[00:00:04] Speaker 00:
All right, the final case on the argument calendar this morning is Tyler versus Taylor Shared Services.

[00:00:55] Speaker 06:
President Judge, when may please the court.

[00:00:57] Speaker 06:
I'd like to reserve three minutes for a bottle, please.

[00:00:59] Speaker 06:
All right.

[00:01:01] Speaker 06:
The issue is whether the district court erred in refusing to enforce the delegation provision and the party's arbitration agreement on the supposed ground that it's unconscionable under California law.

[00:01:13] Speaker 06:
I'd like to first address the substantive unconscionability holdings of the district court.

[00:01:17] Speaker 06:
The first issue is the confidentiality provision contrary to the district court's holding.

[00:01:24] Speaker 06:
The confidentiality provision is not unconscionable under the Ninth Circuit's Poublan versus C.H.

[00:01:30] Speaker 06:
Robinson decision and the California Court of Appeal Sanchez versus Carmack's decision, which both held that the confidentiality provisions at issue there were not unconscionable.

[00:01:42] Speaker 06:
The district court relied on the so-called repeat player effect identified in the Ninth Circuit's prior Davis versus O'Milvany and Meyer decision, but Poublan held that Davis does not govern

[00:01:54] Speaker 06:
California arbitration agreements because it didn't apply California law.

[00:01:59] Speaker 06:
On appeal, my opponent relies on two other California Court of Appeal decisions, Ramos v. Superior Court and Hayden v. Elegance at Dublin, both of which held that the confidentiality provisions at issue there were unconscionable, but those cases are distinguishable on two grounds.

[00:02:16] Speaker 06:
Number one, this confidentiality provision is narrower.

[00:02:21] Speaker 06:
and can be read and therefore should be read as applying only to the arbitration hearing.

[00:02:28] Speaker 06:
And so it would not bar informal discovery.

[00:02:32] Speaker 06:
And that was one of the grounds that Ramos and Hayden held made those broader confidentiality provisions unconscionable.

[00:02:41] Speaker 03:
So, I mean, really what we're talking about here is arbitration over arbitrability, this very first step.

[00:02:48] Speaker 03:
So, let's just assume for a second that the district court was incorrect and that, in fact, there's no unconscionability associated with arbitrability, the arbitration over arbitrability.

[00:03:01] Speaker 03:
Once you got to arbitration,

[00:03:03] Speaker 03:
Could the plaintiff then come in and still argue that the agreement itself was unconscionable and the arbitrator would then consider some of these arguments with respect to that broader issue?

[00:03:13] Speaker 06:
Yes, that's exactly how I understand it works.

[00:03:17] Speaker 06:
And the reason why Hayden and Ramos are distinguishable is they were concerned that California has an interest in ensuring

[00:03:26] Speaker 06:
that potential victims have access to.

[00:03:29] Speaker 06:
In Ramos it was allegations of discrimination.

[00:03:34] Speaker 06:
In Hayden it was allegations of elder abuse.

[00:03:37] Speaker 06:
There's an interest in ensuring that potential victims have access to information about alleged or a finding of elder abuse or discrimination.

[00:03:48] Speaker 06:
That just doesn't apply in this case because this isn't about the merits.

[00:03:51] Speaker 06:
This is only about

[00:03:52] Speaker 06:
whether this arbitration agreement is going to be enforced.

[00:03:55] Speaker 06:
When we start arbitrating the merits, it's a legitimate concern.

[00:03:58] Speaker 04:
First of all, I think we start with the fact there's no question that this arbitration agreement was a condition of the employment.

[00:04:05] Speaker 04:
It's a take it or leave it, correct?

[00:04:07] Speaker 05:
Agree.

[00:04:07] Speaker 04:
No dispute.

[00:04:08] Speaker 04:
And there's also no dispute that the parties agree that this was a contract of adhesion with that question.

[00:04:12] Speaker 05:
Agree.

[00:04:13] Speaker 04:
And then the level is in terms of what is the level of unconscionability, be it procedural unconscionability, unconscionability, or substantive unconscionability, correct?

[00:04:22] Speaker 06:
There needs to be both, correct?

[00:04:24] Speaker 04:
I mean, there's some agreement in the record.

[00:04:25] Speaker 04:
It appears that there's a finding of some unconscionability.

[00:04:28] Speaker 04:
The question is, what is the degree, essentially?

[00:04:31] Speaker 06:
Well, there needs to be... Not exactly, Your Honor.

[00:04:33] Speaker 04:
I think there needs to be both procedural and... But either prong, in terms of you conduct both an analysis in terms of moderate procedural unconscionability and then some substantive unconscionability.

[00:04:46] Speaker 04:
You have both, analysis under both, correct?

[00:04:49] Speaker 06:
the district court found there was at least moderate.

[00:04:51] Speaker 04:
Yeah, but I guess my point is I understand your argument is to the confidentiality provisions and your reference to Ramos, but the district court found that there were three other provisions that contributed to unconscionability, correct?

[00:05:04] Speaker 06:
True.

[00:05:05] Speaker 04:
Okay.

[00:05:05] Speaker 04:
I'm going to go through them.

[00:05:06] Speaker 04:
All right.

[00:05:06] Speaker 04:
That's good.

[00:05:07] Speaker 06:
Number two.

[00:05:09] Speaker 06:
So discovery provision.

