Carlson v. Home Team Pest Def., Inc.

239 Cal.App.4th 619

191 Cal.Rptr.3d 29

Julie A. CARLSON, Plaintiff and Respondent

v.HOME TEAM PEST DEFENSE, INC. et al., Defendants and Appellants.

A142219

Court of Appeal, First District, Division 4, California.

Filed August 17, 2015

Counsel for Appellant: JACKSON LEWIS, Tyler A. Brown, Conor J. Dale.

Counsel for Respondent: LAW OFFICES OF DOUGLAS A. PRUTTON and Douglas A. Prutton.

RUVOLO, P.J.

I.INTRODUCTION

Respondent Julie A. Carlson (Carlson) filed this wrongful termination action against her former employer Home Team Pest Defense, Inc., and related parties (collectively Home). The trial court denied Home's motion to compel arbitration of Carlson's claims, finding that an arbitration agreement Carlson signed when Home first hired her was procedurally and substantively unconscionable. We agree with the trial court's conclusions and also reject Home's contentions that (1) state law unconscionability principles are preempted by the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq. ); and (2) the trial court abused its discretion by refusing to sever unconscionable provisions from the agreement in this case. Accordingly, we affirm the order denying Home's motion to compel arbitration.

II.PROCEDURAL AND FACTUAL BACKGROUND

A. The Complaint

In January 2014, Carlson filed a complaint against Home in which she alleged that she was employed as the office manager at Home's Antioch office from February 4, 2013, until her wrongful termination on July 1, 2013. Carlson sought damages and attorney fees for wrongful termination, harassment, breach of her employment agreement, a wage claim for unpaid overtime (Lab.Code, §§ 510, 515 ), a claim of retaliation, in violation of Labor Code section 1102.5, and intentional infliction of emotional distress.

B. Home's Motion to Compel

In March 2014, Home filed a motion to compel arbitration and to stay the superior court proceedings, contending that all of Carlson's claims were subject to binding arbitration pursuant to an arbitration agreement between the parties that was “valid and enforceable as a matter of law.” Home supported its motion with a declaration from the general manager of its Antioch office, appellant Mohammed Nadeem (Nadeem).

Nadeem stated that on Carlson's first day of work, he provided her with access to Home's electronic “onboarding system,” which contained company policies, including Home's “Agreement to Arbitrate” (the Agreement). Later that day, Carlson objected to the Agreement in an e-mail which stated: “This agreement is far to [sic ] broad and does not include several very important terms/clause [sic ] relating to the arbitration. I would like to negotiate the terms of this agreement so that the agreement is equally fair to both parties.” The following day, Nadeem arranged a conference call between himself, Carlson and Home's human resources manager (HR Manager) to discuss Carlson's concerns. The HR Manager told Carlson she could review the terms of the Agreement with Home's attorney. In response, Carlson asked who would pay for any arbitration and what firm would perform it. The HR Manager began to explain how costs were handled and that she did not know what firm would be used, but Carlson “cut [her] off,” saying that was all the information she needed and she would sign the Agreement. Carlson also said that her attorney had reviewed the Agreement, and told her that it “lacked details that would prove important.”

Home also submitted a declaration from its in-house counsel, Jefferson Blandford, who confirmed Carlson's prior employment with Home, and who produced a copy of the Agreement that Carlson “signed electronically,” which was kept in her personnel file.¹ Blandford also produced a copy of Home's 13-page “Dispute Resolution Policy” (the Policy or the Dispute Resolution Policy), which was incorporated by reference into the Agreement.

C. The Agreement

The Agreement stated as follows:

“AGREEMENT TO ARBITRATE

“This Agreement is made and entered into by and between Rollins, Inc. and all their related companies including any parent, subsidiary or affiliate, or any other person or entity acting as its agent, (herein ‘Company’) and the Employee.

