Opinion
F074105
12-01-2017
DEBORAH KEEN, Plaintiff and Respondent, v. KAN-DI-KI, LLC et al., Defendants and Appellants.
Fisher & Phillips, Lonnie D. Giamela, Wendy McGuire Coats and Laurie Ann Koscielak for Defendants and Appellants. Bryant Whitten and Amanda B. Whitten for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 16CECG00955)
OPINION
THE COURT APPEAL from a judgment of the Superior Court of Fresno County. Jeffrey Y. Hamilton, Jr., Judge. Fisher & Phillips, Lonnie D. Giamela, Wendy McGuire Coats and Laurie Ann Koscielak for Defendants and Appellants. Bryant Whitten and Amanda B. Whitten for Plaintiff and Respondent.
Before Detjen, Acting P.J., Franson, J. and Smith, J.
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Defendant KAN-DI-KI, LLC, a California limited liability company doing business as Diagnostic Laboratories & Radiology (defendant), challenges the trial court's denial of its motion to compel arbitration pursuant to an arbitration agreement contained in its employee handbook. Defendant contends it established the existence of a valid, enforceable agreement to arbitrate and the trial court erred by applying the wrong legal standard for determining ambiguity and by considering parol evidence that contradicted the unambiguous terms of the agreement.
The threshold question of the agreement's ambiguity is a question of law subject to independent review on appeal. We conclude the arbitration agreement in paragraph 2—when read in conjunction with the language in the opt-out clause in paragraph 3—is ambiguous. "Ambiguous" means reasonably susceptible to more than one interpretation. We also conclude plaintiff's interpretation of the opt-out clause was reasonable. Reasonableness is an objective standard based on the understanding of a hypothetical reasonable layperson placed in the circumstances under which the agreement was made.
Our conclusion about ambiguity leads to the further conclusion that relevant extrinsic evidence is admissible to explain the meaning of the ambiguous language. Consequently, the fact the arbitration agreement is a completely integrated agreement as to dispute resolution does not bar the consideration of the proffered extrinsic evidence. Therefore, the trial court did not err in considering extrinsic evidence.
The trial court's findings establish there was no subjective meeting of the minds about arbitrating disputes because plaintiff reasonably believed she had opted out of arbitration. This finding of fact about the subjective state of mind of the parties, however, does not end our inquiry by fully resolving the question of mutual consent and the formation of a contract. Under California law, an objective standard applies and, consequently, the ambiguities in the agreement do not render the agreement unenforceable. California courts routinely apply principles of contract interpretation to resolve ambiguities and determine which interpretation of the ambiguous language governs the parties' relationship. (E.g., Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 248 [ambiguities in arbitration agreement must be construed against the drafting employer, which precludes drafter from claiming benefit of doubt created by ambiguity].)
Here, the trial court properly considered extrinsic evidence, impliedly resolved the conflicts in that evidence in plaintiff's favor, and expressly found plaintiff's interpretation of the agreement was reasonable under the circumstances. The court impliedly adopted plaintiff's interpretation of the opt-out clause—that is, construed it to mean plaintiff opted out of arbitration altogether by checking the box. This interpretation of the ambiguous language is based on the resolution of conflicts in the extrinsic evidence and is objectively reasonable in the circumstances presented, which includes the short amount of time plaintiff was given to review the document before signing it. Therefore, the interpretation will be upheld on appeal. In sum, there was no mutual consent to an agreement to arbitrate plaintiff's causes of action. We therefore affirm the order denying the motion to compel arbitration.
FACTS
On March 3, 2003, defendant hired plaintiff Deborah Keen as an X-ray technologist in its Fresno region. Defendant's business operations involve providing portable laboratory and radiology services from locations in 11 states.
On June 23, 2014, in conjunction with defendant's issuance of a revised employee handbook, plaintiff's supervisor, Scott Spurgeon, gave plaintiff an "Employee Acknowledgment and Agreement" (Agreement). The Agreement provided, as pertinent to the appeal:
"By signing below, this acknowledges that I have received a copy of the Diagnostic Laboratories' ('Company') Employee Handbook and I will familiarize myself with its contents.
"1. I acknowledge that nothing in the Employee Handbook creates or is intended to create a promise or representation of continued employment and that my employment, position, and compensation at the Company are at-will, shall be for no specific duration, and may be changed or terminated at the will of the Company. Both I and the Company have the right to terminate my employment at any time, with or without cause or notice. By signing below, I certify that I understand that employment at-will is the sole and entire agreement between myself and the Company concerning the duration of my employment and the circumstances under which my employment may be terminated. It supersedes all prior agreements, understandings, and representations (whether written or oral) concerning the duration of my employment with the Company and/or the circumstances under which my employment may be terminated.
