Opinion
B291597
03-30-2020
CHRISTIAN ALANIS, Plaintiff and Appellant, v. LEONARD ROOFING, INC, Defendant and Respondent.
David B. Ezra, Berger, Kah; Tyson and Mendes, Orlando J. Arellano for Defendant and Appellant. Haines Law Group, Paul K. Haines, Fletcher W. Schmidt and Tuvia Korobkin for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(a). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115(a). (Los Angeles County Super. Ct. No. BC672028) APPEAL from an order of the Superior Court of Los Angeles County, William F. Highberger, Judge. Reversed and remanded with directions. David B. Ezra, Berger, Kah; Tyson and Mendes, Orlando J. Arellano for Defendant and Appellant. Haines Law Group, Paul K. Haines, Fletcher W. Schmidt and Tuvia Korobkin for Plaintiff and Respondent.
Christian Alanis sued his employer, Leonard Roofing, Inc., for wage and hour violations on behalf of himself and a putative class of current and former employees. Alanis later signed an agreement to submit employment-related disputes to arbitration. Leonard Roofing petitioned to compel arbitration based on the agreement. Alanis opposed, insisting (among other things) his claims in his preexisting lawsuit were not covered by the agreement. The experienced and highly regarded trial judge found the arbitration agreement was ambiguous concerning coverage of Alanis's preexisting claims, and construed the ambiguity against Leonard Roofing. In denying the petition to compel arbitration, the court did not reach the issues of lack of consideration and unconscionability, which Alanis also raised in opposing the petition.
After the trial court ruled, the Courts of Appeal published two new cases, each examining whether preexisting claims were covered by arbitration agreements: Salgado v. Carrows Restaurant, Inc. (2019) 33 Cal.App.5th 356 (Salgado) ~(Div. 6, Gilbert, Yegan, Tangeman)~, and Franco v. Greystone Ridge Condominum (2019) 39 Cal.App.5th 221 (Franco). ~(Fourth Dist. Fybel, Arronson, Thompson)~ Applying these cases, we conclude the arbitration agreement requires arbitration of Alanis's preexisting claims and reverse the order. We remand to permit the superior court to address the issues of lack of consideration and unconscionability.
FACTUAL AND PROCEDURAL BACKGROUND
Leonard Roofing is a roofing and solar company. Beginning in May 2015, Alanis worked for two years as a roofer for Leonard Roofing. He did not sign an arbitration agreement during this time. Alanis stopped reporting for work in February 2017 and filed a class action lawsuit against Leonard Roofing in August 2017. The complaint alleged various wage and hour violations of the Labor Code.
On September 18, 2017, Alanis resumed working for Leonard Roofing. On October 16, 2017, he filed an amended complaint adding a related claim for recovery of civil penalties under the Labor Code Private Attorneys General Act of 2004. (Lab. Code, § 2698 et seq., (PAGA).)
On October 20, 2017, Leonard Roofing presented Alanis with a two-page arbitration agreement to sign, along with other employment documents. The agreement contained a "Summary" followed by eight labeled provisions, including those entitled "Agreement To Arbitrate," and "Claims Covered." The agreement also excluded any claims or lawsuits not subject to arbitration under applicable law, such as PAGA claims, and contained a class action waiver.
We describe the relevant provisions in detail below.
Alanis signed the arbitration agreement on the day he received it, October 20, 2017. The same day, Alanis terminated his employment with Leonard Roofing.
Leonard Roofing petitioned to compel arbitration of Alanis's claims, with the exception of the PAGA claim, and to dismiss or stay the lawsuit pending completion of arbitration. The grounds for the petition were "that a valid, enforceable and irrevocable written arbitration agreement exists between the parties requiring [Alanis] to arbitrate the non-PAGA claims."
