Possible New Mediation Confidentiality Legislation

Mediation and other forms of ADR are an important part of the litigation process. Colleague and friend, Kevin Coleman, wrote an article recently regarding possible new mediation confidentiality legislation. Like most things Kevin produces, I found the article interesting and helpful. Kevin allowed me to reprint the article for your consideration. Without further ado, here it is:

Mediation Confidentiality Proposed Tentative New Legislation

The California Law Revision Commission (CLRC) has made a tentative recommendation to the legislature to create an exception to mediation confidentiality that will allow communication from a mediation to be admitted into evidence in an attorney malpractice case.  The CLRC has written proposed legislation upon which it is accepting public comment.

By way of background for those not familiar with the issue, in Cassell v. Superior Court 51 Cal. 4th 113 (2011) the Court upheld mediation confidentiality, disallowing testimony in a legal malpractice action of conversations between client and attorney that took place during the course of a mediation.

Thereafter, the legislature tasked the CLRC with analyzing “the relationship under current law between mediation confidentiality and attorney malpractice and other misconduct….” 2012 Cal. Stat. res. ch. 108 (ACR 98 (Wagner & Gorrell)).

After much research, many hearings and public comment, the CLRC has “tentatively concluded that existing California law does not place enough weight on the interest in holding an attorney accountable for malpractice or other professional misconduct in a mediation context.”

Importantly, the CLRC’s tentative proposed exception will still allow for open communication among the parties without fear that what they say during mediation will come back to bite them during a later proceeding.  The proposed evidence code section 1120.5, is narrowly written to only allow communication that took place during mediation in very limited circumstances related to attorney misconduct.

Also, the exception to mediation confidentiality cannot used be to void a settlement.

The exception can only be used it in 3 instances:  a State Bar disciplinary action, a cause of action seeking damages from a lawyer based on alleged malpractice, and, in an attorney-client fee dispute.  The exception to mediation confidentiality is limited to only apply to an allegation that an attorney breached a “professional requirement,” basically when acting as an attorney in a professional capacity, and only when doing so in a mediation context.

It won’t apply to a lawyer who is acting as the mediator.  A mediator still won’t be compelled to testify or provide documentary evidence.  So, Evidence Code 703.5 won’t be affected.

If the above criteria are met then only the portion of the communication necessary for the application of the exception could be admitted but not for any other purpose.

A precaution is built in – mediation participants would receive notice so that they can try to prevent improper disclosure of mediation communications.

The CLRC’s tentative recommendation can be found here, and the actual proposed legislation begins at page 145.

The CLRC is seeking comment on any aspect of its tentative recommendation.  Its next meeting is September 28 but would like comments by September 1.

Kevin C. Coleman has been settling cases as a professional mediator since 1996.  Contact Kevin here, or by calling 415-488-7609.   Kevin mediates throughout the San Francisco Bay Area, including San Francisco, Marin, Alameda, Contra Costa, Sonoma counties, and throughout California. I hope my newsletter provided you some insight.

PAGA Lawsuits Not Subject to Arbitration

PAGA Lawsuits

The Labor Code Private Attorneys General Act (PAGA) authorizes aggrieved employees to file PAGA lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations. Employees pursuing PAGA claims must follow specified requirements. Labor Code Sections 2698 – 2699.5.

Courts enforce employer-mandated arbitration agreements more often than before. Attorneys representing employees generally view arbitration as a less-favorable place for resolving disputes. They usually prefer to be in court. A recent California Court of Appeals decision held that a PAGA lawsuit is not subject to arbitration. The court opened with:

Bernadette Tanguilig, an employee at Bloomingdale’s, Inc. (Bloomingdale’s), filed a representative action on behalf of herself and fellow employees pursuant to the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.), alleging several Labor Code violations by the company. Bloomingdale’s moved to compel arbitration of Tanguilig’s “individual PAGA claim” and stay or dismiss the remainder of the complaint. The trial court denied the motion. We affirm. Under Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian) and consistent with the Federal Arbitration Act (FAA) (9 U.S.C. et seq.), a PAGA representative claim is nonwaivable by a plaintiff-employee via a predispute arbitration agreement with an employer, and a PAGA claim (whether individual or representative) cannot be ordered to arbitration without the state’s consent.

