Muro v. Cornerstone Staffing Solutions, Inc.

• Decision Date: 23 February 2018
• Docket Number: D070206
• Citation: 20 Cal.App.5th 784,229 Cal.Rptr.3d 498
• Court: California Court of Appeals Court of Appeals
• Parties: Tony MURO, Plaintiff and Respondent, v. CORNERSTONE STAFFING SOLUTIONS, INC., Defendant and Appellant.

20 Cal.App.5th 784

229 Cal.Rptr.3d 498

Tony MURO, Plaintiff and Respondent,

v.CORNERSTONE STAFFING SOLUTIONS, INC., Defendant and Appellant.

D070206

Court of Appeal, Fourth District, Division 1, California.

Filed February 23, 2018

Ogletree, Deakins, Nash, Smoak & Stewart, Jack S. Sholkoff, Alexandra A. Bodnar and Ashley B. McAteer, Los Angeles, for Defendant and Appellant.

Turley & Mara, William Turley, David Mara and Jamie Serb, San Diego, for Plaintiff and Respondent.

DATO, J.

Plaintiff Tony Muro entered into an employment contract with defendant Cornerstone Staffing Solutions, Inc. (Cornerstone). The contract included a provision requiring that all disputes arising out of Muro's employment with Cornerstone to be resolved by arbitration. It also incorporated a class action waiver provision. In response to Muro's present action, which was styled as a proposed class action and alleged various Labor Code violations, Cornerstone moved to compel arbitration and dismiss the class claims.

Relying heavily on Garrido v. Air Liquide Industrial, U.S. LP (2015) 241 Cal.App.4th 833, 194 Cal.Rptr.3d 297 ( Garrido ), the trial court concluded the contract was exempted from the operation of the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq. )¹ and was instead governed by California law. It further determined that the California Supreme Court's decision in Gentry v. Superior Court (2007) 42 Cal.4th 443, 64 Cal.Rptr.3d 773, 165 P.3d 556 ( Gentry ) (overruled on other grounds in Iskanian v. CLS Transportation, Los Angeles, LLC (2014) 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129 ) continued to provide the relevant framework for evaluating whether the class waiver provision in the contract was enforceable under California law. After applying Gentry to the record here, the court found the class waiver provision of the contract unenforceable and denied the motion to compel arbitration. Cornerstone appeals, but finding no error, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Cornerstone is a full service employee staffing firm providing assistance to a variety of employers throughout California, Nevada, Michigan, and New Jersey. Cornerstone's website promotes itself as specializing in, among other things, "Logistics & Transportation Staffing & Recruitment". Cornerstone derived over eight percent of its total revenue in 2015 from its transportation division, and has an employee whose self-described position is "Department of Transportation Compliance Coordinator/Payroll Administrator."

Cornerstone hired Muro around May 2012 to drive trucks for Cornerstone's client, Team Campbell, which ships products from its Fontana, California location throughout the country. Muro occupied that position from approximately May 2012 through August 2014. During his tenure as a driver, he had routes both within California and across state lines. He made frequent trips to or through Arizona, Nevada, Utah, Oregon, Washington, New Mexico, Idaho, and Wyoming.

As part of his employment contract, Muro signed an agreement containing the arbitration provisions that are at the center of the present dispute. Under the relevant Mutual Arbitration Policy (the policy), nearly all disputes had to be submitted to binding arbitration.² The policy is governed "solely by the Federal Arbitration Act" and provides that arbitration would be pursuant to the National Rules for the Resolution of Employment Disputes of the American Arbitration Association. The parties agreed to waive a jury trial and "the right to initiate or proceed on a class action basis or participate in a class action in the arbitration."

Muro filed his initial complaint against Team Campbell and subsequently added Cornerstone as a defendant. The complaint, styled as a proposed class action complaint, alleged causes of action for: (1) failure to pay all compensation for time worked; (2) failure to provide meal periods; (3) failure to authorize and permit rest breaks; (4) knowing and intentional failure to comply with itemized wage statements; (5) failure to pay timely wages due at termination/waiting time penalties; and (6) violation of the unfair competition law.

Cornerstone petitioned to compel Muro to arbitrate his claims on an individual basis. It maintained the FAA applied because Cornerstone and Muro were engaged in interstate commerce and because the policy itself referred to the FAA. It further asserted that the FAA required the court to enforce the policy according to its terms, ordering Muro to arbitrate his various wage and hour claims on an individual basis and dismissing all purported class claims.

