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Razavi v. Neocase Software Inc.

California Court of Appeals, First District, Second Division
Mar 13, 2008
No. A116729 (Cal. Ct. App. Mar. 13, 2008)

Opinion


VAHID RAZAVI, Plaintiff and Respondent, v. NEOCASE SOFTWARE, INC., Defendant and Appellant. A116729 California Court of Appeal, First District, Second Division March 13, 2008

NOT TO BE PUBLISHED

San Francisco County Super. Ct. No. CGC-06-456144

Kline, P.J.

Respondent Vahid Razavi (Razavi) commenced this action against appellant Neocase Software, Inc. (Neocase), his former employer, for wrongful termination and other causes of action. Citing a mandatory arbitration clause in Razavi’s at-will employment contract, Neocase petitioned the court to compel arbitration and dismiss the complaint, or, in the alternative, stay the proceedings. The court denied the petition on the ground that a provision in the arbitration clause providing that the cost of arbitration will be borne by the losing party rendered the contract unenforceable under Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 (Armendariz) and its progeny.

We shall affirm the judgment.

FACTS AND PROCEEDINGS BELOW

Razavi was employed by appellant as its Director of North American Sales from September 14, 2005 until April 5, 2006 pursuant to an at-will employment agreement. Section 7(c) of the agreement (hereafter “the arbitration clause”) provided in its entirety as follows: “Arbitration. Any dispute or controversy arising out of this Agreement or Employee’s employment or its termination, including, but not limited to, any claim of discrimination under state or federal law, must be settled exclusively by arbitration in California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The cost of arbitration will be borne by the losing party or in such proportions as the arbitrator(s) decide.” (Italics added.) Section 7(h) of the agreement (hereafter “the attorney fee clause”) states as follows: Attorneys’ Fees and Costs. If any legal action is necessary to enforce or interpret the terms of this Agreement, the prevailing party will be entitled to reasonable attorneys’ fees, costs, and necessary disbursements in addition to any other relief to which that party may be entitled.”

After Razavi’s employment was terminated in early April 2006, a dispute arose between the parties regarding the bonus and commission payments Razavi was entitled to receive. On September 13, 2006, Razavi filed a complaint against Neocase alleging wrongful termination in violation of public policy, breach of contract, breach of the covenant of good faith and fair dealing, and violation of sections 201 and 216 of the Labor Code. On November 8, 2006, counsel for Neocase sent Razavi’s attorney a letter reminding her that Razavi’s employment contract contained a mandatory arbitration provision and requesting confirmation that his filing of a complaint in the San Francisco Superior Court reflected a decision not to arbitrate his claims. Razavi’s attorney responded by a letter stating that “[t]he arbitration clause in the contract you sent is illegal under California law because it imposes the cost of arbitration on Mr. Razavi if he does not prevail. Aside from violating Armendariz, the clause violates CCP Section 1284.3. [¶] As a result, the American Arbitration Association, the selected provider, will not and cannot administer the arbitration. No other provider will be permitted to administer it either. That is why we filed in court. I urge you to confirm the above with the American Arbitration Association before you file any Motion to Compel which I believe would be frivolous under the circumstances.”

Section 201 of the Labor Code provides that all sums owed by the employer to the employee at the time of discharge are due and payable immediately. Section 216 makes it is unlawful for an employer having the ability to pay to willfully refuse to pay wages due and payable.

Code of Civil Procedure section 1284.3, states in subdivision (a) that: “No neutral arbitrator or private arbitration company shall administer a consumer arbitration under any agreement or rule requiring that a consumer who is a party to the arbitration pay the fees and costs incurred by an opposing party if the consumer does not prevail in the arbitration, including, but not limited to, the fees and costs of the arbitrator, provider organization, attorney, or witnesses.” Neocase takes the position that section 1284.3 applies only to consumer arbitration, not that between an employer and an employee. Razavi claims he is a “consumer” within the meaning of the statute. Our resolution of the other legal issues presented by this appeal renders it unnecessary to address this issue. For that reason, Razavi’s request that we take judicial notice of the legislative history of section 1284.3 is denied.

