2005 DEVELOPMENTS IN THE LAW AFFECTING ARBITRATION
Another flood of decisions affecting arbitration and arbitrators---44 in all---emerged from appellate courts in California in 2005.
In addition to the cases decided by appellate courts in California, this report will cover a decision by the Florida Supreme Court on which the Supreme Court granted certiorari and heard argument on November 28. This is the case of Buckeye Check Cashing, Inc. v. Cartegna, which involves the issue of whether a court or arbitrator should decide in the first instance whether a contract containing an arbitration agreement is illegal. The Florida Supreme Court held that plaintiff’s claim that the check cashing arrangement was infected by usury was to be decided by a court. See 894 So.2d 860 (2005). The question is whether by extension of Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967), this issue should be put before the arbitrator. The most recent California case on the subject is the Hotels Nevada case, No. 17 below on the list of Court of Appeal decisions. The court in Hotels Nevada reached the same conclusion as the Florida Supreme Court.
Issues involved in whether to enforce arbitration agreements, especially those imposed on employees and other consumers, were involved in almost half of the California cases. Class action waiver disputes topped this list. Efforts to vacate awards were involved in 10 more cases. The remainder are difficult to classify. Two of the cases, Parker v. McCaw and Ovitz v. Schulman, involved the very rich, if not famous.
As might be expected, most of the cases decided by the Court of Appeal were decided by the Second District. The Fifth District was the least active in the arbitration field with only one decision, followed by the Third with two.
In addition to the judicial decisions, a significant regulatory development came in the form of an announcement by the Judicial Council that it would consider proposals for revision of the Ethics Standards for Neutral Arbitrators in Contract Arbitrations. Comments may be submitted to Romunda Price, Administrative Office of the Courts, 455 Golden Gate Avenue, San Francisco, CA 94102. The deadline for submitting comments is January 20, 2006.
In chronological order, the Ninth Circuit cases included:
1. Al-Safin v. Circuit City Stores, Inc., 394 F.3d 1254 (9th Cir. Jan. 18, 2005). On appeal by Circuit City from an order denying its petition to compel arbitration of a discrimination claim by a former Washington employee on the ground its arbitration agreement was unconscionable, held, affirmed. Circuit City sought to enforce a 2003 arbitration procedure, which was adopted some three years after plaintiff had filed suit in 1999 and longer after he had been terminated in 1998. The court held that Circuit City’s 1998 procedure was applicable. Its provision that claims would be subject to the procedure in effect when arbitration was initiated was unconscionable and, even if that were not so, changes made after plaintiff’s employment was terminated could not be applied to him. The 1998 procedure had been held in Ingle v. Circuit City Stores, Inc., 328 F.3d 1165 (9th Cir. 2003), to be so “permeated with unconscionable provisions” under California law as to be unenforceable, and Washington law is to the same effect. Note: The courts continue to find ways to deny enforcement of the employment arbitration program of Circuit City, which holds the single company record for appellate decisions involving its efforts to force arbitration upon employees.
2. Dees v. Billy, 394 F.3d 1290 (9th Cir. Jan. 20, 2005). On appeal from an order compelling arbitration and staying a medical malpractice action pending such arbitration and closing the file “administratively,” held, appeal dismissed. Under Section 16(b) of the Federal Arbitration Act, an appeal may not be taken from an order compelling arbitration, unless, per Section 16(a)(3), the order “ends the litigation on its merits.” Closing the file for administrative purposes did not “end” this case.
3. Credit Suisse First Boston Corp. v. Grunwald, 400 F.3d 1119 (9th Cir. March 1, 2005). On appeal from an order enjoining Grunwald from arbitrating except before the NASD per NASD procedures, held, affirmed. Upon approval of the NASD procedures by the SEC, the Securities Exchange Act of 1934 pre-empted conflicting California arbitrator disclosure and disqualification procedures. Note: The California Supreme Court not surprisingly reached the same conclusion in the Jevne case below.
4. Ingle v. Circuit City Stores, Inc., 408 F.3d 595 (9th Cir. 2005). This try by Circuit City for a second bite at the cherry led to the imposition of sanctions. See 328 F.3d 1165 (9th Cir. 2003) for the initial decision.
