HM DG, Inc. v. Amini: Court Enforces Arbitration Clause That Does Not Specify How Arbitrator Will Be Selected

In HM DG, Inc. v. Amini (9/20/13) --- Cal.App.4th ---, the trial court denied a petition to compel arbitration because the arbitration clause at issue "is uncertain in that it does not specify before what agency o[r] person the matter will be arbitrated, [or] how the arbitrator will be selected, but merely sets for[th] alternative options for these terms." 

The Court of Appeal reversed. 

Code of Civil Procedure section 1281.61 specifically contemplates the existence of an enforceable arbitration agreement even where the "arbitration agreement does not provide a method for appointing an arbitrator . . . ." The statute further provides that "[i]n the absence of an agreed method, or if the agreed method fails . . . , the court, on petition of a party to the arbitration agreement, shall appoint the arbitrator." (Ibid.) As we shall explain, because the court has the power to appoint an arbitrator under section 1281.6 when the parties fail to agree upon a method for appointment, we conclude that neither the absence of a definite method, nor the presence of "alternative options," for appointing an arbitrator renders an otherwise valid arbitration agreement unenforceable. 

Slip op. at 2. The Court remanded for the trial court to determine whether other grounds exist to deny the petition under section 1281.2. 

The opinion is available here. 

Steven G. Pearl Recognized as One of Ten California "Rising Stars"

I am very honored to be recognized as one of ten "Rising Stars" on the Daily Journal's list of "Top 50 Neutrals" in California. 

To answer a couple of questions that I encounter frequently: 

Yes, I handle the full spectrum of employment law cases, including discrimination, harassment, and retaliation cases, trade secret and non-competition cases, and of course, wage and hour. 

And yes, I will come to you, whether you are in San Diego or San Francisco. 

Please contact my case manager, Dana Sweetman, for availability: (310) 201-0010 or Dana@ADRServices.org.

Court Orders Briefing In Case Considering Whether Obligation to Arbitrate Is Unilateral Or Bilateral

I mentioned not long ago that the California Supreme Court had dismissed Wisdom v. AccentCare, Inc. (2012) 202 Cal.App.4th 591, review granted 3/28/12 (discussed here), a case in which the Supreme Court was set to decide whether certain language in an arbitration agreement was unilateral (requiring only one side to arbitrate) or bilateral (requiring both sides to arbitrate). The parties in Wisdom settled their case, and the Supreme Court dismissed it.

To replace Wisdom on its docket, the Court has ordered briefing in Baltazar v. Forever 21, Inc. (12/20/12) 212 Cal.App.4th 221, review granted 3/20/13 (discussed here). In Baltazar, the Court of Appeal reversed a trial court order denying arbitration, holding inter alia, that the agreement at issue there was not unconscionable because it imposed a bilateral obligation to arbitrate.

Baltazar is Case No. S208345, and the Supreme Court's web page for it is here.  

Ellis v. Toshiba America: Court Affirms Sanctions In Class Action Attorney Fee Dispute

Ellis v. Toshiba America (8/7/13) --- Cal.App.4th --- is an unusual case (to say the least) dealing with class action attorney fees.

Two firms filed a consumer class action against Toshiba. The case settled in mediation, giving class members warranty extensions and repair vouchers. One firm, Sklar Law Office (SLO), objected to the form of the agreement and class notice, but after further negotiation, filed a motion for settlement approval stating its intent to seek fees of almost $25 million (25 percent of a settlement value placed at almost $99 million), to be apportioned between class counsel. Toshiba objected and sought discovery regarding the fee request.

The trial court approved the settlement, awarding over $1 million in fees to SLO's co-counsel. SLO continued to request the remainder of the $25 million, and a battle ensued. Toshiba sought Sklar's electronic billing records, and Sklar objected. The Court ordered Sklar to sit for deposition and to produce the billing records in native format. At deposition, Sklar testified that she had converted her files to .pdf format and deleted the original electronic files with a program called "Wipe and Delete." The trial court ordered SLO to allow a forensic inspection of its computers, and it refused. 

The trial court ultimately awarded SLO 176,900 in fees (for work during the merits phase of the class action by SLO staff), awarding nothing for Sklar's own work; and deducted $165,000 in sanctions awarded to Toshiba for Sklar's failure to comply with court discovery orders and her failure to meet and confer in good faith. 

The Court of Appeal affirmed. 

The Court first granted in part Toshiba's motion to strike portions of the appellant's appendix because it appeared that SLO had altered the record on appeal. The Court awarded monetary sanctions to Toshiba for bringing the motion to strike. Slip op. at 26-29. 

The Court next held that the trial court acted within its discretion in awarding monetary sanctions against SLO for misuse of the discovery process. Slip op. at 29-32. The Court found that SLO both refused to obey the trial court's orders and failed to meet and confer in good faith. 

The Court then held that the trial court did not exceed its jurisdiction in making the ordering inspection of SLO's computers: 

Sklar requested over $24 million in attorney fees. In support, she provided hard copies of her billing records purporting to show that she worked at a superhuman rate, followed by a CD with PDF copies of those time records (which she acknowledges had been redacted). Sklar later represented that she had deleted all the original electronic billing records that arguably might have cast doubt on the accuracy of her billing. We therefore reject Sklar‘s complaint that the court exceeded its jurisdiction when it authorized Toshiba‘s inspection of her hard drive to determine whether any of that electronically stored information survived her destruction of the files.

