Not Grant Arbitrators Power To Order Third Parties To Produce Documents Prior To An Arbitration Hearing
Ninth Circuit Joins Majority Of Circuits On Issue That Divides The Circuits.
Based on a reading of the "plain meaning" of the Federal Arbitration Act, specifically, 9 U.S.C. section 7, the Ninth Circuit holds: "[T]he FAA does not grant arbitrators the power to order third parties to produce documents prior to an arbitration hearing."CVS Health Corporation, et al. v. Vividus, LLC, et al., No. 16-16187 (9th Cir. 12/21/17) (Gritzner,1 Gould, Murguia). In so holding, the 9th Circuit joins the 2nd, 3rd, and 4th Circuits.
The 9th Circuit focused on the language in section 9, providing arbitrators the power to "summon in writing any person to attend before them . . . as a witness," and to compel such person "to bring with him or them" relevant documents. Because the power to summon a person to bring documents is tied to a person who is summoned "to attend" before the arbitrator, the Court read the plain meaning to be that document production only can happen at the arbitrator's hearing. There is no explicit provision in the FAA for pre-hearing discovery, and the policy rationale is that this places less of a burden on third parties who have not agreed to the jurisdiction of the arbitrator.
COMMENT: The Eighth Circuit takes the position that the arbitrator has an implicit power to subpoena relevant documents for production pre-hearing, and that such power is implicit in the power to summon relevant documents for production at a hearing.
The Ninth Circuit holding in CVS Health Corporation highlights a limitation in arbitration that will burden the party to the arbitration most in need of discovery from third parties. Of course, as between the parties to the arbitration, the parties could contractually agree to more expansive discovery, and that would not affect the right of third parties to resist pre-hearing discovery.
1The Hon. James. E. Gritzner, USDC Judge for S. District of Iowa, sitting by designation.
Arbitration, PAGA, Appealability: Fourth District, Div. 1 Holds That Trial Court Erred By Bifurcating Underpaid Wages Portion Of PAGA Claim And Ordering Arbitration Of That Part Of Claim
Civil Penalties Or Victim Specific Statutory Damages?
Lawson v. ZB, N.A. et al., and ZB, N.A., et al. v. Superior Court of San Diego, D071279 & D071376 (4/1 12/19/17) (Benke, Huffman, Haller), is the latest skirmish in the ongoing battle waged between employers and employees over whether Private Attorney General Act of 2004 (PAGA) claims can be arbitrated.
The trial court granted appellant ZB, N.A.'s motion to arbitrate, bifurcating an underpaid wages portion of the employee's PAGA claim and ordering arbitration as a representative action of that portion of the claim, brought under Labor Code section 558. ZB appealed the trial court's order. Evidently ZB didn't want to deal with a representative action in arbitration, and ZB argued that the employee had waived the right to bring a class or representative action. In any case, the Court of Appeal held that an order compelling arbitration is not appealable, instead ruling on the issue when raised by way of a petition for a writ of mandate.
Section 558 of the Labor Code requires payment of underpaid wages, and also provides for civil penalties of $50 for a first violation, and $100 for further violations. The seemingly dual nature of this Labor Code provision opened the door for ZB to argue that the underpaid wages issue needed to be arbitrated, because it was in the nature of a private claim belonging to the employee, unlike PAGA penalties which are obtained on behalf of the State. In fact, ZB didn't even ask the trial court to order abitration of the $50 and $100 amounts provided for as penalties in section 558.
The Court of Appeal now holds that section 558 provides for civil penalties, and "hence claims under section 558, including claims for underpaid wages, are cognizable under the PAGA." Therefore, the claim for underpaid wages is a claim that the employee cannot waive as a representative action, and cannot be forced to arbitrate. The Court also explains that section 558 claims do not create an "express right of private enforcement and instead a regulatory agency has been given the right to enforce the statute . . . "
So: (1) the appeal is dismissed; (2) the writ is granted; (3) the order bifurcating the 558 claims and ordering the underpaid wage part to be arbitrated is vacated; (4) the motion to arbitrate is denied. The result of the writ petition is that the representative PAGA claim, instead of being heard by an arbitrator, will be heard by a judge.
COMMENT: We now have a split among the districts, with the Fourth District, Division 1 "respectfully part[ing] company with the view recently expressed by our colleagues in the Fifth District in Esparza v. KS Industries [13 Cal.App. 5th 1228 (2017). Esparza, the subject of my August 2, 2017 post, held that section 558 wage claims were not a representative action, and therefore could be arbitrated.