Alanis opposed the petition, arguing his claims were not subject to the arbitration agreement because (1) he filed his lawsuit before signing the agreement; (2) the arbitration agreement lacked consideration because it was premised on his "continued employment," but Alanis quit his job the day he signed the agreement; and (3) the arbitration agreement was unconscionable, because it was drafted by Leonard Roofing's counsel and presented to Alanis outside the presence and without the knowledge of his attorney, when Leonard Roofing knew Alanis had legal representation.
At the hearing on the petition, the superior court focused on the "Claims Covered" provision of the agreement, which states in relevant part: "This agreement to submit claims and controversies to binding arbitration covers the following: Any claim that [sic] concerning your employment that could be asserted in a court of law or before an administrative agency or claims for which you have an alleged cause of action . . . ." The superior court found the quoted language was "ambiguous as to whether it would cover a then pending lawsuit known to the employer." The court construed the ambiguity against Leonard Roofing "as not covering the then pending lawsuit" and denied the motion to compel arbitration.
The trial court did not address the arbitrability of the class action claims. Instead, it noted, "that's another question for another day." ~(1RT 34)~
Leonard Roofing timely appealed and the superior court granted a stay pending the appeal.
DISCUSSION
A. Governing Law and Standard of Review
Arbitration "is a favored procedure" for resolving disputes between parties. (Salgado, supra, 33 Cal.App.5th at p. 360.) "An '"'arbitration [agreement] should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.'"'" (Ibid.) A motion to compel arbitration should be granted if the trial court determines that an agreement to arbitrate the controversy exists. (Code Civ. Proc., § 1281.2.) Fundamental to this inquiry is whether the parties have in fact agreed to arbitrate their dispute. (Avery v. Integrated Health Care Holdings, Inc. (2013) 218 Cal.App.4th 50, 59.) The policy favoring arbitration cannot displace the necessity for a voluntary agreement to arbitrate. (Franco, supra, 39 Cal.App.5th at p. 227.) An arbitration agreement, therefore, is a matter of contract. (Salgado, supra, 33 Cal.App.5th at p. 359.)
"General contract law principles include that '[t]he basic goal of contract interpretation is to give effect to the parties' mutual intent at the time of contracting. [Citations.] . . . "The words of a contract are to be understood in their ordinary and popular sense."' [Citation.] Furthermore, "'[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other." (Civ. Code, § 1641.)'" (Franco, supra, 39 Cal.App.5th at p. 227.) "Courts 'interpret a contract to give effect to the parties' intentions at the time of contracting.' [Citation.] 'When language in a contract is clear and explicit, that language governs interpretation.' [Citation.]" (Salgado, supra, 33 Cal.App.5th at pp. 359-360.)
Where, as here, the interpretation of an arbitration agreement does not involve conflicting extrinsic evidence, we apply de novo review to the trial court's denial of the petition to compel arbitration. (Vasserman v. Henry Mayo Newhall Memorial Hospital (2017) 8 Cal.App.5th 236, 244.)
B. The Arbitration Agreement Covers Alanis's Existing Non-PAGA Claims
1. The Salgado and Franco Decisions
When the superior court ruled in this case, it did not have the benefit of two recent decisions, Salgado, supra, 33 Cal.App.5th 356 and Franco, supra, 39 Cal.App.5th 221. The primary issue in these cases was whether the arbitration agreement applied in each case to preexisting claims or lawsuits, which required each appellate court to engage in a contractual interpretation of each agreement. In so doing, both courts emphasized the familiar rule of contract interpretation that every relevant phrase of the agreement must be considered. "'"Courts must interpret contractual language in a manner which gives force and effect to every provision, and not in a way which renders some clauses nugatory, inoperative or meaningless."'" (Salgado, supra, 33 Cal.App.5th at p. 360; accord Franco, supra, 39 Cal.App.5th at p. 229.)
