Armendariz v. Foundation Health Psychcare Services, Inc.

Citation80 Cal.Rptr.2d 255,68 Cal.App.4th 374
Decision Date04 December 1998
Docket NumberNo. A080224,A080224
CourtCalifornia Court of Appeals
PartiesPreviously published at 68 Cal.App.4th 374 68 Cal.App.4th 374, 78 Fair Empl.Prac.Cas. (BNA) 805, 98 Daily Journal D.A.R. 12,353 Marybeth ARMENDARIZ et al., Plaintiffs and Respondents, v. FOUNDATION HEALTH PSYCHCARE SERVICES, INC., Defendant and Appellant.

Pillsbury Madison & Sutro LLP, William Gaus, Craig E. Stewart, Alice Kwong Ma Hayashi, San Francisco, for Defendant and Appellant.

Miller, Clark, Calvert & Raimondi, Glenn M. Clark, Allan C. Miller, Berkeley, for Plaintiffs and Respondents.

SWAGER, J.

Foundation Health Psychcare Services, Inc. (hereafter employer) appeals from an order denying its motion to compel arbitration of the claims asserted by two former female employees, Marybeth Armendariz and Dolores Olague-Rodgers (hereafter plaintiffs) in a complaint for wrongful termination. We sever the remedies' restriction contained in the agreement and reverse.

PROCEDURAL AND FACTUAL BACKGROUND

On April 17, 1997, plaintiffs filed a complaint against employer for wrongful termination of employment, alleging a cause of action for violation of the California Fair Employment and Housing Act (Gov.Code, § 12900 et seq.) and three additional causes of action based on tort and contract theories of recovery. The complaint sought general damages, punitive damages, injunctive relief, and the recovery of attorney's fees and costs of suit. Employer countered by filing a motion for an order to compel arbitration pursuant to Code of Civil Procedure, section 1281.2. The parties submitted declarations in support of, and in opposition to the motion prior to a hearing on September 2, 1997. Relying on Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 60 Cal.Rptr.2d 138, the trial court denied the motion on the ground that the arbitration provision in question was an unconscionable contract of adhesion. 1 Employer filed a timely notice of appeal.

The record reveals that in July and August 1995 the employer hired plaintiffs in the "Provider Relations Group" and they were later given supervisory positions with annual salaries of $38,000. On June 20, 1996, they were informed that their positions were "being eliminated" and that they were "being terminated." During their year of employment, they claim that their supervisors and coworkers engaged in sexually based harassment and discrimination. Plaintiffs alleged that they were "terminated ... because of their perceived and/or actual sexual orientation (heterosexual)."

Both plaintiffs filled out and signed employment application forms, which included an arbitration clause pertaining to any future claim of wrongful termination. Later, they executed a separate employment arbitration agreement, containing the same arbitration clause.

The clause provided: I agree as a condition of my employment, that in the event my employment is "terminated, and I contend that such termination was wrongful or otherwise in violation of the conditions of employment or was in violation of any express or implied condition, term or covenant of employment, whether founded in fact or in law, including but not limited to the covenant of good faith and fair dealing, or otherwise in violation of any of my rights, I and Employer agree to submit any such matter to binding arbitration pursuant to the provisions of title 9 of Part III of the California Code of Civil Procedure, commencing at section 1280 et seq. or any successor or replacement statutes. I and Employer further expressly agree that in any such arbitration, my exclusive remedies for violation of the terms, conditions or covenants of employment shall be limited to a sum equal to the wages I would have earned from the date of any discharge until the date of the arbitration award. I understand that I shall not be entitled to any other remedy, at law or in equity, including but not limited to reinstatement and/or injunctive relief."

DISCUSSION
I. The Policy Favoring Arbitration

The enforceability of pre-employment arbitration agreements is currently the subject of much debate not only in the business and legal communities, but also before various legislative bodies. As an intermediate appellate court, our analysis of the issues raised in this appeal and our conclusion are constrained by statutory provisions and a consistent line of binding case precedent.

The United States Supreme Court has held that " 'as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.' Moses H. Cone Memorial Hospital [v. Mercury Construction Corp.], 460 U.S. at 24-25 [103 S.Ct. 927, 74 L.Ed.2d 765 (1983)]." (Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth (1985) 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444.) Our high court also recognizes this policy in favor of arbitration. "Title 9 of the Code of Civil Procedure, as enacted and periodically amended by the Legislature, represents a comprehensive statutory scheme regulating private arbitration in this state. (§ 1280 et seq.) Through this detailed statutory scheme, the Legislature has expressed a 'strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.' [Citations.] Consequently, courts will ' "indulge every intendment to give effect to such proceedings." ' [Citations.]" (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9, 10 Cal.Rptr.2d 183, 832 P.2d 899.)

