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Hireem Elijahjuan et al v. the Superior Court of Los Angeles County

October 17, 2012


ORIGINAL PROCEEDING in mandate. Zaven V. Sinanian, Judge. (Los Angeles County Super. Ct. No. BC441598)

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


Petition granted.

The difference between an employee and an independent contractor is significant if for no other reason than employees enjoy benefits not afforded independent contractors. Here, petitioners alleged that real parties in interest misclassified them as independent contractors when they were employees. That allegation underlies every cause of action in this lawsuit.

The sole substantive issue on appeal is whether the parties agreed to arbitrate their dispute. We conclude that the dispute falls outside the arbitration provision, which applies only to disputes regarding the "application or interpretation" of the parties' contracts. The dispute in this case is unrelated to the substance of the parties' contractual obligations, and instead depends on extra-contractual legal obligations an employer owes its employees, but does not owe its independent contractors. The trial court granted real parties in interest's motion to compel arbitration. We treat this appeal from a non-appealable order as a petition for writ of mandate, and grant the petition.


Hireem Elijahjuan, Dave Van Huynh, Julio Hernandez, and James Love filed a first amended complaint (FAC) on their own behalf and on behalf of all others similarly situated (petitioners). Mike Campbell & Associates, Ltd., and Mike Campbell & Associates Logistics, LLC were named as defendants (collectively real parties). According to the FAC, each petitioner and each member of the proposed class was misclassified as an independent contractor instead of an employee. As a result, real parties committed numerous violations of the Labor Code,*fn1 violations of the Unfair Business Practices Act (Bus. & Prof. Code, § 17200 et seq.), and negligent misrepresentations.*fn2

Real parties moved to compel arbitration, attaching agreements containing dispute resolution provisions signed by Van Huynh and Hernandez (Agreements). Petitioners do not challenge the trial court's finding that petitioners were bound by the dispute resolution provision in the Agreements, which provided:


"Having entered into this Agreement in good faith, the Parties agree that the terms and procedures set forth herein shall be controlling if a dispute arises with regard to its application or interpretation. [¶] . . . [¶] "11.2 Arbitration. If after the expiration of the thirty (30) day period, a dispute is not resolved voluntarily the Parties shall submit the matter for final and binding arbitration . . . . The award of the arbitrator may be enforced in any court of competent jurisdiction. [¶] . . . [¶] "11.4 Discretion of Arbitrator.

"(a) The arbitrator shall base the award on the terms of this Agreement, federal transportation law, including existing judicial and administrative precedence, and by the arbitration law of the Federal Arbitration Act, title 9 U.S. Code. The arbitrator shall apply each in the order of precedence with the former having primary control." (Italics added.)

In opposition to the motion to compel arbitration, petitioners argued, among other things, that their claims of misclassification did not arise out of or require interpretation of the Agreements. Real parties countered that the Agreements "set forth all of the terms and conditions of the business relationship between [petitioners] and [real parties] including [petitioners'] ability to subcontract work and their ability to contract with other companies during the term of the agreements." The trial court granted the motion to compel arbitration of all claims except for the alleged violations of the Unfair Business Practices Act, which the court severed and stayed. The court rejected petitioners' request for classwide arbitration.


1. Appealability

An order compelling arbitration is not appealable. (Muao v. Grosvenor Properties, Ltd. (2002) 99 Cal.App.4th 1085, 1088-1089.) To overcome this obstacle, petitioners rely on the death knell doctrine, which renders appealable orders that "effectively terminate class claims but permit individual claims to continue." (In re Baycol Cases I and II (2011) 51 Cal.4th 751, 754 (Baycol).) Another case has used the death knell doctrine to consider an appeal of an order compelling the individual arbitration of a class claim. (See Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277, 1288 (Franco).)

Franco, however, is distinguishable from this case because the order compelling arbitration in Franco terminated all class claims. The Franco court "effectively limit[ed] the arbitration to [the] plaintiff's claims." (Franco, supra, 171 Cal.App.4th at p. 1282, italics omitted.) In contrast, here the court stayed litigation on the alleged violations of the Unfair Business Practices Act. The court therefore did not effectively terminate class claims, a prerequisite for the death knell doctrine. As Baycol, supra, 51 Cal.4th at pages 757-758, explained: "Orders that only limit the scope of a class or the number of claims available to it are not similarly tantamount to dismissal and do not qualify for immediate appeal under the death knell doctrine; only an order that entirely terminates class claims is appealable."

