Second District Issues Ruling in Duchrow v. Forrest

Late Show with David Letterman, NYC, 11/20/08 ...

Late Show with David Letterman, NYC, 11/20/08 – 1 of 7 (Photo credit: goodrob13)

The California Court of Appeal for the Second District issued its ruling today in Duchrow v. Forrest, __ Cal. App. 4th __, No. B233736 (2d Dist. Apr. 30, 2013).  The court held that the lower court abused its discretion by permitting an amendment to a complaint on the fourth day of a five-day trial, where there was no reason the amendment could not have been made sooner.  The court of appeal found prejudice in several ways:

First, it changed the damages sought from $44,082.22, as pleaded in the complaint, to $312,260 in attorney fees and $16,851.95 in costs under the Litigation Agreement, plus an additional $27,777.36 in attorney fees and $8,155.13 in accrued interest under the Administrative Agreement, for a total of $365,044.44. . . . Second, had Forrest known about the new damages theory before the discovery cutoff date, she could have used one or more discovery methods to determine if Duchrow had in fact spent 800.65 hours on the prior suit. . . . Third, Forrest could have retained an expert on attorney fee awards, and called him or her as a witness at trial to testify about whether $312,260 was a reasonable amount of attorney fees. . . . Fourth, if Forrest had known earlier about Duchrow’s new theory of liability, she would have given more thought to accepting his offer to compromise (see Code Civ. Proc., § 998) or would have seriously considered settling the case. . . . Fifth, Forrest was a transactional attorney with no litigation experience. . . . If Forrest had known before trial that Duchrow would ask the jury to award him $360,796.94, she would have retained counsel. . . . Last, if Duchrow had made a timely motion to amend, Forrest would have conducted legal research and argued that paragraph 9 was unenforceable. As noted, paragraph 9 permitted Duchrow to recover attorney fees for “all time spent” on a case if he was discharged by a client or if he withdrew from representation for good cause.

Judges & Attorneys

Presiding Justice Robert Mallano issued the opinion for the Court, with Associate Justices Frances Rothschild and Jeffrey W. Johnson concurring.

Appeal from a judgment of the Superior Court of Los Angeles County, Alan S. Rosenfield, Judge.

Ernestine Forrest, in pro per, for Defendant and Appellant.

Law Offices of David J. Duchrow and David J. Duchrow for Plaintiff and Respondent.

By CHARLES H. JUNG

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Former Navy Pilot Wins Pro Se Appeal: Triable Issue of Fact Existed re Enforceability of Saudi Arabian Forum Selection Clause

Museum of Aviation at Robins AFB.

Museum of Aviation at Robins AFB. (Photo credit: Wikipedia)

Today, the Ninth Circuit issued a per curiam opinion in Petersen v. Boeing Company, No. 11-18075, __ F.3d __ (9th Cir. Apr. 26, 2013).  Plaintiff Robin P. Petersen is a former Navy pilot recruited to work in Saudi Arabia for Boeing International Support Services.  Plaintiff alleged he was required to sign a preliminary employment agreement that did not contain a forum selection clause, but that on arrival in Saudi Arabia, he was forced to sign a second employment agreement—which he was not given time to read and which he was told he must sign or else return immediately to the United States at his own expense. The agreement contained a forum selection clause requiring any contractual disputes to be resolved in the Labor Courts of Saudi Arabia.  Petersen alleged he signed the second agreement without reading it, his passport was then confiscated, and he was effectively imprisoned in his housing compound.

Plaintiff submitted evidence that he could not afford to travel to Saudi Arabia for litigation, that he was afraid to return there because he had been kept a virtual prisoner during his employment, and that his ability to obtain a fair trial there was in question because he was a foreigner, an employee challenging a powerful employer, and a non-Muslim.  

The district court dismissed on the basis of the forum selection clause without holding an evidentiary hearing as to whether Petersen was induced to assent to the forum selection clause through fraud or overreaching.

The Ninth Circuit panel held that the evidence submitted and the allegations made by Petersen were more than sufficient to create a triable issue of fact as to whether the forum selection clause at issue is enforceable, and reversed the district court.

Judges & Attorneys

Circuit Judges Harry Pregerson, Stephen Reinhardt, and William A. Fletcher.

Appeal from the United States District Court for the District of Arizona, Chief District Judge Roslyn O. Silver, Presiding.

Robin P. Petersen, pro se, Warner Robins, Georgia, for Plaintiff-Appellant.

