Thursday, June 14, 2018

UCL Penalties Case Goes to a Jury

Nationwide Biweekly Admin., Inc. v. Superior Court, No. A150264 (D1d1 Jun 12, 2018)

Before yesterday, had I been asked whether there’s a right to jury trial in an case brought by a public prosecutor seeking statutory penalties under the Unfair Competition Law, off of the top of my head, I would have guessed no. I vaguely recall having read some cases that say that. Plus the UCL is, so far as California state law goes, a beast of equity. That’s probably what the Court of Appeal first thought too, when it summarily denied a writ Defendant in this case took from the superior court’s striking their jury trail demand. But the Supreme Court granted review and transferred the case back to the Court of Appeal, ordering an assessment of the merits.

And when they got into the merit of it, it turns out everyone’s assumptions were wrong. In a solid, thoughtful analysis, the Court holds that an enforcement action for penalties under the UCL is more closely equivalent to an action at law in the common law of England in 1850 than something at equity. (That’s the test for when there’s a jury trial right under the state constitution.) The Court primarily relies on a U.S. Supreme Court case, Tull v. United States, 481 U.S. 412 (1987) and an older decision of the California Supreme Court, People v. One 1941 Chevrolet Coupe, 37 Cal.2d 283 (1951) to hold that the gist of an enforcement action seeking statutory penalties is to punish, which is a legal, not equitable, practice. The Court holds however, that the jury right applies only to liability. Much like a criminal sentence, a calculation of civil penalties is classically within the discretionary power of the court.

As I recollected, there are a handful of Court of Appeal cases that seemingly go the other way. But the Court plows through them, showing that: (1) they deny a right to jury trial under the Sixth Amendment (although a civil penalties case is punitive, it is not criminal); or (2) they contain cursory or no analysis, or blindly cite to the Sixth Amendment cases, to deny the right without doing any requisite Seventh Amendment (or in California, Article I, § 16) analysis that looks to remedies and equivalents at common law. Finding no other case that has actually done the work, the Court finds these cases unconvincing.

Tthe People also suggest that they could sever off the penalties issue and have their demand for injunctive relief tried first to the court. Because that would necessarily entail a liability ruling, doing so would effectively foreclose Defendant’s jury trial right on liability in any later trial on penalties. But the Court of Appeal rejects that argument. It is true that in California procedure (unlike federal procedure) a court can try a equitable cause of action first, with the court’s fact finding in that trial being preclusive on a later jury trial. Although there’s good authority to do that on a cause-of-action-by-cause-of-action basis, nothing supports to ability to so finely parse the legal and equitable remedies that flow from a single claim.

Writ granted.

Sad Target Stays Sad, But the Lawyers Get Paid

La Mirada Ave. Neighborhood Assoc. of Hollywood v. City of L.A., No. B282137 (D2d2 May 3, 2018)

On the corner of Western and Sunset, there’s a Target that has been sitting half-completed for the better part of a decade. The project has been snaffled up in zoning litigation since basically its inception. Back in 2014, the Challengers—some neighborhood groups, or maybe just groups with names that make them sound like neighborhood groups—won a writ of mandate against the City of L.A., ruling that it had unlawfully granted Target a variance on neighborhood height restrictions. While that ruling was being appealed, the City amended its zoning laws, mooting the appeal. The appeal was dismissed but the underlying writ judgment left in place. There’s now a whole new round of litigation, which resulted in another writ against the City, which is currently on appeal.

But this appeal is about whether Challengers get their attorneys’ fees in the first case. The trial court awarded them almost $1 million under Code of Civil Procedure § 1021.5, which codifies the private attorney general doctrine. Target and the City appeal both the award and its amount.

In the published part of the opinion, the Court of Appeal affirms the trial court’s findings that the Challengers prevailed and that their victory provided a benefit on behalf of the public by vindicating the city’s zoning laws. Moreover, the fact that litigation over the Target is ongoing in other cases doesn’t change that. You don’t need to solve a problem once and for all and forever to be the prevailing party under § 1021.5. Challengers obtained a final judgment in their first writ case, based on the law that existed at the time. That’s all they need.


Wednesday, June 13, 2018

But Can You Delegate the Legality of the Delegation to the Arbitrator?

Nielsen v. Contracting v. Applied Underwriters, Inc., No. D072393M (D4d1 May 23, 2018) 

It is well-settled that an arbitration agreement can delegate questions of arbitrability to an arbitrator, but only if it specifically says so. But even if the agreement contains a delegation clause, a court still must resolve challenges to the delegation clause itself in the first instance. The Court here holds that courts’ responsibility to address delegation issue remains even when a party’s defense to delegation clause would also be a defense to the entire agreement to arbitrate. 

Here, the delegation clause was invalid because it was contained in an insurance contract whose form had not been approved by the Insurance Commissioner. And the arbitration agreement more generally was also invalid for the same reason. So the trial court didn’t err in denying a motion to compel arbitration.


Monday, June 11, 2018

Death Shall Not Quiet My Title

Cnty. Line Holdings, LLC v. McClanahan, No. B278790 (D2d6 May 2, 2018)

Debtor owns some real property in Ventura that is subject to two judgment liens. After Debtor dies, the junior lienholder executes against the property and Collector purchases it in the sheriff’s sale. But the senior lien is still out there. So Collector files a quiet title action to extinguish the senior lien. It argues that Code of Civil Procedure § 366.2(a)’s one-year statute of limitations on causes of action against dead people had run and thus that any enforcement of the senior lien was time-barred. 

