Monthly Archives: November 2023

ALR 2023 - 2024

California Court of Appeal Signals Judicial and Legislative Distrust of Arbitrators

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By

Kristiana Stiles

In June 2023, the Second Appellate District of California’s Court of Appeal ruled that, under California law, an employee or consumer can evade arbitration if their opponent is late in paying their arbitration fees, regardless of the arbitrator’s attempt to fix the late payment.1 This undermines the arbitrator’s ability to manage their proceedings and signals a fundamental distrust of arbitrators. This case and the predicate California statute indicate that California may be looking to take away some of the powers traditionally reserved for arbitrators.

The statute at issue in Cvejic v. Skyview Capital, LLC, California Code of Civil Procedure section 1281.98, states that if the arbitration agreement’s drafting party does not pay their required fees or costs within 30 days of the due date, they are “in material breach of the arbitration agreement,. . . in default of the arbitration, and waive[] the right to compel the employee or consumer to proceed with that arbitration . . .”2 According to the court in Cvejic, this statute intended to prevent a party from forcing arbitration and then stalling by not paying the fees.3 Once the payment is more than 30 days late, the employee or consumer may remove the case to court.4 Further, the law mandates that all parties must agree to time extensions.5

In Cvejic, plaintiff Cvejic sued Skyview Capital, LLC (“Skyview”), his former employer, after his termination.6 Skyview compelled arbitration and then missed the deadline for submitting the corresponding fees.7 The arbitration panel set a new deadline for the fees, which Skyview met.8 Cvejic, however, notified the panel that he was withdrawing from arbitration, which the trial court granted in February 2022.9 Skyview appealed.10

In reviewing Skyview’s appeal, the California Court of Appeal noted that “[t]here is no escape hatch for companies that may have an arbitrator’s favor. Nor is there a hatch for an arbitrator eager to keep hold of a matter.”11 The court agreed with the trial court that the law would lose any “meaning, force, or effect” if the drafting party could continually delay the proceedings with payment extensions.12 The court also noted that “[t]he point was to take this issue away from arbitrators, who may be financially interested in continuing the arbitration and in pleasing regular clients.”13

California’s decision to remove this issue from the arbitrators and give it to the courts shows a growing distrust of arbitrators from the courts and the legislature. The court essentially stated that, if left alone, arbitrators will bend the rules to benefit themselves or their regular clients. The court, however, may not have been the originator of this mistrust. The legislature ultimately empowered the court to make its ruling by enacting California Code of Civil Procedure section 1281.98 and signaling that arbitrators are not the ultimate authority on this issue. While the language of the ruling suggests that the court agrees with the legislature’s distrust, courts must follow the law. Whether the courts have an independent animus against arbitrators or are simply following the legislature’s lead remains to be seen. Either way, this shift does not bode well for arbitrators in the state of California. “[T]his ruling . . . demonstrates the court’s willingness to limit the power of an arbitrator over their own proceedings.”14 There is hope for arbitrators, however, in the fact that California courts are currently split on whether an arbitrator may determine a material breach of a contract and whether the Federal Arbitration Act may preempt this law.15

  1. See Cvejic v. Skyview Capital, LLC, 92 Cal. App. 5th 1073 (Cal. Ct. App. 2023). ↩
  2. See CAL. CIV. PROC. CODE § 1281.98(a) (Deering 2023). ↩
  3. See Cvejic 92 Cal. App. 5th at 1076. ↩
  4. See CAL. CIV. PROC. CODE § 1281.98(b) (Deering 2023). ↩
  5. See id. at § 1281.98(a)(2). ↩
  6. See Cvejic 92 Cal. App. 5th at 1075. ↩
  7. See id. ↩
  8. See id. ↩
  9. See id. at 1075-76 ↩
  10. See id. at 1076. ↩
  11. Id. at 1078 ↩
  12. Id. ↩
  13. Id. at 1079. ↩
  14. Benjamin Hart & Michael Nelson, United States: California Appellate Court Decision Limits Power of Arbitrators to Cure Late Arbitration Payments, MONDAQ (Aug. 15, 2023), https://www.mondaq.com/unitedstates/trials–appeals–compensation/1355518/california-appellate-court-decision-limits-power-of-arbitrators-to-cure-late-arbitration-payments. ↩
  15. See Lee Brand, et al, United States: California Courts Continue Allowing Employees And Consumers To Return To Court Following Late Payment Of Arbitration Fees, MONDAQ (Aug. 21, 2023) https://www.mondaq.com/unitedstates/arbitration–dispute-resolution/1356840/california-courts-continue-allowing-employees-and-consumers-to-return-to-court-following-late-payment-of-arbitration-fees. ↩
ALR 2023 - 2024

Lost in Translation? MA Court Compels Arbitration in Rivera v. Stetson

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By

Ava McCartin

A Spanish-speaking patient, Carlos Lopez Rivera (“Lopez”), will not be permitted to pursue his medical malpractice claim in Massachusetts court—instead, he will be compelled to arbitrate. Even though Lopez could not read the arbitration agreement, which was never translated or read aloud for him, a Massachusetts Appeals Court found that he had sufficient notice of the terms, reversed the lower court, and compelled arbitration.1 This result illustrates the ways in which judicial preference for enforcement of non-negotiated arbitration agreements can lead to absurd results. In the future, Massachusetts courts should tighten notice requirements to ensure fair treatment of consumers in the law.

