California Court of Appeal

Alberto v. Cambrian Homecare. 91 Cal. App. 5th 482

When plaintiff Alberto was hired by Cambrian, she signed an agreement to arbitrate. At the same time, she signed a confidentiality agreement wherein she agreed to preserve Cambrian’s trade secrets. The confidentiality agreement permitted Cambrian to file an injunction without the need for a bond if Alberto violated it and prohibited Alberto from discussing salary with other employees. Subsequently, she filed a lawsuit against Cambrian alleging that it had violated the wage and hour laws. Cambrian’s motion to compel arbitration was denied by the trial court. It held that the confidentiality agreement was part of the agreement to arbitrate and that the aforementioned provisions in the confidentiality agreement were unconscionable. Cambrian appealed, arguing that even if the provisions were unconscionable. they were not part of the agreement to arbitrate.

The Court of Appeal affirmed. Under Civil Code section 1642, it is the general rule that several papers relating to the same subject matter and executed as parts of substantially one transaction, are to be construed together as one contract. According to that rule, documents executed as part of a single transaction are construed together, even if they do not expressly refer to one another. The arbitration agreement and the confidentiality agreement should be read together because they were executed on the same day and were separate aspects of a single primary transaction—Alberto's hiring. They both governed, ultimately, the same issue—how to resolve disputes arising between Alberto and Cambrian arising from Alberto's employment. Failing to read them together artificially segments the parties' contractual relationship. Treating them separately fails to account for the overall dispute resolution process the parties agreed upon. So, unconscionability in the confidentiality agreement can, and does, affect whether the arbitration agreement is also unconscionable. To hold otherwise would let Cambrian impose unconscionable arbitration terms, and then avoid a finding of unconscionability because it put the objectionable terms in a (formally) separate document. That is contrary to Civil Code section 1642.

The Confidentiality Agreement on its face violated the Labor Code. A facially illegal provision, in direct contravention of the Labor Code, is unconscionable. And the provision was not merely illegal or unconscionable in a general sense. It was a kind of illegality that directly affected Alberto's status in the arbitration process. If Alberto sought to avail herself of her rights under the Labor Code, she would be faced with either the inability to discuss or disclose salary information with other employees under the threat of litigation, including potential liability for attorneys‘ fees and costs. This provision dissuaded employees from bringing claims individually, and impeded the ability for employees to investigate facts that might be used in a representative action, including a PAGA action. The trial court was thus correct to find the restriction on discussing wages rendered the arbitration agreement substantively unconscionable.

The provision allowing Cambrian to seek an injunction was also unconscionable. Provisions that allow employers to seek a preliminary injunction outside of arbitration for breach of a confidentiality agreement are not, by themselves, unconscionable, simply because they primarily benefit employers. But additional provisions that waive the employer's need to obtain a bond before seeking an injunction, waive the employer's need to show irreparable harm, and require an employee to consent to an immediate injunction are unconscionable. They exceed the legitimate margin of safety for the employer and are not mutual.

Algo-Heyres v. Oxnard Manor LP., 88 Cal. App. 5th 1064

The successors in interest to Cornelio Heyres sued Oxnard, a nursing home, for elder abuse and negligence. Oxnard moved to compel arbitration. Plaintiffs argued that Cornelio lacked the mental capacity to sign an arbitration agreement, citing an evaluation of his condition by physicians as at St. John’s Hospital where he was a patient when he was discharged just before he was transferred to Oxnard and a declaration by Cornelio’s son that he was unable to recognize or speak coherently to his son and his wife when he became a patient at Oxnard. Oxnard relied on notes by staff where they checked off boxes indicating that Cornelio’s mental capacity was satisfactory. The trial court denied the motion. Oxnard appealed, arguing that it was unfairly assigned the burden of proof to establish Cornelio’s mental capacity, citing Probate Code Section 810(a) which states that there is a “rebuttable presumption affecting the burden of proof that all persons have the capacity to make decisions and to be responsible for their acts or decisions.”

The Court of Appeal affirmed. ”A judicial determination that a person is totally without understanding, or is of unsound mind, or suffers from one or more mental deficits so substantial that, under the circumstances, the person should be deemed to lack the legal capacity to perform a specific act, should be based on evidence of a deficit in one or more of the person's mental functions … .” (Probate Code section 810(c)). Probate Code section 811 requires that incapacity to contract be supported by evidence of a deficit in at least one of four areas: alertness and attention, information processing, thought processes, and ability to modulate mood and affect. (Probate Code section 811(a)). The deficit must “significantly impair the person's ability to understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question.” (Probate Codesection 811(b)). The capacity to make a decision requires the person have the ability to communicate the decision verbally or by other means, and to understand and appreciate the rights and responsibilities affected by the decision, the probable consequences, and the “significant risks, benefits, and reasonable alternatives involved in the decision.” (Probate Code section 812(c).

While Probate Code sections 811 and 812 provide a “baseline” for capacity to contract, “Civil Code section 39(b) provides more specific guidelines for determining the capacity to contract. “A rebuttable presumption affecting the burden of proof that a person is of unsound mind shall exist for purposes of this section if the person is substantially unable to manage his or her own financial resources or resist fraud or undue influence.” (Civil Code section 39(b)). When this presumption applies, the party claiming capacity to contract has the burden to prove that while he or she may be unable to manage his or her financial resources or resist fraud or undue influence, he or she is nevertheless still capable of contracting being of sound mind as defined by Probate Code section 811. The trial court could reasonably infer from the evidence, including Cornelio's inability to recognize his wife or granddaughter, failure to respond to questions about his care, inability to understand speech, and ability to respond to only simple questions or commands, that his deficits significantly impaired his “ability to understand and appreciate the consequences” of waiving his right to trial. Because substantial evidence supported the trial court's finding that Cornelio was not competent to enter into an arbitration agreement, Oxnard Manor did not meet its burden to establish a valid agreement.

Baglione v. Health Net of California, Inc., 97 Cal. App. 5th 882

When plaintiff was hired by the County of Santa Clara, he executed a medical insurance enrollment form with defendant that was negotiated by the County. Plaintiff subsequently sued defendant because it declined to reimburse him for the cost of a medication. Both the insurance contract with the County and the enrollment form contained arbitration clauses. Defendant’s motion to compel arbitration was denied by the trial court because the arbitration clauses did not comply with the disclosure requirements of Health and Safety Code Section 1363.1. Defendant appealed.

The Court of Appeal affirmed. The disclosure provision in the enrollment form begins by stating that the enrollee agrees to arbitrate “any and all disputes,” including medical malpractice. Then, however, the disclosure qualifies this broad language by mentioning that “a more detailed arbitration provision is included in the Evidence of Coverage or Certificate of Insurance. Mandatory arbitration may not apply to certain disputes if the Employer's plan is subject to ERISA, 29 U.S.C. 1001-1461.” By this point, the enrollee can only know which disputes he will have to submit to arbitration by determining whether his plan is covered by ERISA and then by determining what disputes “may” be exempted by ERISA. The enrollee certainly cannot make this determination from the information in the enrollment form. This is not the clear disclosure of which disputes are subject to arbitration that is required by section 1363.1.

By placing these references to additional documents and inapplicable laws between the bulk of the disclosure and the signature line, Health Net also failed to comply with subdivision (d) which provides in pertinent part: “In any … enrollment agreement for a health care service plan, the disclosure required by this section shall be displayed … immediately before the signature line provided for the individual enrolling in the health care service plan.” Even technical violations of the statute—such as the failure to prominently display an arbitration provision immediately above the signature line on the enrollment form—render the arbitration provision unenforceable regardless of whether the person enrolling in the health plan received some notice of the arbitration clause by reviewing the noncomplying provision.

Defendant also argued that the alleged violation of Section 1363.1 contained in the insurance contract did not affect its right to arbitrate because the insurance contract was for the benefit of the County, not its employees. The Court of Appeal rejected this argument. The Court saw no basis for understanding section 1363.1 in this manner. If notice and disclosure are necessary to protect an employer who is giving up its right to a court or jury trial and agreeing to arbitration in an agreement, notice and disclosure to the employer are equally necessary to protect the employees on whose behalf the employer is negotiating the agreement. Viewed differently, it is the agreement between the County and Health Net which sets the terms of the relationship between Health Net and County employees, including the employees' waiver of trial rights and acceptance of mandatory arbitration. Section 1363.1 requires specific disclosures of the trial rights waiver and arbitration provision for the agreement to be valid. Because section 1363.1 compliant notice is required for a knowing waiver of jury rights, if the notice provision in the agreement only tells the employer what rights it, as employer, is giving up, the employer has not knowingly waived the rights its employees are giving up. It is well established that when a contract is made for the benefit of a person who is not a party to the contract, that person does have standing to enforce the contract

.Barrera v. Apple American Group LLC, 95 Cal. App. 5th 63

Plaintiffs filed an individual and representative PAGA claim against defendants.
Defendants’ motion to compel arbitration was denied, based on Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014). Defendants appealed. While the appeal was pending, the Supreme Court in Viking River, supra, overruled the portion of Iskanian that prohibited the arbitration of individual claims but affirmed the portion that denied arbitration of the representative claim. Nevertheless, defendants continued to argue that plaintiffs could not pursue the representative claim because the requirement that they arbitrate the individual claim deprived them of standing.

The Court of Appeal affirmed the portion of the trial court decision that denied arbitration of the representative claim. The requirement that plaintiffs resolve their individual PAGA claims in arbitration did not strip them of their standing to litigate their nonindividual PAGA claims in court.

Although the Viking River court held that individual PAGA claims were arbitrable, plaintiffs argued that the arbitration agreement that they signed was procedurally unconscionable because they were forced to sign the agreement as a condition of employment. Their sole evidence of unconscionability was a declaration submitted by the defendants’ HR director in which she described the process of how defendants were asked to digitally sign the agreement. The declaration noted that there was no time lime imposed upon plaintiffs to sign the agreement.

The Court of Appeal held that the agreement was not procedurally unconscionable. The declaration did not provide much information on the circumstances surrounding the formation and negotiation of the agreement. For example, the declaration did not provide the context in which plaintiffs were presented with and signed the agreement. It did not set forth any discussions defendants may have had with plaintiffs before they were presented with and signed the agreement. The declaration also did not shed light on plaintiffs ‘ability or inability to negotiate and understand the terms of the agreement. What the declaration did state, however, was that when using the online portal, employees were “afforded time (on the clock) to sign the documents.” It also stated “there is no limit on the amount of time an individual may take to review and either … reject [or accept the Agreement.]” In view of this, the declaration did not contain any facts or raise any reasonable inferences that plaintiffs were “forced to sign” the agreement, or that they lacked “a meaningful opportunity to negotiate the terms,” or that the agreement was “presented on a take-it or leave-it basis.”

Basith v. Lithia Motors, 90 Cal. App. 5th 951

When plaintiff Basith was hired by Lithia as the general manager of one of its dealerships, he signed two agreements, both of which contained arbitration clauses. One of them was a lengthy contract given to all employees and the other one was a “short form” agreement relating to his compensation. Basith sued Lithia after he was terminated and opposed Lithia’s motion to compel arbitration. He claimed he could not understand the long form agreement because it contained too much “legalese” and that the short-form agreement failed to clarify in plain English that Basith was not waiving his statutory right to file a charge with the Equal Employment Opportunity Commission or the Department of Fair Employment and Housing. The motion was denied, and Lithia appealed.

The Court of Appeal reversed. With respect to the long form agreement, a complaint about prolix legalese is the same type of objection as a complaint about font size. If the substance of a contract is fair, how the contract is expressed cannot change that. The attack on wording of the short form agreement rather than on substance missed the mark. Moreover, the long-form contract made this point clear. When different contracts relate to the same matter between the same parties, the court interprets them together, meaning it aims to make the parts into a consistent and sensible whole. It does so with awareness that federal and California law strongly favor arbitration and it searches for a lawful and reasonable interpretation. The lawful and reasonable interpretation is that the longer contract filled in the gaps of the shorter one.

Castelo v. Xceed Financial Credit Union, 91 Cal. App. 5th 777

In November 2018, Xceed terminated Castelo effective December 31, 2018. On November 19, Castelo signed an agreement entitled “Separation Agreement and Reformation” wherein she released Xceed from all claims arising from her employment through thedate of her separation in return for a payment of $137,334, of which $5000 was paid when she signed the agreement and the balance paid after the date of separation. In 2019, Castelo sued Xceed, alleging wrongful termination and age discrimination. Xceed’s motion to compel arbitration was granted. Subsequently, the arbitrator granted Xceed’s motion for summary judgment, holding that Castelo’s claims were barred by the release. Castelo moved to vacate the award, arguing that the arbitrator exceeded his powers because he relied on an illegal release. She claimed that the release was illegal because it protected Xceed against future law violations, in violation of Civil Code Section 1168. The motion was denied, and Castelo appealed.
The Court of Appeal affirmed. Castelo asserted an arbitrator exceeds his or her powers under Code of Civil Procedure section 1286.2 any time an arbitrator enforces an illegal provision in a contract. This was incorrect. A contention that the parties' contract or transaction was illegal provides a ground for judicial review of the arbitration award only where the party claims the entire contract or transaction is illegal, not just one provision of the contract. Here, Castelo did not claim the entire Separation Agreement and Reaffirmation was illegal. She did not seek to rescind the agreement and did not propose she return the $137,334.00 she received as consideration. Rather, she sought to invalidate only the release, and only to the extent the arbitrator applied the release to claims that accrued on or after the date of its execution. Castelo's argument that the arbitrator's decision is subject to judicial review simply because the release is alleged to be illegal thus failed.