Slip op. at 33. 

Finally, the Court held that the trial court did not abuse its discretion in awarding only a fraction of the requested fees and denying any fees to Sklar herself. Slip op. at 33-44. Sklar was not credible, her records were not usable to calculate a lodestar figure, and the trial court had other good cause to award fees as it did. 

The Court did remand the matter for the trial court to rule on SLO's request for up to $115,000 in costs. The trial court had not ruled on the issue. 

Ellis v. Toshiba America is available here. 

Smith v. Clark County School District: ADA Plaintiff May Avoid Summary Judgment by Explaining Contradictory Statements In Applications for Disability Benefits

In Smith v. Clark County School District, ___ F.3d ___ (9th Cir. 8/21/13), Jacqlyn Smith worked for a school district, first as a teacher and then as a literary specialist. After aggravating a back injury, Smith applied for medical leave and disability benefits. 

On Smith's application for leave under the Family and Medical Leave Act (FMLA), Smith's doctor stated that Smith was “presently incapacitated” and could not “work at all until released by [a] doctor.” On her application for private disability benefits, Smith stated that her “dates of total disability” ranged from March 31, 2008, to “Not Sure.” On Smith's application for disability retirement under the Nevada Public Employees’ Retirement Systems (PERS), Smith's doctor certified that Smith was “unable to work due to injury or mental or physical illness.” 

At the same time, Smith and the district engaged in negotiations over whether and how she could return to work. Smith contended that she could not work as a teacher, but could work as a literary specialist. The district contended that it could not put her back into a literary specialist position, but offered a teaching position with accommodations. Smith ultimately resigned so that she could receive PERS disability retirement benefits. 

Smith sued the district in federal court, alleging that it violated the Americans with Disabilities Act (ADA) by discriminating against her and not providing reasonable accommodation. The district moved for summary judgment, asserting (1) that Smith was not a “qualified individual” under the ADA because she had represented on her applications for disability benefits that she was permanently disabled; and (2) that the district did not deny Smith a reasonable accommodation. The district court ultimately granted summary judgment, and Smith appealed. 

The Ninth Circuit reversed the judgment. It held that, in deciding whether Smith was a “qualified individual” under the ADA, the district court improperly applied the framework set forth in Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. 795 (1999), for analyzing the effect of inconsistent statements on applications for disability benefits. Slip op. at 9-11. Relying on Cleveland, the Court first determined that Smith's claims for FMLA leave, private insurance benefits, and PERS disability retirement did not inherently conflict with her ADA claim because they did not account for her ability to work with reasonable accommodation. Slip op. at 11-13. 

However, because Smith had made "certain statements" that "appear to conflict" with her ADA claim, the Court next considered whether Smith had met her burden of explaining these inconsistencies. Slip op. at 13-15. Looking at the facts in the light most favorable to the plaintiff, and considering that "Cleveland’s sufficient-explanation standard is not an exceedingly demanding one," the Court concluded that Smith "gave sufficient explanations for the inconsistencies between her ADA claim and her PERS and FMLA applications to survive summary judgment." Slip op. at 16. 

Smith v. Clark County School District is available here. 

Governor Brown Signs Law Addressing Exhaustion of Administrative Remedies and Other Issues

On October 5, 2013, Governor Brown signed SB 666 (Steinberg) into law. SB 666 has the following effects:

Certain licensed professionals and businesses could be subject to license suspension or revocation if the Labor Commissioner or a court determines that they have violated certain provisions of California law.

Attorneys could be subject to discipline for reporting or threatening to report the suspected immigration status of a witness or party to a civil or administrative action or his or her family member, to a federal, state, or local agency because the witness or party exercises or has exercised a right related to his or her employment.

It is not necessary to exhaust administrative remedies or procedures in order to bring a civil action enforcing certain rights. This part of the bill overturns MacDonald v. State of California (8/27/13) --- Cal.App.4th --- (discussed here), in which the Court of Appeal held that an employee must exhaust the administrative remedy set forth in Labor Code section 98.7 before pursuing statutory claims for retaliatory discharge in violation of Labor Code section 1102.5 and retaliatory and discriminatory discharge in violation of Labor Code section 6310.

An employer who retaliates or takes adverse action against any employee or applicant for employment because he or she has engaged in protected conduct may be subject to a civil penalty of up to $10,000 per violation.

Further information on SB 666, including the text of the bill, is available here.  

Vargas v. SAI Monrovia B, Inc.: California Supreme Court Issues Grant-and-Hold of Another Arbitration Decision

In Vargas v. SAI Monrovia B, Inc. (6/4/13) --- Cal.App.4th ---, the Court of Appeal again found the arbitration clause in a standard automobile retail installment sales contract unconscionable and unenforceable. As anticipated, on August 21, 2013, the California Supreme Court granted review and deferred briefing pending its decision in Sanchez v. Valencia Holding Co., LLC (2012) 201 Cal.App.4th 74, review granted March 21, 2012 (Case No. S199119), which addresses the identical arbitration clause. Sanchez raises the following issue: 

Does the Federal Arbitration Act (9 U.S.C. section 2), as interpreted in AT&T Mobility LLC v. Concepcion (2011) 563 U. S. __, 131 S.Ct. 1740, preempt state law rules invalidating mandatory arbitration provisions in a consumer contract as procedurally and substantively unconscionable?

Vargas is Supreme Court Case No. S212033, and the Court's web page for it is here. The Court's web page for Sanchez is here.