Tag Archives: Appeal

Press Quotes About Analysis of Compton v. Superior Court

Armendariz: Besta Berri 2009 4906

Armendariz: Besta Berri 2009 4906 (Photo credit: dantzan)

The author’s analysis of the Compton v. Superior Court, No. B236669, — Cal.Rptr.3d —-, 2013 WL 1120619 (2d Dist. Mar 19, 2013), was quoted in legal press today:

“In both cases, the First and Second districts applied Armendariz and invalidated arbitration agreements for lack of mutuality,” said Charles Jung, a Nassiri & Jung LLP attorney. “At least as far as California courts are concerned, Armendariz is alive and well, and it appears that this is going to continue to be the case until the California Supreme Court overrules it.”

In light of the latest ruling, plaintiffs and their attorneys looking to defeat mandatory arbitration agreements will keep an eagle eye out for any type of one-sidedness, according to Jung.

“The Compton ruling creates an avenue for employees to argue that mandatory agreements are unlawfully one-sided and that under Armendariz, they should be stricken,” he said. “For employers, it suggests the way to make arbitration agreements enforceable is by making them simple and even-handed. Employers can’t have their cake and eat it too.”

“The California Supreme Court really has its work cut out for it,” Jung said. “The challenge for the California Supreme Court is to try to preserve what it can of California’s public policy, yet not fall afoul of and directly contradict or simply ignore the U.S. Supreme Court. It’s a very tricky position for the court to be in.”

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Second District Reverses Class Action Judgment Relating to Bonuses Allegedly Due After Merger

Fiber Optic Candle
Image by Chris Tengi via Flickr

The Second District reversed a trial court’s judgment in favor of employees in a class action trial.  Pearline Zalewa v. Tempo Research Corporation, B210429, 2010 WL 3735240 (Cal. Ct. App. 2d Dist. Sept. 27, 2010).  Defendant  fiber-optic equipment manufacturer was sued in a class action by its former employees who claimed that the manufacturer breached an obligation to pay them annual bonuses, an obligation that allegedly continued for years after they were laid off from work during a business downturn.  Id. The court concluded that the employees were not entitled to any recovery: “All but two of the employees relinquished their right to sue when they were laid off, in return for compensation that exceeded their earned severance pay. In any event, there was no promise made to pay bonuses to the employees after they were laid off.”  Id.

The Trial Court’s Judgment

The trial court conducted a bench trial in January 2008, finding that plaintiffs were entitled to recover a direct bonus under theories of breach of contract, promissory estoppel, accounting, and unfair business practices. Id. The court deemed the bonus payments to be “wages” under the Labor Code. Id. And because the bonus payments are wages, plaintiffs were awarded prejudgment interest and attorney fees under the Labor Code. Id. The court enumerated the amount of the award for each employee, less offsets for monies already paid by defendants, plus interest. Id. The total amount of the award, including interest, was approximately $99,000, and plaintiffs’ counsel was awarded attorney fees of $881,715.  Id. Continue reading

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First District Denies Alter Ego Liability Even Where Officer Pays Self and Wife, While Failing to Pay Wages and Commissions

I'm not hungry - I'm just greedy
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The Court of Appeal for the First District held that an officer’s failure to pay wages and commissions to an employee, while paying himself and his wife during the same period, is not the type of conduct that requires piercing the corporate veil.  Wymore v. Minto, No. A125476, 2010 WL 3687511 (Cal. Ct. App. 1st Dist. Sept. 22, 2010).

Nor do we see any merit to appellants’ various arguments that it would work an injustice to allow respondent to hide behind EWM because it was his decision, as a director and officer of EWM, not to pay appellants wages and commissions in 2007, while paying himself and his wife during the same calendar year. The fact that respondent, as the president of EWM, may have intentionally failed to pay appellants is not the type of conduct that requires piercing the corporate veil. Continue reading

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Eighth Circuit Upholds 2-Year Restrictive Covenant

The U.S. Court of Appeals for the Eighth Circuit considered an appeal from a judgment following a bench trial, in Mayer Hoffman McCann, P.C. v. Barton, et al., No. 09-2061,  — F.3d —-, 2010 WL 3155177 (8th Cir. Aug. 11, 2010).  The district court granted judgment to Plaintiff Mayer Hoffman McCann, P.C. (“MHM”) , awarding MHM permanent injunctive relief and $1,369,921 in liquidated damages.  Defendant appellant appealed, contending, among other things, that enforcement of the restrictive covenants is contrary to Missouri law.  The Eighth Circuit rejected these contentions and affirmed the judgment of the district court.

Mayer Hoffman McCann, P.C. is national certified public accounting (CPA) firm. MHM sued its former employees and shareholders-Thomas L. Barton, Anthony W. Krier, James N. Stelzer, and John C. Walter (collectively, “appellants”), all CPAs licensed by the State of Minnesota-to enforce restrictive covenants contained in contractual agreements between the appellants and MHM.  Following a bench trial, the district court granted judgment to MHM, awarding MHM, inter alia, permanent injunctive relief.

As part of a stock repurchase agreement, Appellants agreed that for the “Post-Employment Restrictive Period,” a period of two years following the termination of their employment, they would not: (1) solicit, directly or indirectly, or attempt to solicit MHM’s clients or otherwise interfere with MHM’s relationship with its clients, or (2) solicit MHM’s employees. Appellants further agreed not to copy, disseminate, or use MHM’s confidential information at any time.

