California Mediation and Arbitration

FAA, Pending Cases: Tamko Building Products v. Hobbs Cert Petition Presents FAA Preemption Issue To SCOTUS

Is There A Meaningful Distinction Between Contract Enforcement And Contract Formation For Purposes Of FAA Preemption?

     Kate Howard’s October 26, 2016 post about “Petitions To Watch” in Scotusblog notes that an arbitration case, Tamko Building Products, Inc. v. Hobbs, No. 15-1318, is up for consideration at the conference of October 28, 2016.

     According to the petition, signed by Paul D. Clement, the issue presented is:  “Whether a state court can evade the preemptive force of the Federal Arbitration Act by framing its refusal to enforce an arbitration agreement as a product of supposed defects in “contract formation” that would not prevent the formation of any other contract.”

     Petitioner Tamko is trying to come within the rule of Concepcion, which held that courts must place arbitration agreements on “equal footing” with other contracts.   In other words, the courts can’t place burdens on arbitration agreements that they couldn’t place on other agreements, absent clear congressional intent to do so. 

     Respondent frames the issue differently:  “Does the Federal Arbitration Act preempt the lower court’s application of this rule¹ to a case where the evidence suggests that the arbitration clause was not presented in a way that would give the consumer notice of its existence or the fact that keeping the product would supposedly constitute agreement to arbitration?”

1  _{In context, “this rule” means, “unless a party has actual knowledge of
the contract terms, the party’s conduct does not signify assent unless there was reasonable notice of the terms and the conduct that would be deemed to manifest assent
to them.”}

Mediation, Confidentiality, Family Law: Lacking Mediation Privilege, Unmediated Spousal Settlement Is Set Aside Because Presumption Of Undue Influence Applied

Here’s A Good Example Of Why It Is Harder To Set Aside A Mediated Spousal Settlement Than An Unmediated, Negotiated Settlement.

     In Marriage of Cooke, B257791 (2/7 10/17/16) (Segal, J.) (unpublished), the wife moved for entry of a stipulation for judgment that she and her husband signed.  The opinion rather vividly describes the the scene in which the distraught, unfocused, weepy, and unrepresented husband met with his wife and signed the stipulation for judgment.  A month later, the husband changed his mind, and responded to the petition for marital dissolution, requesting other arrangements.

     The trial court vacated the stipulation, based on undue influence, and the wife appealed.

     The Court of Appeal explains that a presumption of undue influence applied to the stipulation for judgment, because the stipulation unfairly advantaged the wife, and the fiduciary relationship between husband and wife means that the advantage “presumes such transactions to have been induced by undue influence.”

     However, the presumption of undue influence does not apply to mediated settlements.  Therefore, the wife argued that the negotiated settlement should be treated like a mediated settlement.  The Court disagreed, pointing out:  “Divorce mediators generally work to balance the negotiating power between the parties.” 

      Whether or not that is empirically true, the parties can also take advantage of the mediation privilege to exclude evidence when there is a genuine mediation.

      Here, there was no mediation, just an unmediated, negotiated settlement.  Unable to rely on the mediation privilege, the wife fell back on the settlement negotiation privilege in Evid. Code sections 1152 and 1154, to argue that she would be unfairly prevented by the Evidence Code from introducing evidence to rebut the presumption of undue influence.  However, the protection of settlement negotiations only prevents the introduction of evidence to prove a defendant’s liability, or to preclude evidence of an injured party’s offer to discount a claim to prove the claim’s invalidity.  Those protections would not have prevented the wife from introducing evidence that the parties did not reach a binding contract.

     Affirmed.

     COMMENT:  If the parties had hired a mediator, the stipulation would almost certainly have been enforced.  The presumption of undue influence would not have applied, and the wife could have taken advantage of the mediation privilege.

Arbitration, PAGA: Employer Cannot Compel Arbitration Of “Underlying” Labor Code Violations In Order To Stay PAGA Litigation

California Courts Have Repeatedly Held That PAGA Claims Are Between  Employee Acting On Behalf of State, And Employer, And Therefore Arbitration Cannot Be Compelled By Employer.

     Iskanian v. CLS Transportation Los Angeles LLC, 59 Cal.4th 348 (2014) held, “[A] PAGA claim lies outside the FAA’s coverage because it is not a dispute between an employer and an employee . . . It is a dispute between the employer and the state . . . “

     Nevertheless, California employers continue to seek ways to avoid the ruling in Iskanian.  In Bonillas v. DMSI Staffing, LLC, E064503 (4/2 10/19/16), an unpublished opinion authored by Justice Codrington, the employer sought to escape the clutches of PAGA by arguing that “underlying” Labor Code violations, upon which PAGA violations necessarily depend, must be arbitrated first, while PAGA claims are stayed.

