Recent Developments in Arbitration & Mediation Law

220 Pages·2015·1.94 MB·English

by  Rebecca Callahan

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RECENT DEVELOPMENTS IN ARBITRATION & MEDIATION LAW

A Review of Recent Cases, Statutes and Rules Affecting the Practice of

Mediation, Arbitration and Settl ement Negotiation for Attorneys

Practicing in Southern California

May 6, 2015

ARBITRATION PANEL
Peter Collisson, Attorney-Mediator-Arbitrator
Rex Heinke, Partner, Akin Gump Strauss Hauer & Feld LLP
Barbara A. Reeves Neal, Arbitrator-Mediator-Special Master, JAMS

MEDIATION PANEL
Christopher Blank, Attorney-Mediator
Lisa Jaye, Circuit Mediator, Ninth Circuit Court of Appeals
Gail Killefer, ADR Director, U.S. District Court, Central District of California
Lance La Belle, Partner, Berger Kahn

PROGRAM CHAIR & MODERATOR
Rebecca Callahan, Mediator-Arbitrator, ADR Services

SEMINAR LOCATION
Orange County Bar Association Building
4101 Westerly Place, Newport Beach, CA
TABLE OF CONTENTS

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I. ARBITRATION – SIGNIFICANT CASES 28

A. ARBITRATOR DISQUALIFICATION – REQUIRED 28
DISCLOSURES AND EVIDENT PARTIALITY

(1) Background Statement re Federal Disclosure Standard 28

(2) Background Statement re California Disclosure Standard 32

(3) Conclusion 35

(4) Cases – Federal 35

(a) District Court Reversed for Stepping in Midstream and 35
Removing Arbitrator Before Entry of an Award – In re
Sussex, 778 F.3d 1092 (9th Cir., Jan. 27, 2015)

(b) Court Upbraids a Former Appellate Justice for 37
Rendering an Arbitration Award “in Retaliation” and
Vacates the Award Due to Evident Partiality in the Way
he Decided and Handled the Disqualification Challenge
– Ruhe v. Masimo Corp., 14 F.Supp. 3d 1342 (C.D.Cal.,
Apr. 3, 2014) (Appeal Taken to the Ninth Circuit)

(c) An Arbitrator’s Failure to Disclose a Lucrative Source of 39
Repeat Business from One of the Parties to an
Arbitration is the Type of Circumstance that Forms the
Prima Facie Basis for Vacatur Due to a Reasonable
Impression of Bias and Warrants Both Discovery and an
Evidentiary Hearing – Rosenhaus v. Jackson, U.S. District
Court, Central District of California, Case No. 2:14-cv-
03514-MWF (JCGx)

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(d) Arbitrator’s Pre-Existing Relationships with Party 41
Opponents and Their Counsel Were Disclosed and
Were Trivial or Insubstantial, and Would not Support a
Challenge to the Award Based on Evident Partiality –
Campbell Harrison & Dagley LLP v. Hill, 2014 WL 2207211
(N.D.Tex., May 28, 2014) (Slip Opinion)

(e) A Trivial Relationship is Insufficient to Create the 43
Appearance of Impropriety Necessary to Violate Section
10(b) of the FAA – Postal Industries, Inc. v. Travelers
Casualty & Surety Co. of America, 2014 WL 3594306
(M.D.Fla, Jul. 18, 2014) (Slip Opinion)

(f) Parties are Entitled to Unbiased and Uncorrupted 44
Arbitrators – not Perfect Arbitrators. Failure to Disclose
Serious Medical Condition was not Grounds for
Seeking Vacatur – Zurich American Ins. Co. v. Team
Tankers A.S., 2014 WL 2945803 (S.D.N.Y., Jun. 30, 2014

(5) Cases – California 45

(a) The “Professional Relationship” Triggering a Duty of 45
Disclosure under CCP § 1281.9(a)(6) Requires Some
Degree of Significance and Substantiality and Does not
Require Disclosure of Any Professional Relationship No
Matter How Attenuated – Estate of Mapes, 2014 WL
2467009 (1st Dist., Jun 23, 2014) (Not Reported)

(b) While the Arbitrator may Have Failed to Disclose 47
Significant/Required Relationships, There was no Harm
and Thus no Foul Because the Complaining Party had
Actual Knowledge of Those Relationships and Sat Silent
Until the Matter was Decided Before Lodging a
Complaint – Vitale v. Morgan Stanley Smith Barney, LLC,
2014 WL 2931588 (4th Dist., Jun. 30, 2014)

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(c) Not Every Omission of Information that is Required to 48
be Disclosed Pursuant to Section 1281.9 and the Ethics
Rules Constitutes a Ground for Disqualification. A
Party May Forfeit His/Her Ability to Vacate an
Arbitration Award if the Party the Party had
Knowledge of the Omitted or Incomplete Disclosures
and Took no Action – United Health Centers v. Superior
Court, 229 Cal. App. 4th 63 (5th Dist., Aug. 25, 2014)

