California Mediation and Arbitration

Deadlines, Preemption: First Dist. Div. 1 Agrees That 30-Day Deadline To Pay Arbitration Fees Is Not Preempted

The California Courts Are Divided.

        One more case lines up with those courts holding the 30-day deadline requirement in consumer and employment cases, set by Cal. Code of Civ. Proc. § 1281.98, for the drafting party to pay arbitration fees, is not preempted by the Federal Arbitration Act. Keeton v. Tesla, Inc., A166690 (1/1  6/26/24) (Wilson, Humes, Siggins).

        COMMENT: We agree that Keeton v. Tesla, Inc. is in accord with most California cases that have addressed the subject. See our sidebar category "Deadlines". However, the law is unsettled. On 7/3/24, we blogged about Hernandez v. Sohnen Enterprises, Inc., which holds that when the agreement is governed by the Federal Arbitration Act, § 1281.98 is preempted. Justice Wiley in a dissent has staked the same preemption position in Hohenshelt v. Superior Court. See my 4/11/24 blog post.

        Eventually this split of opinion will need to be decided by a higher court. That's my opinion.

Nonsignatories: Employer Could Not Take Advantage Of Arbitration Agreement In A Temporary Staffing Agency's Contract

Equitable Estoppel, Third-Party Beneficiary, And Agency Arguments Of Employer Failed To Gain Traction.

        Nelida Soltero sued her employer, which sought to compel arbitration, based on an arbitration agreement in a contract between Soltero and Real Time Staffing Services, a temporary worker staffing agency. However, the employer was not a signatory to the agreement between Soltero and Real Time Staffing Services. The trial judge denied the employer's motion to compel arbitration, the employer appealed, and the Court of Appeal affirmed. Soltero v. Precise Distribution, Inc., D083308 (4/1  6/18/24) (Buchanan, Do, Irion).

        COMMENT: We have posted before about cases in which employers have relied on an arbitration clause in a temporary staffing agency company on 7/18/16, 4/26/17, 5/17/17. In fact, the two posts in 2017 relate to Garcia v. Pexco, 11 Cal.App.5th 782 (2017), a case that also involved the staffing agency Real Time. But that case had a different result than Soltero: the employer Garcia was required to arbitrate.

        Cases such as Soltero and Garcia, in which the nonsignatory seeks to take advantage of a third-party's arbitration provision, rely on theories of equitable estoppel, third-party beneficiary, or agency. The Soltero court does not follow Garcia's theory of equitable estoppel, explaining that Soltero's claims did not rely on her contract with the staffing agency. Nor was the employer an intended third-party beneficiary of the staffing agency contract. Finally, while Garcia had sued his employer Pexco, alleging that it and the staffing agency were "joint employees", Soltero did not allege joint employment or agency.

Burden Of Proof: Authority Is Split Over What Constitutes Sufficient Evidence To Dispute Handwritten Signature On Arbitration AgreementOn Arbitra

The Fifth District Rules That It Is Not Enough For The Employee To Say He Doesn't Remember Signing After The Employer Produces Employee's Handwritten Signature.

        Carlos Ramirez filed a class action lawsuit against his employer Golden Queen Mining Company LLC alleging wage and hour violations. The employer moved to compel arbitration and produced an arbitration agreement with the employee's handwritten signature, satisfying the employer's initial evidentiary burden. Ramirez declared he did not recall ever being presented with an arbitration agreement; he did not recall signing an arbitration agreement; and, nobody ever informed him about an arbitration agreement. The trial court denied a motion to compel arbitration, and the employer appealed. Ramirez v. Golden Queen Mining Company, LLC, F086371 (5th Dist.  mod. & cert. for pub. 6/11/24( (Franson, Levy, Poochigian). 

        Justice Franson, author of the opinion, explained: "There is a split of authority among the Courts of Appeal as to what constitutes sufficient evidence to create a factual dispute about the authenticity of a handwritten signature on a document agreeing to arbitration. (Cf. Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 757–758 (Iyere) with Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 164–165 (Gamboa).) We join Iyere in concluding that an individual is capable of recognizing his or her handwritten signature and if that individual does not deny a handwritten signature is his or her own, that person’s failure to remember signing the document does not create a factual dispute about the signature’s authenticity. (Iyere, supra, at p. 757.)" Because Ramirez did not deny his handwritten signature but only claimed he did not remember, the Court of Appeal reversed the order denying the motion to compel arbitration, and remanded to decide an unconscionability issue that the trial court had not needed to reach.

        The Court of Appeal's opinion, initially filed on May 15, 2024, was not for publication. It was certified for publication later on July 11, 2024.

        COMMENT: Justice Franson comments that the court joins Iyere in concluding that an individual is capable of recognizing his handwritten signature. If electronic signatures had been involved, the matter of authenticating could have been messier. See our July 4, 2024 post about Garcia v. Stoneledge Furniture LLC et al., A166785 (1/3  5/17/24) (Petrou, Fujisaki, Rodriguez) under the heading "Failure To Authenticate Electronic Signing Means Arbitration Agreement Is Unenforceable."