In Salgado, the employee signed an arbitration agreement one month after she had filed a lawsuit against her employer, Carrows, alleging employment-related claims. (Salgado, supra, 33 Cal.App.5th at pp. 358-359.) Carrows moved to compel arbitration. (Id. at p. 359.) The employee opposed the motion on various grounds, among them, her lawsuit was filed before she signed the arbitration agreement. (Ibid.) The trial court denied the motion to compel arbitration, finding the employer had '"failed to demonstrate that the arbitration agreement applies to a suit that was filed prior to its signature."' (Ibid.)
In reversing the trial court, the appellate court in Salgado interpreted two relevant provisions of the arbitration agreement. The first provision stated: "'The Company and I agree to acknowledge that we will utilize binding arbitration as the sole and exclusive means to resolve all disputes which may arise out of or be related in any way to my application for employment and/or employment, including but not limited to the termination of my employment and compensation."' (Salgado, supra, 33 Cal.App.5th at p. 359 [Italics added].) The Salgado court agreed with the employer that: "[T]he 'use of the word "or" means the preceding terms "may arise" are not exclusive or controlling. So long as [Salgado's] employment dispute is the type of claim that is "related in any way to [her] employment," it falls within the terms of the Agreement.' [¶] Carrows's interpretation is reasonable. Salgado focuses only on one phrase in the agreement. But the word 'or' shows that there is an alternative. [Citation.] Each phrase must be considered. '"Courts must interpret contractual language in a manner which gives force and effect to every provision, and not in a way which renders some clauses nugatory, inoperative or meaningless.'" [Citation.] The second phrase following 'or' broadly applies to 'all disputes' related 'in any way' to employment. This language is 'clear and explicit.' [Citation.] Salgado's current action is a dispute that falls within the meaning of this provision." (Id. at pp. 360-361.)
The Salgado court also agreed with the employer that the trial court had failed to consider the second provision of the arbitration agreement. That provision stated: "'Both the Company and I agree that any claim, dispute, and/or controversy that I may have against the Company . . . or the Company may have against me, shall be submitted to and determined exclusively by binding arbitration . . . .'" (Salgado, supra, 33 Cal.App.5th at p. 361 [Italics added.]) The court noted "[t]his provision is broad in scope. [Citation.] Here the language is 'clear and explicit.' [Citation.] There is no language containing a limitation or restriction based on the age of the claim. [Citation.] There is no qualifying language. This provision unequivocally requires arbitration for 'any claim' Salgado has against Carrows. Salgado's current lawsuit is such a claim." (Ibid.)
In Franco, an employee signed an arbitration agreement after filing a lawsuit asserting employment-related claims against his employer. (Franco, supra, 39 Cal.App.5th. at pp. 223, 225.) The agreement stated, in pertinent part, the employee "agreed to submit to final and binding arbitration '[a]ny and all claims . . . relating to any aspect of Employee's employment with Employer (pre-hire through post-termination).'" (Id. at pp. 229-230.) The trial court denied the employer's motion to compel arbitration, because the claims had accrued before the employee signed the agreement. (Id. at p. 226.)
The appellate court in Franco relied on Salgado in concluding the employee's claims were subject to mandatory arbitration under the arbitration agreement even though the employee's lawsuit was filed before the employee signed the agreement. The Franco court noted, "As in Salgado, the language of the Agreement is clear and explicit; there is no language containing a limitation or restriction based on the age of covered claims; there is no qualifying language; and the language unequivocally requires arbitration for '[a]ny and all claims' [the employee] has against, inter alia, his employer, its agents, and related entities. Furthermore, the Agreement specifically refers to claims relating to any aspect of employment including those of a 'pre-hire' variety, thereby reasonably supporting the interpretation that the Agreement applies to all claims, whether they had already accrued, or not, at the time the Agreement was executed." (Franco, supra, 39 Cal.App.5th at p. 230.)