Geoffrey M.T. Sturr, Thomas L. Hudson, and Kathleen Brody O’Meara, Osborn Maledon, P.A., Phoenix, Arizona, for Defendants-Appellees.

By CHARLES H. JUNG

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Fourth District Issues Limitations Opinion Regarding Internal Workers’ Compensation Fraud Investigations

English: Image is similar, if not identical, t...

English: Image is similar, if not identical, to the California Department of Corrections and Rehabilitation patch. Made with Photoshop. (Photo credit: Wikipedia)

The Court of Appeal for the Fourth District today issued an opinion in California Department of Corrections and Rehabilitation v. State Personnel Board (Moya), Case No. Cite as D061653, __ Cal. App. 4th __ (4th Dist. April 26, 2013).  The court considered whether the Public Safety Officers Procedural Bill of Rights Act, Gov. Code § 3300 et seq., excepts internal workers’ compensation fraud investigations from the one-year limitations period established in section 3304, subdivision (d)(1).  The court concluded that it does and affirmed the judgment.

Judges & Attorneys

Presiding Justice Judith McConnell delivered the opinion for the court, with Associate Justices James A. McIntyre and Joan Irion concurring.

Appeal from a judgment of the Superior Court of Imperial County, Judge Donal B. Donnelly.

Michelle L. Hoy and Rudy E. Jansen for Real Party in Interest and Appellant.

Kamala D. Harris, Attorney General, Alicia M. B. Fowler, Senior Assistant Attorney General, and Chris A. Knudsen, Deputy Attorney General, for Plaintiff and Respondent California Department of Corrections and Rehabilitation.

By CHARLES H. JUNG

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Ninth Circuit Finds Both Class Counsel and Class Representative Inadequate Where Incentive Awards Conditioned on Reps’ Support for Settlement

English: Mimi & Eunice, “Incentive to Create”....

English: Mimi & Eunice, “Incentive to Create”. Categories at the source website: Arguments, IP. Transcript: Mimi: No one would create without monetary incentives. Eunice: Nonsense. People create for all kinds of reasons. Mimi: Who paid you to say that?! (Photo credit: Wikipedia)

Today, the Ninth Circuit reversed a district court’s approval of a class action settlement against credit reporting agencies under the Fair Credit Report Act.  Radcliffe, et al v. Experian Information Solutions, Inc., et al., Case No. 11-56376, __ F.3d __ (Apr. 22, 2013).  The Court cited a failure by the class representatives and class counsel to adequately represent the class, taking issue with the incentive awards to the class representatives that were conditioned on the class representatives’ support for the settlement.  The court reasoned that these conditional awards caused a divergence of interests between the representatives and the class:

These conditional incentive awards caused the interests of the class representatives to diverge from the interests of the class because the settlement agreement told class representatives that they would not receive incentive awards unless they supported the settlement.

You can read more here.

By CHARLES H. JUNG

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Second District Orders Published Serpa v. California Surety Investigations, Inc.

Old crest of the club.

Old crest of the club. (Photo credit: Wikipedia)

Today, the Second District ordered published Serpa v. California Surety Investigations, Inc., et al., No. B237363, __ Cal. App. 4th __ (filed Mar. 21, 2013, modified Apr. 19, 2013).  At the trial court level, the court denied defendants’  motion to compel arbitration, finding the agreement to arbitrate lacked mutuality.  Defendants argued that the requisite mutuality was provided by the bilateral arbitration provisions in the employee handbook, incorporated by reference into the arbitration agreement.  The trial court rejected this argument because defendant could change the handbook at its sole discretion and without notice.  The Second District reversed.

The motion to compel arbitration was based on three documents: (1) “Acknowledgment of Receipt of Arbitration and Agreement to Arbitrate”; (2) “Acknowledgment of Receipt of Employee Handbook”; and (3) a copy of the employee handbook.  Plaintiff contended the agreement to arbitrate is one-sided because it requires her to submit claims against her employer to arbitration but does not require her employer to arbitrate its claims against her: “I understand and agree that if my employment is terminated or my employment status is otherwise changed or any other dispute arises concerning my employment . . . , I will submit any such dispute exclusively to binding arbitration.”

The Court of Appeal agreed that if “that the full extent of the agreement, we would likely agree it lacked mutuality because it requires Serpa to submit to arbitration ‘any such disputes’ involving her employment without imposing a similar obligation on CSI.”

