Judge Gregory Keosian, Case 22STCV22943 2022-10-13 Tentative Ruling

Judge: Gregory Keosian, Case: 22STCV22943, Date: 2022-10-13 Tentative Ruling

Case Number: 22STCV22943 Hearing Date: October 13, 2022 Dept: 61

Defendants C&M Landscape, Inc., Grant R. Clack, Nicholas D. Clack, and Jose Morales’s Motion to Compel Arbitration is GRANTED as to the claims brought against Grant R. Clack, Nicholas D. Clack, and Jose Morales. Proceedings against Defendant C&M Landscape are STAYED pending the outcome of the arbitration.

I. MOTION TO COMPEL ARBITRATION

On petition of a party to an arbitration agreement to arbitrate a controversy, a court must order the petitioner and respondent to arbitrate the controversy if it determines the arbitration agreement exists, unless (1) the petitioner has waived its right to arbitrate; (2) grounds exist for the revocation of the agreement; or (3) “[a] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” (Code Civ. Proc., § 1281.2.)

“[T]he party moving to compel arbitration bears the burden of establishing the existence of a valid agreement to arbitrate, and the party opposing arbitration bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. The role of the trial court is to sit as a trier of fact, weighing any affidavits, declarations, and other documentary evidence, together with oral testimony received at the court's discretion, to reach a determination on the issue of arbitrability.” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 758.)

Defendants C&M Landscape, Inc., Grant R. Clack, Nicholas D. Clack, and Jose Morales present the employment agreements executed by Grant, Nicholas, and Jose as a condition of their employment with Plaintiff Stay Green Inc. (Flock Decl. Exhs. A–C.) These are the agreements that contain the non-disclosure provisions relied upon by Plaintiff to state its breach of contract claims against Defendants. (Complaint ¶¶ 14–16.) These agreements also contain arbitration language as follows:

Any claims alleging breach of this Agreement or violation of law by SGI in connection with Account Manager's employment and/or termination shall be resolved by final and binding arbitration. This includes claims for breach of contract, wrongful termination, unlawful discrimination or harassment, violation of public policy. SGI and the Account Manager agree to waive any rights we may have to a jury or court trial and shall use final and binding arbitration to resolve all such disputes between us in accordance with California Code of Civil Procedure § § 1280, et seg., and the Federal Arbitration Act, 9 U.S.C. §§1, et seg.

To initiate arbitration, the party raising the dispute must make written demand on the other party within the time set by the applicable statute of limitations which governs the claim asserted by the party. The arbitration shall be held in Los Angeles County, California and conducted in accordance with the Employment Dispute Resolution Process of the American Arbitration Association ("AAA") or other like procedure of the AAA. SOI will pay the arbitrator's expenses and fees and any other expenses that would not have been incurred by Account Manager if the claims were litigated in court. Each party shall pay its own attorneys' fees, witness fees, and other expenses and costs incurred by the party for his or its benefit except as provided by law governing the claim asserted in the arbitration proceeding and as determined by the arbitrator. The arbitrator may award the prevailing party its costs.

(Flock Decl. Exhs. A–C, § D.) Because the clause applies to claims “alleging breach of this Agreement,” and because Plaintiff asserts a claim for breach of the agreement by the individual defendants, Defendants argue that the arbitration clause applies to this dispute. (Motion at pp. 7–9.)

Plaintiff in opposition makes two arguments. First, it argues that the arbitration clause does not cover this dispute, as it applies only to claims brought by employees against itself, rather than by itself against its employees. (Opposition at pp. 2–7.) Second, it argues that Defendant C&M executed no arbitration agreement, and cannot compel arbitration as a non-signatory. (Opposition at pp. 4–5.)

Plaintiff’s first argument is unpersuasive. To read the arbitration agreement as applying only to the claims of Plaintiff’s employees, rather than claims brought by Plaintiff itself, would be to render the entire agreement unenforceable for lack of mutuality, as Plaintiff acknowledges. (Opposition at pp. 5–6, citing Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4^th 1519, 1537.) This is a difficulty for Plaintiff’s position, because if there is a reasonable interpretation of the contract “that will make the instrument lawful, operative, definite, reasonable, and capable of being carried into effect,” the court should embrace that interpretation over another “that would make it harsh, unjust or inequitable.” (Richeson v. Helal (2007) 158 Cal.App.4th 268, 277.) Plaintiff’s interpretation of the arbitration clause is one that would render it ineffectual in every instance.

Fortunately, the contract is susceptible of an interpretation that gives it mutuality, and therefore application to this controversy. The arbitration clause applies to any claims “alleging breach of this agreement,” which is the basic nature of this action. (Flock Decl. Exhs. A–C, § D.) The subsequent language addressing “or violation of law by SGI,” although containing language superficially limiting claims for violations of law to those made against SGI, need not apply that limitation to the prior clause. Indeed, the contract itself contemplates that one or both parties to the contract may raise and prosecute claims in arbitration, contrary to Plaintiff’s interpretation: “To initiate arbitration, the party raising the dispute must make written demand on the other party within the time set by the applicable statute of limitations which governs the claim asserted by the party.” (Flock Decl. Exhs. A–C, § D.) That this language encompasses “parties” rather than “employees” or “Account Managers” is powerful indication of intent to be mutually bound to arbitrate claims by the employer against the employee arising out of the employment relationship. Accordingly, the agreement is mutual, and may be applied against Plaintiff.

However, this argument applies to the individual defendants who have in fact executed arbitration agreements with Plaintiff. Defendant C&M Landscape, however, has executed no such agreement. Defendants in reply acknowledge that no such agreement exists, and ask this court to stay proceedings against C&M while the cases against the individual defendants proceed in arbitration. (Reply at p. 5.) This is a permissible resolution of the motion under the last paragraph of Code of Civil Procedure § 1281.2: “If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party . . . the court . . . may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding.” (Code Civ. Proc. § 1281.2, last par.)

The motion is therefore GRANTED as to the claims against the individual defendants, and proceedings against Defendant C&M are STAYED pending the outcome of the arbitration proceeding.