Archives: January 2007
Wed Jan 31, 2007
Arbitration: Arbitrable & Non Arbitrable Claims
The arbitration clause in a contract contains claims subject to arbitration but the parties have signed multiple contracts and not all contain an arbitration clause. Plaintiff files litigation in federal court, and the defendant files a petition to compel arbitration of the arbitrable claims. Can the court stay the non-arbitrable claims awaiting resolution of the arbitrable claims?
California law permits the court to exercise its discretion pursuant to the California Arbitration Act (CAA) but Federal courts are governed by U.S. Supreme Court decisions mandating enforcement of the arbitration clause under the Federal Arbitration Act (FAA) without regard to the civil action. The Seventh Circuit tackles this problem in a well written decision.
See: www.arbitrationadr.com for a discussion of this issue authored by Judge Waddington. Ch. I-C: Arbitrable and Non-Arbitrable Claims.
Tue Jan 30, 2007
www.Arbitrationadr.com
Federal and California law both recite various grounds for vacating an award. The California Arbitration Act (CAA) has a broader scope of review than the Federal Arbitration Act (FAA) but neither jurisdiction requires the arbitrator to write a decision on the facts or law.
CCP 1283.4 requires an award ..."in writing and signed by the concurring arbitrators" but the statute says nothing about an explantion of the decision per se.
The FAA is silent on the scope of a writtten award but the U.S. Supreme Court has clearly stated that no explanation of the arbitrator's decision is required; Bernhardt v. Polygraphic Co. of America, 350 U.S 198 (1956); McCarthy v. Citygroup Global Markets, 2006 WL 2673424 (1st Cir.).
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Wed Jan 24, 2007
Arbitration, Mediation & ADR Law Practice Online
Judge Waddington has authored an electronic text to augment articles written on this Web Blog and his web page. The text includes U.S. Supreme Court cases; all Federal Circuit Court of Appeals cases; California Supreme Court cases; Court of Appeal-published and non published cases-on arbitration, mediation, referees and temporary judges.
California cases are cross referenced with federal court decisions and accompanied by notes and practice guides. Edited weekly, the latest ADR cases, statutory amendments and changes in the CRC are only a click away.
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Temporary Judges in Lieu of Arbitration
New Rules on Temporary Judges
The Judicial Council has adopted new rules to the California Rules of Court on court-appointed Temporary Judges; CRC 2.810. Effective July 1, 2006 the Code of Judicial Ethics is now imposed on Temporary Judges. In addition, attorneys who serve as Temporary Judges (Cal.Const; Art. VI) are subject to "limitations" and may not serve if: appearing as counsel on the same day in the same courthouse; is presently a party to an action in a similar case; is judging a family law or unlawful detainer case and one party is self-represented. For further details see, Electronic Text, Temporary Judges. Ch. XXIV.
Temporary Judges Requested by the Parties is now governed by CRC 2.830 et seq.
See, Text, Ch.XIV
A Temporary Judge is: an active or inactive member of the State Bar...who, under Article VI, Sect. 21 of the Cal.Const. [and these rules], serves or expects to serve as a judge once, sporadically, or regularly on a part time basis under a separate court appointment for each period of service or each case heard; Rule 2.812 outlines requirements for service as a Temporary Judge.
The Los Angeles Superior Court has initiated a new program for lawyers entitled Early Neutral Evaluation. Not mediation, not arbitration, but a legal analysis of litigation conducted by an experienced lawyer.
Civil Rules for Judicial Arbitration have been amended: CRC 3.810 et seq.
Civil Rules for Judicial Mediators have been amended; CRC
3.850 et seq.
Tue Jan 16, 2007
Mediation Rule Changes
Mediation 2007
The Judicial Council has re-numbered the California Rules of Court (CRC). Former CRC 1634 describing attendance of parties and counsel is now 3.874. This Rule mandates attendance in person of all parties and attorneys of record at mediation sessions unless excused or permitted to attend by telephone. If a party is not a natural person, a representative of that party with authority to resolve the dispute must attend all mediation sessions in person. In the case of a governmental entity requiring approval of an agreement by an elected official or legislative body, a representative with authority to recommend an agreement must attend unless excused or permitted to attend by telephone; CRC 3.874 (a) (1).
CRC 3.874 (a) (2) imposes the same rule of personal attendance on insurance carrier representatives when an insured is covered by an insurance policy.
CRC 3.874 (a) (3) authorizes the mediator to excuse a party, attorney or insurance carrier representative under sub-sections (a) (1) & (a) (2) but each excused absentee must promptly send a letter or e-mail to the mediator and all parties confirming the permitted absence.
