Mercado v.
Doctors Med. Center of Modesto
Filed 7/26/13 Mercado v. Doctors
Med. Center of Modesto CA5
REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN THE
COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH
APPELLATE DISTRICT
SUSAN MERCADO,
Plaintiff and Respondent,
v.
DOCTORS MEDICAL
CENTER OF MODESTO, INC.,
Defendant and Appellant.
F064478
(Super. Ct. No. 670116)
OPINION
APPEAL from a judgment of the
Superior Court of
Horvitz
& Levy, David S. Ettinger, James A. Sonne, Jeremy B. Rosen; Fox Rothschild
and Jeffrey D. Polsky for Defendant and Appellant.
Rancaño
& Rancaño and David C. Rancaño for Plaintiff and Respondent.
-ooOoo-
Defendant appeals from the order
denying its petition to compel arbitration of the disability discrimination
claims asserted in plaintiff’s complaint.
The trial court denied the petition on the ground the
unconscionable. We conclude the
agreement was not substantively unconscionable and reverse.
Plaintiff filed a complaint against
her employer, Doctors Medical Center of Modesto, Inc., alleging three causes of
action sounding in disability discrimination.
In response, defendant filed a petition to compel arbitration pursuant
to Code of Civil Procedure section 1281.2.
Defendant asserted plaintiff agreed to arbitrate employment disputes by
signing an employee acknowledgement form, which stated that she acknowledged
receipt of the employee handbook and that she voluntarily agreed to submit all
employment related disputes, with specified exceptions, to binding arbitration
in accordance with the employee handbook.
Plaintiff opposed the petition, arguing there was no
because defendant did not sign the acknowledgement, plaintiff was not aware
when she signed the acknowledgement that it included an arbitration provision,
and the arbitration agreement was unconscionable. After hearing, the trial court denied the petition
to compel on the ground the arbitration agreement was unconscionable and
therefore unenforceable. Defendant
appeals, arguing the arbitration agreement is not unconscionable and a recent
United States Supreme Court case, AT&T
Mobility LLC v. Concepcion (2011) __ U.S. __, 131 S.Ct. 1740 (
Arbitration Act (FAA) preempted the state authorities on which the trial
court’s reasoning was based.
DISCUSSION
“On petition of a party to an
arbitration agreement alleging the existence of a written agreement to
arbitrate a controversy and that a party thereto refuses to arbitrate such
controversy, the court shall order the petitioner and the respondent to
arbitrate the controversy if it determines that an agreement to arbitrate the
controversy exists, unless it determines that [¶] … [g]rounds exist for the
revocation of the agreement.†(Code Civ.
Proc., § 1281.2, subd. (b).) The party
seeking arbitration bears the burden of proving by a preponderance of the
evidence the existence of an arbitration agreement; the party opposing
arbitration bears the burden of proving by a preponderance of the evidence any
defense to enforcement of the agreement, including unconscionability. (Pinnacle Museum Tower Assn. v. Pinnacle
Market Development (US), LLC (2012) 55 Cal.4th 223, 236 (Pinnacle);
Engalla v. Permanente Medical Group, Inc.
(1997) 15 Cal.4th 951, 972.) “Absent
conflicting extrinsic evidence, the validity of an arbitration clause,
including whether it is subject to revocation as unconscionable, is a question
of law subject to de novo review.†(
Inc. (2013) 215 Cal.App.4th 695, 702 (Serpa).) Where the trial court’s decision is based on
resolution of disputed facts, however, the substantial evidence standard of
review applies to the factual findings.
(Amalgamated Transit Union Local
1277 v. Los Angeles County
107 Cal.App.4th 673, 685.)
II. Effect of
The decision in
preclude the trial court from relying on unconscionability as a ground for
invalidating an arbitration agreement.