"2. I and the Company agree to utilize binding arbitration as the sole and exclusive means to resolve all disputes that may arise out of or be related in any way to my employment, including but not limited to the termination of my employment and my compensation. The Company and I each specifically waive and relinquish our right to bring a claim against the other in a court of law,] [sic] and this waiver shall be equally binding on any person who represents or seeks to represent me or the Company in a lawsuit against the other in a court of law. Both I and the Company agree that any claim, dispute, and/or controversy that I may have against Company (or its owners, directors, officers, managers, employees, or agents), or the Company may have against me, shall be submitted to and determined exclusively by binding arbitration under the Federal Arbitration Act ('FAA'). The FAA applies to this agreement because the Company's business involves interstate commerce. Included within the scope of this Agreement are all disputes, whether based on tort, contract, statute (including, but not limited to, any claims of discrimination, harassment and/or retaliation, whether they be based on Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, or any other state or federal law or regulation), equitable law, or otherwise. The only exception to the requirement of binding arbitration shall be for claims arising under the National Labor Relations Act which are brought before the National Labor Relations Board, claims for unemployment compensation benefits, claims for medical and disability benefits under the state workers' compensation law, or as may otherwise be required by state or federal law. However, nothing herein shall prevent me from filing and pursuing proceedings before the United States Equal Employment Opportunity Commission, or similar state or local agency (although if I choose to pursue a claim following the exhaustion of such administrative
remedies, that claim would be subject to the provisions of this Agreement). By this binding arbitration provision, both I and the Company give up our right to trial by jury of any claim I or the Company may have against each other.
"3. All claims brought under this binding arbitration agreement shall be brought in the individual capacity of the [sic] myself or the Company. This binding arbitration agreement shall not be construed to allow or permit the consolidation or joinder of other claims or controversies involving any other employees, or permit such claims or controversies to proceed as a class action, collective action, private attorney general action or any similar representative action. No arbitrator shall have the authority under this agreement to order any such class or representative action. By signing this agreement, I am agreeing to waive any substantive or procedural rights that I may have to bring an action on a class, collective, private attorney general, representative or other similar basis. However, due to the nature of this waiver, the Company has provided me with the ability to choose to retain these rights by affirmatively checking the box at the end of this paragraph. Accordingly, I expressly agree to waive any right I may have to bring an action on a class, collective, private attorney general, representative or other similar basis, unless I check this box: [X]."
Paragraphs 5 and 6 of the Agreement addressed the selection of the arbitrator and the procedures for conducting the arbitration. Paragraph 7 is an integration clause that provides:
"7. This is the entire agreement between myself and the Company regarding dispute resolution, the length of my employment, and the reasons for termination of my employment, and this agreement supersedes any and all prior agreements regarding these issues. Oral representations or agreements made before or after employment do not alter this Agreement."
The Agreement set forth two sentences in all capital letters immediately above the blanks for the employee's signature and the date. The first sentence stated the employee's signature attested to the fact the employee had read, understood and agreed to be legally bound by all of the terms of the Agreement. The second sentence directed the employee not to sign until the employee had read the Agreement. Plaintiff signed the Agreement.
When Spurgeon presented the Agreement to plaintiff, he did not explain what it was. Plaintiff's declaration stated: "He just said that corporate needed us to sign them and told me to hurry up because I had a patient waiting out in the field." Plaintiff explained her decision to place an "X" in the box relating to arbitration by stating she read the Agreement through, found it was very confusing, and intended to decline arbitration, which is why she placed an "X" in the box after paragraph 3 of the Agreement. Plaintiff stated she "signed the second page because I thought a signature was required regardless of our choice" relating to arbitration.
Plaintiff's declaration stated that about 20 minutes after signing the Agreement, she called and spoke to the office manager, Denise Lancaster, and another X-ray technician, Margie Huff, to confirm that she was not agreeing to arbitration. Plaintiff's declaration also stated: "She told me not to worry about it and that she would make sure it was correct in my file. I did not intend to waive my right to a jury trial."
About 11 months later, in May 2015, plaintiff asked Spurgeon for permission to leave work early for an appointment with her psychiatrist. Plaintiff alleged Spurgeon became upset, expressed an inability to depend upon her, and then told her she could have the time off because it was better than having her "going off" on people. Plaintiff alleges she was so distressed by Spurgeon's conduct that her psychiatrist took her off work.
On July 7, 2015, defendant discharged plaintiff from her employment. In October 2015, plaintiff obtained a right to sue letter from the Department of Fair Employment and Housing.