Nor did the contract violate Section 1668. The purpose of Section 1668 is to prohibit parties from granting themselves licenses to commit future aggravated wrongs (or future negligent acts when certain public policies are implicated). Courts have therefore held the statute does not prevent parties from agreeing to settle disputes or to release claims relating to past conduct. Courts have interpreted section 1668 as precluding releases of liability only for future violations of law, that is, where the facts giving rise to the offense have not yet occurred. Further, the doctrine generally applies to invalidate releases only when the provision at issue purports to contract away liability for future unknown claims, such as when a party is required to sign a predispute release of liability against future unknown acts in order to obtain services from a provider. For example, the Supreme Court has held a release was void as against public policy when a hospital required [**20] patients, as a condition of admittance, to release the hospital from liability for future acts of negligence by employees. Tunkl v. Regents of University of California (1963).

Here, at the time Castelo signed the Separation Agreement and Reaffirmation, Xceed had already made the decision to terminate her. Castelo already knew the basic facts that would later form the basis for her wrongful termination and age discrimination claims. Because Castelo knew the facts underlying her claims at the time she entered into the agreement, the release did not implicate the policies that have led courts to invalidate releases under section 1668. The separation agreement included a settlement of her existing (albeit not yet fully accrued) wrongful termination claim, not a release of future unknown claims.

Cvejic v. Skyview Capital, Inc., 92 Cal. App. 5th 1073

Cvejic sued Skyview, his former employer, alleging wrongful termination. Skyview’s motion to compel arbitration was granted. The arbitration fees owed by Skyview were due on June 4, 2021. On July 8, the case manager advised that the fees had not been paid. The arbitrators ordered a phone conference on July 9 to discuss the situation and set a new deadline of July 14 for Skyview to pay the fees. Cvejic then advised the panel that he was exercising his rights under Code of Civil Procedure Section 1281.98 to withdraw from the arbitration. The panel advised him that he could not do so because the new deadline was still pending. Subsequently, the panel advised the parties that Section 1281.98 was not in play because Skyview met the new deadline. Cvejic thereupon filed a motion in the trial court asking it to vacate the order compelling arbitration pursuant to Section 1281.98. The motion was granted, and Skyview appealed.

The Court of Appeal affirmed. The statute provides recourse when the party that pressed for arbitration fails to pay its arbitration fee. The statute deems this failure to be a material breach and entitles the claimant to withdraw unilaterally from arbitration. Skyview's fees were due June 4, 2021. By July 9, Skyview had not paid. Skyview was in material breach of the parties' arbitration agreement. Section 1281.98 entitled Cvejic to withdraw from the arbitration. The statute does not empower an arbitrator to cure a party's missed payment. If the drafting party were permitted numerous continuances for failure to pay arbitration fees, therefore delaying the proceedings, Section 1281.98 would have no meaning, force, or effect.In enacting section 1281.98, the Legislature perceived employers' and companies' failure to pay arbitration fees was foiling the efficient resolution of cases. This contravened public policy. The Legislature responded by making nonpayment and untimely payment grounds for proceeding in court and getting sanctions. The point was to take this issue away from arbitrators, who might be financially interested in continuing the arbitration and in pleasing regular clients.

Darby v. Sisyphian LLC, 87 Cal. App. 5th 1100

Claimant prevailed in the arbitration and moved timely to confirm the award. Respondent filed a motion to vacate the award 32 days after the motion to confirm was filed. The trial court dismissed the motion because it was not timely and respondent appealed. The Court of Appeal affirmed.

A party may seek an order vacating or correcting an award in a stand-alone petition and the default deadline for filing such a petition is 100 days from the date the petitioner was served with the award. A party may also seek an order vacating or correcting an award in its response to a prior-filed petition to confirm that award, and the default deadline for filing that response is 10 days from the date the responding party is served with the petition to confirm. When a petition to confirm is filed, the shorter deadline applies. If a petition to confirm the award is filed fewer than 90 days after an award is served, a competing request to vacate or correct the award—whether styled as a response to the petition to confirm or as a standalone petition must be filed and served within 10 days of service of the petition to confirm, even if that due date is less than 100 days after service of the award. But if a petition to confirm is filed more than 90 days after an award is served, a competing request to vacate or correct the award—no matter how styled—must still be filed within 100 days of the service of the award, even if that due date is less than 10 days after service of the petition to confirm. The 100-day deadline is immovable, as the statute setting that deadline brooks no exceptions. The 10-day deadline, however, is a little more flexible, as the Act itself authorizes an extension of the 10-day deadline in two situations—namely, (1) when the parties to the court proceeding agree in writing to an extension, or (2) when the court, either explicitly or implicitly, finds “good cause” to extend the deadline and where such an extension would not unduly prejudice the other party.

Sysiphian waited 32 days to respond to plaintiff's petition. Neither statutory exception to the 10-day deadline was invoked here. The parties did not agree to extend the deadline. The trial court also did not find “good cause” to extend the deadline. Sisyphian's filing was untimely.

De Marinis v. Heritage Bank of Commerce, 98 Cal. App. 5th 776

Plaintiffs filed a PAGA representative action against Heritage. Heritage moved to compel arbitration. The arbitration agreement contained a waiver of representative actions and stated: “The Company and I acknowledge and agree that the conditions set forth in [the waiver] provision are material terms of this Agreement and may not be modified or severed, in whole or in part. If this specific provision is found to be unenforceable, then the entirety of this Agreement shall be null and void.” The trial court ruled that this was a poison pill provision which rendered the entire arbitration agreement unenforceable because waivers of representative actions are unenforceable under Iskanian v. CLS Transportation Los Angeles LLC (2014), 59 Cal. 4th 348, and so it denied the motion. Heritage appealed, arguing that Viking River, supra, rendered the arbitration agreement enforceable.

The Court of Appeal affirmed. Employers are free to draft a severability clause like the one that Viking River interpreted in conjunction with the PAGA waiver to permit arbitration of just the individual PAGA claim. But here, Heritage Bank did not do so. Instead, it used an arbitration agreement containing a non-severability clause and a poison pill which together specified that all conditions in the waiver provision are material and may not be modified or severed, either “in whole or in part,” and that if the waiver provision is found unenforceable, then “the entirety” of the arbitration agreement is “null and void.” These provisions precluded giving effect to the Viking River distinction between individual and non-individual claims because they prohibited severance of the unenforceable nonindividual PAGA claims waiver. And because the waiver provision's terms could not be severed in any way, application of Iskanian's principal rule rendered the entire waiver provision unenforceable, which in turn rendered void the entire arbitration agreement.

Doe v. Superior Court (Na Hoku, Inc.), 95 Cal. App. 5th 346

On September 1, 2021, the American Arbitration Association (AAA) sent a letter to defendant Na Hoku advising that a request for deposit for the arbitrator’s anticipated fees had to be paid by October 3 to avoid risk of closing the arbitration pursuant to CCP 1281.98. On September 28, it sent Na Hoku a reminder letter stating that the case was subject to closure if Na Hoku failed to “remit” payment by October 3. Na Hoku mailed a check on September 30, which was received by the AAA on October 5. Plaintiff asked the court to reverse its prior decision granting Na Hoku’s motion to compel arbitration based on Section 1281.98. The trial court denied the motion because payment was “remitted” prior to October 3. Plaintiff appealed, arguing that the statute required the payment to be “received” by the due date.

The Court of Appeal reversed. Na Hoku overstated the arbitration provider's ability to set payment deadlines or to dictate the terms of payment. The statute directs arbitrators to set invoices as “due upon receipt” barring agreement by the parties, provides for an automatic 30-day statutory grace period, and only contemplates extensions of the due date by agreement of the parties, not by the arbitration provider. Once the due date is set, there is no provision in section 1281.98 which contemplates any extension of the statutory 30-day grace period. Therefore, once AAA set the due date as September 1—the day it e-mailed the relevant invoice to the parties—and triggered the 30-day grace period, it had no authority to alter the due date absent the parties' agreement. When AAA e-mailed its September 28 courtesy reminder, it had no authority to adjust the statutory 30-day grace period either. Even if the final sentence in AAA's courtesy reminder noting that “the last day to remit payment [was] October 3rd” created some unfortunate confusion as to whether payment had to be received or could simply be sent by that date, there was no basis for this instruction to have controlled how payment must be made or to have superseded AAA's earlier instructions which clearly notified real parties in interest payment needed to be “received.”

Duran v. EmployBridge Holding Co..92 Cal. App. 5th 59

Plaintiff filed suit against defendant employer to recover civil penalties under PAGA. Defendant moved to compel arbitration. The trial court denied the motion based on a clause in the arbitration agreement which carved out claims “under PAGA” from the agreement. At the time that the agreement was executed, these claims were not arbitrable. That situation was reversed by Viking River, supra. Defendant appealed, arguing that the carveout only applied to non-arbitrable claims.

The Court of Appeal affirmed. Defendant's argument failed to consider Code of Civil Procedure section 1858, which states: “In the construction of a statute or instrument, the office of the Judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted…” If defendant intended the clause to be that only non-arbitrable PAGA claims would not be arbitrable under the agreement, it should have drafted the clause to say so. Alternatively, defendant could have presented extrinsic evidence showing this alleged intention was communicated between the parties.

FCM Investments LLC v. Grove Pham LLC, 96 Cal. App. 5th 545

FCM filed an arbitration demand against Grove to enforce an agreement to purchase a nursing home operated by Grove. The arbitrator awarded FCM nearly $10 million. Her decision was largely based on a finding that Phuong Pham, Grove’s owner, was not a credible witness because she concluded that Phuong used an interpreter as a ploy to appear less sophisticated than she really was. She noted that Phuong had been in the country for decades, had engaged in sophisticated business transactions, and had herself acted as an interpreter. Grove moved to vacate the award arguing, inter alia, that the arbitrator’s statement was evidence of bias. The motion was denied, and Grove appealed.

The Court of Appeal reversed. Whatever Phuong's actual fluency in English, the four corners of the award raised an impression of possible arbitrator bias. Living in the United States for decades does not reasonably imply sufficient English fluency to participate in arbitration without the assistance of an interpreter. Nor is it accurate to assume that being less sufficient in English proficiency equates with a lack of business sophistication or economic success. Historic enclaves like San Francisco's Chinatown, Los Angeles's Koreatown, and Orange County's Little Saigon speak to the ability of immigrants to run thriving businesses despite potential limitations in language skills. The fact that Phuong had engaged in sophisticated business transactions did not reliably predict her English proficiency, much less her ability to proceed in a high-stakes commercial arbitration without an interpreter.

Finally, it was unclear what the arbitrator meant in stating Phuong had “herself functioned as an interpreter.” Every day across the country, immigrants and refugees turn to family and friends to fill language gaps in healthcare, business, and government settings. Phuong may have rendered similar assistance for other newcomers. As a general matter, language proficiency runs along a continuum. Many individuals have some proficiency in more than one language but are not completely bilingual. Without a clearer indication of how and where Phuong acted as an interpreter, the mere fact that she may have served as one at some point in time would not permit a determinative finding on credibility. In evaluating arbitrator bias, the court must consider all relevant contextual facts. Here, that meant reviewing the award as a whole. The four-page decision was sparse and virtually devoid of legal analysis. In deciding whether a breach occurred, the arbitrator relied mainly on her assessment of witness credibility. Her credibility finding as to Phuong relied on uninformed misconceptions about English proficiency and language acquisition. Bearing in mind that an arbitration award must be vacated where there is an impression of possible bias irrespective of actual bias, that standard was amply met. Broad discretion to evaluate witness credibility does not permit credibility assessments rooted in bias.

Fleming v. Oliphant Financial LLC, 88 Cal. App. 5th13

Fleming sued Oliphant, alleging a violation of the California Fair Debt Collection Act.Oliphant moved to compel arbitration. Fleming electronically applied for a Barclay Rewards credit card from Barclays Bank Delaware on December 1, 2013. The electronic application included no reference to an arbitration agreement. Fleming received a Barclay Rewards credit card after Barclays approved his application. Fleming used his credit card for purchases and made payments on his account. He received account statements. The account statements also did not include any reference to arbitration. The statements did provide: “Please refer to your Cardmember Agreement for additional information about the terms of your Account.” In support of its motion, Oliphant submitted three identical exemplars of its agreement, but none with Fleming’s signature. The trial court denied the motion. Oliphant appealed, arguing that Fleming's use of the credit card bound him to the arbitration clause.

The Court of Appeal affirmed. There was no evidence that Fleming had actual notice of the terms of use or was required to affirmatively acknowledge them before completing his online purchases. Oliphant impliedly requested the Court to evaluate the actions of Fleming before requiring a predicate showing that Oliphant sent the agreement to him.Oliphant made the additional argument that Fleming's account statements clearly referred to the Cardmember Agreement and directed Fleming to his Cardmember Agreement for more information regarding his account. Oliphant ignored the incongruity of suggesting that Fleming could have requested the Cardmember Agreement when there was no evidence of its existence, not to mention that no information reflected that either it or any of the proffered exemplars were ever transmitted to Fleming.

