Julian v. Glenair, Inc.

• Citation: 17 Cal.App.5th 853,225 Cal.Rptr.3d 798
• Decision Date: 27 November 2017
• Docket Number: B277064
• Court: California Court of Appeals
• Parties: Malissa JULIAN et al., Plaintiffs and Respondents, v. GLENAIR, INC., Defendant and Appellant.

17 Cal.App.5th 853

225 Cal.Rptr.3d 798

Malissa JULIAN et al., Plaintiffs and Respondents,

v.GLENAIR, INC., Defendant and Appellant.

B277064

Court of Appeal, Second District, Division 4, California.

Filed November 27, 2017

As Modified on Denial of Rehearing December 13, 2017

Gibson, Dunn & Crutcher, Jesse A. Cripps, Los Angeles, Sarah E. Gerdes, and Sarah Zenewicz, San Francisco, for Defendant and Appellant.

Matern Law Group, Matthew J. Matern and Tagore Subramaniam, Manhattan Beach, for Plaintiffs and Respondents.

MANELLA, J.

Appellant Glenair, Inc., challenges the denial of its motion to compel arbitration of respondents' claim under the Labor Code Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698 et seq. ). Glenair contends an agreement respondents executed during their employment with the company was an enforceable postdispute agreement obligating them to arbitrate the claim. We hold that an agreement to arbitrate a PAGA claim, entered into before an employee is statutorily authorized to bring such a claim on behalf of the state, is an unenforceable predispute waiver. As any agreement by respondents was entered into before they were authorized to bring a PAGA claim, the trial court properly denied the petition to compel.

RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

A. Events Preceding Underlying Action

Respondents Malissa and Machele Julian began their employment with Glenair, respectively, in 2012 and 2013.¹ In April 2013, an action was commenced against Glenair (L.A. County Super. Ct. Case No. BC505602) in which Roxane Rojas was ultimately identified as the principal named plaintiff (the Rojas action). Rojas's first amended complaint, filed February 14, 2014, asserted putative class claims based on alleged violations of the Labor Code and the unfair competition law ( Bus. & Prof. Code, § 17200 et seq. ), as well as a PAGA claim for civil penalties.

In July 2014, Glenair served its hourly employees with a proposed arbitration agreement entitled "Glenair Dispute Resolution Program." The proposed agreement informed employees that if they did not "opt out," their continued employment with Glenair manifested consent to mandatory arbitration of a broad range of claims, including claims for wages or other compensation due, meal or rest periods, and "violation of applicable federal, state or local law, statute, ordinance, or regulation. The proposed agreement further stated that it was governed by the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq. ), and that the parties' intent was that "the FAA shall preempt all [s]tate laws to the fullest extent permitted by law."

In bold capital letters with underlining, the proposed agreement provided: "Your decision to participate in the [program] is completely voluntary. You may opt[ ]out of the [program] within 30 calendar days of receipt. Your decision to participate or not participate in the program will have no effect on your work with Glenair. If you do not opt[ ]out ...:

(1) Mandatory arbitration is your ... sole and exclusive means of resolving past, present, and future claims, controversies, and disputes between you and the company covered by this program;

(2) You will not be able to participate in any class or collective action covered by this program, including ... [the Rojas action]; and

(3) To the extent permitted by law, you will not be able to participate in any representative action that seeks to resolve whether individuals other than you have been subject to violations of the law, including ... [the Rojas action]."²

The proposed agreement contained a description of the claims then asserted in the Rojas action, including the PAGA claim.

On July 16, 2014, Glenair distributed copies of the proposed agreement to its hourly employees by first class mail. When the copy sent to Machele was returned as undeliverable, Stephen Bruce, an attorney employed by Glenair, personally observed her supervisor give her a copy of the proposed agreement. Neither respondent took any action to opt out of the proposed agreement.

In January 2015, respondents' employment was terminated. In late 2014 or early 2015, a third amended complaint was filed in the Rojas action that asserted no PAGA claim. In April 2015, attorney Bruce received a copy of a proposed fourth amended complaint in the Rojas action, which identified respondents as additional named plaintiffs and contained a PAGA claim. Later, in May 2015, Glenair sent a demand for arbitration to respondents and their counsel, who also represented the existing named plaintiffs in the Rojasaction. Respondents did not answer the demand for arbitration, and the proposed fourth amended complaint in the Rojas action was never filed.

