California Mediation and Arbitration

Waiver: Ninth Circuit Holds Waiver Of Right To Arbitrate Did Not Occur Despite Delay In Bringing Motion To Compel

Defendant Consistently Asserted Right To Arbitrate And Litigation Conduct Was De Minimis.

        The Supreme Court case Morgan v. Sundance, Inc. (2022) has made it easier to argue that a party has waived its right to arbitrate for two reasons: first, while the party resisting arbitration bears the burden of establishing a waiver of the right to arbitrate, it no longer bears a "heavy burden." Second, the party resisting arbitration no longer needs to show that it will be prejudiced if the court were to order arbitration. Despite the greater ease with which a waiver of the right to arbitrate has been waived, the Ninth Circuit agreed with the trial court that defendant had not waived its right to arbitrate. Teresa Armstrong v. Michaels Stores, Inc., 21-15397 (9th Cir.  2/13/23) (McKeown, Fletcher, Bennett).

        Waiver of the right to arbitrate cases tend to be pretty fact-specific. The plaintiff in  Armstrong filed her complaint against her employer in state court in October 2017. Defendant removed the case to federal court, and an amended complaint was filed. Some small amount of discovery was conducted. The Epic Systems case was decided by the Supreme Court in 2018, holding that an agreement requiring individual arbitration was enforceable and did not violate the National Labor Relations Act of 1935 provision allowing employees to engage in collective action. After Epic Systems was decided, Defendant moved to compel arbitration in 2018. Under those circumstances, the panel held that Michaels Stores had not waived its right to arbitrate.

        We posted about the Morgan v. Sundance decision on 5/24/22. We have also written two articles in the Daily Journal about waiver of the right to arbitrate and the discrepancy between federal law, which no longer requires a showing of prejudice to prove waiver, and California state law.

 

First District, Div. 1 Affirms Order Denying Petition To Compel Arbitration Because Defendant Failed To Establish Existence Of Arbitration Agreement

No Evidence Of Signed Agreement.

        Bruno Fleming sued Oliphant Financial for allegedly violating the California Rosenthal Fair Debt Collection Practices Act. Oliphant unsuccessfully petitioned the trial court to compel arbitration. The Court of Appeal affirmed the trial court's order denying Oliphant's petition to compel arbitration. Fleming v. Oliphant Financial, LLC, A165837 (1/1  1/31/23) (Devine, Humes, Margulies).

        Oliphant failed to meet its burden of establishing the existence of an arbitration agreement. Fleming had signed a credit card application, but apparently there was a lack of evidence that he had signed an arbitration agreement or that he had received one. 

        This is pretty basic stuff. Rejecting Oliphant's efforts to finesse the threshold issue, the court addresses a few points.

• • As the party moving to compel arbitration, Oliphant had the burden of proof of establishing that the parties agreed to arbitrate.
  • An argument that the arbitration agreement delegates the question of arbitrability to the arbitrator fails if the arbitration agreement doesn't exist.
  • Contract formation will be addressed under state law.
  • The court, not the arbitrator, gets to decide whether an agreement to arbitrate exists.
  • Oliphant's choice-of-law argument that the arbitration agreement requires the application of Delaware law fails if there is no arbitration agreement.

 

 

Unable To Apply "Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act" Retroactively, Fourth Dist. Div. 3 Nevertheless Finds Arbitration Provisions Unconscionable

Panel Is Very Critical Of Confidentiality Provisions In Sexual Harassment Dispute With Arbitration Provision.

        Some California Appellate panels and justices make it a practice to neatly summarize the opinion in the first paragraph. I like that practice. Our next case, in which the Court of Appeal issued a peremptory writ of mandate issue directing the trial court to vacate its order compelling arbitration and enter a new order denying the motion to compel arbitration, made excellent use of that practice in a 36-page slip opinion. Cassandra Murrey v. Orange County Superior Court; General Electric Company et al (real parties in interest), G061329 (4/3  1/30/23) (O'Leary, Bedsworth, Marks). So let's let the panel, in an opinion penned by Justice O'Leary, speak:

        "In March 2022, President Joseph R. Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the Act) (9 U.S.C. §§ 401, 402), representing the first major amendment of the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) since its inception nearly 100 years ago. This legislation, having bipartisan support, voids predispute arbitration clauses in cases, such as the one before us now, involving sexual harassment allegations. We regret that this new legislation does not apply retroactively to Casandra Murrey’s complaint filed in March 2021. Nevertheless, we will consider Murrey’s writ petition because the highly secretive and one-sided provisions of her arbitration agreement make it both procedurally and substantively unconscionable. The agreement is factually distinguishable from existing case authority upholding employment adhesion contracts and exemplifies why the legislature drafted House Bill No. 4445. We conclude the trial court erred by enforcing an unconscionably void arbitration agreement."

        This case is particularly interesting for its critical analysis about confidentiality language in arbitration agreements in sexual harassment disputes. In this case, "Murrey was forced to agree she would not 'publish or disseminate' the arbitration award." Justice O'Leary wrote, " GE’s confidentiality provision serves no purpose other than to benefit GE. Future employees cannot take advantage of findings in past arbitrations or prove a pattern of discrimination and/or retaliation." Here, the confidentiality provision weighed heavily in finding the arbitration agreement "substantively unconscionable." Ordinarily confidentiality agreements are upheld, but it is clear that the court viewed such requirements to be  onerous in the circumstances of a sexual harassment dispute. 

        We note California Code of Civil Procedure § 1001 prohibits a provision within a settlement agreement that prevents or restricts the disclosure of factual information related to a claim filed in a civil action or a complaint filed in an administrative action. The Murrey case does not involve a settlement agreement.