Lee v. Technology Integration Group

• Citation: 82 Cal.Rptr.2d 387,69 Cal.App.4th 1549
• Decision Date: 19 February 1999
• Docket Number: No. H018456,H018456
• Parties: Previously published at 69 Cal.App.4th 1549 69 Cal.App.4th 1549, 79 Fair Empl.Prac.Cas. (BNA) 221, 99 Cal. Daily Op. Serv. 1300, 1999 Daily Journal D.A.R. 1608 Amanda LEE, Plaintiff and Respondent, v. TECHNOLOGY INTEGRATION GROUP, et al., Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

Page 387

82 Cal.Rptr.2d 387

Previously published at 69 Cal.App.4th 1549

69 Cal.App.4th 1549, 79 Fair Empl.Prac.Cas. (BNA) 221,

99 Cal. Daily Op. Serv. 1300,

1999 Daily Journal D.A.R. 1608

Amanda LEE, Plaintiff and Respondent, v. TECHNOLOGY INTEGRATION GROUP, et al., Defendants and Appellants.

No. H018456.

Court of Appeal, Sixth District, California.

Feb. 19, 1999.

Review Granted June 3, 1999.

Certified for Partial Publication. ^*

Luce, Forward, Hamilton & Scripps, Charles A. Bird, Craig A. Schloss and John D. Edson, San Diego, attorneys for Appellants.

Huber--Samuelson, Alan F. Hunter and Diane E. Baylor, San Jose, attorneys for Respondent.

ELIA, J.

Technology Integration Group ("TIG") and William English appeal from an order denying a petition to compel arbitration of all claims raised by Amanda Lee, a former employee of TIG. (Code Civ. Proc., § 1294.) The superior court denied the petition on the ground Lee "did not knowingly waive her rights to bring suit for sexual assault and harassment."

Appellants contend that there is no requirement of a knowing waiver under California law, citing Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 53 Cal.Rptr.2d 515 and Cione v. Foresters Equity Services, Inc. (1997) 58 Cal.App.4th 625, 68 Cal.Rptr.2d 167. Lee responds that there is a knowing waiver requirement as recognized by the Ninth Circuit in Prudential Ins. Co. of America v. Lai (9th Cir.1994) 42 F.3d 1299 (hereafter Prudential ) (accord Renteria v. Prudential Ins. Co. of America (9th Cir.1997) 113 F.3d 1104). She also argues that the arbitration provision is unconscionable and against public policy and, therefore, unenforceable. Finally, she urges that the arbitration provision is not enforceable under Code of Civil Procedure section 1281.2.

In the published portion of this opinion, we hold that there is no knowing waiver requirement for enforcement of an arbitration agreement signed as a condition of employment in regard to Title VII claims. We resolve the remaining issues in the unpublished portion.

We reverse.

A. Background

When Lee was hired by TIG, she signed an employment agreement which contained an arbitration provision. The arbitration clause provided: "Any dispute between the parties relating to this Agreement or Employee's employment with Employer shall be resolved by binding arbitration under the then current commercial arbitration rules of the American Arbitration Association."

She subsequently filed a complaint for damages against TIG and William English, who was alleged to be a "managerial employee" of TIG. The complaint sought to allege causes of action for sexual harassment and discrimination under federal and state laws in addition to other causes of action based on tort and contract. She averred that she had been wrongfully terminated and she had obtained right-to-sue authorization from the EEOC (Equal Employment Opportunity Commission) and the DFEH (Department of Fair Employment and Housing).

B. Knowing Waiver Requirement for Title VII Claims

In Prudential, supra, 42 F.3d 1299 the issue was the enforceability of an arbitration provision contained in a U-4 form, the Standard Application for Securities Industry Registration, which appellants had been required to sign as a condition of employment. (Id. at p. 1301.) The Ninth Circuit determined that such arbitration provisions are not enforceable as to Title VII claims (42 U.S.C. § 2000e et seq.) unless the employee "knowingly" agrees to arbitrate those claims. ¹ (Id. at pp. 1304-1305; see Renteria v. Prudential Ins. Co., supra, 113 F.3d 1104, 1107; cf. Nelson v. Cyprus Bagdad Copper Corp. (9th Cir.1997) 119 F.3d 756, 762 [ADA disputes: "the choice must be explicitly presented to the employee and the employee must explicitly agree to waive the specific right in question."] ) The Ninth Circuit engrafted this knowing waiver requirement on arbitration agreements encompassing Title VII claims even though the Federal Arbitration Act (9 U.S.C., § 1 et seq.) provides that arbitration agreements subject to the act "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract" (9 U.S.C., § 2) and even though the United States Supreme Court had held: "Although all statutory claims may not be appropriate for arbitration, '[h]aving made the bargain to arbitrate, the party should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.' [Citation.]" (Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 26, 111 S.Ct. 1647, 114 L.Ed.2d 26.)

