Mondragon v. Sunrun Inc.

320 Cal.Rptr.3d 492

Angel MONDRAGON, Plaintiff and Respondent,

v.SUNRUN INC., Defendant and Appellant.

B328425

Court of Appeal, Second District, Division 7.

Filed April 23, 2024

APPEAL from an order of the Superior Court of Los Angeles County, Michael P. Linfield, Judge. Affirmed. (Los Angeles County Super. Ct. No. 22STCV25672)

Gordon Rees Scully Mansukhani, Matthew G. Kleiner, Andrea K. Williams and Brandon Saxon, San Diego, for Defendant and Appellant.

Lebe Law, Jonathan M. Lebe, Zachary T. Gershman and Brielle D. Edborg for Plaintiff and Respondent.

SEGAL, Acting P. J.

INTRODUCTION

Sunrun Inc. required its employee, Angel Mondragon, to sign an arbitration agreement, which he did. The agreement covered most disputes relating to Mondragon’s employment, but it excluded claims brought "as a representative of the state of California as a private attorney general under" the Private Attorney General Act of 2004 (PAGA; Lab. Code, § 2698 et seq.). After his employment ended, Mondragon filed a complaint asserting several causes of action under PAGA. Sunrun filed a motion to compel arbitration of Mondragon’s claims, which the trial court denied.

Sunrun appeals from the order denying the motion to compel arbitration, arguing that, because the parties delegated arbitra- bility decisions to the arbitrator, the trial court erred in ruling on whether Mondragon’s claims were arbitrable. Sunrun also argues that, if the parties did not delegate arbitrability decisions to the arbitrator, the trial court erred in denying the motion because the arbitration agreement excluded only PAGA claims based on violations involving other employees, not Mondragon’s "individual" PAGA claims. We conclude that, by signing an arbitration agreement that (1) merely referred to the rules of the American Arbitration Association; (2) included a carve-out that arguably covered the dispute; and (3) included a severability clause stating a court may not enforce certain provisions, Mondragon, an unsophisticated party, did not delegate arbitrability decisions to the arbitrator. We also conclude the language of the arbitration agreement did not require Mondragon to arbitrate his individual PAGA claims. Therefore, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A. Sunrun Hires Mondragon; The Parties Sign an Arbitration Agreement

In January 2022 Sunrun hired Mondragon as an hourly employee, contingent on Mondragon signing a two-and-a-half-page arbitration agreement. Mondragon agreed, and he and a Sunrun representative signed the arbitration agreement. The agreement included a section describing which claims the agreement covered and a section describing which claims it did not. These are they:

"CLAIMS COVERED BY THIS AGREEMENT

"Except as provided below, Company and Employee (the Parties) agree to arbitrate before a neutral arbitrator any and all existing or future disputes or claims between or among them that arise out of or relate to Employee’s … employment or separation from employment with Company. This means that the Parties agree to arbitrate any lawsuits that they may have against the other, including (but not limited to) the following:

….

"claims for non-payment, incorrect or overpayment of wages …, failure to pay wages for all hours worked, failure to pay overtime, failure to pay wages due on termination, failure to provide accurate, itemized wage statements, failure to provide breaks, … entitlement to waiting time penalties and/or any other claims involving wages, hours, or conditions of work.

"CLAIMS NOT COVERED BY THIS AGREEMENT

"Parties understand and agree that the following disputes are not covered by this Agreement:

….

"claims brought by Employee in state or federal court as a representative of the state of California as a private attorney general under the PAGA (to the extent applicable) …. "

The agreement also included this provision governing the procedures the parties would use "for arbitration":

"ARBITRATION PROCEDURES

"The parties will use the American Arbitration Association (‘AAA’) for arbitration, subject to its Employment Arbitration Rules and mediation Procedures (‘Arbitration Rules’), available at www.adr.org…. The Rules explain how to file a Demand for Arbitration. If the Arbitration Rules conflict with this Agreement in any way, this Agreement prevails and controls. The demand for arbitration must be filed within the statute of limitations applicable to the claim on which arbitration is sought."

Finally, the agreement included a severability clause. This is it: "The parties understand and agree that if a court or arbitrator invalidates or refuses to enforce any term or portion of this Agreement, the remainder of this Agreement shall not be affected by such invalidity or unenforceability but shall remain in full force and effect …

B. Mondragon Sues Sunrun After His Employment Ends

A year after his employment ended, Mondragon filed this action against Sunrun, asserting a single cause of action under PAGA for Labor Code violations involving him and other employees. Mondragon alleged Sunrun failed to pay all earned wages, including overtime wages; unlawfully deducted earned wages; failed to provide required meal and rest breaks; and failed to provide accurate wage statements.

