Short take-away -- misconduct for arbitrator to base credibility upon use ofinterpreter (FCM v. Grove Pham)

 

Arbitration award reversed due to "misconduct" where arbitrator makes adverse credibility determination upon party's use of an interpreter

The California Court of Appeal for the Fourth District, Division One, has overturned an award in a contractual arbitration proceeding because it was based, at least in part, upon an improper determination a witness was not credible. (KMI v. Grove Pham (October 17, 2023) D080801.)  Writing for a unanimous majority, Justice Dato overturned the order of the Hon. Daniel A. Ottalia, Judge Presiding, of the Riverside County Superior Court.  The trial court had confirmed the petition of plaintiff FCM to confirm the arbitration award in its favor over the objections of defendant Grove Pham.  Grove argued the arbitrator committed misconduct when she made a determination plaintiff and witness Phuong Pham was not credible.  

Despite the general rule that an appellate court defers to an arbitrator's findings as to credibility, the Fourth District found the arbitrator had improperly discounted Mrs. Pham's testimony:

In the arbitrator’s view, although the transaction “was rather complicated,” her decision in the case was “made easier by an evaluation of the credibility of the witnesses.”                                         ...

The arbitrator did not find Phuong or Trish credible. In explaining why, she highlighted as the key example Phuong’s use of an interpreter:

“Among the items that stand out, is Mrs. Pham’s use of an interpreter. While the Arbitrator understands that people for whom English is a second language frequently prefer to testify in their native language in important legal matters, Mrs. Pham’s use of an interpreter appeared to the Arbitrator to be a ploy to appear less sophisticated than she really is. She has been in the country for decades, has engaged in sophisticated business transactions and has functioned as an interpreter." (Id., p 5.) 

The appellate court found this finding rose to the level of "bias" against Pham,  given the fact there was little evidence to support it.  For example, the court of appeal noted that immigrant communities may include "thriving" businesses run by persons who speak English only as a second language, and the fact that Mrs. Pham requested an interpreter did not indicate her testimony was less credible.  The court further noted that the facts plead indicated Mrs. Pham had used her daughter as an interpreter during the subject business dealings.

The Fourth District thus held the record showed arbitrator "bias" and such bias is included in the definition of "misconduct." Consequently, the rights of the plaintiff were prejudiced, and such misconduct resulting in prejudice is one of the narrow grounds for overturning an arbitration award under California's Code of Civil Procedure section 1286.2(a)(3).

No Duty to Warn Tenant of Obvious Water Current (Nicoletti v. Goldrich Kest)

 

Landlord had no duty to warn of open and obvious condition of water current from flowing rainwater

The Second District, Division Eight has upheld a grant of summary judgment by the Hon. Daniel Crowley, Judge Presiding, of the Los Angeles Superior Court in a tenant versus landlord tort suit. (Nicoletti v. Goldrich Kest (November 14, 2023) B319377.)  Summary judgment was granted in favor of the landowner based on the defense that the hazard was an "open and obvious" condition.  Plaintiff Nicoletti allegedly fell due to a rainwater current while walking a dog on the premises she rented from defendant Dolphin Marina apartments, sued as the DBA of Goldrch Kent:

On April 9, 2020, Nicoletti took her neighbor’s dog for a walk around Dolphin’s apartment. . . . Nicoletti observed that it was raining that day with thunderstorms. At around 3:30 p.m., Nicoletti crossed the driveway of the North Side Gate entrance that led to the underground parking lot. The apartment complex also had a South Side Gate entrance and another entrance on Panay Way. Nicoletti testified that she had gone past the North Side Gate “thousands of times” before the incident.

Before crossing, Nicoletti observed that the concrete on the North Side Gate driveway was wet, and rainwater formed a current that was running down the driveway. Nicoletti did not observe any caution tape or other warning advisements. Nicoletti proceeded to cross, and the rainwater current knocked her down. Nicoletti then fell down the North Side Gate driveway and hit the gate at the bottom of the driveway. (Id., p. 2.)

