California Mediation and Arbitration

Arbitration, Discovery, Appealability: In An Uninsured Motorist Arbitration, The Only Way To Challenge A Discovery Order Before Judgment Is With A Writ

A Case Of First Impression.

        Unless you practice in this area, you may not  know that in an uninsured motorist arbitration between the motorist with uninsured motorist coverage and her insurance company, discovery disputes are addressed to the court, not to the arbitrator. State Farm Mutual Automobile Insurance Company v. Cora Robinson, A158467 (1/1  3/14/22) (Humes, Margulies, Banke). "The question of first impression here is whether trial court discovery orders in these proceedings are reviewable on appeal from a judgment confirming the arbitration award. We hold that they are not." 

        The bases for vacating a judgment are found in California Code of  Civ. Proc. § 1286.2 (vacatur). And unhappiness with the trial judge's discovery order is not among the bases. Here, the insured argued that 1286.2(a)(4) provided a reason for  vacatur. That section allows vacatur when the arbitrator exceeded the arbitrator's power, and the award cannot be corrected without affecting the merits of the decision. However, the insured's complaint here was not addressed to the arbitrator, but rather  to the judge's discovery order. So there was no statutory route for vacating the arbitrator's decision. 

        The insured alternatively argued that her appeal should be considered as a writ. But that was not  possible, once a judgment had already been rendered.

        COMMENT: Suppose the arbitrator, rather than the judge, had issued a discovery order, as arbitrators routinely do in other types of proceedings. How easy would it be to attack the arbitrator's order in an appeal of a judgment confirming the award? Not easy. The arbitrator's discovery order would be scrutinized under the same standard as the award, and awards are not set aside just because the  arbitrator makes a mistake of law or fact.

Arbitration, Appealability, Jurisdiction, Celebrities: Second District, Div. 7 Declines To Consider Interim Award Of Preliminary Injunctive Relief

Interim Rulings By An Arbitrator Are Not  Reviewable Until A Final Award Is Issued.

        Charlotte Kirk, an actress,  entered into a confidential settlement agreement in 2017 with four men who were entertainment industry executives. The agreement contained an arbitration clause. Claiming that Kirk violated the settlement agreement, the executives filed an arbitration demand naming Kirk, her fiance Neil Marshall, and  two other respondents, and obtained from an emergency arbitrator injunctive relief to enforce confidentiality provisions and to prevent the filing of a lawsuit that  would make confidential information public. Kirk and respondents filed a petition in superior court to vacate the preliminary injunction. The court denied the petition because the preliminary injunction was not an appealable final award, and the  Court of Appeal affirmed. Kirk v. Ratner, B309880 (2/7   2/10/22) (Perluss, Segal, Feuer).

        Cases teach that, "in the context of a series of rulings . . . a particular ruling is an ‘award’ only if that ruling (1) ‘determine[s] all issues that are necessary to the resolution’ of ‘“the controversy”’ being subject to arbitration, and (2) leaves unresolved only those ‘issues’ that are ‘potential,’ ‘conditional’ or that otherwise ‘could not have been determined’ at the time of the ruling.” In Kirk, the Court of Appeal concluded that there was  no "award."

        COMMENT: Apparently the confidential settlement agreement in Kirk settled, among other things, "Kirk’s claims of sexual harassment, infliction of emotional distress and defamation." Perhaps this explains why the entertainment executives did not want the allegations appearing in public pleadings. And there may have been other motives for  keeping other information confidential, e.g., whether money changed hands as part of the settlement, and if so, how much money. These are common reasons for moving claims of sexual harassment into arbitration, and cloaking the arbitration proceeding in confidentiality. In February 2022, Congress moved to end forced arbitration of sexual assault and sexual harassment claims by amending the Federal Arbitration Act. See the February 17, 2022 post by the Procopio law firm. 

 

Arbitration, Appealability, Jurisdiction, Existence of Agreement: District Court Should Have Summarily Ruled On Existence Of Agreement Before Denying Motion To Arbitrate

There Is A Method To This . . . 

