California Mediation and Arbitration

Arbitration, Employment, Unconscionability: Arbitral Scheme Resembling Civil Litigation Can't Replace Berman Hearing Where Circumstances Are Highly Oppressive

California Supreme Court Opinion Seeks To Promote Accessible And Affordable Procedures To Resolve Wage Disputes.

        I'm trying to catch up with some published opinions I failed to post on earlier this year. The most important, if only because it is a California Supreme Court opinion, is OTO, L.L.C. v. Kho, and the only benefit to my delay is that I can now provide an official reporter case citation: 8 Cal.5th 111 (2019). The majority opinion, authored by Justice Corrigan, appeared August 29, 2019. This is another case in which the court must "consider the enforceability of an agreement requiring arbitration of wage disputes."

        The court granted review "to decide whether an arbitral scheme resembling civil litigation can constitute a sufficiently accessible and affordable process." But the opinion decided something less expansive, because it concluded that on the facts of this case, there was "an unusually high degree of procedural unconscionability," making it unnecessary to definitively resolve the issue for which review had been granted. Rather, here, the court concluded that the circumstances were oppressive, and the agreement to arbitrate was unconscionable.

        The twist here is that the employer sought to bypass a Berman hearing by providing an arbitration procedure that included many of the aspects of a civil litigation. Whereas sometimes an arbitration procedure is viewed as unfair because it does not provide the procedural safeguards of civil litigation, here the unfairness hinged on the fact that the arbitration procedure did not provide the speed, accessibility, and affordability of a Berman proceeding, which is an administrative proceeding that is intended to provide an employee with an economic and efficient means of resolving a wage dispute. 

        In a lengthy and vigorous dissent, Justice Chin writes, "The majority violates these federal and state law principles by invalidating the arbitration rules to which the parties in this case agreed — even though those rules have been “carefully crafted to ensure fairness to both sides” (maj. opn., ante, 251 Cal.Rptr.3d at p. 732, 447 P.3d at p. 695) and do not make arbitration “per se unfair,” unaffordable, or inaccessible (ibid.) — because they are not, in the majority’s view, as advantageous for Kho as the Berman procedure. This conclusion is both inconsistent with California law and preempted by the FAA."

        Comment: If Justice Chin's lengthy dissent demonstrates one thing, it is that California's many published opinions about mandatory pre-dispute employer/employee arbitration can make for confusing reading. I'm not going to provide a drafting solution, but only suggest that arbitration procedures that are accessible and affordable for employees, and not one-sided, should survive this decision.

Arbitration/Collective Bargaining/Administrative: Cal Supreme Court Holds That Compulsory Interest Arbitration In Private Sector Is Constitutional

Compulsory Interest Arbitration Withstands Challenges That It Is Unconstitutional And An Improper Delegation Of Legislative Authority.

        In 2002, California enacted  "Mandatory Mediation and Conciliation"  (MMC) provisions to facilitate negotiating and completing collective bargaining agreements between agricultural employees and growers.  As the label MMC suggests, it is an unusual scheme, since "mandatory" and "mediation" are not usually joined.  But this is more than mandatory mediation.  If employer/union negotiations fail to reach a first contract, either side can invoke MMC, and the mediator resolves disputed terms and submits a proposed contract to the Agricultural Labor Relations Board, which can then impose the contract on the parties.   Thus, the statutory scheme is also quasi-legislative.  

        Mandatory Mediation and Conciliation is thus a form of compulsory interest arbitration, which is a very different animal than grievance arbitration.  As the Supreme Court explains:

Unlike “grievance arbitration,” which focuses on “construing the terms of an existing agreement and applying them to a particular set of facts,” interest arbitration “focuses on what the terms of a new agreement should be.”   . . .  The MMC process results in “quasi-legislative action” by which “[t]he terms of the ‘agreement’ determined by the arbitrator [are] imposed upon [the employer] by force of law.”

        In Gerawan v. Agricultural Labor Relations Board (United Farm Workers of America, Real Party In Interest), S227243 (Sup. Ct.  11/27/17) (Liu, author), one of our state's largest agricultural growers took on the legendary union founded by Cesar Chavez, challenging the MMC process as unconstitutional and as an improper delegation of legislative authority, succeeding in the Court of Appeal, but losing in the California Supreme Court.   

        Basically, Gerawan's position was that imposing a contract on the individual employer through the MMC process was coercive and at odds with freedom of choice for the employer as well as the employee.   The Supreme Court held that there was no violation of equal protection because there was a rational basis for the MMC process, and the process did not involve an improper delegation of statutory authority.

        In addition to addressing the constitutional issue, the Supreme Court addressed a statutory issue  Gerawan argued that the union had abandoned its employees after a lengthy absence and therefore forfeited its status as employee representative.  The Court held "that an employer may not defend against a union's MMC request by challenging the union's certification as bargaining representative on the basis of abandonment."

