We regularly compile a few recent rulings that may be of interest to our clients and friends.  Feel free to contact any of the firm's litigation attorneys should you have questions about these cases.


[1. Civil Procedure]

ARBITRATOR'S FAILURE TO DISCLOSE THAT HE WORKED FOR SAME ADR FIRM PROVIDED GROUNDS TO VACATE ARBITRATION AWARD

While continuing to represent the respondent in arbitration proceedings before ADR Services Inc. (ADR), the respondent's attorney also joined ADR as an arbitrator, a fact the arbitrator failed to disclose.  The arbitrator issued an award for the respondent, which the petitioner then sought vacate based on the nondisclosure.  The Court of Appeal reversed the trial court's denial of the petition to vacate.  The court held that the California Arbitration Act and the California Ethics Standards for Neutral Arbitrators in Contractual Arbitrations require an arbitrator to disclose any grounds for disqualification, which include the status of a party's attorney as a member of the arbitrator's dispute resolution firm.  The court further held that California Code of Civil Procedure section 1286.2(a)(6) requires a court to vacate an award if the arbitrator fails to comply with disclosure requirements.  According to the court, disclosure requirements are mandatory and nonwaiveable under the plain language of the statute and the Ethics Standards.  Therefore, it did not matter whether there in fact existed a significant relationship between the arbitrator and the respondent's attorney, or whether the petitioner knew or should have known of the attorney's membership in ADR.

Gray v. Chiu (2013) 212 Cal. App. 4th 1355.


[2. Real Property]

COURT COULD NOT DENY ARBITRATION FOR EFFICIENCY'S SAKE TO PREVENT PARALLEL LITIGATION/ARBITRATION PROCEEDINGS, WHERE THERE WAS INSUFFICIENT RISK OF CONFLICTING RULINGS

There is a strong policy under California law favoring arbitration.  Consistent with that policy, a court must enforce a written arbitration agreement unless it finds one of the limited number of exceptions set forth in California Code of Civil Procedure Section 1281.2, which include the existence of pending litigation with a third party that creates the possibility of conflicting rulings on common factual or legal issues.  The trial court found that exception to apply in a case involving The Colton Real Estate Group (Colton), a group of related companies that bought and managed commercial real property, which generally used separate funds to solicit investors and take title to each portfolio of properties it managed.  Hundreds of investors sued Colton, alleging a wide variety of fraudulent conduct in connection with multiple different funds.  Some of the funds' governing documents had arbitration provisions and some did not.  Reasoning that having parallel arbitration and court proceedings would be inefficient and could lead to conflicting rulings, the trial court denied all of Colton's motions to compel arbitration.  The Court of Appeal reversed, holding that the primary purpose of Section 1281.2(c) is to avoid conflicting rulings, not to further judicial economy, and that the specific facts of the case did not indicate a sufficient likelihood of conflicting rulings.

Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal. App. 4th 949.


[3. Contracts]

LOW LEVEL OF PROCEDURAL UNCONSCIONABILITY IS INSUFFICIENT FOR COURT TO REFUSE TO ENFORCE ARBITRATION AGREEMENT 

Once a party seeking to compel arbitration has proved that an arbitration agreement exists, the opposing party bears the burden of proving one of the defenses to enforceabilty, which include unconscionability of the agreement.  One relying on that defense must prove both procedural unconscionability (which focuses on oppression and surprise due to unequal bargaining power) and substantive unconscionability (which focuses on overly harsh or one-sided results).  Under that standard, where a used car purchaser's principal argument for unconscionability was that the sales documents were presented to him on a take-it-or-leave-it basis and he was not given an opportunity to negotiate any of the terms, the Court of Appeal held that it was error for the trial court to deny the petition to compel arbitration.  The court reasoned that any procedural unconscionability arising from the use of a pre-printed contract was minimal where the arbitration clause was conspicuous and the lengthy form of contract was commonly used by auto dealers to comply with various statutes.  Likewise, substantive unconscionability, if any, was also minimal.  Requiring the consumer to pay his own arbitration costs did not violate any statute and was not unconscionable absent evidence that the arbitration would be prohibitively expensive.

Vasquez v. Greene Motors, Inc. (2013) 214 Cal. App. 4th 1172.


[4. Real Property]

ATTORNEYS' FEES PROVISION IN HOA STATUTE COVERS PRE-LITIGATION ALTERNATIVE DISPUTE RESOLUTION

A dispute arose between homeowners and their homeowners' association when the homeowners built a cabana and fireplace in their backyard without obtaining the association's prior approval.  Before proceeding to litigate the dispute, the parties unsuccessfully attempted to settle it through the alternative dispute resolution (ADR) process of mediation.  After the homeowners prevailed in litigation, they obtained from the trial court a judgment for their attorneys' fees, including fees incurred in connection with the pre-litigation mediation.  The Court of Appeal affirmed, relying on provisions of the Davis-Sterling Common Interest Development Act (the Act) providing for attorneys' fees to the prevailing party in disputes between an association and a member of a common interest development.  The court held the Act's attorneys' fees provisions are mandatory, as is the requirement under the Act that, before an association or a member may file an enforcement action, the parties must first submit the dispute to ADR.  Since the pre-litigation ADR requirement is mandatory, the court reasoned, there is no basis to exclude mediation fees incurred from the Act's attorneys' fees provisions.

Grossman v. Park Fort Washington Assn. (2012) 212 Cal. App. 4th 1128


[5. Real Property]

ACT GOVERNING HOA REQUIRES STRICT COMPLIANCE WITH PRE-LIEN, PRE-FORECLOSURE NOTICE REQUIREMENTS

After a townhouse owner failed to pay a special assessment, the homeowners association recorded an assessment lien on the property and then filed for judicial foreclosure.  The property owner sought summary judgment on the ground that it was undisputed that the association had failed to strictly comply with the pre-lien and pre-foreclosure notice requirements set forth in the Davis-Stirling Common Interest Development Act (the Act) under California Civil Code Sections 1367.1 and 1367.4.  Finding that the association had substantially complied with the notice requirements, the trial court denied the summary judgment motion.  The Court of Appeal reversed, holding that substantial compliance was insufficient since the Act's legislative history showed that the Legislature intended the notice requirements to be strictly construed.

Diamond v. Superior Court (2013) 217 Cal. App. 4th 1172 (Opinion not available)


[6. Employment Law]

EMPLOYER LIABLE FOR RETALIATION FOR TURNING EMPLOYEE'S COWORKERS AGAINST HER BY LEAKING DETAILS OF PRIOR CONFIDENTIAL DISCRIMINATION SETTLEMENT

As part of a confidential settlement of an employment discrimination lawsuit, an employer agreed to provide its employee with training for a position that would give her a pay increase.  However, when the employee's training began, she was given a "less desirable" workspace that increased her isolation from the rest of the staff, was denied certain training materials and was not told about a class regarding hazardous materials.  The employee then brought a second suit, alleging claims including unlawful retaliation under the California Fair Employment and Housing Act.  Following a jury verdict favoring the employee, the trial court granted a motion for judgment notwithstanding the verdict.  The Court of Appeal reversed with respect to the retaliation claim, reasoning that there was sufficient evidence for a reasonable jury to find that management revealed to the plaintiff's coworkers the details of the prior confidential settlement with the intent to turn her coworkers against her, thus making her training period intolerable.

McCoy v. Pacific Maritime Assn. (2013) 216 Cal. App. 4th 283