Giuliano v. Inland Empire Personnel, Inc.

• Decision Date: 26 March 2007
• Docket Number: No. B190771.,B190771.
• Court: California Court of Appeals Court of Appeals
• Parties: James R. GIULIANO III, Plaintiff and Respondent, v. INLAND EMPIRE PERSONNEL, INC., et al., Defendants and Appellants.

58 Cal.Rptr.3d 5

149 Cal.App.4th 1276

James R. GIULIANO III, Plaintiff and Respondent, v. INLAND EMPIRE PERSONNEL, INC., et al., Defendants and Appellants.

No. B190771.

Court of Appeal, Second District, Division 4.

March 26, 2007.

Beck, De Corso, Daly, Kreindler & Harris, Charles L. Kreindler, and Edward E. Alon, Los Angeles, for Defendants and Appellants.

Dempsey & Johnson, Michael D. Dempsey, and Arlene M. Turinchak, Los Angeles, for Plaintiff and Respondent.

SUZUKAWA, J.

In this breach of contract action, defendant employer appeals from the denial of its motion to compel arbitration pursuant" to plaintiffs employment contract. Defendant contends that plaintiffs right to a judicial forum for his unpaid wages claim under Labor Code section 229 is preempted by section 2 of the Federal Arbitration Act (9 U.S.C. § 1 et seq., FAA), which mandates the enforcement of arbitration clauses in contracts involving interstate commerce. (Perry v. Thomas (1987) 482 U.S. 483, 490-492, 107 S.Ct. 2520, 96 L.Ed.2d 426.) Defendant also argues that plaintiffs "garden variety" breach of contract action is not subject to the minimum requirements for arbitration set forth in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669 (Armendariz), which applies to unwaivable claims that are "carefully tethered to statutory or constitutional provisions" (Boghos v. Certain Underwriters at Lloyd's of London (2005) 36 Cal.4th 495, 508, 30 Cal.Rptr.3d 787, 115 P.3d 68 (Boghos)), such as discrimination in violation of the Fair Employment and Housing Act (Gov.Code, § 12900 et seq.) or wrongful discharge in violation of public policy (i.e., claims under Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 164 Cal.Rptr. 839, 610 P.2d 1330). We reverse the order denying the motion to compel arbitration.

BACKGROUND

In 2003, plaintiff James R. Giuliano III moved from Indiana to California to become executive vice president and chief financial officer of defendant Inland Empire Personnel, Inc., and six related entities (collectively, Empire).¹ After Giuliano left Empire in 2005, he filed the present action against Empire claiming that a $5 million to $8 million profit-sharing bonus and $500,000 severance payment were owed under his employment agreement. The complaint alleged causes of action for: (1) statutory wages under Labor Code section 200 et seq. based on the nonpayment of the bonus and severance payment allegedly due under the contract; (2) breach of contract for failure to pay the bonus and severance payment; and (3) declaratory relief to invalidate the employment contract's arbitration clauses and requirement that he sign a waiver and release in order to receive a severance payment. The complaint also alleged a fourth cause of action for interference with contract against Frontier Homes, LLC, and Frontier Homebuilders, Inc., which were dismissed from the action and are not parties to this appeal.

In this appeal, Empire seeks to enforce the following arbitration clauses contained in the: (1) employment agreement that Giuliano had signed and initialed upon accepting the offer of employment; (2) the employee handbook that was mentioned in the employment contract;² and (3) the employee bonus plan that Giuliano had signed upon accepting the offer of employment.³

The employment agreement contained the following arbitration clause that was initialed by Giuliano: "As a material part of the consideration for you becoming an employee of our Company, we have each agreed that if [sic] any dispute or claim of any kind or amount (including without limitation, wrongful termination, discrimination, harassment, Title VII claims, ADA and ADEA claims, personal injuries and contractual issues that arise in relation to your employment or its termination; other than a Workers' Compensation or Unemployment Claim), shall be arbitrated to a final and binding resolution, in lieu of any court or jury action. No appeal will be available to either party. Such arbitration is to be conducted in San Bernardino County, or any other mutually agreeable location, before a qualified member of the American Arbitration Association (AAA), and shall be conducted in accordance with AAA's then prevailing rules regarding employment disputes, including those relating to the conduct of discovery in preparation for such hearing." In addition, the employment agreement contained the following arbitration provision, which was signed by Giuliano: "THE TERMS AND CONDITIONS CONTAINED WITHIN THIS LETTER (INCLUDING WITHOUT LIMITATION, THE RESTRICTIONS ON MY RIGHTS TO SEEK A JURY OR COURT TRIAL FOR THOSE EMPLOYMENT RELATED ISSUES SET OUT IN THE ARBITRATION PROVISION

OF THIS OFFER LETTER [SEE PARAGRAPH SEVEN (7)]), ACCURATELY REFLECT THOSE TERMS AND CONDITIONS I'VE AGREED SHALL CONTROL MY EMPLOYMENT WITH THE INLAND EMPIRE PERSONNEL, INC."