PROCEEDINGS
Complaint
In March 2016, plaintiff filed a complaint for discrimination based on a disability or perceived disability, failure to prevent discrimination, retaliation for taking medical leave, and wrongful termination based on a violation of public policy. About five weeks later, defendant responded to the complaint by filing a motion to compel arbitration and to stay proceedings pending arbitration. Motion to Compel Arbitration
Defendant supported its motion to compel with a declaration from Christine Waldron, the director of human resources at defendant, a position she held since January 2014. Waldron's declaration stated that, in her capacity as director of human resources, she was familiar with defendant's employment forms and policies and maintained custody of employee personnel files containing those forms and policies. Waldron stated it was defendant's practice to provide all employees with a copy of its employee handbook and the employee acknowledgment and agreement containing a comprehensive arbitration agreement. A copy of the Agreement signed by plaintiff was attached to Waldron's declaration. Waldron also stated: "Employees are provided time to review the Employee Handbook and Arbitration Agreement and ask human resource representatives any questions they may have about the arbitration provisions and company policies. [¶] ... [¶] ... At no time during Plaintiff's employment with Defendant did she ever raise any questions or concerns regarding the Arbitration Agreement."
Waldron supported these factual assertions by declaring under penalty of perjury, from Burbank, California, that "I know all of the facts stated in this declaration from my own personal knowledge and if sworn as a witness, I could and would competently so testify."
Plaintiff opposed the motion to compel arbitration, claiming she did not consent to arbitration. The contents of plaintiff's supporting declaration, which are described above, disputed facts stated or implied by Waldron's declaration. Plaintiff's opposition argued Waldron's assertion that plaintiff never raised any questions or concerns about the Agreement lacked foundation because Waldron did not have personal knowledge of the facts, particularly plaintiff's conversation with Lancaster, the office manager. Plaintiff's opposition also argued defendant had not met its burden of proving the existence of a valid arbitration agreement.
Defendant's reply asserted plaintiff had freely and voluntarily entered into the Agreement and denied the Agreement was confusing or ambiguous. Defendant argued the subject language clearly sets forth that plaintiff agreed to arbitrate all disputes and the opt-out clause was limited to claims brought on a "class, collective, private attorney general, representative or other similar basis." Defendant claimed the Agreement was integrated and the parol evidence rule prevented plaintiff from introducing evidence contradicting its terms. Defendant also filed evidentiary objections to plaintiff's declaration, arguing the declaration's factual assertions were irrelevant and immaterial and some assertions were speculation, opinion or hearsay. Hearing and Decision
The trial court issued a tentative ruling denying the motion to compel arbitration. Following a request from defendant's attorney, a short hearing on the motion was held on June 8, 2016. Counsel for both parties appeared via Court Call. No testimony or other evidence was presented at the hearing, defendant's attorney presented argument, and plaintiff's attorney submitted on the papers.
On June 23, 2016, the court issued a written minute order adopting its tentative ruling denying the motion to compel. The court identified three ambiguities in paragraphs 2 and 3 of the Agreement, which included the opt-out clause. The court's discussion of the ambiguities is quoted in part I.D.1, post. Having determined the opt-out clause was ambiguous, the court referred to the principle that ambiguities in a written contract are construed against the party who drafted it. The court also considered the extrinsic evidence submitted by the parties and explicitly concluded plaintiff's evidence was relevant and admissible (i.e., was not barred by the parol evidence rule or the hearsay rule). The court distinguished the line of cases holding a party's failure to read and understand a written contract did not prevent that party from being bound by its terms. The court stated those cases involved contractual language that was clear and unambiguous.
As an alternate ground for its decision, the trial court discussed the doctrine of unilateral mistake, which allows for the rescission of a contract. The court found plaintiff's understanding that she had opted out of arbitration was reasonable and was communicated to her office manager. The court also found defendant did nothing to correct plaintiff's understanding (which was different from the interpretation defendant has asserted in this litigation). Accordingly, the court stated "it can be said that the mistake was known to defendant and encouraged or fostered by defendant." Thus, the court impliedly concluded plaintiff was entitled to rescind the arbitration agreement.
Defendant timely appealed.
DISCUSSION
I. FORMATION OF AN AGREEMENT TO ARBITRATE
A. Proving an Agreement Exists
A petition to compel arbitration shall be granted "if [the court] determines that an agreement to arbitrate the controversy exists." (Code Civ. Proc., § 1281.2.) When presented with a petition to compel arbitration, the trial court's first task is to determine whether the parties have agreed to arbitrate the dispute. (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59.)
