24 Hour Fitness, Inc. v. Superior Court

• Decision Date: 28 September 1998
• Docket Number: A079502,Nos. A079501,s. A079501
• Citation: 24 Hour Fitness, Inc. v. Superior Court, 78 Cal.Rptr.2d 533, 66 Cal.App.4th 1199 (Cal. App. 1998)
• Court: California Court of Appeals
• Parties: , 78 Fair Empl.Prac.Cas. (BNA) 815, 74 Empl. Prac. Dec. P 45,572, 98 Cal. Daily Op. Serv. 7471, 98 Daily Journal D.A.R. 10,353 24 HOUR FITNESS, INC., et al., Petitioners, v. The SUPERIOR COURT of Sonoma County, Respondent; Sierra Munshaw, Real Party in Interest. Chad HAMILTON et al., Petitioners, v. The SUPERIOR COURT of Sonoma County, Respondent; Sierra MUNSHAW, Real Party in Interest.

Page 533

78 Cal.Rptr.2d 533

66 Cal.App.4th 1199, 78 Fair Empl.Prac.Cas. (BNA) 815,

74 Empl. Prac. Dec. P 45,572,

98 Cal. Daily Op. Serv. 7471,

98 Daily Journal D.A.R. 10,353

24 HOUR FITNESS, INC., et al., Petitioners, v. The SUPERIOR COURT of Sonoma County, Respondent;

Sierra Munshaw, Real Party in Interest.

Chad HAMILTON et al., Petitioners, v. The SUPERIOR COURT of Sonoma County, Respondent;

Sierra MUNSHAW, Real Party in Interest.

Nos. A079501, A079502.

Court of Appeal, First District, Division 3, California.

Sept. 28, 1998.

Henry D. Lederman, Kerin M. Guetersloh, Littler Mendelson, Walnut Creek, for Petitioners 24 Hour Fitness, Inc., dba 24 Hour Nautilus Fitness Centers and Joe Rodriguez.

Michael P. Merrill, Jacqueline M. Moreira, Merrill, Arnone & Handelman, LLP, Santa Rosa, for Petitioners/Defendants Bill Cunningham, Curtis Harmon and Chad Hamilton.

No appearance for Respondent.

Joseph John Turri, Ukiah, Hugh N. Helm, III, Santa Rosa, Co-Counsel for Real Party in Interest Sierra Munshaw.

CORRIGAN, Associate Justice.

The case revolves around an issue of first impression: may a plaintiff who sues multiple defendants avoid summary judgment against all by establishing that at least some defendants do not have a right to compel arbitration? She may not.

Sierra Munshaw sued her former employer, 24 Hour Fitness, Inc., doing business as 24 Hour Nautilus (Nautilus) and various Nautilus employees, for causes of action arising from alleged sexual harassment in the workplace. The defendants sought summary judgment on the ground that Munshaw had agreed with Nautilus to arbitrate all claims. The trial court found triable issues existed concerning whether all Munshaw's claims were subject to the arbitration agreement. Summary judgment was denied as to all defendants. We conclude summary judgment may be granted in favor of those defendants whose claims are subject to mandatory arbitration. We further reject claims that arbitration agreement with Nautilus was unconscionable, illusory and lacking in mutuality.

BACKGROUND

I. The Agreement to Arbitrate

When she was hired, Munshaw signed a document ¹ that provided in pertinent part: "I also read and specifically agree that if there is any dispute arising out of my employment as described in the section called 'Arbitration of Disputes' in the handbook, I will submit it exclusively to binding and final arbitration according to the procedures outlined in the 'Employment Arbitration Procedures Manual.' "

According to the "Arbitration of Disputes" section in the personnel handbook: "If any dispute arises from your employment with Nautilus, you and Nautilus agree that you both will submit it exclusively to final and binding arbitration." Except for workers' compensation and unemployment insurance claims and matters heard by the labor commissioner, the dispute includes every kind or type of dispute including, without limitation, any allegation of wrongful discharge, discrimination, or any injury to your physical mental or economic interests. This means that a neutral arbitrator, rather than a court or jury, will decide the dispute.

"We agree to settle the dispute according to the provisions of the California Code of Civil Procedure, starting at § 1280, or successor or replacement statutes. To start the arbitration process, either party must submit a written arbitration request to the other, within one (1) year of the date the dispute first arose or within one (1) year of the termination of your employment, whichever occurs first....

"The details of the arbitration procedure are in a separate document called the 'Employment Arbitration Procedure Manual,' which Nautilus incorporates into this Personnel Handbook by reference as if it were fully repeated here." (Italics added, underlining original, subheadings omitted.)

II. The Litigation

Munshaw complained that harassment by Nautilus employees rendered her work environment so intolerable that she was constructively discharged on July 3, 1995. She did not invoke arbitration and instead filed this action. The complaint alleged Munshaw had been sexually harassed by Nautilus employees Chad Hamilton, Curtis Harmon, Bill Cunningham and others, and that she had complained repeatedly to the offending individuals, to her immediate supervisors and to defendant Rodriguez. ² She further alleged that these employees were acting within the scope of their managerial authority, with the consent and permission of Nautilus. Her complaint alleged sexual harassment; ³ assault and battery; denial of the right to be free from violence or intimidation because of sex; ⁴ and negligent and intentional infliction of emotional distress.

