Arbitration/Unconscionability: CCA 2/8 Finds Arbitration Agreement Unconscionable Where It Overly Limited Discovery And Exempted Employer Claim For Injunctive Relief From Arbitration
But Procedural Unconscionability Was Low.
After Diaz and Martinez filed suit for various employment-related claims, their employer Hutchinson moved unsuccessfully to compel arbitration, and appealed. Diaz et al. v. Hutchinson Aerospace & Industry, Inc., et al., B271563 (2/8 10/27/17) (Flier, Bigelow, Rubin) (unpublished).
The Court of Appeal followed the template for analyzing unconscionability of the arbitration provision: procedural unconscionability, substantive unconscionability, severance.
Procedural unconscionability: low. Simple contract of adhesion.
Substantive unconscionability: high. The agreement was lop-sided, because the employer did not need to seek arbitration to obtain injunctive relief to enforce a confidentiality agreement. And discovery was too limited to allow Diaz and Martinez to adequately vindicate their rights: the agreement limited discovery to one set of 35 interrogatories, one set of document demands, one deposition, "and it expressly barred any further discovery."
Severance: multiple unconscionable provisions (two here) allowed the trial court, acting within an abuse of discretion standard, to refuse to sever unconscionable provisions.
COMMENT: Baltazar v. Forever 21, Inc., 62 Cal.4th 1237 (2016) allows a carve-out for an employer to reserve its statutory rights to seek provisional remedies in court during the pendency of arbitration — after all, that is allowed by Cal. Code of Civ. Proc., section 1281.8(b). However, Baltazar didn't help the employer here, because the carve-out for injunctive relief was not limited to provisional remedies.
Arbitration/Administrative/Deadlines: Court Of Appeal Finds No Denial Of Due Process Where Terminated Fire Captain Failed To Follow County’s Procedures
Sutter County Only Had A Duty To Provide An Opportunity For Arbitration Review Of Termination Decision, Not To Provide Review.
Sutter County. January, 1942. Lee Russell, photographer. Marileeann Simpson holds a pan of vegetables freshly gathered from her family's garden at the FSA (Farm Security Administration) farm workers community. Yuba City. Library of Congress.
One who does not follow administrative rules risks losing substantive rights. Such was the fate of Fire Captain Gorden Graham in Graham v. County of Sutter, C074701 (3rd Dist. 10/24/17) (Hull, Mauro, Duarte) (unpublished).
Appellant Graham appealed from denial of his request for a writ of mandate requiring Sutter County to provide him a post-termination proceeding after he failed to comply with the deadline for requesting appointment of arbitrators. Graham, a Fire Captain, had been dismissed following his loss of EMT Certifcation, resulting from a domestic abuse violation and conviction for destroying a cellular telephone with intent to prevent its use to summon help. (Bet you didn't know there was such a Penal Code provision. Check out section 591.5).
Graham failed to proceed timely with requesting an arbitration list. The opinion states that the attorney "said he forgot to meet the county's deadline due to a 'hectic' work week." Earlier, some deadlines had been extended.
The Court of Appeal did not cut any slack here. It concluded Graham had not been denied due process, because Sutter County "did not have a ministerial duty to provide the arbitration where Graham failed to follow Sutter County's procedures." And though the Court found authority requiring a good cause exception for late filing of an administrative appeal of dismissal of employment, it concluded that under the circumstances here, due process did not require Sutter County to allow a good cause exception to its internal appeal deadline associated with prosecution of an administrative appeal.
COMMENT: If one becomes involved in administrative proceedings, it is more than a good idea to chart the internal administrative deadlines, as well as any applicable statutory deadlines.
Arbitration, Unconscionability: 1/3 CCA Concludes Arbitration Agreement In Employee Contract Is Procedurally and Substantively Unconscionable
Court Of Appeal Affirms Trial Court's Order Denying Employer's Motion To Compel Arbitration.
Notwithstanding the trend in the SCOTUS, (and as the immediately preceding post demonstrates, in Congress too), to enforce arbitration agreements, many California Courts of Appeal continue to vigilantly scrutinize arbitration agreements for unconscionability. Baxter v. Genworth North America Corporation, et al, A144744 (1/3 10/26/17) (McGuiness, Siggins, Jenkins), affirms a trial court's order, concluding that an employment arbitration provision was both procedurally and substantively unconscionable.
The agreement required the employee to follow a four-stage dispute resolution process: (1) submit concern in writing to company administrator; (2) meet with manager and HR representative; (3) mediate; (4) arbitrate.
The Court readily found a degree of procedural unconscionability based on the "take it or leave it" nature of the agreement and the unequal bargaining power. The Court of Appeal's conclusion that this presented a "high degree of oppressiveness" as opposed to procedural unconscionability may seem a little unusual, since this appears to be a garden variety case of procedural unconscionability. Weighing in a bit on the procedural unconscionability scale was the fact that the employee had been employed for five years before she was required to agree to arbitration. This too does not seem so unusual. But the point is that there was procedural unconscionability.
The Court of Appeal probed deeper into the issue of substantive unconscionability. The factors that led the Court to conclude that the agreement was overly one-sided were the following: (1) employees were prohibited from communicating with other employees; (2) the default limitations on discovery were too restrictive for a case that the Court viewed as factually complex — and the employee set forth facts to show that the discovery would be inadequate to vindicate her rights; (3) a shortened limitations period was insufficient to protect the employee's statutory rights; (4) administrative remedies under the FEHA were limited, because the employee could be forced to pursue its administrative remedy only after it had already arbitrated; (5) default timelines for concluding arbitration created "a modest degree of unconscionability."
