Jarboe v. Hanlees Auto Grp.

• Decision Date: 14 August 2020
• Docket Number: A156411
• Court: California Court of Appeals Court of Appeals
• Parties: Thomas JARBOE, Plaintiff and Respondent, v. HANLEES AUTO GROUP et al., Defendants and Appellants.

53 Cal.App.5th 539

267 Cal.Rptr.3d 640

Thomas JARBOE, Plaintiff and Respondent,

v.HANLEES AUTO GROUP et al., Defendants and Appellants.

A156411

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

Filed August 14, 2020

John P. Boggs, Roman Zhuk, Fine, Boggs, & Perkins, LLP, Half Moon Bay, for Appellants.

Nicholas A. Carlin, Brian S. Conlon, Phillips, Erlewine, Given, & Carlin, LLP, San Fransicos for Respondent.

Siggins, P.J.

I. INTRODUCTION

Plaintiff Thomas Jarboe¹ was hired by DKD of Davis, Inc., doing business as Hanlees Davis Toyota (DKD of Davis). Shortly after he began working, Jarboe was transferred to Leehan of Davis, Inc., doing business as Hanlees Chrysler Dodge Jeep Ram Kia (Leehan of Davis). Following his termination at Leehan of Davis, Jarboe brought this wage and hour action individually and on behalf of a putative class against the Hanlees Auto Group (Hanlees), its 12 affiliated dealerships, including DKD of Davis and Leehan of Davis, and three individual defendants, Dong K. Lee, Kyong S. Han, and Dong I. Lee (collectively defendants). Defendants moved to compel arbitration based on an employment agreement between Jarboe and DKD of Davis. The trial court granted the motion as to 11 of the 12 causes of action against DKD of Davis, but denied the motion as to the other defendants. The trial court also allowed Jarboe's claim under the Private Attorneys General Act of 2004 (PAGA), Labor Code section 2698 et seq. to proceed in court against all defendants. The trial court refused to stay the causes of action allowed to proceed in litigation pending arbitration of Jarboe's claims against DKD of Davis. (See Code Civ. Proc., § 1281.4 ).

Hanlees, its affiliated dealerships, and the individual defendants contend they are entitled to enforce the agreement to arbitrate between Jarboe and DKD of Davis as third party beneficiaries of Jarboe's employment agreement or under the doctrine of equitable estoppel. The record fails to support either theory. Neither did the trial court err in failing to stay the litigation under Labor Code section 1281.4. Accordingly, we affirm.

II. BACKGROUND

Hanlees is a group of automobile dealerships in Northern California. The dealerships function as separate corporate entities.² Three individual defendants own the Hanlees group (individual owners).

As part of the hiring process, Jarboe was required to sign two separate agreements, each containing an arbitration provision (Arbitration Agreements).³ Both agreements were form contracts offered on a non-negotiable, take-it or leave it basis, with little or no time for Jarboe to review them.

The first agreement, electronically signed by Jarboe on August 4, 2017, is entitled "Applicant Statement and Agreement" (Application). The Application is one page, and consists of six paragraphs, all in identical and small—nearly impossible to read—font. None of the six paragraphs is labeled or titled, in boldface or otherwise. The last sentence of the first paragraph provides: "I hereby authorize the Company with which I have applied for employment to share my Application for Employment with other affiliated companies/employers, and hereby agree that all terms, conditions and/or agreements contained in this Applicant's Statement and Agreement ... shall be enforceable by me and by such other companies/employers ..., even though I have not signed a separate Applicant's Statement and Agreement for those other companies/employers." Nowhere in the Application are the terms "Company," "companies," "affiliated companies" or "employers" defined.

The fourth paragraph of the Application refers to arbitration. This paragraph is almost 35 lines and ends with these three sentences: "If CCP § 1284.2 conflicts with other substantive statutory provisions or controlling case law, the allocation of costs and arbitrator fees shall be governed by said statutory provisions or controlling case law instead of CCP § 1284.2. Both the Company and I agree that any arbitration proceeding must move forward under the Federal Arbitration Act ( 9 U.S.C. §§ 3 – 4 ) even though the claims may also involve or relate to parties who are not parties to the arbitration agreement and/or claims that are not subject to arbitration; thus, the court may not refuse to enforce this arbitration agreement and may not stay the arbitration proceeding despite the provisions of California Code of Civil Procedure § 1281.2(c). I UNDERSTAND BY AGREEING TO THIS BINDING ARBITRATION PROVISION, BOTH I AND THE COMPANY GIVE UP OUR RIGHTS TO TRIAL BY JURY."

