Negotiating Enforceable Employment Arbitration Agreements

Even so luminary a firm as O'Melveny has been smacked down by the courts (here, the Ninth Circuit) when trying to enforce employee arbitration agreements.  California lawyers would therefore be well-advised to read the opinion covered at the California Employment Law Report this week:  Arbitration Agreement Upheld Despite Employee's Argument It Was Not Mutual And Adhesive

Here's the clause:

I hereby agree to submit to binding arbitration all disputes and claims arising out of the submission of this application. I further agree, in the event that I am hired by the company, that all disputes that cannot be resolved by informal internal resolution which might arise out of my employment with the company, whether during or after that employment, will be submitted to binding arbitration. I agree that such arbitration shall be conducted under the rules of the American Arbitration Association. This application contains the entire agreement between the parties with regard to dispute resolution, and there are no other agreements as to dispute resolution, either oral or written.

This decision is made more interesting by the recent Parada decision (.pdf) (covered here and here) where the drafter's failure to attach the JAMS arbitration rules cited in the agreement was one of the reasons the Court concluded the arbitration clause was substantively unconscionable.  I think it's safe to say at this point in the development of California law on these issues that it's not malpractice for an attorney to fail to draft an enforceable arbitration clause.  But as the opinions multiply, you can be sure some employer will be looking around for someone to name its legal counsel as the source of his discontent, blame its law firm for having to bear the expense of litigation, and claim damages as a result. 

The best protection for drafters of arbitration clauses (particularly in California where the Courts remain suspicious of adhesion arbitration contracts) is to be familiar with all the case law on the topic in the last five years; to avoid any provision the Courts have used to tip the "sliding scale" in favor of non-enforcement and include those provisions which favorably incline the courts to enforce the clauses.  

Blawg Review #234

Sociologist Elise Boulding has said that we live in a “200 year present,” a “social space which reaches into the past and into the future” -- a space in which “we can move around directly in our own lives and indirectly by touching the lives of the young and old around us.” Miall, Ramsbotham and Woodhouse, Contemporary Conflict Resolution.

What does the 200-year present have to do with conflict resolution week?  It reminds us that new forms never really completely replace the old ones.  We continue to employ every technique we've ever used to suppress, avoid, deny, resolve, transform, or transcend conflict, including force (violent and non-violent such as injunctions subject of a Trial Warrior Blog post this week); thievery (the Trade Secrets Blog); shaming (which Scott Greenfield does to bloggers "looking for fights and dumb as dirt" and which Volokh suggests we do to health insurers); bullying (solutions to which appear at the Citizen Media Law Project); torture (still with us at the Crim Prof Blog); cheating (Make Yourself Better with Their Secrets at Concretely Ambiguous) ingratiation (at the Law School Expert); persuasive argumentation; appeal to third party authority; bargaining; communication; and, problem solving (The Tao of Advice at the Business of Creativity). 

Whichever dispute resolution mechanism you use, it should be much improved if you take up  juggling (as reported this week at Idealawg).

Transformative conflict resolution of the type covered by New York City police officer, Jeff Thompson at Enjoy Mediation, requires accountability (by lawyers, for instance, to the principle of justice at Law21); recognition (at JD Bliss); apology, amends, reconciliation (at Opinio Juris); power with (negotiation and cooperation at the Ohio Family Law Blog) instead of power over (at the Election Law Blog); and, interests rather than rights (at the Gay Couples Law Blog).

No brand of law-giver or enforcer has ever entirely left the scene.  Cops, negotiators, mediators (on the international scene at the Business Conflict Blog); conciliators, arbitrators, trial attorneys (marking tattoos as exhibits over at LawComix), corporate lawyers, legislators  (fomenting a Franken Amendment at the ADR Prof Blawg); judges (whether elected or appointed at Legally Unbound), and, juries (who might be biased at SCOTUS Blog). 

And of course the gadflies (wolf protection lawsuits anyone? at  Point of Law). 

Win, lose, settle, enjoin (at Charon QC) or simply give up (6 Ways We Gave Up Our Privacy at CSO Security and Risk).  We regulate crime and prescribe punishment (Polanski at Sentencing Law and Policy and The End of an Era at Defending People). 

We wage war (at Prawfs Blog) and seek peace (at the Delaware Employment Law Blog) as conflict inevitably erupts over Obama's (embarrassing) peace prize (at Balkinization).

And, lest we forget our primary purpose, we bend our efforts toward justice (which, according to BLT is not necessarily available to card-carrying members of the ACLU).

My own personal 200-year present spans the life of my maternal grandparents who were nine years old in 1909, and that of my step-children’s children, who (assuming they procreate on a reasonable schedule) should be ninety-five'ish in 2109[1]

My grandfather, born in 1900, witnessed the birth of electricity, saw the first automobile roll off an assembly line [2] and stood awestruck in a cornfield as one of mankind’s first airplanes took flight. [3]  Although we've progressed from bi-planes to jets and rockets (some of which may someday be green) we still fly balloons of the type first launched in 1783 -- both Goodyear Blimps and the backyard variety, covered this week by Legal Blog Watch as Law and More

asked here whether the shiny, flying, silver Jiffy Pop-looking craft tethered in the backyard of Richard Heene was an "attractive nuisance" under the law.

