Southern California Arbitration Mediation and Conflict Resolution : Settle it Now Dispute Resolution Services : Serving Los Angeles, Beverly Hills, Century City : Settle It Now Negotiation Blog

Just a quick note on a recent appellate case here holding that where the parties have agreed to conduct their arbitration in accordance with California law, the Federal Arbitration Act does not preempt state law on arbitrability.  

The case is Best Interiors, Inc. v. Millie and Severson, Inc., here.  This is a construction case.  As soon as I read it, I'll get back to you on whether there's anything of value to be said about drafting, enforcing or resisting the enforcement of arbitration clauses in construction contracts.   

• Print
• Comments
• Trackbacks

You just slip out the back, Jack
Make a new plan, Stan
You don’t need to be coy, Roy
Just get yourself free
Hop on the bus, Gus
You don’t need to discuss much
Just drop off the key, Lee
And get yourself free 
  

Where matchmaking service moved to compel arbitration of clients’ action alleging that  "consulting agreements" were fraudulently induced, and agreements were [within a] class of contracts regulated by state law expressly rendering nonconforming contracts void and unenforceable, agreements’ failure to expressly set forth language required under dating service statutes--Civil Code Sec. 1694, et seq.--rendered [them] and [the] arbitration provisions [contained in them] unenforceable. Duffens v. Valenti - filed March 27, 2008, Fourth District, Div. One Cite as 2008 SOS 1811

• Print
• Comments
• Trackbacks

Here's the opinion.  Comment later.

• Print
• Comments
• Trackbacks

Check out California appellate attorney Greg May's post today -- A Dilemma for Some Defendants Who Seek to Arbitrate here.  Excerpt below.  

It’s a long-held rule in California that a defendant sued on a contract may recover attorney fees pursuant to a provision in the contract even if the defendant prevails on a theory that he was not a party to the contract or that the contract is nonexistent, inapplicable, invalid or unenforceable. The rule exists in order to further the purpose of Civil Code section 1717, which is to make unilateral fee provisions reciprocal. . . . . 

Consider now whether a similar rule should apply to arbitration provisions. . . . . Should a defendant be able to compel arbitration pursuant to a contractual arbitration provision in a contract alleged by plaintiff even if the defendant denies the existence of that contract?

The court of appeal says “no” in Brodke v. Alphatec Spine Inc., case no G038591 (4th Dist. Mar. 20, 2008). .......................

For the full post, click here.

• Print
• Comments
• Trackbacks (1)

When we bought our house 6 years ago, Mr. Thrifty struck all ADR provisions from the sales contract.  He's come to respect ADR much more in the last few years.  Still, I believe he'd choose access to the justice system over its alternatives.

Though Mr. Thrifty -- a litigator -- was bold enough to alter a form contract, few other home buyers would be.  

Now it appears that the California courts will protect home buyers from arbitration agreements buried in the voluminous documents all home buyers sign when they purchase a house.  See Bruni v. Dideon, just decided by the Fourth Appellate District of California.  Summary below courtesy of the Metropolitan News-Enterprise. 

Where homebuyers alleged that arbitration clause was contained in preprinted and "voluminous" documents, there was no negotiation, they understood the documents were being presented to them on a "take it or leave it" basis, they [were] generally . . not familiar with real estate documents or with "legalese," were not told to read to read warranty--which contained arbitration provisions . . . .  and were not given enough time to read the warranty or any of the other documents [prior to signing, the] issue as to whether homebuyers knowingly agreed to arbitrate was subject to judicial determination regardless of provision requiring that issues regarding enforceability of arbitration clause be submitted to arbitration.

Where . . . plaintiffs had to accept arbitration provisions if they wanted to buy a house, [the]provisions were part of a preprinted form contract, any attempt to negotiate . . . . the terms of the warranty would have been fruitless, the provisions took up one page of a 30-page booklet that was buried in [a] "voluminous" stack of purchase and sale documents, and plaintiffs were never asked to read the arbitration provisions before signing, those provisions were adhesive and unconscionable, and trial court correctly exercised its discretion by refusing to enforce them.

• Print
• Comments
• Trackbacks

Why do you think they call it recess?

When tempers flare to the boiling point, arbitrators who fail to prevent recess assaults are immune from suit according to the New Jersey appellate court, as detailed in this Law.com article, Arbitrator is Not Liable for Attorneys Alleged Assault here.  Excerpt below:

When fists fly at an arbitration proceeding, the arbitrator isn't liable for not averting the altercation, a New Jersey appeals court says in an interpretation of the model Arbitration Act.

The judges, in Malik v. Ruttenberg, A-6615-06, reversed a trial court's refusal to dismiss a suit charging an arbitrator knew of a lawyer's dangerous propensities yet did not remove him from the case, and an assault allegedly ensued when a recess was called.

The appeals court found that decisions relating to control of the arbitral forum are within the immunity accorded by the N.J. Arbitration Act, adopted from the model act devised by the National Conference of Commissioners on Uniform State Laws.

Eric Tuchman, the general counsel for the American Arbitration Association -- a defendant in the case -- says the ruling is the first in the nation to interpret the act's immunity provision.

The act has been adopted in 13 states, including New Jersey, and is under consideration in four others.

