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Posts Tagged ‘United States Supreme Court’

Ninth Circuit Avoids Broad Ruling, Leaving Question of Viability of Broughton-Cruz to Another Day

In Arbitration, Class Waiver, Concepcion, Public Claims on April 12, 2013 at 11:09 am
U.S. Court of Appeals for the Ninth Circuit

U.S. Court of Appeals for the Ninth Circuit (Photo credit: Wikipedia)

The Ninth Circuit’s en banc ruling yesterday in Kilgore v.Keybank, N.A. (you can read more here) was a decidedly restrained opinion.  The court could certainly have held, as many expected, that the Broughton-Cruz public injunction exception to the general rule that the “FAA requires state courts to honor arbitration agreements” does not stand in light of Concepcion, particularly in light of the Supreme Court’s reaction to state courts taking a narrow read of Concepcion.

But while some reports justifiably see Kilgore as a narrow victory for the plaintiff’s bar, the Ninth Circuit arguably took a narrow read of the public injunction exception.  The court held that the claim for injunctive relief fell outside Broughton-Cruz because the “requested prohibitions against reporting defaults on the Note and seeking enforcement of the Note plainly would benefit only the approximately 120 putative class members.”  Slip op. at 17 (emphasis supplied).

In Kilgore, defendant withdrew from the private school loan business, and accordingly the court concluded that the “injunctive relief sought thus, for all practical purposes, relates only to past harms suffered by the members of the limited putative class.”

The central premise of Broughton-Cruz is that “the judicial forum has significant institutional advantages over arbitration in administering a public injunctive remedy, which as a consequence will likely lead to the diminution or frustration of the public benefit if the remedy is entrusted to arbitrators.” Broughton, 988 P.2d at 78. That concern is absent here, where Defendants’ alleged statutory violations have, by Plaintiffs’ own admission, already ceased, where the class affected by the alleged practices is small, and where there is no real prospective benefit to the public at large from the relief sought.

This suggests an argument for defendants in class action cases where there is a mandatory arbitration agreement: where the company has stopped an alleged unlawful practice, and the proposed private attorney general action affects only the class members, then a defendant might argue that the Broughton-Cruz rule does not apply.  It’s worth noting that 120 putative class members is not an unusually small class in an employment case, and if the Ninth Circuit sees a class of that size as only a “limited putative class”, then it might arguably see many wage and hour cases as affecting only a limited portion of the public.

If this is a victory for the plaintiff’s bar, it is indeed a very narrow one.  And it highlights the importance of the California Supreme Court’s upcoming decision in Iskanian.

By CHARLES H. JUNG

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First District Approves of Arbitration Agreement, Despite Presence of Class Waiver and Arbitration of Public Claims

In Arbitration, Class Waiver, Concepcion, Public Claims on March 28, 2013 at 3:30 pm
Car Sales USA

Car Sales USA (Photo credit: emilio labrador)

Yesterday, the California Court of Appeal for the First Appellate District reversed a trial court’s denial of a motion to compel arbitration.  See Vasquez v. Greene Motors, Inc., et al., Case No. A134829, __ Cal.App.4th __ (1st Dist. Mar. 27, 2013).  The arbitration agreement related to the purchase of a used car on credit from defendants, but the opinion has implications for wage & hour class actions because the agreement contained a class waiver and the requirement to arbitration “public” claims.  Id. at 25-26.

The court found only minimal procedural unconscionability, but an absence of significant substantive unconsionability.  The arbitration clause was printed on the reverse side of a form contract, but the buyer was alerted to the presence of the clause.  The Court described the clause as follows:

The reverse side, also dense with text, contains a number of provisions in separate boxes, many dealing with typical ―boilerplate legal matters, such as warranties, applicable law, and buyer and seller remedies. None of the provisions on the back page requires a buyer‘s signature. Toward the bottom of the page is the arbitration clause. The entire text of the clause is outlined in a black border. In all capital letters and bold type at the top is written, ―ARBITRATION CLAUSE [¶] PLEASE REVIEW— IMPORTANT—AFFECTS YOUR LEGAL RIGHTS. Immediately below, three numbered provisions, also in all capital letters, inform the buyer either party may request arbitration, this would prevent a court or class-wide proceeding, and it might limit discovery. Read the rest of this entry »

Press Quotes About Analysis of Second District’s Compton Case

In Arbitration on March 25, 2013 at 4:22 pm
California Supreme Court

California Supreme Court (Photo credit: Jamison Wieser)

Law360 published an article today quoting the blog author’s analysis of the Compton v. Superior Court case.  Compton v. Superior Court of Los Angeles County, No. B236669, — Cal.Rptr.3d —-, 2013 WL 1120619 (2d Dist. Mar 19, 2013):

“In both cases, the First and Second districts applied Armendariz and invalidated arbitration agreements for lack of mutuality,” said Charles Jung, a Nassiri & Jung LLP attorney. “At least as far as California courts are concerned, Armendariz is alive and well, and it appears that this is going to continue to be the case until the California Supreme Court overrules it.”