Folke v. Pulliam, 96 Cal. App. 5th Supp. 18

Folke filed a petition to vacate an MFAA award in favor of Pulliam on August 9, 2021. He served the petition on Pulliam’s attorney, Akinyemi, by first class mail on August 17, three days before the statutory deadline. Pulliam did not file an acknowledgement of receipt of service. Folke learned that Akinyemi was no longer representing Pulliam on September 17 and immediately served Pulliam by Federal Express at her last known address. No proof of service was necessary because Pulliam had actual notice of the motion as demonstrated by her filing an opposition. At a hearing on the petition, the trial court found that service was required to be completed by August 20, that service by first class mail did not comply with Code of Civ. Procedure Section 1290.4, and that service on September 17 was untimely. It denied the petition and granted Pulliam’s motion to confirm the award. It did not reach the merits of the petition on the ground that it did not have jurisdiction because of Folke’s untimely filing. Folke appealed, arguing that the court should have ruled on the petition on grounds of equitable estoppel.

The Court of Appeal reversed and remanded. The Legislature intended to authorize service by mail, of a petition to vacate an arbitration award issued under the MFAA, only if the responding party has appeared in “the court in which the action is pending, …” Bus. & Prof. Code Section 6203(b). Given that no action was pending with the court when Folke filed the petition to vacate, ordinary service by mail was insufficient. Without the availability of ordinary service by mail, the remaining option was the service dictated in section 1290.4. This statute requires that service of a petition to vacate “shall be made in the manner provided by law for the service of summons in an action.” Service of a summons by mail is authorized only when a copy of the summons is mailed by first-class mail to the person to be served, together with two copies of the notice and an acknowledgment. Such service is complete when a written acknowledgment of receipt of summons is returned to the sender. Here, no acknowledgment was completed by Pulliam. Without an acknowledgment, the August 17, 2021, service of the petition by mail to Akinyemi's office address was inadequate. Folke's petition to vacate was not timely served. However, during the pendency of the appeal, however, the California Supreme Court held, in Law Finance Group, LLC v. Key (2023), supra, the 100-day limitations period in section 1288.2 (governing time to file a response to a petition to vacate or correct an arbitration award) was not fundamently jurisdictional.

Nothing in section 1288.2’s's instructions clearly indicated the Legislature's intent to remove a class of cases from the court's fundamental jurisdiction.Folke's call for equitable relief from untimely service of the petition relied upon his multiple and unsuccessful attempts of service, and that Pulliam had actual notice of the action as evidenced by her opposition. The trial court refused to “weigh the equities” based on its assessment that equitable relief was unavailable to save Folke's failure to comply with the deadline in section 1288. That analysis was now flawed under Law Finance, as there is nothing in the language of section 1288 or its legislative history reflecting an intent by the Legislature to foreclose equitable tolling or other equitable relief under appropriate circumstances. A trial court order misapplying the law is an abuse of discretion, warranting reversal. Because the trial court concluded as a matter of law that Folke was not entitled to equitable tolling, the court did not take evidence or assess the three factors for equitable tolling of a statute of limitations: (1) timely notice to the opposing party, (2) lack of prejudice to the opposing party, and (3) reasonable and good faith conduct by the moving party. Absent a developed record, the appropriate remedy is a remand to the trial court to consider whether the balance of equities supports Folke's claim of entitlement to equitable relief.

Ford Motor Warranty Cases, 89 Cal. App. 5th 1324

Plaintiffs sued Ford (FMC) asserting breach of warranty because of defects in the cars that they purchased from FMC’s dealers. All the plaintiffs financed their vehicles and executed loan agreements which contained an arbitration clause. FMC moved to compel arbitration, asserting that it was a third-party beneficiary to the arbitration agreements and that plaintiffs were equitably estopped from denying FMC’s right to arbitrate. The trial court denied the motions and FMC appealed. FMC's argument proceeded along two lines. The first was that automobile warranty claims were founded in and intertwined with sales contracts in California as a matter of law. This argument relied on Felisilda FCA US LLC, , 53 Cal.App.5th 486 (2020), which determined that equitable estoppel required vehicle purchasers to arbitrate their claim against FCA, a vehicle manufacturer like FMC, pursuant to a dealer sale contract containing the same form arbitration provision at issue here. The second was that breaches of warranties are generally treated as breaches of contract, so breaches of any warranties that accompanied the sale contract were necessarily intertwined with the sale contract.

The Court of Appeal declined to follow Felisilda and affirmed. Relying on the doctrine of equitable estoppel, the Felisilda court concluded the plaintiffs were bound to arbitrate with FCA under the plaintiffs' sale contract with the dealer for three reasons. First, the court reasoned that the condition of the vehicle was within the subject matter of the claims made arbitrable under the sale contract. Second, based only on the plaintiffs' allegation that the vehicle was covered by FCA's warranties, the court found “the sales contract was the source of the warranties.” Third, the court noted the plaintiffs had “expressly agreed to arbitrate claims arising out of the condition of the vehicle—even against third party nonsignatories to the sales contract.

”This division of the court disagreed with Felisilda's analysis for several reasons. First. equitable estoppel would apply if the plaintiffs had sued FCA based on the terms of the sale contract yet denied FCA could enforce the arbitration clause in that contract. That is not what the plaintiffs did in Felisilda. The breach of warranty claims against FCA in Felisilda were not based on their sale contracts with the dealers and the sales contracts were not the source of FCA's warranties at the heart of the case. Manufacturer vehicle warranties that accompany the sale of motor vehicles without regard to the terms of the sale contract between the purchaser and the dealer are independent of the sale contract.

Second, the court disagreed with the Felisilda court's interpretation of the sale contract as broadly calling for arbitration of claims against third party nonsignatories” The Felisilda court relied on the following italicized language to conclude that third parties could enforce the arbitration provision: “‘Any claim or dispute, whether in contract, tort, statute or otherwise … , between you and us or our employees, agents, successors or assigns, which arises out of or relates to … purchase or condition of this vehicle, the cont[r]act or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration … .’” The court did not read this italicized language as consent by the purchaser to arbitrate claims with third party nonsignatories. Rather, it read it as a further delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate. They agreed to arbitrate disputes “between” themselves —“‘you and us’”—arising out of or relating to “relationship[s],” including “‘relationship[s] with third parties who [did] not sign th[e] [sale] contract[s],’” resulting from the “‘purchase, or condition of th[e] vehicle, [or] th[e] [sale] contract.’” Plaintiffs could elect to buy insurance, theft protection, extended warranties and the like from third parties, and finance their transactions with those third parties under the sale contracts. The “third party” language in the arbitration clause meant that if a purchaser asserts a claim against the dealer that relates to one of these third-party transactions, the dealer could elect to arbitrate that claim. It says nothing of binding the purchaser to arbitrate with the universe of unnamed third parties. Most of the plaintiffs attached their sale contracts as an exhibit to their complaints. Some did so in support of general allegations about when they bought their vehicles and to identify their vehicles by make and model. Others attached their sale contracts in support of allegations the sale contracts were accompanied by implied warranties under the Song-Beverly Consumer Warranty Act. No plaintiffs alleged violations of the sale contracts' express terms. Rather, plaintiffs' claims were based on FMC's statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with its warranty.

FMC's argument that plaintiffs' manufacturer warranty claims were founded in the sale contracts because California law treats all warranty claims as contract claims is not supported by California law. California law does not treat manufacturer warranties imposed outside the four corners of a retail sale contract as part of the sale contract. FMC cited no authority establishing that manufacturer warranty obligations are implied terms in a retailer's sale contract.

Fuentes v. Empire Nissan, Inc., 90 Cal. App. 5th 919

Plaintiff sued Empire Nissan, her former employer, for discrimination and wrongful termination. Nissan moved to compel arbitration. Plaintiff opposed the motion, alleging that the arbitration agreement was substantively and procedurally unconscionable because it was written in such small font that it was virtually unreadable. The trial court agreed and denied the motion. Nissan appealed and, in a 2-1 decision, the Court of Appeal reversed.

The majority held that font size and readability are pertinent to procedural unconscionability and not to substantive unconscionability. Even if a contract fair in substance contains a font so minute as to be completely unreadable without a strong magnifying glass, the fairness of the contract's substance remains unchanged. Font is irrelevant to fairness. Font size does not count twice in the analysis of unconscionability. Under California law, an agreement must be both procedurally and substantively unconscionable to be unenforceable. Allowing a single feature to count for both categories would nullify this requirement. That would make the unconscionability doctrine into a one-element defense where the sole issue would be whether there is procedural unconscionability. This would tend to call into question all form contracts because there is procedural unconscionability whenever one party has superior bargaining power and presents a contract of adhesion on a take-it-or-leave-it basis. In sum, tiny and unreadable print is a problem, but it is a problem of procedural unconscionability. A court cannot double count it as a problem of substantive unconscionability.

The dissent noted that substantive unconscionability focuses on the agreement's substance, and whether it is one-sided enough to shock the conscience. In assessing substantive unconscionability, the paramount consideration is mutuality. An agreement with font so small as to challenge the limits of legibility implicates a lack of mutuality. Presumably the employer who drafted the document knows the terms and provisions it included in the agreement. However, the employee who is given this illegible document cannot discern the terms and provisions. If you can't know what you are signing because the other party gives you only an unreadable copy, the stronger party is imposing unknowable terms on the weaker party. Terms unknowable to one side only are different from difficult, confusing, or prolix terms. Their unknowability is sufficient to shock the conscience.

Galarsa v. Dolgen California LLC, 88 Cal. App. 5th 639

Plaintiff filed a representative action under PAGA against Dolgen (Dollar General), her former employer, alleging violations of the Labor Code that both she and other employees allegedly suffered. Defendant’s motion to dismiss the representative claim and arbitrate the individual claim was denied, based on Iskanian v. CLS Transportation Los Angeles. LLC, 59 Cal. 4th 348 (2014). The Court of Appeal affirmed, but the United States Supreme Court remanded the case to the Court of Appeal, following its decision in Viking River Cruises Inc. v. Moriana, 142 S. Ct. 1906 (2022).

The Court of Appeal, in accordance with Viking River, reversed the trial court’s denial of the motion to compel arbitration of the individual claim and held that the representative claim was not arbitrable. It then discussed whether plaintiff had standing to pursue the representative claim or whether she was precluded from doing because she no longer would be an “aggrieved employee” after the arbitration was completed. The Court determined that the plaintiff had standing. Labor Code Section 2699(c) defines the term “‘aggrieved employee’” to mean “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” Our Supreme Court has interpreted section 2699 as having only two requirements for PAGA standing” Kim v. Reins International, Inc., 9 Cal.5th 73. The plaintiff must be an aggrieved employee, that is, someone who was employed by the alleged violator and against whom one or more of the alleged violations was committed. (§ 2699(c). The plaintiff satisfied the two requirements for PAGA standing because she was employed by Dollar General and was subjected to at least one of the Labor Code violations initially alleged in her pleading.

Having determined that plaintiff satisfied PAGA's standing requirements, the court next considered whether California's rule against splitting a cause of action barred plaintiff from pursuing the representative claim in court once the individual claim was sent to arbitration. California has a rule against splitting a cause of action. The court predicted that the California Supreme Court would conclude that California law does not prohibit an aggrieved employee from representative claims in court once they are separated from the individual claims ordered to arbitration. It is the interpretation of PAGA that best effectuates the statute's purpose, which is to ensure effective code enforcement. Another reason for the prediction was that the principles underlying California's general rule against splitting a cause of action did not identify individual claims and representative claims as being based on the same “primary right.” An individual claim is based on Labor Code violations suffered by the plaintiff employee and representative claims are based on Labor Code violations suffered by employees other than the plaintiff. The difference in the harms underlying each type of claim means different primary rights are involved. Consequently, notwithstanding the complaint's reference to one cause of action for civil penalties under PAGA, there is no single cause of action being split when individual claims are pursued in arbitration and civil penalties for violations suffered by other employees are pursued in court.

Glassman v. Safeco Insurance Co., 90 Cal. App. 5th 1281

Glassman filed an arbitration proceeding against Safeco, her automobile insurer, under the Underinsured Motorist Act. During the proceeding, she filed a Section 998 offer which Safeco rejected. She prevailed at the arbitration and obtained an award in excess of the amount of the offer. She then sued Safeco again, seeking prejudgment interest as part of the “costs” due litigants who make successful 998 offers. She claimed that she was entitled to the interest pursuant to Code of Civ. Proc. Section 3287(a) which allows a plaintiff to collect prejudgment interest where the defendant knows or is able to calculate from reasonably information the amount of the plaintiff’s liquidated claim as of a particular day (in this case, the date that the 998 offer expired). The trial court held that the damages were not calculable precisely and ruled in favor of Safeco.

