Compton v. Superior Court of L. A. Cnty.

• Decision Date: 19 March 2013
• Docket Number: B236669
• Parties: Leasa COMPTON, Petitioner, v. SUPERIOR COURT of Los Angeles County, Respondent; American Management Services, LLC et al., Real Parties in Interest.
• Court: California Court of Appeals Court of Appeals

?154 Cal.Rptr.3d 413

Leasa COMPTON, Petitioner,
v.
SUPERIOR COURT of Los Angeles County, Respondent;
American Management Services, LLC et al., Real Parties in Interest.

B236669

Court of Appeal, Second District, Division 8, California.

Filed March 19, 2013

Reversed.

Bigelow, P.J., dissented with opinion.

See 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 330 et seq.

APPEAL from a judgment of the Superior Court of Los Angeles County. Michael Johnson, Judge. Reversed and remanded with directions. (Los Angeles County Super. Ct. No. BC448343)

R. Rex Parris Law Firm, R. Rex Parris, Alexander R. Wheeler, Kitty Szeto and John M. Bickford, Lancaster; Lawyers for Justice and Edwin Aiwazian, for Petitioner.
No Appearance for Respondent.
Jackson Lewis, Thomas G. Mackey and Brian D. Fahy,Los Angeles, for Real Parties in Interest.
RUBIN, J.

Leasa Compton appeals from the order granting the petition by her former employer, American Management Services, to compel arbitration of Compton's class action complaint for violations of Labor Code provisions governing the payment of wages. Treating her appeal from this nonappealable order as a petition for writ of mandate, we conclude that the arbitration agreement she signed as a condition of obtaining employment was unconscionable. We therefore reverse the trial court's order granting the petition to compel arbitration and direct the trial court to enter a new order denying the petition.

FACTS AND PROCEDURAL HISTORY 1. Background Facts

In February 2006, Leasa Compton applied for the job of property manager with American Management Services, California, Inc.¹ In order to have her application considered, Compton was required to, and did, sign an agreement that called for arbitration of various disputes that might arise between her and AMS, and that also barred arbitration of class claims. Compton was hired in March 2006 and worked for AMS until August 2009.

In October 2010 Compton filed a class action complaint against AMS in superior court, alleging that AMS violated various Labor Code provisions governing the payment of minimum and overtime wages, rest and meal breaks, and reimbursement of expenses. AMS removed the action to the federal district court in November 2010, and filed an answer in December 2010 that did not raise arbitration as an affirmative defense. AMS then propounded special interrogatories on Compton, which she never answered because the district court remanded the action to state court in February 2010.

After remand to the superior court, AMS propounded more discovery requests, including form and special interrogatories, document production requests, and requests for admission. Compton objected to nearly all these discovery requests and provided few substantive responses. On April 27, 2011, the United States Supreme Court issued its decision in AT & T Mobility, LLC v. Concepcion (2011) ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 ( Concepcion ), which overruled the California Supreme Court's decision in Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100 ( Discover Bank ). The Discover Bank court had held that provisions in certain consumer contracts of adhesion that barred arbitration or litigation of class-wide claims were unconscionable and therefore unenforceable. Concepcion held that for consumer contracts with arbitration provisions subject to the Federal Arbitration Act (9 U.S.C. § 1, et seq. (FAA)), the mere presence of a ban on class-wide claims did not render such provisions unenforceable.²

Five days after Concepcion was decided, counsel for AMS sent Compton's counsel a copy of the arbitration agreement Compton had signed. During May of 2011, counsel for AMS exchanged e-mails with Compton's lawyers, contending that Concepcion had changed the law in a way that removed the obstacles to arbitration that Discover Bank had erected. When Compton refused to submit her individual dispute, and not class claims, to arbitration, AMS filed a petition to compel arbitration in July 2011.

AMS's petition to compel arbitration was predicated on the theory that the California Supreme Court's decisions in Discover Bank and Gentry v. Superior Court (2007) 42 Cal.4th 443, 64 Cal.Rptr.3d 773, 165 P.3d 556 ( Gentry ) had previously barred class arbitration waivers like the one in Compton's arbitration agreement.³ AMS contended that it could not seek to enforce the arbitration agreement's ban on class action claims, and thereby require Compton to arbitrate only her individual claims, until after Concepcion was decided. Compton opposed the petition on two grounds. First, AMS waived its right to arbitrate by waiting too long to enforce it. Second, the provision was unconscionable because it was one-sided and allowed AMS to litigate in court claims that were important to it.

