California Mediation and Arbitration

Existence Of Agreement: There Is No Agreement Where Nursing Home Stroke Victim Lacked Capacity To Contract

Nursing Homes Continue To Create Arbitration Problems.

        If our readers use the sidebar search box, they will discover other cases involving nursing homes. Sometimes the problem of enforcing an arbitration agreement involving a nursing home resident arises because a relative signs for the resident, and issues arise as to whether the relative had authority to bind the non-signatory. Here, it was the resident himself, a stroke victim, who signed the agreement. However, there was substantial evidence that he was mentally impaired and lacked the ability to contract. The Court of Appeal affirmed the trial court's order denying the skilled nursing home's petition to compel arbitration. Pemilady Algo-Heyres v. Oxford Manor, LP, B319601 (2/6  2/28/23) (Baltodano, Gilbert, Yegan). A rebuttable presumption exists that all persons have the capacity to make decisions and to be responsible for their acts or decisions. 

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.

 

 

Arbitration, Existence Of Agreement: CCA 2/7 Holds Employer Failed To Carry Burden Of Proof Agreement To Arbitrate Existed

After Employee Questioned The Agreement To Arbitrate, Burden Of Proof Shifted To Employer.

        Hope Gamboa sued Northeast Community Clinic for employment-related claims. The employer moved to arbitrate. The trial court denied the motion. Affirmed. No agreement to arbitrate existed. Gamboa v. Northeast Community Clinic, No. 394833 (2/7  11/30/21) (Ibarra, Perluss, Feuer).

        Why couldn't the employer prove an agreement to arbitrate existed? The employer provided a signed contract and a statement by the HR manager that the employee had signed the agreement. This shifted the burden of proof to the employee, who testified she didn't remember the agreement, and wouldn't have signed it if she had known what it was. This amounted to a denial of the existence of the agreement. Unfortunately for the employer, the declaration it provided did not provide foundation that the declarant had personal knowledge that the employee signed. 

Arbitration, Delegation, Agents: Two Cases In Medical Settings Show California Courts Scrutinize Arbitration Agreements Entered Into For The Sick And The Aged

        California courts continue to scrutinize cases in which hospitals and nursing homes seek to enforce arbitration provisions. The medical settings often involve patients who are old, quite sick (or both), hurried admission processes, and urgency. These cases remind me of a story my law school torts professor told, about taking his daughter, who had injured her arm, to emergency care. Presented with the  paperwork, the law professor asked, "where do I sign?"

Oh What A Difference A Little Thereof Makes.

        In Sandoval-Ryan v. Oleander Holdings LLC, et al., C089486 (3rd Dist.  12/7/20) (Hull, Murray. Duarte), the Court of Appeal affirms an order of the trial court, holding that defendants, a skilled nursing facility, claimed the issue of arbitrability had been delegated to the arbitrator rather than the court to decide, lacked merit.

        Defendants did not question the trial court's ruling against them on their motion to compel arbitration, only that the decision had been made by the trial court, instead of an arbitrator. Defendants argued that clear and unmistakable language delegated threshold arbitrability issues to the arbitrator. Their argument foundered on two shoals.

        First, the language  of the arbitration agreement provided that  claims "arising out of the provision of services by the Facility, the  admission agreement, the validity, interpretation, construction, performance and enforcement thereof . . . " were to be submitted to the arbitrator. The court concluded that "thereof" referred to the admission agreement only. OK, I had to read the clause twice myself.

        Second, even if, arguably, the clause could be interpreted to cover issues of arbitrability concerning the provision of  services, the "clear and unmistakable language" burden had not been carried by defendants.

Shaky Custom, Habit, And Practice Testimony That Is Contradicted Fails To Establish Agreement To Arbitrate.

        Maria Garcia v. KND Development 52, LLC, et al., B301929 (2/4  12/15/20) (Manella, Willhite, Collins) is another case in a medical setting where the trial and appeal courts refuse to enforce an arbitration provision. The underlying case involved a patient who was allegedly injured, becoming infected with bedsores, and later dying. 