Grandpa's first war was, well, the First and his second was the Second,[4]  as if there'd never been any wars before the Great One. By the time I was born, mid-century, we'd fought the war to end all wars twice and knew we'd never survive a third

My imagined grandchildren, [6] born sometime between today and 2014, will not be strangers to any of my grandfather’s technologies. Despite the advent of compact fluorescent light bulbs, the early lives of my step-children's children will likely pass under the glow of the same incandescent lights that brightened granddad’s one-room school house. They will be transported to school in cars with internal combustion engines, learn the same alphabet from the same cardboard and paper books (as well as from the "e" variety) [7] and play many of the same games [8]  he did – hop scotch, jump rope and ring-around the rosy. 

Change will etch itself into the lives of my grandchildren as surely as it did my own, my parents' and my grandparents'.  Hybrids will give way to fully electric (and perhaps hemp-powered) [9] vehicles (effective or defective) and though electricity will continue to be  generated by hydroelectric dams, wind farms and nuclear power plants, some new and unimaginable source of power will surely push back the nights of my grand children's children. [10]

Law, politics, society and culture also exist in the 200-year present of conflict resolution.  [11] In my personal 200-year span, the law seems to have changed the most profoundly. Was it the law first and culture later?  Or do they weave our future together?

The first U.S. woman lawyer, Myra Bradwell, was admitted to practice a mere ten years before my grandmother was born. Mrs. Bradwell’s legal career was the subject of one of the sorriest U.S. Supreme Court decisions ever handed down, in which the Court opined,

The civil law as well as nature itself, has always recognized a wide difference in the respective spheres and destinies of man and woman. Man is, or should be, woman’s protector and defender.  The natural and proper timidity and delicacy which belongs to the female sex evidently unfits it for many of the occupations of civil life. The constitution of the family organization, which is founded in the divine ordinance, as well as in the nature of things, indicates the domestic sphere as that which properly belongs to the domain and functions of womanhood. The harmony, not to say the identity, of interests and views which belong, or should belong, to the family institution is repugnant to the idea for a woman adopting a distinct and independent career from that of her husband … for these reasons I think that the laws of Illinois now complained of are not obnoxious to the charge of any abridging any of the privileges and immunities of cities of the United States.

[12]

Another nineteen years would pass after Bradwell began her practice before she (and my nineteen year old grandmother) were guaranteed the right to vote. [13] And another 30 years would pass after my women's movement -- the Second Wave -- before we'd have our own  business magazine -   ForbesWoman (my part in it here).  And let us not forget that despite the 20th Century's great civil rights achievements, when America catches a cold, black America gets pneumonia.  See e.g. Problems All Around for Blacks in Big Law at Being a Black Lawyer.

My grandparents', parents' and step-children's 20th Century was dominated by genocide [14] on a scale and a technological precision unimaginable to our earlier forebears.  Mid-century brought with it the threat of nuclear annihilation but also liberated millions of people enslaved by colonialism.  We cured polio in my own lifetime with both "dead" and "live" vaccines (neither of them counterfeit) - a singular moment in scientific history during which no one took ownership of the cure and no one tried to stop others from seeking another, a problem Patently O addressed this week in Reverse Payments.

Whether god or satan, heaven or hell, war or peace "won" the twentieth century, the world's greatest peace-making body was created during it -- the United Nations.  And here in the U.S., the “living room war,” Viet Nam, coupled with the largest generation of adolescents ever to grace American society, ended the forcible induction of young men into the military[15]

With the recent discovery of our earliest ancestor, Ardi, our biological and social lives exist in a 4.4 million year now. Our physical bodies “evolve” in the womb along the same lines as did our species and, once born, we carry with us our earliest organs. [16] Most critical of these to conflict escalation and avoidance is our “fight-flight” mechanism – the amygdala.[17] And the most pertinent biological agents to promote the collaborative resolution of conflict are our “mirror neurons” which

 provide a powerful biological foundation for the evolution of culture . . . absorb[ing] it directly, with each generation teaching the next by social sharing, imitation and observation.

 [18]

As “exquisitely social creatures,” our “survival depends on understanding the actions, intentions and emotions of others.” Id. That our misunderstandings and cognitive biases -- mentioned by Volokh on Paternalism and Michael Carbone on reactive devaluation at Mediation Strategies this week -- threaten our survival as a species is undeniable (cf. Lawyers Must Survive or Face Extinction at the Lawyerist)

How we’ve manage to survive despite our tendency to misread one another’s actions, intentions and emotions, is often the subject of those who advise us how to choose and move juries -- here -- Anne Reed at Deliberations (explaining why "they" don't see things like "we" do here); and, the Jury Room (explaining why pain hurts more intensely when we believe it's been intentionally inflicted here). 