Iskanian and PAGA Lawsuits

Bloomingdale’s argued Iskanian was wrong under more recent U.S. Supreme Court decisions. On appeal, the company dropped it’s argument that it was distinguishable from Iskanian because the employee had the ability to opt out of the arbitration process. The court disagreed.

[W]e are bound by the Iskanian court’s interpretation of the pre-Iskanian United States Supreme Court decisions cited by Bloomingdale’s. Finally, we note that the Ninth Circuit has ruled that Iskanian correctly decided the federal question, thus superseding conflicting prior federal district court decisions cited by Bloomingdale’s. (See Sakkab v. Luxottica Retail North America, Inc., supra, 803 F.3d at p. 427.)

An essential point in Iskanian and Tanguilig is that PAGA lawsuits are not a dispute between an employer and an employee arising out of their contractual relationship. “It is a dispute between an employer and the state.” The employee is merely acting as a “deputized” agent of the state. Since the state did not sign an arbitration agreement with the employer, the company cannot force the state’s agent–e.g., the employee–into arbitration.

I can think of a couple of different unintended consequences of this analysis. For now, however, I’m keeping those close to my chest as I have a couple of ongoing cases where I may need to use the arguments. No sense giving away all my trade secrets.

Employers wishing to use arbitration agreements should review the agreements with counsel. Not all arbitration agreements are alike, and employees may be able to void an arbitration agreement as unconscionable. I anticipate seeing many more arbitration cases in the upcoming years. If you have an arbitration agreement you would like reviewed, or if you are considering using an arbitration agreement, feel free to contact the Nuddleman Law Firm, P.C.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

 

A Day in the Life of Employment Lawyers

On August 9th, at 6:00 p.m., I and some of my colleagues will be doing a presentation for the Alameda County Bar Association.  The presentation is part of the ACBA’s Intro to Practice Area Series.  Our presentation is: A Day in the Life of Employment Lawyers, and it will be held at the ACBA office in Oakland. The goal is to offer insights for new attorneys or attorneys thinking about practicing employment law regarding what employment lawyers do and what an average day looks like.

Employment Lawyers

My co-presenters hail from a wide range of practices, from small plaintiffs firms to large defense firms and even an in-house counsel. It should be a great opportunity to learn more about employment law. The following is a list of the presenters:

Jamie Rudman of Sanchez & Amador, LLP

Jamie Rudman is a Partner at Sanchez & Amador, LLP, a minority-owned business law firm in Oakland and Los Angeles. Jamie co-chairs the Employment Litigation Team. She has over twenty years of experience representing employers in employment litigation throughout California, primarily in the financial services, tech and retail sectors, and she counsels Fortune 500 companies on sensitive employment matters. Jamie is the 2016 Vice-Chair of the ACBA Labor and Employment Executive Committee.

Sonya L. Smallets of Minnis & Smallets

Sonya Smallets is a partner at Minnis & Smallets, has been representing employees who have been discriminated, harassed, wrongfully terminated, or denied reasonable accommodations by their employers for more than ten years. Sonya is the Secretary of the ACBA Labor and Employment Executive Committee. Sonya graduated with honors from Berkeley Law. She then clerked for Judge Sidney Thomas of the Ninth Circuit Court of Appeals and Judge Claudia Wilken of the Northern District of California before working for Lawless & Lawless as an associate attorney.

Krista Stevenson Johnson of Sheppard Mullin Richter & Hampton LLP

Krista Stevenson Johnson is a Special Counsel at Sheppard Mullin Richter & Hampton LLP in its San Francisco office. Krista advises and represents management clients in employment and labor litigation, focusing on employment class actions and harassment and wrongful termination lawsuits. In addition, Krista uses her extensive knowledge of and experience in employment and labor laws to provide practical and effective advice to management regarding employment law compliance, wage and hour laws, and workplace investigations.