     Nope, said the Court.  “Based on the cases of Iskanian and Williams [237 Cal.App.4th 642 (2015)], we hold the PAGA claim is not subject to arbitration in whole or part because the PAGA claim is not a discrete dispute between the employer and the employee. Instead, the PAGA claim is a dispute between DMSI and Bonillas – acting on behalf of the state, the real party in interest – about probably Labor Code violations.”

     COMMENT:  See also my article in California Litigation, Vol. 28, No. 2 (2015):  “Can Private Attorney General Actions Be Forced Into Arbitration?”

Arbitration/Fees: Court Affirms Denial Of Attorney Fees In Arbitration Because Claimant Went To Wrong Decider And Waited To Long

Fees Request Treated As “Hot Potato” By Arbitrator And Judge.

     A nice post dated October 20, 2016 in California Attorney’s Fees summarizes the convoluted procedure in Miceli v. Staples, Inc., Case No D070676 (4th Dist., Div. 1 Oct. 20, 2016) (unpublished), describing the case as one “where the arbitrator and court tossed an attorney’s fees request like a ‘hot potato.’”  Unfortunately for the respondent who was claiming fees, the “hot potato” was dropped, and the respondent never recovered fees.

Arbitration, FAA: Ninth Circuit Holds That Uniformed Services Employment And Reemployment Rights Act Of 1994 Does Not Prohibit Compelled Arbitration Of Arbitration Of Claims Arising Under Its Provisions

Substantive Rights Created By USERRA Are Not Lost By Arbitrating.

     On the one hand, on the other hand . . . On the one hand, there is a liberal federal policy favoring arbitration agreements.  On the other hand, the Federal Arbitration Act’s arbitration mandate can be “overridden by a contrary congressional command.” 

     Does the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) prohibit the compelled arbitration of claims arising under its provisions?  No, holds the Ninth Circuit in an opinion authored by Judge Murguia.  Ziober v. BLB Resources, Inc., No. 14-56374 (9th Cir. 10/14/16). 

     USERRA establishes employment rights for returning servicemembers.   Kevin Ziober told his employer that the Navy was recalling him to duty in Afghanistan, and on the last scheduled day of work, his employer told him that there would be no job upon his return. 

     Mr. Ziober sued, and the employer successfully enforced its arbitration agreement with him.

     USERRA provides a right to sue in federal district court.  Relying primarily on CompuCredit v. Greenwood, 132 S. Ct. 665 (2012), the Ninth Circuit explains that this right is a procedural right, not a substantive right, and absent a clear legislative mandate, the procedural right to arbitrate can be enforced, because it does not affect the substantive rights created by USERRA.

     Concurring, Judge Watford is a skeptic.  He explains that the statute appears to confer a right to sue in district court, and includes what can be interpreted as a non-waiver provision.  Furthermore, legislation benefitting servicemembers is to be liberally construed in their favor.  But because there is a muddled legislative history, Judge Watford writes, “I don’t think it’s prudent for us to create a circuit split by reversing the district court’s ruling, particularly given the ease with which congress can fix this problem.”  And we all know how easily Congress fixes problems these days.

    

Arbitration, Employment, FAA, Class, Waiver: Petition For Certiorari To SCOTUS Filed In Morris v. Ernst & Young

 

     On August 23, 2016, I blogged that the issue in Morris v. Ernst & Young was clearly framed by the majority and minority opinions, and almost certainly headed for Supreme Court Review.  In that Ninth Circuit case, the majority held that an employer violates sections 7 and 8 of the National Labor Relations Act by requiring employees to sign an agreement precluding them from bringing, in any forum, a concerted legal claim regarding wages, hours, and terms of conditions of employment.

     On October 10, 2016, Kate Howard reports for SCOTUSBlog that a petition for a writ of certiorari was in fact filed on September 8, 2016, and states the issue as follows:  “Whether the collective-bargaining provisions of the National Labor Relations Act prohibit the enforcement under the Federal Arbitration Act of an agreement requiring an employee to arbitrate claims against an employer on an individual, rather than collective basis.”

     Currently, the most important number relating to SCOTUS is eight.  With the high court split 4-4 into liberal and conservative wings, arbitration issues, which also tend to break along political lines, could be affected by the appointment of a ninth justice to fill the empty chair.

News: Can Wells Fargo Require Customers To Arbitrate Issues Regarding Unauthorized Accounts?

Attorney General Of Minnesota Say No, Joining Other Political Figures.

     On October 4, 2016, Adam Betz reported for the Star Tribune that Minnesota’s Attorney General Lori Swanson opposes Wells Fargo’s use of arbitration clauses to require its customers to arbitrate claims concerning unauthorized accounts opened by Wells Fargo.  And the LAT reports that on October 3, Sen. Sherrod Brown (Dem. – Ohio) introduced legislation in Congress to prevent Wells Fargo from invoking arbitration in contracts with customers.