"An appellate court has discretion to treat a purported appeal from a non-appealable order as a petition for writ of mandate." (H. D. Arnaiz, Ltd. v. County of San Joaquin (2002) 96 Cal.App.4th 1357, 1366-1367.) We conclude that issuance of the writ is warranted in this unusual case. The issue of arbitrability in this case is one of law and has been fully briefed. (See Olson v. Cory (1983) 35 Cal.3d 390, 401.) Additionally, the record is adequate to consider the issues, and there is no indication the trial court would be more than a nominal party. (H. D. Arnaiz, Ltd., supra, at p. 1367.) If we were to dismiss the appeal, the ultimate reversal of the order would be inevitable, and would follow the substantial expense of completing an arbitration. (Branham v. State Farm Mut. Auto. Ins. Co. (1975) 48 Cal.App.3d 27, 32-33 [treating an order compelling arbitration as a petition for writ of mandate]; see also Schultz v. Regents of University of California (1984) 160 Cal.App.3d 768, 788 [treating purported appeal from denial of summary judgment as petition for writ of mandate].) To dismiss the appeal and require the parties to proceed to arbitration of nonarbitral claims would be "'"unnecessarily dilatory and circuitous."' [Citation.]"*fn3 (Olson v. Cory, supra, at p. 401.)

2. Arbitrability

"California law, like federal law, favors enforcement of valid arbitration agreements." (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97; Truly Nolen of America v. Superior Court (2012) 208 Cal.App.4th 487, 498.) "The Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) incorporates a strong federal policy of enforcing arbitration agreements, including agreements to arbitrate statutory rights." (Armendariz, at pp. 96-97.) However, the preference for arbitration extends only to those disputes the parties agree to arbitrate. (Engineers & Architects Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644, 653; see also AT&T Technologies v. Communications Workers (1986) 475 U.S. 643, 648.) In determining contractual arbitrability, the threshold issue is whether the parties agreed to arbitrate their dispute - i.e., whether the contract included or excluded the dispute from its arbitration clause. (Engineers & Architects Assn., at p. 653.)

"The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties. (Civ. Code, § 1636.) If contractual language is clear and explicit, it governs. (Civ. Code, § 1638.)" (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264.) Because the language of the arbitration provision was not in dispute and no conflicting evidence regarding its meaning was presented, we consider its meaning de novo. (Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 707.)

The crucial issue is whether the arbitration provision - which applies to any dispute that "arises with regard to [the Agreements'] application or interpretation" -includes the alleged misclassification of petitioners as independent contractors, the cornerstone of each cause of action in the FAC. We conclude that the current dispute falls outside the ambit of the arbitration provision.

Petitioners' lawsuit does not concern the application or interpretation of the Agreements, but instead seeks to enforce rights arising under the Labor Code benefitting employees but not independent contractors. No allegation in the FAC is based on rights afforded petitioners under the terms of the Agreements. The parties' dispute therefore cannot be characterized as regarding the application or interpretation of the Agreements.

Narayan v. EGL, Inc. (9th Cir. 2010) 616 F.3d 895, 899 (Narayan) explains the distinction between rights arising under a contract and those arising under a Labor Code statute. The issue in Narayan was whether a contractual choice of law provision requiring use of Texas law applied to alleged California Labor Code violations. The appellate court explained that the alleged Labor Code violations did not arise out of the contract, reasoning that the plaintiffs' claims for relief were dependent on whether they were employees (as opposed to independent contractors), which in turn was dependent "on the definition that the otherwise governing law - not the parties - gives to the term 'employee.'" (Ibid.) The court further explained that although the contracts were relevant, the Labor Code claims did not arise out of them stating: "While the contracts will likely be used as evidence to prove or disprove the statutory claims, the claims do not arise out of the contract, involve the interpretation of any contract terms, or otherwise require there to be a contract." (Ibid.)

Although Narayan involved a choice of law provision, its reasoning is applicable here. As in Narayan, petitioners' claims do not arise out of the Agreements. As in Narayan, although the Agreements may be relevant to prove or disprove the alleged misclassification - as they describe petitioners as independent contractors - their materiality does not show the claims arise out of the Agreements. The critical dispute in this case is not whether the Agreements describe petitioners as independent ...

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