On November 14, 2006, Neocase filed a petition to compel arbitration and to dismiss or, in the alternative, stay the proceedings. At the hearing on the motion, held on January 11, 2007, the trial court summed up its conclusion as follows: “There are two parts to the Armendariz case, in my view. . . . [¶] The first part is whether the arbitration provision is contrary to any of the five criteria that are articulated in that case. And then, secondly and separately, would the arbitration agreement be unconscionable for a separate, independent reason? [¶] So my conclusion is[] that the Plaintiff in this case does not have an obligation to prove both unfairness and unconscionability. [¶] And my conclusion from reading the terms of the arbitration agreement and Armendariz and subsequent cases thereto, is that the plaintiff has met the burden with respect to unfairness in shifting the costs of the arbitration to the losing party . . . . And that’s really the basis of the—my conclusion.” The order denying Neocase’s petition issued the same day.

Denial of a motion to compel arbitration is appealable (Code Civ. Proc., § 1294, subd. (a); Mercury Ins. Group v. Superior Court (1998) 19 Cal.4th 332, 349), and Neocase filed a timely notice appeal on January 26, 2007. Pursuant to Code of Civil Procedure section 916, all further proceedings in the trial court are automatically stayed upon the perfecting of the appeal. (Prudential-Bache Securities, Inc. v. Superior Court (1988) 201 Cal.App.3d 924, 925.)

DISCUSSION

In Armendariz, supra, 24 Cal.4th 83, the Supreme Court reversed the judgment of the Court of Appeal upholding a former employer’s petition to compel arbitration in a wrongful termination against it alleging violation of the Fair Employment and Housing Act (FEHA) and other causes of action. Armendariz focuses in part on objections to arbitration on the ground of unconscionability, which applies generally to any type of arbitration imposed on the employee by the employer as a condition of employment, regardless of the type of claim being arbitrated. (Armendariz, at pp. 114-121.) That portion of the opinion does not bear upon this case, however, because Razavi concedes his employment contract is not unconscionable. The portion of Armendariz Razavi relies upon is that which focuses on the minimum requirements for the arbitration of unwaivable statutory claims. As to that so-called “fairness” issue, Armendariz holds that FEHA claims are arbitrable if the arbitration permits an employee to vindicate his or her statutory rights. (Armendariz, at pp. 90-91.) For vindication to occur, “an agreement to arbitrate public policy employment claims must satisfy five requirements. (1) The agreement must provide for adequate discovery. (2) It must require a written decision allowing limited judicial review. (3) The agreement must permit the types of relief that would be available in court. (4) It must limit the employee’s forum costs. [Citatons.] (5) Finally, as with all contractual arbitration, an agreement to arbitrate a public policy claim must provide for a neutral arbitrator.” (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 653-654, citing Armendariz, at pp. 90-91, 102-103.)

With respect to the limitation on an employee’s forum costs, Armendariz adopts the view of Cole v. Burns Intern. Security Services (D.C. Cir. 1997) 105 F.3d 1465 (Cole), holding it unlawful to require an employee subject to a mandatory employment arbitration to have to pay the costs of arbitration. As in the present case, the issue in Cole was an arbitration agreement that was to be governed by the rules of the American Arbitration Association (AAA) pursuant to which an employee could be obliged to pay substantial arbitrator’s and other fees. As Armendariz notes, Cole relied heavily on Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20 (Gilmer), which “ ‘endorsed a system of arbitration in which employees are not required to pay for the arbitrator assigned to hear their statutory claims. There is no reason to think that the Court would have approved arbitration in the absence of this arrangement. Indeed, we are unaware of any situation in American jurisprudence in which a beneficiary of a federal statute has been required to pay for the services of the judge assigned to hear her or his case. Under Gilmer, arbitration is supposed to be a reasonable substitute for a judicial forum. Therefore, it would undermine Congress’s intent to prevent employees who are seeking to vindicate statutory rights from gaining access to a judicial forum and then require them to pay for the services of an arbitrator when they would never be required to pay for a judge in court.’ ” (Armendariz, supra, 24 Cal.4th at pp. 107-108, quoting Cole, supra, 105 F.3d at p. 1484.) For this and other reasons, Armendariz concludes “that when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.” (Armendariz, at pp. 110-111.) In Little v. Auto Siegler, Inc. (2003) 29 Cal.4th 1064, the Supreme Court extended the rule limiting employee costs to nonstatutory claims, noting that “the principle that arbitration costs may prevent arbitration claimants from effectively pursuing their public rights would apply equally to Tameny [v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 178] claims as to FEHA claims or to federal statutory claims.” (Little v. Auto Siegler, Inc., at p. 1080.)

