California Mediation and Arbitration

Prompt Payment: Along With Other Courts, 1st District Div. 3 Strictly Interprets Statutory Prompt Payment Requirement For Employer Wanting To Arbitrate

The Payment Must Be Received By The Arbitrator Within 30 Days Of When It Was Due.

        September 1, 20221 was the “due date” for the employer in a sexual harassment dispute to pay arbitration fees and costs to the arbitrator, making payment due October 3. Cal. Code of Civ. Proc., § 1281.98(a)(1). The employer mailed the check on September 30, and it was received on October 5, two days after the 30 day grace period expired. That was good enough for the superior order, which issued an order compelling arbitration, but not good enough for the Court of Appeal. "We do not find that the proverbial check in the mail constitutes payment and agree with petitioner that real parties’ payment, received more than 30 days after the due date established by the arbitrator, was untimely." Jane Doe v. The Superior Court of the City and County of San Francisco, Respondent, and Na Hoku, Inc., et al, Real Parties in Interest, A167105 (1/3  9/8/23) (Petrou, Tucker, Fujisaki).

        What can one say? Almost doesn't count? Close but no cigar? How about: close only counts in horseshoes.

        We have now posted a number of times that California courts have been real sticklers about strictly interpreting the 30 day requirement in § 1281.98. See posts of  7/10/23,  8/1/22, 12/11/22, 1/2/23, 3/21/23. Employers who do not comply with the requirement risk ending up outside arbitration and inside court.

 

Arbitration, Deadlines, Prompt Payment, Fees: Plaintiff Successfully Exercises Option To Withdraw From Arbitration Because Defendant Employer Was Tardy Paying Arbitration Fees

Courts Have Been Unforgiving In Interpreting An Unambiguous Statute. See CCP § 1281.98.

        "A statute gave Milan Cvejic the option to get out of arbitration if Skyview was tardy in paying its arbitration fees. Skyview was tardy in paying its arbitration fee. Cvejic was entitled to get out." Milan Cvejic v. Skyview Capital, LLC, B318880 (2/8  6/28/23) (Wiley, Grimes, Viramontes).

        COMMENTS: (1) A panel of three arbitrators got it wrong. (2) Cvejic was smart and did not sit on his rights. "Within about an hour of the call [whereby the arbitration panel set a new deadline for defendant to pay the fees], Cvejic’s counsel wrote the panel to say Cvejic was withdrawing from the arbitration under section 1281.98." 

        See previous posts about § 1281.98 dated 8/1/22, 12/11/22, 1/2/23, 3/21/23.

Arbitration, Vacatur: California Supreme Court Rules 100-Day Deadline Is Not Jurisdictional And Equitable Tolling/Estoppel Could Apply

Missing The 100-Day Deadline For Seeking Vacatur Of An Arbitration Award Was Not The End Of The Story Here.

        It is not possible to improve on the California Supreme Court's summary of the case and its holding:

        "Law Finance Group, LLC, prevailed in an arbitration against Sarah Plott Key and filed a petition to confirm the award. Key filed a response seeking vacatur of the award, but she did so outside the 100-day deadline prescribed by Code of Civil Procedure section 1288.2. The primary questions now before us are whether, as the Court of Appeal held, this 100-day deadline is jurisdictional and, if not, whether the deadline is subject to the equitable doctrines of tolling and estoppel. We hold that the section 1288.2 deadline neither is jurisdictional nor otherwise precludes equitable tolling or estoppel. We remand for the Court of Appeal to determine in the first instance whether Key is entitled to equitable relief from the deadline." Law Finance Group, LLC v. Key, S270798 (S.Ct.  6/26/23).

        Justice Leondra R. Kruger authored the opinion of the court.

MFAA: Losing Trial De Novo After Mandatory Fee Arbitration Award Can Lead To Serious Reversal Of Fortune

Mandatory Fee Arbitration Act Fee Provisions Prevailed Over Contract Fee Provisions.

Oscar Wilde. c1882. N. Sarony. Library of Congress.

        Oscar Wilde is credited with the paraprosdokian, "One would have to have a heart of stone to read the death of Little Nell without laughing." Our next case provokes similar sentiments. Surjit P. Soni v. Cartograph, B316270 (2/5  4/5/23) (Moor, Baker, Kim). File this one under, "Be careful what you ask for." 

        Soni, an attorney, got into a billing dispute with a client Tierney. All California attorneys are required to offer their clients the option of Mandatory Fee Arbitration in case of a fee dispute, and Tierney exercised the option. This procedure is governed by California Bus. & Prof. Code, § 6200 et seq., which has its own timing requirements and attorney fee provisions.

