California Mediation and Arbitration

Happy Thanksgiving To All My Readers

Turkey at the White House (1921 or 1922). Library of Congress.

Settlement: How To Blow A Mandatory Settlement Conference

When Overzealous Advocacy Becomes Contempt.

        The conventional wisdom that there should be no way to lose a settlement conference is tested in Kevin J. Moore v. Superior Court of Orange County, G058609 (4/3   11/16/20) (Goethals, Bedsworth, Thompson). The facts of the underlying case are of little importance, because it was the conduct of attorney Moore at a mandatory settlement conference in OCSC that was at issue:

        "While representing a client at a mandatory settlement conference (MSC) before a temporary judge, petitioner Kevin Moore was rude and unprofessional. Among other things, Moore (1) persistently yelled at and interrupted other participants; (2) accused opposing counsel of lying while providing no evidence to support his accusation; (3) refused to engage in settlement discussions; and (4) effectively prevented the settlement officer from invoking the aid and authority of the supervising judge by asserting this would unlawfully divulge settlement information. To make matters worse, Moore later acknowledged that his contemptuous behavior was the result of a tactical decision he had made to act in such a manner in advance of the MSC. After a hearing, respondent court convicted Moore of four counts of civil contempt, imposed a $900 fine for each count ($3,600 total), and ordered the payment of attorney fees and costs to the opposing party. (See Code Civ. Proc., § 1209 et seq.)"

        As Justice Goethals explains, Moore did not get whacked for zealous advocacy. Indeed, a "failure to yield" at a settlement conference does not amount to contempt. Rather, it was rude and obstreperous conduct that got Moore in trouble. Among other things, the Court was not pleased that Moore had called opposing counsel a liar without explanation, and that he had told opposing counsel, "you could be dead," and that he had apparently used his behavior as a tactic: "Moore’s petition for writ of review, which brings the matter to this court, clarified his state of mind at the outset of the MSC: 'At the MSC, [Moore] employed a tactic in representing his client that included raising his voice and accusing [opposing counsel] of making false statements, which [Moore] believed to be true.' (Italics added.)"

 

               

 

 

        In the Court of Appeal, attorney Moore succeeded in eliminating three of the charges, and reducing the fine to $900. Each party had to bear its own fees and costs. The Court consolidated and reduced the four counts into "a single count for Moore’s bad faith participation and obstreperous misconduct at the settlement conference." Perhaps this is a bittersweet victory, for Justice Goethals concludes, "Though Moore’s petition is largely successful, that success should in no way be construed as an endorsement by this court of his behavior." And the clerk of the court is directed to provide a copy of the opinion to the State Bar.

        The opinion is well worth reading, because among other things, it describes the steps that must be taken to successfully issue a contempt order, and what was done correctly and incorrectly below.

        COMMENT: Note that the conduct that was found to be contemptuous was in front of a temporary judge. Temporary judges in Orange County typically hold the MSCs outside the courtroom, often in the third floor cafeteria. Today, the MSCs are being held remotely via Zoom and other platforms. (And perhaps social distancing may actually be leading to more civil behavior). Therefore, the temporary judge often does not have easy access to a reporter and to a courtroom, where the TJ could make a record of direct contempt and summarily issue a contempt order. Instead, Moore was a case of "indirect contempt" that did not occur in the courtroom. "Although the settlement officer was acting as a temporary judge at the settlement conference," explains Justice Goethals, "he did not pursue summary contempt proceedings (we express no opinion on whether he should or could have done so)." Nevertheless, the case does show that when proper contempt procedures are followed, a temporary judge and the judicial process can be protected from contumacious behavior with an "indirect contempt" proceeding.

 

 

 

 

Arbitration, PAGA: First District, Div. 1 Affirms Order Denying Lyft's Petition To Arbitrate PAGA Claims

Iskanian Is Still Good Law In California.

Once more unto the breach, dear friends, once more! Henry V, Act III, Scene I.

 

        Employers continue to seek to enforce contractual waivers of the right to litigate in court, and employees continue to punch back, insisting on the right to litigate Private Attorneys General Act of 2004 (PAGA) claims in court. Thus far, California courts have followed Iskanian, refusing to enforce the waiver of the right to pursue PAGA claims in court.

        In Brandon Olson v. Lyft, Inc., No. A156322 (1/2  10/29/20) (Richman, Stewart, Miller), the court again addresses whether Iskanian is still good law, and whether  it has been impliedly overruled by SCOTUS in Epic Systems Corp. v. Lewis, which liberally applied Federal Arbitration Act preemption to enforce an arbitration agreement with an employee.

        The short answer is that Iskanian, a California Supreme Court case, has not been overruled, and is still good law in California state court. Nor does Epic Systems, which involves different facts, change the legal analysis. Iskanian held that a PAGA claim is like  a qui tam claim, in which the plaintiff acts on behalf of the state. And therefore the plaintiff's contractual waiver of the right to litigate is not enforceable, because the plaintiff is acting on behalf of the state, which did not waive the right to arbitrate. Epic Systems did not involve a qui tam or PAGA representative claim in which the plaintiff acted as a representative of the state.

