Settlement: Court Of Appeal Gives Plaintiff, Who Lost $250K Settlement With City Of San Francisco, A Second Chance
Trial Judge's Refusal To Continue Hearing On Motion For Summary Judgment Was An Abuse Of Discretion.
You know that plaintiff/appellant Richard A. Denton had a very bad day in the trial court when the trial judge says: "Now, what can I do for you?" and the Court of Appeal comments, "And it was downhill for Denton from there." Denton v. City and County of San Francisco et al., A147384 (1/2 10/30/17) (Richman, Kline, Miller).
Denton filed employment-related claims against the City, the City filed a motion for summary judgment, and with his opposition about to be due, the City and Denton mediated and settled. Denton's attorney then filed a notice of conditional settlement with the court.
Then things started going sideways. Denton discharged his attorney for refusing to withdraw certain 998 offers (notably, however, not saying that all settlement offers were withdrawn), and Denton proceeded in pro per. The City attorney then emailed ex parte notice entitled, "Application for an Order Vacating Notice of Settlement Filed by Plaintiff." As the Court of Appeal explained, the ex parte notice was misleading, because the application also asked the court to maintain the previously scheduled date for the hearing on the City's motion for summary judgment. The trial judge granted the ex parte motion, vacating the notice of conditional settlement, and maintaining the hearing the date for the MSJ, without taking the bench.
You can see what's coming. Denton did not file an opposition to the MSJ. He showed up at the MSJ hearing and asked for a continuance. The trial judge told him there was no basis for a continuance, and entered judgment. Denton moved in pro per for a new trial, and the City attorney argued that Denton failed to oppose the motion for summary judgment and the parties did not have a settlement agreement. The trial judge was unmoved. Denton lost his $250K settlement with the City (which still required approval by the Board of Supervisors).
So it truly was all downhill for Denton, until he appealed, and clawed his way uphill. The Court of Appeal agreed the trial court abused its discretion in refusing to continue the summary judgment hearing and denying the motion for a new trial: "Denton should have been granted the continuance in the circumstances he found himself, circumstances that were not his fault." The order denying the motion for new trial and the summary judgment were both reversed.
COMMENT: The opinion makes for interesting reading, because without actually accusing anyone of a breach of ethics, it suggests displeasure with sharp practice. Item: Remarking on defendants' argument that "'Because No Settlement Was Ever Reached, Denton Had No Reasonable Expectation' that the hearing would be vacated", Justice Richman writes, "In light of the facts set forth above, we wonder how defendants can even assert such a position." Item: "[W]e are troubled by defendants' argument of technical noncompliance with the rules, particularly in light of their position that their own noncompliance with the ex parte notice rules — noncompliance they implicitly acknowledged — be overlooked." Ouch.
Arbitration/Delegation/Gateway Issues: Contract Requiring Arbitration To Be “Generally Conducted” In Conformance with AAA Commercial Arbitration Rules Fails To Delegate Issue Of Arbitrability To The Court
What Does "Generally" Mean?
Pristine Environments Inc. v. Signet Jewelers Limited et al., D071394 (4/1 10/13/17) (Nares, Benke, O'Rourke) (unpublished) involves an interesting wrinkle to the question: who decides the issue of arbitrability? Case law holds the issue of arbitrability is decided by the Court, absent clear and unmistakable evidence of the parties' intent to delegate that "gateway issue" to the arbitrator. And, the Commercial Rules of the American Arbitration Association delegate the decision about arbitrability to the arbitrator. So, when those rules are incorporated by reference into the parties' agreement, the arbitrator gets to decide whether the dispute is arbitrable, right?
But not so fast. Here, the agreement provided, "arbitration shall be generally conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association." Generally? What does that mean? "The [trial] court determined that by using the word 'generally' to describe which AAA rules apply, the Agreement contained no clear and unmistakable evidence the parties intended to incorporate the AAA rule delegating arbitrability issues to arbitration." And the Court of Appeal agreed with that determination.
So Signet lost its argument that the arbitrator should have decided the gateway issue of arbitrability. Nevertheless, Signet did well to appeal the trial court's decision that the matter was not arbitrable. The trial court had determined that Pristine's fraudulent inducement claims were outside the scope of the agreement's arbitration provision covering claims "arising under" the agreement. And now the other wrinkle: Ohio law applied to the agreement. And Under Ohio law, the Court of Appeal held, "arising under" encompasses fraud in the inducement. As a result, the claim of fraudulent inducement could be arbitrated.
Thus, the appellant Signet lost its argument that the arbitrator should have decided arbitrability, but won its argument that the dispute should be arbitrated, and so now it's on to the main event, arbitration of a multi-million dollar dispute in which Pristine alleges it was fraudulently induced by Signet to provide $15M worth of services for $10.5M.
Settlement Agreements/Pending Cases: CCA 4/3 Vitatech Opinion Is Now Certified For Publication
An Unenforceable Settlement: Vitatech Held Stipulation To Enter Judgment For $300K After Defendant Defaults On One-Time Payment of $75K Is An Unenforceable Penalty.
On October 3, 2017, I posted about Vitatech International, Inc. v. Sporn, G053477, a Fourth District, Division Three opinion. Unpublished at the time, the case was certified for publication on October 30, 2017.
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).