Confidentiality: Unlike Mediation, Collaborative Law Settlements Do Not Have Statutory Confidentiality Protection

The Lesson Here Is The Importance of Carefully Drafting Collaborative Law Agreements.

        How's this for a setup:  "Ling and Paul Mueller married in 2009 and separated in 2017. During their marriage, they cultivated cannabis and buried the proceeds on their property." What could possibly go wrong? Plenty.

        The Muellers engaged in a collaborative law session, "a non-judicial alternative dispute resolution process commonly used for marriage dissolutions." Ms. Mueller made some harmful admissions during the collaborative law process regarding how much of the buried proceeds she had dug up and what she had done with it. The trial judge "found both parties had 'significant credibility gaps' but that Paul's 'testimony and differences in credibility on different days pales in connection to [Ling], whom I could not believe most of what she said." Ouch. 

        The trial judge adjusted the division of proceeds in favor of Mr. Mueller. Ms. Mueller argued that her statements in the collaborative law process were confidential and should not have been introduced in evidence. She appealed. Mueller v. Mueller, A166577 (1/5  6/3/24) (Burns, Jackson, Simons). Affirmed.

        "We publish this case to highlight the importance of carefully drafting collaborative law agreements. Unlike mediations, our Legislature has not created an evidentiary privilege for collaborative law processes. (Compare Evid. Code, § 1119 with Fam. Code, § 2013.) If parties intend to keep the process confidential, they are responsible for drafting an enforceable contract that so provides."

"Window of the Space Cowboy Smoke Shop, which calls itself 'the highest head shop in the world,' in Breckenridge, Colorado." 2008. Carol M. Highsmith, photographer. Library of Congress.

Employment: Employee Who Refused To Accept Arbitration Agreement As Condition Of Employment And Promptly Told Employer So Was Not Bound To Arbitrate Despite Continuing Employment

Is An Employee Who Continues To Be Employed After Being Informed That Arbitration Is A Condition Of Continued Employment Bound By The Arbitration Agreement?

        “California law in this area is settled: when an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement.” Diaz v. Sohnen, 34 Cal.App.5th 126, 130 (2019). But Diaz did not govern the outcome in Winston Mar v. Lawrence Perkins, B327665 (2/7  5/22/24) (Feuer, Martinez; Segal separately conc.). 

        Relying on Diaz, defendant argued that after it informed Mar that an arbitration agreement was a condition of his further employment, and he continued to be employed, he was required to arbitrate. The trial court disagreed because Mar stated he refused to sign the arbitration agreement and defendant could terminate his employment if it objected. Therefore, there was no agreement. Agreeing that Mar promptly refused to sign the employee handbook and be bound by arbitration, and that he informed the employer that he could be fired, the Court of Appeal affirmed the trial court's denial of defendant's motion to compel arbitration.

        Justice Feuer sought to distinguish Diaz on the grounds that Mar acted more quickly than Diaz, and Mar explicitly told the employer that he could be fired if the employer didn't like his decision to refuse to be bound by arbitration.

        Concurring separately, Justice Segal believed that Mar's case showed Diaz was wrongfully decided because it could not be effectively distinguished from Mar's case. Diaz, an unsophisticated party, took time to consult an attorney, but also acted promptly. And there was no need to remind the employer that it could fire the employee, because an employer can fire at-will employees for cause and without cause.

Authentication: Failure To Authenticate Electronic Signing Means Arbitration Agreement Is Unenforceable

Shifting Burdens Of Proof.

        Isabel Garcia sued her employer and its sales manager, alleging sexual harassment. Defendants petitioned to compel arbitration, and carried their initial burden by producing an arbitration agreement. But Garcia pushed back, claiming she had not signed, putting the employer to the test of authenticating her electronic signature. The employer was not able to authenticate to the satisfaction of the trial judge or the Court of Appeal. Garcia v. Stoneledge Furniture LLC et al., A166785 (1/3  5/17/24) (Petrou, Fujisaki, Rodriguez).

        The employer relied on a declaration of a person who did not have personal knowledge that Garcia signed. Furthermore, the employer did not explain its security system to establish that only Garcia could have signed the document. Also, the employer used Taleo, described as a third-party electronic workforce management platform. However, "the arbitration agreement lacked the appearance of an electronically signed document as it contained no date, time, or IP address, nor any indication it was created within the Taleo system."

        The order denying defendants' petition to compel arbitration was affirmed.

        COMMENT: In the age of the internet, there are still some advantages to ink signatures on paper with a witness signature. Authenticating electronic signatures can be tricky. Here, it might have helped to have a date, time, or IP address. One wants a verification system that identifies the signer and the authenticity of the signature, and there are electronic tools such as DocuSign that can be effective. Indeed, perhaps Taleo would have provided the necessary authentication, but the opinion states that there was "no indication [the document] was created within the Taleo system."