However, because the agreement incorporated the arbitration policy in the employee handbook, the Court concluded that this “salvages the agreement by establishing an unmistakable mutual obligation on the part of CSI and Serpa to arbitrate ‘any dispute’ arising out of her employment.”  Plaintiff argued that the while the arbitration policy in the handbook establishes a bilateral obligation to arbitrate, she insisted that the mutual obligation is illusory because, the employer is authorized to alter the terms of any policy contained in the handbook at its sole discretion and without notice.  The Court disagreed, reasoning that the right to alter the terms was limited by the covenant of good faith and fair dealing implied in every contract.

The implied covenant of good faith prevents one contracting party from “unfairly frustrating the other party‟s right to receive the benefits of the agreement actually made.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349; accord, American Express Bank, FSB v. Kayatta (2010) 190 Cal.App.4th 563, 570.) Thus, it has long been the rule that a provision in an agreement permitting one party to modify contract terms does not, standing alone, render a contract illusory because the party with that authority may not change the agreement in such a manner as to frustrate the purpose of the contract. (See Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 923 [“„where a contract confers on one party a discretionary power affecting the rights of the other, a duty is imposed to exercise that discretion in good faith and in accordance with fair dealing‟”]; see generally Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 16 [employer‟s right to unilaterally modify employment agreement does not make agreement illusory]; Badie v. Bank of America (1998) 67 Cal.App.4th 779, 787-788 [contracting party with unilateral right to modify contract does not have “carte blanche to make any kind of change whatsoever”; unilateral right to modify, when limited by the implied covenant of good faith and fair dealing, requires the party holding the power to affect the other party‟s rights to exercise it in a manner consistent with the reasonable contemplation of the parties at the time of the contract].) Application of the implied covenant of good faith and fair dealing is no different in the arbitration context. In 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199 (24 Hour Fitness), a former employee brought an action against the company, doing business as 24 Hour Nautilus, for sexual harassment and related torts. The employer moved to compel arbitration based on an arbitration policy in its employee handbook, which also contained a provision allowing the company to amend the handbook at its sole discretion. The 24 Hour Fitness court rejected the plaintiff‟s contention the unilateral right-to-amend provision made the arbitration agreement illusory and thus unconscionable. Observing the parties to an arbitration agreement, like any contract, are bound by the contract‟s implied covenant of good faith, the court explained, “Nautilus‟s discretionary power to modify the terms of the personnel handbook on [written] notice indisputably carries with it the duty to exercise that right fairly and in good faith. [Citation.] So construed, the modification provision does not render the contract illusory.” (Id. at p. 1214.)

Judges & Attorneys

Presiding Justice Perluss delivered the opinion for the court, with Associate Justices Woods and Jackson concurring.

Appeal from an order of the Superior Court of Los Angeles County, Judge Ruth Ann Kwan.

Paul, Plevin, Sullivan & Connaughton, Fred M. Plevin, Jeffrey P. Ames and Matthew R. Jedreski for Defendants and Appellants, California Surety Investigations, Inc., Two Jinn, Inc., Aladdin Bail Bonds and Peter Holdsworth.

Stevens, Carlberg & McMillan and Daniel P. Stevens for Plaintiff and Respondent Valerie Serpa.

By CHARLES H. JUNG

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Second District Denies Arbitration: Holds That Plaintiff’s Allegations That All Defendants are Co-Agents Is Not Judicial Admission Because Defendant Sought to Reserve Argument on Same Issue

A Shack I Own In Eloy, Arizona // U Wouldn't W...

A Shack I Own In Eloy, Arizona // U Wouldn’t Wanna Live Here! (Photo credit: 666isMONEY ☮ ♥ & ☠)

On Monday, the Second District affirmed a trial court’s denial of a motion to compel arbitration.  Barsegian v. Kessler & Kessler, et al., No. B237044, __ Cal.App.4th __ (2d Dist. Apr. 15, 2013).  Some defendants moved to compel arbitration, but the remaining defendants did not.  Slip Op. at 2.  The trial court denied on the grounds of waiver and the possibility of inconsistent rulings.

Moving defendants sought a reversal, arguing that plaintiff’s complaint alleged that all defendants are agents of one another, and that allegation is a binding judicial admission that gives the non-moving defendants the right to enforce the arbitration agreement.  They argued that the non-moving defendants were therefore not “third parties” to the arbitration agreement, within the meaning of C.C.P. section 1281.2(c), which provides that:

A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.

