Opinion
G059264
11-04-2021
TAHSIN KHAIRI, Plaintiff and Respondent. v. WESTERN DIGITAL TECHNOLOGIES, INC. et al., Defendants and Appellants,
Call & Jensen, Julie R. Trotter and Mireya A.R. Llaurado for Defendants and Appellants. Law Office of James L. Miller and James L. Miller for Plaintiff and Respondent.
NOT TO BE PUBLISHED
Appeal from an order of the Superior Court of Orange County No. 30-2019-01095633 Sheila Fell, Judge. Reversed and remanded.
Call & Jensen, Julie R. Trotter and Mireya A.R. Llaurado for Defendants and Appellants.
Law Office of James L. Miller and James L. Miller for Plaintiff and Respondent.
OPINION
O'LEARY, P. J.
Western Digital Technologies (Western Digital) and Dan Hanson (collectively referred to in the singular as the Company), appeal from the court's order denying its petition to compel arbitration of Tahsin Khairi's employment dispute. The court determined the Company failed to prove Khairi received information requiring arbitration sent through a hyperlink to all the Company's United States employees. In making this ruling, the court refused to consider new evidence raised in the Company's reply brief. On appeal, the Company argues the court was required to consider the reply brief's new information, the unsigned agreement was enforceable, and there were no other grounds to deny the petition. We conclude the trial court should not have ignored information in the supplemental reply declaration requiring reversal. However, due to other defects in the Company's briefing, we will not direct the trial court to grant the petition. We remand the matter for an evidentiary hearing. Then the trial court can consider authentication questions surrounding the unsigned and undated arbitration agreement and other supporting documentation that purportedly proved Khairi impliedly consented to be bound to arbitration.
The complaint alleged Hanson was Khairi's supervisor when he was terminated from his employment.
FACTS
In 2003, the Company, a computer data storage company, hired Khairi as a Senior Engineering Manager. After the Company terminated Khairi in September 2017, he filed a complaint alleging wrongful termination, emotional distress, discrimination, retaliation, hostile work environment, and disparate treatment based on age, religion, and minority descent.
I. Motion to Compel Arbitration
The Company filed a motion to compel arbitration. It asserted that in 2014, Khairi entered into a valid arbitration agreement with the Company that required him to arbitrate the claims raised in his complaint. The Company stated the agreement involved interstate commerce and, therefore, was governed by the Federal Arbitration Act. In the last paragraph of its motion, the Company noted "agreements entered into electronically are routine." It also cited Civil Code section 1633.9, subdivision (a) [electronic signature] and made the following assertion: "Courts routinely grant motions to compel where employers distribute agreements electronically provided where, as here, the employer can authenticate that the employee acknowledged the agreement with a unique username and password. (Citing Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047 (Espejo).)
The Company filed several declarations in support of its motion. Jennifer Leahy stated she was the Company's Director of Employee Relations in 2014. Leahy was familiar with the Company's 2014 "process for presenting" its arbitration agreement to all existing United States employees.
She explained the first step of the process involved the Company posting "an article on its intranet system" addressed to "all U.S. employees," which could be accessed "from the homepage of the intranet." Leahy declared the article, dated June 3, 2014, explained the Company was "rolling out an arbitration agreement to resolve" employment disputes. She stated the article directed employees to review the agreement and acknowledge receipt by June 13, 2014, "via its emTrain online training and communication module." She added the article also informed employees "this policy is not mandatory" and they had "the option to opt-out" by submitting a form to the Company within 60 days. Leahy attached a copy of the 2014 arbitration agreement (exhibit A) and the June 3 article (exhibit B). She did not attach a copy of the dispute resolution policy or offer details about the "acknowledge receipt" requirement, i.e., whether the link required employees to first review the new policy and agreement. She did not offer an opinion on whether Khairi actually saw this article.
Exhibit A contains a copy of a standardized contract, simply titled "Western Digital Dispute Resolution Agreement." (Capitalization omitted.) The agreement was three pages long, and the last page did not contain a signature line, date, or any language indicating it was prepared in 2014. The agreement does not suggest if there were different versions or if it was ever modified.
