California Mediation and Arbitration

Arbitration, FAA: Ninth Circuit Agrees That Delivery Workers In Amazon's App-Based Delivery Program Amazon Flex Are Exempt From Arbitration

The FAA Exempts Transportation Workers Engaged In Interstate Commerce From Arbitration -- What About The Amazon Delivery Person Who Brings The Package To Your Door?

     Many of us trying to avoid shopping during the pandemic have become familiar with the delivery of an Amazon package to our door. The delivery workers often drive their own vans or bicycles, go to the Amazon warehouse, pick up items, and complete the "last mile" of delivery. The items that we purchase from Amazon often come from out of  state. However, the delivery workers usually make their deliveries locally, working in our state. So: are those delivery workers exempt from the Federal Arbitration Act's "9 U.S.C. section 1, et seq., enforcement provisions because they are transportation workers engaged in interstate commerce." That's the primary issue in Rittmann v. Amazon, No. 19-35381 (9th Cir.  8/19/20). The majority, in an opinion authored by Judge Milan D. Smith, Jr., says yes, the exemption applies. Judge Daniel A. Bress dissenting, says no. 

    While Amazon has shipped products using FedEx and UPS, "[r]ecently it has supplemented those delivery services by contracting with local delivery providers through its AmFlex program, which is available in certain metropolitan areas in the United States." The AmFlex program is run by Amazon Logistics, Inc., an Amazon subsidiary. "AmFlex drivers' transportation of goods wholly within a state are still a part of a continuous interstate transportation," explains Judge Milan Smith, Jr., "and those drivers are engaged in interstate commerce for section 1's purposes."

    Judge Bress disagrees, arguing that the driver who works completely in state is not engaged in interstate commerce. The majority counters that it does not write on a "blank slate", and that drivers who are part of "continuous interstate transportation" are involved in interstate commerce, even when travelling intrastate. Judge Bress also argues that the majority rule will be difficult to apply in other cases and lead to odd results: the driver who has a Doordash sticker on the car and delivers food, and is also part of the AmFlex program, will be classified differently depending on whether the driver is delivering food for Doordash or making deliveries for Amazon. It seems like that would be an expected result if the driver works for Doordash, and Doordash delivers intrastate, and the AmFlex worker works for the subsidiary of a  national company, and participates in the flow of continuous interstate transportation. More work for judges and attorneys, perhaps, as evidence will need to be  presented and judges will need to decide early on in a lawsuit if transportation workers are participating in continuous interstate transportation and therefore exempt from arbitration. C'est la vie -- for a  federal judge, at least?

    COMMENT: For Amazon and the AmFlex workers, the stakes are high. The workers' underlying lawsuit contends that AmFlex misclassifies the workers as independent contractors rather than as employees. Presumably the plaintiffs' attorneys believe that a court will provide a convenient and viable forum for a class action (rather than divide-and-conquer one-on-one dispute resolution in arbitration) and a more sympathetic setting if the case goes to a jury.

    Legal commentators have noted efforts, which they ascribe to conservatives, to limit access to the federal courthouse by the use of standing doctrine, and enforcement of arbitration agreements. See, e.g., Erwin Chemerinsky, Closing the Courthouse Door: How Your Constitutional Rights Became Unenforceable (2017). In the Rittmann case, however, all three judges were Republicans appointed by a Republican President -- Judge Milan D. Smith, Jr., and Judge N. Randy Smith, appointed by George W. Bush, and Judge Daniel A. Bress appointed by Donald Trump. Though statutory rights may be slightly less of a battle ground than constitutional rights, worker rights in the courts are fought over in many pitched battles. Given the dissent by Judge Bress, one may wonder: what would SCOTUS do? We won't speculate.

     UPDATE: For an explanation of why the 9 USC section 1 arbitration exemption exists for transportation employees, see my September 2, 2020 post.

Arbitration, Employment, Unconscionability: First Dist. Div. 3 Agrees Arbitration Agreement Is Unconscionable And Unenforceable

Limited Discovery And Lack Of Mutuality Were Important To Result.

    The Court of Appeal affirmed orders denying motions to compel arbitration in Scott Davis v. Stefan Kozak et al. and Scott Davis v. Red Bull North America, Inc., A156234 & A156238 (1/3  8/19/20) (Fujisaki, Siggins, Jackson), a consolidated appeal arising from an employee's lawsuit against Red Bull executives for age and sex harassment and related tort claims. The Court agreed that the underlying arbitration agreement was adhesive, and that it was substantively unconscionable.

    Substantive unconscionability was the result of overly restrictive discovery, limiting the fifteen-year employee plaintiff to two depositions, and to a "lack of mutuality." We'd guess it was the discussion of mutuality in connection with an exemption for arbitration involving "obligations under the Employee Confidentiality Agreement with Red Bull" that made the opinion publishable.