Plaintiffs recognize that the overwhelming weight of both state and federal cases requires the arbitration of claims such as theirs, but "contend that this policy is misguided." Our role is not to establish policy in this area of the law. That is a task left to our legislative bodies and higher courts. Guided by the strong public policy favoring arbitration, we examine the enforceability of the arbitration agreement in light of federal and state law.

II. Arbitrability of Statutory Claims

The issues raised by this appeal arise from developments in the law of arbitration following the United States Supreme Court decisions in Southland Corp. v. Keating (1984) 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 and Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (Gilmer ). We will briefly review these developments to better identify the issues in the case.

For decades after its enactment in 1925, the Federal Arbitration Act (FAA) was regarded as a procedural statute applying in federal courts. (9 U.S.C.A. § 1 et seq.) A shift in interpretation of the FAA was signaled by Moses H. Cone Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765. While ruling on the stay of a diversity proceeding to compel arbitration, the United States Supreme Court construed the FAA as creating "a body of federal substantive law of arbitrability," applicable to proceedings in state court. (Id. at p. 24, 103 S.Ct. 927.) The issue was squarely raised the next year in Southland Corp. v. Keating, supra, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1, which adopted the Moses H. Cone analysis, holding that the FAA invalidated a California statute barring arbitration of certain statutory claims. 2

The legislative purpose of the FAA "was to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts." (Gilmer, supra, 500 U.S. at p. 24, 111 S.Ct. 1647; Dean Witter Reynolds Inc. v. Byrd (1985) 470 U.S. 213, 219, 105 S.Ct. 1238, 84 L.Ed.2d 158.) To this end, the FAA affirms the general enforceability of arbitration agreements, subject only to traditional equitable and legal defenses applying to "any contract." In pertinent part, section 2 of the FAA provides: "A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 3 (9 U.S.C.A. § 2.)

The FAA thus serves " 'to foreclose state legislative attempts to undercut the enforceability of arbitration agreements.' [Citation.]" (Perry v. Thomas (1987) 482 U.S. 483, 489, 107 S.Ct. 2520, 96 L.Ed.2d 426.) In Southlandand Perry, the court invalidated state statutes that required the judicial resolution of certain claims without regard to the existence of a private agreement to arbitrate. (Southland Corp. v. Keating, supra, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1; Perry v. Thomas (1987) 482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426.) In Doctor's Associates, Inc. v. Casarotto (1996) 517 U.S. 681, 116 S.Ct. 1652, 134 L.Ed.2d 902, the court struck down a Montana statute that required an enforceable arbitration clause to be accompanied by a statutory notice.

"The effect of [section 2 of the FAA] is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act." (Moses H. Cone Hospital v. Mercury Constr. Corp., supra, 460 U.S. at p. 24.) In this respect, the FAA "is something of an anomaly in the field of federal-court jurisdiction. It creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate, yet it does not create any independent federal-question jurisdiction.... Nevertheless, although enforcement of the Act is left in large part to the state courts, it nevertheless represents federal policy to be vindicated by the federal courts where otherwise appropriate." (Id. at p. 25, fn. 32, 103 S.Ct. 927.)

The FAA, however, does not "reflect a congressional intent to occupy the...

To continue reading

Request your trial
2 cases
  • Lee v. Technology Integration Group
    • United States
    • California Court of Appeals Court of Appeals
    • February 19, 1999
    ...Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1210, 78 Cal.Rptr.2d 533, fn. 9 Armendariz v. Foundation Health Psychcare Services, Inc. (1998) 68 Cal.App.4th 374, 386-387, 80 Cal.Rptr.2d 255 [both rejecting Duffield v. Robertson Stephens & Co., supra, 144 F.3d 1182 as to FEHA claims]; c......
  • Armendariz v. Foundation Health Psychcare Services, Inc.
    • United States
    • California Supreme Court
    • March 9, 1999
    ...FOUNDATION HEALTH PSYCHCARE SERVICES, INC., Appellant. No. S075942. Supreme Court of California March 9, 1999. Prior report: Cal.App., 80 Cal.Rptr.2d 255. Respondents' petition for review GEORGE, C.J., and MOSK, KENNARD, BAXTER, WERDEGAR, CHIN and BROWN, JJ., concur. ...

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT