ADR Case Updates
Appeal Of Arbitration Award Allowed Only When Arbitration Clause Explicitly Provides For Review, 03/05/09
Three recent California Appellate cases are relevant to Alternative Dispute Resolution. The first addressed when judicial review of an arbitration award is permitted. The second held that an attorney�s settlement offer in a letter to opposing counsel was protected activity subject to the absolute litigation privilege. The third, a wage and hour claim, held that a settlement agreement containing a general release did not violate the Labor Code.
In Christensen v. Smith (Jan. 28, 2009, Fourth District, Div. Three), ___Cal. Rptr. 3d ___, 2009 WL 205078, Plaintiff purchased Defendant�s home on Harbor Island in Newport Beach for $8.35M, and then learned that one of the docks along the property belonged to the neighbor. The purchase contract contained an arbitration clause, which stated that the arbitrator �shall render an award in accordance with substantive California law.� Plaintiff pursued arbitration and obtained an award in his favor for $543,451, the value of the dock.
Both parties filed petitions in Superior Court. Defendant sought to correct or vacate the award on the grounds that the arbitrator made errors of law that were reviewable on appeal and because the arbitrator was biased. The trial court denied Defendant�s petition, granted Plaintiff�s petition to affirm the award, and entered judgment for Plaintiff.
Affirmed. Under the general rule of �arbitral finality,� parties give up the right to appeal an adverse arbitration award and accept the risk of legal error in exchange for a more efficient and less expensive resolution process. In order to avoid arbitral finality, parties must include explicit language evidencing their clear intent that legal errors �are in excess of arbitral authority that is reviewable by the courts.�
Here, the language that the award shall be rendered �in accordance with substantive California law,� merely provided identification of forum law. In addition, the arbitration clause did not contain required language that any arbitration award would be subject to expanded judicial review. Finally, there was no evidence of arbitrator bias.
In Genethera, Inc., v. Troy & Gould Prof. Corp. (Feb. 27, 2008, Second District, Div. Eight), ___Cal. Rptr. 3d ___, 2009 WL 485671, Defendants Troy & Gould (�TG�), a law firm that represented clients in a business dispute, filed suit against Genethera in the underlying action. TG sent a letter to opposing counsel offering to settle with just one of the Defendants in the underlying action. Claiming the settlement offer was a tactic to create a conflict of interest and unethical, Genethera sued TG in the present action for interference with contractual relations and negligence.
TG filed a special motion to strike the complaint as a strategic lawsuit against public participation. The trial court granted the motion and dismissed the action.
Affirmed. In ruling on an anti-SLAPP motion, the court must first determine whether the challenged lawsuit arises from protected activity or in furtherance of free speech. Writings in connection with litigation are protected speech. The court must then determine whether plaintiff has demonstrated a probability of prevailing on the merits. Here, TG�s settlement offer letter was not only protected speech, but subject to the absolute litigation privilege under Civil Code � 47.
Finally, in Chindarah v. Pick Up Stix, Inc., (Feb. 27, 2008, Fourth District, Div. Three), ___Cal. Rptr. 3d ___, 2009 WL 475387, current and former employees of Defendant filed a class action alleging unpaid overtime. Numerous class members settled with Defendant, and released it form claims for unpaid overtime and other Labor Code violations. The settling employees also agreed not to participate in any class action involving the released claims.
Later, some of the settling employees joined a proposed class action alleging that the settlement agreement violated the Labor Code. The trial court granted Defendant�s motion for summary judgment, finding that the settlement agreement did not violate the Labor Code.
Affirmed. When a dispute over wages arises, Labor Code � 206 provides that an employer must pay, without condition, any wages that are due, and leave the employee all available remedies. However, an employer and employee may choose to settle a wage dispute, but the compromise is binding only if the wages due have been unconditionally paid.
In the case at bar, the release states that the employee would receive the gross amount due �in full and complete satisfaction of all issues and claims � for unpaid overtime.� Moreover, the release only applied to past wrongs, and did not exonerate Defendant from future violations. Finally, the release did not condition payment on execution of the release. Therefore, the release did not violate the Labor Code, and barred plaintiffs from proceeding with their action.
The opinions may be viewed at: http://www.courts.ca.gov/opinions.htm.
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