Consumers/Fees/Settlement Agreements: Defendants Contesting Fee Award Lose On Appeal Because In Settlement Agreement, They Agreed To Fee Entitlement
Reasonableness Of Award Did Not Need To Be Addressed, Because Entitlement, Which Parties Agreed To, Was The Real Issue.
Once a case is settled, some issues need not be litigated, even though the parties may want to do so. Such was the case in Medina v. South Coast Car Company, Inc., D069820 (4/1 9/19/17) (Benke, Nares, Aaron) (unpublished).
Medina sued South Coast Car Company, Inc. (SCCC) and Veros Credit, LLC (Veros) in connection with the sale to him of an Audi. The seller, SCCC, assigned the retail installment sales contract to Veros. As part of a settlement, defendants agreed they would not dispute the basis for fee entitlement, that Medina would be deemed the prevailing party, and that the defendants could dispute the reasonableness of the attorneys' fees, costs, and prejudgment interest claimed to have been incurred by Medina.
On appeal, SCCC argued that Medina was not entitled to attorney's fees, and Veros was not liable to pay any fees and costs, "as it was merely the 'holder' of the RISC . . . "
"Because defendants' myriad challenges on appeal to the award of attorney fees, costs and prejudgment interest are limited to the issue of entitlement, as opposed to their amount, explained Justice Benke, "we have no reason to review the reasonableness of such an award."
COMMENT: It is not unusual for a settlement agreement to resolve all issues, reserving the determination of fees to the Court. However, if fee entitlement and reasonableness of the fees are both contested, then the settlement agreement must be drafted with care, so as to reserve the genuinely contested issues to the Court, instead of stipulating away a genuinely contested issue. An additional consideration is that reserving the issue of fee entitlement for the court to decide could make it more difficult to settle the case.
Burden Of Proof/Existence Of Agreement: Defendants Failed To Satisfy Burden Of Proof That Agreement To Arbitrate Existed
Trial Court Order Denying Defendants' Petition To Arbitrate Is Affirmed.
This case was about a matter of timing. Plaintiffs sued defendants, alleging defendants failed to build and develop a Web site as agreed to. Defendants move to compel arbitration. The trial court found defendants failed to show that the arbitration clause related to the contract plaintiffs said was the basis for their claims. Defendants appealed. Noor v. Katz, B275176 (2/2 9/19/17) (Ashmann-Gerst, Chavez, Goodman) (unpublished).
Defendants claimed the the dispute arose from a September 10, 2015 agreement containing an arbitration provision. Plaintiffs argued the dispute arose in connection with an earlier July 13, 2015 invoice that did not have an arbitration provision. The Court of Appeal, in affirming the trial court's order denying arbitration, agreed defendants simply failed to meet their burden of showing the existence of an agreement to arbitrate the dispute.
Regarding the standard of review of an order denying a petition to compel arbitration, the Court notes:
There is no uniform standard of review for evaluating an order denying a motion to compel arbitration . . . . If the court's order is based on a decision of fact, then we adopt a substantial evidence standard. . . . Alternatively, if the court's dnial rests solely on a decision of law, then a de novo standard of review is employed . . . ." (quoting Robertson v. Health Net of California, Inc., 132 Cal.App.4th 1419, 1425 (2005)).
Arbitration, Fees: Challenges To Arbitrator’s $4M Attorney Fee Award Are Unsuccessful
Attorney Charged Discounted Rate, Delayed Collection, And Accepted Hybrid Free Structure Due To Client's Limited Cash.
Attorney James D. Daily helped the Stueve Brothers Farms, LLC (Stueve) recover some $20M in property. Stueve and others (Claimants) then sought to arbitrate their fee dispute with Daily. After the arbitrator awarded Daily $1.35 in hourly fees, and approximately $3.42M in contingency fees, which award was confirmed as a judgment, Stueve, Claimants, and nonclaimant entities appealed. Stueve Brothers Farms, LLC, et al. v. James D. Daily, G053220 (4/3 9/18/17) (Ikola, Moore, Aronson) ((unpublished).
The appeal was unsuccessful, with the Court rejecting all appellants' arguments:
(1) An argument that the court lacked jurisdiction to confirm because arbitration took place in Los Angeles County, rather than Orange County, failed, because CCP section 1292.2 relates to venue, not to jurisdiction, and the parties were not prejudiced by confirmation of the award in LA;
(2) An argument that the award was not final failed because the arbitrator's retention of jurisdiction was solely to resolve future disputes;
(3) An argument that the petition to confirm arbitration improperly contained attorney-client privileged information did not explain how the court was empowered to vacate the arbitration award;
(4) An argument by appellants that nonclaimant entities were not parties to the arbitration and thus could not be bound by the arbitrator's ruling was untimely.
COMMENT: Ordinarily objections to jurisdiction can be asserted at any time. The conclusion that appellants forfeited any basis for vacating or correcting the award by objecting in an untimely fashion makes sense as to appellants, but what the opinion does not clearly explain is when and how did the arbitrator or the court obtain jurisdiction over the "nonclaimants" in the first place.
Appealability/Standard Of Review: Appellant Waived Judicial And Appellate Review Of Fee Award By Failing To Raise Objections In Arbitration And In Superior Court
Plus The Court Of Appeal could Not Review Merits Of The Dispute, Which Included Legal And Factual Bases Of The Arbitrator's Award.
After William Schwartz arbitrated with Joel Schwartz, the arbitrator declared William the prevailing party and awarded William $264,559.89 in fees and costs. The Superior Court confirmed the award, and Joel timely appealed. Schwartz v. Schwartz, D071445 (4/1 9/15/17) (Irion, Huffman, Haller) (unpublished).
