California Mediation and Arbitration

Unable To Apply "Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act" Retroactively, Fourth Dist. Div. 3 Nevertheless Finds Arbitration Provisions Unconscionable

Panel Is Very Critical Of Confidentiality Provisions In Sexual Harassment Dispute With Arbitration Provision.

        Some California Appellate panels and justices make it a practice to neatly summarize the opinion in the first paragraph. I like that practice. Our next case, in which the Court of Appeal issued a peremptory writ of mandate issue directing the trial court to vacate its order compelling arbitration and enter a new order denying the motion to compel arbitration, made excellent use of that practice in a 36-page slip opinion. Cassandra Murrey v. Orange County Superior Court; General Electric Company et al (real parties in interest), G061329 (4/3  1/30/23) (O'Leary, Bedsworth, Marks). So let's let the panel, in an opinion penned by Justice O'Leary, speak:

        "In March 2022, President Joseph R. Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the Act) (9 U.S.C. §§ 401, 402), representing the first major amendment of the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) since its inception nearly 100 years ago. This legislation, having bipartisan support, voids predispute arbitration clauses in cases, such as the one before us now, involving sexual harassment allegations. We regret that this new legislation does not apply retroactively to Casandra Murrey’s complaint filed in March 2021. Nevertheless, we will consider Murrey’s writ petition because the highly secretive and one-sided provisions of her arbitration agreement make it both procedurally and substantively unconscionable. The agreement is factually distinguishable from existing case authority upholding employment adhesion contracts and exemplifies why the legislature drafted House Bill No. 4445. We conclude the trial court erred by enforcing an unconscionably void arbitration agreement."

        This case is particularly interesting for its critical analysis about confidentiality language in arbitration agreements in sexual harassment disputes. In this case, "Murrey was forced to agree she would not 'publish or disseminate' the arbitration award." Justice O'Leary wrote, " GE’s confidentiality provision serves no purpose other than to benefit GE. Future employees cannot take advantage of findings in past arbitrations or prove a pattern of discrimination and/or retaliation." Here, the confidentiality provision weighed heavily in finding the arbitration agreement "substantively unconscionable." Ordinarily confidentiality agreements are upheld, but it is clear that the court viewed such requirements to be  onerous in the circumstances of a sexual harassment dispute. 

        We note California Code of Civil Procedure § 1001 prohibits a provision within a settlement agreement that prevents or restricts the disclosure of factual information related to a claim filed in a civil action or a complaint filed in an administrative action. The Murrey case does not involve a settlement agreement.

Confidentiality, Videoconferencing: What Information Does Zoom Keep?

Do You Know What Information Zoom Has About Your Communications?

        Mediators, arbitrators, litigators, and parties are rightly concerned about the confidentiality of communications. Mediators rely on the mediation confidentiality protections in the California  Evidence Code, sections 1119 et seq, and litigators and arbitrators rely on confidentiality agreements. Today, many of us are using online videoconferencing platforms to communicate, and we also seek assurances that those platforms preserve confidentiality. The widespread use of Zoom led to concerns about how Zoom communications were encrypted, and also led to the use of passwords and waiting rooms to  protect participants from unwanted intruders. And it is common at the beginning of  Zoom conferences,  if not  earlier, to insist that participants agree that they will not take screen snapshots, or record Zoom video or chat.

        But what information does Zoom preserve that might be reached by a government agency or a subpoena?

        There are several online sources that are helpful in answering this question:

        First and foremost, the Zoom Government Requests Guide is the place to go. The Guide discusses types of data Zoom has, data retention practices, preservation requests, U.S. and international government requests for user information, notification to users of requests for user or meeting information, details that must be included in information requests, production of documents, user consent, emergency requests, and expert witness testimony and authentication of  records.

        Zoom provides the following high-level summary of types of data it has: "We obtain data that users provide to us, as well as data that our system collects.  We may also obtain some data from visitors to our marketing websites.  . . .We have not built a mechanism to decrypt live meetings for any purpose, including lawful intercept, and we do not have the means to insert our employees or others into meetings without that person being visible as a participant.  As such, we do not collect or maintain information related to meeting content unless requested by the meeting host, for example, to record and store the meeting in our cloud. Zoom does not sell user data and we have no intention of selling user data going forward."

