Recent Developments in Arbitration & Mediation Law
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2I RECENT DEVELOPMENTS IN ARBITRATION & MEDIATION LAW A Review of Recent Cases, Statutes and Rules Affecting the Practice of Mediation, Arbitration and Settlement Negotiation for Attorneys Practicing in Southern California May 7, 2014 ARBITRATION PANEL Rex Heinke, Partner, Akin Gump Strauss Hauer & Feld LLP Deborah Rothman, Mediator-Arbitrator-Arbitration Consultant MEDIATION PANEL Christopher Blank, Attorney-Mediator Stephen J. Kessler, Mediator Gail Killefer, ADR Director, U.S. District Court, Central District of California Michelle Reinglass, Mediator, Judicate West MODERATOR & ADR SECTION IMMEDIATE PAST CHAIR Rebecca Callahan, Attorney-Mediator-Arbitrator SEMINAR LOCATION Orange County Bar Association Building 4101 Westerly Place, Newport Beach, CA RECEPTION / PROGRAM SPONSORS Christopher Blank Rebecca Callahan Stephen J. Kessler Lance LaBelle TABLE OF CONTENTS Page I. ARBITRATION – SIGNIFICANT CASES 19 A. ARBITRATOR DISQUALIFICATION – REQUIRED 19 DISCLOSURES AND EVIDENT PARTIALITY (1) Background Statement re Federal Disclosure Standard 19 (2) Background Statement re California Disclosure Standard 23 (3) Conclusion 26 (4) Cases – Federal 26 (a) Court Upbraids a Former Appellate Justice for 26 Rendering an Arbitration Award “in Retaliation” and Vacates the Award Due to Evident Partiality in the Way he Decided and Handled the Disqualification Challenge – Ruhe v. Masimo Corp., Case No. 8:11-cv-734-CYC (C.D.Cal., Apr. 3, 2014) (Appeal Taken to the Ninth Circuit) (b) Business Relationships Between Arbitrators and Related 27 Parties to the Arbitration are Expected and Tolerated as a Trade-Off for the Expertise and Informality Which Knowledgeable Arbitrators Lend to the Process – Painters District Council 16 Local Union 24 v. Color New Co., 2013 WL 3992128 (E.D.Cal., Aug. 2, 2013) (c) District Court Stepped in to Remove an Arbitrator 28 Before Entry of an Award Because Extreme Circumstances Existed – Sussex v. Turnberry/GMG Grand Towers, LLC, 2013 WL 6895845 (D.Nev., Dec. 31, 2013) 2 TABLE OF CONTENTS - continued Page (d) An Example of Strategic Gamesmanship in Arbitration 30 Gone Awry – Thomas Kinkade Company v. White, 711 F.3d 719 (6th Cir., Apr. 2, 2013) (5) Cases – California 32 (a) Attorney’s Membership on the Same Provider Panel as 32 the Arbitrator was a Required Disclosure – Gray v. Chiu¸ 2013 WL 222279 (2nd Dist., Jan. 22, 2013) (b) Arbitrators are Only Required to Disclose Disqualifying 33 Relationships of Which They are Aware – Wasserman Comden Casselman & Einstein LLP v. Patel, 2013 WL 5310137 (2nd Dist., Sep. 23, 2013) – Not Published (c) Arbitrator’s Failure to Disclose that his Resume Listed 35 as a Reference One of the Partners of a Firm Representing One of the Parties Required Vacatur – Mt. Holyoke Homes, L.P. v. Jeffer Mangels Butler & Mitchell, LLP, 219 Cal. App. 4th 1299 (2nd Dist., Sep. 24, 2013) B. CLASS ACTION ARBITRATION – THE STATUS OF EXPRESS 36 WAIVERS AND CONTRACT SILENCE (1) Background Statement 36 (2) Cases 38 (a) Parties’ Intent to Permit Class Arbitration May be 38 Expressly Stated or Implied in the Arbitration Provision Language – Oxford Health Plans LLC v. Sutter, ___ U.S. ___, 133 S.Ct. 2064 (Jun. 10, 2013) 3 TABLE OF CONTENTS - continued Page (b) Class-Action Waiver Clause is Enforceable Even 40 Though it is Uneconomical for Plaintiff to Pursue Federal Statutory Claim – American Express Co. v. Italian Colors Restaurant, ___ U.S. ___, 133 S.Ct. 2304 (Jun. 20, 2013) (c) Arbitration Agreement Found to be Enforceable in Spite 43 of Plaintiff’s Claim that he Cannot Vindicate his Statutory Claims if Required to Arbitrate his Claims Individually Rather than on a Class Basis Because the Potential Recovery in Terms of Dollars is too Low – Miguel v. JP Morgan Chase Bank, 2013 WL 452418 (C.D.Cal., Feb. 5, 2013) (Superseded by American Express Co. v. Italian Colors Restaurant) (d) Court Upholds Arbitration Agreement that Expressly 44 Waived Plaintiff’s Right to Pursue a Representative PAGA Claim – Parvataneni v. E*Trade Financial Corporation, ___ F.Supp. 2d ___, 2013 WL 5340473 (N.D.Cal., Sep. 24, 2013) (e) FAA Preempts California Law re the Enforceability of 45 Class Action Waivers Even as to PAGA Claims – Iskanian v. CLS Transp. Los Angeles LLC, 206 Cal. App. 4th 949 (2nd Dist., Jun. 4, 2012), petition for review granted and currently pending before the California Supreme Court as Case No. S204032 (f) Certain Class Action Waivers are Still Invalid Post- 46 Concepcion Per the Gentry Test - Franco v. Arakelian Enterprises, Inc., 211 Cal. App. 4th 314 (2nd Dist., Dec. 4, 2012), petition for review granted and currently pending before the California Supreme Court as Case No. S207760 4 TABLE OF CONTENTS - continued Page C. ARBITRABILITY – SUBJECT MATTER JURISDICTION 47 (1) Background Statement 47 (2) Cases 48 (a) FAA Preempts Prohibition of Arbitration of “Patient’s 48 Bill of Rights” Claims – Valley View Health Care, Inc. v. Chapman, ___ F. Supp. 2d ___, 2014 WL 197778 (E.D.Cal., Jan. 16, 2014) D. ARBITRABILITY – WHO DECIDES THE ISSUE? 50 (1) Background Statement 50 (2) Cases 50 (a) On an Issue of First Impression, Incorporation of the 51 UNCITRAL Arbitration Rules into an Arbitration Provision in a Commercial Contract Constitutes Clear and Unmistakable Evidence that the Parties Intended to Delegate Questions of Arbitrability to the Arbitrator – Oracle America, Inc. v. Myriad Group A.G., 724 F.3d 1069 (9th Cir., Jul. 26, 2013) (b) The Issue Concerning the Validity of an Arbitration 52 Clause is Distinct from the Contract Claims and, as such, the Court Should Decide that Issue – Smith v. JEM Group, Inc., 737 F.3d 636 (9th Cir., Dec. 12, 2013) 5 TABLE OF CONTENTS - continued Page (c) Whether Arbitration Agreement Provided for Collective 53 Arbitration was Issue for the Court – not the Arbitrator to Decide – Parvataneni v. E*Trade Financial Corporation. ___ F.Supp. 2d ___, 2013 WL 5340473 (N.D.Cal., Sep. 24, 2013) (d) The Issue of Whether Plaintiffs had to Proceed on an 54 Individual Basis or Could Proceed on a Class Basis was a Matter of Contract Interpretation and Thus a Matter for the Arbitrator (not the Court) to Decide – Lee v. JP Morgan Chase Bank, ___ F.Supp. 2d ___, 2013 WL 6068601 (C.D.Cal., Nov. 14, 2013) (e) The Issue of Whether Litigation Conduct Amounts to a 55 Waiver of the Right to Arbitration is for the Courts Rather Than the Arbitrator to Decide – Hong v. CJ CGV American Holdings, Inc., 222 Cal. App. 4th 240 (2nd Dist., Dec. 18, 2013) E. ARBITRATION AGREEMENTS – ENFORCEABILITY AND 56 CHALLENGES TO ENFORCEMENT (1) Background Statement 56 (2) Cases 57 (a) After Concepcion, Courts May Continue to Apply State 57 Law Unconscionability Doctrine as a Valid Defense to a Petition to Compel Arbitration – Sonic-Calabasas A, Inc. v. Moreno, 57 Cal. 4thh 1109 (Oct. 17, 2013) 6 TABLE OF CONTENTS - continued Page (b) Non-Signatory Defendant May Not Invoke Equitable 58 Estoppel Against Signatory Plaintiff to Compel Arbitration – Rajagopalan v. NoteWorld, LLC, 718 F.3d 844 (9th Cir., May 20, 2013) (c) Absent a Showing of Prejudice, Years of Delay and 60 Court Litigation Does not Amount to Waiver of the Right to Arbitrate – Richards v. Ernst & Young LLP, 734 F.3d 871 (9th Cir. – Per Curiam, Aug. 21, 2013) (d) No Procedural Unconscionability Where the Arbitration 61 Clause was not Buried in Fine Print, but was in its Own Section and Clearly Labeled – Kilgore v. KeyBank National Ass’n, 718 F.3d 1052 (9th Cir., Apr. 11, 2013) (e) Arbitration Agreement Found to be Unconscionable 62 Under State Law and FAA Does not Preempt – Chavarria v. Ralphs Grocery Co., 733 F.3d 916 (9th Cir., Oct. 28, 2013) (f) Concepcion Preempts Broughton-Cruz Rule on Private 64 Attorney General Actions – Ferguson v. Corinthian Colleges, Inc., 733 F.3d 928 (9th Cir., Oct. 28, 2013) (g) After a Very Long Battle, DirecTV Prevails on Motion to 65 Compel Arbitration – Lombardi v. DirecTV, ___ Fed. Appx. ___, 2013 WL 6224642 (9th Cir., Dec. 2, 2013) (h) Deceptive Sign-In Page Results in No Contract 66 Formation and Thus no Arbitration Agreement – Lee v. Intelius, Inc., 737 F.3d 1254 (9th Cir., Dec. 16, 2013) 7 TABLE OF CONTENTS - continued Page (i) Defendant Waited Too Long to Compel Arbitration 67 After it Concluded that Gentry as no Longer Valid under Concepcion – Ontiveros v. Zamora, 2013 WL 593403 (E.D.Cal., Feb. 14, 2013) (Slip Opinion) (j) Consumer Arbitration Provision Survives Attack on 68 Unconscionability Grounds – Vasquez v. Greene Motors, Inc., 214 Cal. App. 4thh 1172 (1st Dist., Mar. 27, 2013), review granted and opinion superseded 154 Cal. Rptr. 2d 778 (Jun. 6, 2013) (k) Stronger Party Could not Attacked its own Choice-of- 70 Law Provision. Massachusetts Law Governed and Required a Clear and Specific Agreement to Arbitrate Statutory Discrimination Claims – Harris v. Bingham McCutchen, 214 Cal. App. 4th 1399 (2nd Dist., Mar. 29, 2013) (l) An Ineffective Rescission Does not Mandate Arbitration 72 Under the Terms of the Prior Agreement, and the Court had Discretion to Decide Entitlement to Rescission in the Context of a Motion to Compel Arbitration – Little v. Pullman, 219 Cal. App. 4th 558 (2nd Dist., Sep. 9, 2013) (m) As a Condition to Enforcement of an Arbitration 73 Provision in a Retainer Agreement, Indigent Parties were not Required to Pay Their Share of the Costs Associated with the Arbitration – Roldan v. Callahan & Blaine, 219 Cal. App. 4th 87 (4th Dist., Sep. 18, 2013) 8 TABLE OF CONTENTS - continued Page (n) Failure to Attach the AAA Rules Referenced in the 75 Arbitration Provision – Standing Alone – Was Insufficient Grounds to Support a Finding of Procedural Unconscionability – Peng v. First Republic Bank, 219 Cal. App. 4th 1462 (1st Dist., Oct. 2, 2013) (o) Contractual Right to Compel Arbitration Lost Where 76 Parties Delayed and Engaged in “Tons of Litigation” Before Requesting Arbitration – Eagan Avenatti LLP v.