    The Employee Confidentiality Agreement defined "Confidential Information" as information relating to the Company, and explained it did not apply to inventions of the employee developed entirely on the employee's own time without the Company's help. Therefore, the Court reasoned that the carve-out for "obligations under the Employee Confidentiality Agreement" only applied to the obligation of the employee to protect the Company's Confidential Information, not to inventions created by the employee on the employee's own time. Hence, the lack of mutuality.

    This lack of mutuality was burdensome in two ways: first, theoretical claims of the employee to protect his intellectual property were not exempted from arbitration by the carve-out, second, the arbitration agreement exempted from arbitration the types of claims Red Bull was most likely to bring against an employee.

    Comment: Because the discussion of unconscionability looks at the arbitration agreement at the  time it was entered into, rather than at the  time the employer seeks to enforce it, the discussion is theoretical, considering mutuality with respect to hypothetical claims that an employee might have brought, rather than actual claims that Davis did bring.

Arbitration, Nonsignatories, Automobiles: Third District Affirms Confirmation Of Arbitrator's Award In Favor Of Nonsignatory

The Court Distinguishes Or Refuses To Follow Similar Cases Involving Nonsignatories.

    The Court affirms the confirmation of  an arbitrator's award in favor of a nonsignatory auto manufacturer in Dina C. Felisilda et al., v. FCA US LLC, No. C086043 (3rd Dist.  7/24/20) (Hoch, Robie, Murray) (filed 7/24, certified for publication 8/14/20). "The Felisildas' claim against [the manufacturer] directly relates to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract [with the dealer]. Because the Felisildas expressly agreed to arbitrate claims arising out of the condition of the vehicle -- even against third party nonsignatories to the sales contract -- they are estopped from refusing to arbitrate their claim against [the manufacturer]."

Arbitration, Nonsignatories: Third Party Beneficiary And Estoppel Arguments Fail To Convince First District Div. 3 That Nonsignatories Can Arbitrate

But Arbitration Is Enforceable Between Employee And His Employer (Except As To PAGA Claims).

    Enforcing an arbitration clause can sometimes become a sticky wicket, glue pot, or dog's breakfast when the party seeking enforcement must rely on more than one document. Such was the case for the defendants seeking to compel arbitration in Thomas Jarboe v. Hanlees Auto Group, et al., No. A156411 (4/3  8/14/20) (Siggins, Fujisaki, Jackson).

    Plaintiff Jarboe sued individually and on behalf of a putative class Hanlees Auto Group (Hanlees), 12 affiliated dealerships, and three individual defendants for various labor claims. Defendants moved to arbitrate, and the trial court required arbitration as to 11 causes of action against DKD of Davis, denied the motion as to the 12th PAGA cause of action, and denied the motion as to the affiliate and individual defendants. The affiliates and individuals were nonsignatories. 

    When hired, Jarboe signed two agreements with arbitration provisions. The first, an application, contained an arbitration clause that also referred to other companies/employers. The second, an Employment Agreement, was between DKD of Davis, named as "Company" and Jarboe. It included an integration clause and superseded other agreements. Because the affiliates and individuals were non-signatories, the second agreement superseded the first, and the second agreement defined "Company" as Employer, the Court of Appeal was not convinced that nonsignatory individuals and affiliates could depend on the agreement to arbitrate.

    Nor was the evidence sufficient to convince the Court that the affiliates and individuals were expressly intended to be third-party beneficiaries of the integrated and superseding Employment Agreement.

    Sometimes nonsignatories can rely on an equitable estoppel theory to compel arbitration when the plaintiff relies on an agreement with an arbitration clause to state claims. But here, the key document, the Employment Agreement between only the Employee and one company, DKD of Davis, was not so clearly factually bound up with the claims, including class action claims, that the plaintiff stated against the individuals and affiliates.

    Comment. Defendants may have wanted to require arbitration of any and all claims against any of the  affiliates, and the individuals. However, the Application and Employment Agreement should have been drafted very carefully and consistently to do so, and the integration clause and superseding clause created a landmine in this case.

Arbitration, Enforceability: Fourth District, Div. 3 Holds That Temporary Conservators Could Not Be Held To Arbitrate

Nursing Homes And Senior Living Facilities Continue To Generate Enforcement Of Arbitration Cases.

    The Court of Appeal affirms denial of a motion to compel arbitration in Diane Holley v. Silverado Senior Living Management, Inc., et al, No. G058576 (4/3  8/7/20) (Moore, Bedsworth, Aronson). 

    Holley brought a suit individually, and as successor in interest against defendants operating a senior living facility for elder abuse and neglect, negligence, and wrongful death. Defendants sought, unsuccessfully, to compel arbitration, even though Holley, as a  temporary conservator, had signed an arbitration agreement on behalf of Elizabeth Holley. Or did she sign it on behalf of Elizabeth?