Leahy stated the second step in the process took place the following day, June 4, 2014. We will recite her entire statement (paragraph 3(b)) because later the trial court sustained an evidentiary objection (objection No. 7) and excluded it. Leahy stated: "The following day, [the Company] sent an e[-]mail to all of its United States employees' Western Digital e[-]mail accounts alerting them, again, to the arbitration process. Once again, [the Company] directed employees to review the agreement on the emTrain online module by June 13, 2014. In addition, this e[-]mail included a hyperlink to the emTrain online module, which employees could access after inputting their own unique username and password."
She attached an example of the e-mail as exhibit C. The exhibit contains an e-mail delivered to Sandra C., an employee unrelated to Khairi. The e-mail's sender "Emtrain" from "emtrain@wdc.com" told Sandra C. she was "assigned" the Company's dispute resolution policy and agreement. The e-mail asked Sandra C. to log into her "LMS Learner Portal" and complete "the Acknowledgment" of the Company's "Dispute Resolution Policy and Agreement." It stated the deadline to complete the assigned acknowledgment was June 13, 2014. The e-mail contained a hyperlink to Sandra C.'s training portal and noted she could also view her training assignments and register for courses. Leahy did not submit a copy of the e-mail purportedly delivered to Khairi.
The example e-mail sent to Sandra C. did not mention the opt-out provision. It also did not explain that acknowledging receipt of the assigned documents would bind an employee to an arbitration agreement. Leahy explained that employees learned about the opt-out option and the purpose of the acknowledgment after reviewing the assigned documents. Leahy declared that after logging into emTrain to review the policy and agreement, employees could ask questions. They also gained access to a frequently asked questions (FAQ) document (exhibit D). One section of the FAQ informed employees that arbitration was not mandatory but if they did not opt-out, "the Agreement applies to you, and in the event of legal dispute you and the Company will follow the dispute resolution processes outlined in the Agreement." She noted section 8 of the arbitration agreement also mentioned the opt-out option. Thus, to summarize, an employee was required to acknowledge receipt of exhibits A, C, and D before being able to receive, review, or raise questions about the new agreement.
The Company also submitted the declaration of Tom States to support the petition. States worked as the Company's legal business operations analyst since 2016. In 2014, States served as the Company's ethics and compliance program administrator. His declaration centered on discussing how the company utilized "a learning management system called 'emTrain'" to bind its existing U.S. employees to arbitration. He noted the company typically used emTrain "[to] communicate policies and initiatives to employees" and kept records on when an employee logged into the system. He explained employees were provided their own unique identification numbers and passwords to access the system.
States offered some details about how the emTrain system created and maintained records, as well as the steps he took to retrieve specific information about Khairi opening the hyperlink to acknowledge receipt of the dispute resolution policy documents. States submitted a copy of an Excel report he generated and filtered solely for Khari's 2014 acknowledgement of the arbitration agreement (attached as exhibit A). The court sustained objections to portions of States' declaration discussing exhibit A, which we will restate in their entirety.
Paragraph 5: "As a review of that report shows-specifically the column on page 2 entitled 'Finish Date'-the emTrain system recorded that . . . Khairi acknowledged having reviewed the Dispute Resolution Agreement that Western Digital presented to its employees in the United States . . . [on] June 6 at 17:53:41, i.e., approximately 5:53p.m." (Relating to evidentiary objection No. 22.)
Paragraph 5: "In order for the emTrain system to have recorded that Khairi acknowledged reviewing the Dispute Resolution Agreement, he would have first had to have opened the agreement via hyperlink from the emTrain system." (Relating to evidentiary objection No. 23.)
Paragraph 6: "Once an employee opened the agreement, they could print a PDF copy of the Dispute Resolution Agreement if they wished to do so." (Relating to evidentiary objection No. 24.)
Paragraph 7: "I have reviewed our records, and . . . Khairi was not one of" the employees who chose to opt-out of the agreement. (Relating to evidentiary objection No. 26.)