Neocase challenges the trial court’s ruling on three grounds: First, that the arbitration clause in Razavi’s employment contract is ambiguous as to whether it requires him to pay arbitration costs, and resolution of this issue is not among the “gateway” issues exclusively committed to judicial resolution; second, that even if the arbitration clause is not ambiguous as to the payment of arbitration costs, the trial court erred in not severing that language and enforcing the remaining provisions of the arbitration clause; and third, that even if it was proper to find Razavi’s statutory claims nonarbitrable under Armendariz, the trial court erred in denying the petition to compel arbitration in its entirety, because the Armendariz fairness standard does not apply to his nonstatutory claims (breach of contract and of the covenant of good faith and fair dealing). We address these issues in turn.

A. The Meaning of the Arbitration Clause Was For the Court to Decide, Not the Arbitrator

As indicated, a court called upon to rule on a petition to compel arbitration may only consider two “gateway” issues: “whether the parties are bound by a given arbitration clause,” which is here the question, and “whether an arbitration clause in a concededly binding contract applies to a particular type of controversy” (Howsam v. Dean Witter Reynolds, Inc. (2003) 537 U.S. 79, 83-84); all other issues must be decided by the arbitrator in the first instance. (Ibid.)

Neocase’s argument that the meaning of the arbitration clause is not a “gateway” issue exclusively for the court is predicated on two principles: first, that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or of an allegation of waiver, delay, or a like defense to arbitrability” (Moses H. Cone Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 24-25) and, second, that the meaning of an arbitration clause, like that of any other provision of a contract, should be resolved in favor of an interpretation that “will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties” (Civ. Code, § 1643; see also Civ. Code, § 3541 [“[a]n interpretation which gives effect is preferred to one which makes void”].)

The gist of Neocase’s argument is that the arbitration clause in Razavi’s employment contract is ambiguous, because it does not necessarily require the losing party to bear the cost of arbitration, but permits the arbitrator to require the losing party to bear the cost of arbitration “in such proportions as the aribitrator(s) decide” is fair. Neocase argues that “in light of the policy favoring the resolution of all doubts in favor of enforcing arbitration, the trial court should have compelled arbitration and ruled that the issue of the interpretation of the ambiguous clause be resolved by the arbitrator in the first instance.” We are not persuaded; principles relating to the manner in which a contract provision should be interpreted do not bear upon the forum in which the interpretation must first take place.

Discover Bank v. Superior Court (2005) 36 Cal.4th 148 (Discover Bank), illuminates the difference between “gateway” issues for the court and other issues arising under an arbitration agreement that are left to the arbitrator. In that case, the Court of Appeal upheld an arbitration agreement’s class action waiver, holding that any California rule prohibiting class action waivers was preempted by the Federal Arbitration Act (FAA). The Supreme Court reversed, holding that in certain circumstances such waivers were unconscionable under California law and the FAA did not prohibit a California court from refusing to enforce such a waiver. During the course of its analysis, the Discover Bank court discussed the meaning of the United States Supreme Court’s opinion in Green Tree Financial Corp. v. Bazzle (2003) 539 U.S. 444 (Bazzle), which related to the propriety of class arbitration but did not produce a majority opinion. (Discover Bank, at pp. 169-172.) A plurality of four justices held in Bazzle that the question whether the contract was in fact silent on arbitration was for the arbitrator to decide, and remanded for an arbitral determination. (Id. at p. 169.) Discover Bank points out that Bazzle did not “address the question whether the determination of unconscionability should be made by the court or an arbitrator. The court was in general agreement that courts should be left to decide certain ‘gateway matters’ [citation] or ‘fundamental’ matters such as the validity and scope of the arbitration agreement [citation]. Under California law, the question whether ‘grounds exist for the revocation of the [arbitration] agreement’ (Code Civ. Proc., § 1281.2) based on ‘grounds as exist for the revocation of any contract’ (id., § 1281) is for the courts to decide, not an arbitrator. [Citation.] This includes the determination of whether arbitration agreements or portions thereof are deemed to be unconscionable or contrary to public policy. [Citations.]” (Discover Bank, at p. 171, italics added.)