        Before I get to the case, I should mention that I'm playing "catch up." I've fallen somewhat behind on posting, between a busy mediation calendar and some travel to visit a newly born child in the family. But it's the weekend, so let's see how much we can get done.

        Bill Hansen v. LMB Mortgage Services, Inc., et al., No. 20-15272 (9th Cir.  6/11/21) (Ikuta, Nguyen, Eaton) presented a jurisdictional question. Plaintiff Hansen opposed LMB Mortgage Services, Inc and CPL Assets, LLC's (collectively LMB) motion to compel arbitration. The district court issued a nonfinal order denying the motion and decided to schedule a  trial to determine whether there was a binding agreement to arbitrate. LMB appealed.

        LMB's appeal presented a threshold jurisdictional issue. Ordinarily interim orders are not appealable. However, as Judge Ikuta explains, under 9 USC §16, an order denying a petition to compel arbitration under §4 of the FAA is appealable, whether it is an interim or final order. So the  Ninth Circuit could consider the appeal of the interim order.

        What should the district court have done? It should have summarily tried the issue of whether an agreement to arbitrate existed, before deciding the motion to arbitrate. So the Ninth Circuit vacated the district court's denial of the motion to compel and  remanded for the district  court to  "proceed summarily to the trial" on the  question of  whether plaintiff is required to arbitrate. 

Arbitration: Ninth Circuit Rules That Plaintiff's Voluntary Dismissal With Prejudice, After Defense Motion To Compel Arbitration Is Granted, Does Not Create Appellate Jurisdiction

A SCOTUS Case Effectively Overruled An Earlier Ninth Circuit Opinion.

        In Damian Langere v. Verizon Wireless Services, No. 19-55747 (9th Cir.  12/29/20) (Bumatay, Parker, Watford), the court holds, "the voluntary dismissal of claims following an order compelling arbitration does not create appellate jurisdiction." 

        The rule had been otherwise in the Ninth Circuit in  Omstead v. Dell, Inc., 594 F.3d 1081 (9th Cir. 2010). However, now the Ninth Circuit finds that its earlier opinion in Omstead, allowing a plaintiff compelled to arbitrate to create appellate jurisdiction by voluntarily dismissing its claims, is incompatible with Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017). 

        Microsoft involved a situation where there was a voluntary dismissal of claims after plaintiff had been denied class certification, and the Supreme Court held that did not create appellate jurisdiction. While Olmstead involved a dismissal following an order compelling arbitration, and Microsoft involved a dismissal following an order denying class certification, the court in Langere finds that the ultimate question in both cases is the same: "whether a plaintiff may bypass a regime for discretionary appellate review through a voluntary dismissal." And the answer in both cases is the same: no. A plaintiff cannot create appellate jurisdiction by voluntarily dismissing claims after a denial of class certification, and a plaintiff cannot create appellate jurisdiction by voluntarily dismissing claims after being ordered to arbitrate.

        COMMENT: If a plaintiff files in federal court, hoping to obtain class certification, and the defendant successfully moves to compel arbitration, what are the plaintiff's alternatives? The plaintiff can arbitrate and challenge the decision to compel arbitration by appeal after the merits of the case are decided by the arbitrator and confirmed as a judgment. Alternatively, the plaintiff can seek an interlocutory appeal if the district judge certifies that an appeal involves a “controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” 28 U.S.C. § 1292(b). 

        Neither alternative is likely to be very tempting. The interlocutory appeal requiring district court certification is usually a longshot. As to arbitration, arbitrating for the class will be impossible unless the arbitration agreement allows class arbitration, or the rules of the arbitral forum permit the consolidation of claims by the claimants. Arbitrating one small claim is likely to be very uneconomical, and appealing the district court's decision to compel arbitration at the end would  be very expensive and perhaps ultimately pointless, as a judge or jury might reach the same result as an arbitrator is the dispute were to be litigated instead of arbitrated. Another possibility, filing serial small claim arbitrations, only makes sense if there are fee and cost shifting provisions in the agreement between plaintiff and defendant and the plaintiff has a strong case.

 

 

Arbitration, Construction Of Agreement, Reference: Trial Court Properly Denied Motion To Compel Arbitration Or For A Reference

An Order Denying A Judicial Reference Is Not Appealable, Even When Coupled With An Order Denying Arbitration, Which Is Appealable.

