Habla Espanol? Another Wrinkle in Arbitration Agreements

On April 21, 2014, the appellate court issued their opinion in Carmona v. Lincoln Millenium Car Cash (4/21/14), 2014 S.O.S. 2369. The plaintiffs were former employees who filed a Class Action for wage and hour violations. All employees had signed an employment agreement containing a binding arbitration agreement, and a confidentiality clause. The arbitration clause and confidentiality clause were translated into Spanish, but other portions of the contract were in English, as were other documents the employees were required to sign including a confidentiality agreement.
Upon filing the lawsuit, Defendants filed a Motion to Compel Arbitration. In opposition, two of the named plaintiffs submitted declarations stating that they could not read or write English, read very little Spanish, and did not understand the contracts that they were signing, but thought it was only a required employment application that they could not negotiate. They further declared that they did not understand what arbitration meant or that they were waiving their rights to appear in court.
The trial court denied the motion, finding the agreement was procedurally unconscionable because it was presented to employees as a “take it or leave it” application, the employer did not provide copies of the rules of arbitration, and gave insufficient time to review the agreement. Finally, the court ruled that because only portions of the agreement were in Spanish, and key provisions were never translated the agreement was unenforceable. The appellate court affirmed the ruling, noting that what produced the “high degree” of unconscionability in this case was the fact that key provisions in the agreement, including the clause regarding the enforceability, and confidentiality sub-agreement were not translated into Spanish. The court explained that because some portions were translated it was clear that Defendants knew the plaintiffs could not read or write English, but chose not to translate the entire agreement.
While courts have previously found both procedural and substantive unconscionability for many of the issued raised in this opinion, it is notable because the court specifically addressed the failure to translate portions of the hiring documents into Spanish as a ground for refusing to consider enforcing the arbitration agreement. Employers who hire non-English speaking employees should consider updating their employment applications, as well as any other agreements that they have employees sign translated into the employee’s native language.

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The Importance of Offers to Compromise under CCP 998

One of the many tools in a Defendant’s arsenal for civil litigation is a statutory Offer to Compromise under California Code of Civil Procedure §998. A simple way to understand this offer is that it is essentially a settlement offer with strings – or risks – attached. Under California Law, if a plaintiff rejects the offer, and then fails to obtain a judgment that is more favorable at trial, then mandatory penalties apply which provide that the plaintiff is not entitled to recover their post-offer costs and must pay the defendant’s post-offer costs. Further, under the case of Regency Outdoor Advertising, Inc., v. City of Los Angeles, (1996) 39 Cal.4th 507, 533, the plaintiff may also be ordered to pay a sum to cover Defendant’s reasonably necessary expert fees incurred, as well as any other fees incurred “in preparation for trial”. Importantly, “costs” in some types of cases may include the attorneys fees to which a party is entitled by statute or contract (CCP §1033.5(a)(10), Heritage Engineering Const. v City of Industry (1998) 65 Cal.App.4th 1435).

As the court in Bank of San Pedro v. Superior Court (1993) 3 Cal.4th 797, 804 explained, “The policy is plain. It is to encourage a settlement by providing a strong financial disincentive to a party – whether it be a Plaintiff or a Defendant – who fails to achieve a better result than that party could have achieved by accepting his or her opponent’s settlement offer”. Thus, in many cases, including those in which the claims include the provision of attorneys fees, it is advantageous to place your settlement offer into a CCP §998 Offer at the earliest opportunity to limit the plaintiff’s potential recovery of costs, fees and expenses within the case.

Perhaps the best known example of an effective 998 Offer was the case of Scott Co. v. Blount, Inc., (1999) 20 Cal.4th 1103. In that construction case, the plaintiff alleged potential damages of over two million dollars. Prior to trial, Defendant made an CCP 998 Offer of $900,000. Plaintiff rejected the offer and the case went to trial. Although Plaintiff won the case at trial, they were only awarded appox. $440,000 in damages. Including Plaintiff’s pre-offer attorneys fees and costs, the total award was approx $670,000. However, since that total award was less than the $900,000 offer to compromise, the Defendant recovered it’s attorneys fees, costs and expert fees incurred after it made the offer totaling over $880,000. Thus, even though plaintiff was the winner at trial, they ended up being required to pay Defendant approx $212,000 in damages. There, plaintiff may have won the battle, but certainly lost the war.

