ADR Case Updates
No Class Arbitration; An "Object Lesson" On CCP 664.6; FAA And Intrastate Transportation Workers; Solitary PAGA Claims; and More, 06/05/2019
U.S. Supreme Court Rules No Class Arbitration In Ambiguous Agreements
In Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019), a divided U.S. Supreme Court reversed the Ninth Circuit and held that an ambiguity in an employment contract arbitration provision could not be construed to authorize classwide arbitration, contrary to state law contract principles.
Frank Varela was employed my Lamps Plus, Inc., a retailer of light fixtures and related products. Varela's employment agreement included an arbitration clause. A hacker tricked an employee of Lamps Plus into disclosing tax information of about 1,300 company employees. After a fraudulent federal income tax return was filed in his name, Varela filed a putative class action against Lamps Plus in Federal District Court on behalf of employees whose information had been compromised. Relying on the arbitration agreement in Varela's employment contract, Lamps Plus sought to compel arbitration — on an individual rather than a classwide basis — and to dismiss the suit. The District Court rejected the individual arbitration request, but authorized class arbitration and dismissed Varela's claims. Lamps Plus appealed, arguing that the District Court erred by compelling class arbitration. The Ninth Circuit affirmed, finding the arbitration contract ambiguous on the availability of class arbitration, such that under California contract law principles (i.e., the doctrine of contra proferentem, that ambiguities are construed against the drafter) the classwide arbitration could proceed.
Reversed and remanded: Chief Justice John G. Roberts, Jr., wrote for the majority. Under the Federal Arbitration Act, "Arbitration is strictly a matter of consent." An arbitration agreement's ambiguity cannot provide sufficient basis for compelling classwide arbitration. Under the holding in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (2010), a court may not compel classwide arbitration when an agreement is silent on the availability of such arbitration. The task for courts and arbitrators is "to give effect to the intent of the parties." In carrying out that responsibility, it is important to recognize the "fundamental" difference between class arbitration and the individualized form of arbitration envisioned by the FAA. Class arbitration "sacrifices the principal advantage of arbitration — its informality — and makes the process slower, more costly, and more likely to generate procedural morass than final judgment." Because of such "crucial differences," courts may not infer consent to participate in class arbitration absent an affirmative "contractual basis for concluding that the party agreed to do so," Like silence, ambiguity does not provide a sufficient basis to conclude that parties to an arbitration agreement agreed to "sacrifice the principal advantage of arbitration."
Cal. Supreme Court Rules No Recourse To Correct Arbitration Award Where Arbitrator Refused, Mistakenly Or Not, To Award Costs Based On A Belief In Lack Of Jurisdiction
In Heimlich v. Shivji, (2019) 7 Cal.5th 350, Shiraz Shivji retained attorney Alan Heimlich to handle intellectual property matters. The representation agreement included a clause providing for private arbitration of all disputes. Heimlich sued Shivji for legal fees and then rejected Shivji's two Code of Civil Procedure Section 998 settlement offers. The trial court granted Shivji's motion to compel arbitration. The arbitrator issued an award granting zero dollars to both parties, and determined that each side would bear their own fees and costs. Shivji sought an award of costs from the arbitrator, who stated he no longer had jurisdiction to act in the matter. Shivji filed a motion with the trial court to confirm the award and include costs. The court confirmed the award, but refused to award costs. The appellate court reversed, holding Shivji's post-award request was timely, and that the trial court could vacate the arbitrator's award because the arbitrator "refused ... to hear evidence material to the controversy" by rejecting Shivji's attempt to raise the issue of costs related to his 998 offers.
Reversed and remanded: Under Moncharsh v. Healey & Blase (1992) 3 Cal. 4th 1, whether an arbitrator or court should allocate costs depends on the parties' agreement defining the scope of the arbitrator's power. "Absent an express and unambiguous limitation in the contract or the submission to arbitration, an arbitrator has the authority to find the facts, interpret the contract, and award any relief rationally related to his or her factual findings and contractual interpretation." Here, the parties' agreement neither explicitly addressed nor excluded jurisdiction over costs. Shivji was required to and did request costs from the arbitrator in the first instance. Further, evidence of a 998 offer could be presented before or after an arbitrator's final award on the merits. Thus, Shivji's post-award request was timely. Nevertheless, the arbitrator's refusal to award costs, whether a legal or factual mistake, was binding because the statutory arbitration scheme provided no recourse for vacation or correction of the award. Therefore, the appellate court's opinion was reversed. The trial court's ruling to confirm the arbitration award, but deny costs, was correct.