Glassman appealed and the Court of Appeal affirmed. By statute, coverage disputes for underinsured motorists are subject to contractual arbitration. (Ins. Code, § 11580.2, subd. (f).) Absent language in the insurance agreement expanding the issues to be arbitrated, underinsured motorist arbitrations contemplate only two issues—whether the insured shall be legally entitled to recover damages, and if so entitled, the amount thereof. In this context, the term “damages” refers to the amount of damages the insured is entitled to recover from the underinsured motorist. It does not include determination of the extent of coverage and the amount of money the insurance company is obligated to pay the insured. But, as occurred here, when the arbitrator's determination is that the damages suffered by the insured, so defined, exceed the policy limits available, it is sufficient for the arbitrator to make that determination without finding the actual total damages that would be owed from the UIM driver to the insured. Cothron v. Interinsurance Exchange, 103 Cal.App.3d 853, 862 (1980); see also State Farm Mutual Automobile Insurance Co. v. Superior Court,

123 Cal.App.4th 1424, 1429–1432 (2004) [where insurer paid policy limits before UIM arbitration was initiated, there is no controversy left to be arbitrated].) As noted, the parties here contracted in the applicable insurance policies to arbitrate just the two issues as set out in Insurance Code section 11580.2, subdivision (f)—the liability of the UIM driver to Glassman and the amount of damages she would be entitled to from that party, up to the umbrella-policy limits. The scope of their agreement thus did not extend to the issue of arbitration costs or prejudgment interest, leaving both these issues for resolution, if any, by the superior court.The cost-shifting provisions of Code of Civil Procedure section 998 are recoverable as costs incurred during the UIM arbitration. But nothing in the Uninsured Motorist Act or the California Arbitration Act directly addresses the availability of prejudgment interest in UIM proceedings…..In sum, the Uninsured Motorist Act, and specifically Insurance Code section 11580.2, does not address the availability of prejudgment interest in UIM proceedings, whether expressly allowing or disallowing it. As section 998 does not address prejudgment interest—not a cost under section 3287(a) but an element of damages—the obligation rooted in section 998 to pay costs that arises out of a party's “behavior as a litigant” (Pilimai, at p. 144) does not extend to prejudgment interest claimed under section 3287(a).

Gostev v. Skillz Platform, Inc.. 88 Cal. App. 5th 1035

Plaintiff sued Skillz, alleging violations of the UCL and CLRA. Defendant’s motion to compel arbitration was denied on grounds of unconscionability.

Skillz appealed. As a threshold matter, Skillz argued that the issue of the arbitration agreement’s enforceability was required to be decided by the arbitrator because the agreement stated that all disputes arising out of or relating to the agreement were to be determined by the arbitrator. The Court of Appeal rejected this argument. It noted that that the agreement did not contain any language that clearly and unmistakably authorized the arbitrator to decide threshold questions of arbitrability. The language that the word “dispute” in the agreement included “any dispute … concerning these Terms” and “will be given the broadest possible meaning allowable under law” could reasonably be understood to express no more than the parties' intention to arbitrate all claims. Skillz also argued that the agreement stated that the rules of the AAA applied, that this language was contained in the AAA rules and that the Court of Appeal had previously ruled that such language was sufficient to establish a delegation clause, citing Dream Theater, Inc. v. Dream Theater (2004) 124 Cal.App.4th 547, 557. However, Dream Theater involved a purchase agreement and subsequent business dispute between corporate buyers and sellers of a business. Thus, the disputants were sophisticated parties of reasonably equal bargaining power. Here, the parties were a mobile application business and a user of its service. Although incorporation of AAA arbitration rules by reference may fairly be deemed a clear and unmistakable delegation where there are sophisticated parties, a different result may obtain where one party is unsophisticated. For an unsophisticated plaintiff to discover she had agreed to delegate gateway questions of arbitrability, she would need to locate the arbitration rules at issue, find and read the relevant rules governing delegation, and then understand the importance of a specific rule granting the arbitrator jurisdiction over questions of validity.

The court then turned to the issue of substantive unconscionability (since this was an adhesion contract and so there was no dispute about procedural unconscionability) and found the agreement substantively unconscionable for several reasons. First, there was a lack of mutuality because the arbitration provisions were one-sided. They excluded claims related to Skillz’s (but not users') intellectual property rights; granted Skillz (but not users) authority “to seek appropriate equitable remedies with respect to your [i.e., users'] violation of these Terms in any court of competent jurisdiction” “without bond, other security, or proof of damages”; and provided that Skillz (but not users) could institute civil proceedings for claims related to billing and alleged “unfair methods in participating in Services or using the Software.” Second, the agreement required all claims to be filed within one year, even though the statute of limitations for CLRA violations is three years and the limitations period for UCL claims is four years. Third, it required all of Skillz’ customers, no matter where they lived, to arbitrate their claims in San Francisco. Fourth, the arbitration provision stated, “Each party … shall pay an equal share of the fees and costs of the arbitrator and AAA” and “the arbitrator may award to the prevailing party reimbursement of its reasonable attorneys' fees and costs and/or the fees and costs of the arbitrator.” This provision contravened the CLRA, which requires that court costs and attorney's fees be awarded to a prevailing plaintiff but only permits attorney's fees to a prevailing defendant upon a finding by the court that the plaintiff's prosecution of the action was not in good faith. See Civ. Code § 1780.

Gregg v. Uber Technologies, Inc., 89 Cal. App. 5th 786

Gregg filed a representative claim pursuant to PAGA against Uber, alleging that it failed to provide him with employee benefits required by the Labor Code because it claimed that he was an independent contractor. Upon being hired, Gregg had executed a Technology Services Agreement (TSA) wherein he waived filing representative claims and agreed to arbitrate his individual claims. Uber’s motion to compel arbitration was denied, based on the holding in Iskanian, supra, that agreements waiving PAGA representative claims and requiring arbitration of individual claims were invalid.

Uber appealed. The Court of Appeal reversed in part, holding that the individual claim was arbitrable but upholding the Iskanian ruling that the representative claim waiver was invalid.With respect to the individual claim, Gregg argued that with the PAGA Waiver's severance from the Arbitration Provision, he could not be forced to litigate any portion of his PAGA claims in arbitration, relying on the third part of the severance clause, which stated, “any representative action brought under PAGA on behalf of others must be litigated in a civil court of competent jurisdiction and not in arbitration.” He also noted that under section ii of the Arbitration Provision, “[a] representative action brought on behalf of others under [PAGA], to the extent waiver of such a claim is deemed unenforceable by a court of competent jurisdiction” is among the “claims … [that] shall not be subject to arbitration[.]” The Court held that Gregg misread the two contractual provisions on which he relied. In his view, those terms required his entire PAGA claim, including its individual and nonindividual components, to be litigated in court. Both provisions, however, only applied to a “representative action brought” under PAGA “on behalf of others”. They did not state or otherwise suggest they apply to a PAGA action or claim to the extent it is brought on the driver's own behalf.

Uber argued that if the individual claim were arbitrable and the representative claim waiver remained invalid, Gregg would have no standing to pursue the representative claim, citing Viking. The Court of Appeal noted that it was not bound to follow an interpretation of a state statute by a federal court, including the Supreme Court and held that Gregg had standing to pursue the representative claim. The Court applied the two-part test set forth in Kim, supra, and concluded that, at this stage of the proceedings, Gregg had established standing to recover civil penalties for Labor Code violations committed against other employees. His operative complaint alleged he was employed by Uber, that he had sustained “one or more” of the Labor Code violations underlying his claim, and that he “seeks to recover civil penalties on behalf of himself and other current and former Uber drivers for [Uber's] violations of the Labor Code[.]” His agreement to arbitrate his individual claim did not nullify these allegations. It merely required him to litigate a portion of his PAGA claim in an alternative forum governed by different procedures.

However, the Court stayed the litigation based on a clause in the TSA that stated: “To the extent that there are any claims to be litigated in a civil court of competent jurisdiction because a civil court of competent jurisdiction determines that the PAGA Waiver is unenforceable with respect to those claims, the [p]arties agree that litigation of those claims shall be stayed pending the outcome of any individual claims in arbitration.

”Hang v. RG Legacy I LLC, 88 Cal. App. 5th 1243

Plaintiff Jimmy Hang, as successor in interest to his deceased father, sued defendant nursing home for elder abuse. Defendant moved to compel arbitration. Plaintiff argued that his father died penniless and that if the motion were granted, defendant should pay the arbitration fees. The court granted the motion on condition that defendant agree to pay the fees within 15 days and, failing that, it would waive the right to arbitrate. Defendant chose not to pay the fees and instead appealed.

Plaintiff asked the court to dismiss the appeal and award him sanctions because a grant of a motion to deny arbitration is not appealable. The court denied the request. If the RG Legacy parties agreed to pay the entire amount of the arbitration fees and costs within the specified timeframe, the petition to compel arbitration on those terms would be granted. If the RG Legacy parties did not agree, the petition to compel would be denied and the parties would resume litigation in the trial court. The RG Legacy parties did not agree to arbitration fees and costs within the specified timeframe. Thereafter, the trial court's conditional order was self-executing to effect, at the expiration of the specified time period, a denial of the petition to compel arbitration.

Defendant argued that estate had the ability to pay because its attorney was on a contingency and also that the indigency rule did not apply because execution of the arbitration agreement was not a condition of admission to the nursing facility and hence the agreement was voluntary. The Court of Appeal affirmed. Whether plaintiff's counsel agreed to advance litigation expenses or otherwise required no payment of upfront costs did not bear on whether plaintiff would be ultimately liable for arbitration fees and costs incurred. In any event, the ability of a litigant's attorney to pay for arbitration costs is not relevant. That the parties may have voluntarily entered the arbitration agreements does not answer the question whether the estate, at the time arbitration proceedings would commence, was able to pay its share of arbitration fees and costs. The rule cannot be that a party who had voluntarily entered an arbitration agreement later loses the right to pursue claims if that party is indigent and without means to pay the agreed share of arbitration fees and costs.

Hasty v. American Automobile Association, etc., 98 Cal. App. 5th 1041

Plaintiff Hasty sued the Association, her former employer, alleging discrimination and wrongful discharge. The Association moved to compel arbitration based on an arbitration agreement contained in an employment contract that Hasty signed electronically on her first day of work. The Association’s human relations personnel filed declarations stating that execution of this agreement was a condition of employment and thus all its employees executed the agreement. Hasty countered that she did not own a computer when she was hired and that she had to view the agreement on her smartphone where the screen and the agreement’s small font made the agreement impossible to read. The Association’s employees conceded that even though an employee may have signed the contract, it had no way of knowing if the employee had been able to read the arbitration agreement. The trial court denied the motion, inter alia, holding that the agreement was procedurally unconscionable on grounds of surprise. The Association appealed and the Court of Appeal affirmed.

Hasty’s only option to review and sign the arbitration agreement was to do so electronically. Nothing in the record indicated the Association inquired into whether Hasty had the ability to view the documents electronically and did not appear to provide any other alternative, such as to view the documents at an office on a computer or to pick up the physical documents for review before signature. Hasty did not have a computer when she electronically signed her employment paperwork and that she viewed the documents, including the arbitration agreement, on her phone, which had a small screen. Although an employee of the Association testified she was able to read the text of the arbitration agreement on another employee's iPhone, she acknowledged she did not know what phone Hasty had at the time she viewed the employment documents

Additionally, the term “this document” (capitalization omitted) in the signature statement—“BY SIGNING THIS DOCUMENT ELECTRONICALLY, I ACKNOWLEDGE THAT I RECEIVED, READ, UNDERSTAND AND ACCEPT THE PROVISIONS OF THIS DOCUMENT”—is ambiguous. Neither the instructions nor the signature statement explicitly refer to the arbitration agreement. Instead, the instructions refer to the ‘Consent to Electronic Signatures on Employment Records.’ And, the signature statement does not define what “this document” actually is.

The arbitration agreement was substantively unconscionable because of lack of mutuality. Although the agreement also provided that either party could file a charge or complaint with an appropriate governmental administrative agency, it also stated that “the parties waive their right to any remedy or relief as a result of such charges or complaints brought by such governmental administrative agencies.” That provision was simply a waiver of the right to compensation or relief in the administrative context, which certainly could be considered to be one-sided. Government administrative agencies generally oversee and enforce statutes and regulations against employers to protect employees. A waiver of administrative remedies and relief, hidden in an arbitration agreement, is overly harsh and shocks the conscience.

The agreement was also substantively unconscionable because the confidentiality clause was essentially barred an employee from conducting informal discovery. A confidentiality provision in an arbitration agreement is not per se unconscionable when it is based on a legitimate commercial need, such as to protect trade secrets or proprietary information.

The Association identified no commercial need for requiring employment-related proceedings to remain confidential. The confidentiality clause benefitted only the Association. The fact that the provision applied to only the “extent permitted by law” did not save it because the employee would have no way of knowing what would be covered or not covered by this provision.

Haydon v. Elegance at Dublin, 97 Cal. App. 5th 1280-

Plaintiff Haydon filed a lawsuit against defendants, operators of a nursing home, alleging a violation of the Elder Abuse Act after she was sexually assaulted by an employee of the nursing home four days after being admitted. Defendants’ motion to compel arbitration was denied on the ground of unconscionability. Defendants appealed and the Court of Appeal affirmed.

The trial court held that the agreement was procedurally unconscionable because plaintiff was pressured into signing the agreement because she would get a discount if she signed that day. Defendants contended the arbitration clause was not procedurally unconscionable because it was not adhesive given the disclaimer that it was not a condition of admission and because it had a 30-day opt-out provision. Adhesion is not a prerequisite to procedural unconscionability. Even where an arbitration provision allows a party to opt out, there may be procedural unconscionability if there is not an authentic informed choice to make that decision. The Court presumed the trial court found Haydon did not have an authentic informed choice to reject the arbitration clause given its confusing presentation, the failure of anyone at the facility to explain the clause or the opt-out procedure to her, and the temporal and financial pressure she experienced in her vulnerable state.

