New York Arbitrator to Decide If Venue Lies in California Under California Statute—C.A.
By a MetNews Staff Writer
The Court of Appeal for this district held yesterday that a lawyer, merely by invoking Labor Code §925 which bars forcing California employees to have disputes with the employer adjudicated in another state, does not bar an out-of-state arbitrator from deciding the applicability of that provision.
Justice Elizabeth A. Grimes of Div. Eight authored the opinion. It denies a writ of mandate sought by attorney Jinshu “John” Zhang who challenged an order by Los Angeles Superior Court Judge David Sotelo staying his wrongful termination action against Dentons U.S. LLP—identified by Grimes as “a major law firm with offices throughout the United States”—pending a completion of arbitration in New York.
Zhang was a partner in the firm’s Los Angeles office. His contract with Dentons specifies that any disputes would be resolved through arbitration in either New York or Chicago, but Zhang—who claims he was fired after protesting an effort to deny him his share of a $34 million contingency fee in connection with a settlement he secured for client in China—contends that the only available forum is California in light of §925. It provides:
“(a) An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following:
(1) Require the employee to adjudicate outside of California a claim arising in California….”
It specifies, in subd. (b), that “[a]ny provision of a contract that violates subdivision (a) is voidable by the employee, and if a provision is rendered void at the request of the employee, the matter shall be adjudicated in California and California law shall govern the dispute.”
Div. Eight on Nov. 30, 2021, summarily denied Zhang’s writ petition, but the California Supreme Court on Feb. 16 granted review and retransferred the matter to the Court of Appeal with instructions to order the Los Angeles Superior Court to show cause why the petition should not be granted.
The court received further briefing from Zhang and Dentons and heard oral argument. Despite the state high court apparently leaning in favor of honoring §925, Div. Eight again denied the petition yesterday.
“The New York court is a court of competent jurisdiction to rule on Dentons’s motion to compel arbitration. The proposition that Labor Code section 925, when invoked by a plaintiff, automatically strips another state’s courts of jurisdiction is unsupported by legal authority, is antithetical to notions of comity, and is at odds with the animating purpose of the Federal Arbitration Act….
“The parties to the partnership agreement clearly and unmistakably delegated questions of arbitrability to the arbitrator. A solid body of law provides that delegation clauses are enforceable. Consequently, the New York arbitrator must decide whether petitioner is an employee and therefore entitled to the protections of Labor Code section 925.
“If the arbitrator decides petitioner is an employee for purposes of Labor Code section 925, then (as Dentons concedes), ‘none of his claims against Dentons, or Dentons’ claims against him, would ever be adjudicated outside of California.’ If the arbitrator decides petitioner is not an employee, section 925 has no application, and the merits of the parties’ dispute will be decided by arbitration in New York, as agreed.”
Meanwhile, arbitration is proceeding in New York. On Aug. 20, 2021, New York County Supreme Court Judge Barry R. Ostrager confirmed emergency awards in favor of Dentons.
That occurred one day after Zhang filed his petition for a writ of mandate in the Court of Appeal for this district.
Allegations in the litigation include Zhang’s insistence that Mike McNamara, then-CEO of Denton’s U.S. (subsequently removed from the post) forged a letter, purportedly from the client, as part of a “massive fraud” aimed At cheating him. Dentons maintains that Zhang attempted to negotiate secretly with the client in an effort to engineer a bigger share of the contingency fee for himself.
Dentons at one point removed the case from Los Angeles Superior Court to the U.S. District Court for the Central District of California, but that case bounced it back to the state court.
The case is Zhang v. Superior Court, B314386.
Paul D. Murphy and Daniel N. Csillag of the Santa Monica firm of Murphy Rosen argued for Zhang. Richard J. Doren, James P. Fogelman, Kahn A. Scolnick, Dione Garlick and Daniel R. Adler of the downtown Los Angeles office of Gibson, Dunn & Crutcher represented Dentons.
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