Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County Super. Ct. No. BC360716, John P. Shook, Judge.
Sidley Austin, Jeffrey A. Berman, James M. Harris and Kiran A. Seldon for Defendant and Appellant.
Shegerian & Associates, Inc. and Carney R. Shegerian for Plaintiff and Respondent.
ASHMANN-GERST, J.
In this appeal we are called upon to determine whether an arbitration agreement between appellant White Memorial Medical Center (White Memorial) and respondent Patricia LeBlanc (LeBlanc) is procedurally and substantively unconscionable, and whether it otherwise violates public policy in light of Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 (Armendariz). White Memorial has appealed the denial of its petition to compel arbitration of LeBlanc’s claims for breach of contract, breach of implied-in-fact contract, sexual harassment, retaliation, intentional infliction of emotional distress, and wrongful termination in violation of public policy. We find no error and affirm.
FACTS
LeBlanc’s tenure at White Memorial; the grievance and arbitration procedure
LeBlanc began working as a nurse at White Memorial in early 2002. In May of 2003, LeBlanc signed an acknowledgment that she received an employee handbook and was responsible for reading it. The acknowledgment contained an agreement to resolve all disputes pursuant to the employee handbook’s grievance and arbitration procedure (procedure).
Natasha Milatovich (Milatovich), the director of human resources, declared that according to LeBlanc’s employment records she began employment on February 25, 2002. LeBlanc’s complaint states that she began her employment on March 4, 2002.
According to the procedure, an employee was obligated to submit any grievances to a supervisor within 90 days (or, if longer, within the time permitted by the applicable statute of limitations for the claims) and pursue an internal process. Otherwise, the grievances were waived. Only after pursuing internal remedies could an employee seek arbitration. If White Memorial had a claim against an employee, it was permitted to proceed directly to arbitration.
In particular, the procedure provides: (1) To initiate arbitration, an employee must give written notice of the intent to arbitrate within 60 calendar days of the mailing of the decision by White Memorial’s president. (2) Discovery will be allowed only to the extent it is necessary and appropriate, as determined by the arbitrator. At a minimum, each party shall have the right to take one deposition. (3) “The presumption is that each party will be self represented. However, [an employee] will be permitted to be represented at the arbitration hearing by either an attorney or another [White Memorial] employee. If [an employee chooses] to be represented by legal counsel, [the employee] must provide [White Memorial] with written notice of this intention within 15 days after the request to arbitrate has been submitted. [White Memorial] will only be represented by an attorney if [the employee is] represented by an attorney.” (4) Other than a petition to confirm, vacate or modify the arbitrator’s decision, neither party may initiate a lawsuit that arises out of the dispute. (5) White Memorial may change the terms of the procedure without notice.
LeBlanc stopped working at White Memorial in mid-2005.
Milatovich declared that LeBlanc “voluntarily resigned” on June 8, 2005. LeBlanc’s complaint alleges that her employment with White Memorial was constructively or actually terminated on May 13, 2005.
LeBlanc’s complaint
On October 20, 2006, LeBlanc filed a civil complaint against White Memorial based on employment related claims. She alleged that her supervisor Phil Sorley (Sorley) was having a romantic relationship with Elizabeth Gutierrez (Gutierrez), LeBlanc’s former supervisor. Further, LeBlanc alleged that her employment was actually or constructively terminated because Gutierrez urged Sorley to fire LeBlanc to benefit Gutierrez’s own career.
White Memorial’s petition to compel arbitration
White Memorial moved to compel arbitration. In opposition, LeBlanc argued that the procedure is unconscionable due to various terms, including White Memorial’s unilateral right to modify the procedure; the one-sided grievance process that only applies to employees; the guarantee of only one deposition; the failure to allow for any judicial review; the presumption against attorney representation; and the imposition of a 90-day statute of limitations.
