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Jesus Reyes v. Liberman Broadcasting

August 31, 2012


(Los Angeles County Super. Ct. No. BC438669) APPEAL from an order of the Superior Court of Los Angeles County, Debre Katz Weintraub, Judge.

The opinion of the court was delivered by: Johnson, J.



Jesus Reyes filed a class complaint alleging wage and hour violations against Liberman Broadcasting, Inc. (LBI). LBI appeals from the trial court's order denying its motion to compel arbitration. We reverse.


Reyes worked as a security officer for LBI from April 24, 2009 until September 28, 2009. Reyes executed LBI's mutual agreement to arbitrate claims (Arbitration Agreement) on April 8, 2009, prior to commencing his employment with LBI.

The Arbitration Agreement is expressly governed by the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.). The Arbitration Agreement provides that LBI and Reyes "agree to submit to final and binding arbitration all claims, disputes and controversies arising out of, relating to or in any way associated with" Reyes's employment or its termination. Specific claims identified in the Arbitration Agreement include wage claims, unfair competition claims, and claims for violation of federal, state, local, or other governmental law. (Ibid.) The Arbitration Agreement does not contain an express class arbitration waiver. However, the Arbitration Agreement does provide that "each party to the arbitration may represent itself/himself/herself, or may be represented by a licensed attorney." The Arbitration Agreement provides for "discovery sufficient to adequately arbitrate [the parties'] claims," but authorizes the "arbitrator to impose . . . appropriate limits on discovery." Reyes signed an acknowledgment of his receipt of the Arbitration Agreement stating that he could read the Arbitration Agreement in both English and Spanish.

On May 27, 2010, Reyes filed a complaint on behalf of a class asserting seven causes of action arising out of alleged wage and hour violations, citing among other statutes Labor Code section 1194.*fn1 On July 13, 2010, Reyes filed a first amended complaint (FAC) adding a representative claim pursuant to the Private Attorneys General Act (PAGA) (Lab. Code, § 2698 et seq.). LBI answered the FAC on August 5, 2010, asserting 22 affirmative defenses. LBI did not assert the existence of an arbitration agreement as an affirmative defense.

That same day, Reyes propounded discovery on LBI. On September 1, 2010, LBI took the first session of Reyes's deposition. On October 11, 2010, LBI responded to the discovery requests by raising objections to each request. The parties then engaged in lengthy meet and confer efforts whereby LBI agreed to produce some class-wide discovery and statistically representative samples of certain requested information. The parties also scheduled a class-wide mediation for July 1, 2011.

On October 6, 2010, the trial court held a case management conference. On December 17, 2010, the trial court held a second status conference. On March 25, 2011, the trial court entered a stipulation between the parties to extend the deadline for class certification. Some time before May 10, 2011, LBI substituted new counsel.

On June 2, 2011, LBI informed Reyes that it intended to move to compel arbitration and had reserved a July 27, 2011 hearing date. LBI filed the underlying motion to compel arbitration on July 5, 2011. On July 27, 2011, the trial court denied the motion on the ground that LBI had waived its right to arbitration by its "failure to properly and timely assert it." LBI timely appealed from this order.


I. LBI did not waive its right to compel arbitration.

The denial of a motion to compel arbitration is appealable under Code of Civil Procedure section 1294, subdivision (a).

Public policy strongly favors arbitration and "requires close judicial scrutiny of waiver claims." (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195 (St. Agnes).) "Although a court may deny a petition to compel arbitration on the ground of waiver [citation], waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof." (Ibid.) "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." (Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp. (1983) 460 U.S. 1, 24 [103 S.Ct. 927, 74 L.Ed.2d 765].)

The determination of waiver is generally "a question of fact, and the trial court's finding, if supported by sufficient evidence, is binding on the appellate court." (St. Agnes, supra, 31 Cal.4th at p. 1196.) However, when "'the facts are undisputed and only one inference may reasonably be drawn, the issue is one of law and the reviewing court is not bound by the trial court's ruling.' [Citation.]" (Ibid.) The facts in this case are undisputed, and we therefore engage in de novo review.

A written agreement to arbitrate an existing or future dispute can be waived if not properly asserted. (Code Civ. Proc., § 1281.2, subd. (a).) To determine whether a party has waived its right to arbitration, we consider: "'"(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether the 'litigation machinery has been substantially invoked' and the parties 'were well into preparation of a lawsuit' before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) 'whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place'; and (6) whether the delay 'affected, misled, or prejudiced' the opposing party."'" (St. Agnes, supra, 31 Cal.4th at p. 1196.) We address each factor in turn.

