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California Labor Law Compliance:
Agreements and Contracts

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Improper Arbitration Agreements
Arbitrator and his/her authority questioned
Arbitration and Discrimination Suit
Arbitration / Choic of Law Clause
All time worked must be compensated
anti-SLAPP can screen discriminatory actions
PAGA isn’t Class Action
Disclose Credit Auth
File Arbitration Fast
Asking Availability
Cannot Waive Free Speech
Reuglated Arbitrations
Consumer Privacy 2020
Invalidating Agreements
Improper Arbitration Agreements

Improper Arbitration Agreements
​Chris Garner v. Inter-state Oil Company


SOURCE: 

KEY WORDS:
Arbitration Agreements, Waiver, Class Action Claims

AGENCY:

THE COURT OF APPEAL OF THE STATE OF CALIFORNIA, THIRD APPELLATE DISTRICT


ACTION:

Modified and Certified for Publication (7/23/2020)


Document Citation:

NO. C088374, 2020 WL 4218302 


CERTIFIED FOR PUBLICATION:

July 23th, 2020

CHRIS GARNER, Plaintiffs and Appellant, 

v. 

INTER-STATE OIL COMPANY, 

Defendant and Respondent. 

C088374 

(Super. Ct. No. 34-2018-

00234770-CU-OE-GDS)

ORDER MODIFYING

OPINION AND GRANTING

REQUEST TO PUBLISH

[NO CHANGE IN

JUDGMENT]


    THE COURT: The opinion in the above-entitled matter filed on June 26, 2020, was not certified for publication in the Official Reports. For good cause it now appears that the opinion should be published in the Official Reports and it is so ordered. It is also ordered that the opinion filed in this case on June 26, 2020, be modified as follows: At page 2, first full paragraph, remove “(1)” and “(2)” from the only sentence, so that the paragraph now reads: “We conclude the arbitration agreement requires arbitration of Garner’s class claims, and Inter-State Oil did not waive reliance on the arbitration agreement.” This modification does not change the judgment.

_________________________ 


INTRODUCTION 


    Chris Garner sued Inter-State Oil Company (Inter-State Oil), alleging employment claims and seeking certification of a class action. Based on an arbitration agreement between Garner and Inter-State Oil, the trial court granted Inter-State Oil’s petition to compel arbitration of individual claims only, effectively denying Garner the ability to pursue class action claims. The trial court relied on language in the arbitration agreement stating that Garner waived his right to participate in class action lawsuits. 


    On appeal from the order granting the motion to compel arbitration, Garner contends (1) the plain language of the arbitration agreement gives him the right to pursue 2 his class claims in arbitration, and (2) Inter-State Oil waived reliance on the arbitration agreement. 


    We conclude (1) the arbitration agreement requires arbitration of Garner’s class claims, and (2) Inter-State Oil did not waive reliance on the arbitration agreement. 


    We will modify the trial court’s order to require arbitration of both individual and class claims, and affirm the order as modified.


BACKGROUND


     During Garner’s employment with Inter-State Oil, Garner signed a 2014 arbitration agreement. There is no dispute that the 2014 agreement superseded an earlier arbitration agreement.


    Garner subsequently filed a class action complaint against Inter-State Oil, asserting a cause of action for unfair business practices (Bus. & Prof. Code, § 17200) and alleging that Inter-State Oil engaged in various illegal employment practices related to wages, breaks, and reimbursement of business expenses. Inter-State Oil filed a petition to compel arbitration, asserting that Garner agreed to arbitrate all claims arising out of his employment with Inter-State Oil and that Inter-State Oil had asked Garner to arbitrate his dispute but Garner refused. Garner acknowledged Inter-State Oil’s petition to compel arbitration and offered to stipulate to arbitration of the class claims, but Inter-State Oil would agree only to arbitrate Garner’s individual claims. Consequently, Garner opposed the petition to compel arbitration, asserting that Inter-State Oil breached the arbitration agreement by refusing to arbitrate the class claims and that the breach waived its rights under the agreement and excused Garner’s duty to arbitrate.


    The trial court granted Inter-State Oil’s petition to compel arbitration only as to Garner’s individual claims. It relied on language in the arbitration agreement stating that Garner waived his right to participate in class action lawsuits*. Garner appealed the trial court’s order granting Inter-State Oil’s motion to compel arbitration, citing Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277, 1288 [an order to arbitrate individual claims is appealable if it constitutes the “death knell” for class litigation].


*At the hearing on the petition to compel arbitration, Garner orally requested a statement of decision. The trial court took the request under submission and later denied It, issuing a detailed minute order. In a footnote in his opening brief, Garner asserts that the failure to issue a statement of decision was reversible error per se. However, Garner failed to raise the issue properly on appeal. Points raised in the opening brief must be set forth separately under an appropriate heading, showing the nature of the question to be presented and the point to be made. (Cal. Rules of Court, rule 8.204(a)(1)(B); Opdyk v. California Horse Racing Bd. (1995) 34 Cal.App.4th 1826, 1830, fn. 4.) An assertion in a footnote does not meet that standard. Therefore, we need not consider the assertion.


DISCUSSION

I

    Garner contends the plain language of the arbitration agreement gives him the right to pursue his class claims in arbitration. 


    We interpret arbitration agreements using the plain meaning rule, seeking to give effect to the mutual intention of the parties. (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 176-177.) Our review of the contract language is de novo. (Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 707.) 


    Here, resolution hinges on two sentences in the arbitration agreement. The first relevant sentence appears under the admonition to read the agreement carefully, and provides: “To resolve employment disputes in an efficient and cost-effective manner, you and Inter-State Oil Co. agree that any and all claims arising out of or related to your employment that could be filed in a court of law, including but not limited to, claims of unlawful harassment or discrimination, wrongful demotion, defamation, wrongful discharge, breach of contract, invasion of privacy, or class action shall be submitted to final and binding arbitration, and not to any other forum.” The second relevant sentence appears in bold lettering just above the signature lines, and states: “This Arbitration Agreement Is A Waiver Of All Rights To A Civil Jury Trial Or Participation In A Civil Class Action Lawsuit For Claims Arising Out Of Your Employment.”


    Garner acknowledges that the second relevant sentence constitutes a waiver. But he disputes the extent of the waiver. He argues that although he waived the right to present his class claims in court, he did not waive the right to submit the class claims to arbitration. Inter-State Oil counters that the arbitration agreement contains a waiver of class claims.


    The arbitration agreement at issue here contains an express agreement to arbitrate class action claims. As noted, it provides: “To resolve employment disputes . . . , you and Inter-State Oil Co. agree that any and all claims . . . that could be filed in a court of law, including but not limited to . . . class action shall be submitted to final and binding arbitration, and not to any other forum.”


    Inter-State Oil argues “[t]here is no agreement between [Inter-State Oil] and [Garner] to arbitrate class claims. In fact, the express language of the Arbitration Agreement states that [Garner] waives his right to ‘participation in a class action.’ ” In making this argument, Inter-State Oil takes the language of the agreement out of context and ignores the express agreement to arbitrate class claims. The waiver sentence referred to by Inter-State Oil states that the arbitration agreement waived his right to “participation in a civil class action lawsuit,” not to participation in any class action claim. (Italics added.) Inter-State Oil does not account for the word “lawsuit” in its argument. Lawsuits generally refer to court actions. (See Roberts v. Packard, Packard & Johnson (2013) 217 Cal.App.4th 822, 839 [noting the difference between an arbitration claim and a lawsuit (court action)]; see also Mission Beverage Co. v. Pabst Brewing Co., LLC (2017) 15 Cal.App.5th 686, 697 [recognizing the difference between a lawsuit and an arbitration].) There is no indication in the arbitration agreement that the word “lawsuit” was intended to apply, uncharacteristically, to both court actions and arbitration claims. Indeed, the only sentence in the arbitration agreement referring to arbitration of class claims requires arbitration. Thus, read as a whole, this is an agreement to arbitrate all claims, including class claims, with a notice at the end of the agreement that it is a waiver of all jury trials and class action lawsuits. The agreement functions as a waiver of participation in a class action lawsuit because those class claims must be submitted to arbitration.


    Inter-State Oil relies on the holding in Lamps Plus, Inc. v. Varela (2019) __ U.S. __ [203 L.Ed.2d 636]. That case, however, is distinguishable. It held that a court may not compel class arbitration when the arbitration agreement does not provide for such arbitration and that an ambiguity about whether class claims may be arbitrated does not constitute consent to arbitrate class claims. (Id. at pp. __ [203 L.Ed.2d at pp. 645-657].) As we have explained, however, when reading the arbitration agreement in this case as a whole, the language of the arbitration agreement provides for arbitration of class claims. Therefore, the parties consented to arbitrate class claims.


    Accordingly, we conclude this arbitration agreement provides for arbitration of class claims.


II


    Garner further contends Inter-State Oil breached the arbitration agreement by refusing to arbitrate the class claims and therefore waived reliance on the arbitration agreement, thus allowing Garner to pursue his remedies in court. Based on this reasoning and the assertion that the arbitration agreement lacked consideration, Garner claims he is entitled to proceed in court on his class action claims.


    “[T]he term ‘waiver’ has a number of meanings in statute and case law. [Citation.] While ‘waiver’ generally denotes the voluntary relinquishment of a known right, it can also refer to the loss of a right as a result of a party’s failure to perform an act it is required to perform, regardless of the party’s intent to relinquish the right. [Citations.] In the arbitration context, ‘[t]he term “waiver” has also been used as a shorthand statement for the conclusion that a contractual right to arbitration has been lost.’ [Citation.]” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195, fn. 4.)


    Federal and state law favor arbitration. Therefore, “waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof. [Citations.]” (St. Agnes Medical Center v. PacifiCare of California, supra, 31 Cal.4th at p. 1195.) “Both state and federal law emphasize that no single test delineates the nature of the conduct that will constitute a waiver of arbitration. [Citations.] ‘ “In the past, California courts have found a waiver of the right to demand arbitration in a variety of contexts, ranging from situations in which the party seeking to compel arbitration has previously taken steps inconsistent with an intent to invoke arbitration [citations] to instances in which the petitioning party has unreasonably delayed in undertaking the procedure. [Citations.] The decisions likewise hold that the ‘bad faith’ or ‘wilful misconduct’ of a party may constitute a waiver and thus justify a refusal to compel arbitration. [Citations.]” ’ [Citation.]” (Id. at pp. 1195-1196.)


    Here, there is no evidence of bad faith or willful misconduct. The parties simply had a disagreement over the meaning of the arbitration agreement, which is not a model of clarity, and took the disagreement to court. That we have resolved the disagreement against Inter-State Oil is not evidence of bad faith or willful misconduct. We have found no case holding that conduct similar to Inter-State Oil’s rose to the level of waiver of the right to arbitrate. Therefore, giving effect to the public policy favoring arbitration, we conclude that the arbitration agreement must be enforced.


    Finally, Garner asserts Inter-State Oil’s conduct showed “a lack of mutuality of consideration that renders the [arbitration agreement] null and void.” Garner states: “The [arbitration agreement] lacks consideration because [Inter-State Oil] refused to perform its obligation under the agreement . . . .” For this proposition, Garner cites only to a case which held that, to create a contract with sufficient consideration, “the promises must be mutual in obligation. . . .” (Mattei v. Hopper (1958) 51 Cal.2d 119, 122.) Here, the parties made mutual, obligating promises to arbitrate. The dispute over the meaning of the arbitration agreement did not change those mutual, obligating promises. Adequacy of consideration is in the formation of the contract, not in its performance. (Meyer v. Benko (1976) 55 Cal.App.3d 937, 945.) We therefore reject Garner’s contention that Inter-State Oil’s conduct rendered the arbitration agreement null and void because of lack of consideration.


DISPOSITION


    The trial court’s order compelling arbitration is modified to require arbitration of both individual and class claims, and, as modified, the order is affirmed. Garner is awarded his costs on appeal. (Cal. Rules of Court, rule 8.278(a).)

    

Arbitrator and his/her authority questioned

Arbitrator lacked authority to issue a pre-hearing discovery subpoena.
Aixtron, Inc. v. Veeco Instruments Inc.


SOURCE: 

KEY WORDS:
Arbitration Agreements, Due Process, Authority, Subpoena

AGENCY:

THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT


ACTION:

Modified and Certified for Publication (7/16/2020)


Document Citation:

Nos. H045126, H045464, 2020 WL 4013981 (Cal. Ct. App. July 16, 2020)


CERTIFIED FOR PUBLICATION:

July 16th, 2020

AIXTRON, INC.,
Plaintiff and Appellant


v. 

VEECO INSTRUMENTS INC. et al.,

Defendants and Respondents.
H045126
(Santa Clara County Super.
Ct. No. 17CV311362) 

H045464
(Santa Clara County Super.
Ct. No. 17CV315493)


GREENWOOD, P.J.


Miguel Saldana is a former employee of respondent Veeco Instruments, Inc. (Veeco). In 2017, Saldana resigned from his position at Veeco and went to work for a competitor, appellant Aixtron, Inc. (Aixtron). Veeco initiated arbitration proceedings against Saldana pursuant to an arbitration clause in his employee confidentiality agreement, alleging causes of action for breach of contract, breach of the duty of loyalty, and conversion, including alleged data theft. Aixtron was not a party to the arbitration. The arbitrator granted Veeco's application for a pre-hearing discovery subpoena for Aixtron's business records, which included a demand that Aixtron produce any computers that Saldana had used for forensic examination by "an agreed-upon third-party neutral expert." Over Aixtron's objections, the arbitrator granted Veeco's motion to compel and ordered Aixtron to comply with the subpoena. Aixtron initiated a special proceeding in the superior court seeking judicial review of the arbitrator's discovery order. The superior court denied that petition. Veeco filed a separate petition in the superior court to enforce the arbitrator's discovery order, which the court granted. Aixtron appeals both orders.

On appeal, we reject Veeco's contention that the superior court's orders are not appealable. We find it unnecessary to resolve the parties' dispute over whether this case is governed by the Federal Arbitration Act (FAA) or the California Arbitration Act (CAA), since we conclude that under either statutory scheme, the arbitrator did not have the authority to issue a discovery subpoena to Aixtron in the circumstances of this case. We agree with federal appellate cases that hold there is no right to pre-hearing discovery under the FAA. As part of our analysis, we construe Code of Civil Procedure section 1282.6[1] and address, as an issue of first impression, whether it granted the arbitrator broad powers to issue pre-hearing discovery subpoenas. We conclude that it did not and hold that the arbitrator's discovery subpoena to Aixtron was not authorized under the CAA since the parties to the arbitration did not provide for full discovery rights in their arbitration agreement (§ 1283.1). Since we conclude the arbitrator did not have the authority to issue the discovery subpoena, we reverse the superior court's orders.


I. Facts and Procedural History

A. Parties & Saldana's Employment with Veeco and Aixtron


Aixtron is a global technology company that manufactures equipment for use in the semiconductor industry; its headquarters are in Herzogenrath, Germany, with an office in Sunnyvale, California. Veeco is a global electronics, semiconductor and data storage company; it is a Delaware corporation with offices in New York, New Jersey, California, and other locations. Aixtron and Veeco are competitors with respect to a technology known as the Metal Organic Chemical Vapor Deposition (MOCVD) process, which involves layering atoms on a semiconductor wafer to create materials used to manufacture LED's, sensors, compound semiconductors, and other products.


Miguel Saldana worked for Veeco from September 2, 2014, until May 6, 2016, as its Senior Director of Hardware Engineering in Somerset, New Jersey. Weeks before starting his employment with Veeco, he signed an Employee Confidentiality and Inventions Agreement (Veeco Confidentiality Agreement), which contained an arbitration clause. Saldana decided to leave Veeco because of alleged discriminatory acts by Veeco in its hiring process. Around March 8, 2016, Saldana accepted an offer of employment from Aixtron. He resigned from Veeco seven weeks later, on April 25, 2016.


B. Text of Arbitration Clause


The arbitration clause provided in its entirety: "Arbitration of Disputes.Except as provided under `Equitable Remedies' above, any claim or controversy arising out of my employment or the cessation thereof, including any claim relating to this Agreement, shall be settled by binding arbitration, in accordance with the National Rules for Resolution of Employment Disputes of the American Arbitration Association, to be held in the county and state in which my place of employment is located, or any other location mutually agreed upon by the parties. In such arbitration, each party shall bear its own legal fees and related costs, except that the parties shall share equally the fee of the arbitrator, provided that my portion of the arbitrator's fee shall not exceed the amount of the filing fee for commencing an action in the court of general jurisdiction in the judicial district in which my place of employment is located. The decision or award of the arbitrator shall be final and binding upon the parties. The arbitrator shall have the power to award any type of legal and/or equitable relief available in a court of competent jurisdiction, including, but not limited to, the costs of arbitration and attorney's fees, to the extent such damages are available under law. Any arbitral award may be entered as a judgment or order in any court of competent jurisdiction. [¶] To the extent that any claim between the parties is found not to be subject to arbitration and with respect to claims described under `Equitable Remedies' above, such claim shall be decided either by the U.S. District Court or the state court of general jurisdiction in and for the judicial district in which my place of employment is located." (We shall hereafter refer to this clause as the "Arbitration Clause.")


C. Dispute Between Saldana and Veeco


When Saldana submitted his resignation to Veeco, he made it effective May 6, 2016. Saldana's declaration suggests he traveled back and forth between California and New Jersey between the time he accepted the job at Aixtron and the day he resigned from Veeco. After he resigned, someone at Veeco directed him to return to New Jersey to return Veeco's physical property, including a laptop and a tablet computer.


According to Saldana, before submitting his resignation, "with the sole intention of continuing to contribute to Veeco" as part of his continuing employment, he stored and used relevant work information on his personal electronic devices, including a laptop and a cloud storage account, so that he could work remotely from his home in California, as he had done several times before. He declared that such use of personal computing devices was a "common practice" that was "sanctioned by Veeco." Around the time he resigned, Saldana shipped his personal property, including his electronic devices, to California. Veeco alleges Saldana "deliberately and purposefully concealed the fact that he had accepted employment with Aixtron for over a month" to have continued access to Veeco's confidential information.


On May 3, 2016, Saldana went through the first phase of his exit interview from Veeco in Plainview, New York, where he met with Greg Robbins (Veeco's general counsel) and Robert Bradshaw (Veeco's senior vice president for human resources). According to Bradshaw, during that interview, Saldana initially stated that he had not copied any Veeco data. But after they confronted him with forensic evidence that he had retained data on at least one device, Saldana admitted that he had copied Veeco data onto several personal electronic storage devices that were in the process of being shipped to California. He promised to return them immediately. According to Saldana, he did not admit to stealing any company data during his exit interview; he contends he told Bradshaw he backed up data with the sole intention of continuing to work for Veeco remotely until May 6, his last day at work. He also told them he would allow Veeco to access his personal computing devices. Bradshaw later characterized Saldana's statement as an "outright lie" and an "after-the-fact alibi." Veeco alleges that "after months of plotting and disloyal conduct," Saldana went to "its largest competitor . . ., while in possession of significant amounts of stolen . . . confidential data."


The day after his exit interview, Saldana asked Veeco's human resources director what to do about the data on his electronic devices. She told him to follow the instructions on his exit interview forms, which required him to confirm in writing that all Veeco confidential information had been deleted from his personal electronic devices. In a declaration, Saldana stated that on May 7 and May 8, 2016—before he started working for Aixtron—he followed those instructions and deleted any remaining Veeco data from his personal electronic storage devices, laptop, and online accounts.


Saldana started working for Aixtron on May 9, 2016. When hired, Aixtron required Saldana to sign its Confidential Information and Inventions Assignment Agreement, in which Saldana represented that "during his employment with Aixtron, he would not improperly make use of, or disclose, any information or trade secrets of any former employer" bring any former employer's property onto Aixtron's premises, or use any former employer's unpublished documents. Saldana also met with Aixtron's general manager, Bill Bentinck, and assured him that he would not bring any information belonging to Veeco to Aixtron and would abide by his continuing obligations to Veeco.


D. Veeco's Complaint in Superior Court (Case No. 16CV294921)


On May 10, 2016, the day after Saldana started work at Aixtron, Veeco filed a civil complaint against Saldana (Veeco Instruments, Inc. v. Miguel Saldana (Super. Ct. Santa Clara County, 2016, No. 16CV294921)) "in furtherance of arbitration" (§ 1281.8) for injunctive relief based on causes of action for breach of written contract and conversion. Veeco also filed an ex parte application for "evidence preservation" and a "non-use order," directing Saldana not to access, use, copy, destroy, or modify any evidence, including metadata, related to the action. The superior court granted the ex parte application.


On May 11, 2016, Veeco's counsel sent a letter to Aixtron, advising it of the lawsuit and the court's order on the ex parte application. After receiving that letter, Bentinck met with Saldana and told him that Aixtron did not want any Veeco information on its systems and to use only Aixtron-issued devices to do his work. Saldana reaffirmed to Bentinck that he had not brought any Veeco information to Aixtron and that he would abide by his continuing obligations to Veeco.


Two weeks later, Veeco filed a notice of claim and demand for arbitration with the Judicial Arbitration and Mediation Services (JAMS) pursuant to the Arbitration Clause in the Veeco Confidentiality Agreement.[2] Veeco's arbitration demand alleged causes of action for breach of contract, breach of the duty of loyalty, and conversion against Saldana. Saldana presumably agreed that the matter was subject to arbitration, and a retired superior court judge with JAMS was appointed arbitrator. Aixtron was not a party to the superior court action or the arbitration.


On May 20, 2016, pursuant to the superior court's non-use and evidence preservation order, Saldana produced his personal computer and other devices to Veeco's computer forensic expert Bruce Pixley. Pixley imaged Saldana's devices and found eight files, which Veeco identified as containing "highly confidential Veeco data," on Saldana's laptop and cloud storage account. Pixley's declarations identified those files by file names. Pixley stated that "because those files resided in [Saldana's] cloud storage account, the data could be accessed from any computer or device connected to the internet, including any of Saldana's Aixtron computer media." Saldana later asserted that the files that Veeco claimed were "highly confidential" were "automatically generated systems files [that were] left over," and that he did not know about them prior to the search. He argued that he made "every reasonable effort as a common place user of [his] personal computer to delete the files [he] felt contained any Veeco data" and had offered to have the forensic expert remove those files from [his] devices, if relevant and if deemed necessary, after the nature of the file's content was assessed." As of June 2017, Veeco still had "care, custody, and control" of Saldana's personal computer.


E. Proceedings in Arbitration Related to Discovery Subpoena


Early in the arbitration proceeding, Veeco "announced that it would be seeking pre-hearing discovery" from Aixtron "regarding Veeco's claim that Saldana had improperly shared Veeco confidential information with Aixtron." On January 17, 2017, counsel for Veeco, Aixtron, and Saldana had a telephone conference in which counsel for Veeco asked Aixtron to provide "concrete assurances . . . that no Veeco data was retained, used, or disclosed by Saldana." Veeco's counsel stated that Veeco was looking for assurances that Aixtron had conducted an investigation, reviewed its computer systems regarding things that only Saldana had touched, and done its due diligence to confirm that Saldana was not withholding a thumb drive containing Veeco data and had not accessed Veeco's confidential information in connection with his work for Aixtron. Aixtron's counsel stated that Saldana had signed Aixtron's confidentiality agreement, which prohibits used of third-party data, that Aixtron's executives had reminded Saldana of his obligations to Veeco on multiple occasions, and that Aixtron had found no evidence that Saldana had brought Veeco data into Aixtron.


At an arbitration management conference with Veeco and Saldana in January 2017, the arbitrator set the arbitration hearing for August 30, 2017 and made orders regarding discovery consistent with the parties' agreements, which included "a process under which Veeco would advise Saldana of any proposed subpoena to Aixtron and Saldana would have an opportunity to object" before the arbitrator issued the subpoena. Aixtron did not participate in that conference.


The attorneys for Aixtron and Veeco spoke again on February 2, 2017. Aixtron's counsel asked if Veeco had a list of the files Saldana allegedly took and offered to have Aixtron run a targeted search for those files to determine whether they existed on Aixtron's computer systems. Veeco's counsel said he would provide a list of items that would provide reasonable assurances to Veeco.


Four days later, Veeco's counsel sent Aixtron's counsel an e-mail, demanding that Aixtron (1) hire a forensic expert of Veeco's choosing to run searches on all of Aixtron's computer media to which Saldana had had access, as well as Saldana's personal devices, for Veeco-specific terms and files; (2) interview Saldana about specified topics; and (3) provide a "high-level description of Saldana's work for Aixtron" to be used in further discussions between Veeco and Aixtron. Veeco's demands included that its expert would have the right to delete files from Aixtron's computer systems and would report back to Veeco, and that Aixtron would pay for the expert.

Aixtron rejected Veeco's demands, stating that they were "neither reasonable nor unburdensome," "extremely costly," "would interfere with Aixtron's daily business activities," and "put Aixtron's highly sensitive, confidential, and proprietary information at risk" by allowing "a competitor's forensic expert access to its most confidential and proprietary information," to run searches, delete information, and report its findings to Veeco, "without Aixtron having any•control over what is disclosed to its competitor or what is done with its own information." Aixtron stated that Veeco's "offer to enter into a protective order [was] insufficient to protect the exposure and risk these actions pose to [its] confidential information." Aixtron stated that while it "understands and respects Veeco's legitimate interest in protecting its confidential information, these requested actions extend far beyond these legitimate interests" and that Veeco was "trying to place the burden of its own costs and discovery onto a third party [that] has no involvement with the dispute" against Saldana. Aixtron argued that the "requests reveal a much more nefarious apparent intent by Veeco, to improperly gain access to the confidential and proprietary information of its competitor." Aixtron said it had spoken to Saldana multiple times about his duties to Veeco, had not solicited Veeco data from Saldana, had done its own internal review, and was confident that Saldana had not brought any confidential Veeco information onto its premises.


On February 20, 2017, Veeco circulated a proposed subpoena for the production of Aixtron's business records, which demanded 16 different categories of documents and the production of certain Aixtron computers.[3] Saldana objected the following day.


On March 3, 2017, Veeco filed a motion with the arbitrator to enforce the subpoena. It argued that "Saldana's theft of highly confidential Veeco data immediately prior to leaving for Veeco's chief competitor Aixtron, his material deception to Veeco's General Counsel and Senior Vice President of Human Resources, the nature of the highly valuable MOCVD technology in a two-player market where Veeco leads and Aixtron competes, and his possession of Veeco data while employed with Aixtron—in addition to . . . Aixtron's conduct—warrant the discovery sought against Aixtron. Aixtron's complete refusal to assist Veeco in this matter has undermined Aixtron's credibility and furthered the urgency of this subpoena. Saldana's claim that he has not used or disclosed the stolen Veeco data at Aixtron cannot be taken on `scout's honor' . . . as he has lied, among other things, about retaining, returning, and deleting the stolen data, and has made multiple false certifications under oath—all while secretly starting his employment at Aixtron in possession of the stolen Veeco data. . . ."

In opposition, Saldana argued that Veeco had "gloss[ed] over the threshold procedural question" whether the arbitrator "can even order pre-hearing discovery on a nonparty." He argued that arbitrators do not have the power to enforce nonparty discovery subpoenas; that the subpoena was overbroad and sought access to highly confidential information; that the subpoena was invalid because, to the extent that it sought Saldana's employment records, it did not comply with the requirements of section 1985.6. As noted, in a declaration, Saldana stated that the "`highly confidential' files" Veeco sought were "left over," "automatically generated systems files" that he did not know about prior to the search of his computer, that he made "every reasonable effort as a common place user of [a] personal computer to delete the files [he] felt contained any Veeco data, and had "offered to have the forensic expert remove those files from [his] devices, if relevant and if deemed necessary, after the nature of the file's content was assessed." (Aixtron refers to these files as "Binary Files.") Saldana added that Veeco had not proven that the files that remained on his computer contained Veeco data and that Veeco had taken his "cooperation and turned it into additional exaggerated, unfounded, and unreasonable claims."


In reply, Veeco argued that the arbitrator did have the power to enforce the subpoena, the subpoena was not overbroad and did not seek Aixtron's confidential information, and Saldana had waived his objection as to his employment records because he had not previously lodged that objection with the arbitrator.


On March 15, 2017, the arbitrator held a telephone hearing with counsel for Veeco and Saldana—but not Aixtron—regarding the subpoena. The arbitrator modified the language of two of Veeco's demands and approved the subpoena, as modified, for service on Aixtron. The arbitrator found that the revised subpoena was "reasonable as to subject matter and scope," and that he had "the authority, including under JAMS Employment Arbitration Rule 21, to order issuance of third party subpoenas for discovery purposes." The arbitrator signed the subpoena, ordered that it may be served on Aixtron through its counsel, and encouraged Aixtron, in the event it objected to the subpoena, to meet and confer with Veeco to determine if an agreement could be reached on a protective order and the "identity of a third party neutral and the protocols to be followed with respect to Demand No. 15."[4] Veeco served its discovery subpoena on Aixtron on or about March 17, 2017.


F. Aixtron's Objections to the Subpoena and Veeco's Motion in Arbitration to Compel Aixtron's Compliance with the Subpoena


On April 10, 2017, Aixtron filed written objections to the subpoena in arbitration, arguing that (1) the subpoena was impermissible because Aixtron was not a party to the arbitration; (2) the requests were overbroad and irrelevant; (3) the requests sought confidential, trade secret information; and (4) and the subpoena was procedurally deficient. In addition, Aixtron made separate objections directed to each of Veeco's 16 demands. Aixtron told Veeco's counsel that, given its objections, it would not produce any documents.


On April 27, 2017, Veeco filed a motion with the arbitrator to compel Aixtron to respond to the subpoena. Aixtron filed opposition to the motion in arbitration, arguing that under California law, the arbitrator lacked authority to issue and enforce nonparty discovery subpoenas for two reasons. First, the dispute between Veeco and Saldana was not a personal injury or wrongful death action to which the discovery provisions of the California Arbitration Act (§ 1280 et seq.) are deemed to apply under section 1283.1, subdivision (a). Second, the parties had not incorporated the discovery provisions of section 1283.05 into their arbitration agreement or made them applicable to their arbitration agreement as required by section 1283.1, subdivision (b) for the discovery provisions to apply. As before, Aixtron argued that the subpoena was invalid because the requests were overbroad and irrelevant; the subpoena sought Aixtron's confidential, proprietary, and trade secret information; and the subpoena was procedurally deficient. Veeco filed a reply, arguing that Aixtron could not relitigate issues the arbitrator had already decided regarding his authority to enforce the subpoena and the scope of the subpoena, that Veeco sought only its own data, not Aixtron's trade secrets; and that Aixtron's arguments regarding procedural deficiencies were without merit.


In mid-May 2017, after conducting a telephone hearing on Veeco's motion to compel, the arbitrator ordered Aixtron to comply with the subpoena within twenty days. The arbitrator stated that the "discovery provisions in the arbitration statutes provide the `default mode' that applies in the absence of an agreement between the parties as to discovery" and that the parties are free to agree on discovery beyond that minimum, up to the full panoply of discovery rights authorized by the Code of Civil Procedure. He stated that the parties had agreed to arbitrate this case under the JAMS Employment Arbitration Rules and Procedures (JAMS Rules) and that Rule 1 of the JAMS Rules provides that the parties "shall be deemed to have made" the JAMS Rules a part of their arbitration agreement. The arbitrator found that the "incorporated Rules allow for subpoenas directed to third parties, both at the arbitration hearing and prior to the hearing," citing Rule 21; that the subpoena was well within the parties' agreement as to allowable discovery; and that he had the authority and duty to enforce the parties' agreement. (Original italics.) The arbitrator's order stated, without citation to authority, that the "limitations on discovery as found in the arbitration acts was not intended to shield third parties from unwanted discovery; they were intended to put reasonable limits [on] the parties' discovery efforts, in the absence of the parties' agreement otherwise." The arbitrator overruled Aixtron's other objections, stating that they "can be addressed by the use of privilege logs, protective orders, and designation of a neutral third party to oversee any sensitive discovery inquiries." The arbitrator encouraged Aixtron to meet and confer with Veeco regarding a protective order and use of a third party neutral.


G. Aixtron's Petition in the Superior Court for Protective Order and Rehearing on the Arbitrator's Discovery Order (Case Nos. 17CV311362 & H045126)


On June 5, 2017, Aixtron filed a "petition for protective order and for rehearing on arbitrator's discovery order" in the superior court (Aixtron, Inc. v. Veeco Instruments, Inc. (Super. Ct. Santa Clara County, 2017, No. 17CV311362)). Aixtron requested judicial review of the arbitrator's order on the subpoena and a protective order allowing it to refrain from responding to the subpoena. In a declaration, Aixtron general manager Bentinck stated that Aixtron developed its MOCVD technology in Germany over 30 years, that the work done in Sunnyvale on its MOCVD technology was with respect to market segments where Aixtron and Veeco do not compete, and that its main areas of product development in the United States "relate to techniques and technologies other than MOCVD, in areas where Aixtron and Veeco do not compete." Bentinck declared that Aixtron had not uncovered any evidence that Saldana had transferred any Veeco information to Aixtron, that he is knowledgeable about Aixtron's trade secrets, and that the subpoena sought materials that Aixtron considered "nonpublic, confidential, and proprietary," citing Veeco's demands Nos. 4 and 5.[5] He provided additional facts that supported Aixtron's trade secrets claim, including a description of the steps Aixtron took to insure its proprietary data remained confidential. Aixtron asked the superior court to vacate the arbitrator's discovery order, quash the subpoena, and enter a protective order excluding Aixtron's confidential information from the subpoena.

In its opposition, Veeco argued that the petition should be dismissed or denied because the court lacked authority to grant any relief. First, it argued Aixtron was not entitled to relief under section 1285, which authorizes a petition to vacate an arbitrator's award, because only parties to the arbitration may seek relief under that section and Aixtron was not a party to the arbitration. Second, it contended that the court lacked authority to order rehearing under either the JAMS Rules or the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and that Berglund v. Arthroscopic & Laser Surgery Center of San Diego, L.P. (2008) 44 Cal.4th 528 (Berglund), which held that persons who are not parties to an arbitration are entitled to full judicial review of an arbitrator's discovery order, did not apply because it was decided under the California Arbitration Act. Third, it argued Aixtron was not entitled to a protective order because it never requested one from the arbitrator and waited until after the subpoena was issued to object.


Veeco asserted that the arbitrator had twice considered Aixtron's arguments and rejected them and argued that Aixtron's purported trade secrets were not exempt from discovery, given Veeco's repeated offers to enter into a protective order. Veeco asserted that when Saldana deleted Veeco's data from his personal devices, he deleted metadata that showed when he accessed the data and whether he copied it, and that Veeco needed to know whether its data sits on Aixtron's computers and whether Saldana had used his Aixtron computer to access the Veeco data in his cloud storage.


On August 15, 2017, without explanation, the superior court denied Aixtron's petition for a protective order and for rehearing. (We shall refer to this order as the August Order.) Three weeks later, Aixtron filed a notice of appeal from the August Order in Aixtron, Inc. v. Veeco Instruments, Inc. (H045126).


H. Veeco's Petition in the Superior Court to Enforce the Arbitrator's Discovery Order (Case Nos. 17CV315493 & H045464)


Less than an hour after Aixtron filed its notice of appeal, Veeco filed a petition against Aixtron and Saldana in the superior court to enforce the arbitrator's discovery order (Veeco Instruments, Inc. v. Aixtron, Inc. (Super. Ct. Santa Clara County, 2017, No. 17CV315493)). Veeco complained that Aixtron had not produced a single document, argued that Aixtron was not entitled to object further since the matter had been fully adjudicated by the arbitrator and the superior court had denied Aixtron's petition, and asserted that the court's "intervention was necessary to ensure Aixtron's compliance." Veeco analogized the arbitrator's discovery order to an arbitration award on the merits and argued that it was final and enforceable like any other arbitration award.


Three weeks later, Veeco advised the superior court that Aixtron had filed a notice of appeal from the August Order. Veeco told the court the parties disputed whether the August Order was appealable and whether the appeal stayed further proceedings in the superior court in both cases and asked the court to determine whether proceedings on its petition were stayed pending Aixtron's appeal.


Aixtron filed opposition to Veeco's petition. Aixtron argued that as a nonparty to the arbitration, it was entitled to "full judicial review" of the arbitrator's discovery order, which included the right to appeal; that the superior court's order on its petition (the August Order) was appealable; and that Veeco's petition violated the automatic stay on appeal (§ 904.1(a)(2)) since the matters raised in Veeco's petition are embraced in and affected by Aixtron's appeal. Aixtron also reargued the merits of the dispute over the discovery subpoena and reiterated its request that if discovery is ordered, it be subject to a protective order. Veeco filed a reply.


In December 2017, without explanation, the superior court granted Veeco's petition to enforce the arbitrator's discovery order and ordered Aixtron to produce its documents within 20 days subject to a protective order that the parties to the arbitration—but not Aixtron—had stipulated to in June of 2016 in Veeco Instruments, Inc. v. Miguel Saldana (Super. Ct. Santa Clara County, 2016, No. 16CV294921). (We shall refer to this order as the December Order.) Aixtron filed a timely appeal from the December Order in Veeco Instruments, Inc. v. Aixtron, Inc. (H045464).


In February 2018, this court denied Aixtron's motion to consolidate the two appeals, but ordered the appeals considered together for briefing, oral argument, and disposition.


II. Discussion

A. Parties' Contentions on Appeal


Aixtron makes three arguments on appeal. First, it contends that the superior court erred in ordering it to comply with the discovery subpoena because under the plain language of both the CAA and the FAA, an arbitrator does not have the authority to compel a nonparty to the arbitration to produce documents in response to a discovery subpoena for business records issued by an arbitrator. According to Aixtron, the "central issue before this Court is whether the arbitrator is authorized by federal or state statute to issue a deposition subpoena for the production of business records to a [nonparty] outside the context of the arbitration hearing." Second, Aixtron argues that the court erred in ordering it to comply with the subpoena because Veeco failed to make the requisite showing that the information it seeks, which includes Aixtron's confidential information and trade secrets, is both necessary to a claim or defense and essential to a fair resolution of the dispute in arbitration. Third, it argues that Veeco's document requests are overly broad, unduly burdensome, and harassing.


Veeco raises a threshold question of appealability. It argues that Aixtron's first appeal is improper and should be dismissed because the August Order denying Aixtron's petition for a protective order and rehearing on the arbitrator's discovery order is not appealable. In its brief, Veeco apparently concedes, however, that the December Order granting Veeco's petition to enforce the discovery subpoena is appealable. Before addressing the parties' contentions, we shall discuss two issues with the record in these appeals.


B. Veeco's Respondent's Appendix


Veeco has filed a respondent's appendix that consists entirely of documents filed in Veeco's civil complaint against Saldana (Veeco Instruments, Inc. v. Miguel Saldana (Super. Ct. Santa Clara County, 2016, No. 16CV294921)) or before the JAMS arbitrator. But Aixtron has not appealed any of the court's orders in case No. 16CV294921. An appendix may contain only accurate copies of documents filed with the superior court in the matter or matters under appeal. (In re Steroid Hormone Product Cases (2010) 181 Cal.App.4th 145, 151, fn. 6 [inclusion of portions of deposition transcript that were not filed with the trial court is improper].) By filing an appendix, counsel represent, under risk of sanctions, that the appendix "consists of accurate copies of documents in the superior court file" in the matter under review. (Cal. Rules of Court, rule 8.124(g); Perez v. Grajales (2008) 169 Cal.App.4th 580, 592, fn. 11 [inclusion of unfiled documents in an appendix is improper].)