Cal. Supreme Court Holds San Francisco Giants Security Guard Not Required to Arbitrate Waiting Time Penalties Claim - Suit Did Not Require Interpretation of CBA and Thus Not Preempted
In Melendez v. San Francisco Baseball Associates LLC (2019) 7 Cal. 5th 1, George Melendez, a security guard at Oracle Park, home of the San Francisco Giants baseball team, was the lead plaintiff in a putative class action against the Giants for waiting time penalties under Labor Code section 210. The Giants moved to compel arbitration, claiming plaintiffs were subject to a Collective Bargaining Agreement negotiated by their union, the Service Employees International Union, United Services Workers West of San Francisco. Therefore, the action was preempted by the Labor Management Relations Act of 1947. The trial court denied the motion. It "held that resolution of the controversy does not require interpretation of the CBA, but simply a determination of whether the security guards are discharged within the meaning of Labor Code section 201 at the conclusion of an event or series of baseball games." The Giants appealed. The Court of Appeal agreed with the Giants and reversed the order denying the motion to compel arbitration.
Reversed: Although the agreement between the Union and the Giants may be relevant to this lawsuit and may need to be consulted to resolve it, the parties' dispute turns on an interpretation of state law — namely, the meaning of "discharge" under Labor Code section 201 — rather than an interpretation of the agreement itself. Because the provisions of the CBA were not in dispute and did not require interpretation to resolve plaintiffs' claim, the lawsuit was not preempted and may be decided by the trial court on the merits. Therefore, the order denying the motion to compel arbitration was correct.
Claims For Racial Discrimination Under 42 U.S.C. § 1981 Are Arbitrable
In Lambert v. Tesla, Inc., 923 F.3d 1246 (9th Cir. 2019), Dewitt Lambert, an African-American, worked for Tesla, Inc. His employment contract included an arbitration provision. He filed an action in district court against Tesla alleging racial discrimination under 42 U.S.C. Section 1981. Tesla moved to compel arbitration. The district court granted the motion. Lambert appealed, arguing that Section 1981 claims cannot be subjected to compulsory arbitration.
Affirmed: "Section 1981 offers relief when racial discrimination blocks the creation of a contractual relationship." Domino's Pizza, Inc. v. McDonald, 546 U.S. 470, (2006). In Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, the Supreme Court held that claims brought under the Age Discrimination in Employment Act can be subjected to compulsory arbitration pursuant to the Federal Arbitration Act. Under Section 118 of the Civil Rights Act of 1991, "where appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including ... arbitration, is encouraged to resolve disputes arising under the Acts or provisions of Federal law amended by this title." In EEOC v. Luce, Forward, Hamilton & Scripps, 345 F.3d 742 (9th Cir. 2003) the court considered the arbitrability of Title VII claims, and determined that its previous decision on the arbitrability of Title VII claims, Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir. 1998), was "wrongly decided." weakens the 1991 Act is inconsistent with the Supreme Court's endorsement of arbitration." Luce, Forward also disagreed with Duffield's assertion that the text of § 118 "is, at a minimum, ambiguous," and concluded Title VII does not bar compulsory arbitration agreements. Therefore, if Title VII claims can be subjected to arbitration based on section 118 so can Section 1981 claims." Applying Gilmer through the lens of Luce, Forward leads to the conclusion that Section 1981 claims, like Title VII claims, are arbitrable. Therefore, Lambert's Section 1981 claims are arbitrable and the district court was correct in granting Tesla's motion to compel arbitration.
Request For Dismissal Asking Court To Retain Jurisdiction To Enforce Settlement Under CCP § 664.6 Must Be Signed By The "Parties," Not Counsel
In Mesa RHF Partners v. City of Los Angeles (2019) 33 Cal.App.5th 913, Mesa RHF Housing Partners, Hill RHF Housing Partners, and Olive RHF Housing Partners filed actions against the City of Los Angeles and other governmental entities challenging various provisions of the City's establishment of business improvement districts. The parties reached settlements whereby the City agreed to "undertake to make [Mesa, Hill, and Olive] whole" for assessments made against properties owned by them when the business improvement districts were formed.
