Justia Arbitration & Mediation Opinion Summaries

Annalycia Jenkins, a former employee of Dermatology Management, LLC, filed a class action lawsuit against her employer after resigning. She alleged unfair competition, and the employer sought to compel arbitration based on an agreement Jenkins signed on her first day of work. The trial court denied the motion to compel arbitration, finding the agreement both procedurally and substantively unconscionable.The San Luis Obispo County Superior Court found the arbitration agreement substantively unconscionable due to its lack of mutuality, shortened statute of limitations, unreasonable discovery restrictions, and requirement for the parties to equally share the arbitrator’s fees and costs. Procedurally, the court noted the agreement was a contract of adhesion, pre-signed by the employer months before Jenkins was hired, and presented to her on a take-it-or-leave-it basis without the presence of the Chief People Officer.The California Court of Appeal, Second Appellate District, Division Six, reviewed the case de novo and affirmed the lower court’s decision. The appellate court agreed that the arbitration agreement was procedurally unconscionable due to the inequality of bargaining power and the pre-signed nature of the agreement. It also upheld the finding of substantive unconscionability, noting the lack of mutuality, the unreasonable one-year statute of limitations, the unfair cost-sharing provision, and the restrictive discovery terms. The court concluded that the trial court did not abuse its discretion in refusing to sever the unconscionable provisions, as doing so would condone an illegal scheme and incentivize employers to draft one-sided agreements. The order denying the motion to compel arbitration was affirmed. View "Jenkins v. Dermatology Management, LLC" on Justia Law

Edgar Gonzalez worked for Nowhere Santa Monica, one of ten related LLCs operating Erewhon markets in Los Angeles. As a condition of his employment, he signed an arbitration agreement with Nowhere Santa Monica. Gonzalez later filed a class action lawsuit against all ten Nowhere entities, alleging various Labor Code violations. He claimed that all entities were his joint employers, sharing control over his employment conditions.The Superior Court of Los Angeles County granted the motion to compel arbitration for Nowhere Santa Monica but denied it for the other entities, finding no evidence that Gonzalez's claims against the non-signatory entities were intertwined with his claims against Nowhere Santa Monica. Gonzalez then dismissed his complaint against Nowhere Santa Monica, and the other entities appealed.The California Court of Appeal, Second Appellate District, reviewed the case. The court held that Gonzalez was equitably estopped from avoiding arbitration with the non-Santa Monica entities because his claims against them were intimately founded in and intertwined with his employment agreement with Nowhere Santa Monica. The court reasoned that Gonzalez's joint employer theory inherently linked his claims to the obligations under the employment agreement, which contained an arbitration clause. Therefore, it would be unfair for Gonzalez to claim joint employment for liability purposes while denying the arbitration agreement's applicability.The appellate court reversed the lower court's order denying the motion to compel arbitration for the non-Santa Monica entities, concluding that all of Gonzalez's claims should be arbitrated. View "Gonzalez v. Nowhere Beverly Hills LLC" on Justia Law

In 2017, CNU of Alabama, LLC, and Shakeena Cox entered into a loan agreement allowing Cox to take cash advances. Cox took three advances totaling $1,250 but later defaulted. CNU assigned its rights to UHG I LLC, which then sued Cox in Mobile District Court. Cox argued the agreement, including an arbitration provision, was void under the Alabama Small Loan Act. The district court agreed and ruled in Cox's favor.UHG appealed to the Mobile Circuit Court, where Cox filed a counterclaim on behalf of herself and a class, adding CNU as a party and seeking injunctive relief and damages. Both companies moved to compel arbitration based on the agreement's arbitration provision. The circuit court denied the motions, holding that the agreement and arbitration provision were void under the Small Loan Act, the arbitration provision was unconscionable, and UHG had waived its right to arbitrate by appealing the district court's decision. UHG and CNU appealed.The Supreme Court of Alabama reversed the circuit court's decision denying the motions to compel arbitration for Cox's counterclaim, holding that the arbitration provision was valid and enforceable. The court determined that challenges to the agreement's validity, including claims of voidness and unconscionability, were for an arbitrator to decide. However, the court affirmed the circuit court's decision that UHG waived its right to arbitrate its initial collection claim by pursuing it in court. The case was remanded for further proceedings consistent with these findings. View "CNU of Alabama, LLC v. Cox" on Justia Law