The trial court found Dolphin did not have a duty to warn of the running rainwater on the driveway because it was a dangerous condition that was sufficiently obvious.  Dolphin countered  the danger from the water current was not obvious, but the trial court nonetheless granted summary judgment.  

The appellate court affirmed, noting the general rule that landowner must “maintain land in [its] possession and control in a reasonably safe condition.” (Alcaraz v. Vece (1997) 14 Cal. 4th 1149, at 1156; emphasis added.)  However, it also reiterated that "[a] harm is typically not foreseeable if the “dangerous condition is open and obvious," citing Jacobs v. Coldwell Banker Residential Brokerage Co. (2017) 14 Cal. App. 5th 438, at 446.

Upon appeal, Nicoletti further argued that an exception to this doctrine applied, namely that of "necessity."  The appellate court noted this argument was waived as it was first made upon appeal; nonetheless, the Nicoletti court considered and rejected this argument.  Writing for the majority, Justice Viramontes explained the "necessity" argument was not supported by the facts, and, more to the point, public policy indicated no duty should be imposed to place "warnings" due to temporary weather conditions:

Our holding is also consistent with our Supreme Court’s declaration that courts must assign tort duties “to ensure that those ‘best situated’ to prevent such injuries are incentivized to do so.” [Citation.]  Under these circumstances, Nicoletti was in a better position to avoid the obvious danger of walking across a current of water that formed as a result of a rainstorm that began that same day. As discussed above, Nicoletti could have chosen to use a different entrance. The burden imposed on Dolphin to constantly monitor weather conditions and immediately install warning signals is outweighed by Nicoletti’s ability to avoid a condition she should have observed as obviously dangerous. (Id., p. 9.)

Counsel for plaintiffs should note the obvious lesson that arguments destined for a Court of Appeal should first be made in the trial court.  

Defendants should be prepared to argue the applicability of the "necessity" exception to the open and obvious rule.  The defense should also be keen to address public policy issues, such as the scope of the duty the plaintiff seeks to impose, an example being the duty proffered here by the plaintiff, namely, that the landlord should have warned of the current due to the heavy rain that day.

Query - What are the most important Federal and California appellate decisions of 2023?

 

Thus far, the most important Federal and California appellate decisions of 2023 are. . . 

I have been asked what are the most important appellate decisions of 2023, either in Federal or California courts. 

 

Federal Opinions of 2023

As to opinions from our Federal courts, including the United States Supreme Court, the answer is straightforward due to the import and controversy surrounding this year's most talked-about decision.  

Students for Fair Admissions v. Harvard held equal protection under the law prohibits racial preferences in university and graduate school admissions.  To learn more, please see our discussion of Justice Thomas' concurrence, which focuses on the history of racial equality (and inequality) in our country as he writes in support of the majority.

California Opinions of 2023

Choosing just one California opinion is difficult because 2023 has perhaps had fewer blockbuster opinions from the California Supreme Court than in prior years.  Therefore, the answer lies in choosing an opinion that may have the most import for future legal disputes, not only in California but in other jurisdictions as well.  We have therefore chosen the Fourth District, Division Three opinion holding a website is not a "public place" for purposes of disability access, as this opinion is important to attempts to define the scope of a digital "place."

As we explained in a prior post, Acting Presiding Justice Sanchez wrote for the majority in Martin v. Thi E-Commerice,  and interpreted the phrase "place of public accommodation" as defined in the Americans with Disabilities Act.  The majority thus held the wording of the act excluded websites that have no relation to a physical location.  Consequently, a website not required for entrance to a location (in contrast to a website which, for example, might be used to make reservations for an actual physical location) is not subject to the provisions of the ADA as "the ADA unambiguously requires [such] a physical location." (Martin, p. 2.)

Please let us know if you have a contrary opinion as to the most important decisions of 2023.