        Zoom's information about data it has should be read together with its Privacy Statement.

        Our takeaway is that metadata may be kept by Zoom, as well as video, audio, and chat recording that the user decides to store in the cloud. The limitations to accessing such information are set forth in greater detail in the Guide.

        Second, in addition to the policies described on the Zoom website, take a look at the Stored Communications Act, 18 U.S.C. sections 2701-2712. This is a law that addresses voluntary and compelled disclosure of "stored wire and electronic communications and transactional records" held by third-party internet service providers.

        Third, here are some articles still available online, at the time of this post, that are relevant to understanding the accessibility of Zoom's data:

• Dan Zelenko, Nimi Aviad, John Davis, Rukiya Mohamed and Bridget Carr, Anticipate Gov't Subpoenas of Your Zoom Recordings, April 23, 2020, Law360
• Suhauna Hussain, Is Zoom safe to use? Here's what you need to know, April 13, 2020, Los Angeles Times
• Nico Grant and Candy Cheng, Zoom Says Subpoena Is Needed to Work with Law Enforcement, June 5, 2020, Los Angeles Times

Arbitration, Mediation, Confidentiality: Statements Of Director, Who Had Served As Mediator And Arbitrator, Are Admissible In Evidence

Trial Judge Parsed Declaration To Determine Whether Statements Were Made By Judge DickranTevrizian (Ret.) In Capacity As Mediator, Arbitrator, Or Director.

        When an opinion begins, "Leo Tolstoy famously observed that every unhappy family is unhappy in its own way," you can be sure that you are in for a dismal tale. And the reader's expectations would not be disappointed in the case of Drake Kennedy v. Brian Kennedy & Regency Outdoor Advertising, Inc., B294398 (2/1  7/26/19) (Weingart, Johnson, Bendix) (unpublished). The case is part of the ongoing saga of the internecine legal strife between brothers Drake and Brian Kennedy, stemming from the family billboard business they co-own. The substance of this case concerns brother Drake's obtaining of an order appointing a receiver for sale of the family business, affirmed on appeal.

        But it is not the substance of this case with which this post is concerned. Nope, we're focused on a narrow evidentiary issue concerning mediators, arbitrators, and confidentiality.

        Judge Tevrizian had been appointed as a third director, presumably to avoid board statelemate of brothers Drake and Brian, and to help with the sale of the brothers' business. "Given Brian's repeated refusal to respect the board's oversight role, Judge Tevrizian resigned as a director as of September 25, 2018. The resignation was 'noisy,' that is, accompanied by an explanation of reasons set forth in the board minutes . . . " Those reasons included inability to obtain financial information, inability to get access to company books and records, refusal of management to comply with requests for information; and, "disrespect and lack of appreciation exhibited by senior management of the Company . . . " Once Judge Tevrizian resigned, the board was again deadlocked.

        Judge Tevrizian's statements -- some of them -- were admitted into evidence. Brother Brian objected that Judge Tevrizian's declaration should have been excluded, because Evid. Code section 703.5 prohibits arbitrators and mediators from testifying "as to any statement, conduct, decision, or ruling, occurring at or in conjunction with" an arbitration or mediation "in any subsequent civil proceeding." And, "Section 1121 prohibits mediators or anyone else from submitting to a court, and a court from considering, 'any report, assessment, evaluation, recommendation, or finding of any kind by the mediator concerning a mediation conducted by the mediator,' . . . "

        In fact, Judge Tevrizian had also acted as a mediator/arbitrator. But the trial court parsed the declaration, striking statements related to Tevrizian's role as an arbitrator or mediator, and "expressly noted it was receiving the remaining portions because they related to Judge Tevrizian's role as a company director."

        The lesson we draw from this (albeit unpublished) opinion is that if the court can sort out the different roles a person may play, and determine which statements were not made in that person's capacity as a mediator or arbitrator, then the remaining statements may be admissible in evidence. The Court of Appeal rejected the argument that the statements made by Judge Tevrizian in his different roles were so inextricably intertwined that they could not be sorted, and thus rejected the argument that the statements were cloaked in privilege. If Judge Tevrizian's roles and statements could not have been separated and sorted, then the outcome on the evidentiary issue could have been different.