5. Mantor v. Circuit City Stores, Inc., 417 F.3d 1060 (9th Cir. Aug. 3, 2005). And again. On appeal from an order granting a “renewed petition” to compel arbitration after the grant of a previous petition had been reversed in Mantor v. Circuit City Stores, Inc., 335 F.3d 1101 (9th Cir. 2003), held, reversed. EEOC v. Luce, Forward, Hamilton & Scripps, 345 F.3d 742 (9th Cir. 2003), did not make the Circuit City Stores arbitration program any the less unconscionable than it had been before that decision. (Note: Manuel Real, the District Court Judge who was no more right the second time around than the first, is well known for his arbitrary decisions).
6. Brown v. Dillard’s, Inc., 05 C.D.O.S. 10225 (9th Cir. Dec. 6, 2005). When plaintiff was terminated by Dillard’s, she filed a notice of intent to arbitrate under Dillard’s “Fairness in Action Program.” When Dillard’s refused to participate, she filed suit. Dillard’s then removed the suit and sought to compel arbitration. On appeal from an order denying its application, held, affirmed. Whereas the District Court’s decision was based on a determination that Dillard’s arbitration program was unconscionable, the Ninth Circuit refrained from passing on that issue and held instead that, having breached its arbitration agreement by refusing to participate in arbitration, Dillard’s could not enforce it.
In chronological order, the California Supreme Court cases included:
1. Cronus Investments, Inc. v. Concierge Services, 35 Cal. 4th 376 (March 10, 2005). On review of a Court of Appeal decision affirming an order pursuant to CCP Section 1281.2 staying arbitration of the arbitrable claims involved in a lawsuit and consolidating the arbitrable claims with the litigation, held, affirmed. The parties had agreed that their arbitration agreements would be governed by California law, but that this “shall not be deemed an election to preclude application of the [FAA], if that would be applicable.” The court concluded that this language intended the FAA to take priority if Section 1281.2 conflicted with it, but that there was no conflict. Note: The court’s conclusion as to the intent of the arbitration agreement led it to make heavy going out of a seemingly straightforward issue. The FAA unquestionably was applicable. Volt would appear to have been game, set, match.
2. Jevne v. Superior Court, 35 Cal. 4th 935 (May 23, 2005). On review of a Court of Appeal decision affirming an order for NASD arbitration without compliance with the Judicial Council Ethics Standards, held, affirmed. The disclosure standards conflict with those of the NASD which were approved by the SEC and, thus, are pre-empted by the 1934 Act. The remaining standards are “not functionally or volitionally separable” from the disclosure standards and, thus, are also pre-empted.
3. Discover Bank v. Superior Court, 36 Cal. 4th 148 (June 27, 2005). On review of a Court of Appeal decision that, without addressing the choice of law issue, held that the FAA pre-empted California law making class action waivers unconscionable, held, reversed. Unconscionability is a standard state law contract defense and as such is not pre-empted by the FAA. The question is whether California law should be applied or Delaware law, as specified in the form of credit card agreement, which OK’s class action waivers. Note: See Court of Appeal No. 31 below for the choice of law decision on remand.
4. Maynard v. Brandon, 36 Cal. 4th 364 (July 11, 2005). On review of a Court of Appeal decision reversing a judgment confirming an award for plaintiff’s in an attorney-client fee dispute, held, reversed. The lawyer’s request for a trial de novo was filed more than 30 days after service of the award. Unlike the case in a judicial arbitration, CCP Section 473 is not available to excuse a late filing in a attorney-client fee dispute arbitration case.
5. Boghos v. Certain Underwriters at Lloyd’s of London, 36 Cal. 4th 495 (July 18, 2005). Boghos claimed that the arbitration clause in a disability insurance policy was unconscionable and, therefore, unenforceable because it required him to share the costs of arbitration, contrary to Armendariz and Little v. Auto Stiegler, Inc. On review of a Court of Appeal decision affirming an order refusing to compel arbitration, held, reversed.
“To extend Armendariz to the arbitration of claims not carefully tethered to statutory or constitutional provisions would seem an arbitrary refusal to enforce Section 1284.2 . . . .” Note: Possibly the least noticed, but most far reaching arbitration decision of the Court in 2005.