"Opinions like this really permit arbitrators and sponsoring organizations to preside over and administer cases in a way that is free and impartial," Tuchman says.

For remainder of article, click here.

• Print
• Comments
• Trackbacks

. . . the Honorable Sam Cianchetti, Los Angeles Superior Court Judge (ret.) for his decision awarding $8.4 million in punitive damages, for a total $9 million award, against Health Net In the Arbitration between Patsy Bates and Health Net, et al. 

Los Angeles Times article here and the opinion itself here.

UPDATE:  For coverage of this case within the industry see The National Underwriter post here.

• Print
• Comments
• Trackbacks

This one is Lowden v. T-Mobile USA decided today by the Ninth Circuit.

We conclude that the Washington State Supreme Court’s decision in Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007), establishes that T-Mobile’s arbitration provision is substantively unconscionable and unenforceable under Washington state law, and that there is no federal preemption in light of our decision in Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976 (9th Cir. 2007).

• Print
• Comments
• Trackbacks

(right:  '94 quake damage)

Though I've participated (as co-mediator) in the settlement of some of these Northridge Earthquake cases, I'm going to let the insurance bloggers address the wisdom of this decision -- just sent down by the California Court of Appeal in Village Northridge Homeowners Association v. State Farm Fire and Casualty Co.

As the Court itself acknowledged, under its holding,   

a plaintiff could settle a disputed insurance claim, keep the money paid, and then sue for fraud (rather than on the released claim) if it was fraudulently induced to settle the claim by a misrepresentation of policy limits.

We must say we're surprised by this holding and imagine the insurance carriers are as well.  The "parade of horribles" raised by State Farm, however, was dismissed as exaggerated by the appellate court, stating that the

consequences of applying this principle are not dire. Indeed, to avoid them, the insurer need only avoid misrepresenting policy limits when it settles claims. We seriously doubt insureds who settle their claims can be expected thereafter to assert groundless claims of misrepresentation of policy limits on a routine basis.

Is this a case of bad facts making bad law?  Or am I missing something? 

I'd love to hear from Declarations and Exclusions blogger George Wallace on this one!  George?

• Print
• Comments
• Trackbacks

Another reminder of the narrow scope of Evidence Code section 1152's protections has just come come down from California's Second District Court of Appeal in Zhou v. Unisource Worldwide, Inc. here. 

Before discussing the Zhou holding, we remind our readers that in California, at any rate, the differences in protections between mediated settlement communications (absolute protection from disclosure) and non-mediated settlement communications (limited protection) make it imperative that counsel clearly specify, in writing,  whether the settlement conference they are about to attend is a  "mediated" conference -- and hence protected by Evidence Code section 1119 -- or a "non-mediated" conference -- and hence protected only by Evidence Code section 1152.

Federal Practitioners should see the footnote below and read Irvine, California IP attorney Sheila Swaroop's excellent ABTL Newsletter article The Surprising Uses of Prior Settlement Negotiations under FRE 408 here.

Though I'm aware of no case law on the topic, I'll go so far as to say that an attorney's failure to make this distinction will likely be found to fall below the applicable standard of care in the event the client suffers harm as a result.  

The Zhou Holding

Briefly, Plaintiff, who was injured in two separate automobile accidents, sent the insurance carrier an offer to compromise -- which was just barely brought within section 1152's protections -- for Accident No. 2.  During the trial of Accident No. 1, the defense proferred into evidence the settlement offer made for Accident No. 2 to prove the invalidity of the claim arising from Accident No. 1. 

In holding that the trial court erroneously excluded that correspondence from evidence, the Court of Appeal explained:

[I]n this case Zhou’s letters to State Farm regarding his purported injuries
from the March 1, 2004 accident were not offered to disprove the merits of the claim under negotiation, but rather “to show the invalidity of a different claim.” *

The entire case is well worth reading as a refresher if you're about to send a settlement demand, attend an MSC or pursue mediation.

_____________________

*   The Court also cites federal law to the same effect -- Broadcort Capital Corp. v. Summa Medical Corp. (10th Cir. 1992) 972 F.2d 1183, 1194 [federal rule barring admission of evidence relating to settlement discussions does not preclude evidence of settlement of different dispute; “the evidence was not admitted to prove the validity or amount of the ‘claim under negotiation’”]; Towerridge, Inc. v. T.A.O., Inc. (10th Cir. 1997) 111 F.3d 758, 770 [“[r]ule 408 does not require the
exclusion of evidence regarding the settlement of a claim different from the one litigated”].)

• Print
• Comments
• Trackbacks

(photo:  Inside H Block 4 by Still Burning)

Want an angry tax attorney serving as the arbitrator on your personal injury case?  Then head on down to Arizona where the Ninth Circuit has just held that he can be forced  by State law to serve as your neutral for $75 per day -- all without violating the U.S. Constitution.

The indentured tax attorney?  Mark V. Scheehle, to whom you might throw a little tax planning work out of collegial fellow feeling.

The facts below.  Link to Scheehle v. Justices of the Supreme Court here.

