[00:00:07] Speaker 04:
Thank you and welcome everyone to the Ninth Circuit on the last day of argument for this week for this panel.

[00:00:20] Speaker 04:
We have some cases that are submitted this morning.

[00:00:22] Speaker 04:
I won't mention those.

[00:00:23] Speaker 04:
So they're submitted without argument and they'll be submitted as of today.

[00:00:25] Speaker 04:
But we have three cases for argument today.

[00:00:28] Speaker 04:
And the first one is Sandler versus modernizing medicine.

[00:00:35] Speaker 04:
Is that who we've got sitting here at Council table?

[00:00:37] Speaker 04:
All right, make sure you got the right one.

[00:00:38] Speaker 04:
They're all arbitration cases, I think so.

[00:00:42] Speaker 04:
Ms.

[00:00:43] Speaker 04:
Sanders, are you?

[00:00:45] Speaker 04:
Go ahead and approach the bench.

[00:00:46] Speaker 04:
Let us know your name for the record and then how much time you'd like to reserve for rebuttal.

[00:00:56] Speaker 00:
Thank you, Your Honor.

[00:00:58] Speaker 00:
My name is Leslie Sanders.

[00:00:59] Speaker 00:
I'm here representing.

[00:01:01] Speaker 00:
Is that better?

[00:01:02] Speaker 01:
Those microphones aren't very sensitive.

[00:01:05] Speaker 00:
I'll stay in it like that.

[00:01:06] Speaker 00:
There we go.

[00:01:06] Speaker 00:
All right.

[00:01:08] Speaker 00:
I'm Leslie Sanders representing modernizing medicine, the appellant in this case, and I would like to reserve three minutes for rebuttal.

[00:01:18] Speaker 00:
May it please the court.

[00:01:19] Speaker 00:
Modernizing medicine will also be referred to as modmed.

[00:01:23] Speaker 00:
So you'll hear references to modmed.

[00:01:25] Speaker 00:
You'll see them through the brief.

[00:01:26] Speaker 00:
It's one and the same.

[00:01:29] Speaker 00:
Your Honors, we are here this morning primarily related to a delegation clause in the arbitration provision in the contract.

[00:01:39] Speaker 00:
And there's no dispute that the parties agreed that the arbitrator would arbitrate arbitrability.

[00:01:47] Speaker 00:
That's not in dispute.

[00:01:49] Speaker 00:
It's a reference to jams and that's the jams procedures.

[00:01:53] Speaker 00:
So that's not disputed.

[00:01:54] Speaker 00:
What is in dispute is whether the severability clause, which is elsewhere in the agreement, creates ambiguity.

[00:02:04] Speaker 00:
And that ambiguity, if it exists, would create confusion over whether the arbitrator or the court may determine arbitrability.

[00:02:15] Speaker 00:
It's our position, as is clear in the brief, that arbitrability is delegated to the arbitrator.

[00:02:22] Speaker 01:
There's a bit of a logic question, is there not?

[00:02:26] Speaker 01:
You can't have severability until you have a decision on the delegation.

[00:02:33] Speaker 00:
That's correct.

[00:02:34] Speaker 00:
And so the bulk of our brief and the bulk of our argument is about the arbitrability, because you're right.

[00:02:42] Speaker 00:
Beyond, if we don't get past that threshold issue, you never reach it.

[00:02:46] Speaker 00:
That's correct.

[00:02:47] Speaker 00:
The only point of raising the severability at this point is simply because that's the place where both the district court and the APALEE indicate that ambiguity is created.

[00:03:00] Speaker 00:
So that's really the only purpose of referencing it at this threshold issue.

[00:03:05] Speaker 03:
Council, how do you get around the California Court of Appeal decisions, Dennis and Baker?

[00:03:11] Speaker 03:
They seem pretty on point in saying that a severability clause that references a court negates the clarity of a delegation.

[00:03:20] Speaker 00:
Your Honor, there are, first of all, let's address Denison because I think that's the threshold case that's dependent.

[00:03:28] Speaker 00:
There is a distinction in Denison that is very important.

[00:03:32] Speaker 00:
In Denison, the reference in the severability provision

[00:03:36] Speaker 00:
is specifically to the court exclusively.

[00:03:39] Speaker 00:
That's not the case here.

[00:03:41] Speaker 00:
Our provision here in the severability provision refers to a court or another body of competent jurisdiction.

[00:03:50] Speaker 03:
But you don't have that argument available for Baker, right?

[00:03:53] Speaker 03:
Because Baker does refer to a court or an arbitrator.

