Michael Wolgin

Ninth Circuit Affirms Order Compelling Class Arbitration in Employment Dispute Involving Two Employment Agreements With Varying Arbitration Provisions

May 1, 2019 by Michael Wolgin

Oracle America Inc. appealed the trial court’s order compelling class arbitration in an employment dispute in which there were two agreements at issue, one with, and one without, a class action waiver. The Ninth Circuit rejected Oracle’s arguments that the trial court should have selected the former agreement (with the class waiver) over the latter (without the class waiver). First, the court rejected Oracle’s argument that the trial court, as opposed to the arbitrator, should have decided whether there was an enforceable agreement to arbitrate. Here, the Ninth Circuit held, both contracts clearly delegated the issue of arbitrability to the arbitrator. Next, the Ninth Circuit was not persuaded by Oracle’s argument that the trial court should have decided which of the two agreements the arbitrator should enforce, ruling that there was no dispute that the agreement on which the arbitrator relied (the one lacking a class action waiver) was properly entered into by the parties. Finally, the Ninth Circuit rejected Oracle’s argument that the trial court should have considered Oracle’s argument that the second agreement was a novation of the first agreement. The issue of novation was not a defense to the agreement’s validity that should have been decided by the trial court; it was an issue that was to be decided by the arbitrator.

Johnson v. Oracle America, Inc., No. 17-17489 (9th Cir. Mar. 21, 2019).

California Appellate Court Holds U.S. Supreme Court’s Epic Systems Ruling Does Not Authorize Waiver of Class Relief or Arbitration of PAGA Claims Absent Consent From California

April 10, 2019 by Michael Wolgin

Former employees sued their former employer, alleging wage and hour violations and seeking civil penalties under the California Private Attorneys General Act of 2004 (PAGA). In response, the employer petitioned for arbitration under the parties’ arbitration agreement. The agreement provided that arbitration shall be the exclusive forum for any dispute and prohibited employees from bringing a “representative action.”

The trial court granted the arbitration petition on all causes of action except for the PAGA claim, relying on the California Supreme Court decision in Iskanian v. CLS Transportation Los Angeles LLC, which held that agreements that waived the right to bring PAGA representative actions in any forum were unenforceable. The trial court stayed the PAGA claim pending the conclusion of the arbitration.

On appeal, the employer argued that the court erred because Iskanian is inconsistent with a recent Epic Systems decision by the U.S. Supreme Court. The appellate court rejected this argument, finding that Epic Systems did not address the scenario in Iskanian, which involved a claim under PAGA brought on behalf of the government, and the enforceability of an agreement barring a PAGA representative action in any forum. The court concluded that the trial court properly ruled that the waiver of representative claims in any forum is unenforceable. The appellate court agreed with other California court rulings that held that Iskanian’s view of a PAGA representative action — that a PAGA litigant is an agent of the state — means that this claim cannot be compelled to arbitration based on an employee’s arbitration agreement absent some evidence that the state consented to the waiver of the right to bring the PAGA claim in court. There was no such evidence in this case.

The employer also argued that the parties’ arbitration agreement should be interpreted to mean that if the representative-action waiver is unenforceable, the PAGA claim for statutory penalties remains subject to arbitration. The court rejected this argument on the basis that several California courts of appeal have held that a PAGA arbitration requirement is unenforceable based on Iskanian’s view that the state is the real party in interest in a PAGA claim for penalties.

The court also distinguished federal courts that have reached a different conclusion regarding the arbitrability of a PAGA representative claim, finding that these decisions were unpersuasive because the courts did not fully consider the implications of the qui tam nature of a PAGA claim on the enforceability of an employer-employee arbitration agreement.

Correia v. NB Baker Elec., Inc., No. D073798 (Cal. Ct. App. Feb. 25, 2019).

Trial Deadlines Continued in Collection Action Filed by Reinsurer Related to Fraudulent Transfer Scheme

March 22, 2019 by Michael Wolgin

We have been tracking Odyssey Reinsurance’s action to collect a $3.2 million judgment against Richard and Diane Nagby, the owners of two companies involved in an alleged fraudulent transfer scheme. See https://reinsurancefocus.com/tax-counsel-ordered-to-produce-documents-related-to-odyssey-reinsurances-continuing-quest-to-collect-3-2-million-default-judgment-against-richard-and-diane-nagby/ and https://reinsurancefocus.com/post-judgment-collection-efforts-of-reinsurer-continue-in-california-federal-court/. On January 16, 2019, the court denied Diane Nagby’s motion for the court to reconsider its order continuing the pretrial hearing to May 30, 2019. Trial is currently set for July.