In light of the latest ruling, plaintiffs and their attorneys looking to defeat mandatory arbitration agreements will keep an eagle eye out for any type of one-sidedness, according to Jung.

“The Compton ruling creates an avenue for employees to argue that mandatory agreements are unlawfully one-sided and that under Armendariz, they should be stricken,” he said. “For employers, it suggests the way to make arbitration agreements enforceable is by making them simple and even-handed. Employers can’t have their cake and eat it too.”

“The California Supreme Court really has its work cut out for it,” Jung said. “The challenge for the California Supreme Court is to try to preserve what it can of California’s public policy, yet not fall afoul of and directly contradict or simply ignore the U.S. Supreme Court. It’s a very tricky position for the court to be in.”

Second District Reverses Arbitration Order in Wage & Hour Case, Citing Lack of Bilaterality

In Arbitration, Class-wide Arbitration, Concepcion on March 20, 2013 at 5:48 pm
BgKahuna squeezes his way inside. Abandoned an...

BgKahuna squeezes his way inside. Abandoned and decaying Ambassador Apartments in Gary, Indiana (Photo credit: slworking2)

Yesterday, the California Court of Appeal for the Second District reversed the lower court’s order granting a petition to compel arbitration.  Compton v. Superior Court of Los Angeles County, No. B236669, — Cal.Rptr.3d —-, 2013 WL 1120619 (2d Dist. Mar 19, 2013).  Plaintiff was a property manager who filed a putative wage & hour class action complaint in Los Angeles Superior Court.  She was required to sign an arbitration agreement that also barred arbitration of class claims.  The trial court granted defendants’ petition to compel arbitration.

Normally an order compelling arbitration is not appealable.  But the Court of Appeal determined it had jurisdiction, citing the “death knell” doctrine:

An order compelling arbitration is not appealable. (Elijahjuan v. Superior Court (2012) 210 Cal.App.4th 15, 19.) The parties argue over whether this matter is appealable under the “death knell” doctrine, which applies when an order effectively terminates a class action. Rather than parse the case law on that issue, we conclude that we have jurisdiction to treat this nonappealable order as a petition for writ of mandate in this unusual case because: (1) the unconscionability issue is one of law based on undisputed facts and has been fully briefed; (2) the record is sufficient to consider the issue and it appears that the trial court would be only a nominal party; (3) if we were to dismiss the appeal, and the ultimate reversal of the order is inevitable, it would come in a post-arbitration award after the substantial time and expense of arbitrating the dispute; and (4) as a result, dismissing the appeal would require the parties to arbitrate nonarbitrable claims and would be costly and dilatory.

The Court concluded that the arbitration agreement was unconscionably one-sided because (1) it exempted from arbitration claims the employer would more likely bring, such as claims for injunctive or equitable relief from trade secret disclosures; (2) it limited the time to demand arbitration to a period shorter than the relevant statutes of limitation; (3) it retained the statute of limitations period for itself  and (4) it suggested that the arbitrator had the discretion not to award mandatory attorney’s fees under the Labor Code.

The Court determined that it was not violating Concepcion by enforcing Armendariz’s bilaterality rule.

Concepcion did not discuss the modicum of bilaterality standard adopted by Armendariz, which is not a class action case. And Concepcion did not overrule Armendariz. We both agree with and are therefore bound to follow our Supreme Court and apply Armendariz to this case. (Truly Nolen of America v. Superior Court, supra, 208 Cal.App.4th at p. 507.) Accordingly, we conclude that Concepcion does not apply to invalidate Armendariz’s modicum of bilaterality rule, at least in this context.

Justices and Judge

Justice Laurence D. Rubin wrote the opinion for the Court, with Justice Madeleine I. Flier concurring.  Presiding Justice  Tricia A. Bigelow dissented.  Judge Michael Johnson, Los Angeles Superior Court.