B. CLASS ACTION ARBITRATION – THE STATUS OF EXPRESS 50
WAIVERS AND CONTRACT SILENCE

(1) Background Statement 50

(2) Cases 53

(a) Class Action Waivers Are Enforceable, but Waivers of 53
Representative Claims Under PAGA Are Not – Iskanian
v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (Jun. 23,
2014), cert denied, 2015 WL 231976 (Jan. 20, 2015)

(b) California Supreme Court Orders the Court of Appeal 56
to Vacate its Earlier 2012 Ruling that Certain Class
Action Waivers are Still Invalid Post-Concepcion Per the
Gentry Test Consistent with its Ruling in Iskanian –
Franco v. Arakelian Enterprises, Inc., 176 Cal. Rptr. 3d 265
(Aug. 27, 2014)

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(c) Trial Court Improperly Sent Employee’s Entire Action to 58
Arbitration Despite Unenforceable PAGA Waiver
Which This Court Determined Rendered the Entire
Arbitration Agreement Unenforceable – Securitas
Security Services USA, Inc. v. Superior Court, ___ Cal.
App. 4th ___, 2015 WL 848954 (4th Dist., Feb. 27, 2015)

(d) Ninth Circuit Upholds Arbitration Agreements 60
Including Class Action Waivers in Two Actions
Alleging Violations Under California’s Employment
Laws on the Same Day the California Supreme Court
Issued its Decision in Iskanian – Johnmohammadi v.
Bloomingdale’s, Inc., 755 F.3d 1072 (9th Cir., Jun. 23, 2014)
and Davis v. Nordstrom, Inc., 755 F.3d 1089 (9th Cir., Jun.
23, 2014)

C. ARBITRABILITY – SUBJECT MATTER JURISDICTION 62

(1) Background Statement 62

(2) Cases 63

(a) FAA Preempts Prohibition of Arbitration of “Patient’s 63
Bill of Rights” Claims – Valley View Health Care, Inc. v.
Chapman, 992 F. Supp. 2d 1016 (E.D.Cal., Jan. 16, 2014)

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(b) So Much for Functus Officio – Arbitration Tribunal 64
Allows SCA Promotions to Re-Open an Arbitration
Concluded in 2005 and then Hit Armstrong with a
Record-Breaking $10 Million in Sanctions – Armstrong v.
SCA Promotions (JAMS 2005 and 2015), Associated
Press, “Armstrong must pay $10 million in fraud case,”
(wire service report, Feb 17, 2015), Juliet Macur, “Lance
Armstrong’s that it Had Lost with Lance Armstrong’s
Ugly Detour from Road to Redemption,” (New York
Times, Feb. 16, 2015)

(c) Presumption in Favor of Arbitrability Trumped by 66
Forum Selection Clause – Goldman, Sachs & Co. v. City of
Reno, 747 F.3d 733 (9th Cir., Mar. 31, 2014)

(d) What Happens to Non-Arbitrable Claims After 67
Ordering Arbitration of the Rest? This Court Says Non-
Arbitrable Claims are Not Stayed Pending the Outcome
of the Arbitration – Global Live Events v. JA-Tail
Enterprises, LLC, 2014 WL 1830998 (C.D.Cal., May 8,
2014)

(e) The FAA – Per Concepcion – Preempts State Law Rule 68
Prohibiting Arbitration of Injunctive Relief Claims –
McGill v. Citibank, N.A., 232 Cal. App. 4th 753 (4th Dist.,
Dec. 18, 2014)

D. ARBITRABILITY – WHO DECIDES THE ISSUE? 69

(1) Background Statement 69

(2) Cases – Generally 71

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(a) Arbitrators are to Decide Disputes About the Meaning 71
and Application of Procedural Preconditions for the
Use of Arbitration, Including Claims of Waiver, Delay
or a Like Defense to Arbitrability – BG Group, PLC v.
Republic of Argentina, ___ U.S. ___, 134 S.Ct. 1198 (Mar.
5, 2014)

(b) Delegation Clause in Employment Arbitration 73
Agreement is Valid and Enforceable, Meaning that the
Arbitrator, not the Court, Determines the
Conscionability Challenge to Enforcement of the
Arbitration Agreement – Tiri v. Lucky Chances, Inc., 226
Cal. App. 4th 231 (1st Dist., May 15, 2014)

(c) Earlier Cases that Invalidated Delegation Clauses as 75
Substantively Unconscionable due to the Financial
Interest of the Arbitrators who Would be Deciding the
Delegated Issues No Longer Valid Because Such an
Analysis Discriminates Against Arbitration and is
Therefore Preempted – Malone v. Superior Court., 226
Cal. App. 4th 155 (2d Dist., Jun. 17, 2014)

