Opinion
C087628
12-30-2019
ERIC FARLEY, Plaintiff and Respondent, v. DOLGEN CALIFORNIA, LLC, Defendant and Appellant.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published,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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. STK-CV-UOE-2016-0006714)
In 2016, plaintiffs Eric Farley and Dane Rinaldi (collectively, plaintiffs) filed a putative class action complaint against defendant Dolgen California, LLC, alleging various employment-related claims. Defendant appeals from an order denying its motion to stay the action and compel arbitration as to Farley. We agree that the parties did not enter into a binding arbitration agreement and will therefore affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
Farley began working for defendant in April 2014. He was a retail store manager from June 2014 until his employment ended in July 2016.
1. The Agreement
In August 2014, defendant introduced an arbitration agreement to its employees providing that all legal claims and disputes between employees and defendant would be resolved through binding arbitration (the Agreement). The Agreement was disseminated to employees via the company's Web portal, "DGme." After an employee logged into the portal using their unique identification number and password, he or she was presented with an alert requesting that they review the Agreement.
After accessing the Agreement, an employee could expressly agree to the arbitration policy. Inaction also could bind an employee to the new policy if he or she (1) did not expressly opt out by completing and submitting an "Arbitration Opt Out Form," and (2) continued his or her employment for 30 days after first accessing the Agreement. If the employee failed to opt in or opt out of the Agreement after initially viewing it on DGme, the portal continued to display an alert requesting review for up to 30 days.
2. Evidence regarding Farley's access to and acceptance of the Agreement
In August 2014, defendant instructed its retail store managers to (1) access DGme and review the Agreement, (2) print a poster regarding the Agreement and post it in the store's employee break area, (3) print a handout regarding the Agreement and provide one to each employee at the store, (4) review the document and necessary actions with each employee at the store, (5) allow employees time on the store computer to access DGme to review the Agreement, and (6) remind employees they were required to review the Agreement and follow the instructions regarding their options. Later that month, Farley certified to defendant that he had completed these tasks.
In October 2014, defendant hired a marketing company to mail reminder postcards to any employee who had not yet reviewed the Agreement on DGme, including Farley. The postcard stated that defendant had "announced the implementation of an Arbitration Agreement effective August 4, 2014. As previously explained, the Arbitration Agreement establishes a new method for resolving legal disputes between employees and the company. [¶] Our records indicate you have not reviewed the agreement. You are required to access and review the Arbitration Agreement on DGme. [¶] If you do not want to enter into this Arbitration Agreement with [defendant], you must fill out and submit the Opt Out Form on DGme. If you do not do so within 30 days and you continue to work for [defendant], you will be deemed to have accepted and agreed to the terms of the Agreement. [¶] Access DGme and review the required documentation. If you have questions, please contact 1-855-ASK-DGHR, option 9." (Original boldface.)
There was no evidence that Farley accessed, agreed to, or opted out of the Agreement on DGme before or after the postcard was sent. Farley made the following statement in his declaration in support of the opposition to defendant's motion to compel arbitration: "I do not specifically recall receiving the arbitration agreement from Defendant, [but] I do recall that it was my intention to not agree to [it]. . . . I specifically recall that I did not check the box indicating that I agreed to arbitration as I had no intention of doing so."
3. Trial court's denial of defendant's 2018 motion to compel arbitration with respect to Farley
In April 2018, defendant filed a motion to compel arbitration, arguing plaintiffs' claims were subject to binding arbitration under the Agreement. Plaintiffs argued the Agreement was unenforceable because it was unconscionable. They also argued that the motion should be denied because the Agreement excluded claims pending in court as of the date of the Agreement, and that their current claims were covered by a class action suit that was pending against defendant at the time the Agreement took effect.
The trial court granted the motion with respect to plaintiff Rinaldi, finding that defendant had established that he entered into an implied-in-fact agreement to arbitrate. However, it denied the motion with respect to Farley, finding the evidence insufficient to establish that Farley ever received a copy of the Agreement or that a valid arbitration agreement existed between the parties.
The trial court described the evidence of Farley's knowledge and acceptance of the Agreement as "conflicting." The court acknowledged that it "could be inferred" that Farley viewed the Agreement on DGme, based on Farley's statement in his declaration that he remembered choosing to "not" check a box to indicate his acceptance of the Agreement, given that such a check box existed on the online version of the Agreement. However, defendant presented no evidence that Farley either reviewed the Agreement through the Web portal or responded to defendant's requests to accept it or opt out. In addition, Farley stated in his declaration that he did not "specifically recall" seeing the Agreement, although it was his intention to not agree to it.