The complaint alleged that the employment contract's arbitration clause was invalid and unenforceable under Labor Code section 229,⁴ which provides a judicial forum for statutory wage claims. Empire moved to compel arbitration, contending that Labor Code section 229 was preempted by section 2 of the FAA, which mandates the enforcement of arbitration agreements in contracts involving interstate commerce. In support of its motion, Empire submitted the declaration of its executive vice president and chief legal officer Larry Day, who attested that: (1) Empire engages in interstate commerce by acquiring, developing, and selling residential and commercial properties in both California and Arizona, and by shipping supplies from other states to California and Arizona; and (2) Giuliano actively assisted Empire's multistate activities by negotiating loans with a bank that is headquartered outside of California. In anticipation of Giuliano's claim that the arbitration clause is unenforceable under Armendariz, Empire argued that the arbitration clause was not invalid because both parties were "on equal footing, with equal rights to arbitration by a neutral arbiter in accordance with the rules of the American Arbitration Association or Judicial Arbitration and Mediation Services, both of which comply with the Armendariz standard."

Giuliano argued in opposition to the motion that: (1) because the Frontier defendants (who were dismissed after the motion to compel arbitration was denied) were not parties to the employment agreement, the Frontier defendants may not be compelled to arbitrate and, under Code of Civil Procedure section 1281.2, subdivision (c), the court may refuse to enforce an arbitration agreement when, due to common issues of law or fact in a pending action with a third party, there is a possibility of conflicting rulings; (2) Empire had waived its right to compel arbitration against the six related Empire defendants (Empire Land, LLC, Empire Partners, Inc., Empire Commercial Real Estate, L.P., Empire Capital, LLC, Aviat Homes, L.P., and Empire Global Holdings, L.P.) by arguing inconsistently in another lawsuit between Empire and former Empire executive Jeff Gault, "that Inland Empire Personnel, Inc., is the only one of the Empire companies that can be compelled to arbitrate"; (3) Giuliano's employment contract did not involve interstate commerce because Empire does not operate in two states—its principal offices are in California, the employment agreement was signed in California, Giuliano worked in California, Giuliano paid state income taxes in California, and Giuliano was terminated in California; and (4) Giuliano's employment agreement is unconscionable because it failed to "advise employees that California public policy provides them with extensive protections in wage disputes that would be taken away by an undisclosed federal statute."

Giuliano did not oppose the motion on the grounds that the arbitration agreement was unconscionable or unenforceable under Armendariz, or that the arbitration agreement was ambiguous as to which parties were bound by the agreement; both of those grounds were nevertheless cited by the trial court in its order denying the motion. The trial court denied Empire's motion to compel arbitration on the grounds that: (1) the arbitration clause was "vague and unintelligible" as to which parties were bound by the agreement; (2) the FAA did not preempt Giuliano's statutory wage claim because his employment contract did not involve interstate commerce; and (3) the arbitration clause was unconscionable and invalid under Armendariz. After the trial court denied Empire's motion for reconsideration, Empire appealed. (Code Civ. Proc, § 1294, subd. (a) [order denying a motion to compel arbitration is appealable].)

DISCUSSION

"`The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract. [Citations.]' (Engineers & Architects Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644, 653.)" (Wolschlager v. Fidelity National Title Ins. Co. (2003) 111 Cal. App.4th 784, 789, 4 Cal.Rptr.3d 179.) Code of Civil Procedure sections 1281.2 and 1290.2 provide for the resolution of motions to compel arbitration in summary proceedings in which "[t]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination. [Citation.] No jury trial is available for a petition to compel arbitration. [Citation.]" (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972, 64 Cal. Rptr.2d 843, 938 P.2d 903.) "We will uphold the trial court's...