Judge: Stephen P. Pfahler, Case: 22CHCV00941, Date: 2023-04-03 Tentative Ruling

Case Number: 22CHCV00941    Hearing Date: April 3, 2023    Dept: F49

Dept. F-49

Date: 4-3-23

Case # 22CHCV00941

Trial Date: Not Set

ARBITRATION

MOVING PARTY: Defendants, Valencia H. Imports, Inc. dba Autonation Honda Valencia

RESPONDING PARTY: Plaintiff, Tarek Sbitani

RELIEF REQUESTED

Motion to Compel Arbitration and Stay Action

SUMMARY OF ACTION

Plaintiff Tarek Sbitani alleges employment with defendant Valencia H. Imports, Inc. dba Autonation Honda Valencia from May 19, 2019 to February 21, 2020. On October 20, 2022, Plaintiff filed a complaint for wage and hour violations, including failure to pay minimum and overtime wages, failure to pay commissions, meal and rest period liability, failure to provide accurate wage statements, inspection of personnel records, and lack of timely payment of final wages.

RULING: Granted.

Defendant Valencia H. Imports, Inc. dba Autonation Honda Valencia moves to compel arbitration and stay the action. Plaintiff in opposition contends the prior rejection of Plaintiff’s demand for arbitration now constitutes a repudiation and waiver, plaintiff requests attorney fees and costs, and alternatively requests the appointment of an arbitrator in compliance within American Aribtration Association rules. Defendants in an extensive reply reiterates the enforceability of the arbitration agreement, cites to the language regarding the mutual agreement upon an arbitrator, denies the selection of an arbitrator language in any way prevents reinforcement, and denies any claimed defense preventing enforcement of the agreement, specifically repudiation and waiver.

In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. The burden then shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud, unconscionability, etc.). (Rosenthal v. Great Western Fin'l Securities Corp. (1996) 14 Cal.4th 394, 413-414; Hotels Nevada v. L.A. Pacific Ctr., Inc. (2006) 144 Cal.App.4th 754, 758.) Any challenges to the formation of the arbitration agreement should be considered before any order sending the parties to arbitration. The trier of fact weighs all evidence, including affidavits, declarations, documents, and, if applicable, oral testimony to determine whether the action goes to arbitration. (Hotels Nevada v. L.A. Pacific Ctr., Inc., supra, 144 Cal.App.4th at p. 758.)

Defendant cites to the May 13, 2019 executed Arbitration Agreement. [Declaration of Cynthia Diaz, Ex. 1.] The agreement identifies claims for “employment by, termination of employment from, or other association with the Company, shall be resolved through mandatory, neutral, binding arbitration on an individual basis only. For purposes of this Arbitration Agreement (“Agreement"), the ‘Company’ is defined as the entity Employee is employed by, together with its parents, subsidiaries, affiliates, predecessors, successors and assigns, and each of their respective owners, directors, officers, managers, employees, vendors, and agents. This Agreement covers all theories and disputes, whether styled as an individual claim, class action claim, private attorney general claim or otherwise, and includes, but is not limited to, any claims of discrimination, harassment, breach of contract, tort, or alleged violations of statute, regulation, or ordinance, or any claims in equity. …” [Id.] Defendant contends the subject complaint arises from the terms of the agreement. The existence of and entry into the agreement remains undisputed by Plaintiff. [Declaration of Alexander Perry, ¶ 5, Ex. A.]