Karla Franklin of Gap Inc.

Karla Franklin is Senior Counsel in the Global Employment Law Group at Gap Inc., an American worldwide clothing and accessories retailer that operates five distinct retail brands (Gap, Old Navy, Banana Republic, Athleta and Intermix). Ms. Franklin has been with Gap Inc. for over ten years and during that time has lead the company’s defense against a variety of wage and hour class actions. She currently leads the Company’s Wage and Hour compliance efforts. Prior to joining Gap Inc., Ms. Franklin spent approximately ten years as a defense side employment lawyer (working in both large and small firms). Ms. Franklin earned her J.D. from the University of California, Hastings College of the Law.

Robert Nuddleman of Nuddleman Law Firm, PC

Robert Nuddleman began representing employers and employees as a certified law student, and completed his first wage and hour trial before he graduated law school. A significant focus of Robert’s practice relates to wage and hour claims, including unpaid overtime, minimum wages, commissions and bonuses. Robert also represents individuals and companies in claims of sex, race, age, and pregnancy discrimination and/or harassment, and he assists employers and employees regarding how to accommodate persons with disabilities. A particular focus of Robert’s practice includes advising trustees, conservators, families, care agencies, residential care facilities, care homes and others regarding wage and hour and employment laws in the elder care industry. The 2016 Chair of the ACBA Labor and Employment Executive Committee, Robert frequently presents seminars and workshops.

If you haven’t registered yet, you can do so here. Even if you are not an ACBA member, come join us. Hope to see you there.

 

California Court Rejects Unconscionable Arbitration Agreement

Martha Carbajal sued her former employer, CW Painting, for unpaid wages.  The employer moved to compel arbitration pursuant to the employment agreement Carvajal signed.  The trial court denied the motion and refused to enforce the unconscionable arbitration agreement. CW appealed, but the Fourth Appellate District agreed with the trial court.  You can read the full opinion here.

Procedurally Unconscionable Arbitration Agreement

The appellate court held the arbitration agreement was procedurally unconscionable because it was part of an adhesion contract CW Painting imposed on Carbajal as a term of her employment.  The court took particular issue with the fact that, although the arbitration provision required the parties to arbitrate their disputes under the American Arbitration Association’s (AAA) rules, the agreement did not identify which of AAA’s many different rules would apply, CW Painting did not provide Carbajal with a copy of the rules it believed applied, and CW Painting required Carbajal to sign the agreement without telling her where she could find the governing rules or giving her an opportunity to determine which rules would apply.

Substantively Unconscionable Arbitration Agreement

The court went on to find the arbitration agreement substantively unconscionable because it allowed CW Painting to obtain injunctive relief in court while requiring Carbajal to seek relief through arbitration.  The agreement also waived the statutory requirement that CW Painting post a bond or undertaking to obtain injunctive relief, and it effectively waived Carbajal’s statutory right to recover her attorney fees if she prevailed on her Labor Code claims.

The court refused to sever these unconscionable terms and enforce the remainder of the arbitration provision,and instead declared the whole contract void because multiple unconscionable terms permeated the entire agreement.

The court rejected CW Painting’s contention the Federal Arbitration Act (9 U.S.C. § 1 et seq.; FAA) governed the dispute because CW Painting failed to timely present  evidence that the contract with the arbitration provision had a substantial relationship to interstate commerce.

Although many courts will enforce arbitration agreements, California courts will not rubber-stamp an employer-mandated arbitration clause.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

Another Arbitration Agreement Upheld by Supreme Court

I’ve written several articles regarding the somewhat recent shift toward courts upholding arbitration agreements.  A few years ago, California courts in particular were reluctant to force employees into arbitration even when the parties agreed to resolve all disputes through arbitration.  After AT&T Mobility LLC v. Concepcion, 563 U. S. 333, held that California’s Discover Bank rule was pre-empted by the Federal Arbitration Act, more and more courts have upheld arbitration agreements.  Still, some courts try to find ways to bring cases outside AT&T’s broad application.  The result of this case: arbitration agreement upheld.

