California Mediation and Arbitration

Arbitration Agreement: No Agreement With Insufficient Evidence Of Signing Or Authorization Of Agent To Sign

A Reference To "Dementia" Signals Where The Court Was Headed.

        Harold and Lucy West and their adult daughter Deon were approached by a salesperson from Elite Home Remodeling, Inc. regarding solar panel installation and bathroom renovation. Harold and Lucy, in their 90s and suffering from dementia, did not use email, computers, or mobile phones. A loan agreement with Solar Mosaic LLC for financing was processed using Deon’s email and signed electronically with Harold’s name. However, a recorded call with Harold raised doubts about his understanding of the transaction. He struggled to answer basic questions. When the bathroom was demolished, Deon tried to cancel the contract. Elite refused. The trial court denied Mosaic’s petition to compel arbitration, citing a lack of evidence that Harold had entered into the agreement or that Deon had authority to bind him. Mosaic appealed. Lucy West, et al. v. Solar Mosaic LLC, B334178 (2/8  10/16/24) (Stratton, Grimes, Wiley).

        Affirmed. Solar Mosaic LLC did not establish an enforceable arbitration agreement. There was insufficient evidence Harold West signed the loan documents or authorized Deon to do so on his behalf.

 

 

 

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."

Employment: Employee Who Refused To Accept Arbitration Agreement As Condition Of Employment And Promptly Told Employer So Was Not Bound To Arbitrate Despite Continuing Employment

Is An Employee Who Continues To Be Employed After Being Informed That Arbitration Is A Condition Of Continued Employment Bound By The Arbitration Agreement?

        “California law in this area is settled: when an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement.” Diaz v. Sohnen, 34 Cal.App.5th 126, 130 (2019). But Diaz did not govern the outcome in Winston Mar v. Lawrence Perkins, B327665 (2/7  5/22/24) (Feuer, Martinez; Segal separately conc.). 

        Relying on Diaz, defendant argued that after it informed Mar that an arbitration agreement was a condition of his further employment, and he continued to be employed, he was required to arbitrate. The trial court disagreed because Mar stated he refused to sign the arbitration agreement and defendant could terminate his employment if it objected. Therefore, there was no agreement. Agreeing that Mar promptly refused to sign the employee handbook and be bound by arbitration, and that he informed the employer that he could be fired, the Court of Appeal affirmed the trial court's denial of defendant's motion to compel arbitration.

        Justice Feuer sought to distinguish Diaz on the grounds that Mar acted more quickly than Diaz, and Mar explicitly told the employer that he could be fired if the employer didn't like his decision to refuse to be bound by arbitration.

        Concurring separately, Justice Segal believed that Mar's case showed Diaz was wrongfully decided because it could not be effectively distinguished from Mar's case. Diaz, an unsophisticated party, took time to consult an attorney, but also acted promptly. And there was no need to remind the employer that it could fire the employee, because an employer can fire at-will employees for cause and without cause.

Internet Commerce: Clickwrap Arbitration Agreement Was Unenforceable Because Seller "Undid" Notice

An Effective Clickwrap Agreement Provides Notice Of Arbitration, Which, However, Can Be Undone.

        Plaintiffs, who purchased the Dexcom G6 Continuous Glucose Monitoring System to manage their diabetes, and sued the manufacturer alleging the the Dexcom G6 was defective and caused injuries. Dexcom moved to compel arbitration, based on a clickwrap agreement referring to arbitration. After the trial court granted motions to compel, Plaintiffs appealed. Herzog v. Superior Court of San Diego County (Real Party In Interest Dexcom, Inc.), D082847 (4/1  5/16/24) (Do, Kelety; Irion dsst).

        The majority opinion authored by Justice Do concluded that the clickwrap here did not constitute unambiguous acceptance of Terms of Use, including an arbitration agreement, because Dexcom "undid whatever notice it might have provided" by telling the customer that clicking "constituted authorization for Dexcom to collect and store the user's sensitive, personal health information."