In Concepcion, the court
overruled Discover Bank v. Superior Court
(2005) 36 Cal.4th 148 (Discover Bank),
which had held that class action waivers in certain adhesive consumer contracts
were per se unconscionable when the party with the superior bargaining power
engaged in a scheme to defraud large numbers of consumers out of individually
small sums of money; Discover Bank
reasoned such waivers had the practical effect of exempting the wrongful party
from responsibility for its own fraud. (
p. 1746.) Concepcion held that the rule set out in Discover Bank was preempted by the FAA. (Concepcion,
at p. 1753.) The FAA, which was enacted
in response to widespread judicial hostility to arbitration agreements,
provides that arbitration agreements are “valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the revocation of any
contract.†(9 U.S.C. § 2.) The final provision, the “saving clause,â€
“permits agreements to arbitrate to be invalidated by ‘generally applicable
contract defenses, such as fraud, duress, or unconscionability,’ but not by defenses
that apply only to arbitration or that derive their meaning from the fact that
an agreement to arbitrate is at issue.â€
(Concepcion, at p. 1746.) The Concepcion
court concluded the FAA did not permit a state to rely on categorical rules
prohibiting arbitration of a particular type of claim. (Id.
at p. 1747.) Although California’s
general unconscionability doctrine was not such a categorical rule, because the
Discover Bank rule would apply to
most consumer contracts, it stood “as an obstacle to the accomplishment of the
FAA’s objectives, †one of which was to “‘ensure the enforcement of arbitration agreements according to their
terms so as to facilitate streamlined proceedings.’†(Concepcion,
at p. 1748.) Allowing a party to a
consumer contract to demand class wide arbitration notwithstanding an express
class arbitration waiver in the arbitration agreement “interferes with
fundamental attributes of arbitration and thus creates a scheme inconsistent
with the FAA.†(Ibid.) Further, imposing
class wide arbitration on a party who did not agree to it is inconsistent with
the FAA. (Id. at pp. 1750–1751.)
Concepcion does not “preclude[] a court from relying on
unconscionability as a ground for invalidating an arbitration provision …
for three reasons. First, our Supreme
Court’s decision in Pinnacle, which
was handed down more than a year after Concepcion, applied California’s
traditional unconscionability principles in concluding that an arbitration
provision governing a condominium complex was not unconscionable. Second, Concepcion itself recognized
the continuing validity of the doctrine of unconscionability as a basis for
declaring an arbitration agreement unenforceable. [Citation.]
Third, the California Courts of Appeal have recognized that ‘Concepcion
did not eliminate state law unconscionability as a defense to the enforcement
of arbitration agreements subject to the Federal Arbitration Act.’ [Citations.]â€
(Vargas v. SAI Monrovia B, Inc.
(2013) 216 Cal.App.4th 1269, 1287–1288.)
Accordingly,
unconscionability remains a valid basis for refusing to enforce an arbitration
agreement when it does not interfere with the fundamental attributes of
arbitration.
III. Agreement to
Arbitrate
Plaintiff’s complaint
alleges she was employed by defendant.
Defendant presented evidence that plaintiff entered into an agreement to
arbitrate disputes arising out of her employment with defendant. The agreement was headed “EMPLOYEE
ACKNOWLEDGMENT,†bore plaintiff’s signature, and was dated April 23, 2007. It contained the following language:
“I acknowledge that I have received
a copy of the Tenet Fair Treatment Process brochure. Except
to the extent that any applicable collective bargaining agreement provided
otherwise, I hereby voluntarily agree to use the Company’s Fair Treatment
Process and to submit to final and binding arbitration any and all claims and
disputes except ‘Excluded Issues’ that are related in any way to my employment
or the termination of my employment with Tenet.
I understand that final and binding arbitration will be the sole and exclusive
remedy of any such claim or dispute against Tenet or its parent, subsidiary or
affiliated companies or entities, and each of its and/or their employees,
officers, directors or agents, and that, by agreeing to use of arbitration to
resolve my dispute, both the Company and I agree to forego any right we each
may have had to a jury trial on issues covered by the Fair Treatment
Process. I also agree that such
arbitration will be conducted before an experienced arbitrator chosen by me and
the Company, and will be conducted under the Federal Arbitration Act and the
procedural rules of American Arbitration Association (‘AAA’).
