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, Scope: 9th Circuit Ruled Amazon Arbitration Agreement With Flex Drivers Did Not Apply To Spying On Drivers On Facebook

Two Judge Majority With Judge Susan P. Graber Concurring And Dissenting.

        Amazon Flex Drivers sued Amazon for allegedly spying on them in a closed Facebook group where the drivers discussed employment-related issues when they were not working. A panel of the 9th Circuit held that a 2016 arbitration agreement applied, because the employer seems not to have given adequate notice of the terms of a later agreement to the drivers. However, a majority of the panel held that the allegations of spying did not come within the scope of the arbitration agreement; in fact, the drivers' claim that spying and invasion of privacy were wrongful acts would have been wrongful acts even if they had not been drivers. Drickey Jackson v. Amazon, No. 21-56107 (9th Cir.  4/19/23) (Schroeder, Friedland; Graber conc. & dsst.).

        Judge Graber concurred that the 2016 agreement applied and that denial of a motion to compel arbitration was appealable. However, she believed that the conduct alleged did arise from the employment relationship, and therefore the drivers should have been required to arbitrate."In sum," Judge Graber wrote, "Defendant allegedly spied on Plaintiff solely because of Plaintiff’s independent contractor relationship with Defendant and in order to defeat, preempt, or combat work-related activities by Plaintiff and other Flex drivers." (emphasis by Judge Graber). 

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.

Employment: Employee's Release Of Claim After It Accrued Is Not Illegal Or A Violation Of Public Policy

Employee Entered Into Release Of Claims In Her Separation Agreement.

        Elizabeth Castelo entered into a release of claims in her separation agreement from her employer Xceed Financial Credit Union. In arbitration, the employee argued that she had entered into a pre-dispute arbitration agreement that was invalid. The arbitrator ruled in favor of the employer, the court confirmed the award, and the employee appealed. Castelo v. Xceed Financial Credit Union, B311573 (2/7  5/18/23) (Escalante, Perluss, Segal).

        Some pre-dispute releases can be found invalid under some circumstances. Civil Code section 1668 provides: "All contracts which have for their object, directly or indirectly, to exempt any one from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law."

        Here, however, the Court of Appeal agreed that Castelo knew about her claims before she entered into the release of claims. There was no violation of public policy.

Construction Of Agreement And Unconscionability: Confidentiality Agreement And Arbitration Clause Were Construed Together

File This Under "More Ways Than One To Skin A Cat."

Woman wearing a blue robe with Buzzer the cat. Photographer: Arnold Genthe. Library of Congress.

        Alberto v. Cambrian Homecare, B14192 (2/4   filed 4/19/23, cert for pub. 5/10/23) (Daum, Collins, Currey), affirms the trial court's order finding an arbitration clause unconscionable.

        Here's the wrinkle. Ordinarily, a contract and an arbitration provision are separately construed, and the court must decide whether the arbitration provision is unconscionable. Here, there was a confidentiality agreement, and a separate agreement to arbitrate. Or were they separate? Neither agreement incorporated by reference the other agreement.

        But as we said above, there's more than one way to skin a cat. Here, the court construed the two agreements together, applying Civil Code §1642. That section provides: "Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together."

        The confidentiality agreement allowed the employer to obtain immediate injunctive relief for a breach of confidentiality and apparently was not symmetrical. The discussion of wages among employees was prohibited. In contravention of PAGA, the arbitration agreement created a blanket prohibition of representative actions, absent mutual consent. The agreements, construed together, infected one another.

Unconscionability: Second District, Div. 8 Holds That Illegible Contract Is Fair, And Therefore Not Unconscionable

Majority Of Panel Holds That Substantive Unconscionability Was Missing. Justice Stratton Dissents. 

