Serpa v. Cal. Sur. Investigations, Inc.

• Citation: 215 Cal.App.4th 695,155 Cal.Rptr.3d 506
• Decision Date: 26 April 2013
• Docket Number: B237363
• Court: California Court of Appeals
• Parties: Valerie SERPA, Plaintiff and Respondent, v. CALIFORNIA SURETY INVESTIGATIONS, INC., et al., Defendants and Appellants.

215 Cal.App.4th 695

155 Cal.Rptr.3d 506

Valerie SERPA, Plaintiff and Respondent,

v.CALIFORNIA SURETY INVESTIGATIONS, INC., et al., Defendants and Appellants.

B237363

Court of Appeal, Second District, Division 7, California.

Filed March 21, 2013

As Modified April 19, 2013

As Modified April 26, 2013

Reversed and remanded with directions.

See 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 330 et seq.

APPEAL from an order of the Superior Court of Los Angeles County, Ruth Ann Kwan, Judge. Reversed and remanded with directions. (Los Angeles County Super. Ct. No. BC464218)

Paul, Plevin, Sullivan & Connaughton, San Diego, Fred M. Plevin, Jeffrey P. Ames and Matthew R. Jedreski for Defendants and Appellants, California Surety Investigations, Inc., Two Jinn, Inc., Aladdin Bail Bonds and Peter Holdsworth.

Stevens, Carlberg & McMillan and Daniel P. Stevens, Tustin, for Plaintiff and Respondent Valerie Serpa.

PERLUSS, P.J.

Valerie Serpa sued California Surety Investigations (CSI), its employee Peter Holdsworth and CSI's parent company, Two Jinn, Inc., doing business as Aladdin Bail Bonds (collectively CSI parties), for sexual harassment, employment discrimination, wrongful termination in violation of public policy and related causes of action. The trial court denied the CSI parties' motion to compel arbitration, finding the agreement to arbitrate lacked mutuality. The court rejected the CSI parties' argument the requisite mutuality was provided by the bilateral arbitration provisions in CSI's employees' handbook, incorporated by reference into the arbitration agreement, because CSI could change the handbook at its sole discretion and without notice. We reverse.

FACTUAL AND PROCEDURAL BACKGROUND

1. Serpa's Complaint

On June 24, 2011 Serpa filed a complaint in Los Angeles County Superior Court alleging claims against the CSI parties under the Fair Employment and Housing Act (FEHA) for sexual harassment, gender discrimination, retaliation and failure to prevent harassment and discrimination (Gov.Code, § 12940, subds. (a), (h), (j), (i), & (k)). Serpa's complaint also included claims for violation of the Family Rights Act (Gov.Code, § 12945.2) and wrongful termination in violation of public policy.

2. The CSI Parties' Motion To Compel Arbitration

On August 9, 2011 the CSI parties moved to compel arbitration contending Serpa had agreed at the inception of her employment as a bail bonds investigator with CSI to arbitrate all claims arising out of her employment. The motion was based on three documents that were attached as exhibits: (1) “Acknowledgment of Receipt of Arbitration and Agreement to Arbitrate” (the arbitration agreement); (2) “Acknowledgment of Receipt of Employee Handbook”; and (3) a copy of CSI's employee handbook.

a. The arbitration agreement

The arbitration agreement that Serpa signed provided, “I understand and agree that if my employment is terminated or my employment status is otherwise changed or if any other dispute arises concerning my employment and The Company and I cannot resolve such dispute through informal internal efforts, I will submit any such dispute (including, but not limited to wage and hour claims, claims of unlawful discrimination based on race, sex, age, national origin, disability or any other basis prohibited by law, but excluding claims which are required by law to be resolved solely by a public agency, such as claims relating to workers' compensation or unemployment insurance) exclusively to binding arbitration before a retired judge. I further agree to abide by the procedures in The Company's Arbitration Policy. I have received a copy of the Arbitration Policy that is located in the employee handbook.”

b. The employee handbook arbitration policy

Page three of the employee handbook, under the bold-face-type heading “Arbitration Agreement,” contains the company's arbitration policy: “The Company has adopted an arbitration policy, which provides for mandatory arbitration of all disputes arising out of any employee's employment at the Company, an employee's termination of employment or other change in employment status, which cannot be resolved by informal internal resolution. By accepting or continuing in employment with the Company, every employee agrees to the following policy[:]

“If your employment is terminated or your employment status is otherwise changed and you believe that your rights were violated or if any other dispute arises concerning your employment which you and the Company cannot resolve informally and internally, you and the Company agree to submit the dispute (including, but not limited to wage and hour claims and, claims of unlawful discrimination based on race, sex, age, national origin, disability or any other basis prohibited by law), exclusively to binding arbitration before a retired judge. This Arbitration Policy specifically excludes only those claims that are required by law to be heard solely by a public agency such as worker's compensation.... [¶] ... [¶]

“You and the Company shall each bear your own costs for legal representation at any such arbitration. The Company will be responsible for all costs associated with the arbitration (with the exception of legal representation)....

