Opinion
G054960
06-25-2018
MUSTAFA BARATI, Plaintiff and Respondent, v. OTTNO, INC., Defendant and Appellant.
Call & Jensen, Virginia L. Miller and L. Lisa Sandoval for Defendant and Appellant. Aegis Law Firm, Samuel W. Wong, Kevin H. Sun and Ali S. Carlsen for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2017-00905201-CU-OE-CJC) OPINION Appeal from an order of the Superior Court of Orange County, Ronald L. Bauer, Judge. Reversed with directions. Call & Jensen, Virginia L. Miller and L. Lisa Sandoval for Defendant and Appellant. Aegis Law Firm, Samuel W. Wong, Kevin H. Sun and Ali S. Carlsen for Plaintiff and Respondent.
Plaintiff Mustafa Barati worked for Ottno Inc. from December 2014 until February 24, 2016, the day he was fired. Ottno is a company that matches consumers seeking auto refinance loans with lenders. Barati worked as a loan officer.
That is pretty much the extent of the parties' agreement. Almost everything else - especially why Barati was fired - is a subject of dispute.
Barati's side of the story is that the day before he was fired, he dimmed his computer screen because its previous brightness had hurt his eyes, precipitating headaches. He was told by Ottno's CEO to turn up the brightness of the screen and obtain a doctor's note if he wanted a dimmer screen. Barati promptly turned up the screen and made an appointment to see an optometrist the next day. But when, on February 24, 2016, Barati emailed Ottno's CEO to tell him of the appointment, he was "abruptly" fired a few hours later. Barati believes he was the object of disability discrimination and failure to accommodate the medical condition affecting his eyes.
His complaint does not specify the condition.
Ottno's story is rather different. According to Ottno, a lender had noticed that Barati had submitted fabricated information. Ottno did a random review of five other Barati loan files, which revealed he had falsified vehicle information. Ottno had previously communicated these concerns to him, and he certainly wasn't fired for any medical disability. Moreover, Ottno has a policy of not allowing employees to dim their computer screens because of the possibility something "detrimental" might be going on with the screen's visibility diminished.
The instant appeal centers on a mediation and arbitration agreement Barati signed with Ottno on December 18, 2014. There is no question Barati signed it - as distinct from simply being given a handbook with an arbitration clause.
The agreement begins by establishing the employee's employment to be "at-will." As such, the employment can be terminated "without cause or notice." After that, most of the agreement is devoted to the mechanics of the mediation and arbitration process. In that regard, it provides that all claims of "any nature arising out of or connected with" Barati's employment, "including civil rights violations," are to be submitted to a dispute resolution process that involves two steps - a mediation administered by the Judicial Arbitration and Mediation Services (JAMS) before a retired judge or justice, and then, "if necessary," arbitration "if requested by either party." The agreement specifically allows discovery in such a JAMS proceeding.
The mediation step is itself a two-fold process. There is a "first meeting" between the employee "and Ottno concerning the complaint." And if "informal negotiation" after the first meeting does not resolve the "controversy," then "the case shall be referred to the nearest office of JAMS for mediation, that is, an informal nonbinding conference or conferences between the parties in which a retired judge or justice will seek to guide the parties to a resolution of the case."
On July 8, 2016, about five months after his February firing, Barati sent a confidential settlement letter to Ottno. The letter (according to Ottno's counsel) asked if Ottno was "inclined to mediate the case." Ottno's response was to insist on "the required in-person meeting" first, and "then a mediation" if Barati still wanted to "pursu[e]" the matter.
The record does not contain the letter. The only references to it are in the declaration of Ottno's counsel and its motion to compel arbitration.
Barati was not interested in any in-person meeting first. Rather, in December 2016, after another five months had gone by, Barati sent a formal demand for arbitration to JAMS itself, submitting a $400 filing fee. Ottno first learned of that demand in January 2017, apparently from an email from a JAMS employee to both Barati's counsel and Ottno's counsel. Ottno's counsel responded a few days later saying the demand for arbitration was "premature" because Barati had not complied with the "require[d] two steps before arbitration," i.e., there had been no first meeting. Barati's counsel countered about a month later by noting Ottno had not paid its fee for a JAMS arbitration and imposed on Ottno a February 17, 2017 deadline for the fees. Barati threatened litigation if the fees were not paid.
Barati filed this suit seven days later. Ottno then demanded Barati dismiss his complaint and "make himself available for the in person meeting and mediation that are required under the agreed to procedures." Barati retorted by noting Ottno had failed to pay the necessary fees when it had the chance, and thus forced Barati into filing his civil complaint.
In late March 2017, Ottno filed its motion to enforce the arbitration agreement, which included a request for an informal meeting and mediation to be followed by an arbitration if necessary. The hearing on the motion took place on May 1. No reporter was present. The ensuing minute order simply denied the motion to compel without explanation, and Ottno took this appeal.
We must reverse. The elephant-in-the-room issue in the case is whether Ottno waived arbitration by refusing to pay the JAMS mediation fees. (See Oregel v. PacPizza, LLC (2015) 237 Cal.App.4th 342, 360-361 [collecting cases in which parties seeking arbitration were found to have waived the right to it because of delay].) We think not. Barati has no good answer for the plain language in the agreement he agreed to which, whatever else it does, clearly sets up a "first meeting" as a prerequisite to arbitration. Thus contrary to what Barati argues on appeal, Ottno did not "refuse[]to perform" under the agreement. Rather, it was Barati who refused to have a first meeting which is a plain part of the agreement.