Plaintiff relies on an argument of repudiation and waiver, due to prior rejections of the demand to arbitration by Plaintiff before the filing of the instant complaint. [Perry Dec., ¶¶ 7-9.] Waiver generally occurs upon a finding of prejudice against the challenging party. Examples include the propounding discovery or service of an answer, where such action reveals the strategies or theories that would not otherwise be available to the party in arbitration. (Berman v. Health Net (2000) 80 Cal. App. 4^th 1359, 1367; Davis v. Continental Airlines, Inc. (1997) 59 Cal. App. 4^th 205, 212.) Where an agreement lacks a specific time frame, an excessive and unreasonable delay in a demand for arbitration can support a finding of a waiver. (Spear v. California State Auto. Assn. (1992) 2 Cal.4th 1035, 1043; Allstate Ins. Co. v. Gonzalez (1995) 38 Cal.App.4th 783, 790.) “‘[W]hat constitutes a reasonable time is a question of fact, depending on the situation of the parties, the nature of the transaction, and the facts of the particular case.’ Among the facts a court may consider is any prejudice the opposing party suffered because of the delay. [Citation.]” (Spear v. California State Auto. Assn. supra, 2 Cal.4th at 1043.) The determination of diligence applicable to an arbitration motion commences upon the filing of the action. (Allstate Ins. Co. v. Gonzalez, supra, 38 Cal.App.4th at 790; Schumpert v. Tishman Co. (1988) 198 Cal.App.3d 598, 603.)

The subject complaint was filed on October 20, 2022, and the motion to compel arbitration was December 6, 2022. The court finds no improper conduct supporting an argument for waiver upon the following of the complaint. The court also finds no basis of waiver under the pre-complaint filing conduct of Defendant. Plaintiff characterizes the pre-filing response of Defendant as a rejection of the demand, and therefore the basis of waiver. The dispute in fact appears to be over the lack of specifically articulated criteria for selection of an arbitrator other than the imposition of FAA rules, which Defendant represents in reply encompasses arbitrator selection guidelines in case of a dispute. Defendant apparently rejected the demand by Plaintiff for arbitration on condition of the use of American Arbitration Association (AAA) rules and guidelines. [Perry Decl., ¶¶ 8, 10-20, Ex. B-C.] The correspondence from moving counsel distinctly denies any claims of waiver raised prior to the filing of the complaint and instant motion.

“Private arbitration is a matter of agreement between the parties and is governed by contract law. (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 313; Jones v. Jacobson (2011) 195 Cal.App.4th 1, 17.) Contracts are interpreted under certain rules.

“‘A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.’ (Civ. Code, § 1636.) ‘The 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.) ‘When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible; subject, however, to the other provisions of this Title.” (Civ. Code, § 1639.) “The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.’ (Civ. Code, § 1641.) ‘A contract must receive such an interpretation as 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.) ‘The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed.’ (Civ. Code, § 1644.) ‘However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.’ (Civ. Code, § 1648.) ‘Repugnancy in a contract must be reconciled, if possible, by such an interpretation as will give some effect to the repugnant clauses, subordinate to the general intent and purpose of the whole contract.’ (Civ. Code, § 1652.) ‘Stipulations which are necessary to make a contract reasonable, or conformable to usage, are implied, in respect to matters concerning which the contract manifests no contrary intention.’ (Civ. Code, § 1655.)”

(Siligo v. Castellucci (1994) 21 Cal.App.4th 873, 880–881.)

“A contract term should not be construed to render some of its provisions meaningless or irrelevant.” (Estate of Petersen (1994) 28 Cal.App.4th 1742, 1754 (footnote 4).) “A well-settled maxim states the general rule that ambiguities in a form contract are resolved against the drafter. (Citations.) But that is a general rule; it does not operate to the exclusion of all other rules of contract interpretation. It is used when none of the canons of construction succeed in dispelling the uncertainty.” (Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441, 1448.)

Accepting the implied reference/requirement for reference to Federal Arbitration Act (FAA) rules regarding arbitrator selection, and given California law on such situations, infra, the court finds no basis of support for the argument of lack of performance by Defendant or repudiation of the arbitration clause. “An express repudiation is a clear, positive, unequivocal refusal to perform (Citations); an implied repudiation results from conduct where the promisor puts it out of his power to perform so as to make substantial performance of his promise impossible.” (Taylor v. Johnston (1975) 15 Cal.3d 130, 137.) Nothing prevents performance of the ultimate agreement—submission of the claim to the arbitrator. Again, Defendant the pre-litigation correspondence demonstrates an explicit rejection of any claim of repudiation. California law allows for the selection of an arbitrator where the terms remain silent or insufficient. (Code Civ. Proc., § 1281.6.) The court therefore finds the agreement enforceable pending selection of an arbitrator based on the parties impasse over the selected arbitrator.