The Most Effective Conflict Resolution Technology is the Oldest

One of our true original gangsters, Al Capone, is reported to have said that “you can get much further with a kind word and a gun than you can with a kind word alone” and one of our greatest Presidents, Theodore Roosevelt said “speak softly and carry a big stick.”

Capone and Roosevelt didn't know it, but they were talking about the most effective (and most ancient) form of conflict resolution – tit for tat. In 1980, political Scientist Robert Axelrod asked game theory experts to submit computer programs designed to prevail in a game that provided the highest reward to cooperating pairs -- the famous Prisoner's Dilemma. (See also Max Kennerly's excellent post on Game Theory and Medical Malpractice Settlements at the Philadelphia Litigation and Trial Blog).

The winner of Axelrod's competition was a program named tit for tat.  Tit for tat was programmed to cooperate [19]  with its first encounter with any other programmed player.  It  rewarded cooperation with cooperation (just as networking will reward the savvy lawyer over at Chuck Newton's Ride the Third Wave) and punished non-cooperation with retaliation. Because Tit for Tat retaliated in the face of non-cooperation (just as a former employee did according to Hell Hath No Fury at Chicago Law Blogger) it was never repeatedly victimized. And because Tit for Tat “forgave” non-cooperators upon their return to cooperative game playing (as some believe Mr. Polanski should be forgiven over at the Marquette U. Law School Faculty Blog) it never got locked into mutually costly chains of mutual betrayal. [20]

As Robert Wright, author of The Moral Animal explained, had Tit for Tat been tossed into the game with 50 steadfast non-cooperators, there would have been a 49-way tie for first place. But none of the players' programs failed to cooperate in at least some circumstances, leaving Tit for Tat the clear victor.  According to Wright, humans, like the programs in Axelrod's competition, are evolutionarily “designed” to cooperate under at least some circumstances. The engine and benefit of cooperation is present in our neurochemistry.  When scientists observed the brain activity of volunteers playing the Prisoner’s Dilemma game, for instance, they found that the participants' “reward circuits” were activated and their impulsive "me first" circuits inhibited when they cooperated. Cooperation, retaliation, forgiveness and a return to cooperation. Tit for Tat. 

Laws and Lawyers

First and most importantly, I suppose, are the social media signs that you're "tweeting" like a lawyer over at the Social Media Law Student Blog.  Why first or important?  Know thyself.  Everything else follows that.

We don't "dis" lawyers here at the Negotiation Blog.  We simply remind ourselves that our primary purpose is the promotion of justice, with a stable societal order closely behind.  Most people don't understand, for instance, that Shakespeare's famous the first thing we do, let's kill all the lawyers was not an insult.  In King Henry IV, Act IV, Scene II, Shakespeare's sentiment was not his own, but that of a revolutionary who wished to destroy the social order.

The historic "present" of laws and lawyers is in the thousands, not simply the hundreds, of years. Hammurabi (make of his choice for the memorialization of his laws what you will) was the sixth king of Babylon, remembered for creating -- in his own name (and likeness?) - the first written and systematic legal code. 

These laws provided for a mix of physical punishment - 60 lashes with an ox hide whip - ‘measure for measure’ awards (still with us in the form of lethal injection as covered by The StandDown Texas Project) – eye for eye, bone fracture for bone fracture – and monetary compensation – 20 shekels for tooth injuries – (preserved by workplace injury awards such as those discussed at the Workers Compensation Blog) depended not only upon the type of injury, but the social classes involved in the loss, i.e., ‘measure for measure’ sanctions were specified for losses among the upper classes while monetary awards were required for losses caused to and by commoners (reminding us that disrespect still too often turns on social status or "outsider" classification as discussed at Balkinization this week).  [23] 

For the wrongful killing of another, for instance, the victim’s kin were paid according to the social status of the deceased party. Thus the ‘man price’ for killing a peasant was 200 shillings and that for a nobleman 1200 shillings. Payments were not, however, tailored to the loss, but fixed according to types of affront, a distinction we continue to make when we punish intentional torts more severely than negligent ones.  [24]

Criminal law and civil, it all comes down to a process that is "due" (a topic covered in a blistering post about tea-partiers and other "protectors" of the Constitution at the Criminal Jurisdiction Law Blog) and a set of guidelines against which we can exercise some small degree of control over our own commercial and personal futures (like those subject of Delays Not "Party Time, Excellent" for Subcontractor at the Construction Contract Review).

Lawyers, litigators and trial lawyers are too often demonized by the ADR community as if you could get someone to sit down to negotiate without first pointing the gun of litigation at their heads; I salute you (and myself, for that matter!) for bringing us all to the bargaining table.  See Steve Mehta's recent post at Mediation Matters, Factors When Peace Makes Sense for a note that touches upon the symbiotic relationship between litigation and mediation, litigators and mediators.

I shouldn't cite single legal blogs twice, but I cannot resist this quote of Scott Greenfield's on another pundit's view of the future lawyers have in store for them, i.e., 

shucking oysters for a living if we don't accept a future of lawyers being piece workers in factories, sending our work off to Bangalore in pdf files and complementing people on their choice of forms at Legal Zoom.

