California Mediation and Arbitration

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.

Arbitration, PAGA, Appealability: Fourth District, Div. 1 Holds That Trial Court Erred By Bifurcating Underpaid Wages Portion Of PAGA Claim And Ordering Arbitration Of That Part Of Claim

Civil Penalties Or Victim Specific Statutory Damages?

         Lawson v. ZB, N.A. et al., and ZB, N.A., et al. v. Superior Court of San Diego, D071279 & D071376 (4/1  12/19/17) (Benke, Huffman, Haller), is the latest skirmish in the ongoing battle waged between employers and employees over whether Private Attorney General Act of 2004 (PAGA) claims can be arbitrated.    

        The trial court granted appellant ZB, N.A.'s motion to arbitrate, bifurcating an underpaid wages portion of the employee's PAGA claim and ordering arbitration as a representative action of that portion of the claim, brought under Labor Code section 558.  ZB appealed the trial court's order.  Evidently ZB didn't want to deal with a representative action in arbitration, and ZB argued that the employee had waived the right to bring a class or representative action.   In any case, the Court of Appeal held that an order compelling arbitration is not appealable, instead ruling on the issue when raised by way of a petition for a writ of mandate.

        Section 558 of the Labor Code requires payment of underpaid wages, and also provides for civil penalties of $50 for a first violation, and $100 for further violations.  The seemingly dual nature of this Labor Code provision opened the door for ZB to argue that the underpaid wages issue needed to be arbitrated, because it was in the nature of a private claim belonging to the employee, unlike PAGA penalties which are obtained on behalf of the State.  In fact, ZB didn't even ask the trial court to order abitration of the $50 and $100 amounts provided for as penalties in section 558.

        The Court of Appeal now holds that section 558 provides for civil penalties, and "hence claims under section 558, including claims for underpaid wages, are cognizable under the PAGA."  Therefore, the claim for underpaid wages is a claim that the employee cannot waive as a representative action, and cannot be forced to arbitrate.  The Court also explains that section 558 claims do not create an "express right of private enforcement and instead a regulatory agency has been given the right to enforce the statute . . . "  

        So:  (1) the appeal is dismissed; (2) the writ is granted; (3) the order bifurcating the 558 claims and ordering the underpaid wage part to be arbitrated is vacated; (4) the motion to arbitrate is denied.  The result of the writ petition is that the representative PAGA claim, instead of being heard by an arbitrator, will be heard by a judge.

            COMMENT:  We now have a split among the districts, with the Fourth District, Division 1 "respectfully part[ing] company with the view recently expressed by our colleagues in the Fifth District in Esparza v. KS Industries [13 Cal.App. 5th 1228 (2017).  Esparza, the subject of my August 2, 2017 post, held that section 558 wage claims were not a representative action, and therefore could be arbitrated.

Arbitration, Appealability, Fees, Estoppel, Waiver, Sanctions: Fourth Dist. Div. 3: "This Is An Appeal Borne Of Sharp Practices"

Waiver, Invited Error, And Sharp Practices Doom The Appeal.

            Justice Ikola grabs the reader by the lapels in the opening lines of Diaz v. Professional Community Management, Inc., G053909 (4/3 certified for pub. 11/8/17) (Ikola, O'Leary, Aronson):  "A 'sharp practice' is defined as a 'dealing in which advantage is taken or sought unscrupulously. . . . This is an appeal borne of sharp practices."  The unsettling feeling that one side is about to get slammed is thoroughly reenforced by the Justice's choice of words in the first four pages of a 32 page slip opinion:  efforts by a party to "spin that ruling", "invited error", "bad faith", "specious", "deliberately designed to obscure," "machinations," "patently unfair manner", "frivolous appeal", "we were most disturbed."  One need hardly read further, but I did, because the case involved arbitration.

