Waiver Of Right To Arbitrate Results From Delay After Agreeing To Mediate And Not Mentioning Arb Agreement
Waiver Results From Delaying Bringing Motion To Compel Arbitration Without Adequate Explanation.
Britnee Campbell, a former employee of Sunshine Behavioral Health, LLC, filed a class action lawsuit in May 2022 for wage and hour violations. Sunshine entered into litigation and mediation discussions, without mentioning an arbitration agreement allegedly signed by Campbell. In November 2022, Sunshine claimed it discovered the arbitration agreement but continued to engage in mediation discussions. In March 2023, Sunshine announced it would not mediate and instead sought to compel arbitration. The court ruled that Sunshine had waived its right to arbitration by delaying its motion and engaging in mediation efforts, leading to Campbell’s motions to compel discovery responses. The Court of Appeal affirmed the trial court’s decision that Sunshine’s actions constituted a waiver of arbitration. Campbell v. Sunshine Behavioral Health, LLC, G062886 (4/3 9/25/24) (Moore, J.).
Third Party Beneficiaries: Second Dist., Div. 6 Rejects Argument Third-Party Ford Could Benefit From Arbitration Clause With Non-Party Dealer
One More Opinion Rejects Reasoning In Felisilda.
In Rivera et al. v. Superior Court of Ventura County, B334522 (2/6 9/23/24) (Gilbert, P.J.) petitioners Rivera and Espinosa sued Ford Motor Company under California's Song-Beverly Consumer Warranty Act (the "lemon law") after their Ford F-250 truck experienced repeated mechanical issues. They also included Ford of Ventura, an authorized repair service, in their complaint but did not sue the selling dealer. FMC moved to compel arbitration based on an arbitration clause in the sale contract signed between the petitioners and the non-party dealer.
The trial court granted FMC's motion, relying on the case Felisilda v. FCA US LLC, which allowed a manufacturer to enforce an arbitration clause as a third-party beneficiary of the sale contract. However, the petitioners sought reconsideration after several appellate courts disapproved Felisilda. The trial court denied reconsideration, citing the unresolved status of Felisilda. The petitioners then sought a writ of mandate. The appellate court ruled that Ford Motor Company was not a third-party beneficiary and that petitioners were not equitably estopped from rejecting arbitration. The appellate court thus granted the writ and ordered the trial court to vacate its order compelling arbitration.
COMMENT. Why did the court reject Felisilda? Unlike Felisilda, the petitioners in this case sued only the manufacturer, and not the selling dealer. The obligations under manufacturer's warranty are independent of the sale contract, and the manufacturer is neither a party to nor a beneficiary of that contract. The court emphasized that petitioners’ claims stemmed from statutory warranty obligations under the lemon law, not the sale contract, thus rendering Felisilda inapplicable. We posted on the Felisilda case way back on 8/29/20. Since then, the law has tipped against Felisilda.
Ford F-250. Photo: Scott Beeton. Creative Commons Attribution-Share Alike 4.0 International license
Arbitration, Health Care, Agents: Trial Court Must Reconsider Arbitration Agreements In Light Of Harrod Case
Health Care Cases Continue To Generate Problematic Arbitration Agreements.
The case James Maxwell v. Atria, A168043 (1/1 9/19/24) (Siggins, J.) involves the death of 93-year-old Trudy Maxwell, a resident at Atria Park of San Mateo, who passed away after drinking industrial-strength cleaner mistakenly served by an Atria employee. Trudy's children, including James Maxwell III, filed a lawsuit against Atria, alleging negligence, wrongful death, and elder abuse. A central issue in the case was James III's authority to sign an arbitration agreement on behalf of his mother, as he held a durable power of attorney, while his sister, Marybeth, held the health care power of attorney. The trial court denied Atria's motion to compel arbitration, ruling James III lacked the authority to sign the agreement and the wrongful death claims by Trudy’s heirs were not bound by it. Atria appealed, arguing James III was authorized to sign the arbitration agreement and all claims should be arbitrated.
The Court of Appeal reversed the trial court's denial of the motion to compel arbitration and remanded the case. The appellate court held that it was necessary for the trial court to reconsider the enforceability of the arbitration agreement in light of Harrod v. Country Oaks Partners, LLC, which clarified that signing an arbitration agreement may not constitute a health care decision under a health care power of attorney. The case was sent back for further proceedings to resolve the remaining issues.