C. Sunrun Files a Motion To Compel Arbitration; The Trial Court Denies It

Sunrun filed a motion to compel arbitration of Mondragon’s individual PAGA claims. Citing the United States Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, , 213 L.Ed.2d 179 (Viking River), Sunrun contended that, where there is an arbitration agreement, a court may compel a party to arbitrate individual PAGA claims, even if the court may not compel the party to arbitrate non-individual PAGA claims. Sunrun further contended the "PAGA carve-out" provision in the arbitration agreement applied only to PAGA claims filed on behalf of other employees, not to Mondragon’s individual PAGA claims.¹

Sunrun also contended—somewhat inconsistently—that if the court did not grant the motion to compel arbitration, an arbitrator should decide whether Mondragon agreed to arbitrate his claims.² Sunrun contended that the arbitration agreement incorporated the rules of the AAA and that, under the applicable rules, the arbitrator had authority to decide questions of arbitrability. Therefore, according to Sunrun, by signing the arbitration agreement, Mondragon agreed an arbitrator would decide those questions.

The trial court denied the motion to compel arbitration. The court first ruled it, not the arbitrator, should decide questions of arbitrability. Quoting Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227 at page 239, 190 Cal.Rptr.3d 159, the court ruled that, " " ‘unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court’ " " and that the agreement’s reference to the AAA rules did not clearly and unmistakably delegate arbitrability decisions to the arbitrator. The court next ruled the agreement "unambiguously" excluded PAGA claims and did not differentiate between individual PAGA claims and PAGA claims brought on behalf of other employees. The court also ruled that, even if the agreement were ambiguous regarding whether it covered individual PAGA claims, the court would construe the ambiguity against Sunrun because Sunrun drafted the arbitration agreement and because Sunrun’s employment offer to Mondragon characterized the arbitration agreement as "excluding Private Attorney General (PAGA) claims" (again, without differentiating between individual and other claims). Sunrun timely appealed from the order denying the motion.

DISCUSSION

A. Applicable Law and Standard of Review

[1–3] Where, as here, the parties to a lawsuit have executed an arbitration agreement, a "threshold question … presented by every motion or petition to compel arbitration" is "whether the parties’ dispute falls within the scope of that agreement." (Ahern v. Asset Management Consultants, Inc. (2022) 74 Cal.App.5th 675, 687, 289 Cal.Rptr.3d 773; accord, Wilson-Davis v. SSP America., Inc. (2021) 62 Cal. App.5th 1080, 1086-1087, 277 Cal.Rptr.3d 258; see Performance Team Freight Systems, Inc. v. Aleman (2015) 241 Cal. App.4th 1233, 1244, 194 Cal.Rptr.3d 530 ["Only disputes that fall within the scope of an arbitration provision are arbitrable."].) In addition, "parties may disagree about who—the court or the arbitrator—has the power to decide whether the dispute is arbitrable." (Wilson-Davis, at p. 1087, 277 Cal.Rptr.3d 258; see Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 243, 205 Cal.Rptr.3d 359, 376 P.3d 506 (Sandquist) [" ‘the question "who has the primary power to decide arbitrability" turns upon what the parties agreed about that matter’ "]; Nelson v. Dual Diagnosis Treatment Center, Inc. (2022) 77 Cal. App.5th 643, 654, 292 Cal.Rptr.3d 740 (Nelson) [same].) While "[b]oth the federal government and California have strong public policies " ‘in favor of arbitration as an expeditious and cost-effective way of resolving disputes," there "is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate …." (In re Uber Technologies Wage & Hour Cases (2023) 95 Cal. App.5th 1297, 1304-1305, 313 Cal.Rptr.3d 867, internal quotation marks omitted; see Victoria v. Superior Court (1985) 40 Cal.3d 734, 744, 222 Cal.Rptr. 1, 710 P.2d 833; B.D. v. Blizzard Entertainment, Inc. (2022) 76 Cal.App.5th 931, 943, 292 Cal. Rptr.3d 47.) "Indeed, a trial court has no power to order parties to arbitrate a dispute that they did not agree to arbitrate." (Bouton v. USAA Casualty Ins. Co. (2008) 43 Cal.4th 1190, 1202, 78 Cal.Rptr.3d 519, 186 P.3d 1; accord, Sellers v. JustAnswer LLC (2021) 73 Cal.App.5th 444, 460-461, 289 Cal.Rptr.3d 1; see Howard v. Goldbloom (2018) 30 Cal.App.5th 659, 663, 241 Cal.Rptr.3d 743 ["no dispute may be ordered to arbitration unless it is...