[00:05:12] Speaker 06:
District court

[00:05:13] Speaker 06:
how that's unconscionable.

[00:05:14] Speaker 06:
District Court's wrong because under the Ramirez versus Charter Communications case from the California Supreme Court, it held that so long as the arbitration agreement, even assuming the default discovery provisions, are inadequate to permit a claimant to arbitrate arbitrability.

[00:05:31] Speaker 06:
Once the agreement says the arbitrator may order more and is showing a good cause, that, quote, eliminates any unconscionability.

[00:05:40] Speaker 06:
Now, my friend on the other side says, wait a minute, Ramirez is distinguishable because this agreement says good cause.

[00:05:46] Speaker 06:
And Ramirez didn't have that phrase good cause.

[00:05:49] Speaker 06:
My point here is I don't think that's a good argument because Ramirez is clear that we assume the arbitrator is going to act reasonably unless there's evidence to the contrary and there's no evidence to the contrary.

[00:06:00] Speaker 06:
So if, think of the district court found, if, if Tyler says, look,

[00:06:05] Speaker 06:
I've deposed three people and asked them these questions.

[00:06:08] Speaker 06:
They all said, I don't know.

[00:06:09] Speaker 06:
You have to ask somebody else.

[00:06:11] Speaker 06:
And Tyler says, so arbitrator, let me serve an interrogatory finding the right deponent or let me take another deposition.

[00:06:16] Speaker 06:
For the arbitrator to say, no, your need for more discovery is not good cause to order more discovery is patently unreasonable.

[00:06:28] Speaker 06:
And we should not assume the arbitrator will act unreasonable.

[00:06:31] Speaker 06:
assume the arbitrator would then grant more discovery.

[00:06:33] Speaker 03:
When we're talking about the availability of discovery, are we really just focused on this, you know, if this goes to the arbitrator and there's a question over arbitrability, what discovery would you get in connection with that kind of preliminary piece of this part of the arbitration?

[00:06:51] Speaker 06:
It's true.

[00:06:52] Speaker 03:
It's unclear and plaintiff doesn't make any robust argument as to what additional discovery that's kind of what I'm wondering is like what there may be some discovery limitations for the arbitration as a whole Somebody could consider those and decide, you know, they're too severe.

[00:07:05] Speaker 03:
So this contract is is void but really what we're asking about here is just this arbitration over arbitrability and what discovery would be needed in connection with that and

[00:07:16] Speaker 06:
I agree, Your Honor.

[00:07:17] Speaker 06:
My point about the arbitrator's power to order more is moot, so long as Tyler has failed to show that she doesn't have enough default discovery to begin with.

[00:07:29] Speaker 06:
I agree.

[00:07:30] Speaker 06:
So it's not unconscionable because of arbitrariness.

[00:07:33] Speaker 03:
But there could be, I mean, if somebody needed discovery over the question of arbitrability, I take it this discovery provision does apply to that?

[00:07:41] Speaker 03:
I mean, you could ask for that discovery.

[00:07:43] Speaker 03:
You have some discovery you're entitled to.

[00:07:44] Speaker 03:
This would be part of that.

[00:07:45] Speaker 03:
You could ask for more.

[00:07:47] Speaker 03:
So in this kind of preliminary phase, you do have some discovery.

[00:07:50] Speaker 03:
So it's different than like the Heckman case where there was just none.

[00:07:53] Speaker 06:
I agree, Your Honor.

[00:07:55] Speaker 00:
Right.

[00:07:55] Speaker 00:
What about the fact that the discovery restriction prohibited written interrogatories?

[00:08:02] Speaker 06:
It does prohibit written interrogatories.

[00:08:04] Speaker 00:
Right.

[00:08:07] Speaker 00:
I think I take it that you're going to argue that the district court erred in the repeat player analysis.

[00:08:14] Speaker 00:
which then was linked to essentially the imbalance that the district court found with the discovery provision.

[00:08:20] Speaker 00:
But I think to Judge Bress's point, discovery at this stage on the question of arbitrability is going to be fairly limited, and it's just a lot cheaper to do written interrogatories than to have to take depositions.

[00:08:35] Speaker 00:
And so it does play into the district court's notion of potential imbalance between a player who

[00:08:43] Speaker 00:
is a repeat player and somebody who's coming into arbitration for the first time.

[00:08:47] Speaker 00:
What do you make of that argument?

[00:08:49] Speaker 06:
I mean, I took Judge Bress' point to be it's unlikely that Tyler would need any discovery at all, written depositions.

[00:08:56] Speaker 00:
Well, I don't know.

[00:08:57] Speaker 00:
I mean, we have acknowledged that discovery sometimes is necessary, or often is necessary, even on threshold issues such as the validity of the delegation clause, right?

[00:09:08] Speaker 00:
I don't know what limited discovery there may be, and perhaps your opposing counsel can give us some examples of that.

[00:09:14] Speaker 00:
That would be helpful.

[00:09:16] Speaker 00:
But why is there restriction on written interrogatories, which I think is the simplest way to seek discovery?

[00:09:22] Speaker 00:
Does that create some sort of an imbalance that should be a concern?

[00:09:28] Speaker 04:
Can I follow up with that question from Judge Winn, in terms of the pre-existing informal imbalance?

[00:09:34] Speaker 04:
The California law has definitely recognized discovery limits to disadvantage an employee

[00:09:40] Speaker 04:
more than an employer under the Fitts case, F-I-T-Z.

