Justia Arbitration & Mediation Opinion Summaries

A Private Attorneys General Act (PAGA) plaintiff may not be compelled to arbitrate whether he or she is an aggrieved employee. Petitioners filed suit against Zum under PAGA, alleging that Zum misclassified them and others as independent contractors and thus violated multiple provisions of the California Labor Code. The trial court granted Zum's motion to compel arbitration and ordered into arbitration the issue of arbitrability of petitioners' suit.The Court of Appeal reversed the order compelling arbitration, concluding that the delegation of the question of arbitrability to an arbitrator frustrates the purpose of PAGA and is therefore prohibited under California law. The court explained that the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, and several Courts of Appeal are uniform in holding that PAGA claims are not waivable and are not arbitrable. Furthermore, under that case law and in light of the very nature of a PAGA claim, a court – not an arbitrator – must decide all aspects of the claim. The court further explained that the only exception is when the state, as real party in interest, has consented to arbitration. However, the state did not consent here. The court concluded that the "preliminary" question of whether petitioners are "aggrieved employees" under PAGA may not be decided in private party arbitration. View "Contreras v. Superior Court of Los Angeles County" on Justia Law

The Court of Appeal reversed a judgment confirming an arbitration award removing the managing director of two corporations, owned by Ted and his brother Harry Roussos as cotrustees of two trusts, and appointing the director proposed by Harry. The court concluded that the parties cannot contract away California's statutory protections for parties to an arbitration, including mandatory disqualification of a proposed arbitrator upon a timely demand. The court explained that the arbitrator was still a "proposed neutral arbitrator" for the present arbitration under Code of Civil Procedure sections 1281.9 and 1281.91, and under section 1281.91, subdivision (b)(1), the arbitrator was required to disqualify himself upon Ted's timely service of a notice of disqualification. In this case, as the proposed neutral arbitrator, Judge Shook was legally required to make the disclosures set forth in his disclosure report, and Ted had an absolute right to disqualify him without cause. Because the arbitrator refused to disqualify himself, the trial court was required to vacate the award under section 1286.2, subdivision (a)(6)(B). The court remanded with instructions for the trial court to vacate its order granting the petition to confirm the arbitration award, and to enter a new order vacating the award. View "Roussos v. Roussos" on Justia Law

Putnam purchased a service-only (satellite) Subaru facility in San Francisco. Putnam entered into a temporary “Dealer Candidate Satellite Service Facility Agreement.” Subaru and Putnam subsequently executed a Subaru Dealer Agreement for the sale and service of vehicles at a Burlingame dealership and a five-year (renewable) Satellite Service Facility Agreement, which contained an arbitration provision. In 2017, Subaru stated that it would not approve Putnam’s proposed relocation of the satellite facility and would not renew the Satellite Agreement in 2019. Putnam filed protests with the New Motor Vehicle Board. Subaru moved to compel arbitration.The trial court found that the Satellite Agreement did not come within the Motor Vehicle Franchise Contract Arbitration Fairness Act, an exception to the Federal Arbitration Act. Putnam was compelled to arbitrate claims arising from that agreement. The court denied Subaru’s request to compel Putnam to dismiss its Board protests, which were stayed pending arbitration. An arbitrator found that the Satellite Agreement was a franchise, that Subaru was required to show good cause, and that Subaru had established good cause for terminating the Satellite Agreement.The court of appeal affirmed the confirmation of the arbitration award, rejecting arguments that the arbitrator lacked jurisdiction to make a good cause determination; enforcement of the arbitration provision was illegal under the Vehicle Code; public policy underlying California’s New Motor Vehicle Board Act precluded the arbitrator from making a good cause determination; and that Putnam’s due process rights were violated when Subaru failed to provide the required notice of the reasons for termination. View "Subaru of America, Inc. v. Putnam Automotive, Inc." on Justia Law

In a putative class action, plaintiffs Joe Maldonado, Alfredo Mendez, J. Peter Tuma, Jonabette Michelle Tuma, and Roberto Mateos Salmeron (collectively referred to as “the Customers”), claimed Fast Auto Loans, Inc., (Lender) charged unconscionable interest rates on loans in violation of California Financial Code sections 22302 and 22303. Lender filed a motion to compel arbitration and stay the action pursuant to an arbitration clause contained within the Customers’ loan agreements. The court denied the motion on the grounds the provision was invalid and unenforceable because it required consumers to waive their right to pursue public injunctive relief, a rule described in McGill v. Citibank, N.A., 2 Cal.5th 945 (2017). On appeal, Lender argued the “McGill Rule” did not apply, but even if it did, other claims were subject to arbitration. Alternatively, Lender contended the McGill Rule was preempted by the Federal Arbitration Act . Finding Lender’s contentions on appeal lacked merit, the Court of Appeal affirmed the trial court’s order. View "Maldonado v. Fast Auto Loans" on Justia Law

The Court of Appeal reversed the trial court's denial of Altamed's motion to compel arbitration of plaintiff's employment-related claims. The court concluded that the trial court erred in denying the motion to compel arbitration. The court explained that the arbitration agreement is valid where plaintiff knowingly waived her right to a jury trial and the signature of Altamed's CEO was not required on the arbitration agreement. The court also concluded that any unconscionability in the arbitration agreement does not provide grounds for revocation or non-enforcement. However, the court concluded that the second review provision appears entirely severable from the remainder of the agreement and removing it would remove the only instance of substantive unconscionability. Therefore, the court ordered Paragraph 5 authorizing review by a second arbitrator severed, and remanded for the trial court to enter an order granting the motion to arbitrate. View "Cisneros Alvarez v. Altamed Health Services Corp." on Justia Law