States' exhibit A contained a single line of data configurated in something resembling an Excel report. It included the following information: (1) Khairi's first and last name; (2) Khairi's e-mail at wdc.com; (3) "Title" as "WD Dispute Resolution Agreement 1.1."; (4) "Status" as "Completed"; (5) "Score" as 100; (6) date assigned as June 4, 2014; (7) "Start Date" and "Finish Date" as June 6, 2014, in the following time frame of 15:50:32 to 17:53:41 (approximately three minutes); and (8) "Department" as "WDT FIC, Benchmarking & HV."
II. Opposition
Khairi asserted the agreement (Leahy's exhibit A) was not enforceable because it was not executed by any party. Khairi maintained he never saw the agreement or any e-mail/communication alerting him of its existence during his employment. Khairi denied signing it. Indeed, he noted the Company referred to an electronic signature, however, the agreement did not have a place for either party to sign and date the document. Khairi recalled that it was his experience that when the Company wanted a document signed to create a binding contract, it would send the proposed agreement to the employee in a DocuSign format for execution and return. He attached to his declaration photocopies of other DocuSign documents he received from the Company. Khairi asserted these exhibits showed the Company e-mailed documents through DocuSign because it knew this format would satisfy the California Uniform Electronic Transaction Act (CUETA).
In his opposition, Khairi raised several evidentiary objections. He asserted the Company failed to lay a proper foundation for the actual agreement, making it hearsay and inadmissible. He explained the Company failed to present a declaration of a custodian of records, and therefore the agreement did not qualify as an admissible business record. (Evid. Code, § 1272, subd. (c).) He noted the lack of a signature and date line in the contract was problematic because neither States nor Leahy could verify the submitted version of the agreement was the same one used in 2014.
Khairi objected to States' declaration as lacking foundation, lacking personal knowledge, and being conclusory. Khairi noted States failed to explain why his job title qualified him to discuss details about the IT-based emTrain system. He argued States' job title also did not suggest he had personal knowledge about obtaining an employee's consent to binding arbitration.
Khairi asserted these same objections applied to Leahy. He maintained her declaration failed to set forth a factual showing as to why the director of employee relations could know how the emTrain system functioned. He objected to her statement she had personal knowledge that all U.S. employees, including Khairi, were presented with the article or the agreement. Khairi argued Leahy did not personally deliver the agreements to each employee. "[She did] not explain how she ha[d] the IT knowledge as to how the process actually worked. Missing [was] how she personally confirmed" Khairi received the agreement. Khairi asserted Leahy's statements were particularly suspect because she submitted an example e-mail, rather than the one purportedly sent to Khairi. Moreover, Leahy's declared exhibit A was an emTrain printout of a standardized agreement, but there was no indication it was the same version sent to employees in 2014.
Khairi noted neither Leahy nor States claimed the emTrain system was designed to obtain electronic consent in compliance with CUETA. To the contrary, States described it as a learning management system used to communicate information. Similarly, Leahy declared the emTrain system was used for sending documents for employees to '"review"" and submit questions.
Khairi separately filed written evidentiary objections to over 30 different statements in States' and Leahy's declarations. He raised the same legal contentions discussed in his opposition, which we need not repeat. The sustained objections will be discussed anon.
III. Reply
The Company argued it satisfied the minimum requirement of providing an arbitration agreement, and the burden shifted to Khairi to prove it was unenforceable. The Company asserted Khairi's arguments about electronic signatures failed because written consent was not required for an employee/employer agreement. The Company did not require signatures and the FAQ's clearly stated an employee would be bound by the arbitration agreement unless he or she opted out. The Company filed evidentiary objections to Khairi's declaration and filed responses to Khairi's evidentiary objections.