[00:09:47] Speaker 04:
There's clear case law in that regard.

[00:09:49] Speaker 04:
I mean, there's clearly an imbalance and there's clearly California law that holds that in terms of the imbalance at this stage that it recognizes that discovery limits that are present here would be a disadvantage to the employee and more to the advantage of the employer.

[00:10:03] Speaker 04:
Isn't that correct?

[00:10:04] Speaker 06:
I'm willing to assume that cases like Fitz are correct.

[00:10:07] Speaker 04:
I think that's the case.

[00:10:08] Speaker 04:
I think it's Fitz, F-I-T-Z, I believe, yes.

[00:10:11] Speaker 06:
So the issue is, is it an unconscionable unbalance?

[00:10:14] Speaker 06:
Is it overly harsh?

[00:10:15] Speaker 06:
Is it unfairly one-sided?

[00:10:17] Speaker 06:
Does it shock the conscience?

[00:10:19] Speaker 06:
Right?

[00:10:19] Speaker 06:
And Poublan held that a good cause provision for more discovery makes an agreement conscionable.

[00:10:27] Speaker 06:
And Ramirez held that

[00:10:30] Speaker 06:
authorizing the arbitrator to order more discovery eliminates any unconscionability.

[00:10:37] Speaker 04:
But the Ramirez case didn't stand for the proposition that a good cause standard precludes a finding of unconscionability.

[00:10:44] Speaker 04:
Doesn't preclude that finding.

[00:10:48] Speaker 04:
I think you've argued that this good cause standard precludes a finding of unconscionability under Ramirez, and I don't really read that Ramirez says that.

[00:10:57] Speaker 06:
I think Poublon says that.

[00:10:59] Speaker 04:
Ramirez does not.

[00:11:01] Speaker 06:
Ramirez does not discuss good cause.

[00:11:03] Speaker 04:
That's right.

[00:11:03] Speaker 06:
That's true.

[00:11:04] Speaker 06:
My argument is despite the fact that Ramirez did not have a good cause requirement, that shouldn't be a dispositive difference because a reasonable arbitrator would

[00:11:16] Speaker 06:
rule that a showing of a need for more discovery is good cause to order more discovery.

[00:11:23] Speaker 06:
It would be patently unreasonable.

[00:11:24] Speaker 00:
Under this provision, if there's good cause shown, can an arbitrator order written interrogatories, or is that just off the table?

[00:11:32] Speaker 06:
Absolutely.

[00:11:33] Speaker 06:
It just says more discovery.

[00:11:35] Speaker 06:
There's no restriction on what type of discovery.

[00:11:39] Speaker 06:
But as Judge Bennett noted, there were four issues of the district court.

[00:11:45] Speaker 04:
Let's get to three and four.

[00:11:46] Speaker 06:
Yes.

[00:11:47] Speaker 06:
So the offer of judgment provision.

[00:11:49] Speaker 06:
So the district court and my opponents say there are three problems with the offer of judgment provision.

[00:11:54] Speaker 06:
I think they all fail.

[00:11:55] Speaker 06:
Number one, they say that, well, employees are typically less able to pay the other side's costs than employers.

[00:12:03] Speaker 06:
But that hypothesis applies equally in

[00:12:06] Speaker 06:
on a Rule 68 offer of judgment in federal court.

[00:12:09] Speaker 06:
It's not sensible that it's unfair to employees if it's in federal court, but it's unconscionable to employees if it's in arbitration.

[00:12:17] Speaker 06:
And they make the similar point that, well, this provides an offer of judgment provision at the outset before there's any discovery, and that is unfair to employees.

[00:12:28] Speaker 06:
But again, an employer can make a Rule 68 offer of judgment at the outset of litigation in the district court.

[00:12:35] Speaker 06:
And there wouldn't be any discovery until there's a rule 16f conference.

[00:12:39] Speaker 06:
And again, it's not sensible to hold it.

[00:12:41] Speaker 06:
That's fair in the district court, but unconscionable in arbitration.

[00:12:46] Speaker 06:
There's also this 30 to 45.

[00:12:48] Speaker 03:
But more precisely, I mean, unconscionable in arbitration over arbitrability.

[00:12:54] Speaker 03:
I mean, because I'm not even sure that the offer of judgment provision would even come into play at that very kind of step zero part of this.

[00:13:04] Speaker 06:
I read it to mean that we can make an offer of judgment of the arbitrator will hold that the arbitration agreement is enforceable.

[00:13:13] Speaker 06:
That would be the most sensible offer of judgment we would offer.

[00:13:17] Speaker 06:
But you're right, it's limited to arbitrability.

[00:13:20] Speaker 03:
It's not, there wouldn't be... Isn't an offer of judgment a money judgment?

[00:13:26] Speaker 03:
Or some other kind of actual relief to the plaintiff?

[00:13:29] Speaker 04:
But I guess I'm in the works.

[00:13:33] Speaker 04:
You go ahead.

[00:13:34] Speaker 06:
I was just going to say the point is the offer of judgment in this case would not be, will offer money.

[00:13:42] Speaker 06:
There's going to be no pressure on Tyler to say yes or no to money.

[00:13:45] Speaker 06:
It's only going to be about arbitrability.

[00:13:48] Speaker 03:
I guess I'm not following that.

