California Mediation and Arbitration

Burden Of Proof: Authority Is Split Over What Constitutes Sufficient Evidence To Dispute Handwritten Signature On Arbitration AgreementOn Arbitra

The Fifth District Rules That It Is Not Enough For The Employee To Say He Doesn't Remember Signing After The Employer Produces Employee's Handwritten Signature.

        Carlos Ramirez filed a class action lawsuit against his employer Golden Queen Mining Company LLC alleging wage and hour violations. The employer moved to compel arbitration and produced an arbitration agreement with the employee's handwritten signature, satisfying the employer's initial evidentiary burden. Ramirez declared he did not recall ever being presented with an arbitration agreement; he did not recall signing an arbitration agreement; and, nobody ever informed him about an arbitration agreement. The trial court denied a motion to compel arbitration, and the employer appealed. Ramirez v. Golden Queen Mining Company, LLC, F086371 (5th Dist.  mod. & cert. for pub. 6/11/24( (Franson, Levy, Poochigian). 

        Justice Franson, author of the opinion, explained: "There is a split of authority among the Courts of Appeal as to what constitutes sufficient evidence to create a factual dispute about the authenticity of a handwritten signature on a document agreeing to arbitration. (Cf. Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 757–758 (Iyere) with Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 164–165 (Gamboa).) We join Iyere in concluding that an individual is capable of recognizing his or her handwritten signature and if that individual does not deny a handwritten signature is his or her own, that person’s failure to remember signing the document does not create a factual dispute about the signature’s authenticity. (Iyere, supra, at p. 757.)" Because Ramirez did not deny his handwritten signature but only claimed he did not remember, the Court of Appeal reversed the order denying the motion to compel arbitration, and remanded to decide an unconscionability issue that the trial court had not needed to reach.

        The Court of Appeal's opinion, initially filed on May 15, 2024, was not for publication. It was certified for publication later on July 11, 2024.

        COMMENT: Justice Franson comments that the court joins Iyere in concluding that an individual is capable of recognizing his handwritten signature. If electronic signatures had been involved, the matter of authenticating could have been messier. See our July 4, 2024 post about Garcia v. Stoneledge Furniture LLC et al., A166785 (1/3  5/17/24) (Petrou, Fujisaki, Rodriguez) under the heading "Failure To Authenticate Electronic Signing Means Arbitration Agreement Is Unenforceable."

Authentication: Failure To Authenticate Electronic Signing Means Arbitration Agreement Is Unenforceable

Shifting Burdens Of Proof.

        Isabel Garcia sued her employer and its sales manager, alleging sexual harassment. Defendants petitioned to compel arbitration, and carried their initial burden by producing an arbitration agreement. But Garcia pushed back, claiming she had not signed, putting the employer to the test of authenticating her electronic signature. The employer was not able to authenticate to the satisfaction of the trial judge or the Court of Appeal. Garcia v. Stoneledge Furniture LLC et al., A166785 (1/3  5/17/24) (Petrou, Fujisaki, Rodriguez).

        The employer relied on a declaration of a person who did not have personal knowledge that Garcia signed. Furthermore, the employer did not explain its security system to establish that only Garcia could have signed the document. Also, the employer used Taleo, described as a third-party electronic workforce management platform. However, "the arbitration agreement lacked the appearance of an electronically signed document as it contained no date, time, or IP address, nor any indication it was created within the Taleo system."

        The order denying defendants' petition to compel arbitration was affirmed.

        COMMENT: In the age of the internet, there are still some advantages to ink signatures on paper with a witness signature. Authenticating electronic signatures can be tricky. Here, it might have helped to have a date, time, or IP address. One wants a verification system that identifies the signer and the authenticity of the signature, and there are electronic tools such as DocuSign that can be effective. Indeed, perhaps Taleo would have provided the necessary authentication, but the opinion states that there was "no indication [the document] was created within the Taleo system."

Stay, Burden Of Proof: First District Div. 5 Holds Defendant Is Entitled To Stay Litigation With Plaintiff Pending Pending Plaintiff's Arbitration With Another Party

Mattson Obtained The Stay Of Litigation Against Applied Material's Lawsuit Despite Not Having Arbitration Agreement With Applied Material.

        Preliminarily, our next case, Mattson Technology, Inc. v. Applied Material, Inc., A165378 (1/5  11/1/23) (Burns, Jackson, Simons), is somewhat confusing to read. Mattson is designated as plaintiff and appellant in the case heading, though Applied, which is designated as defendant and respondent, sued Mattson and Mattson's former employee Lai. We'll refer to Applied as plaintiff. Applied sued its former employee Lai and his new employer Mattson for misappropriating trade secrets, and also sued Lai for breach of his employment contract with Applied. 

     Mattson and Applied Material are head-on competitors. Applied accused Lai of downloading confidential information, wiping his phone, and lying about whether he had Applied confidential information when he left Applied's employment. 

       Lai successfully moved to compel arbitration with Applied based on his arbitration agreement with Applied. The trial court denied Mattson's efforts to arbitrate against Applied, because Mattson was not a party to the arbitration agreement. (In this respect, the case is factually similar to Waymo LLC v. Uber Techs, Inc., 252 F.Supp.3d 954 (2017)). Also, the trial court denied Mattson's request to stay litigation against Applied pending the arbitration with Lai, on the ground that the litigation against Applied was severable from Applied's arbitration and contract with Lai.

        The Court of Appeal reversed the denial of the request for a stay pending arbitration with Lai. "The party seeking severance under Code of Civil Procedure section 1281.4 has the burden of proving its claim is independent from the arbitrable matter." Applied did not meet its burden. Applied's claims against Mattson and Lai were not independent, because the claims depended on proof of misappropriation of trade secrets.

        COMMENT: The case shows that under some circumstances, Cal. Code of Civ. Proc. 1281.4, which is the basis for a mandatory stay pending arbitration, makes it possible for a party to obtain a stay pending an arbitration, though it is not a party to that 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.