B. Underlying Action

In October 2015, respondents initiated the underlying action against Glenair. Their complaint contains a single claim under PAGA for civil penalties "on behalf of themselves and other current and former non-exempt employees" of appellants. The claim is predicated on alleged violations of the Labor Code and Industrial Welfare Commission Wage Order No. 1-2001 (Wage Order 1-2001).³ The complaint asserts that respondents are " ‘aggrieved employees' " for purposes of a representative action under PAGA, and that they complied with the requirements for commencing a representative action under PAGA.

Glenair filed a petition for an order to compel arbitration of respondents' claim ( Code Civ. Proc., § 1281.2 ). Relying on Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 382, 173 Cal.Rptr.3d 289, 327 P.3d 129 ( Iskanian ), Glenair maintained that respondents, in the course of their employment, signed an enforceable voluntary postdispute arbitration agreement that encompassed their claim. Glenair argued that in Iskanian , our Supreme Court prohibited predispute waivers of PAGA claims, but approved postdispute waivers of PAGA claims by employees aware of Labor Code violations.

Respondents opposed the petition, contending they entered into no enforceable agreement requiring arbitration of their PAGA claim. They argued that they were insufficiently aware of their right to assert a PAGA claim when they failed to opt out of the proposed agreement. Additionally, they argued that the agreement was unenforceable due to procedural and substantive unconscionability.

In support of those contentions, respondents relied on their own declarations. Malissa stated that prior to her termination, she never received the proposed arbitration agreement, and had no knowledge of the proposed agreement, the Rojas action, and her potential claims against Glenair. Machele stated that in July 2014, her boss handed her the proposed arbitration agreement. She tried to read it but did not understand it, and decided that she did not want to participate in the dispute resolution program. She took no further action, believing that the agreement would bind her only if she signed it. Machele further stated that prior to her termination, she was unaware of the Rojas action and her potential claims against Glenair.

On April 18, 2016, the trial court issued a tentative ruling denying Glenair's petition. The court first discussed Iskanian and its progeny, stating: " Iskanian establishes that a predispute arbitration clause ... cannot be used to compel arbitration of PAGA claims." Turning to the subject of postdispute waivers, the court stated: "Conceivably, our Supreme Court would allow postdispute arbitration agreements to cover PAGA claims because, at that point, an employee would be represented by counsel who could weigh the benefits and risks of proceeding in arbitration rather than superior court. [¶] In this case, [respondents] were not represented by counsel when they allegedly agreed to arbitration." On October 6, 2016, at the parties' request, the court entered the tentative ruling as its final order.⁴

DISCUSSION

Glenair challenges the denial of its petition to compel arbitration, arguing that under Iskanian , the agreement at issue constituted an enforceable postdispute arbitration agreement encompassing respondents' PAGA claim. For the reasons discussed below, we affirm the denial because the agreement is an unenforceable predispute agreement.

A. Standard of Review

A petition to compel arbitration is a suit in equity seeking specific performance of an arbitration agreement. ( Hotels Nevada, LLC v. L.A. Pacific Center, Inc. (2012) 203 Cal.App.4th 336, 347, 136 Cal.Rptr.3d 832.) Under Code of Civil Procedure section 1281.2, a petition to compel arbitration of a claim may be denied when the arbitration agreement is unenforceable ( Robertson v. Health Net of California, Inc. (2005) 132 Cal.App.4th 1419, 1425, 34 Cal.Rptr.3d 547 ( Robertson )) or the claim is not subject to the arbitration agreement ( Fitzhugh v. Granada Healthcare & Rehabilitation Center, LLC (2007) 150 Cal.App.4th 469, 474, 58 Cal.Rptr.3d 585 ( Fitzhugh ); see Sky Sports, Inc. v. Superior Court (2011) 201 Cal.App.4th 1363, 1367–1368, 134 Cal.Rptr.3d 405 ).

Generally, the standard of review applicable to the denial of a petition to compel arbitration is determined by the issues presented on appeal ( Robertson , supra , 132 Cal.App.4th at p. 1425, 34 Cal.Rptr.3d 547 ). To the extent the denial relies on a pertinent factual finding, we review that finding for the existence of substantial evidence.⁵ ( Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1277, 16 Cal.Rptr.3d 296.) In contrast, to the extent the denial relies on a determination of law, we review the trial court's resolution of that determination de novo. ( Ibid. ) Nonetheless, we are not bound by the trial court's rationale, and thus may affirm the denial on any correct legal theory supported by the record, even if the theory was not invoked by the trial court. ( Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 268–269, 88 Cal.Rptr.3d 186 ; Cheng–Canindin v. Renaissance Hotel Associates (1996) 50 Cal.App.4th 676, 683, fn. 3, 57 Cal.Rptr.2d 867 ; Chan v. Drexel Burnham...