Plaintiffs brought a putative class action against Live Nation Entertainment, Inc., and Ticketmaster LLC, alleging anticompetitive practices in violation of the Sherman Act. The plaintiffs had purchased tickets through Ticketmaster’s website, which required them to agree to Ticketmaster’s Terms of Use. These terms included an arbitration agreement mandating that disputes be resolved by an arbitrator from New Era ADR, using expedited/mass arbitration procedures.The United States District Court for the Central District of California denied the defendants' motion to compel arbitration. The court found that the clause delegating the authority to determine the validity of the arbitration agreement to the arbitrator was unconscionable under California law, both procedurally and substantively. The court also held that the entire arbitration agreement was unconscionable and unenforceable. The defendants appealed this decision.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s decision. The appellate court held that the delegation clause and the arbitration agreement as a whole were unconscionable under California law. The court found that the delegation clause was part of a contract of adhesion and that the terms on Ticketmaster’s website exhibited extreme procedural unconscionability. Additionally, the court identified several features of New Era’s arbitration rules that contributed to substantive unconscionability, including the mass arbitration protocol, lack of discovery, limited right of appeal, and arbitrator selection provisions.The Ninth Circuit also held that the application of California’s unconscionability law to the arbitration agreement was not preempted by the Federal Arbitration Act (FAA). As an alternate and independent ground, the court held that the FAA does not preempt California’s prohibition of class action waivers in contracts of adhesion in large-scale small-stakes consumer cases, as established in Discover Bank v. Superior Court. The court concluded that Ticketmaster’s Terms and New Era’s Rules were independently unconscionable under Discover Bank. The decision of the district court was affirmed. View "HECKMAN V. LIVE NATION ENTERTAINMENT, INC." on Justia Law

A former employee, Campbell, filed a putative class action lawsuit against her employer, Sunshine Behavioral Health, LLC, alleging wage and hour violations. Campbell claimed that employees were not paid proper overtime, were required to work through meal and rest breaks without compensation, were not paid minimum wage, and were not paid in a timely manner. Sunshine initially proceeded with litigation and agreed to participate in mediation. However, Sunshine later claimed to have discovered an arbitration agreement signed by Campbell, which included a class action waiver.The Superior Court of Orange County found that Sunshine had waived its right to compel arbitration. Despite allegedly discovering the arbitration agreement in November 2022, Sunshine continued to engage in mediation discussions and did not inform Campbell or the court of its intent to compel arbitration until March 2023. Sunshine's delay and conduct were deemed inconsistent with an intent to arbitrate, leading the court to conclude that Sunshine had waived its right to arbitration.The California Court of Appeal, Fourth Appellate District, Division Three, reviewed the case and affirmed the lower court's decision. The appellate court found clear and convincing evidence that Sunshine had waived its right to arbitration. The court noted that Sunshine's actions, including agreeing to mediation on a class-wide basis and delaying the motion to compel arbitration, were inconsistent with an intent to arbitrate. The court emphasized that Sunshine's conduct demonstrated an intentional abandonment of the right to arbitrate, thus affirming the order denying the motion to compel arbitration. View "Campbell v. Sunshine Behavioral Health" on Justia Law

Adam and Miranda Steines, along with Andrew Ormesher, filed a class action lawsuit against Westgate, a resort company, alleging violations of the Military Lending Act (MLA). The Steines, who purchased a timeshare in Orlando and financed it through a loan from Westgate, claimed that Westgate's loan documents did not comply with the MLA's requirements, including the prohibition of mandatory arbitration clauses. The Steines sought rescission of their timeshare, injunctive relief, damages, and restitution.The United States District Court for the Middle District of Florida held an evidentiary hearing and denied Westgate's motions to compel arbitration and dismiss the complaint. The court found that the MLA applied to the timeshare loan and that the MLA's prohibition on mandatory arbitration clauses overrode the Federal Arbitration Act (FAA). Westgate appealed the decision, arguing that the district court should not have addressed the arbitrability issue and that the MLA did not override the FAA.The United States Court of Appeals for the Eleventh Circuit reviewed the case and affirmed the district court's decision. The court held that the question of whether the MLA overrides the FAA is a matter for the court to decide, not the arbitrator. The court found that the MLA explicitly prohibits mandatory arbitration clauses in consumer credit contracts involving servicemembers, thereby overriding the FAA. Additionally, the court agreed with the district court's finding that the timeshare loan did not qualify as a "residential mortgage" under the MLA, as the timeshare units were more akin to hotel rooms than residential dwellings.As a result, the Eleventh Circuit dismissed the interlocutory appeal for lack of jurisdiction, affirming that the MLA's provisions rendered the FAA inapplicable in this case. View "Steines v. Westgate Palace, L.L.C." on Justia Law

Pilar Domer placed an online order for a can of paint from Menards, selecting an in-store pickup option that incurred a $1.40 fee. Domer later filed a class action lawsuit against Menards, alleging that the company failed to disclose the pickup fee and used it to manipulate prices. Menards moved to compel arbitration based on an arbitration clause in their online terms of order. The district court granted Menards' motion, finding that Domer had agreed to the arbitration terms and that her claims fell within the scope of the arbitration agreement.The United States District Court for the Western District of Wisconsin ruled in favor of Menards, determining that the arbitration agreement was enforceable. The court found that Menards provided adequate notice of the terms and that Domer had unambiguously agreed to them by completing her purchase. The court also concluded that Domer’s claims were related to her purchase contract with Menards and thus fell within the scope of the arbitration agreement.On appeal, the United States Court of Appeals for the Seventh Circuit affirmed the district court's decision. The appellate court held that Menards' website provided reasonably conspicuous notice of the terms, and Domer unambiguously manifested her assent by submitting her order. The court also found that Domer’s claims, which included violations of consumer protection laws and unjust enrichment, arose from or related to her purchase contract with Menards. Therefore, the claims were within the scope of the arbitration agreement. The Seventh Circuit concluded that the arbitration agreement was valid and enforceable, and Domer’s claims must be arbitrated. View "Domer v. Menard, Inc." on Justia Law