Legal Rebels:  the Sky is Falling at Simple JusticeCharon QC also weighs in on the ABA Legal Rebels project here.

Arbitration

Which came first? Public civil trials or private arbitrations? You’ll be surprised, I’ll wager, to hear that arbitration was one of the earliest forms of dispute resolution, practiced by the juris consults of the Roman Empire. Roman arbitration predates the adversarial system of common law by more than a thousand years. [25]

Ah, the glory of Rome! The juris consulti were (like too many mediators) amateurs who dabbled in dispute resolution, raising the question whether they (and we) should be certified or regulated as Diane Levin asks at The Mediation Channel this week.  The Roman hobbyists gave legal opinions (responsa) to all comers (a practice known as publice respondere). They also served the needs of Roman judges and governors would routinely consult with advisory panels of jurisconsults before rendering decisions. Thus, the Romans – god bless them! - were the first to have a class of people who spent their days thinking about legal problems (an activity some readers will recall Ralph Nader calling "mental gymnastics in an iron cage").

18th Century Dispute Resolution Technology:  The (Inevitably Polarizing) Adversarial System

It was Buckminster Fuller who famously opined that the "significant problems we face cannot be solved at the same level of thinking we were at when we created them."  If you keep this aphorism in mind for the remainder of this post, you'll likely have some extraordinarily innovative comments to make in the comment section below.

As the Law Guru wiki reminds us, we can trace the adversarial system to the "medieval mode of trial by combat, in which some litigants were allowed a champion to represent them."  We owe our present day adversarialism, however, to the common law's use of the jury - the power of argumentation replacing the power of the sword.

The Act abolishing the infamous Star Chamber in 1641 also granted every "freeman" the right to trial by "lawful judgment of his peers" or by the "law of the land" before the Crown could "take[] or imprison[]" him or "disseis[e] [him] of his freehold or liberties, or free customs."  Nor could he any longer be "outlawed or exciled or otherwise destroyed."  Nor could the King "pass upon him or condemn him." 

English colonies like our own adopted the jury trial system and we, of course, enshrined that system in the Fifth, Sixth, and Seventh Amendments.  Whether this 17th century dispute resolution technology can be fine-tuned to keep abreast of 21st century dispute creation technology (particularly in the quickly moving area of intellectual property) remains one of the pressing questions of legal and ADR policy and practice, particularly in a week in which a Superior Court verbally punished the lawyers before it for filing The Most Oppressive Motion Ever Presented (see the Laconic Law Blog).  The motion? 

Defendants['] . . . motion for summary judgment/summary adjudication, seeking adjudication of 44 issues, most of which were not proper subjects of adjudication.  Defendants’ separate statement was 196 pages long, setting forth hundreds of facts, many of them not material—as defendants’ own papers conceded.  And the moving papers concluded with a request for judicial notice of 174 pages.  All told, defendants’ moving papers were 1056 pages.

Id. (and ouch!)  On a less Dickensian note (think Bleak House) take a look at the IP Maximizer's post on IP litigation not being smart source of revenue for inventors

Mediator, author and activist, Ken Cloke, suggests that interest-based resolutions to conflict must replace power and rights based resolutions if we expect to create a future in which justice prevails.  As Ken wrote in Conflict Revolution:

Approaching evil and injustice from an interest-based perspective means listening to the deeper truths that gave rise to them, extending compassion even to those who were responsible for evils or injustices, and seeking not merely to replace one evil or injustice with another, but to reduce their attractiveness by designing outcomes, processes, and relationships that encourage adversaries to work collaboratively to satisfy their interests.

Evil and injustice can therefore be considered byproducts of reliance on power or rights, and failures or refusals to learn and evolve.

All political systems generate chronic conflicts that reveal their internal weaknesses, external pressures, and demands for evolutionary change. Power- and rights-based systems are adversarial and unstable, and therefore avoid, deny, resist, and defend themselves against change. As a result, they suppress conflicts or treat them as purely interpersonal, leaving insiders less informed and able to adapt, and outsiders feeling they were treated unjustly and contemplating evil in response.

As pressures to change increase, these systems must either adapt, or turn reactionary and take a punitive, retaliatory attitude toward those seeking to promote change, delaying their own evolution. Only interest-based systems are fully able to seek out their weaknesses, proactively evolve, transform conflicts into sources of learning, and celebrate those who brought them to their attention.

These are the words I leave with the readers of Blawg Review #234 because they are the ones that informed my personal and professional transformation from a legal career based on rights and remedies to one based upon interests and consensus. 

Whatever my own personal 200-year present was, is and will be, it is pointed in the direction of peace with justice, with an enormous and probably unwarranted optimism best expressed by the man after whom my law school was namedMartin Luther King, Jr.  - the arc of history is long, but it bends toward justice.

Blawg Review has information about next week's host, and instructions how to get your blawg posts reviewed in upcoming issues. Next week's host, Counsel to Counsel, will devote its round-up of the week's best legal posts to the Great Recession.



[1]             See the WSJ Law Blog’s post on the evolving law on gay marriage this week – Procreat[ion] Not Required.

