California Mediation and Arbitration

Sanctions: 4th Dist. Div. 3 Affirms Sanctions For Frivolous Opposition To Proceedings To Confirm Arbitration Award

Once Again, Judicial Review Of Arbitration Awards Is Extremely Limited.

        Kenneth J. Catanzarite, representing plaintiffs, filed an opposition to defendant's petition to confirm the award. The court imposed $37,000 in sanctions against Catanzarite for presenting unsupported and meritless arguments, including a claim that the arbitrator had refused to consider evidence, despite no evidence supporting this claim.

        Affirmed. "A party’s abstract right to oppose a petition, or to preserve arguments for appeal, is not an entitlement to pursue frivolous arguments in the trial court or this court. Nor are we persuaded by Catanzarite’s contention that his reliance on a case he knew had been explicitly disapproved by our Supreme Court, on the very point he cites no less, demonstrates his argument was a reasonable one to make. We consequently find no abuse of discretion in the trial court’s sanction award against Catanzarite. Plantations’s response to Catanzarite’s opening brief on appeal included a motion for sanctions which we also conclude is meritorious. Catanzarite filed an opening brief in this court which repeats the arguments he made below—including his refusal to acknowledge the binding Supreme Court authority that fatally undermines his claim, and his opposition to the sanctions motion is more of the same."  Plantations at Haywood 1, LLC et al v. Plantations at Haywood, LLC, G062909 (4/3  2/10/25) (Goethals, Sanchez, Delaney).

        COMMENT. The case reaffirms judicial review of arbitration awards is extremely limited, and challenges must meet specific statutory grounds. Regarding sanctions, the case highlights the serious consequences of filing frivolous motions and appeals.

Section 998 Settlement Offers: Different Code Provisions Govern Post-Judgment Fees And Costs

This Case Involves The (Non) Application Of Civil Code § 998 To Postjudgment Fees And Costs.

        The plaintiff, Caesar Elmi, rejected a settlement offer made by the defendant, Related Management Company, pursuant to section 998. The case was later resolved for an amount lower than what was offered, leading to a limitation on Elmi’s recovery of prejudgment costs and attorney fees, specifically limiting them to those incurred before the settlement offer.

        After the judgment, Elmi sought additional postjudgment fees and costs for efforts to enforce the judgment. However, the trial court denied the request, stating that section 998 only applied to prejudgment costs and fees, and not to postjudgment enforcement costs.

        The court of appeal reversed this decision, clarifying that postjudgment costs, including attorney fees incurred during enforcement, are not governed by section 998. Caesar Elmi v. Related Management Company, L.P., G062788 (4/3  pub. 2/6/25) (Goethals, Moore, Sanchez). Instead, they are governed by other provisions, particularly section 685.040, which allows recovery of costs necessary for enforcing a judgment. Consequently, the case was remanded to the trial court to reconsider Elmi’s request for postjudgment fees and costs.

Gateway Issues: JAMS' Consolidation Of Arbitration Claims Did Not Present Gateway Issue Of Arbitrability

Plaintiff Was Not Harmed Because Defendant Had Not Refused To Arbitrate, And Questioned Consolidation Of Claims Could Still Be Addressed By Arbitrator.

        Kiana Jones sued Starz Entertainment, LLC, claiming violations of federal and state privacy laws after Starz allegedly disclosed her identity and video viewing history to third parties. Jones initiated arbitration proceedings under Starz’s Terms of Use, which included a mandatory arbitration clause. However, Jones and other claimants’ filings were consolidated by the arbitration provider, JAMS, to be presided over by a single arbitrator. Jones objected to the consolidation, arguing that it conflicted with her right to individual arbitration as outlined in the Terms. She petitioned the district court to compel individual arbitration. The district court denied her petition, holding that Jones was not "aggrieved" under the Federal Arbitration Act (FAA) and that the consolidation did not present a gateway question of arbitrability for the court.