The parties' settlement agreements contained the following language: "The Court shall retain jurisdiction pursuant to Code of Civil Procedure Section 664.6 to enforce the terms of the Settlement Agreement." Plaintiffs' counsel filed requests for dismissal on Judicial Council form CIV-110 that contained the following language counsel inserted into the document: "Court shall retain jurisdiction to enforce settlement per C.C.P. § 664.6." A deputy clerk entered the dismissals "as requested" on the same day.
A dispute subsequently arose regarding the duration of the City's obligation to remit assessment payments. Plaintiffs brought motions to enforce the settlements, which the trial court heard and denied on the merits. Plaintiffs appealed.
Affirmed: The appellate court affirmed, but on different grounds. The trial court was without jurisdiction to hear the motions. The requests for dismissal were insufficient to retain jurisdiction because they were not signed by the parties, only counsel.
Due to its streamline and summary process, the courts have required strict compliance with all elements of the statue in order to invoke the power to enforce settlements. Under the holding in Wackeen v. Malis (2002) 97 Cal. App. 4th 429, the request for retention of jurisdiction must comport to the three requirements of Section 664.6: (1) made during the pendency of the action, not after the case has been dismissed; (2) by the parties themselves; and (3) in writing or orally before the court.
In Levy v. Superior Court (1995) 10 Cal. 4th 578, 586, the California Supreme court determined "the term 'parties' as used in section 664.6 ... means the litigants themselves, and does not include their attorneys of record." Here, the requests for dismissals were not signed by the "parties" or even a single "party." They were signed only by counsel and therefore insufficient to retain jurisdiction to enforce the settlements.
How to insure compliance with the unforgiving requirements of 664.6? The opinion makes two suggestions to invoke Section 664.6 before the case is dismissed. The first is by filing a stipulation and proposed order and attaching a copy of the settlement agreement. The settlement agreement must be signed by the parties and include language to the effect that they request the court to retain jurisdiction to enforce the settlement. Alternatively, by filing a stipulation and proposed order signed by the parties themselves noting the settlement and requesting that the trial court retain jurisdiction under Section 664.6. As the court noted, "The process need not be complex. But strict compliance demands that the process be followed."
In Attorney Fee Dispute Under Mandatory Fee Arbitration Act Before Local Bar Association, Client May Not Avail Himself To Appeal Provisions In California Arbitration Act Governing Private Contractual Arbitration
In Levinson Arshonsky & Kurtz LLP v. Kim, (2019) 35 Cal.App.5th 896, David Kim retained Levinson Arshonsky & Kurtz LLP (LAK) for employment law advice and representation in litigation matters. LAK withdrew from representation after a disagreement arose and claimed Kim owed over $124,000 for work performed, but Kim refused to pay. After LAK notified Kim that failure to request arbitration before a local bar association within 30 days constituted a waiver of his right to arbitrate, Kim timely filed a petition for arbitration with the Los Angeles County Bar Association (LACBA). However, Kim listed only one restaurant entity and omitted himself or his other restaurant entities for whom LAK allegedly performed litigation work. LAK filed suit against Kim to recover fees. Kim filed an untimely petition for arbitration with LACBA and LAK objected. After unsuccessfully petitioning the superior court to compel arbitration, Kim sought a petition for writ of mandate.
Petition denied: Under the Mandatory Fee Arbitration Act (Bus. and Prof. Code Section 6200 et seq.), attorneys must notify a client disputing legal fees of the client's right to arbitration via written notice before bringing any collection proceeding, and the client's failure to request arbitration within 30 days of receiving notice constitutes waiver of the client's right to arbitration. Under the California Arbitration Act (Code Civ. Pro. Section 1280 et seq.), governing private contractual arbitration, an aggrieved party may appeal from "an order dismissing or denying a petition to compel arbitration" under Code of Civil Procedure Section 1294(a). This CAA provision did not apply to mandatory fee arbitration under the MFAA, and thus Kim's appeal was not authorized by statute. The CAA & MFAA are separate and distinct, and the procedures for one may not be substituted for, or combined with, the procedures for the other if no legislative direction allows such action. Only the MFAA applied here, and section 1294(a) did not authorize Kim's appeal, so the court lacked jurisdiction to hear it.
