California Mediation and Arbitration

Collective Bargaining: Ninth Circuit Rules That Railway Labor Act Requires Flight Attendant To Resort To Arbitral Mechanism Required By Collective Bargaining Agreement Instead Of Washington State Labor Agency

This Is A Railway Labor Act Preemption Case.

    Alaska Airlines v. Schurke, et al., No. 13-35574 (9^th Cir. 1/25/17) is not about the merits of whether a flight attendant gets to use her vacation time to care for her sick child – a Washington state agency had ruled in her favor on the merits. Rather, the case is about who gets to decide: the State of Washington, or the System Adjustment Board established pursuant to a collective bargaining agreement.

    The collective bargaining agreement set up an "arbitral mechanism" providing for a grievance procedure, mediation, and arbitration for union members. Existing case law holds that the Railway Labor Act (which, incidentally, applies to airlines too) requires the use of the dispute resolution mechanism set up by collective bargaining agreements rather than resort to a state agency. But existing case law also holds that the Railway Labor Act sometimes does not preempt state dispute resolution. The legal art requires that federal courts discern whether the situation does or does not require federal preemption of state procedures.

    Here, in a majority opinion penned by Judge Kleinfeld, the panel held that the district court got it wrong and preemption did apply. So, reversed and remanded.

    Judge Kleinfeld's opinion is notable for its candid acknowledgment that this is an exercise in fuzzy line-drawing:

    "What we wind up with from all these cases is the need to exercise judgment, not a mechanical rule. Our three part test and words and phrases establish only a 'hazy' and indeterminate line between independent state rights and state rights inextricably intertwined with the collective bargaining agreement. In this case, the sounder view is that the state law right and the collective bargaining agreement are indeed inextricably intertwined."

    Judge Christen dissents, arguing that the flight attendant's complaint with the Washington Department of Labor & Industries involves a right that exists, if at all, by virtue of state law, and that the right asserted is not substantially dependent on analysis of the collective bargaining agreement. Judge Christen agrees with the district court that the Washington forum is not preempted by the Railway Labor Act.

    Best Line In The Case (quoting late Harvard Law Professor Thomas Reed Powell): ""If you think that you can think about a thing inextricably attached to something else without thinking of the thing which it is attached to, then you have a legal mind." Bonus Trivia: A former student of Thomas Reed Powell recalled he was, "vexatious and nasty and snide and, consequently somehow, stimulating." John Braeman, "Thomas Reed Powell On The Roosevelt Court", Constitutional Commentary, vol. 5:143 (1988), p. 144.

Enforcement Of Arbitration Agreement, Non-Signatories: Ninth Circuit Affirms Order Denying Samsung’s Motion To Compel Arbitration Of Class Complaint Filed By Purchaser Of Galaxy S4 Phone

Customer Agreement With Verizon And Samsung Product And Safety & Warranty Agreement In The Box Failed To Bind Plaintiff To Arbitrate.

     In Norcia v. Samsung Telecommunications America, LLC, et al., No 14-16994 (9th Cir. 10/17/17) (Ikuta, Thomas, Bea), Judge Ikuta provides in depth analysis of whether a 101 page brochure containing an arbitration provision and placed in the box containing a purchaser’s Galaxy S4 phone bound Daniel Norcia to arbitrate.  For a number of reasons, the panel concludes that Mr. Garcia was not bound to arbitrate.  He had not signed the brochure, the box did not state that opening it meant he agreed to the terms found in the brochure, generally, “silence or inaction does not constitute acceptance of an offer” (Golden Eagle Ins. Co. v. Foremost Ins. Co., 20 Cal.App.4th 1372, 1385 (1993), and the brochure stated that Norcia was entitled to “the benefits of the Limited Warranty” regardless whether he opted out of the arbitration agreement.  As the party seeking to compel arbitration, Samsung bore the burden of proving the existence of an arbitration agreement, and it failed to carry its burden.

    Samsung also argued that Norcia agreed to arbitrate by signing a Customer Agreement with Verizon, an argument that Judge Ikuta dismissed in three paragraphs as “meritless.”  Samsung was not a signatory, nor was there evidence that Samsung was intended as a third-party beneficiary of the Verizon agreement.   