The trial court also considered the postcard as evidence of an agreement, stating: "If the postcard was the only evidence that Mr. Farley knew of the Arbitration Agreement the court would find that there is insufficient proof of an agreement," reasoning that the mailing failed to inform Farley that he would be "giving up his right to a court proceeding on an individual level and a class proceeding entirely on new actions." Finally, the trial court noted Farley had certified that he completed the tasks required of store managers with respect to the Agreement, but described this as "very thin evidence as to exactly what he did other than passing paper."
DISCUSSION
Defendant argues that even though there is no signed arbitration agreement between the parties, an implied-in-fact agreement to arbitrate arose because Farley "was made aware of the Agreement, its legal significance, and the manner in which an employee could opt out or become bound by the terms of the Agreement." Defendant notes that Farley did not contest the issue of assent in his opposition to the motion to compel arbitration.
To the extent defendant is arguing that Farley forfeited the issue, or that the trial court erred in considering whether Farley had agreed to the Agreement, such an argument is not well founded. The trial court necessarily considered the issue because the existence of a valid agreement is a "statutory prerequisite to granting" a motion to compel arbitration. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)
1. Standard of review
The parties dispute whether we should review the trial court's order de novo or for substantial evidence. Courts will review for substantial evidence a trial court's denial of a motion to compel arbitration that is based on a decision of fact. (Robertson v. Health Net of California, Inc. (2005) 132 Cal.App.4th 1419, 1425.) If only a question of law is involved, or if the facts were undisputed, the standard of review is de novo. (Ibid.; Brown v. Wells Fargo Bank, N.A. (2008) 168 Cal.App.4th 938, 953.)
Here, the trial court's ruling was based chiefly on its finding that Farley could not be bound by the Agreement because there was insufficient evidence that he ever received or reviewed it. According to defendant, the de novo standard of review should apply because there was no conflicting evidence presented in the trial court.
Our review of the record indicates otherwise. Defendant introduced evidence that Farley had certified, in his capacity as a store manager, that he had accessed and reviewed the Agreement, and also reviewed it with employees. Other evidence conflicted with that conclusion, including defendant's evidence that Farley had not reviewed the Agreement on DGme as of October 2014. In addition, Farley stated in his declaration that he did not "specifically recall" receiving the Agreement. We reject defendant's argument that Farley's recollection is irrelevant or otherwise not competent evidence because it can be inferred from the statement that Farley never received the Agreement. These aspects of the order are reviewable under the substantial evidence standard.
To the extent the trial court analyzed Farley's undisputed receipt of the reminder postcard as distinct evidence of an implied agreement to arbitrate, we will review that portion of the order de novo. (Brown v. Wells Fargo Bank, N.A., supra, 168 Cal.App.4th at p. 953.)
2. Arbitration
A party alleging the existence of a written agreement to arbitrate may petition the trial court for an order to compel arbitration. (Code Civ. Proc., § 1281.2.) Because such a proceeding is simply a suit in equity seeking specific performance of a contract to arbitrate, the trial court may only grant a petition if a valid agreement exists. (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 356; see also Victoria v. Superior Court (1985) 40 Cal.3d 734, 739 [" 'the policy favoring arbitration cannot displace the necessity for a voluntary agreement to arbitrate' "].)
The procedures for the summary determination of whether a valid agreement to arbitrate exists are found in Code of Civil Procedure sections 1280 through 1294.4. The party seeking to compel arbitration bears the burden of proving the existence of the agreement by a preponderance of the evidence, and the party opposing arbitration bears the burden of proving any affirmative defense by a preponderance of the evidence. (Rosenthal v. Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 413.)
Whether the parties have entered into a binding agreement to arbitrate is determined under general principles of contract law. (Pinnacle Museum Tower Assn. v. Pinnacle Marketing Development (US), LLC (2012) 55 Cal.4th 223, 236.) Free and mutual consent are prerequisites to contract formation. (Civ. Code, §§ 1550, 1565.) Consent to an arbitration agreement can be express or implied in fact through conduct. (Pinnacle Museum Tower Assn., at p. 236.)
