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Sunday, August 16, 2020

Definitely default

A second timely ruling just dropped on Friday, and this one is most definitely not in Patreon's favor. An August 14 decision by a US District Court judge has settled what had hitherto been the undefined "due date" of the new California law intended to prevent corporations from delaying and evading arbitrations, and it means that Patreon is in material default of every single one of the Bears' 91 arbitrations. 
Dekker v. Vivint Solar, Inc., No. C 19-07918 WHA (N.D. Cal. Aug. 14, 2020)

The legislature expressly sought to avoid a "perverse incentive scheme" whereby ambiguity in the law allowed companies to delay adjudication, perhaps even affording them "an incentive to refuse to arbitrate claims . . . in the hope that the frustrated [employees and consumers] would simply abandon them." Id. at 8 (quoting Brown v. Dillard's, 430 F.3d 1004, 1012 (9th Cir. 2005)) (emphasis added).

Yet, this "perverse incentive scheme" remains a distinct possibility under defendants' theory of the due date. At the hearing, defense counsel admitted that, in their view, if JAMS hypothetically granted a due date extension after defendants missed a first given due date, § 1281.97's 30-day grace period would only begin after defendants missed the second due date (Dkt. No. 81 at 14). Under this view, the arbitrator could postpone time and again, delaying the 30-day grace period for as long as the arbitrator wished. This would subvert the whole point of the new law.

Finally, a similar action involving food delivery app Postmates illustrates how other arbitration providers have responded to the new California law. There, over ten thousand former and current Postmates drivers filed individual arbitration demands against Postmates with the American Arbitration Association on February 15, 2020, pursuant to the mandatory arbitration provisions in their contracts. The AAA notified Postmates of the filings and gave a payment due date of March 16. The AAA wrote that, subject to the newly enacted § 1281.97, "payment must be received by April 15, 2020 or the AAA may close the parties' cases," and that it would "not grant any extensions to this payment deadline." Postmates, now owing over $4.6 million in initial filing fees, sought a TRO to enjoin the drivers from enforcing § 1281.97. The court denied Postmates' request, finding, among other things, that payment of filing fees would not irreparably harm Postmates, and that the balances of equities favored the drivers, who "have an interest in having their claims heard in a timely matter." Postmates Inc. v. 10,356 Individuals, No. CV 20-2783 PSG (JEMx), 2020 WL 1908302 at *4, 9 (C.D. Cal. Apr. 15, 2020) (Judge Philip Gutierrez).

There, with Postmates owing over $4.6 million in filing fees for over ten thousand arbitrations, the court refused to temporarily suspend the due date and buy Postmates more time. Here, on the other hand, defendants owed little more than $15,000 across the eight disputes. The district court also echoed California's legislature when it weighed the competing interests and found that the drivers' prevailed. "[The drivers] have an interest in being permitted to pursue their wage and hour claims in arbitration, which is supposed to be a speedy and inexpensive alternative to litigation." Id. at *8 (internal quotations omitted). This decision, along with the clear legislative intent to prevent delays in commencing arbitration, points towards a strict enforcement of the 30-day grace period that begins upon defendants' receipt of invoice.

When AAA said payment was due by April 15 without extensions, else the arbitrators could close their case, the court enforced that deadline. This order agrees with AAA's view of § 1281.97. Here, the JAMS invoices stated that payment was due upon receipt. It is true that JAMS, perhaps in order to keep the business, was willing to let payment slide for a few weeks, but that doesn't change the fact that it was due and payable upon receipt. Defendants then had 30 days to pay or be in material breach, even if JAMS was willing to wait. Waiting is delay, and delay is exactly what the legislature sought to stop.

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32 Comments:

Blogger Avalanche August 16, 2020 7:03 AM  

Cool.

Blogger Trid August 16, 2020 7:25 AM  

"irreparable harm" is that lawyer-speak, or would a judge seriously consider letting a company off the hook because their behavior would bankrupt them via arbitration fees?

Blogger Silent Draco August 16, 2020 7:32 AM  

Sounds like a break in the square, with cavalry swirling around them. Settling up-front must look so much better, now.

Blogger Shimshon August 16, 2020 7:56 AM  

I did not realize Patreon was still in default of all the arbitrations after their recent stinging defeat in court, but it makes sense. Owen may have lost his case, but the bears that Patreon sued are almost certainly going to prevail in large numbers, even if not unanimously.