[00:13:49] Speaker 03:
It seems like a Rule 68 offer is like, you know, here's some money to make this go away and if you don't accept it, there's going to be some cost consequences for you later.

[00:13:58] Speaker 06:
Well, if that's the proper way to rule, to read this offer, then it just wouldn't apply in arbitrability.

[00:14:07] Speaker 04:
Well, can't your client essentially use this offer of judgment in terms of then staying arbitration?

[00:14:16] Speaker 04:
Can't it be used to its advantage in terms of there's been no discovery of any kind and essentially a 30-day stay is automatically entered the minute there's an offer of judgment?

[00:14:27] Speaker 06:
I think that that was a fair thing that the district court said, that this probably, the state probably does favor my client.

[00:14:36] Speaker 04:
Of course it does.

[00:14:37] Speaker 04:
I mean, it would appear to be pretty obvious that it does.

[00:14:39] Speaker 06:
Okay.

[00:14:40] Speaker 06:
But again, the issue is, is it overly harsh?

[00:14:43] Speaker 06:
Does it shock the conscience?

[00:14:45] Speaker 04:
I want to make sure we give you time to get to the consolidation provision too.

[00:14:48] Speaker 00:
But if I can circle back to the state, that state doesn't go into effect until after the question of arbitrariness is decided though, right?

[00:14:57] Speaker 06:
If the offer of judgment provision doesn't apply at the arbitrability stage, then it would not go into effect at all.

[00:15:03] Speaker 00:
Well, what's your position?

[00:15:04] Speaker 00:
Does it apply at the arbitrability stage?

[00:15:06] Speaker 06:
Well, I take Judge Bress's point that probably the best reading is that it would not apply, that it would not get triggered until... Yeah, I thought that was going to be your position.

[00:15:16] Speaker 06:
I think that's a better position.

[00:15:17] Speaker 03:
I always thought that these stays were actually favorable to the plaintiff, that it prevented the defendant from running up the cost of the litigation while the offer of judgment was outstanding.

[00:15:27] Speaker 03:
And so really, I thought, just traditionally, this kind of protection exists for the party who's ultimately seeking relief, not for the defending party.

[00:15:36] Speaker 03:
I could be wrong about that.

[00:15:37] Speaker 06:
OK.

[00:15:39] Speaker 06:
Well, then that would mean that that's another reason why the district court erred in finding that it's unconscionable.

[00:15:45] Speaker 00:
I know you're running out of time and wanted to save some, but I wanted you to get to Judge Bennett's question on consolidation, and then I'll give you a couple of minutes back for rebuttal.

[00:15:53] Speaker 06:
Thank you very much.

[00:15:54] Speaker 06:
So the multiple filings provision, the district court and my opponent, what they get wrong is they claim that it entitles us to stay or phase.

[00:16:07] Speaker 06:
So Tyler has an arbitration pending, and there happens to be another arbitration pending at the same time.

[00:16:13] Speaker 06:
we're entitled now to stay or phase Tyler's arbitration pending the other arbitration.

[00:16:20] Speaker 06:
It's not accurate because let's look at how it would work.

[00:16:23] Speaker 06:
We would say to the arbitrator, all right, under this provision, we want you to stay or phase Tyler's arbitration pending the other arbitration.

[00:16:32] Speaker 06:
And Tyler would be able to say, no, you shouldn't do that because there's, because it's unfair.

[00:16:39] Speaker 06:
And there is a fairness provision literally written into the provision.

[00:16:43] Speaker 06:
that she agrees that it will be stay or phase, quote, to allow the AAA to establish efficient and fair adjudication procedures.

[00:16:52] Speaker 06:
So she can argue it would be unfair, whatever it is.

[00:16:54] Speaker 06:
I filed mine first, the other one's more complex, whatever it is.

[00:16:58] Speaker 06:
And then, again, we should assume the arbitrator would act reasonably, as if the arbitrator finds that it would be unfair to Tyler to stay or phase her case, we should assume that the arbitrator would deny our request to stay or phase.

[00:17:11] Speaker 06:
So it's not unconscionable.

[00:17:13] Speaker 00:
Thank you, counsel.

[00:17:14] Speaker 06:
Thank you.

[00:17:32] Speaker 02:
Good morning, your honor.

[00:17:33] Speaker 02:
Good morning.

[00:17:33] Speaker 02:
May it please the court.

[00:17:35] Speaker 02:
I will jump straight into the substantive unconscionability issues before the court.

[00:17:42] Speaker 00:
That's the hardest issue for me in this case because as I'm sure you're well aware, you have to show that the delegation clause itself is unconscionable and there's some blending of whether there's unconscionability potentially as to the merits claim, but we have to focus on the delegation clause.

[00:18:01] Speaker 02:
Correct.

[00:18:02] Speaker 02:
And on the issue of the confidentiality provision, the court in Pueblan, this court in Pueblan did overturn, did say that confidentiality provisions are not per se unconscionable.

[00:18:15] Speaker 02:
But the court relied on Carmack's California Court of Appeals decision.

[00:18:22] Speaker 02:
And that decision didn't actually analyze the conscionability question of confidentiality provision.

[00:18:28] Speaker 02:
It simply relied on Woodside Homes.

[00:18:31] Speaker 02:
which is a non-employment case, similarly didn't really analyze the question and only looked at it in terms of the impact on the public, not the unfairness of such a provision in an arbitration provision.

