Archives: January 2006
Sun Jan 29, 2006
Arbitration: Expediting the Process
The Legislature and the courts have repeatedly sought to expedite dispute resolution by offering alternatives to litigation. Examples include judicially ordered mediation (CCP 1775 et.seq.);judicial arbitration (CCP 1141.10 et.seq.; CRC 1600 et.seq.); Referees (CCP 638); Temporary Judges (Cal.Cons., Article VI, sec. 21); pre trial offers to settle (CCP 998); expedited settlement and judgment (CCP 664.6). But the most controversial form of an alternative to litigation is arbitration (CCP 1280 et.seq.), whether voluntary, mandated by statute or by terms unilaterally imposed in an agreement- particularly in employment (Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 [2000]), consumer (Discover Bank v. Sup.Ct., 36 Cal.4th 148 [2005]) and franchise agreements (Independent Ass’n of Mailbox Center Owners v. Sup.Ct., 133 Cal.App.4th 396 [2005]).
Aside from objecting to arbitration, parties may fail, neglect, refuse to participate in or delay the process. Recent legislation compelling arbitrators to disclose financial and personal records (CCP 1281.9), penalizing non disclosure by authorizing the court to vacate an award (CCP 1286.2 [a][6], and the Armendariz decision mandating discovery in employment cases, compound “foot dragging” that often delays litigation.
In Titan /Value Equities Group, Inc. v. Sup.Ct. , 29 Cal.App.4th 482 (1994) the trial court had attempted to expedite arbitration when confronted by a dilatory and uncooperative party. The court issued detailed orders, inter alia, for discovery, set a date for completion of arbitration and a trial date regardless of the arbitration completion date. The Court of Appeal in Titan/Value held the trial court lost jurisdiction upon ordering arbitration and staying litigation, retaining only “vestigial” jurisdiction to issue provisional relief and confirm, correct, or vacate an award.
In Blake v. Ecker, 93 Cal.App.4th 728 (2001), after a two year delay in arbitration attributable to plaintiff, the trial court granted a motion to dismiss litigation previously stayed concurrent with the order to arbitrate. The Blake court held the defendant (moving party) should have sought dismissal from the arbitrator according to the provisions of the arbitration agreement or the rules of the arbitration service provider.
Bosworth v. Whitmore, 37 Cal.Rptr.560 (2006) distinguishes these two cases and holds that, absent an agreement established by the parties, the court can set a date for completion of the arbitration and entry of an award. The court cited CCP 1283.8:...“the [arbitration] award shall be made within such time as the court orders on petition of a party to the arbitration.”
Obviously a court order issued under CCP 1283.8 places all parties under a deadline. The statute does provide a safety valve by permitting the parties to extend a time limit, whether fixed by the agreement or court ordered, either before or after its expiration. To avoid a “casual waiver” of compliance with the order or the terms of the agreement, CCP 1283.8 requires a party to provide the arbitrator with written notice of a time limit prior to service of the award.
Given the vagaries of human nature, and the innumerable reasons for delay in arbitration, Bosworth nonetheless enables the trial court to exercise a discretionary power to expedite the process by fixing a date for rendition of an award. CCP 1283.8 refers only to time limits for rendition of an award and does not affect intermediate judicial intervention in arbitration precluded by Titan/Valve and Blake. Other than the Bosworth rule, after the court has ordered arbitration, only the arbitrator can: compel a recalcitrant or obstructive party to participate; hold a default hearing; impose sanctions. See also, CCP 1282.4; 1282.6.
The Bosworth court agrees their interpretation of CCP 1283.8 is not the only possible alternative. The statute could be read to mean the court can set an award date only after completion of the evidentiary hearing at the arbitration, in effect compelling the arbitrator-not the parties- to act. That the statute requires notice of a time limit to the arbitrator, suggests the parties are requesting a dilatory arbitrator to render an award. Under that interpretation, if Titan /Value and Blake are correct that a court issuing an order to arbitrate retains only “vestigial” jurisdiction, i.e., the power to grant further relief after submitting an action to arbitration, the Bosworth rule authorizing judicial intervention during arbitration is in jeopardy.
Sun Jan 15, 2006
Mediation: Enforcing Settlement Agreements (cont.)