Employment, Existence Of Arbitration Agreement: Employer Failed To Show Arbitration Agreement Existed During Second Employment Stint

Termination Of Employment Stint #1 Terminated Arbitration Agreement.

        Plaintiff Jasmin Vazquez sued SaniSure, Inc. for Labor Code violations. SaniSure moved to compel arbitration based on the existence of a broad arbitration clause in Vazquez's employment agreement. SaniSure failed in the trial court and in the Court of Appeal. Vazquez v. SaniSure, Inc. (2/6  4/3/24) (Baltodano, Yegan, Cody).

        SaniSure was unsuccessful because the arbitration clause it relied upon only existed in a first stint of Vazquez's employment from July 2019 to May 2021. However, she terminated her employment, and the arbitration agreement terminated. The employer could not show that an agreement to arbitrate existed during her second stint of employment, and the court was not going to imply the existence of the agreement from the first employment stint.

        COMMENT: The employer could have avoided its predicament by the execution of another arbitration agreement during employment stint #2. 

Internet Commerce: Second District Div. 2 Rejects Invitation To Broadly Enforce Browserwrap Arbitration Agreement

The Court Also Rejected Argument That Federal Preemption Required Enforcement Of Browserwrap Arbitration Provision.

        Plaintiff Brinan Weeks sued Interactive Life Forms, LLC in a putative class action, alleging that it made false claims, alleging "that he purchased a device called a Stamina Training Unit (STU) from the fleshlight.com website (the website) on or around September 21, 2021, on the basis of Interactive’s claims that the device would help him 'perform better,' 'last longer,' and 'improve [his] sexual stamina.'" Weeks v. Interactive Life Forms, LLC, B323430 (2/1  3/25/24) (Weingart, Chaney, Bendix). Interactive Life Forms, LLC tried to enforce an arbitration provision in a browserwrap.

        Justice Weingart explains, "Prior cases hold that so-called “browsewrap” provisions on a website, which deem a consumer to have agreed to the website’s terms of use simply by using the website and without taking any affirmative steps to confirm knowledge and acceptance of the terms of use, generally do not form an enforceable agreement to arbitrate under California law." The Court agrees with those prior cases, and also rejects an argument that federal law favoring the enforcement of arbitration agreements preempts California law. The law favoring the enforcement of arbitration agreements still requires that the party seeking arbitration establish the existence of an agreement to arbitrate.

 

 

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). 

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.

 

 

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. 

Internet Commerce: Ninth Circuit Agrees Online Ticket Purchasers Were Bound By Agreement To Arbitrate

CONSPICUOUS NOTICE.

        In a putative antitrust class action, plaintiffs sued Live Nation Entertainment, Inc./Ticketmaster LLC for charging "supra-competitive fees" for tickets to events. Defendants moved successfully to compel arbitration in the trial court, and the Ninth Circuit affirmed. Oberstein et al v. Live Nation Entertainment, Inc. et al (9th Cir.  2/13/23) (Boggs, Wardlaw, Ikuta).

        Two BigLaw firms squared off against one another in the appeal to address an issue that will be familiar to readers of this blog: whether an agreement on the internet that fell somewhere between a click-wrap and a browserwrap was sufficient to create an agreement between the consumer and the seller. As a refresher, see our post dated 3/26/2016: Internet contracts “come primarily in two flavors: ‘clickwrap’ (or ‘click-through’) agreements, in which website users are required to click on an ‘I agree’ box after being presented with a list of terms and conditions of use; and ‘browsewrap’ agreements, where a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen,” quoting from Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2014)."

        Here, the court concluded that the agreement sufficiently noticed the consumer that the consumer was agreeing to arbitrate: the font was conspicuous, in color other than the rest of the text, near buttons the consumer had to click on, and by clicking on buttons and proceeding through the process of purchasing the ticket, the consumer evidenced consent.  

        COMMENT: The keys to a binding agreement in internet commerce are reasonably conspicuous notice of the arbitration agreement and action by the consumer to unambiguously manifest consent. That's enough to impart constructive notice.