[00:18:43] Speaker 00:
In Ramos, however, the Court of Appeal, post... But how does the repeat player effect render the delegation clause unconscionable?

[00:18:54] Speaker 00:
You know, once you get into arbitration, I understand your argument.

[00:18:58] Speaker 02:
Certainly.

[00:19:01] Speaker 02:
It renders it unconscionable because it provides the employer the benefit of repeat litigation on that question.

[00:19:10] Speaker 02:
So the employer can litigate the question of delegation as many times as it needs to.

[00:19:19] Speaker 02:
But the employee doesn't have access to that prior litigation.

[00:19:22] Speaker 02:
They don't know what arguments worked, which arguments don't work, what evidence works, and what evidence doesn't work.

[00:19:28] Speaker 02:
They're not even allowed to speak to any of the other

[00:19:31] Speaker 02:
parties to those litigations about the provision or the litigation or the outcome of that.

[00:19:36] Speaker 03:
So let's just assume for a second that arbitration over arbitrability goes to the arbitrator.

[00:19:43] Speaker 03:
Let's just assume that.

[00:19:44] Speaker 03:
So then you're in front of the arbitrator and you're going to argue that what, the whole agreement essentially is unconscionable because of some of these same features we're talking about?

[00:19:55] Speaker 02:
these features and some additional ones.

[00:19:57] Speaker 03:
OK.

[00:19:58] Speaker 03:
So how does the confidentiality restrictions impede your client's ability to arbitrate arbitrability?

[00:20:07] Speaker 02:
Again, it's both the repeat player effect and informal discovery, which are two sides of the same coin.

[00:20:14] Speaker 02:
It creates an unfairness where the employer, here tailored, has access to prior cases where they've litigated the issue.

[00:20:23] Speaker 00:
That's more merits related, right?

[00:20:26] Speaker 00:
More substantive merits related.

[00:20:27] Speaker 02:
Also on the delegation, if there's litigation on the delegation clause, they've litigated that question.

[00:20:32] Speaker 02:
They've looked at the evidence that exists as a whole and specific to employees.

[00:20:38] Speaker 02:
They have access to all of that, whereas an employee doesn't have access to any of it.

[00:20:44] Speaker 03:
What evidence are we really talking about?

[00:20:46] Speaker 03:
I mean, it seems to me you have arguments about the agreement being unconscionable based on various features.

[00:20:52] Speaker 03:
These seem to be really legal arguments.

[00:20:54] Speaker 03:
There's no dispute about what the features are.

[00:20:56] Speaker 02:
There are other arguments.

[00:20:59] Speaker 02:
There's the whether the agreement was made or not, which is an argument we raised.

[00:21:03] Speaker 00:
Whether the agreement was created.

[00:21:06] Speaker 02:
Whether our client, whether Ms.

[00:21:09] Speaker 02:
Tyler consented to the agreement or not.

[00:21:12] Speaker 03:
You have your client, you get some discovery rights.

[00:21:16] Speaker 03:
How does the confidentiality affect that?

[00:21:18] Speaker 02:
You can't speak to other individuals who have been through this same process.

[00:21:22] Speaker 02:
You can't ask them what evidence they looked at, what evidence they asked for.

[00:21:26] Speaker 00:
I guess that relates to discoveries.

[00:21:27] Speaker 00:
Let's go right to that.

[00:21:29] Speaker 00:
This is not a situation like Heckman where there's no discovery rights.

[00:21:32] Speaker 00:
It just limits the discovery.

[00:21:36] Speaker 00:
The provision that I was interested in as counsel about is the restriction on written interrogatories.

[00:21:42] Speaker 00:
I don't know that that in and of itself makes it rise the level of unconscionability, because again, you know, Heckman, there's no discovery rights at all.

[00:21:54] Speaker 00:
And here you can expand the scope of discovery.

[00:21:57] Speaker 00:
And counsel said the arbitrator can even order written interrogatories under this provision.

[00:22:05] Speaker 00:
So what's your answer to that?

[00:22:08] Speaker 02:
I don't think that's a clear result of this arbitration.

[00:22:12] Speaker 02:
discovery provision.

[00:22:14] Speaker 02:
It says that interrogatories are prohibited or are not provided.

[00:22:18] Speaker 02:
It specifically identifies the type of discovery that's allowed and the good cause provision doesn't say arbitrator can expand that to interrogatories.

[00:22:28] Speaker 02:
And when you're looking at the delegation issue, now you'd have to essentially ask the arbitrator for the right to serve the interrogatories before you've even litigated any issue

[00:22:42] Speaker 02:
And it's not just, there's a distinction here between the good cause provision that Ramirez found consumable and the provision here.

[00:22:54] Speaker 02:
In Ramirez, the provision provided that, specifically provided that the arbitrator with the stated goal should allow full and equal opportunity to all parties to present evidence.

[00:23:05] Speaker 00:
But discovery for the delegation clause issue is pretty limited, isn't it?

[00:23:10] Speaker 00:
So how does this hurt you?

[00:23:11] Speaker 00:
You have the right to take depositions, three fact witness depositions, depositions of expert witnesses, make requests for production of documents, subpoena documents from third parties, and you can modify it by agreement or you can establish good cause for the arbitrator to expand discovery.

[00:23:31] Speaker 02:
Of course.