At-Will Employee's Continued Employment, After Notice Of New Arbitration Provision, Deemed Acceptance To New Condition Of Employment Even If She Objects
In Diaz v. Sohnen Enterprises (2019) 34 Cal.App.5th 126, Erika Diaz, an employee of Sohnen Enterprises, filed a complaint alleging workplace discrimination. Twenty days earlier, she and her co-workers received notice at an in-person meeting that the company was adopting a new dispute resolution policy requiring arbitration of all claims. At that meeting, employees were told that continued employment by an employee who refused to sign the agreement would itself constitute acceptance of the dispute resolution agreement. Diaz and her lawyer presented to Sohnen a letter rejecting the agreement but indicating that Diaz intended to continue her employment. At the same time, Diaz also served the complaint she filed against Sohnen. Sohnen filed its motion to compel arbitration, which the trial court denied, finding the agreement was a "take-it or leave-it contract and (sic) adhesion."
Reversed: California law in this area is well 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. Because the contract was at-will, Sohnen could unilaterally change the terms of Diaz's employment agreement, as long as it provided Diaz notice of the change. "[I]t is settled that an employer may unilaterally alter the terms of an employment agreement, provided such alteration does not run afoul of the Labor Code. "The at-will presumption authorizing an employer to discharge or demote an employee similarly and necessarily authorizes an employer to unilaterally alter the terms of employment, provided that the alteration does not violate a statute or breach an implied or express contractual agreement."
That Arbitration Agreement Was Signed After Initial Filing of Suit Does Not Preclude Its Enforceability
In Salgado v. Carrows Restaurant, Inc. (2019) 33 Cal.App.5th 356, Plaintiff Maureen Salgado worked at Carrows Restaurant for over 32 years. On November 22, 2016, she filed suit alleging employment discrimination. On April 18, 2017, Salgado amended her complaint to add Carrows Restaurants, Inc. Later, Carrows filed a motion to compel arbitration, alleging that Salgado entered into an arbitration agreement on December 7, 2016 (after the initial suit was filed, but before Carrows was brought into the action). Salgado filed an opposition to the motion claiming her lawsuit was filed before she signed the arbitration agreement. She contended the agreement "is not retroactive" and was procedurally and substantively unconscionable. Carrows responded that it was not added as a defendant until months after the signing of the arbitration agreement. Carrows claimed that they did not know of the existence of Salgado's lawsuit when the arbitration agreement was signed and that Salgado voluntarily signed it. The trial court denied the motion.
Reversed and remanded: The language of the arbitration agreement was sufficient to apply to the action. The contention that an agreement to arbitrate a dispute must pre-date the actions giving rise to the dispute is misplaced. Such a suggestion runs contrary to contract principles which govern arbitration agreements. An arbitration agreement may be applied retroactively to transactions which occurred prior to execution of the arbitration agreement. Therefore, Salgado's claims were subject to arbitration. However, the matter was remanded for the trial court to determine if Carrows knew Salgado was represented by counsel when she signed the arbitration agreement, which could render the arbitration agreement unconscionable and unenforceable for that reason.
Local Delivery Truck Driver Cannot Be Compelled To Arbitrate Wage And Hour Claims — Although He Worked Exclusively Intrastate, His Deliveries Were Part of Continuous Flow of Interstate Commerce bringing him within the FAA's Exemption of Transportation Workers Engaged In Interstate Commerce
In Nieto v. Fresno Beverage Company, Inc. (2019) 33 Cal.App.5th 274, Plaintiff Daniel Nieto was employed for many years as a delivery driver for defendant Fresno Beverage Company, Inc., doing business as Valley Wide Beverage Company (VWB). After being terminated from his employment, Nieto filed a class action lawsuit against VWB alleging various wage and hour violations under California labor law. VWB responded by filing a petition to compel arbitration, since Nieto had signed a written arbitration agreement when he was hired. VWB argued that under the Federal Arbitration Act (9 U.S.C. § 1 et seq.) Nieto must be ordered to arbitrate the dispute in accordance with the terms of the parties' arbitration agreement. Nieto opposed the petition, primarily arguing that his employment at VWB came within a statutory exemption to the FAA granted to transportation workers engaged in interstate commerce. Nieto reasoned that since the FAA did not apply, a California law allowing court actions on wage claims notwithstanding the existence of an arbitration agreement (i.e., Lab. Code, § 229) was not preempted by the FAA, meaning the lawsuit may proceed in court. The trial court agreed with Nieto's exemption argument and denied the petition to compel arbitration.