            So what so exercised the ire of the appellate justice?  Defendant/appellant PCM "unilaterally orchestrated the issuance of an appealable order" 11 days before trial, by filing an ex parte application to shorten time to hear its motion to compel arbitration, knowing the trial judge would deny it -- the case had been pending for 1 1/2 years, defendant had pleaded it had a right to arbitrate as an affirmative defense, defendant had done nothing to perfect that right earlier, and there was no justification for a last moment application to shorten time.  Denial of an ex parte application to shorten time, however, would not have generated an appealable order.  So defendant immediately submitted an order to the trial judge, inconsistent with the ex parte application and the minute order, burying within the proposed order that the judge was also denying the motion to compel arbitration -- a motion that was never heard, and that was still on calendar.  The judge signed the order, probably without realizing that he was being played, and the order denying a motion to compel arbitration became the springboard for an appeal and a stay. 

            Defendant lost its appeal because "PCM invited the trial court's alleged error when it proposed the court issue the very ruling it now challenges on appeal.  By doing that, PCM won the battle -- it got the court to issue the appealable order it sought, prior to trial -- but it lost the war.  A party that invites the court to commit error is estopped from challenging that error on appeal."

            For good measure, the Court also concluded that the order denying PCM's motion to compel arbitration should have be affirmed on the merits, given that the litigation conduct and delay of defendant was inconsistent with a sincere desire to arbitrate.

            One final twist involved the fact that a motion to compel arbitration was involved.  Appellant argued that the Court of Appeal could not act as a factfinder in the first instance and decide the issue of waiver, when the issue of waiver had not been presented below.  And in fact, the Court of Appeal could have sent the case back to the trial court, though given the "sharp practices" sussed out by the Court, such an outcome would seem pretty unfair.  In order to make any factual ruling on its own, the Court of Appeal had to get around Cal. Code of Civ. Proc., section 909, which provides in part, "In all cases where trial by jury is not a matter of right or where trial by jury has been waived, the reviewing court may make factual determinations contrary to or in addition to those made by the trial court. "  But as the Court of Appeal explained, the purpose of section 909 "is to preserve the parties' right to have a jury act as finder of fact in matters where that right applies."  And a petition to compel arbitration "is in essence a suit in equity to compel specific performance of a contract."  So no right to a jury to decide that limited issue, and  problem solved.

            COMMENT:  One could conclude that if the goal of defendant was to delay, then defendant succeeded.  The trial was scheduled to begin April 11,  2016.  The unpublished appellate opinion was filed October 17, 2017.  And there will be 40 days for the remittitur.  And the trial judge will need to reset the trial.  But at what cost?  Appellant, its law firm and two of its attorneys are ordered, jointly and severally, to pay the court $8,5000, and to pay to Diaz an amount "equal to the reasonable value of services performed by his attorney in  preparing for the trial . . . and in responding to this appeal, but not to include pretrial services which need not be repeated."  And there is the additional reputational cost of being slammed for "sharp practices."

               

Arbitration/Collective Bargaining/Appealability: Union Employee's Writ Petition Was Not Proper Route To Challenge Arbitrator's Award

San Francisco Trolley Operator's Writ Petition And Motion To Vacate Go Off The Rails.

San Francisco Trolley on Market St.  2012.  Carol M. Highsmith, photographer.  Library of Congress.

         Appellant's procedural quagmire is underscored by the following statement of the Court of Appeal:  "In a somewhat puzzling argument, appellant contests his own standing to challenge the arbitration award."  Quiambao v. San Francisco Municipal Transportation Agency  et al., A148511 (1/4  9/28/17) (Ruvolo, Reardon, Streeter) (unpublished).

        Mr. Quiambao, a San Francisco trolley car operator engaged with his municipal employer in a union grievance and arbitration procedure resulting in his dismissal, based on safety violations and conduct issues.   Rather than moving to vacate the award in court pursuant to CCP 1286.2, Mr. Quiambao filed a writ of mandamus.    The thought process here is a bit obscure:  an employee does not have standing to appeal an arbitration award where a union acts on his behalf, as was the case here, so apparently Mr. Quiambao decided to file a writ.  The trial court concluded, and the Court of Appeal agreed, that the Court of Appeal properly dismissed the writ petition too, because a writ petition is not the way to challenge a private arbitration award.