A recent appellate case (unpublished) – Dwight Smith v Rouhollah Esmailzadeh (3/19/14), Case B239828 (2nd Dist.) further demonstrates the effective use of a CCP §998 Offer. In that case, the Defendants made an offer of compromise for $350,000, and other corrective actions. Following trial the court issued judgment denying the tort claims, but awarding an equitable damage regarding an easement in favor of plaintiff. Thereafter both sides claimed that they were the prevailing party, however the court found it was a “mixed” result, and under the terms of the CCP §998 Offer awarded Defendants $478,022 in attorneys fees. The appellate court affirmed the decision and award to attorneys fees to the Defendant, noting that even a defendant who ultimately loses at trial is treated as the prevailing party under CCP §998, and that Defendant was entitled to recover it’s costs and attorneys fees of litigation after the offer expired.

It is clear from these cases that employing a Statutory Offer to Compromise is a tactic that should be discussed early in Defense of cases. In attempting to settle a case, Plaintiffs and their counsel will certainly be concerned as to whether they can “beat” the offer at trial, and whether they are prepared to face the risks if they don’t.

Emilio Law Group, APC are Business and Employment Lawyers, emphasizing their practice on Small Businesses and the issues they face. We have successfully used CCP 998 Offers to resolve cases on behalf of our clients. If you are currently engaged in a legal dispute and would like a consultation on your matter, please feel free to call us for a no-cost consultation. If you think a CCP §998 Offer may be appropriate in your case, please feel free to contact us.

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In October, 2012, a lawsuit was filed against a private escrow company, a national bank and the Plaintiff’s former attorney alleging fraud, theft and breach of contract related to the misappropriation of the proceeds from a real estate transaction by the Plaintiff’s former attorney. While all parties agreed that the Plaintiff’s former attorney had improperly cashed the escrow check, the Plaintiff attempted to hold both the bank and the private escrow company liable. The escrow company hired the Emilio Law Group to represent their interests in court.

Upon taking the deposition of the Plaintiff, we realized that Plaintiff’s theory was not sustainable against our client, the private escrow company. Plaintiff admitted that he executed escrow instructions that required the escrow company to send the final escrow check to Plaintiff’s former attorney. Further, while the check was made payable only to the Plaintiff, the check was mailed “c/o Attorney.” Plaintiff readily admitted that the escrow company followed Plaintiff’s escrow instructions, but because the former attorney had stolen Plaintiff’s money and run off to Mexico, the private escrow company should be held liable for the actions that occurred subsequent to the closing of escrow.

We successfully wrote and argued a Motion for Summary Judgment, pointing out to the Court that Defendant strictly followed the written escrow instructions, including sending the proceeds of the escrow to the Plaintiff’s desired location. Upon the mailing of the check, Defendant’s duties ended. The Court agreed, resulting in the dismissal of The Emilio Law Group’s client without the need for a costly trial. A motion for attorney’s fees to reimburse our client for the expense of this frivolous lawsuit is pending.

“This testimonial or endorsement does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.”

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Employers Beware | by Laurie M. Cortez, Esq.

-Employers Beware : Sexually “Risqué” Jokes, Images, and Gift-Giving to a same-gender subordinate may be sufficient to support a Sexual Harassment Claim-

Supervisors, Managers, and Employers will need to watch their conduct and comments to subordinates even more closely following the appellate court’s recent ruling. In Lewis v. City of Benicia (March 26, 2014, No. A134078) ___ Cal.App.4th __, (2014 S.O.S. 1571), the court reversed the granting of a summary judgment motion finding that sexual harassment can occur between members of the same gender even if they are not motivated by sexual desire and that plaintiff could prevail by demonstrating that the harassment amounted to discrimination “because of sex”.