Copies of some of the documents in Veeco's appendix were filed as exhibits to the pleadings and papers filed in Aixtron, Inc. v. Veeco Instruments, Inc. (Super. Ct. Santa Clara County, 2017, No. 17CV311362) and Veeco Instruments, Inc. v. Aixtron, Inc. (Super. Ct. Santa Clara County, 2017, No. 17CV315493) and are therefore properly before us in this appeal since they are in the record in those cases. But some of the documents in Veeco's appendix were not filed in either of the cases before us. They include the May 9, 2016 declaration of Veeco's forensic expert, which Veeco cites three times in its brief on appeal. Since that declaration and other documents in Veeco's appendix were not before the superior court, we shall not consider them, except as described in the next paragraph.


A court may judicially notice the "record of . . . any court of this state." (Evid. Code, § 452, subd. (d).) "We may take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached—in documents such as orders, statements of decision, and judgments—but cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact." (Williams v. Wraxall (1995) 33 Cal.App.4th 120, 130, fn. 7.) On our own motion, we shall take judicial notice of the court documents from Veeco Instruments, Inc. v. Miguel Saldana (Super. Ct. Santa Clara County, 2016, No. 16CV294921) in Veeco's appendix for the purpose of providing background information regarding the dispute between Veeco and Saldana and for the facts that the documents were filed in that case and that the court issued a preservation order. (Evid. Code, §§ 452, subd. (d); 459.) But we shall not consider any of the documents in Veeco's appendix that were not part of the record in the cases on appeal, including its expert's May 2016 declaration, for the truth of the matters stated therein. (Lindsey v. Conteh (2017) 9 Cal.App.5th 1296, 1302, fn. 2 [judicial notice of the existence, but not the contents, of the document is proper].)


C. Aixtron's Request for Judicial Notice


Aixtron has filed a motion for judicial notice, asking this court to judicially notice two declarations that were signed months after the superior court made the orders at issue: (1) the declaration of Randy Singh, Aixtron's chief financial officer, who helped coordinate a forensic examination of two Aixtron computers by Kivu Consulting, Inc. (Kivu), a computer forensics consulting firm; and (2) the declaration of Adam Demonaco, the senior director of Kivu, who supervised the forensic analysis of the two computers. Aixtron's request for judicial notice was based on Evidence Code section 452, subdivision (h), which permits a court to judicially notice "[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonable indisputable accuracy."


Reviewing courts generally do not take judicial notice of evidence that was not presented to the trial court. (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 76, fn. 3.) In addition, the subject matter of these declarations is reasonably subject to dispute since Aixtron's and Veeco's experts might disagree regarding Kivu's search protocols, as well as the expert's qualifications and bias. This court therefore denied Aixtron's motion for judicial notice in August 2018. We shall not consider these declarations further and will disregard any reference to them in the briefs.


D. Both orders are appealable.

1. Parties' Contentions Regarding Appealability


Veeco argues that Aixtron's first appeal is improper because the superior court's August Order, which denied Aixtron's petition for a protective order and rehearing, is not appealable. Veeco analogizes the August Order to an order denying a motion to vacate an arbitration award and argues that such an order is not appealable under section 1294. Alternatively, Veeco argues that even if the August Order is characterized as an order denying a protective order, it is not appealable.


In its reply brief, Aixtron asserts that the August Order is appealable under the authority of Berglund, supra, 44 Cal.4th 528. Alternatively, it argues that the appealability of the August Order is moot, since Veeco's petition raised the same issues as Aixtron's petition and since Veeco concedes that the December Order is appealable. Aixtron argues that the August Order is appealable because it finally resolved the discovery issue between a party to the arbitration and a nonparty.


In its respondent's brief, Veeco challenges only the appealability of the August Order and does not challenge the appealability of the December Order. Shortly before oral argument, we asked the parties to be prepared to discuss Uber Technologies, Inc. v. Google LLC (2018) 27 Cal.App.5th 953, 959-960 (Uber), which was not final until after briefing in this case was completed. At oral argument, Veeco argued that neither order is appealable under the one final judgment rule or section 1294 and that this case is procedurally distinguishable from Uber. While we might otherwise deem the question of the appealability of the December Order forfeited because it was not raised until oral argument, we will exercise our discretion to consider it.


2. Berglund


"`"[N]o appeal can be taken except from an appealable order or judgment, as defined in the statutes and developed by the case law. . . ." [Citation.]'" (City of Gardena v. Rikuo Corp. (2011) 192 Cal.App.4th 595, 601, italics omitted.) "The existence of an appealable order or judgment is a jurisdictional prerequisite to an appeal." (Canandaigua Wine Co., Inc. v. County of Madera (2009) 177 Cal.App.4th 298, 302 (Canandaigua).)


"Section 904.1, subdivision (a), governs the right to appeal in civil actions. It codifies the `one final judgment rule,' which provides that `"`an appeal may be taken only from the final judgment in an entire action.'" [Citation.]' [Citation.] A judgment is final, and therefore appealable, when it embodies `the final determination of the rights of the parties in an action or proceeding' (§ 577.) A judgment constitutes the final determination of the parties' rights `"where no issue is left for future consideration except the fact of compliance or noncompliance with [its] terms. . . ." [Citation.]' [Citation.]" (Kaiser Foundation Health Plan, Inc. v. Superior Court (2017) 13 Cal.App.5th 1125, 1138 (Kaiser Foundation).) "The one final judgment rule is a `fundamental principle of appellate practice that prohibits review of intermediate rulings by appeal until final resolution of the case.' [Citation.] `[A]n appeal cannot be taken from a judgment that fails to complete the disposition of all . . . causes of action between the parties. . . .'" (C3 Entertainment, Inc. v. Arthur J. Gallagher & Co. (2005) 125 Cal.App.4th 1022, 1025.) An appeal from a judgment or order that is not appealable must be dismissed. (Canandaigua, supra, 177 Cal.App.4th at p. 302.)

There are statutes, apart from section 904.1, that more specifically confer a right of direct appeal. Veeco cites section 1294, which confers a statutory right to appeal certain arbitration orders, including: "(a) An order dismissing or denying a petition to compel arbitration. [¶] (b) An order dismissing a petition to confirm, correct or vacate an award. [¶] (c) An order vacating an award unless a rehearing in arbitration is ordered. [¶] (d) A judgment entered pursuant to [(the CAA)]. [¶] (e) A special order after final judgment." Veeco argues that the August Order denying Aixtron's petition for protective order and for rehearing on the arbitrator's discovery order does not fit any of these categories. Aixtron does not contend otherwise and argues that Veeco's arguments and citation to authority are inapposite since Aixtron did not appeal from such an order.


Aixtron relies on the authority of Berglund, supra, 44 Cal.4th 528, the Supreme Court's decision regarding the scope of judicial review of an arbitrator's discovery order, to assert that the August Order is appealable. Berglund was an action for personal injuries based on alleged negligent medical treatment. The case was eventually ordered to arbitration. (Id. at p. 532.) The plaintiff in Berglund served a discovery subpoena for the production of documents on a nonparty, which asserted that the documents were privileged and moved for a protective order in the superior court. While that motion was pending, the plaintiff filed a motion with the arbitrator to compel production of the documents. The arbitrator concluded that he had jurisdiction to rule on the motion and ordered the nonparty to produce the documents for his in-camera review. (Id. at p. 533.) The superior court subsequently denied the nonparty's motion for a protective order, reasoning that "the arbitrator, not the court, had jurisdiction over [the] discovery subpoena and thus was empowered to compel . . . production of the subpoenaed documents." (Ibid.) The nonparty filed a notice of appeal and filed a motion for a stay, or alternatively a petition for writ of supersedeas, prohibition, or other relief in the Court of Appeal. The appellate court denied the request for a stay and denied the writ petition but allowed the appeal of the superior court's order denying the nonparty's motion for a protective order to proceed. The appellate court held that the arbitration proceeding was the proper forum for the nonparty to challenge the discovery sought by a party to the arbitration and that the limitations on judicial review of arbitration decisions do not apply to an arbitrator's discovery orders against a nonparty. The appellate court reversed the superior court and remanded for further proceedings. (Ibid.) The Supreme Court granted review and affirmed the Court of Appeal judgment, concluding that (1) a discovery dispute involving a nonparty to an arbitration proceeding "must be submitted first to the arbitral, not the judicial, forum"; and (2) a "nonparty is entitled to full judicial review of the arbitrator's discovery order" and is not subject to the same statutory limitations on judicial review of an arbitrator's order as the parties to the arbitration. (Id. at pp. 532, 536-539.)


In reaching its conclusions, the Supreme Court explained: "Generally, an arbitrator's decision in a dispute between parties to an arbitration agreement is subject to only limited judicial review. This is why: An `arbitration decision is final and conclusive because the parties have agreed that it be so.' [Citation.] Arbitration by agreement is often a `process in which parties voluntarily trade the safeguards and formalities of court litigation for an expeditious, sometimes roughshod means of resolving their dispute.' [Citation.] Because `arbitral finality is a core component of the parties' agreement to submit to arbitration' [citation] and because arbitrators are not required to make decisions according to the rule of law, parties to an arbitration agreement accept the risk of arbitrator errors [citation], and arbitrator decisions cannot be judicially reviewed for errors of fact or law even if the error is apparent and causes substantial injustice [citations]. `"As a consequence, arbitration awards are generally immune from judicial review."' [Citation.]" (Berglund, supra, 44 Cal.4th at p. 534, citing Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10-12 & Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 831-832.)


The court also noted that under section 1283.05, subdivision (c), an arbitrator's discovery order is "`as conclusive, final and enforceable as an arbitration award on the merits.'" (Berglund, at p. 536.) The Berglund court held that nonparties "cannot be compelled to arbitrate a dispute" and "are not bound by an arbitrator's decision because the arbitrator's authority is derived from the parties' consent and, . . ., nonparties have not consented to arbitration." (Id. at pp. 536, 537.) The court stated that "giving arbitrator discovery orders the same deference normally given arbitration awards would substantially compromise the legal rights of nonparties against whom erroneous discovery orders may be made" and observed that the "normal limitations on judicial review of arbitrator decisions mean that arbitrators need not follow the law and, apart from some narrow exceptions, their errors are not subject to judicial review and correction." (Id. at pp. 537, 538.) The court concluded that absent their consent, nonparties were entitled to full judicial review of any adverse discovery order issued by an arbitrator, which was necessary to protect the legal rights of nonparties who had "not consented to arbitration and consequently have not agreed to the finality of arbitrator decisions." (Id. at p. 539.)


On its facts, Berglund established that a nonparty dissatisfied with an arbitrator's discovery order may seek "full judicial review" by a superior court of that order. It is reasonable to conclude that the Supreme Court's repeated use of the phrase "full judicial review" (Berglund, supra, 44 Cal.4th at pp. 532, 534, 538, 539) also suggests a right to appellate review of the superior court's order. Thus, Aixtron argues that the August Order is appealable because, as in Berglund, its appeal stems from the superior court's denial of a petition for a protective order after a nonparty was served with a subpoena for the production of documents in arbitration. But the Berglund court did not address the question whether a nonparty or a party to the arbitration that is dissatisfied with the superior court's decision has a right of direct appeal. (See Uber, supra, 27 Cal.App.5th at pp. 959-960 [Berglund" did not determine whether a party to the arbitration dissatisfied with the superior court decision then has a right of direct appeal"; italics added].) The Supreme Court noted without comment in its recitation of the procedural status of the case that the appellate court had denied the nonparty's request for a stay and denied its petition for writ of supersedeas but allowed the nonparty's appeal of the superior court's order to proceed. But the court did not discuss the appealability of that order. (Berglund, supra, 44 Cal.4th at p. 533.) "It is axiomatic that cases are not authority for propositions not considered." (People v. Ault (2004) 33 Cal.4th 1250, 1268, fn. 10.) Berglund thus does not provide clear authority for Aixtron's contention that the August Order is appealable.


3. Uber


Generally, discovery orders are not appealable. (Good v. Miller (2013) 214 Cal.App.4th 472, 475.) Instead, the challenge to a discovery order must await appeal from a final judgment. (Nickell v. Matlock (2012) 206 Cal.App.4th 934, 940; see also Marriage of Economou (1990) 224 Cal.App.3d 1466, 1474-1476.) But courts have recognized two general exceptions to the one final judgment rule. Even though issues remain for further determination, a direct appeal may be taken from (1) a collateral final judgment or order, or (2) a judgment that is final as to a party. (Eisenberg, et al., Cal. Practice Guide: Civil Appeals & Writs (The Rutter Group 2017) ¶¶ 2:76, 2:77, 2:91, pp. 2-54, 2-66.) The latter exception has been applied to find a right to appeal discovery orders involving nonparties. (See e.g., Brun v. Bailey (1994) 27 Cal.App.4th 641, 649-650 [nonparty deponent became a party by moving for a protective order; denial of that motion was appealable as a final determination of the litigation as to the nonparty].)


In Uber, supra, 27 Cal.App.5th 953, 958-962, the appellate court addressed the appealability of a superior court order in a special proceeding to vacate an arbitrator's discovery order and held that a party to an arbitration that is dissatisfied with a superior court order vacating an arbitrator's discovery order in favor of a nonparty has a right of direct appeal based on the one final judgment rule (§ 904.1, subd. (a)). In the underlying dispute in Uber, Google, Inc. (Google) initiated arbitration proceedings against two of its former employees for breach of their employment contracts, breach of fiduciary duty, and other claims. Google, a party to the arbitration, issued a discovery subpoena for the production of documents to Uber, a nonparty. (For ease of reference, we shall sometimes use the terms "party" and "nonparty" instead of the parties' names.) The nonparty objected that the documents were privileged, and the party moved in arbitration to compel production of the documents. The arbitration panel rejected the nonparty's privilege claims, granted the motion, and ordered the nonparty to produce the documents. The nonparty filed a special proceeding in the superior court to vacate the arbitrators' discovery order. Unlike the court here, the superior court in Uber granted the nonparty's petition and vacated the arbitrators' discovery order. (Uber, at p. 957.)


The party appealed, asserting that the superior court's order was final, conclusive, and appealable as an order vacating an arbitration award under section 1294, subdivision (c). "Days later, in an effort `to accelerate adjudication of the issues raised [in the] appeal,' [the party] petitioned for a writ of mandate, prohibition, and/or other appropriate relief" and asked the appellate court to direct the superior court to vacate the order. (Uber, supra, 27 Cal.App.5th at p. 958.) The appellate court summarily denied the writ. Shortly thereafter, the nonparty moved to dismiss the appeal, arguing that the superior court's order was not appealable. The appellate court disagreed and denied the motion to dismiss "because the superior court's order determined all the pending issues in the special proceeding between Google and Uber and was thus a final appealable order." (Id. at p. 957.) The court held that a right of direct appeal existed "based on the one final judgment rule," reasoning that the superior court's order was "the final resolution of the special proceeding initiated by [the nonparty] for the sole purpose of vacating" the arbitration panel's discovery order, that the superior court's order resolved the discovery dispute between the party and the nonparty with finality since it relieved the nonparty of any obligation to produce the documents and conclusively determined its obligations to the party, and there was nothing left for the superior court to determine as between them and disposed of all the issues raised in the special proceeding. (Id. at p. 960.)


The Uber court concluded that the superior court's order also had the finality required under section 1294. The court explained that "`[u]nder section 1294, appealable arbitration orders require finality. . . . ". . . [T]he Legislature's philosophy and intent in drafting section 1294 was that there should be no appellate consideration of intermediate rulings in arbitration disputes if the superior court was of the view that there should be initial or further proceedings in arbitration. . . ." An intermediate ruling in an arbitration dispute that contemplates further proceedings in arbitration is not appealable. [Citations.] Requiring finality in appealable arbitration orders is consistent both with the language of section 1294 and the general prohibition of appeals from interlocutory nonfinal judgments in section 904.1, subdivision (a). [Citations.]" (Uber, supra, 27 Cal.App.5th at p. 960, quoting Vivid Video, Inc. v. Playboy Entertainment Group, Inc. (2007) 147 Cal.App.4th 434, 442-443.) The court concluded that the superior court's order was appealable under section 1294 since it contemplated no further proceedings between Uber and Google and completely resolved their dispute since Uber was not a party to the arbitration. (Uber, at p. 960.) The court noted that Uber involved "a nonparty to the underlying arbitration, and the single dispute involving the nonparty was conclusively determined by the superior court." (Id. at p. 962.) The court held that because the superior court's order was "a final determination of the discovery rights between Uber and Google in the special proceeding commenced for the sole purpose of resolving this discovery dispute, the order is appealable." (Ibid.)


We agree with the analysis in Uber and conclude that because the superior court's August Order was "a final determination of the discovery rights [between Aixtron and Veeco] in the special proceeding commenced for the sole purpose of resolving this discovery dispute, the order is appealable" under the one final judgment rule and section 904.1. (Uber, supra, 27 Cal.App.5th at p. 962.) Like the nonparty in Uber, Aixtron filed a special proceeding in the superior court for the express purpose of challenging the arbitrator's discovery order. The superior court finally determined Aixtron's and Veeco's rights as to the discovery order when it denied Aixtron's petition. The August Order embodied the final determination of Aixtron's and Veeco's rights in the special proceeding (§ 577).


At oral argument, Veeco argued that neither the August Order on Aixtron's petition nor the December Order on Veeco's separate petition is appealable under the one final judgment rule or section 1294 and that this case is distinguishable from Uber. Veeco argued that unlike the order in Uber, the orders here are not final because the superior court ordered the parties to return to arbitration for further discovery proceedings before the arbitrator. But Veeco has mischaracterized the superior court's orders. The August Order summarily denied Aixtron's petition for a protective order, and the December Order granted Veeco's petition to enforce the arbitrator's discovery order and ordered Aixtron to produce the responsive documents within 20 days pursuant to the protective order that the parties to the arbitration had already stipulated to in Veeco Instruments, Inc. v. Miguel Saldana (Super. Ct. Santa Clara County, 2016, No. 16CV294921). Contrary to Veeco's assertions, the superior court did not order further discovery proceedings before the arbitrator on either occasion.


Both orders were final and appealable because there was no issue left for future consideration except the fact of Aixtron's compliance or noncompliance with their terms. (Kaiser Foundation, supra, 13 Cal.App.5th at p. 1138.) Veeco acknowledged as much regarding the August Order when it filed its own petition seeking enforcement of the arbitrator's order and an order directing Aixtron to comply with the order's terms. Veeco's petition initiated a separate special proceeding for the sole purpose of enforcing the arbitrator's order. In its petition, Veeco argued that Aixtron was not entitled to object to its petition, since the "matter has been fully adjudicated by the arbitrator" and Aixtron's petition to the superior court had been unsuccessful. Veeco stated that the superior court's "intervention [was] necessary to ensure Aixtron's compliance" (italics added) and that the arbitrator's order requiring Aixtron to produce documents was a "conclusive, final, and immediately enforceable award and is subject to confirmation under C.C.P. § 1285." Veeco did not assert that further discovery proceedings were contemplated before the arbitrator or ask the superior court to remand for further discovery proceedings in arbitration regarding its discovery subpoena to Aixtron. Thus, in its briefing and request for relief below, Veeco treated the superior court's August Order as final and appealable and argued there was nothing left to do but ensure Aixtron's compliance with the arbitrator's discovery order. This underscores our conclusions that the August Order was final and appealable, and there was no issue left for future consideration except the fact of Aixtron's compliance or noncompliance with the arbitrator's discovery order. (Kaiser Foundation, supra, 13 Cal.App.5th at p. 1138.)


As Veeco notes, there are procedural differences between this case and Uber. In Uber, the nonparty (Uber) that sought to vacate the arbitrator's discovery order prevailed in the superior court and the party to the arbitration (Google) appealed. In contrast here, the nonparty (Aixtron) lost in the superior court and the nonparty appealed. In Uber, the superior court vacated the arbitrator's discovery order and the nonparty was not required to produce its documents. Moreover, the superior court's order vacating the arbitrator's discovery order was final as to the privilege issue presented in Uber. Here, the superior court's August Order resolved the legal issues presented by Aixtron's petition and Veeco's response, denied nonparty Aixtron's petition for a protective order, leaving the arbitrator's discovery order in place and requiring Aixtron to produce its documents and computers.

Veeco argued at oral argument that the superior court's validation of the arbitrator's discovery order would result in further arbitration proceedings, and thus the August Order could not be considered final. We do not agree. Both the arbitrator and the superior court issued orders, and assumed compliance with those orders would be forthcoming. The arbitrator found that some of Aixtron's objections to the ordered discovery could be addressed by the use of privilege logs, protective orders, or a third party neutral, but he did not order any further proceedings in arbitration to resolve Aixtron's concerns. Rather, he urged Aixtron to meet and confer with Veeco to craft an appropriate protective order to shield Aixtron from the damage of discovery disclosure, and suggested the parties hire a neutral to oversee sensitive discovery inquiries. The arbitrator's decision was made; and he was not going to work through the gritty details of Aixtron's compliance with his discovery order. Nor did the superior court remand the case to the arbitrator for further proceedings in its August Order. In short, the superior court's August Order was a final determination of the discovery rights between Aixtron and Veeco, and thus appealable under Uber.


As noted, Veeco filed a separate proceeding in the superior court seeking an order directing Aixtron to comply with the arbitrator's discovery order. In its December Order, the superior court directed Aixtron to produce documents pursuant to an existing protective order between the parties to the arbitration, thus resolving the compliance issue raised in Veeco's petition. Since the December Order ordered compliance with the arbitrator's discovery order, and there was no further issue left for the court's consideration, it was also appealable under Uber. (See also Kaiser Foundation, supra, 13 Cal.App.5th at p. 1138.)


E. The discovery order exceeded the arbitrator's statutory authority in the circumstances of this case.


Aixtron argues that an arbitrator in a private arbitration has no authority under the FAA or California law to compel nonparty discovery. Aixtron contends that because it is not a party to the arbitration agreement between Saldana and Veeco, it has not consented to the arbitrator's authority or to be bound by the JAMS Rules. Aixtron argues that the arbitration agreement and any arbitration rules Saldana and Veeco have agreed to are insufficient to confer authority on the arbitrator to compel Aixtron to produce documents for the purposes of discovery and that such authority exists only if conferred by statute. Veeco responds that the section 1282.6 of the CAA and the JAMS Rules authorize this subpoena and that it is irrelevant that Aixtron was not a party to the arbitration.


1. Standard of Review


The question whether an arbitrator in a private, contractual arbitration can compel a nonparty to the arbitration to respond to a subpoena duces tecum for the production of business records issued by the arbitrator for the purposes of discovery is a question of law, which we review de novo. (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191.) To the extent this question requires us to construe certain statutes and written instruments for which there is no conflicting extrinsic evidence, these are also questions of law, which we review de novo. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 432 [statutory construction]; Parson v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866 [written instruments].)


2. Whether This Case is Subject to the FAA or the CAA


Generally, the first step in reviewing an arbitration dispute is to determine whether the qu

estion presented is subject to the FAA or the CAA because different rules apply under the two acts, which in some cases leads to federal preemption. (Knight, et al., Cal Practice Guide: Alternative Dispute Resolution (Rutter Group 2018) ¶ 5:47, pp. 5-40, citing Southland Corp. V. Keating (1984) 465 U.S. 1, 12 and other cases; ¶¶ 5:44-5:49.6, pp. 5-40 to 5-5-52.)


The Arbitration Clause does not specify which act applies. The parties dispute whether the FAA or the CAA applies. Aixtron contends the FAA applies because the Veeco Confidentiality Agreement involves interstate commerce. In its papers below, Veeco agreed that the FAA governs this dispute. But on appeal, Veeco argues that the CAA applies because Aixtron filed its petition under the CAA. It also argues that if we conclude that the FAA applies, then we should reject the Ninth Circuit's view in CVS Health Corp. v. Vividus, LLC (9th Cir. 2017) 878 F.3d 703 (CVS Health), which held that the FAA does not grant arbitrators the power to compel production of documents from nonparties prior to an arbitration hearing. (Id. at pp. 705, 708.) Veeco urges us to follow the contrary, minority view adopted by the Sixth and Eighth Circuit Courts of Appeals in In re Security Life Ins. Co. of America (8th Cir. 2000) 228 F.3d 865, 870-871 (Security Life), and American Fed'n of Tel. & Radio Artists v. WJBK-TV (6th Cir. 1999) 164 F.3d 1004, 1009 (TV Artists), which hold that the FAA authorizes arbitrators to compel production of documents prior to the hearing. Aixtron responds that it does not matter which arbitration act applies because the result is the same under both the FAA and the CAA.


In addressing this issue, the parties discuss the choice of law clause in the Veeco Confidentiality Agreement. Without much discussion, each side relies on a different United States Supreme Court case: Veeco quotes briefly from Volt Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468 (Volt) and Aixtron relies on Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52 (Mastrobuono). At first blush, Volt and Mastrobuono seem to state conflicting rules. Neither party discusses Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376 (Cronus), which resolves the seeming conflict. The Cronus court explained, "Under United States Supreme Court jurisprudence, we examine the language of the contract to determine whether the parties intended to apply the FAA to the exclusion of California procedural law and, if any ambiguity exists, to determine whether [the procedural law at issue] conflicts with or frustrates the objectives of the FAA." (Cronus, at p. 383.) "`Like other federal procedural rules, . . ., "the procedural provisions of the [FAA] are not binding on state courts . . . provided applicable state procedures do not defeat the rights granted by Congress." [Citation.]'" (Id. at p. 390.) As one commentator cogently explained "`[in] Volt, the state policy furthered the federal goal of encouraging arbitration, and thus . . . did not require construing ambiguities toward applying the FAA. 


In Mastrobuono, however, the policy at issue would have directly impeded the FAA's goals, thus triggering the FAA preemption. As a result, it should hardly be surprising that a choice-of-law clause, in an agreement bound by the contract law and involving the arbitration rules of one state, happened to produce a different result than did a choice-of-law clause in an entirely different context.'" (Cronus, at p. 393, quoting Note, An Unnecessary Choice of Law: Volt, Mastrobuono, and Federal Arbitration Act Preemption (2002) 115 Harv. L.Rev. 2250, 2259-2260, fns. omitted.)


While the record suggests that Saldana's work may have affected interstate commerce, the parties did not develop that point below and the evidentiary support for that conclusion is thin. Neither the Arbitration Clause nor the choice-of-law clause mentions the FAA. Both clauses are silent on the issue of discovery and the scope of allowable discovery in arbitration. To ensure that we have fully reviewed this matter and foreclose any possibility of federal preemption, we shall examine both federal and state law regarding the authority of an arbitrator to issue a discovery subpoena to a nonparty. As we shall explain, we arrive at the same conclusion under both the FAA and the CAA: the discovery subpoena here was not authorized by either act. We therefore need not resolve the question whether the Arbitration Clause is subject to the FAA or the CAA.


3. Discovery from Non-Parties Under the FAA


The right to discovery under the FAA is limited. Under section 7 of the FAA (9 U.S.C. § 7), arbitrators are authorized to subpoena nonparties to appear before them and to produce documents or other evidence, and the arbitrator's subpoena is enforceable by the district court.[6] There is a split of authority in the federal courts of appeals regarding the scope of the arbitrator's subpoena power under section 7 of the FAA. Some courts have interpreted section 7 to restrict the arbitrator's subpoena power to hearings in the physical presence of the arbitrator. (Hay Group, Inc. v. E.B.S. Acquisition Corp. (3d Cir. 2004) 360 F.3d 404, 410 (Hay Group) ["Nowhere does the FAA grant an arbitrator authority to order non-parties to appear at depositions, or to demand that non-parties provide . . . documents during pre-hearing discovery"]; Life Receivables Trust v. Syndicate 102 at Lloyd's of London (2d Cir. 2008) 549 F.3d 210, 212, 216-217CVS Health, supra, 878 F.3d 703, 704-705 [9th Circ.]; Managed Care Advisory Grp., LLC v. CIGNA Healthcare, Inc. (11th Cir. 2019) 939 F.3d 1145, 1160.) Adhering to this view, one court has stated that an arbitration panel might be able to subpoena a nonparty for prehearing discovery "under unusual circumstances" "upon a showing of special need or hardship." (COMSAT Corp. v. National Science Foundation (4th Cir. 1999) 190 F.3d 269, 275-276.) Other federal appellate courts have held that "implicit" in the arbitrator's power under the FAA to subpoena relevant documents for production at the arbitration hearing "is the power to order the production of relevant documents for review by a party prior to the hearing." (Security Life, supra, 228 F.3d at pp. 870-871 [8th Cir.]; TV Artists, supra, 164 F.3d at p. 1009 [6th Cir].)


No California appellate court has addressed the issue. The Ninth Circuit reviewed this question in CVS Health. In that case, HMC Compounding Services (HMC) sued CVS Health, Express Scripts, and others for alleged antitrust violations. (CVS Health, supra, 878 F.3d at p. 705.) HMC's claims against CVS Health were submitted to arbitration, and its claims against Express Scripts were litigated in federal court. (Ibid.) The arbitrators issued a records subpoena to Express Scripts, which was not a party to the arbitration. Express Scripts did not respond, and HMC filed a petition in federal district court to enforce the subpoena, which the district court denied. (Ibid.) The issue on appeal was "whether the FAA allows an arbitrator to order a third party to produce documents as part of pre-hearing discovery." (Id. at p. 706.) After reviewing section 7 of the FAA and opinions from other federal appellate courts, the Ninth Circuit concluded that the FAA does not grant arbitrators that power and affirmed the district court. The court held that section 7 of the FAA gives arbitrators two powers: (1) to compel the attendance of persons to appear as witnesses at the hearing and (2) to compel such persons to bring relevant documents to the hearing. (Ibid.) The court held that a "plain reading of the text of section 7 reveals that an arbitrator's power to compel the production of documents is limited to production at an arbitration hearing," and that "section 7 grants an arbitrator no freestanding power to order third parties to produce documents other than in the context of a hearing." (Ibid., fn. omitted.)


The CVS Health court noted that in Security Life, the Eighth Circuit had reasoned that "`implicit in an arbitration panel's power to subpoena relevant documents for production at a hearing is the power to order the production of relevant documents for review by a party prior to the hearing,' "which furthered "efficient resolution of disputes by allowing parties to `review and digest' documents before hearings." (CVS Health, supra, 878 F.3d at p. 707, citing Security Life, supra, 228 F.3d at pp. 870-871.) The CVS Health court rejected this rationale, stating: "it is not absurd to restrict third-party discovery to the disclosures that can be made at a hearing; third parties `did not agree to [the arbitrator's] jurisdiction' and this limit on document discovery tends to greatly lessen the production burden upon non-parties." (CVS Health, at p. 708.) "`Under a system of pre-hearing document production, by contrast, there is less incentive to limit the scope of discovery and more incentive to engage in fishing expeditions that undermine some of the advantages of the supposedly shorter and cheaper system of arbitration.'[ ] . . . Practical constraints on document production during an arbitration hearing may often result in lower production demands upon third parties. [Citation.] Moreover, an arbitrator's power under section 7 extends only to documentary evidence `which may be deemed material . . .,' further demonstrating that under the FAA an arbitrator is not necessarily vested with the full range of discovery powers that courts possess." (Id. at p. 708.) The court rejected the proposition that the FAA grants arbitrators implicit powers to order document discovery from nonparties prior to a hearing and declined to create additional discovery powers for arbitrators. (Ibid.) We find this reasoning persuasive and adopt the holding in CVS Health.


4. Discovery from Nonparties Under the CAA (§§ 1283.05 & 1283.1)


The right to discovery in arbitration proceedings under the CAA "is generally limited" and "highly restricted." (Berglund, supra, 44 Cal.4th 528, 534Alexander v. Blue Cross of California (2001) 88 Cal.App.4th 1082, 1088 (Alexander)Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 106, fn.11 (Armendariz) ["a limitation on discovery is one important component of the `simplicity, informality, and expedition of arbitration'"], abrogated in part on another ground as stated in ATT Mobility LLC. v. Concepcion (2011) 131 S.Ct. 1740, 1746.)


Aixtron contends that the applicable statutory authority for conducting discovery in arbitration cases is found in sections 1283.1 and 1283.05 and argues that these statutes do not authorize discovery in this case. Our State Supreme Court has said that "[s]ections 1283.1 and 1283.05, . . ., grant arbitrators authority over discovery in certain arbitration proceedings." (Berglund, at p. 535; accord Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1802, fn. 10 (Brock) ["arbitrators have authority to order discovery in certain types of arbitration proceedings"].) Sections 1283.05 and 1283.1 are both in chapter 3 of the CAA, which governs the conduct of arbitration proceedings.


Section 1283.05 describes the circumstances under which "depositions may be taken and discovery obtained in arbitration proceedings," as well as the powers of the arbitrator with regard to such discovery. Subdivision (a) of section 1283.05 incorporates the Civil Discovery Act (§§ 2016.010 et seq.) and authorizes discovery "as if the subject matter of the arbitration were pending before a superior court." This statutory grant of authority is subject to the limitation in subdivision (e) of section 1283.05, which provides that "[d]epositions for discovery shall not be taken unless leave to do so is first granted by the arbitrator or arbitrators." (§ 1283.1, subds. (a), (e).) "Section 1283.05's subdivision (b) grant arbitrators the power to enforce discovery through sanctions" similar to the power of a trial court, "`except the power to order the arrest or imprisonment of a person.'" (Berglund, supra, 44 Cal.4th at p. 535.) Subdivision (c) of section 1283.05 gives the arbitrator the power to issue discovery orders imposing "terms, conditions, consequences, liabilities, sanctions and penalties." (Ibid.)


The discovery authorized in section 1283.05 is subject to one more important limitation. Section 1283.05 begins with the phrase, "[t]o the extent provided in section 1283.1." This phrase limits the application of the deposition and discovery rules in section 1283.05 to the circumstances described in section 1283.1. The Brock court held that an arbitrator's authority to order discovery "is statutorily conferred" and applies to the types of arbitrations described in section 1283.1. (Brock, supra, 10 Cal.App.4th at p. 1802, fn.10.)


Subdivision (a) of section 1283.1 "provides that section 1283.05 is incorporated into and made part of every agreement to arbitrate any dispute arising out of a claim for wrongful death or for personal injury."[7] (Berglund, supra, 44 Cal.4th at p. 535; italics added.) Since the dispute between Veeco and Saldana is not a claim for wrongful death or personal injury, subdivision (a) of the statute does not apply.


Subdivision (b) of section 1283.1 provides that in "all other arbitrations, the arbitrator may grant discovery `[o]nly if the parties by their agreement so provide. . . .'" (Brock, at p. 1802, fn. 10, quoting § 1283.1, subd. (b).) Thus, to determine whether the arbitrator had the authority to order discovery under the CAA, we must determine whether Veeco and Saldana provided that authority through their arbitration agreement. (§ 1283.1, subd. (b).) One treatise has opined that a "simple agreement for discovery `pursuant to the California Discovery Act' or `pursuant to CCP § 1283.05' creates enforceable discovery rights." (Knight, supra, ¶ 5:386.6, p. 5-388, citing § 1283.1, subd. (b); see e.g. OTO, LLC v. Kho (2019) 8 Cal.5th 111, 119 (OTO) [arbitration clause in acknowledgment of at-will employment provided that arbitration would be conducted pursuant to the CAA, "with full discovery permitted (see . . . § 1283.05)"]; Cox v. Bonni (2018) 30 Cal.App.5th 287, 304-305 (Cox) [arbitration agreements that "provided that discovery would be conducted pursuant to section 1283.05" "expressly granted the parties the same ability to obtain discovery that they would have had in the trial court"].) Unlike the arbitration clauses in OTO and Cox, the Arbitration Clause here does not mention the California Discovery Act or section 1283.05, or even contain the word "discovery." Since Veeco and Saldana have not provided for discovery in their arbitration agreement, we conclude that section 1283.05 does not apply in this case.


5. Interpretation of Section 1282.6


Veeco relies on a different code section and argues that section 1282.6 authorized the arbitrator to sign and issue the discovery subpoena to Aixtron. Veeco contends that section 1282.6, which governs the issuance of subpoenas in arbitration, provides that a subpoena may be issued for discovery purposes either when section 1283.05 applies or whenever a neutral arbitrator issues and signs the subpoena. Veeco argues that unlike section 7 of the FAA, the arbitrator's authority to issue subpoenas under section 1282.6 is not limited to commanding the production of records at the hearing. In reply, Aixtron argues that section 1282.6 applies to deposition subpoenas and subpoenas duces tecum for the purpose of producing documents at the arbitration hearing and not for discovery.


The issue is one of statutory interpretation. "In construing a statute, our fundamental task is to ascertain the Legislature's intent so as to effectuate the purpose of the statute. [Citation.] We begin with the language of the statute, giving the words their usual and ordinary meaning. [Citation.] The language must be construed `in the context of the statute as a whole and the overall statutory scheme, and we give "significance to every word, phrase, sentence, and part of an act in pursuance of the legislative purpose."' [Citation.] In other words, `"we do not construe statutes in isolation, but rather read every statute `with reference to the entire scheme of law of which it is part so that the whole may be harmonized and retain effectiveness.'"'" (Smith v. Superior Court (2006) 39 Cal.4th 77, 83.) The parties do not cite, and our research has not disclosed any cases that have construed section 1282.6. The issue is therefore one of first impression.


Section 1282.6 provides in its entirety: "(a) A subpoena requiring the attendance of witnesses, and a subpoena duces tecum for the production of books, records, documents and other evidence, at an arbitration proceeding or a deposition under Section 1283, and if Section 1283.05 is applicable, for the purposes of discovery, shall be issued as provided in this section. In addition, the neutral arbitrator upon his own determination may issue subpoenas for the attendance of witnesses and subpoenas duces tecum for the production of books, records, documents and other evidence. [¶] (b) Subpoenas shall be issued, as of course, signed but otherwise in blank, to the party requesting them, by a neutral association, organization, governmental agency, or office if the arbitration agreement provides for administration of the arbitration proceedings by, or under the rules of, a neutral association, organization, governmental agency or office or by the neutral arbitrator. (c) The party serving the subpoena shall fill it in before service. Subpoenas shall be served and enforced in accordance with Chapter 2 (commencing with Section 1985) of Title 3 of Part 4 of this code." (Italics added.)


Section 1282.6 describes the procedures used in arbitration for issuing "a subpoena requiring the attendance of witness, and a subpoena duces tecum for the production of books, records, documents and other evidence." (§ 1282.6, subd. (a).) The first sentence in subdivision (a) limits its application to three circumstances: (1) "at an arbitration proceeding"; (2) at "a deposition under Section 1283," and (3) "if Section 1283.05 is applicable, for the purposes of discovery. . . ." (§ 1282.6, subd. (a).) As we shall explain, none of these three circumstances applies here.


The first circumstance for which a subpoena may be used to compel the attendance of witnesses and the production of evidence is "at an arbitration proceeding." (§ 1282.6, subd. (a).) Based on its plain language, we construe this phrase to mean an arbitration hearing before an arbitrator or panel of arbitrators. The subpoena at issue here was a discovery subpoena; it did not demand that Aixtron produce documents or other evidence (its computers) for an arbitration hearing.


The second circumstance for which a subpoena may be used to compel attendance of witnesses and production of documents is at "a deposition under Section 1283." (§ 1282.6, subd. (a).) Under section 1283, an arbitrator, on application of a party, "may order the deposition of a witness to be taken for use as evidence and not for discovery if the witness cannot be compelled to attend the hearing or if exceptional circumstances exist as to make it desirable, in the interest of justice and with due regard to the importance of presenting the testimony of witnesses orally at the hearing." (Italics added.) Notably, section 1283 underscores the importance of presenting the testimony of witnesses orally at the hearing (i.e., live testimony before the arbitrator). The subpoena here was not for a deposition for evidentiary purposes under section 1283.