[2]             Alas, there will always be lemons over at the Texas Lemon Law Blog (save those repair invoices!)

[3]             See Ruth Bader Ginsberg Hospitalized at the Volokh Conspiracy, reporting on Ginsberg’s fall from the seat of an airplane before take-off.

[4]             See the Law History Blog on Brewer’s Why America Fights.

[6]             Grandchildren who will not, I hope, have to deal with my Alzheimers, the perils of which are described at the Slutsky Elder Law and Estate Planning Blog.

[7]             Though, of course, e-books will be read side-by-side with hard copy as paper and cardboard eventually goes the way of Colonial era hornbooks. See Downloadable e-Books Change the Face of Brick and Mortar Libraries at the Law Librarian Blog.

[8]              Those games will, of course, exist side by side the video variety, many of which are recommended as Tools for Special Needs Students and Educators at the Adjunct Law Prof Blog this week.

[9]               See Hemp and Audacity at the U.S. Ag and Food Law Policy Blog.

[12]             Alas there’s still a gender gap as described this week at Ms. JD.

[13]             Voting rights are still a matter of concern today, of course. See Judge Says Virginia Violated Rights of Overseas Voters at the Blog of Legal Times.

[14]             See Rachel Anderson’s Law Blog on the scope of immunity for foreign officials that Anderson believes may have important implications for Plaintiffs seeking recompense for genocide.

[15]             One generation wants out and the other wants in. See Don’t Ask, Don’t Tell, Don’t Teach at Sexual Orientation and the Law Blog.

[16]             Earlier scientific theory posited that each human embryo (see Embryo Mix-Up at the Proud Parenting Blog) passes through a progression of abbreviated stages that resemble the main evolutionary stages of its ancestors, i.e., that the fertilized egg starts as a single cell (just like our first living evolutionary ancestor); as the egg repeatedly divides it develops into an embryo with a segmented arrangement (the “worm” stage); these segments develop into vertebrae, muscles and something that sort of looks like gills (the “fish” stage); limb buds develop with paddle-like hands and feet, and there appears to be a “tail” (the “amphibian” stage); and, by the eighth week of development, most organs are nearly complete, the limbs develop fingers and toes, and the “tail” disappears (the human stage). It turns out that this one-to-one correlation was too simplistic, but it remains safe to say that our biological development still passes through several stages that “recapitulate” the evolution of our species.

[17]          The amygdala is a region of the brain that permits the formation and storage of memories associated with emotional events. It permits us to “read” the emotional responses of our fellows and is thought to facilitated our ability to form relationships and live and work in groups. It is also the source of our “fight or flight” response to danger.

[18]             In Cells that Read Minds, New York Times Science writer Sandra Blakeslee explained:

Studies show that some mirror neurons fire when a person reaches for a glass or watches someone else reach for a glass; others fire when the person puts the glass down and still others fire when the person reaches for a toothbrush and so on. They respond when someone kicks a ball, sees a ball being kicked, hears a ball being kicked and says or hears the word "kick."

 “When you see me perform an action - such as picking up a baseball - you automatically simulate the action in your own brain,” said Dr. Marco Iacoboni, a neuroscientist at the University of California, Los Angeles, who studies mirror neurons. ”Circuits in your brain, which we do not yet entirely understand, inhibit you from moving while you simulate,” he said. ”But you understand my action because you have in your brain a template for that action based on your own movements. “

[20]             Check out the post on the Betrayal of Corporate Clients at the Investment Fraud Lawyer Blog.

[21]             Wrongful death compensation over at the Product Liability Law Blog.

[22]             Looking toward the future, the Neuroethics and the Law Blog predicts that in the “experiential future, we will have better technologies to measure physical pain, pain relief, and emotional distress. These technologies should not only change tort law and related compensation schemes but should also change our assessments of criminal blameworthiness and punishment severity” here.

[23]             This week Beck and Herrmann at the Drug and Device Law Blog note that “shame works wonders” in their post on the Free Speech Challenges to the FDA.

[24]             Intentionally left blank.

[25]             ADR professionals are often heard critics of the adversarial system, as can be seen over at the Australian Dispute Resolvers Blog where author Chris Whitelaw (really??) quotes the Journal of Law and Medicine as follows:

The adversarial system of medical negligence fails to satisfy the main aims of tort law, those being equitable compensation of plaintiffs, correction of mistakes and deterrence of negligence. Instead doctors experience litigation as a punishment and, in order to avoid exposure to the system, have resorted not to corrective or educational measures but to defensive medicine, a practice which the evidence indicates both decreases patient autonomy and increases iatrogenic injury.

 (Iatrogenic, by the way, is a fancy term for “we have know idea whatsoever what the source of this ailment is). Chris is looking for comments so run on over there if you’ve been thinking about medical malpractice litigation during the marathon American health care debates.