The existence of a valid agreement to arbitrate is determined by reference to state law principles concerning the formation, interpretation, and enforceability of contracts. (Avery v. Integrated Healthcare Holdings, Inc., supra, 218 Cal.App.4th at p. 59; Bolter v. Superior Court (2001) 87 Cal.App.4th 900, 906.) The party seeking to compel arbitration "bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence." (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.)
B. Rules Governing Contract Formation
A party seeking to prove an arbitration agreement was formed must establish the essential elements of a contract—specifically, (1) parties capable of contracting, (2) the consent of those parties, (3) a lawful object, and (4) adequate consideration. (Civ. Code, § 1550.) In this appeal, the dispute relates to the consent of the parties, which must be (1) free, (2) mutual, and (3) communicated by each to the other. (Civ. Code, § 1565.)
The existence of mutual consent is determined by applying an objective standard to the outward manifestations or expressions of the parties and ascertaining the reasonable meaning of their words and their conduct, and not their unexpressed intentions or expectations. (Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 141.) This objective standard refers to what a reasonable person would be lead to believe by the outward manifestations or expressions of the parties. (Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 208.) This hypothetical reasonable person is a layperson, not an attorney or a person with specialized training. (See e.g., E.M.M.I. Inc. v. Zurich American Ins. Co. (2004) 32 Cal.4th 465, 471.)
C. Written Contracts and Parol Evidence
Here, defendant has attempted to prove the contractual element of mutual consent to arbitration by presenting a written document signed by plaintiff. The trial court determined the copy of the Agreement attached to Waldron's declaration was admissible.
The court rejected plaintiff's challenge to its authenticity because plaintiff's declaration stated she reviewed the copy attached to Waldron's declaration, recalled receiving the Agreement from Spurgeon, read it, considered it very confusing, made an "X" in the opt-out box on the first page, and signed the second page of the Agreement. The trial court's determination as to the admissibility of the Agreement is not challenged in this appeal.
1. Determining Mutual Intent from a Writing
Here, the Agreement is the primary evidence of the parties' outward manifestations of their intentions. The importance of the written document is demonstrated in the following rules of California contract law. First, "[w]hen a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible ...." (Civ. Code, § 1639.) Second, "[t]he language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity." (Civ. Code, § 1638.) Thus, when the dispute is about whether plaintiff agreed (i.e., mutually consented) to arbitration, a court is to consider whether it is possible to ascertain "the intention of the parties ... from the writing" (Civ. Code, § 1639) and whether the Agreement's "language is clear and explicit" (Civ. Code, § 1638). This step lead us to the rules of law that govern the determination of the meaning of a written document (i.e., its interpretation) and the role of extrinsic evidence plays in that determination.
Plaintiff argued there was no mutual consent because defendant did not sign the Agreement. The trial court rejected this argument, finding defendant intended to be bound by the arbitration provision in the employee handbook. This finding is supported by substantial evidence and comports with California law, which recognizes that consent to a written contract may be implied by conduct. (See DeLeon v. Verizon Wireless, LLC (2012) 207 Cal.App.4th 800, 812 [signature is not the only form of assent under contract law]; Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 420 [acceptance of agreement to arbitrate may be implied in fact].)
2. Ambiguity and Parol Evidence
The threshold question for trial and appellate courts is whether the writing is ambiguous—that is, reasonably susceptible to more than one interpretation. (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165; Smith v. Adventist Health System/West (2010) 182 Cal.App.4th 729, 754-755.) Whether a written agreement is ambiguous presents a question of law subject to independent review on appeal. (Smith, supra, at p. 755.)
"The analysis of whether an ambiguity exists is not limited to the words of the contract. [Citation.] Trial courts are required to receive provisionally any proffered parol evidence that is relevant to show whether the contractual language is reasonably susceptible to a particular meaning." (Adams v. MHC Colony Park, L.P. (2014) 224 Cal.App.4th 601, 620, fn. omitted (Adams).) In this context, evidence is relevant if it relates to the party's outward manifestation or expression of intent. (Id. at p. 620, fn. 18.) "Such parol evidence might expose a latent ambiguity when the contract appears unambiguous on its face." (Id. at p. 620.)
Essentially the same principles apply to appellate courts. The reviewing court must consider the proffered parol evidence when conducting an independent review into whether an ambiguity exists. (Adams, supra, 224 Cal.App.4th at p. 620.) Stated another way, appellate courts evaluate the instrument's language and relevant extrinsic evidence and decide whether, in light of the extrinsic evidence, the language is reasonably susceptible to the competing interpretations urged by the parties. (Ibid.)