The third circumstance for which a subpoena may be used in arbitration to compel attendance of witnesses and production of evidence is "if Section 1283.05 is applicable, for the purposes of discovery." Thus, the procedures for issuing subpoenas described in section 1282.6 may only be used for the purposes of discovery if section 1283.05 applies. But as we have stated, section 1283.05 does not apply in this case.


Subdivisions (b) and (c) of section 1282.6 describe the procedures to be used for the issuance of subpoenas in arbitration. Subdivision (b) provides that a "neutral association" like JAMS may issue subpoenas "as of course, signed but otherwise in blank, to the party requesting them." Subdivision (c) of section 1282.6 provides that the party shall fill in the subpoena before serving it and that subpoenas shall be served and enforced in accordance with "Chapter 2 . . . of Title 3 of Part 4" of the Code of Civil Procedure, which includes sections 1985 to 1997. We construe the word "party" in section 1282.6 to mean a "party to the arbitration," which is defined in section 1280, subdivision (e). As a practical matter, in most cases, the party's attorneys will obtain and serve the subpoena.

Veeco focuses on discovery subpoenas and argues that section 1282.6, subdivision (a) authorizes the issuance of discovery subpoenas in two circumstances: (1) when section 1283.05 applies; and (2) when the neutral arbitrator signs and issues the subpoena. Veeco contends that since the arbitrator signed and issued the discovery subpoena to Aixtron, "[t]hat makes all the difference," and the arbitrator's signature was "dispositive." As we have stated, the first sentence of section 1282.6, subdivision (a) describes three circumstances in which an arbitrator may issue a subpoena. Veeco's argument and the two circumstances it identifies are not consistent with the language of section 1282.6 or our interpretation of subdivision (a) of section 1282.6. Rather than focus on the first sentence, Veeco relies on the second sentence of that subdivision, which provides: "In addition, a neutral arbitrator upon his [or her] own determination may issue subpoenas for the attendance of witnesses and subpoena duces tecum for the production of books, records, documents, and other evidence." (§ 1282.6, subd. (b).) Veeco's contention appears to be that the second sentence defines a fourth circumstance in which a subpoena may be issued in arbitration and a second circumstance in which a subpoena may be issued for the purposes of discovery: namely, when the arbitrator signs the subpoena.


In support of this assertion, Veeco cites an unpublished, tentative decision from the superior court in Los Angeles County—not even its appellate department—in an unrelated case that has no precedential value and is not citable authority. (Cal. Rules of Court, rule 8.1115(a) [unpublished appellate court or superior court appellate department opinions "must not be cited or relied on by a court or a party in any other action"]; Bolanos v. Superior Court (2008) 169 Cal.App.4th 744, 761 [citation of unrelated trial court order improper].)


Veeco also relies on the following language from the Knight treatise on alternative dispute resolution: "CAUTION—Signature of attorney v. arbitrator authorizing subpoena: Unless the parties have incorporated rules allowing for discovery under CCP § 1283.05 into their arbitration agreement . . ., attorneys are not authorized to sign the subpoena. But many attorneys assume they have such authority regardless of the agreement. If the discovery provision is not incorporated, the arbitrator must sign the subpoena." (Knight, supra, ¶ 5:390.1, p. 5-401.) The treatise does not cite any primary authority supporting this statement. In the previous paragraph, entitled "Subpoenas," the treatise states "[a]rbitrators have power to issue subpoenas for witnesses and for production of documents . . . at the hearing"; it does not mention discovery. (Id. at ¶ 5:390, p. 5-400.) While secondary sources like practice guides and treatises are not compelling authority, they may be persuasive when there is an absence of precedent. (See e.g., Kucker v. Kucker (2011) 192 Cal.App.4th 90, 95.) But such sources "certainly are not binding" (Ammerman v. Callender (2016) 245 Cal.App.4th 1058, 1086), especially when, as here, they do not cite any authority for the asserted rule. In the absence of any relevant precedent, we return to the language of the statute.


As noted, the second sentence in subdivision (a) of section 1282.6 (hereafter Second Sentence) provides: "In addition, a neutral arbitrator upon his own determination may issue subpoenas for the attendance of witnesses and subpoena duces tecum for the production of books, records, documents, and other evidence." (§ 1282.6, subd. (a).) Unlike the initial sentence in subdivision (a) of section 1282.6, which describes three circumstances in which subpoenas may be issued, the Second Sentence does not describe the circumstances in which an arbitrator may issue a subpoena "upon his own determination." Veeco contends the Second Sentence grants the arbitrator unlimited powers to issue subpoenas, both for the arbitration hearing and for the purpose of discovery, as long as the subpoena is signed by the arbitrator. But the Second Sentence says nothing about the arbitrator signing the subpoena or about discovery from which we may conclude that the statute grants the arbitrator broad authority to order discovery.


As we have noted, subdivisions (b) and (c) describe a procedure by which the parties to the arbitration may obtain a blank subpoena issued by the neutral association (or other entity listed in section 1282.6), fill out the subpoena, and serve it on the prospective deponent or records custodian, without involving the arbitrator in the process. The Second Sentence provides that in addition to the procedure outlined in subdivisions (b) and (c), which authorizes the parties to the arbitration to issue subpoenas, the arbitrator may issue subpoenas "upon his own determination." Another reasonable interpretation of the statute is that the initial sentence of subdivision (a) describes the three circumstances under which a subpoena may be issued, regardless of whether the subpoena is issued by the neutral association at the request of one of the parties or by the arbitrator. Under this interpretation, the arbitrator's authority is not unlimited. Instead, it is limited to the three circumstances described in the first sentence in subdivision (a).


Since the language of the Second Sentence is arguably subject to these two conflicting interpretations, we may resort to extrinsic evidence, including the statute's legislative history as an aid to interpretation. (Title Ins. & Trust Co. v. County of Riverside (1989) 48 Cal.3d 84, 96 ["in construing the terms of a statute we resort to the legislative history of the measure only if its terms are ambiguous"].)


Section 1282.6 was enacted in 1961 as a part of a comprehensive overhaul of the CAA. (Stats 1961, ch. 461, p. 1540.) The prior act (former Code Civ. Proc., §§ 1280-1293) was enacted in 1927 and repealed by the 1961 legislation. (Ibid.; Recommendation and Study Relating to Arbitration (Dec. 1960) 3 Cal. Law Revision Com Rep. (1960) p. G-28 (Law Revision Rep.).) The 1961 revisions to the CAA did not contain sections 1283.05 or 1283.1, the code sections discussed above that currently provide for limited discovery in arbitration. The Law Revision Commission report that lead to the 1961 revisions to the CAA noted that "[i]t would be most unwise and inappropriate in an arbitration proceeding to permit the taking of depositions . . . for discovery purposes of the parties" and opined that subpoenas duces tecum should not be used "for the purpose of a `fishing expedition.'" (Law Revision Rep., pp. G-48 to G-49.) When section 1282.6 was enacted in 1961, it provided: "Upon application of a party to the arbitration or upon his own determination, the neutral arbitrator may issue subpoenas for the attendance of witnesses and subpoenas duces tecum for the production of books, records, documents and other evidence. Subpoenas shall be served and enforced in accordance with Chapter 2 (commencing with Section 1985) of Title 3 of Part 4 of this code." (Stats 1961, ch. 461, § 2.) Based on the legislative history and the language of the statute in 1961, we conclude that the subpoena authorized by former section 1282.6 was intended to be used to compel the attendance of witnesses and the production of documents and other evidence at the arbitration hearing only and not for discovery purposes.


As originally enacted, section 1282.6 provided that only the arbitrator could issue subpoenas, either upon application of a party to the arbitration or on the arbitrator's own motion. (Former § 1282.6) Section 1282.6 was amended once, in 1982, to read as set forth above. (Stats. 1982, ch. 108, § 1.) As noted, it currently provides that subpoenas may issue in three circumstances, including for discovery if section 1283.05 applies. In addition to authorizing the arbitrator to issue subpoenas, the 1982 amendment provided a procedure whereby the parties to the arbitration may obtain a blank subpoena from the neutral association (or other enumerated entity) and fill out and serve the subpoena, without having to make an application to the arbitrator. When amended in 1982, section 1282.6 retained most of the language from the original statute in the Second Sentence, which provides that "in addition" to the procedure whereby the parties may issue subpoenas, "the neutral arbitrator upon his own determination may issue subpoenas for the attendance of witnesses and subpoenas duces tecum for the production of books, records, documents and other evidence." (§ 1282.6, subd. (a).) This was almost identical to the language of the original statute, except that it deleted the introductory phrase "[u]pon application of a party to the arbitration," which was no longer necessary because the 1982 amendment provided a mechanism for the parties to obtain and serve subpoenas without the arbitrator's involvement.


Given this legislative history, we reject Veeco's contention that the Second Sentence grants the arbitrator broad powers to issue subpoenas in arbitration for the purpose of discovery. As originally enacted, the subpoena power granted by section 1282.6 applied only to subpoenas for the arbitration hearing. When amended in 1982, the subpoena power granted by section 1282.6 was broadened to the three circumstances described in the first sentence of subdivision (a): (1) for the arbitration hearing, (2) for a section 1283 deposition, and (3) for the purposes of discovery, but only if section 1283.05 applies. (§ 1282.6, subd. (a).) We conclude these limitations on circumstances in which a subpoena may issue in arbitration apply to subpoenas issued by both a party to the arbitration and the arbitrator. Our construction is consistent with case law that describes the right to discovery in arbitration under the CAA as "limited" and "highly restricted." (Berglund, supra, 44 Cal.4th 528, 534Alexander, supra, 88 Cal.App.4th at p. 1088.) To construe section 1282.6 as granting arbitrators unlimited power to issue discovery subpoenas as long as the subpoena is signed by the arbitrator, is inconsistent with the limitations on discovery in sections 1283.05 and 1283.1. Such an interpretation would also nullify the limits on discovery in sections 1283.05 and 1283.1, rendering both sections superfluous. For all these reasons, we reject Veeco's assertion that the Second Sentence in subdivision (a) of section 1282.6 granted the arbitrator unlimited powers to issue discovery subpoenas and authorized the discovery subpoena here. Since the arbitration agreement here does not provide for discovery or reference section 1283.05, we conclude that the arbitrator did not have the authority to issue the discovery subpoena to Aixtron in this case.


6. Discovery from Nonparties Under the JAMS Rules


Veeco argues that its arbitration agreement with Saldana provided for section 1283.05 discovery rights as required by section 1283.1, subdivision (b) "by incorporating in their Agreement arbitration rules that offer discovery rights like those that section 1283.05 confers." That assertion is not supported by a citation to the record or any legal authority.


The Arbitration Clause provided that the arbitration shall be conducted "in accordance with the National Rules for Resolution of Employment Disputes of the American Arbitration Association." The Arbitration Cause did not mention discovery, the Civil Discovery Act, or section 1283.05. In its petition below, Veeco told the court that Saldana and Veeco had agreed to arbitrate this dispute at JAMS and abide by the JAMS rules instead of the AAA rules. But the record does not contain any other written agreement between Veeco and Saldana that may have superseded the Arbitration Clause.[8]


We nonetheless examine the JAMS Rules to see what they provide with regard to discovery. Rule 17 of the JAMS Rules, entitled "Exchange of Information," generally provides for limited discovery between the parties.[9] But it does not incorporate the Civil Discovery Act or mention section 1283.05. JAMS Rule 17 does not provide the parties to the arbitration broad rights to discovery comparable to those in section 1283.05 or authorize discovery from nonparties.


JAMS Rule 21, which Veeco cites, is entitled "Securing Witnesses and Documents for the Arbitration Hearing." It does not contain the word "discovery." It provides that the "Arbitrator may issue subpoenas for the attendance of witnesses or the production of documents either prior to or at the Hearing pursuant to this Rule or Rule 19(c). The subpoena or subpoena duces tecum shall be issued in accordance with the applicable law."[10] Since the discovery subpoena here was not authorized by either the FAA or the CAA, it was not authorized by JAMS Rule 21.


Moreover, only Veeco and Saldana—the parties to the arbitration—agreed to be bound by the JAMS Rules. As the Supreme Court stated in Berglund, "the arbitrator's authority is derived from the parties' consent" and "nonparties have not consented to arbitration." (Berglund, supra, 44 Cal.4th at p. 537.) Nonparties are entitled to full judicial review of arbitrator discovery orders because "arbitrators are not required to follow the law when resolving the parties' disputes, and their decisions as to parties cannot be judicially reviewed for errors of fact or law" and giving arbitrator discovery orders the same deference normally given arbitration awards would substantially compromise the legal rights of nonparties against whom erroneous discovery orders may be made." (Ibid.) The arbitration and the application of JAMS Rules obtain their legal force based on party consent as reflected in the terms of the arbitration agreement or statutes that authorize limited discovery in arbitration. Aixtron did not consent to be bound by the JAMS rules, the Arbitration Clause did not authorize discovery from nonparties, and neither the FAA nor the CAA authorize nonparty discovery in this case.

For these reasons, we reject Veeco's contention that the JAMS Rules provided it with discovery rights that are comparable to those in section 1283.05 and that those rules authorized the discovery subpoena here.


In summary, based on the language of the arbitration agreement in this case, the statutes and case law cited above, we hold that the arbitrator's pre-hearing discovery subpoena for Aixtron's business records and computers was not authorized under the FAA, the CAA, or the JAMS Rules. Since we conclude the arbitrator did not have the authority to issue the discovery subpoena to Aixtron, we shall not reach Aixtron's contention that the superior court erred in ordering it to comply with the subpoena because Veeco failed to make the requisite showing that the information it seeks is both necessary to a claim or defense and essential to a fair resolution of the dispute in arbitration and or its contentions that Veeco's document requests are overly broad, unduly burdensome, and harassing.


III. Disposition


The superior court's August 2017 order denying Aixtron's petition and its December 2017 order granting Veeco's petition are reversed. The superior court is directed to enter new orders granting Aixtron's petition, vacating the arbitrator's discovery order, quashing the discovery subpoena to Aixtron, and denying Veeco's petition to enforce the arbitrator's discovery order. Aixtron shall recover its costs on appeal.


Bamattre-Manoukian, J. and Danner, J., concurs.


[1] All undesignated statutory references are to the Code of Civil Procedure.

[2] The Arbitration Clause provides that any arbitration shall be "in accordance with the National Rules for Resolution of Employment Disputes of the American Arbitration Association" (AAA). (Italics added.) In its petition below, Veeco told the court that Saldana and Veeco had agreed to arbitrate this dispute at JAMS and abide by the JAMS rules instead of the AAA rules.

[3] There is no proof of service or cover letter in the record. The arbitrator's subsequent order and other documents suggest that the proposed subpoena was sent to Saldana's counsel, and perhaps the arbitrator, but not Aixtron.

[4] Demand No. 15 requested: "ALL DOCUMENTS RELATING TO AIXTRON's handling of non-public third-party information which its employees possess or acquire, including, but not limited to, ALL DOCUMENTS RELATING TO AIXTRON'S acquisition, retention, disclosure, and/or use of any VEECO data."

[5] Veeco's demand No. 4 requested: "ALL DOCUMENTS RELATING TO any actual or potential business transaction related to [MOCVD] technology that you have closed or reasonably expect to close in the next twelve months in which SALDANA had any participation or involvement" and demand No. 5 asked for "ALL DOCUMENTS RELATING TO any development for AIXTRON of MOCVD technology and in which SALDANA had any participation or involvement."

[6] Section 7 of the FAA provides in relevant part: "The arbitrators . . ., or a majority of them, may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case. . . . Said summons shall issue in the name of the arbitrator or arbitrators, or a majority of them, and shall be signed by the arbitrators, or a majority of them, and shall be directed to the said person and shall be served in the same manner as subpoenas to appear and testify before the court; if any person or persons . . . shall refuse or neglect to obey said summons, upon petition the United States district court . . . may compel the attendance of such person or persons before said arbitrator or arbitrators, or punish said person or persons for contempt in the same manner provided by law for securing the attendance of witnesses or their punishment for neglect or refusal to attend in the courts of the United States." (9 U.S.C. § 7.)

[7] Section 1283.1, subdivision (a) provides: "All of the provisions of Section 1283.05 shall be conclusively deemed to be incorporated into, made a part of, and shall be applicable to, every agreement to arbitrate any dispute, controversy, or issue arising out of or resulting from any injury to, or death of, a person caused by the wrongful act or neglect of another."

[8] The only other document in the record that Veeco has characterized as an arbitration agreement is a "Notice to All Parties" regarding the "Commencement of Employment Arbitration" issued by JAMS on June 9, 2016. That notice states: "This arbitration shall be conducted in accordance with JAMS Employment Rules" and is signed by a JAMS case manager, not the parties to the arbitration. In our view, this is not an agreement between Veeco and Saldana.

[9] Subdivision (a) of Rule 17 provides for a "voluntary and informal exchange of non-privileged documents and other information . . . relevant to the dispute . . . immediately after commencement of the Arbitration" and describes the types of information that must be exchanged. Subdivision (b) of the rule provides that each party "may take at least one deposition of an opposing Party or an individual under the control of the opposing Party," encourages party agreement when scheduling depositions, and authorizes the arbitrator to resolve any disputes about depositions. Subdivision (c) describes the parties' continuing obligation to exchange information and subdivision (d) sets forth procedures for resolving discovery disputes.

[10] JAMS Rule 19(c) authorizes the arbitrator to conduct the hearing at any JAMS location for the convenience of the parties or the witnesses.

 

Arbitration and Discrimination Suit

Employee must arbitrate her discrimination suit against her employer because she consented to an arbitration agreement by continuing to work.
​Diaz v. Sohnen Enters.


SOURCE: 

KEY WORDS:
Discrimation, Agreements and Contracts, Arbitration, Agreement

AGENCY: 
COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN

Document Citation: 
    B283077

Erika DIAZ, Plaintiff and Respondent,

 

v. 


SOHNEN ENTERPRISES et al., Defendants and Appellants.
B283077

(Los Angeles CountySuper. Ct. No. BC644622)

_________________________ 


ZELON, Acting P. J.


Wolflick & Simpson, Gregory D. Wolflick, David B. Simpson and Theodore S. Khachaturian, Glendale, for Defendants and Appellants.


Bruce Loren Karey,Long Beach, for Plaintiff and Respondent.


ZELON, Acting P. J. 


Sohnen Enterprises appeals from the denial of its motion to compel arbitration of claims brought by its employee, Erika Diaz. The record before this court demonstrates there was no evidence to support the denial; accordingly, we reverse with directions.

FACTUAL AND PROCEDURAL BACKGROUND

Erika Diaz, an employee of Sohnen Enterprises, filed a complaint alleging workplace discrimination on December 22, 2016. Twenty days earlier, on December 2, 2016, she and her co-workers received notice at an in-person meeting that the company was adopting a new dispute resolution policy requiring arbitration of all claims. At that meeting, according to the declaration of Marla Carr, the Chief Operating Officer of Sohnen, Carr informed all employees present, including Diaz, about the new dispute resolution agreement. She included in her explanation that continued employment by an employee who refused to sign the agreement would itself constitute acceptance of the dispute resolution agreement. According to Carr, she provided the explanation in English and Elaina Diaz, a human resources employee, explained the terms in Spanish. Diaz confirmed this in her own declaration, in which she stated that she discussed the terms in Spanish; she did not provide further details about the December 2 meeting. All employees received a copy of the agreement to review at home.

On December 19, 2016, representatives of the company met privately with Diaz, who had indicated to Elaina Diaz on December 14 that she did not wish to sign the agreement. Carr and Diaz advised her again, in Spanish and English, that continuing to work constituted acceptance of the agreement.

On December 23, 2016, Diaz and her lawyer presented to Sohnen a letter dated December 20, 2016 rejecting the agreement but indicating that Diaz intended to continue her employment. On the same date, Diaz also served the complaint in this action.On January 17, 2017, Sohnen sent a demand for arbitration to Diaz’s counsel, based on the fact of Diaz’s continued employment at the company. Counsel for Diaz did not reply. Sohnen filed its motion to compel arbitration in April. Diaz filed opposition in May. The trial court heard argument, and denied the motion.

The trial court, in its oral ruling, held that the agreement was a "take-it or leave-it contract and (sic ) adhesion. There is no meeting of the minds." The court made no factual findings, nor did it address whether the agreement was substantively unconscionable.

DISCUSSION

A. We Review The Ruling De Novo

The facts in the record are undisputed. Accordingly, our review is de novo. ( Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413, 58 Cal.Rptr.2d 875, 926 P.2d 1061 ; Flores v. Nature’s BestDistribution, LLC (2016) 7 Cal.App.5th 1, 9, 212 Cal.Rptr.3d 284 ; Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 787, 206 Cal.Rptr.3d 474.)B. The Record Demonstrates Consent to Arbitration

Respondent Diaz argues that she was off-work, due to illness, between December 17 and December 23, 2016. The record, however, contains no evidence to support that assertion; Diaz filed no declaration in opposition to the motion to compel, nor did any of the declarations filed present facts supporting the argument of counsel. We review based on the factual record before the trial court.

When presented with a petition to compel arbitration, the initial issue before the court is whether an agreement has been formed. ( American Express Co. v. Italian Colors Restaurant (2013) 570 U.S. 228, 233 [133 S.Ct. 2304, 2306, 186 L.Ed.2d 417 ] [arbitration is a matter of contract]; Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US ), LLC (2012) 55 Cal.4th 223, 236, 145 Cal.Rptr.3d 514, 282 P.3d 1217 [" ‘ " ‘a party cannot be required to submit to arbitration any dispute which he has not agreed to so submit’ " ’ "].)

It is the party seeking to compel arbitration which bears the burden of proving the existence of the agreement. ( Rosenthal, supra , 14 Cal.4th at p. 413, 58 Cal.Rptr.2d 875, 926 P.2d 1061.) In this case, Sohnen presented to the trial court evidence of the manner in which the agreement was presented to Diaz, and the actions which followed. This undisputed evidence was sufficient to meet Sohnen’s burden. California law in this area is settled: when an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement. ( Pinnacle, supra , 55 Cal.4th at 236, 145 Cal.Rptr.3d 514, 282 P.3d 1217 ; Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 383, 203 Cal.Rptr.3d 522 ; Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 420, 100 Cal.Rptr.2d 818 ; cf. Asmus v. PacificBell (2000) 23 Cal.4th 1, 11, 96 Cal.Rptr.2d 179, 999 P.2d 71 [continued employment demonstrated implied acceptance of change in job security rules].)

The dissent relies in part on three cases, two of which apply the law of other states, which come to a different conclusion. The first, Scott v. Education Management Corporation (3d Cir. 2016) 662 Fed.Appx. 126 involved an arbitration agreement presented to the employee after a federal civil rights dispute arose. The case was decided under Pennsylvania law which, according to the decision, requires an explicit agreement, not an implied agreement. (Id. at p. 131 ) The decision, by its own terms, does not constitute binding precedent. In the second case, Bayer v. Neiman Marcus Holdings, Inc. (N.D.Cal. Nov. 8, 2011, No. CV 11-3705 MEJ), 2011 WL 5416173, a court in the Northern District of California, acknowledging that under California law an employee could either expressly consent to a new arbitration agreement or be bound by continuing to work after it was presented, found that the terms of the agreement before it required a signature to be effective. Finally, in Kunzie v. Jack-In-The-Box, Inc . (Mo.Ct.App. 2010) 330 S.W.3d 476, 486, the court held that, under Missouri law, the assent of an employee cannot be implied where the employee has continued to work after a change in conditions of employment was presented.

Diaz relies on Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164, 69 Cal.Rptr.3d 223, and Gorlach v. Sports Club Co. (2012) 209 Cal.App.4th 1497, 148 Cal.Rptr.3d 71, arguing that these cases support the trial court’s ruling. Neither case, however, addresses the situation presented here; accordingly, neither supports the result below.

In Mitri, the employee acknowledged receipt of an employee handbook containing an arbitration provision, but the acknowledgement form did not reference or contain any agreement to comply with the arbitration provision. ( Mitri, supra , 157 Cal.App.4th at p. 1173, 69 Cal.Rptr.3d 223.) The general acknowledgment stands in distinction to the express explanation provided twice to Diaz: that continued employment would itself be a manifestation of agreement to the arbitration provisions.

In Gorlach, the handbook provided to employees contained an express signature requirement for the arbitration agreement: "[T]he handbook told employees that they must sign the arbitration agreement, implying that it was not effective until (and unless) they did so. Because Gorlach never signed the arbitration agreement, we cannot imply the existence of such an agreement between the parties." ( Gorlach, supra , 209 Cal.App.4th at p. 1509, 148 Cal.Rptr.3d 71.) Here, there was no such implication because Diaz was told that her continued employment was sufficient. Moreover, unlike Diaz, Gorlach left her employment to avoid the arbitration obligation. ( Gorlach, supra , 209 Cal.App.4th at p. 1508, 148 Cal.Rptr.3d 71.) The uncontradicted evidence in this record demonstrates that Diaz maintained her employment status between December 2 and December 23, and remained an employee at the time of the hearing in this case. As a result, she was already bound by the arbitration agreement before the presentation of the letter indicating both her rejection of the agreement and her intent to remain employed. Although Diaz now asserts that this forced Sohnen to choose whether to proceed without arbitration, this is incorrect. At most, the letter was an attempt to repudiate the agreement. (See, e.g. Taylor v. Johnston (1975) 15 Cal.3d 130, 137, 123 Cal.Rptr. 641, 539 P.2d 425 [express repudiation requires clear and unequivocal refusal to perform]; Mammoth Lakes LandAcquisition, LLC v. Town of Mammoth Lakes (2010) 191 Cal.App.4th 435, 463, 120 Cal.Rptr.3d 797 [same].)

Neither party has briefed the issue of repudiation, and the potential effect of an attempted repudiation on the rights of the parties is not before this court.

In any event, because the employment agreement between Diaz and Sohnen was at-will, Sohnen could unilaterally change the terms of Diaz’s employment agreement, as long as it provided Diaz notice of the change. "[I]t is settled that an employer may unilaterally alter the terms of an employment agreement, provided such alteration does not run afoul of the Labor Code. [Citations.]" ( Schachter v. Citigroup (2009) 47 Cal.4th 610, 619, 101 Cal.Rptr.3d 2, 218 P.3d 262.) "The at-will presumption authorizing an employer to discharge or demote an employee similarly and necessarily authorizes an employer to unilaterally alter the terms of employment, provided that the alteration does not violate a statute or breach an implied or express contractual agreement." ( Id. at p. 620, 101 Cal.Rptr.3d 2, 218 P.3d 262 ; see also DiGiacinto v. Ameriko-Omserv Corp. (1997) 59 Cal.App.4th 629, 636-637, 69 Cal.Rptr.2d 300 [in adopting the majority view of at-will contracts, the court stated "[T]the majority line of cases supports the proposition that as a matter of law, an at-will employee who continues in the employ of the employer after the employer has given notice of changed terms or conditions of employment has accepted the changed terms and conditions. Presumably, under this approach, it would not be legally relevant if the employee also had complained, objected, or expressed disagreement with the new offer; as long as the employee continued in employment with notice of the new terms, the employee has no action for breach of contract as a matter of law."].)

C. Diaz Has Not Demonstrated That The Arbitration Agreement Is Unenforceable

Once the party seeking arbitration has established that a binding agreement was formed, as Sohnen did here, the burden shifts to the party opposing arbitration to demonstrate the agreement cannot be enforced. (  Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972, 64 Cal.Rptr.2d 843, 938 P.2d 903 ; Rosenthal, supra , 14 Cal.4th at pp. 409-410, 58 Cal.Rptr.2d 875, 926 P.2d 1061.)

A showing that an agreement is unconscionable can bar enforcement. The doctrine has "both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results." ( Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1243, 200 Cal.Rptr.3d 7, 367 P.3d 6.) Both elements must be present for a court to refuse enforcement. ( Ibid. ; see also Pinnacle, supra , 55 Cal.4th at p. 246, 145 Cal.Rptr.3d 514, 282 P.3d 1217 [both elements must be present, but there is a sliding scale; if more of one element is shown, less of the other need be present].)

The trial court found that the contract was adhesive in nature, but that finding, standing alone, is not sufficient. (See Baltazar, supra , 62 Cal.4th at p. 1245, 200 Cal.Rptr.3d 7, 367 P.3d 6 ["[t]he adhesive nature of the employment contract requires us to be ‘particularly attuned’ to her claim of unconscionability [citation], but we do not subject the contract to the same degree of scrutiny as ‘[c]ontracts of adhesion that involve surprise or other sharp practices.’ "].)

This record contains no evidence of surprise, nor of sharp practices demonstrating substantive unconscionability. While Diaz argues in the introduction to her briefing that the agreement is substantively unconscionable, she fails to specify, with appropriate citations to the record and relevant legal authority, any terms of the agreement that she believes are unconscionable. Accordingly, Diaz has waived any argument that the agreement is unenforceable. ( Okorie v. Los Angeles Unified School Dist. (2017) 14 Cal.App.5th 574, 599-600, 222 Cal.Rptr.3d 475 [parties must present legal authority for all arguments made]; Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852, 57 Cal.Rptr.3d 363 [party raise or support issues by argument and citation to authority]; Berger v. California Ins. Guarantee Assn. (2005) 128 Cal.App.4th 989, 1007, 27 Cal.Rptr.3d 583 [parties must make coherent argument and cite authority in support of a contention; failure to do so waives the issue on appeal].)

DISPOSITION

The order denying the petition to compel arbitration is reversed and the matter is remanded for the trial court to conduct further proceedings consistent with this opinion. Appellant is to recover its costs on appeal.

I concur:

FEUER, J.

SEGAL, J., Dissenting.I agree an employee can impliedly accept an arbitration agreement by continuing to work for his or her employer. I also think an employee, like any other contracting party, can reject an arbitration agreement offered by an employer and yet continue to work for the employer. Whether an employer and an employee entered into an implied agreement regarding the terms of employment is a factual issue we routinely ask a trier of fact to decide in employment cases. Because the facts in this case do not support only one reasonable conclusion, I would defer to the trial court’s resolution of that factual issue.

"The issue of an implied agreement or consent is ordinarily a factual question to be resolved by the trier of fact." ( Antelope Valley Groundwater Cases (2018) 30 Cal.App.5th 602, 618, fn. 11, 241 Cal.Rptr.3d 692 ; see  Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 677, 254 Cal.Rptr. 211, 765 P.2d 373 [whether the parties’ conduct created an implied agreement is generally a question of fact]; Citizens for Amending Proposition L v. City of Pomona (2018) 28 Cal.App.5th 1159, 1189, 239 Cal.Rptr.3d 750 ["The existence and scope of implied-in-fact contracts are determined by the totality of the circumstances. [Citation.] ‘The question whether such an implied-in-fact agreement exists is a factual question for the trier of fact unless the undisputed facts can support only one reasonable conclusion.’ "]; Unilab Corp. v. Angeles-IPA (2016) 244 Cal.App.4th 622, 636, 198 Cal.Rptr.3d 211 ["Whether an implied contract exists ‘ " ‘is usually a question of fact for the trial court. Where evidence is conflicting, or where reasonable conflicting inferences may be drawn from evidence which is not in conflict, a question of fact is presented for decision of the trial court.’ " ’ "]; Kashmiri v. Regents of University of California (2007) 156 Cal.App.4th 809, 829, 67 Cal.Rptr.3d 635 ["the question whether the parties’ conduct creates ... an implied agreement is generally " ‘a question of fact" ’ "].) In the arbitration context, while "California law permits employers to implement policies that may become unilateral implied-in-fact contracts when employees accept them by continuing their employment," whether "employment policies create unilateral contracts is ‘a factual question in each case.’ " ( Gorlach v. Sports Club Co. (2012) 209 Cal.App.4th 1497, 1508, 148 Cal.Rptr.3d 71, quoting Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 11, 96 Cal.Rptr.2d 179, 999 P.2d 71.)

Because we are reviewing the trial court’s resolution of a factual issue, I would not apply, as the majority does, a de novo standard of review. Indeed, I would not even apply a substantial evidence standard of review. I think the standard of review is much more onerous on the appellant in this case.

As the majority acknowledges, Sohnen had the burden of proving the existence of the implied arbitration agreement. (Maj. opn. at p. 830; see Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236, 145 Cal.Rptr.3d 514, 282 P.3d 1217 ["[t]he party seeking arbitration bears the burden of proving the existence of an arbitration agreement"]; Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 859, 243 Cal.Rptr.3d 340 [same].) The trial court found Sohnen failed to meet its burden. In this situation, we do not review the record to determine whether substantial evidence supports the trial court’s finding, but whether the evidence compels the opposite finding as a matter of law. Thus, where the trier of fact, here the trial court ruling on a motion to compel arbitration, " ‘expressly or implicitly concluded that the party with the burden of proof did not carry the burden and that party appeals, it is misleading to characterize the failure-of-proof issue as whether substantial evidence supports the judgment. ... [¶] [W]here the issue on appeal turns on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law. [Citations.] Specifically, the question becomes whether the appellant’s evidence was (1) "uncontradicted and unimpeached" and (2) "of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding." ’ " ( Dreyer’s Grand Ice Cream, Inc. v. County of Kern (2013) 218 Cal.App.4th 828, 838, 159 Cal.Rptr.3d 832 ; accord, Glovis America, Inc. v. County of Ventura (2018) 28 Cal.App.5th 62, 71, 238 Cal.Rptr.3d 895 ; Atkins v. City of Los Angeles (2017) 8 Cal.App.5th 696, 734, 214 Cal.Rptr.3d 113.) For this reason, " ‘[w]here, as here, the judgment is against the party who has the burden of proof, it is almost impossible for him to prevail on appeal by arguing the evidence compels a judgment in his favor. That is because unless the trial court makes specific findings of fact in favor of the losing plaintiff, we presume the trial court found the plaintiff’s evidence lacks sufficient weight and credibility to carry the burden of proof. [Citations.] We have no power on appeal to judge the credibility of witnesses or to reweigh the evidence.’ " ( Patricia A. Murray Dental Corp. v. Dentsply Internat., Inc. (2018) 19 Cal.App.5th 258, 270, 227 Cal.Rptr.3d 862.)

The evidence does not compel a finding Diaz and Sohnen impliedly agreed to arbitrate. The evidence shows Diaz attended a meeting on December 2, 2016, where Marla Carr, Sohnen’s chief operating officer, and Eliana Diaz, an employee in the human resources department, announced the company was implementing a new arbitration policy. Carr and Eliana Diaz gave the employees copies of the new dispute resolution agreement, "in English and Spanish, to take home and review." Eliana Diaz and Carr, however, had different recollections of the chronology of events. Eliana Diaz did not state in her declaration that employees were told on December 2, 2016 that, even if they refused to sign the arbitration agreement, continuing to work at the company would constitute acceptance of the agreement. Eliana Diaz stated it was not until December 19, 2016 that, during a private meeting with Diaz, she read Diaz a document stating, "If you continue working for Sohnen Enterprises on or after December 20, 2016, your actions will be viewed just as if you signed the [arbitration agreement]." Eliana Diaz also stated in her declaration that, in the meantime, Diaz told her on December 14, 2016 she would not sign the arbitration agreement. Eliana Diaz also said that on December 23, 2016 Sohnen received a letter from Diaz’s attorney dated December 20, 2016 again rejecting the arbitration agreement. The letter from counsel for Diaz stated: "This letter will serve as a formal response [to], and rejection of, the attempt at obtaining Ms. Erika Diaz’[s] agreement to forced arbitration as set forth in an agreement presented to her on, or about, 12-2-16." The letter also stated that Diaz "intends to, and will continue, with [sic ] her employment by Sohnen Enterprises on all the terms, and conditions, of her employment in effect prior to the presentation to her of the [arbitration agreement]."

On the other hand, Carr stated in her declaration that at the December 2, 2016 meeting she "explained in English the basic terms of the [arbitration agreement]" and "[s]pecifically" told the employees that "continued employment would constitute acceptance" of the agreement. The documentary evidence, however, does not support this statement in her declaration. The memorandum advising Diaz that Sohnen would consider continued employment as acceptance is dated December 19, not December 2. In addition, the December 19 memorandum suggests that it was the first time the company had made this statement and that Diaz had until the next day to decide (presumably demonstrated by continuing to work, because Diaz had already said she was not going to sign the arbitration agreement) whether she would agree to the arbitration provision. The document states: "This memo is to inform you that if you continue working for Sohnen Enterprises on or after December 20, 2016, you will be deemed for all purposes to have accepted the terms of the [arbitration agreement]." (Italics added.) Counsel for Diaz wrote his letter the next day.

This evidence created factual disputes and supported different reasonable conclusions about what happened and whether Diaz impliedly agreed to Sohnen’s proposed arbitration agreement. The trial court resolved this conflict in favor of Diaz and ruled the parties did not reach an implied agreement to arbitrate. The court stated, "You can’t have an agreement where one side says, ‘This is the deal,’ and the other side says, ‘No, this is not the deal,’ " and the court found "there [was] no meeting of the minds." We do not have the authority to reweigh the evidence and come to a different conclusion, let alone conclude the evidence compels a finding the parties did enter into an implied agreement.There was also a conflict in the evidence concerning whether the employees needed to sign the arbitration agreement in order to accept it. The arbitration agreement stated it had to be accepted in writing: "[B]y my signature below ... I agree to comply with and be bound by this Agreement." But Carr stated she told the employees they could accept the arbitration agreement, even if they did not sign it, by continuing to work there. Which was it? Again, the trial court resolved this conflict against Sohnen and found Diaz did not accept the agreement, a finding we should respect on appeal. (See Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 337, 100 Cal.Rptr.2d 352, 8 P.3d 1089 ["Where there is no express agreement, the issue is whether other evidence of the parties’ conduct has a ‘tendency in reason’ ( Evid. Code, § 210 ) to demonstrate the existence of an actual mutual understanding on particular terms and conditions of employment. If such evidence logically permits conflicting inferences, a question of fact is presented."].) The trial court’s ruling was also consistent with California cases holding that courts will not imply an employee’s consent to an arbitration agreement where the agreement requires the employee’s signature to be effective. (See Gorlach v. Sports Club Co. , supra , 209 Cal.App.4th at p. 1509, 148 Cal.Rptr.3d 71 [court would not "imply the existence of [an arbitration] agreement" where "the handbook told employees that they must sign the arbitration agreement, implying that it was not effective until (and unless) they did so," and the employee "never signed the arbitration agreement"]; Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164, 1172-1173, 69 Cal.Rptr.3d 223 [no implied agreement to arbitrate where the agreement’s "express term requir[ed] a signed agreement"].)

