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May 2003 
Vol. 9 No. 5 ISSN 1087-6219
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The Ninth Circuit has ruled that agreements to arbitrate employment disputes are inherently so one-sided that they are presumptively unconscionable under California law.
Circuit City required Catherine Ingle to sign an agreement to arbitrate all employment-related legal disputes as a condition of her employment. When she sued Circuit City for harassment and discrimination, Circuit City moved to compel arbitration. The Ninth Circuit affirmed the federal district court's denial of the motion.
To determine whether an arbitration agreement is unconscionable, a court must weigh its procedural and substantive unconscionability. Although Circuit City gave Ingle three days to consider the terms of the agreement, it was still procedurally unconscionable, because there was no meaningful opportunity to negotiate.
The agreement was also substantively unconscionable. Although Circuit City argued that the agreement was mutual because it required arbitration of all employment-related disputes, such agreements take rights away from the employee and confer benefits on the employer. Therefore, an arbitration agreement between an employer and an employee raises a rebuttable presumption of substantive unconscionability.
Although that infirmity was sufficient to invalidate the agreement, there were others. It imposed a one-year statute of limitations without allowing the employee the benefit of the continuing violation doctrine. It prohibited the arbitrator from hearing claims as a class action. There was a $75 fee payable to Circuit City without possibility of exemption for indigence. The agreement also contained an impermissible cost-splitting provision, and limited the damages and front pay recoverable in arbitration.
Ingle v. Circuit City Stores, Inc., 2003 WL 21058241 (9th Cir. May 13, 2003).
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The Ninth Circuit has affirmed a jury verdict for a doctor who was dismissed from his residency after he complained about the billing practices of the chief of his division.
David Ostad was a resident at Oregon Health Sciences University, where Alan Seyfer was the chief of the Plastic and Reconstructive Surgery Division. Seyfer wrote unsatisfactory reports about Ostad in the same time period that Ostad was complaining that Seyfer was billing Medicare and Medicaid improperly. According to Ostad, Seyfer told him that he had meddled in Seyfer's business too much.
Ostad received a hearing before a panel of doctors. Because the panel was not familiar with plastic surgery, it relied heavily on Seyfer for an assessment of how residents in the division should perform. The panel recommended that the University dismiss Ostad from his residency.
Ostad sued Seyfer and the University for violating his free speech rights. The jury awarded him $32,000 in economic damages and $150,000 in non-economic damages against both defendants, and $200,000 in punitive damages against Seyfer.
A public employee has a First Amendment right to be free of retaliation for speaking out on matters of public importance. Where adverse employment action follows exercise of free speech rights, the employee satisfies his burden of proof by showing that his speech was a motivating factor in the adverse action. The employer may defend by proving that it would have reached the same decision even without the protected conduct.
In this case, the defendants argued that the hearing before the panel of doctors established the defense. Even if Seyfer had a retaliatory motive, they claimed, the panel of doctors did not, and they had the final word. The court rejected the argument, because the panel had relied on Seyfer's expertise in arriving at its recommendation.
Ostad v. Oregon Health Sciences University, 327 F.3d 876 (9th Cir. 2003).
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The Santa Ana division of the Fourth District Court of Appeal has ruled that an employee's claim under the California Family Rights Act (CFRA) was preempted by federal labor law, because resolution of the claim hinged on an interpretation of a collective bargaining agreement.
Denise Harris took family leave from her job at Verizon on an intermittent basis under CFRA. Verizon allowed her to use sick leave to pay for the first four weeks, but then refused to pay for the rest when she failed to provide a medical report from an orthopedist or neurologist.
CFRA requires employers to allow employees to take up to 12 weeks of family leave per year. Employers must allow employees to use any paid time off that they have accrued.
Harris was an hourly employee covered by a collective bargaining agreement. The agreement provided that management “in its sole discretion” could require a doctor's opinion that use of sick leave was appropriate. As a matter of policy, Verizon required a doctor's opinion for leave taken over a four-week period.
Although Harris settled a grievance on the issue under the collective bargaining agreement, the Department of Fair Employment and Housing pursued a claim for violation of CFRA on her behalf. The Court of Appeal agreed with Verizon that federal labor law preempted the claim.
The United States Supreme Court has ruled that federal labor law generally preempts state law claims that are substantially dependent on an analysis of a collective bargaining agreement. Allis-Chalmers Corp. v. Lueck, 471 U.S. 202 (1985). Employees may proceed with state claims where the issues are factual or legal ones that can be resolved without construing the collective bargaining agreement. Deschene v. Pinole Point Steele Co., 76 Cal. App. 4th 33 (1999); Lujan v. Southern California Gas Co., 96 Cal. App. 4th 1200 (2002).