Does this mean that sans payment, default decisions will be issued, or will arbitrators need to be sued as well to enforce the law?

You mentioned JAMS arbitrators' predilections to granting extensions to companies even in violation of their own stated rules. That was a fascinating glimpse into how many different excuses can be given to get to the same outcome.

The next stage in law on the subject should a requirement that arbitrators explicitly and strictly enforce their own procedural rules. That makes it easy to document and litigate violations. If companies want leeway and forbearance and extensions, they have courts for that. And if the arbitrators don't like the rules, then change them.

Blogger Tatooine Sharpshooters' Club August 16, 2020 8:20 AM  

@2 - Anything is possible, of course, but it appears in this case the judge was simply refuting the argument Postmates was trying to use to avoid paying up. The weight of decisions gives a strong indication that the courts, arbitrators, and even the legislators are accepting no excuses. After all, arbitration is supposed to be "a speedy and inexpensive alternative to litigation", right, putative plutocrats of Silicon Valley?

Blogger Dillytont August 16, 2020 8:30 AM  

I believe not. In the Patreon case for an injunction, the judge explicitly stated that merely incurring costs didn’t amount to “irreparable harm”.

Blogger #7139 August 16, 2020 8:32 AM  

...and it means that Patreon is in material default of every single one of the Bears' 91 arbitrations.

This is excellent news. It would be wise for Patreon to pay up.

Blogger Jim August 16, 2020 9:02 AM  

Trid wrote:"irreparable harm" is that lawyer-speak, or would a judge seriously consider letting a company off the hook because their behavior would bankrupt them via arbitration fees?
"Irreparable harm" is that which cannot be remedied by the courts. Money is something courts can (theoretically) remedy. And it wouldn't be letting them off the hook, but delaying whatever harm is forthcoming until the courts have issued final ruling to ensure the harm is warranted, being that the harm is irreparable once done. Hence the "T" in "TRO."

Blogger Section 8A August 16, 2020 9:24 AM  

It looks like their attempt to run out the clock won't work. Is this simply coincidence or have parties been hashing this out previously?

Blogger Pathfinderlight August 16, 2020 9:27 AM  

Ouch. Sounds painful for some of these smaller tech companies. Too bad they put abusing their customers and employees into their business model...and tried to contract away their rights...and tried to break the rules they set.

I think that a set of laws allowing the courts to raid the fortunes of company officers may be in order for a while.

Blogger VD August 16, 2020 9:31 AM  

is that lawyer-speak, or would a judge seriously consider letting a company off the hook because their behavior would bankrupt them via arbitration fees?

As a general rule, money cannot be "irreparable harm". Money can always be moved around later. So far, no judge has let any company off the hook for the arbitration fees it owes.

Does this mean that sans payment, default decisions will be issued, or will arbitrators need to be sued as well to enforce the law?

With a few predictable exceptions related to scheduling, arbitrators tend to be pretty reliable when it comes to following guidance. It's when there is no guidance that they get wonkey. Now there is solid guidance from a strong authority, so I'd be surprised if they didn't fall uniformly in line.

Blogger VD August 16, 2020 9:32 AM  

Is this simply coincidence or have parties been hashing this out previously?

The reason the CA legislature passed the law is because every freaking company that imposes arbitration on its employees and consumers has been pulling the same stunt.

Blogger CCP August 16, 2020 9:33 AM  

Could Patreon still make much of this go away if they just reinstated Big Bear? 🐻

Blogger VD August 16, 2020 9:39 AM  

Could Patreon still make much of this go away if they just reinstated Big Bear? 🐻

No, in part because they can't reinstate him. The arbitrator ruled that the contract was terminated in October.

And also no, because Owen is not a party to the hundreds of other disputes.

Blogger Newscaper312 August 16, 2020 10:29 AM  

Congrats

Blogger Yossarian August 16, 2020 10:38 AM  

2020 is definitely not Patreon's best year ever.

Blogger Joeplanet August 16, 2020 10:54 AM  

The blue hairs will still say no victory as Patreon shutters. Onward. more!

Blogger Ray - SoCal August 16, 2020 10:57 AM  

Congrats!

