California Mediation and Arbitration

Arbitration, PAGA: Fourth District, Div. 1 Denies Employer's Effort To Split PAGA Cause Of Action, Affirming Denial Of Motion To Compel Arbitration

The Ruling Is Consistent With Other  California Cases Denying Efforts To Split PAGA Cause Of Action.

        YourMechanic sought to compel plaintiff to arbitrate whether he was an "aggrieved employee" before he could proceed under the  Private Attorneys General Act of 2004 (PAGA). The trial court denied the motion, and YourMechanic appealed.  Jonathan Provost v. YourMechanic,  Inc., D076569 (4/1  10/15/20) (Benke, Aaron, Dato).

        As Justice Benke explains, "requiring Provost to arbitrate whether he was an 'aggrieved employee' with standing to bring a representative PAGA action would require splitting that single action into two components: an arbitrable 'individual' claim (i.e., whether he was an independent contractor or employee under either the parties' written arbitration provision or section 226.8 . . . making it unlawful to willfully misclassify an individual as an independent contractor); and a nonarbitrable representative claim." 

        As a case subheading summarizes, "Case Law Prohibits the Splitting of a Single Representative PAGA Action into 'Individual' Arbitrable and Representative Nonarbitrable Components in Deciding whether an Individual Has Standing under PAGA.'

        But that doesn't keep employers from continuing to try to split PAGA claims, and arbitrate first whether the plaintiff is an "aggrieved employee." The employer's logic is that if the employer could get an arbitration award holding that the plaintiff is an independent contractor rather than an employee, then the plaintiff would not have standing to adjudicate the PAGA claim, since only an employee would have a PAGA claim. Thus far, this strategy has not worked, because the plaintiff brings a claim on behalf of him or  herself, and as a representative, and prevailing California law does not require the plaintiff to split the individual and representative claims and arbitrate the individual claims first.

Mediation, Confidentiality: Is Your Mediation Confidential?

Mediator Jeff Kichaven Spoke About Whether Mediation Is Confidential To The Orange County Bar.

        On Friday, October 2, 2020, mediator Jeff Kichaven presented a Zoom webinar to the Orange County Bar on the subject: "Guess What? Your Online Mediation Is Not Confidential." Jeff's presentation was jointly sponsored by the ADR section and the Business Litigation section of the OC Bar. (Your blogger chairs the ADR section).

        In his fascinating, and provocative presentation, Jeff contrasted the extremes of mediation confidentiality, of which the antipodes are New York, where there is little  protection, and California, where mediation confidentiality is nearly absolute. Online mediation, more important since the onset of COVID-19, often brings together attorneys and parties in different locations. And this opens up conflict of laws issues: does the law govern where the arbitrator, the courts, the attorneys, or the parties are located? Jeff provided a war story in which the attorneys in a mediation were themselves divided over which laws governed mediation confidentiality.

        Jeff is a severe critic of California's "absolute confidentiality" rules, which he views as a lowering of professional standards, since mediators and attorneys cannot be successfully sued for wrongdoing that occurs during the course of the mediation, for the simple reason that evidence of communications will be inadmissible. Perhaps more controversially, Jeff does not make representations of confidentiality to participants in mediations that he conducts.

    COMMENT: Mediation is a voluntary process. Is there a drafting solution for parties voluntarily seeking mediation confidentiality in high-stakes litigation? Could the parties simply enter into a confidentiality agreement with a choice of law provision, and have the court  enter it as a protective order? It would seem that this would help the parties protect confidentiality of mediation in their lawsuit, but even so they might not be protected if a time came when a third party sought discovery of, for example, a settlement agreement that the  parties had entered into. For readers who are interested in learning more about Jeff Kichaven's thoughts about the confidentiality of mediation, check out this article linked to his website.

Arbitration, Contract Interpretation, FAA: 9th Circuit Holds California's "Absurd Results" Rule Of Contract Interpretation Is Not Preempted By FAA

Provisions Requiring Arbitration With AT&T's Affiliates Did Not Apply To A Future Affiliate.

        Plaintiff contracted with AT&T for service, and sued an affiliate DIRECTV acquired later by AT&T. The Court of Appeal had to "decide whether a satellite television company, which became an affiliate years after the agreement was signed, may use the wireless services agreement to compel arbitration in a suit brought against it under the Telephone Consumer Protection Act." Jeremy Revitch v. DIRECTV, LLC, No. 18-16823 (9th Cir.  9/30/20) ( O’Scannlain, McKeown; conc. O'Scannlain; dsst, Bennett).

