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Lane v. Francis Capital Management LLC

California Court of Appeal, Second District, Fourth Division

March 11, 2014

Martin Keith LANE, Jr., Plaintiff and Respondent,
v.
FRANCIS CAPITAL MANAGEMENT LLC, Defendant and Appellant.

APPEAL from a judgment of the Superior Court of Los Angeles County, Abraham Khan, Judge. Affirmed in part, reversed in part, and remanded with instructions. (No. BC482348)

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COUNSEL

Seyfarth Shaw, David D. Kadue, Los Angeles, and Coby M. Turner, Sacramento, for Defendant and Appellant.

Jeffer Mangels Butler & Mitchell, and Travis Gemoets, Los Angeles, for Plaintiff and Respondent.

OPINION

MANELLA, J.

INTRODUCTION

Francis Capital Management LLC (FCM) appeals from an order denying its motion to compel a former employee, respondent Martin Keith Lane, Jr., to arbitrate his employment claims against appellant. FCM contends the trial court erred in determining (1) that Labor Code section 229 allowed Lane to maintain his claims in superior court, and (2) that the arbitration agreement was unconscionable.[1] For the reasons stated below, we conclude that section 229 applies to only one of Lane's claims, and that the arbitration agreement was not unconscionable. Accordingly, we affirm in part, reverse in part, and remand for further proceedings.

PROCEDURAL HISTORY

On April 5, 2012, Lane filed a complaint for damages against FCM, arising from FCM's purported failure to pay Lane a bonus, its unlawful labor practices, and its termination of Lane's employment. In the complaint, Lane alleged eight causes of action: (1) wrongful termination in violation of public policy; (2) breach of oral contract; (3) failure to pay wages; (4) unpaid overtime wages (§ 510); (5) unpaid meal period wages (§§ 226.7, 512); (6) waiting time penalties (§§ 201, 202, 203); (7) itemized wage statement violations (§ 226); and (8) unfair competition (Bus. & Prof.Code, § 17200 et seq.). Lane also alleged that he is a resident of Los Angeles County, California; that FCM is a corporate entity organized and existing under the laws of the State of California, with its principal place of business in Los Angeles, California; and that the acts and omissions that are the subject of the complaint occurred in the County of Los Angeles, California. Lane further alleged that he was hired as an analyst in FCM's Los Angeles office, and was verbally promised a base annual salary of $150,000, participation in an

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annual bonus program (with a minimum annual bonus of $100,000), and additional benefits, including medical insurance, paid holidays, and vacation. After he was not paid his bonus for a prior year's work, Lane complained, and was subsequently terminated.

On May 21, 2012, FCM moved, pursuant to Code of Civil Procedure sections 1281.1 et seq., for an order compelling arbitration of each of the causes of action asserted in the complaint. In the motion, FCM alleged that the parties were signatories to a valid, binding arbitration agreement that encompassed all of the causes of action. FCM also sought a stay of the proceedings pending the arbitration.

FCM submitted a copy of the written arbitration agreement executed by the parties in January 2008. In the two-page agreement, the parties agreed that " all claims, disputes and controversies arising out of, relating to or in any way associated with [Lane's] employment by [FCM] or the termination of that employment shall be submitted to final and binding arbitration," except for worker's compensation claims and certain administrative claims before federal or state administrative agencies. The parties further agreed to waive their rights to trial on " any such arbitrable claims or disputes." " Examples of such disputes or claims which must be resolved through arbitration, rather than a court proceeding, include, but are not limited to, wage, hour and benefit claims; contract claims; personal injury claims; tort claims; claims for wrongful termination; defamation; discrimination and harassment, including, without limitation, those claims brought under Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the American with Disabilities Act, the California Family Rights Act, the California Fair Employment and Housing Act, the Family and Medical Leave Act, the Employment Retirement Income Securities Act of 1974 and any other analogous state or federal statute or any other employment-related claim of any kind."

The parties further agreed to " arbitrate all such disputes and controversies according to the applicable employment dispute resolution rules of the American Arbitration Association then current Employment Arbitration Rules and Mediation Procedures. The arbitration proceedings will be held in Los Angeles, California or such other mutually agreeable place as determined by Employee and Company." In addition, the parties agreed that " [t]he arbitrator shall have the authority to award any damages or remedies authorized by law, including, without limitation, costs and attorneys' fees." Finally, the parties agreed that the arbitration agreement " shall be governed by the laws of the State of California."

Lane opposed the motion. Citing Hoover v. American Income Life Insurance Company (2012) 206 Cal.App.4th 1193, 142 Cal.Rptr.3d 312 ( Hoover ), he contended

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that his statutory Labor Code claims were not subject to arbitration. Lane also argued that the arbitration agreement was procedurally unconscionable, as (1) it was a contract of adhesion, and (2) he was not provided a copy of the AAA rules. Lane further alleged that the agreement was substantively unconscionable, as (1) the agreement contained no express right to discovery, and (2) the AAA rules were incorporated by reference, requiring him to go to another source to access them.

In its reply, FCM contended that Hoover was distinguishable, as there, the arbitration agreement did not expressly encompass " wage, hour and benefit claims." In a footnote, FCM noted that Hoover was inapplicable where " federal preemption applies and the [Federal Arbitration Act (FAA) ] is triggered." FCM suggested that the FAA was triggered in the instant case, as, " Mr. Lane was a security analyst at a firm which manages capital investments."

FCM also argued that the arbitration agreement was not unconscionable, as (1) the provisions in the agreement did not fall outside the reasonable expectations of the weaker party, and (2) the provisions were not unduly oppressive or unconscionable. FCM contended that the failure to attach the American Arbitration Association (AAA) rules to the arbitration agreement did not render the agreement procedurally unconscionable, as the AAA rules were expressly referenced and incorporated without any changes adverse to the weaker party. FCM further contended that the agreement was not " silent" as to discovery, as discovery was provided for in the AAA rules.

On August 6, 2012, the trial court denied FCM's motion for an order compelling arbitration. Citing section 229, the court found that absent FAA preemption, an action for unpaid wages may be maintained without regard to the existence of any private agreement to arbitrate. Relying on Hoover, the court found that absent FAA preemption, statutory wage-and-hour claims were not subject to arbitration. As to the existence of FAA preemption, the court noted that " [r]eviewing courts have declined to consider the issue of FAA preemption where the issue was not addressed or fully developed in the trial court." ...


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