COMMENT: Findings of unconscionability — especially substantive unconscionability — tend to be very fact-oriented, often appear in shades of gray, and require the exercise of judgment. Several examples of the tentative language in this particular published opinion demonstrate my point: "Baxter sets forth facts tending to show . . . " (slip op. p. 14), "provisions . . . tend to be substantively unconscionable" (p. 15), "we would tend to agree" (p. 19), "we tend to agree with the trial court's assessment" (p. 22), "short default arbitration timelines give some cause for concern" (p. 23).
Arbitration, Rules: Senate Republicans Strike Down New Rule That Would Have Allowed Suits Against Financial Institutions In Lieu Of Arbitration
The Congressional Vote Furthers De-Regulation Of Wall Street.
In a NYT article entitled, "Consumer Bureau Loses Fight to Allow More Class-Action Suits," Jessica Silver-Greenberg reports about the October 24, 2017 vote in the Senate to roll back a rule written by the consumer bureau and previously intended to go into effect in 2019. The 51 to 50 Senate vote, in which VP Pence broke the tie, will allow financial institutions to continue to channel consumer complaints into arbitration. The roll-back, which is part of a wave of Republican efforts to deregulate, was favored by financial institutions, the Treasury Department, and the US Chamber of Commerce.
The US consumer bureau, consumer advocates, and plaintiff class-action attorneys have opposed the ubiquitous enforcement of arbitration clauses.
I posted on November 1, 2015 that Jessica Silver-Greenberg and Robert Gebeloff were authoring a series of special reports in the NYT critical about the use of arbitration clauses to avoid enforcement of plaintiff rights through class-action lawsuits.
Arbitration/Collective Bargaining: Dispute Not Within Scope Of Arbitration Provision In Collective Bargaining Agreement Must Nevertheless Be Arbitrated Under Section 301 Of Labor Management Relations Act
Because Application Of State Labor Code Provision Required Interpretation Of The Collective Bargaining Agreement, Federal Preemption Applied, Requiring Adherence To Grievance Procedure In CBA.
San Francisco Giants baseball team plays the Chicago Cubs at AT&T ball park in San Francisco, California. 2012. Carol M. Highsmith, photographer. Library of Congress.
General practitioners without experience in labor law can get tripped up by grievance procedures in Collective Bargaining Agreements (CBAs). While we can't say that is what occurred in Melendez v. San Francisco Baseball Associates LLC, A149482 (1/3 10/17/17) (Pollak, McGuiness, Siggins), we can say that CBAs contain procedural minefields. One tricky aspect of CBAs is that when the interpretation of the CBA is involved, substantive federal law and federal preemption occur.
Melendez, who worked as a unionized security guard for the Giants at AT&T Park, sued the Giants, alleging he and other security guards were employed "intermittingly" and under California Labor Code section 201, they were entitled to, but did not receive, payment of final wages upon "discharge". He claimed the security guards were "discharged" at the end of Giants homestands, at the end of the baseball season, and at the end of various inter-season events. Unsurprisingly, the Giants disagreed, arguing that the security guards were "year-round employees who remain employed with the Giants until they resign or are terminated pursuant to the CBA."
The trial judge agreed that Melendez's claim was not within the scope of the CBA arbitration provision, because Melendez's claim was that the Labor Code had been violated, not that his contract had been violated. The trial judge also agreed with Melendez that there was no federal preemption by section 301 of the Labor Management Relations Act, presumably because whether a violation of the California Labor Code had occurred did not require interpretation of the CBA.
The Court of Appeal agreed the claim that the California Labor Code had been violated was not within the scope of the CBA arbitration provision. However, the Court parted ways with the trial judge on the question of preemption.
True, the gravamen of the claim involved state law, and whether the Labor Code provision requiring payment of wages upon discharge had been violated. But consideration of the state law claim required interpretation of the employment provisions in the CBA, in order to determine whether Melendez was an intermittent or a full-time employee. As the Court explained, analysis of the CBA meant that federal preemption applies, and, "the dispute must be resolved pursuant to the grievance procedure and arbitration under the CBA.
Thus, the Court of Appeal reversed the order denying the motion to compel arbitration.
Arbitration/Vacatur/Res Judicata: Ignoring Res Judicata Effect Of A Prior Arbitration Is At Most An Error Of Law, And Therefore Not In Excess Of The Arbitrator’s Power
Same Was The Case If The Arbitrator Awarded Nonrecoverable Costs.
Without saying the arbitrator made a mistake, the Court of Appeal explains in Dyna, LLC v. GreatCall, Inc., D071003 (4/1 10/10/17) (McConnell, Haller, O'Rourke) (unpublished), "even if the arbitrator erred by ignoring the res judicata effect of a prior arbitration award or by awarding nonrecoverable costs, these are errors of law and not acts in excess of the arbitrator's power that must be vacated or corrected."
As a consequence, the Court of Appeal reversed a judgment whereby the trial court had corrected an arbitrator's cost award, directing "the court to confirm the award as made without any reduction in the amount of recoverable costs."