Attorneys

R. Rex Parris Law Firm, R. Rex Parris, Alexander R. Wheeler, Kitty Szeto and John M. Bickford; Lawyers for Justice and Edwin Aiwazian, for Petitioner.

Jackson Lewis, Thomas G. Mackey and Brian D. Fahy for Real Parties in Interest.

By CHARLES H. JUNG

Applying Concepcion, U.S. Supreme Court Strikes Down West Virginia High Court Rulings That Held Unenforceable All Predispute Arbitration Agreements That Apply to Personal Injury or Wrongful Death Claims Against Nursing Homes

In Arbitration, Preemption on February 21, 2012 at 5:13 pm
TAMPA, FL - MARCH 17:  Dalton Pepper #32 of th...

Image by Getty Images via @daylife

In a per curiam opinion today applying the rule in Concepcion, the U.S. Supreme Court  reversed and remanded orders of the Supreme Court of Appeals of West Virginia, which held unenforceable all predispute arbitration agreements that apply to claims alleging personal injury or wrongful death against  nursing homes.  Marmet Health Care Center, Inc., et al. v.  Clayton Brown, et al., Case Nos. 11–391 and 11–394, 565 U. S. ____ (Feb. 21, 2012).

The U.S. Supreme Court held that the “Supreme Court of Appeals of West Virginia, by misreading and disregarding the precedents of this Court interpreting the FAA, did not follow controlling federal law implementing that basic principle.”  Id.  “When this Court has fulfilled its duty to interpret federal law, a state court may not contradict or fail to implement the rule so established.”

Background

In each of three negligence suits, a family member of a patient requiring extensive nursing care had signed an agreement with a nursing home on behalf of the patient.  Id. The agreements included arbitration clauses requiring the parties to arbitrate all disputes, other than claims to collect late payments owed by the patient.  Id. In each of the three cases, a family member of a patient who had died sued the nursing home in state court, alleging that negligence caused injuries or harm resulting in death. Id.

In a decision concerning all three cases, the Supreme Court of Appeals of West Virginia held that “as a matter of public policy under West Virginia law, an arbitration clause in a nursing home admission agreement adopted prior to an occurrence of negligence that results in a personal injury or wrongful death, shall not be enforced to compel arbitration of a dispute concerning the negligence.”  Id.

The state court considered whether the state public policy was pre-empted by the FAA:

The state court found unpersuasive this Court’s interpretation of the FAA, calling it “tendentious,” id., at 51a, and “created from whole cloth,” id., at 53a. It later concluded that “Congress did not intend for the FAA to be, in any way, applicable to personal injury or wrongful death suits that only collaterally derive from a written agreement that evidences a transaction affecting interstate commerce, particularly where the agreement involves a service that is a practical necessity for members of the public,”  id., at 84a.  The court thus concluded that the FAA does not pre-empt the state public policy against predispute arbitration agreements that apply to claims of personal injury or wrongful death against nursing homes.

Id.

Discussion

The Supreme Court held that the “West Virginia court’s interpretation of the FAA was both incorrect and inconsistent with clear instruction in the precedents of this Court.”  Id.  The Court held that the FAA includes “no exception for personal-injury or wrongful-death claims.”  Id.

Citing AT&T Mobility LLC v. Concepcion, 563 U. S. ___, ___ (2011), the Court wrote:

When state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.”  AT&T Mobility LLC v. Concepcion, 563 U. S. ___, ___ (2011) (slip op., at 6–7).  That rule resolves these cases. West Virginia’s prohibition against predispute agreements to arbitrate personal-injury or wrongful-death claims against nursing homes is a categorical rule prohibiting arbitration of a particular type of claim, and that rule is contrary to the terms and coverage of the FAA. See ibidSee also, e.g., Preston v. Ferrer, 552  U. S. 346, 356 (2008) (FAA pre-empts state law granting  state commissioner exclusive jurisdiction to decide issue the parties agreed to arbitrate); Mastrobuono v. Shearson  Lehman Hutton, Inc., 514 U. S. 52, 56 (1995) (FAA preempts state law requiring judicial resolution of claims  involving punitive damages);  Perry v.  Thomas, 482 U. S.  483, 491 (1987) (FAA pre-empts state-law requirement that litigants be provided a judicial forum for wage disputes); Southland Corp. v.  Keating, 465 U. S. 1, 10 (1984) (FAA pre-empts state financial investment statute’s  prohibition of arbitration of claims brought under that  statute).

