ADR Case Updates
California Supreme Court Invalidates Employment Arbitration Provision, 04/02/2011
A more detailed summary and analysis is below:
In Sonic-Calabasas A, Inc., v. Moreno, (Feb. 24, 2011) 51 Cal. 4th 659, Frank Moreno was a former employee of Sonic-Calabasas A, Inc., (Sonic) and signed an employment agreement containing an arbitration clause. After he left Sonic's employment, Moreno filed an administrative wage claim with the Labor Commissioner for unpaid vacation pay. Under Labor Code Section 98, an employee with a claim for unpaid wages has a right to seek an informal hearing in front of the Labor Commissioner, a "Berman" hearing. Sonic filed a motion to compel arbitration, arguing that Moreno had waived his right to a Berman hearing. The trial court determined that the Berman hearing and post-Berman protection did not significantly impair Moreno's ability to vindicate his right to vacation pay through arbitration.
Reversed and remanded. Arbitration agreements that are a condition of new employment are enforceable provided they do not include features that are contrary to public policy or unconscionable. Here, the provision requiring Moreno to waive his right to a Berman hearing and post-Berman protections with all the benefits and advantages they provide, was contrary to public policy. Therefore the arbitration clause was unenforceable.
In addition, the following cases hold:
JSM Tuscany, LLC v. Superior Court (NMS Properties, Inc.) (Mar. 29, 2011, Second Dist., Div. Three), ___ Cal. App. 4th ___, WL 2011 WL1126582, (Nonsignatory plaintiff may be subject to arbitration provision in contract if claim is inextricable intertwined with obligations imposed by contract);
Augusta v. Keehn & Associates, (Mar. 4, 2011, Fourth Dist., Div. One), 193 Cal. App. 4th 331 (Plaintiff waives his right to arbitrate by unreasonably delaying in seeking arbitration after obtaining discovery from defendants through litigation);
Wherry v. Award, Inc., (Feb. 9, 2011, Fourth Dist., Div. Three), 192 Cal. App. 4th 1242 (in suit for gender discrimination, sexual harassment, and retaliation, court errs in compelling arbitration contained in adhesion contract found to be unconscionable between real estate broker and salespersons);
Johnson v. Wells Fargo Home Mortgage, Inc., (Feb. 15, 2011, Ninth Cir.), ___ F. 3rd ___, 2011 WL 505016 (Appellate court does not have jurisdiction over appeal taken directly from private arbitrator);
Anders v. Superior Court (Meritage Homes of California, Inc.), (Feb. 7, 2011, Fifth Dist.), 192 Cal. App. 4th 579 (Builder may not require homeowners to comply with statutory prelitigation procedures after its contractual alternative prelitigation procedures were found unenforceable);
Infuturia Global Ltd., v. Sequus Pharmaceuticals, Inc., (Feb. 7, 2011, Ninth Cir.), 631 F. 3rd 1133 (Removal jurisdiction is proper under Convention on Recognition and Enforcement of Foreign Arbitral Awards where defendant raises defenses related to foreign arbitration award);
Tarrant Bell Property, LLC, v. Superior Court (Abaya), (Feb. 10, 2011, Cal. Sup. Court) 51 Cal. 4th 538 (Court has discretion to deny petition to appoint referee despite parties' pre-dispute agreement providing that referee may decide certain contested issues under Code of Civil Procedure Section 638);
California Retail Portfolio Group Fund GMBH & Co. KG v. Hopkins Real Estate Group, (Mar. 22, 2011, Second Dist., Div. Eight), ___ Cal. App. 4th ___, 2011 WL 989014 (Application for writ of attachment is properly granted where arbitration award to petitioner would be rendered ineffectual because of insolvency);
City of Los Angeles v. Superior Court (Engineers & Architects Association), (Mar. 25, 2011, Second Dist., Div. Three), ___ Cal. App. 4th ___, 2011 WL 1088039 (Agreement to arbitrate issue of furloughs would constitute improper delegation of discretionary policymaking power vested in city council);
The Housing Group v. PMA Capital Insurance Company, (Mar. 25, 2011, First Dist., Div. Three), ___ Cal. App. 4th ___, 2011 WL1087260 (Court properly denied insurer's motion to compel arbitration under Civil Code Section 2860 for attorney fee dispute where insurer failed to provide insured's defense in underlying action); and
Lee v. Kwong, (Mar. 29, 2011, First Dist., Div. Five), ___ Cal. App. 4th ___, 2011 WL 1126577 (Plaintiff may not dismiss action after unsuccessful judicial arbitration to avoid award of attorney fees to prevailing defendant).
The California opinions are posted at: http://www.courts.ca.gov/opinions.htm, and the Ninth Circuit opinions at: http://www.ca9.uscourts.gov/opinions/.
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