Plaintiff, a heterosexual male, filed suit contending that two of his male supervisors had sexually harassed him, and his employer had retaliated against him for complaining. The appellate court found that some of the alleged harasser’s comments had sexual “connotations”, including “risqué jokes” about sexual acts with his wife, displaying images of sexual humor to the plaintiff on a work computer, and most importantly, the frequent giving of gifts and lunches to the Plaintiff as an intern could constitute unwelcome advances, and an inference that the supervisor was motivated by “sexual interest”. The court concluded that a jury might reasonably believe that such acts constituted harassment based upon sex or gender, and that summary judgment should not have been granted. Because a potential cause of action existed against one supervisor, the court also reversed Judgment against the city, allowing plaintiff’s claims to continue forward.

The court noted that California appellate courts have disagreed as to the standards and evidentiary showing needed to support an inference that same-gender harassment constituted discrimination the basis of sex, citing to Kelley v. The Conco Companies (2011) 196 Cal.App.4th 191, 202-203 in which the court had held that an alleged harasser’s sexual comments were not actionable unless plaintiff presented evidence of a genuine “sexual interest” versus the court’s rulings in Singleton v. U.S. Gypsum Co. (2006) 140 Cal.App.4th 1547, 1557; and Mogilefsky v. Superior Court (1993) 20 Cal.App.4th 1409, 1416-1418, which did not require a showing of sexual interest.
However, applying a fact-specific inquiry of this case, the court explained that some of the alleged conduct directed at plaintiff could be viewed as acts of ‘sexual interest’. It is important to note that the court differentiated and concluded that another alleged harasser’s conduct of sexually explicit jokes and showing of obscene internet videos to the entire office, and the massaging of a female employee’s shoulders, and touching of her hair and arms in the presence of other employees did not constitute sexual harassment because it was not directed toward plaintiff.

This case serves as a warning for employers and supervisors regarding the existence of potential claims based upon an employee’s beliefs of sexual harassment, and of the need to carefully evaluate their harassment policy to include prohibitions against inappropriate actions and behaviors toward subordinates, even those of the same gender. Further, if an employee complains of sexual harassment, a swift investigation and prompt action is needed to protect the employer.

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The California Court of Appeal offers new Guidance on Arbitration Agreements and Discovery

On March 4, 2014, the California Court of Appeal issued a published ruling in Sanchez v. CarMax Superstores California, LLC, (2014 S.O.S. B244772, 2nd Dist. Div. One) which offers businesses additional ammunition against employee litigants wishing to avoid their arbitration agreement.  In that wrongful termination case, the appellate court found that the business’ employment arbitration agreement which had been contained within the Plaintiff’s employment application was enforceable. 

The plaintiff had sought to invalidate the agreement in a Motion to Compel Arbitration by arguing that it was both procedurally and substantively unconscionable.  The plaintiff claimed that the agreement was offered on a “take-it-or-leave-it” basis and the signing of the contract was a precondition of his employment.  However, the court recognized that the requirement that a prospective or current employee sign an arbitration agreement does not make it unenforceable unless other factors are present. 

The court focused on the fact that the agreement limited both parties rights to discovery (limits of 20 interrogatories, and three depositions per side), but gave the arbitrator discretion to increase discovery if it was needed.  Relying on a series of cases beginning with Armendariz, the court agreed that the California Courts do not require “unfettered discovery” within an arbitration setting and the parties may agree to less than a full array of discovery that would be available in a civil action.  The court explained that limitations on discovery is an effective method to streamline the arbitration procedure.  Importantly, the court differentiated the agreement from that within Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, which the court had found to be unconscionable, because the CarMax agreement was considerably more liberal, and the standard for additional discovery was lower.  Further, the court explained that the plaintiff had not demonstrated to the court that he could not maintain his claim without more discovery than what was provided by the agreement. 

We continue to see the role of Arbitration agreements in Employment settings increase, and courts have demonstrated more willingness to allow litigants to resolve their disputes through Arbitration rather than the judicial forum by granting a Motion to Compel Arbitration.  Businesses are advised to review their own employment applications and arbitration agreements to ensure that they are complying with the rapidly changing laws and court opinions to avoid and help prevent lawsuits from being tried in the courts. 

Emilio Law Group, A P.C. offers businesses a free Employment Application and Arbitration Agreement sample, and recommends that businesses integrate arbitration agreements into their employee and business contracts.  If you would like a review of your business’ procedures, please give us a call. 

Emilio Law Group - Corporate Defense, Employment Litigation

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