3. Integration Clause and Parol Evidence
Defendant contends the use of parol evidence in this case is restricted because the Agreement was fully integrated—that is, a final expression of the parties' agreement that cannot be modified or contradicted by matters existing outside the four corners of the document. Defendant supports this contention by referring to paragraph 7 of the Agreement, an integration clause. The integration clause is not ambiguous. The only objectively reasonable interpretation of the clause is that the parties intended the Agreement to be a final and exclusive expression of their agreement regarding dispute resolution. As a result of this conclusion, the rules of law governing the use of parol evidence in connection with an integrated agreement apply in this case. (See 2 Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2017) ¶ 8:3079, p. 8E-332.)
Those rules of law are contained in Code of Civil Procedure section 1856, which provides: "(a) Terms set forth in a writing intended by the parties as a final expression of their agreement with respect to the terms included therein may not be contradicted by evidence of a prior agreement or of a contemporaneous oral agreement." (Italics added.) Code of Civil Procedure section 1856, subdivision (b) provides that the terms set forth in an integrated writing may be explained by evidence consistent with the writing. Based on these statutory provisions and our earlier conclusion that the Agreement is integrated, it follows that any parol evidence offered in this case may not be used to contradict the terms of the Agreement. Consequently, the dispute about the role of parol evidence is reduced to the following question: Does the parol evidence submitted in this case contradict the writing or, alternatively, explain the writing? (See 2 Wegner et al., Cal. Practice Guide: Civil Trials and Evidence, supra, ¶¶ 8:3079 & 8:3102, pp. 8E-332 & 8E-338.)
The distinction between contradicting a writing and explaining its meaning is directly connected to the question whether its text is ambiguous—that is, reasonably susceptible to more than one meaning. When language is ambiguous, the court must ascertain its meaning, which is the equivalent of explaining (not contradicting) the meaning of the ambiguous terms used. (2 Wegner et al., Cal. Practice Guide: Civil Trials and Evidence, supra, ¶ 8:3106, pp. 8E-338, 8E-339.) Accordingly, the test for using extrinsic evidence to explain the meaning of a written instrument is "whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible." (Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 37.)
D. The Agreement Is Ambiguous
Having set forth the applicable legal principles, we turn to the application of those principles to the question whether the Agreement was ambiguous. As background, we include the trial court's analysis of the Agreement's text, which resulted in the court identifying three ambiguities.
1. Trial Court's Analysis of Text
The trial court described the first ambiguity in the language of the Agreement as follows:
"The language of paragraphs 2 and 3 is confusing, especially when read together. Although paragraph 2 states that the arbitration agreement applies to 'all disputes that may arise out of or be related in any way to' the employee's employment, that 'each specifically waive[s] and relinquish[s] our right to bring a claim against the other in a court of law,' and both 'give up our right to trial by jury of any claim [each] may have against each other,' paragraph 2 still enumerates no less than four specific claims not covered by the agreement and refers to miscellaneous 'state or federal law claims' that also might not be covered. This leads to uncertainty as to what the arbitration clause covers."
The specific language used in paragraph 2 of the Agreement described "[t]he only exception" (which infers a single exception) by listing three types of claims and then stating "or as may otherwise be required by state or federal law."
The trial court described a second ambiguity in the text of the Agreement by stating:
"More troubling is the uncertainty as to what the opt-out clause entails. Paragraph 2 states that the arbitration agreement is 'equally binding on any person who represents or seeks to represent [the employee] or the Company in a lawsuit against the other in a court of law' and paragraph 3 states that all claims 'brought under this binding arbitration agreement shall be brought in the individual capacity of the [sic] myself or the Company.' To a layperson, unknowledgeable about the difference between 'representation' and 'representative claims,' this would appear to conflict. Paragraph 3 then waives the right to bring 'all claims or controversies [that] proceed as a class, action, collective action, private attorney general action, or any similar representative action.' (Emphasis added.) Even if a layperson understands what a class action is, it is unlikely that a lay person will know what a representative action is, much less a collective action, or private attorney general action, as these terms are not defined."
The third ambiguity identified by the trial court relates to the opt-out clause and uncertainty about the meaning of the word "representative." The court explained:
"Finally, paragraph 3 allows the employee to opt-out of the right to bring 'an action as a class, collective, private attorney general, representative or other similar basis,' which plaintiff did. However, because paragraph 2 includes all representatives in the arbitration agreement, it is conceivable that a layperson could misunderstand the 'representative or other similar basis' opt-out language to include all claims."
The trial court's analysis of ambiguity was set forth before the court discussed the parol or extrinsic evidence about the circumstances under which the Agreement was offered by defendant and signed by plaintiff. Thus, it appears the trial court determined the Agreement was ambiguous on its face.
Regardless of the exact breadth of the trial court's ambiguity determination, our determination is narrow because it is limited to the particular circumstances of this case—circumstances which appear to have deviated from defendant's common practice in presenting the agreement to arbitrate to its employees. (See fn. 5, post.)
