California Mediation and Arbitration

Arbitration/Miscellaneous/MFAA: California State Bar Offers Arbitration Advisories Under Auspices Of The Committee On Mandatory Fee Arbitration

 

Useful Resource for Mandatory Fee Arbitration

     The California State Bar offers a useful collection of “Arbitration Advisories” that I wanted to share with my readers.  These advisories come with the following disclaimer:

     “Points of view or opinions expressed in this document are those of the Committee on Mandatory Fee Arbitration. They have not been adopted or endorsed by the State Bar’s Board of Trustees and do not constitute the official position or policy of the State Bar of California.”

2012-03
Handling Legal Malpractice Claims and Ethical Issues During Arbitration

2012-02
Arbitration Agreements (Supercedes 2004-01)

2012-01
Voidability of Fee Agreements (Supercedes 1996-04)

2011-02
Statute of Limitations for Fee Arbitrations (Supercedes 1996-02)

2011-01
Enforcement of Non-Refundable Retainer Provisions (Supercedes 2001-02)

2010-01
Arbitration of Loan Modification Fee Disputes

2009-01
The Arbitrator's Role in Accepting Settlement Agreements As Stipulated Awards

2008-02
Authority to Compel Compliance with Third-Party Subpoena

2008-01
Timing of Agreements to Binding Fee Arbitration

2007-02
Preservation of Client Confidences in Arbitrations Involving Parties Other Than The Client

2007-01
Arbitral Immunity

2005-02
Resisting Attempts to Subpoena Fee Arbitrators or Fee Arbitration Documents

2005-01
Jurisdiction of the Mandatory Fee Arbitration Program to Determine the Existence of an Attorney-Client Relationship

2004-01
Arbitration Agreements (Superceded by 2012-02)

2003-03
Awarding Program Filing Fees
 003-02
The Amendment or Supplementation of Arbitration Awards (Supercedes 2000-01)

2003-01
Detecting Attorney Bill Padding

2002-01
Imposition of Sanctions by Arbitrators in Conducting Fee Arbitration Matters

2001-02
Enforcement of 'Non-Refundable' Retainer Provisions (Superceded by 2011-01)

2001-01
Impact of the Truth in Lending Act and Retain Installment Sales Act Upon Attorney-Client Fee Disputes

2000-01
The Amendment or Supplementation of Arbitration Awards. (Superceded by 2003-02)
11/3/2000

1998-03
Determination of a 'Reasonable' Fee
6/23/1998

1998-02
Required Accommodations for Fee Arbitration Participants with Disabilities

1998-01
Impact of Arbitration Clauses in Fee Agreements Upon Client's Right to Mandatory Fee Arbitration

1997-03
Fee Arbitration Issues Involving Contingency Fees

1997-02
Handling a Request for Arbitration When a Party Files for Bankruptcy

1997-01
Disclosures To Be Made by Arbitrators to Parties

1996-05
Arbitrator's Role in Settlements at Time of Hearing

1996-04
Voidability of Fee Agreements (Superceded by 2012-01)

1996-03
Burden of Proof in Fee Arbitrations

1996-02
Statute of Limitations for Fee Arbitrations (Superceded by 2011-02)

1996-01
Records Retention

1995-02
Standards for Attorney Fee Billing Statements

1995-01
Disclosure Required of Fee Arbitrators by CCP 1281

1994-04
Identification of 'Individual Responsible Attorney' in Fee Arbitration Awards
 1994-03
Avoiding Arbitrator Bias

1994-02
Jurisdiction to Arbitrate Court Ordered Fees

1994-01
Avoiding Arbitrator and Administrator Bias

1993-02
Standard of Review in Fee Disputes Where There Is a Written Fee Agreement

1993-01
Awards of Interest by the Arbitrator
 

Arbitration/Employment: One More Opinion Weighs In That Representative PAGA Claim Cannot Be Compelled To Arbitration

PAGA Claims Are Representative, Not Individual Claims, Fourth District, Division 3 Explains