In this case, the court could not determine whether Harris was entitled to paid time off without interpreting the collective bargaining agreement. Therefore, federal labor law governed the claim, which was barred as untimely.
DFEH v. Verizon California Inc., 108 Cal.App.4th 160 (2003).
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The Second District Court of Appeal in Los Angeles has ruled that the attorney for a woman who brought an action for the wrongful death of her child did not have a duty to advise the child's father of his possible rights.
Brent Lindrum found his 2-year old daughter at the bottom of a swimming pool at his mother's house. She died two days later. Brent's wife, Estella, was not present. Estella retained Howard Hall to file a wrongful death suit in the face of Brent's demand that she not do so. Shortly thereafter the couple divorced. Hall never met with Brent. After, Hall obtained a $210,000 settlement for Estella, Brent sued Hall for not advising him that he had rights to participate in the wrongful death action, and for not joining him as a nominal defendant.
An earlier case had held that a lawyer owed a duty to a wife in connection with a medical malpractice claim by her husband, because she had a possible loss of consortium claim, even though the attorney told her that he only represented her husband. Meighan v. Shore, 34 Cal. App. 4th 1025 (1995). The principles of that case did not apply here because that case involved the “peculiar tort” of loss of consortium, and because both the husband and the wife had actually consulted the attorney. Here, Brent had never spoken to Hall.
Although heirs who file a wrongful death action have a mandatory duty to join all known heirs in the action, that duty does not extend to the attorney for the heirs who file the action. That duty may allow Brent to recover half the proceeds from Estella, who may in turn have a malpractice claim against Hall if he did not advise her properly. Brent does not have a direct claim against Hall.
Hall v. Superior Court, 2003 WL 21054664 (Cal. Ct. App. May 12, 2003).
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The First District Court of Appeal in San Francisco has ruled that the “force” of federal labor law was with Skywalker Sound, and preempted an employee's claim that he should have received benefits under a collective bargaining agreement.
Robert Levy went to work for Skywalker Sound as an audio recording engineer. Skywalker told him that his position was non-union. Levy claimed that the collective bargaining agreement permitted him to join the union, and to receive union wages. He filed a state court lawsuit claiming breach of contract, fraud and unpaid wages under the California Labor Code.
Although state courts have concurrent jurisdiction over disputes involving collective bargaining agreements, the applicable law is exclusively federal, and the interpretation of collective bargaining agreements is exclusively a matter for arbitration under federal law.
Federal labor law preempted all Levy's state law claims, because they all required interpretation of the collective bargaining agreement.
Levy v. Skywalker Sound, 2003 WL 21079812 (Cal. Ct. App. May 14, 2003).
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The Second District Court of Appeal in Los Angeles has reversed a trial court's refusal to compel arbitration of an employment dispute.
Michael McManus was required to sign two arbitration agreements as a condition of his employment by a securities broker-dealer firm. After he was discharged, McManus sued for wrongful termination and defamation.
The Court of Appeal ruled that McManus had to pursue his claims in arbitration. The agreement did not lack for mutuality even though it exempted all injunctive relief from arbitration. There was no support for the employee's argument that the arbitrator had to be a lawyer or retired judge. Although the agreement contained an unconscionable fee-splitting provision, it was severable, and the court could enforce the balance of the arbitration agreement.
McManus v. CIBC World Markets Corp., 2003 WL 21205262 (Cal. Ct. App. May 23, 2003).
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Subsequent treatment of decisions reported on in earlier issues:
County of Riverside v. Superior Court (April 2003 issue), now reported at 30 Cal.4th 278 (2003).
Dee v. Vintage Petroleum, Inc. (February 2003 issue), review denied (May 14, 2003).
Granowitz v. Redlands Unified Sch. Dist. (February 2003 issue), review denied (Apr. 30, 2003).
Little v. Auto Stiegler, Inc. (October 2001 issue), aff'd in part and rev'd in part, 29 Cal.4th 1064 (2003).
Miranda v. Clark County (February 2003 issue), petition for certiorari filed (May 5, 2003).
Mitsubishi Materials Corp. v. Superior Court (February 2003 issue), review granted (Apr. 30, 2003).
Richelle L. v. Roman Catholic Archbishop of San Francisco (March 2003), review denied (May 14, 2003).
Thompson v. Sacramento City Unified Sch. Dist. (April 2003 issue), now reported at 107 Cal.App.4th 1352 (2003).
Wiener v. Southcoast Childcare Centers, Inc. (April 2003 issue), now reported at 107 Cal.App.4th 1429 (2003).
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