The recent decision of the California Court of Appeal, Second District in Saheli v. White Memorial Medical Center (2018) 21 Cal.App.5th 308, proves again the point that what is stated in your contractual arbitration clause matters. While it may seem axiomatic that words matter, in reality business law scribes generally spend less time on crafting arbitration clauses than the business terms of an agreement.
Winning on appeal can sometimes spawn further litigation, including the launching of a malicious prosecution action. Indeed, if your client has prevailed in defeating a Uniform Trade Secrets Act (“UTSA”) case, been awarded attorney fees because the trial court found that action was brought in bad faith by the former employer, and the trial court’s decision upheld on appeal, malicious prosecution jumps out as the next logical step, right?
Maybe not. According to the California Supreme Court’s recent decision in Parrish v. Latham & Watkins, 2017 DJDAR 7724 (8/10/17), it all depends on whether your client (the former employee) brought a motion for summary judgment (or other ruling on the merits but not on technical or procedural grounds) which the former employer defeated on the merits (made a minimal showing of issues of fact requiring trial). In Parrish, a former employer sued former employees for misappropriation of trade secrets under the UTSA. After defeating the employees’ motion for summary judgment on flimsy evidence but albeit arguably meritorious, the employer lost a full evidentiary trial because the employer was shown to have no factual basis for bringing the action and did so for anti-competitive reasons. The former employees obtained substantial attorney’s fees on the grounds of bad faith as defined in the UTSA. Then, of course, they filed a malicious prosecution action against the employer’s lawyers. But that action was dismissed by way of an anti-SLAPP motion.
The United States Supreme Court recently ruled in Kindred Nursing Centers v. Clark that a Kentucky Supreme Court holding barring attorneys-in-fact from signing arbitration agreements on behalf of their principals because it infringed on their principal’s constitutional right to a trial by jury, was pre-empted by the Federal Arbitration Act (FAA). What is remarkable about the opinion authored by Justice Elena Kagan, is that it puts virtually the entire court (save for Justice Clarence Thomas who dissented and newly appointed Justice Neil Gorsuch who did not participate) on the same page in support of arbitration in a consumer action, here a health care case. Even AT & T Mobility LLC v. Concepcion (Concepcion), heavily relied upon in this decision, was decided on a 5-4 split with Justices Ginsburg, Breyer, Sotomayor and Kagan dissenting. Thus, Kindred Nursing Centers demonstrates how a majority of the Justices now broadly accepts the FAA’s pre-emption of “any state rule discriminating on its face against arbitration.” (Justice Thomas’ dissent was based solely on his belief that the FAA does not apply to state court actions.)