[00:03:57] Speaker 00:
That's correct, Your Honor.

[00:03:59] Speaker 00:
But if we look at Mohammed, which is cited, if you look at the federal case Mohammed, and interestingly, the way in which our district court here applied

[00:04:10] Speaker 00:
Mohammed in Redfin is what's, I think, of most interest in this entire case because Mohammed dealt with different provisions.

[00:04:19] Speaker 00:
So there was an arbitration provision that was broad, much like ours, but there was also a venue provision that referred to where cases would be heard.

[00:04:29] Speaker 00:
that seemed to be contradictory if everything was going to be arbitrated.

[00:04:34] Speaker 00:
But what the court said in Mohammed is that the location, a venue, doesn't negate a broad arbitration provision because any number of things could end up in court, even the enforcement of an arbitration provision.

[00:04:48] Speaker 03:
I guess, counsel, that raises the question, which law is controlling here, federal law,

[00:04:53] Speaker 03:
or state law, because Baker seems closer on the facts, right?

[00:05:00] Speaker 03:
It deals with the severability clause.

[00:05:02] Speaker 03:
The Muhammad case deals with the venue clause.

[00:05:05] Speaker 03:
So Baker is closer, but that raises the question, is Baker even binding here?

[00:05:11] Speaker 00:
It's a state law case or does federal law control your honor federal law controls because it's the Federal Arbitration Act That is that is the the that is an issue here So Mohammed and the cases under Mohammed the federal cases under Mohammed would be controlling and in the Redfin case It didn't cite directly to Mohammed, but it cited to the cases that Mohammed cited and it concluded that

[00:05:39] Speaker 00:
And it was about a severability provision.

[00:05:41] Speaker 00:
And because that severability provision referenced something other than an arbitrator, the same district court found that that did not negate the arbitrability.

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And the reason is because even in our agreement,

[00:05:58] Speaker 00:
It's a broad arbitration provision that covers most things.

[00:06:01] Speaker 00:
However, there are certain things that are delegated to the court, injunctive relief for the employer, but then also the employee is not prohibited from going to an agency.

[00:06:12] Speaker 00:
For example, the Federal Trade Commission, the NLRB, those are both agencies that at the time of this agreement would have been interested in the provisions, the restrictive covenants in the arbitration provision.

[00:06:24] Speaker 03:
So this is not a case involving restrictive covenants.

[00:06:27] Speaker 00:
No, it's not.

[00:06:28] Speaker 00:
It's not, your honor.

[00:06:29] Speaker 00:
It's just an example of those.

[00:06:30] Speaker 00:
That's really, though, restrictive covenants is the only place where either party would have a reason to go outside of arbitration.

[00:06:39] Speaker 00:
The employer for injunction and the employee, if they wanted to, if she wanted to go to an administrative agency, perhaps to challenge the restrictive covenant or even the EEOC for discrimination claim.

[00:06:51] Speaker 03:
Can I return to the question of whether federal law

[00:06:54] Speaker 03:
or state law governs here, because under general contract principles, when we are as a court, even as a federal court, interpreting contract between the parties, we generally look to state law to determine what the parties intended.

[00:07:09] Speaker 03:
And if that is right, then my hands are bound under Baker.

[00:07:15] Speaker 03:
Denison, I think I can distinguish, but Baker, I seem stuck.

[00:07:20] Speaker 03:
But then you've got Brennan, a Ninth Circuit case, which appears to be applying federal law in determining how one should interpret the meaning of the contract.

[00:07:33] Speaker 03:
So help me out here, counsel.

[00:07:36] Speaker 03:
the general principles of state law that apply to interpretation, or is it federal law that helps me decide whether something has been clearly and unmistakably delegated to the arbitrator?

[00:07:47] Speaker 00:
Thank you, Your Honor.

[00:07:48] Speaker 00:
I understand your question.

[00:07:51] Speaker 00:
So it's certainly terms, basic interpretation of contract, the classic core interpretation of contract is delegated to the state law.

[00:08:00] Speaker 00:
That is correct.

[00:08:02] Speaker 00:
But when looking at the arbitration provision, certainly the Federal Arbitration Act would say that this provision in and of itself is not violative of the law.

[00:08:16] Speaker 00:
So it's a combination.

[00:08:18] Speaker 00:
If we're looking at basic contract interpretation principles, certainly state law is applicable.

[00:08:24] Speaker 00:
But when we look at the application

[00:08:27] Speaker 00:
of the broader picture, which is arbitration.

[00:08:30] Speaker 00:
Is arbitration consumable?

[00:08:32] Speaker 00:
Is arbitration itself appropriate in this case?

