Bill on Arbitration Contradicts Ruling By Appeals Court

by Amanda Bronstad

If Gov. Gray Davis signs a bill now on his desk, it could send California employment law into a state of confusion.

Senate Bill 1538, passed by the state Assembly Aug. 24 and concurred by the state Senate on Aug. 30, is at odds with a decision handed down earlier this month by a three-judge panel in the U.S. Court of Appeals for the 9th Circuit, in Los Angeles.

The panel ruled on Sept. 3 that businesses can require employees to sign agreements to arbitrate discrimination claims, in direct opposition to the bill, which says employers cannot force employees to sign arbitration agreements for discrimination disputes.

"Everybody's kind of confused," said Allison Michael, an employment attorney at Jones Day Reavis & Pogue in L.A. "If the decision remains, and the bill isn't signed, you'll see employers more willing to put arbitration agreements in place. At this time, the way businesses are folding and merging, having an arbitration as a workable alternative dispute resolution is a huge goal for businesses."

Davis, who has until the end of the month to sign the bill into law or veto it, has not taken a position on the legislation, said Russ Lopez, spokesman for the Governor's office.

The court's ruling came in the case of a legal secretary fired by San Diego law firm Luce Forward Hamilton & Scripps LLP after declining to sign an agreement to arbitrate discrimination claims. The U.S. Equal Employment Opportunity Commission filed a suit on his behalf in Los Angeles County Superior Court in 1998.

A trial court ruled in favor of the secretary, but the Court of Appeals backed the firm, stating "employers may require employees to sign agreements to arbitrate claims as a condition of their employment."

Anna Park, regional attorney at the EEOC's L.A. district office, said the agency is considering whether to ask the 9th Circuit Court of Appeals to re-hear the case.

Wiped out

A local surf wear company forced to file for bankruptcy protection because of a legal dispute with a licensor owes six local law firms more than $2.7 million in unpaid legal fees.

Gotcha International, based in Irvine, filed for Chapter 11 protection Aug. 23. Since last fall, the company has been mired in a legal squabble with Ederel Sport Inc. that forced Gotcha into bankruptcy.

As part of its bankruptcy filing, Gotcha said it owed its 20 largest creditors about $3.3 million. The largest creditor, the L.A. office of Dewey Ballantine LLP, is owed about $2.4 million. Outstanding debts to Mitchell Silberberg & Knupp LLP are almost $222,000, while the local office of Stroock & Stroock & Lavan LLP has almost $93,000 in unpaid bills.

Other firms listed in the Chapter 11 filing were Buchalter Nemer Fields & Younger PC in L.A., Dapeer Rosenblit & Litvak LLP in L.A., and Christie Parker & Hale LLP in Pasadena.

Staff reporter Amanda Bronstad can be reached at (323) 549-5225 ext. 225, or at

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