        The service agreement required arbitration with AT&T and its affiliates. However, both the  district court and the 9th Circuit held that "affiliates" did not include DIRECTV, LLC, an affiliate acquired by AT&T after the service agreement was signed. The interesting part of the opinion is the analysis of California's "absurd results" rule of contract interpretation, providing, "The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” (Cal. Civ. Code section 1639). The majority opinion explained that if "affiliates" was interpreted to include after-acquired affiliates, then Revitch could be required to arbitrate with a party who had not contracted with him, and who was acquired later, regardless of the affiliate's connection to the dispute.

        Judge Bennett dissenting disagreeing that such an interpretation of the contract resulted in an absurd result. Judge Bennett argued that the word "affiliates" was clear and included DIRECTV, that if there was any ambiguity, it had to be interpreted to favor arbitration, and that agreeing to a broadly worded arbitration agreement was not an absurd result. 

        COMMENT: California's "absurd results" rule of contract interpretation is not preempted by the FAA, because the rule would apply to contracts in general, and thus would not unduly burden arbitration  agreements.

Arbitration, Class, Waiver, FINRA: FINRA Rules Preventing Arbitration Of Class Actions Do Not Apply When There Is A Class Action Waiver

The Class Action Waiver Is Enforceable.

         When a financial advisor brought a putative class action against Credit Suisse for deferred compensation, Credit Suisse moved successfully to dismiss based on an arbitration requirement in its Employee Dispute Resolution Program. The financial advisor appealed, arguing that Financial Industry Regulatory Authority (FINRA) rule Rule 13204(a)(4) barred arbitration of his claim. Cristopher M. Laver v. Credit Suisse Securities (USA) LLC, No. . 18-16328 (9th Cir.  9/18/20) (Feinerman, Gould, Murguia).

        The FINRA rule provides in part, "A member or associated person may not enforce any arbitration agreement against a member of a certified or putative class action with respect to any claim that is the subject of the certified or putative class action" until certain conditions are met, for example, until there is a denial of  class certification.

        So why didn't the FINRA rule apply to bar arbitration of Mr.  Laver's class action claim? Because there was also a class action waiver, and the FINRA rules do not make a class action waiver unenforceable. Because the class action waiver is effective, there can be no class action, thus making the FINRA rule barring arbitration of class action claims inapplicable.

 

Arbitrability: 9th Circuit Holds Court Decides Arbitrability Of Collective Bargaining Agreement Silent About Arbitrability

Commercial Arbitration And Labor Arbitration Agreements Are To Be Analyzed The Same Way.

American Nurses somewhere in England, November 2018. Library of Congress.

        When the agreement is silent about who decides whether a dispute is arbitrable, does the court or the arbitrator decide? The court decides. However, 9th Circuit case law created an exception in the case of collective bargaining agreements: if the arbitration provision is broad, then the arbitrator gets to decide. United Bhd. Of Carpenters & Joiners of Am., Local No. 1780 v. Desert Palace, Inc., 94 F.3d 1308 (9th Cir. 1996). And so in a  case where it was undisputed that the arbitration clause was broad, the district court, analyzing the motion to compel arbitration brought by a union representing nurses with grievances, held, consistent with 9th Circuit law, that the arbitrator would get to decide. Defendant, a medical center, appealed. SEIU Local 121RN v. Los Robles Regional Medical Center, No. 19-55185 (9th Cir.  9/18/20) (Van Dyke, Callahan; Dsst. Lee).

        Though district court did not believe that it could overrule 9th Circuit case law, that was not a problem for  the 9th Circuit, which concluded that the district court, rather than the arbitrator, was responsible for determining whether the grievance filed by the union was arbitrable. The panel majority held that Desert Palace was no longer good law, because Desert Palace, Inc. is “clearly irreconcilable with the reasoning or theory of intervening higher authority” set forth in Granite Rock Co. v. Int’l Bhd. Of Teamsters, 561 U.S. 287 (2010), requiring that labor arbitration and commercial arbitration disputes be analyzed the same way.

        Judge Lee dissented, believing Granite Rock did not impliedly overrule Desert Palace, because the two cases addressed different issues.