Arizona law requires that each superior court, by rule of court, provide for the arbitration of cases in which the amount in controversy does not exceed $65,000. Ariz. Rev. Stat. § 12- 133. At the time this action was filed, the Local Rules of Practice for the Superior Court of Maricopa County required that all attorneys who reside in the county and have been active members of the Arizona Bar for five years serve as arbitrators.

Attorneys who served as arbitrators under the Appointment System were paid a flat fee of $75 for each day in which they actually conducted an arbitration hearing.  

Scheehle has been a member of the Arizona Bar since 1981, and a certified tax specialist since 1988. In September 1996, Scheehle was appointed as the arbitrator in a motor vehicle personal injury action. He served as an arbitrator and submitted a report to the Maricopa Superior Court in December 1997.

In July 1997, Scheehle was appointed as the arbitrator in a second motor vehicle personal injury suit and accepted the appointment. In October 1997, while still serving as the arbitrator in the second action, Scheehle was appointed as the arbitrator in a third personal injury action.

Scheehle decided to challenge the authority of the Arizona courts to require that he serve as an arbitrator. He returned the file to the Presiding Arbitration Judge of the Maricopa County Superior Court with a letter declining to serve as an arbitrator. He also expressed his unwillingness to serve as an arbitrator in any subsequent case, and his belief that the Appointment System was unconstitutional and violated Arizona law.

The judge responded by holding a telephone conference at which Scheehle placed his objections on the record. The judge further encouraged Scheehle to apply for relief for good cause shown from the particular assignment, but Scheehle declined, choosing to challenge the Appointment System as a whole.

Scheehle was allowed to file a brief in support of his position. In January 1998, the Presiding Arbitration Judge entered an order rejecting Scheehle’s arguments and imposing a $900 sanction on Scheehle for refusing the arbitrator appointment.

• Print
• Comments
• Trackbacks

In her recent post Supreme Court Orders Additional Briefing in Hall Street, Moritz Law School Professor Professor Sarah Cole at Indisputably Dot Org worries that the Supreme Court might punt the issue squarely placed before it in Hall & Associates -- whether parties to an arbitration agreement may expand judicial review of arbitration awards -- and decide the issue on a narrow common law ground, thus creating more, rather than less, uncertainty for parties wishing to design the best conflict resolution vehicle for their particular dispute. 

(sorry for the run-on sentence grammarians)

The heart of Professor Cole's concerns is quoted below.  The questions from the Supreme Court giving rise to those concerns may be found in the linked post above.

(our earlier posts on the case -- which we referred to as the "Mattel" -- are here and here)

It may be that the[ Court is] considering whether substantive judicial review provisions contained in an agreement among parties transforms what the parties think is arbitration into a procedure governed by common law (contract law) rather than the FAA.

If that is the case, then the question becomes whether parties can ask courts to review their contracts on grounds that courts normally don’t use to review contracts. Then, the district court judge would have to look at whether he or she had authority to grant the parties’ request — in past cases, courts have used their inherent authority to grant or deny such non-traditional requests.

But, because courts’ inherent authority is discretionary, courts might reject the parties’ requests. That level of uncertainty might doom these kinds of agreements.

• Print
• Comments
• Trackbacks

(right:  Julia Louis-Dreyfus on the picket line)

When we first wrote about the writers' strike and the active picketing just down the street here at Paramount on Santa Monica and CBS on Beverly Boulevard, we asked our friend Jim Stott for comment.

Because Jim's excellent comment was buried in small type in our "comments" section, I give it its due here by bringing it up into a post of its own.  

(for "live" WGA Strike Blogging from the Los Angeles Times, click here)

After noting that his own comments are not "in any way intended to minimize, diminish or otherwise criticize the hard efforts of the writers, producers or federal mediator's efforts to reach agreement in this ongoing dispute," Jim opines as follows:

Often, both parties become "blinded by the sparks" associated with their lack of progress at the bargaining table. In those situations, a psychological phenomenon occurs wherein parties start start to blame the 'other side' through personal attacks; one against the other. As this practice grows, the underlying issues that really need to be discussed are subsumed by the superficial and surface diatribes.

Obviously - to the outsider - settlement can only be reached when the parties focus on the substantive and underlying issues as a mutual and common problem. Often, both sides fail to realize that a problem for one contingent group is ultimately a problem for all contingents. If force, i.e., a work stoppage or lock-out is used as a means for getting the 'other side' to soften their positions, the latent residual feeling caused by such an action is often long-lasting and will materially damage the ongoing relationship between all stakeholders involved.

In practice and theory, writers need work provided by the producers, just as producers need the work-product of the writers. In negotiations, it is this symbiotic internal relationship that is most important. Long after the work stoppage has been resolved, the latent and labile underlying emotional distrust and dissatisfaction will continue; often for years.

The federal mediator assigned to this particular case is exceptionally well qualified. He is a colleague and friend. I have no doubt that his professional services provided in this situation were of the highest quality.

Rarely however, even with the presence of a mediator, negotiations break down and reach impasse. Intractable parties are often the stock-in-trade for federal mediators. It not at all unusual to hear the warring factions self-diagnose their positions as being "miles apart." On rare occasions though, parties are so far apart that their tangential distances and differences, when measured in cost and dollars can be significant.