“I desire, as does the Company, to resolve any disputes regarding or arising from my employment in an expeditious and economical fashion. I recognize and agree, as does the Company, that arbitration of such disputes through binding arbitration is in the best interest of both parties. Therefore, in consideration of employment and the mutual promises, covenants, and conditions set forth in this Agreement, I agree, as does the Company, to abide by the Company's Dispute Resolution Policy (‘DRP’) and to arbitrate any dispute, claim, or controversy regarding or arising out of my employment (as defined by the Company's DRP, a copy of which I may request at any time) that may arise between me and the Company, its parent, subsidiaries, affiliates or any other persons or entities acting as its agent. The parties agree that the Company's operations directly affect interstate commerce to the extent that all procedures hereunder contemplated shall be subject to, and governed by, the Federal Arbitration Act (FAA). Unless the parties agree otherwise, the arbitration shall be administered under the applicable rules of the American Arbitration Association (‘AAA’). The parties agree that the arbitrator shall follow the substantive law, including the terms and conditions of this Agreement.

“I retain the right to file a claim for workers compensation or unemployment insurance benefits, and certain other claims enumerated in the Company's DRP. The Company retains the right to file a lawsuit for purposes of preventing or stopping any unfair or unlawful competition or solicitation of its customers and employees, and/or misappropriation of its trade secrets.

“I specifically understand that by agreeing to arbitrate, I waive any right to trial by judge or jury in favor of having such disputes resolved by binding arbitration. I understand that any disputes presented to an arbitrator shall be resolved only in accordance with the applicable federal, state, or local law governing such dispute. The award rendered by the arbitrator shall be final and binding, and judgment may be entered on the award in any court having jurisdiction thereof. I agree that any arbitration proceeding under this Agreement will not be consolidated or joined with any action or legal proceeding under any other agreement or involving any other employees, and will not proceed as a class action, collective action, private attorney general action or similar representative action.

“If any provision, or portion thereof, of this Agreement is found to be invalid or unenforceable, it shall not affect the validity or enforceability of any other part of this Agreement. Provided, however, that if the sentence in the foregoing paragraph precluding the arbitrator from conducting an arbitration proceeding as a class, collective, representative or private attorney general action is found to be invalid or unenforceable, then the entirety of this Agreement shall be deemed unenforceable.

“I acknowledge that this agreement to arbitrate is not a contract of employment and does not alter my status as an employee at-will (to the extent applicable under state law), and is a free-standing independent contract.

“By electronically signing, the New Hire Policy Acknowledgement Form, I agree to all the terms and conditions contained in this form .” (Original boldface and underscoring.)

The Dispute Resolution Policy referenced in the Agreement sets forth the procedures to resolve any disputes that might arise between Home and its employee. It defines a “dispute” as including legal claims the employee may have against Home under federal, state, statutory or common law relating to his or her employment with Home, including termination. Excluded from the definition are those claims the employee may have under the exclusive jurisdiction of a federal or state agency, such as workers compensation, unemployment benefits, claims which must be filed with the National Labor Relations Board (NLRB), employee benefit plan claims, Employee Retirement Income Security Act of 1974 (ERISA; 29 U.S.C. § 1001 et seq. ), and criminal complaints. Also excluded are claims Home may have to prevent unfair or unlawful competition by the employee, including solicitation of Home's customers or the misappropriation of Home's trade secrets. The Policy also confirms that the Agreement is a mandatory document that must be signed by the employee at the commencement of employment.

Section IV of the Policy sets forth pre-arbitration procedures to be followed by an employee who wishes to demand arbitration, which includes a requirement that the employee first must make a “Request for Dispute Resolution.” Any claims by the employee that are not included in the initial Request for Dispute Resolution are waived and barred from arbitration. During the resolution process, the employee is prohibited from having any representation, including legal counsel. If informal resolution is not successful, then under section IV.A. of the Policy, the employee is required to file a separate “Demand for Arbitration” within 90 days after filing of the initial Request for Dispute Resolution. The Policy does not require that Home follow the Request for Dispute Resolution procedure.

Once a Demand for Arbitration has been timely made, section VII of the Policy gives Home's legal department the right to select in the first instance a “reputable arbitration service” which will provide a list of seven potential arbitrators. If the employee objects to the selected arbitration service, the parties will use the American Arbitration Association (AAA). Section XII of the Policy provides that the employee must pay a $120 filing fee within 90 days after the employee makes an initial Request for Dispute Resolution. Except for “statutory civil rights claims,” the parties agree to split the...