California Mediation and Arbitration

Scope Of Arbitration Agreement Did Not Encompass Pre-Employment Disputes

Court of Appeal Also Held That Trial Court Properly Declined To Require Arbitration Of  FEHA Claim For "Public Injunction."

        Defendant and Appellant Tesla, Inc. -- you've probably heard of the company -- appealed from denial of Tesla's motion to compel arbitration as to employees Chatman and Hall, plaintiffs. Marcus Vaughn et al v. Tesla, Inc., A164053 (1/5   1/4/23) (Simons, Burns, Wiseman). Plaintiffs alleged that they and other Black employees had been discriminated and harassed while working at Tesla.

        The wrinkle to this case is that, while an arbitration agreement provided all "disputes, claims, or causes of action, in law or equity, arising from or relating to your employment, or the termination of your employment, will be resolved, to the fullest extent permitted by law by final, binding and confidential arbitration . . . ", the agreement did not cover pre-employment claims. And Chatman and Hall claimed some claims arose pre-employment, at a time when a hiring agency had provided them as workers to Tesla. So the trial court concluded that Chatman and Hall were required to arbitrate claims after they became employees, but not before. 

        The Court of Appeal affirmed the order denying arbitration in part and allowing arbitration in part. The Court also agreed that the trial court properly declined to mandate arbitration of plaintiffs' claim for a public injunction for two reasons: "First, we hold that injunctions sought under the Fair Employment  Housing Act (FEHA) (Gov. Code, §§ 12900 et seq.) may be considered 'public injunctions.' Second, we rule the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.), as interpreted in Viking River Cruises, Inc. v. Moriana (2022) ___ U.S. ___ [142 S.Ct. 1906, 213 L.Ed.2d 179] (Viking River), does not preempt the California rule prohibiting waiver of the right to seek such injunctions."

Arbitration, FAA: Federal Arbitration Act Applied To Intrastate Driver Who Worked For Paratransit Service For Persons With Disabilities

Federal Preemption Of California's Gentry Rule Means Class Action Waiver Can Be Enforced.

        David Evenskaas, a driver, filed a wage and hour lawsuit against his employer, California Transit, Inc., which operates paratransit services for persons with disabilities in West and Central Los Angeles.  Evenskaas's employment agreement included a broad arbitration agreement with a class action waiver that the employer tried, unsuccessfully, to enforce in the trial court. The employer appealed. Evenskaas v. California Transit, Inc., B308354 (2/7  7/15/22) (Segal, Perluss, Feuer). 

        The issue was whether the Federal Arbitration Act preempted California law and the rule in Gentry v. Superior Court, 42 Cal.4th 443 (2007), which holds that certain class action waivers in employment arbitration agreements are unenforceable. The trial court had determined that interstate commerce was not involved, because California Transit, Inc. operated in California, and absent involvement in interstate commerce, there could be no federal preemption by the FAA.

        However, the Court of Appeal reached a different result, distinguishing those cases holding intrastate activities not affecting interstate commerce do not trigger federal preemption. "None of them involved an arbitration agreement between an employer and an employee hired to provide commercial services required by federal law enacted by Congress under its commerce power. Moreover, in Carbajal, Lane, and Woolls the party arguing the FAA applied did not present evidence of the party’s business that would show a connection to interstate commerce." The ADA is enacted with Congress exercising its commerce powers to the fullest, and transportation through a paratransit service affects the ability of persons with disabilities to participate in the national economy.

        COMMENT: If the driver, like a trucker, fell within a class of workers who was actually engaged in interstate commerce, then he would specifically be excluded from coverage under the FAA. 9 USC § 1.

 

 

 

 

Arbitration, Waiver, Employment, Civil Rights: Ninth Circuit Allows Statutory Claims, Including Civil Rights And Employment Discrimination, To Be Arbitrated

Zoller v. GCA Advisors Lays Out Rules For Determining Whether Statutory Claims Can Be Arbitrated.

        Zoller v. GCA Advisors, No. 20-15595 (9th Cir. 4/14/21) (Wallace, Smith, Restani), reverses the district court's denial of defendants' motion to compel arbitration of statutory employment discrimination and civil rights claims.

        Shannon Zoller, a corporate attorney turned investment banker, sued her former employer for contract claims, gender discrimination, denial of equal pay, and conspiracy to violate her civil rights. An agreement to arbitrate existed. The parties agreed to arbitrate some of the claims, but she refused to arbitrate her statutory claims. The district court agreed on the ground she did not knowingly waiver her right to pursue the statutory claims in court.

        Judge Wallace, writing for the court, explains that if the parties agree to arbitrate, statutory claims will be arbitrated, unless a party can prove a congressional intent to prelude a waiver of judicial remedies. This put a burden of proof on Zoller and she could not carry that burden.