        Olson v. Lyft, Inc. relies heavily on the legal analysis in Correia v. NB Baker Electric, Inc., 32 Cal.App.5th 602 (2019), about which we posted on February 26, 2019. If you read the earlier post about Correia, you'll get a pretty fair summary of the argument in Olson v. Lyft. The later/latest case gathers the authority supporting the continuing viability of Iskanian.

 

Arbitration: First District, Div. 1 Rules State Regulatory Law Did Not Allow Plaintiff To Avoid Arbitration

In Which We Create A New Side Bar Category-- Arbitration: State Regulatory Law

        Nearly every new post on this blog links to one of our many sidebar categories. This post, however, addresses an arbitration issue that required the creation of a new sidebar category: "Arbitration: State Regulatory Law." The issue presented was whether an optometrist who entered into a "Network Doctor Agreement" with his vision care insurer in California, VSP, could rely on state regulatory law to avoid having to arbitrate a dispute with VSP after VSP concluded that Epstein had purchased lenses from an unapproved supplier and terminated his provider agreement. Gordon Epstein v. Vision Service Plan, A155219 (1/1  10/22/20) (Banke, Margulies, Sanchez).

        Epstein's provider agreement described a two-step dispute resolution process: (1) a "Fair Hearing" with an internal review  process; (2) if  the first step did not resolve the dispute, then "Binding Arbitration" requiring arbitration pursuant to the FAA. Seeking to avoid going to the second step, Epstein instead filed an administrative mandamus proceeding. As Justice Banke explained, "he maintained the second step of the dispute resolution process was contrary to state regulatory law requiring certain network provider contracts to include a procedure for prompt resolution of disputes and expressly stating arbitration 'shall not be deemed' such 'a provider dispute resolution mechanism.'"

        Well might you ask, why wouldn't such a regulatory law unfairly burden an agreement to arbitrate, and thus be preempted by the  Federal Arbitration Act? Here, Epstein argued that the state law was not preempted by virtue of the McCarran-Ferguson Act, "which generally exempts from federal law, state laws enacted to regulate the business of insurance."

        While that may sound like a pretty good argument, the Court of Appeal concluded that the state regulatory law did not make the second step of the dispute resolution process requiring arbitration unenforceable, because the state regulatory law only applied to the initial step, which did not require binding arbitration.

        Because Epstein had failed to exhaust administrative remedies requiring him to ask for  arbitration, the trial court's judgment rejecting his writ petition was AFFIRMED.

 

 

Internet Commerce: 9th Circuit Rules Change-Of-Terms Provision Did Not Exempt Website Visitor From Arbitration Where Visitor Was Unaware Of The Contract Terms

Original Contract Required Arbitration Of Dispute, New Terms Exempted Consumer Claim From Arbitration, And Website Visitor Was Not Aware Of New Contract Terms.

        Rachel Stover  attempted to prosecute a class action complaint against Experian, alleging that Experian had provided her with a credit reporting score represented to be useful, but essentially useless, because the score was based on a formula that lenders would not rely upon. Two contracts were involved: an original 2014 contract that she entered into with Experian, and that included an arbitration provision, as well as a "change-of-terms" provision purporting to bind her to contract changes, and a 2018 contract that exempted certain claims (including her  claims) from arbitration. Each time she accessed the website, she would manifest assent to the changes to the then current terms of the agreement. Or would she?

        The district court required her to arbitrate, finding that her claims were not covered by the 2018 agreement, and she appealed. Stover v. Experian Holdings, Inc., et al., 19-55204 (9th Cir. 10/21/20) (Smith, Owens, Cardone). The 9th Circuit affirmed the order requiring arbitration, but on another ground, namely, that the parties were not bound by the terms of the 2018 contract that could have exempted Stover's claims from arbitration.

        "This case. . . requires us to address whether a mere website visit after the end of a  business relationship is enough to bind parties to changed terms in a contract pursuant to a change-of-terms provision in the  original contract," write Judge Smith. And the panel holds "it does not."

        COMMENT: Compare and contrast the the internet contract with a paper contract. If a paper contract with changes in 2018 had been drafted by Experian and handed to the customer in 2018, could the customer have enforced it against Experian? Generally, a contract can be enforced against the signatory, even by the recipient who has not signed the contract, and generally, the recipient of the contract is presumed to be charged with its contents and to have read it, even if the recipient has bad eyesight and is not wearing glasses. But the situation here is a little different, because the change-of-terms provision does not create a requirement that Stover read the 2018 contract, the new contract was presented in the form of a browserwrap rather than a click-wrap, making it uncertain Stover received actual notice of the terms. And apparently Stover did not allege she knew the terms of the 2018 contract. So here, based on specific facts, there was a lack of contract formation. It was not enough that the drafting party, Experian, knew the terms of the contract, to create a meeting of the minds.