Arbitration, Appealability, Nonsignatories: 9th Circuit Grants Writ, Vacates Order Granting Motion To Stay And To Compel Arbitration Obtained By Alleged Zombie Cookie User
How Do You Like Them Zombie Cookies?
"I walked with a Zombie." 1943.
The Ninth Circuit granted a petition for a writ of mandamus and vacated the district court's order that had granted Turn, Inc.'s motion to stay a putative class action and compel arbitration with Turn, Inc., the alleged user of "zombie" cookies. In re Henson, No. 16-71818 (9th Cir. 9/5/17) (per curiam).
Turn, Inc. is a middle-man for Internet-based advertisements, and has a contract with Verizon to deliver advertisements to Verizon subscribers based on usage data collected from the users' mobile devices. The users' wireless transmissions contain a "Verizon Unique Identifier Header" that can be attached to a tracking cookie to send the user data to Turn, Inc. As the Court explains, "A 'cookie' is software code that transmits a user's web-browsing history and other usage data back to the entity that attached the cookie."
"Subscribers were allegedly unable to detect, delete, or block these 'zombie' cookies attached to their UIDHs." Even when the user tried to kill a zombie cookie, the cookie would be replicated, and attach to the user's previously collected data. Turn, Inc. allegedly auctioned off users' collected data so advertisers could place targeted advertisements on the users' mobile phones. The putative class action alleged deceptive business practices and trespass to chattels by Turn, Inc.
Verizon had an arbitration provision in its user contracts, but Turn, Inc. was not a party to those contracts. Though a nonsignatory, Turn, Inc. sought to take advantage of the arbitration provision, and the district court, applying equitable estoppel, allowed Turn, Inc. to do so, staying the lawsuit and requiring arbitration.
A party cannot directly appeal from an order compelling arbitration, requiring the Court to analyze whether mandamus was available. Applying the so-called Bauman factors, the Court found that the first three weighed in favor of granting mandamus, and granted mandamus. In Bauman v. U.S. dist. Court, 557 F.2d 650 (9th Cir. 1977), the court considered whether a direct appeal is unavailable, whether prejudice is not correctable on appeal, whether clear error exists, whether the error is often repeated, and whether the issue is of first impression.
![[Girl Scout serving cookies]](http://cdn.loc.gov/service/pnp/hec/40200/40244r.jpg)
Girl Scout serving cookies. 1936. Library of Congress.
Arbitration, Class, Waiver, Collective Bargaining: 2/7 CCA Affirms Part Of Order Requiring Arbitration, Grants Part To Deny Arbitration Of Statutory Claims To Pay Wages Timely And For Unlawful Competition, Agrees Class Action Waived
Arbitration Was Required Under A Collective Bargaining Agreement That Did Not Provide For Class Arbitration.
Brushing aside thorny appealability issues, Cortez v. Doty Bros. Equipment Company, B275255 (2/7 filed 8/15, pub. order 9/1/17) (Perluss, Zelon, Segal) treated an employee's appeal as a writ of mandate, enabling the Court to address the effect of an arbitration provision in an employer/union collective bargaining agreement (CBA).
The Court agreed that the arbitration provision in the CBA, requiring the employee to arbitrate claims "arising under" Wage Order 16, showed a clear and unmistakable intent to arbitrate claims relating to Wage Order 16, even if the claims referenced the Labor Code without referencing Wage Order 16. "To hold that wage and hour disputes arising under Wage Order 16 are arbitrable under the CBA only in theory, but not in practice because they are, by necessity, brought under the Labor Code, would result in the very absurdity courts are required to avoid."
Causes of action for statutory penalties due for failure to pay wages timely, and for unfair competition based on the employer's purported violations of the Labor Code, were another matter. Here, the CBA did not contain an explicit and unmistakable agreement to arbitrate those statutory claims. The waiver of the right in a CBA to prosecute a statutory violation in a judicial forum is only effective if it is explicit, "clear and unmistakable." Therefore, those two claims could not be arbitrated.
Finally, the the Court held that the CBA did not contemplate class-wide arbitration — "the CBA refers to the grievance or dispute of an individual employee, not a group of employees."