    The Court of Appeal explains that a temporary conservator could not make long-term decisions on behalf of Elizabeth, nor had there been an adjudication of Elizabeth's mental capacity. Nor was there any evidence that Diane Holley intended to be individually bound by the arbitration agreement. So Diane Holley's individual claims, and claims as a successor can be litigated.

    Comment: The outcome could have been different if the plaintiff had (a) been a permanent conservator; or (b) Elizabeth Holley had been adjudicated to be mentally incompetent.

 

Mediation, Foreclosure: 9th Circuit Holds Nevada's Foreclosure Mediation Rules Provide Exclusive Remedy

Purpose Of Nevada's Foreclosure Mediation Rules Is To Provide Expedited Proceeding For Loan Modifications.

    The Court of Appeals holds in Tobler v. Sables (9th Cir. 8/4/20) (Collins, J.), that Nevada's Foreclosure Mediation Rules are the exclusive remedy under Nevada law for challenging a lender's conduct in the foreclosure mediation process. So a lawsuit brought by borrowers against the lender for tortious breaches of the implied covenant of good faith and fair dealing in the mediation process goes nowhere.

    Two comments. First, under California state law, lawsuits for tortious breaches in the mediation process tend to be stillborn, because given California's strong rules protecting against the introduction into evidence of communications during mediation, there is no way to introduce evidence of wrongdoing.

    Second, why is your blogger posting only now about a case decided on August 4? Blame  it on our pandemic and a bit of distraction.

Videoconferencing: The Effective Use of Remote ADR -- Tips From The Pros

Remote ADR Is An Effective Way To Resolve Disputes At A Time When COVID-19 Has Shuttered Courts And Delayed Legal Procedures.

        The COVID-19 Task Force of the Orange County, California Bar and the ADR Section of the Bar jointly hosted a Zoom webinar on August 14, 2020 about the effective use of remote mediation. The panel discussion included the Hon. David Chaffee (ret.), the Hon. Franz Miller (ret.), and Jill Sperber, mediator/arbitrators who come from three major ADR providers: ADR Services, JAMS, and Judicate West. Our panel moderator was Darrell White, a director of the OC Bar, and a business litigator at Kimura, London & White LLP. As chair of the ADR section, I introduced the topic and our panel. Remote ADR continues to be a hot topic in California, five months after we began “sheltering in place”, and the webinar attracted over 150 participants.

        Our panelists explained the obvious need for videoconferencing triggered by the public health crisis:

• Cases requiring a civil trial in Orange County are very unlikely to get to trial before 2021.
• Getting to trial may require a  statutory preference (e.g. bumping up against the five year rule) or else stipulating to an expedited one-day jury trial.
• Juror response rates, once estimated at  80%, may now be around 40%.
• Older persons are likely to be more reluctant to serve as jurors.
• Courthouse logistics are inhospitable, with limitations on the number of people who can ride in an elevator, and limitations on seating in courtrooms and jury rooms.
• The case inventory of individual judges has greatly increased. When the COVID-19 crisis subsides, inventories will increase, as cases such as unlawful detainers and foreclosures move forward.

        Those new pressures placed on a judicial system already suffering from a lack of resources mean that, for many lawyers and litigants, remote ADR will be the best and only way to resolve disputes.

        Here are some takeaways:

        While generally preferring face-to-face meetings, the panelists have been able to make effective use of videoconferencing to resolve cases.

• Though not the exclusive platform, Zoom is the preferred platform of the ADR providers, attorneys, and clients.
• For many parties, remote mediation offers the comfort of their surroundings, and costs and time efficiencies, as there is no need for  travel (or a parking fee). It is especially helpful for bringing participants to the table from out of state.
• The added comfort, and cost and time saving of remote ADR may, in some cases, make a case harder to settle, because the ease of videoconferencing may mean that parties and attorneys invest less time, money, and effort into the process than would be the case in a face-to-face meeting.
• Physical distance  can be helpful in highly emotional cases, and therefore videoconferencing may be well-suited for employment, sexual harassment, and partnership disputes.
• Always have a backup communication plan in case the videoconferencing platform fails.
• Test the platform with attorneys before videoconferencing.
• While videoconferencing can result in a signed settlement agreement, using services such as DocuSign, often the outcome will be agreed-to deal points, followed up with a notice of settlement filed by the attorneys, and the court’s order to show cause why the matter should not be dismissed after a  reasonable amount of time to finalize a settlement.
• Mediators can treat videoconference mediations like ordinary mediations, using the videoconference platform to hold joint sessions and effectively caucus in breakout rooms. And parties and attorneys should treat videoconference mediations like ordinary mediations, taking them seriously, and being thoroughly prepared.

        Bottom line: remote ADR is a good alternative to face-to-face meetings. Just as CourtCall initially faced resistance but came to be widely accepted, we expect that remote ADR will grow in acceptance.