[00:08:35] Speaker 00:
Then federal law does apply.

[00:08:37] Speaker 00:
I hope that answers the court's question.

[00:08:40] Speaker 00:
And back to Baker.

[00:08:43] Speaker 00:
In this case that's before the court, there is a broad agreement.

[00:08:48] Speaker 00:
It's not just an arbitration provision.

[00:08:50] Speaker 00:
It's an agreement addressing multiple things related to employment.

[00:08:54] Speaker 00:
When you see one of the cases that is cited or any of the cases that are cited to support the opposite position that relate only to arbitration, that makes a difference because in those cases, if there's a severability provision in an exclusively arbitration provision that relates to a court,

[00:09:12] Speaker 00:
That is confusing and that does create ambiguity.

[00:09:15] Speaker 00:
But here, while the restrictive covenants are not at issue here, those restrictive covenants are important because this agreement deals with more than just arbitration of employment disputes.

[00:09:29] Speaker 00:
If you look at the total picture of this provision, again, of this particular agreement, you'll see restrictive covenants, you'll see intellectual property protections, and you'll see arbitration of any employment dispute.

[00:09:47] Speaker 00:
There's no question that there are disputes encompassed within this agreement that a court could determine.

[00:09:56] Speaker 00:
And if a court would determine those issues, such as injunction or an agency would determine, such as enforceability of a restrictive covenant,

[00:10:06] Speaker 00:
then if an agency or a court would determine those issues, that's when the severability provision matters.

[00:10:13] Speaker 00:
The severability provision doesn't negate the clear instruction under JAMS, again, no dispute, that the agreement itself refers to arbitrability determination under JAMS, which is relegated to the arbitrator.

[00:10:29] Speaker 00:
So as an initial, as a threshold issue, the court should not have made the determination

[00:10:35] Speaker 00:
as to arbitrability, that should have been designated for the arbitrator itself.

[00:10:42] Speaker 03:
Counsel, did the court reach the question of whether the delegation clause itself was unconscionable?

[00:10:51] Speaker 00:
Yes.

[00:10:51] Speaker 00:
So, well, no.

[00:10:53] Speaker 00:
No, Your Honor.

[00:10:53] Speaker 00:
The delegation clause itself, it is, whether it's unconscionable, I think you could say is woven within the unconscionability determination that the court reached.

[00:11:05] Speaker 00:
It basically reached four different, looked at four different provisions that it found unconscionable.

[00:11:11] Speaker 00:
Now, again, we would argue that wasn't the court's job in this case, but looking at each one of those, you can see there's error in those decisions as well.

[00:11:26] Speaker 03:
So the first- Before we get there, counsel, did your friend on the other side argue that the delegation clause specifically was unconscionable, or was the argument only about the lack of a clear

[00:11:40] Speaker 03:
and unmistakable delegation.

[00:11:43] Speaker 00:
Your Honor, I don't want to say, because I don't know, as I stand in front of the court, I know what the court did, and the court did not raise that.

[00:11:51] Speaker 00:
That is true.

[00:11:52] Speaker 00:
I don't believe that was raised by the appellee, but it wasn't raised by the court, that I know.

[00:11:58] Speaker 00:
So the court, first of all, in the unconscionable determination, the first issue that it raised was the parties.

[00:12:08] Speaker 00:
And it effectively said that the parties were not equal.

[00:12:13] Speaker 00:
In other words, really, the non-parties that were referenced were not equal.

[00:12:20] Speaker 00:
That misses the point of employment claims.

[00:12:24] Speaker 00:
If you look at the, because remember this provision is limited to employment claims.

[00:12:30] Speaker 00:
Again, a distinction that we'll get to as we go through the unconscionability, particularly with the Cook case.

[00:12:35] Speaker 00:
But this is limited to claims related to Ms.

[00:12:38] Speaker 00:
Sandler's employment or termination from employment.

[00:12:42] Speaker 00:
So to suggest that because ModMed includes companies related to ModMed, but the employee is limited to not only ModMed, she can't sue ModMed, but she also can't sue employees or agents of ModMed.

[00:12:59] Speaker 00:
The court found that somehow that was inequitable.

[00:13:03] Speaker 00:
But what the court did not explain or did not address is the fact that in employment claims, you necessarily

[00:13:09] Speaker 00:
Uh, have differences in who the parties would be.

[00:13:12] Speaker 00:
If you're an individual employee bringing an employment claim, then obviously you could bring that claim against your employer.