The trial court held that the agreement was substantively unconscionable because it contained a confidentiality provision that barred the parties from “‘disclos[ing] the existence, content, or results of the arbitration’”. This clause restricted the plaintiff from gathering information informally, increasing his or her costs unnecessarily and defeating the purpose of using arbitration as a simpler, more time-effective forum for resolving disputes. And requiring an elder abuse action like this one to be “kept secret” unreasonably discouraged potential plaintiffs from bringing such cases. While defendants dismissed Haydon's alleged abuse as an isolated incident, the Legislature has recognized that elders are particularly vulnerable to abuse by caretakers. There is an obvious risk that such abuse could occur at an elder residential care facility and that it could reoccur if kept secret. Such a requirement is at odds with the Legislature's declaration that “confidential settlement agreements are disfavored” in actions involving violations of the Elder Abuse Act. The confidentiality provision was unconscionable to a high degree.

The agreement was also substantively unconscionable because the provider rules only allowed a single deposition absent a determination by the arbitrator that additional depositions were necessary and did not provide for interrogatories or requests for admission. Particularly when combined with the confidentiality provision, these restrictions ran the risk of frustrating plaintiff’s statutory rights under the Elder Abuse Act, which requires plaintiffs to prove their claims by clear and convincing evidence. While courts have approved discovery restrictions akin to these in other contexts, the heightened standard of proof for elder abuse claims and the obstruction of informal discovery tipped the balance here.

Hernandez v. Meridian Management Services LLC, 87 Cal. App. 5th 1214

Hernandez was hired by Intelex as a customer representative. Upon hiring, she signed an arbitration agreement. She also worked for six other companies (the Other Firms) which had the same address, HR representative, controller, payroll department, legal department, and centralized information technology as Intelex. She did not sign any arbitration agreements with the Other Firms. After she was terminated, she sued the Other Firms, but not Intelex, for various violations of state employment laws. The Other Firms’ motion to compel arbitration was denied and they appealed. They argued that they were entitled to enforce Intelex’ arbitration agreement on grounds of equitable estoppel, agency, and thirdparty beneficiary.

The Court of Appeal affirmed. With respect to equitable estoppel, the court noted that the linchpin of the estoppel doctrine is fairness. It rejected the Other Firms’ complaint that it was unfair for Hernandez to tailor her complaint in such a way as to avoid arbitration. But there is nothing wrong with either party wanting to appear in court, or in arbitration. It wasn‘t as though Hernandez was trying to have it both ways. To appear in court, she gave up her claims against Intelex. Parties make tactical bargains like this all the time.

Agency was a potential theory in this case because Hernandez contracted with Intelex to arbitrate her employment disputes with its “agents.”. The agency theory here, however, collided with the fact the Other Firms offered no evidence they had authority to act on behalf of Intelex. The court cannot assume a joint employer relationship simply because the companies shared officers and had offices next to one another.

The test to establish a party as a third-party beneficiary includes whether a motivating purpose of the contracting parties was to provide a benefit to the third party. Nothing in the record showed Intelex and Hernandez sought to benefit the Other Firms.

Housing Authority of the City of Calexico v. Multi Housing Tax Credit Partners XXIX LP, 94 Cal. App. 5th 1103

The arbitration agreement herein provided for review of the merits of the arbitrator’s award. by stating that the parties “do not waive or relinquish their rights of appeal and [each party] shall have the right of appeal as specifically provided in accordance with the laws relating to appeals then in effect in the State of California….and the [arbitrator's] findings of fact and conclusions of law shall be reviewable on appeal upon the same grounds and standards of review as if said decision and supporting findings of fact and conclusions of law were entered by a court with subject matter and present jurisdiction”.

After the arbitrator ruled in favor of the respondent, the claimant filed two motions in Superior Court---a notice of appeal and a petition to partially reverse and/or vacate the award. It asserted that the arbitrator’s ruling was tainted by errors of both law and fact. The Superior Court concluded that the language of the agreement satisfied the “explicit and unambiguous” requirement for providing for review on the merits, but that it did so in a manner that pointed to appellate review, not review in the trial court, and so it denied the request for an appeal of the award. It then denied the petition to vacate, noting that the scope of review under section 1286.2 is “statutorily limited” and that using mistakes of law or fact as a basis for an argument that the arbitrator exceeded her power was only available at the appellate level. It thus was powerless to review the award on the merits, leaving unaddressed the claim that the award was tainted by errors of fact and law.

Claimant appealed and the Court of Appeal reversed. The state's constitution delimits the jurisdiction of the state's courts, in part, by declaring that, whereas the courts of appeal have original jurisdiction in habeas corpus proceedings and on writs for extraordinary relief, the Superior Courts have original jurisdiction in all other causes. Thus, inasmuch as the review of an arbitration award on the merits (or otherwise) is neither a habeas corpus proceeding nor a writ for extraordinary relief, it follows that the Court of Appeal is without the original jurisdiction that is required in order for a court to be empowered to undertake such a review in the first instance. A Court of Appeal does have appellate jurisdiction with regard to review of an arbitration award. But the existence of the Court of Appeal's appellate jurisdiction did not render the Superior Court at liberty to refrain from exercising its original jurisdiction on a theory that the parties had agreed to proceed “as though” that original jurisdiction had been vested in an arbitrator instead. The Superior Court erred when it concluded the parties were at liberty to ordain in which court the review on the merits should occur in the first instance, and when it concluded it was constrained to yield in this regard to what it understood to be the parties‘ intent. As a consequence, the judgment entered was not informed by the type of comprehensive review and assessment of the record that the arbitration agreement (calling for a review on the merits) contemplated and did not resolve the issues presented by the parties. Hence the judgment was inherently incomplete and needed to be reversed.

Because the judgment below was incomplete, the Court deemed it premature to further exercise its appellate jurisdiction by undertaking that review itself. It was for the trial court on remand to decide the merits in the first instance.

In re Uber Technologies Wage and Hour Cases, 95 Cal. App. 5th 1297

The Department of Labor Standards Enforcement brought suit against Uber and Lyft, alleging that they violated the Unfair Competition Law by classifying their ride share and delivery drivers as independent contractors rather than employees. The defendants moved to compel arbitration based on agreements between the defendants and the drivers. Faced with the decisions in EEOC v. Waffle House, Inc., (2002); People v. Maplebear, Inc. (2022) 81 Cal. App. 5th 923, and Department of Fair Employment and Housing, Inc. v. Cisco, Inc. (2022) 82 Cal. App. 5th 93, defendants argued that their position was more akin to the situation described in Viking River Cruises v. Moriana, supra. Uber and Lyft dwelt on language in footnote 4 of Viking River, in which the high court stated that “regardless of whether a PAGA action is in some sense also a dispute between an employer and the State, nothing in the FAA categorically exempts claims belonging to sovereigns from the scope of 9 U.S.C.

2.”The court disagreed and affirmed. The cited passage established that, when an employee who has agreed to arbitrate claims against an employer brings a PAGA action, then (even if that action could be said to be a dispute between an employer and the state) the FAA requires that the employee submit to arbitration any claim covered by the agreement, because the claim arises out of the contractual relationship between the parties. The passage addresses which claims (brought by a plaintiff who was a signatory to an arbitration agreement) are to be submitted to arbitration pursuant to the FAA's mandate. (Viking River, at p. __, fn. 4 [142 S.Ct. at p. 1919, fn. 4].) The Viking River court did not cite Waffle House and did not state it was altering or limiting the holding in that case. And nowhere in footnote 4 or elsewhere in the Viking River opinion did the high court state it was addressing or expanding the category of litigants who are covered by the FAA's mandate to include public enforcement agencies who did not agree to arbitrate any claims against the employer.

Defendants' reliance on Preston v. Ferrer (2008) 552 U.S. 346 was also misplaced. Preston held that, “when parties agree to arbitrate all questions arising under a contract, state laws lodging primary jurisdiction in another forum, whether judicial or administrative, are superseded by the FAA.” The Preston court distinguished Waffle House, noting that in that case, “the Court addressed the role of an agency, not as adjudicator but as prosecutor, pursuing an enforcement action in its own name … .” Here, the People and the Labor Commissioner were acting as prosecutors, not adjudicators.

In a separate line of attack, Uber and Lyft contended that Waffle House was distinguishable, in part because it involved claims for victim-specific relief brought by a federal agency.Waffle House did involve a federal agency suing under a federal antidiscrimination statute, but a government body exercising express statutory authority to seek judicial relief (including “victim-specific” relief) cannot be barred from doing so on the ground the agency is supposedly a mere “proxy” of an individual employee who entered an arbitration agreement. As with the agencies in Waffle House, Maplebear, and Cisco, the People and the Labor Commissioner were not parties to the arbitration agreements invoked in this case, and they could pursue their claims in court. Like the EEOC, the People and the Labor Commissioner decide whether to bring claims within their statutory authority, and their ability to do so does not depend on the consent or approval of individual employees. The People and the Labor Commissioner are not acting as proxies for drivers but bringing independent civil enforcement actions, and they are not barred from seeking judicial relief by arbitration agreements they did not enter. As to Maplebear and Cisco, in both cases the relief sought by the public enforcement agencies included restitution or other victimspecific relief, and the appellate courts held that no portion of those actions should be compelled to arbitration, because the public prosecutors had not agreed to arbitrate.

Iyere v. Wise Auto Group, 87 Cal. App. 5th 747

Plaintiffs sued Wise, alleging wrongful termination and discrimination. They opposed Wise’s motion to compel arbitration, inter alia, on the ground that they did not realize that they signed arbitration agreements. The motion was denied and Wise appealed. The Court of Appeal reversed. All the plaintiffs admitted that they had signed the agreements but claimed that they did not recall doing so because they were just handed a stack of documents and were told to sign them immediately. In the absence of any evidence that their purported signatures were not their own, there was no evidence that plaintiffs did not in fact sign the agreement. If a party confronted with his or her handwritten signature on an arbitration agreement is unable to allege that the signature is inauthentic or forged, the fact that that person does not recall signing the agreement neither creates a factual dispute as to the signature's authenticity nor affords an independent basis to find that a contract was not formed.

Jack v. Ring LLC, 91 Cal. App. 5th 1186

Plaintiffs filed a class action seeking an injunction that would require Ring to disclose certain conditions attached to its customers’ purchases. The trial court, citing McGill v. Citibank, N.A., 2 Cal. 5th 945 (2017), denied Ring’s motion to compel arbitration because plaintiffs were seeking a public injunction. Ring appealed arguing, inter alia, that arbitrability needed to be decided by the arbitrator pursuant to a delegation clause in the agreement. Plaintiffs countered that the delegation clause was ineffective because it referred to rulings by a “court of competent jurisdiction” and hence was not “clear and unmistakable”..

The Court of Appeal affirmed. The arbitration provision contained a delegation clause providing the arbitrator “shall have exclusive authority to resolve all disputes” relating to the “enforceability … of these Terms,” including “any claim that all or any part of these Terms are void or voidable.” But another provision, the “poison pill,” contemplated that “a court” may decide the enforceability of the subsection of the arbitration provision that required arbitration to “be conducted only on an individual basis and not in a class, representative or private attorney general action.” Thus, the arbitration provision pointed in two directions on the question whether a court or an arbitrator was to decide the enforceability of the agreement to arbitrate.

Ring argued the severability clause in the arbitration provision did not create any ambiguity because the arbitration provision permitted certain claims to be brought in small claims courts and intellectual property rights to be enforced in state or federal court. Ring's argument was premised on Aanderud v. Superior Court, 13 Cal. App. 880 (2017), but the case was distinguishable. In Aanderund, the arbitration provision expressly stated that any disputes, which included those over the scope and applicability of the arbitration provision, were to be resolved through binding arbitration except those within small claims court jurisdiction. Since arbitration was not at issue in a small claims court action, the small claims court could only find unenforceable provisions of the contract other than the arbitration provision. Thus, when the severability clause made reference to a court of competent jurisdiction, the court being referred to was the small claims court, which was not empowered to determine the scope or applicability of the arbitration provision. In this case, as in Aanderud, the arbitration provision allowed certain claims to be brought in court. But, unlike Aanderud, the poison pill was not a separate provision of an overall contract that applied to the contract in general. Instead, it was a subsection of the arbitration provision itself. Thus, in contrast to Aanderund, the severability clause in this case very clearly contemplated that a court could decide whether the arbitration provision was enforceable when the provision was challenged based on the limitations of the subsection itself.Ring also argued that public injunctive relief was available in arbitration under the language of the arbitration provision. The court was not convinced. The arbitration provision specified arbitration was to be “conducted only on an individual basis and not in a class, representative or private attorney general action,” an arbitration award must be “on an individual basis,” and the arbitrator could award injunctive relief “only in favor of the individual party seeking relief and only to the extent necessary to provide relief warranted by that party's individual claim.” Terms in arbitration agreements that prohibit “private attorney general” actions in arbitration, limit arbitration awards to “an individual basis,” and limit injunctive relief in arbitration to awards “only in favor of the individual party seeking relief and only to the extent necessary to provide relief warranted by that party's individual claim” are all commonly understood by the parties who agree to these terms to mean public injunctive relief is not available in arbitration.

JPV I L.P. v. Koetting, 88 Cal. App. 5th 172

Two tribal lending organizations (TLEs), Green Gate and Clear Loan, entered into agreements with two limited liability companies, Redondo and Rockhill, to operate their lending businesses. Daniel Koetting had a 50% interest in one of the LLCs and his brother Mark Koetting had a 50% interest in the other. Each brother effectively ran the LLC with which he was associated. Neither brother was a party to the agreements. After the relationship between the TLEs and the Koettings soured, the TLEs commenced an arbitration against Redondo, Rockhill, and the Koettings. The arbitrator found that the Koettings were alter egos of the LLCs and awarded $10 million against all respondents. They appealed. The Court of Appeal affirmed the award against the LLCs, but reversed as to the Koettings, holding that they had not consented to arbitration.After the Court of Appeal ruling, the TLEs assigned their judgment to JPV, which moved to amend the judgment to add the Koettings. It argued that the Koettings were collaterally estopped from asserting that they were alter egos of the LLCs because of the arbitrator’s finding that they were.