Granting the petition for certiorari, the Court vacated the judgment of the Supreme Court of Appeals of West Virginia is and remanded the cases for proceedings not inconsistent with this opinion.

By CHARLES JUNG

After Substantial Litigation and Full Arbitration, Second District Reverses Order Compelling Arbitration Finding That Defendants Waived Right to Arbitrate

In Uncategorized on November 15, 2010 at 9:23 am
Day 222 (Or is this Day 1 now?) - Oops!
Image by ktpupp via Flickr

The Second District Court of Appeal reversed an order compelling arbitration after the conclusion of an arbitration and judicial confirmation of the arbitration award because defendants waived their right to arbitrate.  Knight v. Toe Brights, Inc., et al., No. B220648, 2010 WL 4542324 (Cal. App. 2d Dist. Nov. 12, 2010).

Background

Plaintiff Knight filed an action against her former employer, Toe Brights, Inc. (TBI), and two of its officers/directors/stockholders, alleging that they failed to pay her more than $9,000 in salary and reimbursement for expenses that was due at the time of her termination, and also failed to repay a loan from her to TBI in the amount of $41,783. Id. TBI filed its answer to Knight’s complaint, and alleged as an affirmative defense that “Plaintiff’s action is barred by any arbitration agreement requiring that this action be arbitrated.”  Id.

Defendants moved to compel arbitration about eight months after plaintiff Knight filed her suit.  Id. *1.  By that time, defendants had propounded multiple sets of discovery to which Knight had responded, and numerous discovery motions were pending.  Id. Defendants had claimed “priority” in discovery, and then refused to respond to Knight’s discovery.  Id. The court ordered the matter to arbitration less than three months before the date set for trial. Id.

The case proceeded through arbitration, and the arbitrator awarded Knight $40,000 for the repayment of her loan plus “interest at the statutory rate from the date she filed her lawsuit”.  Id. *4. Knight did not prevail on her other claims for unauthorized use of her jewelry designs, name and likeness, and the arbitrator awarded defendants $60,000 in attorney fees and $1,160 in filing fees as the prevailing parties on some of Knight’s claims. Id. The arbitrator denied Knight’s motion for attorney fees  and costs. Id. Read the rest of this entry »

Second District Compels Arbitration of Individual’s Overtime Claims Even Where Arbitration Agreement Included Unenforceable Class Arbitration Waiver

In Arbitration, Class-wide Arbitration on October 4, 2010 at 8:55 am
Settlement by Arbitration (383/2 BC)
Image by Tilemahos Efthimiadis via Flickr

The Second District compelled a class action plaintiff to arbitrate his individual claims in Maiorano v. Professional Community Management, Inc., No. B220127, 2010 WL 3786721 (Cal. Ct. App. 2d Dist. Sept. 30, 2010).  Defendant, Professional Community Management, Inc., appealed from an order denying its petition to compel arbitration of a putative class action filed by plaintiff, Ray A. Maiorano.  Id. *1.  The Second District held that “based solely on the parties’ agreement, we conclude they cannot be compelled to arbitrate on a class basis”, but it directed the trial court to compel arbitration of plaintiff’s individual claims. Id. The court reasoned that the “presence of a provision limiting arbitration to individual rather than joined or representative claims did not present a basis upon which the trial court could conclude the present arbitration agreement was permeated by an unlawful purpose.”  Id. *4.

Background

Plaintiff brought a class action complaint alleging violations of statutory meal and rest breaks, wage reporting and overtime requirements, and unlawful and unfair business practices.  Id. *2.  Plaintiff also asserted a cause of action for penalties under the Labor Code Private Attorneys General Act of 2004–Labor Code sections 2698 and 2699.  Id. Defendant filed a petition to compel arbitration. The trial court denied defendant’s petition, ruling that: Read the rest of this entry »

Third District Affirms Arbitrator’s Award Denying Mandatory Attorneys’ Fees to Prevailing Plaintiff

In Arbitration, Attorney's Fees on September 4, 2010 at 6:32 am
Seniors Dancing, Mayfest
Image by StevenM_61 via Flickr

The Third District in Miller v. Lifestyles Senior Housing Managers et al., No. C059843, 2010 WL 3398750 (Cal. Ct. App. 3d Dist. Aug. 31, 2010), affirmed the trial court’s judgment confirming an arbitrator’s decision denying statutorily mandated attorneys fees to the prevailing plaintiff.  Id. *1. Read the rest of this entry »