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Tiri v. Lucky Chances, Inc.

California Court of Appeals, First District, Fourth Division

May 15, 2014

LOURDES TIRI, Plaintiff and Respondent,
LUCKY CHANCES, INC., Defendant and Appellant.

San Mateo County Superior Court No. CIV514064, Honorable Joseph C. Scott, Trial Judge.

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Tyler M. Paetkau for Defendant and Appellant.

Allan A. Villanueva for Plaintiff and Respondent.


Humes, J.

Several years after she was hired, Lourdes Tiri signed an agreement with her employer, Lucky Chances, Inc., requiring disputes between them to be resolved by arbitration. In one of the provisions, the parties agreed to delegate questions about the enforceability of the agreement to the arbitrator, instead of a court. Tiri was subsequently fired, and she filed a complaint in superior court for wrongful discharge. Lucky Chances petitioned to compel arbitration, but the trial court denied the petition on the basis that the arbitration agreement was unconscionable and therefore unenforceable.

Lucky Chances appeals the court’s order denying arbitration. We hold that the trial court lacked the authority to rule on the enforceability of the agreement because the parties’ delegation of this authority to the arbitrator was clear and is not revocable under state law. Accordingly, we reverse.

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I. Factual and Procedural Background

More than three years after she was hired as a cook by Lucky Chances, a card-club casino and restaurant in Colma, Tiri was asked and agreed to sign a mutual agreement to arbitrate claims (the agreement). Five years later, Tiri was fired, allegedly while on medical leave after undergoing heart surgery. Tiri brought this action for wrongful discharge, and this appeal turns on whether the agreement precluded the trial court from considering the validity of both the agreement and her underlying legal claims.

The parties dispute the circumstances surrounding Tiri’s signing the agreement. According to Tiri, she was called to the human-resources department and given the agreement “right there and then... to sign immediately.” She contends that the terms of the agreement were not explained, and that she was not told that the terms were negotiable, that her signature was optional, or that she could take the agreement and review it before signing. She “felt [she] had to sign it as a condition of continued employment with Lucky Chances, ” and she believed that she would be fired if she did not sign it. According to Lucky Chances’s human-resources manager, Tiri was never told that the agreement was nonnegotiable, and Tiri never asked to change the agreement or to negotiate its terms. Still, Lucky Chances does not specifically deny that Tiri was told to sign the agreement immediately and was never informed that the terms could be negotiated.

The agreement is a five-page, stand-alone document that is entitled, in blocked, bold lettering, “MUTUAL AGREEMENT TO ARBITRATE CLAIMS.” It relates solely to resolving claims between Tiri and Lucky Chances and provides that “any and all differences and/or legal disputes” (except those related to workers’ compensation and unemployment-insurance benefits) will be resolved “through the process of final and binding arbitration.” The agreement further provides that any arbitration “shall be in accordance with the current AAA [American Arbitration Association] Employment Rules.” A copy of those rules was not attached to the agreement, although the agreement identified a website where the rules could be found.

The agreement also includes an explicit provision that delegates to the arbitrator issues regarding the agreement’s enforceability: “The Arbitrator, and not any federal, state, or local court or agency, shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this Agreement, including, but not limited to, any claim that all or any part of this Agreement is void or voidable.” This provision is central to the issues in this appeal, and we will refer to it as the delegation clause.

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After Tiri filed her complaint, Lucky Chances filed a petition to compel arbitration arguing that the enforceability of the arbitration agreement is a question for the arbitrator, not a court, under the express terms of the delegation clause. Tiri opposed the petition. She argued that the arbitration agreement was unconscionable and that its unconscionability was an issue properly resolved by the trial court.

The trial court issued a tentative ruling denying Lucky Chances’s petition, but the ruling did not address the delegation clause. At the hearing on the petition, Lucky Chances’s attorney argued that it was important for the court to rule on the threshold issue of the delegation clause and that recent case law required the trial court to delegate to the arbitrator the question whether the arbitration agreement was unconscionable. The court asked about the presence of contractual consideration when an employer asks a current employee to sign an arbitration agreement, and Lucky Chances’s attorney insisted that the adequacy of consideration in this case was an issue for the arbitrator to decide, an argument the court considered “rather circular.”

At the close of the hearing, the trial court adopted its tentative ruling and denied the petition to compel arbitration. In doing so, it focused on the fact that the arbitration agreement stated it would be governed by AAA (American Arbitration Association) rules but failed to attach those rules, citing two cases that declined to enforce arbitration agreements under similar circumstances: Zullo v. Superior Court (2011) 197 Cal.App.4th 477 [127 Cal.Rptr.3d 461] and Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702 [13 Cal.Rptr.3d 88]. The court found that “the arbitration agreement is both substantively and procedurally unconscionable and therefore unenforceable because [Lucky Chances] presented the agreement to plaintiff on a ...

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