Neocase relies primarily on Pacificare Health Systems, Inc. v. Book (2003) 538 U.S. 401 (Pacificare) to persuade us that the legal question in this case does not present a “gateway” issue of arbitrability. In Pacificare, physicians brought suit against managed-health-care organizations that had failed to reimburse them for patient services, alleging violations of, inter alia, the Racketeer Influenced and Corrupt Organizations Act (RICO). The district court refused the organizations’ motions to compel arbitration of RICO claims because the remedial limitations in the arbitration agreements might prevent the plaintiffs from obtaining the treble damages available under the RICO statute, and the Court of Appeals affirmed. The Supreme Court reversed, holding that the physicians could be compelled to arbitrate the RICO claims, even though the arbitration agreements could be construed to limit an arbitrator’s authority to award treble damages. The petitioners in Pacificare argued that “whether the remedial limitations render their arbitration agreements unenforceable is not a question of ‘arbitrability,’ and hence should have been decided by an arbitrator, rather than a court, in the first instance. They also claim that even if this question is one of arbitrability, and is therefore properly within the purview of the courts at this time, the remedial limitations at issue do not require invalidation of their arbitration agreements. Either way, petitioners contend, the lower courts should have compelled arbitration.” (Id. at pp. 403-404.) Declining to address these issues, the Supreme Court focused instead on provisions in the arbitration agreements that in various ways precluded arbitral award of extra-contractual damages of any kind, including punitive and exemplary damages. The trial court had concluded that these provisions precluded an arbitrator from awarding treble damages under RICO. However, the Supreme Court felt that “neither our precedents nor the ambiguous terms of the contracts make this clear.” (Id. p. 405.) “In light of our case law’s treatment of statutory treble damages, and given the uncertainty surrounding the parties’ intent with respect to the contractual term ‘punitive,’ the application of the disputed language to respondents’ RICO claims is, to say the least, in doubt. And Vimar [Seguros y Reaseguros, S. A. v. M/V Sky Reefer (1995) 515 U.S. 528] instructs that we should not, on the basis of ‘mere speculation’ that an arbitrator might interpret these ambiguous agreements in a manner that casts their enforceability into doubt, take upon ourselves the authority to decide the antecedent question of how the ambiguity is to be resolved. [Citation.] In short, since we do not know how the arbitrator will construe the remedial limitations, the questions whether they render the parties’ agreements unenforceable and whether it is for the courts or arbitrators to decide enforceability in the first instance are unusually abstract. As in Vimar, the proper course is to compel arbitration.” (Pacificare, supra, 538 U.S. at pp. 406-407, fns. omitted.)

Pacificare is inapposite. The ambiguity in that case did not relate to whether the parties were bound by the agreement but to the remedies contemplated by and legally available under the arbitration agreement; i.e., what the parties intended by the contractual term “punitive,” and whether the treble damages available under the RICO statute are compensatory or punitive. There are no such uncertainties in this case. The question here relates not to the availability of a particular arbitral remedy, which is not a “gateway” issue, but whether the arbitration clause is unfair within the meaning of Armendariz and therefore invalid and unenforceable, which is manifestly a “gateway” question. We do not believe there is any genuine ambiguity in the contract relating to the fairness of the arbitration clause, but it would not matter if there was. As stated in Pacificare, supra, 538 U.S. 401, “[i]f the contractual ambiguity could itself be characterized as raising a ‘gateway” question of arbitrability, then it would be appropriate for a court to answer it in the first instance.” (Id. at p. 407, fn. 2.)

As Pacificare observes, the cases “have placed different statutory treble-damages provisions on different points along the spectrum between purely compensatory and strictly punitive awards” (Pacificare, supra, 538 U.S. at p. 405.)

Neocase’s insistence upon the certainty whether an arbitrator will exercise his or her discretion to require a losing employee to pay all of the arbitral costs incurred by a prevailing employer or a lesser proportion, misses the point. As Armendariz points out, “it is not only the costs imposed on the claimant but the risk that the claimant may have to bear substantial costs that deters the exercise of the constitutional right of due process. [Citation.] So with the arbitration of statutory claims; if it is possible that the employee will be charged substantial forum costs, it is an insufficient judicial response to hold that [an employee] may be able to cancel these costs at the end of the process through judicial review. Such a system still poses a significant risk that employees will have to bear large costs to vindicate their statutory right . . ., and therefore chills the exercise of that right. . . . [Accordingly,] we hold that the cost issues should be resolved not at the judicial review stage but when the court is petitioned to compel arbitration.” (Armendariz, supra, 24 Cal.4th at p. 110.)

Neocase’s contention that the arbitrator of Razavi’s claim would necessarily interpret the allegedly ambiguous cost provisions language of the arbitration clause in his favor—because that is the only way to make the clause consistent with Armendariz, and AAA rules now specifically provide that the employer shall pay the arbitrator’s compensation—proves too much, because it is, in effect, a concession that the allegedly ambiguous issue relates to the validity of the arbitration agreement and is therefore a “gateway” issue for the court, not an arbitrator.