The issue began when Lopez sought vision correction services from Steven Stetson, an eye surgeon.2 On the day of his procedure, Stetson presented Lopez with four sets of documents: three dealt with the procedure itself, while the fourth was an arbitration agreement.3 Importantly, “Lopez did not have a sufficient understanding of English to allow him to read the Arbitration Agreement,” and no one explained the agreement in Spanish.4 Nevertheless, Lopez signed the documents.

After the procedure, Lopez filed a claim for medical malpractice in Superior Court.5 Stetson moved to compel arbitration.6 The Superior Court found the agreement invalid and unenforceable, but the Appeals Court reversed.7 Even though the court agreed that Lopez could not read the agreement and lacked an understanding of the terms of the agreement, it found that he had sufficient notice of the terms to give reasonable manifestation of assent to them.8 This conclusion is self-contradictory.

While the court correctly explained that an arbitration agreement is valid “even if the party did not actually view the agreement, so long as the party had an adequate opportunity to do so,”9 it erred in its determination that “Lopez’s lack of facility with the English language” was not relevant to the analysis.10 Although the arbitration agreement was clearly marked and identifiable in plain English, those markings were not sufficient notice for Lopez because he could not read them.11 Thus, while Lopez had an opportunity to “view” the contract, viewing it did not put him on notice of its terms.

Further, the judge found that when signing the four documents, Lopez “was led to believe that he was signing medical forms,” not a waiver of his right to pursue potential claims in court.12 These facts indicate that Lopez clearly did not have notice of the arbitration agreement, and he testified that had he been aware of the terms of the agreement, he would not have signed.13 In spite of these facts, the court relied on two distinguishable cases from the early twentieth century to insist that Lopez was bound to the agreement without understanding it.14

Moving forward, courts should tighten notice requirements to ensure parties have a meaningful opportunity to comprehend legal agreements before being bound to them. While it may be fair to hold a party who can read a contract, but chooses not to, to their word, it is not fair to bind parties like Lopez to agreements they are unable to read or comprehend. Rather than focusing on whether parties have an opportunity to view an arbitration agreement, courts should ask whether parties have an opportunity to comprehend an agreement when considering its validity.15

 

 

 

  1. See Rivera v. Stetson, 218 N.Ed.3d 55 (Mass.App.Ct. 2023) ↩
  2. See id. at 57. ↩
  3. See id. at 57-58. ↩
  4. Id. at 59. ↩
  5. In Massachusetts, the “Superior Court” is the trial court of general jurisdiction. ↩
  6. See id. at 57. What happened to Mr. Lopez that caused him to file the medical malpractice claim is not discussed in the court’s decision. ↩
  7. See id. ↩
  8. See Rivera, 218 N.Ed.3d at 58-59. ↩
  9. See id. at 59. (quoting Archer v. GrubHub, Inc., 190 N.E.3d 1024, 1033-34 (2022)) ↩
  10. Id. ↩
  11. See id. at 58-59. ↩
  12. Id. at 58. ↩
  13. See id. at 59. ↩
  14. See Rivera, 218 N.Ed.3d at at 59 (citing to Wilkisius v. Sheehan, 155 N.E. 5, 6-7 (1927) (factually distinguishable because the plaintiffs could not speak English, but the contested agreement was “dictated in the presence of the parties . . . read aloud in the presence of the plaintiff . . . and the interpreter was asked to explain it to him before it was signed”); Paulink v. American Exp. Co., 163 N.E. 740, 740-41 (1928) (factually distinguishable because there was no indication that the plaintiff was led to believe he was signing any type of document other than one for traveler’s checks)). ↩
  15. See id. Even operating under the “opportunity to view” standard, courts could protect Lopez and similarly situated partied by construing “view” broadly— meaning to “inspect” or “perceive” rather than just to look at. ↩
ALR 2023 - 2024

Using Public Policy to Deny Arbitral Awards: Domestic Overstep or Transnational Necessity?