“I further acknowledge that in
exchange for my agreement to arbitrate, the Company also agrees to submit all
claims and disputes it may have with me to final and binding arbitration, and
that the Company further agrees that if I submit a request for binding
arbitration, my maximum out-or pocket [sic]
expenses for the arbitrator and the administrative cost of the AAA will be an
amount equal to one day’s pay (if I am an exempt employee) or eight times my
hourly rate of pay (if I am a non-exempt employee), and that the Company will
pay all of the remaining fees and administrative costs of the arbitrator and
the AAA. I further acknowledge that this
mutual agreement to arbitrate may not be modified or rescinded except in
writing by both me and the Company.â€
In support of its
petition to compel arbitration, defendant presented evidence that defendant is
a subsidiary of Tenet. It also presented
an excerpt from its employee handbook setting out the provisions of the Fair
Treatment Process (FTP). The FTP
included five steps for resolving employment disputes, the last of which was
final and binding arbitration. It
provided that the FTP applied to all employees and covered “all disputes
relating to or arising out of an employee’s employment with the company or the
termination of employment.†It
stated: “Your decision to accept
employment or to continue employment with the company constitutes your
agreement to be bound by the FTP.
Likewise, the company agrees to be bound by the FTP. This mutual agreement to arbitrate claims
means that both you and the company are bound to use the FTP as the only means
of resolving employment-related disputes and to forego any right either may
have to a jury trial on issues covered by the FTP.â€
Plaintiff admitted she was employed by defendant;
she did not dispute that she signed the arbitration agreement submitted by
defendant. Rather, she declared that she
“was under the impression†the employee acknowledgment she signed on April 23,
2007, “was a code of ethics agreement†between herself and defendant. She stated:
“Since my hire in 2001 I have had to sign a code of ethics agreement
every year in order to keep my employment.â€
Plaintiff asserted she “believed [she] had no choice but to sign it in
order to keep [her] employment with DMC.â€
Plaintiff, who bore the burden of proving any
defense to enforceability of the arbitration agreement, presented no evidence
of the circumstances under which she signed the agreement. There was no evidence that defendant, or
anyone connected with it, misrepresented the nature of the document she signed
or deceived her in any way about the content of the acknowledgment form. She presented no evidence defendant prevented
her from reading the document before signing it, or denied her sufficient time
to read it. Apparently, she simply
signed the employee acknowledgment without reading it to determine its
content. A party who fails to read a
contract, but objectively manifests assent by signing it, may not avoid its
effect by claiming he or she did not agree to its terms. (Stewart
v. Preston Pipeline Inc. (2005) 134 Cal.App.4th 1565, 1589 (
fraud, overreaching or excusable neglect, that one who signs an instrument may
not avoid the impact of its terms on the ground that he failed to read the
instrument before signing it.’ [Citations.]†(Id.
at pp. 1588–1589.)
Plaintiff argues that the
arbitration agreement is not enforceable because it is not mutually binding on
plaintiff and DMC. She asserts the
Employee Acknowledgment was an agreement between plaintiff and Tenet only,
concerning her employment with Tenet (which did not exist), and she had no
dispute with Tenet (which was not a party to her action against DMC). She points to language in the Employee
Acknowledgment stating that she voluntarily agreed “to submit to final and binding
arbitration any and all claims and disputes … related in any way to my
employment or the termination of my employment with Tenet.†(Italics
added.) From this she concludes DMC was
not a party against whom she could enforce the arbitration agreement;
consequently, it was not mutually binding or mutually enforceable.
The
Employee Acknowledgment, however, contains provisions mentioning Tenet and
numerous other provisions concerning “the Company.†The first paragraph contains an
acknowledgment of the receipt of the Tenet Healthcare Corporation Employee
Handbook and Standards of Conduct, which contain “important information about
the Company’s general personnel policies and about my privileges and
obligations as an employee.†The
Employee Acknowledgment reflects plaintiff’s understanding that her “employment
with the Company is not for a specified term†and “either I or the Company can
terminate my employment relationship at will.â€
The arbitration agreement reflects plaintiff’s voluntary agreement to use
“the Company’s Fair Treatment Process†and to submit to arbitration her claims
or disputes related to her employment or termination of her employment with
Tenet, including claims against Tenet or its subsidiary. The agreement also states that she and “the
Company†agree to forego the right to a jury trial, and will mutually choose
the arbitrator. It states that, in
exchange for plaintiff’s agreement to arbitrate, “the Company also agrees to
submit all claims and disputes it may have with me to final and binding
arbitration.â€
Plaintiff
conceded in her declaration that DMC was her employer. She did not dispute defendant’s evidence that
DMC was a subsidiary of Tenet. Although
neither party submitted any provision of the agreement or the FTP that defined
the term “the Company,†in context, it is clear the references to “the Companyâ€
in the arbitration agreement meant plaintiff’s employer, DMC. Plaintiff offers no explanation why, if the
term “the Company†referred to Tenet and she was not employed by Tenet, as she
contends, she signed an acknowledgment of her at will employment with Tenet.