The fact that Neocase is now apparently willing, after the employment relationship has ended, to forego the advantage of the illegal provision of the arbitration clause “does not change the fact that the arbitration agreement as written is . . . contrary to public policy. Such a willingness ‘can be seen, at most, as an offer to modify the contract; an offer that was never accepted. No existing rule of contract law permits a party to resuscitate a legally defective contract merely by offering to change it.’ ” [Citation.]” (Armendariz, supra, 24 Cal.4th at p. 125.)

B. The Trial Court Did Not Err in Refusing to Sever The Objectionable Clauses of the Arbitration Agreement

“[T]he Legislature expressly and directly recognizes judicial discretion to sever objectionable provisions. The governing statute provides: ‘If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.” (Abramson v. Jupiter Networks, Inc., supra, 115 Cal.App.4th 638, 658; Armendariz, supra, 24 Cal.4th at p. 122 [“the statute appears to give some discretion as to whether to sever or restrict the unconscionable [or illegal] provision or whether to refuse to enforce the entire agreement”].) The question for us, therefore, is whether the trial court’s refusal to save the arbitration agreement by severing the objectionable provisions was an abuse of discretion.

Armendariz points out that the case law implicitly identifies two reasons for severing illegal terms from an arbitration agreement rather than voiding the entire contract. “The first is to prevent parties from gaining undeserved benefit or suffering undeserved detriment as a result of voiding the entire agreement—particularly when there has been full or partial performance of the contract. [Citations.] Second, more generally, the doctrine of severance attempts to conserve a contractual relationship if to do so would not be condoning an illegal scheme. [Citations.]” (Armendariz, supra, 24 Cal.4th at pp. 123-124.) The “overarching” question for the court is whether severance serves the interests of justice. (Id. at p. 124.)

Armendariz identified three factors relevant to whether severance is appropriate. The first relates to the agreement’s chief object. “If the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced. If the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate.” (Armendariz, supra, 24 Cal.4th at p. 124.) A second factor is whether the agreement contains more than one objectionable term. The fact that an “arbitration agreement contains more than one unlawful provision” may “indicate a systematic effort to impose arbitration on an employee . . . as an inferior forum that works to the employer’s advantage” and may justify concluding “that the arbitration agreement is permeated by an unlawful purpose. [Citation.]” (Ibid., fn. omitted.) The third factor is whether “there is no single provision a court can strike or restrict in order to remove the unconscionable taint from the agreement.” (Id. at pp. 124-125.) In that situation “the court would have to, in effect, reform the contract, not through severance or restriction, but by augmenting it with additional terms” (id. at p. 125), which exceeds judicial power to cure a contract’s illegality. Where the taint of illegality cannot be removed by severance or restriction, the court “must void the entire agreement.” (Ibid.)

The parties disagree as to whether the employment contract contains more than one objectionable provision. Razavi contends that the attorney fee clause is as objectionable as the arbitration clause. It is contrary to law, he claims, because under our law “an employee who brings a claim under the federal or state discrimination statutes (such as the Fair Employment and Housing Act) and is unsuccessful is only required to bear the employer’s attorney’s fees if the action was unreasonable, frivolous, meritless, or vexatious. See, e.g., Bond v. Pulsar Video Productions, 50 Cal.App.4th 918 (1996). Accordingly, Neocase’s Agreement modifies existing law by requiring Razavi to bear the cost of Appellant’s attorney’s fees even if Razavi had brought a discrimination claim in good faith. Such a modification of California law is inappropriate under Armendariz as it has the effect of denying Razavi the rights and remedies he would have if he were litigating his claims in court.” According to Razavi, “when the employer has mandated arbitration, a provision which requires the employee to pay the employer’s attorneys fees if the employee loses his claim, violates California’s public policy. Any such arbitration agreement is effectively rendered invalid and void by [Code of Civil Procedure section] 1284.3, since no arbitrator is permitted to administer the case.” Finally, Razavi maintains that severance of the attorney fee clause would deprive him of an entitlement to fees he would enjoy under the contract in the event he prevailed in any legal action. In order to cure this illegality, he says, the court would have to completely rewrite the attorney fee provision to make clear he could recover attorney fees from Neocase, but Neocase could not recover such fees from him, which would constitute an impermissible judicial reformation.

Neocase claims Razavi’s arguments are meritless, and the attorney fee clause does not offend Armendariz. Aside from the fact that Razavi is not pursuing a claim under a state or federal anti-discrimination statute, the attorney fee clause would not apply in any case, because it only applies to legal actions necessary to enforce the employment contract, and the fee-shifting clause is consistent with and impliedly authorized by numerous statutes, such as Civil Code section 1717, which relates to the administration of contracts that “specifically provide that attorney’s fees and costs, which are incurred to enforce that contract, shall, be awarded to . . . the prevailing party.”