     COMMENT:  The Federal Arbitration Act, embodying the national policy favoring arbitration, applies to this case.  However, the parties agreed that California law governs the issue of contract information, and thus Judge Ikuta applies basic principles of California contract law.

     Samsung sought to rely on several cases involving licenses and warranties, arguing that those cases are analogous to the brochure in the box.  Because the panel’s analysis involves contract law, the opinion examines differences between contract, license, and warranty cases.   For example, a shrink-wrap license imposing limits on the number of authorized licenses has been held to be enforceable in California.  Wall Data Inc. v. L.A. Cty. Sheriff’s Dep’t, 447 F.3d 769, 782 (9th Cir. 2006).  Such a license states that by opening a package or wrapper, the user agrees to the terms of the license.    In Wall Data Inc., the court avoided the issue of contract formation.  Norcia explains it makes sense that a user who opens a box with notice of a shrink-wrap license cannot do more than what the license permits -- say, installing software on 6,007 computers when the license is only for 3,663 computer.  In Norcia, “the outside of the Galaxy S4 box did not notify the consumer that opening the box would be considered agreement to the terms set forth in the brochure.” 

Miscellany: On The Eve Of An Inauguration, We Glance At Inaugurations Past . . .

March 4, 1865 And March 4, 1921.

 

Pres. Abraham Lincoln taking the oath of office at his second inauguration. Library of Congress.

VP Calvin Coolidge and Pres. Warren G. Harding. Library of Congress.

Arbitration/Class Action Waivers: Supreme Court Has Granted Cert To Hear Cases Addressing Whether National Labor Relations Act Prohibits Class Action Waivers

Ninth Circuit Case of Morris v. Ernst and Young Is One Of The Three Cases.

    On December 9, 2016, I linked my article on "The Politics of Arbitration" to this blog. In that article, I predicted, "Morris [v. Ernst and Young] could serve as a springboard for sending divergent opinions about the enforceability of arbitration provisions used to prevent 'concerted activity' by employees to the Supreme Court for review." It has now happened.

    Mediator and arbitrator Ross Runkel reports today that SCOTUS agreed on January 13, 2017 to hear three cases relating to arbitration class action waivers: Morris v. Ernst and Young, NLRB v. Murphy Oil, and Epic Systems Corp. v. Lewis.

Arbitration/Appealability: Ninth Circuit Dismisses Appeal Of Order Denying Motion To Compel Arbitration Because Appellants Invoked California Arbitration Act Rather Than Federal Arbitration Act

A Trap For The Unwary . . .

    Kum Tat Limited v. Linden Ox Pasture, LLC, No. 14-17472 (9^th Cir. 1/13/17) (Hurwitz, Lucero, Graber) presents a trap for the unwary.

    Plaintiff Kum Tat Limited sued in California state court in connection with its attempted purchase of residential property for approximately $40M, after its attempted purchase went sideways. Defendant Linden Ox Pasture removed to federal court. Plaintiff then moved unsuccessfully to compel arbitration and to stay the action pursuant to California Code of Civil Procedure sections 1281.2 and 1281.4. The trial court denied the motion, concluding the parties failed to form a contract.

    Under the California Arbitration Act, California Code of Civil Procedure, section 1294, a party whose motion to compel arbitration has been denied can appeal. Similarly, under the Federal Arbitration Act, 9 U.S.C. section 16(a)(1), one can file an interlocutory appeal from an order denying a petition to order arbitration. So, given that the district court denied Kum Tat's motion to compel arbitration, should the Ninth Circuit have entertained an interlocutory appeal?

    No. The reason is that Kum Tat invoked the California Code of Civil Procedure as the basis for an appeal, rather than the Federal Arbitration Act. So the Ninth Circuit dismissed the appeal for lack of federal jurisdiction. Gotcha.

    Ironically, Linden Ox's answering brief did not contest jurisdiction. But of course the federal court gets to exercise its "independent obligation to ensure jurisdiction."