[00:23:31] Speaker 02:
And again, we're looking at the unfairness that this creates.

[00:23:36] Speaker 02:
Tyler has to look at that provision and decide, do I spend one of my three depositions determining and challenging this issue of the creation of the contract, the delegation clause?

[00:23:49] Speaker 02:
Did I actually sign it?

[00:23:51] Speaker 02:
I don't recall viewing it.

[00:23:54] Speaker 02:
We can't serve an interrogatory to get that information.

[00:23:59] Speaker 02:
And our request for production isn't going to cover that.

[00:24:02] Speaker 02:
You'd have to decide, you have to make the decision, do I spend one of my three depositions on this issue?

[00:24:08] Speaker 02:
Do I serve one of my limited numbers of requests for production on these issues?

[00:24:13] Speaker 02:
Or do I not?

[00:24:15] Speaker 03:
What discovery do you think you need to litigate arbitrability in this case?

[00:24:20] Speaker 02:
Again, well, you would need the personnel file, the arbitration agreement itself,

[00:24:26] Speaker 02:
the records, this was an electronic signature, so the records related to the signing of the agreement, whether there was consent to it or not.

[00:24:35] Speaker 03:
When that... Isn't that all stuff you could get, though, under the discovery provision, everything you've listed?

[00:24:42] Speaker 02:
It is, but you have to look at the unfairness.

[00:24:46] Speaker 02:
Taylor doesn't need to waste any of its limited discovery on those issues, because it has access to them.

[00:24:51] Speaker 04:
And Tyler clearly does not.

[00:24:53] Speaker 02:
And Tyler does not, exactly.

[00:24:54] Speaker 02:
Tyler would have to

[00:24:56] Speaker 03:
make the decision, do I spend any of this limited discovery on this issue or do I just... Isn't this an argument that can be made to the arbitrator to say, listen, if I'm going to litigate this here, I'm going to lose all my future discovery and I'm going to spend all my discovery litigating arbitrability.

[00:25:14] Speaker 03:
Therefore, the arbitrator should conclude that the whole contract is void.

[00:25:19] Speaker 03:
I mean, you'd still have to get the arbitrator to agree to all that stuff, the good cause, everything.

[00:25:23] Speaker 03:
But the issue here is just arbitration over arbitrability.

[00:25:26] Speaker 03:
You have some discovery rights in that process.

[00:25:29] Speaker 03:
I understand your argument, which is I don't want to have to use up all my discovery in that preliminary issue.

[00:25:35] Speaker 03:
And I'm worried I won't be able to litigate the case later.

[00:25:37] Speaker 03:
But isn't that a question for later?

[00:25:40] Speaker 02:
No.

[00:25:40] Speaker 02:
It goes to whether these provisions are fair to Tyler or not.

[00:25:46] Speaker 02:
and whether the delegation clause is fair, having it be covered as a covered claim, whether that's a fair issue or not.

[00:25:52] Speaker 02:
When you've limited the ability to informal discovery through the confidentiality, to formal discovery through the discovery clause, all of that creates an imbalance, an unfairness to Tyler, who is at a disadvantage in litigating this either before the court or, sorry, litigating this

[00:26:10] Speaker 02:
before the arbitrator.

[00:26:12] Speaker 02:
They're now at, Tyler would be at a disadvantage, whereas Taylor has the advantage, doesn't need to waste any of its resources on doing this discovery, on making these difficult decisions, because it already has access to all that, and it doesn't face the same limits.

[00:26:27] Speaker 02:
So, and Ramirez, which is the California Supreme Court on this issue, notes that, or cautions against looking at the discovery that is specifically required,

[00:26:39] Speaker 02:
as to the issue, and rather focus on the unfairness that existed when the contract was formed.

[00:26:45] Speaker 02:
So again, we're not looking at what Tyler specifically needs for the issue of delegation, but does it create an unfairness and imbalance at the time the contract was formed?

[00:26:55] Speaker 02:
And here it does, for the reasons we've just discussed.

[00:26:59] Speaker 00:
So it's a standard, whether it's overly harsh though, right?

[00:27:03] Speaker 00:
I'm sorry, what was that?

[00:27:05] Speaker 00:
the standards, whether it's overly harsh, this discovery provision.

[00:27:09] Speaker 02:
Correct.

[00:27:10] Speaker 02:
And here it is, where on a delegation issue, again, there's no interrogatories.

[00:27:15] Speaker 02:
You have to balance the need.

[00:27:17] Speaker 02:
And then even the clause that allows for the arbitrator to provide additional discovery, here it's not just good cause, but it requires, sorry, one moment.

[00:27:35] Speaker 02:
a showing of need as well.

[00:27:39] Speaker 02:
Whereas in Ramirez... Sure, that's what good cause is.

[00:27:42] Speaker 00:
You got to show why you need it.

[00:27:44] Speaker 00:
It's not a terribly high standard.

[00:27:46] Speaker 02:
Well, but it is because, for example, here let's say the delegation issue is at issue.

[00:27:52] Speaker 02:
Tyler decides to use a deposition, deposes a PMK on the issue, gets some information but not all of it.

[00:28:02] Speaker 02:
If you're looking at the standard that looked at in Vermeer as a provision there, which was to generate any material and substantive information and evidence, you would allow additional deposition of another witness, let's say, who's identified by that person most knowledgeable.

[00:28:21] Speaker 02:
When you're looking at a need, do you really need that?

