Cal Biz Lit

REMOTE MEDIATION DURING THE PANDEMIC SHELTER IN PLACE PERIOD

 

 

 

By Bruce Nye, www.BruceNyeMediation.com

During this current era, in many parts of California (and in many parts of the United States) arranging court appearances, live discovery, group meetings and mediations ranges from difficult to impossible.  Many courts have used telephone participation or website appearance programs for the parties’ appearances.  Some attorneys have used Zoom or a few other video services for depositions.  And some mediators have been using Zoom or other video services to lead mediations.

I am happy to state that three times in two weeks I have successfully used BlueJeans.com to lead mediations that resulted in settlements.  This helped to continue my success rate in mediations to above 80%, and as a guy to whom statistics are essential, that is great news to me.  Here is what I have learned:

1. It is still important to have pre-mediation conferences separately with each side before the mediation itself. This provides an essential opportunity to make sure that both the lawyers and their clients get a chance to meet the mediator and gain a full understanding of the process before it takes place. Before the pandemic crisis, when mediations were all conducted live and face-to-face, we often conducted the pre-mediation meetings by conference call.  We can still do that, but it sometimes works to conduct them by Zoom or another type of remote video. It is absolutely best to have the parties present for the pre-mediation conference, and not just the lawyers, so that the parties have a full understanding in advance. Also, this is a good time for the mediator to get a commitment when possible  that the individuals attending will be those with full settlement authority.

2. When, as is currently the case, the mediation is conducted by remote video, the pre-mediation meetings are even more important. It will normally be my practice to first send a letter to the parties explaining the remote on-line process and how they should connect once they receive the link I will send them by e-mail.  A part of the pre-mediation conference that is unique to the current situation involves teaching the parties and lawyers the technical aspects of participating in the mediation. For this, a conference call may be better than a Zoom meeting.

3. It is not uncommon for mediations to take place when a party’s principle with full authority is not present. While the mediator will always prefer having the decision-makers present, the mediator will understand that the in lawsuit world because of distance away, schedule, or other matters, sometimes not everyone will be able to attend.  In those instances, it is not unusual to speak with decision-makers by telephone during the process.  However, during the Shelter in Place Era, with nobody attending the mediation live and in person, Zoom or another remote video program makes it easier for all parties and their decision-makers to attend.  Recently, I have successfully helped settle a case where a primary decision-maker attended via remote video from across the country. 

4. There are typically two meeting elements of mediations: Joint mediation meetings, and separate caucuses.  Under California State laws, all information exchanged during the joint meeting is confidential, meaning that mediation communications made may not be offered in evidence at trial. And by terms of the Agreement to Mediate that the parties and their attorneys sign, communications by a party during the caucus is also confidential, meaning that it cannot be communicated to the other side, or to anyone, without the permission of the party in the caucus.   Remote video programs work very well for both.  They are, of course, set up to allow everyone to be present on line and on either their cell phones or computer monitors for the joint programs.  Most of them also permit establishing “breakout rooms,” meaning electronic online rooms to which individuals can only participate if I invite them.  These work perfectly for the mediation caucuses, ensuring participation and confidentiality.

5. Finally, so far the remote video mediation process has been very effective. The parties just about always seem comfortable speaking to all participants in the joint sessions, and talking to the mediator during the caucuses. We all look forward to the complete end of the Covid-19 pandemic and the Shelter in Place requirements.   When they end, I suspect that some attorneys and parties will want to continue with the remote video approach.  If that is possible and desirable, I will continue to make that available. My best bet is it will be both.

Ninth Circuit Rules “No, You Can’t Just Stash the Binding Arbitration Agreement in the Box”

We know that under the “shrink-wrap doctrine,” the manufacturer of software can place language on the outside of its package stating that by opening the shrink-wrap around the DVD or CD-ROM that contains the software, the user agrees to the terms of a license, which may be inside the packaging, on the wide world web or elsewhere. That’s Wall Data Inc. v. L.A. Cty. Sheriff’s Dep’t, 447 F.3d 769, 782 (9th Cir. 2006). And we also know that when a manufacturer puts provides a warranty in a use and care guide, which the buyer doesn’t see until she has bought the product, taken it home opened the package and put the product to use, if those things happen at all, the warranty is enforceable against the manufacturer. Weinstat v. Dentsply International Inc., 180 Cal. App. 4th 1213 (2010).