6. Grafton Partners, L.P. v. Superior Court, 36 Cal. 4th 944 (Aug. 4, 2005). Plaintiffs filed what was, in effect, an accounting malpractice case. Based on a jury waiver in the engagement agreement, a motion by defendants to strike plaintiffs’ jury trial demand was granted. On review of a Court of Appeal decision reversing the order, held, affirmed. Pursuant to Article 1, Section 16 of the California Constitution, a jury trial may be waived only as provided by the Legislature, and the only form of pre-filing ADR agreement by which the Legislature has authorized a jury trial waiver is one for arbitration.
In chronological order, the Court of Appeal cases included:
1. Riegelsperger v. Siller, 129 Cal. App. 4th 1008 (3rd Dist. Jan. 13, 2005). On appeal by a chiropractor from an order denying his petition to compel arbitration of a malpractice claim arising from the chiropractor’s treatment of the patient’s cervical spine and shoulder, held, affirmed. The patient signed an arbitration agreement when he obtained treatment for a twisted back. Two years later he sought the treatment complained of. No new arbitration agreement was signed. Under CCP 1295(c), an arbitration agreement applies only to the treatment or series of treatments for which the agreement was signed.
2. Provencio v. WMA Securities, Inc., 125 Cal. App. 4th 1228 (2nd Dist. Jan. 18, 2005). On appeal by WMA from an order denying its petition to compel customers to arbitrate claims of fraud and breach of contract, held, affirmed. NASD Rule 10301(a) provided that customer claims against firms that were not members could be arbitrated only with the customer’s consent. Since WMA had ceased to be an NASD member, the customer plaintiffs had the option to proceed in court.
3. Parker v. McCaw, 125 Cal. App. 4th 1494 (2nd Dist. Jan. 28, 2005). On appeal from a judgment confirming an arbitration award, held,
affirmed in part and reversed in part. Two arbitrations had been consolidated pursuant to CCP 1281.3. The agreement in one provided for a single arbitrator. The agreement in the other provided for three arbitrators. The consolidation order provided for a single arbitrator. The consolidation was held not to “achieve substantial justice” and was therefore improper, because the right to a three-arbitrator panel was a “substantial contract right.” That part of the judgment arising from the three-arbitrator agreement was reversed. Note: the principal parties were Wendy McCaw, the ex-wife of the cellular telephone magnate, and a lawyer who initially counseled her regarding the $500 million-plus business holdings she received from the marital dissolution and then for a time became romantically involved. One of the lawyer’s former partners who at his suggestion had succeeded him as McCaw’s personal counsel was also involved on her side.
4. American Federation of State Employees (AFSCME) v.
Metropolitan Water Dist. of Southern Calif. (MWD), 126 Cal. App. 4th 247 (2nd Dist. Feb. 1, 2005). On appeal from an order refusing to compel arbitration, held, affirmed. Since the Memorandum of Understanding (MOU) provided for appeal pursuant to CCP 1094.5 from any “final and binding” decision of a hearing office, it did not provide for a final and binding decision. Thus, an essential characteristic of arbitration was lacking, and arbitration could not be compelled.
5. Viola v. Department of Managed Health Care, 126 Cal. App. 4th 373 (2nd Dist. Feb. 3, 2005). Plaintiff’s sought a declaration that the approval by the Department of health service plans containing mandatory arbitration clauses denied their right to a jury trial. On appeal from a judgment for the Department after its demurrer was sustained without leave to amend, held, affirmed. In Madden v. Kaiser Foundation Hospitals, (1976) 17 Cal. 3d 699, the California Supreme Court held that, as agents of their employees could agree to health care plans that waived jury trial rights of those employees who accepted coverage. The Legislature, accordingly, could, as the Legislature did authorize approval of plans with mandatory arbitration clauses, subject only to specified disclosures. Note: Affirmed on rehearing in No. 25 below.