COMMENT: We have previously blogged about an issue resulting in a split among the US Courts of Appeals, and on the docket at the beginning of the new Supreme Court term: whether waivers of class-wide arbitration violate the NLRA's protection of collective activity. 9th Circuit and 7th Circuit: Yes, that's a violation. 5th Circuit, no, labor organizing does not mean class legal action. See posts dated 10/11/16, 1/17/17, 7/24/17, 8/23/17.
The NLRAs protection of concerted activity is clearly relevant to the outcome in Cortez, and as to the applicability of that protection to class legal activity, the 9th Circuit and the California Supreme Court are not on the same page. Because "'the NLRA's general protection of concerted activity, which makes no reference to class actions,' [Iskanian v. CLS Transportation, LLC Los Angeles, 59 Cal.4t 348, 375-376 (2014)] does not bar parties to a CBA from excluding class claims from the agreement to arbitrate," the Court in Cortez saw no reason to delay and wait for a ruling from the SCOTUS.
Arbitration/Confidentiality: Is Arbitration Confidential?
My Article, "Confidentiality in Arbitration" Is In The Latest Issue of California Litigation And Available Through This Post.
My article on "Confidentiality in Arbitration" and an accompanying MCLE test are published in California Litigation, The Journal of the Litigation Section, State Bar of California, Vol. 30, No. 2 (2017), p. 6. With the permission of the State Bar, I have republished the article and the test, and they are available by clicking here.
Reviews: Alt ADR — High Noon, The Hollywood Blacklist And The Making Of An American Classic
Frontier Justice: An Alternative Form Of Dispute Resolution.
I just finished reading Glenn Frankel's "HIGH NOON: The Hollywood Blacklist and the Making of an American Classic" (Bloomsbury 2017), an enjoyable, very readable and scholarly book about the making of the iconic Western and the scoundrel times of the Hollywood Blacklist, with portraits of those involved in the movie, in the Hollywood Blacklist, or both: the actors Gary Cooper, Grace Kelly, Lloyd Bridges, and Katy Jurado, the director Fred Zinneman, the writer, Carl Foreman, the editor Elmo Williams, the producer, Stanley Kramer, and the witness Martin Berkeley, who named names (more than 150). The movie's themes of rugged individualism, a weak community, lawlessness, and rough justice resonate in later American films, such as John Ford's The Man Who Shot Liberty Valance (1962), and Don Siegel's Dirty Harry (1971). Gary Cooper's daughter, Maria Cooper Janis, described Marshal Will Kane, the character played by her father, as "a template for principle and courage that has seeped deeply into the global consciousness over the decades."
Glenn Frankel writes that the High Noon poster was transformed into a poster for Poland's Solidarity trade union movement in 1989, just before the first free election held in Poland in decades. Marshal Kane holds a folded ballot and has a Solidarity badge. The poster includes the message: HIGH NOON: 4 JUNE 1989.
Source: Wikipedia.
Arbitration, Class Action, Waiver: Defendant Who Decides Not To Arbitrate Against Named Plaintiff Waives Right To Compel Arbitration Against Absent Class Members
Unreasonable Delay Supported Trial Court's Finding Of Prejudice, Resulting In Waiver Of Right To Arbitrate.
Sprunk, et al. v. Prisma LLC, B268755 (2/1 8/23/17) (Lui, Chaney, Johnson) holds that, under the circumstances, defendant Prisma LLC aka "Plan B", an employer of exotic dancers, waived its right to seek arbitration "by filing and then withdrawing a motion to compel arbitration against the named plaintiff, Maria Elena Sprunk, and then waiting until after a class had been certified to seek arbitration against class members." (See BONUS below).
This is interesting from the class action standpoint, because Plan B could not have compelled the absent class members to arbitrate prior to certification. Nevertheless, the Court allowed the trial court to consider the fact of unreasonable delay in seeking adjudication of the right to arbitrate with the named plaintiff, in ruling on the issue of waiver. Here, after withdrawing a motion to compel arbitration, the defendant waited years to bring a motion to compel arbitration.