None of the cases the majority or Sohnen cites involved a plaintiff who expressly rejected the arbitration agreement, as Diaz did here twice (once orally and once in writing). (See Scott v. Education Management Corporation (3d Cir. 2016) 662 Fed.Appx. 126, 130-131 [continuing to work did not constitute an implied agreement to an arbitration provision where the employees "promptly voiced their specific objection to and rejection of the ADR policy" and, "[r]ather than indicate their assent, both men quite clearly expressed their strong disagreement with its terms"]; Bayer v. Neiman Marcus Holdings, Inc. (N.D.Cal. Nov. 8, 2011, No. CV 11-3705 MEJ), 2011 WL 5416173, at p. 5 [employee did not impliedly agree to an arbitration agreement where the employee refused to sign the arbitration agreement and told his supervisors he was not agreeing to the employer’s arbitration program]; Kunzie v. Jack-In-The-Box, Inc. (Mo.Ct.App. 2010) 330 S.W.3d 476, 486 [employee’s "rejection [of an arbitration agreement] and continued employment, under basic contract principles, reasonably could be viewed as [the employee’s] counteroffer to [the employer] that [the employee] would continue his employment without being subject to [the employer’s] arbitration policy," and the employer’s "failure to then terminate [the employee’s] employment could be deemed to constitute an acceptance of such counter-offer"].) Presented with evidence of those two express rejections and, at most, 18 days (December 2 to December 20, 2016) of continued employment, the trial court was entirely justified in giving the former more weight than the latter, and we should defer to that finding. (See Haworth v. Superior Court (2010) 50 Cal.4th 372, 385, 112 Cal.Rptr.3d 853, 235 P.3d 152 [trial courts "generally are in a better position to evaluate and weigh the evidence"]; Tucker v. Pacific Bell Mobile Services (2010) 186 Cal.App.4th 1548, 1562, 115 Cal.Rptr.3d 9 [" ‘[i]t is the exclusive function of the trial court to weigh the evidence, resolve conflicts and determine the credibility of witnesses’ "]; see also Haraguchi v. Superior Court (2008) 43 Cal.4th 706, 711, fn. 3, 76 Cal.Rptr.3d 250, 182 P.3d 579 ["that the trial court’s findings were based on declarations and other written evidence does not lessen the deference due those findings"]; Ramos v. HomewardResidential, Inc. (2014) 223 Cal.App.4th 1434, 1441, 168 Cal.Rptr.3d 114 ["we defer to factual determinations made by the trial court when the evidence is in conflict, whether the evidence consists of oral testimony or declarations"]; Poniktera v. Seiler (2010) 181 Cal.App.4th 121, 130, 104 Cal.Rptr.3d 291 ["we resolve all conflicts in favor of the judgment, even when (as here) the trial court’s decision is based on evidence received by declaration rather than by oral testimony"].)

The cases the majority cites are also factually distinguishable. Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC, supra , 55 Cal.4th 223, 145 Cal.Rptr.3d 514, 282 P.3d 1217 did not involve an implied agreement to arbitrate, by conduct or otherwise. In that case there was a written arbitration agreement in the applicable CC&Rs. ( Id. at p. 231, 145 Cal.Rptr.3d 514, 282 P.3d 1217.) The court in Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 100 Cal.Rptr.2d 818 held the employee’s continued employment constituted acceptance of an arbitration agreement her employer had proposed. ( Id. at pp. 420-421, 100 Cal.Rptr.2d 818.) But the employee in that case continued to work at the company for four years ( id. at pp. 418, 421, 100 Cal.Rptr.2d 818 ), without ever saying a word about the arbitration agreement, whereas Diaz continued to work at Sohnen one day or 18 days and expressly rejected the arbitration agreement twice. And in Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 203 Cal.Rptr.3d 522 the employer gave the employee the arbitration agreement when the employee began working full time, and the employee worked at the company for at least a year (and perhaps three) before the company terminated his employment. (See id. at pp. 376-377, 203 Cal.Rptr.3d 522.) Again, a far cry from the (at most) 18 days Diaz continued to work at Sohnen before she rejected the agreement in writing.Neither Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610, 101 Cal.Rptr.3d 2, 218 P.3d 262 nor DiGiacinto v. Ameriko-Omserv Corp. (1997) 59 Cal.App.4th 629, 69 Cal.Rptr.2d 300, both cited by the majority, involved an arbitration agreement, express or implied. (See Gorlach v. Sports Club Co. , supra , 209 Cal.App.4th at p. 1510, 148 Cal.Rptr.3d 71 [" ‘ DiGiacinto v. Ameriko-Omserv Corp. [did not] address[ ]  whether an arbitration agreement existed between an employer and employee’ "]; Mitri v. Arnel Management Co. , supra , 157 Cal.App.4th at p. 1171, 69 Cal.Rptr.3d 223 [same].) Certainly, as the majority points out (maj. opn. at p. 831), "California law permits employers to implement policies that may become unilateral implied-in-fact contracts when employees accept them by continuing their employment." ( Asmus v. Pacific Bell , supra , 23 Cal.4th at p. 11, 96 Cal.Rptr.2d 179, 999 P.2d 71.) But here the evidence was disputed whether Sohnen made such a unilateral change in the terms of Diaz’s employment. There was some evidence Sohnen intended to implement arbitration unilaterally, which Diaz could accept by continued employment, but there was also evidence Sohnen intended to implement arbitration as part of a bilateral agreement, which, as stated, Diaz could accept by signing the agreement. Indeed, the language of the arbitration agreement suggested that the parties were intending to exchange mutual promises, not that Sohnen was implementing arbitration unilaterally. The arbitration agreement states, "By this Agreement, you and Sohnen Enterprises ... agree to resolve by arbitration any and all disputes arising out of or related to your employment by [Sohnen]." (Italics added.) The agreement also states, "By mutually agreeing to arbitrate covered disputes, we both recognize that these disputes will not be resolved by a court or jury." (Italics added.) (See Bleecher v. Conte (1981) 29 Cal.3d 345, 350, 213 Cal.Rptr. 852, 698 P.2d 1154 ["[a] bilateral contract is one in which there are mutual promises given in consideration of each other"].) The trial court again resolved these factual issues in favor of Diaz. (See Asmus , at p. 11, 96 Cal.Rptr.2d 179, 999 P.2d 71 ["whether employment policies create unilateral contracts will be a factual question in each case"]; Davis v. Jacoby (1934) 1 Cal.2d 370, 378, 34 P.2d 1026 [in many cases, "whether the particular offer is one to enter into a bilateral or unilateral contract" depends on "the intent of the offerer and the facts and circumstances of the case"].)

The defendant in Harris terminated the plaintiff’s employment in December 2013. (Harris v. TAP Worldwide, LLC , supra , 248 Cal.App.4th at p. 376, 203 Cal.Rptr.3d 522.) The new arbitration policy went into effect in January 2010. (Id. at p. 379, 203 Cal.Rptr.3d 522.) The plaintiff stated he signed the acknowledgement of receipt of the documents containing the arbitration provision in September 2012, "but the year was erroneously listed as 2010." (Id. at p. 377, 203 Cal.Rptr.3d 522.)
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Finally, I believe that courts, not employers, should determine whether there is an implied agreement to arbitrate. That the employer told its employees continued employment would constitute acceptance, or that the employer gave the employee a reasonable period of time to consider whether to sign an arbitration agreement, is evidence that may support a finding the parties entered into an implied agreement. But it is not the only evidence a trier of fact can consider. The majority’s decision takes from courts the power to determine whether (the party seeking to compel arbitration has met its burden of proving) the evidence shows an implied agreement to arbitrate, because the decision gives employers the unilateral power to create an implied agreement simply by announcing that continued employment will constitute acceptance, no matter how strongly or clearly the employee manifests his or her rejection of the proposed agreement. Carr’s memorandum stated that continuing to work for Sohnen would "be viewed" as acceptance. The issue for me is, "viewed" by whom? I believe the "viewer" should be the court, not the employer.

Because in my opinion the majority applies the wrong standard of review and does not give sufficient deference to the trial court’s resolution of the factual issues in this case, I respectfully dissent.
Arbitration / Choic of Law Clause

Arbitration agreement with choice-of-law clause requiring interpretation in accordance with California law required all claims to be arbitrated despite Labor Code section 229.
​Bravo v. RADC Enters., Inc.


SOURCE: 

KEY WORDS:
California Law, Arbitration Agreement, Choice-of-law clause

AGENCY: 
COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION EIGHT

Document Citation: 
   B289506

Mel R. BRAVO, 

Plaintiff and Respondent, 


Bleau Fox, Martin R. Fox, Los Angeles, Megan A. Childress, 

and Elizabeth M. Martin,  for Defendant and Appellant. 

Law Offices of Ann A. Hull, Ann A. Hull, Tarzana, and Joseph S. Socher, 

Los Angeles, for Plaintiff and Respondent.


v. 


RADC ENTERPRISES, INC., Defendant and Appellant.

B289506

Mar 29, 201933 
Cal.App.5th 920 
(Cal. Ct. App. 2019)

_________________________ 


This employment case concerns a choice-of-law clause in an arbitration agreement. The trial court interpreted the clause to mean some but not all individual employment claims must be arbitrated. We conclude all of them must be arbitrated.

The facts are simple. RADC Enterprises, Inc. hired Mel R. Bravo to manage a store. The parties signed a two-page arbitration agreement covering "all disputes" arising from the employment relationship. On page two, near the end, the agreement added a one-sentence choice-of-law provision: "This Agreement shall be governed by and shall be interpreted in accordance with the laws of the State of California."

After RADC fired him, Bravo sued RADC on individual employment claims, as well as on representative claims under the Private Attorneys General Act of 2004 (PAGA). RADC moved to stay Bravo’s PAGA claims and to compel arbitration on his individual claims.

The trial court severed and stayed the PAGA claims. The court found RADC engaged in interstate commerce and thus the Federal Arbitration Act governed the agreement. But the court compelled arbitration for only three of Bravo’s nine individual claims, denying the arbitration motion on the remaining six individual claims. The logic was that, while the Federal Arbitration Act did apply, the choice-of-law sentence meant the parties wanted California law to govern their relationship. California Labor Code section 229 directs courts to disregard agreements to arbitrate wage claims, so the trial court declined to send Bravo’s remaining claims to arbitration. ( Lab. Code, § 229.) On appeal, RADC correctly contends the choice-of-law provision did not mean the parties wanted to oust arbitration from their arbitration agreement. RADC rightly says the trial court should have sent all Bravo’s individual claims to arbitration.

We independently review contract interpretation where, as here, there is no extrinsic evidence about contract meaning and the facts are undisputed.

As RADC correctly explains, the choice-of-law clause does not remove any arbitration from this arbitration agreement. The first textual clue is the title: "ARBITRATION AGREEMENT." This agreement is for arbitration and not against it.

The text of the agreement swiftly announces its objective: the parties will arbitrate "any and all disputes" arising from Bravo’s employment, "including any claims brought by the Employee related to wages" under the California Labor Code. The main point of the deal was to arbitrate all employment disputes. The parties could not have intended to apply Labor Code section 229 to this contract because that section prohibits arbitrating wage claims and requires courts to disregard private agreements to arbitrate. ( Lab. Code, § 229.) Applying this California law would contradict the parties’ intent to arbitrate "any and all disputes," including claims "related to wages ...."

Interpreting the choice-of-law provision to negate the purpose of the two-page agreement is incorrect. Readers must assume legal authors mean to draft texts that cohere. To assume otherwise departs from common sense and makes mischief. So we read documents to effectuate and harmonize all contract provisions. (E.g., Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 63, 115 S.Ct. 1212, 131 L.Ed.2d 76.) Bravo’s interpretation of the choice-of-law provision in this agreement is untenable because it unnecessarily sets one clause in conflict with the rest of the agreement. ( Id. at p. 64, 115 S.Ct. 1212.)

The choice-of-law provision becomes consistent with the parties’ intent to arbitrate all disputes when we read "the laws of the State of California" to include substantive principles California courts would apply, but to exclude special rules limiting the authority of arbitrators. (See Mastrobuono, supra, 514 U.S. at pp. 63–64, 115 S.Ct. 1212 ; Preston v. Ferrer (2008) 552 U.S. 346, 363, 128 S.Ct. 978, 169 L.Ed.2d 917.) This arbitration agreement is like the one in Preston v. Ferrer , which contained a similar choice-of-law provision. The Supreme Court of the United States interpreted that agreement as we interpret this one. ( Id. at pp. 362–363, 128 S.Ct. 978.)

The trial court cited Mastick v. TD Ameritrade, Inc. (2012) 209 Cal.App.4th 1258, 1264, 147 Cal.Rptr.3d 717, which does not apply here. Mastick involved Code of Civil Procedure section 1281.2, subdivision (c). That statute is not at issue here. The same goes for Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 471, 475–477, 109 S.Ct. 1248, 103 L.Ed.2d 488. Code of Civil Procedure section 1281.2, subdivision (c) permits a court to refuse to enforce an arbitration agreement or stay arbitration pending resolution of related litigation between a party to the arbitration agreement and third parties not bound by it, where there is a possibility of conflicting rulings on a common issue of law or fact. ( Id . at p. 471, 109 S.Ct. 1248.) There are no third parties in this case. Cases dealing with this third-party statute do not apply where there are no third parties. DISPOSITION

We affirm part of the trial court’s order and reverse part of it. We affirm the part severing the agreement provision requiring the parties to arbitrate the PAGA claims. We also affirm the order granting RADC’s motion as to three individual claims. We reverse the order denying the motion as to the remaining six individual claims. RADC is awarded costs on appeal.

WE CONCUR:

GRIMES, Acting P. J.
ADAMS, J.

Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
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All time worked must be compensated

All time worked must be compensated
​Rodriguez v. Nike Retail Services, Inc.


SOURCE: 

KEY WORDS:
Federal Labor Law, Wage, Time Calculation

AGENCY: 
UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

Document Citation: 
   No. 17-16866

ISAAC RODRIGUEZ, 

as an individual and on behalf 

of all others similarly situated,

Plaintiff - Appellant,


v. 


NIKE RETAIL SERVICES,INC.,  

Defendant - Appellee.

No. 17-16866

928 F. 3d 810
Court of Appeals
9th Circuit
2019

_________________________ 

OPINION

RAKOFF, District Judge:

 

Defendant Nike Retail Services, Inc. ("Nike") requires its retail employees to undergo "off the clock" exit inspections every time they leave the store. Seeking compensation for the time spent on these exit inspections, plaintiff Isaac Rodriguez brought a class action on behalf of himself and similarly situated Nike employees. The District Court granted summary judgment for Nike, holding the Rodriguez's claims were barred by the federal de minimis doctrine, which precludes recovery for otherwise compensable amounts of time that are small, irregular, or administratively difficult to record. The California Supreme Court subsequently held in Troester v. Starbucks Corp., 5 Cal.5th 829, 235 Cal.Rptr.3d 820, 421 P.3d 1114 (2018), that the federal de minimis doctrine does not apply to wage and hour claims brought under California law. Accordingly, we reverse and remand to the District Court for further proceedings consistent with Troester.

 

FACTUAL AND PROCEDURAL HISTORY

A. The District Court's Order Granting Summary Judgment for Nike


Nike has 34 retail stores in California. At these stores, employees (other than those exempt from applicable wage and hour laws) are required to track their hours by "punching" in and out on a time clock. Separately, these employees are required to submit to exit inspections each time they leave the store on a break or at the end of the day. These inspections can be longer or shorter depending, for example, on whether an employee needs to wait at the exit for someone to check them, whether the employee is carrying a box or bag that must be inspected, or the like. Regardless of how long the inspections take, however, they occur after the employee has punched out, such that exit inspections are "off the clock" and are thus uncompensated.

 

Plaintiff Isaac Rodriguez worked at Nike's Gilroy, California retail store from November 2011 to January 2012. On February 25, 2014, Rodriguez filed a class-action complaint in Santa Clara County Superior Court, and on April 1, 2014, Nike removed the case to the District Court. On December 8, 2014, Rodriguez filed his First Amended Class Action Complaint, which brings claims under: (1) California Labor Code §§ 1194 and 1197 (failure to pay minimum wages); (2) California Labor Code §§ 510 and 1194 (failure to pay overtime wages); and (3) California Business and Professions Code § 17200 et seq. (unfair business practices). On August 19, 2016, the District Court certified a class of "[a]ll current and former non-exempt retail store employees of [Nike] who worked in California during the period from February 25, 2010 to the present."

 

On January 31, 2017, Nike moved for summary judgment against the certified class. Nike argued that Rodriguez's claims were barred by the federal de minimis doctrine, which precludes recovery for otherwise compensable amounts of time that are small, irregular, or administratively difficult to record. See Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 692, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946); Lindow v. United States, 738 F.2d 1057, 1062-63 (9th Cir. 1984). In support of its motion, Nike put forth expert testimony from Robert Crandall, who, in response to this lawsuit, conducted a "time and motion study" to measure the length of exit inspections at Nike's California stores. Crandall randomly selected 15 of Nike's California retail locations and conducted video and in-person observations over a 30-day period. Based on his study, Crandall concluded that the average exit inspection took between 16.9 and 20.2 seconds, and that the median inspection took 4.7 seconds. Crandall also concluded that 21.5% of inspections took no measurable time, 92.2% took less than a minute, and 97.5% took less than two minutes.

 

In his opposition to Nike's motion, Rodriguez put forth testimony from his own expert, Brian Kriegler, who analyzed Crandall's study. Based on Kriegler's testimony, Rodriguez argued that Crandall's study was flawed in several respects, including that it: (1) covered too brief a sample to be extrapolated to the class period; (2) relied on "judgment calls" about what was happening in video observations; (3) artificially decreased inspection times by assuming that subjects who were interacting with others were not also waiting to be inspected; and (4) contained disparities between video and in-person observations. Rodriguez also put forth deposition testimony from Nike store managers who said that exit inspections regularly took several minutes.

 

Furthermore, Rodriguez noted that the question of whether the federal de minimis doctrine applied to California Labor Code claims was then pending before the California Supreme Court. See Troester v. Starbucks Corp., 680 F. App'x 511, 512 (9th Cir. 2016) (certifying the question). Even if the doctrine applied, Rodriguez argued, Nike failed to carry its burden because it did not show that the amounts of time at issue were small, irregular, or administratively difficult to record.

 

On September 12, 2017, the District Court granted Nike's motion and dismissed the case. See Rodriguez v. Nike Retail Servs., Inc., No. 14-cv-01508-BLF, 2017 WL 4005591, at *1 (N.D. Cal. Sept. 12, 2017). The court began by addressing whether the de minimis doctrine applied to Rodriguez's claims and by explaining that "Nike's motion for summary judgment hinges on this question." Id. at *6. Although the court acknowledged that the question was pending before the California Supreme Court in Troester, it stated that it "must operate in the present legal landscape and apply the law as it currently exists." Id. at *7. Under current precedent, the court held, "the de minimis doctrine is a valid defense to wage claims brought under the California Labor Code." Id. The court then applied the factors set forth in Lindow v. United States, which courts in our circuit consider when evaluating whether amounts of time are de minimis: "(1) the practical administrative difficulty of recording the additional time; (2) the aggregate amount of compensable time; and (3) the regularity of the additional work." 738 F.2d at 1063.

 

Before applying the Lindow factors, the District Court summarized the evidence before it. The court stated that it would not consider Kriegler's testimony insofar as it attacked the accuracy of Crandall's study because these attacks did "not supply evidence addressing any of the de minimis factors." Rodriguez, 2017 WL 4005591, at *8. Although such attacks "may be appropriate on a motion to strike expert testimony," the court reasoned, "it is not evidence that creates a factual dispute for purposes of summary judgment." Id. Moreover, the court held, to the extent that Rodriguez intended for his motion to be construed as a motion to strike, the motion was denied, as Kriegler's testimony failed to show that Crandall's study was so unreliable as to be inadmissible. Id. at *9. The court did, however, consider the depositions of Nike store managers who testified that exit inspections regularly took several minutes. On this basis, the court concluded that, "viewing the evidence in the light most favorable to" Rodriguez, "it is undisputed that an exit inspection takes between zero seconds and several minutes." Id. at *12.

 

Even assuming that exit inspections took several minutes, however, the court held that this time was de minimis under Lindow. The court began by noting that "[a]n important factor in determining whether a claim is de minimis is the amount of daily time spent on the additional work," and that "courts have regularly held that daily periods of up to 10 minutes are de minimis." Id. at *11 (alteration in original) (quoting Lindow, 738 F.2d at 1062). The court then turned to the first Lindow factor—the administrative difficulty involved in recording exit-inspection time—and held that Rodriguez had failed to create a triable issue by arguing that Nike should install time clocks at store exits, rather than at the back of the store. Id. at *13-14. Not only did Nike offer business reasons for having clocks at the back of the store, the court explained, but Rodriguez's proposal would also require some employees to spend more time clocking back in and out at store exits than they spent undergoing inspections. Id. at *14. This conclusion was unaltered, the court held, by the fact that other major retailers placed time clocks at the front of their stores to compensate employees for security checks. Id. at *13. The court also acknowledged, but did not address, Rodriguez's further proposals that Nike perform inspections at the back of the store before employees clock out, or that Nike add a fixed amount of time to each employee's paycheck to account for inspection time. Id.

 

Moving to the aggregate amount of compensable time, the court repeated the point that daily periods of 10 minutes or less are generally considered de minimis. Id. at *15. Even if each exit inspection took several minutes, the court reasoned, it would take multiple exits to meet the 10-minute threshold. Moreover, the court explained, "the Lindow court made clear that even when an aggregate claim is substantial, a claim may still be considered de minimis `because of the administrative difficulty of recording the time and the irregularity of the additional [ ] work.'" Id. at *16 (alteration in original) (quoting Lindow, 738 F.2d at 1064).

 

Finally, with respect to regularity, the court held that Crandall's study "demonstrates that compensable exit times lasting at least 60 seconds did not occur regularly." Id. The 60-second threshold was important, the court concluded, because Nike's systems measured time to the whole minute, and a 60-second inspection would thus have a measurable effect on wages. Although, as noted, Rodriguez had put forth testimony from Nike store managers that exit inspections could take several minutes, the court held that there was no evidence that such inspections occurred regularly. Id. at *17. Accordingly, the court concluded that each of the Lindow factors favored Nike and that no reasonable jury could find that exit inspections were compensable.

 

B. The California Supreme Court's Decision in Troester

Rodriguez filed his notice of appeal on September 14, 2017, and on April 20, 2018, we stayed appellate proceedings pending the California Supreme Court's decision in Troester. On July 26, 2018, the California Supreme Court issued its decision. Troester v. Starbucks Corp., 5 Cal.5th 829, 235 Cal.Rptr.3d 820, 421 P.3d 1114 (2018), as modified on denial of reh'g (Aug. 29, 2018).

 

Troester involved a challenge to Starbucks's practice of requiring employees to perform store-closing tasks after clocking out. Id., 235 Cal.Rptr.3d 820, 421 P.3d at 1116-17. The undisputed evidence before the District Court showed that these tasks took 4 to 10 minutes per day. Troester v. Starbucks Corp., No. CV 12-7677 GAF (PJWx), 2014 WL 1004098, at *4 (C.D. Cal. Mar. 7, 2014). Because these amounts were less than the 10-minute threshold discussed above, and because it was not administratively feasible for employees to clock out after performing store-closing tasks, the District Court granted summary judgment for Starbucks based on its de minimis defense. Id. at *4-5. The court held that summary judgment was appropriate even though employees performed store-closing tasks on a daily basis, such that the third Lindow factor, regularity, weighed in the employees' favor. Id. at *5.

 

On appeal, we certified the following question to the California Supreme Court: "Does the federal Fair Labor Standards Act's de minimis doctrine, as stated in Anderson v. Mt. Clemens Pottery Co. and Lindow v. United States, apply to claims for unpaid wages under the California Labor Code sections 510, 1194, and 1197?" Troester, 680 F. App'x at 512 (citations omitted). The panel explained that "[t]he federal de minimis rule could be seen as less employee-protective than California's wage and hour laws and, therefore, at odds with those laws." Id. at 515. By answering the question, the panel stated, the California Supreme Court could "either dispose of the appeal or determine how the case might proceed were we to remand this putative class action to the district court." Id.

 

The California Supreme Court accepted certification, and it held that the federal de minimis doctrine does not apply to California's wage and hour statutes or regulations. Troester, 235 Cal.Rptr.3d 820, 421 P.3d at 1116. The court began by observing that California labor laws are generally more protective than federal labor laws, and it reasoned that "[t]he federal rule permitting employers under some circumstances to require employees to work as much as 10 minutes a day without compensation is less protective than a rule that an employee must be paid for `all hours worked' or `[a]ny work' beyond eight hours a day." Id. 235 Cal.Rptr.3d 820, 421 P.3d at 1120 (second alteration in original) (citations omitted) (first quoting Cal. Code Regs. tit. 8, § 11050(3)(A)-(B); then quoting Cal. Lab. Code § 510(a)). The court concluded, moreover, that "[n]othing in the language of the wage orders or Labor Code shows an intent to incorporate the federal de minimis rule articulated in Anderson, Lindow, or the federal regulation" codifying the de minimis doctrine. Id.

 

Although the court held that the federal de minimis doctrine did not apply to wage and hour claims, it left open "whether a [California] de minimis principle may ever apply." Id. 235 Cal.Rptr.3d 820, 421 P.3d at 1121; see id. 235 Cal.Rptr.3d 820, 421 P.3d at 1116 ("We do not decide whether there are circumstances where compensable time is so minute or irregular that it is unreasonable to expect the time to be recorded."). At least on the facts of the case before it, the court held, Starbucks's de minimis defense failed. Id. 235 Cal. Rptr.3d 820, 421 P.3d at 1125. In so holding, the court explained that "[a]n employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine." Id. (emphasis added). Nor was a different conclusion compelled by the administrative difficulties involved in recording the additional time. Id. To the contrary, the court stated that "employers are in a better position than employees to devise alternatives that would permit the tracking of small amounts of regularly occurring work time." Id. For example, the court reasoned, Starbucks might adapt or develop tools to "track[ ] small amounts of time," or it might "restructure the work so that employees would not have to work before or after clocking out." Id. And even if these solutions were not practical, the court concluded, "it may be possible to reasonably estimate work time . . . and to compensate employees for that time." Id.

 

After the California Supreme Court issued its ruling, we reversed and remanded the District Court's order granting summary judgment for Starbucks. Troester v. Starbucks Corp., 738 F. App'x 562, 563 (9th Cir. 2018). Because the California Supreme Court had held that the de minimis doctrine did not apply to the wage and hour claims at issue, we declined to "reach alternate grounds for appeal, which challenged the correctness of the district court's application of the de minimis doctrine to the evidence presented." Id. at 563 n.1.

 

C. The Instant Appeal

As noted above, Rodriguez filed his appeal and opening brief before the California Supreme Court issued its decision in Troester. The parties subsequently stipulated that Rodriguez would strike his opening brief and file a revised brief in light of Troester. In his revised brief, Rodriguez argues that the District Court erred in granting summary judgment for Nike based on the federal de minimis doctrine. Nike argues that reversal is unwarranted because the amounts of time at issue here are de minimis even under Troester.

 

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction pursuant to 28 U.S.C. § 1291. "We review a grant of summary judgment de novo." EEOC v. Luce, Forward, Hamilton & Scripps, 345 F.3d 742, 746 (9th Cir. 2003) (en banc). "We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law." Id.

 

DISCUSSION

The issue on appeal is straightforward: did the District Court err in granting summary judgment for Nike based on the federal de minimis doctrine? The answer, after Troester, is equally clear: the federal de minimis doctrine does not apply to wage and hour claims brought under the California Labor Code. By applying the doctrine to Rodriguez's claims, the District Court failed—understandably, given the legal landscape at the time—to "appl[y] the relevant substantive law."

 

That the District Court relied on the federal de minimis doctrine is beyond question. Indeed, the court began its discussion of Nike's motion by addressing "whether the [federal] de minimis doctrine applies to claims for violations of the California Labor Code." Rodriguez, 2017 WL 4005591, at *6. The court acknowledged that "[t]he outcome of Nike's motion for summary judgment hinges on this question," and that "the California Supreme Court has not addressed" the matter. Id. The court even referenced the pending decision in Troester, noting that "this Court does not have the benefit of a ruling from California's high court that either alters or solidifies the viability of the de minimis doctrine outside of the FLSA context from which it originated." Id. at *7. "Under current law," the court concluded, "the de minimis doctrine is a valid defense to wage claims brought under the California Labor Code." Id.

 

The court's analysis, moreover, rested on several premises that Troester explicitly rejected. Both as a preliminary matter and in its discussion of Lindow's "aggregate amount of compensable time" factor, id. at *11, the court repeatedly invoked the federal doctrine's 10-minute daily threshold for determining whether amounts of uncompensated time are de minimis. See, e.g., id. at *12 ("Most courts have found daily periods of approximately 10 minutes de minimis even though otherwise compensable." (quoting Lindow, 738 F.2d at 1062)); id. at *15 ("Drawing all reasonable inferences in favor of Rodriguez, the daily amount of time is still well within the 10-minute de minimis threshold."). Troester made clear, however, that the 10-minute threshold is inconsistent with California labor laws, under which "an employee must be paid for `all hours worked' or `[a]ny work' beyond eight hours a day." 235 Cal.Rptr.3d 820, 421 P.3d at 1120 (alteration in original) (citations omitted) (first quoting Cal. Code Regs. tit. 8, § 11050(3)(A)-(B); then quoting Cal. Lab. Code § 510(a)). After Troester, "[a]n employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine." Id. 235 Cal.Rptr.3d 820, 421 P.3d at 1125.

 

Likewise, in its discussion of "the practical administrative difficulty" of recording exit-inspection time, the District Court assumed that Nike was required to prove "only that it would be administratively difficult to [record inspection time] given its timekeeping system." Rodriguez, 2017 WL 4005591, at *13-14. But Troester expressly "decline[d] to adopt a rule that would require the employee to bear the entire burden of any difficulty in recording regularly occurring work time." 235 Cal.Rptr.3d 820, 421 P.3d at 1125. To the contrary, Troester held that "employers are in a better position than employees to devise alternatives that would permit the tracking of small amounts of regularly occurring work time." Id. And Troester explained that "even when neither a restructuring of work nor a technological fix is practical, it may be possible to reasonably estimate work time . . . and to compensate employees for that time." Id. Rodriguez proposed such an alternative, pursuant to which fixed amounts of time would be added to employees' paychecks. He also proposed an alternative whereby employees would undergo inspections at the back of the store before clocking out. Cf. id. ("One such alternative, which it appears Starbucks eventually resorted to here, was to restructure the work so that employees would not have to work before or after clocking out."). Although the court acknowledged that Rodriguez had made these proposals, it did not explain why they failed to create a triable issue. Rodriguez, 2017 WL 4005591, at *13.

 

On appeal, Nike essentially concedes that the District Court applied the wrong legal standard when it relied on the federal de minimis doctrine. Nike nevertheless argues that we should affirm the grant of summary judgment on the alternative ground that the exit inspections at issue are de minimis even under Troester. As Nike notes, Troester left open "whether there are circumstances where compensable time is so minute or irregular that it is unreasonable to expect the time to be recorded," and "decline[d] to decide whether a de minimis principle may ever apply to wage and hour claims" under California law. 235 Cal.Rptr.3d 820, 421 P.3d at 1116, 1121. Citing Troester's admonition that employers must compensate employees who "work minutes off the clock on a regular basis or as a regular feature of the job," id. 235 Cal.Rptr.3d 820, 421 P.3d at 1125, Nike argues that Troester "rejected the de minimis defense as applied to a matter of minutes worked `off the clock,' not a matter of seconds." Because "only 3.3% of the exits [measured by Crandall] lasted more than 60 seconds," Nike contends, "the occurrences where exits were more than mere seconds were irregular."

 

To the extent Nike urges us to interpret Troester as replacing the federal de minimis doctrine's 10-minute daily threshold with a state-law 60-second analogue, we hereby decline to do so. Not only would this interpretation read far too much into Troester's passing mention of "minutes," but it would also clash with Troester's reasoning, which emphasized the requirement under California labor laws that "employee[s] must be paid for all hours worked or any work beyond eight hours a day." 235 Cal.Rptr.3d 820, 421 P.3d at 1120 (quotations and alteration omitted). We doubt that Troester would have been decided differently if the closing tasks at issue had taken only 59 seconds per day.[1]

 

Instead, we understand the rule in Troester as mandating compensation where employees are regularly required to work off the clock for more than "minute" or "brief" periods of time. Id. 235 Cal. Rptr.3d 820, 421 P.3d at 1116, 1125. This rule does not require employers to "account for `[s]plit-second absurdities,'" id. 235 Cal.Rptr.3d 820, 421 P.3d at 1123 (alteration in original) (quoting Anderson, 328 U.S. at 692, 66 S.Ct. 1187), and it might not apply in cases where work is so "irregular that it is unreasonable to expect the time to be recorded," id. 235 Cal. Rptr.3d 820, 421 P.3d at 1116. But where employees are required to work for more than trifling amounts of time "on a regular basis or as a regular feature of the job," id. 235 Cal.Rptr.3d 820, 421 P.3d at 1125, Troester precludes an employer from raising a de minimis defense under California law.

 

Applying this rule to the instant case, we hold that the District Court's grant of summary judgment cannot be affirmed on the record below. As the District Court noted, the undisputed facts show only "that an exit inspection takes between zero seconds and several minutes." Rodriguez, 2017 WL 4005591, at *12. And the evidence before the court indicated that employees frequently exited multiple times per day, although it did "not indicate how many times an employee leaves the store each day, or if an employee ever leaves more than twice in a single day." Id. at *15. Moreover, while Crandall found that 69.0% of exit inspections took less than 15 seconds, and that 81.4% of inspections took less than 30 seconds, multiple Nike store managers testified, to the contrary, that longer inspections were common. See, e.g., id. at *4 ("90% of the time an employee was required to wait for some period of time for a manager to be available to perform the exit inspection," and "60-65% of the time that period of waiting time was at least a minute." (quotations omitted)); id. ("40-50% of the time . . ., the employee had to wait at least one full minute before the check was performed."); id. at *12 ("[A]bout 45 percent of the time an employee would be required to wait a minute or two for a manager to become available and perform a security check." (quotations omitted)).

 

Given this evidence, we cannot conclude that exit inspections qualify as "split-second absurdities." Nor do they appear so "irregular that it is unreasonable to expect the time to be recorded." Even according to Crandall's study, the vast majority of inspections took measurable amounts of time, and there is a genuine dispute between the parties as to whether these amounts were more than "minute," "brief," or "trifling." As such, the record below does not support affirmance of the District Court's grant of summary judgment, and we reverse and remand for further proceedings consistent with Troester.

 

Each party shall bear its own costs on appeal.

 

REVERSED AND REMANDED.

anti-SLAPP can screen discriminatory actions

California’s anti-SLAPP statute can be used to screen claims alleging discriminatory or retaliatory employment actions.
Wilson v. Cable News Network, Inc.


KEY WORDS:
Discrimination, Anti SLAPP, SLAPP Exceptions, SLAPP

AGENCY:

Supreme Court of California


Document Citation:

NO. S239686, 7 Cal.5th 871 (Cal. 2019)


Stanley WILSON, 

Plaintiff and Appellant, 


v. 


CABLE NEWS NETWORK, INC., et al., 

Defendants and Respondents.

S239686 

SUPREME COURT OF CALIFORNIA

Jul 22, 2019

7 Cal.5th 871 (Cal. 2019)

Law Offices of Lisa L. Maki, Lisa L. Maki, Santa Monica, Jennifer Ostertag ; Shegerian & Associates, Jill P. McDonnell and Carney R. Shegerian, Santa Monica, for Plaintiff and Appellant.

FEM Law Group and F. Edie Mermelstein, Huntington Beach, for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Appellant.

Briggs Law Corporation, Cory J. Briggs and Anthony N. Kim, San Diego, for California Taxpayers Action Network as Amicus Curiae on behalf of Plaintiff and Appellant.

Mitchell Silberberg & Knupp, Adam Levin, Aaron M. Wais, Los Angeles, Jolene Konnersman and Christopher A. Elliott for Defendants and Respondents.

Davis Wright Tremaine, Kelli L. Sager, Rochelle Wilcox and Dan Laidman, Los Angeles, for Los Angeles Times Communications LLP, CBS Corporation, NBCUniversal Media, LLC, American Broadcasting Companies, Inc., Fox Networks Group, Inc., California News Publishers Association and First Amendment Coalition as Amici Curiae on behalf of Defendants and Respondents.

Horvitz & Levy, Jeremy B. Rosen, Felix Shafir and Ryan C. Chapman, Burbank, for California Hospital Association as Amicus Curiae on behalf of Defendants and Respondents.

Opinion of the Court by Kruger, J. 

Code of Civil Procedure section 425.16 ( section 425.16 ), commonly known as the anti-SLAPP statute, allows defendants to request early judicial screening of legal claims targeting free speech or petitioning  activities.  We consider two questions concerning the application of the anti-SLAPP statute to certain claims arising in the employment context.

The primary question before us concerns the statute’s application to employment discrimination and retaliation claims. Here, a journalist alleges that his employer denied him promotions, gave him unfavorable assignments, and ultimately fired him for unlawful discriminatory and retaliatory reasons. Some courts of appeal, including the court in this case, have concluded the anti-SLAPP statute cannot be used to screen claims alleging discriminatory or retaliatory employment actions. We hold otherwise. The statute contains no exception for discrimination or retaliation claims, and in some cases the actions a plaintiff alleges in support of his or her claim may qualify as protected speech or petitioning activity under section 425.16. In such cases, the plaintiff’s allegations about the defendant’s invidious motives will not shield the claim from the same preliminary screening for minimal merit that would apply to any other claim arising from protected activity. The defendant employer in this case has shown plaintiff’s claims arise in limited part—though not in whole—from protected activity. The employer is therefore entitled to a determination of whether those limited portions of plaintiff’s claims have sufficient potential merit to proceed.

The second question concerns the application of the anti-SLAPP statute to the journalist’s claim that defendant defamed him by privately discussing the alleged reasons for his termination with potential employers and others. We conclude that this claim need not be screened for merit because these privately communicated remarks were not made in connection with any issue of public significance, as the statute requires. (See § 425.16, subds. (a), (b)(1), (e)(4).) We thus affirm in part, reverse in part, and remand for further proceedings.

I.
Plaintiff Stanley Wilson began working for Cable News Network, Inc., in 1996, and wrote and produced stories for the network for more than 17 years. During his tenure, Wilson covered matters of general public importance, including multiple presidential elections, the Bush v. Gore  controversy, the September 11, 2001 attacks, and Hurricane Katrina. For his work, Wilson attained recognition in the field, receiving three Emmy awards and many other journalism honors.

In 2004, Wilson, who is African American and Latino, began raising concerns about the network’s treatment of African-American men. He also took a five-week paternity leave after the birth of his twin children in 2013.  According to Wilson, the network rewarded him with menial assignments and denied him promotions in favor of younger and less experienced White candidates.

Wilson’s tenure came to an end in 2014, after Wilson drafted a story covering the unexpected retirement of Los Angeles County Sheriff Lee Baca. An editor reviewing the draft flagged several passages that appeared similar to another news organization’s published story. Citing concerns about plagiarism, the network placed Wilson on leave of absence and ultimately fired him.

Wilson filed suit against Cable News Network, Inc., various affiliated corporate entities, and his supervisor. (For simplicity’s sake, we will refer to defendants collectively as CNN.) Wilson’s complaint contains seven causes of action, six of which challenge CNN’s alleged discrimination and retaliation. Specifically, Wilson alleges he was denied promotions, given unfavorable assignments, and ultimately fired because of his race and other protected characteristics, as well as in retaliation for exercising his right to make complaints about discrimination and his right to take parental leave. (See Gov. Code, §§ 12940, 12945.2.) He further alleges wrongful termination in violation of the public policy against employment discrimination and retaliation. (See Gantt v. Sentry Insurance (1992) 1 Cal.4th 1083, 1089–1097, 4 Cal.Rptr.2d 874, 824 P.2d 680.) In his seventh  and final cause of action, Wilson alleges that CNN defamed him by telling prospective employers and others that Wilson had committed plagiarism in violation of CNN’s standards and practices.

Wilson was 51 when he was fired. His wife had a medical condition. On these facts, Wilson alleges CNN discriminated against him because of his age and association with a disabled person. (See Gov. Code, §§ 12926, subd. (m), 12940, subd. (a).)