2. The Arbitration Agreement and Rules

Job applicants at AMS were provided with an eight-page arbitration agreement stating in short that no application would be considered until the applicant agreed to be bound by the company's arbitration program. The agreement said that AMS “has implemented an arbitration procedure to provide quick, fair, final and binding resolution of employment-related legal claims.” Prospective employees signing the agreement had three days to withdraw their consent in writing by stating that they no longer sought employment with AMS. The agreement said that applicants had to read and sign the agreement, and that their signature would also acknowledge receipt of arbitration rules, which were provided in a separate document. The agreement stated that applicants should familiarize themselves with the rules, and that they were allowed to take the agreement and rules with them, and could then sign and return them at a later date if they wished.

The agreement also said that the applicant would submit to arbitration any and all claims arising out of his employment with AMS, and then listed by way of example claims arising under common law or federal, state, and local statutes, including age discrimination, civil rights, and disability protection statutes. AMS stated that it would also arbitrate such claims.

The arbitration rules specified which claims were, or were not, subject to arbitration: “Except as otherwise limited herein, any and all employment-related legal disputes, controversies, or claims arising out of, or relating to, an Employee's application or candidacy for employment ... with [AMS] shall be settled exclusively by final and binding arbitration before a neutral, third-party Arbitrator selected in accordance with these [rules]. Arbitration shall apply to any and all such disputes, controversies or claims whether asserted against [AMS] and/or against any employee, officer, alleged agent, director or affiliate in their capacity as such or otherwise. All employment-related claims that [AMS] may have against an Employee also must be resolved via the arbitration process described therein.”

The next paragraph describes without limitation the types of claims that were subject to arbitration. These included claims under “the Age Discrimination in Employment Act (ADEA) ..., Title VII of the Civil Rights Act of 1964, as amended, including the amendments of the Civil Rights Act of 1991, the Americans With Disabilities Act (ADA), the Fair Labor Standards Act (FLSA), 42 U.S.C. [section] 1981, ... the Employee Polygraph Protection Act, the Employee Retirement Income Security Act (ERISA), state discrimination statutes, and/or common law regulating employment termination. This also includes any claim you may have under contract or tort law; including, but not limited to, claims for malicious prosecution, sexual harassment, wrongful discharge, wrongful arrest/wrongful imprisonment, intentional/negligent infliction of emotional distress or defamation.”

The next paragraph specifies those claims not covered by the arbitration agreement: “Claims by Employees for state employment insurance (e.g., unemployment compensation, workers' compensation, worker disability compensation) are not subject to arbitration. Claims still may be filed with administrative agencies such as the National Labor Relations Board, the Equal Employment Opportunity Commission or the appropriate state agency. However, participants in the [arbitration program] may not bring or participate in any lawsuit arising out of such a claim. Likewise, if the Equal Employment Opportunity Commission or some other administrative agency files a lawsuit in the courts against [AMS], the Employee cannot participate in the lawsuit as a party. Instead, as stated above, the Employee must pursue any and all personal claims against [AMS] through arbitration. Statutory or common law claims raised by Employees alleging that [AMS] retaliated or discriminated against an Employee for filing an administrative claim or for participating in such a claim in any manner shall also be subject to arbitration.

“Not subject to arbitration are claims by [AMS] for injunctive and/or equitable relief for unfair competition and/or the use and/or unauthorized disclosure of trade secrets or confidential information. The Employee acknowledges and agrees that [AMS] may seek and obtain relief from a court of competent jurisdiction.”

Unless all parties consent in writing, “the Arbitrator shall not consolidate claims of different employees into one proceeding. Each arbitration proceeding shall cover the claims of only one Employee. Unless the parties mutually agree, the ... arbitrator has no authority to adjudicate a ‘class action.’ ”

Under the arbitration rules, a request to arbitrate a dispute “shall be submitted not later than one year after the date on which the Employee knew, or through reasonable diligence should have known, of the facts giving rise to the Employee's claim(s).” (Original boldface.) The failure to do so constitutes a waiver of that dispute as to the employee. However, the one year time limit does “not affect...