So how about when the manufacturer, or distributor, or seller puts a provision that reduces consumer rights in the box, in a manual, such as, say, a binding arbitration provision? That was the issue in Norcia v. Samsung Telecomm ___ F.4^th___ (9^th Cir. 2017) decided just a few days ago.

Norcia bought a cell phone and a plan at a Samsung Galaxy GS4 phone at a Verizon store (Fortunately, it wasn’t a Note 7). He sued Verizon, and Verizon moved to compel contractual arbitration.

At the store, Norcia had signed a “Customer Agreement” with the following provisions:.

I agree to the current Verizon Wireless Customer Agreement, including the calling plan, (with extended limited warranty/service contract, if applicable), and other terms and conditions for services and selected features I have agreed to purchase as reflected on the receipt, and which have been presented to me by the sales representative and  which I had the opportunity to review.

What Makes a Mediation Successful?

For the past seven months, CalBizLit, operating under the birth name Bruce Nye, has been regularly serving as a mediator in Northern California.  With this peacemaking experience, and after a decades-long history of participating in mediations as an advocate, CBL is thinking it would be worthwhile to write about what makes mediation succeed and what makes it fail.  So we’ll be providing some posts on that subject, starting with this one. Nye’s mediation website is at www.brucenyemediations.com.

Regular litigators, corporate counsel and insurers are well aware of the mediation process, and many of them have much experience in the mediation world.  Once upon a time, we settled all of our cases by picking up the telephone and exchanging letters (remember letters?) Sometimes in litigation with represented parties, the parties ought to be able to reach settlement by sitting down together, talking on the telephone or both.  But in many other instances, the mediation process – where a neutral works with both sides to help them reach a decision they control – is the way to go. So here are some initial thoughts on five things likely to make a mediation more successful.

More after the jump.

Does The Class Action Suit Go to Arbitration? And Who Decides?

 

 

 

 Here comes Chapter Three in the law of arbitration and class actions in California. 

Chapter One:  In Discover Bank v. Superior Court (2005) 36 Cal. 4th 148, Cal Supremes rule that a consumer contract provision that waives the right to class action litigation as part of a binding arbitration agreement is unconscionable and void. 

Chapter Two: In AT & T Mobility LLC v. Concepcion (2011) 563  U.S. 333, SCOTUS responds to Cal Supremes with "the heck you say," overruling Discover Bank as preempted by the Federal Arbitration Act.  And now,

Chapter Three: If there is a binding arbitration agreement without a waiver of class action rights, does the class action matter go to arbitration or trial?  And who decides? That is the issue in the recently decided  Sandquist v. Lebo Automotive, Inc., ___ Cal.4th ___ (Jul. 28, 2016).

Sandquist was a case involving allegations of racial discrimination, harassment and retaliation.  The Plaintiff had signed three binding arbitration agreements, all stating he agreed that "any claim or dispute or controversy . . . which would otherwise require or allow resort to any court or other governmental dispute resolution forum" would be "submitted to and determine[d] exclusively by binding arbitration."  

The parties had a dispute about whether the agreement permitted or prohibited classwide arbitration. Cal Supremes held that, since this was a "claim or dispute" that would other wise be submitted to a court for decision, then as a matter of contract interpretation, the arbitrator would decide. "[W]ho decides is in the first instance a matter of agreement, with the parties' agreement subject to interpretation under state law." And since a majority of the Supremes found no contrary presumption under federal law and concluded that under California law, this language meant the decision went to the arbitrator, that's how the Court ruled.

This was a 4-3 decision, with Justices Kruger, Chin and Corrigan dissenting that under federal law, this was a decision for the court, not the arbitrator, as it was a "gateway question of arbitrability." 

So there is a conflict between four justices' position that state law applies and the minority's view that federal law governs. This certainly seems like a likely case for a cert petition to the SCOTUS. 

CAL SUPREMES DECIDE SANCHEZ V. VALENCIA HOLDINGS – UPHOLD ARBITRATION AGREEMENT

Well, it only took 3 ½ years since the Petition for Hearing was filed, and just a year and a half since the case was fully briefed (see CBL’s posts whining about the long delay here and here) but we finally have a decision in Sanchez v. Valencia Holdings (August 3, 2015) ___Cal.4^th___, S1999119, the eagerly awaited consumer arbitration agreement case.

 

Short version:  the binding arbitration agreement in the Form 553 CA ARB retail installment sale contract predominantly used by California automobile dealers in 2010 was valid and enforceable.  But this is not just important for automobile dealers. The overall decision is important for all consumer goods businesses that want to use class action waiver and binding arbitration provisions. Because it confirms that they can.

More after the jump.

Finally, Cal Supremes Schedule Hearing in Contractual Arbitration Case

For years now, companies, consumers and their lawyers have been waiting to see what would happen to the law involving contractual arbitration in Sanchez v. Valencia Holdings.  The California Supreme Court has been sitting on this case for years:  The Court of Appeal issued its ruling in November, 2011, invalidating a commonly used retail automotive installment sales contract arbitration clause on the grounds of unconscionability. The auto dealership defendant filed a petition for hearing in January, 2012, and the Supremes granted a hearing two months later.  It looked as though the case was fully briefed in November, 2012, and then the Supremes invited supplemental briefing.  That was all done (including lots of amicus briefing) in March of last year.

And now, just three years and three months after the petition for review was filed, the world is going to get its first hint about what the newly constituted California Supreme Court (three of seven have been seated on the court since the court granted a hearing in this case)  thinks about binding arbitration clauses in consumer contracts. The Court has set this for hearing on May 5 at 9:00 a.m. in the Supreme Court's courthouse in San Francisco.

As CBL pointed out almost a year ago here,  there are about 25 cases on hold at the Supreme Court pending the decision in Sanchez. And if Cal Supremes rule for the consumer, there's a pretty good chance this case will be headed for the US Supremes, and we can see what they think.

So What the Heck is Happening With Contractual Arbitration in California?

CBL is not just about Proposition 65 – it just sometimes seems that way.  But the goal here is to provide out-of-state lawyers, general counsel, and other interested parties with some useful information about cutting edge issues facing litigants here in the Golden State.  And today, we’re talking about the seemingly never-ending battle about contractual arbitration. There is a lot going on, resulting, no doubt, in an overly long post.  Here goes.

OK, so if you haven’t been sleeping under a rock the past three years, you know this:  In 2011, SCOTUS decided AT & T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011).  Up until then, California Courts followed the “Discover Bank rule” (Discover Bank v. Superior Court (2005) 36 Cal.4th 148) to rule that in consumer contracts with binding arbitration clauses and class action waivers, the class action waiver rendered the arbitration clause unconscionable and therefore unenforceable.  But in Concepcion, SCOTUS invalidated Discover Bank, ruling that it conflicted with the Federal Arbitration Act (“FAA”), 9 U.S.C. § 2.  More broadly, SCOTUS noted:

[The FAA] permits arbitration agreements to be declared unenforceable "upon such grounds as exist at law or in equity for the revocation of any contract." This saving clause permits agreements to arbitrate to be invalidated by "generally applicable contract defenses, such as fraud, duress, or unconscionability," but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue. 

Since Concepcion was decided, there have been scores of arbitration decisions coming out of the California Courts of Appeal, and three subject to review by Cal Supremes.  Two of the three Cal Supremes cases have been decided, as follows:

Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (“Sonic I”) and Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109 (“Sonic II”) arrived on the scene, respectively, before and after Concepcion.  In Sonic I, before Concepcion, the Cal Supremes considered an employee/employer contract that (a) had binding arbitration provision and (b) waived the right to a “Berman hearing,” a California administrative hearing mechanism for wage claims.  The Cal Supremes held that the waiver of the Berman hearing was unconscionable, that the employee had a right to the hearing, but that if the arbitration provision was valid, arbitration would supplant the post-Berman court processes.

