Abramson v. Juniper Networks, Inc.

Decision Date06 February 2004
Docket NumberNo. H025840.,H025840.
CourtCalifornia Court of Appeals Court of Appeals
PartiesDavid ABRAMSON, Plaintiff and Appellant, v. JUNIPER NETWORKS, INC., et al., Defendants and Respondents.

McADAMS, J.

Plaintiff David Abramson sued his former employer and four of its employees, asserting breach of contract, wrongful termination, and other claims. Plaintiff's employment agreement contained arbitration provisions, which he challenged as unenforceable. The trial court rejected plaintiff's challenges and ordered the parties to arbitration. Following an interim appeal, several motions, and two abortive attempts at arbitration, the trial court entered defense summary judgment on the ground that plaintiff had failed to exhaust his arbitration remedies.

In this appeal, plaintiff continues to assert the invalidity of the arbitration agreement and the orders and judgment flowing from it. For their part, defendants ask us to dismiss the appeal, to limit its scope, or to affirm the judgment.

As we explain in an unpublished portion of the opinion, we decline to dismiss the appeal. We also decline to limit the scope of the appeal. On the merits, we conclude that the arbitration agreement is unenforceable in its entirety. We therefore reverse the judgment.

FACTS AND PROCEDURAL HISTORY

In March 1999, plaintiff began working for defendant Juniper Networks, Inc., as its director of corporate communications. Before starting with Juniper, plaintiff signed an offer letter and an employment agreement. Both contained arbitration provisions. Less than a year later, Juniper terminated plaintiff's employment.

In February 2000, shortly after his termination, plaintiff filed a complaint against Juniper and four of its employees.1 According to the complaint, the defendants made misrepresentations and false promises, which induced plaintiff to leave his prior employer and join Juniper. Plaintiff also alleged that defendants violated public policy by discriminating against him on the basis of his age, by failing to reasonably accommodate his disabilities, by unfairly depriving him of stock options, and by wrongfully terminating his employment. Plaintiff's complaint asserted seven causes of action. The first six were for breach of contract, fraud, misrepresentation, termination of employment in violation of public policy, unfair competition, and defamation. Plaintiff's seventh cause of action sought a declaration that the agreement to arbitrate was unenforceable.

In April 2000, defendants moved to compel arbitration. They also sought a dismissal or stay of the action pending arbitration. In support of the motion, defendants presented copies of the offer letter and the employment agreement and submitted evidence that plaintiff had refused to stipulate to arbitration. Plaintiff opposed the motion, arguing that the arbitration agreement was unconscionable and declaring that there had been no negotiation concerning arbitration, that he was surprised by its one-sided terms, and that the arbitration costs had not been explained to him.

Following a hearing in May 2000, the court took the motion under submission. The next month, it issued a minute order stating: "The motion is granted." In July 2000 the court entered judgment, which both compelled arbitration and dismissed plaintiff's complaint without prejudice.

Plaintiff appealed the July 2000 judgment to this court. As to the first portion of the judgment compelling arbitration, we treated the appeal as a petition for a writ, which we summarily denied in April 2001. The following month, we disposed of the remainder of the judgment, concluding on the merits that the trial court erred in dismissing plaintiff's action rather than staying it. We therefore reversed the judgment of dismissal and directed the court to stay the action pending arbitration.

In June 2001, shortly after we decided the first appeal, plaintiff filed a demand for arbitration with the American Arbitration Association (AAA). Despite the demand, no arbitration was commenced, because the parties disagreed on who should pay the filing fee and administrative expenses. Plaintiff took the position that Juniper should pay the arbitration fees, relying on a California Supreme Court case, Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669 (Armendariz). Defendants took the opposite view, relying on the contract provision requiring Juniper to advance only half of the fees. In July 2001, faced with this impasse, AAA "returned" the matter to plaintiff's counsel "until the pre-case issue with the filing fee" could be "resolved."

