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Derr v. Superior Court of Monterey Cnty.

COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT
Feb 8, 2012
H037117 (Cal. Ct. App. Feb. 8, 2012)

Summary

vacating order compelling arbitration where plaintiff-employee signed form stating "I have received and read the . . . Arbitration Agreement . . . . I willingly agree to participate in arbitration as set forth in the Arbitration Agreement" but the handbook containing the Arbitration Agreement provided that the "handbook does not create a contract express or implied"

Summary of this case from Ashbey v. Archstone Prop. Mgmt., Inc.

Opinion

H037117

02-08-2012

SUSAN K. DERR, Petitioner, v. THE SUPERIOR COURT OF MONTEREY COUNTY Respondent, NEPENTHE/PHOENIX CORP., Real Party in Interest.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Monterey County Super. Ct. No. M110322)

Petitioner Susan Derr (hereafter Ms. Derr) seeks a writ of mandate directing the trial court to vacate its order compelling her to arbitrate employment related claims against her employer, Nepenthe/Phoenix Corporation (hereafter Nepenthe). We issued an order to show cause why the writ should not be granted. Having considered the parties' further briefing, we order that the writ should issue.

Facts and Proceedings Below

The material facts are not in dispute.

Ms. Derr began working for Nepenthe in 1969 as a server and continued so to do for approximately the next 40 years. In October 2008, when Ms. Derr was 63 years old, she was diagnosed with cancer, which required that she undergo chemotherapy treatments. On January 15, 2009, she received through the mail a document entitled "Notice to-Employee as to Change in Relationship," which indicated that she had voluntarily "quit" effective January 15, 2009. In the comments section of the document was the following: "Due to Susi's chemo she will be unable to work for the next 30 days. We will have to terminate Susi from employment at Nepenthe. When she is all healed, she is welcome to come back and apply for a position at Nepenthe." Ms. Derr refused to sign to acknowledge that she had received a copy of the document.

Subsequently, on January 24, 2011, Ms. Derr filed a complaint against Nepenthe alleging, among other things, causes of action for disability discrimination and wrongful termination in violation of public policy. Nepenthe responded to the complaint by filing a petition to compel arbitration and stay the court proceedings. Nepenthe asserted that on or about December 12, 1996, Ms. Derr had entered into a written agreement to arbitrate any and all claims or controversies between her and Nepenthe arising from her employment with the company. Further, Nepenthe pointed out that on November 2, 2007, Ms. Derr had executed an "Acknowledgement of Receipt of Employee Handbook" and the "Nepenthe Arbitration Agreement" which had "superseded and replaced the previous Handbook and Arbitration Agreement of 1996."

Nepenthe argued that Ms. Derr's claims were within the scope of the 2007 arbitration agreement, which it said "expressly provides that any disputes arising between employee and employer, whether based in contract, tort, or statutory duty or prohibition (including prohibition against discrimination or harassment) shall be submitted to binding arbitration."

Ms. Derr opposed Nepenthe's petition. She argued that the agreement she signed did not actually state that she was required to arbitrate claims arising out of her employment. She pointed out that the agreement made no explicit reference to claims arising out of employment, rather, by its express terms arbitration was required only for "dispute[s] arising from or relating to th[e] Agreement" itself.

The court granted the motion to compel arbitration on May 10, 2011. The court found the arbitration agreement was enforceable and that a "reading of the Arbitration Agreement at issue in its entirety makes clear that its purpose is to resolve, through arbitration, any disputes arising out of the employer/employee relationship. The Agreement specifically references the Employee Handbook which contains provisions pertaining to medical leave. A claim of involuntary termination following a need for such leave would certainly qualify as such an employee/employer dispute. To the extent there may be any ambiguity concerning its intent, extrinsic evidence, specifically the 1996 arbitration agreement, may be considered. That agreement, which [Ms. Derr] signed, supports the parties' intent to arbitrate an employment termination issue."

As noted, thereafter, on July 7, 2011, Ms. Derr filed a petition for writ of mandate asking this court to direct the lower court to vacate its order compelling arbitration.

Discussion

A party to an arbitration agreement may petition the court to compel arbitration. (Code Civ. Proc., § 1281.2.) "A petition to compel arbitration based on a written arbitration agreement must be granted unless grounds exist to revoke the agreement." (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1468 (Roman).)

Code of Civil Procedure section 1281.2 provides in pertinent part: "On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] (a) The right to compel arbitration has been waived by the petitioner; or [¶] (b) Grounds exist for the revocation of the agreement. [¶] (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact."

"Orders compelling arbitration are considered interlocutory and not directly appealable." (Parada v. Superior Court (2009) 176 Cal.App.4th 1554, 1566 (Parada); Zembsch v. Superior Court (2006) 146 Cal.App.4th 153, 160 (Zembsch).) However, writ review is available in a proper case. (Parada, at pp. 1566-1567; Zembsch, at p. 160.)

