Vaughn v. Tesla, Inc.

87 Cal.App.5th 208

303 Cal.Rptr.3d 457

Marcus VAUGHN et al., Plaintiffs and Respondents,

v.TESLA, INC., Defendant and Appellant.

A164053

Court of Appeal, First District, Division 5, California.

Filed January 4, 2023

Holland & Knight LLP, Sara A. Begley, Christina T. Tellado, Los Angeles; Reed Smith LLP, Raymond A. Cardozo, San Francisco, Tyree P. Jones, Brian A. Sutherland, San Francisco, for Defendant and Appellant.

Bryan Schwartz Law, Bryan Schwartz, Oakland; California Civil Rights Law Group, Larry Organ ; Altshuler Berzon LLP, Michael Rubin, Corinne Johnson, San Francisco, Jonathan Rosenthal for Plaintiffs and Respondents.

SIMONS, Acting P.J. Defendant and appellant Tesla, Inc. (Defendant) appeals from the denial of its motion to compel arbitration of workplace race discrimination claims asserted by plaintiffs Monica Chatman and Evie Hall (Plaintiffs). Plaintiffs initially worked for Defendant through staffing agencies before signing employment letters prepared by Defendant in July 2017. Plaintiffs’ complaint alleged the discrimination occurred before and after the letters were signed. We determine the trial court properly relied on the language in an arbitration provision contained in the letters to exclude from arbitration those claims based on conduct occurring during periods Plaintiffs were employed by staffing agencies rather than directly by Defendant. We also conclude the trial court properly declined to mandate arbitration of Plaintiffs’ request for a public injunction. On that issue, we reject Defendant's two principal contentions. First, we hold that injunctions sought under the Fair Employment and Housing Act (FEHA) ( Gov. Code, §§ 12900 et seq. ) may be considered "public injunctions." Second, we rule the Federal Arbitration Act (FAA) ( 9 U.S.C. § 1 et seq. ), as interpreted in Viking River Cruises, Inc. v. Moriana (2022) ––– U.S. ––––, [142 S.Ct. 1906, 213 L.Ed.2d 179] ( Viking River ), does not preempt the California rule prohibiting waiver of the right to seek such injunctions.

BACKGROUND

Defendant, a manufacturer of electric vehicles, operates a factory in Fremont, California. Through staffing agencies, plaintiff Chatman began working at Defendant's Fremont factory in November 2016 and plaintiff Hall began working there in March 2017. In July 2017 letters, Defendant offered Hall and Chatman employment at specified wages and with specified benefits. The letters stated, "If you accept our offer, your first day of employment will be August 2, 2017."¹

Plaintiffs each electronically signed their offer letters.² Those offer letters contain the following arbitration agreement (Arbitration Provision): "[T]o ensure the rapid and economical resolution of disputes that may arise in connection with your employment with Tesla, you and Tesla agree that any and all disputes, claims, or causes of action, in law or equity, arising from or relating to your employment, or the termination of your employment, will be resolved, to the fullest extent permitted by law by final, binding and confidential arbitration ..." (Italics and bolding omitted.)

In November 2017, plaintiff Marcus Vaughn filed a complaint alleging he suffered a racially hostile work environment at Defendant's Fremont factory. He alleged that he and other Black workers had "suffered severe and pervasive harassment." Vaughn alleged three causes of action under FEHA. Although Defendant offered Vaughn direct employment, he never signed the offer letter, which contained an arbitration agreement. For that reason, the trial court denied Defendant's motion to compel arbitration of Vaughn's claims, and this Court affirmed in Vaughn v. Tesla, Inc. (May 21, 2019, A154753) 2019 WL 2181391 [nonpub. opn.].

In November 2020, Defendant moved to deny class certification and to strike the class allegations in plaintiff Vaughn's complaint, arguing among other things that, because Vaughn was not bound to arbitrate, he could not adequately represent the interests of workers who had agreed to arbitration. The trial court directed Vaughn to file an amended complaint "that asserts subclasses." In May 2021, plaintiff Vaughn filed a first amended complaint with proposed subclasses. On the same day, Vaughn moved for leave to file a second amended complaint adding Chatman and Titus McCaleb as named plaintiffs. In June 2021, Vaughn sought leave to add Hall as a named plaintiff.