CNN filed an anti-SLAPP motion. ( § 425.16.) It argued that the first six causes of action arose, in whole or in part, from Wilson’s termination, and CNN’s decision to fire Wilson was in furtherance of its right to determine who should speak on its behalf on matters of public interest. CNN further argued that the defamation cause of action arose from protected speech because its statements as to whether Wilson met CNN’s editorial standards in reporting on a matter of public interest furthered CNN’s exercise of free speech rights. The trial court agreed with these arguments, concluded that Wilson had not shown any of his claims had minimal merit, and granted the motion. A divided Court of Appeal reversed. ( Wilson v. Cable News Network, Inc. (2016) 6 Cal.App.5th 822, review granted Mar. 1, 2017, S239686 ( Wilson ); see id. at p. 840 (dis. opn. of Rothschild, P. J.).) The majority held the trial court erred in granting the motion to strike Wilson’s employment discrimination and retaliation claims because the claims arose from "defendants’ allegedly discriminatory and retaliatory conduct against him, not the particular manifestations of the discrimination  and retaliation, such as denying promotions, assigning him menial tasks, and firing him." ( Id. at p. 836.) Reasoning that discrimination and retaliation do not qualify as protected activity, even when committed by a news organization, the majority concluded the anti-SLAPP statute did not apply. ( Id. at pp. 834–837.) The dissent disagreed, urging that the claims arose from CNN’s decision about who would report the news on its behalf, a decision in furtherance of CNN’s exercise of free speech rights. ( Id. at pp. 840–842 (dis. opn. of Rothschild, P. J.).) The majority and dissent likewise disagreed over the treatment of Wilson’s defamation claim: The majority thought the trial court was wrong to strike the claim, while the dissent took the opposite view. (See id. at pp. 837–840 ; id. at pp. 845–846 (dis. opn. of Rothschild, P. J.).)

An anti-SLAPP motion seeks to strike a "[s]trategic lawsuit against public participation," that is, a "SLAPP." (See Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1109 & fn. 1, 81 Cal.Rptr.2d 471, 969 P.2d 564.)
The Court of Appeal’s decision in this case added to a growing divide over whether, in an employment discrimination or retaliation case, the employer’s alleged motive to discriminate or retaliate eliminates any anti-SLAPP protection that might otherwise attach to the employer’s employment practices. We took review to answer that question and to address the application of the anti-SLAPP statute to Wilson’s related defamation claim.

Compare Bonni v. St. Joseph Health System (2017) 13 Cal.App.5th 851, 861, 863–864 (basis for a retaliation claim is the defendant’s unprotected retaliatory motive for an adverse action, not the adverse action itself), review granted November 1, 2017, S244148; Nam v. Regents of University of California (2016) 1 Cal.App.5th 1176, 1187–1193, 205 Cal.Rptr.3d 687 (basis includes the defendant’s retaliatory motive) with Symmonds v. Mahoney (2019) 31 Cal.App.5th 1096, 1108 (alleged "discriminatory motive" does not "negate[ ] protections that otherwise would apply to the defendant’s conduct" under the anti-SLAPP statute), review granted April 24, 2019, S254646; Daniel v. Wayans (2017) 8 Cal.App.5th 367, 380 (courts should focus on allegations of conduct, not motive, because " ‘ "[c]auses of action do not arise from motives; they arise from acts" ’ "), review granted May 10, 2017, S240704; Hunter v. CBS Broadcasting, Inc. (2013) 221 Cal.App.4th 1510, 1520, 165 Cal.Rptr.3d 123 (same); Tuszynska v. Cunningham (2011) 199 Cal.App.4th 257, 268–269, 131 Cal.Rptr.3d 63 (same); see also San Diegans for Open Government v. San Diego State University Research Foundation (2017) 13 Cal.App.5th 76, 104 (in a self-dealing case, concluding the underlying conduct, not the alleged motive, is the basis), review granted August 16, 2017, S242529.

II.
Enacted by the Legislature in 1992, the anti-SLAPP statute is designed to protect defendants from meritless lawsuits that might chill the  exercise of their rights to speak and petition on matters of public concern. (See § 425.16, subd. (a) ; Rand Resources, LLC v. City of Carson (2019) 6 Cal.5th 610, 619, 243 Cal.Rptr.3d 1, 433 P.3d 899 ;  Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 192, 25 Cal.Rptr.3d 298, 106 P.3d 958.) To that end, the statute authorizes a special motion to strike claims "arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue." ( § 425.16, subd. (b)(1).)

A court evaluates an anti-SLAPP motion in two steps. "Initially, the moving defendant bears the burden of establishing that the challenged allegations or claims ‘aris[e] from’ protected activity in which the defendant has engaged. [Citations.] If the defendant carries its burden, the plaintiff must then demonstrate its claims have at least ‘minimal merit.’ " ( Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1061, 217 Cal.Rptr.3d 130, 393 P.3d 905 ( Park ).) If the plaintiff fails to meet that burden, the  court will strike the claim. Subject to certain exceptions not relevant here, a defendant that prevails on a special motion to strike is entitled to attorney fees and costs. ( § 425.16, subd. (c).)
Because the Court of Appeal determined CNN had failed to carry its initial burden, we are here concerned only with the first step of the analysis. The defendant’s first-step burden is to identify the activity each challenged claim rests on and demonstrate that that activity is protected by the anti-SLAPP statute. A "claim may be struck only if the speech or petitioning activity itself is the wrong complained of, and not just evidence of liability or a step leading to some different act for which liability is asserted." ( Park , supra , 2 Cal.5th at p. 1060, 217 Cal.Rptr.3d 130, 393 P.3d 905.) To determine whether a claim arises from protected activity, courts must "consider the elements of the challenged claim and what actions by the defendant supply those elements and consequently form the basis for liability." ( Id. at p. 1063, 217 Cal.Rptr.3d 130, 393 P.3d 905.) Courts then must evaluate whether the defendant has shown any of these actions fall within one or more of the four categories of " ‘act[s]’ " protected by the anti-SLAPP statute. ( § 425.16, subd. (e) ; Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 66, 124 Cal.Rptr.2d 507, 52 P.3d 685.)

CNN relies on section 425.16, subdivision (e)(4), which protects "any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest." Whether Wilson’s claims arise from activity protected by this provision is a matter we consider de novo. ( Park , supra , 2 Cal.5th at p. 1067, 217 Cal.Rptr.3d 130, 393 P.3d 905 ), evaluating the context and content of the  asserted activity ( FilmOn.com Inc. v. DoubleVerify Inc. (2019) 7 Cal.5th 133, 144–145, 149, 246 Cal.Rptr.3d 591, 439 P.3d 1156 ).

The other parts of subdivision (e) shield statements and writings made in connection with official proceedings or in public on matters of public interest. (See § 425.16, subd. (e)(1)–(3).)

III.
Wilson’s intentional discrimination and retaliation claims are the centerpiece of his complaint. To prove unlawful discrimination, Wilson must show he was a member of a protected class; was performing competently in the position he held, and suffered an adverse employment action such as termination or demotion; and that other circumstances suggest a discriminatory motive. ( Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 355, 100 Cal.Rptr.2d 352, 8 P.3d 1089.) To prove unlawful retaliation, Wilson must likewise  show CNN subjected him to adverse employment actions  for impermissible reasons—namely, because he exercised rights guaranteed him by law. (See Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1042, 32 Cal.Rptr.3d 436, 116 P.3d 1123 [retaliation under the Fair Employment and Housing Act]; Rogers v. County of Los Angeles (2011) 198 Cal.App.4th 480, 491, 130 Cal.Rptr.3d 350 [retaliation for taking family leave].) Finally, Wilson’s wrongful termination claim turns on proof that Wilson was terminated and the reason for the firing violates public policy. ( Gantt v. Sentry Insurance , supra , 1 Cal.4th at pp. 1089–1090, 4 Cal.Rptr.2d 874, 824 P.2d 680.) In sum, all of Wilson’s employment-related claims depend on two kinds of allegations: (1) that CNN subjected Wilson to an adverse employment action or actions, and (2) that it took these adverse actions for discriminatory or retaliatory reasons. The critical threshold question before us is whether such claims can ever be said to be based on an "act ... in furtherance" of speech and petitioning rights under section 425.16, subdivisions (b)(1) and (e)(4). The Court of Appeal answered no. We disagree. 

A. These are the elements of a disparate-treatment claim of discrimination—that is, a claim of "intentional discrimination against one or more persons on prohibited grounds." (Guz v. Bechtel National, Inc. , supra , 24 Cal.4th at p. 354, fn. 20, 100 Cal.Rptr.2d 352, 8 P.3d 1089.) A plaintiff may also raise other theories of discrimination or harassment, each of which has different elements. (See ibid. [recognizing disparate-impact theory of discrimination, that is, the theory "that regardless of motive, a facially neutral employer practice or policy, bearing no manifest relationship to job requirements, in fact had a disproportionate adverse effect on members of the protected class"]; Hughes v. Pair (2009) 46 Cal.4th 1035, 1043, 95 Cal.Rptr.3d 636, 209 P.3d 963 [quid pro quo harassment]; Lyle v. Warner Brothers Television Productions (2006) 38 Cal.4th 264, 279, 42 Cal.Rptr.3d 2, 132 P.3d 211 [hostile work environment harassment].) Wilson does not rely on any of those theories here.

The same is true of the sixth claim for declaratory relief, which is derivative of the other five. The complaint alleges an actual controversy as to whether CNN’s decision to terminate Wilson was motivated by discrimination.

Whether it is unlawful for a person to perform a particular action or engage in a particular activity often depends on whether the person has a good reason for doing it—or, at least, has no bad reason for doing it. For example, it is ordinarily perfectly lawful for a person to possess a screwdriver, but to possess one for the purpose of burglarizing a house is a criminal offense. (See Pen. Code, § 466.) It is likewise lawful to file a lawsuit—even a meritless one—but to do so for the sake of impoverishing an enemy constitutes the tort of malicious prosecution. (See Bertero v. National General Corp. (1974) 13 Cal.3d 43, 49–51, 118 Cal.Rptr. 184, 529 P.2d 608.) The laws proscribing intentional discrimination and retaliation in employment and other areas belong to this category of prohibitions. It is ordinarily perfectly permissible for an employer to decide not to hire, not to promote, or to fire an employee. The employer may not, however, act based on "the race, religious creed, color, national origin," or other protected characteristic of the employee ( Gov. Code, § 12940, subd. (a) ), or because the employee has exercised certain rights guaranteed by law, including the right to complain about discrimination (e.g., id. , subd. (h)).

This feature of the antidiscrimination and anti retaliation laws has led some appellate courts, including the Court of Appeal in this case, to conclude that discrimination and retaliation claims fall outside the scope of the anti-SLAPP statute. The appellate court here reasoned that because the adverse employment actions Wilson alleged would have been perfectly lawful in the absence of CNN’s discriminatory or retaliatory motive, Wilson’s claims must be based on CNN’s unprotected discrimination or retaliation—and not "the particular manifestations of the discrimination and retaliation, such as denying promotions, assigning him menial tasks, and firing him." ( Wilson , supra , 6 Cal.App.5th at p. 836, rev. granted.) On this view, it does not matter that one of these "particular manifestations" might otherwise qualify as protected speech or petitioning activity. If the plaintiff alleges the defendant acted for discriminatory or retaliatory reasons, the plaintiff’s allegation of illicit motive will defeat any argument for anti-SLAPP protection. This view cannot be squared with either the statutory text or our precedent interpreting it. It is true that a cause of action for intentional discrimination would be incomplete without allegations of a discriminatory motive. But a cause of action for discrimination would likewise be incomplete without allegations of concrete adverse action. (See Guz v. Bechtel National, Inc. , supra , 24 Cal.4th at p. 355, 100 Cal.Rptr.2d 352, 8 P.3d 1089.) For pleading purposes, both are necessary elements; neither is privileged over the other. It follows that even if a plaintiff’s discrimination claim can be said to be based in part on the employer’s purported  wrongful motives, it is necessarily also based on the  employer’s alleged acts—that is, the various outward "manifestations" of the employer’s alleged wrongful intent, such as failing to promote, giving unfavorable assignments, or firing. ( Wilson , supra , 6 Cal.App.5th at p. 836, rev. granted; see Black’s Law Dict. (6th ed. 1990) p. 25, col. 2 [defining "act" as the "external manifestation of [an] actor’s will" and, more generally, as "an effect produced in the external world by an exercise of the power of a person objectively, prompted by intention"].) Under the first step of the anti-SLAPP analysis, that is the end of the story, for it is the defendant’s acts that matter. (See § 425.16, subd. (b)(1) [protecting "any act of that person" in furtherance of particular rights]; Park , supra , 2 Cal.5th at p. 1063, 217 Cal.Rptr.3d 130, 393 P.3d 905 [at the first step of the anti-SLAPP inquiry, courts must "consider the elements of the challenged claim and what actions by the defendant supply those elements and consequently form the basis for liability," italics added].) If the acts alleged in support of the plaintiff’s claim are of the sort protected by the anti-SLAPP statute, then anti-SLAPP protections apply.

Resisting this conclusion, Wilson contends that "the basis of CNN’s alleged liability is not staffing or hiring for a news position, but discriminatory treatment and actions." But the discriminatory treatment and actions Wilson alleges in support of his claims are actions related to the staffing of CNN’s newsroom. The argument thus boils down to an assertion that, for purposes of the first step of the anti-SLAPP analysis, a court must accept Wilson’s allegation that the challenged personnel actions were taken for discriminatory reasons and are therefore unlawful. (See Wilson , supra , 6 Cal.App.5th at p. 836, rev. granted.) This is not how the anti-SLAPP statute works. In deciding an anti-SLAPP motion, a court must at the second step " ‘accept as true the evidence favorable to the plaintiff.’ " ( Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3, 46 Cal.Rptr.3d 638, 139 P.3d 30, italics added.) But we have never insisted that the complaint’s allegations be given similar credence in the face of contrary evidence at the first step. Such conclusive deference would be difficult to reconcile with the statutory admonition that courts must look beyond the pleadings to consider any party evidentiary submissions as well. ( § 425.16, subd. (b)(2).)

Nor does the anti-SLAPP statute require a defendant to disprove allegations of illicit motive. At the first step of the analysis, the defendant must make two related showings. Comparing its statements and conduct against the statute, it must demonstrate activity qualifying for protection. (See § 425.16, subd. (e).) And comparing that protected activity against the complaint, it must also demonstrate that the activity supplies one or more elements of a plaintiff’s claims. (Id. , subd. (b)(1); see Rand Resources, LLC v. City of Carson , supra , 6 Cal.5th at p. 620, 243 Cal.Rptr.3d 1, 433 P.3d 899 ["A defendant  satisfies the first step of the analysis by demonstrating that the ‘conduct by which plaintiff claims to have been injured falls within one of the four categories described in subdivision (e) [of section 425.16 ]’ [citation], and that the plaintiff’s claims in fact arise from  that conduct [citation]."].) At this stage, the question is only whether a defendant has made out a prima facie case that activity underlying a plaintiff’s claims is statutorily protected ( City of Montebello v. Vasquez (2016) 1 Cal.5th 409, 420, 205 Cal.Rptr.3d 499, 376 P.3d 624 ; Simpson Strong-Tie Co., Inc. v. Gore (2010) 49 Cal.4th 12, 21, 109 Cal.Rptr.3d 329, 230 P.3d 1117 ), not whether it has shown its acts are ultimately lawful.

We so held in Navellier v. Sletten (2002) 29 Cal.4th 82, 124 Cal.Rptr.2d 530, 52 P.3d 703. There, the plaintiffs urged that the defendant’s petitioning activity should receive no protection because it was not a valid exercise of speech and petitioning rights, the defendant having previously waived the right to engage in the activity. We disagreed. We acknowledged that the preamble to the statute does reflect a purpose to protect the "valid exercise" of speech and petition rights. ( § 425.16, subd. (a).) But the Legislature’s expression of "a concern in the statute’s preamble with lawsuits that chill the valid exercise of First Amendment rights does not mean that a court may read a separate proof-of-validity  requirement into the operative sections of the statute. [Citations.] Rather, any ‘claimed illegitimacy of the defendant’s acts is an issue which the plaintiff must raise and support in the context of the discharge of the plaintiff’s [secondary] burden to provide a prima facie showing of the merits of the plaintiff’s case.’ " ( Navellier , at p. 94, 124 Cal.Rptr.2d 530, 52 P.3d 703 ; see City of Montebello v. Vasquez , supra , 1 Cal.5th at pp. 422–425, 205 Cal.Rptr.3d 499, 376 P.3d 624 [lawfulness of activity generally addressed in the second step].) To conclude otherwise would effectively shift to the defendant a burden statutorily assigned to the plaintiff. (See § 425.16, subd. (b)(1) [if acts are protected, it is for the "plaintiff [to] establish[ ] that there is a probability that the plaintiff will prevail on the claim"].)

Consistent with this understanding, at the first step of the anti-SLAPP analysis, we routinely have examined the conduct of defendants without relying on whatever improper motive the plaintiff alleged. For example, in Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 3 Cal.Rptr.3d 636, 74 P.3d 737, we considered whether claims for malicious prosecution could be subject to an anti-SLAPP motion. The plaintiff urged that filing an action without probable cause was not activity in furtherance of constitutional speech and petition rights, and so such claims should be exempt. We rejected the argument. That the claim arose from the filing of a lawsuit, protected First Amendment activity, was alone dispositive; allegations that the suit was filed without probable cause—or, for that matter, based on a malicious motive—were irrelevant at the first step, and mattered only at the second step. ( Id. at pp. 739–740, 3 Cal.Rptr.3d 636, 74 P.3d 737 ; see Soukup v. Law Offices of Herbert Hafif , supra , 39 Cal.4th at pp. 291–292, 46 Cal.Rptr.3d 638, 139 P.3d 30.)

The same was true in Park . There, when considering "what actions by the defendant supply [the] elements" of a claim (  Park , supra , 2 Cal.5th at p. 1063 ), we determined a discrimination suit arose from the decision to deny the plaintiff tenure and examined whether that decision was protected, without reference to the alleged discriminatory motive ( id. at pp. 1071–1072, 217 Cal.Rptr.3d 130, 393 P.3d 905 ). And in Rand Resources, LLC v. City of Carson , supra , 6 Cal.5th 610, 243 Cal.Rptr.3d 1, 433 P.3d 899, we considered whether  claims for intentional interference with contract and prospective economic advantage arose from protected activity. The claims rested in part on the defendants’ lobbying the city council and lobbying on behalf of the city. These acts were lawful, considered on their own, but alleged to be wrongful because taken with the intent to disrupt existing and potential contractual relations. We examined whether the acts themselves were protected, without ever suggesting that the plaintiffs’ allegations of wrongful motive were sufficient to remove the lobbying activity from the statute’s aegis. (See id. at pp. 628–630, 243 Cal.Rptr.3d 1, 433 P.3d 899.)

Many courts of appeal, too, have correctly recognized that the text of the anti-SLAPP statute and our precedent require a court at the first step to examine the defendant’s actions without regard to the plaintiff’s allegations about the defendant’s motives. (Symmonds v. Mahoney , supra , 31 Cal.App.5th at pp. 1106–1108, 243 Cal.Rptr.3d 445, rev. granted; San Diegans for Open Government v. San Diego State University Research Foundation , supra , 13 Cal.App.5th at p. 104, rev. granted; Daniel v. Wayans , supra , 8 Cal.App.5th at p. 380, rev. granted; Collier v. Harris (2015) 240 Cal.App.4th 41, 53–54, 192 Cal.Rptr.3d 31 ; DeCambre v. Rady Children’s Hospital-San Diego (2015) 235 Cal.App.4th 1, 22, 184 Cal.Rptr.3d 888, disapproved on another ground in Park , supra , 2 Cal.5th at p. 1070, 217 Cal.Rptr.3d 130, 393 P.3d 905 ; Hunter v. CBS Broadcasting Inc. , supra , 221 Cal.App.4th at p. 1520, 165 Cal.Rptr.3d 123 ; People ex rel. Fire Ins. Exchange v. Anapol (2012) 211 Cal.App.4th 809, 823, 150 Cal.Rptr.3d 224 ; Nesson v. Northern Inyo County Local Hospital Dist. (2012) 204 Cal.App.4th 65, 83, 138 Cal.Rptr.3d 446, disapproved on another ground in Park , supra , 2 Cal.5th at p. 1070, 217 Cal.Rptr.3d 130, 393 P.3d 905 ; Tuszynska v. Cunningham , supra , 199 Cal.App.4th at pp. 268–269, 131 Cal.Rptr.3d 63 ; Wallace v. McCubbin (2011) 196 Cal.App.4th 1169, 1186, 128 Cal.Rptr.3d 205 ; Gallanis-Politis v. Medina (2007) 152 Cal.App.4th 600, 612–613, fn. 8, 61 Cal.Rptr.3d 701.)

To be clear, we do not hold that a defendant’s motives are categorically off-limits in determining whether an act qualifies as protected activity under the anti-SLAPP statute. We hold only that the plaintiff’s allegations cannot be dispositive of the question.  In some cases (including this one, as we explain below), whether the defendant’s act qualifies as one in furtherance of protected speech or petitioning will depend on whether the defendant took the action for speech-related reasons. Nothing in the statutory scheme prevents the defendant from introducing evidence establishing such reasons. But there is an important difference between permitting the defendant to present evidence of its own motives in an effort to make out its prima facie case of protected activity and treating a plaintiff’s allegations of illicit motive as a bar to anti-SLAPP protection, as Wilson would have us do here.

To conclude otherwise would effectively immunize claims of discrimination or retaliation from anti-SLAPP scrutiny, even though the statutory text establishes no such immunity. As originally drafted, "[n]othing in the statute  itself categorically exclude[d] any particular type of action from its operation." ( Navellier v. Sletten , supra , 29 Cal.4th at p. 92, 124 Cal.Rptr.2d 530, 52 P.3d 703.) And although subsequent amendments to the statutory scheme have added exclusions (see Code Civ. Proc., § 425.17 ; Simpson Strong-Tie Co., Inc. v. Gore , supra , 49 Cal.4th at pp. 21–22, 109 Cal.Rptr.3d 329, 230 P.3d 1117 ), there are none for discrimination or retaliation actions. Nor can we infer that failure to include such an exception was a legislative oversight. After all, a meritless discrimination claim, like other meritless claims, is capable of "chill[ing] the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances." ( § 425.16, subd. (a) ; see  Ingels v. Westwood One Broadcasting Services, Inc. (2005) 129 Cal.App.4th 1050, 1064, 28 Cal.Rptr.3d 933 [upholding strike of caller’s age discrimination claim against call-in radio talk show].)

Wilson, echoing the Court of Appeal, expresses concern that if the plaintiff’s allegations of discriminatory motives are not considered at the first step of the anti-SLAPP analysis, " ‘most, if not all, harassment, discrimination, and retaliation cases [will be subject] to motions to strike.’ " ( Wilson , supra , 6 Cal.App.5th at p. 835, rev. granted, quoting Nam v. Regents of University of California , supra , 1 Cal.App.5th at p. 1189, 205 Cal.Rptr.3d 687.) This result would impose substantial burdens on discrimination and retaliation plaintiffs, who would be compelled to establish the potential merit of their claims at an early stage of the litigation, generally "without the benefit of discovery and with the threat of attorney fees looming." ( Nam , at p. 1189, 205 Cal.Rptr.3d 687 ; accord, Bonni v. St. Joseph Health System , supra , 13 Cal.App.5th at p. 864, rev. granted; see Wilson , at p. 835.)

The concern is overstated. We see no realistic possibility that anti-SLAPP motions will become a routine feature of the litigation of discrimination or retaliation claims. The anti-SLAPP statute does not apply simply because an employer protests that its personnel decisions followed, or were communicated through, speech or petitioning activity. A claim may be struck under the anti-SLAPP statute "only if the speech or petitioning activity itself is the wrong complained of, and not just evidence of liability or a step leading to some different act for which liability is asserted." ( Park , supra , 2 Cal.5th at p. 1060, 217 Cal.Rptr.3d 130, 393 P.3d 905.) Put differently, to carry its burden at the first step, the defendant in a discrimination suit must show that the complained-of adverse action, in and of itself, is an act in furtherance of its speech or petitioning rights. Cases that fit that description are the exception, not the rule.

A brief survey of the case law illustrates the point. For example, in Martin v. Inland Empire Utilities Agency (2011) 198 Cal.App.4th 611, 624–625, 130 Cal.Rptr.3d 410, the court denied a government agency’s motion to strike an employee’s discrimination claim because the claim arose from various actions that had culminated in the employee’s constructive discharge, even though  the complaint also mentioned statements critical of the plaintiff’s performance. In McConnell v. Innovative Artists Talent & Literary Agency, Inc. (2009) 175 Cal.App.4th 169, 176–177, 96 Cal.Rptr.3d 1, the plaintiffs sued over the modification of their job duties and subsequent termination in retaliation for their filing lawsuits; that these allegedly retaliatory acts were conveyed in writing did not render them protected. And in  Department of Fair Employment & Housing v. 1105 Alta Loma Road Apartments, LLC (2007) 154 Cal.App.4th 1273, 1284–1285, 65 Cal.Rptr.3d 469, the plaintiff’s disability discrimination claims arose from a landlord’s failure to accommodate a disability by giving sufficient time to seek alternative housing, not the unlawful detainer action the landlord filed.

In the relatively unusual case in which the discrimination or retaliation defendant does meet its first-step burden of showing that its challenged actions qualify as protected activity, the burden shifts to the plaintiff. But the plaintiff’s second-step burden is a limited one. The plaintiff need not prove her case to the court ( Briggs v. Eden Council for Hope & Opportunity , supra , 19 Cal.4th at p. 1123, 81 Cal.Rptr.2d 471, 969 P.2d 564 ); the bar sits lower, at a demonstration of "minimal merit" ( Navellier v. Sletten , supra , 29 Cal.4th at p. 89, 124 Cal.Rptr.2d 530, 52 P.3d 703 ). At this stage, " ‘[t]he court does not weigh  evidence or resolve conflicting factual claims. Its inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment. It accepts the plaintiff’s evidence as true, and evaluates the defendant’s showing only to determine if it defeats the plaintiff’s claim as a matter of law.’ " ( Sweetwater Union High School Dist. v. Gilbane Building Co. (2019) 6 Cal.5th 931, 940, 243 Cal.Rptr.3d 880, 434 P.3d 1152, quoting Baral v. Schnitt (2016) 1 Cal.5th 376, 384–385, 205 Cal.Rptr.3d 475, 376 P.3d 604 ; see Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821, 123 Cal.Rptr.2d 19, 50 P.3d 733.)

True, in the absence of discovery, even this reduced barrier could pose particular difficulties for discrimination and retaliation plaintiffs, whose claims depend on assertions of motive that are peculiarly within the defendant’s knowledge. But "[c]ourts deciding anti-SLAPP motions ... are empowered to mitigate their impact by ordering, where appropriate, ‘that specified discovery be conducted notwithstanding’ the motion’s pendency." ( Equilon Enterprises v. Consumer Cause, Inc. , supra , 29 Cal.4th at p. 66, 124 Cal.Rptr.2d 507, 52 P.3d 685, quoting § 425.16, subd. (g).) A court exercising its discretion to grant or deny a motion under section 425.16, subdivision (g) should remain mindful that the anti-SLAPP statute was adopted to end meritless suits targeting protected speech, "not to abort potentially meritorious claims due to a lack of discovery." ( Sweetwater Union High School Dist. v. Gilbane Building Co. , supra , 6 Cal.5th at p. 949, 243 Cal.Rptr.3d 880, 434 P.3d 1152.) Where a defendant relies on motive evidence in support of  an anti-SLAPP motion, a plaintiff’s request for discovery concerning the asserted motive may often present paradigmatic "good cause." ( § 425.16, subd. (g).)

With careful attention to the limited nature of a plaintiff’s second step showing, and to granting discovery in appropriate cases, courts can mitigate the burden of anti-SLAPP enforcement on discrimination and retaliation plaintiffs, even if they cannot eliminate it altogether. If the Legislature believes the residual burden is unnecessary or excessive, it certainly can adjust the statutory scheme, as it has before. We cannot, however, rewrite the statute to create an exception the Legislature has not enacted.

In sum, we conclude that for anti-SLAPP purposes discrimination and retaliation claims arise from the adverse actions allegedly taken, notwithstanding the plaintiff’s allegation that the actions were taken for an improper purpose. If conduct that supplies a necessary element of a claim is protected, the defendant’s burden at the first step of the anti-SLAPP analysis has been carried, regardless of any alleged motivations that supply other elements of the claim. We disapprove Bonni v. St. Joseph Health System , supra , 13 Cal.App.5th 851, review granted, and Nam v. Regents of University of California , supra , 1 Cal.App.5th 1176, 205 Cal.Rptr.3d 687, to the extent they are inconsistent with this conclusion.

B. With these principles in mind, we return to the allegations in Wilson’s complaint. Wilson alleges a range of adverse employment actions, but the most prominent is CNN’s decision in January 2014 to terminate him. Expressly or implicitly, Wilson’s firing supplies  an element of the first six claims in the complaint. These claims thus all arise—at least in part—from this adverse action. (See Park , supra , 2 Cal.5th 1057, 217 Cal.Rptr.3d 130, 393 P.3d 905.)  We therefore begin by considering whether firing Wilson qualifies as an act in furtherance of CNN’s right to free speech. ( § 425.16, subd. (b)(1).)

CNN is a cable and Internet news organization. Its publication of news concerning matters of public interest is an exercise of free speech rights secured by the state and federal Constitutions. CNN does not contend the  termination of Wilson’s employment is itself speech. But to insulate the exercise of free speech rights against chilling litigation, the Legislature has defined protected activity to include not only the act of speaking, but "any other conduct in furtherance of the exercise of" constitutional speech rights on matters of public interest. ( § 425.16, subd. (e)(4).) CNN makes two arguments for application of that provision here. First, it argues that its selection of content producers is conduct in furtherance of its exercise of speech rights. Second, it argues that its decision to enforce its journalistic standards by terminating a writer for alleged plagiarism constitutes conduct in furtherance of protected activity.

See Reno v. American Civil Liberties Union (1997) 521 U.S. 844, 870, 117 S.Ct. 2329, 138 L.Ed.2d 874 (publication of Internet content entitled to 1st Amend. protection); Turner Broadcasting System, Inc. v. FCC (1994) 512 U.S. 622, 636, 114 S.Ct. 2445, 129 L.Ed.2d 497 ("Cable programmers ... engage in and transmit speech, and they are entitled to the protection of the speech and press provisions of the First Amendment"); Leathers v. Medlock (1991) 499 U.S. 439, 444, 111 S.Ct. 1438, 113 L.Ed.2d 494 ("Cable television provides to its subscribers news, information, and entertainment. It is engaged in ‘speech’ under the First Amendment, and is, in much of its operation, part of the ‘press.’ "); Park , supra , 2 Cal.5th at page 1071, 217 Cal.Rptr.3d 130, 393 P.3d 905 ("The reporting of news, whether in print or on air, is constitutionally protected free speech."); California Constitution, article I, section 2, subdivision (a) ("Every person may freely speak, write and publish his or her sentiments on all subjects ....").

The anti-SLAPP statute provides no explicit guidance for evaluating these arguments. Section 425.16, subdivision (e)(4), does not define precisely how, or to what extent, conduct must further the exercise of speech or petition rights to merit protection. At a minimum, the subdivision shields expressive conduct—the burning of flags, the wearing of armbands, and the like—that, although not a "written or oral statement or writing" ( § 425.16, subd. (e)(1)–(3) ), may similarly communicate views regarding "matters of public significance" (id. , subd. (a)). (See, e.g., Texas v. Johnson (1989) 491 U.S. 397, 404–406, 109 S.Ct. 2533, 105 L.Ed.2d 342 [flag burning]; Tinker v. Des Moines School Dist. (1969) 393 U.S. 503, 505–506, 89 S.Ct. 733, 21 L.Ed.2d 731 [armbands].) Indeed, the legislative history suggests expressive conduct was foremost in the Legislature’s thinking when subdivision (e)(4) was added. But the text’s reference to acts "in furtherance" of speech or petitioning rights can also reasonably be read to extend to at least certain conduct that,  though itself containing no expressive elements, facilitates expression.

The provision was inserted in 1997, five years after original enactment of the anti-SLAPP statute. The committee reports are uniform in describing the motivation for the provision. Proponents asserted "that the constitutional right of free speech and petition also includes constitutionally protected expressive conduct." (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 1296 (1997–1998 Reg. Sess.) as amended May 12, 1997, p. 4; Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 1296 (1997–1998 Reg. Sess.) as amended June 23, 1997, p. 4.) The Legislature agreed and sought to codify the principle that expressive conduct, like expressive speech, is protected activity. (See, e.g., Sen. Com. on Judiciary, Analysis of Sen. Bill No. 1296, supra , pp. 3–4; Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 1296, supra , p. 4; Assem. Com. on Judiciary, Analysis of Sen. Bill No. 1296 (1997–1998 Reg. Sess.) as amended May 12, 1997, p. 4.)

A news organization’s hiring or firing of employees—like virtually everything a news organization does—facilitates the organization’s speech to some degree. But it does not follow that everything the news organization  does qualifies as protected activity under the anti-SLAPP statute. The First Amendment does not immunize news organizations from laws of general applicability "simply because their enforcement ... has incidental effects on [the press’s] ability to gather and report the news." (  Cohen v. Cowles Media Co. (1991) 501 U.S. 663, 669, 111 S.Ct. 2513, 115 L.Ed.2d 586.) We likewise do not read the anti-SLAPP statute to call for preliminary screening of every claim that might be brought against a news organization, merely because the claim might have incidental effects on the organization’s operation. The question we must consider is whether, and when, a news organization’s selection of its employees bears a sufficiently substantial relationship to the organization’s ability to speak on matters of public concern to qualify as conduct in furtherance of constitutional speech rights.

1. We begin with the first, and broader, of CNN’s two arguments: that its decisions to hire or fire writers and other content producers categorically qualify as conduct in furtherance of its speech rights. The argument rests on two basic propositions. One, the right of a news organization to speak includes the right to exercise editorial control and judgment—that is, the right to choose what news it will report and how the news will be reported. ( Miami Herald Publishing Co. v. Tornillo (1974) 418 U.S. 241, 258, 94 S.Ct. 2831, 41 L.Ed.2d 730.) And two, an entity can act and speak only through the individuals that comprise and represent it. The law thus recognizes that, to exercise certain First Amendment freedoms, such as the right of free exercise of religion, an entity "must retain the corollary right to select its voice." ( Petruska v. Gannon University (3d Cir. 2006) 462 F.3d 294, 306 ; see ibid. [ministerial exception to federal employment discrimination law]; accord, Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC (2012) 565 U.S. 171, 185, 132 S.Ct. 694, 181 L.Ed.2d 650 ["it is impermissible for the government to contradict a church’s determination of who can act as its ministers"].)

But in the area of press freedoms, it has long been established that the First Amendment does not guarantee a news organization absolute control over who may write, report, or even edit on its behalf. ( Associated Press v. Labor Board (1937) 301 U.S. 103, 130–133, 57 S.Ct. 650, 81 L.Ed. 953 ( Associated Press ).) In Associated Press , the National Labor Relations Board (NLRB) charged the respondent news organization with unlawfully discharging an editorial employee for engaging in union activity and ordered the employee reinstated. Challenging the NLRB’s order on First Amendment grounds, the news organization urged that "whatever may be the case with respect to employees in its mechanical departments it must have absolute and unrestricted freedom to employ and to discharge those who ... edit the  news." ( Id. at p. 131, 57 S.Ct. 650.) The Supreme Court rejected this as an "unsound generalization" ( ibid. ), noting that the constitutional guarantees of free speech and a free press afford "[t]he publisher of a newspaper ... no special immunity from the application of general laws" ( id. at p. 132, 57 S.Ct. 650 ; see Pittsburgh Press Co. v. Human Rel. Comm’n (1973) 413 U.S. 376, 382–383, 93 S.Ct. 2553, 37 L.Ed.2d 669 ;  Shulman v. Group W Productions, Inc. (1998) 18 Cal.4th 200, 239, 74 Cal.Rptr.2d 843, 955 P.2d 469 ). Regulation of the press’s labor practices was permissible, provided it left untrammeled "the full freedom and liberty of the petitioner to publish the news as it desires it published or to enforce policies of its own choosing with respect to the editing and rewriting of news for publication." ( Associated Press , at p. 133, 57 S.Ct. 650.)

Courts in various contexts have applied these principles to distinguish between permissible regulation and unconstitutional interference with a newspaper’s editorial judgment. In Passaic Daily News v. N.L.R.B. (D.C. Cir. 1984) 736 F.2d 1543, 1549, for example, the court held that the NLRB could order the reinstatement of a newspaper columnist unlawfully discharged for engaging in union activity, though it drew the line at compulsory future publication of his weekly column. In McDermott v. Ampersand Pub., LLC (9th Cir. 2010) 593 F.3d 950, in contrast, the court invalidated an NLRB order requiring reinstatement of news reporters and editors, but it did so because these individuals had been discharged for "union activity directed at pressuring the newspaper’s owner and publisher to refrain from exercising editorial control over news reporting"; the court explained that under the circumstances, relief  "in support of union activity aimed at obtaining editorial control poses a threat of violating" the newspaper’s First Amendment editorial rights. ( Id. at p. 953 ; but see id. at pp. 968–971 (dis. opn. of Hawkins, J.) [injunction ordering reinstatement does not risk 1st Amend. infringement].) In Nelson v. McClatchy Newspapers (1997) 131 Wash.2d 523, 936 P.2d 1123, the Washington Supreme Court held that the First Amendment partially invalidated a statute prohibiting discrimination against employees for political participation because, in its judgment, the nature of the regulation directly interfered with the plaintiff newspaper’s ability to maintain journalistic integrity and credibility by restricting its employees’ political activism. ( Id. at p. 1133 ; but see id. at p. 1133 (dis. opn. of Dolliver, J.) ["The First Amendment does not give a newspaper immunity from general laws absent a showing of interference with the newspaper’s right to determine what to print."].)  The considerations raised in these cases differ, but the bottom line is this: Not every staffing decision a news organization makes—even with respect to those who write, edit, or otherwise produce content—enjoys constitutional protection. As a general rule, application of laws prohibiting racial and other forms of discrimination will leave the organization with "the full freedom and liberty" to "publish the news as it desires it published." ( Associated Press , supra , 301 U.S. at p. 133, 57 S.Ct. 650.) It follows that, also as a general rule, a legal challenge to a particular staffing decision will have no substantial effect on the news organization’s ability to speak on public issues, which is the anti-SLAPP statute’s concern.

As another example, in Hausch v. Donrey of Nevada, Inc. (D.Nev. 1993) 833 F.Supp. 822, 832, the federal district court rejected a newspaper’s First Amendment defense to the employment discrimination claim of a managing editor based on failure to promote her to the position of editor, reasoning that the application of antidiscrimination laws did not burden the newspaper’s "ability to control the content and character of their newspaper’s message."