        The Ninth Circuit affirmed the district court’s decision, ruling that Jones was not aggrieved because Starz had not failed, neglected, or refused to arbitrate. Kiana Jones v. Starz Entertainment, LLC, 24:1645 (9th Cir.  2/28/25) (Clifton, Gould, Sanchez). The court found that the arbitration provider’s consolidation of the claims under its rules did not constitute a refusal to arbitrate and that Jones could raise her concerns about consolidation within the arbitration process itself. Additionally, the court ruled that Jones could not invoke unconscionability to modify the arbitration agreement she sought to enforce.

        NOTE: 9 USC § 4 of the FAA states in part: "A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement." 

Enforceability Of Arbitration Agreement On Internet: 9th Circuit Agrees Terms Were Not Conspicuous Enough

"A Question Of Ever-Increasing Ubiquity In Today's E-Commerce World."

        The question: did an internet user’s online activities bind her to certain terms and conditions? 

        The majority opinion in Katherine Chabolla v. ClassPass Inc., et al, 23:15999 (9th Cir.  2/27/25) (Mendoza, Fitzgerald; Bybee, dsst.) affirmed the district court’s decision to deny ClassPass’s motion to compel arbitration. The key issue was whether Chabolla agreed to ClassPass's Terms of Use, specifically the arbitration clause. The majority found that Chabolla did not unambiguously manifest her assent to the Terms. ClassPass's website displayed links to the Terms, but the notice on screens 1, 2, and 3 was not sufficiently conspicuous. Screen 1, in particular, had the notice placed far from the action items and used a small, gray font that could be overlooked. Even though screens 2 and 3 provided more prominent notices, the majority concluded Chabolla never unambiguously assented to the Terms. For an online agreement to be enforceable, the user must be explicitly notified that their action (e.g., clicking a button) binds them to the terms. Because Chabolla's actions were ambiguous and the website did not clearly indicate continuing would manifest assent to the Terms, the majority affirmed the lower court’s ruling, denying enforcement of the arbitration provision.

        Dissenting, Judge Bybee argued Chabolla agreed to the Terms of Use, including the arbitration clause. The dissent highlighted Chabolla clicked “Continue” or “Redeem Now” three times, with each click accompanied by a clear notice she was agreeing to the Terms. The dissent found the notices to be conspicuous, especially when compared to other cases like Patrick and Oberstein, where similar sign-in wrap agreements were upheld. The dissent argued the majority's stricter interpretation would create uncertainty for online contracts and compel businesses to adopt more rigid contract structures like clickwrap or scrollwrap agreements. Thus, the dissent would have enforced the arbitration provision.

Discovery: Sixth District Holds Arbitration Agreement Is Enforceable Where Discovery Rules Are Lenient Enough

The Court Of Appeal Distinguished Between The More Lenient Discovery Provisions In Vo And The Tougher Discovery Restrictions In Aixtron.

        In Vo v. Technology Credit Union, H051619 (6th Dist.  2/4/25) (Greenwood, Grover, Danner), the California Court of Appeal reviewed an arbitration agreement signed by Thomas Vo, an employee of Technology Credit Union (TCU). After Vo was terminated, he filed a lawsuit against TCU, alleging various violations under the Fair Employment and Housing Act. TCU moved to compel arbitration based on the arbitration agreement, but the trial court found the agreement to be unconscionable, particularly due to its lack of provisions for third-party discovery, relying on Aixtron to justify the decision.

        The Court of Appeal reversed the trial court's order, determining that the arbitration agreement was not unconscionable. The court held that the agreement provided adequate discovery, including the authority for the arbitrator to allow additional discovery if necessary. Despite concerns about third-party discovery, the court clarified that the arbitration agreement's incorporation of the JAMS Rules permitted the arbitrator to make decisions regarding the scope of discovery, thus ensuring Vo had sufficient access to necessary information for his claims.

        COMMENT. Aixtron and Vo both addressed the availability of third-party discovery in arbitration. In Aixtron, the court emphasized that the arbitration agreement failed to incorporate California Arbitration Act provisions or any rules that would grant the arbitrator authority to compel discovery from nonparties. Specifically, the court found that the arbitrator did not have the power to issue subpoenas to third parties for prehearing discovery, and thus, the agreement could not support such a discovery request.