    A frequent source of confusion with motions to arbitrate is an arbitration provision that refers to both the Federal Arbitration Act (FAA) and California law. Indeed, that was the source of confusion (somewhat amplified, as the Court of Appeal ultimately determined there was no ambiguity) in J.H. Boyd Enterprises, Inc. v. Kenneth Robert Boyd, F078292 (5th Dist.  9/10/19) (DeSantos, Smith, Meehan). 

    Defendants/Appellants, the Boyd Trust, moved to compel arbitration after their tender of payment of a promissory note to J.H. Boyd Enterprises, Inc., was rejected.  It was clear that an agreement between the Boyd Trust and J.H. Boyd Enterprises, Inc. included a broad arbitration clause that governed the dispute over the refusal to accept the tender. However, there was an exception: If California law governed a dispute that involved a promissory note secured by property, as happened to be the case here, then arbitration could not be compelled, unless J.H. Boyd Enterprises, Inc. elected to arbitrate, which it assuredly did not do. And as many arbitration agreements do, this one provided that any arbitration proceeding shall be governed by the FAA. 

    So was the dispute governed by California law or the FAA? Basically, the Court of Appeal concludes that even if the FAA applies to an arbitration proceeding, the parties agreed to arbitrate this particular dispute, alleged in the complaint to involve a defaulted promissory note, by applying ordinary state law principles. The term "Dispute" was defined to encompass "any dispute, claim or controversy", which encompassed a promissory note default, and forum was not included in the definition of Dispute.

    Defendants/Appellants alternatively sought a reference, and that too had been denied by the trial judge. We see plenty of cases involving orders denying motions to compel arbitration, but orders denying a motion to deny a reference? Not so much. The short answer here is that orders denying a motion to compel a reference are not appealable.

    However, Appellants made a rather ingenious argument. Orders denying a motion to arbitrate are appealable, and Code of Civ. Proc. section 1294.2 creates ancillary appellate jurisdiction over orders affecting appealable arbitration orders. For example, if the Court denies an order to compel arbitration and to deny a stay, ancillary jurisdiction exists to consider the denial of the stay. No go here. The ancillary jurisdiction that allows an appeal of the order denying a stay is necessary to effectuate an appellate ruling on an arbitration order. An appellate ruling allowing arbitration becomes pointless if the litigation is not stayed. But that's not the case here, where review of the order denying the reference is not necessary to effectuate the order denying arbitration. It's apples and oranges.

MFAA, Appealibility, Jurisdiction: An Order Denying A Petition To Compel A Mandatory Fee Arbitration Act Arbitration Is Not Appealable

Appealability Under The Mandatory Fee Arbitration Act Is Different Than Appealability Under The California Arbitration Act.

            The holding of Levinson Arshonsky & Kurtz LLP v Kim (2/1  5/29/19) (Weingart, J.), is that an order denying a petition to compel an MFAA arbitration is not appealable. Therefore, the Court of Appeal lacks jurisdiction to hear it.

          The case arose from restaurateur David Kim's fee dispute with his attorneys, Levinson Arshonsky & Kurtz LLP. After LAK provided notice of disputed billing matters to Kim and his attorney, Kim's attorney filed a petition for fee arbitration with the LACBA on behalf of a Kim-related entity. However, the petition was not filed on behalf of Kim personally, and thus the right to seek county bar mandatory fee arbitration ended up being waived.  Kim's attorney filed a petition to compel MFAA fee arbitration with the Superior Court, which was denied. Kim filed a timely notice of appeal from the order denying his petition to compel arbitration, and did not seek review of an order granting LAK's motion to vacate the stay.

        By analogy to the CAA, Kim argued that a denial of a petition to arbitrate should be appealable. The opinion is interesting because it points out that we have distinct statutory regimes in California, and each needs to be considered separately: (1) judicial arbitration of civil cases with limited amounts in controversy; (2) private contractual arbitration; and (3) mandatory fee arbitration. "[W]hereas a party in a CAA proceeding must move to stay the parallel non-arbitration proceeding, the MFAA adopts the reverse approach -- the parallel nonarbitration matter is automatically stayed, and the party seeking to proceed outside arbitration must move to lift the stay."