        The arbitrator awarded attorney Soni $2.50. Evidently displeased with the outcome, Soni filed a complaint for a trial de novo in Superior Court. Disagreeing with the arbitrator, the trial judge entered judgment in Soni's favor in the amount of $2,890. Soni requested fees in the amount of $281,191.65, which the trial court reduced to $79,898. Tierney appealed, and the Court of Appeal reversed the trial court judgment, ordering the judge to confirm the $2.50 award. We previously blogged about this portion of the case. (Soni blew the 30-day deadline for filing his complaint for a trial de novo, because the deadline is not extended by mailing). But wait, there's more!

        On remand, the trial court confirmed the $2.50 arbitration award. Soni filed a motion to recover attorney's fees, arguing that he prevailed in the trial court with an award of $2,890, and $79,898 in fees. Soni now sought fees of $543,365. Tierney, who may have litigated more efficiently, sought fees of  $339,603. The trial judge denied Soni's motion for fees, and awarded Tierney fees of $328,166.50. Tierney prevailed.

        The problem with Soni's argument is that he was not the prevailing party. There is a single final judgment, and at the end of the day, Soni had done worse with his trial de novo (0) than with his arbitration award ($2.50). Furthermore, the Court of Appeal held that the fee provisions in the MFAA governed the fee award, rather than contractual provisions. Under the MFAA fee rules, Soni's unsuccessful trial de novo entitled Tierney to fees.

        "Respondents Timothy Tierney and Cartograph, Inc., formerly known as Simplelayers, Inc., are awarded their costs on appeal."

        COMMENT. Tread very carefully before rejecting an award in Mandatory Fee Arbitration and filing a complaint for a trial de novo. If you don't do better in the trial, you risk an adverse award of attorney's fees under the MFAA.

 

Deadlines: Deadlines To Vacate Or Correct Arbitration Award Are Strictly Applied By Second District, Div. 2

Darby v. Sisyphian, LLC, B314968 (2/2  1/26/23) (Hoffstadt, Ashmann-Gerst, Chavez), Helpfully Lays Out Deadlines To Confirm, Vacate, Or Correct Award.

Sisyphus. Titian. Public Domain. Wikipedia.

        Aisha Darby, an exotic dancer, arbitrated wage and hour claims with her employer Sisyphian, LLC.  After robust advocacy in arbitration, she eventually received an award of $105,109.75 -- less than she and her attorney sought, more than the respondent thought they were entitled to. She petitioned to confirm the award. Respondent had a 10 day window to respond and seek to vacate or correct the award, but waited 32 days. Respondent's untimely response meant the award was successfully confirmed. The Court of Appeal further held that Sisyphian's failure to timely respond to vacate or correct in the trial court deprived the Court of Appeal of the ability to consider arguments to vacate or correct.

        BONUS:

The Court of Appeal summarizes key deadlines:

-- Four years to petition to confirm an award from the date the award is served. Cal. Code of Civ. Proc. § 1288.

-- The shorter of: (1) 100 day rule. A petition to vacate an award or to correct an award shall be served and filed not later than 100 days after the date of the service of a signed copy of the award on the petitioner. 1288; (2) 10 day rule. A response to vacate or correct an award shall be served and filed within 10 days after service of the petition to confirm. 1290.6.

-- The 100 day rule is jurisdictional. The 10 day rule is jurisdictional, but it can be extended by agreement of the parties, or by the court for good cause if no one will be prejudiced.

        COMMENT: The economics of this case are hard to fathom. While it may seem at first blush that the employer got socked with a $105,109.75 award -- not chump change -- that's not the whole story. Darby's award included $82,800 in attorney's fees and $23,347.25 in compensation, minus $1,037.50 in costs for which she was responsible. She had requested  $283,941.25 in attorney's fees. So she prevailed, but someone took a haircut.

        Mike Hensley's and my blog, California Attorney's Fees, makes the point that sometimes attorney's fees are the tail that wags the dog. Darby v. Sisyphian, LLC is such a case. Readers can also find a post about this case on our attorney's fees blog.

 

 

Award, Fees: Award Of Arbitrator Was Final And Could Not Be Changed By Later Efforts To Award Fees

Once The Arbitrator Determines All Issues Necessary To Resolve The Essential Dispute, The Arbitrator's Ruling Constitute A Final Award Under § 1283.4.

        The arbitrator issued an award, labeled neither final nor interim, on April 3, 2020, denying employee a finding of liability in her favor, and denying employee and respondent employer attorney's fees, on the grounds that employee's claim was neither frivolous nor meritless. After post-hearing briefing, the arbitrator awarded $53,705.43 in fees to employer on June 11 in a revised award. Finally, on June 29, the arbitrator issued a corrected final award of $73, 756.43. The employer then asked the trial court to confirm the award denying employee a finding of liability and awarding $73,756.43 to employer. The trial court confirmed the award, except as to the fees, and so the employer appealed in order to recover its fees. Elizabeth Taska v. The RealReal, Inc., A164130 (1/5  11/4/22) (Jackson, Burns, Wiseman).

