Omar v. Ralphs Grocery Co.

• Decision Date: 06 May 2004
• Docket Number: No. B169025.,B169025.
• Court: California Court of Appeals Court of Appeals
• Parties: Adel OMAR, Plaintiff and Respondent, v. RALPHS GROCERY COMPANY et al., Defendants and Appellants.

13 Cal.Rptr.3d 562

118 Cal.App.4th 955

Adel OMAR, Plaintiff and Respondent, v. RALPHS GROCERY COMPANY et al., Defendants and Appellants.

No. B169025.

Court of Appeal, Second District, Division 2.

May 6, 2004.

As Modified May 20, 2004.

Review Denied September 1, 2004.

Littler Mendelson and Henry D. Lederman, Walnut Creek, for Defendants and Appellants.

Greenberg & Weinmann, Paul A. Greenberg and Iris Weinmann, Santa Monica, for Plaintiff and Respondent.

DOI TODD, J.

Ralphs Grocery Company and Mark Strauch appeal the trial court's denial of their motion to compel arbitration, which was filed as part of a motion for summary judgment. Appellants contend the trial court erred in failing to determine the two "gateway" issues of arbitrability: (1) whether there is an enforceable agreement to arbitrate, and (2) whether the agreement covers the disputes at issue. We agree and reverse, and remand the matter to the trial court for a determination of these issues. We also determine that in this case the issue of whether appellants waived the right to compel arbitration must be decided in the first instance by an arbitrator and not the court.

FACTUAL AND PROCEDURAL BACKGROUND

Respondent Adel Omar was hired by Ralphs' predecessor, Hughes Markets, in 1986. In 1990 he was promoted to manager of operations at the Ralphs store on West Pico Boulevard in Los Angeles, a position he held for the next 11 years. On September 14, 2001, Ralphs' district manager, Scott Drew, signed a declaration stating that on that day he delivered a copy of Ralphs' Mediation and Binding Arbitration Policy (the arbitration agreement) to respondent, along with an Employee Acknowledgment form. In a subsequent declaration, Drew stated that he also delivered to respondent a memorandum from the group vice president of Ralphs' Human Resources and Labor Relations department which explained the company's dispute resolution program (DRP) and informed employees that even if they "fail or refuse to sign and return the Employee Acknowledgment, the DRP Mediation & Binding Arbitration Policy will still be a binding term of [their] employment with the Company." Respondent denied receiving the arbitration agreement during his employment. It is undisputed that respondent did not sign the Employee Acknowledgment form.

The arbitration agreement provides that it applies to "any employment-related disputes" that arise between employees and Ralphs and "requires that any Employee who wishes to initiate formal proceedings to resolve any employment-related disputes must submit the matter to final and binding arbitration." The arbitration agreement further provides that "[a]rbitration as described in this Policy is the sole and exclusive remedy for any dispute(s) arising out of or related to the employer/employee relationship." The arbitration agreement also provides that it does not prevent employees or Ralphs from agreeing voluntarily to submit the disputes to mediation before beginning any arbitration proceedings. The arbitration agreement specifies that it "is subject to and governed by the Federal Arbitration Act, 9 U.S.C. section 1 et seq." (FAA), that the parties will select the arbitrator by mutual agreement and that Ralphs will pay the arbitration fees "in all cases where required by law."

On November 28, 2001, respondent's employment was terminated for allegedly making offensive comments to another employee on November 7 2001. On December 12, 2001, respondent wrote to Ralphs apologizing for his actions and requesting that his employment be reinstated. On December 17, 2001, Ralphs sent respondent a notice of dispute form to be completed and signed by him. According to respondent, on December 20, 2001 he hand-delivered a letter to Christine Bowers, vice president of human resources, in which he stated that he wanted to participate in mediation as soon as possible but that he did not understand what an arbitration was. Ms. Bowers denied receiving the letter. Respondent signed and returned the notice of dispute form on January 29, 2002, which stated that "this form is to be used to initiate a complaint or request for dispute resolution under the company's policy against unlawful harassment and discrimination and/or dispute resolution procedure."