It would appear that producers and writers are faced with unanticipated outcomes associated with the expotential growth of the broadband internet capacity and online streaming video and audio. On the one hand, producers may see this as a marketing and distribution opportunity, by which they will increase audience participation and marketshare. While at the same time however, writers may see this exploding media as one in which their recognition, compensation and earning potential has been and will be diluted and otherwise diminished.

These complex negotiations are never easy and are often rocky. The challenge to all the stakeholders is to continue the conversation and continue to make progress, albeit ever-so-slowly. Even if their conversations are not face-to-face, but done through an intermediary; they are critically important.

As long as all dialogue has stopped, there virtually is no chance the impasse will self-resolve; thus the stand off will continue indefinitely. This is precisely what happened in the Caterpillar work stoppage which lasted over five years. All communication stopped. Distrust on both sides grew expotentially. Replacement workers were hired. All the while, the union pickets were outside the plant, locked out, while the plant production continued to grow.

While this is an extreme case in labor management relationships, it is my hope that productive conversations, clandestine and off the record or not, continue. This is the only way in which this dispute will resolve without inflicting extensive and long-lasting damage to all stakeholders.

Currently, Jim Stott is a Principal and Senior Consultant with Stott & Associates of Gig Harbor, Washington. Until recently, he was Assistant Director at the Straus Institute for Dispute Resolution, Pepperdine University School of Law.

Prior to joining Straus, Jim spent nearly six years as a Commissioner with the Federal Mediation and Conciliation Service (FMCS) in Los Angeles and Washington, D.C., where he provided collective bargaining mediation and negotiation consultation services to federal agencies, private and public sector employers, and labor unions.

Jim was also instrumental in the design and development of joint labor/management committee problem solving protocols used by Los Angeles Dodgers, Southwest Airlines, Toyota, Kaiser Permanente, Boeing and Walt Disney Studios.

In his professional and academic career, Jim mediated more then 1,500 disputes. The majority of these conflicts were associated with employment, labor/management or collective bargaining issues. Jim has also provided pro-active and pre-emptive conflict management design systems. In his teaching and coaching capacity, he has taught mediation protocols and processes to over 1,500 students in academic settings, court programs, international labor unions as well as management/employer groups including CUE.

Jim holds a Bachelor of Science Degree in Business and Management from University of Redlands, as well as a Masters Degree in Dispute Resolution from Pepperdine University School of Law.

THANKS FOR THE GOOD THOUGHTS JIM!! 

WE MISS YOU DOWN HERE IN SOUTHERN CALIFORNIA!!

• Print
• Comments
• Trackbacks

This post follows up yesterday's about questions asked by the Supreme Court Justices during oral argument in the Hall v. Mattel case.  For a more thorough analysis than I was capable of providing,  I put out a call to my arbitration law posse and was greatly rewarded by the following comments.

Eric van Ginkel writes from Amsterdam:

Courts and scholars have traditionally ignored the distinction between vacatur (as to which section 10 limits the grounds, and there should not be any additional, non-statutory grounds) and appeal, about which the FAA is silent (other than perhaps section 9 which conditions the confirmation of an award on whether the parties have agreed that judgment on the award can be entered, arguably leaving that until later if they have agreed on an appeal to a court or a panel of appeal Arbitrators).

Sadly, the petitioners have also ignored this distinction, so the chances are that the Supremes will come out against appeal. As I have pointed out in the past, the clearest example of appeal next to vacatur as two distinct remedies can be found in the English Arbitration Act of 1996. 

AAA arbitrator Jay McCauley, who teaches Arbitration Law at Pepperdine School of Law writes:

This case tests the limits of the power of contracting parties to curtail the power of their arbitrator. Section 10 of the Federal Arbitration Act (i.e., the provision stating the grounds for vacatur) already provides that an award may be vacated if the arbitrator exceeds his or her powers. The question before the Supreme Court is whether parties may contractually define those powers by specifying that the arbitrator exceeds them if he or she fails to base his or her decision on the law.

There appear to be five lines of argument supporting the proposition that such contracts should not be enforced:

1. Congress intended the grounds for vacatur to be limited to those expressly set forth in Section 10, and none of those permits vacatur based on the content of the award.

2. Part of the ethos of arbitration is that it shall be quick and efficient (not slow and accurate), regardless of what the contracting parties desire.

3. Contracting parties should not be able to dictate to courts what courts should do.

4. Allowing vacatur on the basis of the content of the award will put too big a burden on trial courts handling vacatur motions, who are not used to the reviewing function.

5. Judicial review is often not in the parties' interests. We need to prohibit review to save the parties from their own bad judgment.

I think each of these arguments is faulty. 

As to Argument 1: Congress expressly said Courts may vacate when the arbitrator exceeds his power.  It never prohibited the contracting parties from defining what those powers are. There is no reason to consider the four Section 10 grounds for vacatur as exclusive. As long ago as 1953, the Supreme Court itself added a content based non-statutory basis for vacatur ("manifest disregard of the law") without an excuse as great as we have here, i.e., that the parties asked for it.

