Sparks v. Vista Del Mar Child & Family Servs.

• Decision Date: 20 August 2012
• Docket Number: No. B234988.,B234988.
• Citation: 145 Cal.Rptr.3d 318,207 Cal.App.4th 1511,12 Cal. Daily Op. Serv. 8612,2012 Daily Journal D.A.R. 10494
• Court: California Court of Appeals Court of Appeals
• Parties: Perry SPARKS, Plaintiff and Respondent, v. VISTA DEL MAR CHILD AND FAMILY SERVICES, Defendant and Appellant.

207 Cal.App.4th 1511

145 Cal.Rptr.3d 318

12 Cal. Daily Op. Serv. 8612

2012 Daily Journal D.A.R. 10,494

Perry SPARKS, Plaintiff and Respondent,

v.VISTA DEL MAR CHILD AND FAMILY SERVICES, Defendant and Appellant.

No. B234988.

Court of Appeal, Second District, Division 5, California.

July 30, 2012.

Certified for Partial Publication.^*

As Modified on Denial of Rehearing Aug. 20, 2012.

Hill, Farrer & Burrill, Los Angeles, James A. Bowles and E. Sean McLoughlin for Defendant and Appellant.

Karl Gerber, Sherman Oaks, for Plaintiff and Respondent.

MOSK, J.

INTRODUCTION

Defendant Vista Del Mar Child and Family Services (defendant) appeals from an order denying its petition to compel arbitration of the wrongful termination claims of its former employee, plaintiff Perry Sparks (plaintiff). Defendant relies upon an arbitration clause in its 2006 employee handbook (Handbook), which plaintiff acknowledged he received. We hold that plaintiff is not bound by the arbitration clause because that clause was included within a lengthy employee handbook; the arbitration clause was not called to the attention of plaintiff, and he did not specifically acknowledge or agree to arbitration; the handbook stated that it was not intended to create a contract; the handbook provided that it could be amended unilaterally by defendant and thus rendered any agreement illusory; the specific rules referred to in the arbitration clause were not provided to plaintiff; and the arbitration clause is unconscionable.

PROCEDURAL HISTORY

A. The Complaint

Plaintiff filed a wrongful termination complaint against defendant, his former employer. Plaintiff alleged he was initially hired as a temporary employee in January 2007, he was permanently hired in April 2007 as a controller, and he was terminated for pretextual reasons in 2010. According to plaintiff, he was terminated after he complained of various employee practices that he asserted violated federal and state reporting and compensation laws. Plaintiff sought damages for termination in violation of fundamental public policy; unfair business practices—Business and Professions Code section 17200; violation of Labor Code section 1102.5, subdivision (a); and intentional infliction of emotional distress.

Defendant filed a petition to compel arbitration and stay the action, and moved for a hearing. In the unverified petition to compel arbitration, defendant alleged that plaintiff and all of defendant's employees were subject to a mutual dispute resolution policy that required binding arbitration of employment disputes. Defendant further alleged that it demanded arbitration of the claims asserted in the complaint and that plaintiff refused to respond or submit to arbitration. According to defendant, the arbitration policy was “prominently” located in the Handbook that was distributed to all employees. Defendant stated, “Plaintiff acknowledged receipt and review of the Handbook, and expressly agreed to abide by its terms by signing the ‘Acknowledgment of Receipt of Employee Handbook’ ... on April 24, 2007.”

Paragraphs KK and LL on pages 35 and 36 of the Handbook contain the following clauses, which are in the same type and size as all other provisions in the Handbook:

“KK. DISPUTE RESOLUTION POLICY

“All disputes regarding your employment with [defendant], or the termination of your employment, will be subject to final and binding arbitration pursuant to the provisions of the Federal Arbitration Act. The arbitration will be held under the applicable rules of the American Arbitration Association. [¶] This policy requires that arbitration shall be the exclusive forum for resolving all disputes between you and [defendant] or any of its employees or managers arising out of claims for wrongful termination, discrimination, retaliation or harassment in violation of state or federal law, alleged violation of state or federal family and medical leave laws and any other laws pertaining to employment, and for unpaid wages under state or federal law. All such claims, as well as any other claims that arise out of your employment relationship with [defendant], shall be resolved by an arbitrator and not by judge or jury. [¶] The sole exceptions to arbitration are claims for workers' compensation or unemployment insurance benefits. This policy also requires [defendant] to arbitrate any and all claims it may have against you which arise of the employment relationship. [¶] The arbitration shall be held before a single arbitrator, who shall issue a written decision detailing his findings and award within thirty (30) days after the close of the arbitration hearing. [Defendant] will bear the cost of the arbitration proceeding.”