2. The Language of the Arbitration Agreement Does Not Exclude Existing Claims or Lawsuits
Alanis makes three related arguments concerning the interpretation of the arbitration agreement. First, he argues the Summary of the arbitration agreement "strongly indicates" the agreement was intended to apply only to future disputes. Alanis points to the first sentence of the Summary, "By signing this arbitration agreement[,] you agree to arbitrate any issue instead of filing a lawsuit" (emphasis omitted), as excluding from arbitration any issues that have already resulted in a lawsuit. ~(RB 19-20)~ Additionally, Alanis maintains the "Claims Covered" provision is to be disregarded to the extent it can be interpreted as conflicting with the stated intent of the "Summary." Finally, Alanis argues that unlike Salgado and Franco, the arbitration agreement does not "clearly and explicitly" cover existing claims or lawsuits, is ambiguous, and must be construed against Leonard Roofing.
As discussed, before the trial court, Alanis argued his claims were not subject to arbitration because he filed the lawsuit before signing the arbitration agreement, and nothing in the agreement referenced retroactive application to preexisting claims. ~(1CT 176-177)~ Alanis appears to have abandoned this argument on appeal, however, in the wake of the Salgado's express rejection of it. "[T]he 'contention that an agreement to arbitrate a dispute must pre-date the actions giving rise to the dispute is misplaced. Such a suggestion runs contrary to contract principles which govern arbitration agreements.' [Citation.] '[A]n arbitration agreement may be applied retroactively to transactions which occurred prior to execution of the arbitration agreement.'" (Salgado, supra, 33 Cal.App.5th at p. 361.) --------
Alanis has failed to consider all the provisions pertaining to the scope of the arbitration agreement, however. Giving effect to every relevant provision in light of Salgado and Franco, we conclude the agreement covers his preexisting claims. We address those provisions in the order they appear in the arbitration agreement.
The arbitration agreement begins with the Summary, which states, "By signing this arbitration agreement, you agree to arbitrate any issue instead of filing a lawsuit. Arbitration is an alternative to a lawsuit. Instead of a judge and jury, an arbitrator will hear both sides and make a decision. The arbitrator will be a neutral person from the American Arbitration Association. Leonard Roofing, Inc. will pay for the arbitrator's fee and administrative charges. Both you and Leonard Roofing, Inc. are subject to this arbitration agreement. This means that Leonard Roofing, Inc., and you, waive the right to bring a controversy or claim directly to a court of law and waive any right to a jury trial. [Original emphasis]. [[¶] For more details, please read the term of the arbitration agreement below[.]"
Despite Alanis's argument, we do not interpret the Summary as restricting mandatory arbitration to future claims. The Summary is an introductory paragraph. It briefly defines arbitration, describes how it works, and indicates the parties' mutual assent to arbitrate. To be sure, the Summary's first sentence, "By signing this arbitration agreement you agree to arbitrate any issue instead of filing a lawsuit;" and final sentence, "This means that Leonard Roofing, Inc., and you, waive the right to bring a controversy or claim directly to a court of law and waive any right to a jury trial," explain that future employment-related disputes are to be arbitrated rather than litigated. Neither of these sentences, however, expressly excludes preexisting claims or lawsuits from the scope of the agreement. Furthermore, the sentence at the end of the Summary, "For more details, please read the terms of the arbitration agreement below," clearly directs the parties not to rely solely on the Summary for the terms of the agreement.
Alanis has overlooked the explicit language of the arbitration agreement's first provision, the "Agreement To Arbitrate." It states, "As a benefit of, and in exchange for, your continued employment at Leonard Roofing, Inc. (Leonard Roofing), you and Leonard Roofing, Inc. agree that certain legal issues (such as a claim or lawsuit) between you and Leonard Roofing, Inc. or its owners or management, regarding your employment (including layoff or firing) must be submitted for binding arbitration." (Italics added, original emphasis.) Under this provision, Alanis agreed to arbitrate any legal disputes, including claims or lawsuits in existence when he signed the agreement. Similar to the language in Salgado, the language of this provision is broad in scope. There is no limitation or qualification concerning the nature or age of the claim or lawsuit. (See Salgado, supra, 33 Cal.App.5th at p. 361.) The provision unequivocally mandates arbitration for any and all employment-related issues, whether or not they are the subject of a current lawsuit. (Ibid.) Alanis's claims clearly fall within this provision.
