Definitely default

A second timely ruling just dropped on Friday, and this one is most definitely not in Patreon’s favor. An August 14 decision by a US District Court judge has settled what had hitherto been the undefined “due date” of the new California law intended to prevent corporations from delaying and evading arbitrations, and it means that Patreon is in material default of every single one of the Bears’ 91 arbitrations. 
Dekker v. Vivint Solar, Inc., No. C 19-07918 WHA (N.D. Cal. Aug. 14, 2020)

The legislature expressly sought to avoid a “perverse incentive scheme” whereby ambiguity in the law allowed companies to delay adjudication, perhaps even affording them “an incentive to refuse to arbitrate claims . . . in the hope that the frustrated [employees and consumers] would simply abandon them.” Id. at 8 (quoting Brown v. Dillard’s, 430 F.3d 1004, 1012 (9th Cir. 2005)) (emphasis added).

Yet, this “perverse incentive scheme” remains a distinct possibility under defendants’ theory of the due date. At the hearing, defense counsel admitted that, in their view, if JAMS hypothetically granted a due date extension after defendants missed a first given due date, § 1281.97’s 30-day grace period would only begin after defendants missed the second due date (Dkt. No. 81 at 14). Under this view, the arbitrator could postpone time and again, delaying the 30-day grace period for as long as the arbitrator wished. This would subvert the whole point of the new law.

Finally, a similar action involving food delivery app Postmates illustrates how other arbitration providers have responded to the new California law. There, over ten thousand former and current Postmates drivers filed individual arbitration demands against Postmates with the American Arbitration Association on February 15, 2020, pursuant to the mandatory arbitration provisions in their contracts. The AAA notified Postmates of the filings and gave a payment due date of March 16. The AAA wrote that, subject to the newly enacted § 1281.97, “payment must be received by April 15, 2020 or the AAA may close the parties’ cases,” and that it would “not grant any extensions to this payment deadline.” Postmates, now owing over $4.6 million in initial filing fees, sought a TRO to enjoin the drivers from enforcing § 1281.97. The court denied Postmates’ request, finding, among other things, that payment of filing fees would not irreparably harm Postmates, and that the balances of equities favored the drivers, who “have an interest in having their claims heard in a timely matter.” Postmates Inc. v. 10,356 Individuals, No. CV 20-2783 PSG (JEMx), 2020 WL 1908302 at *4, 9 (C.D. Cal. Apr. 15, 2020) (Judge Philip Gutierrez).

There, with Postmates owing over $4.6 million in filing fees for over ten thousand arbitrations, the court refused to temporarily suspend the due date and buy Postmates more time. Here, on the other hand, defendants owed little more than $15,000 across the eight disputes. The district court also echoed California’s legislature when it weighed the competing interests and found that the drivers’ prevailed. “[The drivers] have an interest in being permitted to pursue their wage and hour claims in arbitration, which is supposed to be a speedy and inexpensive alternative to litigation.” Id. at *8 (internal quotations omitted). This decision, along with the clear legislative intent to prevent delays in commencing arbitration, points towards a strict enforcement of the 30-day grace period that begins upon defendants’ receipt of invoice.

When AAA said payment was due by April 15 without extensions, else the arbitrators could close their case, the court enforced that deadline. This order agrees with AAA’s view of § 1281.97. Here, the JAMS invoices stated that payment was due upon receipt. It is true that JAMS, perhaps in order to keep the business, was willing to let payment slide for a few weeks, but that doesn’t change the fact that it was due and payable upon receipt. Defendants then had 30 days to pay or be in material breach, even if JAMS was willing to wait. Waiting is delay, and delay is exactly what the legislature sought to stop.

Score one for the concerned consumers

And it’s a very big one. Patreon’s core strategy from the start has been to try carving out an exception to the arbitrations it imposes upon all of its users in order to avoid paying the required arbitration fees. This strategy has uniformly failed, as evidenced by decisions by the arbitration company, the arbitrators, and even the Superior Court judge.

Now Patreon’s attempt to avoid permitting the arbitrators to decide if its practices are deceptive and in violation of California law or not has been comprehensively shot down by the highest relevant authority. This means that its legal strategy has been a complete and comprehensive failure, as any informed observer could have told them it would be back in December when they implemented it.

So much for those “waivers”

Patreon’s new Terms of Use are completely dead on arrival.

Dispute resolution
To summarize: If you have a problem please talk to us, but you are limited in how you can resolve disputes. You waive your right to trial by jury and your right to participate in a class action proceeding.

Except you don’t, because you can’t. Not in Patreon’s legal jurisdiction of California, anyhow. First, you simply cannot waive your right to trial by jury except for a small number of specific reasons, which basically amount to “not showing up for the trial” and “not paying the court’s filing fee”, so any contractual agreement to preemptively waive your right to trial by jury is unenforceable according to both the California legislature and the California Supreme Court.