At the hearing, the trial court noted that it was concerned about all the points raised by LeBlanc in her opposition, and it was particularly concerned by the one-deposition rule, the failure of the procedure to include a clearly defined provision for judicial review of an arbitrator’s decision, and White Memorial’s right to modify the procedure on a unilateral basis.
The petition was denied.
This timely appeal followed.
STANDARD OF REVIEW
When no disputed facts concerning an agreement to arbitrate were presented below, the validity of the arbitration clause and the denial of the appellant’s petition to compel arbitration are subject to de novo review. (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 650.)
DISCUSSION
1. The law of unconscionable contracts; public policy in Armendariz.
Our jurisprudence parses the principle of unconscionability into a procedural component and a substantive component. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071.)
Procedural unconscionability “‘focuses on factors of oppression and surprise. [Citation.] The oppression component arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party. [Citations.]’ [Citation.] ‘The component of surprise arises when the challenged terms are “hidden in a prolix printed form drafted by the party seeking to enforce them. [Citation.]” [Citation.] Where an adhesive contract is oppressive, surprise need not be shown.’ [Citation.]” (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1281 (Nyulassy).) Substantive unconscionability encompasses overly harsh or one-sided results. (Fittante v. Palm Springs Motors, Inc. (2003) 105 Cal.App.4th 708, 722–723.)
Armendariz laid out specific rules for the arbitration of an employee’s statutory rights. An arbitration agreement that governs an employer-employee relationship may not limit statutorily imposed remedies in connection with statutory claims, and it must provide for discovery that is sufficient for the employee to adequately arbitrate those claims. (Armendariz, supra, 24 Cal.4th at pp. 103–106.) The arbitration agreement must provide for a neutral arbitrator, and it must require an arbitrator presiding over a statutory claim to issue a written arbitration award which, at a minimum, discloses “the essential findings and conclusions on which the award is based.” (Id. at p. 107.) Moreover, it is unlawful for an employer to require an employee to share the cost of arbitrating a statutory claim. (Id. at pp. 110–111.)
2. The procedure is a contract of adhesion.
In her declaration below, LeBlanc averred that she was told that signing the acknowledgment and agreeing to grieve and arbitrate her disputes was mandatory. Also, she was not permitted to negotiate. In its reply papers below, White Memorial recognized that the procedure was compulsory. We conclude that it was a product of oppression because LeBlanc was unable to refuse the procedure, and she was not permitted to negotiate its terms. Because the procedure was offered on a take it or leave it basis, it was a contract of adhesion.
3. The procedure is unconscionable.
According to White Memorial, the trial court erred when it found that the procedure is unconscionable. We disagree. Though the parties focus on a number of the procedure’s provisions in their appellate briefs, we focus only on the provisions that are problematic. Also, we note that our analysis differs from the trial court’s analysis. But, as recently explained by our Supreme Court, a correct decision will not be disturbed on appeal simply because the trial court’s reasoning may have been errant. If the decision was right upon any theory of law applicable to the case, the decision must be sustained. (People v. Geier (2007) 41 Cal.4th 555, 582.)
a. Discovery.
Armendariz held that employees “are at least entitled to discovery sufficient to adequately arbitrate their statutory claims, including access to essential documents and witnesses, as determined by the arbitrator(s).” (Armendariz, supra, 24 Cal.4th at p. 106.) Following Armendariz, Mercuro v. Superior Court (2002) 96 Cal.App.4th 167 (Mercuro) upheld an arbitration agreement that limited the parties to 30 discovery requests (which included the right to request three depositions) but gave the arbitrator discretion to increase the discovery requests upon a showing of good cause. The court noted that the discovery limits were mutual, they could prevent discovery abuse by the employer, and they could be changed by the arbitrator. Additionally, it noted that “‘adequate’ discovery does not mean unfettered discovery and Armendariz itself recognizes an arbitration agreement may require ‘something less than the full panoply of discovery provided in Code of Civil Procedure section 1283.5’ Ultimately it is up to the arbitrator and the reviewing court to balance the need for simplicity in arbitration with the discovery needs of the parties.” (Mercuro, supra, at p. 184, fn. omitted.)
