Arb Going Back To Cali

The U.S. Court of Appeals for the Ninth Circuit recently blocked a California law that prohibited employers from requiring their workers to resolve legal disputes in private arbitration, ruling that it conflicts with federal law. A panel affirmed the district court’s grant of a preliminary injunction barring enforcement of California’s Assembly Bill (AB) 51 with respect to arbitration agreements governed by the Federal Arbitration Act (FAA). Since 2020, California was first to ban mandatory arbitration of all employment-related disputes in the wake of the #MeToo movement. New York and New Jersey similarly passed laws prohibiting mandatory arbitration of sexual harassment and discrimination claims, but California's statute was much broader. Employers were prohibited from requiring individuals to sign as a condition of employment or employment-related benefits arbitration agreements concerning disputes arising under the California Fair Employment and Housing Act or Labor Code. In affirming the district court’s grant of a preliminary injunction, a majority of the Ninth Circuit panel used U.S. Supreme Court precedent that states rules burdening the formation of arbitration agreements are an obstacle to legislative intent of and preempted by the FAA. The court also noted the U.S. Court of Appeals for the First and Fourth Circuits reached similar conclusions when confronted with state laws that attempted to prevent parties from entering arbitration agreements. The court rejected arguments from the State of California that it should sever clauses that were deemed preempted by the FAA and leave the remainder of the law intact. The court found AB 51 could not be dissected as the statute’s provisions all work together to burden the formation of arbitration agreements and there was no authority in the legislation to sever the penalty portions of the law. If the State of California does not get a rehearing en banc or pursue further appeal, the matter will return to the district court to proceed for a final determination on the legality of AB 51. See reporting here-- https://bit.ly/3ZtxpoU and https://tinyurl.com/mvvfn6um and latest decision here-- https://tinyurl.com/54u4jukp

Dash for Arbitration

DoorDash delivery workers filed thousands of individual claims at once as initial fees approach $12 million for the company. Under District Judge William Alsup’s order this week in Abernathy v. DoorDash pending in the Northern District of California, DoorDash must arbitrate over 5,000 individual disputes with various workers who claim that they were misclassified as independent contractors, when they should be treated as employees. It also must pay a $1,900 fee for each of these individual arbitration proceedings. As with other gig economy platforms, DoorDash includes an arbitration agreement in its contracts with couriers, who deliver food orders. But after facing a flood of claims, DoorDash balked at the costs of going into arbitration administered by the American Arbitration Association (AAA) where couriers themselves paid more than $1.2 million in filing fees. After Uber imposed arbitration and a class action ban, more than 60,000 of those drivers sought to arbitrate claims against the company. Faced with legal costs of at least $600 million, Uber settled the a majority of these claims last spring. Could the same happen in this case? Another California federal judge similarly compelled arbitration in a case with thousands of claims against Postmates, asking the attorneys to explain how the company’s refusal to pay arbitration fees didn’t amount to contempt. A ruling is pending on that issue. DoorDash had asked to suspend the court proceedings until the approval of a settlement could be reached in a separate class-action case, given the potential for overlap. The company reportedly stands ready and willing to defend legitimate arbitration demands, but maintains it should only be responsible for arbitrating legitimate claims. See more here-- https://bit.ly/39uUehT and https://bit.ly/38qRDWa and https://bit.ly/2OSRQcW

Judge Blocks CA Arb Ban

Today, there's a hearing on a Temporary Restraining Order (TRO) against the State of California where a federal district judge is blocking implementation of the state’s new ban on arbitration of cases involving sexual harassment. The court will hear a request by the California Chamber of Commerce and other business groups for a preliminary injunction. This is a big test that will have national impact. The ban was signed into law in October 2019. It prohibits California employers from requiring employees to waive any right to or opt out of any legal forum or procedure established by the California Fair Employment or Labor Code. The new law applies to contracts for employment entered into, modified or extended on or after January 1, 2020-- the effective date of the new law. If an employer violates the act by forcing arbitration, they would commit a misdemeanor. The National Retail Federation filed suit in federal court seeking to prevent the law from going into effect by arguing the Federal Arbitration Act (FAA) and recent U.S. Supreme Court cases created a federal policy of using arbitration as a legitimate alternative to court litigation. Further, the FAA preempts state law to the contrary. A final ruling regarding primacy of the FAA over state law will serve as a bellwether on employer use of arbitration and may thwart other states from passing similar laws. See more here-- https://bit.ly/2R1oWrz and https://bit.ly/2RafHWa UPDATE: Following oral argument during which recent SCOTUS cases involving the FAA such as Epic Systems and Kindred Nursing were cited, the court requested supplemental briefing regarding the state's suggestion that the court lacks jurisdiction. The TRO will remain in effect until January 31, 2020.

California's Arbitration Ban

This month, a California bill prohibiting workplace arbitration was signed into law. Effective January 1, 2020, the new law criminalizes the use of mandatory arbitration agreements by making such a practice a misdemeanor offense. It prevents allegations of discrimination, harassment, and retaliation arising under that state’s Fair Employment and Housing Act from being subject to mandatory arbitration. This action sets up a direct conflict with the Federal Arbitration Act (FAA) and clear federal policy favoring arbitration. Challenges to constitutionality of this and other states' laws of this nature are coming. In recent terms, the U.S. Supreme Court reminded states of the predominance of federal policy regarding arbitration, striking down efforts to undermine the use of arbitration. States will likely argue that an arbitration agreement covering such claims is effectively a contract that is void as a matter of public policy. It will be argued such provisions fall within the FAA’s savings language, which preserves traditional state law defenses to arbitration agreements arising out of contract formation. At least one attorney commentator recognizes the problem with this argument-- that the underlying state policy established by the statute appears to directly conflict with the FAA’s underlying purposes, making the policy itself unconstitutional. As such, an unconstitutional policy should not void a contract whose terms are consistent with federal policy regarding dispute resolution. See more here-- https://tinyurl.com/y5yld9x4 and https://tinyurl.com/y37n4pxn

Mediation Law Changes Coming to Cali

Interestingly, a new California law that will take effect next year requires mediation participants to essentially sign an informed consent. Revised Evidence Code section 1129 will require a lawyer to make sure their client understands the implications of California's legal protections for mediation communications, before the client agrees to mediate. If the client has already agreed to mediation before seeking counsel, say by signing a contract with a mediation clause, consultation will be still required as soon as possible after engaging counsel. A Mediation Disclosure Notification and Acknowledgment is to be signed essentially outlining that communications, negotiations, or settlement offers in the course of a mediation must remain confidential. The ADR Section of The Florida Bar was recently considering the outstanding issue (currently in the hands of the ADR Rules & Policy Committee of The Supreme Court of Florida) of mediators possibly being required to be certified to mediate court connected cases in Florida. In that discussion, those advocating against are confusing self-determination in choosing a mediator with self-determination of the actual outcome of a settlement. During this debate, we wondered aloud whether such conversations regarding the process take place often enough with counsel in the detail required here, or whether the elements of an opening found in our certified mediator rules suffice. The new law smartly includes language that mediator’s report, opinion, recommendation, or finding about what occurred in a mediation may not be submitted to or considered by a court or another adjudicative body. This would alleviate a problem, though infrequent, of subpoenaing mediators to court in enforcement actions which certainly compromises our neutrality and mostly results in our being excused from such proceedings. See full article from Mediate.com here-- https://bit.ly/2QYWh5v and amended statutory language here-- https://bit.ly/2p4ozPq