        COMMENT: Fee expert Gerald G. Knapton has an article in the June 17, 2019 issue of the Daily Journal entitled, "MFAA versus CFA: Jurisdictional traps for the unwary in arbitration". The article discusses Levinson Arshonsky & Kurtz LLP, as well as the previous case we posted about on May 30, Heimlich v. Shivji. Unfortunately, the Daily Journal is behind a paywall.

        

    

 

Arbitration: Tetrad Of Unpublished Cases Present Issues Concerning Mandatory Fee Arbitration, Res Judicata, Existence Of Agreement, 1281.2, Appealability

Ferguson v. Camarillo Health Care District, B281856 (2/6  11/28/18) (Tangeman, Gilbert, Yegan) (unpublished).

    When a an opinion begins, "Calling it an 'unproductive waste of time,' attorney Ralph T. Ferguson did not participate in mandatory arbitration of a fee dispute with his client Camarillo Health Care District (CHCD). The arbitrators ruled in favor of CHCD," you can make a pretty good guess how it will end.  And you would be right here.

    Attorney Ferguson blew off the Mandatory Fee Arbitration, failed to appeal the judgment on the award or the denial of relief from the judgment. Instead, he collaterally attacked the award in a separate lawsuit, then appealed. No go. The final award, confirmed by the trial court, was res judicata, and Ferguson failed to timely appeal. 

    It was obvious that the Court of Appeal was not amused by the way the attorney handled his fee dispute with his client. "He declined to give CHCD its legal files," writes Justice Tangeman, "asserting they are privileged, or too heavy to lift, or the subject of a ransomware attack on his computer."

    COMMENT: Perhaps the moral is that clients are entitled by statute to arbitrate fee disputes, and the attorney who does not treat mandatory fee arbitration seriously does so at the attorney's risk.

Massicotte v. A-One Janitorial LLC, G055604 (4/3  11/26/18) (Aronson, Bedsworth, Moore) (unpublished).

    The parties entered into an Asset Purchase Agreement under which "the parties agreed an independent accounting firm would render a conclusive and binding decision concerning any disagreement the parties had over a specific accounting issue." The buyers contended this provision did not constitute an arbitration agreement (a) because it did not include the word "arbitration" and (b) because it allowed the determination of the neutral (an accounting firm) to be challenged "for manifest error", as a result of which an award could not be final and binding. 

    The Court of Appeal wasn't buying it. The use of the word "arbitration" is not determinative, and case law is clear about this. If it looks like a duck, swims like a duck, and quacks like a duck, it is a duck. (No, the Court didn't write that, I did.) As to the "manifest error" language, an arbitration decision may be reviewed for legal errors if the parties contractually agreed to judicial oversight.  Cable Connection, Inc.  v. DIRECTV, Inc., 44 Cal. 4th 1334, 1355-1356 (2008).

Doan v. Nhan Hoa Comprehensive Health Care Clinic, Inc., G055323 (4/3 11/26/18) (Bedsworth, Moore, Fybel) (unpublished).

    This is one of the many cases in which an employer seeks to enforce an arbitration agreement against a former employee who did not sign the arbitration agreement. Sometimes those cases arise because of problems obtaining electronic signatures, but that was not the case here. And sometimes those cases arise because an employee who did not sign a change to an employment agreement that included an arbitration clause did not sign the new agreement, but continued to work for a long time, but that was not the case here. Here, the employee straight up didn't sign an arbitration provision that had lines for a date and an employee signature. The final paragraph included an acknowledgment that the agreement had been carefully read and understood, and that binding arbitration would apply, but those darn date and signature lines were blank. And Doan, a new hire, only worked at the company from early May till the end of July 2016. The Court of Appeal concluded that substantial evidence supported the decision of the trial court that the evidence did not establish an intent to be bound by an unsigned document.

Porter v. AG Arcadia, LLC, B285461 (2/5  11/26/18) (Jaskol, Baker, Moor) (unpublished).