Id. (emphasis supplied).  The court noted that:

[N]ot every factual allegation in a complaint automatically constitutes a judicial admission.  Otherwise, a plaintiff would conclusively establish the facts of the case by merely alleging them, and there would never be any disputed facts to be tried.  Rather, a judicial admission is ordinarily a factual allegation by one party that is admitted by the opposing party. The factual allegation is removed from the issues in the litigation because the parties agree as to its truth. Thus, facts to which adverse parties stipulate are judicially admitted. (See, e.g., In re Marriage of Hahn (1990) 224 Cal.App.3d 1236, 1238-1239.) Similarly, in discovery when a party propounds requests for admission, any facts admitted by the responding party constitute judicial admissions. (See, e.g., Wilcox v. Birtwhistle (1999) 21 Cal.4th 973, 978-979; Code Civ. Proc., § 2033.410.) And when an answer admits certain factual allegations contained in a complaint or cross-complaint, those facts are likewise judicially admitted.2 (See, e.g., Valerio, supra, 103 Cal.App.4th at p. 1271.) A judicial admission is therefore conclusive both as to the admitting party and as to that party’s opponent. (4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 454, p. 587.) Thus, if a factual allegation is treated as a judicial admission, then neither party may attempt to contradict it—the admitted fact is effectively conceded by both sides.

Here, the moving defendants sought to reserve the right to argue at arbitration that the allegation of mutual agency was false, and thus it was not conceded by both sides.

Although the Kessler defendants frame their argument using the term “judicial admission” and rely on case law concerning judicial admissions, their counsel confirmed at oral argument that they do not in fact wish to treat Barsegian‟s allegation of mutual agency as a judicial admission, because the Kessler defendants do wish to be able to contest the truth of that allegation, either in court or before an arbitrator. That is, the Kessler defendants wish to hold Barsegian to the mutual agency allegation only for purposes of the motion to compel arbitration, but, should they succeed in compelling arbitration on the basis of that allegation, they wish to retain the right to prove to the arbitrator that the allegation is false. That is not how judicial admissions operate.

By CHARLES H. JUNG

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Supreme Court Endorses Dismissal of FLSA Collective Action for Lack of Subject Matter Jurisdiction After Full-Value F.R.C.P. 68 Offer

Pick Off Attempt

Pick Off Attempt (Photo credit: Rich Anderson)

In a ruling with broad implications for employers facing federal wage & hour collective actions, the U.S. Supreme Court held that an FLSA collective action was properly dismissed for lack of subject matter jurisdiction, where the lead plaintiff ignored the employer’s offer of judgment under Federal Rule of Civil Procedure 68.  Genesis Healthcare Corp., et al. v. Symczyk, No. 11-1059, 569 U.S. __ (April 16, 2013).

Plaintiff brought a collective action under the Fair Labor Standards Act (“FLSA”), and Genesis Healthcare Corp. promptly made an offer of judgment under F.R.C.P. 68.  The District Court found that the Rule 68 offer fully satisfied plaintiff’s claim and that no other individuals had joined her suit, and it dismissed the suit for lack of subject matter jurisdiction.  The Third Circuit reversed, explaining that allowing defendants to “pick off” named plaintiffs before certification with calculated Rule 68 offers would frustrate the goals of collective actions.

A 5-4 majority of the Supreme Court (led by Justice Thomas) disagreed, concluding that:

Reaching the question on which we granted certiorari,we conclude that respondent has no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness. Respondent’s suit was, therefore, appropriately dismissed for lack of subject-matter jurisdiction.

You can read more here.

By CHARLES H. JUNG

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FLSA Collective Actions Held Not to Be Inherently Inconsistent with State Law Class Actions

Stanford University Memorial Church.

Stanford University Memorial Church. (Photo credit: Wikipedia)

Today the Ninth Circuit held that FLSA collective actions and state law class actions are not inherently incompatible.  Bush v. Integrity Staffing Solutions, Inc., No. 11-16892, __ F.3d __ (9th Cir. Apr. 12, 2013).  The district court dismissed warehouse workers’ claims for unpaid wages under the Fair Labor Standards Act and Nevada state law.  The Ninth Circuit reversed the dismissal of state law claims on the basis that they would be certified using different class certification procedures than the federal wage-and-hour claims.  In agreeing with other circuits, the panel held that a FLSA collective action and a state law class action are not inherently incompatible as a matter of law even though plaintiffs must opt into a collective action under the FLSA but must opt out of a class action under Federal Rule of Civil Procedure 23.

You can read more about the ruling here.

Judges

Before: Jerome Farris, Sidney R. Thomas, and N. Randy Smith, Circuit Judges. Opinion by Judge Thomas.

The case was argued and submitted at Stanford Law School.

By CHARLES H. JUNG

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Ninth Circuit Compels Arbitration in Kilgore v. KeyBank, But Avoids Vitiating Broughton-Cruz Rule

English: Diamond Katana aircraft owned by Amer...