In September 2021, cybercriminals targeted a chain of pawnshops, a payday lender, and a prepaid-card company, exposing customers' personal information. The companies informed customers of the breach weeks later, leading to three nationwide class-action lawsuits in the District of Minnesota. The companies moved to dismiss the cases, arguing lack of standing and failure to state a claim, but did not mention arbitration. They continued to engage in litigation activities, including briefing issues, preparing a discovery plan, and requesting a pretrial conference. There is a dispute about whether the companies mentioned arbitration during the pretrial conference, but no formal motion to compel arbitration was filed until months later.The United States District Court for the District of Minnesota found that the companies had waived their right to arbitration by substantially engaging in litigation. The court noted that the companies had no credible explanation for their delay in filing the motion to compel arbitration, despite allegedly deciding to do so during the pretrial conference.The United States Court of Appeals for the Eighth Circuit reviewed the case and affirmed the district court's decision. The appellate court applied a two-part test to determine waiver of the right to arbitration, focusing on whether the party knew of the right and acted inconsistently with it. The court concluded that the companies had knowledge of their right to arbitration and acted inconsistently by engaging in extensive litigation activities. The companies' actions, including participating in a motion-to-dismiss hearing and scheduling mediation, were deemed to have substantially invoked the litigation machinery, thus waiving their right to arbitration. The court emphasized that the companies' delay and litigation conduct were inconsistent with promptly seeking arbitration. View "Thomas v. Pawn America Minnesota, LLC" on Justia Law

The plaintiff, Mary Rodgers-Rouzier, worked as a bartender on steamboats operated by American Queen. She alleged that she and her coworkers were wrongly denied overtime wages. Rodgers-Rouzier filed a suit as a collective action, and over one hundred of her coworkers joined her proposed collective action. Meanwhile, American Queen moved to dismiss the case, arguing that Rodgers-Rouzier had agreed to arbitration. The district court denied the motion, but American Queen moved again to dismiss based on the arbitration agreement, this time invoking Indiana state law. The district court granted this motion, over Rodgers-Rouzier’s objections.The district court had previously denied American Queen's motion to dismiss the case for improper venue because Rodgers-Rouzier had agreed to arbitration. However, American Queen then moved again to dismiss based on the arbitration agreement, this time invoking Indiana state law. The district court granted this motion, over Rodgers-Rouzier’s objections that American Queen had waived its argument and the court lacked authority to apply Indiana law in this context. The court further determined that all the workers who had filed consent forms were not parties to the action.The United States Court of Appeals for the Seventh Circuit reversed the district court's decision. The court concluded that although American Queen’s arguments were not waived and the court had authority to enforce the arbitration agreement under Indiana law, Indiana law would hold American Queen to its bargain that its arbitration agreement was governed by the Federal Arbitration Act (FAA). Therefore, Rodgers-Rouzier’s case may continue in federal court. The court did not decide whether it may do so as a collective action and left that question for further litigation. View "Rodgers-Rouzier v. American Queen Steamboat Operating Company, LLC" on Justia Law

Joseph Work, a former employee of Intertek, filed a collective action against the company for unpaid overtime, liquidated damages, attorneys’ fees, and relief for the collective class. Intertek objected to the judicial forum and requested arbitration. The dispute centered on whether the agreed-upon Arbitration Agreement provided for individual or class arbitration. Work sought class arbitration, while Intertek sought individual arbitration. Intertek filed a Motion to Compel Individual Arbitration, arguing that the Arbitration Agreement did not contain an express delegation clause and was silent on class arbitration.The United States District Court for the Southern District of Texas ruled that the issue of class arbitrability was delegated to the arbitrator. The court held that the Arbitration Agreement incorporated certain JAMS Rules by reference, which delegate questions of arbitrability to the arbitrator, including the question of class arbitrability. The district court granted Work’s motion to dismiss and denied Intertek’s motion to compel individual arbitration.On appeal to the United States Court of Appeals for the Fifth Circuit, Intertek argued that consent to class arbitration was absent and that the language in the Arbitration Agreement was not clear. The court rejected both arguments, affirming the district court's decision. The court held that the Arbitration Agreement was not ambiguous and that it clearly incorporated the JAMS Rules by reference. The court concluded that the language in the Arbitration Agreement was "clear and unmistakable" in its incorporation of the JAMS Rules, which provide that the arbitrator decides the question of arbitrability. View "Work v. Intertek" on Justia Law