We find it unnecessary to resolve the conflicting claims of the parties as to the propriety of the attorney fee clause because the trial court’s discretion to refuse to sever is independently justified. The employment contract Razavi signed was presented to him in 2005, five years after Armendariz had been decided. At that time, Neocase knew or at least should have known that the form contract it was using contained illegal provisions, suggesting that the contract was presented to Razavi in bad faith. As Armendariz points out, the judicial tendency to invalidate rather than merely restrict covenants apparently drafted with a knowledge of their illegality applies with equal force to arbitration agreements. “An employer will not be deterred from routinely inserting such a deliberately illegal clause into the arbitration agreements it mandates for its employees if it knows that the worst penalty for such illegality is the severance of the clause after the employee has litigated the matter. In that sense, the enforcement of a form arbitration agreement containing such a clause drafted in bad faith would be condoning, or at least not discouraging, an illegal scheme, and severance would be disfavored unless it were for some other reason in the interests of justice. [Citation.]” (Armendariz, supra, 24 Cal.4th at pp. 124-125, fn. 13.)

Furthermore, insofar as the doctrine of severance “attempts to conserve a contractual relationship” (Armendariz, supra, 24 Cal.4th at p. 124), that purpose would not be served in this case, because Neocase previously ended its contractual relationship with Razavi by terminating his employment.

For the foregoing reasons, we cannot say that the trial court’s refusal to sever the illegal provision from the arbitration clause and enforce the remaining provisions exceeded its broad discretion.

C. Neocase Has Waived the Claim That the Petition to Compel Should at Least Have Been Granted With Respect to Razavi’s Nonstatutory Claims, Because They are Not Governed by Armendariz

Neocase maintains that even if the arbitration clause of Razavi’s employment did not satisfy the minimum standards of essential fairness required by Armendariz, the agreement to arbitrate was nevertheless enforceable with respect to Razavi’s second and third causes of action, which are nonstatutory claims for breach of the covenant of fair dealing and breach of contract.

Neither in its written papers in support of the petition to compel arbitration, nor at the January 11, 2007 hearing on the petition, did Neocase ask the trial court, if it was inclined to deny the petition with respect to Razavi’s statutory claims, to nevertheless enforce the arbitration clause with respect to his nonstatutory claims. The January 11 hearing was held, at the request of Neocase, after the trial court issued a tentative ruling denying the petition to compel in its entirety. Thus, at the hearing, Neocase had both an opportunity and reason to advance the alternative claim that arbitration should be ordered, at least with respect to Razavi’s private right claims, which arguably are not covered by Armendariz. (See Abramson v. Jupiter Networks, Inc., supra, 115 Cal.App.4th at pp. 651-652.) Without suggesting that the trial court would have been obliged to grant such alternative relief if it had been sought, Neocase’s failure to raise the issue below forecloses it from doing so for the first time on appeal. Theories not raised in the trial court ordinarily cannot be asserted for the first time on appeal. “Appellants are commonly held to an ‘implied waiver’ where the error urged on appeal was never asserted in the trial court. Appellate courts will not reverse for procedural defects or erroneous rulings that could have been, but were not, challenged below.” (Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2007) ¶ 8:265, pp. 8-146 to 8-147, citing Doers v. Golden Gate Bridge, Highway & Transp. Dist. (1979) 23 Cal.3d 180, 184-185; Imperial Bank v. Pim Electric, Inc. (1995) 33 Cal.App.4th 540, 546; Children’s Hosp. & Med. Ctr. v. Bonta (2002) 97 Cal.App.4th 740, 776-777.)

DISPOSITION

For the foregoing reasons, the judgment is affirmed. Respondent shall be awarded his costs on appeal.

We concur: Lambden, J. Richman, J.


Summaries of

Razavi v. Neocase Software Inc.

California Court of Appeals, First District, Second Division
Mar 13, 2008
No. A116729 (Cal. Ct. App. Mar. 13, 2008)
Case details for

Razavi v. Neocase Software Inc.

Case Details

Full title:VAHID RAZAVI, Plaintiff and Respondent, v. NEOCASE SOFTWARE, INC.…

Court:California Court of Appeals, First District, Second Division

Date published: Mar 13, 2008

Citations

No. A116729 (Cal. Ct. App. Mar. 13, 2008)