English: Diamond Katana aircraft owned by American School of Aviation, an FAA Part 141 flight school based in Atwater, California. (Photo credit: Wikipedia)

In a ruling that was expected to have a broad impact on mandatory employment arbitration agreements, the Ninth Circuit today compelled arbitration in Kilgore v. Keybank, National Association, but avoided a broad ruling vitiating the Broughton-Cruz rule.  Kilgore v. Keybank, National Association, No. 09-16703, __ F.3d __ (9th Cir. Apr. 11, 2013) (en banc).  The appeal involved a putative class action by former students of a failed flight-training school who seek broad injunctive relief against the bank that originated their student loans among others.  The en banc court held that the arbitration agreement was not unconscionable under California law and reversed and remanded with instructions to compel arbitration.

Arbitration Clause

The Court quoted the relevant part of the arbitration clause as follows:

IF ARBITRATION IS CHOSEN BY ANY PARTY WITH RESPECT TO A CLAIM, NEITHER YOU NOR I WILL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR HAVE A JURY TRIAL ON THAT CLAIM . . . . FURTHER, I WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION. . . . I UNDERSTAND THAT OTHER RIGHTS I WOULD HAVE IF I WENT TO COURT MAY ALSO NOT BE AVAILABLE IN ARBITRATION. . . .

Defendants sought a broad ruling that the U.S. Supreme Court’s 2011 ruling in Concepcion vitiated the Broughton-Cruz rule that makes unenforceable arbitration agreements that bar certain claims for public injunctive relief.  The Ninth Circuit did not reach this question: Continue reading

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Employers Must Pay Piece Rate Workers Separate Hourly Compensation, Even Where Employer Maintains Minimum Wage Floor

Mercedes-Benz Motor Shop

Mercedes-Benz Motor Shop (Photo credit: Visionstyler Press)

The Second District published today Gonzalez v. Downtown LA Motors, LP, et al., Case No. B235292, __ Cal. App. 4th __ (2d Dist. Mar. 6, 2013).  Gonzalez is a wage and hour class action where the question presented was whether California’s minimum wage law requires an employer that compensates its automotive service technicians on a “piece-rate” basis for repair work must also pay those technicians a separate hourly minimum wage for time spent during their work shifts waiting for vehicles to repair or performing other non-repair tasks directed by the employer.  Defendant automobile dealership contended it was not required to pay the technicians a separate hourly minimum wage for such time because it ensured that a technician’s total compensation for a pay period never fell below what the employer refers to as the “minimum wage floor” — the total number of hours the technician was at work during the pay period (including hours spent waiting for repair work or performing non-repair tasks), multiplied by the applicable minimum wage rate.  The employer supplemented pay, if necessary, to cover any shortfall.

The Court of Appeal concluded that class members were entitled to separate hourly compensation for time spent waiting for repair work or performing other non-repair tasks directed by the employer during their work shifts, as well as penalties under Labor Code section 203, subdivision (a).  You can read more about the Gonzalez opinion here.

Judges and Attorneys

Associate Justice Victoria M. Chavez wrote the opinion for the court, with Presiding Justice Roger W. Boren and Associate Justice Judith Ashmann-Gerst concurring.  Appeal was taken from a judgment of Hon. Mary H. Strobel of the Superior Court of Los Angeles County.

Dickstein Shapiro, Arthur F. Silbergeld and Jennifer A. Awrey; Greines, Martin, Stein & Richland, Robin Meadow, Cynthia E. Tobisman, and Alana H. Rotter for Defendants and Appellants.

Gartenberg Gelfand Hayton & Selden and Aaron C. Gundzik; Law Offices of Neal J. Fialkow and Neal J. Fialkow for Plaintiffs and Respondents.

Curiale Hirschfeld Kraemer LLP and Felicia R. Reid for National Automobile Dealers Association as Amicus Curiae on behalf of Defendants and Appellants.

Nossaman LLP and John T. Kennedy for California Automotive Business Coalition as Amicus Curiae on behalf of Defendants and Appellants.

Fine, Boggs & Perkins LLP, John P. Boggs and David J. Reese for California New Car Dealers Association and Alliance of Automobile Manufacturers as Amicus Curiae on behalf of Defendants and Appellants.

Altshuler Berzon LLP, Eve H. Cervantez and Eileen B. Goldsmith for California Employment Lawyers Association as Amicus Curiae on behalf of Plaintiffs and Respondents.

By CHARLES H. JUNG

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