The trial court denied the motion and JPV appealed.The Court of Appeal reversed. In resisting the application of collateral estoppel, the Koettings challenged two of the doctrine's elements. First, they contended collateral estoppel applies only to issues previously determined in a different action, not earlier rulings in the same action. Second, the Koettings argued that JPV could not show they were in privity with a party to the arbitration. Both contentions failed. It is well settled that an arbitration award may provide the basis for issue preclusion, That the arbitration award here was previously confirmed in the same judicial proceeding in which JPV sought to apply collateral estoppel did not change the fact that the arbitration involved the actual adjudication of identical issues which resulted in a final judgment on the merits. The court was likewise unpersuaded by the Koettings' contention that JPV could not satisfy the privity requirement. Privity refers to a mutual or successive relationship to the same rights of property, or to such an identification in interest of one person with another as to represent the same legal rights and to a relationship between the party to be estopped and the unsuccessful party in the prior litigation which is sufficiently close so as to justify application of the doctrine of collateral estoppel.

The Koettings and the LLCs had a sufficiently close relationship and identification in interest so as to represent the same legal rights for purposes of the privity concept. There was no dispute that Daniel and Mark each owned 50 percent of their respective LLCs and managed them. The Koettings were directly involved in the arbitration, filing papers through counsel, personally attending the arbitration hearing as the designated representatives of their respective LLCs, and testifying at the hearing. Because the LLCs' and Koettings‘ interests were aligned in defending against the claims of the TLEs during the arbitration, the Koettings could reasonably expect to be bound by the findings the arbitrator made against the LLCs.

Kielar v. Superior Court (Hyundai North America), 94 Cal. App. 5th 614

Plaintiff sued Hyundai alleging a violation of the Song-Beverly Act. Hyundai moved to compel arbitration based on a sales contract between plaintiff and the dealership, to which Hyundai was not a signatory. The arbitration agreement covered disputes that included “the purchase or condition” of the vehicle and included “any relationship with third parties who do not sign this contract”. The trial court granted the motion, based on the decision in Felisada v. FCA US LLC, 53 Cal. App. 5th 486 (2020). Plaintiff filed a writ and the Court of Appeal granted it.

The court noted that Kielar‘s complaint alleged “Hyundai issued a written warranty.” This warranty was not part of his sales contract with the dealership. Indeed, the sales contract acknowledged this separate warranty and disclaimed any implied warranties by the dealership. In Ford Motor Warranty Cases, 89 Cal. App. 5th 1324 (2023) and Montemayor v. Ford Motor Co.,92 Cal. App. 5TH 958 (2023), Ford Motor Company moved to compel arbitration of the same type of claims at issue in this proceeding based on “the same form arbitration provision” in the plaintiffs’ sales contract with dealerships. These sales contracts also included the same disclaimer regarding warranties.

These authorities explained Felisilda's statement that “‘the sales contract was the source of the warranties’” was flawed because “manufacturer vehicle warranties that accompany the sale of motor vehicles without regard to the terms of the sale contract between the purchaser and the dealer are independent of the sale contract.” (Ford Motor, supra, at p. 1334; accord, Montemayor, supra, at p. 969). Whether a manufacturers' express or implied warranties that accompany a vehicle at the time of sale constitute obligations arising from the sale contract, permitting manufacturers to enforce an arbitration agreement in the contract pursuant to equitable estoppel is a question now pending before our Supreme Court. In the meantime, the court agreed with Montemayor and Ford Motor that they did not.

Additionally, the court agreed with Montemayor and Ford Motor that the parenthetical language in the arbitration provision referring to nonsignatory third parties “was a ‘delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate’” and does not bind the purchaser “‘to arbitrate with the universe of unnamed third parties.’” (Montemayor, supra, 92 Cal.App.5th at p. 971, quoting Ford Motor, supra, 89 Cal.App.5th at p. 1335, rev. granted.)

Kinder v. Capistrano Beach Care Center LLC, 91 Cal. App. 5th 804

Plaintiff Kinder sued defendants alleging elder abuse. Defendants moved to compel arbitration based on arbitration agreements that were signed by Kinder’s children, James and Barbara, but not by Kinder. Above the signatures of James and Barbara were statements in which they averred that they were authorized by Kinder to sign the documents. The trial court denied the motion. Defendants appealed and the Court of Appeal affirmed.

Defendants presented no evidence that Kinder did anything to lead James and Barbara to believe they had actual or ostensible authority to enter into arbitration agreements on her behalf. Instead, defendants contended the court should have found James and Barbara were Kinder's actual or ostensible agents based on their purported certification in the arbitration agreement that they were “authorized to act as Resident's agent in executing and delivering of [sic] this arbitration agreement.” Courts have consistently rejected this position.

Defendants also asserted Kinder led them to believe her children had authority and effectively ratified the arbitration agreements by “not objecting” and “allow[ing]” her children “to review multiple arbitration agreements and act on her behalf.” However, defendants did not produce any evidence to support these assertions. Even if defendants had presented evidence to support those purported facts, that would not have been sufficient to establish ostensible agency. A defendant cannot prove a plaintiff consented to arbitration merely by showing the plaintiff stood idly by while the purported agent signed on his or her behalf.

Mattson Technology, Inc. v. Applied Materials, Inc., 96 Cal. App. 5th 1149

Applied sued Mattson and its former employee, Lai, for misappropriation under theUniform Trade Secrets Act after Lai joined Mattson and purportedly provided Mattson with Applied confidential information. Applied also sued Lai for breach of his employment contract. Mattson and Lai moved to compel arbitration, based on the arbitration clause in the employment agreement. The trial court granted Lai’s motion but denied Mattson’s motion and denied the defendants’ motion to stay the litigation pending completion of the arbitration pursuant to Code of Civil Procedure Section 1281.4. Mattson appealed, arguing that Applied was equitably estopped from opposing the motion because its claims against Lai and Mattson arose from the same contract.

The Court of Appeal affirmed the denial of Mattson’s motion to compel arbitration. It is not enough that a complaint simply refers to a contract; the claims must be founded on the contract. Nor is it sufficient that a complaint alleges collusion between a signatory and nonsignatory defendant, or that the controversy would not have occurred but for the existence of the contract, provided the contract is not the basis for the claims against the nonsignatory. In these situations, the policy rationale for equitable estoppel—relying on an agreement for one purpose while disavowing the arbitration clause of the agreement—does not exist. Applied alleged Mattson violated the Act by knowingly misappropriating its confidential information. That statutory claim exists without regard to Lai's contractual obligations to Applied, and Applied has disavowed any reliance on the contract to prove its case against Mattson. Mattson pointed to the complaint's allegation that Mattson “knew or had reason to know” that the stolen information was subject to ongoing confidentiality obligations, but the complaint did not cite or rely on a contract for this allegation; the same obligations arise from statutory and common law. Accordingly, the policy rationale for estoppel did not apply. Applied was not selectively enforcing against Mattson the trade secret provisions of Lai's employment contract while trying to avoid its arbitration clause.

However, the Court reversed the denial of the stay of the litigation pending resolution of the arbitration decision. Code of Civil Procedure Section 1281.4 provides: “If a court of competent jurisdiction. … has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court … shall … stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate.” The word “shall” is mandatory. A “controversy’” in this context is “any question arising between parties to an agreement whether the question is one of law or of fact or both.” However, if the issue which is the controversy subject to arbitration is severable, the court has the discretion to sever and stay proceedings on the arbitrable claims and permit any non-arbitrable issues to proceed in court. The party seeking severance under Code of Civil Procedure Section 1281.4. has the burden of proving its claim is independent from the arbitrable matter. Applied did not satisfy that burden. Applied's complaint makes no attempt to distinguish the factual bases for its claims against the two defendants; to the contrary, it relies on the same factual allegations against both defendants to depict a scheme whereby Mattson recruited Lai to provide it with Applied's trade secrets. For good reason. To prevail on its misappropriation claim against Lai, Applied must prove he acquired its confidential information by improper means. To prevail against Mattson, Applied must essentially prove its competitor obtained its confidential information fromLai with actual or constructive knowledge that he obtained it improperly; or that he owed Applied a duty to maintain its secrecy; or that Mattson obtained the information by inducing Lai to breach that duty of secrecy. The trade secret claims against Lai and Mattson thus share common factual questions concerning Lai's activities during his last week at Applied and Mattson's alleged involvement in them.

McConnell v. Advantest America, Inc., 92 Cal. App. 5th 596

Advantest filed an arbitration proceeding against Kabbani, its former senior executive, after it learned that he controlled Lattice, one of Advantest’s suppliers. Prior to the hearing, Advantest’s attorneys asked several executives of Lattice, who were non-parties. to supply copies of text messages that they had received from Kabbani regarding Advantest, but they refused. The attorney thereupon prepared a subpoena ordering the non-parties to appear at a hearing with the documents. The subpoena also stated that the hearing would be adjourned after the documents were produced and that the non-parties would be required to appear at a hearing 12 months later. The arbitrator issued the subpoena. The nonparties moved to quash it, citing Aixtron, Inc. v. Veeco Instruments, Inc., 52 Cal. App. 5th 360 (2020), wherein it was held that arbitrators cannot issue discovery subpoenas. The trial court denied the motion on the ground that the subpoena complied with Code of Civil Procedure Section1282.6 because the non-parties were required to appear at a hearing. The non-parties appealed and the Court of Appeal reversed. The court rejected Advantest's contention that because the subpoenas required production of the documents at a hearing, the analysis ended. If this were the case, parties to an arbitration proceeding could avoid the prohibition against nonparty discovery, and demand any manner of documents, by simply requiring the nonparty produce the documents at an arbitration proceeding. This literal reading of section 1282.6 would defeat the purpose of the statutory scheme and lead to absurd results. Although the subpoenas required the document production at a hearing presided over by the arbitrator, the hearing was limited to the arbitrator appearing only for so long as needed for the documents to be collected with the intent that the hearing be adjourned for nearly 12 months, at which time the nonparties would later be summoned to testify. The subpoenas also allowed appellants to upload the documents to a website controlled by Advantest's counsel. There is no indication in the record showing the arbitrator would have access to this website to review or evaluate the purported evidence. This defeated the purpose of production at a hearing which gives the arbitrator control over what is produced, such as ruling on objections and ordering redactions.

Montemayor v. Ford Motor Co., 92 Cal. App. 5th 958

The Montemayors sued Ford under the Song-Beverly Act after Ford refused to take back their allegedly defective vehicle. Ford moved to compel arbitration based on the sales contract between the Montemayors and the dealer, Auto Nation, which, like the contract in Felisilda v. FCA Corp., 53 Cal. App. 5th 486 (2020), made reference to third parties. The trial court denied the motion, holding that the lawsuit was based on the warranty that Ford provided to the Montemayors, which did not have an arbitration clause, rather than the sales contract between the Montemayors and the dealer, the document on which Ford based its arbitration demand. Ford appealed and the Court of Appeal affirmed.

Ford contended the Montemayors' claims were inextricably intertwined with the sales contract because the claims concerned the condition of the vehicle sold by AutoNation, and the arbitration agreement specifically applied to the purchase and “condition of this vehicle.” But this argument conflated the concept of “but for” causation with a determination whether the Montemayors' claims were founded on obligations imposed on Ford under the sales contract. To be sure, the Montemayors would not have sued Ford for the defective condition of the vehicle but for the sale of the vehicle by AutoNation pursuant to the sales contract. And Ford provided an express warranty to the Montemayors as a result of the sale. But that did not mean Ford's obligation to provide a non-defective vehicle under its separate express warranty was in any way founded on an obligation imposed by the sales contract or was intertwined with those obligations. The fact the Montemayors purchased the defective vehicle from AutoNation pursuant to the sales contract, and as a result of their purchase they received separate express warranties from Ford, did not mean their causes of action against Ford based on those express warranties were founded in the sales contract.

Ford's but-for argument that “[w]ithout a purchase, the Montemayors would lack any basis for their fraud claims” based on Ford's knowledge of the defects similarly failed. The court disagreed with Felisilda that the language in the arbitration provision referencing “third parties who do not sign this contract” provided a basis for nonsignatory manufacturers to compel arbitration of claims brought by vehicle purchasers. It agreed with Ford Warranty, supra, that this language referred to the subject matter of covered claims, not the scope of who may enforce the arbitration provision. The arbitration provisions in Ford Warranty and here required arbitration of claims and disputes arising from the sales contract and “‘“any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract).”’” As the Ford Warranty court reasoned, the parenthetical language referring to third party nonsignatories was a “delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate,” but the purchasers clearly agreed only to arbitrate disputes between “‘“you and us,”’” that is, with the dealership. In other words, “[t]he ‘third party’ language in the arbitration clause means that if a purchaser asserts a claim against the dealer (or its employees, agents, successors or assigns) that relates to one of these third-party transactions, the dealer could elect to arbitrate that claim. It said nothing of binding the purchaser to arbitrate with the universe of unnamed parties.