THe dramatic increase in mediation warrants a review of potential pitfalls in drafting and enforcing settlement agreements. Stewart v. Preston Pipeline, Inc., 2005 WL 3475669 illustrates the expense to clients for failure to sign settlement agreements. In Stewart, plaintiff and counself signed the settlement agreement but the defendant failed to sign-although counsel signed. Plaintiff subsequently recanted, arguing the defendant had not signed in compliance with CCP 664.6, the expedited motion to confirm settlements into a judgment.
A settlement is a contract, and the legal principles applicable to contracts generally apply to settlement contracts. The burden is the moving party to establish the elements of a valid contract. Levy v. Sup.Ct., 10 Cal.4th 578 (1995) requires the "parties" to sign the settlement, not counsel. But according to the Stewart court, Levy did not exclude the possibility of enforcing a settlement by alternative procedures, i.e., summary judgment, a suit in equity, or amendment of the pleadings. Thus the absence of a signature by one of the parties does not necessarily vitiate a settlement if the issue is confidentiality of the mediation and a party moves for summary judgment rather than under CCP 664.6; Stewart.
Stewart is also a valuable case to read on the right of counsel to enter into agreements without consent of the client. Procedural decisions do not require the concurrence of the client but substantive decisions require consent.
To recapitulate case law on settlements, herewith a summary:
The court may retain jurisdiction, if requested by the parties, to enforce the terms of the settlement; Elyaou Dayan v. Hoffman, 104 Cal.App.4th 1421 (2003). Or, the settlement agreement may authorize arbitration of any disputed issues; Universal Cities, Inc. v. Sup.Ct. 110 Cal.App.4th 1273 (2003). The request to retain jurisdiction must be explicit, occur during the pendency of litigation and not subsequent to a dismissal; Wackeen v. Malis, 97 Cal.App.4th 429 (2002); Kohn v. Jayamar-Ruby, 23 Cal.App.4th 1530 (1994) .
Innumerable cases are resolved by mediation (whether a particular dispute resolution process is a “mediation” is a mixed question of law and fact but the “process” and “result” must comport with the statutory definition to enforce confidentiality; Saeta v. Sup.Ct., 117 Cal.App.4th 261 ( 2004); Doe 1 v. Sup.Ct., 132 Cal.App.4th 1160 [2005]). If the mediation is successful, the parties will ordinarily confirm the agreement in writing. This “writing” is inadmissible in evidence in a civil action (Ev.Code 1119[a]) unless the parties agree that the writing is enforceable or the settlement binding or enforceable; Ev. Code 1123; Auguston v. Texaco Refining & Marketing, Inc., 2005 WL 2277732( Non.Cite.); or in compliance with Ev.Code 1118 (oral agreement); or, if offered to show fraud, duress, or illegality relevant to an issue in dispute; Ev.Code 1123. The parties must unambiguously signify their intent to be bound by the agreement; Fair v. Bakhtiari, 121 Cal.App. 4th 1286 (2004)[Rev.Grtd]. In that regard, the court may consider arbitration service Rules incorporated in the arbitration.
Practice: To insure that all parties agree to the terms, counsel and clients should sign the agreement. A settlement agreement is a contract and legal principles apply to allegations of breach, i.e., mutual assent; Civ. Code 1550;1565; see also Meyer v. Benko, 55 Cal.App.3d 937 (1948). An incomplete, or ambiguous, settlement agreement is grounds for the court to refuse enforcement; Weddington Prods., Inc. v. Flick, 60 Cal.App.4th 793 (1998); Ersa Grae Corp. v. Flour Corp., 1 Cal.App.4th 613 (1991); Terry v. Conlon, 131 Cal.App.4th (2005) [an illustration of an ambiguous settlement written after settlement negotiations].
The most effective method of settlement is a written document containing all terms and conditions of the agreement acknowledged by the signature of all parties and counsel. In some cases, details of a settlement are reserved for future discussions. This practice may be necessary but should be avoided if possible. In the event additional terms require discussion, the signed agreement should clearly state that these items do not impair the validity of the original document. Some provision for resolving additional terms of discussion should be included, i.e., arbitration or mediation of settlement terms only.
