Opinion
E065070
08-03-2017
SUPERSHUTTLE LOS ANGELES, INC., Plaintiff and Appellant, v. RICHARD DANKER, Defendant and Respondent.
Marron Lawyers, Paul Marron, Steven C. Rice and Mainak D'Attaray for Plaintiff and Appellant. Law Offices of Angie M. Kwik and Angie M. Kwik for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. CIVDS1510696) OPINION APPEAL from the Superior Court of San Bernardino County. David Cohn, Judge. Affirmed. Marron Lawyers, Paul Marron, Steven C. Rice and Mainak D'Attaray for Plaintiff and Appellant. Law Offices of Angie M. Kwik and Angie M. Kwik for Defendant and Respondent.
Defendant and respondent Richard Danker filed a complaint against plaintiff and appellant SuperShuttle Los Angeles, Inc. (Company). The complaint was filed with the California Labor Commissioner and alleged Labor Code violations. Company petitioned the trial court for an order compelling arbitration. The trial court denied the petition. Company contends the trial court erred. We affirm the order.
FACTUAL AND PROCEDURAL HISTORY
A. FRANCHISE AGREEMENT
In July 2009, Danker entered into a unit franchise agreement (the Agreement) with Company. The recitals portion of the Agreement provided, "[Danker] is operating a business independent of and distinct from those of SuperShuttle [Franchise Corporation] and [Company]." The recitals further provided, "Persons who do not wish to be franchisees and independent business people, but who prefer a more traditional employment relationship, should not become SuperShuttle franchisees."
In the contractual stipulations portion of the Agreement, Company granted Danker "use [of] the Marks and the System in the operation of one (1) SuperShuttle van." In exchange, Danker paid a franchise fee and other fees to Company. The other fees/payments included (1) 25 percent of all gross revenue; (2) a weekly system fee; (3) a fee for a vehicle decal; (4) reimbursing Company for all airport loop fees, airport concession fees, and airport vehicle permits; (5) reimbursing Company for vehicle insurance costs; and (6) reimbursing Company for any costs Company incurred on behalf of Danker, such as pager costs, toll fees, and inspection fees.
The contract stipulations further provided, "[Danker] shall not hold [himself] out as an . . . employee of [Company]. With respect to all matters pertaining to the operation of the business conducted hereunder, [Danker] is, and shall be, an independent contractor." The contractual stipulations also provided, "It is acknowledged that [Danker] is the independent owner of [his] business, shall be in full control thereof, and shall conduct such business in accordance with [his] own judgment and discretion, subject only to the provisions of this Agreement." Further, the Agreement reflected, "IT IS ACKNOWLEDGED THAT [DANKER] IS THE INDEPENDENT OWNER OF [HIS] BUSINESS AND THAT [DANKER] AND [HIS] DRIVERS ARE NOT ENTITLED TO WORKERS' COMPENSATION BENEFITS AND THAT [DANKER] IS OBLIGATED TO PAY FEDERAL AND STATE INCOME TAX ON ANY MONIES EARNED PURSUANT TO THIS AGREEMENT."
An arbitration provision in the Agreement reads, in part, "Except as provided below, any controversy arising out of this Agreement, including without limitation an allegation that this Agreement is void ab initio, shall be submitted to the American Arbitration Association at its offices in or nearest to Los Angeles, California, for final and binding arbitration in accordance with its commercial rules and procedures that are in effect at the time the arbitration is filed."
B. LABOR COMPLAINT
In June 2015, Danker filed a complaint with the California Labor Commissioner. In the complaint, Danker sought: (1) vacation wages earned; (2) commissions earned; (3) reimbursement for unauthorized wage deductions; (4) reimbursable business expenses for fuel; (5) meal period premiums; (6) piece-rate pay for 4,368 trips; and (7) maintenance costs.
C. PETITION TO COMPEL ARBITRATION
In July 2015, Company filed a petition to compel arbitration in the trial court. Company asserted Danker's complaint sought to recharacterize the parties' relationship from franchisee/franchisor to employee/employer. Company asserted the Agreement reflects Danker was "a franchisee and an independent contractor." Company contended the issues raised by Danker arose out of the Agreement and therefore are subject to arbitration. Company reasoned that the issues arose out of the Agreement because (1) Danker was seeking to void the portion of the Agreement that provides Danker was operating an independent business; and (2) Danker was seeking to change the expenses associated with the franchise, which were set forth in the Agreement.
