Truly Nolen of Am. v. Superior Court of San Diego Cnty.

• Decision Date: 09 August 2012
• Docket Number: No. D060519.,D060519.
• Citation: 2012 Daily Journal D.A.R. 11207,145 Cal.Rptr.3d 432,208 Cal.App.4th 487,12 Cal. Daily Op. Serv. 9221
• Court: California Court of Appeals Court of Appeals
• Parties: TRULY NOLEN OF AMERICA, Petitioner, v. The SUPERIOR COURT of San Diego County, Respondent Alvaro Miranda et al., Real Parties in Interest.

208 Cal.App.4th 487

145 Cal.Rptr.3d 432

12 Cal. Daily Op. Serv. 9221

2012 Daily Journal D.A.R. 11,207

TRULY NOLEN OF AMERICA, Petitioner,

v.The SUPERIOR COURT of San Diego County, Respondent

Alvaro Miranda et al., Real Parties in Interest.

No. D060519.

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

Aug. 9, 2012.

Ronald W. Novotny and Michael D. Drenan, Atkinson, Andelson, Loya, Ruud & Romo, San Diego, for Defendant and Petitioner.

Norman B. Blumenthal, San Diego, and Kyle R. Nordrehaug, Blumenthal & Nordrehaug; Alexander Isaac Dychter and Dychter Law Offices, for Real Parties in Interest.

HALLER, J.

Alvaro Miranda and Danny Luna filed a class action complaint against Truly Nolen of America (Truly Nolen) alleging violationsof California's wage and hour laws. Truly Nolen moved to compel arbitration of the claims under arbitration agreements signed by the parties and requested that the court order plaintiffs to arbitrate on an individual and not a class basis. The arbitration agreements did not contain a specific provision pertaining to the availability or unavailability of classwide arbitration. After briefing and a hearing, the court granted the motion to compel arbitration, but rejected Truly Nolen's request that the court order individual arbitration, relying on Gentry v. Superior Court (2007) 42 Cal.4th 443, 64 Cal.Rptr.3d 773, 165 P.3d 556( Gentry).

Truly Nolen filed a writ of mandate petition challenging the court's refusal to order individual arbitration. We issued an order to show cause and provided the parties the opportunity to submit supplemental briefing. In its briefs, Truly Nolen contended the court erred in relying on Gentry because Gentry has been overruled by the United States Supreme Court in AT & T Mobility LLC v. Concepcion (2011) ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742( Concepcion) and, even if Gentry remains viable, the factual record did not support the application of the Gentry factors in this case. Plaintiffs countered that Concepcion did not overrule Gentry, and substantial evidence supported the trial court's decision that Gentry applied in the case. Plaintiffs raised numerous additional arguments, many of which were never raised before the trial court.

Although Concepcion's reasoning strongly suggests that Gentry's holding is preempted by federal law, the United States Supreme Court did not directly rule on the class arbitration issue in the context of unwaivable statutory rights and the California Supreme Court has not yet revisited Gentry. Thus, we continue to be bound by Gentry under California's stare decisis principles. However, we conclude the trial court's application of the Gentry elements was unsupported on the factual record before it.

In reaching these conclusions, we recognize the court did not address one foundational matter: whether the parties impliedly agreed in their arbitration contract to permit class arbitration. As explained below, if such an agreement existed, there would be no need to reach the Gentry issues and a court order refusing to require individual arbitration would have been warranted. Although plaintiffs did not specifically raise this issue in the trial court, we shall remand the matter to the trial court and allow the parties to submit additional evidence and/or argument on this issue.

We thus grant Truly Nolen's petition and order the trial court to (1) vacate the portion of the order denying Truly Nolen's motion to order individual arbitration; and (2) provide the parties the opportunity to submit additional evidence and/or argument on the issue of whether the arbitration contract reflects a mutual intent to permit classwide arbitration. Based on the trial court's review of this evidence, the court should enter a new order as outlined in the Conclusion section below.

FACTUAL AND PROCEDURAL BACKGROUND

In April 2011, plaintiffs filed a complaint against Truly Nolen seeking relief on behalf of themselves and a class of similarly situated current and former California employees. Plaintiffs alleged that Truly Nolen, a nationwide provider of pest control services, violated California's wage and hour laws. Plaintiff Miranda alleged that he is employed as a nonexempt pest control technician at Truly Nolen. He began his employment in 1995 and worked at Truly Nolen until approximately 1999, and then was reemployed from August 2006 through the present date. Plaintiff Luna alleged he was formerly employed by Truly Nolen as a nonexempt pest control technician. He began his employment in approximately April 2005 and left the company in approximately May 2010.