To read cases involving considerable confusion among the parties and the additional expense incurred in resolving whether the terms of a settlement could be enforced, see: Tender Loving Things, Inc. v. Robbins, 2005 WL 902648 (Non.Pub.) RF Video, Inc. v. Dream Stage Ent., Inc., 2005 WL 1274453 (Non.Pub.).
Clauses to be considered in the event of future disagreement over terms: Choice of law, including use of state substantive and /or procedural law; choice of forum; issues for resolution; court specifically retains jurisdiction to enforce settlement; or resolved by arbitration.
Comment: There are no bright lines here. An appellate court can characterize a “settlement” either way but the terms must be “sufficiently certain” to enforce; Tender Loving Things; CRC 162.6 (h).[judicially ordered mediation]. In Terry, the court said: ...:we do not mean to say that a failure to agree on the means to achieve settlement goals will necessarily cause a settlement to fail....”many settlements are reached by an initial agreement on the goals of settlement. However, agreement to the goals alone may not result in a judicially enforceable settlement agreement;” Terry @1458.
As above, to assure the ability to enforce the agreement, parties should ask the court to retain jurisdiction; Stone Age Equipment, Inc. v. Nelson Sports, Inc., 2005 WL 1208522 (Non.Cite).
Sun Jan 01, 2006
Arbitration: "Choice of Laws Clause
Credit card companies routinely send notices to potential customers offering their service and, upon receiving a favorable reply, contractually enroll the subscriber. The contract includes terms reciting interest rates, late fees and penalties. In some cases, the contractual terms preclude classwide arbitration, consolidation of claims or representational claims. In Discover Bank v. Sup.Ct., 36 Cal.4th 148 (2005), the California Supreme Court refused to enforce classwide arbitration waivers.
Also included in the contract is a unilateral and non negotiated arbitration clause describing a dispute resolution process, usually in the format of arbitration. In some cases, California residents are notified the location of an arbitration will take place in another state, or, resolved under the laws of a different state. The courts recognize the need for standard forms enforceable throughout the nation, but a distant location for resolution of a dispute, or the applicable state law other than California, can create a hardship for consumers.
In Discover Bank, the contract identified Delaware as the locus of the arbitration and governened resolution of the dispute by its state law. Delaware does not prohibit class action waivers, conflicting with California law as interpreted by the California Supreme Court. Recognizing the choice of law issue, the California Supreme court remanded the case to the Court of Appeal.
On remand, the Court of Appeal in Discover Bank v. Sup.Ct., 36 Cal.Rptr. 3d 456 (2005)reviewed California case law on choice of law and forum non conveniens, each category essentially analyzed similarly. The plaintiff filed in a California court but had pled causes of action under Delaware law-not California law-and defendant Discover Bank is domiciled in Delaware. The Court of Appeal applied California law developed in Nedlloyd Lines B.V. v. Sup.Ct. 3 Cal.4th 459 (1992). Nedlloyd invokes the Restatement of Laws section 187 to apply choice of law analysis.
The plaintiff having pled Delaware law in a California filing,and the defendant bank chartered in Delaware, the Court of Appeal ruled that both states had a “material interest” in the outcome. Conceding classwide waivers are unenforceable in California, but enforceable in Delaware, the court held state law of Delaware prevails. The court found no fundamental violation of California public policy to trump Delaware law.
In Klussman v. Cross Country Bank, 36 Cal.Rptr. 3d 728 (2005) decided after both Discover Bank decisions, a diffferent Court of Appeal reached the opposite result interpreting the choice of law clause and citing the same California decisional law. In Klussman, the parties were California residents and pled causes of action under the CLRA (Civ. Code 1750), UCL (Bus. & Prof.Code 17200), and Delaware Business Practices Act. The arbitration clause provided that Delaware law applies and the transaction is conducted in interstate commerce, invoking the rules of the Federal Arbitration Act; 9 U.S.C. 2 et.seq.
The court disposed of FAA pre emption, citing the California Supreme Court decision in Discover Bank and, interpreting the choice of law clause, concluded California had a greater “material interest” in the litigation.
Note: Aral v. Earthlink, Inc. 134 Cal.App.4th 544 (2005), decided after the California Supreme Court decision in Discover Bank, refused to enforce a choice of laws clause mandating arbitration in Georgia. Plaintiff alleged violation of Bus. & Prof.Code 17200.
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