            A motion to vacate would be appropriate, if it had been filed by the Union, which would have had standing.  But the trial court, the Muni, and the employee all allowed Mr. Quiambao's challenge to be treated as a motion to vacate, even though he, rather than the union, acted as a party.  Respondent Muni argued appellant could not now "press rewind" and undo his standing, because if the trial court granted standing erroneously, it was "invited error."  The Court of Appeal explained that "invited error" didn't apply, since the trial court was not mislead in any way.  Instead, Mr. Quiambao could not press rewind, because he had expressly agreed to the action taken by the trial court when it treated his papers as a motion to vacate.  Thus, the proper label was "waiver" rather than "invited error."

        On the merits, the employee lost his appeal, with the Court of Appeal finding no evidence of fraud, and with the Court explaining that even mistake of law or fact is ordinarily no reason for setting aside an arbitrator's award.

        

Appealability/Standard Of Review: Appellant Waived Judicial And Appellate Review Of Fee Award By Failing To Raise Objections In Arbitration And In Superior Court

Plus The Court Of Appeal could Not Review Merits Of The Dispute, Which Included Legal And Factual Bases Of The Arbitrator's Award.

        After William Schwartz arbitrated with Joel Schwartz, the arbitrator declared William the prevailing party and awarded William $264,559.89 in fees and costs.  The Superior Court confirmed the award, and Joel timely appealed.  Schwartz v. Schwartz, D071445 (4/1  9/15/17) (Irion, Huffman, Haller) (unpublished).  

        Joel raised some interesting substantive issues on appeal, namely, that the fee award was largely based on work done by Oregon attorneys who had not been admitted pro haec vice, and that William had failed to beat Joel's 998 settlement offer.  But Joel's substantive points were never considered by the Court of Appeal.

        First, Joel waived the "out-of state-attorney" argument, by failing to raise it with the arbitrator or with the Superior Court judge.  Second, because a mistake of law or fact is not a basis for reviewing the merits of an arbitration award, the Court did not need to address the merits of Joel's argument that William had not prevailed on Joel's 998 settlement offer after he turned down Joel's 998 settlement offer.  Third, Joel apparently did not provide record references to support some of his arguments.

        COMMENT:  Arbitration proceedings may seem informal, but it is certainly important to raise objections in arbitration, to have a record, and to preserve the objections and the record in the Superior Court -- at least, where a substantial fee and cost award may be challenged later.  And if one wants appellate review to include review of the merits, then the arbitration agreement needs to provide that the arbitrator who makes mistakes of law or of fact exceeds his powers.

Arbitration, Appealability, Nonsignatories: 9th Circuit Grants Writ, Vacates Order Granting Motion To Stay And To Compel Arbitration Obtained By Alleged Zombie Cookie User

How Do You Like Them Zombie Cookies?

"I walked with a Zombie."  1943.

        The Ninth Circuit granted a petition for a writ of mandamus and vacated the district court's order that had granted Turn, Inc.'s motion to stay a putative class action and compel arbitration with Turn, Inc., the alleged user of "zombie" cookies.  In re Henson, No. 16-71818 (9th Cir. 9/5/17) (per curiam).

         Turn, Inc. is a middle-man for Internet-based advertisements, and has a contract with Verizon to deliver advertisements to Verizon subscribers based on usage data collected from the users' mobile devices.  The users' wireless transmissions contain a "Verizon Unique Identifier Header" that can be attached to a tracking cookie to send the user data to Turn, Inc.  As the Court explains, "A 'cookie' is software code that transmits a user's web-browsing history and other usage data back to the entity that attached the cookie."  