"California courts have held that writ review of orders compelling arbitration is proper in at least two circumstances: (1) if the matters ordered arbitrated fall clearly outside the scope of the arbitration agreement or (2) if the arbitration would appear to be unduly time consuming or expensive." (Zembsch, supra, 146 Cal.App.4th at p. 160.) The first condition is satisfied if "the matters ordered arbitrated are not within the scope of an enforceable arbitration agreement." (Id., at p. 161, italics added.) The expense of unwarranted arbitration in such cases satisfies the second condition. (Ibid.; see Parada, supra, 176 Cal.App.4th at p. 1567 [writ review justified by the high cost of arbitrating before a three-judge panel at JAMS and the amount of time necessary to complete arbitration].) As one court has put it, "any arbitration compelled in the absence of a valid, enforceable arbitration agreement is an unduly time consuming and expensive proposition. Writ review is the appropriate way to review the challenged order and avoid having parties try a case in a forum where they do not belong, only to have to do it all over again in the appropriate forum." (Medeiros v. Superior Court (2007) 146 Cal.App.4th 1008, 1014, fn. 7.)

That being said, " '[a]rbitration is . . . a matter of contract, and the parties may freely delineate the area of its application. The court's role . . . must be strictly limited to a determination of whether the party resisting arbitration agreed to arbitrate.' " (Gravillis v. Coldwell Banker Residential Brokerage Co. (2006) 143 Cal.App.4th 761, 771 (Gravillis).) We review questions of contract interpretation independently. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.)

" '[A]n order to arbitrate a particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.' [Citation.]" (Titolo v. Cano (2007) 157 Cal.App.4th 310, 316-317.)

The party opposing arbitration has the burden to show the agreement cannot be interpreted to apply to the dispute. (Gravillis, supra, 143 Cal.App.4th at p. 772.)

" 'To determine whether a contractual arbitration clause requires arbitration of a particular controversy, the controversy is first identified and the issue is whether that controversy is within the scope of the contractual arbitration clause.' [Citation.]" (Titolo v. Cano, supra, 157 Cal.App.4th at p. 316.) While doubts as to the meaning and interpretation of an arbitration agreement are resolved in favor of requiring arbitration, " '[t]here is no public policy favoring arbitration of disputes which the parties have not agreed to arbitrate.' [Citation.]" (Id. at p. 317.) Moreover, "no dispute may be ordered to arbitration unless it is within the scope of the arbitration agreement. 'In determining the scope of an arbitration clause, "[t]he court should attempt to give effect to the parties' intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made [citation]." [Citation.]' [Citation.] '[T]he terms of the specific arbitration clause under consideration must reasonably cover the dispute as to which arbitration is requested.' [Citation.]" (Ibid.) For this reason, " 'the contractual terms themselves must be carefully examined before the parties to the contract can be ordered to arbitration' by the court. [Citation.]" (Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 705.)

Accordingly, we set forth in detail the first page of the "NEPENTHE ARBITRATION AGREEMENT."

"This Arbitration Agreement ('Agreement') between the parties designated below as Employer and Employee (each a 'party' and collectively the 'parties') is effective as of the date that appears above the signature lines hereunder.

The agreement was dated November 2, 2007.

Recitals

This Agreement is made with regard to the following facts:

A) Employee represents that he or she has received and read the Nepenthe Employee Handbook prior to signing this Agreement. Employee further represents that he or she understands the legal effect of binding arbitration on the parties.
B) Employee is aware that his or her employment is not contingent upon signing this arbitration agreement. Employee therefore voluntarily agrees to arbitration in accordance with the provisions below.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for valuable consideration, the receipt and sufficiency of which are acknowledged by the parties, the parties agree as follows:

1. The parties shall submit any dispute arising from or relating to this Agreement or the breach hereof, whether based on contract, tort, or statutory duty or prohibition (including any prohibition against discrimination or harassment) to binding arbitration in accordance with the California Arbitration Act (California Code of Civil Procedure §§ 1280 through 1294.2). Either party may enforce the award of the arbitrator under California Code of Civil Procedure § 1285. The parties understand that they are waiving their right to a jury trial." (Hereafter paragraph one.)

The remainder of the agreement goes on to outline basic arbitration rules and procedures, but mentions nothing at all about employment disputes.

Ms. Derr argues that in order to compel her to arbitrate all employment claims arising out of her employment with Nepenthe, there must be evidence that she actually agreed to arbitrate all employment claims.

The rules of construction generally applicable to contracts govern the interpretation of arbitration provisions; that is, we interpret the words in their ordinary sense, according to the plain meaning a layperson would attach to them. (Gravillis, supra, 143 Cal.App.4th at p. 774.)

Although Ms. Derr seems to concede that paragraph one outlined ante is ambiguous, we find that it plainly and unmistakably indicates that any disputes between the parties arising from or relating to the arbitration agreement itself shall be submitted to arbitration; it does not, as Nepenthe argued below, "expressly provide[] that any disputes arising between the employee and employer . . . shall be submitted to binding arbitration." (Italics added.)