Each party may have counsel present at all mediation sessions that concern the party; CRC 3.874 (a) (4).
CRC 3.874.(b) (1) requires each party to serve a list of all mediation participants five court days before the first mediation session. The list includes all parties, counsel, insurance representatives and representatives of governmental agencies. A party must promptly serve any supplemental list of others who will attend the mediation.
The mediator may also request each party to submit a short mediation statement providing information about the issues in dispute and any possible suggestions for resolution of the dispute; CRC 3.874 (b) (2).
Comment: The CRC amendments are presumably intended to tighten the rules of judicially ordered mediation. Although the Rules do not apply to private mediation, the substance is desirable. The absence of someone with authority to settle frequently disrupts the mediation process.
Caveat: The Rules provide no remedy for non compliance. Sanctions in the Rules are not cross referenced. In addition, many lawyers dislike court-ordered mediation, attend only because of court order, and their participation is perfunctory. Unless a court has local rules for non-compliance with CRC Rules, an issue that begets argument, failure to appear without excuse is not sanctionable.
Tue Jan 09, 2007
Mediation & Mandatory Settlement Conferences
Note for Mediators: CRC numbering has been revised. Rule 3.852 et seq. now govern judicially ordered mediation.
The California Legislature enacted the Civil Mediation Act (CCP 1775 et seq.) allowing courts to order civil litigation into mediation as an alternative to judicial arbitration; CCP 1775.2; 1775.3 (a) 1775.4. Under court authority, the Council has established procedures governing submission of actions to mediation if the amount in controversy does not exceed $50,000.00, a figure comparable to limits in judicially ordered arbitration; CCP 1411.00 et seq.; CRC 3.870. Despite a court order, mediation is essentially voluntary and a party may withdraw at any time or refuse to participate; CRC 3.853 (2).
In judicially ordered mediation, the parties incur no cost. Can the court not only order the parties to mediation but also compel payment of mediator pro rata costs? In Jeld-Wen, Inc., v. Sup. Ct., 2007 WL 16068 the trial court ordered the parties to mediate with a person designated as a “Mediator and/or MSC [Mandatory Settlement Conference] Judge;” CRC 3.1380. In addition, the court appointed the mediator to serve as a discovery referee pursuant to CCP 639 and CRC 3.920-3l92. The Court of Appeal ultimately determined that compelling a party to participate in mediation and pay costs is unwarranted. According to the Court, the trial court appointment was not to conduct an MSC but to mediate in derogation of the right of the parties to voluntarily participate in mediation.
In reaching its decision, the Court reviewed the differences in settlement options. Judicially ordered mediation imposes no penalty on parties for non compliance or pro forma compliance unless local rules prevail; Reitveld v. Rosebud Storage Partners, LP, 121 Cal.App.4th 250 (2004). Mandatory settlement conferences conducted by the court are governed by CRC 3.1380 et seq. but require settlement statements from each party; CRC 3.1380 (c).
Referees are limited in their authority if appointed by the court (CCP 639) and cannot serve as mediators in the same case; CRC 3.920 (b). The court can appoint a referee to conduct an MSC in a complex case or, after termination of a reference, appoint the referee to mediate; CRC 3.920. The Adv. Comm. comment to CRC 3.920 specifically approves appointing a referee to conduct an MSC in a complex case. The trial court had designated the litigation as a complex case.
According to the Court of Appeal in Jeld-Wen, Inc, the trial court appointed a referee to mediate, not conduct a settlement conference pursuant to CRC 3.920. Jeld-Wen, Inc. is subject to criticism on the ground the trial court did characterize the order to include ...“Mediator and/or MSC [Mandatory Settlement Conference] Judge.” In other words, the mediator wore three hats: a mediator; a mandatory settlement judge; a referee. The court evidently wanted the mediator to invoke the widest possible statutory and Rule authority to maximize settlement options in the case but the Court of Appeal emphasized that the trial court had primarily designated mediation as an impermissible option requiring the party to pay costs.
The holding of the case is described above. For mediators, the case is an excellent guide to compare different ADR processes a court can exercise. Mediation, mandatory settlement conferences, referees, CCP 998 and good faith settlements (CRC 3.1382) are alternatives to litigation but each is governed different rules. Or, the parties can achieve settlement independently and confirm the settlement in court; CCP 664.
