Judge Daniel M. Crowley, Case 23SMCP00099 2023-04-05 Tentative Ruling

Judge: Daniel M. Crowley, Case: 23SMCP00099, Date: 2023-04-05 Tentative Ruling

Case Number: 23SMCP00099 Hearing Date: April 5, 2023 Dept: 207

Background

Petitioner Douglas Emmett Management, LLC (“Petitioner”) previously employed Respondent Rachid Rhellou. Mr. Rhellou has filed claims against Petitioner with Respondent Labor Commissioner, State of California, Department of Industrial Relations, Division of Labor Standards Enforcement (“Labor Commissioner” or “Commissioner”) relating to his former employment with Petitioner. Petitioner has filed the instant petition seeking to compel Mr. Rhellou’s claims to arbitration and requests the Court stay all further proceedings before the Labor Commissioner on Mr. Rhellou’s claims. The Labor Commissioner opposes the petition.

Request for Judicial Notice

Petitioner requests the Court take judicial notice of two court records from an unrelated action in Los Angeles Superior Court, Case No. 21STCV10680. Petitioner’s request is unopposed and is GRANTED.

Legal Standard

Under both the Title 9 section 2 of the United States Code (known as the Federal Arbitration Act) and the Title 9 of Part III of the California Code of Civil Procedure commencing at section 1281 (known as the California Arbitration Act, hereinafter “CAA”), arbitration agreements are valid, irrevocable, and enforceable, except on such grounds which exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)

California Code of Civil Procedure section 1281.2 permits a party to file a motion to request the Court order the parties to arbitrate a controversy. (Code Civ. Proc., § 1281.2.) Under Code of Civil Procedure section 1281.2, the Court must grant the motion “if the Court determines that an agreement to arbitrate the controversy exists”, unless one of four limited exceptions apply. (Ibid.) The statutory exceptions arise where: (a) the right to compel arbitration has been waived by the petitioner; (b) grounds exist for rescission of the agreement; (c) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues; or (d) the petitioner is a state or federally chartered depository institution seeking to compel arbitration pursuant to a contract whose agreement was induced by fraud or without respondent’s consent. (Ibid.)

Under Code of Civil Procedure section 1281.2, the party moving to compel arbitration bears the burden of demonstration “that an agreement to arbitrate the controversy exists.” (Code Civ. Proc., § 1281.2.) “With respect to the moving party’s burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court.” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160 [emphasis in original].) “Once such a document is presented to the court, the burden shifts to the party opposing the motion to compel, who may present any challenges to the enforcement of the agreement and evidence in support of those challenges.” (Ibid.; see also Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 [“The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability”].)

Section 1281.2 “was intended primarily to prevent conflicting rulings resulting from arbitration proceedings and other related litigation arising out of the same transaction.” (Whaley v. Sony Computer Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 488.) In enacting section 1281.2 “the Legislature has … authorized trial courts to refuse enforcement of an arbitration agreement where, as here, there is a possibility of conflicting rulings” (C.V. Starr & Co. v. Boston Reinsurance Corp. (1987) 190 Cal. App. 3d 1637, 1642.) “[T]he presence of a nonarbitrable cause of action is not sufficient by itself to invoke the trial court’s discretion to deny arbitration under Code of Civil Procedure section 1281.2, subdivision (c).” (Laswell v. AG Seal Beach, LLC (2010) 189 Cal.App.4th 1399, 1409.) “The mere fact that some claims are arbitrable and some are not is surely not the ‘peculiar situation’ meant to be addressed by section 1281.2(c).” (RN Solution, Inc. v. Catholic Healthcare West (2008) 165 Cal.App.4th 1511, 1521.)

For section 1281.2(c) to apply, “[a] party to the arbitration agreement” must also be “a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions” and there must be “a possibility of conflicting rulings on a common issue of law or fact.” (§ 1281.2(c), italics added.) For purposes of section 1281.2(c), a third party is a party who is not bound by the arbitration agreement. (See, e.g., id. at 1521.) “[C]ourts have routinely relied on the allegations contained in the operative pleading to determine whether there is the possibility of conflicting rulings within the meaning of section 1281.2, subdivision (c).” (Abaya v. Spanish Ranch I, L.P. (2010) 189 Cal.App.4th 1490, 1499 [citations omitted].)