In Gilmer v. Interstate/Johnson Lane Corp., supra, 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26, the question presented was whether a claim under the Age Discrimination in Employment Act as then amended (29 U.S.C. § 621 et seq.) could be subjected to compulsory arbitration agreement in a securities registration application. (Id. at p. 23, 111 S.Ct. 1647.) In determining whether the Congress intended to preclude a waiver of judicial remedies of those statutory rights in favor of arbitration, the court stated that "it should be kept in mind that 'questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration.' Moses H. Cone, [(1983) 460 U.S. 1], at 24 [103 S.Ct. 927, 74 L.Ed.2d 765]." (Gilmer v. Interstate/Johnson Lane Corp., supra, 500 U.S. at p. 26, 111 S.Ct. 1647.)

The United States Supreme Court rejected Gilmer's arguments that arbitration should be precluded as to ADEA claims because, among other proffered reasons, "arbitration will undermine the role of the EEOC in enforcing the ADEA" (id. at p. 28, 111 S.Ct. 1647), arbitration deprives claimants of the judicial forum provided for by the ADEA (id. at p. 29, 111 S.Ct. 1647), "the discovery allowed in arbitration is more limited than in the federal courts" (id. at p. 31, 111 S.Ct. 1647), and "there often will be unequal bargaining power between employers and employees" (id. at p. 33, 111 S.Ct. 1647). The court observed: "Although those [discovery] procedures [allowed in arbitration] might not be as extensive as in the federal courts, by agreeing to arbitrate, a party 'trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration.' [Citation.]" (Id. at p. 31, 111 S.Ct. 1647.) The United States Supreme Court reiterated in Gilmer that "the FAA's purpose was to place arbitration agreements on the same footing as other contracts" (id. at p. 33, 111 S.Ct. 1647) and "arbitration agreements are enforceable 'save upon such grounds as exist at law or in equity for the revocation of any contract.' 9 U.S.C. § 2 [9 U.S.C.S. § 2]." (Ibid.)

The Ninth Circuit in Prudential, supra, 42 F.3d 1299 examined section 118 of the Civil Rights Act of 1991, which provides: "Where appropriate and to the extent authorized by law, the use of alternative means of dispute resolution including ... arbitration, is encouraged to resolve disputes arising under the Acts or provisions of Federal law amended by this title." (Pub.L. 102-166, § 118, 1991 U.S.Code Cong. & Admin. News, at p. 1081.) The court determined that "Congress intended there to be at least a knowing agreement to arbitrate employment disputes before an employee may be deemed to have waived the comprehensive statutory rights, remedies, and procedural protections prescribed in Title VII and related state statutes." (Prudential, supra, 42 F.3d at p. 1304.)

In reaching its interpretation of section 118, the Ninth Circuit relied upon a senator's remark in the congressional record that arbitration was encouraged where the parties knowingly and voluntarily elect to use these methods and on statements in a house report. The court quoted from the report: " 'Section 216 [of the 1991 Act] encourages the use of alternative means of dispute resolution ... where appropriate and to the extent authorized by law.... The committee emphasizes ... that the use of alternative dispute resolution mechanisms is intended to supplement, not supplant, the remedies provided by Title VII. Thus, for example, the committee believes that any agreement to submit disputed issues to arbitration, whether in the context of a collective bargaining agreement or in an employment contract, does not preclude the affected person from seeking relief under the enforcement provisions of Title VII. This view is consistent with the Supreme Court interpretation of Title VII in Alexander v. Gardner-Denver Co., 415 U.S. 36 [94 S.Ct. 1011, 39 L.Ed.2d 147] (1974). The committee does not intend for the inclusion of this section to be used to preclude rights and remedies that would otherwise be available.' " (Prudential, supra, 42 F.3d at pp. 1304-1305; see Legis. His., Pub.L. 102-166, § 118, 1991 U.S.Code Cong. & Admin. News, at p. 635.) ² The Ninth Circuit also rested its decision on its view that the public policy of protecting victims of sexual discrimination and harassment, through provisions of Title VII and analogous state statutes, was at least as strong as public policy in favor of arbitration. (Prudential, supra, 42 F.3d at p. 1305.)

A number of federal courts have criticized and declined to follow Prudential, supra, 42 F.3d 1299. (See Seus v. John Nuveen & Co., Inc. (3rd Cir.1998) 146 F.3d 175, 184, fn. 2; Battle v. Prudential Ins. Co. of Am. (D.Minn.1997) 973 F.Supp. 861, 866; Cremin v. Merrill Lynch Pierce Fenner & Smith, Inc. (N.D.Ill.1997) 957 F.Supp. 1460, 1475; Johnson v. Hubbard Broadcasting, Inc. (D.Minn.1996) 940 F.Supp. 1447, 1455; Beauchamp v. Great West Life Assur. Co. (E.D.Mich.1996) 918 F.Supp. 1091, 1096 ["conclusion flies in the face of the language of the Civil Rights Act of 1991, the Supreme Court's opinion in Gilmer, and fundamental principles of contract law"]; Maye v. Smith Barney, Inc. (S.D.N.Y.1995) 897 F.Supp. 100, 107.)

As pointed out by Lee, the 9th...