Unconscionability: Fourth District Div. 3 Finds Arbitration Provision Presented In English To Spanish Speaking Legal Client Was Not Enforceable

Presenting An English Contract To A Spanish Speaking Legal Client Illiterate In English Was Problematic

        Justo Malo Sanchez filed a legal malpractice lawsuit against Consumer Defense Legal Group and its representatives, alleging issues with the firm's handling of his case. The retainer agreement he signed contained an arbitration clause, but Sanchez argued that the agreement was unconscionable. He contended it was procedurally unconscionable because he was illiterate in English, had a limited education, and was presented with the contract in a "take it or leave it" manner without translation or explanation. It was also substantively unconscionable due to high arbitration fees, which Sanchez could not afford.

        The trial court initially denied the motion to compel arbitration, citing concerns about the lack of proof of a valid agreement and the significant procedural unconscionability. After reconsideration, the court reversed its decision, granting the motion, convinced by defense arguments that Sanchez was not truly indigent and could afford arbitration fees. Sanchez then sought writ relief from the Court of Appeal, which granted the petition, ruling that the arbitration clause was both procedurally and substantively unconscionable. 

        The Court of Appeal agreed the contract was a standard, adhesive one and the arbitration provision was hidden, written only in English, and not adequately explained. Furthermore, the arbitration costs were prohibitively high, effectively denying Sanchez access to a forum to litigate his claims, rendering the arbitration clause unenforceable​. Sanchez v. Superior Court of Orange County, G064490 (4/3   2/3/25) (Delaney, Sanchez, Motoike).

        COMMENT: In the past, we have blogged about many cases in which a contract written in English presented some degree of unconscionability for a person who did not speak English. Here, the contract at issue was an attorney-client agreement, and a California statutory provision applies. California Civil Code section 1632(b)(6) requires a person in a trade or business who negotiates a contract in Spanish (and other specified languages) to provide a translation in Spanish of the contract. And this applies to: "A contract or agreement, containing a statement of fees or charges, entered into for the purpose of obtaining legal services, when the person who is engaged in business is currently licensed to practice law pursuant to Chapter 4 (commencing with Section 6000) of Division 3 of the Business and Professions Code."

Preemption, Choice Of Law: Effort To Compel Arbitration With CAL Choice Of Law Provision Is Preempted

Can An Employer Avoid The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 With A California Choice Of Law Provision?

        No. The EFAA preempts California law, rendering the arbitration agreement unenforceable in cases of sexual harassment disputes. That's the holding of  Casey v. Sup. Ct.,  D.R. Horton, Inc., et al (Real Parties In Interest),  A170650 (1/1  2/3/2025) (Humes, Banke, Langhorne Wilson).

        Why? "The EFAA’s purpose is plainly obstructed by an attempt to use state law to force a person who is alleging sexual harassment to arbitrate their dispute."

Deadlines, FAA: First Dist. Div. 1 Sides With Courts Holding FAA Does Not Preempt Prompt Payment Of Arbitrator CA Statute

The Court Distinguishes The Case From Hernandez v. Sohnen Enterprises, Inc.

        Jenny-Ashley Colon-Perez sued her former employer, Security Industry Specialists, Inc. (SIS), for various employment-related claims. After agreeing to arbitrate, SIS failed to pay arbitration fees within the 30-day deadline required by California Code of Civil Procedure section 1281.98. Colon-Perez chose to withdraw from arbitration, and the trial court ruled that SIS had materially breached the arbitration agreement. SIS attempted to vacate the order, citing the Federal Arbitration Act (FAA) and other arguments, but the trial court denied the motion.

        The court held that section 1281.98 applied and was not preempted by the FAA. The failure to pay the arbitration fees within the statutory period constituted a material breach, allowing Colon-Perez to proceed with her claims in court. Colon-Perez v. Security Industry Specialists, Inc., A168297 (1/1  1/29/2025) (Banke, Humes, Langhorne Wilson).