[00:28:24] Speaker 02:
And the arbitrator's now presented with, well, is it needed?

[00:28:26] Speaker 02:
You've already deposed the

[00:28:28] Speaker 02:
person that Taylor identified as the person most knowledgeable.

[00:28:32] Speaker 00:
I understand your argument.

[00:28:33] Speaker 00:
Before you run out of time, can I have you address the offer of judgment provision?

[00:28:36] Speaker 00:
Because this is consistent with federal rules of procedure 68, right?

[00:28:42] Speaker 00:
So is there, what's the problem here?

[00:28:45] Speaker 02:
The problem is that the offer of judgment comes at the outset.

[00:28:51] Speaker 02:
Before, it's the first step in the arbitration procedure.

[00:28:56] Speaker 02:
it's prior to filing a demand for arbitration, there's an offer of judgment.

[00:29:00] Speaker 02:
So the first line of the provision is at least 45 days before filing a covered claim.

[00:29:05] Speaker 02:
So this is before Tyler is even allowed to file the claim, she must go and give Taylor the opportunity to make this offer of judgment.

[00:29:18] Speaker 02:
That gives Taylor 45 days to amass all this information that, again, it has

[00:29:25] Speaker 02:
It's tied to the confidentiality and the discovery issues.

[00:29:30] Speaker 02:
It can speak to the managers.

[00:29:32] Speaker 02:
It can address and amass all the evidence it needs on the delegation issue.

[00:29:38] Speaker 02:
While Tyler isn't prohibited from doing anything, can't conduct discovery at that point because it can't proceed with the arbitration.

[00:29:45] Speaker 02:
Even if Tyler made the decision to do discovery, use some of the limited discovery available to Tyler.

[00:29:55] Speaker 02:
You couldn't do so at that point.

[00:29:58] Speaker 02:
So it creates an unfairness and an imbalance, even on the delegation issue of, do I challenge this or not?

[00:30:07] Speaker 02:
I don't know.

[00:30:08] Speaker 02:
But Taylor has that opportunity to amass evidence, get declarations, review when the arbitration agreement was signed, if it was signed or not, and can make an offer of judgment based on that imbalance of information.

[00:30:21] Speaker 02:
Let's say there's no record that

[00:30:24] Speaker 02:
Taylor selected the I agree button.

[00:30:27] Speaker 02:
Taylor could make an offer of judgment.

[00:30:29] Speaker 02:
And Tyler doesn't know that that evidence is missing at that point.

[00:30:32] Speaker 02:
There has been no issue of delegation raised.

[00:30:36] Speaker 02:
Taylor could make that offer.

[00:30:40] Speaker 02:
And Tyler is in this unfair position of not knowing what exists, not being able to conduct discovery, and has to make a decision that's going to impact them and their ability to proceed with potential reasonable costs hanging over their head

[00:30:53] Speaker 02:
for the entirety of the litigation.

[00:31:01] Speaker 02:
And finally, the joint.

[00:31:03] Speaker 03:
And how specifically is this different than Rule 68?

[00:31:07] Speaker 02:
Rule 68 doesn't come into effect until the claim has already been filed.

[00:31:12] Speaker 02:
There has to be the litigation.

[00:31:13] Speaker 02:
It has to be pending.

[00:31:14] Speaker 02:
This is before the arbitration even can be filed.

[00:31:18] Speaker 03:
Right, but when a litigation is filed, you don't just get discovery necessarily immediately either.

[00:31:24] Speaker 02:
No, but under the federal rules, you'd get initial disclosures, you'd get, you could proceed with some discovery, you'd have the right to discovery, and you could even, you know, have it.

[00:31:36] Speaker 04:
Rule 68 clearly doesn't preclude discovery in terms of a litigant having decided that.

[00:31:41] Speaker 04:
No litigant can just muscle in under Rule 68 and stop everything and say take it or leave it.

[00:31:46] Speaker 04:
Rule 68 does not, that is not the expanse of Rule 68.

[00:31:49] Speaker 01:
Exactly.

[00:31:51] Speaker 01:
But this does limit that.

[00:31:53] Speaker 01:
This stops the litigation.

[00:31:53] Speaker 04:
I mean, just for the record, it's perfectly clear.

[00:31:55] Speaker 04:
Rule 68 does not permit a defendant in litigation to stop all the presses and take it or leave it.

[00:32:01] Speaker 04:
There's no court that can order that on the district court level.

[00:32:06] Speaker 02:
Correct.

[00:32:06] Speaker 02:
The joint proceedings provision is similarly unfair as it relates to the delegation clause.

[00:32:12] Speaker 02:
It would stay litigation in favor of Taylor to allow Taylor to combine the litigation over the delegation issue amongst other

[00:32:21] Speaker 02:
employees, that right is not provided to Tyler.

[00:32:25] Speaker 02:
It's only provided to Taylor.

[00:32:26] Speaker 02:
That is a blatantly unfair provision.

[00:32:29] Speaker 02:
And so with that, I guess my time is up.

[00:32:35] Speaker 00:
Thank you.

[00:32:35] Speaker 00:
Thank you, counsel.

[00:32:38] Speaker 00:
Put a couple of minutes.

[00:32:49] Speaker 06:
As to discovery, so I understand my friend to say that there's some limit on requests for production.

[00:32:54] Speaker 06:
That's not correct.