[00:13:19] Speaker 03:
And sometimes, some situations there's individual liability for, uh, and the council, you, you can see though, that if the third party, so not the modmed party, but an affiliate or a third party to modmed sues your client, um,

[00:13:36] Speaker 03:
That can't go to arbitration.

[00:13:38] Speaker 00:
No, no, your honor, that would have to go to arbitration because ModMed and its affiliates is bound by arbitration.

[00:13:44] Speaker 00:
Yes.

[00:13:46] Speaker 00:
Right.

[00:13:46] Speaker 00:
They, they, anyone that's defined as ModMed, which would mean its parents, its subs, its affiliates are ModMed and they're all bound by arbitration.

[00:13:54] Speaker 00:
Just as the employee is bound if she's going to bring an employment claim, regardless if it's against ModMed or a manager, that also is bound to arbitration.

[00:14:05] Speaker 03:
Even though the third parties didn't sign the arbitration agreement?

[00:14:08] Speaker 00:
That's correct, Your Honor, because it's the scope of the provision.

[00:14:11] Speaker 00:
The scope of the provision is about employment claims.

[00:14:14] Speaker 00:
And so now there is a difference because let's say that Ms.

[00:14:20] Speaker 00:
Sandler had a workers' comp claim.

[00:14:21] Speaker 00:
That's accepted.

[00:14:23] Speaker 00:
That obviously would not have to be arbitrated because it specifically says she may go to an agency.

[00:14:30] Speaker 00:
So she could go to a workers' comp board.

[00:14:32] Speaker 00:
She could go

[00:14:33] Speaker 00:
to any administrative agency.

[00:14:35] Speaker 00:
She's not bound to arbitration in those circumstances.

[00:14:38] Speaker 00:
But she is bound to arbitration of claims.

[00:14:41] Speaker 00:
So the arbitration provision is related to claims, not parties.

[00:14:46] Speaker 00:
If she wanted to sue someone at ModMed because she purchased the ModMed software and it didn't work, then obviously that's not arbitrable because that's not an employment claim.

[00:14:58] Speaker 00:
So to find that the different definitions of the parties is somehow un-imbalanced is ignoring the fact that it relates to the nature of the claim, which is employment claims.

[00:15:18] Speaker 04:
You have one minute left of your three.

[00:15:21] Speaker 00:
Of my three?

[00:15:22] Speaker 00:
Yeah.

[00:15:22] Speaker 00:
Perhaps I should stop.

[00:15:23] Speaker 00:
You probably should.

[00:15:24] Speaker 00:
Okay.

[00:15:25] Speaker 00:
So, but the point is, we do not believe that those provisions that were found unconscionable are unconscionable.

[00:15:32] Speaker 00:
Thank you.

[00:15:33] Speaker 04:
Yeah, you'll have a minute.

[00:15:34] Speaker 00:
Okay, thank you so much.

[00:15:42] Speaker 02:
Good morning, Your Honors.

[00:15:44] Speaker 02:
May it please the court?

[00:15:46] Speaker 02:
My name is Jenna Runhill on behalf of the appellee, Kara Sandler.

[00:15:50] Speaker 02:
Can you hear me okay?

[00:15:52] Speaker 02:
Yes.

[00:15:52] Speaker 02:
All right.

[00:15:54] Speaker 02:
So order of operations are going to be the same as she was going through, starting with this delegation issue, the gateway issue of arbitrability.

[00:16:01] Speaker 02:
Now there's a presumption that courts and not arbitrators will decide arbitrability.

[00:16:05] Speaker 02:
To delegate arbitrability requires clear and unmistakable intent to do so, and this is a heightened standard.

[00:16:13] Speaker 01:
Council, what do we do with the fact that the

[00:16:16] Speaker 01:
The agreement specifically incorporates the JAMS rules and procedures for employment claims.

[00:16:23] Speaker 01:
That's a pretty clear showing of the intent of the parties to have arbitrators decide this case.

[00:16:31] Speaker 02:
So we did not dispute that the JAMS rules incorporate that Brennan's going to apply there, but where we went was that the severability clause

[00:16:39] Speaker 02:
creates the ambiguity and confusion.

[00:16:42] Speaker 01:
I'm sticking with my logical A plus B then C, A being the decision of whether or not the contract is actually enforceable.

[00:16:52] Speaker 01:
And doesn't the agreement contain a provision saying that any disputes related to the formation of the contract have to be submitted to the arbitrator for resolution?

[00:17:01] Speaker 02:
So we looked at it as a whole, right?

[00:17:03] Speaker 02:
The entire employment agreement.

[00:17:05] Speaker 01:
Not under my analysis.