Affirmed: Nieto's deliveries, although intrastate, were essentially the last phase of a continuous journey of the interstate commerce (i.e., beer and other beverages delivered to VWB's warehouse from out-of-state) being transported until reaching its destination(s) to VWB's customers. Accordingly, as a delivery truck driver for VWB, Nieto was engaged in interstate commerce through his participation in the continuation of the movement of interstate goods to their destinations. Therefore, the trial court did not err in concluding that Nieto was employed as a transportation worker engaged in interstate commerce to whom section 1 of the FAA was applicable, exempting "contracts of employment of seaman, railroad employees, or any other class of workers engaged in foreign or interstate commerce."
See also, Muller v. Roy Miller Freight Lines, LLC (2019) 34 Cal.App.5th 1056, reaching a similar result where an intrastate truck driver, who never delivered freight outside of California, played an "integral role" in interstate commerce because 99% of the goods he transported originated across state lines thereby bringing him within the Section 1 FAA exemption as to transportation workers such that he was not subject to arbitration of his wage and hour dispute.
No Portion Of A Solitary PAGA Claim Is "Private" And Subject To Arbitration
In Zakaryan v. The Men's Warehouse, Inc. (2019) 33 Cal.App.5th 659, Arthur Zakaryan was a store manager for The Men's Warehouse. After his employment ended, he brought a solitary representative wage and hour action for underpayment of wages under the Labor Code Private Attorneys General Act of 2004 (PAGA). The Men's Warehouse sought to compel arbitration of Zakaryan's "individual" damages, while staying the PAGA portion of the case, based upon arbitration agreements Zakaryan had signed. The trial court denied the motion to compel, refusing to split the claim between Zakaryan's underpaid wage damages and the PAGA per-pay-period penalties.
Affirmed: Under Lab. Code, § 2698 et seq., PAGA deputizes individual employees to step into the shoes of California's labor enforcement agency and sue their employers for underpaid wages and additional, statutorily prescribed amounts on behalf of themselves and their aggrieved coworkers. In Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 382-392 (Iskanian), the California Supreme Court held that individual employees cannot contractually agree to arbitrate their potential PAGA claims, but may still contractually agree to arbitrate their "individual damages claims." However, if an employee brings a solitary PAGA claim, the trial court may not split that claim and send part of it to arbitration. Under California's primary rights theory, plaintiffs may not divide a primary right and enforce it in two suits, whether in a traditional or arbitral forum. Thus, plaintiffs may not divide a PAGA claim into two claims, one for underpaid wages and another for per-pay period- penalties pursuant to Lab. Code, § 558. This would impermissibly divide a single primary right because the employee bringing the PAGA claim is vindicating only one injury. Further, PAGA splits penalties between the state agency and affected employees in a 75/25 ratio, rather than between underpaid wages and per-pay period- penalties. No portion of a PGA claim is "private" because "the real party in interest" remains California's labor enforcement agency pursuant to Iskanian.
Unconscionable Provisions In Employment Arbitration Agreement Render Entire Agreement Unenforceable
In Subcontracting Concepts (CT), LLC v. Chafie Gabriel Pereira Moreira De Melo (2019) 34 Cal.App.5th 201, Chafie Gabriel Pereira Moreira De Melo was hired by Express Messenger Systems, Inc., doing business as OnTrac and Subcontracting Concepts (CT), LLC (SCI) and signed SCI's "Owner/Operator Agreement" that included an arbitration clause. The arbitration clause provided, "The arbitrators will have authority to award actual monetary damages only. No punitive or equitable relief is authorized." De Melos filed an administrative wage claim with the Labor Commissioner for labor code violations. SCI moved to compel arbitration. The trial court denied the motion after finding that the arbitration clause was both procedurally and substantively unconscionable, and that severance of the substantively unconscionable provisions was not possible because the arbitration clause was permeated with unconscionability.