        There is a proviso. Arbitration of Title VII claims for employment discrimination requires at least showing a knowing agreement to arbitrate employment disputes. Here, that was demonstrated by a number of documents that referred to employment and arbitration. Assuming, without deciding, that the "knowing waiver requirement remains good law", the appeal "is resolved on the arbitration agreement's clear language encompassing employment disputes and evidence that Zoller knowingly waived her right to a judicial forum to resolve her statutory claims."

        COMMENTS: This is an impactful case, since it makes it clear that statutory claims, including civil rights and employment claims, may be subject to arbitration, and that a carefully drafted agreement will result in a knowing waiver of the employee's right to a judicial forum. In his 2017 book, Closing the Courthouse Door: How Your Constitutional Rights Became Unenforceable, Erwin Chemerinsky discussed how arbitration has made it more difficult to get into court to vindicate rights. Zoller is an example of that trend. All her claims will now be sent to arbitration -- though it does not  automatically follow that her rights will be unenforceable.

Arbitration, Civil Rights: Ninth Circuit Rules That Racial Discrimination Section 1981 Claims May Be Subjected To Compulsory Arbitration

Chief Circuit Judge Thomas Concurs, But Writes That Earlier Case Law Was Wrongly Decided.

    The Ninth Circuit has affirmed the district court's order compelling arbitration of racial discrimination claims under section 1981. Lambert v. Tesla, Inc., DBA Tesla Motors, Inc., No. 18-15203 (9th Cir.  5/17/19) (Opn. by Smith,  Thomas conc.).

    Lambert, an  African-American, sued Tesla for racial discrimination. Tesla moved, successfully, to compel arbitration, and Lambert appealed. Following EEOC v. Luce, Forward, Hamilton & Scripps, 345 F.3d 742 (9th Cir. 2003), holding that Title VII claims were arbitrable, the Ninth Circuit panel held that section 1981 claims also can be arbitrated.

    Chief Circuit Judge Thomas concurred, believing that the result was compelled by the earlier decision in EEOC v. Luce, Forward, Hamilton & Scripps. However, he believed that case was wrongly decided.

    His explanation is that the statutory text merely stating "that arbitration should be 'encouraged' to the extent it is 'appropriate' and 'authorized by law'" is ambiguous. And that if the statutory language is ambiguous, then the court should have looked further at legislative history and purpose. He sees a contradiction between enforcing arbitration and carrying out Congressional intent "to supplement, rather than supplant, the rights and remedies provided . . . "

    COMMENT: As this opinion, and others, acknowledge, "We have become an arbitration nation." Many opinions, including this one, reason that compelling arbitration merely means a change of forum, not a diminishment of rights. The opinion's author, Judge Smith, explains, "The question before us is whether claims under section 1981 should be added to the ever-expanding list of statutory causes of action already subject to arbitration." To which Smith responded yes, and to which Thomas responded with a qualified yes, only because the result is compelled by earlier Ninth Circuit case law.

    Dean Erwin Chemerinsky wrote a book published in 2017 and entitled: Closing the Courthouse Door: How Your Constitutional Rights Become Unenforceable." The Lambert case, according to Thomas, is a decision that "signifies a further departure from the increased choice of fora Congress intended to bring about in the 1991 [Civil Rights] Act."

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, Civil Rights: Ninth Circuit Rules Employer Can Expressly Require Arbitration Of Title VII Claims

1991 Amendment To Title VII Facilitates Waiver Of Statutory Remedies In Favor Of Arbitration

     “Before 1991, ‘Title VII had been interpreted to prohibit any waiver of its statutory remedies in favor of arbitration.  Prudential Ins. Co. of Am. v. Lai, 42 F.3d 1299, 1304 (9th Cir. 1994).  But Congress reversed course with amendments to Title VII [i.e., Section 118 of the Act] in the Civil Rights Act of 1991. . . ‘”  Ashbey v. Archstone Prop. Mgmt., No. 12-55912 (9th Cir. May 12, 2015) (Bea, Bybee, Christen).  Before Ashbey, Ninth Circuit opinions were loathe to find that an employee asserting Title VII claims had waived the right to a jury trial by agreeing to arbitrate.  Kummetz v. Tech Mold, Inc., 152 F.3d 1153 (9th Cir. 1998); Nelson v. Cyprus Bagdad Copper Corp., 119 F.3d 756 (9th Cir. 1997).  Relying on the Section 118 amendment to the Civil Rights Act of 1991, however, Ashbey holds that an employee may be required to arbitrate a claim alleging unlawful retaliation in violation of Title VII, where the employee “knowingly” waives the right to a jury trial by agreeing to submit such disputes to arbitration.

     The Ninth Circuit concluded that Ashbey’s waiver was “knowing” in circumstances where he was explicitly notified of a Dispute Resolution Policy, and that policy unambiguously stated: it “is governed by the the Federal Arbitration Act,” all disputes are to be resolved only by an arbitrator through final and binding arbitration and not by way of court or jury trial, and it “applies, without limitation, to disputes arising out of the employment relationship . . . including, without limitation, disputes over . . . harassment and claims arising under the . . . Civil Rights Act of 1964.”