Employers may "implement policies that 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 (Gorlach).) " ' "[T]he very heart of this kind of agreement is an intent to promise." ' " (Id. at p. 1507.)
Defendant relies on Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416 for the proposition that Farley impliedly consented to the Agreement through inaction and continued employment. Craig is distinguishable on its facts. In that case, the court found sufficient evidence of an implied agreement to arbitrate where the employer introduced evidence that it had twice mailed copies of a memorandum and brochure detailing its proposed arbitration agreement to the employee's home address. (Id. at pp. 419-420.) The mailed documents made clear that everyone would be bound by the agreement and it would "govern all future legal disputes between [employee] and the Company that [were] related in any way to [employee's] employment." (Id. at p. 419.) The mailings were not returned, and the employee continued to work for the employer for three years after the second mailing was sent. (Id. at pp. 421-422.) This created a presumption of receipt that shifted the burden of producing evidence to the employee. (Id. at p. 421.) For her part, the employee declared that she had never received the documents. (Id. at p. 420.) The Court of Appeal concluded it was proper for the trial court to infer that the employee agreed to be bound by the terms of the arbitration agreement because there was substantial evidence that she (1) had received the documents detailing the agreement and (2) continued to work for her employer. (Id. at p. 422.)
Here, in contrast, the trial court's finding that Farley never received the Agreement is supported by substantial evidence. Defendant's records showed that Farley had not reviewed the document on DGme as of October 2014 and never consented to or opted out of the Agreement on DGme. Farley also stated in his declaration that he did not recall receiving the Agreement. Although Farley certified that he completed the tasks required of store managers with respect to the Agreement, including accessing DGme and reviewing the Agreement, the trial court described this as "very thin evidence as to exactly what he did other than passing paper." The evidence before the trial court—including the absence of evidence that Farley accessed or reviewed the Agreement—supports the trial court's conclusion that there was no mutual intent to enter into an arbitration agreement.
We next examine whether the postcard that was mailed to employees like Farley, who had not reviewed the Agreement on DGme, gave rise to an implied agreement to arbitrate.
Although we review this question separately (and de novo), at oral argument, counsel for defendant clarified that mailing of the postcard by defendant should be viewed as one step in the company's overall effort to secure Farley's review of the Agreement, not as a distinct implied agreement to arbitrate.
As noted, Code of Civil Procedure section 1281.2 requires a written agreement to arbitrate, but employers may implement policies that become unilateral implied-in-fact contracts when employees accept them by continuing their employment. (Gorlach, supra, 209 Cal.App.4th at p. 1508.) Unlike the comprehensive memorandum and brochure that were twice mailed to employees in Craig, however, the postcard mailed to delinquent employees by defendant lacked any detail concerning the new arbitration policy—it merely noted that the Agreement "establishes a new method for resolving legal disputes between employees and the company" and stated that employees "are required to access and review the Arbitration Agreement on DGme," and opt out if desired. The mailing did not inform Farley of the Agreement's principal purpose and effect, namely, that he would waive his right to a judicial forum and that all future legal claims or disputes would now be resolved through arbitration, including disputes related to his employment. (See, e.g., Craig v. Brown & Root, Inc., supra, 84 Cal.App.4th at p. 419; Gorlach, at p. 1508.)
The language of the postcard itself also suggested that it did not create an agreement between the parties without further action by the employee, namely, review of the Agreement on defendant's Web portal. Gorlach, supra, 209 Cal.App.4th 1497 is instructive on this point. In Gorlach, a handbook provided to employees "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, at p. 1509.) Similarly here, the postcard alludes to a new dispute resolution method, but expressly provides that employees "are required to access and review the Arbitration Agreement on DGme," implying that no binding commitments would arise until they did so (and they either opted in or 30 days passed after their review). (See also Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164, 1170-1171 [finding no implied agreement to arbitrate where employee handbook referenced a separate document that the employees were required to sign before the agreement became binding].)
Because the postcard lacked detail and contemplated additional action would be necessary on the part of employees before a valid, binding contract could be formed, we agree with the trial court's conclusion that the mailing was "insufficient proof of an agreement."
DISPOSITION
The order is affirmed. Farley shall recover his costs on appeal. (Cal. Rules of Court, rule 8.278(a).)
KRAUSE, J. We concur: DUARTE, Acting P. J. RENNER, J.