        First, whether the award was labeled final, interim, revised, or corrected could not be dispositive, because the law values substance over form. Second, what was dispositive was that the initial award, issued on April 3, was in substance a final award: the arbitrator addressed the liability issue, ruling against the employee, and she addressed the fee issue, denying fees to the employer. Once she determined all issues necessary to resolve the essential dispute, the arbitrator had, in substance, issued the final award. She had no power, except on narrow grounds that were not present, to change her award. And so the Court of Appeal confirmed the trial judge's judgment.

        COMMENT: My colleague Mike Hensley and I have another blog entitled California Attorney's Fees. Our mission statement in that blog cites the words of  the late Justice Edward Wallin: "All too often attorney fees become the tail that wags the dog in litigation." 

Arbitration, Deadline, Vacatur: Second District, Div. 2 Holds Missed Deadline Means Arbitration Award Can't Be Vacated

Deadline To Move To Vacate Arbitration Award Is Jurisdictional.

Cover, First Edition of Charles Dickens' Bleak House. 1852-53. 

        Locked in sororicidal probate litigation over the disposition of mom and dad's estate, Sarah Plott Key prevailed at first, entitling her to one-third of her parents' estate which, at the time "was equivalent to about $20 million." To get to that result, Key borrowed $2.4M from Law Finance Group to pay for the probate action. Key paid back the principal, but refused to pay back the interest, claiming terms of the note violated the California Financing Law.

        The loan agreement with LFG required binding arbitration. A panel of three arbitrators awarded LFG $778,351 interest plus $838,864 attorney fees and costs to LFG. 

        In superior court, Key filed a petition to vacate the award, arguing the arbitrators exceeded their power because they found the loan to be a consumer loan and should have voided the loan in violation of the California Financing Law. For good measure, Key also filed a response to LFG's petition to confirm the award, raising the same arguments as in her petition to vacate. And the superior court agreed with Key, vacating the award. LFG appealed. Law Finance Group, LLC v. Sarah Plott Key, B305790 (2/2  7/30/21) (Lui, Ashmann-Gerst, Hoffstadt).

        With a nod to the recently departed Ron Popeil: "But wait, there's more!" The Court of Appeal never reached the substantive issue because it held Key did not timely request the arbitration award be vacated. Here's the timeline:

9/18/19 -- panel of 3 arbitrators issued modified award

10/1/19 -- LFG files petition to confirm award in superior court

1/27/20 -- Key files petition to vacate award in superior court

2/5/20 -- Key files response to LFG's petition to confirm, including her arguments from motion to vacate

        The Court of Appeal held Key is SOL because her petition to vacate was filed 130 days after the modified award was issued, missing the 100 day deadline for filing the petition to vacate. Key argued she had ten days to respond to LFG's motion to confirm the award, which was  true, and she included her objections to confirming the award in her  timely response to the petition, which was also true. But that  did not help her in the Court of Appeal, which concluded the dispositive statutory provision was the one governing time to file the petition to vacate the award (100 days), rather  than the statutory provision giving her 10 days to respond to the petition to confirm the award. By the time Key filed her petition to confirm, and by the time she filed her response to LFG's petition to confirm, she was beyond the 100-day deadline to petition to vacate.

        COMMENT: "Litigation among the sisters continues. . . . " (footnote 1 to the opinion). There is an anti-SLAPP motion filed in a probate proceeding to enforce a no contest clause in the parents' trust, and another currently pending appeal arising from a petition by Key alleging her sister breached fiduciary duties as trustee. It's a shame this roiling family dispute among sisters could not have been successfully mediated.

 

 

Arbitration, Disclosures, Vacatur: Second District, Div. 7 Holds That Party Cannot Waive Right To Timely Object To Appointment Of An Arbitrator

Years Earlier, The Parties Had Agreed To The Appointment Of A Particular Arbitrator.

        Brothers Harry and Ted Soussos fought over control of  family business interests. Harry moved to compel arbitration, and Ted timely objected. The arbitrator refused to recuse himself, and Harry obtained an award in  his favor. The rub here is that several years earlier, Ted and Harry had agreed that in case future disputes arose, they would not object to the appointment of Judge John P. Shook (ret.) as the  arbitrator. After the arbitrator issued the award, Ted unsuccessfully sought to vacate it in the trial court. Did the earlier agreement not to contest the appointment of Judge Shook mean that Ted had waived the  right to object? 