D. OPPOSITION
Danker opposed Company's petition to compel arbitration. First, Danker asserted he was seeking to enforce employee rights arising under the Labor Code—he was not seeking to enforce rights under the Agreement—and therefore, the arbitration provision did not apply. Second, Danker contended he was an employee of Company, and therefore, law related to employment arbitration agreements was applicable.
Third, Danker asserted the arbitration provision should not be enforced because it was unconscionable. Danker asserted he did not have an opportunity to review the arbitration provision, which causes the provision to be procedurally unconscionable. Danker further asserted the arbitration provision was substantively unconscionable because it did not allow for a hearing before the Labor Commissioner, it lacked mutuality, it denied statutory attorney's fees, it limited remedies, and it provided for impermissible cost sharing.
E. HEARING
The trial court held a hearing on Company's petition. At the beginning of the hearing, the trial court said, "[T]he agreement . . . calls for arbitration of any controversy, quote, 'arising out of this agreement,' end of quote. [¶] The lawsuits filed by the respondents here don't arise out of that agreement. They are saying 'We are not franchisees. We are employees, and the lawsuits are brought under the Labor Code.'"
The trial court heard the instant case and a related case at the same time (Supershuttle Los Angeles, Inc. v. Kaunang [E065068]) hence the trial court's use of the plural forms.
The trial court found Elijahjuan v. Superior Court (2012) 210 Cal.App.4th 15 (Elijahjuan) controlled. The trial court explained Elijahjuan as follows: The plaintiffs had signed independent contractor agreements with arbitration provisions. The plaintiffs asserted they were employees. The plaintiffs argued that their allegations concerning Labor Code violations did not arise from the independent contractor agreements because they were suing under the Labor Code. Therefore, the plaintiffs reasoned, their suit was not subject to arbitration. The appellate court agreed with the plaintiffs.
Company argued that the arbitration provision in Elijahjuan was "completely different" because the Elijahjuan arbitration provision was much narrower than the arbitration provision in the instant case. The trial court asked Company to explain how alleged Labor Code violations arise out of the Agreement. Company asserted, "[T]he entire relationship that the parties have with each other comes from that agreement. That's the only relationship they have." The trial court explained, "That's not their position. Their position is they are employees, not franchisees. Now, they may be wrong about that, but that's the nature of the claim."
Company asserted, "[T]he only reason that the parties have a relationship at all is by virtue of the fact that they signed these agreements . . . ." Company continued, "[T]he only reason they are allowed to be subjected to the type of conduct that they are alleging in their [complaint] is through that fact that they signed these unit franchise agreements."
Danker asserted, "[T]hese arbitration agreements do not cover, do not envision, any disputes regarding whether or not they are employees or whether or not they have Labor Code claims. It's just not covered by the arbitration agreements." The trial court concluded, "I do think the Elijahjuan case controls this. I'm going to deny [Company's] petition[] to compel the arbitration." The trial court entered an order denying Company's petition.
DISCUSSION
A. CONTENTION
Company contends the trial court erred by finding Danker's claims are beyond the scope of the arbitration provision.
B. STANDARD OF REVIEW
When interpreting a contract we apply the de novo standard of review. (Wolf v. Walt Disney Pictures and Television (2008) 162 Cal.App.4th 1107, 1134; Parfi Holding A.B. v. Mirror Image Internet, Inc. (Del. 2002) 817 A.2d 149, 154 (Parfi).)
C. DELAWARE LAW
We interpret the Agreement under Delaware law, which is the law chosen in the Agreement. "When parties to an agreement decide that they will submit their claims to arbitration, Delaware courts strive to honor the reasonable expectations of the parties and ordinarily resolve any doubt as to arbitrability in favor of arbitration. Nevertheless, arbitration is a mechanism of dispute resolution created by contract. An arbitration clause, no matter how broadly construed, can extend only so far as the series of obligations set forth in the underlying agreement. Thus, arbitration clauses should be applied only to claims that bear on the duties and obligations under the Agreement. The policy that favors alternate dispute resolution mechanisms, such as arbitration, does not trump basic principles of contract interpretation." (Parfi, supra, 817 A.2d at pp. 155-156, fns. omitted.)