Tue Jan 02, 2007
Arbitration: Health Care Service Providers
Health & Safety Code 1340 et seq. apply to health insurance coverage. Companies offering this service include a clause in the insurance contract providing for binding arbitration of any dispute arising out of the terms of coverage. Employers, acting as agent of the employees, negotiate these plans with the insurance company. Any employee who signs on to the plan is bound by its terms; Madden v. Kaiser Found. Hospitals, 17 Cal.3d 699 (1976). An action for declaratory and injunctive relief against state enforcement of these clauses was rejected in Viola v. Dept. of Managed Health Care, 133 Cal.App.4th 299 (2005).
Health & Services 1363.1(b) & (d) require health care service plans to clearly disclose, as a separate article, prominently displayed in the enrollment form and immediately before the signature line, that the enrollee submits to binding arbitration and both parties surrender the right to jury trial-including malpractice; H&S 1361(a). In Malek v. Blue Cross of Cal., 121 Cal.App.4th 44 (2004) the court held that these requirements were not adequately met and therefore no contract was formed; accord, Imbler v. PacifiCare of Cal., 103 Cal.App.4th 567; Robertson v. Health Net of Cal., Inc., 132 Cal.App.4th 1419 (2005) explains that "immediately before" means no intervening language between the text and signature line. Merely bolding the words "arbitration agreement" is insufficient to comply with the requirement of "prominently displayed". The whole agreement must be bolded.
Zembsch v. Sup.Ct., 2006 WL 3791296 * concurs with these cases, disagrees with the trial court finding the information was "bold" and refuses to enforce the agreement on the same grounds it refused to enforce the agreement in Robertson.
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Mon Jan 01, 2007
Arbitration: Class Action Waivers in Employment
In Konig v. U-Haul Co. of California, 2006 WL 3720248 (Dec. 21, 2006) the Court of Appeal held that a class action waiver contained in an employment agreement between plaintiff and his former employer defendant U-Haul is enforceable. The contract in Konig prohibited employees from consolidation of arbitrable cases or seeking class action status. In consumer cases, class action waivers cases are substantively unconscionable and unenforceable if the amounts alleged in the Complaint are “predictably small;” Discover Bank v. Sup.Ct., 36 Cal.4th 148, 162-163 (2005); Civ. Code 1670.5. In Konig, the plaintiff asserted his claim qualified as a general jurisdiction case, implicitly conceding the amounts sought were outside the Limited Jurisdiction category of $25, 000.00; CCP 85.
The amounts sought in Konig were not “predictably small” and, said the court, the employee was not a consumer-a factor heavily relied on in Discover Bank. The majority in Konig concluded that Discover Bank did not apply.
Although the holding of the case is straightforward, the opinion summarizes a number of procedural issues for counsel challenging arbitration clauses or seeking their enforcement:
Arbitration Clause: The contract in Konig expressly provided for arbitration of employment disputes under the FAA (9 U.S.C.1-16). The arbitration clause also added a provision that in the event the court held the contract did not “affect” commerce, as required by the federal statute, the rules of the CAA (CCP 1280 et seq.) would apply. In state and federal courts an employment dispute is subject to arbitration; Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991); Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 93 (2000).
Arbitration Rules: The contract also contained a clause incorporating the Rules of an arbitration service provider specifically outlining the conduct of an arbitration hearing. A court may consider these Rules governing procedure of the arbitration in the event of a disagreement between the parties; Dream Theater Inc. v. Dream Theater, 124 Cal.App.4th 527 (2005). Counsel should obtain a copy of the Rules immediately after a court orders arbitration or if the parties agree to submit to arbitration.
Appeal of Order to Arbitrate: The trial court granted defendant’s petition to compel arbitration and dismissed class action claims. Federal and California courts prohibit appeal of an order granting a petition to compel arbitration (only denial of a petition to compel arbitration is appealable; U.S.C. 16 (a) (3); CCP 1294 [a]), but the employee had sought class action status. The trial court order denying class action status to the plaintiff is subject to appeal.
Arbitration Clauses (Consideration):
Counsel for Konig included a clause in the employment contract that “your decision to accept employment or continue employment ...constitutes your agreement to be bound by the ...Policy [Arbitration Policy].” This language satisfies compliance with the policy in the event of later claims by an employee contending lack of consideration. Continued employment qualifies as adequate consideration; Armendariz, ibid.
Unconscionable Contracts: Konig reviews the procedural and substantive analysis of allegedly unconscionable arbitration clauses. The court also summarizes the holding of Discover Bank, the leading California case on class action and classwide arbitration waivers.
Konig is authority for enforcing class action waivers in employment litigation but counsel should delay citing the case pending a petition for review.