(d) Trial Court, Not the Arbitrator, Had Authority to 76
Resolve the Issue of Whether Collective Bargaining
Agreement Created a Duty to Arbitrate – Knutson v.
KTLA, LLC, 228 Cal. App. 4th 1118 (2dt Dist., Sep. 4,
2014)

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(3) Cases – Class Arbitration Issue 78

(a) Deciding Whether the Parties’ Arbitration Agreement 79
Authorized Class Arbitration Requires a Determination
of Whose Claims the Parties Agreed to Arbitrate.
Accordingly, Class Arbitration is a Gateway Issue to be
Decided by the Court - Network Capital Funding Corp. v.
Papke, 230 Cal. App. 4th 503 (4th Dist., Oct 9, 2014)

(b) The “Who Decides” Question is a Gateway Question of 81
Arbitrability for the Court to Decide in the Absence of a
Clear Indication that the Parties Intended Otherwise –
Garden Fresh Restaurant Corp. v. Superior Court, 231 Cal.
App. 4th 678 (4th Dist., Nov. 17, 2014)

(c) Agreement Between Employer and Employee to Follow 82
the AAA Rules Was Unambiguous and Thus Gave the
Arbitrator the Power to Decide Whether the Parties’
Arbitration Agreement Permits Class Arbitration –
Universal Protection Service, L.P. v. Superior Court, ___
Cal. App. 4th ___, 2015 WL 851090 (4th Dist., Feb 27,
2015)

(d) Trial Court Erred in Deciding the Arbitrability of the 84
Class Action and Was Ordered to Vacate its Order
Dismissing Class Claims and Enter a New Order
Submitting the Issue of Whether the Parties Agreed to
Arbitrate Class Claims to the Arbitrator – Sandquist v.
Lebo Automotive, Inc., 228 Cal. App. 4th 65 (2d Dist., Jul.
22, 2014), review granted, 180 Cal. Rptr. 3d 1 (Nov. 12,
2014)

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(e) Whether the Parties to an Arbitration Agreement 86
Agreed to Arbitrate Class Claims is a Procedural
Question for the Arbitrator – not the Court – Decide –
Rivers v. Cedars-Sinai Medical Care Foundation, 2015 WL
166867 (2d Dist., Jan. 13, 2015) (Not Reported)

E. ARBITRATION AGREEMENTS – ENFORCEABILITY AND 89
CHALLENGES TO ENFORCEMENT

(1) Background Statement 89

(2) Cases 90

(a) The Lack of an Express Provision for Discovery and the 90
Failure to Attach a Copy of the AAA Rules did not
Render the Arbitration Agreement Unconscionable –
Lane v. Francis Capital Management, LLC, 224 Cal. App.
4th 676 (2d Dist., Mar. 11, 2014)

(b) Parties’ “High-Low” Agreement to Arbitration of 92
Personal Injury Claim Was Implicitly, if not Expressly,
Clear with Respect to the Outcome Restrictions to
Which They Both Agreed – Horath v. Hess, 225 Cal. App.
4th 456 (4th Dist., Apr. 10, 2014)

(c) When an Arbitration Agreement Contains Multiple 93
Unconscionable Provisions, the Arbitration Agreement
is Permeated by an Unlawful Purpose and Thus
Unenforceable – Carmona v. Lincoln Millennium Car
Wash, Inc., 226 Cal. App. 4th 74 (2d Dist., Apr. 21, 2014)

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(d) Answering a Complaint and Participating in Litigation, 95
on Their Own, do not Waive the Right to Arbitrate
Especially if, Along the Way, Defendant Repeatedly
Asserts its Right to Arbitrate – Gloster v. Sonic
Automotive, Inc., 226 Cal. App. 4th 438 (1st Dist., Apr. 23,
2014)

(e) Employee Handbook Arbitration Provision can be 96
Modified and Still be Binding Because Employer
Provided Employee with 30-Day Opt-Out Notice and
Employee did not Opt Out, so Deemed to have
Accepted by Conduct – Davis v. Nordstrom, 755 F.3d
1089 (9th Cir., Jun. 23, 2014)

(f) One-Sided Option to Elect Arbitration is Substantively 97
Unconscionable – Sabia v. Orange County Metro Realty,
Inc., 227 Cal. App. 4th (2d Dist., Jun. 18, 2014), review
granted (Not Citable)

(g) Simply Requiring the Other Party to Agree to 99
Arbitration as Part of the Overall Contract Relationship
Without Evidence of Undue Pressure, Threat or
Coercion, does not Amount to Procedural
Unconscionability – Galen v. Redfin Corp., 227 Cal. App.
4th 1525 (1st Dist., Jul. 21, 2014)

(h) Where a Website User Did Not Receive Sufficient 100
Notice of the Terms in a “Browserwrap” – Versus a
“Clickwrap” – Agreement in Connection with a Web-
Based Transaction, the Arbitration Clause was
Unenforceable – Nguyen v. Barnes & Noble, Inc., 763 F.3d
1171 (9th Cir., Aug. 18, 2014

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