The
trial court found that “although there is an apparent agreement to arbitrate
any disputes or claims that are related in any way to employment or termination
of employment with Defendant medical center, other grounds exist for the
revocation of such agreement.†Thus, it
found that an arbitration agreement existed between plaintiff and DMC, but that
it was revocable, or unenforceable, because it was unconscionable. To the extent this finding was based on
factual evidence, such as the identity of plaintiff’s employer, it is supported
by substantial evidence. To the extent
it is based on interpretation of the terms of the Employee Acknowledgment and
the FTP, we agree that the agreement was between plaintiff and DMC and
concerned her employment with DMC, although it also included some provisions
concerning disputes she might have with DMC’s parent, Tenet. Plaintiff’s claim that the agreement lacked
mutuality because DMC was not bound by it is without merit.
The trial court correctly found there was “an
apparent agreement to arbitrate any disputes or claims that are related in any
way to employment or termination of employment with Defendant medical
center.†The remaining question is
whether the unconscionability of that agreement justified the trial court’s
refusal to enforce it.
IV. Unconscionability
Under
California law, unconscionability is a defense against enforcement of contracts
in general: “If the court as a matter of
law finds the contract or any clause of the contract to have been
unconscionable at the time it was made the court may refuse to enforce the
contract, or it may enforce the remainder of the contract without the
unconscionable clause, or it may so limit the application of any unconscionable
clause as to avoid any unconscionable result.â€
(Civ. Code, § 1670.5, subd. (a).)
“Unconscionability consists of both procedural and substantive elements. The procedural element addresses the
circumstances of contract negotiation
and formation, focusing on oppression or surprise due to unequal bargaining
power. [Citation.] Substantive unconscionability pertains to the
fairness of an agreement’s actual terms and to assessments of whether they are
overly harsh or one-sided.
[Citations.] A contract term is
not substantively unconscionable when it merely gives one side a greater
benefit; rather, the term must be ‘so one-sided as to “shock the
conscience.â€â€™ [Citation.]†(Pinnacle,
supra, 55 Cal.4th at p. 246.)
“Both procedural unconscionability
and substantive unconscionability must be shown, but ‘they need not be present
in the same degree’ and are evaluated on ‘“a sliding scale.â€â€™ [Citation.] ‘[T]he more substantively oppressive the
contract term, the less evidence of procedural unconscionability is required to
come to the conclusion that the term is unenforceable, and vice versa.’ [Citation.]â€
(Pinnacle, supra, 55
Cal.App.4th at p. 247.)
A. Procedural
unconscionability
“[P]rocedural
unconscionability requires oppression or surprise. ‘“Oppression occurs where a contract involves
lack of negotiation and meaningful choice, surprise where the allegedly
unconscionable provision is hidden within a prolix printed form.â€â€™ [Citation.]â€
(Pinnacle, supra, 55 Cal.4th
at p. 247.) “The procedural element of
an unconscionable contract generally takes the form of a contract of
adhesion. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071 (
contract, which, imposed and drafted by the party of superior bargaining
strength, relegates to the subscribing party only the opportunity to adhere to
the contract or reject it.’
[Citation.]†(
v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113.)
“It is well settled that adhesion contracts in the
employment context, that is, those contracts offered to employees on a
take-it-or-leave-it basis, typically contain some aspects of procedural
unconscionability.†(
704.)
Plaintiff
presented no evidence of the circumstances under which she signed the Employee
Acknowledgment, so there was no specific evidence it was presented to her on a
take-it-or-leave-it basis. The FTP,
however, which plaintiff agreed to use to resolve any employment disputes,
included provisions that the FTP applied to all employees and that accepting or
continuing employment with defendant “constitutes your agreement to be bound by
the FTP.†These provisions suggest
plaintiff would not have been permitted to opt out of the arbitration agreement
or to negotiate terms other than those contained in the FTP. Thus, the arbitration agreement was adhesive.
Plaintiff
asserts surprise was established because the Employee Acknowledgment was located
on page 103 of the employee handbook and did not conspicuously advise that it
contained an arbitration provision.