Joel raised some interesting substantive issues on appeal, namely, that the fee award was largely based on work done by Oregon attorneys who had not been admitted pro haec vice, and that William had failed to beat Joel's 998 settlement offer. But Joel's substantive points were never considered by the Court of Appeal.
First, Joel waived the "out-of state-attorney" argument, by failing to raise it with the arbitrator or with the Superior Court judge. Second, because a mistake of law or fact is not a basis for reviewing the merits of an arbitration award, the Court did not need to address the merits of Joel's argument that William had not prevailed on Joel's 998 settlement offer after he turned down Joel's 998 settlement offer. Third, Joel apparently did not provide record references to support some of his arguments.
COMMENT: Arbitration proceedings may seem informal, but it is certainly important to raise objections in arbitration, to have a record, and to preserve the objections and the record in the Superior Court — at least, where a substantial fee and cost award may be challenged later. And if one wants appellate review to include review of the merits, then the arbitration agreement needs to provide that the arbitrator who makes mistakes of law or of fact exceeds his powers.
Mediation Confidentiality: 4/1 CCA Holds That Mediator’s Purported Threat To Tell Judge Plaintiffs Were Reason Case Did Not Settle Is Covered By Mediation Privilege
The Case, Though Unpublished, Is Timely, With California Law Revision Commission Considering Changes In Mediation Confidentiality.
Chodosh v. Trotter, et al., D070952 & D070953 (4/1 9/13/17) (Benke, Haller, Dato) (unpublished) offers us a veritable mini-treatise on the mediation confidentiality privilege — most timely, given ongoing efforts by the California Law Revision Commission to create exceptions to mediation confidentiality.
In the trial court, members of a mobile home park sued the mobile park owner's Association alleging special assessments had been improperly assessed against plaintiffs. After Judge Stock, the trial judge, retired and joined JAMS, the case was reassigned to Judge Moss, whereupon the plaintiffs moved to disqualify Judge Stock and to void her order for a jury trial retroactively. Plaintiffs claimed that the mediator, Justice Trotter (ret.), allegedly threatened, in front of the Association's directors, to tell Judge Stock, "that plaintiffs were the reason the case did not settle." Plaintiffs further complained about "the purported failure to disclose Judge Stock was joining JAMS." Judge Moss denied the requests, plaintiffs filed a petition for writ of mandate to vacate his ruling, and the writ was denied. Plaintiffs then filed the Chodosh lawsuit against Justice Trotter and JAMS for numerous claims, alleging mediator misconduct. The trial court granted defendants' anti-SLAPP motion, and found the statements allegedly made by Justice Trotter to be inadmissible, because they were covered by the mediation privilege, quasi-judicial immunity, and the litigation privilege.
In their appeal, plaintiffs made many ingenious arguments in their attempt to pierce the mediation confidentiality privilege. For example, they argued that a mediation had not occurred, because the mediator was not "neutral." They argued that the mediation violated due process and led to an absurd result. They claimed without evidence that the mediator's conduct was criminal. They argued that defendants, by their silence, conceded illegality through an adoptive admission. They argued that the trial judge had improperly sent the matter to Justice Trotter, at a time when she purportedly was engaged in discussions to move to JAMS after retirement. They argued that they were extorted. None of these arguments, however, held traction, and thus, the trial court's orders and judgment were AFFIRMED. Chodosh shows once again that it is nearly impossible to pierce mediation confidentiality in order to build a case based on alleged mediator misconduct.
COMMENT: One of the more recondite provisions relied upon by plaintiffs to seek the disqualification of Judge Stock was California Code of Civil Procedure, section 170.1(a)(8), which supports disqualification if the judge has an arrangement concerning prospective employment as a dispute resolution neutral and directs the parties to participate in dispute resolution with the entity with which she is seeking employment. There are good reasons for such a provision. Here, however, it appears that there was a lack of evidence to show (a) that the trial judge had directed the parties to mediate with JAMS; and (b) that she was negotiating with JAMS while the matter was being mediated at JAMS.
Agreement To Arbitrate: 4/2 CCA Holds Agreement To Arbitrate Is Not Void Just Because Employee Is Unfamiliar With English Language
Employee Did Not Ask For A Translation.
Plaintiff Zaragoza filed a wage and hour class action against her employer, and the employer moved, successfully, to compel arbitration. Zaragoza appealed, arguing the arbitration agreement was void and obtained by fraud because she could not read English. Zaragoza v. Sela Healthcare, Inc., E065373 (4/2 9/11/17) (Codrington, Miller, Slough) (unpublished).
Zaragoza's appeal was unsuccessful for two main reasons. First, the law is replete with cases holding that one who has not read a contract, or is unfamiliar with the terms, should have read it, or had it explained to them. An inability to understand English is not enough to avoid this general rule. Second, Zaragoza did not ask for a translation.
COMMENT: I have blogged before [9/13/2016] on the effect of presenting employees with contracts in English, when their first language is Spanish. In Penilla v. Westmont Corporation, 3 Cal.App.5th 205 (2016), the Court concluded, "the arbitration provision was procedurally unconscionable, as it failed to disclose prohibitively expensive arbitration fees and was neither provided in a Spanish-language copy nor explained to respondents who did not understand written English."
While the fact that the agreement is not in the language of the employee is not dispositive, it has been considered as a factor in weighing procedural unconscionability. The better practice for an employer who wants to avoid a claim of procedural unconscionability is to translate the arbitration provision into Spanish for employees whose first language is Spanish, or to explain it to them, as the Court of Appeal suggested in Penilla.