 

California Courts May Not Require Parties to "Negotiate in Good Faith"

Although a California Court may properly sanction a non-party insurance carrier who possesses the authority to settle litigation for its failure to participate in a mandatory settlement conference, there is no statutory (nor inherent) authority given the Court to sanction the carrier or a party for its purported failure to negotiate in "good faith."  As the Court in Vidrio v. Hernandez (2d DCA) explained today:

In sum, even were we to agree with the trial court's assessment of the conduct of counsel and the [insurance] adjuster, the failure to increase a settlement offer or to otherwise participate meaningfully in settlement negotiations violates no rule of court and is not a proper basis for an award of sanctions.11 (See, e.g., Triplett v. Farmers Ins. Exchange (1994) 24 Cal.App.4th 1415, 1424 [“[w]e eschew any notion that a court may effectively force an unwilling party to settle by raising the specter of a post hoc determination that failure to do so will be evidence of failure to participate in good faith”]; Sigala v. Anaheim City School Dist., supra, 15 Cal.App.4th at p. 669 [“„[a] court may not compel a litigant to settle a case, but it may direct him to engage personally in settlement negotiations, provided the conditions for such negotiations are otherwise reasonable‟”].) [Defendant] filed an appropriate settlement conference statement; her lawyer and Mercury [the insurance carrier] attended the conference and participated in it. While the trial court‟s frustration at the parties‟ lack of movement is understandable, no more was required.
 

In particular, the Court of Appeal, held that the Court was not at liberty to "judge" whether the defendant and its carrier "should have" offered more than had previously been offered at a mediation either because the case was "worth" more or because the offer was so low in light of the attorneys fees and costs that would likely be incurred at trial.

I believe most mediators would approve of this ruling, even though it applies only to settlement conferences and not to mediations, the latter of which is protected from the Court's inquiry by Evidence Code section 1119.  Whether or not a mediator, a settlement judge, a party or a trial judge believes a defendant "should" offer more or a plaintiff "should" accept less by way of settlement, should not form the basis of an award of sanctions.  Not only would such a rule decrease citizens' trust and respect for the Courts, whose job it presumably is to provide a forum in which litigated disputes may be tried, such a rule would impermissibly chill the parties' Constitutional right to a jury trial.  

 

Pursuing a Divide and Conquer Negotiation Strategy? Don't Miss New California Case Law on Good Faith Settlement Findings

Challenges to good faith settlements that cut off the rights of non-settling defendants to seek indemnification and contribution from settling defendants are nearly always doomed to failure.  Trial courts are understandably eager to clear their dockets and there's no docket-clean-up pitcher like the first defendant to settle.  Deny the motion and bring a settled defendant and his trial-ready resources back in to the litigation when the first defendant-domino has just successfully toppled over?   Not likely, my friend. Not in the trial court at any rate.

These motions are so difficult to oppose that I've seen a target defendant threaten a marginal player (my client) with sanctions just for challenging the target's very low six-figure settlement in an eight-figure antitrust action.

It looks like low value settlements got just a little bit harder to defend yesterday when the Second District Court of Appeal reversed a trial court's good faith settlement finding in  Long Beach Memorial Medical Center v. Superior Court (Conners).

Best quotation:  "The hospital contends that the physicians‟ $200,000 settlement -- representing 2 percent of plaintiffs‟ $10 million damages estimate -- was so far out of the “ballpark” it was not even in the parking lot."  With a first runner-up to "If section 877.6 is to serve the ends of justice, it must prevent a party from purchasing protection from its indemnification obligation at bargain-basement prices."

The Court of Appeal relied upon the following "facts" in finding that the trial court abused its considerable discretion in granting a good faith motion to defendant physicians in light of defendant hospital's opposition.

  • payment of $200,000 in settlement for a $10 million claim, which the appellate court found to be "wholly disproportionate."  As the Court opined "[e]ven a slight probability of liability on [the settling doctor's] part would warrant a contribution more significant than 2 percent."
  •  the "evidence" supporting the court's finding that the settling physician's probable fault was "not de minimis,"  which appears to have been based upon Plaintiff's attorney's fault analysis (not generally known for its unbiased nature) and the physicians' counsel's candid (?) suggestion that his clients' contribution to a global settlement might be in the range of $1.5 million;
  • the availability of $2 million in coverage, which "militated against a good faith determination" because the settlement constituted only 10% of available policy limits [carrier alert here!];
  • the non-settling Hospital's contention that the physicians and their attorneys engaged in "bad faith tactics" during two mediation sessions -- a factor the appellate court acknowledged it was barred by mediation confidentiality from considering -- but which it neatly avoided by concentrating on post-mediation negotiations; /*
  • the timing of the physicians' settlement offer, which suggested to the appellate court that their "reason for entering into the settlement with plaintiffs was to cut off the hospital's . . .  right to indemnity from the physicians" (I thought that was a legitimate reason to settle litigation but see the Court's citation to Mattco Forge, stating that when a defendant  “enters into a disproportionately low settlement with the plaintiff solely to obtain immunity from the cross-complaint, the inference that the settlement was not made in good faith is difficult to avoid.” Mattco, supra (emphasis added); and,
  • a consideration I've never seen defeat a good faith motion before - that a settlment "dictated by the tactical advantage of removing a deep-pocket defendant . . . is not made in 'good faith' consideration of the relevant liability of all parties. . . ." (leading to the question whether we're now required to consider the interests of clients other than our own in entering into a settlement agreement on a contested claim)

If this case isn't depublished (an unfortunate California practice) or taken up for review, it will bear re-reading and deeper thinking about the stategy and tactics of breaking away from the mob to cut a separate deal beneficial to one's own client without "consider[ing] . . the relevant liability of all parties . . . "

Comments welcome!!

