February 17, 2021 Dispute Resolution Magazine

Case Law Update

Lindsey Anderson and Andrew Jordan

Company ‘Affiliate’ Cannot Compel Arbitration, Circuit Court Rules

In Revitch v. DIRECTV, LLC, No. 18-16823, 2020 WL 5814095 (9th Cir. Sept. 30, 2020), the Ninth Circuit created a circuit split regarding the ability of a company to compel arbitration from a contract a customer signs with a separate company – even if that company eventually becomes “affiliated.” Revitch sued DIRECTV based on unsolicited phone calls he received in violation of the Telephone Consumer Protection Act. DIRECTV had obtained Revitch’s phone number from AT&T, now the parent company of DIRECTV. Revitch had previously signed a contract with AT&T containing a clause that required mandatory arbitration between customers and any affiliates of AT&T. Since the clause in the contract made no specific mention of affiliates in both the present and future, the court determined that Revitch did not consent to arbitration with an affiliate company. To read the contract otherwise, the court said, would produce “absurd results.”

This decision split from a similar case with the same defendant in the Fourth Circuit. Mey v. DIRECTV, LLC, 971 F.3d. 284, (4th Cir. 2020). In Mey, the Fourth Circuit held that DIRECTV could compel arbitration based on the contract signed with AT&T.

In the case of Revitch, the Ninth Circuit determined that the language in the contract could not allow for compelled arbitration. A contract allowing compelled arbitration would require specific terms pertaining to when a newly affiliated company became part of AT&T and how that affiliation might affect preexisting or future contracts with AT&T customers.

Ability to Subpoena Records Found Valid Only in Government and State-Sponsored Tribunals

In Servotronics, Inc v. Rolls-Royce PLC, 975 F.3d 689 (7th Cir. 2020), the Seventh Circuit examined whether a statute authorizing a district court to provide discovery assistance to foreign tribunals also applies to private foreign arbitration. The court held that private foreign arbitrations do not fall under the scope of Section 1782(a) of Title 28, which permits courts to issue discovery orders “for use in a proceeding in a foreign or international tribunal.” Instead, the Seventh Circuit determined that the statute was made to apply only to “state-sponsored, public, or quasi-governmental tribunal[s].” The court’s decision focused on canons of statutory interpretation, on congruence with the Federal Arbitration Act, and on policy concerns relating to the judicial role within arbitration in deciding the case. A circuit split persists regarding the interpretation of Section 1782(a).

State Foreclosure Program Deemed Exclusive Remedy for Mediation Conduct Complaints

In Tobler v. Sables, LLC, 968 F.3d 1010 (9th Cir. 2020), the Ninth Circuit upheld the dismissal of a civil suit by homeowners against the bank holding their mortgage. The Nevada Foreclosure Mediation Program allows homeowners facing nonjudicial foreclosure an opportunity to petition for mediation in an attempt to modify the loan agreement and prevent foreclosure. The plaintiffs filed suit, alleging that the bank violated the requirement of “good faith” dealings during this mediation process. The court noted, however, that the plaintiffs did not request judicial relief under the Nevada Foreclosure Mediation Rules, which permit a party to seek a judicial remedy if a party failed to participate in good faith. In this case, rather than file such an objection, the court said, the plaintiffs sought to “evade the mediation program’s exclusive judicial review mechanism by repackaging their complaints about the adequacy of the mediation process as state common-law claims.”           

This, the court held, was contrary to the Nevada state law establishing the foreclosure mediation program. Noting that such questions “appear [to be a] recurring issue” with the state program, the court held that the homeowners could have (and should have) raised their complaints within the process set forth in the Foreclosure Mediation Rules.