A. LBI's actions were not inconsistent with the right to arbitrate.

1. The Arbitration Agreement does not authorize class arbitration.

"[A] party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so." (Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. (2010) 559 U.S. ___ [130 S.Ct. 1758, 1775, 176 L.Ed.2d 605] (Stolt-Nielsen); Kinecta Alternative Financial Solutions, Inc. v. Superior Court (2012) 205 Cal.App.4th 506, 510 (Kinecta); but see Jock v. Sterling Jewelers Inc. (2nd Cir. 2011) 646 F.3d 113, 127.) As the Arbitration Agreement explicitly covers the type of claims that are the subject of Reyes's lawsuit and provides only for bilateral arbitration, there is no contractual basis for concluding the parties agreed to submit to class arbitration. Therefore, we conclude that the Arbitration Agreement does not authorize class arbitration.

In Stolt-Nielsen, the parties "stipulated that the arbitration clause was 'silent' with respect to class arbitration"; they conceded that they had reached no agreement regarding class arbitration and submitted the question of whether the arbitration clause provided for class arbitration to an arbitration panel. (Stolt-Nielsen, supra, 130 S.Ct. at p. 1766.) The arbitrators found that class arbitration was permitted. (Id. at p. 1769.) The court held that the arbitrators' decision conflicted with the FAA because the parties never agreed to submit their dispute to class arbitration. (Id. at p. 1776.) The court reasoned that "the differences between bilateral and class-action arbitration are too great for arbitrators to presume, consistent with their limited powers under the FAA, that the parties' mere silence on the issue of class-action arbitration constitutes consent to resolve their disputes in class proceedings." (Ibid.) Therefore, the court concluded that because there was no agreement to engage in class arbitration, the arbitration panel exceeded its authority in determining that the clause provided for class arbitration. (Ibid.)

In Kinecta, the plaintiff signed an arbitration agreement providing for the arbitration of all disputes with the employer-defendant arising out of the employment context. (Kinecta, supra, 205 Cal.App.4th at p. 511.) The arbitration agreement made no reference to any parties other than plaintiff and defendant, and did not include an express waiver of class arbitration. (Id. at pp. 511, fn. 1, 517.) When defendant moved to compel arbitration and to dismiss plaintiff's class claims, the trial court granted the motion to compel arbitration of plaintiff's individual claims but denied defendant's motion to dismiss class claims. (Id. at p. 512.) Division Three of this appellate district reversed the trial court's denial of defendant's motion to dismiss class claims. (Id. at p. 519.) The court reasoned that "the arbitration provision was limited to the arbitration of disputes between [plaintiff] and [defendant]" because the plain language of the provision identified only plaintiff and defendant as parties to the agreement. (Id. at pp. 517-518.) Additionally, the court noted that the plaintiff failed to provide any evidence showing that "the parties agreed to arbitrate disputes of classes of other employees." (Id. at p. 519.) Therefore, the court held: "[T] he parties did not agree to authorize class arbitration in their arbitration agreement." (Ibid.)

Like the arbitration provision in Kinecta, the Arbitration Agreement in the instant case makes no reference to any parties other than plaintiff and defendant. It provides only for the "final and binding arbitration" of "all claims, disputes and controversies arising out of" Reyes's employment or its termination. The plain language of the Arbitration Agreement further states that each party may only represent "itself/himself/herself" or "may be represented by a licensed attorney." There is no mention of class action claims in the Arbitration Agreement. (As in Kinecta, class actions are not listed among the expressly excluded claims.) Furthermore, Reyes has not presented any evidence showing any intent by the parties to provide for class arbitration in the Arbitration Agreement. Therefore, we hold that because the plain language of the Arbitration Agreement provides only for the bilateral arbitration of Reyes's claims, the Arbitration Agreement does not authorize class arbitration. The Arbitration Agreement, like the arbitration provision in Kinecta, bars class arbitration because the parties did not agree to class arbitration.

2. California case law potentially barred enforcement of the Arbitration Agreement.

In 2005, the California Supreme Court held that while not all "class action waivers are necessarily unconscionable," "when the waiver is found in a consumer contract of adhesion" where disputes between the parties will "predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to cheat large numbers of consumers out of individually small sums of money, then" the waiver is in practice an exculpatory contract clause. (Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 162-163 (Discover Bank).) The court held that such waivers were unconscionable. (Ibid.) The court applied the framework in Armendariz v. Foundation Health Psychcare Services, Inc.(2000) 24 Cal.4th 83, 99 (Armendariz), finding both a procedural and substantive element of unconscionability. (Discover Bank, at pp. 160-161.) The court found procedural ...

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