Recent notable developments include:

  • Erosion of California Arbitration Contracts?:  Another recent decision from the California Courts of Appeal (Fourth District, San Diego) adds to the potential erosion of benefits obtainable from the crafting of arbitration provisions in private commercial contracts.  In this case, the Court of Appeal ordered that provisions in a contractual arbitration clause between a business franchisor and franchisee be “stricken” and disregarded as “unconscionable” to the extent they provided that the arbitrator could not award punitive, consequential or incidental damages including lost profits.  The court stated that the fundamental California arbitration statute (Code of Civil Procedure Section 1281) does not authorize the elimination of substantive legal rights.  The court also found unconscionable, and ordered stricken the arbitration provisions that prohibited representative or class actions from being handled in arbitration, although arguably this finding reflects the view that franchisor/franchisee agreements are comparable to consumer adhesion contracts, leaving room for more arbitration flexibility in commercial contracts between sophisticated parties.  (Independent Association of Mailbox Center Owners, Inc. v. Superior Court (Mailboxes etc., USA, Inc., No. D045354, October 13, 2005) 
    On the issue of exclusion of punitive and consequential damages from the arbitrator’s authority, it may be that commercial parties could first agree as between themselves to exclude punitive and consequential damages from any scope of remedies in the contract, and then separately provide for arbitration, which might at least limit contractual exposure. 
  • FCC to Scrutinize Local Franchising:  The Federal Communications Commission adopted a Notice of Proposed Rulemaking November 3 inviting public comment on its potential authority to regulate the local cable television franchising process, particularly to curb perceived abuses and delays by local franchising authorities (LFAs) in franchising large telephone companies attempting widespread rollout of video services competitive to local cable providers.  Searching for a source of legal authority to affect such local franchising determinations, the FCC has focused on the provision of Cable Act Section 621(a)(1) that an LFA “may not unreasonably refuse to award an additional competitive franchise” (47 U.S.C. Section 541(a)(1)).  Importantly, while the FCC’s interest is primarily in accelerating the grant of competitive franchises, it also invites public comment on “what problems cable incumbents have encountered with LFAs, including how best the Commission can ensure that the local franchising process is not inhibiting the ability of incumbent cable operators to invest in broadband services.”  For new entrants, the Commission draws special attention to the Cable Act provisions against redlining (avoiding or delaying service to lower income parts of town) and requiring adequate PEG access support by each cable franchisee.  Public comment deadlines will be established by publication (Notice of Proposed Rulemaking, FCC 05-189, November 3, 2005). 
    In other recent actions, the FCC has also: 

    Extended the broadcast Emergency Alert Service (EAS) rules to cable and satellite service providers (FCC 05-191, November 3, 2005); 
    Publicized its 24-hour emergency assistance line, for example in disasters requiring special temporary authorizations for communications services:  (202) 418-1122; 
    Launched a website “explaining” its broadcast obscenity, indecency and profanity rules, which for communications practitioners continue to be explainable only by astute reading of the political breezes to divine what degree of broadcast self-censorship is sufficient to avoid potential government punishment.  New online public complaint forms 475 and 475B have also been launched.  The FCC’s new censorship site can be found within 

  • Fourth Circuit Allows Private Action Against Signal Pirate:  The federal Fourth Circuit Court of Appeals ruled earlier this year in a North Carolina case that generic federal wiretapping laws provide a private cause of action by a satellite television service provider against the user of a “pirate access device” who intercepted encrypted satellite video signals.  The relevant statute makes it unlawful to “intentionally intercept, endeavor to intercept, or procure any other person to intercept or endeavor to intercept, any wire, oral, or electronic communication” (18 U.S.C. Section 2511(1)(a)).  The Fourth Circuit decision brings it current with amendments to the wiretap statute which occurred since its 1985 decision against a private cause of action for pirate signal interception.  (DirecTV Inc. v. Nicholas, Fourth Circuit No. 04-1845, April 13, 2005) 
  • California Victories Against Nuisance Litigation:  The California Courts of Appeal have provided at least two recent decisions which appear to perform the proper appellate function of filtering out bad indulgences from lower courts.  First, in a decision under California’s Proposition 65 toxics warning law which has been fertile ground for plaintiffs’ litigation, the Court of Appeal completely vacated a case settlement calling for the usual no-consumer-benefit terms plus payment of plaintiff’s attorney’s fees.  The settlement agreement included plaintiff’s admission that no violation of the law had occurred.  The Court of Appeal found that with plaintiffs conceding no violation, the court lacked jurisdiction except to dismiss the case outright, without accepting any trial court settlement.  (Consumer Cause, Inc. v. Johnson & Johnson, Court of Appeal No. B176381, September 22, 2005)  
    In another case under California’s Proposition 64 reform of the BPC 17200/Unfair Practices Law, a Court of Appeal found that an unfair practices plaintiff acting “on behalf of the general public” as a “private attorney general” who already obtained a judgment against defendant credit card association for its currency conversion fees to cardholders, lost that judgment altogether because Prop 64 was adopted while his case had been pending on appeal.  The Court of Appeal found, correctly in your editor’s view, that Prop 64 while not literally “retroactive”, simply does not allow the continuation of any 17200 lawsuit by a private plaintiff who does not claim actual injury (Schwartz v. Visa International, No. A105222, Sept. 28, 2005).  
  • California/West Employment Decisions:  Recent notable employment cases from California and the federal Ninth Circuit Court of Appeals include: 
    Employer can cover auto expenses in salary:  A California Court of Appeal has found that when a California employee is required or permitted to use a personal automobile on the job, while the employer is required to cover the employee’s on-the-job auto expense, it may do so by providing a slightly higher base compensation rate, rather than specific separate reimbursement of the auto expenses incurred. (Gattuso v. Harte-Hanks Shoppers, Inc., No. B172647, Oct. 27, 2005) 
    No 132a claim for termination where injured employee cannot perform job:  A Court of Appeal reversed a finding of the Workers Compensation Appeals Board in favor of the employee’s Labor Code Section 132(a) retaliation claim, after the employee’s job was terminated when the workplace injury caused permanent medical restrictions inconsistent with core job requirements.  In this case, a mental health therapist was assaulted and injured by a violent patient, an event considered an unavoidable requirement of that job involving the need to physically restrain large, violent patients.  While every case is fact-specific, the Court of Appeal applied the established “reasonable business necessity rule” that an employer is not guilty of retaliatory discrimination merely for not keeping an injured worker who is unqualified, has no suitable position available, or cannot perform the customary work without risk of additional injury (County of San Luis Obispo v. WCAB (Martinez), No. B182145, Oct. 19, 2005). 
    Harassment victim complains too late, loses claim:  A new decision from the federal Ninth Circuit Court of Appeals on a case from the State of Washington finds that, surprisingly, a company supervisor’s seemingly egregious and prolonged sexual harassment of a subordinate was not actionable against the employer, largely because the employee waited too long to complain (that is, did not properly use the remedies available in the workplace), did not fully report the gory  details of the harassment, and did not suffer formal adverse job action such as a demotion by the harasser (although the employee appeared to have resigned in a deeply demoralized state).  Unusually, the claimant was a male salesman under a female supervisor, whose claimed harassment seemed frequently to have occurred when both parties were voluntarily inebriated together.  This case is certainly testament to a courageous defense working with potentially intimidating facts.  (Hardage v. CBS Broadcasting, No. 03-35906, Nov. 1, 2005)   
  • New CWC Website:  Our updated, more informative and interactive website has been launched at the existing address:  Please visit.

Linked Attorney(s)