     Here, the arbitration agreement required plaintiff to arbitrate “claims for wages or other compensation due or penalties . . . [and] violation of statute.”  But she could not be compelled to litigate her California Private Attorney General Act claim as an individual, as the trial court ordered, because the PAGA claim is by its nature a representative claim.  “An employee bringing a PAGA claim ‘does so as the proxy or agent of the state’s labor law enforcement agencies. The act’s declared purpose is to supplement enforcement actions by public agencies, which lack adequate resources to bring all such actions themselves.’” Whalley v. The Wet Seal, Inc., Case No.G047406 (4th Dist. Div. 3 Nov. 15, 2013) (Thompson, J. author 3:0) (unpublished), citing Arias v. Superior Court ,46 Cal.4th 969, 986 (2009).

     Here, the employee could not be compelled to arbitrate her representative action as an individual action, and the employer could not be compelled to arbitrate the PAGA claim as a representative action.  Result:  “We reverse those portions of the order that compel [the employee] to arbitrate her PAGA claim on an individual basis and that bar her representative PAGA claim but we exclude that claim from the arbitration.” 

     As we have pointed out in other posts (June 5, 2012, July 28, 2013, November 5, 2013) and as the Court points out in Whalley at footnote 4, case law is currently divided on whether an employee can be compelled to arbitrate her PAGA claims on an individual basis.  Stay tuned for the California Supreme Court to rule on the pending issue.

Arbitration/Rules: AAA Adopts Optional Appellate Arbitration Rules Effective November 1, 2013

Grounds For Appeal Go Beyond Those Allowed By Existing State And Federal Statutes

     Perhaps the greatest risk with arbitration is that errors of fact and law are not grounds for appeal.  The American Arbitration Association has now addressed that risk by adopting Optional Appellate Arbitration Rules effective November 1, 2013.

     These optional rules expand the grounds for appealing an Underlying Award to include, “(1) an error of law that is material and prejudicial; or (2) determinations of fact that are clearly erroneous.”

     Parties seeking to appeal an Underlying Award obtained from the AAA arbitrator must file a Notice of Appeal within 30 days of the date of the Underlying Award, a filing fee, a copy of the applicable arbitration agreement providing for appeal of the Underlying Award, and a copy of the Underlying Award. The AAA provides sample language for an arbitration agreement that anticipates appellate review by an AAA tribunal.  Without such an agreement, a party still cannot unilaterally appeal.

     The appellate tribunal will have three arbitrators, unless the parties agree to one arbitrator, and will have broad power to rule on the scope of its own jurisdiction.

     While providing an added safeguard against errors of fact and law, the optional rules will add a new layer of expense and time, thereby narrowing the gap between arbitration and litigation in court.  But choosing the arbitration appellate option may well be worth it, on a case-by-case basis, especially in large-scale commercial arbitration.

Arbitration/Disclosures/Vacatur//Waiver: Fifth District Holds That Arbitrator’s Adverse Relationship In Litigation With Law Firm Representing Losing Party In Arbitration Did Not Require Vacating The Award Here

 

The Purported Conflict Did Not Come Within Any Of Those Specifically Listed Matters That Must Be Disclosed

     Plaintiff Diamond Manufacturing & Engineering Co. (Diamond) obtained a favorable arbitration award against defendant Equipment Parts Wholesale, LLC (EPW).  When Diamond petitioned the trial court to confirm the award, EPW requested – unsuccessfully – that the trial court vacate the award because of the arbitrator’s alleged failure to disclose a potential conflict, and that the trial court correct the amount of the award based on an alleged miscalculation of figures.  EPW appealed the denial of the order confirming the award and entering judgment.  Diamond Manufacturing & Engineering Co. v. Equipment Parts Wholesale, LLC, Case No. F064701 (5th Dist. Nov. 4, 2013) (Kane, Acting P.J. author 3:0) (unpublished). 