"When the arbitrability of a claim is disputed, the court is faced with two issues. First, the court must determine whether the arbitration clause is broad or narrow in scope. Second, the court must apply the relevant scope of the provision to the asserted legal claim to determine whether the claim falls within the scope of the contractual provisions that require arbitration. If the court is evaluating a narrow arbitration clause, it will ask if the cause of action pursued in court directly relates to a right in the contract. If the arbitration clause is broad in scope, the court will defer to arbitration on any issues that touch on contract rights or contract performance." (Parfi, supra, 817 A.2d at pp. 155.)
In Parfi, the arbitration clause provided for arbitration of "'any dispute, controversy, or claim arising out of or in connection with" the contract. (Parfi, supra, 817 A.2d at p. 155.) "'Arising out of or in connection with'" means "based on the rights and obligations created by the underlying agreement." (Id. at p. 151.) There was no dispute that the provision was broad in scope because it reflected "an intent to arbitrate all possible claims that touch on the rights set forth in their contract." (Id. at p. 155, fn. omitted.) The Delaware Supreme Court interpreted the provision as follows: "When [the parties] agreed to the arbitration provision in the [contract] they did not commit to bring into arbitration every possible breach of duty that could occur between the parties. The arbitration clause signals only an intent to arbitrate matters that touch on the rights and performance related to the contract. The term 'arising out of or in connection with' must be considered in that light." (Parfi, supra, 817 A.2d at p. 156, fns. omitted.)
The court explained, "[T]he analysis must turn on the issue of whether [the] claims would be assertable had there been no [contract]. (Parfi, supra, 817 A.2d at p. 157.) The court examined whether the contract "establish[ed] rights and obligations extensive enough to encompass the dispute." (Ibid.) For example, is there a provision in the contract upon which the plaintiff could base his claims? (Ibid.)
D. ANALYSIS
The arbitration provision in the Agreement is broadly worded. It requires "any controversy arising out of this Agreement" to be submitted to arbitration. There is nothing indicating the parties intended "arising out of" to have a narrow or specific meaning. Therefore, we conclude the arbitration provision is broad in scope.
Next, we examine whether the alleged Labor Code violations fall within the scope of the contractual provisions that require arbitration. In his complaint, Danker seeks: (1) vacation wages earned; (2) commissions earned; (3) reimbursement for unauthorized wage deductions; (4) reimbursable business expenses for fuel; (5) meal period premiums; (6) piece-rate pay for 4,368 trips; and (7) maintenance costs.
The Agreement does not provide for Danker to receive the foregoing enumerated items because the Agreement does not set forth an employee/employer relationship. Thus, Danker could not sue for these items under the Agreement.
Danker's complaint is not seeking an interpretation of the Agreement, nor is it seeking to enforce rights under the Agreement. In Danker's complaint, he is asserting that the manner in which he performed his work was the manner in which an employee works—not the manner of a franchisee or independent contractor. Danker asserts that because he worked like an employee, he should have been compensated in the manner of an employee. Danker's complaint is seeking to formalize a new relationship between Danker and Company, in particular the relationship of employee/employer.
Danker's complaint is not based upon the Agreement, because he is asserting an entirely different relationship exists between the parties—one that has not been formalized by an agreement, one that needs to be legally determined by the Labor Commissioner. Because Danker is alleging a different relationship exists—that of employee/employer—and Danker is alleging statutory violations, we conclude Danker's complaint is not based upon the Agreement. Therefore, the controversy did not arise out of the Agreement. As a result, the trial court did not err. (See Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1208 [this court reached a similar conclusion under California law].)
"Under the common law, '"[t]he principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired."' [Citations.] What matters is whether the hirer 'retains all necessary control' over its operations. [Citation.] '"[T]he fact that a certain amount of freedom of action is inherent in the nature of the work does not change the character of the employment where the employer has general supervision and control over it."' [Citations.] Perhaps the strongest evidence of the right to control is whether the hirer can discharge the worker without cause, because '[t]he power of the principal to terminate the services of the agent gives him the means of controlling the agent's activities.'" (Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 531 (Ayala).)