COMMENT. In Harrod v. Country Oaks Partners, LLC, the California Supreme Court held signing an optional arbitration agreement with a skilled nursing facility is not considered a "health care decision" under a health care power of attorney. The court reasoned decisions regarding arbitration agreements involve legal rights, including waiving the right to a jury trial, and are distinct from decisions necessary for the patient's well-being or medical care. Therefore, even if a person holds a health care power of attorney, they may not have authority to bind the patient to an arbitration agreement unless the power to make such decisions is explicitly granted. We blogged about Harrod on 7/1/24.
Deadlines: 30-Day Deadline To Pay Arbitration Fees Not Violated Where Mistake Was Made By Provider, Not Employer
First Invoice Was Paid By Employee And Marked "Paid" And Employer Timely Paid Second Invoice.
In Anoke v. Twitter, Inc., A168675 (1/5 pub. 9/18/24) (Burns, J.), Sarah Anoke and other employees initiated arbitration against Twitter ("X") for employment-related disputes. Under California Code of Civil Procedure section 1281.97, an employer must pay its share of arbitration fees within 30 days of receiving the invoice, or the employer may face penalties, including paying the employee’s attorney fees.
Here, the arbitration provider mistakenly accepted payment from the employees' counsel for the employer's portion of the fees. The arbitration provider later refunded this mistaken payment and issued a new invoice to X, which was paid within the 30-day window. Anoke argued X’s payment was untimely because it was not made within 30 days of the first invoice. However, the court ruled that since the first invoice was marked “paid” and a new invoice was issued, the 30-day period started from the second invoice.
Held: X timely paid its share of arbitration fees within the 30-day grace period after receiving a second invoice. As a result, X was not in default under section 1281.97, and Anoke was not entitled to recover attorney fees under the statute. The superior court’s denial of Anoke’s petition was affirmed.
Arbitration, Standard Of Review: The Parties Can Agree That Arbitrator Will Follow The Law
An Exception To The General Rule That Errors Of Fact And Law Are Not A Basis For Reversing An Arbitrator's Award.
If you need an example of a recent case in which the parties agreed that the arbitrator shall follow the law, see Samuelian v. Life Generations Healthcare, LLC, No. G061911, G062416 & G062426 (4/3 8/20/24) (Moore, Acting P.J.).
While the general rule is that an arbitrator's mistake of law or fact is not cause for reversal, there is an exception in California. The parties can agree that the arbitrator shall follow the law. Here, the parties agreed in writing: “The Arbitrator shall not have the power to commit errors of law or legal reasoning and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error.” That meant that the arbitrator's award could be reviewed de novo as to matters of law. Here, the arbitrator made a legal error, and as a result the award was not confirmed and was vacated instead.
Delegation, Arbitrability, Third-Party Beneficiary: Ralph’s Wasn’t Third-Party Beneficiary Of Agreement Between Customer And Instacart
Delegation Of Threshold Issue To Arbitrator Must Be Unmistakably Clear.
Mahram used Instacart to purchase groceries and later sued Ralphs (The Kroger Co.) for allegedly raising prices after applying a coupon, claiming violations under false advertising and unfair competition laws. Ralphs moved to compel arbitration based on an agreement between Mahram and Instacart, even though Ralphs was not a signatory to that contract. The Court of Appeal affirmed the trial court's denial of Ralphs' motion to compel arbitration. Payam Mahram v. The Kroger Co., B324405 (2/8 8/19/24) (Wiley, J.).
While Mahram did enter into an arbitration agreement with Instacart by signing up for its services, the agreement only applied to disputes between Mahram and Instacart.
Whether Ralphs could compel arbitration was for the court to decide, not an arbitrator, because the contract did not make it "unmistakably clear" that Mahram agreed to arbitrate with any party other than Instacart.
And Ralphs was not a third-party beneficiary of the contract between Mahram and Instacart, because the contract's purpose was to facilitate grocery deliveries, not to benefit Ralphs specifically.
In sum, Ralphs could not enforce the arbitration agreement between Mahram and Instacart, and the trial court's denial of Ralphs' motion to compel arbitration was affirmed.