Murrey v. Superior Court, 87 Cal. App. 5th 1223

Murrey sued her former employer, GE, for sexual discrimination and opposed GE’s motion to compel arbitration, asserting that the arbitration provisions were unconscionable because they restricted discovery and allowed GE to choose the provider and the location of the hearing. The trial court granted the motion. Murrey obtained a writ and the Court of Appeal reversed.

The discovery provisions limited each party to three depositions, twenty interrogatories, fifteen requests for documents, and fifteen requests for admissions. While superficially neutral, these discovery restrictions only favored GE. GE asserted the agreement allowed the arbitrator to expand or limit discovery, depending “on the facts of the particular claim” keeping in mind “the expedited nature of arbitration” and what the arbitrator “considers necessary for a full and fair exploration of the issue.” It pointed out that these are some of the same words used by the AAA's discovery rules, which were upheld in multiple cases. But GE did not simply incorporate by reference AAA's discovery rules or, more importantly, adopt all relevant parts of the AAA rules. An AAA arbitrator is not required to start with the presumption of three depositions and limited written discovery. The AAA arbitrator is not told certain rules limiting discovery will apply unless the arbitrator finds a reason to modify them. Because GE borrowed some but not all of the language used by the AAA's discovery rules, the cases it cites upholding the AAA rules were inapt.

The arbitration agreement also stated that a provider would be selected based on the location of the arbitration, given the various locations of GE’s operations. GE claimed that the AAA was its default provider, but it did not inform Murrey when she signed the agreement following her hiring. The court found the provision to be unconscionable. GE offered no justification for keeping the name of the provider or its rules hidden from new hires. The court suspected the information was kept secret to give GE the upper hand in selecting a favorable provider.The arbitration agreement further stated: “Unless the parties agree otherwise, or the arbitrator directs otherwise, the parties shall use the [provider] office nearest to the employee's work location to arbitrate the Covered Claims”. The court found this provision to be a complicated way of saying the location of your arbitration will be a surprise. The provision vaguely promised to select the “nearest available” venue suitable to an unidentified provider. But there was no guarantee the arbitration would be close to Murrey's home or workplace. The provision may have been reasonable if GE had designated a specific location with offices near Murrey's workplace. Alternatively, GE could have drafted more specific terms guaranteeing the location would not unfairly burden the employee, such as including a default maximum distance from the employee's workplace or home.

Nicksam v. Shemran, Inc.. 90 Cal. App. 5th 121

Plaintiff filed suit against his employer alleging individual and non-individual PAGA claims. The employer’s motion to compel arbitration was denied, based on Iskanian. The employer appealed.

The Court of Appeal followed the ruling in Viking River and affirmed the portion of the trial court’s ruling denying arbitration of the non-individual claim and reversed the portion of the trial court’s ruling that denied arbitration of the individual claim. Iskanian's rule prohibiting a PAGA action from being split into separate individual and nonindividual actions circumscribed the freedom of parties to determine the issues subject to arbitration and the rules by which they will arbitrate by imposing on them an all-or-nothing choice: arbitrate both individual and nonindividual claims or forgo arbitration entirely. Viking River eliminated this harsh choice by allowing an individual claim to be split off and compelled to arbitration, while the remaining nonindividual claims remained for disposition in court.

Plaintiff requested that if the court held that the individual claim was arbitrable, then the matter be remanded to the trial court so that it could decide whether the arbitration agreement was unconscionable, an issue not considered initially by the trial court because of the Iskanian ruling. The Court of Appeal declined to do so, noting that the agreement contained a delegation clause that provided that the arbitrator had exclusive authority to resolve disputes involving enforceability of the agreement. The plain meaning required the issue of unconscionability to be decided in arbitration.

Perez v. Kaiser Foundation Health Plan, Inc., 91 Cal. App. 5th 645

Maria and Vicente Perez filed an arbitration demand against Kaiser, alleging malpractice. The arbitrator selected by the parties revealed, prior to his appointment, that he had three pending cases involving Kaiser. While the Perez case was pending, he decided all three cases in favor of Kaiser, but did not reveal this to the parties. He ultimately ruled in favor of Kaiser in the Perez case and the Perezes moved to vacate the award, citing the failure to reveal the outcome of the three pending cases. The trial court denied the motion and the Perezes appealed.

The Court of Appeal affirmed. CCP Section 1281.9(a)(4) states that proposed arbitrators must disclose “all prior or pending … cases involving any party to the arbitration or lawyer for a party for which the proposed neutral arbitrator served or is serving as neutral arbitrator, and the results of each case arbitrated to conclusion.” “Prior cases” are those “in which an arbitration award was rendered within five years prior to the date of the proposed nomination or appointment.” (Id., subd. (d).) By definition, prior cases—rather than pending cases—are the only types of cases that are resolved prior to the date of appointment. Thus, under the plain terms of the statute, within 10 days of their appointment or nomination, proposed arbitrators must disclose their services as a neutral arbitrator involving a party or lawyer for a party to the current arbitration in pending cases, prior cases, and the results for the resolved prior cases. The proposed arbitrator cannot disclose the results of a pending case—those cases are unresolved prior to the date of appointment.

The California Rules of Court, Ethics Standards for Neutral Arbitrators in Contractual Arbitration, standard 7 addresses the same initial disclosure duties as section 1281.9. Contrary to the Perezes' assertions, standard 7 imposes no requirement that the arbitrator disclose the resolution of separate cases that were pending at the time of the arbitrator's appointment and completed during the current arbitration. Like section 1281.9, standard 7 mandates disclosure of certain information if “the arbitrator is serving or has served” as a neutral or party-appointed arbitrator in a prior or pending case “involving a party to the current arbitration or a lawyer for a party.” (Std. 7(d)(4)(B)–(A).) Arbitrators must disclose the names of the parties and attorneys in each prior or pending case. (Std. 7(d)(4)(B)(i).) But they are only required to disclose the “results of each prior case arbitrated to conclusion.” (Std. 7(d)(4)(B)(ii), Although standard 7 does not define “prior cases” for disclosures related to service as an arbitrator for a party, it expressly incorporates the statutory disclosure requirements. Specifically, it states, “[t]o the extent … [standard 7] addresses matters that are also addressed by statute, it is intended to include those statutory disclosure requirements, not to eliminate, reduce, or otherwise limit them.” (Std. 7(a). The fact that—under standard 7(f)—arbitrators have a continuing duty to disclose disqualification grounds until the conclusion of the arbitration proceeding does not compel a different result.

Piplack v. In-N-Out Burgers, 88 Cal. App. 5th 1281

Plaintiffs filed a representative PAGA claim against their former employer in late 2019 Defendant did not file a motion to compel arbitration until the Supreme Court granted certiorari in Viking River Cruises, supra. The motion to compel arbitration was filed before Viking was decided and was denied. Defendant appealed. Viking was decided while the appeal was pending, but plaintiffs argued that the trial court ruling should nevertheless be affirmed because defendant waited over two years to file the motion and in the interim vigorously litigated the case.

The Court of Appeal rejected the waiver argument. Prior to 2022, a motion to compel arbitration would have been futile because of the decision in Iskanian, supra. Defendant raised its right to arbitrate as soon as it had any chance of success. The fact that it vigorously defended itself in the trial court makes no difference because the relevant question is whether there was any unreasonable delay. The omission of arbitration as an affirmative defense to plaintiffs' first amended complaint is also not a waiver of arbitration for precisely the same reason, and in any event, defendant raised arbitration as an affirmative defense to plaintiffs' second amended complaint. Nor did plaintiffs' invocation of Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022) alter the “futility” rule. In Morgan, the United States Supreme Court held waiver of a right to arbitrate under the FAA did not depend on a showing of prejudice, but rather arose from any “‘intentional relinquishment or abandonment’” of the right to arbitrate. Failing to make a futile motion to compel arbitration does not constitute an intentional relinquishment of the right to compel arbitration should the law change.With respect to the merits of the appeal, the court reversed the trial court insofar as the portion of the complaint that involved an individual claim because of Viking. Defendant also argued that the Supreme Court’s ruling that the plaintiff had no right to maintain a representative claim once the individual claim was referred to arbitration was correct. It argued that Labor Code Section 2699(a) only authorized an aggrieved employee to file an action “on behalf of himself or herself and other current or former employees”. Thus, a plaintiff who could not maintain an individual PAGA claim in court was not an aggrieved employee and could not maintain a representative PAGA action.

The Court of Appeal disagreed, citing Kim, supra. The defendant in Kim sought to apply the doctrine of claim preclusion to bar the plaintiff from pursuing a PAGA action after having dismissed his individual claims as part of a settlement. The California Supreme Court held this doctrine could not apply because the individual claims, which had been sent to arbitration, and the PAGA action were part of the “same lawsuit.” The same reasoning applied here. Even though Viking requires the trial court to bifurcate and order individual PAGA claims to arbitration when an appropriate arbitration agreement exists, the individual PAGA claims in arbitration remain part of the same lawsuit as the representative claims remaining in court. Thus, plaintiffs were pursuing a single PAGA action “on behalf of [themselves] and other current or former employees,” albeit across two fora.

Ramsey v. Comcast Cable Communications LLC, 99 Cal. App. 5th 197

In 2009, Ramsey purchased a basic subscription to Comcast’s service under a promotional price that was less than the price that Comcast normally charged to its customers, and which expired within one year. Just before the expiration date, Ramsey attempted to cancel the subscription, but then decided to maintain the subscription after Comcast’s customer representative offered a subscription price lower than the norm and again good for only one year. Thereafter, Ramsey called Comcast each year before the expiration date and, on each occasion, was able to continue his subscription at a below normal rate. Comcast never advertised that this service was available. Ramsey ultimately concluded that this was a deceptive practice and filed a class action lawsuit against Comcast, alleging violation of the Unfair Competition Law and California Legal Remedies Act, and seeking an injunction preventing Comcast from continuing to engage in this practice. Comcast’s motion to compel arbitration was denied on the ground that Ramsey was seeking a public injunction, a cause of action that was not arbitrable under McGill v. Citibank N.A., 2 Cal. 5th 945 (2017). Comcast appealed, arguing that Ramsey was not seeking a public injunction because the injunction would only apply to customers who received the promotional rate.

The Court of Appeal affirmed. The injunctive relief Ramsey sought would require Comcast to cease its “unfair or deceptive practices” and provide increased pricing transparency. Such relief would benefit not only those who subscribed to Comcast (such as Ramsey), but any member of the public considering such a subscription, by preventing Comcast from contracting or proposing to contract with any member of the public—not just current customers—on unfair terms. This is the essence of what the consumer protection statutes were designed to do. Because the relief Ramsey requested sought to enjoin future violations of California's consumer protection statutes, and was oriented to and for the benefit of the general public, it fell within McGill's definition of public injunctive relief

Rocha v. U-Haul Co. of California, 88 Cal. App. 5th 65

Plaintiffs sued U-Haul, their former employer, alleging discrimination and a violation of Labor Code Section 1102.5 (retaliation for filing a whistleblower complaint). The trial court granted U-Haul’s motion to compel arbitration. Plaintiffs then filed a motion to amend the complaint by adding a PAGA claim based on the Section 1102.5 violation. The trial court denied the motion holding that plaintiffs lacked standing because they failed to allege that they were acting on behalf of other employees. The arbitrator ruled in favor of U-Haul. Plaintiffs’ motion to vacate was denied and they appealed from that decision and the dismissal of the motion to amend the complaint.

The Court of Appeal affirmed. The Court of Appeal noted that PAGA defines an “aggrieved employee” who has standing to bring a PAGA claim as “any person who was employed by the alleged violator [of the Labor Code] and against whom one or more of the alleged violations was committed.” (§ 2699(c).) Thus, unless and until there is a finding on the merits regarding the alleged violation, allegations of a Labor Code violation by an alleged employee or former employee alone are sufficient to establish PAGA standing. Settlement of an individual Labor Code claim does not reflect any determination regarding the merits of an alleged violation. Thus, a settlement does not affect the ability of a plaintiff to later establish PAGA standing using the same allegations. By contrast, an adjudication that determines that a violation has not occurred, like the arbitrator's finding regarding UHaul's alleged violations in this case, does not merely address injury or redress, but finally determines the fact of the violation itself. Once the Labor Code violations based on which a plaintiff seeks to qualify for PAGA standing have been finally adjudicated, the extent to which that adjudication prevents a plaintiff from qualifying for standing will depend on general principles of issue preclusion. Here, the requirements for issue preclusion were all satisfied with respect to the issue of whether the plaintiffs were “aggrieved employees” based on the alleged section 1102.5 violation. The arbitrator found that U-Haul did not retaliate against plaintiffs in violation of Section1102.5. This was the same issue the plaintiffs wanted to relitigate in connection with PAGA standing. Because this issue was litigated in the arbitration and was necessary to resolution of the claims in arbitration, the plaintiffs were the parties against whom preclusion was sought, and plaintiffs were parties to the arbitration, all the requirements for issue preclusion were met and the arbitrator's finding precluded the plaintiffs from using the allegations in the proposed amended complaint that they suffered a section 1102.5 violation to establish PAGA standing.

Seifu v. Lyft, Inc., 89 Cal. App. 5th 1129

Plaintiff filed a PAGA claim against Lyft asserting that he was an employee, not an independent contractor and should have been paid accordingly. The trial court denied Lyft’s motion to compel arbitration, based on Iskanian, supra. Lyft appealed. In the interim, Viking River. supra, was decided and plaintiff conceded that his individual claim was arbitrable. Hence, the sole issue before the court was whether the plaintiff was precluded from pursuing the representative claim.