William Blake. The Body of Abel Found by Adam and Eve. 1826. Wikimedia Commons. Public Domain.

Arbitrator, Confidentiality, Disclosures, Discovery, Unconscionability: Former Employee Advanced No Meritorious Reasons For Why An Employment Agreement Was Unconscionable

Also, Arbitrator’s Religious Affiliation Is No Reason For Disqualification, With Jewish Affiliation Not Showing Any Inherent Bias Against Homosexuals.

            Bogue v. Anesthesia Service Medical Group, Inc., Case No. D073518 (4^th Dist., Div. 1 July 17, 2019) (unpublished) (McConnell, P.J.; Benke, J.; and Irion, J.) is a case where a former employee lost an arbitration against a former employer, with the arbitration award being confirmed by a superior court judge.  Plaintiff’s claims primarily consisted of whistleblower retaliation and FEHA claims, mainly focused on the allegations that employer discriminated against employee because he was a homosexual.  The arbitrator summarily adjudicated out the whistleblower retaliation claim and found against plaintiff on the merits in a detailed arbitration award.  On appeal, plaintiff principally claimed that the parties’ arbitration agreement was unconscionable and that the arbitrator, who was Jewish, was prejudiced against homosexuals in general.

            The Fourth District, Division 1, affirmed the confirmation of the arbitration award.

            With respect to the claim that the arbitration agreement was unconscionable, the appellate court found no substantive unconscionability in these respects:  (1) the arbitration agreement contained no limitations on discovery and the ADR provider rules had no similar restrictions; (2) the arbitration agreement did provide for a written award consisting of a concise statement of reasons supporting the award and explaining the basis for a decision on a statutory claim, which more than sufficed; and (3) the arbitration agreement had no confidentiality ban, but the ADR rules did not restrict the litigants from publicly discussing the arbitration, which actually was done through the appeal. 

            The appellate court was not impressed with the religious affiliation disqualification claim against the arbitrator.  Religious affiliation is not a sufficient ground by itself to require disqualification of an arbitrator.  (Code Civ. Proc., § 170.2.)  One cannot reasonably presume, because an arbitrator is Jewish, that the arbitrator has any faith-based animosity toward homosexuality or homosexuals.  “Moreover, many people of faith, including arbitrators and judges, engage in professions requiring them to make decisions based on standards separate from and not necessarily aligned with the tenets of their faith. As long as an arbitrator is able to base his or her decision on the evidence and the applicable law, regardless of the tenets of his or her faith, the arbitrator is not required to disclose his or her faith-based memberships.”  (Slip Op., at p. 13.)  Furthermore, the arbitrator did include a CV showing his Jewish affiliations such that the failure to seek the arbitrator’s disqualification before the arbitration took place forfeited the losing party’s right to disqualify the arbitrator on that basis.

            We note that a similar opinion was published back in 2011, involving a disgruntled party in arbitration and a Jewish arbitrator.  Rebmann v. Rohde, 196 Cal. App. 4th 1283 (2011). The defendant/appellant informed the trial court that if only he had "known about his [the arbitrator's] religious affiliation, his cultural affiliation, and the dedication to keeping the memory of the Holocaust alive, I never would have allowed him to be the arbitrator in my case." The defendant/appellant's father, and his wife's father served in the SS during WWII. Among other things, the Court of Appeal rejected the "tacit assumption" that "a judge who is a member of a minority cannot be fair when a case somehow related to that minority status – no matter how remote or tenuous that relationship might be – comes before that judge." We posted about this on Mike & Marc's California Attorney's Fees blog on July 5, 2011. Efforts to disqualify judges and arbitrators based on religion and race do  not succeed. 

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/Confidentiality: Is Arbitration Confidential?

My Article, "Confidentiality in Arbitration" Is In The Latest Issue of California Litigation And Available Through This Post.

        My article on "Confidentiality in Arbitration" and an accompanying MCLE test are published in California Litigation, The Journal of the Litigation Section, State Bar of California, Vol. 30, No. 2 (2017), p. 6.  With the permission of the State Bar, I have republished the article and the test, and they are available by clicking here.