2. Extrinsic Evidence—Contemporaneous Circumstances
Applying the rules of appellate review set forth in part I.C.2., ante, we consider both the text of the Agreement and the proffered parol evidence in conducting our independent review into whether an ambiguity exists. (See Adams, supra, 224 Cal.App.4th at p. 620.) Both sides submitted a declaration describing the circumstances in which the Agreement was presented to plaintiff.
Waldron's declaration stated (1) employees are provided time to review the employee handbook and arbitration agreement and ask human resources representatives any questions they may have about the arbitrations provisions and (2) plaintiff did not raise any questions or concerns regarding the Agreement during her employment with defendant. Plaintiff's declaration disputed both of these factual assertions. Plaintiff stated Spurgeon presented the Agreement to her, did not explain it, told her corporate needed it signed, and told her to hurry up because a patient was waiting in the field. For a number of reasons, we conclude the trial court impliedly found plaintiff's version of events was credible.
We further conclude plaintiff's description of the events involving the presentation of the Agreement to her constitutes relevant extrinsic evidence because the circumstance under which a contract is made is relevant to determining the meaning of that contract. Our conclusion is based on our Supreme Court's recognition of the principle of contract interpretation stating "'a contract must be understood with reference to the circumstances under which it was made and the matter to which it relates. (Civ. Code, § 1647.)' [Citation.]" (Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 752.) Those circumstances include the amount of time a person is given to consider the arbitration provisions. (See Morey v. Vannucci (1998) 64 Cal.App.4th 904, 912 [evidence relevant to the parties' outward manifestations of their intentions includes the surrounding circumstances under which the parties negotiated or entered into the contract].) For example, in Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, the court stated:
"Grasping the import and meaning of this particular delegation clause [in the arbitration agreement] would have been beyond the ken of most anyone in these rushed circumstances. Without going to the expense of hiring a lawyer—not just any lawyer, but a Texas lawyer skilled in the intricacies of arbitrability, with the choice of law overlay presented here—and then having sufficient time to seek and obtain legal advice from that lawyer, Pinela was not in a position to make an informed assessment of the consequences of agreeing to [the delegation clause]." (Id. at p. 244.)
The court's statement was made as part of its analysis of procedural unconscionability, but it demonstrates that a layperson's reasonable understanding of the text of an arbitration agreement (or any agreement) is influenced by the amount of time that person has to review and consider the agreement. Accordingly, in determining whether the Agreement is reasonably susceptible to more than one interpretation, we consider the evidence about Spurgeon telling plaintiff to hurry up and sign the Agreement because a patient was waiting in the field.
Despite having the burden of proof regarding the formation of an agreement to arbitrate, defendant's reply papers did not include any declaration rebutting plaintiff's version of events surrounding the execution of the Agreement or, alternatively, explaining why defendant deviated from its common practice (i.e., providing its employees with time to review the agreement and ask questions of human resources representatives) in plaintiff's case.
3. Analysis of Text and Extrinsic Evidence
The first sentence of paragraph 2 of the Agreement states the employee and defendant agree to arbitrate "all disputes that may arise out of or be related in any way to my employment." The second sentence of paragraph 2 states the employee and defendant waive the right to bring a claim against the other in a court of law and "this waiver shall be equally binding on any person who represents or seeks to represent me ... in a lawsuit." The word "represents" is not defined in the Agreement and the question of its meaning is related to the meaning of the word "representative," which is used four times in paragraph 3 of the Agreement.
The first sentence of paragraph 3 of the Agreement states "[a]ll claims brought under this binding arbitration agreement shall be brought in the individual capacity of the [sic] myself or the Company." (Italics added.) The second sentence of paragraph 3 states the Agreement "shall not be construed to allow or permit the consolidation or joinder of other claims or controversies involving any other employees, or permit such claims or controversies to proceed as a class action, collective action, private attorney general action or any similar representative action." (Italics added.) The last sentence of paragraph 3 contains the opt-out clause, which states: "I expressly agree to waive any right I may have to bring an action on a class, collective, private attorney general, representative, or other similar basis, unless I check this box. [ ]." (Italics added.) Plaintiff checked the box and, as a result, retained any right to bring a representative action.
The italicized language supports the inference that there are claims that can be brought outside of the arbitration described in the Agreement.
The reference to a private attorney general action appears to describe an action brought under the Private Attorneys General Act of 2004, which "authorizes an employee to bring an action for civil penalties on behalf of the state against his or her employer for Labor Code violations committed against the employee and fellow employees." (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360.) Our Supreme Court described such an action as a "representative action." (Ibid.)