More after the jump.

The Rich Are Different Than You and Me . . . .

The rich are different than you and me.  They have more money.

           -- Famous phony quote of conversation between F. Scott Fitzgerald and Ernest                  Hemingway.

OK, let's see if I have this right.  Jeffrey Drazan is a big deal VC in Silicon Valley, now the managing partner of Bertram Capital.  Worth a few bucks.  In 2002, he decides to build a $13 million house in Woodside.  He hires a contractor by the name of Vance Brown to build it for him.

But construction manager?  He don't need no stinkin' construction manager.  He's going
to be the construction manager himself, starting an LLC, Frog Creek Partners, LLC to manage the project.

And lawyers?  He don't need no stinkin' lawyers either.  He let's Brown start the job
before a contract is signed, and for some time after that, drafts of contracts pass back and forth, and by the time they are done, nobody seems to know exactly what is and what is not the contract.

Drazan / Frog Creek sue Brown.  Brown cross complains, but also moves to compel arbitration under Brown's version of the contract.  The trial court denied arbitration in that it couldn't find mutual assent for Brown's contract version, and the Court of Appeal affirmed.  This was about six years ago.

So then Brown apparently pieces together Fox Creek's version of the contract and it has an arbitration provision also, and he moves to compel arbitration on that one.  The trial court denied the motion, but the Court of Appeal reversed, ordering arbitration in 2007.  

Now the case goes to arbitration.  As we learn in the latest Court of Appeal case involving Mr. Drazan's Dream House, 

Following 50 days of arbitration hearings, an American Arbitration Association panel issued a 65-page decision awarding Brown damages against Frog Creek of $1,905,902.90, plus $2,517,687.31 in attorney fees for the arbitration proceeding and $666,422.78 in costs.  The arbitrators declined to rule on whether attorney fees and costs might be awarded for litigation activity before the arbitration.  Frog Creek paid the arbitration award in February 2010, and the trial court entered judgment on it on April 7, 2010.

The contract -- whatever it is -- has a provision that the prevailing party in any dispute gets attorneys fees.  So Brown moves for pre and post arbitration attorneys' fees of close to a million bucks.  And Drazan goes, oh yeah?  and moves for attorneys' fees of his own for defeating the first attorneys' fee petition.  And the trial court gives Brown about $700K in attorneys' fees and Drazan about $125K.

To which the Court of Appeal says, "nope."  Doesn't work that way.  Under Civil Code section 1717, there is only one prevailing party, and that's the one who gets the most relief.  Hmm, Vance Brown -- got about $2 million in damages.  Jeffrey Drazan -- gets to delay arbitration for five or six years.  i'm thinking it worked out better for Brown.  And that's what the Court of Appeal thought too, as they (a) took away Drazan's $125K, and (b) told the trial court to give Brown fees for the first effort to take the case to arbitration, and for this appeal.

Read all about it in Frog Creek Partners LLC v. Brown (May 24, 2012) ___Cal.App.4th___ .  Or not.  The opinion is 37 pages long.

CBL is going with the commentary of Legal Pad a few years ago talking about the same case:  

Anyway the moral of the story is: if you want someone who knows how to pick start-up stars like FrontBridge Technologies  and Theravance, call Jeff Drazan. If you want someone to manage construction of your next $13 million home, call someone else, like Bob the Builder.

Happy Birthday AT&T v. Concepcion

Happy Friday.  Today is the one year anniversary of AT&T Mobility LLC v. Concepcion, 563 U.S.___ (2011), in which SCOTUS overruled the Cal Supremes' decision in Discover Bank v. Superior Court (2005) 36 Cal. 4th 148.  SCOTUS held that Discover Bank, which provided a roadmap for avoiding contractual arbitration, was preempted by the Federal Arbitration Act,  9 U. S. C. §1, et seq.