Plaintiffs identified two classes of similarly situated persons: (1) current pest control technician employees who worked for Truly Nolen since April 21, 2007; and (2) former pest control technician employees whose employment ended since April 21, 2008. The complaint alleged six causes of action: (1) failure to pay straight time and overtime wages; (2) failure to provide meal periods; (3) failure to allow rest periods; (4) failure to pay all wages owed upon termination; (5) failure to provide accurate itemized wage statements; and (6) unfair competition.

About one month after plaintiffs filed their complaint, Truly Nolen petitioned for an order directing plaintiffs to submit their claims to binding arbitration under the parties' written arbitration agreements, and to stay the action pending the completion of arbitration. In support, Truly Nolen submitted evidence showing that both plaintiffs signed a written agreement to submit employment disputes to binding arbitration. Luna signed the agreement in April 2005, and Miranda signed the agreement in August 2006.

The arbitration agreement is part of a document titled “The ‘RESOLVE’ Program,” which details Truly Nolen's conflict resolution policies and contains four mandatory dispute resolution steps: (1) discussions with the employee's immediate manager; (2) human resources involvement; (3) mediation; and (4) binding arbitration. The one-page arbitration agreement contains provisions describing the broad scope of the claims subject to the arbitration requirement, the manner in which an arbitration may be requested, and the governing procedures for the arbitration proceeding.

Of relevance here, the agreement states that all specified employment-related claims “will be resolved by Binding Arbitration administered by the American Arbitration Association (hereafter known as ‘AAA’), under its National Rules for the Resolution of Employment Disputes, including its Optional Rules for emergency measures of protection.... The Arbitrator may grant any remedy or relief that the Arbitrator deems just and equitable, including any remedy that would have been available if the matter had been heard in court.” The agreement further provides: “By signing the acceptance form and accepting or continuing employment, the [employee] voluntarily, knowingly and intelligently waives any right he or she may have to seek remedies in court, including the right to a jury trial. However, the arbitration process is less formal, less expensive and less time-consuming than traditional litigation, and the proceedings are not open to the public.”

The arbitration agreement also states that Truly Nolen “will not retaliate or take any adverse action against [employees] because of their reporting to a state or federal agency or their request for arbitration.” Under the agreement, all administrative expenses (including arbitrator fees) are borne by Truly Nolen, except for a $50 filing fee. Each party is initially responsible for his or her attorney fees, subject to an attorney fees award by the arbitrator under applicable law. The agreement additionally states: “If [an employee] chooses not to have legal counsel present at the arbitration hearing, then Truly Nolen will not have legal counsel present at the hearing.”

In moving to compel arbitration under this agreement, Truly Nolen argued that plaintiffs' claims are within the scope of the arbitration provisions, the agreements are governed by the Federal Arbitration Act (FAA), and the FAA requires enforcement of plaintiffs' agreements to arbitrate these disputes. Truly Nolen additionally requested “that arbitration be ordered as an individual as opposed to a collective basis” under the United States Supreme Court's recent decisions in Concepcion and Stolt–Nielsen.( Concepcion, supra, 131 S.Ct. 1740;Stolt–Nielsen v. AnimalFeeds Internat. Corp. (2010) ––– U.S. ––––, 130 S.Ct. 1758, 176 L.Ed.2d 605( Stolt–Nielsen ).) Truly Nolen argued it could not be compelled to submit to classwide arbitration because the arbitration agreements did not contain a contractual basis for authorizing class arbitration.

Plaintiffs opposed the arbitration request, arguing the arbitration agreement was procedurally and substantively unconscionable under California contract law. In support, they submitted their declarations stating that Truly Nolen managers did not explain the meaning of binding arbitration and plaintiffs did not understand the effect of signing the arbitration agreement when they signed it. Plaintiffs also stated that during their employment they made numerous complaints to their branch manager about wage and hour issues, and they were never told they were required to attend mediation or arbitration. Based on this and other similar evidence, plaintiffs argued the arbitration agreement was a “procedurally unconscionable contract of adhesion presented ... on a take-it-or-leave-it basis” and the agreement was substantively unconscionable because “the practical effect of the agreement is one-sided....”

Plaintiffs alternatively argued that if the court granted Truly Nolen's motion to compel arbitration, the court should deny Truly Nolen's request that the arbitration be conducted on an individual (not a class) basis. Citing the California Supreme Court's Gentry decision, plaintiffs maintained that a court must grant arbitration...