Affirmed: The trial court found that the arbitration clause was "permeated with unconscionability and thus severance of the unconscionable terms is not possible." In Armendariz v. Health Psychcare Services, Inc. (2000) 24 Cal 4th 83, the court identified three factors relevant to whether severance is appropriate. First, "[i]f the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced." Second, the fact that an "arbitration agreement contains more than one unlawful provision" may "indicate a systematic effort to impose arbitration on an employee . . . as an inferior forum that works to the employer's advantage" and may justify a conclusion "that the arbitration agreement is permeated by an unlawful purpose." Third, if "there is no single provision a court can strike or restrict in order to remove the unconscionable taint from the agreement," the court would have to "reform the contract, not through severance or restriction, but by augmenting it with additional terms," which would exceed its power to cure a contract's illegality. Here, in addition to at least a moderate level of procedural unconscionability, the central purpose of the arbitration provision was to evade the statutory protections and limit the remedies available to De Melo, as reflected in the numerous specific provisions that were substantively unconscionable. "Such multiple defects indicate a systematic effort to impose arbitration" on respondent "as an inferior forum that works to [appellants'] advantage." Thus, because there was no single provision that can be stricken to "remove the unconscionable taint from the agreement," the trial court did not abuse its discretion when it found the arbitration clause could not be enforced.
Defendant Employer Waived Right To Compel Arbitration By Making Inconsistent Statements To Trial Court And Through Delay That Prejudiced Plaintiff
In Nunez v. Nevell Group, Inc., (2019) 35 Cal.App.5th 838, Xavier Nunez filed a complaint against his former employer, Nevell, Inc., alleging violations of the Labor Code. Nevell, and the union to which Nunez belonged, were parties to a collective bargaining agreement that included an arbitration clause. Nevell represented to the trial court that it intended to file a motion to compel arbitration, but did not file the motion by the court-imposed deadline. Nunez then proceeded to serve discovery demands. Before the second status conference, Nevell stated in writing: "Defendant is electing at this juncture to move forward on its motion to compel arbitration and will file the petition to compel arbitration ...." In the third joint status conference statement, Nevell stated: "Defendant has elected not to proceed with the petition to compel arbitration." The parties participated in a fourth case management conference. Nevell did not mention filing a motion to compel arbitration in the parties' joint statement. The parties engaged in further discovery, including class discovery. Nunez filed a motion for sanctions against Nevell due to Nevell's failure to comply with a discovery order. Then, Nevell filed a motion to compel arbitration. The trial court denied the motion, finding Nevell "acted inconsistently with its right to compel arbitration resulting in prejudice to the Plaintiff.
Affirmed: Code of Civil Procedure Section 1281.2 provides: "On petition of a party to an arbitration agreement alleging the existence of a written agreement ... the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that the right to compel arbitration has been waived by the petitioner." Here, the trial court found that Nevell's written election not to proceed with the filing of a petition to compel arbitration was an explicit waiver of its right to arbitrate Nunez's claims. Additionally, Nunez expended significant time and money on litigation activities when it hired an expert, and filed discovery motions. Therefore, Nunez was unequivocally prejudiced by Nevell's late decision to file a motion to compel arbitration and the trial court's judgment was affirmed.
District Court Did Not Clearly Err By Determining That Plaintiff Assented To Terms On Store Website, Which Incorporated An Arbitration Clause, And Compelling Arbitration (9th Cir.)
In In Re Holl, 925 F.3d 1076 (9th Cir. 2019), Randall Holl shipped a package through UPS and then brought a putative class action in federal court alleging that UPS systematically overcharged retail customers by assessing rates higher than those advertised. UPS brought a motion to compel arbitration demonstrating that Holl enrolled in the UPS My Choice program — a free, optional program that allowed UPS customers to track and manage deliveries — and, in doing so, agreed to arbitrate all claims relating to UPS's shipping services. The district court granted the motion to compel. Holl sought a petition for writ of mandamus seeking to vacate the district court's order compelling arbitration
Petition denied: Under California law, "An offeree, knowing that an offer has been made to him but not knowing all of its terms, may be held to have accepted, by his conduct, whatever terms the offer contains." Here, Holl affirmatively assented to the UPS My Choice service terms, since he checked a box acknowledging his acceptance. Those terms included the arbitration clause to which Holl unequivocally assented. Therefore, the district court did not error in a manner sufficient to justify mandamus.