In addition to control, courts look to other indicia to determine if an employment relationship exists: "'(a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.'" (Ayala, supra, 59 Cal.4th at p. 532.)
E. NARAYAN V . EGL, INC.
In Narayan v. EGL, Inc. (9th Cir. 2010) 616 F.3d 895, truck drivers signed independent contractor agreements with a global transportation company. The agreements reflected an intention to create a vendor/vendee relationship and acknowledged there was not an employee/employer relationship. Nevertheless, the drivers filed a complaint in California alleging they were "employees who were deprived of benefits conferred upon them by the Labor Code. They sought money damages for unpaid overtime wages, business expenses, meal compensation and unlawful deductions from wages . . . ." The transportation company moved for summary judgment asserting that, under the terms of the agreements, the drivers were independent contractors, not employees. (Id. at pp. 897-898.)
The Court of Appeal wrote, "The Drivers' claims involve entitlement to benefits under the California Labor Code. Whether the Drivers are entitled to those benefits depends on whether they are employees of [the transportation company], which in turn depends on the definition that the otherwise governing law—not the parties—gives to the term 'employee.' While the contracts will likely be used as evidence to prove or disprove the statutory claims, the claims do not arise out of the contract, involve the interpretation of any contract terms, or otherwise require there to be a contract." (Narayan v. EGL, Inc., supra, 616 F.3d at p. 899; see also Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1064-105 [discussing the distinction between an act that forms the basis of a claim and an act that provides evidence of liability in the context of anti-SLAPP].)
The instant case is similar to Narayan. In the instant case, Danker is not seeking an interpretation of a term of the Agreement and is not seeking to enforce any rights under the Agreement. Rather, Danker is asserting the legal definition of "employee" applies to the work he performed and, therefore, he is entitled to certain benefits under the Labor Code.
F. ELIJUAHJUAN V . SUPERIOR COURT
In Elijuahjuan, the plaintiffs were owner-operator truck drivers who sued the logistics company for whom the plaintiffs delivered goods. (Elijahjuan, supra, 210 Cal.App.4th at pp. 17-18, 24.) The plaintiffs alleged they were employees of the logistics company and had been misclassified as independent contractors. (Id. at p. 17.) The plaintiffs alleged numerous Labor Code violations. (Id. at p. 18.)
The plaintiffs had signed agreements including arbitration provisions. The arbitration provisions required arbitration of "'if a dispute arises with regard to [the agreement's] application or interpretation.'" (Elijahjuan, supra, 210 Cal.App.4th at p. 18, italics omitted.) The logistics company sought to compel arbitration, relying upon the agreements. The trial court granted the motion to compel arbitration. The plaintiffs petitioned for a writ of mandate. (Id. at pp. 17-18.)
The appellate court examined whether the dispute fell within the ambit of the arbitration provision. The appellate court wrote, "[The plaintiffs'] lawsuit does not concern the application or interpretation of the [a]greements, but instead seeks to enforce rights arising under the Labor Code benefitting employees but not independent contractors. No allegation in the [complaint] is based on rights afforded [the plaintiffs] under the terms of the [a]greements. The parties' dispute therefore cannot be characterized as regarding the application or interpretation of the [a]greements." (Elijahjuan, supra, 210 Cal.App.4th at pp. 20-21.)
The instant case is similar to Elijahjuan. In the instant case, Danker is not seeking an interpretation of a term of the Agreement and is not seeking to enforce any rights under the Agreement. Rather, Danker is asserting the legal definition of "employee" applies to the work he performed and, therefore, he is entitled to certain benefits under the Labor Code. Thus, Danker's claims do not arise from the Agreement.
Company contends Elijahjuan should not be applied in the instant case because the arbitration provision in Elijahjuan is "vastly different" than the arbitration provision in the instant case. The Elijahjuan provision required arbitration of any dispute "aris[ing] with regard to [the contract's] application or interpretation." (Elijahjuan, supra, 210 Cal.App.4th at p. 18.) Company does not explain how "aris[ing] with regard to [the contract's] application" is "vastly different" from the language of "arising out of this Agreement." As a result, we find Company's argument to be unpersuasive. (See Central Valley Gas Storage LLC v. Southam (2017) 11 Cal.App.5th 686, 721 [provide meaningful legal analysis].)