Daniel and Indiana Cabatit entered into a solar power lease agreement (the agreement) with Sunnova Energy Corporation. After a solar power system was installed on the Cabatits’ residence, the Cabatits sued Sunnova, alleging damage to their roof. Sunnova moved to compel arbitration based on an arbitration clause in the agreement, but the trial court found the arbitration clause unconscionable and denied the motion. On appeal, Sunnova contended: (1) the arbitration clause required the Cabatits to submit to an arbitrator the question whether the clause was enforceable; (2) the trial court erred in finding the arbitration clause unconscionable, and (3) despite the trial court’s conclusion to the contrary, the rule announced in McGill v. Citibank, N.A. 2 Cal.5th 945 (2017), did not apply to the circumstances of this case. The Court of Appeal determined: (1) Sunnova did not raise at trial the issue of whether the arbitration clause was itself had to be decided by an arbitration, thus not addressed on appeal; (2) the arbitration clause was procedurally and substantively unconscionable and therefore unenforceable, and (3) the Court did not consider whether the McGill rule applied here because general considerations of unconscionability, independent of the McGill rule, supported the trial court’s determination. Thus, the Court affirmed the trial court's denial of Sunnova's motion to compel arbitration. View "Cabatit v. Sunnova Energy Corporation" on Justia Law

The Court of Appeal affirmed an order denying defendant's motion to compel arbitration, holding that there was sufficient evidence to support the trial court's finding that defendant waived its right to arbitrate. The court rejected defendant's contention that it was reasonable to wait until it located the executed arbitration agreements before filing its motion, particularly in light of its concession that at the outset of the litigation, it was not only aware of its policy requiring arbitration, but had located checklists that demonstrated both plaintiffs had received a copy of the arbitration agreement. Furthermore, substantial evidence supported a finding that the length of defendant's delay prior to filing its motion to compel arbitration and for a stay was unreasonable.The court also held that defendant acted in a manner inconsistent with its right to arbitrate. The court explained that, although defendant initially asserted arbitration as an affirmative defense, it subsequently represented in two status conference statements that it did not intend to arbitrate. The court explained that defendant's conduct related to classwide issues was inconsistent with its claimed right to arbitrate individual claims and strongly supported the trial court's finding that defendant acted in a manner inconsistent with its right to arbitrate. The court also concluded that substantial evidence supported the trial court's conclusion that defendant continued to act in a manner inconsistent with arbitration even after it located the arbitration agreements in June 2018. Finally, substantial evidence supported the trial court's finding of prejudice where defendant's delay impaired plaintiffs' ability to realize the benefits and efficiencies of arbitration. View "Garcia v. Haralambos Beverage Co." on Justia Law

Daylight, an expedited less-than-truckload carrier, contracts with independent truck drivers. Daylight’s California drivers only provided services within California. The plaintiffs each entered into an “Independent Contractor Service Agreement” before beginning to drive for Daylight and regularly signed materially identical contract extensions while driving for Daylight. All of those Agreements contained an identical arbitration provision. The plaintiffs filed a putative class action, requesting relief from Daylight’s “unlawful misclassification of former and current Daylight delivery drivers as ‘Independent Contractors,’ ” and alleging violations of Labor Code and wage order provisions, and the law against unfair competition.The court of appeal affirmed the denial of Daylight’s motion to compel arbitration, applying California law and finding the agreement procedurally and substantively unconscionable, and that severance of the unconscionable terms is not possible. Daylight was in a superior bargaining position and presented the contracts on a take it or leave it basis. The Agreement’s 120-day limitations period is substantially shorter than the statutory limits. The Agreement permits Daylight to seek a provisional judicial remedy but precludes plaintiffs from equivalent access and requires that the parties split the cost of arbitration, a cost greater than litigation filing fees. Because Daylight had waived its argument, the court did not address preemption under the Federal Arbitration Act, which“provides a limited exemption from FAA coverage to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce (9 U.S.C. 1). View "Ali v. Daylight Transport, LLC" on Justia Law

Aetna brought a qui tam action to recover damages and fees occasioned by the surgical center's fraudulent billing practices. The trial court denied the surgical center's petition to compel arbitration of the quit tam action. At issue is Aetna's claims of fraudulent insurance billing practices by the surgical center and its healthcare billing services in violation of the Insurance Fraud Protection Act (IFPA).The Court of Appeal affirmed and concluded that the qui tam action is not subject to arbitration because it is brought on behalf of the state which is not a party to the contract between the insurance company and the surgical center. In this case, California is the real party in interest and it cannot be compelled to arbitrate this qui tam IFPA action because it is not a signatory to the contracts. View "California ex rel. Aetna Health of California Inc. v. Pain Management Specialist Medical Group" on Justia Law

The State entered into a Memorandum of Understanding (MOU) with the Union regarding terms and conditions of employment for certain state employees classified as bargaining unit 12. The State subsequently appealed the trial court’s order denying its petition to vacate or correct an arbitration award determining that DWR had violated article 16.7(G) of the MOU by using purged documents to support the adverse disciplinary action taken against the employee.The Court of Appeal concluded that the arbitration award interpreted and enforced article 16.7(G) of the MOU in a manner that constitutes a violation of the constitutional merit principle, because it impedes the ability of state departments to make reasonable and sound employment decisions based on merit. Therefore, the award violated public policy and the trial court erred in denying the petition. The court reversed the trial court's order on the petition and the ensuing judgment, remanding the matter to the trial court with instructions to enter a new order vacating the award. View "Department of Human Resources v. International Union of Operating Engineers" on Justia Law