On May 2, 2002, Ralphs wrote to respondent advising him that it had determined his termination was proper and that he could either request mediation or demand final and binding arbitration. A copy of the arbitration agreement and request for mediation and arbitration forms were enclosed. Respondent signed the request for mediation form, which stated: "I further understand and agree that if the complaint/dispute is not resolved through mediation and I wish to pursue this matter further, I must submit this complaint/dispute to final & binding arbitration pursuant to the policy." His attorney returned this form to Ralphs on May 10, 2002. On October 9, 2002, respondent's attorney sent a letter to Ralphs in which he reiterated his client's request to mediate his claims. On October 11, 2002, Ralphs' in-house lawyer responded by letter, stating that Ralphs had reviewed and considered respondent's request for mediation and determined that the dispute was not appropriate for mediation. The letter also stated that respondent's dispute could only be submitted to final and binding arbitration, and that if he commenced any other type of formal dispute resolution, Ralphs would consider such action to be a repudiation of the arbitration agreement and would seek summary judgment and to recover its damages.

On October 15, 2002, respondent's attorney wrote to Ralphs asking Ralphs to suggest how "the proposed mechanics of the subject arbitration would play out" and to clarify whether Ralphs would pay all the costs of an arbitration. The same day, Ralphs wrote back stating that the "mechanics" of arbitration were clearly spelled out in the arbitration agreement and enclosed another copy of the agreement. On November 12, 2002, respondent's attorney again asked Ralphs to clarify whether Ralphs was agreeing to pay the costs of arbitration and to advise of Ralphs' proposed method for choosing an arbitrator. On November 12, 2002, respondent's attorney also served Ralphs with a complaint and demand for arbitration "subject to the Court's determination whether the claims are subject to an enforceable arbitration agreement."

On November 25, 2002, respondent filed his complaint in the Los Angeles Superior Court against Ralphs and his former supervisor, Mark Strauch. The complaint asserted eight causes of action: for declaratory relief, rescission of the arbitration agreement based on fraud, harassment and discrimination based on race, age and religion and retaliation in violation of the Fair Employment and Housing Act, wrongful termination in violation of public policy, breach of implied contract, and violation of Business and Professions Code section 17200 et seq. Respondents answered the complaint and the parties engaged in written discovery on the issue of arbitrability.

On April 1, 2003, appellants filed a combined motion for summary judgment and to compel arbitration. Appellants requested that the motion to compel be granted in the event summary judgment was denied. At the June 18, 2003 hearing on the motion, the trial court denied the motion for summary judgment on the grounds that triable issues of material fact existed regarding the enforceability of the arbitration agreement. Specifically, the court found there were four triable issues: (1) whether respondent ever received the arbitration policy in September 1991 while working for Ralphs, (2) whether the arbitration policy is a contract of adhesion, (3) whether the arbitration policy is procedurally and substantively unconscionable, and (4) whether appellants waived their right to request or compel arbitration having given respondent the "royal run-around and delayed it so long." The court also denied the motion to compel arbitration, but did not specify its reasons. Appellants challenge only that portion of the court's ruling denying the motion to compel arbitration.

DISCUSSION

1. Standard of Review

As an initial matter, the parties dispute the proper standard of review. Appellants assert that interpretation of the FAA presents questions of law for de novo review, while respondent asserts that the trial court's factual finding that appellants waived their right to compel arbitration must be reviewed under the substantial evidence test. It is well settled that we review de novo the legal question whether the FAA required the court to grant appellants' motion to compel arbitration. (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 699, 170 Cal.Rptr. 817, 621 P.2d 856; Basura v. U.S. Home Corp. (2002) 98 Cal.App.4th 1205, 1210-1211, 120 Cal.Rptr.2d 328; Ralphs Grocery Company v. Massie (2004) 116 Cal.App.4th 1031, 11 Cal.Rptr.3d 65 (Ralphs).)

2. The Matter Must Be Remanded for the Trial Court's Determination of the Question of Arbitrability

Appellants contend the trial court exceeded its authority in determining that triable issues of material fact existed regarding the enforceability of the arbitration agreement. Citing Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (Howsam), appellants argue that a trial court may consider only two "gateway issues" of arbitrability: (1) whether there is an agreement to arbitrate between the parties, and (2) whether the agreement covered the dispute at issue.

As the court in Howsam explained, the phrase "question of arbitrability" has a limited scope and applies only "in the kind of narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter." (Howsam, supra, 537 U.S. at p. 83, 123 S.Ct. 588.) "Thus, a gateway dispute about whether the parties are bound by a given arbitration clause raises a `question of...