The agreement at issue in Mattel calls for a deeper level of review than manifest disregard of the law. Nevertheless, the Supreme Court would be hard pressed to say that such a review would contravene Congressional intent.  The Court long ago broke that supposed barrier. In any event, what Congress said it intended was to put arbitration agreements "on the same footing" as all other agreements.  That should mean "carry out what the parties contracted for" so long as their contract is neither illegal nor contrary to public policy.

As to Argument 2: There is no ethos to Arbitration other than the ethos of parties' freedom to customize their own adjudication process in any way they see fit. There are many in the ADR community who think about, and advocate for, arbitration as if it were an institution that must conform to a Platonic ideal.  The largest arbitration provider in the world, the American Arbitration Association, filed an amicus brief in the Mattel case, arguing that the customized arbitration the parties contracted for in this case should not be permitted because, inter alia, it runs afoul of the ethos of arbitration (i.e., quick, efficient and un-litigation-like). I have no idea why AAA, a neutral provider, would put its oar in this water at all. Nor can I fathom why they did so to pull against the direction of contractual freedom.

As to Argument 3: It is the Courts that should not be able to dictate what they do or do not do. It is Congress that has that power.  And Congress already used that power to dictate to Courts what they should do in this instance: that is, "enforce the parties' agreement as written."

As to Argument 4: The best of the arguments against permitting the parties to include judicial review in their private dispute resolution process is the long recognized common law limitation on contractual freedom: impossibility or impracticability. The kind of judicial review called for here, however, is not onerous or novel. District courts have been conducting content based reviews of administrative decisions as a significant part of their ordinary duties since the 1930s. 

As to Argument 5: I am the first to admit that judicial review of an arbitration award is usually, maybe even almost always, a bad idea. But those who oppose enforcement of contracts calling for judicial review are saying something more: that it is always a bad idea, and that it is such a bad idea that parties themselves should not be able to decide for themselves just how bad an idea it is for them.

It turns out that this case is the very worst scenario for judicial paternalism. Not only were the parties sophisticated players engaged in a commercial dispute, they entered into the agreement after the dispute arose (i.e., it was a true "submission agreement"), so they had reason to know precisely what they were getting into.

Something extra to watch: Just as the U.S. Supreme Court is now reviewing the Mattel case, the California Supreme Court is reviewing the Crowell case.  The Crowell arbitration arose under the California Arbitration Act and raises the identical issue as that raised by Mattel.

But here is the real irony in California: One of the reasons trial courts are already experienced with vacating arbitration awards for legal error is that they have already been told to do so by the California Supreme Court in employment cases (Armendariz). They must do so even though the California vacatur statute (CCP section 1286.2) like the federal vacatur statute (FAA section 10), does not include legal error as a ground for vacatur.  

Under Armendariz, California courts are not permitted to enforce an arbitration agreement if it does not provide a mechanism for judicial review.  If California now prohibits private contracts requiring judicial review of commercial arbitration awards, it will be imposing two directly contrary limitations on contractual freedom: Parties may neither limit the power of commercial arbitrators (by requiring judicial review) nor expand the power of employment arbitrators (by failing to provide for judicial review).

Imposing both limitations would not be a contradiction -- they arise in different contexts. But such a decision would starkly elevate the policy of protecting employees over the policy in favor of the freedom to contract. That is, the California court would be saying that employee protection is a good enough reason to override all of the arguments against thejudicial review of arbitration awards, but freedom of contract is not.

Finally, AAA arbitrator Les J. Weinstein writes:

While some might argue that judicial review would add transparency to the arbitration process by opening up the private proceeding to public judicial review would fuel the notion of a tailored private system for the rich and powerful using public resources.

Suppose the parties contract for judicial review under seal; is that OK?

If we like contract so much, why not let the parties "rent" an appellate panel?  Maybe the Supreme Court will review arbitrations as well?

If we go down this road, we would need new rules as well as Congressional authority. 

Who will pay for this potential new burden on the appellate system?

I doubt that mere contract alone will cut it under the current law but I predicted a Gore victory and a Supreme Court abstention so what do I know?

There you have it.  Three lawyers.  Three very good opinions.  Don't you LOVE the law?

• Print
• Comments
• Trackbacks

(photo:  Reading the tea leaves by Joel Carranza)

In Judiciary's Role in Arbitration Weighed, AP reports on the tea leaves that lawyers and business people will be reading for the next several months as we await the Supreme Court's ruling on this issue --  may the parties to an arbitration agreement contract for  judicial review of any resulting arbitration award.  

While asking my arbitration expert posse Jay McCauley, Les Weinstein, Eric van Ginkel and Jack McCrory to please weigh in here, I'll provide you with my semi-tutored two cents.

Because the central policy issue supporting arbitration under the Federal Arbitration Act is to allow contracting parties to control their own destiny, I'd wager the Supremes will permit them to do what they want to do here, i.e., allow federal courts to review any arbitration award the parties want them to.

Here are the tea leaves: 

• Chief Justice John Roberts suggested expanded judicial review is appropriate, noting the two sides negotiated an agreement with court review as an option. But Roberts also questioned whether federal law allows the expanded review the agreement between Mattel and the property owner calls for.
• Justices Anthony Kennedy and John Paul Stevens pointed to court review as a tool that can be used in business disputes to encourage the use of arbitration. 
• Justice Ruth Bader Ginsburg suggested the property owner is seeking more latitude than the law allows for judicial review of arbitration cases.
• Justice David Souter told the lawyer representing Hall Street Associates that "you want to get rid of" the section of the arbitration law that specifies limited circumstances under which courts can step in and overrule an arbitrator's decision. 
  