But § 366.2(a) applies to “causes of action.” The right to execute on a judgment lien is a creditor’s remedy, not a cause of action. It survives so long as the judgment does. And since—for a bunch of complicated probate reasons that I don’t really care to wade into—the lien survives Debtor’s death, the property remains subject to the senior lien. 


Friday, June 8, 2018

The Fait Accompli Exception

Smythe v. Uber Techs., Inc., No. A149891 (D1d3 Jun. 8, 2018)

This is kind of interesting. You might have noticed that ridesharing drivers often have both Lyft and Uber stickers on their cars. Plaintiff here is one of those guys. He’s suing Uber in his capacity as a Lyft driver, alleging that Uber engages in unfair business practices by encouraging people to set up fake Lyft accounts and send its drivers on wild goose chases. But Plaintiff's driver contract with Uber has an arbitration clause in it, so the question is whether his obligation to arbitrate with Uber extends to claims arsing from driving for its competitor.

You dont need to be Farnsworth to get that the case isnt arbitrable under the text of the agreement. The clause is broad; it requires arbitration of disputes arising from or related to Plaintiffs driver agreement with Uber. But its not so intergalactic that it includes every possible dispute between Plaintiff and Uber, such as a dispute arising from Plaintiff's injury sustained while working for an Uber competitor.

But the arb agreement has a delegation clause. It says, contrary to the general rule, questions about arbitrability go to the arbitrator. So Uber says the court should have compelled arbitration nonetheless, and then it was up to the arbitrator to find that Plaintiffs claims in his capacity as a Lyft driver dont arise from or relate to his Uber driver contract and send him back to court accordingly. 

Of course, it seems rather wasteful to pay an arbitrator a couple of grand to entertain motion practice over what is evident from the face of the contract. That said, Uber probably thought it worth a shot, because an arbitrator addressing his or her future employment as an arbitrator has a pretty big financial incentive to find some potential ambiguity to be interpreted in favor of arbitration. Which is why Ive always believed that delegating the arbitrability question to the same arbitrator who is going to get paid to hear the merits is problematic. (Ive lost that argument, for now.)

In any event, theres apparently an exception to the delegation rule, at least in some federal cases, as well as dicta in a 2004 Court of Appeal case and a 1957 decision of the California Supreme Court. Under these cases, even if arb clause clearly and unmistakably delegates arbitrability questions to the arbitrator, courts can still decline to do so when a party’s assertion of arbitrability is wholly groundless. And since that was the case here, the superior court didnt err in denying Ubers motion to compel arbitration, even if just for the threshold question.


Court Can Intercede to Preserve Right of Newly Indigent to Access Arbitration

Weiler v. Marcus & Millchap Real Estate Inv. Servs., Inc., No G053953 (D4d3 Apr. 30, 2018)

Plaintiff is in an arbitration with her real estate investment advisor. But she claims she’s out of money and can no longer afford to pay her half of the arbitrators’ fees. Under Roldan v. Callahan & Blaine, 219 Cal. App. 4th 87 (2013), when a party’s inability to pay arbitrators risks denial of access to the justice system, she can seek relief with the court. If the moving party is truly unable to pay, the other party gets a choice. It can choose to front the indigent party’s costs. But if it does not want to do that, the arbitration is over and the parties can resolve their dispute in court. 

Here, the arbitrators wouldn’t rule on the Roldan issue, so Plaintiff filed a declaratory relief case. The superior court denied any relief on the grounds that the arbitration agreement was not unconscionable. But the Court of Appeal reverses. The question isn’t whether the agreement is unconscionable, but whether Plaintiff’s subsequent inability to front the costs is depriving her of access to a forum to resolve her dispute. She’s entitled to seek relief in the courts to resolve that question, despite the fact that the arbitration is ongoing. It falls under the court
s vestigial jurisdiction.

There are, however, disputed factual issues about whether Plaintiff really can’t afford to pay the arbitrators. So the trial court on remand needs to resolve those in order to determine if Plaintiff is entitled to Roldan relief.

Reversed and remanded.

Wednesday, June 6, 2018

Secret Brief Spoils an Arbitration

Baker Marquart v. Kantor, No. B280861 (D2d2 Apr. 25, 2108)

In an arbitration over attorneys’ fees, Client submitted an ex parte (real ex parte, not California ex parte*) brief to the panel, which accepted it. The Panel ruled for Client, relying in part on claims raised in the secret brief. Attorneys never saw the brief until Client submitted it in connection with his motion to confirm the award. The superior court confirmed the award and denied a motion to vacate. 

That was error. Although arbitration awards are not subject to appeal on the merits, Code of Civil Procedure § 1286.2(a)(1) requires a court to vacate an award that has been “procured by corruption, fraud, or other undue means.” Among the variety of “undue means,” is improper ex parte contact with the arbitrator, which is a form of extrinsic fraud that deprives a party of an opportunity to fairly present its case. The fact that the brief contained only ex parte arguments—all of Client’s evidence had been served on attorneys—didn’t make it any less so.


*For reasons that have been lost to history, practice California state courts (as well as in several of the federal district courts in California) permit a filing called an “ex parte application.” It is generally the manner in which parties can request that a court address a motion outside of the ordinary statutory briefing schedule. See Cal. R. Ct. 3.1200–3.1207; C.D. Cal. L.R. 7-19. But contrary to the name, these filings require service on all opposing parties, except under extraordinary circumstances. See Cal. R. Ct. 3.1203, 3.1206; C.D. Cal. L.R. 7-19.1.