[00:17:06] Speaker 02:
You've got to get A first, then you go to B, and then we come hopefully to the resolution at C. So where we went with it was that because the arbitration provision is part and parcel of a larger employment agreement,

[00:17:23] Speaker 02:
where the severability clause is in line with the arbitration provision.

[00:17:27] Speaker 01:
Doesn't it have to do with the entire formation of the contract, the employment agreement, including the enforceability of the arbitration provision?

[00:17:39] Speaker 02:
You're saying the delegation provision has to do with the entire employment agreement?

[00:17:42] Speaker 02:
I would read it as only applying to the arbitration provision itself.

[00:17:44] Speaker 01:
You're in essence challenging the legitimacy of the underlying employment agreement, are you not?

[00:17:51] Speaker 02:
Because of all of the unconscionability with that flow throughout?

[00:17:56] Speaker 01:
Yes, correct.

[00:17:57] Speaker 01:
So why isn't that covered by the provision in the arbitration clause that says any disputes with regard to the formation of the contract go to the arbitrator?

[00:18:08] Speaker 02:
I'm sorry, can you rephrase for me?

[00:18:10] Speaker 01:
The district court, I think, may have gone off the rails when it looked at

[00:18:16] Speaker 01:
the severability clause in order to answer the delegation clause.

[00:18:21] Speaker 01:
But there's no ambiguity as I read this contract.

[00:18:24] Speaker 01:
The language is pretty clear that the arbitrator basically gets to decide everything, not the court.

[00:18:32] Speaker 02:
I think that when you look at the different examples that we showed as well, there were severability clauses that were not necessarily within the arbitration provision itself.

[00:18:42] Speaker 02:
And I think under standard California law, and I believe there was a recent California Pellet Court case, which I am blanking on right now, but when you have all of these agreements that were signed at the same time, and in this one, it's just one agreement.

[00:18:53] Speaker 02:
You have to read everything in context.

[00:18:55] Speaker 01:
But it's an agreement that specifically looks to the Federal Arbitration Act that cites it.

[00:19:01] Speaker 02:
And then it also cites the California... Along with the procedures of the California Arbitration Act.

[00:19:06] Speaker 01:
And the Jams Employment Act.

[00:19:07] Speaker 02:
And the Jams Employment Rules.

[00:19:09] Speaker 02:
and so I say you cannot seclude just the reference to the jams rules to get to the delegation clause without looking at the entire agreement altogether including the severability clause because on one hand you have but again maybe I'm wrong in my in my step one step two step three analysis but I don't see where we get to the severability clause at all unless we find

[00:19:34] Speaker 01:
that there's some kind of a problem with regard to who decides step one.

[00:19:39] Speaker 01:
Is it the arbitrator or a court?

[00:19:41] Speaker 02:
And I think that given the severability clause within the entire agreement altogether causes the ambiguity because on one hand you're reading through an arbitration provision that is embedded within an employment agreement.

[00:19:52] Speaker 01:
But a severability clause, as I understand it, let's take a typical statute.

[00:19:56] Speaker 01:
Congress often includes a severability clause when it enacts a multi-section statute, does it not?

[00:20:02] Speaker 01:
And that severability clause is intended to address a situation where down the road a court invalidates one of the sections of the act.

[00:20:10] Speaker 01:
It's to make clear that we don't want the rest of all the remaining sections to be thrown out with the bathwater.

[00:20:19] Speaker 01:
You understand what I'm saying?

[00:20:21] Speaker 02:
I think, but from my view, you can't segregate the arbitration provision and the delegation agreement away from the severance clause.

[00:20:29] Speaker 01:
But in my hypothetical, you never get to the severability question until

[00:20:33] Speaker 01:
the decision-maker in my hypothetical accord declares that one of the provisions of the act is, let's say, unconstitutional or unenforceable for some reason.

[00:20:42] Speaker 01:
Then we look to the severability clause to ask whether or not the rest of the act remains standing.

[00:20:48] Speaker 01:
Why shouldn't that same logic apply to the enforcement of an employment contract that contains an arbitration provision?

[00:20:55] Speaker 02:
Because I think they are meant to all be read together under general California contract law.

[00:21:00] Speaker 02:
And I understand what you're saying is that once you've

[00:21:02] Speaker 02:
get to the arbitration provision, you're then going to look to the delegation clause and say that the arbitrator decides.

[00:21:08] Speaker 02:
But I think you under the California contract law, you have to look at it all together.

[00:21:12] Speaker 02:
And the severance clause does cause an ambiguity in all of these appellate.

[00:21:16] Speaker 03:
Yes.