“LL. AMENDMENTS, REVISIONS AND MODIFICATIONS

“This Employee Handbook may be amended, revised and/or modified by [defendant] at any time without notice. If you have any questions about this, please contact the Human Resources Department.”

Page i of the Handbook provided as follows: “This handbook is provided for the use of the Employees as a general summary of the agency's personnel policies, work rules and benefits. The handbook is designed to acquaint you with the information as quickly as possible by highlighting agency policies, practices and benefits for your personal education. The handbook cannot anticipate every situation or answer every question. Therefore, you will find variations in working conditions and benefits, depending upon the division, category and Employee unit to which you belong. Your more detailed questions should be referred to your supervisor and/or the Human Resources Department. This Handbook is not intended to create a contract of employment and does not in any way alter the at-will employment relationship between [defendant] and its Employees.”

The document signed by plaintiff is entitled, “Acknowledgment of Receipt of Employee Handbook.” The acknowledgement states that the Handbook “contains important information about [defendant's] general personnel policies and on [his] privileges and obligations as an Employee.” It provides, “I understand that I am governed by the contents of the Handbook and that [defendant] may change, rescind or add to any policies, benefits or practices described in the Handbook from time to time in its sole and absolute discretion, with or without prior notice.”

Plaintiff in his declaration opposing the petition to compel arbitration stated that he was not made aware of the arbitration clause by defendant and was not aware of it. He also stated that during his employment he received a new handbook, of which he never acknowledged receipt in writing, and an accompanying letter from defendant's human resources director. That letter stated, “Here is your Master Copy of the 2009 Employee Handbook. This copy is to be placed in a location where all key Employee reference information is maintained. New employees will receive personal copies as part of the hiring process. All [of defendant's] Employees will sign the receipt for their personal copy. [¶] If you have questions or wish to recommend changes, please refer to the changes in terms of how the manual is organized.” The letter further provides: “Please do not mark your corrections or recommendations on the 2009 Employee Handbook Master Copy to send it to [Human Resources] for modification. When our request for changing a section in the 2009 Employee Handbook is approved; the page(s) will be revised and forwarded to each cost center for an addition to the handbook. Once the newly revised page is received in the cost center, remove the current page and replace it with the revised page.”

In this new handbook, there is an arbitration provision virtually identical to the one in the 2006 Handbook, except it adds the following significant language: “Employees will be required to sign for receipt of the handbook acknowledging inclusion of the arbitration policy stated in the handbook. Also, Employees will be required to sign a full arbitration agreement that is signed by both the Employee and the Human Resources Director or designee.”

B. Ruling on Petition

At the hearing on the petition to compel arbitration, the trial court heard argument and concluded there was no agreement to arbitrate, explaining that the mere acknowledgement of receipt of the Handbook was insufficient to create an enforceable arbitration agreement. The trial court therefore denied the petition.

DISCUSSION

A. Arbitration Principles and Standard of Review

A written agreement to arbitrate is enforceable. (Code Civ. Proc., § 1281¹; 9 U.S.C., § 2.) If, upon a petition to compel arbitration, the court determines that a written agreement to arbitrate the controversy exists, the court shall order the arbitration of the controversy. (§ 1281.2.) “Under both federal and state law, the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate. The United States Supreme Court has stated that ‘... the first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute.’ ( Mitsubishi Motors v. Soler Chrysler–Plymouth (1985) 473 U.S. 614, 626 [105 S.Ct. 3346, 3353, 87 L.Ed.2d 444, 454].) Similarly, under California law, ‘ “[a]rbitration is recognized as a matter of contract, and a party cannot be forced to arbitrate something in the absence of an agreement to do so.” ’ [Citations.]” ( Cheng–Canindin v. Renaissance Hotel Associates (1996) 50 Cal.App.4th 676, 683, 57 Cal.Rptr.2d 867.)

As one court has said, “Under both federal and state law, ... arbitration cannot be compelled absent an arbitration agreement. ‘As the United States Supreme Court has stated, “The ‘liberal federal policy favoring arbitration agreements,’ [citation] ... is at bottom a policy guaranteeing the enforcement of private contractual arrangements.” [Citations.] Similarly, the California Supreme Court has stated [the] “ ‘... policy favoring arbitration cannot...