The second agreement, which Jarboe signed in ink on August 10, 2017, is entitled "Agreements" and is between DKD of Davis, as the named "Company" and Jarboe as the named "Employee" (Employment Agreement). The Employment Agreement contains two boldfaced paragraphs, the first of which is entitled "At Will Employment Agreement." This first paragraph concludes with the following advisement: "This agreement is the entire agreement between the Company and the employee regarding the rights of the Company or employee to terminate employment with or without good cause and this agreement takes the place of all prior and contemporaneous agreements, representations, and understandings of the employee and the Company." The second paragraph is entitled "Binding Arbitration Agreement." It is 43 lines, without indentation, included within which is a sentence that is alone 11 lines.⁴

Jarboe worked at Hanlees Toyota for approximately one month before he was transferred to Hanlees Kia in September 2017, where he worked until his termination in January 2018. The compensation reports Jarboe received while working at Hanlees Kia referred to his employer as "Leehan of Davis, Inc dba Hanlees [Chrysler Dodge Jeep Ram Kia]."

After he was terminated in 2018, Jarboe filed this putative class action against Hanlees, its 12 affiliated dealerships, and the three individual owners, alleging numerous Labor Code violations, including: failure to provide meal and rest periods; failure to pay overtime compensation; failure to pay for all hours worked; and failure to pay for waiting time compensation. In addition to various tort claims, including fraud and conversion, the complaint alleges an unfair competition claim, as well as a PAGA claim. All but one cause of action are asserted against "All Defendants" without differentiation. The fifth cause of action (failure to timely pay all earned wages in violation of Lab. Code, § 204 ) is alleged solely against the Hanlees group. The complaint seeks damages and injunctive relief, as well as civil penalties under the PAGA.

Defendants moved to stay the action and compel arbitration. The court determined that there was an enforceable arbitration agreement, finding evidence that Jarboe electronically signed the Application and ink signed the Employment Agreement. While the Employment Agreement was procedurally unconscionable it was not substantively unconscionable. Except for Jarboe's individual claims against DKD of Davis, the court denied the motion to compel. The court determined that the defendants failed to establish that the Employment Agreement applied to entities other than the named "Company": DKD of Davis. The court also determined that Jarboe's PAGA cause of action could proceed in court because an employee "bringing a PAGA action ... is not acting on his or her own behalf, but on behalf of the state and the state is not bound by the employee's prior agreement, including any waiver of his right to bring a representative action." The court denied defendants’ motion to stay the PAGA claim pending completion of the arbitration of Jarboe's private claims.

III. DISCUSSION

A. Standards of Review

On appeal from an order denying a petition to compel arbitration, we review the trial court's factual determinations under the substantial evidence standard, and we review the legal issues independently. ( Duick v. Toyota Motor Sales, U.S.A., Inc. (2011) 198 Cal.App.4th 1316, 1320, 131 Cal.Rptr.3d 514 ; Provencio v. WMA Securities, Inc. (2005) 125 Cal.App.4th 1028, 1031, 23 Cal.Rptr.3d 524.) Specifically, we independently consider the question of whether and to what extent a nonsignatory may enforce an arbitration agreement. ( Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 708, 111 Cal.Rptr.3d 876 ; DMS Services, LLC v. Superior Court (2012) 205 Cal.App.4th 1346, 1352, 140 Cal.Rptr.3d 896 ( DMS Services ).)

Although an order denying a stay of proceedings is not generally appealable, it is reviewable on appeal from an order denying arbitration because the denial of stay affects the order appealed from and substantially affects the rights of the appellant. ( J.H. Boyd Enterprises, Inc. v. Boyd (2019) 39 Cal.App.5th 802, 811–812, 252 Cal.Rptr.3d 360.) A trial court's decision whether to stay an action at law when a controversy has been ordered to arbitration is reviewed for an abuse of discretion. (See Cardiff Equities, Inc. v. Superior Court (2008) 166 Cal.App.4th 1541, 1548, 83 Cal.Rptr.3d 699.)

B. The Trial Court Correctly Refused to Compel Arbitration

Defendants contend that the trial court erred by concluding the arbitration provision in the Employment Agreement was limited to its signatories. Defendants argue that Hanlees, its affiliated dealerships, and the individual owners were entitled to compel arbitration either under the terms of the agreement, as third party beneficiaries or under the theory of equitable estoppel.

1. Legal Principles

Under federal and state law, a strong public policy favors arbitration and seeks to ensure " ‘private agreements to arbitrate are enforced according to their terms.’ " ( Stolt-Nielsen S.A. v. AnimalFeeds Internat. Corp. (2010) 559 U.S. 662, 664, 130 S.Ct. 1758, 176 L.Ed.2d 605 ; see Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9, 10 Cal.Rptr.2d 183, 832 P.2d 899.) However, " ‘ "there is no policy compelling persons to accept arbitration of controversies which they have not...