CCP 664.6 AND FRCP 41(a): Retention Of Jurisdiction To Enforce Settlement Agreement In Federal And California State Courts
Because Federal Courts Are Courts Of Limited Jurisdiction, The Procedures Differ.
We posted on December 4, 2017, about Sayta v. Chu, A148823 (1/5 11/29/17) (published), an opinion that "offers an object lesson on the requirements to invoke [Cal. Code of Civ. Proc.] section 664.6 and the consequences of failure to comply with those requirements." Section 664.6 enables a California state court to enforce a settlement agreement in a case that it has dismissed, by retaining jurisdiction to do so. The obvious advantage for the party seeking to enforce a settlement is that it need not file a new lawsuit to enforce the settlement.
In order to rely on 664.6, the parties to a stipulated settlement need to request the court to retain jurisdiction over the parties to enforce the settlement, if the parties have requested the court for this specific retention of jurisdiction prior to dismissal. In Sayta, enforcement went sideways because the parties failed to request the court to retain jurisdiction to enforce the settlement before dismissal, and thus the court lost jurisdiction.
Federal court is somewhat different. The key case is Kokkonen v. Guardian Life Insurance Company of America, 511 U.S. 377 (1994) (Scalia, author). Because a federal court is one of limited jurisdiction, meaning there must be a basis for federal jurisdiction, bare enforcement of most settlement agreements, which after all are merely contracts, will very likely not create a basis for federal jurisdiction.
However, there are two or three ways to skin this cat. Federal Rule of Civil Procedure 41(a) allows the parties to voluntarily dismiss by a stipulation of dismissal signed by all parties who have appeared, and it also allows for dismissal by court order by plaintiff on terms the court considers proper. If the parties wish to provide for the court's jurisdiction to enforce a dismissal-producing settlement via the stipulation route, they can do so, if the district court embodies the settlement contract in its dismissal order as a condition to dismissal, or the court retains jurisdiction to enforce the settlement agreement, and the parties so agree. And if the dismissal is, pursuant to plaintiff's instance, by court order, it must be done "upon order of the court and upon such terms and conditions as the court deems proper," which means the court can require the parties' compliance with the terms of the settlement contract or provide for the court's "retention of jurisdiction" over the settlement contract.
PRACTICE TIP: In federal court, the Stipulation and proposed Order language should indicate that the parties request that the district court retain jurisdiction to enforce the settlement — and the Order will recite that the district court retains jurisdiction to enforce the settlement agreement. But the settlement agreement itself need not be put before the Court. This is our conclusion, based on the alternative language in Kokkonen, that "the court is authorized to embody the settlement contract in its dismissal order (or, what has the same effect, retain jurisdiction over the settlement contract) if the parties agree." (Italics added).
HAT TIP to Gail Killefer, the director of the ADR program for the USDC, Central District, for bringing to the attention of panel mediators the distinction between federal and state retention of jurisdiction to enforce a settlement agreement.
NOTE: This post has been revised, and the Practice Tip added, after comment from Gail Killefer. Any mistakes are entirely my own.
Deadlines: Appellant Forfeited Ability To Challenge Judgment Confirming Arbitration Award Based On Lack Of Jurisdiction By Permitting The Arbitration To Proceed Without Objection
How Long You Can Wait To Challenge A Judgment Confirming Arbitration Award Depends On Whether Court Compelled Participation In The Arbitration, Or Whether You Simply Allowed The Arbitration To Proceed Without Objection.
Appellant waited more than seven years to attack a superior court judgment confirming an arbitration award in FIA Card Services, N.A. v. Cross, D071954 (4/1 1/19/18) (Aaron, McConnell, Huffman) (unpublished). While that may seem like an awfully long time (and so it proved to be here), there was a narrow opportunity to attack the judgment that the appellant tried to exploit.
A party seeking to vacate an arbitration award has a 100-day deadline to do so, and the 100-day deadline is jurisdictional. However, in the case of attacking a judgment to confirm the award, there is a loophole: if the court erroneously compelled the parties to arbitrate, then there is a jurisdictional flaw, and of course, a lack of jurisdiction can be attacked at any time. See United Firefighters of Los Angeles v. City of Los Angeles, 231 Cal.App.3d 1576, 1581 (1991). As the Court of Appeal explained:
"In the circumstance where a court orders the parties to arbitrate, if the arbitration process is later found to be invalid, the responsibility for the wasting of resources lies with the trial court, not the litigant, and there has not been any gaming of the system."
Here, however, the Court of Appeal believed that the evidence showed Appellant had received notice of the arbitration, had not participated, and had not objected. Under those circumstances, the Appellant had "forfeited her contention that the arbitration . . . against her was invalid. She may not come to court for the first time a decade after the fact and attempt to undermine a judgment entered based on the arbitration award."
Note that, rather than address a specific time deadline for attacking the judgment confirming the arbitration award, the Court phrased the outcome in terms of "forfeiture" through delay, probably because it recognized that a fundamental lack of jurisdiction that would make a judgment void ab initio can be attacked at any time.
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).