The arbitration and waiver provision in paragraph 2 of the Agreement stated it was binding on "any person who represents or seeks to represent" the employee. To a layperson, this wording appears to encompass any attorney who might provide legal representation of the employee in an action brought in court because the attorney is "person who represents" the employee. This interpretation of the word "represents" comports with dictionary definitions of the verb "represent," which include to "take the place of in some respect" and to "act the part of, in the place of, or for (as another person)." (Webster's Third New International Dict. (1993) p. 1926; see Wasatch Property Management v. Degrate (2005) 35 Cal.4th 1111, 1121-1122 [when attempting to ascertain the ordinary, usual meaning of a word, courts appropriately refer to the dictionary definition of that word].) In addition, the interpretation is consistent with the way the word "represented" is used in various places in the California Rules of Court. For instance, rule 3.821(a) states "[a] party to the arbitration has a right to be represented by an attorney at any proceeding or hearing in arbitration, but this right may be waived." (See also, rule 8.71(b)(3) [electronic filing in appellate court by "represented parties" and "self-represented parties"]; rule 3.2222(b) ["parties represented by counsel are deemed to have agreed to accept electronic service"]; rule 3.35(a) [definition of "limited scope representation," which describes some relationships between an attorney and a person seeking legal services for specific tasks].) Therefore, to an objectively reasonable layperson, the word "represents" used in paragraph 2 of the Agreement could include the services of an attorney retained by an employee to act in place of, or for the employee, in proceedings before a court or arbitrator.
All subsequent references to numbered rules are to the California Rules of Court.
Similarly, the language in paragraph 3 of the Agreement stating all claims brought under the Agreement "shall be brought in the individual capacity of the [sic] myself" could be read as distinguishing between claims where the employee is represented by an attorney and claims where the employee acts as her own attorney. (See rule 3.821(a).) The interpretation of "represents" to include an attorney's representation of a client is increased in reasonableness and likelihood under the particular circumstances of this case because plaintiff was told before signing to hurry up because a patient was waiting in the field.
On the threshold legal question of ambiguity, we conclude the Agreement, particularly the language in the opt-out clause, is reasonably susceptible to more than one interpretation. First, the opt-out clause reasonably could be interpreted in the manner proposed by defendant and applied only to actions in which another employee or former employee pursued a claim on behalf of plaintiff and perhaps others. Under this interpretation, "representative" is used in the sense it was used by the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, supra, 59 Cal.4th at page 360. Second, in the specific circumstances of this case, the opt-out clause reasonably could be interpreted in a manner understood by plaintiff and applied to actions in which an attorney represents the client-employee. Such an interpretation might seem unreasonable to an objectively reasonable attorney, but an objectively reasonable layperson given a short time to review and understand the Agreement could adopt this interpretation. Based on our determination that there are at least two reasonable ways to interpret the Agreement in the circumstances of this case, we conclude the Agreement is ambiguous. Therefore, contrary to defendant's arguments, the trial court did not err when it determined the Agreement was ambiguous and did not err when it concluded the extrinsic evidence was relevant and not barred by the parol evidence rule.
4. Resolving the Ambiguity by Applying Rules of Interpretation
Our review of the order denying arbitration does not end with the conclusion that the Agreement was ambiguous. Similarly, it does not end by noting the trial court's findings establish there was no subjective meeting of the minds about arbitrating disputes because plaintiff reasonably believed she had opted out of arbitration. (See Desny v. Wilder (1956) 46 Cal.2d 715, 734-739 [use of objective standard can lead to enforceable contracts where there is no subjective meeting of the minds].) Under California law, the question of mutual consent and the formation of a contract is judged under an objective standard. As a result, the ambiguities themselves do not render the Agreement unenforceable. California courts routinely apply principles of contract interpretation to resolve ambiguities and determine which interpretation of the ambiguous language governs the parties' relationship. (See e.g., Sandquist v. Lebo Automotive, Inc., supra, 1 Cal.5th 233.)
Our Supreme Court has addressed the rules for appellate review of the interpretation of written instruments. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866.) When the interpretation of an ambiguous written instrument turns upon the credibility of extrinsic evidence, the interpretation presents questions of fact that are resolved by the trier of fact. (Id. at p. 865.) Alternatively, when no extrinsic evidence is presented or there is no conflict in the evidence, the resolution of the ambiguity is a question of law and is subject to independent review on appeal. (Id. at pp. 865-866; Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1351.)
