Source: http://kruismediation.com/cgi-bin/adrcases.cgi?case=ADR20170308.htm
Timestamp: 2017-12-14 06:25:30
Document Index: 395125882

Matched Legal Cases: ['§ 1119', '§ 1119', '§ 1286', '§ 2698', '§ 1', '§ 1750', '§ 17200', '§ 17500', '§ 1']

California Law Review Commission Considering Revision To Mediation Confidentiality Thereby Enabling Clients To Sue Their Lawyers For Malpractice Committed In Mediation
Effective mediation depends on candid and confidential communication between the parties and mediator. Evidence Code § 1119 fosters this confidentiality by providing that anything said or written in mediation is inadmissible. However, should § 1119 prevent a client from suing his or her lawyer for alleged malpractice committed in mediation?
California law currently shields an attorney for such misconduct. In Cassel v. Superior Court (2011) 51 Cal. 4th 113, the California Supreme Court held that mediation confidentiality statutes are clear and absolute, must be strictly applied, and are not subject to judicially crafted exceptions. This is so even when competing public policies may be affected, such as emasculating a client's legal malpractice claim against counsel because mediation confidentiality renders inadmissible any advice given by counsel to the client in mediation.
Justice Ming Chin concurred with the majority in Cassel, but voiced his concern about mediation confidentiality shielding acts of attorney malpractice. The California Legislature referred the question to the California Law Review Commission (CLRC), which commenced Study K-402 (Relationship Between Mediation Confidentiality and Attorney Malpractice and Other Misconduct). The CLRC met recently and directed staff to continue drafting the tentative recommendations to allow discovery and admissibility of all mediation communication in a subsequent malpractice claim. If the Legislature enacts the recommended legislation, the parties may be required to produce in a subsequent action all confidential briefs, documents, emails and other communication with the mediator.
Author's Comments: If an exception to confidentiality is established, the law should be narrowly tailored as suggested by the Conference of California Bar Associations in its Resolution 10-06-2011. Specifically, to enact legislation that would make admissible mediation "communications directly between the client and his or her attorney only," but not the mediation communications among all other parties and the mediator.
If an exception is made to address potential attorney malpractice in mediation, this would be the best way to address that issue while continuing to protect and foster frank discussions in mediation, an essential prerequisite to the settlement of disputes. You can express your opinion before the CLRC votes by writing to bgaal@clrc.ca.gov#.
State Appeals Court Overturns $30.8 Million Arbitration Award Where Arbitrator Allowed Plaintiff To Add Last-Minute Punitive Damages Claim
In Emerald Aero, LLC v. Kaplan (2017) 9 Cal. App. 5th 78, plaintiffs were investors who sued Stephen Kaplan and a limited liability company alleging defendants breached fiduciary duties pertaining to plaintiffs' investment in a self-storage facility located in Texas. Pursuant to an arbitration agreement between the parties, the matter was arbitrated before the American Arbitration Association. Plaintiffs sought $1 million dollars in their "CLAIM SUMMARY." The arbitration hearing was stayed while Kaplan was criminally prosecuted for his conduct in soliciting and handling investments in self-storage facilities, including the property at issue in plaintiffs' lawsuit.
After Kaplan pled guilty to a wire fraud charge in the criminal action but before his sentencing hearing, a telephonic arbitration hearing was scheduled. On the day before the hearing, plaintiffs emailed a brief substantially increasing their original arbitration damages claim and requesting punitive damages for the first time. Defendants did not appear at the hearing. After the telephonic hearing, the arbitrator awarded plaintiffs $30,835,152.57, without specifying the grounds or nature of the award. Kaplan then requested that the arbitrator vacate or modify the award, but the assigned arbitrator recused himself from all further arbitration proceedings and the arbitration administrator declined to reassign the case to another arbitrator.
In the superior court, Kaplan moved to vacate the award, and plaintiffs moved for an order confirming it. The court denied Kaplan's motion to vacate, and entered judgment. Kaplan appealed.
REVERSED AND REMANDED: As a general rule, courts have limited authority to review arbitration awards. However, one exception is when the arbitrator "exceeded [his] powers" by issuing an award that violated applicable arbitration rules and procedural fairness principles. (Code of Civil Procedure § 1286.2, subd. (a)(4).) Specifically, less than 24 hours before the arbitration hearing, plaintiffs notified Kaplan for the first time they were seeking punitive damages. Plaintiffs did so by requesting punitive damages in a late-filed arbitration brief attached to an email sent to the arbitrator and copied to Kaplan (who was not represented by counsel at the time). This notice violated the parties' arbitration agreement because it was not reasonably calculated to inform Kaplan of the punitive damages claim and precluded a fair arbitration proceeding. The notice defects were also compounded by other procedural irregularities in the arbitration process. The arbitrator acted beyond his authority.