Although Plaintiff only challenges the agreement on grounds of enforcement, the court acknowledges the statutory provisions for wage and hour claims. Labor Code section 229 prohibits arbitration for wage and hour claims. “Actions to enforce the provisions of this article for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.” (Lab. Code, § 229; Ware v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1972) 24 Cal.App.3d 35, 45.) State law exclusions are preempted where Federal Arbitration Act (FAA) preemption occurs. (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 238; Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 688.)

Moving Defendants hold “the burden to demonstrate FAA coverage by declarations and other evidence.” (Hoover v. American Income Life Ins. Co., supra, 206 Cal.App.4th at p. 1207.) The agreement contains a clause providing for the exclusive reliance on FAA regulations. [Arbitration Agreement.] Plaintiff submits no opposition to this. The subject agreement is enforceable pursuant to the FAA. (Aviation Data, Inc. v. American Express Travel Related Services Co., Inc. (2007) 152 Cal.App.4th 1522, 1535.) The court finds no basis of preemption under California law.

Plaintiff also raises no objection on grounds of unconscionability. The court therefore finds the agreement compliance with the employment arbitration requirements. (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1531-1532; Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071-1072; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102, 117-118.)

The court therefore finds the agreement valid and enforceable. The only disputed issue remains arbitrator selection.

The law consistently upholds the rights of parties to agree in contract regarding the determination of the arbitrability of a controversy, which may also include selection of an arbitrator. (Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1288; see Henry Schein, Inc. v. Archer and White Sales, Inc. (2019) 139 S.Ct. 524, 527–528.)

The agreement itself only requires the appointment of a qualified arbitrator with no other specific criteria other than adherence to FAA rules and a right to disqualification. Given the absence of selection criteria, the court cites to the applicable code section:

If the arbitration agreement does not provide a method for appointing an arbitrator, the parties to the agreement who seek arbitration and against whom arbitration is sought may agree on a method of appointing an arbitrator and that method shall be followed. In the absence of an agreed method, or if the agreed method fails or for any reason cannot be followed, or when an arbitrator appointed fails to act and his or her successor has not been appointed, the court, on petition of a party to the arbitration agreement, shall appoint the arbitrator.

(Code Civ. Proc., § 1281.6.)

The motion to compel is brought under Code of Civil Procedure section 1281, et seq. The court therefore finds the language of section 1281.6 applicable, but also consistent with the cited FAA provisions in the reply.

The participating parties are therefore ordered to select an arbitration organization and individual arbitrator within the organization, or an individual arbitrator with no affiliation. If the parties cannot agree on an organization, and/or arbitrator, the court orders the parties to submit a list of one to two organizations and/or arbitrators from each party, where the court will select the organization or individual. In other words, the parties may submit up to a total of two nominations per side. If the parties select an organization, which still further requires selection of an individual within the organization, the court will reject this proposal, and the parties will still maintain their right to disqualify any remaining submissions, if applicable.

The parties have 30 days from the date of this order to begin the selection process, with any proposed list due the day after the lapse of the 30-day period. (Code Civ. Proc., § 1281.6.) Nothing in this requirement in any way bars the nomination of an AAA based arbitrator, but, gain, the plain language of the agreement allows for a party to disqualify said organization/individual. Thus, if Plaintiff continues to elect the nomination of an AAA based arbitrator, the court can accept any disqualification.

“If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.)

The motion to compel arbitration is therefore granted and the entire action stayed.

Moving parties to give notice.