     The purported conflict the arbitrator did not disclose stemmed from the arbitrator’s representation of a client in a federal action where the opposing party was represented by an attorney in the law firm representing EPW in the arbitration.  However, that purported conflict does not fit into any of the categories specifically listed as matters that must be disclosed by an arbitrator under CCP section 1281.9.  Consequently, EPW had to argue that the conflict had to be disclosed under the general catch-all requirement that an arbitrator must “disclose all matters that could cause a person aware of the facts to reasonably entertain a doubt that the . . . arbitrator would be able to be impartial . . . “ 

     But the Court of Appeal did not “see how the relationship at issue would lead a reasonably objective person to doubt the arbitrator’s ability to be impartial.”  The two cases and parties involved were entirely unrelated.

     Two additional attenuating factors supported the Court’s conclusion.  First, different attorneys from EPW’s law firm were involved in the federal action and the arbitration.  Second, the parties and the arbitrator did not learn of the purported conflict until after the arbitration hearings were over and the process was close to completion. 

     Additionally, EPW’s attorneys, after learning of the purported conflict, did not move immediately to disqualify the arbitrator, but waited until after the arbitrator delivered an award.  Without using the pejorative word, the Court apparently viewed this as sandbagging, and treated the delay as a waiver.

     As for correcting the award, “EPW is . . . asking us to remedy the arbitrator’s allegedly flawed reasoning and/or factual determinations – something we may not due.”

     Affirmed.

Arbitration/Employment/Construction of Agreement/Waiver: Second District, Div. 6, Affirms Trial Court’s Refusal To Preclude Employee With Statutory Grievance From Filing Judicial Action

Employee Here Did Not Clearly And Unmistakably Waive Right To A Judicial Forum

     Certain distinctions are importantly at play in Volpei v. County of Ventura, Case No. B243954 (2nd Dist. Div. 6 Nov. 7, 2013) (Gilbert, P.J., author 3:0):  statutory versus contractual rights, mandatory versus voluntary arbitration, unilateral versus bilateral right to initiate arbitration, and preponderance of the evidence versus clear and unmistakable evidence.

      Volpei, an investigator for the Ventura County District Attorney’s Office, sued the County for retaliation, harassment, and discrimination claims under the California Fair Employment and Housing Act.  The County petitioned to compel arbitration, based on the dispute resolution provisions under the terms of a memorandum of agreement (MOA) between Volpei’s bargaining representative, the Ventura County Deput Sheriffs’ Associaiton, and the County.

       The sheriff of McAlester, Oklahoma, sitting in front of the jail.  He has been the sheriff for thirty years.  1936.  Dorothea Lange, photographer.  Library of Congress.

      The trial judge concluded that Volpei was not bound to arbitrate his claims, and the Court of Appeal agreed with the trial judge.

       First, it is significant that statutory, rather than merely contractual rights are at issue.  California courts have not been so quick to find a waiver of the right to sue for a violation of statutory claims.  Here, the MOA did “not provide for a clear and unmistakable waiver of Volpei’s right to a judicial forum for his statutory discrimination claims.” 

      The grievance procedure at issue provided that a grievance unresolved after the employee’s filing of an informal complaint and a three-step formal complaint process “may be submitted to arbitration by the [Ventura County Deputy Sheriffs’] Association . . . “  The Court of Appeal pointed out that the Association was not a party to the lawsuit; that the submission of a matter to arbitration was unilaterally in favor of the Association, and that the word “may” could be construed as meaning permissive rather than mandatory.  Other cases that construed “may” to mean “shall”, within the context of compelling arbitration, were distinguishable, as they pertained to waiver of a judicial forum where non-statutory rights were involved.

     Here, however, the Court refused to find a “clear and unmistakable” waiver by Volpei of his right to a judicial forum:  “The provision may have required arbitration of contractual claims, and may have permitted Volpei to voluntarily arbitrate his statutory claims, but it did not unambiguously require arbitration as the sole and exclusive remedy for his statutory discrimination claim.”