        The hospital did not carry its burden of establishing a binding arbitration clause (a) because it relied on the custom and practice testimony of a supervisor who did not interact with the patient; (b) because it relied on the custom and practice testimony of a receptionist who lacked first-hand recollection; and (c) the custom and practice testimony was contradicted by relatives of the  patient who testified from first-hand personal knowledge. As a result of the thin evidence, the hospital was unable to establish that the relative who signed the hospital documentation had acted as an agent of the patient and had been authorized by the patient to agree to arbitration. 

 

 

Arbitration, Internet Commerce: 9th Circuit Tests Limits Of "Reasonably Conspicuous" Provision In Internet Commerce Adhesion Contract

Plaintiff Had To Jump Through Hoops To Get To Arbitration Clause.

        For our next case, we add a new sidebar category: "Arbitration: Internet Commerce." "This case tests the outer limits of what constitutes a 'reasonably conspicuous' provision as part of the terms of usage so prevalent in the adhesion contracts of modern internet commerce," writes Senior Circuit Judge Michael Daly Hawkins in In re Randall Holl, No. 18-70568 (9th Cir.  5/30/19) (Hawkins, Smith, Lynn).

        Plaintiff Holl sued UPS alleging it systematically overcharges retail customers shipping packages through third-party facilities by applying Delivery Surcharge Rates higher than the rates it advertises. UPS successfully moved to arbitrate, and Holl sought a writ of mandamus.

        The issue here is the convoluted path Holl had to take to get to the arbitration clause. It takes the panel six pages just to describe how Holl gets to the arbitration clause. He must be able to proceed through the UPS Technology Agreement, which is lengthy; incorporation of rules, regulations, and documents by reference; and inclusion of a jurisdictional provision. And without agreement, there is no agreement to arbitrate.

        However, the Court concludes that mandamus is not justified because Holl assented to the service terms with a click, and the terms clearly incorporated the document containing the arbitration clause in question. Never mind that you, I, and even a learned judge sending a UPS package would likely never get to the arbitration clause, unless we were looking for it. After all, this is about mandamus relief. And the Court concludes: "Faced with the heavy burden of showing a 'clear and indisputable' right to the extraordinary remedy he seeks, Holl fails to establish the type of 'judicial usurpation of power' or 'clear abuse of discretion' that might justify issuance of the writ."

Arbitration: Burden Of Proof, FAA: Ninth Circuit Determines That USC Employment Arbitration Clause Did Not Encompass Plaintiff Employees’ Claims On Behalf Of ERISA Plans

However, Ninth Circuit Panel Did Indicate In A Footnote That It Might Have Been Wrong To Say Certain ERISA Claims Inarbitrable As A Matter Of Law.

       In Munro v. University of Southern California (USC), No. 17-55550 (9^th Cir. July 24, 2018) (published) (Thomas, Chief Judge, author; Friedland, Circuit Judge; and Zilly, W.D. Wash. District Judge by designation) confronted a situation where USC required current and former employees to sign standard employment contracts with arbitration clauses. However, the language only covered them in individual capacities such that the controversy here was whether these arbitration clauses covered employees bringing collective claims for breach of fiduciary duty against USC for the administration of certain ERISA plans. The district judge denied USC’s motion to compel arbitration after concluding that it did not encompass the ERISA plan challenges brought by the employees.

       The Ninth Circuit agreed in a 3-0 panel opinion.

       The summit issue under the Federal Arbitration Act (FAA) was whether the employment contract’s arbitration clause encompassed the dispute at issue. Employees won on that issue.

       Earlier, in U.S. ex rel. Welsh v. My Left Foot Children’s Therapy, LLC, 871 F.3d 791 (9^th Cir. 2017), decided under a similar employment contract that an arbitration clause did not cover qui tam claims brought by an employee on behalf of the U.S. government under the False Claims Act (FCA). The Ninth Circuit, in Munro, found that Welch’s reasoning did apply, because qui tam suits under the FCA—where a plaintiff sues for injury to the government—was akin to ERISA fiduciary breach suits—where a plaintiff sues for injury to the ERISA Plan. Beyond that, neither a plaintiff in an FCA suit nor a plaintiff in a similar ERISA suit can alone settle the suit. So, the USC arbitration clause was not broad enough to encompass “representative” claims of the nature alleged under ERISA.