        COMMENT:  In the landmark 1905 case Lochner v. New York, involving the state's regulation of bakery employee hours,  a majority of the SCOTUS held that there was "unreasonable, unnecessary and arbitrary interference with the right and liberty of the individual to contract," provoking Justice Holmes' famous dissent, and memorable line, "The Fourteenth Amendment does not enact Mr. Herbert Spencer's Social Statics."  Who knows? Federalist Society picks likely to be appointed to the SCOTUS, could breathe new life into the spirit of Lochner.  If the SCOTUS revives the spirit of Lochner, arguments about coercion of employers by unions and legislatures may strike a chord that they do not strike in the California Supreme Court.

        On May 15, 2016, I blogged about another aspect of the Gerawan case, the unconstitutionality of a statutory provision that limited review of the Agricultural Labor Relations Board to the Court of Appeal and the Supreme Court, improperly divesting the superior court of original jurisdiction.

      

 

Arbitration/Administrative/Deadlines: Court Of Appeal Finds No Denial Of Due Process Where Terminated Fire Captain Failed To Follow County's Procedures

Sutter County Only Had A Duty To Provide An Opportunity For Arbitration Review Of Termination Decision, Not To Provide Review.

Sutter County.  January, 1942.  Lee Russell, photographer.  Marileeann Simpson holds a pan of vegetables freshly gathered from her family's garden at the FSA (Farm Security Administration) farm workers community. Yuba City.  Library of Congress.

        One who does not follow administrative rules risks losing substantive rights.  Such was the fate of Fire Captain Gorden Graham in Graham v. County of Sutter, C074701 (3rd Dist.  10/24/17) (Hull, Mauro, Duarte) (unpublished).  

        Appellant Graham appealed from denial of his request for a writ of mandate requiring Sutter County to provide him a post-termination proceeding after he failed to comply with the deadline for requesting appointment of arbitrators.  Graham, a Fire Captain, had been dismissed following his loss of EMT Certifcation, resulting from a domestic abuse violation and conviction for destroying a cellular telephone with intent to prevent its use to summon help.  (Bet you didn't know there was such a Penal Code provision.  Check out section 591.5).

        Graham failed to proceed timely with requesting an arbitration list.  The opinion states that the attorney "said he forgot to meet the county's deadline due to a 'hectic' work week."  Earlier, some deadlines had been extended.

        The Court of Appeal did not cut any slack here.  It concluded Graham had not been denied due process, because Sutter County "did not have a ministerial duty to provide the arbitration where Graham failed to follow Sutter County's procedures."  And though the Court found authority requiring a good cause exception for late filing of an administrative appeal of dismissal of employment, it concluded that under the circumstances here, due process did not require Sutter County to allow a good cause exception to its internal appeal deadline associated with prosecution of an administrative appeal.

        COMMENT:  If one becomes involved in administrative proceedings, it is more than a good idea to chart the internal administrative deadlines, as well as any applicable statutory deadlines.

        

Arbitration/Administrative: Ruling of Workers' Compensation Appeals Board Is Annulled Because Rescission Issue Remained "Factually Open And Unresolved"

Arbitrator And Appeals Board Did Not Address Whether Rescission Was A Meritorious Defense To Employee's Claim.

    Southern Insurance Company rescinded an insurance policy based on violation of a representation that covered employer's employees did not travel out of state, after an employee injured out of state made a workers' comp claim. The matter was referred to arbitration.  The arbitrator concluded that the insurer could not rescind, the Workers' Compensation Appeals Board affirmed, and the insurer appealed. Southern Insurance Company v. Workers' Compensation Appeals Board, et al., B278412 (2/2  5/10/17) (Chavez, Hoffstadt, Goodman) (unpublished).

    Held:  "The conclusion is unavoidable that the issue whether  Southern's rescission was legally effective remains factually open and unresolved."  Accordingly, the decision of the appeals board was annulled, and the matter remanded to the board for proceedings consistent with the opinion.

    COMMENT:  We would have liked to see a discussion of the standard of review and relevant authority in this opinion.  

Arbitration, Construction Of Agreement: Construing Agreement Between Two Communications Companies To Allow Arbitration, Ninth Circuit Avoids Gnarly Statutory Construction

Course Of Conduct By The Parties Weighed Heavily In Construing Their Conduct.

     North County Communications of Arizona v. Qwest Corporation, No. 14-35254 (9th Cir. May 31, 2016) (Scannlain, Silverman, Bea) involves two communications carriers, North County and Qwest, in a messy billing dispute, construction of their “interconnection agreement” (ICA), and the panel’s skillful avoidance of having to interpret the Telecommunications Act of 1996 (“Act”).  The issue making the case blog-worthy was whether Qwest could compel arbitration of the billing dispute between the two carriers. 

     At first blush, it appeared which party initiated the arbitration could be significant   On its face, the Act allowed competitive local exchange carriers (CLECs) to initiate negotiations and to compel arbitration.  However, the Act did not explicitly state that incumbent local exchange carriers (ILECs) that had a monopoly on local phone service in a particular geographic area prior to the Act could initiate the negotiation/arbitration process.  Qwest is an ILEC, and North County is a CLEC, and it was Qwest that sought to compel arbitration. 