        Writing for the majority, Justice John Shepard Wiley Jr. explains that the above contract is enforceable, requiring the plaintiff employee to arbitrate her dispute. Though the document is manifestly illegible, Justice Wiley concludes that the contract is fair. Therefore, there is no "substantive unconscionability." And as we know, California law requires both procedural and substantive unconscionability for a contract to be unenforceable on the basis of unconscionability. Fuentes v. Empire Nissan, Inc., B314490 (2/8   4/21/23) (Wiley, Harutunian; Stratton, dissenting). 

        Justice Maria E. Stratton dissents.  She writes, " '[W]atering down' unconscionability analysis is not what I have in mind. Acknowledging the obvious is my intention. Holding a signatory to an illegible contract that is also as prolix as this one strains the concepts of mutuality, fairness and common sense. If an employee literally cannot read the contract, how is that substantively fair?"

        COMMENT: Perhaps a simpler approach than "unconscionability," which requires satisfying two prongs, is a contract formation approach. Was there ever a meeting of the minds? Was there consent to the terms of the contract, when the contract was illegible and prolix? Justice Arthur Gilbert has written, "An arbitration clause in a contract is invalid because the clause is as inconspicuous as a frog in a thicket of water lilies." Domestic Linen Supply, Inc. v. L J T Flowers, Inc., 58 Cal.App.5th 180 (2020). Here, the job seeker wouldn't see the frog or the water lilies, just a typographic mess. Thus, in addition to the two-prong unconscionability analysis, arbitration clauses can also be analyzed under a contract formation analysis.

        Suppose the prospective employee had said she wanted to come back the next day when she could read what was actually written. And the employer had replied that if she wanted to go to work, she should sign. So she signed. Then the court could have said she signed because she wanted to start work. But since that was simply evidence of additional "procedural unconscionability," everything was copacetic. Or is it?

        This case stretches to the breaking point the legal fiction that agreements to arbitrate are always a matter of consent.

Same Outcome In A Tandem Case: Mohammad Basith v. Lithia Motors, Inc., B316098 (2/8  4/21/23) (Wiley, Harutunian; Stratton, dissenting).

        In Basith, a tandem case involving a contract substantially similar to the one in the Fuentes case, the Second District, Div. 8, reaches the same conclusion that the arbitration provision is valid and enforceable. It's another split decision, with Wiley and Harutunian in the majority, and Stratton again dissenting.

        Here, we get bit of policy to justify the outcome: "Our holding is that, unless we are to imperil the vast online world of take-it-or-leave-it contracts, substantive unconscionability must retain meaningful independent content. For that reason, the contracts here and in Fuentes are valid and enforceable, despite their procedural unconscionability."

        COMMENT: While it is true that the contracts are substantially the same, there is a factual difference between Basith and Fuentes. "We note at the outset that this case poses no issue of small or unreadable font. It is a striking coincidence that, not only do we encounter substantially similar form contracts in two simultaneous and otherwise unrelated cases, but also that font size should be a dominating issue in one case—Fuentes—and entirely absent as an issue in Basith’s case. The difference stems from the media: in Fuentes, the contract was printed only on paper, and was printed in a largely unreadable way, whereas Basith’s main contract was online."

        Nevertheless, Justice Wiley explains that a complaint about prolix legalese and a complaint about font size are just examples of procedural unconscionability, not substantive unconscionability. In short, the court majority does not recognize a situation in which the employer drafts a contract and thus knows its terms, and an employee is unable to read the illegible contract, as being one-sided and substantively unfair. This appears to be dictum in Basith, but it helps to further explain the majority's thinking in Fuentes, where font size and prolixity were issues, not to mention the poor condition of the tiny font.

 

 

PAGA: Second District Div. 4 Holds Employee Has Standing To Bring PAGA Representative Claims After Individual Claim Is Sent To Arbitration

Court Follows Opening Provided By Justice Sonia Sotomayor's Concurrence In Viking Cruises v. Moriana.

        Following the Supreme Court opinion in Viking Cruises v. Moriani, there could be no disagreement that employee Million Seifu's individual PAGA claim against Lyft for personal Labor Code violations he suffered could be arbitrated. But that left the hot issue to be decided: whether he had standing, after his individual claim had been directed to arbitration, to bring a representative claim for other employees. 