Appellants asserted that the restrictive covenants are unreasonable in scope and, therefore, unenforceable.  The court rejected this argument, holding that the two year restrictive covenant “has been found reasonable under the “overwhelming weight of case authority” and was “reasonable under Missouri law”.  Id. *10 (citing Missouri Alltype Fire Prot. Co. v. Mayfield, 88 S.W.3d 120, 123 (Mo. Ct. App. 2002)).

Although the restrictive covenants in this case are not restricted geographically, Missouri law recognizes that a customer restriction may substitute for an explicit geographical restriction. See Schott, 950 S.W.2d at 623-24, 627 (concluding that a two-year restriction on CPAs soliciting their former employer’s customers, or doing any accounting work for them, was enforceable, without a geographical restriction, because “the covenant does not prevent employees from practicing in any particular geographical area, it merely prohibits them from soliciting employer’s clients”); Mills v. Murray, 472 S.W.2d 6, 11-12 (Mo. Ct. App. 1971) (determining that a three-year restrictive covenant was reasonable, even absent a geographical restriction, because the former employee was only restricted from soliciting his former employer’s clients such that he could even “conduct a competing business at [his former employer’s] doorstep as soon as [he] left [his former employer’s] service”). As the Schott Court observed, where “the specificity of limitation regarding the class of person with whom contact is prohibited increases, the need for limitation expressed in territorial terms decreases.” 950 S.W.2d at 627 (quoting Seach v. Richards, Dieterle & Co., 439 N.E.2d 208, 213 (Ind. Ct. App. 1982)). Under Schott and Mills, the restrictive covenant at issue here is not unenforceable, even though it lacks a geographical restriction, because it only prohibits appellants from soliciting MHM clients-not from performing services for MHM’s clients whom the appellants did not solicit. Furthermore, even if the restrictive covenant completely barred the appellants from doing any accounting work for MHM clients, the appellants would still be free to provide accounting services to all non-MHM clients anywhere. Therefore, the scope of the restrictive covenants at issue here is reasonable under Missouri law.

Judges and Attorneys

Before Judge Raymond Gruender, Judge Bobby E. Shepherd of the Eighth Circuit Court of Appeals and Hon. John A. Jarvey, United States District Judge for the Southern District of Iowa, sitting by designation.

The trial court judge was Hon. Gary A. Fenner, United States District Judge for the Western District of Missouri.

Kay Nord Hunt, argued, Minneapolis, MN (Phillip A. Cole, Robert Kent Sellers, Michael Jat Abrams, Diane M. Odeen, Hudson, WI, on the brief), for Appellant.

John C. Aisenbrey, argued, Kansas City, MO (Patricia Konopka, Robin K. Carlson, on the brief), for Appellee.

By CHARLES H. JUNG

 

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Second District Holds that Federal Choice of Law Provision in Arbitration Agreement Requires Application of Vacatur Provisions of FAA

CALABASAS, CA - JULY 18:  The Countrywide Fina...
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In a 3-0 opinion, the Second District held that while California state courts do not apply the FAA vactur provisions, because of the choice of law provision in the arbitration agreement, the trial judge was required to utilize the vacatur provisions of the FAA in passing on the amended petition to vacate the partial arbitration awards.

In Countrywide Financial Corp. v. Bundy, — Cal.Rptr.3d —-, 2010 WL 3064481 (Cal. Ct. App. 2d Dist. August 06, 2010), Defendants, Thomas Bundy, Misty Sanchez, Kevin Prevost and David Godina, appealed from an order vacating partial arbitration awards against plaintiffs, Countrywide Financial Corporation and Full Spectrum Lending, Inc.

The underlying case involved two arbitrations that were ultimately consolidated. The Bundy-Sanchez-Prevost arbitration demand sought classwide arbitration of claims for unpaid wages including incentive compensation, waiting penalties, costs and attorney fees pursuant to Labor Code section 200 et seq., Business and Professions Code section 17200 et seq., and common law principles.  The Godina arbitration demand alleged many of the same matters in terms of plaintiffs’ operations.

The arbitrator issued partial arbitration awards in favor of defendant.  Judge Elizabeth A. White vacated the partial arbitration awards on the ground the arbitrator committed a number of legal errors.  The Second District concluded that because of the unambiguous choice of law language in the agreements to arbitrate, “we must apply the vacatur provisions applicable before a United States District Court in a case subject to the Federal Arbitration Act. (9 U.S.C. § 1 et seq.)”  Applying the vacatur provisions of the Federal Arbitration Act, the Court of Appeal reversed, finding “no grounds permitted the partial awards to be vacated.”

The Court expressed doubt regarding whether the “manifest disregard of the law standard” survives Hall Street Associates L.L.C., but it chose to evaluate the interim awards under both title 9 United States Code section 10(a)(4) and the manifest disregard of the law test.  ; the course chosen by the Supreme Court in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., supra, 559 U.S. at page —- [130 S.Ct. at page 1768].”  The Court described the manifest disregard standard as follows:

The first element is the arbitrator must know the governing rule of law and refuse to apply it or ignore it. The second element is that the law ignored by the arbitrator is well-defined, explicit, and clearly applicable to the case.

Presiding Justice Paul A. Turner wrote the opinion.  Hon. Sandy R. Kriegler and Hon. Richard M. Mosk concurred.

Defendants and appellants were represented by Caryl L. Boies, Sigrid S. McCawley and Lauren E. Fleischer of Boies, Schiller & Flexner.

Plaintiffs and Respondents were represented by Andrew M. Paley, Gregg A. Fisch and Jennifer Sloane Abramowitz of Seyfarth Shaw.

By CHARLES H. JUNG

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