[00:32:55] Speaker 06:
There's no limit on requests for production, no default limit on requests for production.

[00:32:59] Speaker 06:
The arbitrator is authorized to order more.

[00:33:04] Speaker 06:
And it doesn't specifically, it's true, it doesn't specifically say the arbitrator can order interrogatories, but it can order more discovery.

[00:33:10] Speaker 04:
Mr. Kropsch, I'm going to interrupt you, but let's, I want to move to the Offer of Judgment here.

[00:33:14] Speaker 04:
Yes.

[00:33:15] Speaker 04:
And clearly the distinction, Rule 68, this doesn't lay on arbitration like this, because there's clearly, Rule 68 clearly permits some discovery, but Milligan is not put in the position of being blind in terms of take it or leave it, correct?

[00:33:29] Speaker 06:
I disagree.

[00:33:30] Speaker 04:
Let's move to the next topic.

[00:33:32] Speaker 04:
I think what troubles me in this case is the subtleties of discovery and what discovery is allowed.

[00:33:39] Speaker 04:
You have an offer of judgment in which clearly, it seems to me, Taylor can use discovery advantages to make a better offer, and Tyler has to evaluate the offer absent any discovery.

[00:33:52] Speaker 04:
in an offer of judgment.

[00:33:53] Speaker 04:
Essentially, if you have the expanse of Rule 68 laid in this fashion, how does Tyler anywhere near on equal footing with respect to Taylor if Taylor makes the offer of judgment and has a period of whether it's, in the nature of whatever the allegation is, has a period of some 45 days to have discovery and Tyler has nothing other than to sit and wait and then Tyler has to fly blind in terms of whether or not she will or will not accept it.

[00:34:21] Speaker 06:
That is not correct, Your Honor.

[00:34:23] Speaker 06:
During that stay, we are not entitled to discovery.

[00:34:26] Speaker 06:
Tyler's not entitled to discovery.

[00:34:28] Speaker 06:
There's no discovery.

[00:34:28] Speaker 04:
But you have the ability to record and to check other cases.

[00:34:31] Speaker 04:
That actually dovetails back in with

[00:34:34] Speaker 04:
the confidentiality provisions, which I think are the weakest of the four for the district court, but when you lay those on, it becomes more clear the effect of the confidentiality provisions if you then are able to lay on that an offer of judgment.

[00:34:48] Speaker 04:
How can you argue that they're clearly in equal positions in that regard?

[00:34:51] Speaker 06:
The confidentiality provision only applies to the arbitration hearing.

[00:34:55] Speaker 06:
It does not limit informal discovery.

[00:34:57] Speaker 06:
And just like in federal court,

[00:34:59] Speaker 06:
If a defendant, an employer serves a Rule 68 offer at the outside, there's no discovery.

[00:35:05] Speaker 06:
My friends at Initial Disclosures, those are essentially stayed.

[00:35:09] Speaker 06:
It's not called a stay, but they don't start until it's a Rule 16-F conference, or maybe it's a Rule 16-F conference.

[00:35:16] Speaker 04:
Well, taking Rule 16-F conference is not necessarily binding upon the district judge in terms of how that's approached is the point.

[00:35:23] Speaker 04:
I mean, I'm having a hard time understanding how Rule 68 is like a trump card to lay down on this case.

[00:35:28] Speaker 04:
Let me just get to one last question to allow you enough time in terms of the consolidation provision.

[00:35:33] Speaker 04:
As I understand it, in terms of the litigants such as Tyler or Bard from any kind of consolidation, but with respect to consolidation, Taylor determines whether it consents to consolidation or not.

[00:35:46] Speaker 04:
That's the fourth of the four factors.

[00:35:47] Speaker 04:
There are four different factors considered here by the district court judge.

[00:35:51] Speaker 06:
Yes.

[00:35:52] Speaker 04:
Okay.

[00:35:52] Speaker 04:
There's not just confidential.

[00:35:54] Speaker 04:
There are four different factors.

[00:35:55] Speaker 04:
I want to make sure we get to the consolidation provision.

[00:35:58] Speaker 04:
You feel there's equal balance there as well?

[00:36:00] Speaker 06:
Yes.

[00:36:01] Speaker 06:
I addressed the stay in the phase portion of it.

[00:36:03] Speaker 04:
Yes, you did.

[00:36:03] Speaker 06:
There's also language about how there will be no consolidation absent consent by my client.

[00:36:10] Speaker 06:
But both parties, in a previous provision, in the class action waiver provision, both parties give up the right to any consolidation to begin with.

[00:36:20] Speaker 06:
So the only way that no consolidation without my party's consent comes into effect is, I guess the arbitrator could say, despite the fact that both of you have waived your right to consolidate, what do you think about consolidating anyway?

[00:36:33] Speaker 06:
Which seems pretty unlikely.

[00:36:34] Speaker 06:
So I don't think it's, I think it's a moot point.

[00:36:38] Speaker 00:
Good.

[00:36:38] Speaker 00:
Right.

[00:36:38] Speaker 00:
Thank you, counsel.

[00:36:39] Speaker 00:
Thank you.

[00:36:40] Speaker 00:
We've taken you over your time, but we appreciate your argument on both sides.

[00:36:43] Speaker 00:
The matter is submitted, and we are in recess until tomorrow morning.

[00:36:49] Speaker 01:
All rise.