States filed a supplemental declaration in support of the Company's reply brief (reply declaration). States elaborated on his job duties as the Company's compliance administrator. He declared that in this role he was required to be "very familiar with the emTrain LMS system" and the Company's policies for trainings, initiatives, and other communications to employees. He worked with his manager to circulate information and was responsible for "maintaining and accessing the training records." States claimed the records were created "contemporaneously to the training and initiatives" and he retained access to the information. Part of his job included being knowledgeable and compliant with the Company's "information security procedures, such as employee['s] use of passwords and other confidential employee records, in order to safeguard this data." States declared the following: "I believe that it is only . . . Khairi who could have, on June 6, 2014, taken the steps . . . to acknowledge the [arbitration agreement] on the emTrain system. The password and identification number were unique to [him], and [he] does not claim that he ever shared his identification or password with any other employee. More specifically, based on my knowledge of emTrain and [the Company's] security procedures in this regard, only . . . Khairi and no one else could have" logged in to emTrain and used the username, password, and hyperlink that were "unique" to him. Khairi objected to States' supplemental declaration, arguing the document was not admissible because it was not timely filed with the motion.
IV. Response to the Reply
Khairi argued the Company's reply was based on the premise the contract was legally formed. He asserted the agreement was never properly authenticated, and contrary to the Company's arguments, this was not like other cases where an employee cannot remember the agreement. To the contrary, it was his contention he never saw it. Khairi explained this fact distinguished this case from other authority holding an evidence-deficient motion can be saved if an employee continues to work after receiving the agreement. He added there was no evidence the purported agreement was "the one, allegedly, delivered via emTrain."
V. Court's Ruling
The court posted a tentative ruling stating it did not consider the "new evidence submitted" in the reply. It denied the motion on the grounds the Company failed to prove Khairi received the "information regarding arbitration."
In the tentative ruling, the court also sustained some of Khairi's evidentiary objections. Specifically, it sustained the objections listed in Nos. 7, 22, 23, 24, and 26. It overruled the rest.
The court sustained objections to Khairi's and his attorney's declarations. However, we need not repeat them for purposes of this opinion because they are not relevant to the issues on appeal.
After the hearing, the court issued a written minute order stating it adopted its tentative ruling. The court elaborated as follows: "The e[-]mail to [Khairi was] not provided and Leahy does not explain how she would know [Khairi] got the e[-]mail. Further, States does not explain how he knows how the system works or why records obtained from it would be reliable. He further does not explain how his position as a legal operations systems analyst in charge of ethics and compliance equips him to understand how the emTrain system works."
DISCUSSION
I. Standard of Review
"We review an order denying a petition to compel arbitration for abuse of discretion unless a pure question of law is presented. In that case, the order is reviewed de novo. [Citations.]" (Espejo, supra, 246 Cal.App.4th at pp. 1056-1057.) Questions concerning the burden of proof on a motion to compel arbitration and the method of authentication of the purported arbitration agreement are legal issues subject to de novo review (see id. at p. 1057), as are questions concerning a party's standing to enforce the arbitration agreement (Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 857). We review the trial court's evidentiary rulings for abuse of discretion. (Christ v. Schwartz (2016) 2 Cal.App.5th 440, 446-447.)
II. Applicable Legal Principles
The parties devote their briefing to arguments about whether the court was obligated to consider new evidence submitted with the Company's reply brief. We conclude this issue is tangential to the dispositive issue of timeliness, which turns on whether the Company was required to authenticate the arbitration agreement as a preliminary matter, i.e., was authentication initially required in the petition to compel arbitration. For this reason, we begin our analysis with a brief overview of the various burdens at play when a party moves to compel arbitration.
A petition to compel arbitration must "alleg[e] the existence of a written agreement to arbitrate a controversy." (Code Civ. Proc, § 1281.2.) It also "must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference." (Cal. Rules of Court, rule 3.1330.)
All further statutory references are to the Code of Civil Procedure, unless otherwise indicated.