At oral argument, Barati's counsel advanced the idea that the word "meeting" was ambiguous, and might encompass merely an exchange of emails or letters. We note that neither Barati nor his counsel ever asked for clarification or suggested any type of "meeting" other than an in-person one. Moreover, when we look at the language of the clause as a whole - the exact phrase is "first meeting," - we see no ambiguity in the term. The argument that Barati might have discharged the "first meeting" obligation by phone calls or an exchange of emails is unconvincing. That is not how the word "meeting" is used in ordinary parlance.
Barati next presents four arguments against the enforceability of the arbitration agreement, two procedural, two substantive.
The first procedural argument is that the agreement should not be enforced because it was presented to him on a take it or leave it basis. But the idea that an arbitration agreement is not enforceable just because it is a condition of employment has been repeatedly rejected in California case law. (See Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 400, fn. 3; Franco v. Arakelian Enterprises, Inc. (2015) 234 Cal.App.4th 947, 956; Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1122-1123.) "Courts have consistently held that the requirement to enter into an arbitration agreement is not a bar to its enforcement." (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 179.)
The second procedural argument was the fact the agreement did not attach JAMS rules of arbitration. In Harper v. Ultimo (2003) 113 Cal.App.4th 1402 (Harper), for example, the signers of a construction contract received a "nasty shock" when they finally found out that the Better Business Bureau rules of arbitration limited both the damages and remedies available to customers even if "out and out fraud" had been perpetrated. The failure to apprise the customers of those rules thus readily formed the basis of a finding of both procedural and substantive unconscionability. (Id. at p. 1406.) While we agree that the (essentially ministerial) failure to attach a copy of the relevant arbitration rules can undergird a finding of procedural unconscionability (see Trivedi. v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387, 393, disapproved on another point, Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1246-1247) the failure to attach the relevant rules, by itself, is a minor factor. In Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 485, for example, the court recognized the absence of an attachment of the American Arbitration Association rules added "a bit" to a procedural unconscionability argument. But in order to add more than that "bit," there must be something in the unattached rules that, as was the case in Harper, would prevent a "fair and full arbitration." (Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1472.) Barati made no attempt at the trial level, nor does he here, to show there is anything unfair about the JAMS rules. We note, in fact, that JAMS allows discovery on what appears to be substantively the same terms as would be allowed in any California civil court.
Barati also makes two substantive unconscionability arguments. One is the "free peek" theory, which is also Barati's answer to the contract's requirement of a first meeting. Barati claims that requirement in effect gives the employer a "free peek" at his case. (Cf. Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1282-1283 (Nyulassy).)
No, it doesn't. Barati overreads the onerousness of the first meeting requirement. The case he relies on for the "free peek" rationale, Nyulassy, required discussions with "successive levels" of supervisors up the "chain of command" (Nyulassy, supra, 120 Cal.App.4th at p. 1273, fn. 4), and was a unilateral (only the employee was forced to arbitrate) agreement to boot. (See id. at pp. 1282-1283.) This case, by contrast, only requires a "meeting." There is no requirement, even implied, that the employee reveal anything about his case or even negotiate in good faith. Barati could schedule a meeting, ask Ottno's representative why he was fired, and either keep silent or reject Ottno's explanation - in which instance it would be Barati who would have the benefit of the free peak at Ottno's case.
This case is closer to this court's recent decision in Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th 232, 254 (Nguyen), where we rejected application of a "first peek" rationale in a context of an agreement requiring "informal internal efforts" prior to arbitration. In Nguyen, we found nothing substantively unconscionable in requiring that an "internal grievance procedure be exhausted before proceeding to arbitration[.]" (Id. at p. 255.)
Barati's final claim of substantive unconscionability centers on his theory that having to pay anything toward a mediation would be ipso facto unconscionable because it would mean he was being forced to pay more to arbitrate than he would to file in court. The answer is that because the arbitration agreement itself is silent on the topic of who must pay for the mediation, it will be the employer which would bear the cost of both the mediation and the arbitration. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1082.) Barati can hardly complain about that.
We decline Ottno's invitation to hold the issue waived as not raised in the trial court. Having no reporter's transcript, we don't know that; in fact, we must assume the issue was raised. (See Verio Healthcare, Inc. v. Superior Court (2016) 3 Cal.App.5th 1315, 1327.)
In sum, this case involves an arbitration agreement with an easily-complied-with first meeting requirement, with the only hint of unconscionability being the relatively minor element of a failure to attach the relevant arbitration rules, and no harm done even there. Accordingly, we reverse the trial court's order denying Ottno's motion to compel and direct the court to enter a new order granting that motion. The order is to include an informal meeting, mediation if the meeting does not resolve the case, and finally arbitration if the case is not settled by then.
Rather than award appellate costs now, we will leave that matter to the discretion of the arbitrator depending on the eventual outcome of the arbitration (assuming of course that the first meeting or mediation does not obviate the necessity of such an arbitration).
BEDSWORTH, J. WE CONCUR: O'LEARY, P. J. THOMPSON, J.