Contractual language is ambiguous if it is susceptible of more than one reasonable interpretation in the context of the contract as a whole. (MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635, 648.) We do not find the language of paragraph one to be susceptible of more than one reasonable interpretation; and that interpretation is there was an agreement to arbitrate disputes "arising from or relating to" the arbitration agreement itself; the arbitration agreement does not describe the types of disputes that could arise from or relate to the agreement—as nonsensical as that is.

Certainly in 1996, Ms. Derr did sign an "ACKNOWLEDGMENT AND ARBITRATION AGREEMENT" whereby she acknowledged receiving a copy of Nepenthe's employee handbook and she did agree "that the handbook provides for the arbitration of any and all claims or controversies between [her] and Nepenthe/Phoenix Corporation arising from [her] employment with the company . . . ." Nevertheless, the 2007 "ACKNOWLEDGEMENT OF RECEIPT OF EMPLOYEE HANDBOOK" states that the policies contained in the 2007 employee handbook "supersede and replace all previously communicated policies both in written and verbal form." Thus, the 2007 acknowledgment expressly voided the terms of the 1996 employee handbook and arbitration provision that was contained therein and the 1996 acknowledgment. Moreover, the introduction section of the 2007 employee handbook states "[t]his handbook is designed to acquaint you with Nepenthe and to provide you with information about working conditions, your benefits and some of the policies affecting your employment. The polices contained in this Employee Handbook dated October 2007 apply to all employees and supersede and replace all previously communicated policies both in written and verbal form." Although the "problem solving" section of the handbook states that an additional step in the resolution of disputes between the employer and employee "may" involve "Alternative Dispute Resolution" including "mediation and/or arbitration of claims," the introduction section of the handbook expressly provides that the "handbook does not create a contract express or implied."

For this reason, it was error for the court to look to the 1996 acknowledgment and arbitration agreement as extrinsic evidence of the parties' intent in entering into the 2007 arbitration agreement. If the purpose of the 2007 handbook was to replace and supersede the 1996 agreement, it is illogical to look to the earlier agreement as evidence of the parties' intent in forming the newer agreement.

With regard to the 2007 arbitration agreement the acknowledgement contains a paragraph that reads as follows: "By initialing on the line below, I represent that I have received and read the Nepenthe Arbitration Agreement and that I understand the legal effect of binding arbitration. Further, I willingly agree to participate in arbitration as set forth in the Arbitration Agreement and am aware that I am not obligated to accept the Arbitration Agreement as a condition of my employment." Ms. Derr's signature appears on the acknowledgment. However, nothing in this acknowledgment indicates that Ms. Derr is required to arbitrate all claims arising out of her employment. Rather, the acknowledgment expressly provides that the employee agrees to participate in arbitration as set forth in the arbitration agreement; the particular controversies within the scope of the arbitration agreement are left undefined.

It appears that there was a huge drafting mistake. However, Nepenthe drafted the agreement and must accept that it can hardly expect Ms. Derr to be held to contract terms that it neglected to include in the agreement it asked her to sign. Here there was no plain and clear notification of the terms of the agreement and an understanding consent to arbitrate employment related disputes. "However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract." (Civ. Code, § 1648.)

If Nepenthe wished to require Ms. Derr to adhere to an arbitration clause that required her to arbitrate any disputes arising from her employment with Nepenthe, it should have made that clause explicit, preferably as explicit as possible, and understandable to a layperson not represented by an attorney.

In conclusion, we hold that Ms. Derr's employment related claims are beyond the scope of the 2007 arbitration agreement. Accordingly, since there is no enforceable agreement to arbitrate Ms. Derr's employment related claims, Nepenthe's motion to compel arbitration should have been denied.

In light of our holding, we need not reach petitioner's additional argument that the 2007 arbitration agreement is unconscionable.
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Disposition

Let a peremptory writ of mandate issue directing respondent court to vacate its order of May 10, 2011, granting the petition of real party in interest to compel arbitration and stay court proceedings, and to enter a new order denying the petition. Upon finality of this opinion, the temporary stay order of this court is vacated. This opinion is made final as to this court seven days from the date of filing. (Cal. Rules of Court, rule 8.490(b)(3).) Costs in this original proceeding are awarded to petitioner.

ELIA, J. WE CONCUR: PREMO, Acting P. J. BAMATTRE-MANOUKIAN, J.


Summaries of

Derr v. Superior Court of Monterey Cnty.

COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT
Feb 8, 2012
H037117 (Cal. Ct. App. Feb. 8, 2012)

vacating order compelling arbitration where plaintiff-employee signed form stating "I have received and read the . . . Arbitration Agreement . . . . I willingly agree to participate in arbitration as set forth in the Arbitration Agreement" but the handbook containing the Arbitration Agreement provided that the "handbook does not create a contract express or implied"

Summary of this case from Ashbey v. Archstone Prop. Mgmt., Inc.
Case details for

Derr v. Superior Court of Monterey Cnty.

Case Details

Full title:SUSAN K. DERR, Petitioner, v. THE SUPERIOR COURT OF MONTEREY COUNTY…

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

Date published: Feb 8, 2012

Citations

H037117 (Cal. Ct. App. Feb. 8, 2012)

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