Here, as the trier of fact, the trial court resolved conflicts in the declarations presented by the parties. Since defendant had the burden of proving the existence of a valid arbitration agreement in the trial court, and the trier of fact explicitly or implicitly concluded the appellant did not carry its burden, "'the question for a reviewing court is whether the evidence compels a finding in favor of the appellant as a matter of law.'" (Vierira Enterprises, Inc. v. McCoy (2017) 8 Cal.App.5th 1057, 1074.) Under the finding-compelled-as-a-matter-of-law standard, the finding is required only if 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. (In re I.W. (2009) 180 Cal.App.4th 1517, 1528.)
"'[I]t is misleading to characterize the failure-of-proof issue as whether substantial evidence supports the judgment.'" (Valero v. Board of Retirement of Tulare County Employees' Assn. (2012) 205 Cal.App.4th 960, 965.) --------
Defendant has failed to meet this standard by showing the trial court was compelled as a matter of law to adopt its view of the extrinsic evidence and the meaning of the Agreement. For instance, Waldron's declaration was impeached by her failure to perceive the manner in which the Agreement was presented to plaintiff. Thus, defendant has not established that the trial court was compelled as a matter of law to accept its version of the facts.
The trial court's interpretation of the Agreement in favor of plaintiff is supported by a recent Supreme Court decision. In Sandquist v. Lebo Automotive, Inc., supra, 1 Cal.5th 233, an arbitration agreement was ambiguous as to the matters within the arbitrator's purview. (Id. at p. 248.) The Supreme Court referred to the principle that ambiguities in written agreements are to be construed against their drafter, stated the form arbitration agreement had been prepared entirely by the employer, and construed the ambiguity in favor of the nondrafting employee. (Id. at pp. 247-248.) Applying the same approach in this case leads to the conclusion that the ambiguous language in the opt-out clause should be interpreted in favor of plaintiff to mean she opted out of arbitration. Accordingly, this approach confirms the trial court did not error in denying arbitration.
5. Extrinsic Evidence—Subsequent Conduct
The telephone conversation plaintiff had with the office manager shortly after plaintiff signed the Agreement provides additional support for plaintiff's interpretation of the opt-out clause. Under California law, the objective manifestations of the mutual intentions of the parties to a written contract include the words of the contract; "the surrounding circumstances under which the parties negotiated or entered into the contract; the object, nature and subject matter of the contract; and the subsequent conduct of the parties." (Morey v. Vannucci, supra, 64 Cal.App.4th at p. 912.) To be relevant, however, a party's subsequent conduct must have occurred before any dispute arose. (2 Wegner et al., Cal. Practice Guide: Civil Trials and Evidence, supra, ¶ 8:3121, p. 8E-343.) In Heston v. Farmers Ins. Group (1984) 160 Cal.App.3d 402, the court stated: "While evidence of the actions of the parties subsequent to an inquiry because of an ambiguous contract may be considered in interpreting an agreement, this allowance is qualified by a restriction that the actions to be considered occur before a dispute has arisen." (Id. at p. 413.)
Here, plaintiff's phone call to the officer manager was "an inquiry because of an ambiguous contract" because plaintiff was concerned about the meaning of an ambiguous agreement and the conversation they had occurred before plaintiff's employment was terminated and this lawsuit was filed. Consequently, the telephone conversation is conduct subsequent to plaintiff's execution of the Agreement that qualifies as relevant extrinsic evidence of objective manifestations of mutual intention. (See Morey v. Vannucci, supra, 64 Cal.App.4th at p. 912.) That conversation supports the determination that an ambiguity exists and supports the trial court's resolution of the ambiguity in plaintiff's favor.
On appeal, defendant has specifically referred to plaintiff's phone conversation with the office manager and argued plaintiff did not notify anyone at defendant with authority to change or otherwise modify the Agreement. This assertion implies the office manager lacked that authority and also lacked the authority to explain or resolve ambiguities in the Agreement. The factual foundation for this argument was not developed in the trial court. Specifically, the record lacks any evidence about the scope of the office manager's actual and ostensible authority. (See generally, Pierson v. Helmerich & Payne Internat. Drilling Co. (2016) 4 Cal.App.5th 608, 634-635 [ostensible authority of employee to act for employer is a question of fact and such authority may be implied from circumstances].) Therefore, the argument is not convincing, particularly when made by the party with the burden of proof in the trial court. II. UNILATERAL MISTAKE
Based on our foregoing conclusions, we do not reach the issues involving the doctrine of unilateral mistake, which was an alternate ground for the trial court's decision. On appeal, defendant argued there was no unilateral mistake justifying the rescission of the Agreement.
DISPOSITION
The order denying the motion to compel arbitration, filed on June 23, 2016, is affirmed. Plaintiff is entitled to costs on appeal. (Cal. Rules of Court, rule 8.278(a).)