A New Wrinkle on Arbitration Clauses in Retainer Agreements

Many lawyers nowadays have arbitration clauses in their retainer agreements, whereby the Clients agree that any dispute that may arise out of the lawyers' representation of the clients shall be submitted to arbitration.  However, a recent case from the 4th District Court of Appeal puts a new wrinkle on the enforceability of such clauses.  Depending on the circumstances, the lawyer seeking to compel arbitration may have to pay the arbitration costs to enforce that provision.

In Roldan v. Callahan & Blaine (4^th Dist. 2013) 219 Cal. App. 4th 87, 161 Cal.Rptr. 3d 493, the Plaintiffs (former clients) filed suit against their former lawyers based upon a claim that the settlement they reluctantly agreed to in the underlying action was inadequate. The lawyers successfully moved to compel arbitration based upon an arbitration clause in the attorney retainer agreement. The plaintiffs then filed a motion in the trial court seeking an order compelling the lawyers to advance the entire upfront cost of the arbitration, which the trial court denied. 

The appellate court reversed and remanded for the trial court to do the following: (1) calculate the reasonable cost of the arbitration previously ordered; (2) determine whether the plaintiffs are financially able to pay their share of the anticipated costs; and (3) if any of the plaintiffs are unable to pay, issue an order specifying that the lawyers have the option of either paying or else waiving their right to arbitrate.  Thus, the Appellate Court basically said that if the Court determines that clients cannot afford the costs of the arbitration, the attorneys' option is to pay "full freight" or waive the right to arbitration and proceed to trial in court.

(It should be noted that the Appellate Court in Roldan had a number of criticisms of the particular retainer agreement involved, including the observation that the plaintiffs had been required to initial all pages of the retainer agreement except for the page including the arbitration clause, and that their signatures on the agreement were on a different page from the arbitration provision.  This may have factored into the Court's ultimate conclusion.)  

This case is significant because the court invoked a "public policy" exception to compelling indigent clients to arbitrate.  Despite a recent spate of cases from the US Supreme Court holding that Courts should "rigorously enforce" arbitration agreements, this California case seems to impose limits on the enforceability of arbitration provisions, similar to the holding in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 6 P.3d 669, 99 Cal.Rptr.2d 745, in the employment agreement context.

SCOTUS Rules in Title VII Cases

In two 5-4 decisions, the Supreme Court appears to have made it harder for employees to sue and prevail against their employees under Title VII of the Civil Rights Act.

In Vance v. Ball State, the Court limited who may be deemed a "supervisor" to those who have power to “take tangible employment actions” against a victim of harassment.  Some background: In the late 1990s, the Court held in two cases that an employer is automatically liable under Title VII of the 1964 Civil Rights Act for discrimination by an employer who is a “supervisor.”  On the other hand, if a co-worker discriminates, the company is liable only if the victim complains to her employer and the employer is negligent in responding to the complaint.  The question in this case was who counts as a “supervisor” for purposes of this rule. 

In an opinion from Justice Alioto, the Court held that that for purposes of this Title VII rule, to be a “supervisor,” a person must have the power to take a “tangible employment action” against the victim.  That is, he must be able to “effect a ‘significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.’”

In University of Texas Southwestern Medical Center v. Nassar, the Court ruled that under the retaliation provision of Title VII, a plaintiff must prove that retaliation was the “but-for” reason for an action against an employee (the decisive reason, rather than just one motivating factor).  Justice Anthony Kennedy writing for the majority, held that retaliation claims under Title VII of the Civil Rights Act of 1964 must be proven under traditional “but for” causation principles.

The issue presented in Nassar was whether the retaliation provision of Title VII [42 U.S.C. § 2000e-3(a)], and similarly worded statutes require a plaintiff to prove but-for causation (i.e., that an employer would not have taken an adverse employment action “but for” an improper motive), or instead require only proof that the employer had a mixed motive (i.e., that an improper motive was one of multiple reasons for the employment action). Prior decisions had determined that an individual would win a racial discrimination case if that person could show that the “motivating factor” in not hiring was racial.

What this means is that, effectively, a plaintiff must prove that the employer would not have taken action if an EEOC complaint had not been filed by the employee.

Price is Right Model-Suit Update

We previously reported about the $7.7 Million verdict won by former "Price is Right" Model, Brandi Cochran, in her pregnancy discrimination lawsuit.  (See http://themploymentlaw.blogspot.com/2012/12/price-is-right-model-wins-77-mil-in.html) However, according to the Hollywood Reporter (see link below), that $7.7 Million verdict in favor of Ms. Cochran, has been set aside, and a new trial ordered.

After Cochran won her trial, the California Supreme Court made a decision about jury instructions in a mixed motive discrimination case. In Harris v. City of Santa Monica, No. S181004 (Cal. Feb. 7, 2013), the Supreme Court held that to establish liability in “mixed motive” employment discrimination cases under the California Fair Employment and Housing Act (FEHA), the employee must show that unlawful discrimination was a substantial factor motivating the adverse employment decision. Thus, per Harris, Judges need to instruct the jury that discrimination is not just a "motivating factor/reason" for termination but a "substantial motivation factor/reason." 

In the Cochran case, Judge Kevin Brazile failed to issue this "substantial" guidance despite a request from the defendants. Judge Brazile was then asked by the defense to set aside the verdict and dismiss the case.  Judge Brazile rejected this argument, noting that  "the evidence established that Defendants discriminated against Plaintiff, terminating her on the grounds of her prior pregnancy and complications ... the evidence is sufficient to support the verdict." However, given the decision in Harris, Judge Brazile said the "instruction error cannot be considered harmless," and was compelled to grant a new trial. 

[Hollywood Reporter link: http://www.hollywoodreporter.com/thr-esq/price-is-right-models-77-428148]

New (Required) I-9 Forms for New Employees

On March 8, 2013, the U.S. Citizenship and Immigration Services (USCIS) published a revised Form I-9, which employers should begin using for all new hires (and those being "re-verified").  Under the new rules,  after May 7, 2013, employers must only use the revised Form I-9 dated 03/08/13 for all new hires and reverifications.  Employers are not required to complete the new Form I-9 for current employees if a properly completed Form I-9 is already on file, and employers may continue to use previously accepted revisions (I-9 Forms dated 02/02/09 and 08/07/09) until May 7, 2013. 

The revised Form I-9 includes new fields in Section 1 for employees to provide their email address, telephone number.  It also includes new sections for aliens, requesting additional information about their work status. 

The revised Form I-9 also contains six pages of instructions rather than three, which the USCIS hopes will provide clearer directions to both the employee and the employer about how to complete the Form I-9.

To get the new form, you can click on the following link: http://www.uscis.gov/files/form/i-9.pdf