The California Supreme Court has ruled that a contractual agreement to waive the right to a jury trial, entered into prior to any dispute between the contracting parties, is unenforceable under the California Constitution and Section 631 of the California Code of Civil Procedure (the Code).
– citation summary of Grafton Partners v. Superior Court, 36 Cal.4th 944 (Cal. 2005)

“In Grafton Partners L.P. v. Sup.Ct., 36 Cal. 4th 944, 957-61 (2005), the California Supreme Court held that pre-dispute jury waivers are unenforceable as a matter of law under the California Constitution and state contract law.”
Pallen Martial Arts, LLC v. Shir Martial Arts, LLC, No. 13-cv-05898-JST (N.D. Cal. May 23, 2014)

Nor can you waive your right to participate in a class action proceeding, so long as the class action takes place in court and not in arbitration.

In Discover Bank, the California Supreme Court applied this framework to class-action waivers in arbitration agreements and held as follows:

“[W]hen the waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then … the waiver becomes in practice the exemption of the party ‘from responsibility for [its] own fraud, or willful injury to the person or property of another.’ Under these circumstances, such waivers are unconscionable under California law and should not be enforced.” Id., at 162, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110 (quoting Cal. Civ.Code Ann. § 1668 ).

California courts have frequently applied this rule to find arbitration agreements unconscionable. See, e.g., Cohen v. DirecTV, Inc ., 142 Cal.App.4th 1442, 1451–1453, 48 Cal.Rptr.3d 813, 819–821 (2006) ; Klussman v. Cross Country

Despite Discover Bank, you can, however, waive your right to a class action arbitration, since the conflict between California law and the Federal Arbitration Act caused the California Supreme Court to distinguish between class action litigation and class action arbitration in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).

Can you spell “deceptive practices”? I knew you could….

The Lawstream’s take

Nick Rekeita, the lawyer who hosts the Lawstream, analyzes yesterday’s hearing:

Okay, here’s the skinny. If Patreon does not pay up within 30 days on all 100 of the claims, if they don’t pay up in 30 days, they’re in default. That means that they lose,  basically, and it doesn’t mean that they lose the arbitration action, because they lose this one, but then the backers can compel another one or go to court. In either case, there’s a monetary sanction, there’s also a cost of arbitration plus attorneys fees, or the backer sanctions. If Patreon doesn’t pay up, not only will they then have to go back, and they may have to pay up anyway, well, they will, I mean at some point they’ll have to pay up anyway. They’ll also end up having to pay the attorneys fees for the backers and that gets devastatingly expensive, again, millions and millions of dollars.

This is massive because if this preliminary injunction fails, look to see all of your Terms of Service updated across the board. Big Tech will be watching this, they absolutely will. Anyone who uses adhesion contracts and has arbitration clauses in it is going to be looking at this and the rules are going to change dramatically. But it also shows that we as consumers do have tools in our toolbox to go ahead and combat them, and those tools are often given to us by big tech companies.You just have to find the right situation.

Personally, I think the injunction should be denied. Why we don’t hold these companies to account for their choices is beyond me. Of course Patreon wanted this, they wanted it this way. Now the reason they wanted it this way is because they never for a moment considered that things would go down this way because I think, at their core, Patreon never considered banning creators at the onset.

It looks like it is just going to get even crazier from here. I am informed that Patreon has begun responding to the first independent arbitrations with incoherent rants directed at the JAMS National Arbitration Council. Their argument, such as it was, was explained to me:

“This should not be arbitrated because we know we will lose and we don’t like it and it’s expensive for us.”

At this point, I wouldn’t put it past Patreon to sue both JAMS and the State of California for unfairly holding them accountable to their own contracts of adhesion. The whole thing is beginning to look a lot like a Kids in the Hall sketch.

The Quartering has also put in his two cents on the situation, as has GamerGate legend Sargon of Akkad.

The obvious question the LLOE has to consider now is whether the time has arrived to call Patreon on all their idiotic posturing and bring a massive class action lawsuit against them in the Superior Court. I imagine they would suddenly recall why they mandated arbitration in the first place and do a very fast and astonishingly hypocritical 180.

An observation

If you hear your lawyer saying either of these two phrases, you’d do well to fire him on the spot. And also recognize that you’re headed for defeat.

  • Your Honor, we still feel that we have a very strong case….
  • It could be argued….
In both cases, you’re dealing with a lawyer who already knows he is beaten, but isn’t prepared to tell the client yet for fear that the checks will stop arriving. No one is more doughty in defeat than a lawyer.

Of course, there is a third phrase that is even worse.

  • We can absolutely appeal this!

I won’t comment on the 72 Bears lawsuit, except to say that I feel good, and I’m not scared at all. I just feel kind of… kind of invincible. Is it getting hot in here, or is it just me?

Supreme Court rules against President again

The Supreme Court says the President must turn over his taxes:

The U.S. Supreme Court on Thursday ruled that a New York prosecutor can obtain President Donald Trump’s financial records but prevented – at least for now – Democratic-led House of Representatives committees from getting similar documents.