Accordingly, the appellate court reversed the judgment confirming the award against Kaplan, with directions for the superior court to enter an order vacating the arbitration award as to Kaplan and remanding the matter for a new arbitration hearing on damages.
In Wage and Hour Case, Plaintiff Defeats Motion To Compel Arbitration Of Statutory Claims Because Waiver Of Judicial Forum Not "Clear and Unmistakable"
In Vasserman v. Henry Mayo Newhall Memorial Hospital (2017) 8 Cal. App. 5th 236, Tanya Vasserman was employed as a nurse for Henry Mayo Newhall Memorial Hospital (Hospital). Her employment was controlled by a collective bargaining agreement (CBA) between the California Nurses Association (CNA) and the Hospital.
Article 12 of the CBA titled "Grievance and Arbitration" set forth a procedure for employees to resolve grievances, which were defined as complaints or disputes arising out of the interpretation or application of the CBA. Vasserman sued the Hospital for violations of the California Labor Code and other statutes relating to meal and rest breaks, unpaid wages, and unpaid overtime compensation. Vasserman did not allege that she filed any grievances for alleged violations of the CBA during her employment.
The Hospital argued that the CBA relevant to Vasserman's employment required her to arbitrate her claims. Citing Vasquez v. Superior Court (2000) 80 Cal.App.4th 430, 434 (Vasquez), which held that to determine whether a waiver of statutory claims in a CBA is sufficiently explicit, "the courts look to the generality of the arbitration clause, explicit incorporation of statutory ... requirements, and the inclusion of specific ... provisions." The trial court stated, "None of those indicia of waiver is present here. While it does not appear to be necessary to include references to specific Labor Code sections to enforce a CBA arbitration provision, more specificity is required to constitute a 'clear and unmistakable' waiver than the vague 'any claim or dispute' language found in Defendant's CBA arbitration provision." The trial court denied the Hospital's motion to compel arbitration, and the Hospital appealed.
AFFIRMED: The appellate court adopted the clear and unmistakable standard set forth in Vasquez which requires the waiver of a judicial forum for statutory rights in a CBA to be explicitly stated. In determining whether there has been a sufficiently explicit waiver, courts look to the generality of the arbitration clause, explicit incorporation of statutory requirements, and the inclusion of specific contractual provisions. In applying this analysis, the appellate court found that Article 12 could not be read to include an explicitly stated, clear and unmistakable waiver of a judicial forum for employees' statutory claims because it made no mention of the California Labor Code or any other statute, did not discuss individual statutory rights, nor mention waiver of a judicial forum. The court also rejected the Hospital's contention that other Articles filled the void.
Former Employee Need Not Arbitrate Individual Wage and Overtime Claim Before Proceeding With PAGA Suit As "An Aggrieved Employee"
In Hernandez v. Ross Stores, Inc., (2016) 7 Cal. App. 5th 171, Martina Hernandez was hired as a warehouse employee for Ross Stores, Inc., in 2012 and worked there until she was terminated in 2014. As part of her employment, Hernandez agreed to resolve any "disputes," including allegations of Labor Code violations, through binding arbitration. After her employment was terminated, she brought an action on behalf of all aggrieved employees under the California Private Attorney General Act ("PAGA," Labor Code § 2698, et. seq.), alleging wage and overtime violations. Ross moved to compel arbitration. The trial court denied the motion and Ross appealed.
AFFIRMED: The court of appeal affirmed based on the nature of a PAGA suit and the relationship between the parties as determined under the holdings in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 387, and Williams v. Superior Court (2015) 237 Cal. App. 4th 642. In Iskanian, the court found that an employee suing under PAGA does so as the agent of the state's labor law enforcement agencies and thus the dispute was between the employer and the state. Accordingly, "an employee's right to bring a PAGA action is unwaivable," and "a PAGA claim lies outside the FAA's [Federal Arbitration Act, 9 U.S.C. § 1, et seq.] coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship." In Williams, the court concluded that an employee "cannot be compelled to submit any portion of his representative PAGA claim to arbitration, including whether he was an aggrieved employee." Based on these holdings, the court of appeal found that the dispute between Ross and Hernandez was a representative action and that Hernandez was acting on behalf of the state. Further, the dispute did not involve an individual claim by Hernandez for Labor Code violations but rather an action brought for civil penalties under PAGA for violating the Labor Code. Thus, there were no "disputes" between the employer and employee as defined in the arbitration policy.