6. County of Solano v. Lionsgate Corp., 126 Cal. App. 4th 741 (1st Dist. Feb. 8, 2005). On appeal from a judgment confirming an award of penalties under the False Claims Act, pre-award interest, attorney’s fees and costs, held, affirmed, except for the pre-award interest. Without deciding whether a claim purely for penalties would be arbitrable, the court concluded that False Claims Act claims were arbitrable like other statutory claims and that the arbitrator was “well within his authority” in awarding the County penalties to compensate it for its damages. The court was authorized by Public Contracts Code Section 10240.12 to correct errors of law. The False Claims Act did not authorize recovery of pre-judgment interest on penalties. However, Civil Code Section 3287 allowed post-award, pre-judgment interest.
7. Woolls v. Superior Court, 127 Cal. App. 4th 197 (2nd Dist. Feb. 28, 2005). A homeowner objected to arbitration on the ground that the arbitration clause in a remodeling contract was unenforceable because it failed to include the disclosures required by Business & Professions Code Section 7131. However, without waiving his objection, he participated in the arbitration to avoid a default. On petition for writ of mandate to vacate a trial court’s decision rejecting the homeowner’s objection to an arbitration award on the grounds that it had and should exercise its discretion to enforce the agreement notwithstanding Section 7131 because the homeowner was a lawyer who executed the contract with knowledge of the defect, held, writ granted. The homeowner was entitled to avoid the arbitration clause. The contractor failed to show any interstate commerce nexus sufficient to trigger FAA pre-emption of Section 7131.
8. Alliance Title Co. v. Boucher, 127 Cal. App. 4th 262 (2nd Dist. March 2, 2005). Plaintiff sued Financial Title Company and Alliance, a separate subsidiary of the same corporate parent, for breach of a three-year employment contract with Financial. When the assets of Financial were transferred to Alliance, plaintiff’s compensation was reduced and, when he refused to accept a revised contract, he was terminated. On appeal from an order denying the petition of Alliance to compel arbitration, held, reversed. The obligation to arbitrate was a matter of federal law, not state contract law, and, since plaintiff’s claim arose from a contract containing an arbitration clause, the successor corporation was equitably entitled to compel arbitration. Note: The court’s major premise may be open to question.
9. Cummings v. Future Nissan, 128 Cal. App. 4th 321 (3rd Dist. March 22, 2005). On appeal from an order confirming an arbitration award in favor of an employer, held, affirmed. The employee had not raised any objection to the “two-tier” arbitration proceeding, i.e., one in which the first arbitrator’s decision was reviewed by a second, when the employer’s motion to compel arbitration had come on for hearing, and it was not unconscionable in any event.
10. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. v. Woodman Investment Group, 129 Cal. App. 4th 508 (2nd Dist. May 17, 2005). The trial court vacated an arbitration award and granted the parties that successfully sought vacatur attorney’s fees and costs. On appeal from the grant of attorney’s fees, held, affirmed. The prevailing party on confirmation/vacatur was entitled to costs pursuant to CCP Section 1293.2 (and attorney’s fees in this case per the contract), even though the underlying dispute had not been finally resolved, but was to be subject to a further arbitration.
11. Parrish v. Cingular Wireless, LLC, 129 Adv. Cal. App. 4th 601 (1st Dist. May 18, 2005), review granted, Oct. 3, 2005. On appeal from an order denying a petition to compel arbitration of a class action on the ground that a class action prohibition made the arbitration agreement unconscionable, held, reversed with instructions to grant the petition on an individual basis without prejudice to plaintiff’s right to raise other grounds of unconscionability. Customers are not deterred from seeking redress for small amounts, because they may obtain relief in small claims court and Cingular is to pay the costs of arbitration. Under these circumstances the prohibition on class arbitration is not unconscionable. The unavailability of class arbitration is “part and parcel” of the simplicity and economy of arbitration. Note: See also Nos. 30 and 31 below.
12. Corell v. Fox & Fox, 129 Cal. App. 4th 591 (2nd Dist. May 17, 2005). Corell retained Fox & Fox to represent her in a marital dissolution and gave the firm a deed of trust on her home to secure a note for fees. The retainer agreement gave Corell the option of binding or non-binding arbitration in the event of a fee dispute with binding arbitration to follow if either party rejected a non-binding award. A dispute ensued. Non-binding arbitration resulted in an award for “substantially less” than the firm sought. When the firm sued, Corell sought to compel arbitration. Her motion was granted. The firm dismissed its action. Corell sued for relief from the deed of trust. The law firm cross-complained for its fees. On appeal by Corell from an order dismissing the case and sending the dispute back to arbitration, held, reversed as to Corell’s complaint; affirmed as to the cross-complaint. The law firm’s dismissal of its suit constituted a repudiation of its election of trial de novo such that the award became binding pursuant to Business & Professions Code Section 6203(b).
13. Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc., 129 Cal. App. 4th 759 (1st Dist. May 19, 2005). On appeal by M&M from an order granting a petition by its seller client for arbitration of a claim by the buyer, but denying its petition to compel arbitration, held, reversed. Even though Marcus & Millichap did not sign the arbitration agreement, it was entitled to enforce the agreement as agent of its seller. Assuming that CCP 1298 was not pre-empted by the FAA, it nevertheless applied only to disputes between an agent and its principal.
14. Howell v. Valley, 129 Cal. App. 4th 1076 (6th Dist. May 27, 2005). On appeal from a judgment dismissing an action on a promissory note for legal fees because the lawyer had not given notice pursuant to Business & Professions Code Section 6201(a) of the client’s right to arbitration, held, reversed with directions to grant the lawyer’s motion for summary judgment. Dismissal for failure to give a 6201(a) notice is discretionary, not mandatory. By participating in the litigation for 15 months, the client waived his right to a 6201(a) notice, and there was no other issue of triable fact.
15. Jones v. Humanscale Corp., 130 Cal. App. 4th 401 (4th Dist. June 17, 2005). Jones entered into an employment contract as a sales representative for Humanscale. The contract provided for arbitration and for New Jersey law to apply. The contract included a covenant that Jones would for two years after termination not sell competing products to his Humanscale accounts. After Jones was terminated, Humanscale commenced arbitration in New Jersey. The arbitrator rejected Jones’ argument that Business & Professions Code Section 16600 should be applied to the covenant not to compete. On appeal from an order denying Humanscale’s petition to confirm the award, held, reversed with directions to correct the division of arbitration expenses and, as corrected, to confirm the award. “This is a classic case of the trial court declining to enforce an arbitration award because it disagrees with the merits of the decision.” Moreover, the arbitrator’s decision was “not palpably erroneous under California law.” In order to comply with Armendariz, the trial court should have corrected the award to provide that Humanscale pay all of the arbitration costs. This would not affect the merits of the decision.
16. Taylor v. Van-Catlin Construction, 130 Cal. App. 4th 1061 (6th Dist. June 29, 2005). On appeal from a decision striking attorney’s fees from an arbitrator’s award in favor of the homeowners in a construction case, held, reversed. The construction company sought the recovery of penalties under Civil Code Section 3260. Section 3260(g) provides that the prevailing party in any such action shall be entitled to attorney’s fees. Since the homeowners prevailed, the arbitrator acted within his power in awarding fees.
17. Hotels Nevada, LLC v. Bridge Banc, LLC, 130 Cal. App. 4th 1431 (2nd Dist. July 8, 2005). On appeal from an order denying a petition to compel arbitration on the ground a loan agreement was illegal because the lender lacked the requisite license, held, affirmed. The issue of whether a license was needed was for the court, not the arbitrator.
18. Richard B. Levine, Inc. v. Higashi, 131 Cal. App. 4th 566 (4th Dist. July 27, 2005). On appeal from a summary judgment in favor of defendants, held, affirmed. An arbitration award in favor of defendants’ alleged co-conspirators is res judicata on plaintiff’s claims.
19. Trend Homes, Inc. v. Superior Court, 131 Cal. App. 4th 950 (5th Dist. Aug. 2, 2005). On appeal from an order refusing to enforce a motion to compel a reference pursuant to a pre-dispute agreement in a home sales contract, held, reversed. The agreement was not procedurally unconscionable, because plaintiffs did not show they tried to negotiate the agreement, but were unsuccessful; and it was not substantively unconscionable, because it provided for the apportionment of fees in a “fair and reasonable manner.” Note: This not atypically conservative 5th District decision cannot, in my opinion, be squared with Supreme Court’s Grafton decision issued two days later.
