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."
Arbitration, Class Action, Waiver, FAA, Employment: Oral Argument For Epic Systems Corp v. Lewis And Consolidated Cases Is Now Available On-Line
Epic Systems Corp. And Consolidated Cases Pit FAA Against NLRA.
Does the right to arbitrate a case under the Federal Arbitration Act trump the right of employees to engage in concerted activity under the National Labor Relations Act by filing a class action lawsuit against an employer?
Oral argument in Epic Systems Corp v. Lewis and consolidated cases is now available on-line. Just click here and follow the media link to "Oral Argument – October 02, 2017."
Arbitration/PAGA: Notwithstanding Federal Arbitration Act, 2/4 CCA Holds PAGA Representative Actions Cannot Be Arbitrated
Under What Circumstances Could Predispute Arbitration Agreements Properly Subject PAGA Claims To Arbitration?
The arbitrability of PAGA claims continues to generate court opinions.
In Christman v. Apple American Group II, LLC, B271937 (2/4 10/4/17) (Manella, Epstein, Collins) (unpublished), the Court notes that Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014) "did not expressly address the circumstances — if any — under which predispute arbitration agreements might properly subject PAGA claims to arbitration." For example, if there is an opportunity for class arbitration, is it proper to submit the PAGA claims to arbitration?
Following Iskanian, however, two appellate courts have concluded "that because a PAGA plaintiff asserts that claim as an agent of the state, a predispute arbitration agreement the plaintiff has executed as an individual does not subject the claim to arbitration because the right underlying the claim is then subject to the state's control." Christman follows that reasoning in holding that plaintiff employee's PAGA claims are not arbitrable, in circumstances where the arbitration agreement relies on the FAA to govern its interpretation and enforcement, and the employer has abandoned its argument that the employee "may assert only individual claims in arbitration."
COMMENT: The Court acknowledges that its opinion it is at odds with Valdez v. Terminix Intern. Co. Ltd. Partnership (9th Cir. 2017), in which the federal court reasoned that "the plaintiff, as the state's representative, was free to agree to arbitration." The Christman court finds Valdez unpersuasive: first, because the PAGA claim is not a dispute between the employer and an employee, given California's interest; and second, because the predispute waiver is entered into by the plaintiff individually, at a time when she is not the state's representative.
Settlements: Stipulation To Enter Judgment For $300K After Defendant Defaults On One-Time Payment of $75K Is An Unenforceable Penalty
Admission Of Liability For Underlying Claims Or For Damages Alleged Might Have Made A Difference.
Stipulations to enter judgment upon default for an amount that is larger than an agreed-upon settlement payment continue to confound judges, attorneys, and parties. In Vitatech International, Inc. v. Sporn, G053477 (4/3 9/29/17) (Aronson, Bedsworth, Ikola) (unpublished), the trial court entered judgment against defendants for more than $300,000, based upon a stipulation for entry of judgment, after defendants failed to pay the agreed-upon settlement amount of $75,000. Plaintiff Vitatech contended that the $75,000 settlement amount was merely a discount of the agreed-upon liability to encourage prompt and timely payment, and the trial court agreed.
Defendants did well to appeal. The Court of Appeal applied "well-established precedent", including Greentree Financial Group, Inc. v. Execute Sports, Inc., 163 Cal.App.4th 495 (2008), to explain that the stipulated judgment for more than four times the amount Vitatech agreed to accept as full settlement "is an unenforceable penalty because it bears no reasonable relationship to the range of damages the parties could have anticipated would result from Defendants' failure timely to pay the settlement amount."
COMMENTS: My colleague Mike Hensley represented the successful appellant in Greentree. Mike and I are co-contributors to another blawg, California Attorney's Fees.
An interesting aspect of the Vitatech International, Inc. case is whether appellants properly sought to vacate the judgment under section 473(d), which allows for the vacation of void judgments. A judgment can be void when the court lacks fundamental authority over the subject matter, question presented, or party, which does not seem to be the case here. But the Court of Appeal found another example of a void judgment here: viewed as an unreasonable liquidated damages provision, the judgment was "void as against public policy."
Finally, what might have saved the stipulated judgment? The Court of Appeal analyzes other cases in which a stipulated judgment has been found to be valid, and suggests that the stipulated judgment could have survived if the appellants had admitted their liability for the underlying claims or for the damages Vitatech alleged in the complaint. Apparently merely agreeing to stipulate to the amount of damages alleged in the complaint was not the same as expressly admitting liability for those damages.