Trial Court Erred In Denying Petition To Compel Arbitration Because Subsequent Termination Agreement Did Not Supersede Arbitration Clause In Prior Agreement
In Oxford Preparatory Academy v. Edlighten Learning Solutions (2019) 34 Cal.App.5th 605, Edlighten Learning Solutions entered into three contracts with Oxford Preparatory Academy. One of the contracts was a management services agreement containing an arbitration clause. The parties subsequently entered into a termination agreement terminating all rights and obligations under the three contracts with the exception of two payment obligations. Oxford subsequently sued Edlighten for breach of contract and negligence arising from events that occurred prior to the termination agreement. Edlighten moved to compel arbitration under the arbitration clause in the original management services contract. The trial court denied the motion finding the arbitration clause in the management services contract had been superseded by the termination agreement.
Reversed and remanded: The parties did not expressly or impliedly terminate the arbitration clause with respect to disputes over the performance, before the termination date, of their respective contractual obligations. The parties merely divided their respective rights and obligations on a temporal basis — those existing before the termination date and those existing after the termination date. "Absent any showing that [the Termination Agreement] was either expressly or implicitly inconsistent with [the Arbitration Clause], [plaintiff] may not rely on the [Termination Agreement's] silence about dispute resolution to establish that such agreement superseded [the Arbitration Clause]." (Cione v. Foresters Equity Services, Inc. (1997) 58 Cal.App.4th 625, 638.) Here, especially because the gravamen of the complaint was based upon events occurring well before the termination agreement, the appellate court concluded the dispute must be resolved in a way consistent with the parties' original management services contract that included an agreement to arbitrate.
Insurance Company May Not Compel Arbitration Because It Failed To Submit Request To Bind (That Included An Arbitration Clause) To Department Of Insurance For Regulatory Approval
In Jackpot Harvesting, Inc., v. Applied Underwriters (2019) 33 Cal.App.5th 719, Applied Underwriters, Inc. and California Insurance Company (collectively, Applied Entities) sold a workers' compensation insurance policy to Jackpot Harvesting, Inc. The Applied Entities entered into two agreements with Jackpot concerning the sale. The "Request to Bind Coverages & Services" (Request to Bind) reflected Jackpot's application, and the "Reinsurance Participation Agreement" described the nature of the program. California Insurance Company (CIC) simultaneously issued a "Workers Compensation and Employers Liability Insurance Policy" (CIC policy) to Jackpot. The Request to Bind was the only document containing an arbitration agreement, while the Reinsurance Participation Agreement provided for judicial resolution in federal or Nebraska state court. The CIC policy was silent on arbitration or judicial dispute resolution. After the premiums increased dramatically and believing claims had been mishandled, Jackpot sued the Applied Entities claiming violation of Insurance Code Section 1658 resulting from the sale of an insurance policy in California without first submitting all collateral agreements, not only the CIC policy, for regulatory approval. Applied Underwriters moved to compel arbitration based on the arbitration agreement in the Request to Bind. The trail court denied the motion observing that the arbitration agreement was void and unenforceable because it had not been approved by the California Insurance Commissioner.
Affirmed: Section 2 of the Federal Arbitration Act allows arbitration agreements to be invalidated by general contract defenses, but not those applicable only to arbitration or deriving their meaning from the nature of the dispute over an arbitration agreement. Moreover, contracts made in violation of a regulatory statute are generally void under California law. Insurance Code Section 11658(a) provides the procedure for approval of insurance policies in California, and Code of Regulations, Title 10, Section 2268, provides: "No collateral agreements modifying the application of either the insured or the insurer shall be made unless attached to and made a part of the policy." The trial court correctly concluded that the Request to Bind, which included an arbitration agreement, materially changed the dispute resolution terms in the CIC policy. Consequently, it was unlawful for the Allied Entities to issue the Request to Bind without first submitting it for regulatory approval, and the arbitration provision within it was void and unenforceable.