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By

Austin Robinson

In July 2023, the English Commercial Court alarmed the arbitration community by using UK consumer law as public policy grounds to deny the enforcement of an arbitral award.1 The case of Payward v. Chechetkin serves as an example of how and why a court should be able to reconcile the binding effect of arbitration with its own jurisdictional public policy.2

In opening a cryptoasset exchange account, Mr. Chechetkin formed an arbitration agreement with Payward.3 After a dispute arose between the two, Mr. Chechetkin filed suit, alleging violations of UK consumer laws. Payward removed the case to be settled by an arbitrator.4 In accordance with the arbitration agreement, the arbitrator applied JAMS Consumer Minimum Standards and the law of California to find that Chechetkin assumed the risk of loss and, therefore, could not recover.5 Payward sought enforcement of this award in England, but Chechetkin challenged on the basis of Sec. 103(3) of the English Arbitration Act of 1996, that enforcement may be refused if it would be contrary to public policy.6

The English Commercial Court denied enforcement of the award by finding that the UK’s Consumer Rights Act (“CRA”) constituted UK public policy.7 The Court’s argument rests on prior case law that concluded consumer protection, with respect to the fairness of contractual terms, has “equal standing to national rules which rank, within the domestic legal system, as rules of public policy.”8 Resultingly, the Court determined that the CRA, as a part of their domestic public policy favoring consumer protection, authorized denying enforcement of the arbitral award.9

The Court in Payward interpreted the public policy exception to encompass consumer protection law, effectively ‘overriding’ the arbitral award.10 This poses concerns beyond the mere applicability of UK consumer protection law because it challenges the obligation of contracting states to recognize arbitral awards as binding.11 The treatment of awards varies across jurisdictions. Several other countries favor a transnational approach rather than a domestic approach to public policy in order to more easily enforce awards.12 Contrast this case with Tampico Beverages, in which the Supreme Court of Colombia addressed the enforceability of an ICC award on public policy grounds.13 The Court found that even though the award may violate Colombia’s domestic public policy, they should look to international authorities to determine if there was a violation that justified denying the award.14 The United States similarly adopted a narrow construction of the public policy exception by favoring international public policy rather than the United States’ national policy.15

These alternate approaches reveal that England has interpreted the public policy exception broadly to protect certain areas of their domestic law. Ultimately, the underlying rationale of the public policy exemption justifies English court’s denial of enforcement. The public policy exception enables enforcing jurisdictions to preserve their jurisdictional policies as they deem necessary. The New York Convention made this clear by stating that the “public policy” should be that of the country that is enforcing the award.16 Although the binding nature of an arbitral award must be respected, courts must “enforce them in accordance with the rules of procedure of the territory where the award is relied upon.”17 Public policy was not defined in The New York Convention declined to impose any one transnational public policy so that each contracting state could define it as narrowly or as broadly as they desired.

Payward signifies the importance of the public policy exception, its transnational consequences, and domestic advantages. While cases like Payward may diminish the universal enforcement value of an arbitral award they do not unilaterally destroy that value. This sacrifice is necessary to maintain transnational relationships and prevent arbitration from discriminating against domestic law.

 

  1. See Payward Inc v Chechetkin (2023) EWHC 1780 (Comm), No. CL-2023-000029, (166-169), https://3vb.com/wp-content/uploads/2023/07/CL-2023-000029-Payward-v-Chechetkin-final-Judgment39.pdf. ↩
  2. See id. ↩
  3. Payward supra note 1 at (11), (18). ↩
  4. Id. at (39), (48). ↩
  5. See id. at (48), (62). ↩
  6. Payward supra note 1 at (2). See Arbitration Act of 1996: Refusal of Recognition or Enforcement, UK Public General Acts §103(3), https://www.legislation.gov.uk/ukpga/1996/23/section/103. ↩
  7. Payward, supra note 1 at (118)–(122). ↩
  8. Payward, supra note 1 at (105). E.g. C-40/08, Asturcom Telecomunicaciones SL, 2010 E.C.R. I-09579. ↩
  9. Payward, supra note 1 at (111)–(113); Consumer Rights Act, 2015, §74(1) (United Kingdom). ↩
  10. See Payward , supra note 1 at (2). ↩
  11. United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, adopted June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 4739 (entered into force as to U.S. Dec. 29, 1970) (hereinafter “New York Convention”)). ↩
  12. See Margaret Moses, Public Policy: National, International and Transnational, KLUWER ARB. BLOG, WOLTERS KLUWER, (Nov 12, 2018), https://arbitrationblog.kluwerarbitration.com/2018/11/12/public-policy-national-international-and-transnational/. ↩
  13. See id. (citing Tampico Beverages Inc. v. Productos Naturales de la Sabans S.Z. Alqueria, SC9909-2017, Case No. 11001-02-03-000-2014-01927-00). ↩
  14. See id. ↩
  15. See GLOB. ARB. REV. (GAR), ARBITRABILITY AND PUBLIC POLICY CHALLENGES (2021), https://globalarbitrationreview.com/guide/the-guide-challenging-and-enforcing-arbitration-awards/2nd-edition/article/arbitrability-and-public-policy-challenges#footnote-048 (Penny Madden KC, Ceyda Knoebel, & Besma Grifat-Spackman, eds.) (citing Parsons & Whittemore Overseas v. Société Générale de L’Industrie du Papier (RAKTA), 508 F.2d 969, 974 (1974) (U.S.) (Parsons), in New York Convention Guide, op. cit., p. 240, ¶ 5). ↩
  16. New York Convention, supra note 12, art. III. ↩
  17. Id. ↩