    COMMENT. Kum Tat's motion to compel arbitration was explicitly brought under California arbitration law, and Kum Tat later emphasized that the motion was not made under the FAA. Suppose the arbitration motion had been more ambiguous, and failed to cite state or federal arbitration law? Could such a motion have been brought "under" the FAA for purposes of the interlocutory appeal? The Ninth Circuit expressly states that it does not decide that question. Kum Tat, footnote 3. Generally, parties seeking to compel arbitration find themselves in a stronger position when they proceed under the FAA. Apparently Kum Tat's motion to compel arbitration sought to distinguish some unfavorable case law interpreting the FAA, explaining why Kum Tat was at pains to stake the position that it was proceeding under state law. Kum Tat, footnote 1.

Mediation: A Court’s Impassioned Plea: Please, Please Try To Mediate

The Setting: Dispute Is More Than Ten Years Old, This Is Second Appeal, And There's Still Plenty Of Fight Left In the Old Boys . . .

    Early on the Court's opinion oozes frustration: "As much as we are loathe to drag on this protracted litigation any longer, we conclude we must reverse and remand for a more detailed statement of decision on certain issues." La Melza v. Lindsay, No. G051506, G051514 (4/3 1/13/17) (unpublished). Evidently, this case is one of those cases for associates yet unborn. I won't even bother to recite the gnarly facts. What caught my attention was the impassioned plea by Justice Moore that the parties try and mediate their differences:

    "This case has been dragging on for more than a decade. As the Gilroy defendants' counsel noted in a motion for calendar preference, all of the principals are now in their 70's or 80's. We urge both the parties and the court to take all practical steps to reach a judgment in the trial court as quickly as possible. In the same vein, we also urge the parties to set aside what are obviously long-held and deep-seated emotions about this matter and work with an experienced mediator to settle this case. The alternative, even in the best case scenario, is another two or three years spent in the trial court and in our gracious company, resulting in thousands upon thousands of dollars in fees and costs. The parties would be far better served, and would probably find the ultimate outcome far more satisfactory, if they reached a resolution among themselves."

    Adding to the overwhelming sense that the parties are lost in a Dickensian quagmire located near the ruins of Bleak House is that the majority opinion, penned by Justice Moore with Justice Thompson concurring, draws a dissenting opinion! Justice Aronson, dissenting, "would invite the parties to brief whether we can correct our earlier opinion and retrace our steps to a proper path so the trial court may perform its factfinding function and enter a new judgment consistent with its findings." Justice Aronson in turn quotes from the dissent by a frustrated Justice Frankfurter: "Wisdom too often never comes, and so one ought not to reject it merely because it comes too late."

    To which I add a few additional words of legal wisdom gleaned from dead practitioners:

    "About half the practice of a decent lawyer consists of telling would-be clients that they are damned fools and should stop." -- Elihu Root.

    "An incompetent attorney can delay a trial for years or months. A competent attorney can delay one even longer." -- Evelle J. Younger.

    But Charles Dickens gets the last word, with the characters in Bleak House explaining the end to the seemingly interminable, intractable, and ridiculous case of Jarndyce and Jarndyce:

    "Mr Kenge," said Allan, appearing enlightened all in a moment. "Excuse me, our time presses. Do I understand that the whole estate is found to have been absorbed in costs?"

    "Hem! I believe so," returned Mr Kenge. "Mr Vholes, what do you say?"

    "I believe so," said Mr Vholes.

    "And that thus the suit lapses and melts away?"

    "Probably," returned Mr Kenge. "Mr Vholes?"

    "Probably," said Mr Vholes.

Pending Cases: Hernandez v. Ross, A PAGA Arbitration Case, Is Now Published

Employer Cannot Compel Employee To Arbitrate Individual Aspects Of PAGA Claim While Maintaining Representative Claim In Court.

    We blogged about Hernandez v. Ross, E064026 (4/2 1/3/17) on December 8, 2016. Hernandez is one more California case holding that a court cannot split a representative PAGA claim into arbitrable and non arbitrable parts. We can now report that the case was ordered to be published on January 3, 2017.