The name of this blog is not “CalArbNews.com.” But it sure seems that way sometimes.  Because for the past year, many trial courts and Courts of Appeal have sought to answer this question:  "Supremacy Clause?  What Supremacy Clause?  Do we really have to do what that darned SCOTUS says?  Can't we come up with new ways to avoid arbitration? " And CBL has posted on the ongoing struggle here, here, here and here, among other places. 

In honor of the one-year birthday of Concepcion, here are some of the most recent developments: 

Thomas v. Westlake (March 23, 2012) ___ Cal.App.4th___(4th Dist. No. D058531):  Plaintiff brought churning claims against four financial advisors and two insurance companies, who sought binding arbitration under agreement only the advisors had signed.  The trial court denied a motion to compel arbitration under Code of Civil Procedure  §1281.2, subd. (c), which provides that a court can deny a petition for arbitration when there is a risk of conflicting rulings as to parties and non-parties to the arbitration agreement.  But the Court of Appeal reversed on the ground that everybody was a party to the arbitration contract, even the two who hadn't signed.  Why?  Because the plaintiff had alleged – as every plaintiff does in every case in California – that all of the defendants were agents of all the other defendants.  As agents of signatories to the arbitration agreement, they were bound.  And having alleged the agency in his complaint, the plaintiff was estopped to deny it. 

Peleg v. Neiman Marcus Group, Inc. (April 12, 2012) ___ Cal.App.4^th ___ (2^nd Dist. No. B231634): In this employment case, there was a binding arbitration agreement that the employer could amend, modify, or revoke on thirty days notice.  The Court of Appeal held that this meant that the agreement was illusory, and therefore unenforceable, since 

. . . the employer could amend the contract in anticipation of a specific claim, altering the arbitration process to the employee's detriment and making it more likely the employer would prevail. The employer could also terminate the arbitration contract altogether, opting for a judicial forum if that seemed beneficial to the company. 

Kinecta Alternative Financial Aolutions, Inc.v. Superior Court, County of Los Angeles (April 25, 2012) ___Cal.App.4^th___ (2^nd Dist. Nos. B235491 and B236084):  Also an employment case.  The Court of Appeal upheld an arbitration agreement.  However, since the agreement was silent on the subject of class actions, the trial court should have dismissed the class action allegations without prejudice when it compelled arbitration.  The practical effect, of course, is to eliminate class actions for those bound by this agreement, since the employee who arbitrates his or her claim to judgment will no longer qualify as a class representative.

But here's the most intriguing one:   Last year, CBL reported on  Sanchez v. Valencia Holding Company, LLC (2011) ___Cal.App.4^th___ (2^nd Dist., B228027), in which the Court of Appeal threw out the arbtration contract used by every new car automobile dealer in the State of California.  The Cal Supremes have now granted a hearing.  We'll be monitoring this one carefully, and will keep you posted.

 

Some Little Bits And Pieces From The California Courts

What do bloggers do when they don't have time for real posts?  Stitch together some little pieces of stuff.  So here are CBL's pieces for February:

The California Courts of Appeal keep banging their heads against the wall when it comes to arbitration, finding arbitration agreements unconscionable and refusing to enforce them no matter what the US Supreme Court said in AT & T Mobility v. Concepcion (2011) ___ U.S. ___.  You can see lots of examples in previous posts here, here and here.

And this month, we've got two more cases:  Ajamian v. Cantorcoe2E (Feb 16, 2012) ___Cal.App.4th___ and Mayers v. Volt Management Corp. (February 27, 2012) ___Cal.App.4th___.  Be curious to see how many times Calfornia courts have to get slapped down by SCOTUS on this issue.

An in the "Crystal Ball Actually Worked" department, we bring you  Gonzales v. Southern California Gas S188956, where a Court of Appeal ruled that a gas company owed no duty in connection with its placement of a gas meter more than 11 feet from the curb in a 25 mph residential zone;  the teenage driver decedent in the case took evasive action to avoid another car, jumped the 8 foot curb,  smashed into the gas meter, caused a fire and died from her burns.  In December of last year, CBL predicted the Cal Supremes would depublish the decision, meaning it would have no stare decisis effect.  Sure enough, on February 22, the Supreme Court denied a hearing, and ordered that the decision not be published in official reports.