Both 7-2 rulings were authored by conservative Chief Justice John Roberts. One ruling means that the subpoena issued to Trump’s long-term accounting firm, Mazars LLP, for various financial records to be turned over to a grand jury as part of a criminal investigation can be enforced.

But the court sidestepped a major ruling on whether three House committees could also obtain Trump financial documents under subpoena, giving Trump at least a short-term win. Litigation will now continue in lower courts.

In both rulings, Roberts was joined by the court’s four liberals as well as Trump’s two conservative appointees to the court, Justices Brett Kavanaugh and Neil Gorsuch.

I have no position on this, but things are rapidly getting to the point that one finds oneself beginning to wish Trump would stop arguing and tweeting and start ordering drone strikes.

Suspicions confirmed

The Chief Justice is no conservative:

A divided Supreme Court on Monday struck down a Louisiana law regulating abortion clinics, reasserting a commitment to abortion rights over fierce opposition from dissenting conservative justices in the first big abortion case of the Trump era.

Chief Justice John Roberts and his four more liberal colleagues ruled that the law requiring doctors who perform abortions to have admitting privileges at nearby hospitals violates abortion rights the court first announced in the landmark Roe v. Wade decision in 1973.

The outcome is not the last word on the decades-long fight over abortion with dozens of state-imposed restrictions winding their way through the courts. But the decision was a surprising defeat for abortion opponents, who thought that a new conservative majority with two of President Donald Trump’s appointees on board would start chipping away at abortion access.

Roberts is proving to be the most treacherous Chief Justice since Earl Warren. And he is confirming, once more, that no one is going to be voting their way out of this one.

Martial law requires Congress

But don’t rule out them begging the God-Emperor to accept it:

Recently, a rumor that President Trump would impose martial law in response to the COVID-19 pandemic went viral. The story gained enough traction that the National Security Council stepped in to reassure the public it was fake. But Americans, used to dystopian films featuring government takeovers of quiet civilian life, still wonder: Could it happen here?

The answer is probably no — at least under circumstances as they now stand.

The president’s power to declare martial law is not nearly as broad as rumors suggest. The states’ powers are greater, but they too are subject to important restrictions. Nonetheless, uncertainties in the law show the need for Congress and state legislatures to clarify the scope and limits of martial law.

The concept of “martial law” is not well understood, let alone defined, in American law. It usually refers to military forces taking over the functions of ordinary civilian government. The key words are “taking over.” Although the military often provides support and assistance for certain activities performed by civilian authorities — such as carrying out search-and-rescue missions in the aftermath of a natural disaster — actual displacement of civilian government represents a dramatic departure from normal practice.

But it has happened.

There was a period in American history when martial law was relatively common. Between 1857 and 1945, martial law was declared 70 times in the United States. In most cases, a state governor imposed it on a city, county or group of counties. This was sometimes in response to violent civil unrest but more often to break strikes on behalf of business interests. These declarations lasted anywhere from days to years. Martial law was last declared in the United States in 1966, when the governor of California imposed it to suppress unrest in the Hunters Point neighborhood of San Francisco after a white police officer shot a black teenager.

The federal government has declared martial law too, though far less frequently. Most recently, Hawaii was placed under martial law for the majority of World War II. The U.S. Army controlled every aspect of civilian life on the islands, from criminal justice to curbside trash removal.

We’ll see. It would certainly be remarkable to see the House of Representatives shift from impeaching the President to passing a law declaring martial law and asking him to sign it. But, at this point, would it really be all that surprising?

In the meantime, this picture on Google from March 31 is intriguing.

Repressing American rights

The Prime Minister of Israel publicly admits colluding with U.S. state and federal politicians to further restrict the unalienable rights of Americans:

PM of Israel@IsraeliPM
12 Feb Prime Minister Benjamin Netanyahu:
Whoever boycotts us will be boycotted. The UN Human Rights Council is a biased body that is devoid of influence. Not for nothing have I already ordered the severing of ties with it.

PM of Israel@IsraeliPM
It was also not for nothing that the American administration has taken this step together with us. In recent years, we have promoted laws in most US states, which determine that strong action is to be taken against whoever tries to boycott Israel.

Anti-BDS laws are anti-First Amendment, anti-American, and strongly suggest the sort of illegal collusion with a foreign government of which the Trump campaign was falsely accused.  They have already been blocked in Texas and will likely be correctly overturned in Georgia as well.

And while I would very much welcome a complete U.S. withdrawal from the United Nations and observably have no issue working with Israelis – we publish one Israeli author and are contracted to publish another later this year – I am adamantly opposed to all anti-BDS laws and the political corruption that underlies them on the grounds of their overt unconstitutionality. No one who wishes the state of Israel well should support such laws, as they are extremely short-sighted and will only achieve the precise opposite of their nominal objectives.

In fact, they are so obviously counterproductive that it raises the question of whether the Prime Minister is seeking to encourage the U.S. diaspora to make aliyah.