Leos v. Darden: Supreme Court Issues Another Arbitration Grant-and-Hold

In Leos v. Darden Restaurants, Inc. (6/4/13, pub. 6/24/13) --- Cal.App.4th --- (discussed here), the Court of Appeal reversed a trial court order denying a defendant's motion to compel arbitration in a sexual harassment, retaliation, and wrongful termination action. 

The California Supreme Court has granted review and deferred briefing pending its decision in Baltazar v. Forever 21, Inc. (Case No. S208345) (discussed here) which presents the following issue: 

Is an arbitration clause in an employment application that provides "I agree to submit to binding arbitration all disputes and claims arising out of the submission of this application" unenforceable as substantively unconscionable for lack of mutuality, or does the language create a mutual agreement to arbitrate all such disputes? (See Roman v. Superior Court (2009) 172 Cal.App.4th 1462.) 

Leos v. Darden is Case No. S212511, and the Supreme Court's web page for it is here. 

Diaz v. First American Home Buyers Protection Corporation: Unaccepted Offer of Judgment Does Not Moot Individual Action

In Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523, 569 US __ (2013) (discussed here), the Supreme Court of the United States "assume[d], without deciding," that an employer's Rule 68 offer of judgment mooted an employee's individual claim in an FLSA putative collective action, even though the plaintiff did not accept the defendant's Rule 68 offer. 

In Diaz v. First American Home Buyers Protection Corporation, ___ F.3d ___ (9th Cir. 10/4/13), the plaintiff filed a putative class action alleging a number of state law claims. The district court dismissed certain claims and denied class certification, and the defendant made a Rule 68 offer of judgment on the remaining individual claims. The plaintiff rejected the offer, and the district court dismissed her claims for lack of subject matter jurisdiction.  

The Ninth Circuit reversed. First, it noted that the issue has not been addressed until now: 

The Supreme Court has yet to address this issue. See Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523, 1528–29 (2013) (“While the Courts of Appeals disagree whether an unaccepted offer that fully satisfies a plaintiff’s claim is sufficient to render the claim moot, we do not reach this question, or resolve the split, because the issue is not properly before us.” (footnote omitted)). Nor have we squarely addressed the issue. In Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1091–92 (9th Cir. 2011), we held “that an unaccepted Rule 68 offer of judgment – for the full amount of the named plaintiff’s individual claim and made before the named plaintiff files a motion for class certification – does not moot a class action” (emphasis added), but we did not squarely address whether the offer mooted the plaintiff’s individual claim. We assumed that an unaccepted offer for complete relief will moot a claim, but we neither held that to be the case nor analyzed the issue. See id. at 1090–92. In GCB Communications, Inc. v. U.S. South Communications, Inc., 650 F.3d 1257, 1267 (9th Cir. 2011), we noted that a case will “become moot” when “an opposing party has agreed to everything the other party has demanded,” but we did not address the effects of an unaccepted Rule 68 offer, an issue not presented in that case. We therefore treat this as an open question in this circuit.  

Slip op. at 8. 

The Court then turned to Justice Kagan's dissent in Genesis Healthcare and found it persuasive. Slip op. at 10-14. 

We are persuaded that Justice Kagan has articulated the correct approach. We therefore hold that an unaccepted Rule 68 offer that would have fully satisfied a plaintiff’s claim does not render that claim moot. This holding is consistent with the language, structure and purposes of Rule 68 and with fundamental principles governing mootness. These principles provide that “[a] case becomes moot only when it is impossible for a court to grant ‘any effectual relief whatever to the prevailing party.’” Knox v. Serv. Employees Int’l Union, 132 S. Ct. 2277, 2287 (2012) (quoting City of Erie v. Pap’s A.M., 529 U.S. 277, 287 (2000)). Here, once First American’s offer lapsed, it was, by its own terms and under Rule 68, a legal nullity. 

Slip op. at 14. 

Diaz v. First American is available here. 

Brown v. Superior Court: Supreme Court Grants Review of Another Arbitration Matter

In Brown v. Superior Court (Morgan Tire & Auto, LLC) (6/4/13) --- Cal.App.4th --- (discussed here), the Court of Appeal reversed in part a trial court order compelling individual arbitration of wage claims, holding that the Federal Arbitration Act (FAA) does not preempt California law prohibiting waiver of an employee's right to bring a representative action under the Labor Code Private Attorneys General Act (PAGA).

The California Supreme Court has granted review of that decision and deferred briefing pending its decision in Iskanian v. CLS Transportation of Los Angeles (Case No. S204032) (discussed here), which presents the following issues:

1. Did AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ impliedly overrule Gentry v. Superior Court (2007) 42 Cal.4th 443 with respect to contractual class action waivers in the context of non-waivable labor law rights? 
2. Does the high court's decision permit arbitration agreements to override the statutory right to bring representative claims under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.)? 
3. Did defendant waive its right to compel arbitration? 

Brown v. Superior Court is Case No. S211962, and the Supreme Court's web page for it is here.

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.