Arbitration/Employment/Unconscionability/FAA: Employee’s Waiver Of Dispute Resolution Berman Hearing In Favor Of Arbitration, While Not Per Se Improper, Could Still Be Unconscionable

SCOTUS Ruling In Concepcion Causes California Supreme Court To Change Its Position On Waiver of Berman Hearing  

     So what is a Berman hearing?  It is a dispute resolution forum established by the Legislature to assist employees in recovering wages owed.  Labor Code section 98.  The procedure is named after legislator Howard Berman, who instituted it.

     In Sonic-Calabasas A, Inc. v. Moreno, 51 Cal.4th 659 (2011) (Sonic I), the California Supreme Court “held as a categorical rule that it is contrary to public policy and unconscionable for an employer to require an employee, as a condition of employment, to waive the right to a Berman hearing . . . “ Sonic-Calabasas A, Inc.,, v. Moreno, Case No. S174475 (Cal. Sup. Ct. Oct. 17, 2013) (Sonic II).

     In light of AT&T Mobility LLC v. Concepcion, 563 U.S. __ , 131 S.Ct. 1740 (2011), the California Supreme Court now holds in Sonic II that the Federal Arbitration Act preempts a state law rule “categorically prohibiting waiver of a Berman hearing in a predispute arbitration agreement imposed on an employee as a condition of employment.”  However, the agreement requiring that a Berman hearing to be bypassed in favor of arbitration “may be unconscionable if it is otherwise unreasonably one-sided in favor of the employer,” writes Justice Lui for the Majority.

     In other words, unconscionability depends on the totality of the circumstances.  And so, ‘[b]ecause evidence relevant to the unconscionability claim was not developed below,” the Court remands to the trial court in Sonic II to determine whether the arbitration agreement is unconscionable “under the principles set forth in this [very long!] opinion.”

     Justice Corrigan, while concurring, disagrees with the Majority’s “failure to articulate a clear standard for assessing the unconscionability of arbitration terms in employment agreements.”  And Justices Chin and Baxter, concurring and dissenting, agree with the preemption conclusion, but disagree with the decision to remand to the trial court to address unconscionability.  They believe the issue was forfeited, and that the plaintiff would never have been able to meet the burden of establishing unconscionability.

Arbitration/Agency/Enforceability/CCP 1281.2: Nursing Home’s Petition To Arbitrate Fails For Lack Of Evidence That Husband Delegated Authority To His Wife To Agree To Arbitration

 

Spouses Are Not Automatically The Agents Of One Another When It Comes To Making Health Care Decisions

     Mrs. Goldman signed an arbitration provision on behalf of her husband who entered a nursing home.  After Mr. Goldman died, Mrs. Goldman sued on behalf of her husband for elder abuse and related wrongs, and in her individual capacity, for negligent infliction of emotional distress and wrongful death.  After defendants lost their motion to compel arbitration, they appealed.  Goldman v. Sunbridge Healthcare, LLC, Case No. C069970 (3rd Dist. filed Sept. 27, publication ordered Oct 28, 2013).

     The defendants lost their appeal, because they failed to demonstrate that Mr. Goldman lacked the capacity to make health decisions, and that he had delegated authority to Mrs. Goldman to sign an arbitration agreement.  When Mrs. Goldman signed, she wrote “stroke”, by way of explaining why Mr. Goldman had not signed.  But she was not a doctor, and there was no evidence that Mr. Goldman lacked the ability to sign or make his own health decisions.  Agency had to be created by the purported principal, Mr. Goldman, not the purported agent.  And the mere fact that Mr. and Mrs. Goldman were husband and wife was not enough to automatically confer agency for making health care decisions. 

     Lurking in the appeal is an interesting issue that the Court did not have to address, once it found that there was no effective agreement to arbitrate.  That issue is whether Cal. Code of Civ. Proc., section 1281.2(c), which allows a trial court judge to adjudicate arbitrable and non-arbitrable claims to avoid inconsistent decisions, is preempted by the Federal Arbitration Act. 