  The case is Hall Street v. Mattel, 06-989. 

For a thorough analysis of the issues raised, see  Hall Street:  Contract vs. Statute at Ross' Arbitration blog.

By the way, I get alerted to articles like this on a daily basis here -- Laywers U.S.A.  It's been my best and easiest source for breaking legal news for quite some time now and it appears in my in-box on a daily basis.  For curmedugeons like Mr. Thrifty who say they don't have time to read ANYTHING online, it takes about 60 seconds to scan the news items.  Then one second to delete if there's nothing there of interest to you.  I highly recommend it and give a long belated "thanks" here to the people at Lawyers U.S.A.

• Print
• Comments
• Trackbacks (1)

(photo by Steve Rhodes)

Geek heaven!!  My two obscure specialties -- environmental insurance coverage and arbitration law -- have converged in a case to be decided by the U.S. Supreme Court this term.  To confirm my total nerd credentials, I give you the news not from the New York or L.A. times, but from Yahoo! News, excerpted with link below:

High Court Weighs Role of Judiciary in Arbitration Case Involving Toymaker Mattel

WASHINGTON (AP) -- The outcome of an environmental cleanup dispute now before the Supreme Court could determine the future of arbitration as an alternative to lawsuits.
Tens of thousands of disagreements in the business world are resolved through arbitration each year, a process often regarded by the business community as a cost-saving, time-saving substitute for going to court. 

The risk in arbitration is that the losing side cannot appeal to the judiciary except in limited circumstances. That's the subject of Supreme Court arguments on Wednesday.

The Supreme Court will consider whether the parties in arbitration can agree to take their cases to court for review of arbitration awards.

here's the link to the remainder of the article.

• Print
• Comments
• Trackbacks

 

Left, international commercial arbitrator, Eric Van Ginkel.

Right, AAA patent / commercial arbitrator, Les Weinstein.

 

 

 

The Los Angeles Legal Pad has been talking to our friend Michael Powell over at the AAA about the sixteen percent increase in the arbitrations in the greater Los Angeles area last year.

When asked "why the jump," Powell explained:  

The only thing we can put our fingers on is the increase in mediation.  We think all the attention put on ADR in California has made a difference in companies that are drafting contracts and including arbitration clauses.

The increase, Powell was reported as saying, was especially prevalent in the entertainment and health care industries.  

• Print
• Comments
• Trackbacks

(for our Canadian readers, our featured treatise is Litigating Conspiracy:  An Analysis of Competition Class Actions , Stephen G.A. Pitel, Ed.)

An excellent concise summary of Gentry v. Superior Court, where the California Supreme Court Questions Enforceability of Class Action Waiver on Public Policy Grounds is once again provided by the National Arbitration Forum, excerpt below.

By a 4-3 majority, the California Supreme Court reversed an order compelling arbitration and remanded the case to the trial court with instructions to use a multi-factor test in determining the enforceability of a class action waiver. The ultimate question for the trial court is whether class-wide proceedings would be “a significantly more effective practical means of vindicating the [statutory] rights” of the employees who belong to the putative class. Parties who prefer the simplicity of one-on-one arbitration should not be overly concerned by the majority holding because this decision has no application outside of the employment context.

For full text of NAF's summary, click here.

This pdf of the opinion comes to you courtesy of Jeffer Mangels Class Action Defense Blog with Jeffer's excellent case analysis from a defense perspective here.  

Another good and thorough analysis appears here.  Gentry v. Superior Court - California ruling on class action waiver in arbitration agreement.

 

• Print
• Comments
• Trackbacks

The National Arbitration Forum's excellent and timely Law and Policy Update celebrates its first birthday today, and what a year it has been for changes in the arbitration landscape.  If not for NAF, I would never have been able to keep up.  

You know, we used to have to pay for stuff like this, back in the old days when publishing required paper and stamps and mail people with heavy bags on their shoulders stumping down the street on a hot summer's day. 

Now organizations like NAF make your life easier gratis.  How great is that????

Subscribe today!

 

• Print
• Comments
• Trackbacks

It's not too late to join us and ALFA International for its Labor & Employment Practice Group Seminar entitled "Employer of the Year" or "the Office":  Which One Are You? at the Half Moon Bay Ritz-Carlton on October 3-5, 2007.

HOW COULD YOU RESIST? (photo:  Half Moon Bay Ritz-Carlton at right)

I'll be speaking with Joshua Frank, Senior Legal Counsel to DHL (moderated by James M. Peterson of San Diego's Higgs, Fletcher & Mack, LLP) on the Pro's and Con's of Employment Arbitration. 

You'll have to get up early for this one -- it's scheduled from 8:45-10:00 a.m. on October 3 -- but we promise you a lively debate and fresh perspectives on an issue that might make corporate and litigation counsel want to rip those arbitration clauses out of their and their clients' employment agreements.  Then again, you might just decide to rewrite those ADR Clauses altogether so that you get the best possible dispute resolution mechanism for your and your clients' work-force. 

