TitleMax of Cal. v. Pena

1

TITLEMAX OF CALIFORNIA, Petitioner and Appellant, v. CARLOS PENA, Respondent;

DEPARTMENT OF INDUSTRIAL RELATIONS, DIVISION OF LABOR STANDARDS ENFORCEMENT, Intervener and Respondent.

F084706

California Court of Appeals, Fifth District

March 28, 2023

NOT TO BE PUBLISHED

APPEAL from orders of the Superior Court of Fresno County No 21CECG03730, Rosemary T. McGuire, Judge.

Baker & Hostetler, Shareef S. Farag and Vartan S. Madoyan, for Petitioner and Appellant.

Scott R. Jones and Patrick C. McManaman for Intervener and Respondent.

No appearance for Respondent.

OPINION

SNAUFFER, J.

INTRODUCTION

Petitioner and appellant TitleMax of California, Inc. (TitleMax) appeals from two orders: (1) an order (sometimes referred to as the "subject order") denying its petition to compel arbitration of a wage dispute between it and its former employee, respondent Carlos Pena; and (2) an order denying its ex parte application to stay proceedings before the Division of Labor Standards Enforcement (sometimes referred to as the "ex parte order"). (TitleMax and Pena are referred to, collectively, as the "parties.") The Department of Industrial Relations, Division of Labor Standards Enforcement (DLSE) is the respondent in intervention. (TitleMax and DLSE are sometimes referred to collectively, as the "litigants.")

We reverse the subject order and ex parte order and remand the case to the trial court to enter an order compelling arbitration of Pena's claims and staying the DLSE proceedings pending completion of the arbitration.

FACTUAL AND PROCEDURAL BACKGROUND

I. Pena's Employment By TitleMax and Agreement to Arbitrate Certain Claims

Pena was employed by TitleMax or its affiliates from approximately May 2014 until his resignation in July 2018. On May 12, 2014, at or near the commencement of Pena's employment with TitleMax's affiliate, TitleMax of Nevada, Inc., Pena and his then employer entered into a standalone, multi-page arbitration agreement (arbitration agreement). The arbitration agreement bound Pena and affiliates of TitleMax of Nevada, Inc. to its provisions. Neither Pena nor TitleMax dispute the validity of the arbitration agreement or that each is subject to its terms. Among other things, the arbitration agreement provided:

"The Federal Arbitration Act (9 U.S.C. §§ 1-16) ('FAA') shall govern this Agreement. If for any reason the FAA does not apply, then state law of arbitrability where Employee works for the Employing Company (or, if Employee is no longer employed by the Employing Company, last worked for the Employing Company) shall apply."

The arbitration agreement goes on to describe claims that are covered by the agreement. Those provisions read, in relevant part:

"The Parties mutually consent to the resolution by arbitration of all Arbitrable Claims (as defined below), past, present, or future, that Employee may have against any of the following: (1) TitleMax of Nevada, Inc. (the "Employing Company"), (2) any and all parents, subsidiaries, affiliates, and/or any other related companies of the Employing Company (collectively, the 'Affiliated Companies'), (3) any and all officers, directors, members, managers, owners, shareholders, employees, agents, or any other representatives of any entity referenced in subsections (1) or (2) above (in their capacity as such or otherwise), ... or that the Employing Company or any of the Affiliated Companies may have against Employee. The Parties understand and agree that, if Employee becomes employed by an Affiliated Company after executing this Agreement, then that Affiliated Company shall be the Employing Company for purposes of this Agreement.

"The only claims that are subject to this Agreement are those that are allowed under applicable federal, state, or local law, and are not specifically excluded below ('Arbitrable Claims'). Arbitrable Claims include, but are not limited to: claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied); tort claims (including, but not limited to, claims of outrage, intentional infliction of emotional distress, negligent hiring, or negligent supervision), even if such torts are currently unforeseeable; ... and claims for violation of any federal, state, or other governmental law, statute, regulation, or ordinance ...."

In addition, the arbitration agreement contains a section describing various claims not covered by the agreement. The following provision is one of several describing claims not covered by the arbitration agreement:

"Regardless of any other terms of this Agreement, claims may be brought before and remedies awarded by an administrative agency if applicable law permits access to such an agency, notwithstanding the existence of an agreement to arbitrate. Such administrative claims include, without limitation, claims or charges brought before the Equal Employment Opportunity Commission, the U.S. Department of Labor, the National Labor Relations Board, and any state and local administrative agencies." [Hereafter, the "savings clause."]