Employment Arbitration Agreement Lacking Employer Signature, Description of Disputes To Be Arbitrated, and Arbitration Rules That Applied, Deemed Too Ambiguous To Enforce
In Flores v. Nature's Best Distribution (2016) 7 Cal. App. 5th 1, Julie Flores worked for Nature's Best Distribution (NBD) in the shipping/receiving department. She injured her back and was placed on medical leave. Her medical leave was extended, but she did not receive a doctor's note until after the extension expired. She faxed the doctor's note to NBD and received confirmation that it was received; NBD denied receiving the fax. She then attempted to deliver the fax in person, but learned that her employment was terminated for failing to return from medical leave.
Flores filed a lawsuit against NBD alleging claims for, among other things, disability discrimination and wrongful termination in violation of public policy. NBD filed a petition to compel arbitration on the ground that Flores had signed an agreement for alternative dispute resolution (Agreement). The trial court denied the petition, finding that NBD had failed to prove that Flores agreed to arbitrate her claims, and that the arbitration provision in the Agreement was unconscionable.
AFFIRMED: Under de novo review, the court applied California contract law in deciding the threshold issue whether Flores agreed to arbitrate the claims raised in her complaint. The appellate court found the Agreement ambiguous in several respects. First, although signed by Flores, the Agreement was not signed by the "employer" and thus it did not identify the entity with which Flores agreed to arbitrate. Second, the court concluded that the Agreement failed to define which disputes would be subject to arbitration before the American Arbitration Association (AAA), and which disputes would be subject to resolution through the grievance and arbitration procedure contained in the collective bargaining agreement with Teamsters Local 848, Flores's union. Last, the Agreement failed to identify which set of the AAA rules would apply to binding arbitration. Due to these shortcomings and the ambiguity they created, the court could not conclude that the parties reached agreement on the matter of submitting any or all of Flore's claims to final and binding arbitration.
However, Ninth Circuit Finds Employment Arbitration Agreement Enforceable Where Dispute Resolution Provision Not Tainted With Illegality and Invalid Portions Can Be Severed
In Poublon v. C. H. Robinson Co., 846 F. 3d 1251 (9th Cir. 2017), Lorrie Poublon was employed by C.H. Robinson Co. and C.H. Robinson Worldwide Inc. (C.H. Robinson) as an account manager in Los Angeles. She entered into an agreement with C.H. Robinson to arbitrate claims arising out of her employment. After Poublon alleged that she had been misclassified as exempt from overtime pay requirements, the matter went to mediation. The mediation was unsuccessful. Poublon then filed a class action complaint against C.H. Robinson alleging the same claims on behalf of herself and others. The district court denied C.H. Robinson's motion to compel arbitration on the grounds that the dispute resolution provision was both procedurally and substantively unconscionable and thus unenforceable.
REVERSED AND REMANDED: In a nutshell, the Ninth Circuit found that Poublon did not meet her burden of proof showing that the contract was both procedurally and substantively unconscionable under California law. The court rejected her claim that C.H. Robinson's failure to provide Poublon with a copy of the applicable arbitration rules, which were incorporated by reference, rendered the dispute resolution provision procedurally unconscionable, nor did her unsupported belief that she had to sign the agreement to stay employed. As to the substantive unconscionability, the one clause conceded by C.H. Robinson relating to judicial carve-out, as well as the waiver of representative claims under the PAGA, could be severed from the remainder of the agreement. In the end, the court found that the dispute resolution provision was valid and enforceable.
Samsung Cannot Compel Arbitration of Dispute Over Galaxy S4 Phone Because of Consumer's Silence To Arbitration Provision In Warranty Brochure
In Norcia v. Samsung Telecommunications America LLC, 845 F.3d 1279 (9th Cir. 2017), David Norcia purchased a Samsung Galaxy S4 phone from Verizon Wireless and signed a customer agreement (Agreement) with Verizon. The Agreement contained an arbitration clause but did not mention Samsung or any other party. Norcia took the phone, the phone charger, and the headphones with him as he left the store, but did not take the box in which the phone was packaged. The box contained, among other things, a Product Safety and Warranty brochure. The warranty section of the brochure included an arbitration clause.
Norcia later filed a class action against Samsung, alleging that Samsung misrepresented the Galaxy S4's storage capacity and rigged the phone to operate at a higher speed when it was being tested. The complaint alleged that these deceptive acts constituted common law fraud and violated California's Consumers Legal Remedies Act (Cal. Civ. Code §§ 1750-1784), California's Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200-17210), and California's False Advertising Law (Cal. Bus. & Prof. Code §§ 17500-17509). The complaint sought certification of the case as a class action for all purchasers of the Galaxy S4 phone in California. Norcia did not bring any claims for breach of warranty.