"When presented with a petition to compel arbitration, the initial issue before the [trial] court is whether an agreement has been formed. [Citations.]" (Diaz v. Sohnen Enterprises (2019) 34 Cal.App.5th 126, 129.) The court "must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable." (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413 (Rosenthal))
Courts must apply general principles of contract law to determine whether the parties have entered a binding agreement to arbitrate. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.) Although the agreement generally must be memorialized in writing, a signed agreement is not necessary, and a party's acceptance may be implied in fact. (Ibid.) The petitioner bears the burden of proving the existence of an arbitration agreement by a preponderance of the evidence. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972 (Engalla); Rosenthal, supra, 14 Cal.4th at p. 413 [petition must be accompanied by prima facie evidence of written arbitration agreement]; § 1281.2.)
Several courts have addressed the sufficiency of the initial petition to compel arbitration. A different panel of this court held, "For purposes of a petition to compel arbitration, it is not necessary to follow the normal procedures of document authentication. . . . [Section 1281.2] does not require the petitioner to introduce the agreement into evidence. A plain reading of the statute indicates that as a preliminary matter the court is only required to make a finding of the agreement's existence, not an evidentiary determination of its validity." (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219 (Condee).) In Condee, the court quoted the applicable rule of court, which although renumbered, simply requires that a petitioner state verbatim the provisions of the written agreement and the paragraph providing for arbitration, or submit a copy of the agreement. (Id. at p. 218.) Thus, once the petitioner alleges that the agreement exists, the burden shifts to respondents to prove the falsity of the purported agreement. (Id. at p. 219.) In other words, a petitioner need not authenticate an unsigned arbitration agreement as a preliminary matter in moving for arbitration. (See Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 846 (Ruiz) [no initial burden to authenticate opposing party's signature on arbitration agreement in moving for arbitration].)
Currently California Rules of Court, rule 3.1330, addresses the contents of the requesting party's initial papers as follows: "A petition to compel arbitration . . . pursuant to . . . sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference."
Once the burden has shifted to the party opposing the petition, they "may present any challenges to the enforcement of the agreement and evidence in support of those challenges. [Citation.]" (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)
If the opposing party does not raise any challenges, the moving party need not take further steps to authenticate either the agreement or the signatures.
But if the opposing party raises an authenticity challenge, the burden shifts back to the moving party to "establish by a preponderance of the evidence" the agreement was authentic. (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541 [electronic signature]; Espejo, supra, 246 Cal.App.4th at pp. 1060-1063 [discussing ways to authenticate electronic signature under the Civil Code and the Uniform Electronic Transactions Act]; Ruiz, supra, 232 Cal.App.4th at p. 846 [defendant "had the burden of proving by a preponderance of the evidence that the electronic signature was authentic" because plaintiff could not recall signing contract]; see also Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group) ¶ 9:407.5, p. 9(I)-187 ["If challenged, the petitioner must prove the contract is authentic, including the authenticity of the signatures"].)
There is ample legal authority holding a moving party may satisfy this burden by submitting supplemental declarations with its reply memorandum. (Espejo, supra, 246 Cal.App.4th at p. 1060 [error to strike supplemental declaration needed to establish authenticity of employee's electronic signature as untimely]; Ruiz, supra, 232 Cal.App.4th at p. 844 [court considered supplemental reply declaration in deciding employer failed to establish employee placed electronic signature on arbitration agreement].)
Thus, to summarize, a party moving to compel arbitration may meet its initial burden to prove the existence of an agreement to arbitrate simply by reciting the applicable contract provision in the petition. The burden then shifts to the opposing party to present any challenges to the enforcement of the agreement. If the opposing party challenges the authenticity of the agreement or its signatures, the burden shifts back to the moving party to establish by a preponderance of the evidence that the agreement and signatures are authentic. But if the opposing party does not dispute the authenticity of the arbitration agreement or the signatures, the moving party need not take further steps to authenticate either.
III. Analysis
The Company as the moving party satisfied its initial burden of establishing the existence of an arbitration agreement by attaching a copy of the agreement to its petition. This was all that was required under section 1281.2 and California Rules of Court, rule 3.1330. (Espejo, supra, 246 Cal.App.4th at p. 1060.) Contrary to Khairi's contention, the Company was not required to authenticate the agreement as a preliminary matter in the petition.