Patreon made a poor choices in being in default.

http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB707

Blogger Dick August 16, 2020 11:59 AM  

I work for Vivint selling (not solar LLC Wich is separate) door to door. We have a digital agreement at the end of each sale that makes it all but impossible to file a suit, but also makes it very hard for sales people to be dishonest. The customer holds an iPad and is asked by a person on screen various questions, the customer is recorded visually and audibly answering the questions. "Did the salesman make any promises not outlined in your agreement, do you recognize your rep is not affiliated with any other alarm companies, did they outline the terms of your agreement etc.

I think it's a good thing, protects the consumer and the company. I'm blown away by these suits. I thought the company was on the up and up.

Blogger Zeroh Tollrants August 16, 2020 11:59 AM  

Add me to the list of people who didn't realize Patreon was basically in default regarding the Bears. WTF were they thinking?

Blogger Gregory the Tall August 16, 2020 12:20 PM  

@Avalanche.
I notice that this is one of your shorter contributions whilst being absolutely to the point, of course.

Blogger Shane Bradman August 16, 2020 1:13 PM  

Good news for the humble consumer advocates!

Blogger Darren August 16, 2020 2:02 PM  

Are impossible-to-ignore victories like this maybe the reason why Steph Chowder just got re-monitized?

BigTech actually foreseeing the inevitable?

Blogger Major Styles August 16, 2020 2:20 PM  

Patreon...be gone!!

Blogger Unknown August 16, 2020 2:47 PM  

20. Zeroh Tollrants August 16, 2020 11:59 AM
Add me to the list of people who didn't realize Patreon was basically in default regarding the Bears.


eh? Vox has been talking about this for weeks.

IF the courts / arbs adhere to principal and Law
THEN Patreon should basically be getting a bunch of summary judgments against them, due to failure to follow their own contract and failure to dispute the claims in arb as required.


WTF were they thinking?

that they could get an amenable authority judge, who would be willing to break existing Law and write new Law from the bench.

such as we've been seeing with the Flynn case, all of the judicial rulings against Trump and Mark Steyn being dragged through the DC courts for going on a decade now.

Blogger Unknown August 16, 2020 3:22 PM  

speaking of Steyn, Michael Mann has lost, with prejudice against Tim Ball in British Columbia and even the DC court is ordering him to start paying legal expenses for Steyn.

this is 9 years into the lawsuit now.

https://www.steynonline.com/10400/the-costs-of-mann-delay

Blogger eclecticme August 16, 2020 3:47 PM  

If Patreon is in default, what does that mean for the bears? What do they receive?

Blogger boogeyman August 16, 2020 4:16 PM  

Ralph Nader, 1965: "Hey, these cars are unsafe. Would you add some seat belts or something?"

Dark Lord and Big Bear, 2020: "I will burn you cities, salt your fields, and add your skulls to my collection."

My, how consumer advocacy has changed. This is all much more entertaining than listening to that old scarecrow babel on and on. Imagine if Trump quietly hired Vox, then tasked him to go after American tech monopolies and shady Chinese companies.

Blogger Unknown August 16, 2020 6:49 PM  

27. eclecticme August 16, 2020 3:47 PM
If Patreon is in default, what does that mean for the bears? What do they receive?


in a court proceeding, failure to respond to a pleading before the court typically results in a summary judgment in favor of the party which did appear.

whether the arbs will uphold this legal principle will be up to each arb.

Blogger eclecticme August 16, 2020 9:31 PM  

This is only a little bit OT. It is related to how big tech want to have their cake and eat it too.

Amazon sold a Chinese laptop battery to a woman and the battery caught fire and burned her. Amazon said "we're not responsible as it was a third party seller, we are just a service company." The California court said NFW.

https://www.frontpagemag.com/point/2020/08/big-tech-amazon-can-be-held-accountable-chinese-daniel-greenfield/

https://californiaglobe.com/section-2/amazon-liable-for-defective-third-party-products-rules-ca-appelate-court/

Blogger eclecticme August 16, 2020 9:56 PM  

@29
I know what default judgments are. What are the bears asking for?

Blogger eclecticme August 17, 2020 4:33 PM  

Paypal just kicked gatesofvienna.net off their system.
They had just started their quarterly fundraising.

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