California Mediation and Arbitration

Arbitration, FAA: Federal Arbitration Act Applied To Intrastate Driver Who Worked For Paratransit Service For Persons With Disabilities

Federal Preemption Of California's Gentry Rule Means Class Action Waiver Can Be Enforced.

        David Evenskaas, a driver, filed a wage and hour lawsuit against his employer, California Transit, Inc., which operates paratransit services for persons with disabilities in West and Central Los Angeles.  Evenskaas's employment agreement included a broad arbitration agreement with a class action waiver that the employer tried, unsuccessfully, to enforce in the trial court. The employer appealed. Evenskaas v. California Transit, Inc., B308354 (2/7  7/15/22) (Segal, Perluss, Feuer). 

        The issue was whether the Federal Arbitration Act preempted California law and the rule in Gentry v. Superior Court, 42 Cal.4th 443 (2007), which holds that certain class action waivers in employment arbitration agreements are unenforceable. The trial court had determined that interstate commerce was not involved, because California Transit, Inc. operated in California, and absent involvement in interstate commerce, there could be no federal preemption by the FAA.

        However, the Court of Appeal reached a different result, distinguishing those cases holding intrastate activities not affecting interstate commerce do not trigger federal preemption. "None of them involved an arbitration agreement between an employer and an employee hired to provide commercial services required by federal law enacted by Congress under its commerce power. Moreover, in Carbajal, Lane, and Woolls the party arguing the FAA applied did not present evidence of the party’s business that would show a connection to interstate commerce." The ADA is enacted with Congress exercising its commerce powers to the fullest, and transportation through a paratransit service affects the ability of persons with disabilities to participate in the national economy.

        COMMENT: If the driver, like a trucker, fell within a class of workers who was actually engaged in interstate commerce, then he would specifically be excluded from coverage under the FAA. 9 USC § 1.

 

 

 

 

Arbitration, Agency, Choice Of Law, Discovery: 9th Circuit Holds District Court Should Allow Discovery To Determine If Client Authorized Attorney To Agree To Arbitrate

Factual Questions Existed As To Whether Lawyer's Client Authorized Agreement To Arbitrate.

        Plaintiff Barbara Knapke sued PeopleConnect, the owner of Classmates.com, for allegedly making unauthorized use of her name and likeness. Before filing the lawsuit, Knapke's attorney Reilly logged in to the Classmates.com website, and in doing so, agreed to arbitrate. Did Knapke authorize her attorney to agree to arbitrate? The district court ruled that there was no evidence that she had authorized her attorney to arbitrate. PeopleConnect appealed. Barbara Knapke v. People Connect, Inc., No. 21-35690 (9th Cir.  6/29/22) (Bennett, Wardlaw, Gould).

        Judge Mark J. Bennett first explained that the district court should have applied Washington State law rather than Ohio law. Knapke is a resident of Ohio, and PeopleConnect's principal place of business is in Seattle. But it made no difference, since Ohio and Washington law were not in conflict.

        Second, a question of fact existed as to whether Knapke authorized her attorney to agree to arbitrate. That question required inquiring into "the contours of Knapke’s agreement with Reilly’s law firm and the limits, if any, on Reilly’s authority to act on Knapke’s behalf." In addition to authorization, there was a question as to whether later conduct could have ratified the attorney's actions. Because of such questions, PeopleConnect should have been allowed to conduct discovery.

        When the matter returns to the district court, where PeopleConnect will get "another bite of the apple", there will be additional questions to resolve: does privilege prevent discovery into attorney communications relevant to the scope of authority? Plaintiff's claim that there was a lack of authority makes her communications with her attorney a relevant area of inquiry. Has there been a waiver of privilege? If the plaintiff rests on a claim of privilege, what effect will that have upon her claim that she did not convey authority to her attorney to agree to arbitrate? 

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