 

________________

*/  This is a good place to note the importance of either indicating in the parties' post-mediation written negotiations that the mediation is continuing (hence the communications remain absolutely protected) or that the mediation has concluded (hence bringing those post-mediation settlement negotiations outside the scope of the strictly enforced mediation confidentiality restrictions).

No Review of Discretionary Stay by Arbitrator

Thanks LACBA for the daily case reports!


Trial court lacked authority to review discretionary, prehearing order by arbitrator, who imposed stay on arbitration of dispute concerning uninsured motorist policy until plaintiff--who was driving on work-related business in company car provided by employer when rear ended--pursued workers’ compensation benefits in light of Insurance Code Sec. 11580.2.

Briggs v. Resolution Remedies

Oops!! $6,000 in Attorney Sanctions for Failure to Notify Appellate Court Case Had Settled

Nothing irritates a court more than doing unnecessary work because counsel fails to comply with the local rules.  Here in Huschke v. Slater, the Court was sufficiently put out to order that the attorney "personally" pay the sanctions ("don't even think about asking your client to pay, buster!") and to order the opinion published for all the world to see.

Like that pesky appeal where the Court called my client a "school yard bully" for failing to stipulate to the genuine nature of the insurance policies at issue (and no I am not providing a link to that one).  Ordered it published too. Grrrrrrrr.

I'm filing this one under "Advice to Young Lawyers" in the hope that they do not have to learn how to ignite the appellate court's wrath the hard way.

Hey!  Let's all be careful out there!

Thottam Confidentiality: Just Follow the Statute; Don't Get Fancy

 

 

 

 

 

 

 

 

 

 

 

 

From the Los Angeles Daily Journal

November 21, 2008

CONFIDENTIALITY QUESTION HEADED BACK TO TRIAL COURT  By Greg Katz

LOS ANGELES - The state Supreme Court has denied review of an appellate decision that had become a cause celebre for mediators concerned about confidentiality precedents.

Instead, the case will head back for a new trial that includes a dispute over whether a hand-drawn chart, created in a probate mediation and initialed dozens of times by the parties, should have been admissible as evidence.

 A trial court had said that it was not, but the 2nd District Court of Appeal overturned the decision, saying it was in effect a settlement agreement and admissible under Evidence Code Section 1123(c). Thottam v. Thottam, B196933 and B196934 (Cal App. 2nd Dist., filed Sept. 3, 2008).

Many mediators expressed concern that the appellate ruling hurts mediation confidentiality by making draft documents admissible, and the case drew amicus letters from pro-ADR lobbying group California Dispute Resolution Council and others.

But the high court Wednesday denied review. 

Tyna Orren, who won the appeal for Los Angeles-based attorney and political activist Peter Thottam, said she was happy but unsurprised that the court didn't take up the case. 

"The reason mediators don't need to be concerned is that the opinion now tells them precisely what they need to do to avoid what happened in Thottam. Nobody should sign anything which leaves an opening for anything to be divulged," she said.

The 2nd District panel reasoned that the document appeared to be a settlement agreement, and that the parties had signed a premediation agreement allowing for the admissibility of mediation evidence that supported any agreements reached. That qualified the document for an exception in mediation confidentiality statutes.

"Whether or not the document contained all necessary details for enforcement, it certainly contained adequate manifestation of mutual consent to material terms which were capable of being made certain," making it a settlement agreement, Presiding Justice Norman L. Epstein wrote for the unanimous panel.

Justices Thomas L. Wilhite Jr. and Steven C. Suzukawa joined in the opinion.

Beverly Hills-based mediator Victoria Pynchon, who closely followed the case, said it was more about interpretation of the mediation agreement than about confidentiality, that the Supreme Court has vigorously defended the state's confidentiality laws in the past.

Attorneys should rely strictly on those laws when drafting mediation agreements, she said. "Just quote the statute or refer to the statute. Don't get fancy."

Stephen L. Kaplan of Laguna Niguel's Hicks, Mims, Kaplan & Burns, who had petitioned for review, said he was disappointed but expected that the new trial would go in favor of his clients, as the first one had.

The only difference: "There'll be one more piece of evidence," Kaplan said.

greg_katz@dailyjournal.com

Will Dems Ban Mandatory Consumer/Employee Arbitration?

This just in on the same day I attended the AAA's Expedited Case training.  As an ADR practitioner I favor party "choice and voice" in all dispute resolution venues, meaning that I frown on adhesion contracts of all types, including those that are unfairly imposed upon consumers and employees.  The devil in the detail, of course, is the meaning of the term "unfairly."  I am unfamiliar with the proposed law subject of this article and neither support nor oppose it.  Just keeping my readers informed.