Mo’Nique accuses Netflix of Discriminatory Practices in Contract Discussions

A suit alleging race and gender discrimination against Netflix survived a motion for summary judgment, moving one step closer to trial in Hicks v. Netflix, Inc., No. CV1910452ABMAAX, 2020 WL 5223744 (C.D. Cal. July 15, 2020). Actress and comedian Monique Hicks, known as Mo’Nique, brought the suit claiming Netflix offered her substantially less money for a one-hour comedy special because she was a black woman. She contends that after she engaged in protected activity by publicly airing her allegations, Netflix responded by refusing to negotiate further. Mo’Nique argued that the failure to negotiate an opening offer in good faith by Netflix, consistent with its alleged customary practice, constituted an adverse employment action due to the material effect on compensation. To show this connection, Mo’Nique pointed to several instances in which comedians who are male (such as Chris Rock, Jerry Seinfeld, and Dave Chappelle), or Caucasian (such as Amy Schumer), received higher compensation after initial offers. Specifically, Mo’Nique pointed to the fact that Schumer counter-offered to Netflix after finding out how much her male counterparts were being paid and received an offer 15 percent higher as a result. Netflix argued that speculations about how negotiations might have unfolded differently cannot give rise to an adverse employment action, thus making a retaliation-based claim impossible as a matter of law. The court acknowledged that Mo’Nique’s complaint raises novel issues but concluded that novelty alone does not justify dismissal at this early stage. Furthermore, the court noted Mo’Nique’s potential to establish a causal link between her protected activity and the subsequent behavior by Netflix that “could possibly have affected [her] potential pay.”

Ninth Circuit Tosses Claim of ‘Surface Negotiation’ by State of California

The Ninth Circuit rejected a claim that the state of California had engaged in bad-faith negotiations regarding a potential expansion of gaming rights in Pauma Band of Luiseno Mission Indians of the Pauma & Yuima Reservation v. California, 973 F.3d 953 (9th Cir. 2020). The Pauma Band had alleged that the state engaged in “surface bargaining,” refused to bargain legitimate issues, and included unduly harsh language in its suggested gaming compact. The Ninth Circuit disagreed, noting that the state of California remained willing to continue negotiations on the matter even after the onset of the suit at issue. The court pointed out that simply taking a hard line on particular issues does not constitute bad-faith negotiation and the state was under no obligation to explain each of its positions during negotiation with the Pauma Band.

The court also repeatedly highlighted the Pauma Band’s lack of willingness to provide more substantive details around its proposed gaming expansion for the state to adequately evaluate and respond. This lack of detail led the state to submit the compact draft that was referred to as unduly harsh by the Pauma Band. However, the draft was explicitly referred to by the state as a place to start for further negotiation, not a final ultimatum. The court also noted that the majority of issues raised by the Pauma Band were premature and that the state of California had participated actively thus far with continued willingness to negotiate. Ultimately, the court expressed reluctance “to insert ourselves into incomplete negotiations.”

News Report on Mediation Not Grounds for Sanctions over Leak, Tennessee Court Says

A front-page news article detailing a mediation settlement did not provide adequate grounds for a court to grant a motion for sanctions in Greg Adkisson, et al., Plaintiffs, v. Jacobs Engineering Group, Inc., Defendant. Kevin Thompson, et al., Plaintiffs, No. 3:13-CV-505-TAV-HBG, 2020 WL 3791973 (E.D. Tenn. July 7, 2020). The United States District Court in the Eastern District of Tennessee, Northern Division, held that the defendant’s motion failed to show consistent, willful, and intentional disclosure violations on behalf of the plaintiff. The court noted that the defendant must prove by clear and convincing evidence that the other party’s actions are entirely without color and motivated by bad faith. The principal challenge for the defendant was that even if the plaintiffs acknowledged that the news leak emanated from “someone on their side,” there was no evidence to pin the leak on one plaintiff or on one of the plaintiff’s counsel in particular. Absent such evidence, the court found it would be unable to find that anyone “has consistently either intentionally acted in bad faith or recklessly disregarded the rules or orders of this Court.” 

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Lindsey Anderson and Andrew Jordan

Law Students

Lindsey Anderson and Andrew Jordan are law students at the University of Oregon School of Law and serve as law student editors for Dispute Resolution Magazine.