The trial court orders the signatories to an arbitration agreement to arbitrate, while staying the matter as to the nonsignatory plaintiffs’ sole claim for attorney malpractice. Defendants appeal from the order staying the nonsignatory plaintiffs’ attorney malpractice claim until after arbitration. Defendants appeal. Mouradian v. Jehdian, Case No. B251932 (2/5 Sept. 19, 2014) (Turner, Kriegler, Mink) (unpublished).
“Without a proper record,” explains the Court of Appeal, “we cannot determine what happened [below] . . . In numerous situations, courts have refused to reach the merits of an appellant’s claims where no reporter’s transcript of a pertinent proceeding or a suitable substitute has been provided.”
A Statement of Decision Couldn’t Have Hurt Appellants Here
The facts are somewhat odd here. Defendants/Appellants were involved in a fee dispute with Plaintiff/Respondent, a law firm. Defendants moved to compel arbitration, while arguing that the parties’ agreement, governed by the Los Angeles County Bar Association rules, did not allow the arbitrators to decide an alter ego claim. Plaintiff pointed out some of the interested parties were not subject to arbitration, but expressed a willingness to arbitrate, “noting that the only issue in dispute was whether the arbitration would include the alter ego claim.” The trial court said that if the parties “’really want to arbitrate, I’ll let you stipulate to arbitrate’ but emphasized that any arbitration must be ‘all or nothing.’” You guessed it – no stipulation, so no arbitration. Defendants appealed. Tesser Ruttenberg & Grossman LLP v. Forever Entertainment LLC, B249042 (2/1 Aug. 27, 2014) (Chavez, Boren Ashmann-Gerst) (unpublished).
The appellants failed to establish reversible error, perhaps because they failed to request a statement of decision. An order denying a petition to compel arbitration “is presumed to be correct, and all intendments and presumptions are indulged to support the order on matters at to which the record is silent.” Here, the record appeared to be silent on matters as to which Appellants argued the trial court had gone sideways. “The presumption of correctness is particularly applicable when, as was the case here, defendants failed to request a statement of decision explaining the factual and legal basis for the trial court’s ruling denying their motion to compel arbitration.”
That meant that the Court of Appeal only had to find one ground that would support the trial judge’s order, and it did in Cal. Code of Civ. Proc., section 1281.2(c), giving the trial court discretion to deny arbitration so all issues between the parties are resolved in a judicial proceeding.
Defendants argued that the record contained no ruling under section 1281.2(c). No matter. “Their failure to request a statement of decision resulted in the forfeiture on appeal of any objection based on the absence of such findings or ruling.” Surely there is a moral here.
If the Federal Arbitration Act alone had governed the arbitration, Cal. Code Civ. Proc. section 1281.2(c) would have been preempted, and would not have been a basis for denying arbitration.
Court of Appeal Is Skeptical About Gentry, But Avoids Addressing Gentry Factors, Because Record Was Lacking
Macy’s Department Store’s Flagship location in Manhattan, New York. Carol M. Highsmith Collection. Library of Congress.
The issue of the enforceability of class action waivers and compulsory arbitration in employment disputes is before the California Supreme Court by virtue of its grant of review in Iskanian v. CLS Transportation Los Angeles, LLC, 206 Cal.App.4th 949 (2012) (review granted Sept. 6, 2012, S204032). See my June 5, 2012 post on Iskanian. Meanwhile, the Courts of Appeal must still deal with cases that present those issues, sometimes skirting the issues. Our next case, Outland v. Macy’s Department Stores, Inc., A133589 (1st Dist. Div. 1 January 16, 2013) (Margulies, J., author) (unpublished), concerns a class action brought on behalf of California residents employed as group sales managers for Macy’s, alleging they were not compensated for overtime and for missed meal and rest periods, because they were improperly classified as exempt.
The trial court granted Macy’s motion to enforce an arbitration agreement with a class action waiver. Plaintiff appealed, contending that AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740 (2011) was distinguishable, and that dismissal of her class claims could be avoid by relying upon Gentry v. Superior Court, 42 Cal.4th 443 (2007), and D.R. Horton, Inc., a decision of the National Labor Relations Board (NLRB).
Courts that take the position that Gentry is still good law point out Gentry did not establish “a categorical rule that invalidates class action waivers – the type of rule that Concepcion condemned.” Franco v. Arakelian Enterprises, Inc., 211 Cal.App.4th 314, 368 (2012). See my November 27, 2012 post on Franco. Unfortunately for plaintiff here, however, “plaintiff did not submit any evidence to the trial court concerning the Gentry factors.” Thus, there was no basis on the record for finding the class action waiver unconscionable.
The Court also says, somewhat cryptically, that notwithstanding another decision, Truly Nolen of America v. Superior Court, 208 Cal.App.4th 487 (2012), recognizing that Concepcion was inconsistent with Gentry, “we conclude we must follow Concepcion.” See my August 13, 2012 post on Truly Nolen. It is unclear how following Gentry is necessarily inconsistent with Concepcion, because Concepcion does not abolish unconscionability as a defense to arbitration. In Outland, the Court explains that there is no basis in the record “for finding the class action waiver unconscionable.” But if application of the Gentry factors, based on evidence, had led to a finding that the class action waiver was unconscionable, how would that be inconsistent with Concepcion?
Finally, like a number of other courts (including the Iskanian court) that have considered the issue, the Court of Appeal was not persuaded by the ruling in D.R. Horton., a case that held that the NLRA barred mandatory waivers of class arbitration over wages, hours, and working conditions. A ruling by the NLRB was not binding on the California courts. Nor did the Court of Appeal believe that the NLRB has any special expertise in the area of arbitration and class action waivers.
When footnote 1 of an opinion begins, “Appellants omitted several key documents . . . “, followed by, “We therefore have little information . . . “ it does not augur well for the appellant.
An augur holding a lituus, the curved wand often used as a symbol of augury on Roman coins. Wikipedia.
This case arose from an employment suit. Because the Employment Handbook provided for settling disputes “exclusively by final and binding arbitration,” the employer moved to compel arbitration. The trial court denied the motion to compel arbitration, and the employer appealed. Tisor v. Marketshare Partners, LLC, Case No. A134327 (1st Dist. Div. 4 September 13, 2012) (Sepulveda, J., author) (unpublished).
The employee had allegedly signed an acknowledgment that “none of the statements in the handbook (other than this Acknowledgment and the agreement to arbitrate) are intended to create any contractual or other legal obligations. I also understand that [MarketShare] may at any time modify or rescind any policy, benefit or practice described in the handbook, except for its policy of at-will employment, the arbitration agreement and policies required by law.” The Handbook was 41 pages long. (Seems like opinions that deny a motion to compel arbitration often mention the length of the document in which the arbitration provision is to be found).
Here’s the rub: the arbitration provision contained lines for dates and signatures of the employee and the employer, neither of which was signed or dated. Therefore, the one part of the Handbook intended to create legal obligations, and contemplating a signature, was unsigned. Concluding that the Handbook “contemplated that the arbitration of disputes provision would be effective only if both [employer and employee] assented to that provision” (Marcus & Millichap Real Estate Investment Brokerage Co. v. Hock Investment Co., 68 Cal.App. 4th 83, 91 (1998)), the Court of Appeal affirmed. Well, this one didn’t look good for the appellant from the get-go (footnote 1, supra).