    This lawsuit involved a dispute between a patient's relatives and a nursing home after the aged patient "died of sepsis related to her wound from the pressure sore and urinary infections." The arbitrator, the Hon. Judy Chirlin, ret., found that the defendants acted recklessly and awarded damages for elder abuse and wrongful death. The nursing home appealed. The appeal was dismissed under the "one judgment rule", because there was a pending claim for violation of the Patient's Bill of Rights that had not been decided. Thus, the appeal was taken from a non-appealable order.

    COMMENT: Interestingly, the Court of Appeal acknowledges, "we have a sufficient record for writ review and the issues have been fully briefed." Yet the Court concludes that writ review is not appropriate, because it has no information suggesting the Appellants lack of an adequate remedy at law by way of an appeal. The "adequate remedy at law" issue needs to be carefully briefed by appellants seeking writ review. Query whether that was done in this case.

    

Arbitration, Employment, Confidentiality, Construction, Unconscionability: First District, Division 1: Armendariz Is Good Law, Making Law Firm's Arbitration Agreement Unconscionable

Under Armendariz Framework, Court Finds Parties' Arbitration Agreement Is Unconscionable.

     Constance Ramos, "an experienced litigator and patent practitioner with a doctorate in biophysics" petitioned the Court of Appeal to vacate superior court Judge John Stewart's order granting the motion of her erstwhile employer, Winston & Strawn, to compel arbitration of her employment/FEHA dispute. Ramos v. Superior Court, A153390 (1/1  11/2/18) (Margulies, Humes, Banke). 

     Ramos had filed a complaint against Winston asserting causes of action for sex discrimination, retaliation, violation of California's Equal Pay Act, and wrongful termination. Relying on the arbitration agreement between Ramos and Winston, the superior court had granted Winston's motion to compel arbitration, while severing portions of the arbitration agreement deemed unconscionable, prompting Ramos's petition to the Court of Appeal.

    The Court of Appeal vacated the superior court's order, finding that the arbitration agreement contained four unconscionable terms: "The provisions requiring Ramos to pay half the costs of arbitration, pay her own attorney fees, restricting the ability of the panel of arbitrators to "override" or "substitute its judgment" for that of the partnership, and the confidentiality clause, are unconscionable and significantly inhibit Ramos's ability to pursue her unwaivable statutory claims." The agreement was too flawed to allow for severance -- in effect, the court would have had to rewrite the agreement between the parties to make it enforceable.

    This case has a number of interesting aspects:

• The opinion clearly states that Armendariz is still good law, notwithstanding AT&T Mobility v. Concepcion  and the  FAA -- probably dictum, since Winston failed to show that the  FAA applied in the case.
• The reason the confidentiality provision was substantively unconscionable was because it required all aspects of the arbitration to be secret, hindering the ability of Ramos to develop a case.
• An issue in the case, given Ramos's status as an "Income Partner" was whether she was to be considered as an employee or as a partner, for purposes of applying the law firm's partnership agreement, and the procedural protections of Armendariz. The Court explained that it did not need to decide whether Ramos was an employee or a partner, because the critical points, requiring that the Armendariz protections apply, were that Ramos asserted statutory rights Armendariz held to be unwaivable, and Winston was in a superior bargaining position vis-a-vis Ramos.
• In construing the scope of the arbitration clause, the Court reminds us that "arise under" or "relate to" is broader than "arising from" or "arising out of" an agreement.

    COMMENT. Why not include a provision in an employee/employer arbitration agreement to the effect that, if any provisions are determined by a judge or an arbitrator to be inconsistent with the five minimum requirements for the lawful arbitration of unwaivable statutory rights, as set forth in Armendariz, then the five requirements in Armendariz shall take precedence and govern the application of the agreement. Would this make it easier for employers to enforce arbitration agreements precisely because it would protect employees with Armendariz minimum requirements?

     

Arbitration, Discovery, Appealability: Court Of Appeal Reverses Superior Court's Discovery Order Granting Uber's Petition To Vacate Arbitration Panel's Discovery Decision

This Is Part Of The Ongoing Google - Uber Litigation/Arbitration Over Alleged Misappropriation By Uber Of Google Self-Driving Car Technology.