20. SEIU v. Cupertino Union School Dist., 131 Adv. Cal. App. 4th 985 (6th Dist. Aug. 3, 2005), ordered “depublished” Oct. 19. Although the Union’s demand for arbitration was timely, it was submitted to the District and no notice was mailed to the state mediation service, as required by the collective bargaining agreement, until after the deadline for requesting arbitration had passed. On appeal from an order denying the Union’s petition to compel arbitration, held, reversed. To avoid a forfeiture which would be contrary to the state policy in favor of arbitration, the court concluded that the union had not waived its right to arbitrate.
21, Garrison v. Superior Court, 132 Cal. App. 4th 263 (2nd Dist. Aug. 29, 2005). On petition for a writ of mandamus from denial of a petition to compel arbitration, held, writ granted. The holder of a durable power of attorney was authorized to execute an arbitration agreement in connection with the admission of her principal to a residential care facility.
22. Medical Staff of Doctors Medical Center in Modesto v. Kamil, 132 Cal. App. 4th 679 (2nd Dist. Sept. 8, 2005). On appeal from the denial in a defamation action of a motion to compel arbitration by the defendant health insurance provider, held, affirmed. The arbitration agreement between the plaintiffs and defendant covered only “any problem or dispute concerning the terms of this Agreement.” Note: The opinion is devoid of any mention of the FAA or First Options of Chicago. Hopefully, this was not inadvertent, but rather out of recognition that the reservation to states of regulation of the business of insurance pursuant to the McCarran-Ferguson Act has been held to trump the FAA.
23. Villacreses v. Molinari, 132 Cal. App. 4th 1223 (4th Dist. Sept. 26, 2005). The escrow agreement executed in connection with the purchase by Villacreses of a home from Molinari included a provision agreeing to arbitration of any dispute to which “it applies” without any language to which the “it” referred. Arbitration of a claim by Villacreses was ordered over their objection. On appeal from confirmation of an award in favor of Molinari, held, reversed. No effective arbitration agreement was ever executed.
24. Robertson v. Health Net of California, 132 Cal. App. 4th 1419 (1st Dist. Sept. 28, 2005). On appeal from an order denying a petition to compel arbitration of a claim for wrongful cancellation of a health insurance policy, held, affirmed. The arbitration clause failed to comply with Health & Safety Code Section 1361.1, both because the jury trial waiver was not “prominently displayed” in a “separate article” in the agreement and also because it was not placed “immediately” before the line on which the subscriber was to sign. Instead, it was in the middle of a paragraph three paragraphs before the signature line. Note: See note above in regard to the Medical Center in Modesto case.
25. Viola v. California Department of Managed Health Care, 133 Cal. App. 4th 299 (2nd Dist. Oct. 11, 2005)(opinion on rehearing of No. 5 above). In Grafton above, the California Supreme Court reiterated the power of the Legislature to provide for waiver of a jury trial. “The fundamental problem with plaintiffs’ theory is that the Legislature has expressly approved arbitration as a forum for resolution of disputes under health care service contracts, thus authorizing waiver of jury trial for such disputes.” Query: Given the McCarran-Ferguson Act, could the Legislature act to the contrary.
26. Independent Association of Mailbox Center Owners, Inc. v. Superior Court, 133 Cal. App. 4th 396 (4th Dist. Oct. 13, 2005). An alleged class of Mail Boxes Etc. franchisees filed suit on various statutory and common law claims arising out of the acquisition of Mail Boxes Etc by United Parcel Services. AAA arbitration agreements covered 17 plaintiffs. JAMS clauses covered 11 plaintiffs. And mediation only clauses covered 7 plaintiffs. The JAMS clause barred class arbitration. Both arbitration clauses reserved to Mail Boxes Etc. the right to sue on various claims. Both clauses also barred punitive damages. The court ordered the claims to arbitration. The AAA refused to administer a demand for group arbitration. JAMS appointed an arbitrator, but, given the JAMS clause, he refused to proceed with a group arbitration. Plaintiffs then moved pursuant to CCP Section 1281.3 for an order consolidating their arbitrations. On petition for a writ of mandamus to overturn an order denying the motion, held, writ granted. Franchise agreements are enough like employment agreements that it was error not to strike the ban on class arbitrations as unconscionable. Further, to the extent that punitive or consequential damages would be available in court on any of plaintiffs’ claims, it was error not to strike the limitations against them as unconscionable. The claims that defendants should bear fees require further evaluation in light of Armendariz and Boghos and the financial capabilities of the franchisees.