        The right to timely object to the appointment of an arbitrator cannot be waived, holds the court in  Soussos v Soussos, No. B293358 (2/7   2/15/21) (Feuer, Perluss, Segal).

Deadlines, Mandatory Fee Arbitration Act: Mailing Did Not Extend 30-Day Deadline After Service Of Award To File New Action After Mandatory Fee Arbitration

What A Difference A Day Makes . . . 

        Attorney Soni and his client entered into mandatory fee arbitration, and thirty-three days  after receiving an award of $2.50 (two dollars and fifty cents) in his favor, the attorney filed a new action in the superior court. Ruling the 30 day deadline to file a lawsuit had been extended by service of the award by mail, the trial judge held that the filing was timely, and ultimately granted a new more favorable award in Soni's favor. The client appealed. Soni v. Simplelayers, Inc., B284164 (2/5  12/14/19) (Moor, author).

The Court of Appeal reversed, holding that "service is complete at the time of deposit in the mail and not extended for service by mail." Furthermore, the attorney also failed to file a petition or response within 100 days of service of the award, and thus was unable to attack the award.

                Comment: A Trap For The Unwary ! 

Conversion. Animal traps to armor-piercing bullet cores. Some of the traps made by an Eastern concern that specialized in these products during peace years. All the facilities of the plant are now devoted to the making of armor-piercing bullet cores, incendiary bomb noses, army cot parts and other war essentials. Library of Congress. 1942.

    Justice Baker, concurring, states: "The court's opinion observes '[t]he structure of section 6206, read in isolation, is arguably confusing, and it may present a trap for the unwary.' That is an understatement. The statutory scheme is confusing, full stop, and it does present a trap for the unwary."

    Here, the "trap for the unwary" led to a major reversal of fortune. The attorney, who received $2.50 in mandatory fee arbitration, received an award of $2,890 and $79,898 in attorney fees as prevailing party in the trial court. After the appeal, the trial court award goes up in smoke. 

Arbitration, PAGA, FAA, Waiver, Deadlines: Fourth District, Div. 1 Rules California Courts Are Still Bound By Iskanian, Despite SCOTUS Arbitration Cases

Case Contains Rich Discussion Of Arbitration, PAGA, Federal Preemption, And Divergence Of State And Federal Law.

    Plaintiffs sued their former employer, alleging wage and hour violations and seeking civil penalties under California's Private Attorney General Act of 2004 (PAGA). Employer successfully petitioned to arbitrate, with one exception: the trial court held that under Iskanian v. CLS Transportation Los Angeles, LLC (2014), the PAGA claim could not be arbitrated, without the consent of the state. A PAGA claim is in the nature of a qui tam action, and the state has a stake in the outcome. Employer appealed the adverse PAGA ruling. Correia v. NB Baker Electric, Inc., D073798 (4/1  2/25/19) (Haller, McConnell, Nares).

    The Court of Appeal affirmed. Notwithstanding SCOTUS cases such as Epic and Concepcion, finding that the Federal Arbitration Act (FAA) has broad preemptive scope, the Court of Appeal holds that Iskanian is still good law, because the federal cases did not address the precise question presented by Iskanian, because Iskanian involves a claim for civil penalties brought on behalf of the state, and the enforceability of an agreement barring a PAGA representative action in any forum. 

    The Court notes that some federal cases have found that, even if an agreement barring a representative action in any forum is unenforceable under Iskanian, Iskanian does not prevent a court from directing a representative action to arbitration. As the Court explains, however, California appellate courts have reached a different conclusion, based on the fact that in a PAGA action, the State of California plays a role. 

    COMMENT: The Court acknowledges, "[T]here are different ways of viewing a qui tam lawsuit regarding the true claim owner and whether the state and the employee can both be considered to be real parties in interest in the lawsuit for purposes of evaluating an employee's authority to waive rights to bring claims in court." The PAGA claim seems to have a mixed nature, because state authority is required, explicitly or implicitly, for the employee to proceed with the claim, and the state gets 75% of the penalty. On the other hand, the employee brings the claim, and the state does not supervise the litigation. However, the Court explains that at the time of the predispute waiver, the state still retains authority over the claim. Under the Court's reasoning, the state could waive rights to a court forum at the time the dispute arises. Of course, there is no reason to expect that to ever happen.

    The opinion also points out a deadline trap for the unwary. The employer argued that plaintiffs' response to its arbitration petition was untimely. Plaintiffs treated the petition as a motion to which a response would be due nine court days before the hearing, but a response is due 10 days after the arbitration moving papers are served. (Code Civ. Proc., section 1290.6). Fortunately for plaintiffs, the Court of Appeal said that it was not clear whether the arbitration petition statute or the general motions statute governed, but in either case, the deadline was not jurisdictional.  The safe solution for the practitioner is to calendar the earlier response date.