The trial court granted leave to amend. Plaintiffs filed their Second Amended Complaint (Complaint) in July.³

Among other allegations, the Complaint alleges that Plaintiffs and other similarly situated Black co-workers were subjected to repeated instances of racial harassment and discrimination, including regularly being called racial slurs by co-workers and supervisors. Plaintiffs seek to represent a class of Black persons who worked in Defendant's factory at various times after November 2016. The Complaint asserts causes of action for "Race-Based Discrimination in Violation of FEHA," "Race-Based Harassment in Violation of FEHA," and "Failure to Prevent Race-Based Discrimination and Harassment in Violation of FEHA." Plaintiffs are alleged to be part of a subclass of workers who were employed for portions of time by staffing agencies and subsequently became direct employees of Defendant. Plaintiffs seek relief against Defendant based on a "joint" or "dual" employer theory for periods they were employed by staffing agencies.⁴

In August 2021, Defendant moved to compel arbitration of Plaintiffs’ claims. Defendant pointed out that "[n]one of Chatman and Hall's allegations distinguish between the time they were employed by staffing companies and the time they were directly employed by Tesla" and argued, among other things, that the Arbitration Provision mandated arbitration because all of the claims "related to" Plaintiffs’ employment with Defendant. Defendant also argued Plaintiffs could not seek a "public injunction" under FEHA. In opposition, Plaintiffs argued, among other things, that they were not obligated to arbitrate claims based on conduct before August 2, 2017, which was the date the offer letter identified as the "first day of employment." Plaintiffs also argued they had the right to seek a public injunction in court because the Arbitration Provision prohibited such an award in arbitration.

Following a hearing, the trial court granted Defendant's petition to compel arbitration in part and denied it in part. Regarding the scope of the Arbitration Provision, the court concluded, "Applying the plain language of the contracts, the arbitration clauses require [Plaintiffs] to arbitrate disputes that arise on or after 8/2/17." The court also concluded, "any claims based on alleged wrongs before [8/2/17] are not within the temporal scope of the agreements." The trial court also denied the motion to compel arbitration to the extent that Plaintiffs sought a public injunction.

The present appeal followed, and the trial court stayed any portion of the case that was not automatically stayed by the filing of the notice of appeal.

DISCUSSION

I. Legal Background and Standard of Review

"Both the California Arbitration Act ( Code Civ. Proc., § 1280 et seq. ) and the FAA ... recognize ‘ " ‘arbitration as a speedy and relatively inexpensive means of dispute resolution’ " and are intended " ‘to encourage persons who wish to avoid delays incident to a civil action to obtain an adjustment of their differences by a tribunal of their own choosing.’ " [Citation.]’ [Citations.] The fundamental policy underlying both acts ‘is to ensure that arbitration agreements will be enforced in accordance with their terms. ’ " ( Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59, 159 Cal.Rptr.3d 444.)

The FAA mandates that "ambiguities about the scope of an arbitration agreement must be resolved in favor of arbitration." ( Lamps Plus, Inc. v. Varela (2019) ––– U.S.–––– [139 S.Ct. 1407, 1418, 203 L.Ed.2d 636] ( Lamps Plus ).)⁵ Nevertheless, " ‘[t]here is no public policy ... that favors the arbitration of disputes the parties did not agree to arbitrate.’ " ( Howard , supra , 30 Cal.App.5th at p. 663, 241 Cal.Rptr.3d 743.) That is because "it is a cardinal principle that arbitration ... ‘is a matter of consent, not coercion,’ " and " ‘ "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." ’ " ( Pinnacle Museum Tower Assn. v. Pinnacle Mkt. Dev. (US), LLC (2012) 55 Cal.4th 223, 236, 145 Cal.Rptr.3d 514, 282 P.3d 1217 ( Pinnacle Museum ).) Thus, the policy favoring arbitration " ‘does not override ordinary principles of contract interpretation’ ... ‘[T]he terms of the specific arbitration clause under consideration must reasonably cover the dispute as to which arbitration is requested.’ " ( Ahern v. Asset Mgmt. Consultants, Inc. (2022) 74 Cal.App.5th 675, 688, 289 Cal.Rptr.3d 773.)

"Although the FAA preempts any state law that stands as an obstacle to its objective of enforcing arbitration agreements according to their terms, ... we apply general California contract law to determine whether the parties formed a valid agreement to arbitrate their dispute." ( Avery, supra , 218 Cal.App.4th at pp. 59–60, 159 Cal.Rptr.3d 444.) "General contract law principles include that ‘[t]he basic goal of contract interpretation is to give effect to the parties’ mutual intent at the time of contracting. [Citations.] ... "The words of a contract are to be understood in their ordinary and popular sense." ’ [Citation.] Furthermore, ‘ "[t]he 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.)’ " ( Franco v. Greystone Ridge Condo. (2019) 39 Cal.App.5th 221, 227, 252 Cal.Rptr.3d 149 ( Franco ).)

"Where, as here, the evidence is not in conflict, we review the trial court's denial of arbitration de novo." ( Pinnacle Museum, supra , 55 Cal.4th at p. 236, 145 Cal.Rptr.3d...