[00:21:16] Speaker 03:
So even if we do look to the severability clause, what in the severability clause conflicts with the delegation clause?

[00:21:25] Speaker 02:
So the jams rules, let me pull them out specifically.

[00:21:31] Speaker 02:
State

[00:21:33] Speaker 02:
on one hand, that issues such as, quote, validity are going to go to the arbitrator.

[00:21:40] Speaker 02:
And on the other hand, the severability clause states that a court may decide the issues of things like... There's a court or a competent body.

[00:21:48] Speaker 01:
...or a competent body.

[00:21:48] Speaker 01:
...of competent jurisdiction.

[00:21:50] Speaker 01:
So why doesn't or other body of competent jurisdiction include an arbitral town?

[00:21:57] Speaker 02:
It may include an arbitral panel, but there are California appellate court cases that say that even when it's this or, either or, or a may, a court may or another court of jurisdiction may, it still creates an ambiguity.

[00:22:09] Speaker 03:
But we're not bound by those decisions, are we?

[00:22:11] Speaker 02:
The California appellate court?

[00:22:13] Speaker 02:
Yes, we are.

[00:22:14] Speaker 01:
To the extent it conflicts with the Federal Arbitration Act, which has a preference for arbitration,

[00:22:19] Speaker 01:
Why shouldn't we look to other body of competent jurisdiction to conclude that it includes the arbitral?

[00:22:26] Speaker 02:
One to your point, Judge Tong, the state law generally applies here, but also specifically in this employment agreement, there's a provision for California law to apply.

[00:22:34] Speaker 01:
But I'm suggesting that to the extent there may be a conflict between substantive California law and the Federal Arbitration Act's preference for enforcement of arbitration provisions, that the federal law would preempt or control

[00:22:49] Speaker 01:
if to the extent there's a conflict.

[00:22:55] Speaker 02:
I'm sorry, can you rephrase that for me?

[00:22:58] Speaker 02:
Yeah, I'm not following here.

[00:22:59] Speaker 01:
The problem is it's a very broad provision that purports to incorporate both specifically calls out the Federal Arbitration Act and the California arbitration statutes.

[00:23:10] Speaker 01:
Correct.

[00:23:10] Speaker 01:
And the Jams rules and procedures for employment dispute resolution.

[00:23:15] Speaker 02:
And the agreement itself has a specific governing law provision.

[00:23:18] Speaker 01:
I think you'd agree with me.

[00:23:19] Speaker 01:
There is some tension in substantive California law on enforcement of arbitration agreements and federal common law on enforcement of arbitration agreements.

[00:23:30] Speaker 01:
California has some cases that are still, as I read them, reflect the same hostility towards arbitration that prompted Congress in 1925 to enact the Federal Arbitration Act.

[00:23:43] Speaker 01:
I mean, a hundred years later, we're still seeing that tension, are we not?

[00:23:47] Speaker 01:
This case is a perfect illustration of it.

[00:23:51] Speaker 02:
I think that our one, yes, I think our California public court cases are going to govern here, regardless of being over federal law.

[00:24:00] Speaker 01:
You can't mean that.

[00:24:02] Speaker 02:
On this specific issue, this direct issue, because here we have not only are we bringing in the California Arbitration Act, but the contract itself is governed by California law.

[00:24:14] Speaker 04:
So just to try to narrow it down, I think we probably all agree that both California and federal law apply here, right?

[00:24:23] Speaker 04:
And generally on this contract.

[00:24:26] Speaker 04:
And generally that's not going to be a problem because there's not going to be a conflict.

[00:24:29] Speaker 04:
But I think the questions you're getting asked

[00:24:31] Speaker 04:
What do you do if there's a conflict, and specifically a conflict about this particular issue?

[00:24:38] Speaker 04:
And I think your answer keeps being that, well, we just apply California law, because you're pointing to the fact that the contract says California law, but it also says federal law.

[00:24:47] Speaker 04:
So the question, the specific question, or the particular question is, what do we do if there's a conflict between the two?

[00:24:57] Speaker 04:
I think Judge Talman was asking you, do you agree there's a conflict?

[00:25:01] Speaker 04:
You don't have to agree to that.

[00:25:04] Speaker 04:
But can you assume for a second that there's a conflict?

[00:25:06] Speaker 04:
Assume that we think that there's a conflict between what the Federal Arbitration Act says to do in this circumstance and what California law says.

[00:25:14] Speaker 04:
If you assume that, you keep saying, well, you've got to go with state law.

[00:25:21] Speaker 04:
But I haven't heard from you why, other than pointing out the state law is referenced, but so is federal law.