Like most general rules, this one does admit of exceptions. Indeed, Wilson himself acknowledges that in some instances a news organization’s hiring decisions could qualify as conduct in furtherance of the organization’s constitutionally protected  speech on matters of public interest. He agrees, for example, that a television producer’s decision about whom to cast in a program can constitute part of the message conveyed, thus meriting anti-SLAPP protection. (Cf. Hunter v. CBS Broadcasting Inc. , supra , 221 Cal.App.4th at p. 1527, 165 Cal.Rptr.3d 123 [holding that choice of on-air employee to speak on behalf of news organization furthers organization’s exercise of speech rights].) Likewise, the decision to hire or fire an employee who is vested with ultimate authority to determine a news organization’s message might well have a substantial effect on the organization’s ability to speak as it chooses on matters of public concern. Lawsuits directed at influencing the selection of individuals who wield that type of ultimate authority could chill participation in the discussion of public issues, as surely as suits targeting the act of speaking itself. But not so with other employees in a newsroom who may contribute to, but lack ultimate say over, their employer’s speech. (See Manson v. Little Rock Newspapers, Inc. (E.D.Ark. 1999) 42 F.Supp.2d 856, 865 ["A reporter has no free-standing First Amendment right to have her articles published by a privately-owned newspaper for which she works."].) Suits over the hiring and firing of such employees—without more—pose no comparable threat to the exercise of editorial discretion.

As the movant, CNN has the burden of showing Wilson’s role bore such a relationship to its exercise of editorial control as to warrant protection under the anti-SLAPP statute. CNN has failed to make that showing. CNN does not contend that as a field producer Wilson had authority to decide what CNN would air. Instead, CNN relies solely on Wilson’s part-time role as a writer for its website, a comparatively minor part of his duties. But CNN does not demonstrate that Wilson, in his capacity as a writer, had authority to determine what would appear on CNN’s website. Indeed, the facts of this case demonstrate the contrary. Wilson’s work was vetted and reviewed by others who did have editorial power, and who decided whether his  work should—or in the case of the Baca story, should not—be published by CNN.  As far as the record shows, Wilson was one of countless employees whose work contributes to what a large news organization like CNN says about the issues of the day, but was not among those who appear on-air to speak for the organization or exercise authority behind the scenes to determine CNN’s message. CNN’s decisions concerning which assignments to give Wilson and whether to continue employing him, without more, had no substantial relationship to CNN’s ability to speak on matters of public concern. It follows that a claim based on these decisions, without more, falls outside the reach of the anti-SLAPP statute.

2. CNN’s second, and narrower, argument focuses on its specific asserted reason for terminating Wilson—his alleged plagiarism—rather than his general role as a content producer. In support of its motion, CNN submitted numerous declarations attesting that it became aware of possible plagiarism by Wilson, investigated the possibility, and elected to terminate Wilson based on its findings. CNN’s declarations also detail CNN’s prohibition against plagiarism, its policy of sanctioning employees who engage in plagiarism, and the editorial controls CNN has in place to ensure plagiarism will not occur.

Wilson acknowledges his termination followed an investigation into plagiarism, though he disputes CNN’s conclusions and claims the plagiarism rationale was pretextual. We need not, however, determine  whether Wilson plagiarized, or whether any plagiarism was a true motive for his termination. The question is only whether CNN has made out a prima facie case that activity underlying Wilson’s claims is protected. ( City of Montebello v. Vasquez , supra , 1 Cal.5th at p. 420, 205 Cal.Rptr.3d 499, 376 P.3d 624 ; Simpson Strong-Tie Co., Inc. v. Gore , supra , 49 Cal.4th at p. 21, 109 Cal.Rptr.3d 329, 230 P.3d 1117.)

CNN’s plagiarism rationale for terminating Wilson evokes a line of cases concerning the right of news organizations to maintain and enforce standards of journalistic ethics. In Newspaper Guild, etc. v. N.L.R.B. (D.C. Cir. 1980) 636 F.2d 550 ( Newspaper Guild ), the D.C. Circuit held that a newspaper’s code of ethics—unlike other terms of employment—is not the proper subject of mandatory collective bargaining. It explained: "[P]rotection of the editorial integrity of a newspaper lies at the core of publishing control. In a very real sense, that characteristic is to a newspaper or magazine what machinery is to a manufacturer. At least with respect to most news publications, credibility is central to their ultimate product and to the conduct of the enterprise. ... [¶] ... [A] news publication must be free to establish[,] without interference, reasonable rules designed to prevent its employees from engaging in activities which may directly compromise their standing as  responsible journalists and that of the publication for which they work as a medium of integrity." ( Id. at pp. 560–561, fns. omitted.) The Washington Supreme Court would later draw on this reasoning to invalidate the state’s political participation law as applied to a newspaper that had adopted rules against employees’ political activism. ( Nelson v. McClatchy Newspapers , supra , 936 P.2d at pp. 1131–1132.) "Editorial integrity and credibility," it held, "are core objectives of editorial control and thus merit protection under the free press clauses." ( Id. at p. 1131.)

We need not precisely delineate the reach of the relevant constitutional principles here. ( City of Montebello v. Vasquez , supra , 1 Cal.5th at pp. 421–422, 205 Cal.Rptr.3d 499, 376 P.3d 624.) The only question before us is whether, as CNN argues, its decision to terminate Wilson for plagiarism was conduct "in furtherance of" the organization’s speech rights within the meaning of section 425.16, subdivisions (b)(1) and (e). We conclude it was.

Online and on air, CNN covers myriad "matters of public significance." ( § 425.16, subd. (a).) Its broadcasts and publications include extensive "speech in connection with a public issue or an issue of public interest." (Id. , § sub. (e)(4).) CNN presented evidence tending to show that its ability to participate meaningfully in public discourse on these subjects depends on its integrity and credibility.  Plagiarism is universally recognized as a serious breach of journalistic ethics. Disciplining an employee for violating such ethical standards furthers a news organization’s exercise of editorial control to ensure the organization’s reputation, and the credibility of what it chooses to publish or broadcast, is preserved. These objectives lie "at the core" of the press function. ( Newspaper Guild , supra , 636 F.2d at p. 560 ; see id. at p. 561.) CNN has made out a prima facie case that its staffing decision was based on such considerations, and that such decisions protect the ability of a news organization to contribute credibly to the discussion of public matters. The staffing decision thus qualifies as "conduct in furtherance" of CNN’s "speech in connection with" public matter. ( § 425.16, subd. (e)(4).)

But CNN’s invocation of journalistic ethics only takes it so far. The lone act CNN justifies as motivated by the need to enforce editorial standards forbidding plagiarism  is its termination of Wilson. CNN’s own evidence demonstrates that it was unaware of any potential plagiarism until a few weeks before Wilson was let go. CNN has thus carried its first-step burden only insofar as Wilson’s employment-related claims arise from his termination. To the extent Wilson’s causes of action include claims of illegal discrimination and retaliation based on other acts—passing him over for promotions, menial assignments, and so on—these causes of action will survive, even if the termination-specific claims are stricken. (See Baral v. Schnitt , supra , 1 Cal.5th at pp. 393–394, 205 Cal.Rptr.3d 475, 376 P.3d 604 [anti-SLAPP motions target only those claims within a cause of action that rest on protected activity].) Because the Court of Appeal concluded CNN had wholly failed to meet its first-step burden, it did not address whether Wilson’s termination claims must be stricken, or whether they instead have the requisite minimal merit to proceed. We remand on these claims so the Court of Appeal may address that issue in the first instance.

IV.
We turn next to Wilson’s defamation claim. According to the complaint, CNN told third parties, including prospective employers, that Wilson "had plagiarized ... passages in the Baca story and thereby violated CNN standards and practices." Wilson’s declaration also describes a statement by a CNN human resources manager, at a meeting with Wilson and Wilson’s supervisor, defendant Peter Janos, that Wilson had plagiarized. Wilson and CNN disagree over whether these statements were "conduct in furtherance of the exercise of [free speech rights] in connection with a public issue or an issue of public interest." ( § 425.16, subd. (e)(4).) We conclude they were not. Wilson’s complaint alleges the statements to those outside the company on information and belief. No contextual details are provided.

A. In contrast to Wilson’s employment-related claims, Wilson’s defamation claim is based on CNN’s speech rather than any tangible action. A casual reader of the anti-SLAPP statute might wonder whether this makes a difference, since unlike the other provisions of subdivision (e) of section 425.16, subdivision (e)(4) refers to "conduct," not "statement[s]." But courts (including this one) have generally assumed that this reference to "conduct" includes oral or written statements, and a closer reading of the statute reveals why the assumption is correct.

See, e.g., FilmOn.com Inc. v. DoubleVerify Inc. , supra , 7 Cal.5th at p. 149, 246 Cal.Rptr.3d 591, 439 P.3d 1156 (applying § 425.16, subd. (e)(4) to statements); Rand Resources, LLC v. City of Carson , supra , 6 Cal.5th at pp. 621–628, 243 Cal.Rptr.3d 1, 433 P.3d 899 (same); McGarry v. University of San Diego (2007) 154 Cal.App.4th 97, 109–111, 64 Cal.Rptr.3d 467 (same); Vogel v. Felice (2005) 127 Cal.App.4th 1006, 1015, 26 Cal.Rptr.3d 350 (same); Wilbanks v. Wolk (2004) 121 Cal.App.4th 883, 897–898, 17 Cal.Rptr.3d 497 (same).

The reason is straightforward: Section 425.16, subdivision (e)(1), (2), and (3), each describe circumstances in which a "written or oral statement or writing" is eligible for protection as an "act" in furtherance of speech or petitioning rights—when the statement is  made before an official proceeding, made in a public place on a public issue, and so on. Subdivision (e)(4) extends protection to "any other conduct" that meets the requirements specified in that subdivision. Even though the word "conduct" is often used,  particularly in the First Amendment context, in contradistinction  to "speech," the use of the phrase "other conduct" (ibid. , italics added) indicates the Legislature regarded the acts of speaking or writing identified in the preceding provisions as "conduct" too. It follows that "conduct" in subdivision (e)(4) is intended to embrace speech, as well as tangible action. To the extent there is any doubt, we construe the statute broadly to achieve its purposes. ( § 425.16, subd. (a).)

The harder question concerns precisely what kinds of speech are covered by subdivision (e)(4). Unlike its neighboring subdivisions—which define protected conduct "not only by its content, but also by its location, its audience, and its timing" ( FilmOn.com Inc. v. DoubleVerify Inc. , supra , 7 Cal.5th at p. 143, 246 Cal.Rptr.3d 591, 439 P.3d 1156 )—the "catchall" provision of subdivision (e)(4) contains "no similar contextual references to help courts discern the type of conduct and speech to protect" ( id. at p. 144, 246 Cal.Rptr.3d 591, 439 P.3d 1156 ). But when a general provision follows specific examples, as subdivision (e)(4) follows subdivision (e)(1) through (e)(3), we generally understand that provision as " ‘ "restricted to those things that are similar to those which are enumerated specifically." ’ " ( Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 743, 101 Cal.Rptr.3d 758, 219 P.3d 736 ; accord, FilmOn.com Inc. , at p. 144, 246 Cal.Rptr.3d 591, 439 P.3d 1156.)

The common thread that runs through subdivision (e)(1) through (e)(3) is that each provision protects speech that contributes to the public discussion or resolution of public issues—a thread that also ties these provisions together with the statute’s stated purpose of furthering "continued participation in matters of public significance." ( § 425.16, subd. (a).) It follows that a defendant who claims its speech was protected as "conduct in furtherance of the exercise of [free speech rights] in connection with a public issue or an issue of public interest" (id. , subd. (e)(4)) must show not only that its speech referred to an issue of public interest, but also that its speech contributed to public discussion or resolution of the issue (see FilmOn.com Inc. v. DoubleVerify Inc. , supra , 7 Cal.5th at pp. 150–152, 246 Cal.Rptr.3d 591, 439 P.3d 1156 ; City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 217–218, 129 Cal.Rptr.3d 433 ; Wilbanks v. Wolk , supra , 121 Cal.App.4th at p. 898, 17 Cal.Rptr.3d 497 ).

B. CNN argues its statements were in connection with three issues of public significance: Los Angeles County Sheriff Lee Baca’s retirement, Wilson’s plagiarism, and the general subject of journalistic ethics. Considering each in turn, we conclude Wilson’s defamation claim does not arise from speech on "a public issue or an issue of public interest" ( § 425.16, subd. (e)(4) ) that contributed to public discussion of that issue. Sheriff Baca’s retirement was indeed a matter of public interest. But  Wilson’s claim does not rest on statements CNN made about that subject; it rests instead on statements about the reason for Wilson’s termination. The story Wilson wrote could have been about some other topic entirely—the state of global financial markets, gardening tips, or anything else under the sun—and his defamation claim would be the same. CNN’s  alleged statements, although they tangentially referenced Sheriff Baca’s retirement, did not contribute to any public, or even private, discussion of that subject. It follows that the defamation claim does not arise from statements made "in connection with" any public issue related to Sheriff Baca’s retirement. ( § 425.16, subd. (e)(4).)

The sudden, unexpected retirement of a public official (Mather & Sewell, Sheriff Lee Baca’s retirement: ‘Very shocking and very surprising ,’ L.A. Times (Jan. 7, 2014) < https://www.latimes.com/local/lanow/la-xpm-2014-jan-07-la-me-ln-sheriffs-bacas-retirement-very-shocking-and-very-surprising-20140107-story.html> [as of July 22, 2019] ), who later was convicted of obstructing the FBI investigation into inmate abuse in county jails (Stevens, Ex-Los Angeles Sheriff Lee Baca Is Sentenced to 3 Years in Prison , N.Y. Times (May 12, 2017) < https://www.nytimes.com/2017/05/12/us/lee-baca-los-angeles-county-sheriff-sentenced-prison.html> [as of July 22, 2019] ), was a chapter in an ongoing scandal that implicated public concerns such as government misfeasance and prison reform. All Internet citations in this opinion are archived by year, docket number, and case name at < https://www.courts.ca.gov/38324.htm>.

CNN contends the actual subject of its statement, Wilson’s professional competence and the reasons for his termination, is also an issue of public interest. But not every employment dispute—even at a prominent news organization—is a matter of public significance. Certainly some individuals may be so prominent, or in such a prominent position, that any discussion of them concerns a matter of public interest. (See McGarry v. University of San Diego , supra , 154 Cal.App.4th at p. 110, 64 Cal.Rptr.3d 467.) But absent unusual circumstances, a garden-variety employment dispute concerning a nonpublic figure will implicate no public issue. (See, e.g., Baughn v. Department of Forestry & Fire Protection (2016) 246 Cal.App.4th 328, 337–339, 200 Cal.Rptr.3d 764 ; Albanese v. Menounos (2013) 218 Cal.App.4th 923, 934–937, 160 Cal.Rptr.3d 546 ; Carpenter v. Jack in the Box Corp. (2007) 151 Cal.App.4th 454, 472, 59 Cal.Rptr.3d 839 ; Olaes v. Nationwide Mutual Ins. Co. (2006) 135 Cal.App.4th 1501, 1510–1511, 38 Cal.Rptr.3d 467 ; Du Charme v. International Brotherhood of Electrical Workers (2003) 110 Cal.App.4th 107, 113–119, 1 Cal.Rptr.3d 501 ; Rivero v. American Federation of State, County and Municipal Employees, AFL-CIO (2003) 105 Cal.App.4th 913, 919–929, 130 Cal.Rptr.2d 81.) Workplace misconduct "below some threshold level of significance is not an issue of public interest, even though it implicates a public policy." ( Rivero , at p. 924, 130 Cal.Rptr.2d 81.)

Based on the evidence CNN presented in support of its motion, Wilson is not a figure so prominently in the public eye that any remark about  him would qualify as speech on a matter of public concern. CNN cites as proof of Wilson’s prominence the numerous stories Wilson’s lawsuit and the Court of Appeal decision generated. This reliance is unavailing: "[T]hose charged with defamation cannot, by their own conduct, create their own defense by making the claimant a public figure." ( Hutchinson v. Proxmire (1979) 443 U.S. 111, 135, 99 S.Ct. 2675, 61 L.Ed.2d 411.) Nor does Wilson’s own evidence of his awards make him a person of such notoriety that a statement about the reason for his termination would necessarily concern an issue of public interest (cf. McGarry v. University of San Diego , supra , 154 Cal.App.4th at p. 110, 64 Cal.Rptr.3d 467 [reasons for dismissing prominent university football coach of public interest] ).

CNN argues the Court of Appeal erred by making Wilson’s status as a figure in the public eye a necessary component of any showing that CNN’s statement about him was protected activity. But the Court of Appeal did no such thing. Rather, the court held that if Wilson were a figure  in the public eye, that status could be a sufficient basis to conclude statements about him would be on a matter of public interest. ( Wilson , supra , 6 Cal.App.5th at pp. 832–833, rev. granted.) Other grounds might also have justified that conclusion even if Wilson were not well-known. ( Ibid. ) We hold likewise: that a statement is about a person or entity in the public eye may be sufficient, but is not necessary, to establish the statement is "free speech in connection with a public issue or an issue of public interest." ( § 425.16, subd. (e)(4) ; see FilmOn.com Inc. v. DoubleVerify Inc. , supra , 7 Cal.5th at pp. 145–146, 246 Cal.Rptr.3d 591, 439 P.3d 1156 ; Rand Resources, LLC v. City of Carson, supra , 6 Cal.5th at p. 621, 243 Cal.Rptr.3d 1, 433 P.3d 899.)

CNN’s final argument is that, even if Wilson is not a figure in the public eye, discussion of his termination implicates a larger issue that indisputably is of public interest—journalistic ethics. This argument rests on "what might be called the synecdoche theory of public issue in the anti-SLAPP statute" ( Commonwealth Energy Corp. v. Investor Data Exchange, Inc. (2003) 110 Cal.App.4th 26, 34, 1 Cal.Rptr.3d 390 ): that the discussion of a purported lapse on the part of one of its writers is equivalent to a conversation about the ethical lapses of all  journalists everywhere. But for anti-SLAPP purposes, as courts have long recognized, "[t]he part is not synonymous with the greater whole." ( Ibid. ) Contrary to arguments that various defendants have pressed over the years, "[s]elling an herbal breast enlargement product is not a disquisition on alternative medicine. Lying about the supervisor of eight union workers is not singing one of those old Pete Seeger union songs (e.g., ‘There Once Was a Union Maid’). And ... hawking an investigatory service is not an economics lecture on the importance of information for efficient markets." ( Ibid. ; accord, FilmOn.com Inc. v. DoubleVerify Inc. , supra , 7 Cal.5th at p. 152, 246 Cal.Rptr.3d 591, 439 P.3d 1156 ;  Consumer Justice Center v. Trimedica International, Inc. (2003) 107 Cal.App.4th 595, 601, 132 Cal.Rptr.2d 191 ; Rivero v. American Federation of State, County and Municipal Employees, AFL-CIO , supra , 105 Cal.App.4th at pp. 919, 924, 130 Cal.Rptr.2d 81.)

Similarly, here, CNN’s alleged statements about an isolated plagiarism incident did not contribute to public debate about when authors may or may not borrow without attribution. "What a court scrutinizing the nature of speech in the anti-SLAPP context must focus on is the speech at hand, rather than the prospects that such speech may conceivably have indirect consequences for an issue of public concern." ( Rand Resources, LLC v. City of Carson, supra , 6 Cal.5th at p. 625, 243 Cal.Rptr.3d 1, 433 P.3d 899 ; see Consumer Justice Center v. Trimedica International, Inc. , supra , 107 Cal.App.4th at p. 601, 132 Cal.Rptr.2d 191 ["If we were to accept [defendant’s] argument that we should examine the nature of the speech in terms of generalities instead of specifics, then nearly any claim could be sufficiently abstracted to fall within the anti-SLAPP statute"].) To sweep in a claim about falsehoods made regarding a nonpublic figure, where the falsehoods do not contribute in any meaningful way to discussion or resolution of an ongoing matter of public significance, would do nothing to advance the statute’s stated purpose of shielding defendants from meritless lawsuits designed to chill speech and petitioning on matters of public interest or controversy. (See § 425.16, subd. (a).)

Relevant, too, is the private context of the alleged statements. Granted, private communications may qualify as protected activity in some circumstances.  ( FilmOn.com Inc. v. DoubleVerify Inc. , supra , 7 Cal.5th at p. 146, 246 Cal.Rptr.3d 591, 439 P.3d 1156 ; Navellier v. Sletten , supra , 29 Cal.4th at p. 91, 124 Cal.Rptr.2d 530, 52 P.3d 703.) But the private context eliminates any possibility of protection under section 425.16, subdivision (e)(3), for example, and here makes heavier CNN’s burden of showing that, notwithstanding the private context, the alleged statements nevertheless contributed to discussion or resolution of a public issue for purposes of subdivision (e)(4). (See FilmOn.com Inc. , at pp. 146, 150–151, 246 Cal.Rptr.3d 591, 439 P.3d 1156.)

This case does not resemble other cases in which speech concerning the actions of individual nonpublic figures has been held to contribute to ongoing debate on a public controversy. For example, in Taus v. Loftus (2007) 40 Cal.4th 683, 712–713, 54 Cal.Rptr.3d 775, 151 P.3d 1185, we considered the case of two scholars who had investigated a claimed instance of repressed memory recovery and who had published and lectured on the case study to urge caution in acceptance of such memories. We had no difficulty concluding the scholars’ speech concerning the lessons they drew from their case study was entitled to anti-SLAPP protection; the speech contributed to discussion of a matter of ongoing public debate. Similarly, the Court of Appeal in M. G. v. Time Warner, Inc. (2001) 89 Cal.App.4th 623, 107 Cal.Rptr.2d 504 held that a magazine article and television program addressing "the general topic of child molestation in youth sports," a significant  public issue, were protected, even though the article and program illustrated their discussion with examples of specific instances of misconduct. ( Id. at p. 629, 107 Cal.Rptr.2d 504.) No comparable connection between Wilson’s alleged misconduct and any public issue is present here.

For these reasons, we conclude CNN’s privately communicated statements about Wilson’s purported violation of journalistic  ethics do not constitute "conduct in furtherance of ... the constitutional right of free speech in connection with a public issue or an issue of public interest." ( § 425.16, subd. (e)(4).)

V.
CNN has failed to carry its first-step burden with respect to many of Wilson’s claims, but it has met that burden with respect to those claims based on the termination of his employment. CNN is therefore entitled to preliminary screening of those claims to determine whether they have minimal merit. We affirm the Court of Appeal’s judgment in part, reverse in part, and remand for further proceedings not inconsistent with this opinion.

We Concur:
CANTIL-SAKAUYE, C. J.
CHIN, J.
CORRIGAN, J.
LIU, J
CUÉLLAR, J.
GROBAN, J.
PAGA isn’t Class Action

Representative actions brought under the California Private Attorneys General Act cannot be brought as a “class action” under the Class Action Fairness Act of 2005
Canela v. Costco Wholesale Corp.


SOURCE: 

KEY WORDS:
PAGA, California Labor Law, CAFA of 2005

AGENCY: 
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Document Citation: 
   No. 18-16592

LILIANA CANELA, individually and on behalf of all others similarly situated, 

Plaintiff-Appellee,


v.


COSTCO WHOLESALE CORPORATION,
Defendant-Appellant.
No. 18-16592

D.C. No.
5:13-cv-03598-
BLF

OPINION

_________________________ 


Appeal from the United States District Court
for the Northern District of California
Beth Labson Freeman, District Judge, Presiding


Argued and Submitted January 6, 2020
San Francisco, California


Filed July 9, 2020


Before: J. Clifford Wallace and Michelle T. Friedland,
Circuit Judges, and Timothy Hillman,* District Judge.
Opinion by Judge Wallace

SUMMARY

Diversity Jurisdiction/Class Action Fairness Act


The panel vacated the district court's summary judgment with instructions to remand to state court because the district court lacked subject matter jurisdiction at the time the action was removed to federal court.

Plaintiff, a Costco Wholesale Corporation employee, filed a state class action complaint alleging that Costco violated California Labor Code § 1198 by failing to provide her and other employees suitable seating. Plaintiff's only claim arose under California's Private Attorney General Act ("PAGA"). Costco removed the case to federal court based on the federal diversity statute, 28 U.S.C. § 1332(a), and the Class Action Fairness Act ("CAFA").

Concerning traditional diversity jurisdiction, the panel held that the amount in controversy did not meet the statutory threshold at the time of removal. Because the named plaintiff's pro-rata share of civil penalties, including attorney's fees, totaled $6,600 at the time of removal, and the claims of other employees could not be aggregated with hers under Urbino v. Orkin Services of California, Inc., 726 F.3d 1118 (9th Cir. 2013), the requisite $75,000 jurisdictional threshold was not met. Accordingly, the district court lacked diversity jurisdiction at the time of removal.


The panel held that the district court also lacked subject matter jurisdiction under CAFA because plaintiff's stand-alone PAGA lawsuit was not, and could not have been, filed under a state rule similar to Rule 23 of the Federal Rules of Civil Procedure. The panel held that the holding in Baumann v. Chase Investment Services Corp., 747 F.3d 1117, 1122 (9th Cir. 2014), that "PAGA actions are [] not sufficiently similar to Rule 23 class actions to trigger CAFA jurisdiction," controlled the outcome of this appeal. The panel rejected Costco's argument that because the named plaintiff originally sought class status in her complaint, her case was filed as a class action within the meaning of CAFA. The panel also rejected Costco's argument that the decisions in Mississippi ex rel. Hood v. AU Optronics Corp., 571 U.S. 161 (2014), and Hawaii ex rel. Louie v. HSBC Bank Nevada, N.A., 761 F.3d 1027 (9th Cir. 2014), compelled a different result.


ORDER AND AMENDED OPINION

OPINION

The opinion in Canela v. Costco Wholesale Corporation, 965 F.3d 694 (9th Cir. 2020), is amended as follows:

Page 697, final sentence: Replace Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008) (citations omitted).> with Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008) (citation omitted); see also Ehrman v. Cox Commc'ns, Inc., 932 F.3d 1223, 1227 (9th Cir. 2019).> The panel has unanimously voted to deny the petition for panel rehearing. Judge Friedland voted to deny the petition for rehearing en banc, and Judge Wallace and Judge Hillman so recommend. The full court has been advised of the petition for rehearing en banc and no judge has requested a vote on whether to rehear the matter en banc. Fed. R. App. P. 35. The petition for panel rehearing and the petition for rehearing en banc are DENIED. No further petitions for panel rehearing or rehearing en banc will be considered.

WALLACE, Circuit Judge.


Costco Wholesale Corporation appeals from the district court's summary judgment in favor of Liliana Canela. We have appellate jurisdiction under 28 U.S.C. § 1292(b). Because the district court lacked subject matter jurisdiction at the time of removal, we vacate the district court's summary judgment with instructions to remand the case to state court.


I.

Costco is a nationwide retail chain that sells merchandise and offers services to registered members. To verify that those entering its warehouses are members, Costco hires greeters to stand near the entrance where customers display their membership card. Costco also hires exit checkers to stand near the exit and check customers' purchases against their receipts. Costco classifies its greeters and exit checkers as "member service" employees.


Canela worked as a greeter and exit checker at two of Costco's warehouses in California. She sued Costco in a state trial court in California, alleging that Costco had violated California Labor Code section 1198 by failing to provide her and other member service employees who worked as greeters and exit checkers with "suitable seat[ing]" under section 14 of California's Wage Order 7-2001. Cal. Code Regs. tit. 8 § 11070. Because a violation of Labor Code section 1198 confers a cause of action under California's Private Attorneys General Act of 2004 (PAGA), Canela's only claim arises under PAGA. Cal. Labor Code § 2698. Canela's Complaint said "Class Action Complaint" on its cover page and included references to the lawsuit as a class action.


Relying on both the federal diversity statute, see 28 U.S.C. § 1332(a), and the Class Action Fairness Act of 2005 (CAFA), see id. § 1332(d), Costco removed the case to federal court. About a year later, Canela notified the district court that she no longer planned to seek class status. Canela suggested that the district court lacked jurisdiction because her PAGA claim was always a "representative action" and could have never been brought as a "class action" under CAFA. In light of Canela's submission, the district court ordered the parties to brief the issue of its jurisdiction. Because Canela had denominated her lawsuit as a "class action" and had sought class status on her PAGA claim as of the time the case was removed from state court, the district court concluded that it had retained CAFA jurisdiction even though Canela had later decided not to pursue class certification.

Costco then moved for partial summary judgment, contending that without a certified class, Canela lacked Article III standing to represent absent aggrieved employees and could not represent absent "aggrieved employees" under Federal Rule of Civil Procedure 23. The district court denied Costco's motion.


Costco swiftly moved to certify an interlocutory appeal under 28 U.S.C. § 1292(b), raising two questions: (1) "Whether, absent class certification, a PAGA plaintiff in federal court has Article III standing to represent absent aggrieved employees[?]" and (2) "Whether a PAGA plaintiff in federal court can represent absent aggrieved employees without qualifying for class certification under Rule 23[?]" Canela v. Costco Wholesale Corp., No. 13-cv-03598-BLF, 2018 WL 3008532, at *1 (N.D. Cal. June 15, 2018). Concluding that they presented controlling issues of law over which there was a substantial ground for difference in opinion, the district court certified both questions. Id. at *4. We agreed and granted Costco permission to appeal. Costco timely appealed.


II.

"Section 1292(b) authorizes appeals from orders, not questions, so `our review of the present controversy is not automatically limited solely to the question deemed controlling by the district court.'" Baumann v. Chase Inv. Servs. Corp., 747 F.3d 1117, 1120 (9th Cir. 2014), quoting In re Cinematronics, Inc., 916 F.2d 1444, 1449 (9th Cir. 1990). The district court's order on its jurisdiction led to and was discussed in the district court's summary judgment from which Costco now appeals. Because the district court's subject matter jurisdiction is "material" to the summary judgment before us, we address it here. In re Cinematronics, Inc., 916 F.2d at 1449 (citation omitted; emphasis in original). We must do so before we may turn to the merits. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998). To that end, we ordered the parties to submit briefing on the jurisdictional question.

"We review de novo a district court's denial of a motion to remand to state court for lack of federal subject matter jurisdiction." Chapman v. Deutsche Bank Nat'l Tr. Co., 651 F.3d 1039, 1043 (9th Cir. 2011) (citation omitted). We review the "construction, interpretation, or applicability" of CAFA de novo. Bush v. Cheaptickets, Inc., 425 F.3d 683, 686 (9th Cir. 2005) (citation omitted). A "defendant seeking removal has the burden to establish that removal is proper." Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008) (citation omitted); see also Ehrman v. Cox Commc'ns, Inc., 932 F.3d 1223, 1227 (9th Cir. 2019).


III.

In removing the case, Costco invoked two independent bases for federal subject matter jurisdiction: diversity under section 1332(a) and CAFA jurisdiction. We address each in turn.


A.

Traditional diversity jurisdiction requires complete diversity of citizenship and an amount in controversy greater than $75,000. 28 U.S.C. § 1332(a). Where, as here, "a plaintiff's state court complaint does not specify a particular amount of damages, the removing [party] bears the burden of establishing, by a preponderance of the evidence, that the amount in controversy exceeds" the threshold at the time of removal. Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996).


We hold that the amount in controversy did not meet the statutory threshold at the time of removal. Our decision in Urbino v. Orkin Services of California, Inc., 726 F.3d 1118 (9th Cir. 2013), controls.


In Urbino, the plaintiff employee had brought a representative PAGA cause of action in state court. Id. at 1121. The defendants removed the case to federal court, submitting evidence that the alleged labor code violations involved over 800 other employees and over 17,000 paychecks, thereby establishing that the aggregated claims exceeded $75,000. Id. If the claims could be aggregated among all employees with potential claims, the civil penalties for the alleged violations exceeded $9,000,000, well above the $75,000 threshold. Id. However, with no aggregation, the action fell short of the $75,000 threshold because the named plaintiff's pro rata share was only a little over $11,000. Id.


The question before us was therefore whether the penalties of all employees could be aggregated to satisfy the amount in controversy requirement. Id. We concluded that PAGA civil penalties could not be aggregated for this purpose, and therefore that the district court lacked diversity jurisdiction. Id. at 1122-23.[1]


For the same reason, diversity jurisdiction is lacking here. In its Notice of Removal, Costco said that the 968 employees collectively sought $5,324,000 in civil penalties. Costco also said that it could be liable for $1,064,800 in attorney's fees. Because Canela's pro-rata share of civil penalties, including attorney's fees, totaled $6,600 at the time of removal, and the claims of other member service employees may not be aggregated under Urbino, the $75,000 jurisdictional threshold was not met. See id. at 1122; Gibson v. Chrysler Corp., 261 F.3d 927, 942 (9th Cir. 2001) (explaining that we consider a successful party's pro rata share of attorney's fees in assessing whether her claim meets the jurisdictional threshold).[2] Thus, the district court lacked diversity jurisdiction at the time of removal.


B.

We next turn to the question whether the district court had CAFA jurisdiction. CAFA "relaxed" the diversity requirements for putative class actions. Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 84 (2014). Under CAFA, federal courts have jurisdiction over a "class action" when the parties are minimally diverse, i.e., any member of a class of plaintiffs is a citizen of a state different from that of any defendant, and the amount in controversy exceeds $5,000,000, see 28 U.S.C. § 1332(d)(2)(A), and when the proposed class has at least 100 members, see id. § 1332(d)(5)(B).


The proposed "class" here is made up of at least 100 members and Canela's citizenship (California) is diverse from Costco's (Washington). Although the parties dispute whether the amount in controversy exceeded $5,000,000 at the time of removal, see 28 U.S.C. § 1332(d)(6), we need not resolve that issue here, because we hold that the Complaint was not filed as a "class action" under CAFA.


CAFA defines a "class action" as "any civil action filed under Rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action." 28 U.S.C. § 1332(d)(1)(B). Because Canela sued in California state court, the suit was not "filed under Rule 23 of the Federal Rules of Civil Procedure." Id. The only issue before us is whether Canela filed her PAGA cause of action under a "similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action." Id.


In resolving this issue, we do not write on a clean slate. We have observed that there is "no ambiguity in CAFA's definition of class action." Washington v. Chimei Innolux Corp., 659 F.3d 842, 848 (9th Cir. 2011). If Congress had "intended CAFA to apply to any representative actions demonstrating sufficient similarity to class actions under Rule 23, it would not have also included an explicit requirement that the suit be brought `as a class action.'" Id., quoting 28 U.S.C. § 1332(d)(1)(B). Applying the plain meaning of CAFA, we have held that parens patriae suits are not "class actions" when they "lack statutory requirements for numerosity, commonality, typicality, or adequacy of representation that would make them sufficiently `similar' to actions brought under Rule 23, and [other] certification procedures." Id. at 850.


CAFA therefore requires "that the state statute authorize the suit `as a class action'" and that the suit meet "the central requirements of class actions." Id. Although "suits [that] lack the defining attributes of true class actions" may be "representative actions," they are not "class actions" under CAFA. Id. at 848, 850.


We expounded on this language a few years later in Baumann. 747 F.3d 1117 (9th Cir. 2014). We explained that a state statute or rule is similar to Rule 23 if it "closely resembles" it "or is like Rule 23 in substance or in essentials.Id. at 1121, quoting W. Va. ex rel. McGraw v. CVS Pharmacy, Inc., 646 F.3d 169, 174 (4th Cir. 2011) (emphasis added).


Our holding in Baumann that "PAGA actions are [] not sufficiently similar to Rule 23 class actions to trigger CAFA jurisdiction" controls the outcome of this appeal. Id. at 1122. In reaching this conclusion, we explained exactly why PAGA causes of action were nothing like Rule 23 class actions.


We observed that in a PAGA suit, "the court does not inquire into the named plaintiff's and class counsel's ability to fairly and adequately represent unnamed employees— critical requirements in federal class actions . . . ." Id. (citations omitted). In addition, "unlike Rule 23(a), PAGA contains no requirements of numerosity, commonality, or typicality." Id. at 1123, citing Purdue Pharma L.P. v. Kentucky, 704 F.3d 208, 216-17 (2d Cir. 2013) (holding that the suit was not filed as a "class action" under CAFA because it contained none of the "hallmarks of Rule 23 class actions; namely, adequacy of representation, numerosity, commonality, typicality, or the requirement of class certification"); CVS Pharmacy, Inc., 646 F.3d at 175-76 (same).


We also explained that unlike the due process protections afforded to putative class members under Rule 23, "PAGA has no notice requirements for unnamed aggrieved employees, nor may such employees opt out of a PAGA action." Baumann, 747 F.3d at 1122. As a result, the preclusive effect of PAGA judgments differs from that of class action judgments in two important ways. Id.


First, unlike a class action, a judgment from a PAGA suit "binds all those, including nonparty aggrieved employees, who would be bound by a judgment in an action brought by the government." Arias, 209 P.3d at 933. So, "with respect to the recovery of civil penalties, nonparty employees as well as the government are bound by the judgment in an action brought under" PAGA, without an opportunity to opt out. Iskanian v. CLS Transp. L.A., LLC, 327 P.3d 129, 147 (Cal. 2014).


Second, unlike class action judgments that preclude all claims the class could have brought under traditional res judicata principles, employees retain all rights "to pursue or recover other remedies available under state or federal law" in PAGA judgments. Baumann, 747 F.3d at 1123, quoting Cal. Lab. Code § 2699(g)(1). Because non-party aggrieved employees in PAGA suits are "not given notice of the action or afforded any opportunity to be heard," they are not "bound by the judgment as to remedies other than civil penalties." Arias, 209 P.3d at 934, citing Taylor v. Sturgell, 553 U.S. 880, 900-01 (2008)).


We also highlighted the different remedial schemes that exist in Rule 23 class actions and PAGA suits. "In class actions, damages are typically restitution for wrongs done to class members." Baumann, 747 F.3d at 1123. In contrast, PAGA suits "primarily seek to vindicate the public interest in enforcement of California's labor law." Id. (citations omitted). While 75 percent of the recovered civil penalties in a PAGA action is distributed to the Labor and Workforce Development Agency (Agency), only 25 percent is allocated among aggrieved employees. Id. at 1121, citing Cal Lab. Code § 2699(i). The portion of civil penalties reserved for aggrieved employees is not "restitution for wrongs done to members of the class" and "does not reduce any other claim that the employee may have against the employer." Id. at 1123. Instead, it is an "incentive to perform a service to the state."[3] Id. PAGA is therefore a "type of qui tam action" in which the "government entity on whose behalf the plaintiff files suit is always the real party in interest in the suit." Iskanian, 327 P.3d at 148 (citation omitted).[4]

Costco attempts to distinguish Baumann because the complaint there, unlike the one here, "did not invoke the California class action statute." Baumann, 747 F.3d at 1121. In Costco's view, because Canela originally sought class status in her Complaint, her suit was filed as a "class action" under CAFA.


We recognize that Canela titled her Complaint "Class Action Complaint for Violations of the Private Attorneys General Act of 2004." In the caption page, Canela also referred to the Complaint as "a class and representative action." The footer of her Complaint refers to the document as a "Class Action Complaint."

We also acknowledge that Canela suggested that the nature of her lawsuit was a "class action." In her Complaint, Canela stated that she sued "individually and on behalf of all others similarly situated" as "a class action . . . for the recovery of civil penalties . . . pursuant to" PAGA. Canela claimed to represent a putative "class" of all "employees of Costco who . . . within the applicable period . . . have been designated as member service and have, within California, been assigned to work either as a greeter or as an exit checker, and were not provided with a seat." Canela also alleged that her proposed class satisfied the requirements of a class in California.


But these labels and allegations do not transform her PAGA cause of action into one filed under a "similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action." 28 U.S.C. § 1332(d)(1)(B). The plain meaning of CAFA precludes the formalistic test that Costco asks us to adopt here.


We declined to adopt a formalistic test in Chimei. We explained that "it is not only that parens patriae suits are not `labeled class actions,' it is that they also lack statutory requirements for numerosity, commonality, typicality, or adequacy of representation that would make them sufficiently `similar' to actions brought under Rule 23. . . . ." Chimei, 659 F.3d at 850 (emphasis added). Thus, for a case to be removable under CAFA, the "state action must be filed under a statute that . . . authorizes an action `as a class action.'" Id. at 849, quoting 28 U.S.C. § 1332(d)(1)(B).