The "Claims Covered" provision, a portion of which was described above, states, "This agreement to submit claims and controversies to binding arbitration covers the following: Any claim that [sic] concerning your employment that could be asserted in a court of law or before an administrative agency or claims for which you have an alleged cause of action, for example negligence, wrongful termination, claims for discrimination, and claims for violation of the California Labor Code. The claims covered include those whether made against Leonard Roofing Inc., any of its subsidiary or affiliated entities, its owners, or its management." (Italics added.)
Echoing the "Summary," the "Claims Covered" provision mandates the arbitration of any future employment-related claims—that is "any claim . . . that could be asserted in a court of law or before an administrative agency." This phrase, however, is followed by the phrase "or claims for which you have an alleged cause of action." Similar to the Salgado analysis, we interpret the word "or" as clearly and explicitly signaling an alternative to the mandatory arbitration of future claims. (See Salgado, supra, 33 Cal.App.5th at p. 360.) That alternative includes the mandatory arbitration of a preexisting lawsuit in which Alanis has "an alleged cause of action." Thus, the "Claims Covered" provision requires arbitration of Alanis's claims against Leonard Roofing.
C. Remand Is Necessary for The Superior Court To Make Factual Findings
Although Alanis asserted unconscionability in opposing the petition to compel arbitration, the superior court based its ruling solely on its finding that the agreement was ambiguous concerning the arbitrability of existing claims. On appeal, Alanis urges that even if the arbitration agreement were to apply to his preexisting claims, remand is necessary to determine the issue of unconscionability. Alanis frames the issue as whether Leonard Roofing knew or should have known that Alanis was represented by counsel when he signed the arbitration agreement.
Unconscionability is ultimately a question of law, but factual issues may bear on that determination. (Baker v. Osborne Development Corp. (2008) 159 Cal.App.4th 884, 892.) We review a superior court's unconscionability determination de novo. (Ibid.) But, to the extent the determination turns on the resolution of conflicts in the evidence or on factual inferences to be drawn from the evidence, we consider the evidence in the light most favorable to the superior court's ruling and review that factual determination under the substantial evidence standard. (Ibid.)
Here, however, we cannot decide the issue of unconscionability in the first instance because no findings were made on the issue. "When the record shows the trial court [did] not 'undertake the factual inquiry necessary to determine' a question, we may not infer on appeal that factual finding." (Bouton v. USAA Casualty Ins. Co. (2008) 167 Cal.App.4th 412, 422.) Accordingly, we reject Leonard Roofing's argument that because the evidence of unconscionability was insufficient, there is no need to remand.
Alanis also argues, as he did before the superior court, the arbitration agreement is unenforceable for lack of consideration. Alanis posits that because the agreement was conditioned on his continued employment, there was no consideration because he quit his job the day he signed the agreement. Whether there is sufficient consideration to support a contract is a question of fact for the superior court to resolve. (Raine v Spreckels (1946) 77 Cal.App.2d 117, 126.) Because the court made no findings on that issue, we remand for the trial court to do so.
We note Alanis's opposition to the petition to compel arbitration included a declaration from his counsel and excerpts from deposition transcripts. We also note Leonard Roofing's petition to compel arbitration included a declaration from Leonard Roofing's counsel and executive vice president, and a copy of the arbitration agreement and of the American Arbitration Association's rules. We express no opinion on whether these documents or other evidence support factual findings concerning the agreement's purported unconscionability and lack of consideration and what those findings might be.
DISPOSITION
The order denying the petition to compel arbitration is reversed. The cause is remanded to the superior court to determine whether the arbitration agreement is supported by adequate consideration and to determine the issue of unconscionability. The parties shall bear their own costs on appeal.
CURREY, J. We concur:
MANELLA, P. J.
COLLINS, J.