Construction Of Arbitration Agreements/Non-Signatories: Homes Sellers Will Be Required To Arbitrate Disputes With Brokers And Service Providers

Must Reading For Home Sellers, Brokers And Service Providers Who Want To Understand Their Obligations To Arbitrate.

    Home sellers sign Residential Listing Agreements (RLAs) with their brokers, and Residential Purchase Agreements (RPAs) with their buyers.  Both RLAs and RPAs constantly undergo drafting revisions in California.  And both types of standard agreements include arbitration agreements, leading to issues about the seller's obligations to arbitrate with the broker and with any service providers to the broker.  Those issues were addressed in Laymon v. J. Rockliff and Hernandez v. Mason-McDuffie Real Estate, Inc., A147464 & A147469 (consolidated appeals) (1/1  6/9/17) (Margulies, Humes, Dondero).  Originally unpublished, the case is now certified for publication -- thankfully, because it will be useful for home sellers, brokers, and service providers (e.g., providers of title insurance, escrow, natural hazard disclosure reports, and home-warranty contracts).

    In this case, home sellers sued their brokers and their brokers' service providers, alleging that the brokers "violated their fiduciary duties by failing to disclose alleged kickbacks paid by the service providers to the brokers in connection with the sales."  The home sellers signed an RLA, a 2007 RPA, a 2010 RPA, or some combination thereof.  The Court of Appeal held that home sellers who signed any of those agreements were bound to arbitrate with their brokers, as well as with the service providers, who were non-signatories, but able to take advantage of the doctrine of equitable estoppel.   This required a liberal reading of the arbitration provisions -- a reading that promotes "a strong public policy in favor of arbitration" such that "any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration . . . . "  Rice v. Downs, 248 Cal.App.4th 175, 184-186 (2016).  This is a good example of a case that plaintiffs want to try to a jury and defendants want to arbitrate!

     

Mediation and Arbitration Confidentiality: Acquaint Yourself With The EU-U.S. Privacy Shield If You Are Involved With Data Transfers From The EU To The US

The European Commission Has Deemed The Privacy Shield Framework Adequate To Enable Data Transfers To US Under EU Law.

     On July 12, 2016, the European Commission adopted the EU-U.S. Privacy Shield.  I am blogging about this because it relates to transfer of data from the EU to the U.S., and this impacts legal matters affecting the privacy rights of EU citizens, including mediations, arbitrations, and litigation in which a data transfer from the EU to the U.S. is required.  Also, the Privacy Shield provides for binding arbitration as one of several dispute resolution mechanisms for resolving privacy issues.

     The International Trade Administration of the US Department of Commerce has  created a website with information about the EU-U.S. Privacy Shield Program, intended to protect data flows from the EU to the US, and thus to protect the privacy of EU persons.  The protections offered by the Privacy Shield Program are more stringent than protections offered by an earlier Safe Harbor program.  Click here for a link to FAQs about the Privacy Shield program.

     United States companies that join the Privacy Shield Framework can benefit from an “adequacy determination”, meaning a determination that they have joined and committed to a framework deemed adequate by the European Commission to comply with EU data protection requirements when transferring personal data (e.g., names, addresses, telephone numbers) from the EU to the US.

     No doubt the push to satisfy EU concerns about the privacy of EU citizens was motivated, at least in part, by Edward Snowden’s revelations concerning the NSA surveillance of intelligence available in Internet communications.  Snowden’s choice to disclose secret information about US surveillance triggered a debate on privacy and surveillance.

     The EU-U.S. Privacy Shield provides a number of dispute resolution routes, in case a citizen of the EU believes his or her privacy rights have been violated.  These routes include contacting the company directly, going to an independent dispute resolution provider, submitting to EU Data Protection Authorities (DPAs), and binding arbitration.  In the case of national security issues, an ombudsman independent from US intelligence services is to be available. 