     Allowing Qwest to initiate the arbitration would have required deft interpretation of the Act.  The panel would have had to conclude that the language of the Act was not determinative, that an obscure FCC footnote no. 2,087 in a 659 page document should be given great interpretive weight, and that any other interpretation would be contrary to the purpose of the Act – a process that the late Justice Scalia once colorfully characterized as “interpretive jiggery-pokery.”

      So the Court took a simpler route.  It looked to the language of the ICA – the agreement between the parties – finding there guidance that the parties intended either side could initiate arbitration (though the particular provision relied upon did not actually mention arbitration).  More persuasive was the parties’ course of conduct, for North County agreed to a series of extensions of the time to file an arbitration, specifically agreeing to extend “the period during which either party may file for arbitration” under the Act.  The repeated conduct of the parties was given great weight in interpreting their contractual intent as intent to allow either party to initiate arbitration.

California Supreme Court Holds That Arbitrator May Rule On Pitchess Discovery Motion For Officer Personnel Records

Justice Werdegar Concurs and Dissents.

     The California Supreme Court held today, “that when hearing an administrative appeal from discipline imposed on a correctional officer, an arbitrator may rule upon a discovery motion for officer personnel records, commonly referred to as a Pitchess motion.”  Riverside County Sheriff’s Department v. Stiglitz, S206350 (Dec. 1, 2014) (Cordigan writing for the majority).

      The context in which the issue arose was a disciplinary proceeding involving a Riverside Sheriff’s Deputy Kristy Drinkwater, fired for allegedly falsifying her payroll forms.  Deputy Drinkwater urged a disparate treatment defense, seeking discovery of other personnel investigations.  The arbitrator denied the Pitchess motion without prejudice, but after further briefing did order production of 11 officers’ personnel records for in camera review.

     The Sheriff’s Department sought a writ of administrative mandamus, successfully arguing to the superior court that only judicial officers could grant Pitchess motions.  However, Drinkwater and intervener Sheriffs’ Association sought review, and the Court of Appeal reversed.  The Supreme Court has now affirmed the Court of Appeal, thereby allowing the arbitrator to do an in camera review and rule on the Pitchess motion.

     Justice Werdegar agreed with the majority that Pitchess discovery can be sought in administrative proceedings.  She disagreed, however, that every nonjudicial presiding officer may review privileged and confidential materials in the context of a Pitchess motion, arguing only judicial officers should be permitted in camera review of such materials.

 

Ninth Circuit Alphabet Soup Of Acronyms Yields Tidbits Regarding Arbitration In Regulatory Context

 

Watch Deadlines And Exhaustion Requirements And Hope That It Works Out . . .

     The next case would be even more impenetrable without the helpful glossary of 15 acronyms at the end. Some of our favorites: CMRS (Commercial Mobile Radio Service), DTMF (Dual Tone Multi-Frequency signaling), LEC (Local Exchange Carrier), ILEC (Incumbent Local Exchange Carrier), PUC (Oregon Public Utility Commission),Wink-start MF (Wink-start Multi Frequency signaling). Yes, Dear Reader, we are in the land of telecommunications regulation. Western Radio Services Co. v. Qwest Corporation, et al., No. 10-35820 (9^th Cir. March 15, 2012) (Opinion byJudge Ebel) (for publication).

     Plaintiff-Appellant Western is a CMRS (hey, we just told you what that means). Defendant-Appellee Qwest is an LEC. The case arose between two telecommunications carriers over their ICA.

     The Ninth Circuit affirmed the district court’s dismissal of Western’s claim for Qwest’s alleged failure to negotiate an ICA in good faith. Regarding a challenge to the district court’s decision affirming an order of the PUC, which order adopted results of arbitration leading to the ICA and the approval of the ICA, the Ninth Circuit affirmed in part and denied in part.

     What are the tidbits concerning arbitration?

     First, the regulatory scheme results in a complex process in which arbitration plays an important part. The carriers are required to negotiate in good faith, if they cannot agree (“Mommy, Jimmy won’t share”) they arbitrate, the arbitrator files a decision with the PUC, if the PUC adopts the arbitrator’s decision, the carrier submits an ICA to the PUC in compliance with the decision, objections can be made, and at some point, when all the steps of the administrative process are exhausted, there can be judicial review of the PUC’s decision. This is actually an incomplete summary of the complete process of review and remand that occurred here.

     The factual findings of the PUC’s decision adopting the arbitrator’s decision will be reviewed under an “arbitrary and capricious standard.”

     Administrative procedures present fiendish issues of exhaustion of remedies and narrow deadlines. The words bramble bush, maze, quicksand, and land mine spring to mind. Alas for Western, the Telecommunications Act provides “a strict window of time for the submission of a petition for arbitration: ‘the 135th to the 160^th day (inclusive) after the date on which [a carrier] receives a request for negotiation under this section. . . .’” This deadline tripped up Western on one of its issues – Qwest’s alleged failure to negotiate in good faith.

     Western submitted two petitions for arbitration. The first submission failed to properly identify Qwest’s failure to negotiate in good faith as an “open issue.” After the ICA had already been approved by the PUC, Western submitted a second petition.

     But Western could not rely on the second petition for arbitration. Why?