Either way, the time is ripe for reconsidering and revising the way in which you and your clients handle disputes with their employees.

JOIN US!! 

 

• Print
• Comments
• Trackbacks

(right:  12 Angry Men because this post will end up being about depositions, settlement and trial and not simply -- yawn -- reinsurance)

Business Insurance reported yesterday that the California Supreme Court has Shield[ed] Reinsurance Details in Abuse Case.  As B.I. wrote,

In Catholic Mutual Relief Society et al. vs. The Superior Court . . . , victims sought to learn whether the nonprofit entity, which administers self-insurance funds for more than 300 archdioceses and other Roman Catholic entities in the United States and Canada, could meet its policy obligation should they enter into a settlement with the Archdiocese of San Diego.

In 2004, a Los Angeles County trial court judge said the victims could seek reinsurance information . . . A state Court of Appeal . . . rul[ed] that California law authorizing limited discovery of a defendant’s insurance coverage does not authorize pretrial discovery of reinsurance agreements with a “nonparty” liability insurer.

On Monday, the California Supreme Court agreed. It found that discovery of reinsurance is allowed when a reinsurer’s policy functions “in the same way as a liability policy (fronting arrangement), or where the reinsurance agreement is itself the subject matter of the litigation at hand.”

I'd just been musing on this issue (really! -- listen, only nerds blog) because I think attorneys should use discovery as much as possible to settle litigation as to try it. 

Conducting Discovery to Settle the Case

I'm just back from vacation so I haven't yet read this Supreme Court opinion.  I have, however, fought the reinsurance issue more times than I care to remember.  I also once sought to discover the extent of a privately owned corporation's ability to pay a sizable judgment only to be thwarted by the rule that discovery must be relevant to the subject matter of the action (etc.)

Still, I recommend that counsel find creative ways to learn facts that will assist them in settling the case during depositions (where "background" questions receive less scrutiny than interrogatories).

What information pertinent to settlement is useful to obtain other than the ability to fund an award?  Plenty! but since I'm still on Hawaiian time and in an Hawaiian mind, I'll provide only a few -- let your own imagination make far longer lists than the following.

1. The identity of those making the settlement decision is question number one, not only to assure that you have the proper parties at your first settlement conference, but also because -- as McElhaney recently suggested -- you want to "hip" corporate deciders to some of the dangers of proceeding that the company's attorneys might not have mentioned (or couldn't stress strongly enough).  
2. Where the corporate entity is split into operating divisions, which division is going to take the "hit" if the case settles.
3. Whether there are any corporate acquisitions or mergers on the horizon -- or any major upheavals in management -- that might suggest that the executive team green-lighting the litigation is on its way out and less litigation-friendly management about to come on the scene.
4. Whether other litigation on this same issue, product, financial practice, etc. is pending, making the possibility of bad precedent an issue for any eventual settlement "team."

How can you obtain answers to these questions during a deposition when none of them are relevant to the subject matter of the action or likely to lead to the discovery of admissible evidence?  The same way you do everything else in your legal practice -- with chutzpah, imagination, creativity, preparation and sheer good luck.  

I'd innocently sprinkle most of these questions into the background portion of the deposition when opposing counsel is generally less attentive than during "substantive" questioning.  You can also get away with "it's just background, counsel" when s/he begins to awake with his/her morning latte.  If it's a big case with less experienced attorneys assigned to less important depositions, I'd first ask these questions of low level corporate representatives who might be, shall we say, under-represented. 

Then there's always simple dumb luck.  When I was a first year taking one of my first depositions, opposing counsel fell asleep after lunch!  He was snoring while his client innocently waited for me to continue questioning him as if this were a normal event!

I genuinely didn't know what to do. Could I legitimately and ethically continue to question my opponent's client in his "absence"?  I suppose a more experienced or aggressive attorney might have done so.  But because it just didn't seem right to me, I woke him up before continuing with my line of questioning. 

Some defenders, however, might just as well be asleep.  As I teach my NITA students, you can do that which you can (ethically) get away with in a deposition.  And that is quite a lot if you are a skillful poker player who doesn't let on that the questions you're asking might be strategically beneficial even though entirely irrelevant to the substance of the litigation.

It's the beginning of a new "school" year.  Go get 'em!

• Print
• Comments
• Trackbacks

(pictured:  an overdressed 1985 Motorola Cell Phone from Bulletz of Knowledge post Dress the Elderly Cell Phone)

For the business, rather than a strictly legal, analysis of the recent Ninth Circuit and other California rulings on the unconscionability of consumer arbitration clauses, see the excerpt and link to Business Week's article on the issue below.

Cell-Phone Contract Disputes Heat Up -- Court rulings in California could lead to changes in dispute clauses in wireless contracts and fuel class actions against carriers by Olga Kharif 

Read almost any cell-phone contract and you'll discover that the longest passage deals with dispute resolution. While seemingly important matters like billing get only one paragraph, Verizon Wireless devotes six paragraphs to dispute resolution. At AT&T (T), the dispute section takes up 10 fat paragraphs and states: "You agree that, by entering into this Agreement, you and AT&T are each waiving the right to a trial by jury or to participate in a class action."