27. Ovitz v. Schulman, 133 Cal. App. 4th 830 (2nd Dist. Oct. 26, 2005). On appeal from an order vacating an arbitration award, held, affirmed. The arbitrator failed to comply with revised Standard 12, which requires an arbitrator to disclose if he or she reserves the right during an appointment to accept a second engagement as an ADR neutral from a party to the initial dispute or a lawyer for a party. Then, before rendering his award in the arbitration, the arbitrator accepted an appointment in a second matter in which one of the parties was represented by the law firm for the party which turned out to prevail in the first arbitration. Vacatur was required by CCP Section 1286.2(a)(6). Note: In defense of the arbitrator, he was asked to make his disclosures in the first case only two weeks after revised Standard 12 had become effective. However, the AAA, which administered both arbitrations, should probably have had a system in place to prevent the arbitrator from being offered the second appointment while the first arbitration was still pending.
28. Big Valley Band of Pomo Indians v. Superior Court, 133 Cal.
App. 4th 1185 (1st Dist. Nov. 11, 2005). Employees of a tribal casino, whose employment contracts provided for arbitration, sued for wrongful termination. The tribe demurred to the complaint, contending that it had sovereign immunity except to a suit to compel arbitration. On petition for a writ of mandamus from an order overruling a demurrer, held, writ granted. To the extent the tribe may have waived sovereign immunity, its waiver was limited to being subject to arbitration.
29. Evans v. Cornerstone Development Co., 134 Cal. App. 4th 151 (4th Dist. Nov. 21, 2005). On appeal from a judgment confirming an arbitration award, held, affirmed. Appellants claimed assorted defects in the proceeding, including that the arbitrator failed to disclose he had nothing to disclose. In sum, sanctions were justified, to be imposed jointly on appellants and their lawyer, because of “egregious violations” of the appellate rules and because the contentions of appellants were “patently frivolous.” The case was remanded for determination of the attorney’s fees to which respondents were entitled under the arbitration agreement for resisting the appeal and for making their fee application, with instructions to
double the attorney’s fee award as sanctions.
30. Aral v. Earthlink, Inc., 134 Cal. App. 4th 544 (2nd Dist. Nov. 29, 2005). On appeal from an order denying a petition to compel (presumably individual) arbitration of a class action claiming violation of Business & Professions Code Section 17200, held, affirmed. A class action waiver rendered the arbitration agreement unconscionable. A forum selection clause which provided for arbitration in Atlanta was also unconscionable. “We believe . . . (requiring) a consumer to travel 2,000 miles to recover a small sum is not reasonable . . . .” The court noted that plaintiff was seeking recovery on behalf of a class of California residents for violation of a California statutes, whereas in Discover Bank the claim was based on Delaware law. The court rejected the application of Georgia law, as provided in the arbitration agreement, because California has a “materially greater interest” in the issue.
31. Discover Bank v. Superior Court, 05 C.D.O.S. 10291 (2nd Dist. December 7, 2005). On remand from the California Supreme Court to consider the choice of law issue, held, petition for writ of mandamus compelling individual arbitration granted. The choice of Delaware law, which allows class action waivers, should be respected. Plaintiff conceded that Delaware law, not that of California, should govern the decision on the merits. Thus, California public policy is not implicated. Moreover, since the suit was filed on behalf of a nationwide class, not a California class, California does not have a “materially greater interest” in the outcome than any other state, including Delaware.
32. Klussman v. Cross Country Bank, 05 C.D.O.S. 10602 (1st Dist. Dec. 19, 2005). On appeal from an order denying a motion to compel arbitration of a credit card case, held, affirmed. The designated provider was the National Arbitration Forum, and its rules prohibited class arbitrations without the consent of all parties. This “hidden waiver” of the right to classwide arbitration was unconscionable under California law. Since plaintiffs sought to assert California statutory claims on behalf of a class of California residents who received their cards in California, paid their bills from California and were the object of collection efforts in California, California law was to be applied in preference to a Delaware choice of law clause, under which the class action waiver was not unconscion