            In Milton Seifu v. Lyft, Inc., B301774 (2/4  3/30/23) (Collins, Currey, Stone), the court explained that Seifu did have standing: "We conclude that we are not bound by the analysis of PAGA standing set forth in Viking River. As Justice Sotomayor recognized in her concurring opinion, PAGA standing is a matter of state law that must be decided by California courts. Until we have guidance from the California Supreme Court, our review of PAGA and relevant state decisional authority leads us to conclude that a plaintiff is not stripped of standing to pursue non-individual PAGA claims simply because his or her individual PAGA claim is compelled to arbitration." The court remanded to the trial court to decide whether the representative claims should be stayed pending arbitration of the individual.

         The court relied on the California Supreme Court case Kim v. Reins International, 9 Cal.5th 13 (2020) to reach its conclusion that Seifu had standing under California law. The law is remedial and given a liberal interpretation to effect the Legislature's purpose of enforcing California's labor laws. We have blogged about other California cases that reached the same conclusion about standing: Tricia Galarasa v. Dolgen California, LLC, post dated 3/8/23, and Tom Piplack v. In-N-Out Burgers, post dated 3/20/23. We're eager to see how this turns out when the California Supreme Court decides  Adolph v. Uber Technologies.

PAGA, FAA Preemption: Fourth District, Div. 3 Holds Arbitration Of Individual PAGA Claims Can Be Compelled, But Not Representative Claims

 

 

 

 

 

 

 

 

Texas Longhorn.        

Clinton & Charles Robertson from Del Rio, Texas & San Marcos. Wikipedia.                                       Between Scylla and Charybdis. Wikipedia.

Between Horns Of A Dilemma And Between Scylla And Charybdis.

        In a PAGA case, the Court of Appeal, employing mixed salad metaphors, explains that it is between the horns of a dilemma and between Scylla and Charybdis.  Tom Piplack v. In-N-Out Burgers, G061098 (4/3  3/7/23) (Sanchez, Bedsworth, Delaney). This is a PAGA case in which the Court of Appeal held that plaintiff Piplack's individual PAGA claims could be arbitrated and plaintiff Sherrod's individual PAGA claims had to be sent back to the trial court for consideration of Sherrod's argument that Sherrod had been underage when he agreed to arbitrate. However, the Court of Appeal held that the plaintiffs' representative claims could be litigated.

        Returning to horns, dilemmas, Scylla and Charybdis, quandaries, plights, puzzles, and predicaments, Justice Sanchez explains that the court must follow SCOTUS's ruling in Viking River Cruises, Inc. v. Moriana, ___ U.S. ___ [142 S.Ct. 1906] (2022) (Viking), holding that Iskanian's ruling that PAGA claims could not be forced into arbitration was preempted by the Federal Arbitration Act. But Viking only requires this result as to individual PAGA claims. Viking did not preempt the portion of Iskanian prohibiting waiver of the right to pursue representative PAGA actions. Yet Viking apparently concluded that if the individual PAGA claim was arbitrated, then no one was left with standing under California law to bring the representative claim, even if the right to litigate the representative claim was not preempted.

        Standing to bring the representative claim is an issue of state law that Justice Sanchez explains was decided in Kim v. Reins International California, Inc., 9 Cal.5th 73 (Kim) (2020). Because Kim is a recent case decided by the California Supreme Court, and because SCOTUS does not decide state law, Justice Sanchez resolved the court's dilemma by following Kim on the issue of state law standing. Kim has only two requirements for a plaintiff to have standing to bring a representative action: “The plain language of [Labor Code] section 2699(c) has only two requirements for PAGA standing. The plaintiff must be an aggrieved employee, that is, someone ‘who was employed by the alleged violator’ and ‘against whom one or more of the alleged violations was committed.’” (quoting Kim).

        In short, the court followed "Viking on FAA preemption and Kim on PAGA standing." 

 

                                                                                                                                                                

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.

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."