Happy Fourth Of July To All Our Readers

HAPPY FOURTH OF JULY

 

July 4th tourists, NYC, 1969. Bernard Gotfryd, photographer. Library of Congress.

Internet Commerce: Clickwrap Arbitration Agreement Was Unenforceable Because Seller "Undid" Notice

An Effective Clickwrap Agreement Provides Notice Of Arbitration, Which, However, Can Be Undone.

        Plaintiffs, who purchased the Dexcom G6 Continuous Glucose Monitoring System to manage their diabetes, and sued the manufacturer alleging the the Dexcom G6 was defective and caused injuries. Dexcom moved to compel arbitration, based on a clickwrap agreement referring to arbitration. After the trial court granted motions to compel, Plaintiffs appealed. Herzog v. Superior Court of San Diego County (Real Party In Interest Dexcom, Inc.), D082847 (4/1  5/16/24) (Do, Kelety; Irion dsst).

        The majority opinion authored by Justice Do concluded that the clickwrap here did not constitute unambiguous acceptance of Terms of Use, including an arbitration agreement, because Dexcom "undid whatever notice it might have provided" by telling the customer that clicking "constituted authorization for Dexcom to collect and store the user's sensitive, personal health information."

Health Care: Parents Had To Arbitrate Their Claims Where Son Agreed To Arbitration Of Medical Malpractice Claims

The Outcome Relied On Ruiz v. Podolsky, 50 Cal.4th 838 (2020) (Ruiz).

        Parents sued Asistencia, a skilled nursing facility, alleging survivor claims for dependent adult abuse and negligence on behalf of their son Skyler as well as their own claim for wrongful death. An arbitration agreement existed between Skyler and Asistencia, so Astincencia moved to compel arbitration. The trial court granted Asistencia’s motion as to the survivor claims, but not as to the wrongful death claim, reasoning that the parents, who had not signed the arbitration agreement, did not have an enforceable agreement. Asistencia appealed -- successfully. Jonie A. Holland v. Silverscreen Healthcare, Inc. (Asistencia), 101 Cal. App. 5th 1125 (2/2  4/16/24) (Ashmann-Gerst, Chavez, Hoffstadt).

        In Ruiz, the California Supreme Court held that CCP § 1295 permitted patients who consented to arbitration to bind their heirs in actions for wrongful death. The Court in Asistencia agreed that the parents' claims were essentially for medical negligence, and were governed by Ruiz, requiring that the parents' claims be arbitrated.

Deadlines, Federal Preemption: California Judges Disagree About Whether 30-Day Deadline To Pay Fees Furthers Purpose Of Arbitration

Thirty-Day Deadline Applies.

        The Court of Appeal, Fifth District, following the weight of California precedent, applies California Code of Civ. Proc. § 1281.98, requiring that the party who has drafted an arbitration agreement must pay arbitration fees within 30 days of when they are due, or else the other party gets an option to reject arbitration and litigate instead. In Reynosa v. Superior Court (Real Party in Interest Advanced Transportation Services, Inc., F086342 (5th Dist.  5/6/24) (Detjen, Meehan, Snauffer), employee Reynosa did not expressly agree to the extension of a due date for his employer to pay arbitration fees, and the employer did not pay within 30 days, in violation of 1281.98. The Court of Appeal issued  a writ of mandate issue directing the Superior Court to vacate its  order denying plaintiff Reynosa’s motion to withdraw from arbitration. and to enter an order granting Reynosa's motion to withdraw from arbitration.

Thirty-Day Deadline Does Not Apply If There Is Federal Preemption.

        The arbitration agreement stated "this agreement is governed by the FAA" in Hernandez v. Sohnen Enterprises, Inc. B323303 (2/5  5/22/24). Justice Moor, writing for the majority, explains that this results in federal preemption of California procedural and substantive provisions. Furthermore, the majority takes the position that the California requirement of payment within 30 days unduly burdens arbitration. Usually, a payment deadline is only enforce in a contract if time is of the essence and the breach is material. Thus, the majority opinion aligns with Justice Wiley's dissent in Hohenshelt, and in fact cites to Wiley's dissent in footnote 8 of the Hernandez opinion.

        Justice Baker, dissenting, believes there is no preemption. He takes the position, consistent with other California cases, that the statutory 30-day limit to pay fees furthers the goal of arbitration by preventing employers from compelling arbitration and then delaying arbitration by not paying fees. "The majority’s opinion rather obviously invites a grant of review from our Supreme Court," writes Justice Baker.

        COMMENT: I have written about conflicting California and Federal views of whether California is a friend or foe of arbitration, as well as about Justice Wiley's dissent in Hohenshelt. For my April 10, 2024 article in the Daily Journal, use this link to the ARC website. I also have an April 11, 2024 blog post on the subject.