     COMMENT:  The opinion states that the employer “presented Ashbey the ‘express’ choice lacking in both Kummetz and Nelson.”  What exactly is that express choice?  It’s not the choice of accepting employment and choosing to waive or not to waive the right to a judicial forum.  Rather, the choice appears to be between accepting employment and agreeing to waive the right to a judicial forum or not accepting employment.  Under those circumstances, we predict that employers will make use of the waiver language in Ashbey, and employees will choose to be employed rather than unemployed.  Thus Title VII claims will be channeled into arbitration.

Arbitration, Waiver & Civil Rights – Recommended Reading: “ADR Update: Dealing with AB 2617”

Article By Mediator/Arbitrator Paul Dubow Anticipates Arbitration Issues Arising From California AB 2617 And Proposes Solutions.

     Paul J. Dubow’s article, “ADR Update: Dealing with AB 2617”, appearing in California Litigation, volume 28, No. 1, 2015, anticipates FAA preemption issues arising from AB 2617, passed by the California Legislature in 2014, and amending Civil Code sections 51.7, 52, and 52.1.

      By way of background, The Ralph Civil Rights Act of 1976, Civil Code section 51.7,  prohibits violence or threats of violence based on an individual’s race, color, religion, ancestry, age, disability, sex, sexual orientation, political affiliation, or position in a labor dispute.  Civil Code section 52.1, part of the Tom Bane Civil Rights Act of 1987, provides plaintiffs may sue those interfering by “threats, intimidation or coercion” with the plaintiff’s exercise or enjoyment of any state or federal constitutional or legal right.

     AB 2617 declares its legislative intent: “It is the purpose of this act to ensure that a contract to waive any of the rights, penalties, remedies, forums, or procedures under the Ralph Civil Rights Act or the Tom Bane Civil Rights Act, including any provision that has the effect of limiting the full application or enforcement of any right, remedy, forum, or procedure available under the Ralph Civil Rights Act or the Tom Bane Civil Rights Act, is a matter of voluntary consent, not coercion.” (italics added for emphasis).

     Dubow anticipates that AB 2617’s assurance that any contract to waive rights under sections 51.7 and 52.1 must be a matter of voluntary consent will spawn disputes over arbitrability.  While at first blush, AB 2617 is silent about arbitration, Dubow points out that the legislative history “makes clear that the bill was directed at arbitration provisions” – raising the specter of Federal Arbitration Act preemption.  Thus, to the extent that contracts for goods and services will now contain waivers of the right to sue in court under sections 51.7, and 52.1, and will contain provisions for binding arbitration, issues will invariably arise as to whether the waivers are involuntary and unenforceable under AB 2617, or enforceable under the FAA, which will preempt state law where interstate commerce is involved.

     Without arguing for or against preemption, Dubow offers drafting solutions for those who want to draft an arbitration waiver that will stick.  Those suggestions include:  (1) provide that arbitration is to be conducted under the FAA; (2) state that the court may not refuse to enforce the arbitration agreement and may not stay arbitration under Cal. Code of Civ. Proc., section 1281.2; (3) make the arbitration provisions prominent; (4) explain the consequences – e.g., that a jury trial is waived; (5) get the provision initialed; (6) include a prominent opt-out provision; (7) draft a fair agreement.

     Dubow’s tips for drafting enforceable arbitration provisions are generally useful advice for employer-employee and consumer contract situations.

News/Employment/Civil Rights: Executive Order Limits Pre-Dispute Arbitration Clauses For Federal Contracts Exceeding $1 Million In Title VII And Sexual Assault/Harassment Cases

Fair Play and Safe Workplaces Executive Order Is Announced July 31, 2014

     One of the impactful judicial trends in recent years has been the expanded use of arbitration in employment disputes.  Counter to that judicial trend is the recent Executive Order announced July 31, 2014 by the White House.

     Section 6 of the Executive Order provides:

“Complaint and Dispute Transparency.  (a) Agencies shall ensure that for all contracts where the estimated value of the supplies acquired and services required exceeds $1 million, provisions in solicitations and clauses in contracts shall provide that contractors agree that the decision to arbitrate claims arising under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment may only be made with the voluntary consent of employees or independent contracts after such disputes arise.  Agencies shall also require that contractors incorporate this same requirement into subcontracts where the estimated value of the supplies acquired and services required exceeds $1 million.”

     There are particular exclusions from this requirement for contracts or subcontracts for the acquisition of commercial items or commercially available off-the-shelf items; for employees covered by collective bargaining agreements; and, for valid contracts to arbitrate entered into prior to the bidding covered by this Executive Order.