In August 2001, plaintiff moved the trial court for an order lifting the arbitration stay and permitting prosecution of the action in the judicial forum. In support of the motion, plaintiff offered evidence of the impasse in the arbitration and of the resulting return of his arbitration demand. Defendants confirmed plaintiff's refusal to share the arbitration costs and their refusal to bear them all. Both parties argued their respective positions, with plaintiff relying principally on Armendariz.

In October 2001, the trial court denied plaintiff's motion. The court opined that Armendariz"is not applicable unless a statutory FEHA claim is asserted as contrasted with a claim cognizable under FEHA." The court thus concluded that Armendariz did not control any of plaintiff's claims, even those it recognized as "cognizable under FEHA."

In November 2001, following the denial of his motion, plaintiff refiled his arbitration demand, this time advancing half of the fees initially demanded by AAA, which amounted to more than four thousand dollars. In March 2002, AAA conducted a "preliminary hearing" in the matter by conference call. In that initial conference, plaintiff's attorney proposed that the arbitrator first consider two threshold issues: responsibility for payment of arbitration fees and validity of the arbitration agreement. Defendants' attorney objected to the proposal, asserting that the court already had decided both issues.

The arbitrator ordered the parties to brief the two threshold issues concerning arbitrability. In April 2002, in accordance with the briefing schedule, plaintiff submitted his arbitration brief addressing those two issues.

Defendants did not respond in the arbitration forum, but instead returned to court. By motion filed with the trial court in April 2002, defendants requested relief from the arbitration stay on their own behalf; they also sought enforcement against plaintiff of the court's previous arbitration orders, as well as sanctions and contempt orders against his counsel. In support of their motion, defendants cited plaintiff's attempt to have AAA decide the two threshold questions relating to arbitrability. In opposition to the motion, plaintiff's attorney declared and explained his belief that those issues were properly before the arbitrator, particularly the issue of validity of the agreement to arbitrate. With respect to the arbitration fees, he further declared: "My client has already advanced $4,250 in fees billed by the AAA, and has just been billed an additional $6,450. It is unlikely that he will be able to pay these new fees."

In June 2002, the court granted the defendants' motion to the extent that it sought enforcement of prior judicial orders, though it denied their request for sanctions and contempt. The court ordered plaintiff to "arbitrate his substantive claims" according to the terms of the arbitration agreement. Stating that it had "previously determined that those arbitration provisions, including the cost-sharing provision, are valid and enforceable," the court reiterated that determination. It also reiterated that the judge, "not the arbitrator, is to determine whether an agreement is arbitrable." The court then cautioned plaintiff that he would be subject to sanctions if he continued to argue the arbitrability issues in the arbitration forum.

Shortly thereafter, AAA terminated the arbitration proceedings based on plaintiff's failure to make further payments.

In September 2002, defendants moved the court in the alternative for summary judgment or summary adjudication. They argued that a defense judgment was proper because plaintiff had failed to exhaust his arbitration remedies. Plaintiff opposed the motion, citing his inability to pay the costs demanded by AAA. Among other things, he declared that his "only current income is $330 per week in unemployment benefits." He further declared that he had traded in his car for a used pickup truck and that he was then in the process of selling his house — his "only other significant asset" — and that the proceeds of these transactions were needed for "living expenses and debts." Plaintiff's declaration further recited that he had debts in excess of $140,000. It also stated that AAA had closed his arbitration because he was "unable to afford the administrative fees" it demanded.

In October 2002, the court granted the defense motion for summary judgment. The court stated: "Summary judgment for the defendant is appropriate where the plaintiff fails to exhaust the arbitration remedies before resorting to the courts [citations]." Because defendants had made "a prima facie showing" of plaintiff's failure to exhaust those remedies, the court said, "the burden shifted to plaintiff to establish a defense, namely, prohibitive costs. Plaintiff failed to satisfy this burden due to the inadequacy of his declaration." The court specifically commented on plaintiff's failure to offer "evidence of his assets." It concluded: "By...

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