Employment Agreement Arbitration Clause With Choice-Of-Law Provision Stating, "The Laws Of The State Of California Will Apply," Must Be Interpreted So As To Be Consistent With Parties' Intent To Arbitrate
In Bravo v. RADC Enterprises, Inc. (2019) 33 Cal.App.5th 920, RADC Enterprises, Inc. hired Mel R. Bravo to manage a store. The parties signed a two-page arbitration agreement covering "all disputes" arising from the employment relationship. The agreement added a one-sentence choice-of-law provision: "This Agreement shall be governed by and shall be interpreted in accordance with the laws of the State of California." After RADC fired him, Bravo sued RADC on individual employment claims, as well as on representative claims under the Private Attorneys General Act of 2004 (PAGA). RADC moved to stay Bravo's PAGA claims and to compel arbitration on his individual claims. The trial court severed and stayed the PAGA claims. The trial court found RADC engaged in interstate commerce and thus the Federal Arbitration Act governed the agreement, and compelled arbitration for only three of Bravo's nine individual claims, denying the arbitration motion on the remaining six individual claims. The trial court observed that, while the Federal Arbitration Act did apply, the choice-of-law sentence meant the parties wanted California law to govern their relationship. California Labor Code section 229 directs courts to disregard agreements to arbitrate wage claims, so the trial court declined to send Bravo's remaining claims to arbitration. (Lab. Code, § 229.)
Affirmed in part and reversed in part: The arbitration agreement stated its objective: the parties will arbitrate "any and all disputes" arising from Bravo's employment, "including any claims brought by the Employee related to wages" under the California Labor Code. The main point was to arbitrate all employment disputes. The parties could not have intended to apply Labor Code section 229 to this contract because that section prohibits arbitrating wage claims and requires courts to disregard private agreements to arbitrate. (Lab. Code, § 229.) Applying this California law would contradict the parties' intent to arbitrate "any and all disputes," including claims "related to wages . . . ." The trial court's interpretation of the choice-of-law provision to negate the purpose of the two-page agreement was incorrect. Agreements must be read to effectuate and harmonize all contract provisions. The choice-of-law provision becomes consistent with the parties' intent to arbitrate all disputes when "the laws of the State of California" is read to include substantive principles California courts would apply, but to exclude special rules limiting the authority of arbitrators. Therefore, trial court's order was affirmed as to severing that portion of the agreement requiring the parties to arbitrate the PAGA claims. The trial court's order was also affirmed granting RADC's motion as to three individual claims. The trial court's order denying the motion as to the remaining six individual claims was reversed. The trial court should have sent all Bravo's individual claims to arbitration.
A Settlement Agreement And Confirming Order Do Not Constitute An Arbitral Award Under The New York Convention And Convention Act Simply Because They Are Signed In The Presence Of An Arbitrator (9th Circuit)
In Castro v. Tri Marine Fish Company LLC, 916 F.3d 1191 (9th Cir. 2019), Michael Castro, a Philippine citizen and resident of American Samoa, sustained a severe knee injury while working as deck hand on a fishing vessel owned by Tri Marine Fish Company LLC. He negotiated a settlement of his disability claims against Tri Marine that was reduced to writing and signed in front of an accredited maritime voluntary arbitrator in the Philippines, who recognized the settlement in an "order." After later discovering that he would need more surgery, Castro sued Tri Marine in state court to recover additional expenses. Tri Marine removed the case to federal court and moved to confirm order as a foreign arbitral award under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517 (New York Convention), and related federal law under the Convention Act, 9 U.S.C. §§ 201-08. The district court confirmed the order and dismissed case.
Reversed and remanded: The arbitrator's order, which was issued after the parties already had agreed to settle their dispute, was not an "arbitral award" entitled to enforcement under the New York Convention and Convention Act. Rather, it was an arbitral award in name only. There was no dispute to arbitrate, as the parties had fully settled their claims before approaching an arbitrator. The purported arbitration consisted of an impromptu meeting in a building lobby with the arbitrator, and the "proceedings" disregarded the terms of three arbitration agreements between the parties and the issuing forum's arbitral rules. Therefore, the case was remanded for the district court to assess jurisdiction under the Convention Act and—as appropriate—venue and any defenses to enforcement of the settlement.
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