The Court of Appeal ruled that plaintiff had standing to pursue the representative claim. PAGA provides that civil penalties recoverable by the state for Labor Code violations may be recovered through a civil action brought by “an aggrieved employee on behalf of himself or herself and other current or former employees.” There are only two requirements for PAGA standing. The plaintiff must be an aggrieved employee, that is, someone “who was employed by the alleged violator” and “against whom one or more of the alleged violations was committed.’” See Kim v. Reins International California, Inc., 9 Cal. 5th 73, 83-384 (2020). This language indicates that PAGA standing is not inextricably linked to the plaintiff's own injury. Employees who are subjected to at least one unlawful practice have standing to serve as PAGA representatives even if they do not personally experience each and every alleged violation. Seifu satisfied the standing requirements under Kim to maintain his nonindividual of PAGA claims at this stage of the proceedings. Seifu's operative complaint alleged that he was employed by Lyft and that one or more of Lyft's alleged Labor Code violations was committed against him. He was therefore an “aggrieved” employee within the meaning PAGA with standing to assert PAGA claims on behalf of himself and other employees.

Lyft also contended that if Seifu's non-individual PAGA claims were not dismissed, they should be stayed pending the arbitration of the individual PAGA claims pursuant to CCP Section 1281.4. Because the trial court did not have the opportunity to rule on Lyft's stay request, because it denied Lyft's motion to compel arbitration outright. The court therefore remanded the matter for the trial court to determine in the first instance whether a stay of Seifu's non-individual PAGA claims would be appropriate under the circumstances.

Sitrick Group LLC v. Vivera Pharmaceuticals, Inc., 89 Cal. App. 5th 1059

Plaintiff Sitrick filed an arbitration demand with JAMS alleging that defendant Vivera failed to pay for a public relations campaign. It selected Judge Swart as the arbitrator. Prior to his selection, Judge Swart advised the parties in his disclosure statement that he would not inform them of cases where he was retained by a party or counsel in a future action. He also described the case as “non-consumer”. Neither party objected to the disclosure. In April 2021, after his selection, Judge Swart accepted an assignment as an arbitrator in a matter where Sitrick was the claimant and represented by the same law firm (but different counsel) as the Vivera case. In May, JAMS advised the parties of the second arbitration. Vivera moved to disqualify Judge Swart. JAMS denied the motion stating that it had notified the parties of the second arbitration as a matter of courtesy and that Judge Swart’s participation in the second arbitration was not an indication of bias. Vivera declined to participate in the arbitration. Judge Swart ruled in favor of Sitrick. Sitrick moved to confirm the award and Vivera countered with a motion to vacate because of Judge Swart’s failure to recuse himself. The motion to confirm was granted and Vivera appealed.

The Court of Appeal affirmed. Judge Swart's disclosures complied with the Ethics Standards and consequently complied with the CAA. Contrary to what Vivera contended, this was a non-consumer arbitration. Ethics Standard 2(d) defines a consumer arbitration to specifically exclude arbitration proceedings conducted under or arising out of private sector agreements. In the disclosure checklist, Vivera did not object to Judge Swart’s disclosure within the 15 days the Act specifies for such objections to be made and thus acceded to this term of Judge Swart's retention. As a result, Judge Swart was under no obligation to make any further disclosures because, as required by the Ethics Standards, he had specifically informed the parties that he was not required to do so in the initial disclosure checklist.

Soni v. Cartograph, Inc., 90 Cal. App. 5th 1

Attorney Soni filed a non-binding arbitration demand against Tierney and his company to recover unpaid attorney fees. He was awarded $2.50. Soni exercised his right to a trial de novo by filing a complaint against Tierney in Superior Court 33 days after the award was served on him, which was three days after the filing deadline. Soni prevailed at trial. In the interim, Tierney filed a motion to confirm the arbitration award. The motion was denied because of the outcome of the trial de novo. Tierney appealed and the denial of the motion to confirm was reversed because of Soni’s late filing. Soni and Tierney then filed competing motions for attorney fees incurred in the motion to confirm, each arguing that it was the prevailing party. Tierney prevailed and Soni appealed.

The Court of Appeal affirmed. The plain language of the statute states that the prevailing party for purposes of an award of attorney fees under section 6203(c), is the party obtaining a judgment confirming, correcting, or vacating the arbitration award. Tierney obtained a judgment confirming the arbitration award. There was no order vacating the arbitration award. The judgment from the trial had no effect on the issue of attorney fees because the judgment was reversed on appeal. There was only one final judgment in an action. Until a judgment becomes final because it is affirmed on appeal or the time to take an appeal has lapsed, the judgment is not admissible in evidence and cannot be relied upon to enforce the rights declared in the judgment. The reversal of the judgment placed the parties in the trial court in the same position as if the cause had never been tried, with the exception that the opinion of the court on appeal had to be followed so far as applicable. There was no order vacating the arbitration award, and the final judgment in this case confirmed the arbitration award. Therefore, Tierney was the prevailing party for purposes of section 6203(c).

State of California v. Alco Harvest, Inc., 97 Cal. App. 5th 456

Plaintiff Guzman, a Mexican national, was hired to do farmwork by Alco pursuant to the national H-2A program. To participate in the program, Alco filed required “job order” with the Department of Labor (DOL). The program required that this document contain the “material terms and conditions of employment”. After Guzman’s employment terminated, he sued defendants, alleging various violations of the Labor Code and asserting a PAGA claim. The Labor Commissioner also filed an enforcement action arising from the same conditions and the two cases were consolidated. Alco moved to compel arbitration pursuant to an arbitration agreement that Guzman signed during orientation in Mexico. The trial court denied the petition holding that the arbitration provision was a “material term and condition of employment” and was unenforceable because Alco did not include it in the job order submitted to the DOL.

Alco appealed and the Court of Appeal affirmed. Alco's arbitration agreement required
Guzman to forfeit his right to a jury trial in “any claim, dispute and/or controversy that [any] Employee may have against the Company … arising from, relating to or having any relationship or connection whatsoever with [or to the] Employee's … employment by, or other association with the Company …” The arbitration agreement also prohibited him from participating in any class action claims against Alco. We consider the relinquishing of these rights as “material terms and conditions” of his employment. The right to select a judicial forum, vis-a-vis arbitration, is a “substantial right,“‘ not lightly to be deemed waived….[Alco’s] submissions mention nothing, however, about workers signing a separate, all-encompassing arbitration agreement when they reported to orientation. The agreement is thus unlawful and unenforceable.

Tornai v. CSAA Insurance Exchange, 98 Cal. App. 5th 974

Plaintiff was injured in an automobile accident and settled with the other driver for $25,000, the limit on his insurance policy. She then demanded $275,000 from the defendant, her carrier. This amount was the difference between the limit on her policy and what she had been paid by the driver. She produced medical bills in the amount of $30,518.98. Defendant offered $2920 and she sued. Defendant moved to compel arbitration, based on an arbitration clause in the policy that complied with Insurance Code 11580.2. The trial court denied the motion, stating that defendant acted in bad faith because plaintiff “indisputably” incurred damages of at least $30,518.98. Defendant appealed, arguing, inter alia, that there was a dispute over the $30,518.98 figure because plaintiff had allegedly received Medi-Cal benefits but had refused to provide defendant with this information.

The Court of Appeal reversed. Section 11580.2(f) requires the parties to arbitrate the narrow issues of whether the insured is entitled to recover damages from the uninsured or underinsured motorist, and if so, the amount of those damages. As such, an insurer's contractual right to arbitrate the value of a UIM claim does not prevent an insured from filing a suit for bad faith. McIsaac v, Foremost Insurance Co. Grand Rapids, Michigan (2021) 64 Cal. App. 5th 418, 423. Put slightly differently, if the insured files a lawsuit for bad faith before resolving the UM/UIM claim, the UM/UIM claim is still subject to arbitration, even if the bad faith action is not subject to arbitration.

In its motion, the defendant asserted that it had disputed the amount that plaintiff claimed under the policy and therefore the dispute fell squarely within the arbitration provision of both the auto policy and the statute. In her opposition, plaintiff claimed she was “undisputedly owed” $30,451.98, the amount of medical bills and expenses which she had incurred. Plaintiff acknowledged, however, that $244,548.02 (the difference between the remaining policy limits of $275,000 and the $30,451.98) was “remaining in dispute.” In its reply, defendant refuted plaintiff's claim that she was “‘undisputedly owed’” at least $30,451.98 because of her failure to provide documentation from Medi-Cal. This indicated that the parties plainly failed to reach an agreement as to the amount of damages owed, thereby triggering the requirements of section 11580.2(f).

Vaughn v. Tesla, Inc., 87 Cal. App. 5th 208

Plaintiffs were assigned to work at Tesla’s factory by a staffing agency. After they worked at Tesla for a few months, Tesla offered them employment and they accepted. Upon being hired, they signed arbitration agreements which called for arbitration of all disputes “relating to” their employment. Subsequently, they sued Tesla, alleging racial discrimination that occurred both before and after their hiring date. Tesla moved to compel arbitration. Plaintiffs argued that the arbitration agreement did not cover the period prior to their hire. The trial court agreed and granted the motion only in part, denying Tesla the right to arbitrate events that occurred pre-hiring. Tesla appealed, arguing that “relating to” is a broad term that would cover the pre-employment period.

The Court of Appeal affirmed. The phrase “relating to” is a broad provision. However, the phrase only acquires meaning by considering what two things are being related to each other—in this instance plaintiffs' claims and their direct employment with Tesla---and is necessarily qualified by what follows. The phrase normally encompasses extracontractual claims only so long as they have their roots in the relationship between the parties which was created by the contract. The court was not persuaded that “relating to” meant the arbitration agreement applied to any past dispute between the parties, based on events occurring before commencement of the contractual employment relationship. Because plaintiffs' claims based on pre-hire conduct were not rooted in the relationship between the parties which was created by the contract—because that relationship did not yet exist—the inclusion of the language “relating to” did not justify applying the arbitration agreement to those claims.

Westmoreland v. Kindercare Education LLC, 90 Cal. App. 5th 967

Plaintiff Westmoreland filed a lawsuit against Kindercare, her former employer. after she was terminated that included a representative (and non-arbitrable) PAGA claim. The arbitration agreement that she signed contained a class action and representative action waiver and further provided that the agreement would be invalid if the waiver provision was not enforceable. The purpose of this clause was to avoid parallel proceedings. Consequently, the trial court denied the employer’s motion to compel arbitration in its entirety. The employer appealed arguing, inter alia, that the decision in Viking River, supra, and the cases decided in the Court of Appeal thereafter permitted it to arbitrate the individual PAGA claim and the other causes of action in the complaint.

The Court of Appeal affirmed. In the absence of the poison pill provision, Kindercare could have compelled arbitration of Westmoreland's non-PAGA claims on behalf of herself alone as a consequence of Viking River. The dilemma for Kindercare, however, was that the provision in the “Waiver of Class and Collective Claims” also barred Westmoreland from arbitrating any claim. The agreement's poison pill provision prevented this outcome because it provided that, in this scenario, the “agreement is invalid and any claim brought on a class, collective, or representative action basis must be filed in a court of competent jurisdiction, and such court shall be the exclusive forum for such claims. Had Kindercare simply included a waiver of representative claims in its arbitration agreement, and not included the poison pill at the end of the agreement, the result here could have been substantially similar to that in Viking River. The case also would have been similar to other recent appellate decisions following Viking River, including Piplack, and Galarsa., supra.. The arbitration agreements in those cases did not have a poison pill provision like the one in Kindercare's agreement here, and so PAGA claims could be divided: the “individual” PAGA claim sent to arbitration and the “representative” PAGA claim pursued in court.

Yeh v. Superior Court, 95 Cal. App. 5th 264

Plaintiffs sued Mercedes Benz USA (MBUSA) under the Song Beverly Act for breach of warranty. MBUSA moved to compel arbitration based on arbitration clauses in a lease agreement and a retail sales installment contract (RISC) between plaintiffs and the dealer. There was no arbitration clause in the warranty. The motion was granted on grounds of equitable estoppel. Plaintiffs filed a writ of mandate.

The writ was granted, and the Court of Appeal reversed. The Act defines an “express warranty” as “a written statement arising out of a sale to the consumer of a consumer good pursuant to which the manufacturer, distributor, or retailer undertakes to preserve or maintain the utility or performance of the consumer good or provide compensation if there is a failure in utility or performance.” (Civ. Code, § 1791.2, subd. (a)(1).) Based upon a plain reading of the language of the statute, an express warranty arises out of a sale rather than the underlying contracts.

It was undisputed that the warranties were separate from the lease agreement and RISC because the language of the express warranties, as described by the complaint, was not part of the lease agreement or RISC. Moreover, the dealer in the RISC expressly disclaimed any warranties, which provided further evidence that the warranties were independent.

Thus, MBUSA's warranties were not part of the sales contract. The court also rejected MBUSA's reliance on the portion of the arbitration provision in the RISC stating it applied to any claim “between you and us” which arises out of or related to the condition of the vehicle, the contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract). This language did not show consent by the purchaser to arbitrate claims with third party nonsignatories. Rather, it was a further delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate. They agreed to arbitrate disputes between themselves—‘“you and us—arising out of or relating to relationships, including relationships with third parties who did not sign the sale contracts resulting from the purchase, or condition of the vehicle, or the sale contract.