     Arbitration “is available to an individual to determine . . . whether a Privacy Shield organization has violated its obligations under the Principles as to that individual, and whether any such violation remains fully or partially unremedied.”  In short, the purpose of arbitration is to provide an equitable, rather than a monetary remedy, for an individual whose privacy rights have been violated.  “Once invoked, the individual forgoes the option to seek relief for the same claimed violation in another forum, except that if non-monetary equitable relief does not fully remedy the claimed violation, the individual’s invocation of arbitration will not preclude a claim for damages that is otherwise available in the courts.”  See Arbitral Model, Annex II, pp. 12 to 16 of 128. 

     Because the binding arbitration dispute resolution mechanism exists to protect privacy, it would make little sense if the Privacy Shield did not protect the confidentiality of the arbitration proceeding itself.  In fact, “Materials submitted to arbitrators will be treated confidentially and will only be used in connection with the arbitration.”  Furthermore, individual-specific discovery “will be treated confidentially by the parties and will only be used in connection with the arbitration.”

International Arbitration And Confidentiality: What Confidentiality Should One Expect In International Arbitration?

Confidentiality May Seem A Self-Evident Feature Of International Arbitration – In Which Case, You May Be Surprised.

     At the 41st Annual IP Conference held in Santa Barbara, I was asked an excellent question yesterday about dealing with confidentiality in international arbitrations.  Unfortunately, this is not a subject about which I had devoted enough thought.  However, Camilla Mickelson Lous, an attorney with the Norwegian law firm Steenstrup Stordrange, has obviously thought long and hard about this.  It is the subject of her excellent April 14, 2014 on-line article entitled:  “Hush!  Let’s Arbitrate – Discourse And Practice On The Question Of Confidentiality In International Commercial Arbitration.”  While I recommend reading the article in its entirety to anyone interested in the subject, I will give you a few of the highlights.

     Ms. Lous points out that there is “a notable presumption that confidentiality is a self-evident feature of international arbitration.”  However, as important as confidentiality may be to the parties, it shouldn’t be taken for granted. 

     Preliminarily, there is a difference between confidentiality and privacy.  While arbitral hearings may generally be “private”, i.e., they are not open to the public, it cannot be said that confidentiality, as a state of secrecy, necessarily permeates the arbitral process.  Participants could be free to communicate outside the arbitration about the existence of the arbitration, communications in the arbitration, and the arbitration award, absent well-defined confidentiality safeguards.

     Looking for examples of confidentiality protection in England, Australia, the US and Sweden, Ms. Lous identifies different approaches

• England:  Arbitral matters are presumed to be confidential.
• Australia:  Confidentiality is not an essential attribute of arbitration, especially where matters of public interest are concerned, though the parties may contract for confidentiality.
• US:  Neither the Federal Arbitration Act nor the Uniform Arbitration Act contain confidentiality provisions.  The parties may contract for confidentiality.
• Sweden:  No obligation of confidentiality exists, though a “duty of loyalty” may exist between the parties to an arbitration.  If the parties want confidentiality, they must contract.

     Though the rules of international arbitral institutions may regulate confidentiality, there is no uniform approach.   WIPO Arbitration Rules 75 to 77, address confidentiality of the existence of the arbitration, disclosures made during the arbitration, and maintenance of confidentiality by the arbitration center and the arbitrator.  It makes perfect sense that WIPO would have rules addressing confidentiality, because the “World Intellectual Property Organization” exists to protect the “IP” in “WIPO”, and intellectual property is often valuable because it is confidential.

      The UNCITRAL Model Law on International Commercial Arbitration leaves the question of confidentiality to the parties and the arbitration rules they choose.

     While confidentiality cannot be taken for granted in international arbitration, there are some things a party can do:  (1) include a confidentiality clause in the original contract; (2) get individual confidentiality agreements from third parties; (3)  if confidentiality is a concern, pay attention to the choice of law and seat of arbitration; (4) request protective orders from the arbitrator; (6) go to national courts to enforce protective orders (sometimes a self-defeating option). 

      Bottom line:  do not take the obligation to maintain confidentiality for granted in international commercial arbitration.

      While I found Ms. Lous’ article to be genuinely illuminating, I can’t help but remember Laurel and Hardy’s immortal words:  “Well, here’s another nice mess you’ve gotten me into.”

     HAT TIP to the attorney in the audience who asked me about confidentiality in international arbitration yesterday!