Muro opposed the petition claiming he was a "transportation worker" within the ambit of a specific FAA exemption. He argued that under the pertinent analysis in Garrido , the FAA did not govern the court's evaluation of Cornerstone's petition to compel arbitration. According to Muro, because the FAA did not apply, California law as expressed in Gentry continued to govern. He contended that because he satisfied the Gentry factors, the class arbitration waiver provision was unenforceable and his claims should be permitted to proceed in the current civil action. He also argued that under Labor Code section 229, his action to recover unpaid wages could proceed notwithstanding the terms of the policy.

Relying on Garrido , the trial court held that the express exemption contained in section 1 made the FAA inapplicable to the policy because Muro was a transportation worker. The court also rejected Cornerstone's claim that it was not part of the "transportation industry," concluding that evidence of Cornerstone's employment of a Department of Transportation Compliance Coordinator and its transportation-related revenues demonstrated that it was "at least somewhat involved in the transportation industry." ( Garrido, supra, 241 Cal.App.4th at p. 840, 194 Cal.Rptr.3d 297.) Because the FAA did not apply, the court turned to the California Arbitration Act to assess whether Cornerstone's petition to compel individual arbitration was proper under Gentry . It found that each of the four Gentry factors militated in favor of finding the policy's class action waiver unenforceable, and therefore denied Cornerstone's petition.

DISCUSSION

When a trial court's order is based on a question of law, we accord no deference to the ruling and instead will review the order de novo. ( Garrido, supra , 241 Cal.App.4th at p. 839, 194 Cal.Rptr.3d 297.) A judgment is presumed correct, and if it is correct on any theory, it must be affirmed regardless of the trial court's reasoning. ( Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1201, 142 Cal.Rptr.3d 312.) "Decisions on issues of fact are reviewed for substantial evidence." ( Garrido, supra , at p. 839, 194 Cal.Rptr.3d 297.) As to the trial court's evaluation on whether Muro met his burden of establishing the Gentry factors, an appellate court reviews the ruling under the deferential abuse of discretion standard. ( Truly Nolen of America v. Superior Court (2012) 208 Cal.App.4th 487, 508, 145 Cal.Rptr.3d 432 ( Truly Nolen ).)

1. The Trial Court Correctly Ruled the FAA Did Not Apply

The trial court implicitly found, and the parties do not dispute on appeal, that Cornerstone was engaged in interstate commerce and that Muro's employment contract was therefore a contract "evidencing a transaction involving commerce" within the meaning of section 2 of the FAA, which potentially triggers application of the FAA to the policy. (§ 2; see Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 277, 115 S.Ct. 834, 130 L.Ed.2d 753.) However, section 1 of the FAA expressly exempts from its coverage all " ‘contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.’ " ( § 1 ; Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 109, 121 S.Ct. 1302, 149 L.Ed.2d 234 [adopting "the better interpretation" of section 1"as exempting contracts of employment of transportation workers"] ( Circuit City ).) Thus, section 1's reference to "any other class of workers engaged in foreign or interstate commerce" is defined to mean "transportation workers" ( id. at p. 121, 121 S.Ct. 1302 ), and the courts have consistently "found transportation workers' employment agreements are exempt from the FAA." ( Garrido, supra, 241 Cal.App.4th at p. 840, 194 Cal.Rptr.3d 297.)

There is substantial evidence, and indeed Cornerstone does not dispute, that Muro was a driver who transported goods and often did so across state lines. Courts have repeatedly concluded that contracts of employment with drivers whose routes include transporting goods across state lines are "transportation workers" within the meaning of section 1's exemption. ( Garrido , supra , 241 Cal.App.4th at p. 840, 194 Cal.Rptr.3d 297 ["Garrido was a ‘transportation worker’ under section 1 of the FAA ... [because he] worked as a truck driver transporting Air Liquide gases, frequently across state lines"]; Performance Team Freight Systems, Inc. v. Aleman (2015) 241 Cal.App.4th 1233, 1240, 194 Cal.Rptr.3d 530 ["Truck drivers who cross interstate lines usually are considered transportation workers"]; Lenz v. Yellow Transportation, Inc. (8th Cir. 2005) 431 F.3d 348, 351 ["Indisputably, if Lenz were a truck driver, he would be considered a transportation worker under [section] 1 of the FAA"]; Harden v. Roadway Package Systems, Inc. (9th Cir. 2001) 249 F.3d 1137, 1140 ["[T]he FAA is inapplicable to drivers ... who are engaged in interstate commerce."].)

Cornerstone maintains that Muro's job as a transportation worker, while a necessary predicate, it is not sufficient to trigger section 1's exemption. It urges us to disagree with Garrido and instead adopt the rationale of Hill v. Rent-A-Center, Inc. (11th Cir. 2005) 398 F.3d 1286 ( Hill ), which concluded that the section 1 exemption applies only to transportation workers who are employed by an employer "within the...