Analysis

Petitioner has attached an arbitration agreement between itself and Mr. Rhellou. (Ex. A to Hurtado Decl.) This agreement applies to “all disputes arising out of or related to” Mr. Rhellou’s employment with Petitioner. (Id. at ¶1.) The agreement further provides it is governed by the Federal Arbitration Act (“FAA”). (Id.) Petitioner argues Mr. Rhellou has filed “wage claims” with the Division of Labor Standards Enforcement for overtime, bonuses, rest period wages, waiting time penalties, and similar claims which are currently pending before the Labor Commissioner. Petitioner seeks an order compelling Mr. Rhellou’s claims to arbitration and staying any further administrative proceedings before the Commissioner on those claims.

Mr. Rhellou received notice of this petition by mail as provided for in the subject arbitration agreement and has not filed an opposition or otherwise disputed the existence or enforceability of the arbitration agreement submitted by Plaintiff. (Ex. A to Hurtado Decl. at ¶4.) The only opposition to this petition was filed by the Labor Commissioner. In that opposition, the Labor Commissioner draws a distinction not drawn in Petitioner’s moving papers, stating Mr. Rhellou has filed two distinct claims with the Labor Commissioner: one for unpaid wages (State Case No. WC-CM-757300), and a second claim for retaliation (State Case No. RCI-CM-770341). Petitioner asks the Court to “stay all pending and future administrative proceedings relating to Rhellou’s claim.” (Petition at 4.) The Labor Commissioner takes no position on whether Mr. Rhellou’s wage claims should be compelled to arbitration, however she opposes any request to stay the administrative proceedings on Mr. Rhellou’s retaliation claim.

The Labor Commissioner argues she has independent prosecutorial authority to continue her investigation of Mr. Rhellou’s retaliation claim which cannot be stayed by an arbitration agreement between Petitioner and Mr. Rhellou. The Court agrees the administrative proceedings regarding Mr. Rhellou’s retaliation claims should not be stayed. As the Court explained in Crestwood Behavioral Health, Inc. v. Lacy (2021) 70 Cal.App.5th 560:

Thus, whether the FAA displaces our Labor Code in this case depends on whether the Labor Commissioner acts as a prosecutor or an adjudicator when she investigates and acts on a retaliation complaint pursuant to sections 98.7 and 98.74. If the Commissioner is acting as a prosecutor on behalf of the state, then the FAA is inapplicable and does not prevent the Commissioner from investigating and acting on the retaliation complaint. If the Commissioner is acting as an adjudicator, then the FAA applies and supersedes any Labor Code proceeding on the complaint. Applying this distinction, we conclude that the Commissioner, at a minimum, acts as a prosecutor when she investigates a retaliation complaint, seeks temporary or preliminary injunctive relief (interim relief process), or issues a determination (determination process) under section 98.7. As a result, the FAA does not prevent the Commissioner from taking any of those actions on Lacy's retaliation complaint. (Preston, supra, 552 U.S. at p. 359, fn. 7.)

(Crestwood Behavioral Health, Inc. v. Lacy (2021) 70 Cal.App.5th 560, 583-584.) As set forth above, the arbitration agreement at issue here is governed by the FAA, and thus the existence of such an agreement does not prevent the Commissioner from investigating or conducting proceedings on a complaint for retaliation.

Petitioner does not appear to dispute this conclusion. Petitioner’s moving papers discuss only Mr. Rhellou’s wage claims and make no mention of Mr. Rhellou’s claim for retaliation, and offers no showing as to whether that retaliation claim is governed by the subject arbitration agreement. Petitioner has also not filed a reply disputing the arguments raised in the Commissioner’s opposition. The Court thus GRANTS the petition to compel arbitration as to Mr. Rhellou’s wage claims only and orders the administrative proceedings currently pending in State Case No. WC-CM-757300 stayed pending resolution of the arbitration. Mr. Rhellou’s retaliation claim, State Case No. RCI-CM-770341, is not stayed.

Conclusion

The petition to compel arbitration is GRANTED as to Mr. Rhellou’s wage claims pending before the Labor Commissioner in State Case No. WC-CM-757300, and proceedings in that action are stayed pending resolution of the arbitration. To the extent the petition seeks to compel arbitration of Mr. Rhellou’s retaliation claim pending before the Labor Commissioner in State Case No. RCI-CM-770341, the petition is DENIED.