        "Subscribers were allegedly unable to detect, delete, or block these 'zombie' cookies attached to their UIDHs."   Even when the user tried to kill a zombie cookie, the cookie would be replicated, and attach to the user's previously collected data.  Turn, Inc. allegedly auctioned off users' collected data so advertisers could place targeted advertisements on the users' mobile phones.  The putative class action alleged deceptive business practices and trespass to chattels by Turn, Inc.  

        Verizon had an arbitration provision in its user contracts, but Turn, Inc. was not a party to those contracts.  Though a nonsignatory, Turn, Inc. sought to take advantage of the arbitration provision, and the district court, applying equitable estoppel, allowed Turn, Inc. to do so, staying the lawsuit and requiring arbitration.  

        A party cannot directly appeal from an order compelling arbitration, requiring the Court to analyze whether mandamus was available.  Applying the so-called Bauman factors, the Court found that the first three weighed in favor of granting mandamus, and granted mandamus.    In Bauman v. U.S. dist. Court, 557 F.2d 650 (9th Cir. 1977), the court considered whether a direct appeal is unavailable, whether prejudice is not correctable on appeal, whether clear error exists, whether the error is often repeated, and whether the issue is of first impression.

    Girl Scout serving cookies.  1936.  Library of Congress.

Arbitration, Appealability: Was The Judgment Appealable, And If Not, Could It Be Reviewed By Writ? The Parties Answer Yes, Yes. The Court Of Appeal Answers No, No.

Partial Final Award Here Was Not A Final Award.

         When I read, "[a]fter a rather convoluted multi-year path, the parties agreed to arbitration in lieu of the superior court litigation," I had a queasy feeling that the parties are not at the end of that path.  Nor were my expectations disappointed in Kaiser Foundation Health Plan, Inc. v. Superior Court (Prime Health Care LA Palma, LLC, et al. Real Parties In Interest), B272284 (2/7  7/31/17) (Small¹, Perluss, Zelon).

        The underlying dispute concerned claims by Prime Healthcare La Palma LLC that Kaiser had failed to reimburse Prime for emergency medical services it provided to Kaiser members.  In the arbitration, Kaiser moved to dismiss Prime's claims on the ground they were preempted by the Medicare Act and subject to administrative exhaustion requirements that had not been satisfied.  The arbitration panel issued a partial final award denying Kaiser's motion, and the superior court entered a judgment confirming the award.

        Kaiser appealed from the judgment, contending the panel's ruling on Medicare Act preemption and exhaustion issues was wrong as a matter of law. 

        However, the Court of Appeal had another idea.  It "asked the parties to address whether the judgment was appealable, and, if not, whether we could review the judgment by treating Kaiser's appeal as a petition for writ of mandate."  Though the parties may have disagreed about Medicare Act preemption and exhaustion issues, they were as one that the judgment was appealable, and if not, that it could be reviewed by writ. 

        However, the Court of Appeal had another idea.  It concluded "the issues are not reviewable, either by appeal or by writ."

        A judgment must be final to be reviewable, and the "partial final award here does not meet that standard."  So what about review by writ?  Because the award did not "include a determination of all the questions submitted to the arbitrators the decision of which is necessary in order to determine the controversy" (section 1283.4), the trial court lacked jurisdiction to confirm the award in the first place.  Therefore, because the "award" was not an award, it could not be reviewed by way of writ.

        The case could be viewed as an example of the principle that parties cannot by agreement create jurisdiction in the Court of Appeal where jurisdiction does not otherwise exist.

Bronze and Silver Oak Leaf Clusters.  Wikipedia.

1_{Judge of the LA Sup. Ct. sitting by designation.}     

Appealability: An Order Denying A Renewed Motion To Compel Arbitration Under CCP 1008(b) Is Nonappealable.

Courts Like To Conserve Judicial Resources.