There is no evidence in the record demonstrating that the acknowledgment
appeared on page 103 of the employee handbook.
The declaration of Michele Bava, submitted by defendant in support of
the petition to compel arbitration, merely states that exhibit A to her
declaration is “a true and correct copy of an Employee Acknowledgment Form
signed by†plaintiff. Exhibit A to her
declaration consists of the one-page Employee Acknowledgment and a second
one-page employee acknowledgment, which acknowledges receipt of an employee
handbook supplement. Plaintiff’s
declaration in opposition to the petition says nothing about the form being
part of the employee handbook.
The
Employee Acknowledgment, as presented, is a one-page document, containing five
paragraphs, with the heading “Employee Acknowledgment†at the top and an
employee signature line and date at the bottom.
The first three paragraphs acknowledge receipt of a copy of the employee
handbook and standards of conduct, express an understanding that the employee
is “expected to read, understand, familiarize [himself or herself] with and
comply with the policies contained in them,†and acknowledge the employment is
at will. The last two paragraphs of the
document set out the arbitration agreement.
There is no separate heading identifying it as an arbitration agreement,
and it does not appear in larger or darker typeface. It does, however, take up half of the page,
immediately above plaintiff’s signature.
The
Employee Acknowledgment provided that the arbitration “will be conducted under
the Federal Arbitration Act and the procedural rules of American Arbitration
Association (‘AAA’).†Plaintiff asserts
that the failure to furnish her a copy of the AAA procedures at the time she
signed the arbitration agreement is further evidence of procedural
unconscionability. Cases have held that
incorporating procedural rules into the arbitration agreement without providing
a copy of those rules to the employee is an aspect of procedural
unconscionability. (See, e.g.,
v. Curexo Technology Corp.
(2010) 189 Cal.App.4th 387, 393; Fitz v.
NCR Corp. (2004) 118 Cal.App.4th 702, 721.)
Defendant did not present the AAA rules as part of the arbitration
agreement between the parties.
Plaintiff, however, presented no evidence the AAA rules were not
provided to her at the time she signed the arbitration agreement.
The
evidence presented in the trial court, including evidence of the adhesive
nature of the agreement and the lack of a prominent heading or bold print to
highlight the arbitration provision itself, established at least some degree of
procedural unconscionability. However,
“a finding of procedural unconscionability does not mean that a contract will
not be enforced, but rather that courts will scrutinize the substantive terms
of the contract to ensure they are not manifestly unfair or one-sided.†(Gentry
v. Superior Court (2007) 42 Cal.4th 443, 469.) Accordingly, we must examine the agreement
for substantive unconscionability.
Substantive unconscionability exists
when the terms of an agreement are overly harsh or so one-sided as to shock the
conscience. (Pinnacle, supra, 55 Cal.4th at p. 246.) In the employment context, substantive
unconscionability may be found “when the arbitration agreement is ‘one-sided’
in favor of the employer without sufficient justification, for example, when
‘the employee’s claims against the employer, but not the employer’s claims
against the employee, are subject to arbitration.’ [Citations.]â€
(Serpa, supra, 215 Cal.App.4th
at p. 703.) The arbitration agreement
provided that both plaintiff and defendant agreed to arbitrate their claims
against the other. It stated: “I further
acknowledge that in exchange for my agreement to arbitrate, the Company also
agrees to submit all claims and disputes it may have with me to final and
binding arbitration.†The FTP reiterated
that both parties agreed to be bound by the FTP “as the only means of resolving
employment-related disputes†and to waive their right to a jury trial of those
disputes. The only claims excluded from
the arbitration agreement were those listed in the “Excluded Issues†section of
the FTP: “Workers’ Compensation Claims, any claim involving the construction or
application of a benefit plan covered by ERISA, and claims for unemployment
benefits.†Thus, the agreement was
bilateral and not unfairly one-sided.
The trial court, however, found the
agreement to be substantively unconscionable because of “the general nature of
the terms, i.e. without specific reference to the nature and extent of
discovery and that findings of fact and conclusions of law must be included in
the written decision; the ambiguity surrounding the provisions concerning the
right to recover attorney’s fees and costs; and the absence of any provision
for limited judicial review.†Plaintiff
had argued in her opposition to the petition to compel arbitration that the
arbitration agreement was substantively unconscionable because the discovery
provision lacked guidance as to exercising the arbitrator’s discretion, the
agreement provided that the employee was entitled to
contrary to the statutory provision for an award of attorney fees to a
successful employee plaintiff under the FEHA (Gov. Code, § 12965), and the
agreement failed to provide for limited judicial review of the arbitrator’s
decision.