Odyssey Reinsurance Co. v. Nagby, No. 3:16-cv-03038 (S.D. Cal. Jan. 16, 2019).

Ninth Circuit Finds That Party was a Third-Party Beneficiary of Arbitration Agreement, and Affirms Order Compelling Arbitration of Putative Class Action

December 27, 2018 by Michael Wolgin

Three delivery drivers sued a transportation broker for failure to pay overtime and minimum wages, failure to provide rest and meal breaks, failure to timely pay wages upon termination, and willful refusal to pay wages on behalf of a proposed class of current and former drivers. The transportation broker moved to dismiss or stay the proceedings and compel arbitration, asserting that the plaintiffs were required to submit their claims to arbitration because the broker was a third-party beneficiary to arbitration agreements between the delivery drivers and a third party administrator. The district court granted the motion, concluding that the broker was a third-party beneficiary, that the claims were arbitrable, and that arbitration was the proper forum. The individual plaintiffs appealed, but the Ninth Circuit affirmed, holding that, under the applicable state law, the agreements containing the arbitration provisions intended to create a third-party beneficiary contract for the benefit of the broker. The drivers’ “work under the agreement–delivering parcels–was an integral part of [the broker’s] business, and the agreements obligated [the drivers] to indemnify logistics company customers, grant customers the right to subrogate claims and notify customers within four hours of any accidents.” The Ninth Circuit rejected the drivers’ argument that the agreements contained substantively unconscionable provisions, since they were not raised below. Ege v. Express Messenger Systems Inc., Case No. 17-35123 (9th Cir. Dec. 7, 2018).

This post written by Michael Wolgin.

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Shingled Out: Eleventh Circuit Binds Homeowners to Individual Arbitration Provisions Displayed on Roofing Shingle Packaging

December 6, 2018 by Michael Wolgin

This case involved a twist on the classic “shrinkwrap” agreement. Here, plaintiff homeowners brought a putative class action seeking damages and declaratory relief on behalf of a class of building owners who had used Tamko shingles. In response, Tamko filed a motion to compel arbitration, contending that by unwrapping and retaining its shingles, the homeowners had accepted the terms of its purchase agreement and warranty which were both printed—in full—on the outside wrapper of every shingle package. Specifically, each package wrapper displayed the all-capped word “IMPORTANT” and warned the purchaser in all caps to “READ CAREFULLY BEFORE OPENING [THE] BUNDLE.” The warranty also contained a mandatory arbitration clause, which was similarly printed in capital letters on the outside of every shingle wrapper and specified that any action against Tamko must be arbitrated individually rather than as part of a consolidated or class action. The district court granted Tamko’s motion and dismissed the homeowners’ complaint, reasoning that the homeowners were bound to arbitrate because through their roofers, they had accepted the terms of Tamko’s purchase agreement, including its mandatory-arbitration provision.

On appeal, the Eleventh Circuit affirmed, finding that (1) Tamko’s packaging sufficed to convey a valid offer of contract terms; (2) unwrapping and retaining the shingles was an objectively reasonable means of accepting that offer; and (3) the homeowners’ grant of express authority to their roofers to buy and install shingles necessarily included the act of accepting purchase terms on the homeowners’ behalf. In so finding, the appellate panel reasoned that “[a]s in the shrinkwrap cases, Tamko’s packaging provided conspicuous notice of its offer—something a reasonable, objective person would understand as an invitation to contract.” The panel further stated that, as master of its offer, Tamko was “free to invite acceptance by specified conduct” and rejected the plaintiffs’ arguments that they never saw the shingle packaging and thus never had a reasonable opportunity to consider Tamko’s purchase terms. Instead, the panel found that “acceptance of Tamko’s purchase terms—arbitration clause and all—was incidental to, and reasonably necessary to accomplish, the homeowners’ express grant of agency authority to their roofers to purchase and install shingles” and therefore, notice of the terms printed on the shingle wrappers was properly imputed to the homeowners. Dye v. Tamko Bldg. Prods., Inc., Case No. 17-14052 (11th Cir. Nov. 2, 2018).

This post written by Gail Jankowski.

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