Arbitration/Employment: Arbitration Agreement Fails To Clearly And Unmistakably Refer Statutory Discrimination Claims To Arbitration

Collective Bargaining Agreement Must Clearly and Unmistakably Refer Statutory Discrimination Claims to Arbitration in Order Make Arbitration Mandatory

     Defendant Mid-Wilshire Health Care Center appealed from an order denying its motion to compel arbitration and to stay a wrongful termination action filed by plaintiff Mendez, a nurse assistant.  After determining the provisions of a collective bargaining agreement applied to plaintiff, a union member, even though plaintiff had not signed an arbitration agreement, the Court of Appeal agreed with the trial judge that the arbitration agreement failed to clearly and unmistakably refer statutory discrimination claims to arbitration.  A collective bargaining agreement containing a broad arbitration clause coupled with general language about complying with the law will not pass the “clear and unmistakable waiver test.”  Mendez v. Mid-Wilshire Health Care Center, Case No. B243144 (2nd Dist. Div. 7, filed Sept. 23, pub. order Oct. 15 2013).

Arbitration/Employment/Public Policy: Private Attorney General Act Claims Need Not Be Arbitrated

PAGA Claims Are Outside the Principles of the FAA and the Supreme Court Decisions Applying It

     The Private Attorney General Act of 2004 (PAGA), Labor Code sections 2698 through 2699.5, authorizes actions by aggrieved employees on their own behalf and on behalf of other employees to recover civil penalties from employers for Labor Code violations.  Brown v. Ralphs Grocer Co., 197 Cal.App.4th 489 (2011), does not require a plaintiff to arbitrate her individual PAGA claims pursuant to an arbitration agreement. 

      Employee Shelley Pickett brought a representative action under PAGA against her employer, asserting that employees operating cash registers had not been provided with seats, in violation of Labor Code section 1198, and a Wage Order.  The trial court denied the employer’s motion to compel arbitration.  The Court of Appeal, with two concurring opinions, followed Brown v. Ralphs Grocer Co., sided with the trial court judge, and affirmed the order denying defendant’s motion to compel arbitration.  Pickett v. 99 Cents Only Stores, Case No. B246394 (2nd Dist. Div. 5 Oct. 15, 2013) (Mosk, J., author, with two concurrences) (unpublished).

     Following the reasoning in Brown v. Ralphs Grocer Co., a plaintiff does not bring a PAGA claim as an individual claim, but rather as the proxy or agent of the state’s labor law enforcement agencies – who are not parties to an arbitration agreement.  Brown has been criticized, but it has not been overruled.  Whether arbitration agreements can override the statutory right to bring representative claims under PAGA is an issue currently awaiting review in Iskanian v. CLS Transportation Los Angeles, LLC, 206 Cal.App.4th 949 (review granted Sept. 19, 2012, S204032).  For my earlier blog post on Brown, click here; for my earlier post on Iskanian, click here.

Arbitrations/Automobiles: Fourth District, Division 2, Finds Form Purchase And Sale Agreement Used By Many New Car Dealers Not Unconscionable

Appellate Opinion Is Divided And Issue Is Before The California Supreme Court

Automobile wreck.  Between 1918 and 1920.  Library of Congress.

     The Fourth District, Division 2, has added one more appellate opinion to the mix of opinions concerning whether a form purchase and sale contract used by many new car dealers in California and including a form arbitration clause is unconscionable.  It’s not unconscionable, says the Court, reversing the trial court judge.  The Court finds “minimal” procedural unconscionability and no substantive unconscionability.  Gonzalez v. Metro Nissan of Redlands, Case No. E056160 (4th Dist. Div. 2 Sept. 12, 2013) (Richli, J. author 3:0) (unpublished).  As noted by the Court, the California Supreme Court has granted review of the issue in no fewer than five published appellate opinions so far, but has yet to decide any of them.

     California Mediation and Arbitration has its own sidebar category for “automobiles”, because automobile dealers make widespread use of arbitration clauses in consumer contracts.  Those clauses have generated quite a few appellate opinions – and those opinions are divided on the question of unconscionability.