Instead of filing an answer to the complaint, Samsung moved to compel arbitration by invoking the arbitration provision in the Product Safety & Warranty Information brochure. The district court denied Samsung's motion. It held that even though Norcia should be deemed to have received the Galaxy S4 box, including the Product Safety & Warranty Information brochure, the receipt of the brochure did not form an agreement to arbitrate non-warranty claims. Samsung timely appealed the district court's order.
AFFIRMED: Applying straightforward contract principles, the Ninth Circuit affirmed. Absent a valid agreement to arbitrate, a party cannot be compelled to arbitrate. Samsung contended that there was a contract and offered two theories of contract formation to support its position. First, Samsung maintained that the inclusion of the arbitration provision in the brochure created a contract between Norcia and Samsung to arbitrate all disputes related to the phone. The court rejected this contention, finding that Norcia did not expressly assent to any agreement in the brochure or otherwise act in a manner that would show his silence meant he was accepting the arbitration agreement. Next, Samsung argued that the Agreement signed by Norcia incorporated the brochure by reference, creating a binding contract between Norcia and Samsung. The appellate court also rejected this argument since Samsung was neither a signatory nor a third-party beneficiary to the Agreement between Norcia and Verizon.
Under Auto Sales Contract, Dealership Entitled To New Arbitration Proceeding Where Award In Buyer's Favor Exceeded $100,000 Limit Set Forth In Contract's Arbitration Clause
In Condon v. Daland Nissan, Inc., (2016) 6 Cal. App. 5th 263, plaintiff purchased a car from defendant, and then sued claiming the defendant knowingly failed to disclose prior damage to the vehicle. Plaintiff was compelled to arbitrate his claims under the auto sales contract, which included an arbitration provision providing that the arbitration awards would be final unless they were either null or in excess of $100,000. ADR Services, Inc., rendered an award totaling over $180,000. Defendant sought renewed arbitration pursuant to the contract's $100,000 limit. Plaintiff demurred and moved to confirm the arbitration award. The trial court confirmed the award in plaintiff's favor finding that ADR Services lacked the defined process by which an arbitration decision could be appealed. However, ADR had stated it was willing and able to reinitiate a new proceeding under the parties' contract.
REVERSED: Under the California Supreme Court's holding in Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal. 4th 899, "new arbitration" clauses like the one at issue here are enforceable. Presumably aware of this holding, plaintiff's argument was more technical. It focused on evidence showing ADR lacked "special rules for 'appeals.'" The appellate court rejected plaintiff's argument and concluded that the trappings of a judicial appeal are unnecessary. Rather, the arbitration clause in the auto sales contract provided a "do-over - governed by the same rules that applied to the first arbitration." Therefore, the trial court should have ordered a new arbitration hearing.
Interlocutory Appeal From Order Denying Motion To Compel Arbitration Dismissed For Lack Of Jurisdiction Because Motion Relied On State Law And Did Not Invoke FAA
In Kum Tat Ltd. v. Linden Ox Pasture LLC, 845 F.3d 979 (9th Cir. 2017), Kum Tat offered to purchase a residential property from Linden Ox. The offer provided that any disputes "arising out of this Contract" would be arbitrated and that the parties "may be compelled to arbitrate under the authority of the California Civil Code." Linden Ox initialed the arbitration clause in the offer, but counter-offered to sell for a higher price. After some further negotiations, Linden Ox rejected a price reduction and later sold the property to a third party.
Kum Tat sued Linden Ox in California state court, claiming breach of contract and recorded a lis pendens on the property. Asserting diversity, Linden Ox removed the suit to the district court and moved to expunge the lis pendens. The district court granted the motion. Kum Tat then moved for an order compelling arbitration, arguing that California law governed the motion. The motion did not mention the Federal Arbitration Act ("FAA," 9 U.S.C. § 1, et seq.). The district court denied the motion and Kum Tat appealed.
DISMISSED: Finding the district's order denying Kum Tat's motion to compel arbitration interlocutory, the Ninth Circuit dismissed the appeal for lack of jurisdiction. The court noted that its appellate jurisdiction was generally limited to final orders. The court further acknowledged that under the FAA, an interlocutory appeal is authorized under certain circumstances. The court found that the FAA did not apply since Kum Tat never invoked the FAA in its motion to compel arbitration and instead urged the application of California law.
California opinions are posted at: click here, and the Ninth Circuit opinions at: click here.