[00:25:26] Speaker 04:
So it's a specific issue of if there's a conflict here.

[00:25:30] Speaker 04:
assume for a second that there's a conflict, why wouldn't we apply the federal arbitration acts over state law?

[00:25:39] Speaker 04:
It seems like we would.

[00:25:41] Speaker 04:
Preemption.

[00:25:48] Speaker 04:
I'm not asking you to agree there's a conflict.

[00:25:50] Speaker 04:
I'm just saying if you assume, because if we think so, we have to figure out what to do with that.

[00:25:57] Speaker 02:
From my perspective here,

[00:26:02] Speaker 02:
If there is a conflict in interpretation, we are going to look at general state contract law that's going to apply to resolve that.

[00:26:10] Speaker 04:
And not, not, not that will trump the FAA.

[00:26:16] Speaker 04:
I think if I was in your shoes, I would answer.

[00:26:18] Speaker 04:
Well, the FAA incorporates state law as long as there's general principles of, but I, but it doesn't feel like that here.

[00:26:27] Speaker 04:
It feels like, you know, these, these, these California state decisions seem, I mean,

[00:26:32] Speaker 04:
So that would be, I think, your answer.

[00:26:35] Speaker 04:
But it feels like the state court decisions are sort of anti-arbitration.

[00:26:40] Speaker 04:
They don't make a lot of sense.

[00:26:43] Speaker 04:
Because you have this provision.

[00:26:45] Speaker 04:
They're reading some provision about severability that refers to not just courts, but some other, but also other bodies.

[00:26:54] Speaker 04:
And then they're reading it to knock this provision out, even though to knock out the delegation clause.

[00:27:02] Speaker 04:
If I don't have to defer those decisions, that seems completely wrong.

[00:27:06] Speaker 04:
Yeah, it just doesn't seem right to me.

[00:27:12] Speaker 04:
So why would I privilege those over federal law?

[00:27:17] Speaker 02:
I think that what the California public courts have tried to do is really hone in on this aspect of it's a heightened standard that requires a clear and unmistakable intent.

[00:27:27] Speaker 02:
And so when you're looking at... But nobody just... And we have other cases to say the Jams provisions do that.

[00:27:34] Speaker 02:
They do, but then again, we're falling back on the severability clause causing this conflict and regardless of it saying court or... The severability clause that specifically references arbitrators, if you read arbitrators into the second part of it.

[00:27:45] Speaker 02:
Well, if you read it into it, correct.

[00:27:47] Speaker 02:
But it also says... It's capacious enough to do that.

[00:27:51] Speaker 02:
That is one way of reading it.

[00:27:53] Speaker 02:
There are two alternatives, right?

[00:27:54] Speaker 02:
Court or court of competent jurisdiction.

[00:27:57] Speaker 02:
And the reference to the court, and this was in a few other of the appellate court cases as well, just the reference to it, now you have multiple ways of reasonably reading the interpretation of this contract.

[00:28:11] Speaker 02:
And in that situation, when there are multiple ways to read the language, it causes ambiguity.

[00:28:16] Speaker 02:
And when you have ambiguity, that cannot meet the heightened standard of clear and unmistakable.

[00:28:21] Speaker 01:
And that's where- Is your position that other body of competent jurisdiction means an appellate court?

[00:28:28] Speaker 01:
So we have court or appellate court?

[00:28:31] Speaker 02:
No.

[00:28:32] Speaker 02:
They didn't define what other court of competent jurisdiction means.

[00:28:35] Speaker 01:
Do you agree that it is capacious enough to include an arbitral panel?

[00:28:39] Speaker 02:
It could, but the district court pointed out that if they wanted that, they could have written that.

[00:28:43] Speaker 04:
In order to not be ambiguous, that language would have to say court or arbitrator.

[00:28:51] Speaker 04:
I think is what your argument becomes.

[00:28:54] Speaker 02:
Or remove court.

[00:28:55] Speaker 02:
Remove court.

[00:28:56] Speaker 02:
If you don't have the word court in there, it doesn't cause an ambiguity.

[00:28:59] Speaker 04:
But when I say A plus B and you say, well, the only way B means this is

[00:29:04] Speaker 04:
What B says is, if B is broad, is if you remove A, that's not logically correct.

[00:29:10] Speaker 04:
If it's A or B, you don't have to remove A to make B mean something.

[00:29:19] Speaker 02:
And the California courts have disagreed with that because they say that just the reference to it itself does create this conflict, this ambiguity, because you can read it in multiple different ways now.

