Oracle’s Anti-Arbitration Line Is ‘Man Bites Dog,’ Judge Says

Posted February 15th, 2019.

As It Appeared On

By Dorothy Atkins

Law360 (February 15, 2019, 7:18 PM EST) — A Ninth Circuit panel appeared skeptical Friday of Oracle Inc.’s appeal of a decision to send an ex-worker’s putative class action over sales commission pay to arbitration, with one judge calling the company’s anti-arbitration stance ironic and a “man bites dog” situation.

During a hearing in San Francisco, U.S. District Judge Robert Lasnik, who sat on the three-judge panel by designation, said big companies are typically the ones insisting on arbitration and “making class actions disappear.” But in this case, Oracle is fighting the district judge’s decision to send plaintiff Marcella Johnson’s case to arbitration.

“There’s a man bites dog aspect to this case. Usually the big corporations are the ones who are imposing arbitration on people,” the judge said. “Don’t you see the irony here?”

Johnson originally filed her claims in California federal court, accusing Oracle of holding back $150 million in commission wages owed to sales employees by changing commission formulas that applied to past sales, sometimes even after the commissions had been paid. The commissions were allegedly reduced to align employee pay with the company’s “financial forecasts and bottom-line goals,” according to Johnson.

She voluntarily dismissed the suit after Oracle produced a mandatory arbitration agreement, and then she filed an arbitration demand with JAMS, as the agreement required. But she claims Oracle has “flatly refused” to participate in the process and asked the court to compel Oracle to arbitrate her dispute, pay its designated share of the fees and award attorneys’ fees and costs.

After a hearing on the motion to compel in November 2017, U.S. Magistrate Judge Elizabeth D. Laporte sided with Johnson, but Oracle appealed the ruling to the Ninth Circuit.

During a hearing on the appeal Friday, counsel for Oracle, Brendan Dolan of Vedder Price LLP, argued that Judge Laporte erred by failing to conduct a proper analysis under two prongs of the Federal Arbitration Act. He said she never did the first analysis to determine if there is a valid arbitration agreement, instead jumping immediately to the second step, and therefore the motion to compel should be reversed. Dolan argued that the fact Oracle has power as a corporation shouldn’t be considered until conducting an analysis under the second prong.

U.S. Circuit Judge Johnnie B. Rawlinson asked Dolan whether Oracle’s counsel clearly made its current argument on first instance to the district court. Dolan responded that they did, but not in the exact same words as on appeal, and they certainly didn’t waive the argument. But Judge Rawlinson appeared skeptical, noting that judges and attorneys both have a duty to work together to resolve disputes, but attorneys have a responsibility to frame the issues so that judges can sufficiently address them.

“The parties have an obligation to tee up the issues,” the judge said. “I see it as us all working together to come to the correct conclusion. … [A district judge] doesn’t do it separate and apart from the issues that have been framed by the parties.”

Meanwhile, Johnson’s counsel, Michael Douglas Palmer of Sanford Heisler LLP, noted that Judge Laporte said explicitly that there was “no question” that there’s an arbitration agreement between the parties, and the question is which of the two agreements apply. Therefore, Palmer said the first prong, or the threshold determination, was properly decided by the district judge. Palmer also agreed with Judge Lasnik’s suggestion that Oracle’s position is ironic.

“Oracle has to face the facts that these are their agreements, these are the documents that they wrote and they must be required to actually abide by them,” Palmer said. “They keep trying to fight them in courts, which is ironic.”

The panel took the arguments under submission.

U.S. Circuit Judges Mary M. Schroeder and Johnnie B. Rawlinson and U.S. District Judge Robert Lasnik, sitting by designation, sat on the panel.

Johnson is represented by Michael Douglas Palmer of Sanford Heisler LLP.

Oracle is represented by Brendan Dolan of Vedder Price LLP.

The case is Johnson v. Oracle America Inc., case number 17-17489, in the U.S. Court of Appeals for the Ninth Circuit.

–Additional reporting by Cara Bayles. Editing by Breda Lund.

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