We also rejected a formalistic test in Baumann. We held there that the PAGA statute was not a state statute similar to Rule 23 after evaluating its "substance and essentials." Baumann, 747 F.3d at 1121. Because "a PAGA suit is fundamentally different than a class action" id. at 1123, quoting McKenzie v. Fed. Express Corp., 765 F. Supp. 2d 1222, 1233 (C.D. Cal. 2011), and "Rule 23 and PAGA are more dissimilar than alike," id. at 1124, a PAGA cause of action is not authorized as a "class action" under CAFA.


Both holdings comported with the proper "statutory construction" of CAFA. Id.Chimei, 659 F.3d at 847. To hold otherwise would, "for CAFA jurisdictional purposes . . . exalt form over substance," which the Supreme Court has instructed us not to do. Standard Fire Ins. Co. v. Knowles, 568 U.S. 588, 595 (2013).


Costco argues that the United States Supreme Court's decision in Mississippi ex rel. Hood v. AU Optronics Corporation, 571 U.S. 161 (2014), and our decision in Hawaii ex rel. Louie v. HSBC Bank Nevada, N.A., 761 F.3d 1027 (9th Cir. 2014), compel a different result. We disagree.


In AU Optronics, the Supreme Court resolved the different question whether a lawsuit filed by a state was a "mass action" under CAFA even though the claim was based on injuries suffered by citizens who were not named plaintiffs. AU Optronics Corp., 571 U.S. at 164, quoting 28 U.S.C. §1332(d)(11)(B)(i). The Supreme Court held that it was not, interpreting CAFA's text as requiring a "mass action" to be brought by 100 or more named plaintiffs. Id. at 169-76. Because the State of Mississippi was the only named plaintiff, the action was not filed as a "mass action" under CAFA. Id.


AU Optronics did not address the district court's and court of appeal's separate "determination that Mississippi's suit is not a `class action' under CAFA" because that determination was never challenged. Id. at 167 & n.2. In fact, the Supreme Court distinguished between the "two types of cases" included in CAFA. See id. at 165 (observing that, for purposes of CAFA, "class action" is defined in section 1332(d)(1)(B) and "mass action" is defined in section 1332(d)(11)(B)(i)). The Supreme Court rejected the argument that the case was filed as a "mass action" because it was "`similar to a class action' such that it should be removed[,]" as that view "fail[ed] to recognize this key distinction" between a "mass action" and a "class action." Id. at 173. AU Optronics therefore says nothing about the meaning of a "class action" under CAFA.


Nor does the reasoning in AU Optronics support Costco's theory here. In holding that the case was not a "mass action," the Court primarily relied on the statutory text of CAFA. Id. at 168-74. By contrast, the plain meaning of a "class action" under CAFA requires that a state cause of action be authorized as a "class action" under state law.

We acknowledge that AU Optronics rejected an inquiry into the "substance of the action," and instead selected one that looks "only at the labels that the parties may attach." Id. at 174, quoting La. ex rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418, 424 (5th Cir. 2008), abrogated by AU Optronics Corp., 571 U.S. at 174. However, that rationale has no significance here.


To begin with, the plain meaning of "class action" under CAFA controls, even if a conflicting "background principle" would otherwise apply. Id. Consistent with the statutory text, we evaluate the "substance and essentials" when deciding whether a state cause of action is filed under a state law similar to a "class action" under CAFA.


The "background principle" that the Supreme Court discussed in AU Optronics—that the "real party in interest inquiry identifies what party's (or parties') citizenship should be considered in determining diversity," id. at 175— does not apply here. The question here is not whether the parties are minimally diverse. There is no dispute that they are. Instead, we are asked to decide whether this stand-alone PAGA lawsuit was filed under a state rule or statute similar to Rule 23. For the reasons we outlined in Baumann, we conclude that it was not.[5]


We are also not persuaded by Costco's suggestion that our decision in HSBC Bank affects our analysis. We held there that a complaint that disclaimed class status was not filed as a suit similar to a class action. 761 F.3d at 1042. We declined to "ignore [the class] disclaimers and transmogrify the[] suits into class actions." Id. at 1039.

In explaining this point, we said that the "appropriate inquiry is . . . whether a complaint seeks class status." Id. at 1040. We also said that "a plaintiff files a class action for CAFA purposes by invoking a state class action rule, regardless of whether the putative class ultimately will be certified." Id., quoting United Steel Workers Int'l Union v. Shell Oil Co., 602 F.3d 1087, 1091-92 (9th Cir. 2010)). Costco interprets this language to suggest that what matters is whether a plaintiff formally makes class allegations. We disagree.


It is clear that, in context, we meant to convey the point that a cause of action filed as and authorized as a class action under state law is a "class action" under CAFA, even if, after discovery or litigation of the class certification question, the cause of action might not be certifiable. Here, though, the question is whether a PAGA cause of action could have ever, as a matter of law and without any need for discovery into the facts, been filed as a class action. On the face of the Complaint, we hold that it could not have been.


The cases on which we relied in the course of making these observations confirm this reading. We cited United Steel, in which we discussed whether "post-filing developments . . . defeat jurisdiction if jurisdiction was properly invoked as of the time of filing," and not whether deficiencies with the complaint could do so. 602 F.3d at 1091-92. We also relied on the proposition in Baumann that because "the plaintiff's complaint was brought under PAGA, a statute not similar to Rule 23, it was irrelevant that the action might later be converted to a class action if removed.HSBC Bank, 761 F.3d at 1040, quoting Baumann, 747 F.3d at 1124 (emphasis added).


But our holding here is wholly consistent with the principle that "if jurisdiction exists at the time an action is commenced, such jurisdiction may not be divested by subsequent events." Freeport-McMoRan, Inc. v. K. N. Energy, Inc., 498 U.S. 426, 428 (1991) (per curiam). We therefore reject Costco's argument to supplant our substantive test with one that considers only the formal labels and allegations in a complaint.[6]


Costco next argues that even if we were to consider the "substance and essentials" of Canela's PAGA claim, we ought to hold that there is CAFA jurisdiction because a PAGA cause of action could be brought as a class action in California. Costco relies on Arias v. Superior Court, in which the California Supreme Court suggested that PAGA causes of action could possibly be brought as class actions. See 209 P.3d at 930 n.5. We disagree.

The Arias footnote on which Costco relies is dicta. In Arias, which was decided soon after PAGA was enacted, the California Supreme Court held that a PAGA cause of action need not be brought as a class action. Id. at 930. In a footnote, the California Supreme Court said that PAGA actions "may be brought as class actions." Id. at 930 n.5. In support of this proposition, the California Supreme Court cited Amaral v. Cintas Corp. No. 2, 78 Cal. Rptr. 3d 572, 583-84 (Ct. App. 2008). However, Amaral had proceeded as a class action without the parties' or California's intermediate appellate court's addressing whether the PAGA claim could be brought as a class action. Id. In context, the Arias footnote was an observation that parties had been filing PAGA claims as class actions, rather than a pronouncement that PAGA claims could actually be brought as class actions.


But even if the footnote in Arias left open the question whether there is such a thing as a PAGA class action, the California Supreme Court has since definitively rejected that view. In Kim v. Reins International California, Inc., 459 P.3d 1123 (Cal. 2020), the California Supreme Court addressed whether "aggrieved employees" lose standing to pursue a PAGA cause of action after settling their individual claims for Labor Code violations. Id. at 1126-27. Kim held that the settlement and dismissal of individual Labor Code claims did not strip an employee of standing to bring a PAGA claim as an authorized representative of the State of California. See id. In reaching this conclusion, Kim emphasized that a PAGA cause of action cannot be a class action. Id. at 1130.


Looking first at the statutory text, Kim observed that "PAGA standing is not inextricably linked to the plaintiff's own injury." Id. Examining the statutory purpose, Kim confirmed the point that "PAGA claims are different from conventional civil suits." Id.


Most significantly for our purposes, Kim then explained that a PAGA claim is different from a class action. Although a PAGA claim is "representative in nature," it "is not simply a collection of individual claims for relief, and so is different from a class action. The latter is a procedural device for aggregating claims `when the parties are numerous, and it is impracticable to bring them all before the court.'" Id., quoting Cal. Civ. Proc. Code § 382 (emphasis added). "In a class action, the `representative plaintiff still possesses only a single claim for relief—the plaintiff's own.'" Id. (internal quotation marks and citation omitted). By contrast, "a representative action under PAGA is not a class action." Id. at 1131, quoting Huff v. Securitas Sec. Servs. USA, Inc., 233 Cal. Rptr. 3d 502, 509 (Ct. App. 2018).


Kim also analyzed the statutory context of stand-alone PAGA claims, acknowledging that "many PAGA actions consist of a single cause of action seeking civil penalties." Id. at 1132. Kim observed that "courts have rejected efforts to split PAGA claims into individual and representative components." Id. (citing cases). Thus, standing for "PAGA-only cases cannot be dependent on the maintenance of an individual claim because individual relief has not been sought.Id. (emphasis added).


Kim confirms that Canela, as an aggrieved employee, has no individual claim of her own and is not seeking individual relief. See ZB, N.A. v. Superior Ct., 448 P.3d 239, 250 (Cal. 2019). Instead, Canela's PAGA suit is a type of qui tam action. As the only real party in interest, the State of California received notice from Canela, as was required by law, before she filed this suit. See Cal. Lab. Code. § 2699.3(a). If Canela's claim has merit, she will obtain a pro-rata share of the civil penalties as an incentive for bringing the suit as California's authorized representative. Finally, the essential attributes of a class action have no place in this stand-alone PAGA suit.

For these reasons, a PAGA claim cannot be brought as a "class action" under CAFA. CAFA jurisdiction was therefore lacking at the time of removal.


IV.

The district court lacked diversity jurisdiction under section 1332(a). The district court also lacked subject matter jurisdiction under CAFA because Canela's stand-alone PAGA lawsuit was not, and could not have been, filed under a state rule similar to a Rule 23 class action. The district court erred by not remanding the case to state court. Thus, the district court's summary judgment is

VACATED WITH INSTRUCTIONS TO REMAND TO STATE COURT.


[*] The Honorable Timothy Hillman, United States District Judge for the District of Massachusetts, sitting by designation.

[**] This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.

[1] We were also unpersuaded that the PAGA action could satisfy the complete diversity element because the State of California was the real party in interest and was not a citizen. Id. at 1123. Because the amount-in-controversy requirement was not satisfied here, we do not address the issue of whether the parties are completely diverse.

[2] Our logic in Gibson extends to this case. Like the statute at issue in Gibson, PAGA does not provide that attorney's fees may only be awarded to the representative who files the suit. Compare Cal. Civ. Proc. Code § 1021.5 (providing that "a court may award" attorney's fees "to a successful party" (emphasis added)), with Cal. Lab. Code § 2699(g)(1) (providing that "[a]ny employee who prevails in any action" shall be entitled to reasonable attorney's fees (emphasis added)). And like the statute at issue in Gibson, California courts have not treated only the representative or named plaintiff as a prevailing party. See Gibson, 261 F.3d at 942Arias v. Superior Court, 209 P.3d 923, 933 (Cal. 2009) (explaining that a PAGA judgment "is binding not only on the named employee plaintiff but also on government agencies and any aggrieved employee not a party to the proceeding").

[3] This incentive is not awarded exclusively to the employee who files the suit. Instead, it is allocated among the aggrieved employees. See Williams v. Superior Court, 398 P.3d 69, 79 (Cal. 2017) (explaining that PAGA "deputiz[es] employees harmed by labor violations to sue on behalf of the state and collect penalties, to be shared with the state and other affected employees"); Iskanian, 327 P.3d at 148 ("The PAGA conforms to [the] traditional criteria [of a qui tam action] except that a portion of the penalty goes not only to the citizen bringing the suit but to all employees affected by the Labor Code violation."); Cal Lab. Code § 2699(i) (providing that "[c]ivil penalties recovered by aggrieved employees shall be distributed as follows: 75 percent to the . . . Agency . . . and 25 percent to the aggrieved employees" (emphasis added)); see also Moorer v. Noble L.A. Events, Inc., 244 Cal. Rptr. 3d 219, 224 (Ct. App. 2019) (interpreting Iskanian and Williams to stand for the proposition that fees should be allocated among aggrieved employees on a pro rata basis).

[4] We highlighted the fundamental differences between a PAGA claim and a Rule 23 action again the following year. See Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 435 (9th Cir. 2015).

[5] Before the Supreme Court decided AU Optronics, we had already departed from the Fifth Circuit's holding, concluding that a state suit was not filed as a "mass action" under CAFA because the real party in interest was the only named party—the State of Nevada. See Nevada v. Bank of Am. Corp., 672 F.3d 661, 671-72 (9th Cir. 2012). Before turning to the "mass action" provision of CAFA, we held that the attorney general enforcement action was not a "class action" under CAFA. Id. at 667. In so doing, we treated the two classes of cases in CAFA as the separate provisions that they are. We follow the same framework here.

[6] The Sixth Circuit also recently rejected a purely formalistic inquiry in interpreting the class action provision of CAFA. See Nessel ex rel. Mich. v. AmeriGas Partners, L.P., 954 F.3d 831, 837 (6th Cir. 2020).

 

Disclose Credit Auth

Disclose Credit Auth
Luna v. Hansen & Adkins Auto Transp., Inc.


SOURCE: 

KEY WORDS:
Fair Credit Reporting Act, Agreements, Pre-Authorization

AGENCY: 
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Document Citation: 
   No. 18-55804

LEONARD LUNA, 

on behalf of themselves and all others similarly situated; 

IAN HALL, Plaintiffs-Appellants,


v. 


HANSEN AND ADKINS AUTO TRANSPORT,INC., 

a California Corporation; DOES,1–10, inclusive, 

Defendants-Appellees.

No.18-55804

D.C.
No. 8:17-cv-00990-DOC-KES

_________________________ 




LEONARD LUNA, on behalf of themselves and all others similarly situated; IAN HALL, Plaintiffs-Appellants, v. HANSEN AND ADKINS AUTO TRANSPORT, INC., a California Corporation; DOES, 1-10, inclusive, Defendants-Appellees.

COUNSEL Aashish Y. Desai and Adrianne DeCastro, Desai Law Firm, Costa Mesa, California, for Plaintiffs-Appellants. Victor J. Consentino, Larson & Gaston LLP, Pasadena, California, for Defendant-Appellee.

Opinion by Judge McKeown

FOR PUBLICATION

D.C. No. 8:17-cv-00990-DOC-KES 

OPINION Appeal from the united states District Court for the Central District of California

David O. Carter, District Judge, Presiding Submitted November 4, 2019 Pasadena, California  Before: Jerome Farris, M. Margaret McKeown, and Barrington D. Parker, Jr., Circuit Judges. Opinion by Judge McKeown 

SUMMARY 

The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). The Honorable Barrington D. Parker, Jr., United States Circuit Judge for the U.S. Court of Appeals for the Second Circuit, sitting by designation. This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader.

Fair Credit Reporting Act

Affirming the district court's summary judgment in favor of defendant, the panel held that an employer does not violate the Fair Credit Reporting Act by providing a FCRA disclosure simultaneously with other employment materials, and by failing to place a FCRA authorization on a standalone document.

The panel held that 15 U.S.C. § 1681b(b)(2)(A)(i), forbidding procurement of a consumer report for employment purposes unless "a clear and conspicuous disclosure has been made in writing to the consumer . . . in a document that consists solely of the disclosure," does not prohibit the presentation of the disclosure together with other application materials. The panel held that the co-presentation of the disclosure and an authorization did not render the disclosure neither clear nor conspicuous. Further, the FCRA requires only that a consumer authorization be "in  writing," not that it be put in a clear and conspicuous, standalone document.

COUNSEL

Aashish Y. Desai and Adrianne DeCastro, Desai Law Firm, Costa Mesa, California, for Plaintiffs-Appellants. Victor J. Consentino, Larson & Gaston LLP, Pasadena, California, for Defendant-Appellee.

OPINION
McKEOWN, Circuit Judge:

Leonard Luna joins a long line of litigants challenging aspects of the federal consumer credit report regime. His theory, however, is more novel than most: Luna contends an employer violates the Fair Credit Reporting Act ("FCRA") by providing a FCRA disclosure simultaneously with other employment materials, and by failing to place a FCRA authorization on a standalone document. His argument is thwarted by the statute itself. We affirm the district court's summary adjudication of Luna's claim.

Luna is a former employee of Hansen & Adkins, a vehicle transportation business employing over 1,100 big rig truckers, mechanics, dispatchers, and other support staff. His FCRA claim stems from Hansen & Adkins's hiring process, which involved a Commercial Driver Employment Application ("the Application"). This multi-form, multi-page application included notices and authorizations  permitting Hansen & Adkins to retrieve safety history and driving records, and conduct drug and background checks.

Background checks such as these are classified as consumer reports under FCRA, as they are provided by credit reporting agencies and concern an applicant's "character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for...employment purposes." 15 U.S.C.A. § 1681a(d)(1)(B). 

Job applicants signed two documents related to consumer reports. One, "the disclosure," appeared on a separate sheet of paper, and informed applicants "that reports verifying your previous employment, previous drug and alcohol test results, and your driving record may be obtained on you for employment purposes." The other, "the authorization," indicated that an applicant's signature authorized Hansen & Adkins "or their subsidiaries or agents to investigate my previous record of employment." The authorization appeared at the end of the Application, and included other notices, waivers, and agreements unrelated to acquiring the consumer report.

Luna filed a putative class action alleging Hansen & Adkins's hiring process violated FCRA's disclosure and authorization requirements. We review de novo the district court's grant of summary judgment, viewing the evidence in the light most favorable to Luna, the non-moving party. United States v. Phattey, 943 F.3d 1277, 1280 (9th Cir. 2019).

FCRA forbids procurement of a consumer report for employment purposes unless "a clear and conspicuous disclosure has been made in writing to the consumer . . . in a document that consists solely of the disclosure." 15 U.S.C.  § 1681b(b)(2)(A)(i). Luna claims Hansen & Adkins violated this provision by presenting the disclosure together with other application materials. This argument stretches the statute's requirements beyond the limits of law and common sense. It is true that FCRA requires "that a disclosure form contain nothing more than the disclosure itself," Walker v. Fred Meyer, Inc., No. 18-35592, 2020 WL 1316691, at *5 (9th Cir. Mar. 20, 2020), but no authority suggests that a disclosure must be distinct in time, as well.

Luna nevertheless attempts to bootstrap FCRA's physical requirement into a temporal one, relying on Syed v. M-I, LLC, 853 F.3d 492 (9th Cir. 2017). In Syed, we held that the inclusion of a liability waiver in a disclosure document violated FCRA, because the statute "unambiguously requires a document that 'consists solely of the disclosure.'" Id. at 500 (citing 15 U.S.C. § 1681b(b)(2)(A)(i)). Observing that the "ordinary meaning of 'solely' is '[a]lone; singly' or '[e]ntirely; exclusively,'" we concluded that FCRA precludes the inclusion of any terms besides a disclosure and an exempted authorization. Id. (citing American Heritage Dictionary of the English Language 1666 (5th ed. 2011)); see also Walker, 2020 WL 1316691 at *5 ("Simply put, the disclosure form should not contain any extraneous information." (internal punctuation and citation omitted)). But nothing in Syed can be read to prohibit an employer from providing a standalone FCRA disclosure contemporaneously with other employment documents.

Indeed, we decisively rejected this argument last year, noting that no "judicial authority, legislative history or dictionary definition" supports the proposition "that the word 'document,' as used in FCRA, encompasses the universe of employment application materials furnished by  an employer to a prospective employee." Gilberg v. Cal. Check Cashing Stores, LLC, 913 F.3d 1169, 1174 (9th Cir. 2019). Were we to accept Luna's argument that a FCRA disclosure cannot be presented together with other employment documents, "it is difficult to see how an employer could ever provide an applicant written application materials without violating FCRA's standalone document requirement." Id. Hansen & Adkins's disclosure may have been provided alongside other application materials, but it appeared in a standalone document—precisely what FCRA requires.

The disclosure is similarly "clear and conspicuous," which we have interpreted in the context of FCRA to mean a "reasonably understandable form" that is "readily noticeable to the consumer." 15 U.S.C. § 1681b(b)(2)(A)(i); Gilberg, 913 F.3d at 1176 (citations omitted). The disclosure, entitled "FAIR CREDIT REPORTING ACT DISCLOSURE STATEMENT," explains in plain language that, as required by law, the applicant is "informed that reports verifying your previous employment, previous drug and alcohol test results, and your driving record may be obtained on you for employment purposes." Aside from this notice, the disclosure contains nothing but the employer logos and signature lines. It is reproduced below. 

HARBOR AUTO TRANSPORT
HANSEN & ADKINS AUTO TRANSPORT
FAIR CREDIT REPORTING ACT DISCLOSURE STATEMENT

In accordance with the provisions of Section 604(b)(2)(A) of the Fair Credit Reporting Act Public Law 91-508, as amended by the Consumer Credit Reporting Act of 1996 (Title II, Subtitle D, Chapter I, of the Public Law 104-208), you are being informed that reports verifying your previous employment, previous drug and alcohol test results, and your driving record may be obtained on you for employment purposes. These reports are required by Sections 382, 413, 391.23, and 391.25 of the Federal Motor Carrier Safety Regulations.

[Redacted]
Applicant's Signature

[Redacted]
Print Name

2/5/14
Date

Luna contends the co-presentation of the disclosure and authorization renders the disclosure neither clear nor conspicuous. But it is both, and applicants, such as big-rig truckers, can be expected to notice a standalone document featuring a bolded, underlined, capital-lettered heading.

Luna argues Hansen & Adkins also violated FCRA by failing to put the authorization in a clear and conspicuous, standalone document. This attempted wholesale importation of FCRA's disclosure requirements runs aground on the statutory language, which provides only that a prospective employer must obtain the authorization "in writing." 15 U.S.C. § 1681b(b)(2)(A)(ii). Crucially, the authorization subsection of FCRA lacks the disclosure subsection's  standalone document requirement. Compare 15 U.S.C. § 1681b(b)(2)(A)(ii) with 15 U.S.C. § 1681b(b)(2)(A)(i). "[T]he authorization form is not relevant to the disclosure form standard set forth in the statute where, as here, the authorization is not included in the Disclosure." Walker, 2020 WL 1316691 at *4 n.3. As FCRA dictates only that a consumer authorization be "in writing," without specifying its format, Hansen & Adkins's authorization conformed to the requirements of the statute.

AFFIRMED
File Arbitration Fast

File Arbitration Fast
Fleming Distrib. Co. v. Younan


SOURCE: 

KEY WORDS:
Timeline, Arbitration, Deadline, Delay of Filing

AGENCY: 
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA, FIRST APPELLATE, DISTRICTDIVISION THREE

Document Citation: 
   No. 18-16592

ALFONS YOUNAN, Plaintiff and Respondent,


v.


FLEMING DISTRIBUTION COMPANY, Defendant and Appellant

A157038

(Sonoma County Super. Ct. No. SCV-263702)


Appellant Fleming Distribution Company (Fleming) appeals from a trial court order denying its petition to compel arbitration, stay proceedings, vacate a Labor Commissioner award of $27,412.60 to former Fleming employee, respondent Alfonus Younan (Younan), and dismiss the action. Fleming contends the court erred in denying its petition because Younan’s employment application and employment agreement contained enforceable arbitration clauses and Fleming did not waive its right to arbitration. We conclude Fleming did waive its right to arbitration and affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Younan worked for Fleming as a sales representative from 2009 to 2016. In June 2017, he filed a complaint against Fleming with the Department of Industrial Relations, Labor Commissioner’s Office for $22,000 in commissions, plus penalties and interest.

On August 31, 2017, counsel for Fleming sent a letter to the Labor Commissioner asserting the complaint should be dismissed because the parties signed an arbitration agreement. Fleming attached to its letter a copy of an arbitration agreement signed by Fleming and Younan that provided in part: “To resolve disputes in an efficient and cost-effective manner, Employee and Employer agree that any and all claims arising out of or related to the employment relationship that could be filed in a court of law . . . shall be submitted to final and binding arbitration, and not to any other forum.” (Italics added.) Fleming stated in its letter to the Labor Commissioner: “If the Labor Commissioner is unwilling to [dismiss the complaint], Fleming is prepared to file a motion with the Superior Court seeking to compel arbitration.” The Labor Commissioner did not dismiss the complaint, yet Fleming opted not to file a petition to compel arbitration.

A hearing before the Labor Commissioner was set for August 13, 2018. The parties were notified they would “be given the opportunity at the scheduled hearing to present any relevant evidence, to call witnesses and to cross-examine witnesses” and were provided detailed rules and procedures applicable to the hearing, including how to request a continuance of the hearing.

In late July 2018, Fleming filed an Answer with the Labor Commissioner that contained a general denial and nine affirmative defenses, including a defense that arbitration was the proper forum. In its prayer for relief, Fleming requested dismissal of the complaint and attorney fees and costs.

On August 7, 2018, Fleming filed a motion with the Labor Commissioner to vacate the August 13 hearing and dismiss the complaint on the grounds that Younan’s employment application and agreement required arbitration of his claim. Fleming requested the motion to vacate/dismiss be heard on August 13 and, once again, stated: “If the Labor Commissioner is unwilling to [dismiss the complaint], [Fleming] is prepared to file a motion with the Superior Court seeking to compel arbitration.” Both parties appeared at the August 13 hearing before the Labor Commissioner. Fleming’s motion to vacate/dismiss was denied on the ground that Fleming had failed to obtain a stay from the superior court, the hearing proceeded, and the parties presented testimony, documentary evidence, and argument.

On December 5, the Labor Commissioner issued an order setting forth its summary of the witnesses’ testimony, factual findings including credibility findings, and legal analyses and determinations. The Labor Commissioner awarded Younan $22,000 in commissions and an additional $5,412.60 in “interest accrued to date on the unpaid balance of wages and liquidated damages,” for a total of $27,412.60.

On December 20, Fleming filed a notice of appeal in the superior court and a de novo trial was scheduled for March 20, 2019. On February 8, 2019 Fleming filed a petition to compel arbitration, stay proceedings, vacate the Labor Commissioner’s order, and “dismiss this matter in its entirety.” First, Fleming argued the matter should be arbitrated because the agreement the parties signed was governed by the Federal Arbitration Act (FAA), which “preempts Labor Code section 229”—a California statute that allows employees to pursue their wage claims in court even if they have agreed to arbitrate such claims. Second, Fleming argued it did not waive its right to arbitration because it “rather consistently requested that this matter be dismissed and brought through . . . arbitration.”

Younan opposed the petition on several grounds. First, he argued the action should proceed in superior court because the employment application provides that “nothing in the agreement will affect . . . petitions for judicial review of a decision issued after an administrative hearing . . . .” Second, Younan argued Fleming’s petition was procedurally defective to the extent it was asking the trial court to vacate (rather than stay) the Labor Commissioner’s order and dismiss the superior court action. Third, Younan argued the arbitration agreements were procedurally and substantively unconscionable. Fourth and finally, Younan argued that, even if the arbitration agreements were valid, Fleming waived its right to arbitration by taking actions inconsistent with an intent to arbitrate and unreasonably delaying its petition, “contrary to the purposes of arbitration—expeditious resolution of disputes in a cost-effective manner.”

The trial court denied Fleming’s petition. The court found Fleming waived its right to arbitration by taking steps inconsistent with an intent to invoke arbitration, including delaying its request to the superior court until after a full hearing took place and the Labor Commissioner issued its order. The court also found Fleming failed to meet its burden to show an agreement to arbitrate the trial court action existed: “Here, the two ‘arbitration agreements’ attached to [Fleming’s] [p]etition both include specific language that ‘nothing in this agreement will affect petitions for judicial review of a decision issued after an administration hearing.’ ” “Thus, . . . the purported arbitration agreements . . . explicitly carve out []petitions for judicial review of a decision issued after an administrative hearing, which is exactly the procedural posture of this case.” In light of its denial of Fleming’s petition on these grounds, the court did not reach the other issues, including whether the arbitration agreements were unconscionable.

DISCUSSION

Fleming contends the trial court erred in denying its petition because: (1) Younan’s employment application and employment agreement contain valid arbitration clauses that cover Younan’s claims; and (2) Fleming did not waive its right to arbitration. We address—and reject—Fleming’s second argument regarding waiver. As this issue is dispositive, we do not reach the other issues raised in the appeal.

Code of Civil Procedure section 1281.2 allows the trial court to deny a petition to compel arbitration where “[t]he right to compel arbitration has been waived by the petitioner.” The term “waiver” as used in the statute is “ ‘a shorthand statement for the conclusion that a contractual right to arbitration has been lost.’ ” (St. Agnes Medical Center v. PacifiCare of California et al. (2003) 31 Cal.4th 1187, 1195, fn. 4 (St. Agnes).) Both federal and state law favor arbitration as a “ ‘speedy and relatively inexpensive means of dispute resolution.’ ” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) Because the law favors arbitration, waiver will not be lightly inferred and the party asserting waiver “bears a heavy burden of proof,” with any doubts to be resolved in favor of arbitration. (St. Agnes, supra, 31 Cal.4th at p. 1195.)

“The relevant factors establishing waiver include whether the party’s actions are inconsistent with the right to arbitrate; whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; whether a party delayed for a long period before seeking a stay; whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and whether the delay affected, misled, or prejudiced the opposing party.” (Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1204 (Hoover); accord, St. Agnes, supra, 31 Cal.4th at p. 1196.) “ ‘California courts have found a waiver of the right to demand arbitration in a variety of contexts, ranging from situations in which the party seeking to compel arbitration has previously taken steps inconsistent with an intent to invoke arbitration [citations] to instances in which the petitioning party has unreasonably delayed in undertaking the procedure. [Citations.] The decisions likewise hold that the “bad faith” or “willful misconduct” of a party may constitute a waiver and thus justify a refusal to compel arbitration. [Citation.]’ ” (Iskanian v. CLS Transportation Los Angeles, LLC. (2014) 59 Cal.4th 348, 374-375 (Iskanian).) Waiver is not a mechanical process and no one factor is predominant. (St. Agnes, supra, 31 Cal.4th at p. 1195.)

Although participating in the litigation of an arbitrable claim does not by itself waive a party’s right to later seek to arbitrate the matter, at some point continued litigation of the dispute justifies a finding of waiver. (Hoover, supra, 206 Cal.App.4th at p. 1204 [courts look at the party’s actions, as a whole, in determining whether its conduct is inconsistent with an intent to arbitrate]; see also e.g., Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 446 [four months passed after the filing of an action before the party “expressed a desire to arbitrate”]; (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 314 [party may waive the right without the intent to do so by, for example, making an untimely demand to arbitrate]; Zamora v. Lehman, supra, 186 Cal.App.4th at pp. 12, 18.)

Relatedly, a party that wishes to pursue arbitration must take “ ‘active and decided steps to secure that right’ ” because an arbitration agreement “ ‘is not . . . self-executing.’ ” (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1795.) “Mere announcement of the right to compel arbitration is not enough. To properly invoke the right to arbitrate, a party must (1) timely raise the defense and take affirmative steps to implement the process, and (2) participate in conduct consistent with the intent to arbitrate the dispute. Both of these actions must be taken to secure for the participants the benefits of arbitration. (Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, 997-998; Brock v. Kaiser Foundation Hospitals, supra, 10 Cal.App.4th at p. 1795 [a party wishing to compel arbitration files a petition to compel arbitration and request a stay in the superior court].) The proper procedure for “halt[ing] [Labor Commissioner] proceedings” is to file a petition to compel arbitration and request a stay of the Labor Commissioner proceedings in the superior court. (OTO, LLC v. Kho (2019) 8 Cal.5th 111, 140.)

The question of waiver is ordinarily a question of fact, and the trial court’s finding of waiver is binding on the reviewing court if it is supported by substantial evidence. (St. Agnes, supra, 31 Cal.4th at p. 1196.) Reversal is not justified simply because the trial court could have potentially reached a different conclusion on the question of waiver; “rather, we may reverse the trial court’s waiver finding only if the record establishes a lack of waiver as a matter of law.” (Lewis v. Fletcher Jones Motor Cars, Inc., supra, 205 Cal.App.4th at p. 453.) Where the relevant facts are undisputed and only one inference may reasonably be drawn from the facts, the waiver issue may be reviewed de novo. (St. Agnes, supra, 31 Cal.4th at p. 1196.)

Under either standard of review, we affirm the trial court’s ruling on the basis that Fleming waived its right to arbitration. The record establishes that Fleming was well aware of the option to file a petition in the superior court if it wished to compel arbitration. In fact, Fleming explicitly stated in its August 2017 letter to the Labor Commissioner that it was going to seek relief from the superior court if the Labor Commissioner did not dismiss Younan’s complaint. Fleming attached to its letter a copy of the signed arbitration agreement that provided in relevant part that “any and all claims arising out of or related to the employment relationship that could be filed in a court of law . . . shall be submitted to final and binding arbitration, and not to any other forum.” In other words, it was Fleming’s position from the start that “any and all claims,” i.e., Younan’s wage claims, were to be “submitted to final and binding arbitration, and not to any other forum,” i.e., not to the Labor Commissioner’s Office. (Italics added.) Despite this, when the Labor Commissioner did not dismiss the complaint, Fleming made the decision not to file a superior court petition to compel arbitration or stay the Labor Commissioner proceedings.

Once an employee files a complaint with the Labor Commissioner for nonpayment of wages, Labor Code section 98 subdivision (a) “ ‘provides for three alternatives: the commissioner may either accept the matter and conduct an administrative hearing [citation], prosecute a civil action for the collection of wages and other money payable to employees arising out of an employment relationship [citation], or take no further action on the complaint. [Citation.]’ ” (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1115.) As noted, the Labor Commissioner accepted Younan’s complaint and scheduled a hearing on the merits for August 13, 2018. At that point, Fleming once again stated it was going to move to compel arbitration, yet did not do so. When the Labor Commissioner denied Fleming’s motion to dismiss stating Fleming had failed to obtain a stay from the superior court, Fleming did not request a continuance of the hearing or otherwise take action in furtherance of its purported position that the matter had to be arbitrated. Instead, Fleming fully participated in the hearing by presenting documentary evidence, witness testimony, and argument. Younan notes—and Fleming does not dispute—that Fleming’s attorney also “gather[ed] Younan’s testimony,” cross-examined him, reviewed Younan’s exhibits, and learned “Younan’s trial strategies” at the hearing. In light of Fleming’s repeated choice not to move to compel arbitration in the trial court, coupled with its full participation in the Labor Commissioner proceedings, the trial court correctly determined Fleming did not “properly invoke the right to arbitrate” by “tak[ing] affirmative steps to implement the process” and “participate in conduct consistent with the intent to arbitrate the dispute.” (Sobremonte v. Superior Court, supra, 61 Cal.4th at pp. 997-998.)

Even after the Labor Commissioner issued its order, Fleming appealed from the order but did not exercise its right to immediately seek to compel arbitration and stay the superior court proceedings. Further, the trial court’s register of actions indicates the parties engaged in discovery after the filing of the notice of appeal; there are multiple entries relating to Younan’s request for “compliance with . . . [his] request for production of documents” and other discovery, as well as a lengthy court order granting Younan’s discovery requests. It was not until February 8, 2019—20 months after Younan filed his Labor Commissioner complaint—that Fleming finally filed a superior court petition to compel arbitration. The trial court properly found this delay was not reasonable.

Fleming argues the trial court’s order must nevertheless be reversed because Younan failed to show he was prejudiced by the delay. Fleming takes the position that its actions must have caused Younan to incur extensive costs and legal expenses and/or an unfair disadvantage that would materially prejudice his position in any future arbitration. Here, while the issue of prejudice presents a closer issue, we disagree with Fleming’s position that there was “no evidence” of prejudice to support a waiver.

As the court explained in Hoover, supra, 206 Cal.App.4th at page 1205, prejudice can be found “where the petitioning party has unreasonably delayed seeking arbitration or substantially impaired an opponent’s ability to use the benefits and efficiencies of arbitration.” There, the court observed that the party seeking arbitration had conducted litigation in a style inconsistent with the right to arbitrate; its actions suggested it was more interested in delay than expeditious resolution through arbitration. (Id. at p. 1205.)

Here, although Younan did not have an attorney during the Labor Commissioner proceedings and therefore did not suffer monetary loss in the form of attorney fees and costs, he was represented in the superior court action and engaged in discovery after Fleming delayed the filing of its petition to compel arbitration. Younan also suffered the prejudice of waiting several years to collect wages that at least one tribunal has determined he was owed, when the matter could have been arbitrated—assuming arbitration was proper—if Fleming had sought to compel arbitration in August 2017 when it said it was going to do so. As noted, the benefit of arbitration is that it is a relatively efficient and cost-effective way of resolving disputes. At this point, however, all benefits of a speedy resolution Younan could have obtained through arbitration have been lost. (Sobremonte v. Superior Court, supra, 61 Cal.App.4th at p. 996 [“any benefits they may have achieved from arbitration have been lost”]; St. Agnes, supra, 31 Cal.4th at p. 1204 [prejudice is found where “the petitioning party’s conduct has substantially undermined [the] important public policy [in favor of arbitration] or substantially impaired the other side’s ability to take advantage of the benefits and efficiencies of arbitration”].) We conclude Younan suffered cognizable prejudice.

Further, although prejudice has been held to be “critical” in determining waiver, we also note the Supreme Court has cautioned courts to examine each case in context: “no single test delineates the nature of the conduct that will constitute a waiver of arbitration.” (St. Agnes, supra, 31 Cal.4th at p. 1195, 1203.) Moreover, a party’s unreasonable delay has also been considered a significant and determinative issue. In Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 29–30, for example, the Supreme Court observed that a party’s unreasonable delay in demanding or seeking arbitration, in and of itself, may constitute a waiver of a right to arbitrate. “[A] party may [not] postpone arbitration indefinitely by delaying the demand. . . . [¶] When no time limit for demanding arbitration is specified, a party must still demand arbitration within a reasonable time. [Citation.] . . . ‘[W]hat constitutes a reasonable time is a question of fact, depending upon the situation of the parties, the nature of the transaction, and the facts of the particular case.’ ” We conclude the trial court properly determined Fleming waived its right to arbitration.

DISPOSITION

The trial court order denying Fleming’s petition is affirmed. Younan shall recover his costs on appeal.
Petrou, J.

WE CONCUR:
Fujisaki, Acting P.J
Jackson, J.

A157038/Fleming Distribution Company v. Younan


Asking Availability

Asking Availability
2 CCR § 11016


SOURCE: 

KEY WORDS:
Agreements, Availability, Scheduling

DOCUMENT: 
2 CCR § 11016
§ 11016. Pre-Employment Practices.

(a) Recruitment.

(1) Duty Not to Discriminate. Any employer or other covered entity engaged in recruitment activity shall recruit in a non-discriminatory manner. However, nothing in these regulations shall preclude affirmative efforts to utilize recruitment practices to attract an individual who is a member of an underrepresented protected class covered by the Act.
(2) Prohibited Recruitment Practices. An employer or other covered entity shall not, unless pursuant to a permissible defense, engage in any recruitment activity that:

(A) Restricts, excludes, or classifies individuals on a basis enumerated in the Act;
(B) Expresses a preference for individuals on a basis enumerated in the Act; or
(C) Communicates or uses advertising methods to communicate the availability of employment benefits in a manner intended to discriminate on a basis enumerated in the Act.

(b) Pre-employment Inquiries.