[00:29:31] Speaker 02:
If you wanted to read it in a way, the straightforward way that they would like, which is the arbitrator is going to decide arbitrability.

[00:29:38] Speaker 02:
And even on severance issues, the arbitrator is going to decide they could have written that.

[00:29:42] Speaker 03:
Well, counsel on the other side did also mention that the employment agreement carves out certain disputes from arbitration, namely breaches of restrictive covenants.

[00:29:53] Speaker 03:
So there is a role for the court to play.

[00:29:55] Speaker 03:
Potentially, a court could reach the severability issue.

[00:30:00] Speaker 03:
The contract already accounts for that possibility, but this case does not involve a breach of restrictive covenants, right?

[00:30:07] Speaker 02:
It does not, but the carve-outs that are in there, we contend are unconscionable.

[00:30:13] Speaker 02:
They're one-sided carve-outs for claims that typically an employer is going to make.

[00:30:18] Speaker 03:
You're putting the cart before the horse because that question, some of us believe, should go to the arbitrator.

[00:30:25] Speaker 03:
We have to decide that question first, the delegability question.

[00:30:30] Speaker 03:
So it's no answer for you to say, well, those provisions are unconscionable.

[00:30:34] Speaker 03:
I would say, well, that's a question for the arbitrator.

[00:30:46] Speaker 02:
Is there a question in there?

[00:30:47] Speaker 02:
I'm sorry.

[00:30:47] Speaker 02:
I don't have an answer on that.

[00:30:49] Speaker 04:
All right.

[00:30:49] Speaker 04:
Well, I think we're down to the end of time.

[00:30:51] Speaker 04:
It has been a helpful discussion.

[00:30:54] Speaker 04:
I'll let you sum up or something if you have any.

[00:30:58] Speaker 02:
You know, the sum up is really what is submitted in the papers, that ModMed has asked us here, or is asking the court to look past California Pellet Law to extend Mohammed the way that the district courts, a few of the district courts have, which is saying that a venue clause, which in that case made sense, right, you had an arbitration agreement that had some arbitration opt-outs, it had a class action waiver that was

[00:31:28] Speaker 02:
carved out of the delegation clause, it said this is where the cases should be filed if you need to go to court.

[00:31:35] Speaker 02:
That made sense.

[00:31:35] Speaker 02:
It caused no conflict.

[00:31:37] Speaker 02:
Any conflict was, I think it was artificial is what they said.

[00:31:40] Speaker 02:
Here you don't have that.

[00:31:41] Speaker 02:
You have two conflicting statements about enforceability, about validity, about interpretation of the clauses, and that under California appellate law is enough and should be followed here to

[00:31:57] Speaker 02:
take delegation, put delegation, the issues of arbitrarily back with the district court.

[00:32:03] Speaker 04:
All right, counsel.

[00:32:04] Speaker 04:
Thank you very much.

[00:32:05] Speaker 04:
Appreciate your argument.

[00:32:06] Speaker 04:
I think you have close to a minute left or something like that.

[00:32:11] Speaker 04:
I guess you have a minute left.

[00:32:14] Speaker 00:
Thank you.

[00:32:16] Speaker 00:
The the issue which was articulated obviously by this court and in the briefs is

[00:32:22] Speaker 00:
You have federal cases that follow Mohammed.

[00:32:25] Speaker 00:
You have state cases that are in one of two categories.

[00:32:30] Speaker 00:
Some of the state cases relate only to arbitration provisions.

[00:32:34] Speaker 00:
If it's only an arbitration agreement, then obviously language that indicates it could go to someone other than an arbitrator could create ambiguity.

[00:32:43] Speaker 00:
That's not the case here.

[00:32:45] Speaker 00:
Here we have a contained arbitration provision.

[00:32:48] Speaker 00:
Under the Federal Arbitration Act, that arbitration provision is enforceable.

[00:32:53] Speaker 03:
Counsel, you don't have a federal case that addresses the presence of a severability clause, right?

[00:32:59] Speaker 03:
Muhammad is the closest case you have?

[00:33:01] Speaker 00:
Well, Redfin, which is the U.S.

[00:33:04] Speaker 00:
district case, that does interpret Muhammad.

[00:33:06] Speaker 00:
And it actually doesn't cite to Muhammad, but it cites to the other cases in Muhammad.

[00:33:11] Speaker 00:
And it is a severability provision.

[00:33:12] Speaker 00:
And it's the same district court.

[00:33:15] Speaker 04:
Interestingly, but it does address it and it does find that it does not negate the arbitrability delegation Thank you both for your argument is a helpful dialogue we'll move on to the next case