White Memorial contends that the procedure permits LeBlanc to conduct adequate discovery. This may or may not be true.
The arbitration portion of the procedure provides: “Arbitration is intended to provide a less time-consuming, less expensive, and less complicated means of settling employment-related disputes. Therefore, discovery will be allowed only to the extent that it is necessary and appropriate, as determined by the arbitrator. However, under no circumstances will discovery be permitted that is broader than that which is allowed by the applicable procedural rules of the state in which [White Memorial] is located. [¶] The arbitrator may issue subpoenas to compel the testimony of third party witnesses or the production of documents. At a minimum, each party shall have the right to take one deposition.”
Under the procedure, it is the arbitrator’s decision regarding what discovery is necessary and appropriate. Thus, the procedure ensures an employee’s discovery rights to the degree that a presiding arbitrator deems reasonable. While we have faith in arbitration and arbitrators in general, there is no accounting for human vagaries. The guarantee of only one deposition means that an employee could be denied other discovery, which would be highly unfair.
b. The time limits.
The grievance portion of the procedure requires an employee to file a written grievance within 90 days of an injurious event. Then, the arbitration portion of the procedure states that arbitrable disputes are those that are timely initiated and processed through the grievance portion of the procedure. It adds: “However, if the applicable statute of limitations provides a longer period of time in which to initiate a claim, the grievance will be considered timely if you initiate the [p]rocedure within the period of time allowed by that statute of limitations.” Then, a half-page later, it states that “[a]rbitration is to be initiated only by giving written notice of the intention to arbitrate within 60 calendar days of the mailing of the President’s written [grievance] decision to [the employee] at the last address on file in [human resources]. A failure to file the notice within the 60-day time period shall constitute a waiver of the dispute in any forum.” Thus, the procedure permits an employee to pursue a grievance within the applicable statute of limitations. But if the grievance process is initiated and processed quickly, an employee is required to initiate arbitration in 60 days, which may be well short of the applicable statute of limitations.
We are concerned that the procedure may be difficult for a lay person to decipher. Because the grievance portion of the procedure does not alert employees that they have longer than 90 days to file grievances for violations of the Fair Employment and Housing Act, or for other causes of action, they may believe that their claims are waived once the 90-day period expires. This lack of clarity in the grievance portion of the procedure does not promote the vindication of statutory rights. Moreover, the procedure can drastically truncate the time for pursuing legal claims. Because the procedure does not explain this, it is harsh and can surprise unsuspecting employees.
In her respondent’s brief, LeBlanc states in a footnote: “LeBlanc abandons her arguments based upon lack of judicial review and restricted statute of limitations.” We could treat this as an implied concession that the procedure does not contain an unconscionable time restriction. “‘[While] briefs and argument are outside the record, they are reliable indications of a party’s position on the facts as well as the law, and a reviewing court may make use of statements therein as admissions against the party.’ [Citation.]” (DeRose v. Carswell (1987) 196 Cal.App.3d 1011, 1019, fn. 3.) However, we opt not to treat LeBlanc’s statement as a concession. In our view, the issue is an important one. Also, significantly, the trial court relied on all points raised by LeBlanc below, including the time restriction, and White Memorial discussed the time restriction in its opening brief.
It bears iterating that White Memorial devoted four short paragraphs in its opening brief to whether the procedure shortens the otherwise applicable limitations periods for the assertion of claims. The discussion was somewhat cursory, and it did not delve into the same detail as this opinion. But White Memorial had the opportunity to go further, which is all that is pertinent. Any time a party had an opportunity to brief an issue, it is fair game for the appellate courts. In other words, we can address it without giving the parties another say. Recently, in People v. Alice (2007) 41 Cal.4th 668, Justice Moreno succinctly explained the applicable law in this fashion: “The parties need only have been given an opportunity to brief the issue decided by the court and the fact that a party does not address an issue, mode of analysis, or authority that is raised or fairly included within the issues raised does not implicate the protections of [Government Code] section 68081.” (People v. Alice, supra, at p. 679.)
c. The presumption against attorney representation.