The small print keeps expanding in response to an influx of court cases—at least 10 of them in California over the past few years—questioning a wireless carrier's right to block consumers from suing or filing class-action claims. In late June a California appeals court reaffirmed a lower court's order that (T-Mobile USA) could not enforce a clause requiring arbitration of disputes with customers. And on Aug. 17, the U.S. Court of Appeals for the Ninth Circuit in California ruled that AT&T's prohibition against subscribers banding together in class actions, "is unconscionable, and, thus, unenforceable."

Click here for the remainder of the article.

• Print
• Comments
• Trackbacks

According to the ABA Journal Law News two Democratic lawmakers have introduced legislation that would prevent the inclusion of mandatory arbitration clauses in consumer contracts as well as those contracts implicating the consumer's civil rights. 

Though the parties could still agree to arbitrate their disputes after they arise, the bill would make unenforceable pre-dispute arbitration provisions within the scope of the legislation.  Article here and except below:

Two Democratic lawmakers have introduced legislation that would bar enforcement of some mandatory arbitration agreements.

The Arbitration Fairness Act would bar mandatory arbitration agreements involving employment, consumer rights, franchises or civil rights, according to a press release.

Agreements to arbitrate in these areas could be made after a dispute arises, but not before.

The law is designed to prevent consumers from being forced into arbitration.

To continue reading, click here.

• Print
• Comments
• Trackbacks

(click on image to see consumer law attorneys Horwitz, Horwitz & Associates)

Financial Week reports today in SEC and Congress gang up on arbitration that "[l]egislation in Congress would block mandatory arbitration clauses" in all instances.  As the article notes,

Bills introduced by Sen. Russ Feingold (D-Wis.) and Rep. Hank Johnson (D-Ga.) would make pre-dispute arbitration agreements invalid and unenforceable. Mr. Johnson called mandatory arbitration an “albatross” for investors. “Despite what companies may say, it is not more affordable than going to court,” he said.

Zach Lowe, a spokesman for Mr. Feingold, said the legislation reflected concern over a push in the corporate world to allow mandatory arbitration and the overuse of such clauses in broker-dealer contracts. The Senate bill said that mandatory arbitration “undermines the development of public law for civil rights and consumer rights because there is no meaningful judicial review of arbitrators’ decisions.”

This legislation, if enacted, would affect so many powerful corporate instances that I wouldn't hold my breath for its passage any time during this century.  Still, it will be interesting to follow the debate.  

As I've often said here, I favor negotiated agreements, not obligations imposed by a party with superior bargaining power on a take it or leave it basis.  This is particularly true in consumer contracts where the print is fine, located only on web sites and/or imposed in the middle of a contract term by way of notice contained in a consumer's bill.  

Because self-regulation often follows Congressional regulatory trial-balloons, the best  consumers can likely hope for will be increasing attempts by service providers of all stripes to make arbitration a genuine choice for its customers.

And while you're over at Horwitz, check out their blog, particularly this post on frivolous lawsuits (my own post on frivolous lawsuits can be found here).

• Print
• Comments
• Trackbacks

(photo:  Cohdra at MorgueFile)

Friday the thirteenth was (temporary) bad luck for Canadian consumers.  I say temporary because Ontario and Quebec have forbidden mandatory arbitration clauses and class action waivers.  The Canadian Supreme Court in the two cases discussed below held that in the cases before it those statutes could not be applied retroactively.

Though no Canadian Law expert (I was hipped to the Dell opinion by my Canadian buddy Michael Webster of the Due Diligence and Misleading Advertising Blog) it appears that a Dell mandatory arbitration and class action waiver clause is not against Canadian public policy (referred to by the Court as not against "public order.")  See the Canadian "The Court" Blog's article, "Is the Class Action a Public Order Institution," excerpted below.

Ironically, when the Dell and Rogers cases are placed in a larger social context, the public’s interest in securing the class action as a vital aspect of the public justice system could hardly have been rendered clearer. The Rogers case received much less of the court’s attention, having been carried through on Dell’s slipstream; however it is the features of Rogers’ mandatory arbitration/class action waivers on its consumer contracts that highlight the hollowness of off-the-bench judicial laments about access to justice for ordinary Canadians.

Both cases turned on the sublimely procedural question of whether an arbitrator or a Quebec superior court judge should have first kick at the can in deciding whether a mandatory arbitration clause on a consumer contract was enforceable or not. Such clauses preclude consumers from pursuing corporations in any kind of court action, including class action.

In both Ontario and Quebec the question has been rendered moot by amendments to consumer protection legislation which prohibit such clauses, underlining the public order aspect of the class action.

Read the rest of the article here (emphasis added).

• Print
• Comments (1)
• Trackbacks

(photo by Vilanova, MorgueFile)

In this federal case, the Ninth Circuit held that the addition of an arbitration clause to the cell phone service contract, imposed by way of the posting of a revised contract on its website with no pre-existing notice to its subscribers was unenforceable.  The class action plaintiffs were therefore not required to arbitrate their claims and the class action waiver (also imposed upon subscribers in this same manner) was unenforceable.  Douglas v. United States District Court for the Central District of California. 

• Print
• Comments (1)