Medical Center Waived Its Right To Arbitrate By Delaying And Actively Trying The Issues In Non-Arbitration Forum.

Desert Regional Medical Center (DRMC) employed three nurses (RNs) under a collective bargaining agreement (CBA). The CBA governed nurses’ rest breaks, meal periods, and payment of missed break premiums. The CBA also required grievance and arbitration procedures for disputes involving interpretation or application of the CBA. The CBA stated that individual nurses and DRMC may voluntarily agree to arbitrate “any dispute not otherwise arbitrable under the [CBA].” RNs also signed a DRMC employment document (Agreement) in which they agreed submit non-CBA covered claims or disputes to final and binding arbitration before the American Arbitration Association (AAA).

In March 2015, the nurses’ Union filed a meal and rest break grievance against DRMC. Thereafter, the RNs filed individual claims with the California Labor Commissioner (LC), alleging unpaid rest and meal period wages, and requesting waiting time penalties. In February 2019, DRMC participated in the LC proceedings by filing a brief. The LC awarded each of the RNs thousands of dollars in unpaid wages in July 2019.

In August 2019, DRMC appealed the LC award to the trial court, alleging that the LC lacked jurisdiction because the CBA controlled. By October 2019, the Union and DRMC had begun the arbitration process on the Union’s meal and rest break grievance. In July 2020, DRMC filed a petition with the trial court to compel arbitration of the RNs’ wage claims. In August 2020, DRMC filed an amendment to its petition to compel arbitration, adding allegations that it did not waive its right to arbitrate and that furthermore, the RNs were prevented from arguing DRMC waived its right to arbitrate because the Union had already agreed to arbitrate the same issues. The trial court denied DRMC’s requests to arbitrate and amend the petition, and DRMC appealed.

The Court of Appeal upheld the trial court’s decision to deny DRMC’s petition to compel arbitration. First, Court noted that the California Arbitration Act requires the trial court to compel arbitration unless an exception applies. Here, the exception provides that state statutory wage and hour claims are generally not subject to arbitration, whether the arbitration clause is contained in the CBA or an individual agreement. Here, the Agreement stated that RNs will submit claims to arbitration, except that “wage claims within the jurisdiction of a local or state labor commissioner…are not subject to [arbitration].” Therefore, RNs Agreement allowed them to “file such non-waivable statutory claims with the appropriate agency,” which they did when they filed with the LC.

Second, on the issue of waiver, the Court found that even if an agreement states that arbitrations must follow the procedural rules in the Federal Arbitration Act and American Arbitration Association, California law nevertheless requires the court to determine whether a waiver to arbitrate has occurred. Accordingly, the trial court had jurisdiction under state law to determine whether DRMC waived its right to arbitrate RNs claims.

Finally, the Court determined that DRMC did waive its right to arbitrate through numerous actions. For example, DRMC delayed filing its petition to compel arbitration for over four years, including at least three years from when RNs filed their individual claims with the LC and one year after the LC issued its decision. Instead, DRMC actively participated in the LC proceedings, including participating in the hearing and presenting evidence and arguments. Before filing a petition to compel arbitration, for example, DRMC filed motions to remove its case in order to appeal the LC decision to federal court, filed motions of related cases, requested reassignment and transfer of the case, filed objections to RNs written discovery, and requested discovery sanctions.

Desert Regional Medical Center v. Miller, 2022 WL 18142878.

Note:

As a general rule, if an employer wants to preserve its right to arbitrate, it must promptly petition for arbitration and not actively participate in proceedings outside the arbitration forum.

Corporation’s Section 998 Settlement Offer Was Valid And Shifted Fees and Costs To Consumer.

In 2013, Smalley bought a 2014 Subaru. While the car was still under warranty, non-repairable defects surfaced. Subaru subsequently denied Smalley’s request that Subaru repurchase the vehicle, and Smalley sued Subaru.

Subaru served Smalley a Code of Civil Procedure Section 998 settlement offer for $35,001.00 and Smalley’s choice of either $10,000 for costs and attorneys’ fees, or costs and attorneys’ fees to be determined by the Court. In exchange, Smalley would have to request dismissal of his lawsuit with prejudice and return the car to the dealer and clear the title to Subaru. Smalley objected to the offer in writing as “not reasonable.”

Section 998 incentivizes settlement of lawsuits by shifting post-offer litigation fees and costs to the party who declined a more lucrative offer than the court or jury later awards after trial. In making the decision to reject Subaru’s Section 998 offer, Smalley took the risk that he would not obtain a better result, be deprived of post-offer attorney fees, and be made to pay the other side’s fees or costs.

After a civil trial, a jury awarded Smalley $27,555.74. The Court, finding the section 998 offer valid, then awarded Smalley $1,351.17 in pre-offer costs and awarded Subaru $16,684.92 in post-offer costs to account for the greater amount Subaru had offered in its 998 offer. Smalley appealed from this post-judgment order, alleging that the offer was invalid.

The Court rejected Smalley’s argument that the 998 offer was invalid because it did not specify whether he would be the prevailing party for purposes of a motion for attorneys’ fees. The Court noted that Section 998 does not require that language.

The Court also rejected Smalley’s argument that the offer was invalid because it did not distinguish expenses from costs. Relying on prior case law the Court noted “Where a section 998 offer is silent on costs and fees, the prevailing party is entitled to costs and, if authorized by statute or contract, fees.” Therefore, Smalley still would have been entitled to recover expenses, and the failure to include the word “expenses” in the offer does not make it invalid.

The Court upheld the post-judgment order for costs.

Note:

Statutory settlement incentives like 998 offers are very complex, and rejecting these offers involves monetary risks. Never reject a 998 settlement offer without first receiving sound legal advice.