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 Schwartz v. Schwartz, D071445 (4/1 9/15/17) (Irion, Huffman, Haller) (unpublished).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The Case, Though Unpublished, Is Timely, With California Law Revision Commission Considering Changes In Mediation Confidentiality.
Chodosh v. Trotter, et al., D070952 & D070953 (4/1 9/13/17) (Benke, Haller, Dato) (unpublished) offers us a veritable mini-treatise on the mediation confidentiality privilege — most timely, given ongoing efforts by the California Law Revision Commission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.
Construction Of Arbitration Agreement: Ninth Circuit Holds That Agreement To Arbitrate Employment-Related Claims Does Not Include Qui Tam Action Against Employer
Court Ducks Ruling On The Enforceability Of Agreement To Arbitrate False Claims Claims, Saying It Is Only Ruling "On A Rather Unremarkable Textual Analysis."
An interesting issue exists as to whether qui tam claims, brought by a private party (the "relator" or "private attorney general") are arbitrable. The argument against arbitrability is that the qui tam claim (in our next case, a False Claims Act claim) is really brought on behalf of the government, which is not a signatory to the arbitration agreement. The argument in favor of enforcing the arbitration agreement is that the claim is brought and prosecuted by a private party that is a party to the arbitration agreement, and that frequently the government has de minimis involvement in pressing a qui tam claim, leaving the hard lifting to the private party.
As explained by Judge Fisher in United States Ex Rel. Welch v. MLF, No. 16-16070 (9th Cir. Sept. 11, 2017) (Fisher, Schroeder, Smith), the District Court held that, "because FCA claims belong to the government and neither the United States nor Nevada agreed to arbitrate their claims, sending this dispute to arbitration would improperly bind them to an agreement they never signed." The Ninth Circuit panel agreed with the result, but reached it through the route of contract interpretation.
Basically, the Court held that the arbitration provisions covered claims relating to the employment relationship. However, the employee's qui tam claim that her employer was making false Medicaid claims did not arise from the employment relationship, and in fact, could have been brought by a non-employee.
The broadest arbitration provision covered a claim, dispute, or controversy that the employee "may have against [the employer]." As to this broad clause, the Court explained:
Indeed, though the FCA grants the relator the right to bring a FCA claim on the government's behalf, an interest in the outcome of the lawsuit, and the right to conduct the action when the government declines to intervene, our precedent compels the conclusion that the underlying fraud claims asserted in a FCA case belong to the government and not the relator.
The Ninth Circuit affirmed the District Court's denial of the employer's motion to compel arbitration on the alternate ground that the employee's FCA claims did not fall within the scope of the arbitration agreement.
COMMENT: While the Court claims that it is simply engaging in "rather unremarkable textual analysis", is it also setting forth its substantive interpretation of the FCA, namely, that the qui tam claims permitted under the FCA are not claims of the relator, but rather claims of the government? Has the Court through the backdoor of "contract interpretation" admitted the District Court's conclusion that the FCA claim is not arbitrable, because the government holds the claim, but unlike the relator, the government never signed the arbitration agreement? Perhaps the Court's reluctance to take a deep dive into the weeds with a searching discussion of the respective roles played by the relator and the government in pressing the FSA claim in this case explains the Court's choosing the easy way out by following the route of "contract interpretation."
Settlement Agreements: 4/2 CCA Holds Trial Court Can Grant Equitable Remedies In Motion Brought Under CCP Section 664.6 To Enforce Settlement Agreement
Trial Court Erred By Ruling It Could Not Grant Equitable Remedies In Motion Under Section 664.6.
Plaintiff Mathis settled with defendants by agreeing to purchase property from defendants for $1M, with escrow to close in 120 days. The trial court dismissed the underlying case, while retaining jurisdiction under that convenient device, Cal. Code of Civ. Proc., section 664.6, to enforce the settlement. Mathis moved to enforce the settlement agreement asking the trial court to grant equitable relief modifying escrow terms by extending the date of closing, and by assigning the property to a nominee. The trial judge denied the motion, ruling it had no jurisdiction to modify the settlement agreement, and Mathis appealed. Mathis v. Pacific Mortgage Exchange, Inc., et al., E063868 (4/2 9/7/17) (Ramirez, Miller, Slough) (unpublished).
"While this was not an unreasonable reading of the statutory language, it was incorrect under established case law. On a motion to enforce a settlement under section 664.6, a trial court has jurisdiction 'to provide any appropriate equitable remedy,'" explained the Court, relying on Lofton v. Wells Fargo Home Mortgage, 230 Cal.App.4th 1050, 1061-1062 (2014).
Because the trial court has the power to grant equitable relief when enforcing a motion brought under section 664.6, upon remand, the trial judge will have to consider whether it is appropriate to provide the requested relief.
BEST LINE IN THE OPINION: "[D]efendants pick up the scent of Mathis's red herring and run off after it."
Herman Bencke, lithographer. Library of Congress.
Arbitration, Gateway Issues, Delegation: 2/7 CCA Reverses Trial Court’s Order Denying Petition To Compel Arbitration Because Incorporated AAA Rules Delegated The Decision To The Arbitrator
Sixteen Page Majority Decision Draws Fifteen Page Concurrence And Dissent From Justice Segal.
If an agreement to arbitrate is unconscionable, why should decisions about arbitrability ever be sent to the arbitrator? Answer: ordinarily, it is presumed that decisions about arbitrability are to be made by the judge, and therefore a determination that the agreement is unconscionable will not be sent to the arbitrator. And if the judge decides that the arbitration agreement is unconscionable, the arbitrator will never get to decide anything. The exception to this rule, however, is that the parties may agree to delegate to an arbitrator the authority to decide questions of arbitrability — and that can include whether the arbitration agreement is unconscionable.
In Advanced Air Management, Inc. v. Gulfstream Aerospace Corporation, B265723 (2/7 9/6/17) (Menetrez, Zelon; Segal, concurring and dissenting) (unpublished), the trial court held that an agreement between the plaintiff and the defendant was unconscionable. Judge Menetrez, sitting by designation, and Justice Zelon, however, reversed the trial court's order denying Gulfstream's petition to compel arbitration, because the incorporation of AAA Commercial Rules delegated the decision-making authority on the unconscionability issue to the arbitrator. As a result, the arbitrator will get to decide the unconscionability issue.
Justice Segal concurred and dissented. He concurred that the parties agreed to delegate the issue of arbitrability to the arbitrator. However, he would have held that Gulfstream invited error it argued the trial court made in deciding the issue, because Gulfstream asked the court to decide the issue. However, Justice Segal believed that the arbitration provision was not unconscionable.
COMMENT: Apparently Gulfstream did not explicitly reference arbitrability in its petition to compel arbitration. Justice Segal explains that Gulfstream argued that it asked the court to refer arbitrability to the arbitrator "by asking the court to compel Advanced Air to arbitrate the claims raised in its complaint" and that one of the claims raised in Advanced Air's complaint "was that the arbitration clause was unconscionable." Justice Segal then sets forth verbatim the dense language in Advanced Air's complaint, and challenges the reader to find the hook upon which Gulfstream is hanging its argument that it preserved the issue of delegating to arbitration whether the arbitration clause was unconscionable. "Did you miss it?" asks Justice Segal, adding "So did I." Actually, I did not miss it the first time. But thanks to Justice Segal, I was looking for the language on which Gulfstream relied.