Opinion Addresses Substantive Versus Procedural Arbitrability – And Who Gets To Decide
Kurt Knutsson, aka Kurt the CyberGuy, and his company, Woojivas, Incorporated, filed claims against KTLA, LLC, a television broadcaster, for breach of contract, misappropriating CyberGuy’s name and likeness, unfair business practices, and age discrimination. The company brought a motion to compel arbitration that the trial court denied, leading to an appeal. Knutsson v. KTLA, LLC, B251567 (2/5 Aug. 12, 2014) (Turner, Mosk, Kriegler).
Defendant argued that plaintiffs were bound by a personal services agreement to an arbitration clause in a collective bargaining agreement that contained a tiered grievance procedure. That procedure included three steps: (1) the union or employee were allowed to resolve a grievance by discussion with a supervisor; (2) if the union was dissatisfied with the supervisor’s resolution of the matter, it could formally present a grievance to a manger; (3) the union could (a) file an appeal followed by a discussion process; (b) if that did not resolve the dispute, arbitration could result.
The defendant’s problems were several: first, “defendant has forfeited the right to compel compliance with the collective bargaining agreement’s non-arbitration provisions” in the grievance process by moving to compel arbitration without mentioning steps one and two; second, the arbitration provisions simply did not say that the defendant could compel arbitration – only the union could compel arbitration; and third, the trial court, not the arbitrator, was entitled to resolve the substantive arbitrability issue – a so-called “gateway issue.”
The last issue – whether the court or the arbitrator gets to decide arbitrability – is the most interesting. By labeling the issue as a substantive arbitrability issue, the Court of Appeal telegraphed that this was a gateway issue for the trial judge to decide.
When the issue of “arbitrability” is whether procedural prerequisites to arbitration have been complied with, the issue may be decided by the arbitrator. See, e.g., our March 6, 2014 post on BG PLC v. Republic of Argentina, 573 U.S. __, 134 S. Ct. 1198 (2014).
At first blush, John Wiley v. & Sons, Inc. v. Livingston, 376 U.S. 543, 556-558 (1986) should have supported defendant’s argument that an arbitrator should have decided the arbitrability issue, because “John Wiley held an arbitrator should decide whether the first two steps of a grievance procedure, which were prerequisites to arbitration, had been completed.” However, John Wiley also “held the issue of whether the dispute must be arbitrated is decided by the court.” And here in Knutsson, “as we have explained, defendant cannot compel plaintiffs to arbitrate anything – there is no agreement between them.”
One curious point about the opinion is that the issue of “substantive arbitrability” decided by the Court of Appeal – the “gateway issue” – is seemingly resolved on the ground that there is no arbitration agreement between plaintiff and defendant, and therefore no duty to arbitrate. The trial court’s reasoning, at least as described by the Court of Appeal, is different: “Concluding the grievance procedure was a condition precedent for arbitration and it had not occurred, the trial court denied the motion.”