     In Chango Coffee, Inc. v. Applied Underwriters, Inc., B267358 (2/3  5/26/17) (Johnson (Michael), Edmon, Aldrich), the trial court denied a renewed motion brought by defendant to compel arbitration of a complaint brought by Chango Coffee, Inc.  Defendant appealed the order denying a renewed petition brought under Cal. Code Civ. Proc. section 1008(b) to compel arbitration.

     Held:  The appeal is dismissed for lack of jurisdiction.  An order denying a renewed motion or application under 1008(b) is not appealable.  See Tate v. Wilburn, 184 Cal.App.4th 150, 160 (2010).

Arbitration, Appealability: Two Recent Appeals In Arbitration Cases Dismissed For Lack Of Appealability

No Appeal From Order Denying Motion To Vacate Arbitration Award.    

    The Court of Appeal dismissed an appeal without prejudice in Porter v. AG Arcadia, LLC, No. B276183 (2/5 2/28/17) (Turner, Kriegler, Kin) (unpublished). Defendants appealed from an order denying a motion to vacate an arbitration award. The problem? "No appeal may be taken from an order denying a motion to vacate an arbitration award." However, the appeal was not frivolous, because sometimes an appeal can be treated as a writ petition – though here the necessary criteria were lacking.

No Appeal From Judgment That Is Not Final.

    Defendants appealed from a judgment confirming an arbitration award "on one of 27 causes of action." Acquire II, Ltd. V. Colton Real Estate Group, No. G052353 (4/3 2/28/17) (Aronson, Fybel, Ikola) (unpublished). No go. An arbitrator's award that does not determine all the questions presented does not qualify as an award under section 1283.4. Dismissed for lack of jurisdiction, because the trial court's judgment was not final.

Arbitration/Appealability: Ninth Circuit Dismisses Appeal Of Order Denying Motion To Compel Arbitration Because Appellants Invoked California Arbitration Act Rather Than Federal Arbitration Act

A Trap For The Unwary . . .

    Kum Tat Limited v. Linden Ox Pasture, LLC, No. 14-17472 (9^th Cir. 1/13/17) (Hurwitz, Lucero, Graber) presents a trap for the unwary.

    Plaintiff Kum Tat Limited sued in California state court in connection with its attempted purchase of residential property for approximately $40M, after its attempted purchase went sideways. Defendant Linden Ox Pasture removed to federal court. Plaintiff then moved unsuccessfully to compel arbitration and to stay the action pursuant to California Code of Civil Procedure sections 1281.2 and 1281.4. The trial court denied the motion, concluding the parties failed to form a contract.

    Under the California Arbitration Act, California Code of Civil Procedure, section 1294, a party whose motion to compel arbitration has been denied can appeal. Similarly, under the Federal Arbitration Act, 9 U.S.C. section 16(a)(1), one can file an interlocutory appeal from an order denying a petition to order arbitration. So, given that the district court denied Kum Tat's motion to compel arbitration, should the Ninth Circuit have entertained an interlocutory appeal?

    No. The reason is that Kum Tat invoked the California Code of Civil Procedure as the basis for an appeal, rather than the Federal Arbitration Act. So the Ninth Circuit dismissed the appeal for lack of federal jurisdiction. Gotcha.

    Ironically, Linden Ox's answering brief did not contest jurisdiction. But of course the federal court gets to exercise its "independent obligation to ensure jurisdiction."

    COMMENT. Kum Tat's motion to compel arbitration was explicitly brought under California arbitration law, and Kum Tat later emphasized that the motion was not made under the FAA. Suppose the arbitration motion had been more ambiguous, and failed to cite state or federal arbitration law? Could such a motion have been brought "under" the FAA for purposes of the interlocutory appeal? The Ninth Circuit expressly states that it does not decide that question. Kum Tat, footnote 3. Generally, parties seeking to compel arbitration find themselves in a stronger position when they proceed under the FAA. Apparently Kum Tat's motion to compel arbitration sought to distinguish some unfavorable case law interpreting the FAA, explaining why Kum Tat was at pains to stake the position that it was proceeding under state law. Kum Tat, footnote 1.