During a four-year delay, plaintiffs conducted class-related discovery and prepared and argued a class certification motion. The Court believed none of this would have been necessary if defendant had sought early adjudication of the right to arbitrate. Weighing heavily in the Court's opinion was that Plan B delayed filing its motions to compel arbitration so it could obtain a strategic advantage, for Plan B believed that had it moved to compel arbitration earlier, it might have been directed to arbitrate with the class. "An attempt to gain a strategic advantage through litigation in court before seeking to compel arbitration," explained Justice Lui, "is a paradigm of conduct that is inconsistent with the right to arbitrate."
BONUS. Click here to read the Wikipedia article on "Balk". Wikipedia cites an example of a famous balk: "A famous balk came in the first All-Star Game of 1961, when strong winds at Candlestick Park caused pitcher Stu Miller to sway erratically and be called for a balk. This story is often exaggerated in re-tellings of baseball lore, some having Miller being blown off the pitching mound."
Arbitration, Unconscionability: First District Div. 1 Reverses Denial Of Petition To Compel Arbitration, Concluding There Was “Extraordinarily High Degree Of Procedural Unconscionability”, But No Substantive Unconscionability
California Law Requires Both Substantive And Procedural Unconscionability To Avoid Enforcement Of Arbitration Provision.
The Court of Appeal's conclusion that it was "disturbed by the manner" in which an arbitration agreement was drafted and presented to an employee for signature, and that an "extraordinarily high degree of procedural unconscionability" existed, was not enough to uphold the trial court's denial of One Toyota's petition to compel arbitration with an employee in Oto, L.L.C. v. Kho (defendant and respondent) and Su, Labor Commissioner (intervener and appellant), A147564 (1/1 8/21/17) (Margulies, Humes, Banke). Despite its manifest displeasure, the Court reversed the trial court's denial of the petition to compel arbitraiton. The Court's reasoning process is straightforward: under California law, unconscionability has both a procedural and a substantive prong, and the Court concluded that substantive unconscionability did not exist.
Regarding substantive unconscionability, the Court focused on "dual requirements of affordability and accessibility." As to affordability, One Toyota acknowledged it had to pay all costs of arbitration. The Court explained that the Agreement "does not necessarily require an expense beyond that necessary under Labor Code procedures." The chief issue with accessibility, raised by the Labor Commissioner, was that arbitration would replace "the relative simplicity of the Berman hearing [where the Labor Commissioner considers an employee wage claim] with a complex proceeding resembling civil litigation." However, the Court brushed that objection aside, observing that Berman hearings are nonbinding, and that either side could appeal, nullifying the result, and compelling civil litigation.
The degree of procedural oppression really was high. The agreement was not negotiated. It was printed in 7-point font. The plaintiff's first language was Chinese, and the agreement was presented in English without translation. The agreement was presented without explanation to someone who was already an employee, while he was at his work station, where he was expected to do his job. A low level employee presented the agreement, "creating the impression that no request for an explanation was expected and any such request would be unavailing." The Court obviously didn't like the "dense, single-spaced paragraph", because it attached it as an Appendix to the opinion. "These circumstances," the Court concluded, "were highly coercive and appear intended to thwart, rather than promote, voluntary and informed consent."
COMMENT: I have occasionally noted a disconnect between the theory of arbitration and California unconscionability law. In theory, an agreement to arbitrate is all about intent. Over and over again, the courts state the need for agreement and an intent to arbitrate. However, in California, where substantive unconscionability is required, procedural unconscionability, resulting in surprise and confusion, is not enough to nix an arbitration agreement. Instead, the employee would need to argue that he did not intend or agree to arbitrate. Where the procedural unconscionability is as high as it was in the Oto, L.L.C. v. Kho case, one wonders to what extent the employee intended and agreed to arbitrate.
I am reminded of a story I once heard about a University of Chicago Law School professor teaching the famous Williams v. Walker-Thomas Furniture case to his class. This is the opinion penned by Judge J. Skelly Wright addressing unconscionability as a defense to enforcement of contracts. Williams had signed an installment purchase contract for furniture, and when she defaulted in 1962, Walker-Thomas Furniture tried to repossess all furniture purchased since 1957. As the law students became increasingly unhappy with the unfairness of it all, the law professor became increasingly frustrated with his students' rebellion against enforcing the contract. Finally, the University of Chicago Law School professor exclaimed, "If she signed it, make her eat it!" Apocryphal, perhaps. Or can you name the professor?