      However, not everything was lost from the defense perspective. In a footnote, the Ninth Circuit panel did hint quite strongly that its earlier holding in Amaro v. Continental Can Co., 724 F.2d 747 (9^th Cir. 1987) might have been wrongly decided. Amaro found that ERISA 409(a) claims are inarbitrable, but the Ninth Circuit panel suggested this conclusion might have been wrong as a matter of law based on intervening binding authority—but did not have to reach the issue based on its narrower holding.

        BLAWG OBSERVATION—I noticed that Eugene Scalia was on the losing side of the arbitration issue. Given his deceased father’s (former SCOTUS Justice Antonin Scalia's) views favoring arbitration and his pronouncements in Concepcion/other cases, his father might be rolling in his grave based on the result in this case, circumspect as it might be.

Arbitration: Burden Of Proof: 4/3 DCA Affirms Trial Court’s Conclusion That Arbitration Agreement Did Not Exist In The Face Of Conflicting Evidence

Former Employee Did Not Sign Arbitration Clause, Denied Receiving Letter Where Employer Tried To Create A Ratification, And Subsequent Compensation Program Signature Did Not Evince An Agreement To Arbitrate.

            The facts of this case were hotly contested. Former employee, after 13 years with employer, was presented with a handbook containing an arbitration agreement to sign. He refused and was put on suspension. Company sent him a FedEx letter, left on his doorstep, indicating that if he returned to work, he agreed to the handbook with the arbitration clause. Employee claimed he never received the letter. Employee returned to work and, 7 ½ years later, defendant implemented a new compensation program replete with arbitration, which employee signed—although resigning months later. Importantly, the compensation program only indicated employee would agree to arbitration to the extent he had signed such an agreement or would execute one later.

            In light of this conflicting testimony, the trial court found no agreement to arbitrate, triggering an appeal by the losing ex-employer.

            The 4/3 DCA, in Vitters v. Solesbee Auto Crafts, Inc., Case No. G054926 (4^th Dist., Div. 3 June 18, 2018) (unpublished; Goethals, J., author, concurred in by Bedsworth, A.P.J. and Moore, J.), affirmed.

            The problem for appellant, ex-employer was the substantial evidence rule. The key issue was whether employee agreed to the FedEx letter, but the presumption of acceptance and agreement was rebutted by employee—as the trial court determined. The subsequent compensation agreement did not result in a different result, given the language that employee had to agree or would agree in the future to arbitration—which employee claimed he did not do.

Burden Of Proof/Existence Of Agreement: Defendants Failed To Satisfy Burden Of Proof That Agreement To Arbitrate Existed

Trial Court Order Denying Defendants' Petition To Arbitrate Is Affirmed.

        This case was about a matter of timing.  Plaintiffs sued defendants, alleging defendants failed to build and develop a Web site as agreed to.  Defendants move to compel arbitration.  The trial court found defendants failed to show that the arbitration clause related to the contract plaintiffs said was the basis for their claims.  Defendants appealed.  Noor v. Katz, B275176 (2/2  9/19/17) (Ashmann-Gerst, Chavez, Goodman) (unpublished).  

        Defendants claimed the the dispute arose from a September 10, 2015 agreement containing an arbitration provision.  Plaintiffs argued the dispute arose in connection with an earlier July 13, 2015 invoice that did not have an arbitration provision.  The Court of Appeal, in affirming the trial court's order denying arbitration, agreed defendants simply failed to meet their burden of showing the existence of an agreement to arbitrate the dispute.

        Regarding the standard of review of an order denying a petition to compel arbitration, the Court notes:

 There is no uniform standard of review for evaluating an order denying a motion to compel arbitration . . . . If the court's order is based on a decision of fact, then we adopt a substantial evidence standard. . . . Alternatively, if the court's dnial rests solely on a decision of law, then a de novo standard of review is employed . . . ." (quoting Robertson v. Health Net of California, Inc., 132 Cal.App.4th 1419, 1425 (2005)).

        

        

 

Arbitration, Authentication, Burden Of Proof: Defendants/Appellants Sufficiently Established Existence Of Agreement To Arbitrate By Authenticating Electronic Signature

Because Defendant Introduced Key Evidence In Supplemental Declaration, Rather Than In Moving Papers, Court Had To Address The Burden Of Proof.