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Arbitration — Employer alleged to have received trade secrets from a new employee does not have a right to “arbitrate” claims brought by prior employer against the new employer (Mattson v. Applied)

 

Arbitration — while a former employee may demand that the former employer arbitrate its claims of trade secret theft against him, the new employer who allegedly received the secrets cannot claim any right to arbitrate the claims against it

The First District, Division Five, has held agreement signed by an employee agreeing to arbitrate claims related to his employment cannot be utilized by the employee’s new employer to force the former employer to arbitrate claims against it related to theft of trade secrets. (Mattson v. Applied (October 30, 2023) A165378.)  Defendant Applied is a competitor of plaintiff Mattson and hired at least 14 former employees of Mattson, including co-defendant Lai, who eventually admitted that he emailed himself documents from his tenure at Mattson before he left for Applied.  Mattson sued both Lai and Applied, and the defense moved to compel arbitration pursuant to the employment agreement signed by Lai and Mattson.  

Plaintiff alleged causes of action for 1) misappropriation under the Uniform Trade Secrets Act against each defendant, and, as against employee Lai, breach of his employment agreement.  Of course, at the time the agreement with Mattson was signed, there was no employment or other sort of contractual relationship between Lai and Applied.

The Hon. Evelio M. Grillo, Judge Presiding, of the Superior Court of Alameda County ruled that while Lai could compel arbitration, Applied had no right to compel former employer Mattson to arbitrate.  The trial court also issued a broad preliminary injunction regarding any use of trade secrets.  Moreover, the trial court declined to stay litigation of the claims of Mattson against Applied until the claims against Lai could arbitrated.

Justice Burns and a unanimous court upheld the first two of these trial court orders.  Even though Applied could claim no contractural privity, it argued that “equitable estoppel” prevented Mattson from refusing arbitration of its claims against Applied.  This argument was rejected by the First District because, inter alia, former employer Mattson made no attempt to apply any portion of the employment agreement with Lai against new employer Allied:

Equitable estoppel provides a limited exception to this general rule.  When a signatory to a contract asserts claims against a non-signatory that rely upon, or are inextricably bound up with, the contract terms, the non-signatory may invoke an arbitration clause in the same contract.  

This makes sense.  As a matter of fairness, when a party to a contract seeks to hold a non-signatory defendant liable for obligations imposed by the contract, the party cannot evade an arbitration clause in the contract simply because the defendant is a non-signatory.  It’s a two-way street. 

Keeping this policy in mind helps define the limits of the rule.  It is not enough that a complaint simply refers to a contract; the claims must be founded on the contract.  Nor is it sufficient that a complaint alleges collusion between a signatory and non-signatory defendant, or that the controversy would not have occurred but for the existence of the contract, provided the contract is not the basis for the claims against the non-signatory.  In these situations, the policy rationale for equitable estoppel—"relying on an agreement for one purpose while disavowing the arbitration clause of the agreement”—does not exist.  (Id., pp. 5-6; citations omitted and emphasis added.)

The Mattson court therefore relied upon a federal case, Waymo LLC v. Uber Techs., Inc. (Fed. Cir. 2017) 870 F. 3d 1342, at 1343-1344) where, likewise, the claims of misappropriation against the new employer did not rely upon the employee's contract with the former employer.

The appellate court also upheld the injunction against Applied, finding the trial court had a reasonable basis for granting its order.  However, it overturned the trial court’s order denying the request to stay the litigation to first permit the completion of the arbitration with Lai.  As the First District pointed out, California's Code of Civil Procedure section 1281.4 provides a “stay” in these circumstances “shall” be granted:

If a court of competent jurisdiction. . . has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court . . . shall . . . stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate. (Id., p. 12.)

Tips for practitioners

Equitable estoppel is often misapplied by counsel, not only because it is an equitable concept that relies heavily upon how the facts of a particular case are to be interpreted.  The concept is also applied in a sloppy and/or cursory way because counsel wrongly presume the concept is entirely malleable because it involves "equity;" therefore, counsel mistakenly focus more on what they believe are the sympathies in their particular case rather than the limitations of the doctrine set forth by case law.  

However, the key concept in equitable estoppel may be said to be the parameters of "estoppel" and not the broader concept of equity.

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