Democratic Party control could ban mandatory arbitration, expert says

11/17/08

Jan Dennis, Business & Law Editor
217-333-0568; jdennis@illinois.edu

LeRoy
Click photo to enlarge
Photo by L. Brian Stauffer
Michael LeRoy, a professor of law and of labor and employment relations, says Democratic Party control in Washington could restore lawsuits as an option for workers and consumers now forced to settle disputes through mandatory arbitration that gives employers and businesses an unfair edge.
CHAMPAIGN, Ill. — Democratic Party control in Washington could restore lawsuits as an option for workers and consumers now forced to settle disputes through mandatory arbitration that gives employers and businesses an unfair edge, a University of Illinois labor law expert says.

Michael LeRoy predicts a bill sponsored by Democrats that would bar companies from imposing arbitration will likely be approved next year when Democrats take over the White House and add to their majorities in Congress.

The measure, introduced last year but stalled by the prospect of a Bush administration veto, would halt a shift that has grown since a 1991 U.S. Supreme Court ruling allowing firms to require arbitration rather than courts to resolve disputes, he said.
For full article click here.

Here's the summary of the bill courtesy of the Consumerist:


Arbitration Fairness Act of 2007 - Declares that no predispute arbitration agreement shall be valid or enforceable if it requires arbitration of: (1) an employment, consumer, or franchise dispute, or (2) a dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power.

Declares, further, that the validity or enforceability of an agreement to arbitrate shall be determined by a court, under federal law, rather than an arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement.

Exempts arbitration provisions in collective bargaining agreements from this Act.

Fact that Class Settlement Was Reached in Mediation Does Not Prevent Objectors from Discovering Factual Basis for Mediated Terms

Excerpts from Kullar v. Foot Locker Retail, Inc. below.  Comment will follow.

[T]he fact that the settlement was reached during mediation to which Evidence Code section 1119 applies does not eliminate the court’s obligation to evaluate the terms of the settlement and to ensure that they are fair, adequate and reasonable. If some relevant information is subject to a privilege that the court must respect, other data must be provided that will enable the court to make an independent assessment of the adequacy of the settlement terms.

[T]he fact that communications were made during the mediation and writings prepared for use in the mediation that are inadmissible and not subject to compulsory production does not mean that the underlying data, not otherwise privileged, is also immune from production. (Evid. Code, § 1120 [“Evidence otherwise admissible or subject to discovery outside of a mediation . . . shall not be or become inadmissible or protected from disclosure solely by reason of its introduction or use in a mediation . . .]; Rojas v. Superior Court (2004) 33 Cal.4th 407, 417; Wimsatt v. Superior Court (2007) 152 Cal.App.4th 137, 157-158.)

Foot Locker’s payroll records, for example, if relevant to the quantification of the claims being settled, are subject to discovery and may be introduced in opposition to the settlement even if they were disclosed to class counsel during the mediation, and even if class counsel was shown only a summary or analysis of those records that is not itself subject to production because prepared for use in the mediation.

                           *                           *                      *

Following the opportunity for limited discovery, the trial court should redetermine whether the proposed settlement is fair, adequate and reasonable. The court may and undoubtedly should continue to place reliance on the competence and integrity of counsel, the involvement of a qualified mediator, and the paucity of objectors to the settlement. But the court must also receive and consider enough information about the nature and magnitude of the claims being settled, as well as the impediments to recovery, to make an independent assessment of the reasonableness of the terms to which the parties have agreed.

We do not suggest that the court should attempt to decide the merits of the case or to substitute its evaluation of the most appropriate settlement for that of the attorneys. However, as the court does when it approves a settlement as in good faith under Code of Civil Procedure section 877.6, the court must at least satisfy itself that the class settlement is within the “ballpark” of reasonableness. (See Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499-500.)

While the court is not to try the case, it is “ ‘called upon to consider and weigh the nature of the claim, the possible defenses, the situation of the parties, and the exercise of business judgment in determining whether the proposed settlement is reasonable.’ ” (City of Detroit v. Grinnell Corp., supra, 495 F.2d at p. 462, italics added.) This the court cannot do if it is not provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.

By remanding we do not suggest that the proposed settlement ultimately may not pass muster. We hold only that the trial court may not finally approve the settlement agreement until provided with sufficient information to assure itself that the terms of the agreement are indeed fair, adequate and reasonable.

FEHA Attorney Fees Unavailable Under Cal Civil Code 998

Civil Procedure Sec. 998--which permits a defendant to shift costs to plaintiff if plaintiff rejects a settlement offer and then fails to obtain a more favorable judgment--does not eliminate substantive requirements for awarding attorney fees to a prevailing Fair Employment and Housing Act defendant; prevailing defendant in FEHA action is only entitled to recover fees if plaintiff rejects defendant's settlement offer, fails to obtain a more favorable judgment, and plaintiff's action was without any legal or factual foundation. Mangano v. Verity, Inc.