During pre-filing discussions, Nautilus advised Munshaw's attorneys several times that her claims were subject to the arbitration agreement. Munshaw maintained that the arbitration clause was unenforceable. In a letter sent to Nautilus's counsel after filing the complaint, Munshaw's attorney expressly repudiated the arbitration agreement: "plaintiffs [sic] are knowingly waiving their right to arbitrate, and are not reversing their position."

Nautilus and Rodriguez subsequently moved for summary judgment or summary adjudication, arguing Munshaw's claims were covered by her agreement to arbitrate. Cunningham, Hamilton and Harmon sought similar relief on the same basis. Munshaw raised three arguments in opposition. First, she asserted, there was no valid contract to arbitrate because the agreement was unconscionable, illusory, and without mutual assent. Second, she claimed that the existence of assertedly non-arbitrable claims against individual employees barred any defendant, including Nautilus, from raising the arbitration agreement defensively on summary judgment. Finally, she contended her cause of action for civil rights violations was unrelated to her employment relationship and, thus, was beyond the scope of the arbitration agreement.

III. The Trial Court's Ruling

The trial court requested additional briefing on the propriety of enforcing the arbitration agreement through summary judgment rather than by motion to compel arbitration and stay the proceedings. Relying on Badgley v. Van Upp (1993) 20 Cal.App.4th 218, 24 Cal.Rptr.2d 406 (Badgley ) and Charles J. Rounds Co. v. Joint Council of Teamsters No. 42 (1971) 4 Cal.3d 888, 95 Cal.Rptr. 53, 484 P.2d 1397 (Charles J. Rounds ), the court ruled summary judgment was unavailable to any defendant. "Here, there are multiple defendants named in the complaint including defendant 24 Hour. The complaint and answer raise the issue whether the individual defendants were employees of defendant Nautilus and acting within the scope of such employment. It is evident therefore that there are issues raised by the complaint and answer that are not covered by the arbitration agreement nor susceptible to arbitration. [p] Moving parties in both motions have not met their initial burden of showing that all issues in this litigation are covered by the arbitration agreement, or that all parties have signed and are bound by the agreement." The court did not reach Munshaw's contentions that the arbitration agreement was unenforceable and that her civil rights claim was nonarbitrable.

Nautilus and Rodriguez sought a peremptory writ of mandate compelling the court to grant summary judgment or adjudication or, alternatively, to issue an order adequately specifying the controverted material facts and conflicting evidence precluding summary judgment. Hamilton, Cunningham and Harmon also sought a writ compelling the trial court to grant summary judgment or adjudication. We consolidated the petitions and ordered Munshaw to show cause before this court why a peremptory writ of mandate should not issue. We now direct the trial court to vacate its order and grant summary judgment for all defendants but Hamilton.

DISCUSSION

I. Nautilus Is Entitled To Summary Judgment If All Claims Against It Are Subject To The Arbitration Agreement

On this issue of first impression, we conclude the presence of nonarbitrable claims against other defendants does not preclude summary judgment in favor of a defendant as to whom all claims are arbitrable.

As the trial court recognized, the analytic framework is provided by Charles J. Rounds, supra, 4 Cal.3d 888, 95 Cal.Rptr. 53, 484 P.2d 1397. There, plaintiff employer sued defendant union for breach of a "no-strike" clause in a collective bargaining agreement that included an arbitration clause. The defendant raised the arbitration agreement as an affirmative defense. The trial court dismissed the case, ruling the dispute was covered by the arbitration agreement and that the employer's failure to arbitrate barred the action. (Id. at p. 891, 95 Cal.Rptr. 53, 484 P.2d 1397.)

On appeal, the plaintiff argued that the appropriate remedy was not dismissal, but a stay of the proceedings pending arbitration. The Supreme Court disagreed. After reviewing the relevant authorities, it announced the following rule: " [W]here the only issue litigated is covered by the arbitration clause, and where plaintiff has not first pursued or attempted to pursue his arbitration remedy, it should be held that (1) plaintiff has impliedly waived his right to arbitrate, such that defendant could elect to submit the matter to the jurisdiction of the court; (2) defendant may also elect to demur or move for summary judgment on the ground that the plaintiff has failed to exhaust arbitration remedies; and (3) defendant may also elect to move for a stay of proceedings pending arbitration if defendant also moves to compel arbitration." However, "Where plaintiff has attempted to exhaust its arbitration remedy or raises issues not susceptible to arbitration or not covered by the arbitration agreement, defendant may not merely assert failure to arbitrate an issue as an affirmative defense; a stay rather than dismissal of the suit is then proper." (Id. at p. 899, 95 Cal.Rptr. 53, 484 P.2d...