(1) Limited Permissible Inquiries. An employer or other covered entity may make any pre-employment inquiries that do not discriminate on a basis enumerated in the Act. Inquiries that directly or indirectly identify an individual on a basis enumerated in the Act are unlawful unless made pursuant to a permissible defense.

(A) An employer may make, in connection with prospective employment, an inquiry as to, or a request for information regarding, the physical fitness, medical condition, physical condition, or medical history of applicants if the inquiry or request for information complies with the provisions of sections 11067, 11070 and 11071 of these regulations.

(B) Pre-employment inquiries regarding an applicant's availability for work on certain days and times shall not be used to ascertain the applicant's religious creed, disability, or medical condition. Such inquiries must clearly communicate that an employee need not disclose any scheduling restrictions based on legally protected grounds, in language such as: “Other than time off for reasons related to your religion, a disability, or a medical condition, are there any days or times when you are unavailable to work?” or “Other than time off for reasons related to your religion, a disability, or a medical condition, are you available to work the proposed schedule?”

(2) Applicant Flow and Other Statistical Recordkeeping. Notwithstanding any prohibition in these regulations on pre-employment inquiries, it is not unlawful for an employer or other covered entity to collect applicant-flow and other recordkeeping data for statistical purposes as provided in section 11013(b) of these regulations or in other provisions of state and federal law.

(c) Applications.
(1) Application Forms. When employers or other covered entities provide, accept, and consider application forms in the normal course of business, in so doing they shall not discriminate on a basis enumerated in the Act.
(2) Photographs. Photographs shall not be required as part of an application unless pursuant to a permissible defense.
(3) Schedule Information. An application's request for information related to schedule and availability for work shall not be used to ascertain the applicant's religious creed, disability, or medical condition. Such requests must clearly communicate that an employee need not disclose any scheduling restrictions based on legally protected grounds in language such as: “Other than time off for reasons related to your religion, a disability, or a medical condition, are there any days or times when you are unavailable to work?” or “Other than time off for reasons related to your religion, a disability, or a medical condition, are you available to work the proposed schedule?”

(A) The use of online application technology that limits or screens out applicants based on their schedule may have a disparate impact on applicants based on their religious creed, disability, or medical condition. Such a practice is unlawful unless job-related and consistent with business necessity and the online application technology includes a mechanism for the applicant to request an accommodation.

(4) Separation or Coding. Application forms shall not be separated or coded, manually or electronically, or otherwise treated so as to identify individuals on a basis enumerated in the Act unless pursuant to a permissible defense or for recordkeeping or statistical purposes.

(d) Interviews. Personal interviews shall be free of discrimination. Notwithstanding any internal safeguards taken to secure a discrimination-free atmosphere in interviews, the entire interview process is subject to review for adverse impact on individuals on a basis enumerated in the Act.

Note: Authority cited: Section 12935(a), Government Code. Reference: Sections 12920, 12921, 12940, 12941 and 12942, Government Code.

HISTORY

1. Change without regulatory effect renumbering former section 7287.3 to new section 11016 and amending section filed 10-3-2013 pursuant to section 100, title 1, California Code of Regulations (Register 2013, No. 40).
2. Amendment filed 4-14-2020; operative 7-1-2020 (Register 2020, No. 16).
This database is current through 8/14/20 Register 2020, No. 33
2 CCR § 11016, 2 CA ADC § 11016

Cannot Waive Free Speech

Cannot Waive Free Speech
CA Assembly Bill No. 3109


SOURCE: 

KEY WORDS:
Agreements, Contracts, Constitution, Free Speech, Waiver, Waiver Exemptions

DOCUMENT: 

Assembly Bill No. 3109
CHAPTER 949

An act to add Section 1670.11 to the Civil Code, relating to contracts.
[ Approved by Governor  September 30, 2018. Filed with Secretary of State  September 30, 2018. ]

LEGISLATIVE COUNSEL'S DIGEST
AB 3109, Mark Stone. Contracts: waiver of right of petition or free speech.

The California Constitution provides that the people have the right to petition government for redress of grievances and to assemble freely to consult for the common good. The California Constitution provides that every person may freely speak, write, and publish his or her sentiments on all subjects, being responsible for the abuse of this right. Existing law generally regulates formation and enforcement of contracts, including what constitutes an unlawful contract. Under existing law, a contract is unlawful if it is contrary to an express provision of law, contrary to the policy of express law, though not expressly prohibited, or otherwise contrary to good morals. A contract is also void to the extent that it restrains a person from engaging in a lawful profession, trade, or business of any kind.

This bill would make a provision in a contract or settlement agreement void and unenforceable if it waives a party’s right to testify in an administrative, legislative, or judicial proceeding concerning alleged criminal conduct or sexual harassment.

DIGEST KEY
Vote: majority   Appropriation: no   Fiscal Committee: no   Local Program: no 

BILL TEXT
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1670.11 is added to the Civil Code, to read:

1670.11. Notwithstanding any other law, a provision in a contract or settlement agreement entered into on or after January 1, 2019, that waives a party’s right to testify in an administrative, legislative, or judicial proceeding concerning alleged criminal conduct or alleged sexual harassment on the part of the other party to the contract or settlement agreement, or on the part of the agents or employees of the other party, when the party has been required or requested to attend the proceeding pursuant to a court order, subpoena, or written request from an administrative agency or the legislature, is void and unenforceable.

Reuglated Arbitrations

Regulated Arbitrations
CA Senate Bill No. 707


SOURCE: 

KEY WORDS:
Agreements, Contracts, Controlled Arbitrations, Arbitration Regulations

DOCUMENT: 
Senate Bill No. 707
CHAPTER 870

An act to amend Sections 1280 and 1281.96 of, and to add Sections 1281.97, 1281.98, and 1281.99 to, the Code of Civil Procedure, relating to arbitration.
[ Approved by Governor  October 13, 2019. Filed with Secretary of State  October 13, 2019. ]

LEGISLATIVE COUNSEL'S DIGEST
SB 707, Wieckowski. Arbitration agreements: enforcement.
Existing law regulates arbitrations conducted pursuant to an agreement, as specified.

(1) In an employment or consumer arbitration in which the drafting party, as defined, is required to pay certain fees and costs before the arbitration can proceed, this bill would provide that if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration. If the drafting party materially breaches the arbitration agreement and is in default of the arbitration, the bill would authorize the employee or consumer to either withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction, or to compel arbitration in which the drafting party is required to pay reasonable attorney’s fees and costs related to the arbitration. If the employee or consumer proceeds with an action in a court of appropriate jurisdiction, the bill would provide that the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration are tolled, as specified. The bill would further require the court to impose a monetary sanction on the drafting party who materially breaches an arbitration agreement, and would authorize the court to impose other sanctions, as specified.

(2) In an employment or consumer arbitration in which the drafting party, as defined, is required to pay certain fees and costs during the pendency of an arbitration proceeding, this bill would provide that if those fees or costs are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration. If the drafting party materially breaches the arbitration agreement and is in default of the arbitration, the bill would authorize the employee or consumer to unilaterally withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction, or to compel arbitration, as specified. If the employee or consumer proceeds with an action in a court of appropriate jurisdiction, the bill would provide that the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration are tolled, as specified. The bill would require the court to impose a monetary sanction on the drafting party who materially breaches an arbitration agreement, and would authorize the court to impose other sanctions, as specified. If the employee or consumer compels arbitration, the bill would require the arbitrator to impose appropriate sanctions on the drafting party, including monetary sanctions, issue sanctions, evidence sanctions, or terminating sanctions.

(3) Existing law requires a private arbitration company involved in consumer arbitration cases to collect and make certain information regarding those cases available to the public, as specified.

This bill would additionally require a private arbitration company to collect and report demographic data in the aggregate relative to ethnicity, race, disability, veteran status, gender, gender identity, and sexual orientation of all arbitrators, as specified.

(4) The bill would make related legislative findings and declarations, and would provide that if any provision or its application to any person or circumstance is held invalid, that invalidity does not affect other provisions or applications that can be given effect without the invalid provision or application.

DIGEST KEY
Vote: majority   Appropriation: no   Fiscal Committee: no   Local Program: no 

BILL TEXT
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the following:

(a) In California, private contracts that violate public policy are unenforceable. Under Section 3513 of the Civil Code, contract terms that require a party to forgo unwaivable statutory rights are unenforceable. Similarly, Section 1668 of the Civil Code provides that contracts exempting parties from responsibility of their own violation of law are also unenforceable. Thus, under these and other contract defenses of general applicability, a mandatory arbitration agreement, like any other agreement, cannot undercut unwaivable state statutory rights by, for example, reducing the limitations period to commence an action or arbitration, eliminating certain statutory remedies, or erecting excessive cost barriers to obtaining them.

(b) In Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, the California Supreme Court concluded that “when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.”

(c) A company’s failure to pay the fees of an arbitration service provider in accordance with its obligations contained within an arbitration agreement or through application of state or federal law or the rules of the arbitration provider hinders the efficient resolution of disputes and contravenes public policy.

(d) A company’s strategic non-payment of fees and costs severely prejudices the ability of employees or consumers to vindicate their rights. This practice is particularly problematic and unfair when the party failing or refusing to pay those fees and costs is the party that imposed the obligation to arbitrate disputes.

(e) In Brown v. Dillard’s, Inc. (2005) 430 F.3d 1004, the United States Court of Appeals for the Ninth Circuit held that, under federal law, an employer’s refusal to participate in arbitration pursuant to a mandatory arbitration provision constituted a breach of the arbitration agreement. In Sink v. Aden Enterprises, Inc. (2003) 352 F.3d 1197, the Ninth Circuit held that, under federal law, an employer’s failure to pay arbitration fees as required by an arbitration agreement constitutes a material breach of that agreement and results in a default in the arbitration.

(f) It is the intent of the Legislature in enacting this measure to affirm the decisions in Armendariz v. Foundation Health Psychcare Services, Inc., Brown v. Dillard’s, Inc., and Sink v. Aden Enterprises, Inc. that a company’s failure to pay arbitration fees pursuant to a mandatory arbitration provision constitutes a breach of the arbitration agreement and allows the non-breaching party to bring a claim in court.

SEC. 2. Section 1280 of the Code of Civil Procedure is amended to read:

1280. As used in this title:

(a) “Agreement” includes, but is not limited to, agreements providing for valuations, appraisals, and similar proceedings and agreements between employers and employees or between their respective representatives.

(b) “Award” includes, but is not limited to, an award made pursuant to an agreement not in writing.

(c) “Consumer” means an individual who seeks, uses, or acquires, by purchase or lease, any goods or services for personal, family, or household purposes.

(d) “Controversy” means any question arising between parties to an agreement whether the question is one of law or of fact or both.

(e) “Drafting party” means the company or business that included a predispute arbitration provision in a contract with a consumer or employee. The term includes any third party relying upon, or otherwise subject to the arbitration provision, other than the employee or consumer.

(f) “Employee” means any current employee, former employee, or applicant for employment. The term includes any person who is, was, or who claims to have been misclassified as an independent contractor or otherwise improperly placed into a category other than employee or applicant for employment.

(g) “Neutral arbitrator” means an arbitrator who is (1) selected jointly by the parties or by the arbitrators selected by the parties, or (2) appointed by the court when the parties or the arbitrators selected by the parties fail to select an arbitrator who was to be selected jointly by the parties.

(h) “Party to the arbitration” means a party to the arbitration agreement, including any of the following:

(1) A party who seeks to arbitrate a controversy pursuant to the agreement.

(2) A party against whom such arbitration is sought pursuant to the agreement.

(3) A party who is made a party to the arbitration by order of the neutral arbitrator upon that party’s application, upon the application of any other party to the arbitration, or upon the neutral arbitrator’s own determination.

(i) “Written agreement” includes a written agreement that has been extended or renewed by an oral or implied agreement.

SEC. 3. Section 1281.96 of the Code of Civil Procedure is amended to read:

1281.96. (a) Except as provided in paragraph (2) of subdivision (c), a private arbitration company that administers or is otherwise involved in a consumer arbitration, shall collect, publish at least quarterly, and make available to the public on the internet website of the private arbitration company, if any, and on paper upon request, a single cumulative report that contains all of the following information regarding each consumer arbitration within the preceding five years:

(1) Whether arbitration was demanded pursuant to a pre-dispute arbitration clause and, if so, whether the pre-dispute arbitration clause designated the administering private arbitration company.

(2) The name of the nonconsumer party, if the nonconsumer party is a corporation or other business entity, and whether the nonconsumer party was the initiating party or the responding party, if known.

(3) The nature of the dispute involved as one of the following: goods; credit; other banking or finance; insurance; health care; construction; real estate; telecommunications, including software and Internet usage; debt collection; personal injury; employment; or other. If the dispute involved employment, the amount of the employee’s annual wage divided into the following ranges: less than one hundred thousand dollars ($100,000), one hundred thousand dollars ($100,000) to two hundred fifty thousand dollars ($250,000), inclusive, and over two hundred fifty thousand dollars ($250,000). If the employee chooses not to provide wage information, it may be noted.

(4) Whether the consumer or nonconsumer party was the prevailing party. As used in this section, “prevailing party” includes the party with a net monetary recovery or an award of injunctive relief.

(5) The total number of occasions, if any, the nonconsumer party has previously been a party in an arbitration administered by the private arbitration company.

(6) The total number of occasions, if any, the nonconsumer party has previously been a party in a mediation administered by the private arbitration company.

(7) Whether the consumer party was represented by an attorney and, if so, the name of the attorney and the full name of the law firm that employs the attorney, if any.

(8) The date the private arbitration company received the demand for arbitration, the date the arbitrator was appointed, and the date of disposition by the arbitrator or private arbitration company.

(9) The type of disposition of the dispute, if known, identified as one of the following: withdrawal, abandonment, settlement, award after hearing, award without hearing, default, or dismissal without hearing. If a case was administered in a hearing, indicate whether the hearing was conducted in person, by telephone or video conference, or by documents only.

(10) The amount of the claim, whether equitable relief was requested or awarded, the amount of any monetary award, the amount of any attorney’s fees awarded, and any other relief granted, if any.

(11) The name of the arbitrator, the arbitrator’s total fee for the case, the percentage of the arbitrator’s fee allocated to each party, whether a waiver of any fees was granted, and, if so, the amount of the waiver.

(12) Demographic data, reported in the aggregate, relative to ethnicity, race, disability, veteran status, gender, gender identity, and sexual orientation of all arbitrators as self-reported by the arbitrators. Demographic data disclosed or released pursuant to this paragraph shall also indicate the percentage of respondents who declined to respond.

(b) The information required by this section shall be made available in a format that allows the public to search and sort the information using readily available software, and shall be directly accessible from a conspicuously displayed link on the internet website of the private arbitration company with the identifying description: “consumer case information.”

(c) (1) If the information required by subdivision (a) is provided by the private arbitration company in compliance with subdivision (b) and may be downloaded without a fee, the company may charge the actual cost of copying to any person who requests the information on paper. If the information required by subdivision (a) is not accessible by the internet in compliance with subdivision (b), the company shall provide that information without charge to any person who requests the information on paper.

(2) Notwithstanding paragraph (1), a private arbitration company that receives funding pursuant to Chapter 8 (commencing with Section 465) of Division 1 of the Business and Professions Code and that administers or conducts fewer than 50 consumer arbitrations per year may collect and publish the information required by subdivision (a) semiannually, provide the information only on paper, and charge the actual cost of copying.

(d) This section shall apply to any consumer arbitration commenced on or after January 1, 2003.

(e) A private arbitration company shall not have any liability for collecting, publishing, or distributing the information required by this section.

(f) It is the intent of the Legislature that private arbitration companies comply with all legal obligations of this section.

(g) The amendments to subdivision (a) made by the act adding this subdivision shall not apply to any consumer arbitration administered by a private arbitration company before January 1, 2015.

SEC. 4. Section 1281.97 is added to the Code of Civil Procedure, to read:

1281.97. (a) In an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration administrator, the drafting party to pay certain fees and costs before the arbitration can proceed, if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration under Section 1281.2.

(b) If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may do either of the following:

(1) Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.

(2) Compel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration.

(c) If the employee or consumer withdraws the claim from arbitration and proceeds with an action in a court of appropriate jurisdiction under paragraph (1) of subdivision (b), the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration shall be tolled as of the date of the first filing of a claim in any court, arbitration forum, or other dispute resolution forum.

(d) If the employee or consumer proceeds with an action in a court of appropriate jurisdiction, the court shall impose sanctions on the drafting party in accordance with Section 1281.99.

SEC. 5. Section 1281.98 is added to the Code of Civil Procedure, to read:

1281.98. (a) In an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration provider, that the drafting party pay certain fees and costs during the pendency of an arbitration proceeding, if the fees or costs required to continue the arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel the employee or consumer to proceed with that arbitration as a result of the material breach.

(b) If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may unilaterally elect to do any of the following:

(1) Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction. If the employee or consumer withdraws the claim from arbitration and proceeds with an action in a court of appropriate jurisdiction, the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration shall be tolled as of the date of the first filing of a claim in any court, arbitration forum, or other dispute resolution forum.

(2) Continue the arbitration proceeding, if the arbitration company agrees to continue administering the proceeding, notwithstanding the drafting party’s failure to pay fees or costs. The neutral arbitrator or arbitration company may institute a collection action at the conclusion of the arbitration proceeding against the drafting party that is in default of the arbitration for payment of all fees associated with the employment or consumer arbitration proceeding, including the cost of administering any proceedings after the default.

(3) Petition the court for an order compelling the drafting party to pay all arbitration fees that the drafting party is obligated to pay under the arbitration agreement or the rules of the arbitration company.

(4) Pay the drafting party’s fees and proceed with the arbitration proceeding. As part of the award, the employee or consumer shall recover all arbitration fees paid on behalf of the drafting party without regard to any findings on the merits in the underlying arbitration.

(c) If the employee or consumer withdraws the claim from arbitration and proceeds in a court of appropriate jurisdiction pursuant to paragraph (1) of subdivision (b), both of the following apply:

(1) The employee or consumer may bring a motion, or a separate action, to recover all attorney’s fees and all costs associated with the abandoned arbitration proceeding. The recovery of arbitration fees, interest, and related attorney’s fees shall be without regard to any findings on the merits in the underlying action or arbitration.

(2) The court shall impose sanctions on the drafting party in accordance with Section 1281.99.

(d) If the employee or consumer continues in arbitration pursuant to paragraphs (2) through (4) of subdivision (b), inclusive, the arbitrator shall impose appropriate sanctions on the drafting party, including monetary sanctions, issue sanctions, evidence sanctions, or terminating sanctions.

SEC. 6. Section 1281.99 is added to the Code of Civil Procedure, to read:

1281.99. (a) The court shall impose a monetary sanction against a drafting party that materially breaches an arbitration agreement pursuant to subdivision (a) of Section 1281.97 or subdivision (a) of Section 1281.98, by ordering the drafting party to pay the reasonable expenses, including attorney’s fees and costs, incurred by the employee or consumer as a result of the material breach.

(b) In addition to the monetary sanction described in subdivision (a), the court may order any of the following sanctions against a drafting party that materially breaches an arbitration agreement pursuant to subdivision (a) of Section 1281.97 or subdivision (a) of Section 1281.98, unless the court finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.

(1) An evidence sanction by an order prohibiting the drafting party from conducting discovery in the civil action.

(2) A terminating sanction by one of the following orders:

(A) An order striking out the pleadings or parts of the pleadings of the drafting party.

(B) An order rendering a judgment by default against the drafting party.

(3) A contempt sanction by an order treating the drafting party as in contempt of court.

SEC. 7. If any provision of these sections or its application to any person or circumstance is held invalid, that invalidity does not affect other provisions or applications that can be given effect without the invalid provision or application.
Consumer Privacy 2020

Consumer Privacy 2020
California Consumer Privacy Act of 2020


SOURCE: 

KEY WORDS:
Consumer Contract, Consumer Privacy

DOCUMENT: 

The California Legislature enacted the California Consumer Privacy Act (“CCPA”) in 2018 to give consumers control over the use and sale of their personal information by businesses. The law’s provisions are broad, and may affect how employers collect and store applicants’ and employees’ personal data.

Many of the CCPA’s provisions take effect January 1, 2020.  However, Governor Newsom just signed AB 25, which postpones until 2021 most – but not all – of the CCPA’s applicability to the employment context.

Although this article focuses on employment-related issues, the CCPA applies to many types of information having nothing to do with employment law. Employers therefore must become familiar with the CCPA’s provisions, including those that take effect in 2020, as well as what to expect in the future. 

Is Your Business Covered by the CCPA?
The CCPA applies to entities doing business in California that collect specified personal information.  Qualifying businesses generally must satisfy one of three criteria: have an annual gross revenue of over $25 million; or annually receive, sell, or share personal information from 50,000 or more California residents, households, or internet-connected devices (combined); or derive 50% or more of annual revenues from selling personal information. 

Exceptions may apply to government, non-profits, and consumer reporting agencies, but even these exceptions come with caveats.  The law also contains exceptions for certain types of data, such as information protected by the federal Health Insurance Portability and Accountability Act of 1996 (known as  “HIPAA”), or data from financial institutions that is already protected by similar laws.

The CCPA’s coverage is vague in some respects.  For example, the law does not define what it means to be “doing business in California.”  Additionally, a business that uses a third party to collect personal information on its behalf still may be a covered entity.   

What is “Personal Information”?
Protected “personal information” broadly includes data that can identify, relate to, describe, or is reasonably capable of being associated with a particular consumer or household.  In the employment context, that definition could include basic human resources data, such as names, addresses, date of birth, as well as information such as protected classes, employee purchase history, training records, internet browser records, and more.

How Do Employers Comply?
The CCPA imposes on covered businesses several requirements that may affect human resources policies and practices.  For example, covered businesses must inform consumers (which may include employees) the categories of information collected and their intended use. 
    
Consumers may request disclosure of the specific information a business has collected about them (twice per year), and whether it provided such information to third parties. Employers frequently disclose employees’ information to third-party businesses, as part of benefits programs, for example. Businesses also annually make certain disclosures in their online privacy policies.

Covered businesses must give consumers the option to “opt-out” of the sale of their information. This provision is less likely to apply in the human resources context.

Consumers may request that a business delete personal information it has collected, unless the information is necessary for a transaction, legal obligation, or a few other exceptions. Naturally, employers are obliged to maintain personnel records by law. So, there will be limits on employers’ obligation to comply with this provision.

The CCPA protects consumers against discrimination for exercising their CCPA rights. And, an affected consumer can file a lawsuit or a class action if they are harmed by a business’ lack of appropriate security measures.

The CCPA primarily is intended to limit disclosure of personal information collected for marketing or commercial purposes that is sold or disclosed to third parties.  Because the definition of personal information is so broad, however, critics worry that employees could abuse the CCPA’s protections. For example, employees may exploit disclosure requirements to skirt the discovery process in litigation, or obtain internal HR documents to which they would otherwise not be entitled. 

AB 25
Perhaps in response to these and other concerns, the Legislature passed AB 25 so it could take time to consider how the CCPA should apply in the employment context. AB 25 exempts personal information collected in the course of applying for and holding employment. That includes most human resources data, as well as personal information relating to emergency contacts and collected for administering employee benefits. 

The bill does not relieve employers of other obligations they may have under CCPA with regard to customers, website visitors, or in connection with personal information collected for marketing or other purposes.

The AB 25 exemption also does not apply to the “Notice” and “Private Right of Action” protections, discussed above.  Covered employers therefore must comply with the notice requirements discussed above. Employers also will be held responsible under the statute for security breaches involving personal information.

What Happens When AB 25 Sunsets? 
AB 25’s temporary exemptions expire December 31, 2020, unless the Legislature takes action to extend them.  Absent such action, covered employers must comply with the full suite of CCPA protections starting January 1, 2021.

What Employers Must Do in 2020
Employers should consult with counsel familiar with CCPA to determine if they are covered.  Those covered employers should identify what personal information they collect, and to whom notices must be given.  Employers should examine security measures, and investigate obligations under CCPA both within and without the employment context. 

Finally, employers should monitor developments in the law to see whether the Legislature extends the sunset date of AB 25, or decides to amend CCPA and its treatment of employment-related data.
Invalidating Agreements

Invalidating Agreements
Non-Severability Clause In Arbitration Agreement 
Invalidated Entire Agreement


SOURCE: 

KEY WORDS:
Agreement Invalidation, Contracts, Agreements

AGENCY: 
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA , FOURTH APPELLATE DISTRICT, DIVISION THREE

Document Citation: 
   G058119

NICHOLE KEC, Petitioner, 


v. 


THE SUPERIOR COURT OF ORANGE COUNTY, Respondent; 

R.J. REYNOLDS TOBACCO COMPANY, et al., Real Parties in Interest.

G058119

(Super. Ct. No. 30-2018-01031808)

Law Offices of Natalie Mirzayan and Natalie Mirzayan for Petitioner. No appearance for Respondent. Jones Day, Steven M. Zadravecz, Nathaniel P. Garrett, Allison E. Crow, and Michael A. Carvin for Real Parties in Interest.


IKOLA, ACTING P. J.


(Super. Ct. No. 30-2018-01031808) OPINION Original proceedings; petition for a writ of mandate and/or prohibition to challenge an order of the Superior Court of Orange County, Randall Sherman, Judge. Petition granted. Law Offices of Natalie Mirzayan and Natalie Mirzayan for Petitioner. No appearance for Respondent.  Jones Day, Steven M. Zadravecz, Nathaniel P. Garrett, Allison E. Crow, and Michael A. Carvin for Real Parties in Interest.


It is the established law of this state that a predispute contractual waiver of claims under the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.) is invalid. Here, the parties' arbitration agreement purports to waive class actions and any "other representative action" (the representative waiver). There is no dispute that this representative waiver is broad enough to cover a PAGA claim, and is thus invalid. Usually, where a single contract provision is invalid, but the balance of the contract is lawful, the invalid provision is severed, and the balance of the contract is enforced. But here, the arbitration agreement goes on to provide that the provision containing the class action and representative waiver is not modifiable nor severable. The arbitration agreement also contains a provision that if the representative waiver is found to be invalid, "the Agreement becomes null and void as to the employee(s) who are parties to that particular dispute"—a so-called "'blow-up' provision."


Plaintiff Nichole Kec brought individual, class, and PAGA claims against defendants R.J. Reynolds Tobacco Company, Reynolds American Inc., and three individual employees at R.J. Reynolds Tobacco Company. Plaintiff alleged, in essence, that she and others were misclassified as exempt employees, resulting in various violations of the Labor Code. R.J. Reynolds Tobacco Company and Reynolds American Inc., moved to compel arbitration of plaintiff's individual claims except the PAGA claim. 


Because this writ proceeding concerns only the motion to compel arbitration filed by R.J. Reynolds Tobacco Company and Reynolds American Inc., we will hereafter refer to these two entities as the defendants.


The court granted the motion. The court reasoned: (1) Because defendants had not asked the court to rule on the enforceability of the representative waiver, it had not found the representative waiver invalid, and thus the blow-up provision had not been triggered; and (2) the blow-up provision may apply only to the attempted waiver of the PAGA claim, not to the arbitrability of plaintiff's claims under the Labor Code. Plaintiff filed the present writ petition.


FACTS


Plaintiff's complaint alleges the following: Plaintiff was a territory manager for the defendants from 2012 through 2016. She, and all other similarly situated territory managers, were improperly classified as exempt employees. The term "manager" inaccurately described the actual job duties of a territory manager, which did not involve any supervision, but instead involved " a mixture of manual labor and other non-sales duties - such as re-setting . . . products, checking inventory, rotating products on the shelves based on expiration dates, scanning product barcodes to ensure accurate pricing, enforcing [the defendants'] contracts with established traditional and non-traditional retail outlets, and providing consulting services to store managers/owners by providing tobacco advice through the development of individual business plans."


Plaintiff's complaint includes causes of action for failure to pay wages (including overtime wages), failure to provide meal periods and rest breaks, failure to indemnify for various business expenses, waiting time penalties, failure to pay upon discharge, failure to provide itemized wage statements, conversion, violation of Business and Professions Code section 17200 et seq., and penalties pursuant to PAGA.


In response, defendants moved to compel plaintiff "to arbitrate her claims on an individual basis, pursuant to the binding arbitration agreement she entered into with  Defendants, and to stay this action and Plaintiff's PAGA claim until arbitration has concluded."


Section 5 of the arbitration agreement contains the following waiver provision: "The Parties waive the right to bring, join, participate in, or opt into, a class action, collective action, or other representative action whether in court or in arbitration." "This Section (Section 5) may not be modified or severed from this Agreement for any reason."


Section 16 of the arbitration agreement contains both a general severability provision and an exception for section 5, to which a purported blow-up provision attaches instead. "Except for Section 5, if any provision of this Agreement is held by a court of competent jurisdiction or an arbitrator to be invalid, void, or unenforceable, the remaining provisions shall, nevertheless, continue in full force without being impaired or invalidated in any way. If Section 5 is found by a court of competent jurisdiction to be, in any way, unlawful, invalid, void or otherwise unenforceable, the Agreement becomes null and void as to employee(s) who are parties to that particular dispute, for purposes of that dispute in the jurisdiction of the court delivering the ruling. If Section 5 is found by a court of competent jurisdiction to be, in any way, unlawful, invalid, void or otherwise unenforceable, any class claims, collective claims, or any other representative claims may only be brought in a court of competent jurisdiction."


The court granted defendants' motion to compel arbitration. Addressing the blow-up provision, the court commented, "Section 16 of the Arbitration Agreement does not result in invalidation of the entire agreement. Even if Section 5 contains a legally invalid term, purporting to waive the right to bring a representative PAGA action, defendants are not attempting to enforce that provision. As a result, this court need not reach the question of whether that provision is valid. Since this court thus has not 'held' or 'found' part of Section 5 to be unlawful, invalid, void or unenforceable, the 'Agreement becomes null and void' language of Section 16 does not apply. Moreover,  even if the court had made such a holding or finding, the agreement is invalid only as to 'that particular dispute', which could be interpreted to mean the PAGA claim. Any ambiguity must be resolved consistent with the principle found in a long line of cases, continuing through this year, that arbitration agreements are to be liberally interpreted, with any doubts resolved in favor of arbitration."


Plaintiff petitioned for a writ of mandate seeking to overturn the court's order compelling arbitration of her individual claims. We issued an order to show cause and stayed the court's order. Defendants filed a formal return, and plaintiff a formal reply.


DISCUSSION


As an initial matter, we acknowledge the parties have devoted substantial portions of their briefs on this writ petition arguing their respective positions on the interpretation and effect of the so-called blow-up provision. But we decline to accept their implied invitation to interpret section 16 of the arbitration agreement, in which the blow-up provision is found. First, the blow-up provision contains a condition precedent which was not triggered. By its express terms, the blow-up provision applies only where the court has found section 5 of the arbitration agreement to be "in any way, unlawful, invalid, void or otherwise unenforceable." Here, the court expressly declined to make that finding. Second, even if the blow-up provision had been triggered, plaintiff and defendants have each presented plausible, but competing, interpretations of section 16. But we have no extrinsic evidence by which we might have been able to determine the true intention of the parties to the agreement. Each interpretation offered by the parties, and some we have considered independently, still leaves a lingering ambiguity. Fortunately, we need not resolve this issue. Following Securitas Security Services USA, Inc. v. Superior Court (2015) 234 Cal.App.4th 1109 (Securitas), which is directly on  point, we conclude defendants attempted to accomplish what the contract forbids: trial of individual claims in arbitration, and a representative claim in court. In other words, defendants attempted to modify the contract provision by severing the representative waiver from the balance of the arbitration agreement. This is plainly contrary to the intent of the agreement which expressly provides: "This [class action and representative waiver] may not be modified or severed from this Agreement for any reason." Accordingly, we will grant the petition and issue a writ of mandate ordering the court to vacate its order granting the motion to compel arbitration of plaintiff's individual claims and to enter a new order denying the motion. The representative waiver is void.


Under PAGA, an "aggrieved employee" may bring an action on behalf of herself and other current or former employees seeking civil penalties for violations of the Labor Code. (Lab. Code, § 2699, subd. (a).) Seventy-five percent of the penalties recovered go to the Labor and Workforce Development Agency, leaving the remaining 25 percent for the "aggrieved employees." (Id., subd. (i).) Here, the parties' arbitration agreement purported to waive the parties' right to bring "a class action, or other representative action whether in court or in arbitration." (Italics added.) "There is no dispute that the contract's term 'representative action[]' covers representative actions brought under the Labor Code Private Attorneys General Act of 2004." (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 378 (Iskanian).) And while Iskanian held it is permissible for an employee to waive the right to bring a class action, the rule is different for an employee seeking to bring a PAGA claim. "[A]n employee's right to bring a PAGA action is unwaivable." (Iskanian, at p. 383.) 


Defendants sought to selectively enforce the arbitration agreement by compelling plaintiff to arbitrate all her individual claims while leaving plaintiff's PAGA claim in the court. The question here is whether this selective enforcement is permissible under the terms of the parties' arbitration agreement. Defendants may not selectively enforce the arbitration agreement.


The PAGA claim is not arbitrable. "Without the state's consent, a predispute agreement between an employee and an employer cannot be the basis for compelling arbitration of a representative PAGA claim because the state is the owner of the claim and the real party in interest, and the state was not a party to the arbitration agreement. Under state and federal law, an arbitration agreement applies only to the parties who agreed to its terms and a party cannot be compelled to arbitrate a dispute that it has not elected to submit to arbitration." (Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 622.)


We interpret the arbitration agreement as we would any other contract. "'The fundamental rule is that interpretation of . . . any contract . . . is governed by the mutual intent of the parties at the time they form the contract. [Citation.] The parties' intent is found, if possible, solely in the contract's written provisions. [Citation.] "The 'clear and explicit' meaning of these provisions, interpreted in their 'ordinary and popular sense,' unless 'used by the parties in a technical sense or a special meaning is given to them by usage' [citation], controls judicial interpretation." [Citation.] If a layperson would give the contract language an unambiguous meaning, we apply that meaning.'" (Nelsen v. Legacy Partners Residential, Inc. (2012) 207 Cal.App.4th 1115, 1129.) "We review the scope of an arbitration provision de novo when, as here, that interpretation does not depend on conflicting extrinsic evidence." (RN Solution, Inc. v. Catholic Healthcare West (2008) 165 Cal.App.4th 1511, 1522.) 


It is axiomatic that a contract must have a lawful object. (Civ. Code, § 1550, subd. (3).) "Where a contract has but a single object, and such object is unlawful, whether in whole or in part, or wholly impossible of performance, or so vaguely expressed as to be wholly unascertainable, the entire contract is void." (Civ. Code, § 1598, italics added.) Here, section 4 of the arbitration agreement expresses a single object. The "[a]greement requires that all Covered Claims be resolved through final and binding arbitration. Arbitration of Covered Claims under this Agreement is in lieu of the right and opportunity to engage in litigation and is the exclusive means to resolve any Covered Claim." Usually "[w]here the consideration is only partly illegal and the agreement is severable, the legal portion may be enforced." (1 Witkin, Summary of Cal. Law (11th ed. 2017) Contracts, § 422.) But "where severability is not found, the contract is void." (Ibid.)


There is no dispute that all of plaintiff's claims are "Covered Claims" as defined in section 2 of the arbitration agreement. 


Applying the above general principles, we conclude that defendants may not selectively enforce the arbitration agreement in a manner that defeats its goals. Had the parties intended to permit defendants to proceed with arbitration notwithstanding an invalid waiver of representative claims, they would have simply made that provision severable, like every other term in the agreement. But that is not what they did. Instead, by specifically making section 5 not severable, the agreement evinces an intent not to allow defendants to selectively enforce the arbitration agreement.


Securitas, supra, 234 Cal.App.4th 1109, is directly on point. In Securitas an employee brought wage and hour claims against her employer, including individual, class, and representative claims under PAGA. (Id. at pp. 1112, 1114.) The parties had signed an arbitration agreement containing both a class and representative waiver. As here, the agreement provided that the representative waiver was not severable from the remainder of the agreement. (Id. at pp. 1113-1114.) Also, as here, the employer filed a  motion to compel arbitration of the individual claims and asked the court to either dismiss or stay the class and PAGA claims. (Id. at p. 1114.) The trial court granted the motion to compel arbitration, but instead of staying or dismissing the PAGA claim, it ordered the PAGA claim to arbitration. (Id. at p. 1115.) The employer petitioned for a writ of mandate to compel the court to dismiss or stay the PAGA claim. (Ibid.)


The Securitas court agreed the trial court had erred, but in what must have been a keenly disappointing outcome for the employer, the court held that the entire agreement was unenforceable. (Id. at p. 1112.) The court based its conclusion on the nonseverability provision: "The dispute resolution agreement, therefore, is not divisible, but presents an all-or-nothing proposition: when [an] employee asserts class, collective or representative claims, either the employee forgoes his or her right to arbitrate such claims, or the entire agreement to arbitrate disputes is unenforceable and the parties must resolve their disputes in superior court. We view this construction as clear, but to the extent the dispute resolution agreement's language is uncertain on the point and one can glean a different outcome from the language, our conclusion would nevertheless stand under the principle that 'a court should construe ambiguous language against the interest of the party that drafted it.'" (Id. at p. 1126.)


In its briefing on this writ petition, defendants do not even mention the Securitas holding, much less attempt to distinguish it, despite the case being a prominent centerpiece of plaintiff's argument. That is not surprising since Securitas is squarely on point. Instead, in what is perhaps best regarded as a response to the Securitas holding, defendants counter that "[i]t cannot seriously be disputed that, when the representative waiver was originally included in the Arbitration Agreement, that waiver was intended solely for [defendants'] benefit." Relying on the principle that a "contracting party may waive provisions placed in a contract solely for his benefit" (Doryan v. Salant (1977) 75 Cal.App.3d 706, 712), defendants contend they were entitled to selectively enforce the arbitration agreement. 


Defendants' argument ignores the nature of a waiver. Whether a waiver has been established is measured by the circumstances existing at the time the waiver is exercised. "Case law is clear that '"[w]aiver is the intentional relinquishment of a known right after knowledge of the facts." [Citations.] The burden . . . is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation, and "doubtful cases will be decided against a waiver" [citation].'" (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31.) Here, defendants did not intentionally give up a right to enforce the representative waiver because no such right existed when plaintiff's complaint was filed in November 2018. At the time of contract formation, February 23, 2012, Iskanian had not yet been decided, and at that time it could have been said the representative waiver was solely for defendants' benefit, which defendants accordingly could waive by choosing not to enforce it. But at the time the arbitration agreement was sought to be enforced, defendants no longer had the right to enforce the representative waiver. (Iskanian, supra, 59 Cal.4th at p. 383.) Simply put, there no longer existed any "right" to relinquish. Instead, the attempt to selectively enforce section 5 amounts to an attempt to unilaterally modify the contract provision by allowing its severance. The arbitration agreement expressly prohibits a modification of section 5 "for any reason." Thus, the representative waiver may not be severed. Plaintiff is entitled to pursue her PAGA claim, and because that claim is not arbitrable (see fn. 1, ante), the entire dispute must remain in court. 


DISPOSITION


Let a peremptory writ of mandate issue ordering respondent trial court to vacate its June 7, 2019 order granting defendants' motion to compel arbitration, and to enter a new order denying the motion in its entirety. The stay order imposed by the court is dissolved upon issuance of the remittitur. The order to show cause is discharged. Plaintiff shall recover her costs incurred in this original proceeding.


IKOLA, ACTING P. J. WE CONCUR: THOMPSON, J. GOETHALS, J.

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