G. BROAD SCOPE
Company contends that because the arbitration provision is broad in scope, Danker must submit to arbitration. Company contends Danker's "claims all relate to the money received and/or expenses incurred from his operations as a franchisee—something directly related to the [Agreement]." Notably, Company provides no record citation to indicate where, in the Agreement, it sets forth Danker's rights to receive wages and reimbursements. (Cal. Rules of Court, rule 8.204(a)(1)(C).) We infer there is no citation because the Agreement does not set forth an employee/employer relationship such that the Agreement would provide for wages and employee reimbursements.
While the arbitration provision is broad in scope, it does not provide for arbitration of every dispute arising between the parties. Rather, it requires arbitration of "any controversy arising out of this Agreement." Danker's Labor Code claims did not arise out of the Agreement, as explained ante. Therefore, we find Company's argument to be unpersuasive.
Company contends Danker's claims are challenging the portion of the Agreement that provides "[Danker] shall not hold [himself] out as an . . . employee of [Company]. With respect to all matters pertaining to the operation of the business conducted hereunder, [Danker] is, and shall be, an independent contractor."
In the Agreement, Danker is referred to as a franchisee and independent contractor. Ultimately, Danker's complaint may have the consequence of redefining the parties' relationship; however, that does not mean the controversy arises out of the Agreement. The controversy Danker presents exists independent of the Agreement, e.g., did Danker perform work in the manner of an employee, and, if yes, did Company violate the Labor Code? Thus, the controversy does not arise from the Agreement.
H. OTHER SUPERSHUTTLE CASES
Company contends courts have enforced the arbitration clauses in other franchise agreements to which SuperShuttle entities are a party.
In a New York case, the court wrote, "The [franchise agreements] clearly govern all aspects of the plaintiffs' relationship with SuperShuttle, including their claims that they were employees rather than independent contractors." (Reid v. Supershuttle Int'l, Inc. (E.D.N.Y. 2010) 2010 U.S. Dist. LEXIS 26831, *15.) The court provided no explanation to support its conclusion that the arbitration provision "clearly govern[s] all aspects of the plaintiffs' relationship." (Id. at pp. *15-16.) Due to the lack of analysis, we are not persuaded by the Reid case.
In a California case, the court quoted the same quote from Reid set forth ante and concluded, without analysis, that the plaintiffs statutory wage and hour claims were subject to arbitration. (Kairy v. Supershuttle, Inc. (N.D.Cal. 2012) 2012 U.S. Dist. LEXIS 134945, *18-19.) Due to the lack of analysis, we are not persuaded by the Kairy case.
I. DELEGATION
Company asserts the rules of arbitration require the arbitrator to decide if the dispute is arbitrable.
The arbitration provision in the Agreement provides, "[A]ny controversy arising out of this Agreement . . . shall be submitted to the American Arbitration Association at its offices in or nearest to Los Angeles, California, for final and binding arbitration in accordance with its commercial rules and procedures that are in effect at the time the arbitration is filed."
Rule 7(a) of the American Arbitration Association's Commercial Arbitration Rules and Mediation Procedures provides, "The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim."
"The question whether the parties have submitted a particular dispute to arbitration, i.e., the 'question of arbitrability,' is 'an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise.' [Citation.]" (Howsam v. Dean Witter Reynolds (2002) 537 U.S. 79, 83.) In other words, "[c]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is 'clea[r] and unmistakabl[e]' evidence that they did so." (First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944.)
The arbitration provision in the Agreement provides "any controversy arising out of this Agreement . . . shall be submitted to the American Arbitration Association . . . for final and binding arbitration in accordance with its commercial rules and procedures . . . ." There is nothing in this provision indicating an intent to submit the issue of arbitrability to the arbitrator. The provision reflects the arbitration of controversies arising out of the Agreement will proceed by way of the American Arbitration Association's rules, but does not indicate the issue of arbitrability will proceed via those rules. Because the Agreement does not reflect a clear and unmistakable intent to submit the issue of arbitrability to the arbitrator, we conclude it is an issue for judicial determination.
DISPOSITION
The order denying the petition to compel arbitration is affirmed. Respondent is awarded his costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
MILLER
Acting P. J. We concur: SLOUGH
J. FIELDS
J.