The procedure sets forth a presumption that an employee will be self-represented in arbitration. However, within 15 days of initiating arbitration, the employee can provide White Memorial with written notice that he or she will be represented by counsel. Further, the procedure posits that White Memorial will not be represented by counsel unless the employee is.
In our view, the arbitration portion of the procedure is suspect. A lay person who has complex statutory claims may initiate arbitration under the procedure and realize more than 15 days later that he or she needs an attorney. And without an attorney, he or she may be unable to vindicate the rights at stake. Even though White Memorial would also be without an attorney, it will most likely be represented by sophisticated, experienced employees and have the advice of counsel on the side. Also, in connection with employee claims, self-representation will be harsher on the employee than White Memorial because the employee will have the burden of proof. That burden can be onerous for a lay person.
d. The cumulative impact of the procedure’s provisions.
As we discussed in part 2, ante, the procedure was a contract of adhesion. Also, the time restrictions are unclear, hard to decipher and potentially cut off an employee’s right to pursue legal claims within the applicable statute of limitations. This creates the potential for surprise. We easily conclude that the procedure was procedurally unconscionable.
An agreement is substantively unconscionable if it is so one-sided that it shocks the conscience. (Nyulassy, supra, 120 Cal.App.4th at p. 1281.) And, as a matter of public policy, statutory claims are arbitrable only “if the arbitration permits an employee to vindicate his or her statutory rights.” (Armendariz, supra, 24 Cal.4th at p. 90.) The procedure, in our view, shocks the conscience by prohibiting a self-represented employee from changing his or her mind mid-stream in litigation and deciding to retain an attorney. Also, the procedure violates public policy. The waiver of the right to legal representation 15 days after arbitration is initiated has the potential of frustrating an employee’s attempt to vindicate statutory rights. Moreover, the procedure’s time limitations can cut off an employee’s right to pursue statutory claims within the statute of limitations. Finally, the procedure’s failure to guarantee more than one deposition creates the possibility that an employee will not be able to conduct adequate discovery for purposes of arbitrating and vindicating statutory rights. Taken together, these provisions make the procedure substantively unconscionable.
When analyzing whether an agreement is unenforceable due to unconscionability, courts apply a sliding scale. If the degree of substantive unconscionability is great, the degree of procedural unconscionability can be lesser. (Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322, 1329.) The opposite is also true. Here, the degree of procedural unconscionability is high because the procedure was a contract of adhesion, and because the time restrictions on initiating grievances and arbitrations are confusing. The degree of substantive unconscionability is lesser, but it is still high enough that it works in combination with the procedural unconscionability to render the procedure unenforceable. The only way to enforce the procedure is if the offending provisions can and should be severed.
4. Severance.
Civil Code section 1670.5, subdivision (a) grants trial courts the discretion to sever unconscionable clauses. (Armendariz, supra, 24 Cal.4th at pp. 121–122.) A court can refuse to enforce a contract as a whole if the contract is permeated by unconscionability. (Id. at p. 122.) Based on this, White Memorial contends that the trial court erred when it refused to sever offending provisions because the procedure’s provisions are discrete and can easily be excised. However, in our view, the offending provisions permeate the entire procedure because the right to an attorney, the right to conduct adequate discovery, and the right to vindicate statutory claims (or any claim) within the statute of limitations goes to the very nature of the procedure. Though it is subtle and confusing, the procedure operates to erode those rights. And, if the discovery provision and time limitations were removed, the procedure would be rendered unreasonable because discovery would not be addressed, and because White Memorial and employees would be stuck with a procedure that was virtually open-ended.
DISPOSITION
The order is affirmed.
LeBlanc shall recover her costs on appeal.
We concur: DOI TODD, Acting P. J., CHAVEZ, J.