In DirectTV, Inc. v. Imburgia the U.S. Supreme Court upheld another arbitration agreement.  DIRECTV, Inc., and its customers entered into a service agreements that included a binding arbitration provision with a class-arbitration waiver. It specified that the entire arbitration provision was “unenforceable if the ‘law of your state’ made class-arbitration waivers unenforceable.” The agreement also declared that the arbitration clause was governed by the Federal Arbitration Act. When the plaintiffs entered into that agreement, California law made class-arbitration waivers unenforceable (see Discover Bank v. Superior Court, 36 Cal. 4th 148, 113 P. 3d 1100, subsequently overruled by AT&T Mobility LLC v. Concepcion, 563 U. S. 333).

When the customers sued DirectTV, the trial court denied the company’s request to order the matter to arbitration, and the California Court of Appeal affirmed. The court thought that California law would render class-arbitration waivers unenforceable, so it held the entire arbitration provision was unenforceable under the agreement. The fact that the Federal Arbitration Act pre-empted that California law did not change the result, the court said, because the parties were free to refer in the contract to California law as it would have been absent federal pre-emption. The court reasoned that the phrase “law of your state” was both a specific provision that should govern more general provisions and an ambiguous provision that should be construed against the drafter. Therefore, the court held, the parties had in fact included California law as it would have been without federal pre-emption.

 Arbitration Agreement Upheld

The U.S. Supreme court held that because the California Court of Appeal’s interpretation is preempted by the Federal Arbitration Act, that court must enforce the arbitration agreement. No one can deny that courts must follow Concepcion, but that does not resolve the issue because the parties are free to choose the law governing an arbitration provision, including California law as it would have been if not pre-empted.

According to the Supreme Court, the California court’s interpretation did not place arbitration contracts “on equal footing with all other contracts,” because California courts would not interpret contracts other than arbitration contracts the same way. Several considerations led to this conclusion:

  • First, the phrase “law of your state” is not ambiguous and takes its ordinary meaning: valid state law.
  • Second, California case law—that under “general contract principles,” references to California law incorporate the California Legislature’s power to change the law retroactively, Doe v. Harris, 57 Cal. 4th 64, 69–70, 302 P. 3d 598, 601– 602—clarifies any doubt about how to interpret it.
  • Third, because the court nowhere suggests that California courts would reach the same interpretation in any other context, its conclusion appears to reflect the subject matter, rather than a general principle that would include state statutes invalidated by other federal law.
  • Fourth, the language the court uses to frame the issue focuses only on arbitration.
  • Fifth, the view that state law retains independent force after being authoritatively invalidated is one courts are unlikely to apply in other contexts.
  • Sixth, none of the principles of contract interpretation relied on by the California court suggests that other California courts would reach the same interpretation elsewhere. The court applied the canon that contracts are construed against the drafter, but the lack of any similar case interpreting similar language to include invalid laws indicates that the anti-drafter canon would not lead California courts to reach a similar conclusion in cases not involving arbitration.

It worth noting that this case was decided 4 to 3, with Justices Thomas, Ginsburg and Sotomayor dissenting.  As Justice Thomas has repeatedly said in the past, he believes that the Federal Arbitration Act (FAA), does not apply to proceedings in state courts.  Justices Ginsburg and Sotomayor thought “California court’s interpretation of the ‘law of your state’ provision is not only reasonable, it is entirely right.”

Many U.S. Supreme Court decisions upholding arbitration agreements are won on a 4 to 3 vote.  It will be interesting to see what will happen when one of the Supreme Court justices retires and is replaced by a new judge.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

Your use of this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted to this blog.

The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.