Next, the burden shifted to Khairi, who denied agreeing to arbitrate and challenged the authenticity of the agreement and States' emTrain report. Thereafter, the burden shifted back to the Company to establish by a preponderance of the evidence the agreement was authentic. Accordingly, States' supplemental reply declaration addressing this issue was timely and should have been considered by the trial court.
We conclude there is a reasonable probability that the trial court's erroneous refusal to consider the reply declaration affected its decision to sustain Khairi's evidentiary objections to statements in States' original declaration. The court explained one reason for its ruling was States' failure to explain how his position in the Company equipped him to understand how the emTrain system worked. States' reply declaration directly addresses this concern. If the court had considered the supplemental declaration, it may have overruled some or all of the evidentiary objections.
This decision does not end our analysis. Whether the court's error was prejudicial requires us to review the merits of the court's other evidentiary rulings not impacted by the reply declaration. Complicating matters is the Company's lack of briefing on this issue, discussed in more detail below, leading us to the conclusion the best remedy is to remand the matter to the trial court for an evidentiary hearing.
We turn first to the problem created by the Company's failure to provide any legal authority or meaningful analysis of the evidentiary rulings in its opening brief. Its argument in this regard was limited to the following two sentences: "[The court abused its discretion in sustaining Khairi's objections] over [the Company's] arguments about the admissibility of each offer of evidence, which [the Company] renew[s] in this appeal. (See CT 226:2-13; 232:13-233; 234:5-15.) The court's ruling is vague and does not explain on what grounds it sustains the objections." We are left to speculate about which of the many admissibility arguments were renewed, the resulting prejudice, and why the Company believed the ruling vague. "It is not our responsibility to develop an appellant's argument. [Citation.]" (Alvarez v. Jacmar Pacific Pizza Corp. (2002) 100 Cal.App.4th 1190, 1206, fn. 11.) We may deem the matter waived. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 ["When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived"].)
In his respondent's brief, Khairi explained why the court ruling was not vague. The Company waited until its reply brief to directly challenge the evidentiary ruling but used an unconventional chart format. While the Company provided some supporting record references, the absence of legal authority and analysis once again leaves us with the discretion to deem the matter waived. In addition, "The California Supreme Court long ago expressed its hostility to the practice of raising new issues in an appellate reply brief." (Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764.) "'Obvious reasons of fairness militate against consideration of an issue raised initially in the reply brief of an appellant.' [Citation.]" (Ibid.) "Points raised in the reply brief for the first time will not be considered, unless good reason is shown for failure to present them before." (Campos v. Anderson (1997) 57 Cal.App.4th 784, 794, fn. 3.) The Company does not offer any reason for failing to present its arguments challenging each specific evidentiary ruling in its opening brief.
IV. Appellate Relief
The Company argues "this court should reverse the ruling of the trial court and remand with instructions to stay [Khairi's] action and order his claims to arbitration." We do not believe this would be an appropriate remedy considering the court's limited error in this case did not result in reversal of all the sustained evidentiary objections. It is not our role to resolve evidentiary disputes, which may require credibility determinations and resolution of factual issues. As in the Espejo case, involving a similar error, we conclude the appropriate relief is to reverse the court's order denying the petition and remand for an evidentiary hearing. On remand, the court should consider the supplemental reply declaration, rule on any substantive evidentiary objections to this new information, and then decide whether this unsigned agreement was authentic and enforceable against Khairi. However, because we affirm the court's ruling with respect to Leahy's declaration (evidentiary objection No. 7), the court need not consider her statement in paragraph 3(b) during the evidentiary hearing.
DISPOSITION
The order denying the petition to compel arbitration is reversed. The order sustaining evidentiary objections to State's original declaration is reversed. The order sustaining evidentiary objection No. 7 to Leahy's original declaration is affirmed. In the interests of justice, neither party shall recover costs on appeal.
WE CONCUR: MOORE, J. MARKS, J. [*]
[*] Judge of the Orange County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.