        Justice Kathleen Banke explained: "We recently addressed whether the FAA preempts section 1281.98 in Keeton v. Tesla, Inc. (2024) 103 Cal.App.5th 26, 32 (Keeton), review granted September 11, 2024, S286860. We concluded it does not, as have all but one of the Courts of Appeal that have considered the issue. We are not persuaded to depart from our conclusions in Keeton."

        The Court of Appeal also addressed whether the denial of arbitration violated the Contract Clause of the Constitution. It concluded that it did not violate the clause, because insisting on prompt payment of the arbitrator did not substantially interfere with arbitration.

        Also of note, the Court distinguished Colon-Perez from Hernandez v. Sohnen Enterprises, Inc., which holds that when the agreement is governed by the Federal Arbitration Act, § 1281.98 is preempted. Unlike the Hernandez arbitration provisions, the Colon-Perez provisions mentioned California state law and did not only refer to procedures in the FAA. 

        COMMENT: This last argument distinguishing Hernandez seems a bit sketchy. The arbitration clause in Colon-Perez provided: "Any proceeding pursuant to this Employment Dispute Arbitration Procedure is deemed to be an arbitration proceeding subject to the Federal Arbitration Act, 9 U.S.C. §§ 1–16, if applicable, to the exclusion of any state law inconsistent therewith; or, if the FAA is not applicable, to the law of the state of venue . . ." 

        I wrote an article for the Daily Journal published April 10, 2024, entitled: California: Friend or Foe of Arbitration?, addressing the preemption issue presented by the statutory deadline for paying attorney fees to the arbitrator. The article is available online here.

Reviews: Who Owns This Sentence? -- Book Reviewed By Your Blogger Marc Alexander

A History Of Copyrights And Wrongs.

        David Bellos, an academic, translator, and biographer, and Alexandre Montagu, an IP attorney and founder of MontaguLaw, have written an engaging history of copyright law. Blogger Marc Alexander has written a review of the book. The review is republished here with the permission of the Journal of the Litigation Section of the California Lawyers Association and the CLA. The review appears in the Journal, Vol. 37, issue 3, p. 53. Here's a link to the review: Download Who Owns This Sentence reviewed.

Agency: Third District Agrees Durable Power Of Attorney At Issue Did Not Confer Authority To Agent To Agree To Arbitrate

Authority To Make Medical Decisions Is Not The Same As Authority To Consent To Arbitration.

        In Lombardo v. Gramercy Court, C098857 ( 3rd Dist. 12/31/24) (Robie, Earl, Mauro) the plaintiffs, Lisa Lombardo and others, sued Gramercy Court for wrongful death, negligence, elder abuse, and gross negligence after Elizabeth Stein, their relative, died following inadequate care at the defendant's facility. Gramercy Court sought to compel arbitration based on an agreement signed by Lombardo as Stein's agent under a durable power of attorney (DPOA). The trial court denied the motion, finding Lombardo lacked the authority to bind Stein to arbitration. The appellate court affirmed this decision.

        The court determined that Stein’s DPOA did not grant Lombardo authority to sign arbitration agreements. Specifically, Stein left unchecked the section authorizing the agent to handle “claims and litigation,” which would have included arbitration authority. Furthermore, the DPOA explicitly excluded healthcare decisions, and arbitration agreements are distinct from medical decisions. The court also rejected Gramercy Court's argument that Lombardo had ostensible authority to bind Stein, finding no evidence of Stein’s conduct to justify such a conclusion.

        The appellate court similarly ruled that the arbitration agreement did not bind Lombardo or other heirs individually. It interpreted the agreement's language as ambiguous and construed it against the drafter, Gramercy Court.

        COMMENT: We have posted many times on nursing facilities that ran in to trouble enforcing arbitration agreements. Frequently a relative signs documents for an older relative, and unless all i's are carefully dotted and t's are carefully crossed, courts may find that authority was not conferred on the agent. There is also the issue with durable powers of attorney as to the scope of powers conferred under the DPOA -- does it just cover medical decisions, or does it include the power to agree to arbitrate disputes. And if there is an agency, does it cover the patient's disputes, or the disputes of heirs?