“You and the Company agree that if any court of competent jurisdiction declares that any part of this Arbitration Policy or the Acknowledgment of Receipt of Arbitration Policy and Agreement to Arbitration, which is being provided to you at the same time, is illegal, invalid or unenforceable, such a declaration will not affect the legality, validity or enforceability of the remaining parts of either document, and the illegal, invalid, or unenforceable part will no longer be part of either document.” ¹

The second paragraph of page three of the handbook, under the heading “Right to Revise,” states, “The Company retains the right to revise, modify, or delete any provision or policy in this Handbook, or the implementation of any provision or policy, except for the policy of at-will employment, at any time.”

c. Acknowledgment of receipt of employee handbook

On the first day of her employment, Serpa also received and signed a document entitled “Acknowledgment of Receipt of Employee Handbook” in which she acknowledged reviewing a copy of the handbook and agreed to abide by the terms and conditions of her employment as stated in the handbook. This acknowledgment form also stated, “I understand that any and all policies or practices [in the handbook] can be changed at any time by employer. Employer reserves the right to change my hours, wages and working conditions at any time.... I also understand that the employer reserves the right to amend, modify, rescind, delete, supplement or add to the provisions of the Handbook, as it deems appropriate from time to time in its sole discretion.”

3. Serpa's Opposition to the Motion To Compel Arbitration

Serpa opposed the motion to compel arbitration, asserting any agreement to arbitrate was unconscionable. She argued the agreement to arbitrate was part of an adhesion contract, lacked mutuality of obligation and, because any part of the handbook, including the arbitration policy, could be revised at any time by CSI, was illusory. In addition, Serpa argued the arbitration agreement was substantively unconscionable because it required her to submit to internal grievance procedures before pursuing arbitration, thus giving CSI a “free peek” at her case, and deprived her of her statutory right under FEHA to recover attorney fees if she prevailed on any of her FEHA claims (Gov.Code, § 12965, subd. (b)).

4. The Trial Court's Ruling Denying the CSI Parties' Motion

The trial court denied the CSI parties' motion to compel arbitration, agreeing with Serpa that the agreement was unconscionable. The court found the agreement to arbitrate, considered alone and on its face, lacked mutuality because it required Serpa to arbitrate her employment-related claims against CSI but did not compel CSI to arbitrate its disputes with Serpa. It also concluded that, while the arbitration policy expressed in the handbook and incorporated by reference into the agreement to arbitrate appeared to make the facially unilateral agreement to arbitrate bilateral, the bilateral nature of the agreement was actually illusory because CSI could change the arbitration policy as stated in the handbook at its sole discretion and without notice. Finding the offending nature of the agreement could not be severed without rewriting the agreement, the court concluded the agreement was unconscionable and unenforceable.²

DISCUSSION

1. Public Policy in Favor of Arbitration and Standard of Review

There is a strong public policy in favor of arbitration. ( St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195, 8 Cal.Rptr.3d 517, 82 P.3d 727 [recognizing strong federal and state public policies favoring arbitration]; Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9, 10 Cal.Rptr.2d 183, 832 P.2d 899; Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971–972, 64 Cal.Rptr.2d 843, 938 P.2d 903.) Under both the Federal Arbitration Act (FAA) and the California Arbitration Act (CAA), arbitration agreements are valid, irrevocable and enforceable except upon grounds that exist for revocation of the contract generally. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97–99, 99 Cal.Rptr.2d 745, 6 P.3d 669 ( Armendariz ); AT & T Mobility LLC v. Concepcion (Apr. 27, 2011, No. 09–893) ––– U.S. ––––, 131 S.Ct. 1740, 1746, 179 L.Ed.2d 742 [under § 2 of the FAA, arbitration agreement is valid, irrevocable and enforceable “save upon such grounds as exist at law or in equity for the revocation of any contract”]; Code Civ. Proc., §§ 1281 [same]; 1281.2, subd. (b) [on petition of party to arbitration agreement to arbitrate controversy with another party to agreement, court must compel arbitration...