Plaintiff’s contentions and the
trial court’s conclusions regarding what the agreement should have included and
what it lacked appear to be based on Armendariz. In discussing an agreement to arbitrate
claims involving “unwaivable statutory rights,†the Armendariz court concluded there were 5 minimum requirements
necessary in order for such an arbitration agreement to be enforceable: the
agreement “is lawful if it ‘(1) provides for neutral arbitrators, (2) provides
for more than minimal discovery, (3) requires a written award, (4) provides for
all of the types of relief that would otherwise be available in court, and (5)
does not require employees to pay either unreasonable costs or any arbitrators’
fees or expenses as a condition of access to the arbitration forum.’†(Armendariz,
supra, 24 Cal.4th at p. 102.)
We question whether the
States Supreme Court decisions.
‘rely on the uniqueness of an agreement to arbitrate as a basis for a state-law
holding that enforcement would be unconscionable,’†nor may it enforce
“state-law rules that stand as an obstacle to the accomplishment of the FAA’s
objectives,†including the objective of “‘ensur[ing] that private arbitration
agreements are enforced according to their terms.’ [Citations.]â€
(Concepcion, supra, 131 S.Ct.
at pp. 1747, 1748.) Refusing to enforce
an arbitration agreement according to its terms because the claims involve
unwaivable statutory rights and the agreement does not contain specific
provisions the court believes are necessary to vindicate those statutory rights
appears contrary to the decision in Concepcion. Armendariz
carved out a class of claims— those involving unwaivable statutory rights—and
applied a special rule to agreements to arbitrate those claims—requiring them
to meet its five minimum requirements—in order for them to be enforceable. That appears to be the type of state rule
Restaurant, __U.S.__, 133 S.Ct. 2304, 2013 U.S. Lexis 4700, narrowed the
ability of courts to invalidate arbitration agreements on the ground they
inhibit or preclude vindication of statutory rights. There, the court held arbitration agreements
must be “‘rigorously enforce[d]’ … according to their terms,†even when the
claims to be arbitrated allege a violation of a federal statute. (Id.
at pp. *8–10.) The parties to an
arbitration agreement sought to invalidate the agreement’s prohibition of class
arbitration on the ground individual arbitration of the claims would be
prohibitively expensive. The court
rejected application of a judge-made exception to the FAA, which permitted
courts to invalidate arbitration agreements that prevented the effective
vindication of a federal statutory right.
(Id. at pp. *11–17.) It concluded the exception applied only “to
prevent ‘prospective waiver of a party’s right
to pursue statutory remedies,’†not to prevent the economic infeasibility of
proving the claim and obtaining the remedy.
(Id. at pp. *12–13.)
Although these cases cast doubt on
the continued validity of the Armendariz
requirements for arbitration agreements that apply to claims of violation of
unwaivable statutory rights, Armendariz
has not been overruled and is not clearly abrogated by these decisions; we are
still bound by it. Even if
the arbitration agreement before us meets its requirements and therefore is not
substantively unconscionable.
Armendariz
determined that an employee who is required to arbitrate FEHA claims is
entitled to sufficient discovery to vindicate those claims. (Armendariz,
supra, 24 Cal.4th at p. 106.)
“[W]hen parties agree to arbitrate statutory claims, they also
implicitly agree, absent express language to the contrary, to such procedures
as are necessary to vindicate that claim.â€
(Ibid.) The court held that “the employer, by
agreeing to arbitrate the FEHA claim, has already impliedly consented to such
discovery. Therefore, lack of discovery
is not grounds for holding a FEHA claim inarbitrable.†(Ibid.)
The parties agreed to arbitrate
according to the procedural rules of the AAA; the FTP provided that “[a]ll
discovery shall be conducted in accordance with the Employment Dispute
Resolution Rules of the AAA.â€
Additionally, “[t]he arbitrator shall have the authority to order
discovery sufficient to enable a full and fair exploration of the issues in
dispute, consistent with the expedited nature of arbitration.†Plaintiff has not demonstrated that the AAA
discovery rules are inadequate to vindicate her FEHA rights. We note that at least one court has found the
discovery provisions of those rules to be fair.
(Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1130, fn. 21.) The provision of the FTP expressly granting
the arbitrator authority to order discovery also permits the arbitrator to
adjust the scope of discovery to whatever is necessary, in the particular case,
“to enable a full and fair exploration of the issues in dispute.†The provisions for discovery do not make the
arbitration agreement harsh or one-sided.
The trial court also found
substantive unconscionability because “findings of fact and conclusions of law
must be included in the written decision.â€
Armendariz concluded that “an
arbitrator in a FEHA case must issue a written arbitration decision that will
reveal, however briefly, the essential findings and conclusions on which the
award is based.†(Armendariz, supra, 24 Cal.4th at p. 107.) The arbitration agreement considered by the
requirement of written findings and conclusions. The court concluded, however, that “nothing
in the present arbitration agreement precludes such written findings, and to
the extent it applies to FEHA claims the agreement must be interpreted to
provide for such findings.†(
The FTP requires that the arbitrator render a written decision. Nothing precludes the arbitrator from setting
out findings and conclusions in the written decision. In fact, the requirement of a written
decision implies that it include some explanation of the reasons for the
decision. Pursuant to
and FTP should be interpreted to require the essential findings and conclusions
in the written decision. Consequently,
the arbitration agreement is not unconscionable for failing to include a
requirement that the arbitrator’s written decision include the essential
findings and conclusions on which the decision is based.
The trial court also based its
finding of substantive unconscionability on ambiguity in the provisions
regarding recovery of attorney’s fees and costs. The FTP provides that plaintiff and defendant
“will be responsible for the fees and costs of [their] own respective legal
counsel, if any.†Plaintiff contends
this provision denies her the right under the FEHA to recover attorney fees
from defendant if she prevails in her FEHA claims. The FTP also provides, however, that “[t]he
arbitrator has the authority to award any remedy that would have been available
to you had you litigated the dispute in court under applicable law.†Further, “no remedies that otherwise would be
available to you or the company in a court of law will be forfeited by virtue
of the agreement to use and be bound by the FTP.†Thus, although each party is initially
responsible for that party’s attorney fees and costs, the arbitrator may
include an award of attorney’s fees and costs to one party where such an award
is authorized or required by applicable law; neither party forfeits any
statutory right to recover attorney fees by agreeing to arbitration. The provisions relating to attorney’s fees
are neither ambiguous nor one-sided.
They do not support a finding of substantive unconscionability.
Finally, the trial court found the
absence of any provision for limited judicial review contributed to the
substantive unconscionability of the arbitration agreement. Armendariz
did not require that an arbitration agreement applicable to statutory claims
include a provision for limited judicial
review. Indeed, “the fact that an
arbitration agreement does not explicitly provide for judicial review is no
basis for invalidating it. [Citation.]â€
(Little, supra, 29 Cal.4th at
p. 1075, fn. 1.) Sections 10 and 11 of
the FAA (9 U.S.C. §§ 10, 11) and sections 1286.2 and 1286.6 of the California
Arbitration Act (Code Civ. Proc., §§1286.2, 1286.6) provide for limited
judicial review of arbitration awards governed by their respective
provisions. Nothing in the arbitration
agreement denies either party the benefit of that review. Consequently, there is nothing unconscionable
in the lack of a provision for review in the arbitration agreement.
We conclude that, although there
were elements of procedural unconscionability in the presentation of the
arbitration agreement, the terms of the agreement were not substantively
unconscionable. Because both procedural
and substantive unconscionability must be found in order to invalidate an
arbitration agreement, the trial court erred in refusing to enforce the
arbitration agreement and denying defendant’s petition to compel plaintiff to
arbitrate her employment-related claims in accordance with the arbitration
agreement.
The judgment is reversed and
remanded with instructions to the trial court to vacate its order denying
defendant’s petition to compel arbitration and to enter a new order granting
that petition and staying the litigation while the arbitration proceeding is
pending. Defendant is entitled to its
costs on appeal.
_____________________
HILL, P. J.
WE CONCUR:
_____________________
WISEMAN, J.
_____________________
LEVY, J.