On or about April 30, 2016, Pena was transferred to California and, thereafter, was employed by TitleMax until his resignation in July 2018.

II. Pena Files a Claim Against TitleMax with DLSE

In January 2019, Pena filed a claim against TitleMax with DLSE.^[1] In that claim, Pena sought reimbursement for business expenses he allegedly incurred during his employment with TitleMax, and waiting time penalties for wages he allegedly was not timely paid.

DLSE notified TitleMax of the claim on or about February 19, 2019. Notices were sent to the parties on that date, advising them that a conference "to discuss the validity and to settle the claim" was scheduled to occur the following month.

The settlement conference occurred, as scheduled, on March 14, 2019. Both parties participated but no settlement was reached. During the conference, Pena indicated he wanted to add additional claims against TitleMax. Because the matter did not settle, it was "referred to hearing" which we understand to mean a decision was made by DLSE to hold an evidentiary hearing (Berman hearing).^[2] TitleMax made no mention of the existence of the arbitration agreement at the March 14, 2019 settlement conference.

Nothing significant occurred in connection with the DLSE matter until January 28, 2020, more than ten months after the 2019 settlement conference, when DLSE sent TitleMax a new notice of claim (capitalization omitted). In this new notice of claim, Pena reasserted the claims set forth in his initial claim and added claims for failure to pay overtime wage premiums; failure to compensate for meal periods and rest periods not provided; and failure to pay minimum wages set forth in two counts seeking liquidated damages. Included with the notice of claim was a letter from DLSE indicating the matter would be "set for a formal hearing [i.e., a Berman hearing] pursuant to Section 98 of the California Labor Code." However, no hearing date was set at that time.

On March 3, 2020, DLSE sent the parties a notice of hearing (capitalization omitted) indicating a Berman hearing was scheduled for April 1, 2020. Included with the notice of hearing was a copy of the complaint (capitalization omitted) filed by Pena and dated February 7, 2020. The February 7, 2020 complaint is the earliest filed complaint reflected in the record on appeal.^[3] The notice of hearing informed TitleMax of its right to file an answer within ten days of service of the notice of hearing, and that the hearing would go forward regardless of whether TitleMax submitted an answer, or appeared at the hearing, and that an "Order Decision or Award [would] be issued in accordance with the evidence offered at the hearing." The record on appeal does not reflect that TitleMax ever filed an answer to the February 7, 2020, complaint.

On March 13, 2020, and again on March 17, 2020, counsel for TitleMax requested the Berman hearing be postponed due to the worsening Covid-19 outbreak and the travel bans that had issued. TitleMax proposed the hearing be rescheduled to June 1, 2020. On March 17, 2020, DLSE postponed the Berman hearing to an undetermined date. DLSE admits "the postponement was due to the statewide lockdown over concerns of the Covid-19 pandemic." (Unnecessary capitalization omitted.) As explained by DLSE, Governor Newsom declared a state of emergency on March 15, 2020 due to the pandemic; that "[a] series of executive orders restricting all manners of operations followed[]"; that on March 20, 2020, DLSE "postponed all hearings scheduled to be heard over the ensuing weeks"; that, as a result of the pandemic, "business as usual ceased, including all proceedings before [DLSE]";^[4] and that "in the fall of 2021, as [the] pandemic subsided, [Pena's] case resumed course."

Thus, approximately 18 months after DLSE had shut down all hearing operations, Pena's matter resumed course. Specifically, on September 10, 2021, Pena filed an amended complaint with DLSE which set forth the same claims he had raised in his amended wage claim. In addition, the amended complaint named Tracy Young, Chief Executive Officer of TitleMax's parent company, TMX Finance LLC, as an additional defendant in the matter. On September 14, 2021, DLSE sent the parties notice that a telephonic Berman hearing would be held on October 27, 2021.

On or about September 30, 2021, TitleMax filed an answer to Pena's amended complaint. On or about October 6, 2021, Mr. Young filed his answer. Neither answer made mention of the arbitration agreement.

According to the declaration of Deputy Labor Commissioner Kathleen Salzer, "[o]n October 18, 2021, the Labor Commissioner began receiving batches of evidence from [TitleMax and Young] for...