    Google initiated arbitration proceedings against two former employees involved in developing self-driving car technology after the employees formed their own company (Otto) and their new company was acquired by Uber. A discovery dispute ensued: "Google sought discovery from Uber, a nonparty to the arbitration, related to pre-acquisition due diligence done at the request of Uber and Otto's outside counsel by Stroz Friedberg LLC." The arbitration panel determined the due diligence documents sought by Google were not protected by attorney-client privilege or the work-product rule. Uber, a non-party to the arbitration, then initiated a "special proceeding" in superior court, limited in scope to vacating the arbitration panel's discovery order, and prevailed. Google appealed the superior court's order. Uber Technologies, Inc., v. Google LLC, A153653 (1/3  9/28/18) (Siggins, Pollak, Jenkins).

    The case raised an arbitration issue of first impression: "We know of no case that addresses the precise issue before us, namely, whether a party to an arbitration has a right to appeal an adverse superior court order vacating an arbitrator's discovery order in favor of a third party to the arbitration." The Court of Appeal held that, given the nature of the "special proceeding" involving a discovery issue and completely resolving the discovery issue, there was a final judgment, and Google could appeal.

    The Court of Appeal went on to hold that the due diligence documents sought by Google were not protected by attorney-client privilege or by the work-product rule.

    COMMENT: We have written an article and posted on July 17, 2018, about the availability of third-party document discovery in arbitration governed by the Federal Arbitration Act. The general rule is that such discovery is not available, though the documents can be obtained in connection with a hearing. In Uber v. Google, the issue is not discussed, from which we surmise that the arbitration proceedings were governed by the California Arbitration Act, which unlike the FAA, does allow for third-party document discovery.

Arbitration, Appealability, Jurisdiction: Order Denying Petition To Vacate Award Is Appealable As Order Dismissing Petition -- But The Trial Court Properly Dismissed Petition To Vacate "Partial Interim Award" For Lack Of Jurisdiction

"Partial Final Award" Did Not Constitute An Award Immediately Reviewable By Superior Court.

    Maplebear, Inc. v. Donna Busick, No. A151677 (1/2  8/21/18) affirms the trial court's order dismissing Maplebear's (Instacart's) petition to vacate an award, which award was dismissed for lack of jurisdiction. Instacart is a same-day grocery delivery service, and the dispute arose when an employee, Busick, filed a class action arbitration demand with JAMS, alleging Instacart violated California law by misclassifying employees as independent contractors.

    The arbitrator issued a "partial final award" determining that the parties' arbitration agreement permitted Busick to move for class certification. Instacart petitioned to vacate the award. The trial court denied the petition to vacate, and Instacart appealed the denial of the petition to vacate.

    The opinion, which is a great refresher of the procedural steps involved when appealing an arbitrator's order, is interesting for a number of reasons.

    First, it treats the order denying the petition to vacate as an order dismissing the petition to vacate. This is important, because the relevant statute allows an aggrieved party to appeal from an order "dismissing a petition to confirm, correct or vacate an award." A denial is not the same as a dismissal -- except that by case law, denials may sometimes be treated as dismissals, making them appealable.

    Second, the Court concludes that the ruling in Mid-Wilshire Associates v. O'Leary, 7 Cal. App. 4th 1450 (1992), where the Court of Appeal "declined to construe a trial court order 'denying' a petition to vacate as a dismissal" does not survive Law Offices of David S. Karton v. Segreto, 176 Cal.App.4th 1 (2009) and  and Cinel v. Christopher, 203 Cal.App.4th 759 (2012).

    Third, the Court holds that the trial court properly dismissed Instacart's petition to vacate the "partial final award" because the trial court lacked jurisdiction over a partial award that did not determine "all the questions submitted to the arbitrators the decision of which is necessary in order to determine the controversy." Cal. Code Civ. Proc., section 1283.4. 

    Fourth, the Court rejected Instacart's argument that because the parties agreed that the arbitrator had no "power or authority to commit errors of law or legal reasoning", the trial court could immediately review the partial final award allowing Busick to move for class certification.