     Yes, it happens.  Sometimes, a published case deserving a post escapes my net.  However, Espejo v. Southern California Permanente Medical Group, (2nd Dist. Div. 4 2016) (Collins, Epstein, Willhite), though filed back on April 22, is worth a post, because it systematically addresses how to authenticate an arbitration agreement with an electronic signature, and who has the burden of proof.  I have addressed authentication issues in posts on January 4, 2015 (Ruiz v. Moss Bros. Auto Group) and on December 31, 2014 (JBB Investment Partners). 

     In Espejo, the defendants moving to compel arbitration submitted key evidence in a supplemental declaration, rather than in their initial moving papers.  This put at issue whether the burden to authenticate fell upon them in their moving papers, or whether they could timely present evidence of authentication later after the plaintiff opposing arbitration questioned the authenticity of his electronic signature.  The Court of Appeal concluded that while the moving parties had the initial burden of establishing the existence of an arbitration agreement, that burden did not include authentication.  Therefore, their introduction of evidence to establish authenticity after plaintiff questioned authenticity was still timely.  The Court distinguished Toal v. Tardif, 178 Cal.App.4th 1208 (2009), in which the party seeking arbitration submitted a copy of the contract signed by the party’s attorney – those facts did not satisfy the initial burden of showing that an agreement existed between the parties to arbitrate.

     Espejo lays out a roadmap for authenticating an electronically signed document.  The employee applicant used a private and unique username and password provided to him orally and by phone.  After logging in, he had to re-set his password and choose his own password.  Without resetting his password, he could not proceed.  He then had to agree to complete employment documents using an electronic signature.  Then he was directed to hyperlinks to key documents, including the Dispute Resolution Procedure containing the arbitration provisions.  He was prompted on the signature page of the employment agreement to accept or decline it.  If he accepted, he was prompted to complete his name, which then populated the signature line.  The final employment agreement included the name, date, time, and the IP address where the applicant electronically signed the agreement.  The same procedure applied to the Dispute Resolution Procedure. 

     COMMENT:  The procedure for authentication here seems pretty solid, and therefore useful as a yardstick for evaluating whether an electronic authentication procedure measures up to authentication requirements – at least until the next case comes along.

Arbitration, Employment, FAA, Burden Of Proof: Berman Hearings Are Short-Circuited By Enforceable Arbitration Provision

Keep On Truckin’ . . . In Arbitration.

    We have posted before about the “Berman hearing”, named after Congressman Howard Berman, and providing workers with a procedure intended to provide “a speedy, informal, and affordable method of resolving wage claims” with the California Labor Commissioner.  Under California law, it cannot be waived.  However, if there is an arbitration clause governed by the Federal Arbitration Act, which preempts state law, then employers may use the arbitration clause to preempt the state Berman hearing. That is what ultimately happened in Performance Team Freight Systems, Inc. v. Garcia, B259146 (2/2 Nov. 2, 2015) (Boren, Ashmann-Gerst, Chavez) (published), where a trucking company, prior to commencement of Berman hearings, petitioned to compel arbitration with truck drivers filing wage claims.

     The trial court had denied the petition, ruling that the agreements fell under an FAA exemption for transportation workers engaged in interstate commerce.  Section 1 of the FAA exempts from FAA coverage “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” – and it has been held that transportation workers are included in this exemption.  Without determining whether the truckers, who may have been involved mostly in intrastate short-hauls were truly involved in interstate commerce, the Court of Appeal concluded that they had not met their burden of establishing that the the subject agreements were “contracts of employment.”

     And that leads us to the burden of proof.  The party opposing arbitration bears the burden of demonstrating the exemption to FAA coverage applies.  The agreements under which the truckers worked were labeled “Independent Contractor Agreements”.  The Court of Appeal stuck with the label “independent contractor” because “only minimal evidence was presented to the trial court relevant to the issue of whether the subject agreements were contracts of employment.”

     The Court also had little trouble finding that the clause was broad enough to cover the dispute.  Reversed.

    COMMENT:  The law respects form less than substance.  However, labels, light as they may be, are not weightless.  When minimal evidence is presented on whether a worker is a contractor or an employee, the label may tip the balance, as it did here.