Montano v. Wet Seal Retail, Inc.

         Reposted Upon Lifting of Bankruptcy Stay; Modified on 1/13/15 (see end of opn.)

         APPEAL from an order of the Superior Court of Los Angeles County No. BC472230, Deirdre Hill, Judge. Affirmed in part, dismissed in part.

          Sheppard, Mullin, Richter & Hampton, Ryan D. McCortney and Jason M. Guyser for Defendant and Appellant.

          Scott Cole & Associates, Matthew R. Bainer and Molly A. DeSario for Plaintiff and Respondent.

          EPSTEIN, P. J.

         The Wet Seal Retail, Inc. (Wet Seal) appeals from the denial of its motion to compel arbitration of this wage and hour action brought by employee Elizabeth Montano. Wet Seal also challenges the grant of Montano's motion to compel discovery responses. We affirm the order denying the motion to compel arbitration and dismiss the challenge to the discovery order as nonappealable.

         FACTUAL AND PROCEDURAL SUMMARY

         In October 2011, Montano filed this putative class action against Wet Seal, alleging that it failed to offer all required meal and rest periods to its California non-exempt retail employees; failed to provide all regular and overtime pay when due or when employment terminated; and failed to provide accurate semi-monthly itemized wage statements, in violation of the Labor and Business and Professions Codes, Industrial Welfare Commission Wage Order No. 7, and Title 8 of the California Code of Regulations. She brought this action on behalf of herself and, as a class action, on behalf of all persons similarly situated and damaged by the alleged conduct during the specified time period. Her complaint included a representative claim under the Private Attorneys General Act (PAGA) (Lab. Code, § 2699).^[1]

         Montano propounded various discovery requests to Wet Seal, which responded with objections but no substantive information. After an unsuccessful effort to meet and confer, Montano filed a motion to compel discovery responses. Before the hearing date for that motion, Wet Seal moved to compel arbitration of Montano's individual claims and to stay the action pending completion of arbitration.

         Wet Seal's motion to compel arbitration was based on a “Mutual Agreement to Arbitrate Claims” (arbitration agreement) signed by Montano, which provided: “You and the Company hereby agree that any and all disputes, claims or controversies arising out of or relating to this Agreement, the employment relationship between the parties, the termination of this Agreement or the termination of the employment relationship, that are not resolved by their mutual agreement shall be resolved by final and binding arbitration by a neutral arbitrator.”^[2]

         Montano opposed the motion to compel arbitration on several grounds, including that the arbitration agreement was procedurally and substantively unconscionable. The unconscionability argument was based in part on the arbitration agreement's waiver of the right to bring class actions and representative PAGA actions: “The parties also waive their right to join or consolidate claims with others or to make claims with others as a representative or a member of a class or as a private attorney general. The waiver in the preceding sentence is a material or important term of this arbitration agreement. If either party initiates or joins in a lawsuit or arbitration against the other party in violation of this waiver and the waiver is found to be unenforceable for any reason by a court or arbitrator, then this entire arbitration agreement is void and unenforceable by the parties.”

         On March 28, 2012, the trial court heard Montano's motion to compel discovery and Wet Seal's motion to compel arbitration. The transcript reflects the parties' awareness of the trial court's tentative ruling to invalidate the arbitration agreement's PAGA waiver and sever that invalid waiver from the remainder of the arbitration agreement, which was otherwise enforceable, compel arbitration of Montano's individual claims, stay the action pending completion of arbitration, and defer Montano's motion to compel further discovery responses as moot.^[3] At the conclusion of the hearing, the court took the matter under submission and indicated the final order would be sent to the parties.

         Later that day, the court issued its final order, but apparently did not send it to the parties. In that order, the court declined to sever the invalid waiver provision, stating in relevant part: “In terms of severing the PAGA waiver provision, the paragraph in which it is contained states that if the waiver is found to be unenforceable for any reason by a court, then the entire arbitration agreement is void and unenforceable by the parties. Thus, the PAGA waiver is not severable.” Having determined that the entire arbitration agreement was unenforceable, the court denied Wet Seal's motion to compel arbitration. As to Montano's motion to compel discovery, the final order stated in relevant part: “The Court does not find that any of the objections have merit, and in light of its ruling on the motion to compel arbitration, the motion to compel further discovery responses is granted.”

         Based on the court's Civil Case Summary-which indicated that the court had adopted its tentative ruling as its final ruling-the parties mistakenly assumed that the court had adhered to its tentative decision to sever the invalid PAGA waiver, enforce the class action waiver, grant arbitration of the individual claims, stay the action, and defer the motion to compel discovery as moot. Based on this mistaken belief, the parties stipulated to the filing of a first amended complaint in which Montano would dismiss all arbitrable claims, leaving only the representative claim for civil penalties under the PAGA. The trial court approved the parties' stipulation, which erroneously stated that the court had severed the invalid PAGA waiver, enforced the class action waiver, granted the motion to compel arbitration of the individual claims, stayed the action, and deferred the motion to compel discovery as moot. With court approval, Montano filed a first amended complaint that alleged only a representative PAGA claim.

         Subsequently, the parties discovered the court actually had denied the motion to compel arbitration and had granted the motion to compel discovery. Wet Seal timely appealed from the order denying the motion to compel arbitration. (Code Civ. Proc., § 1294, subd. (a).) We deferred oral argument in this case pending decisions by the California Supreme Court in Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109 and Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian).^[4]

         DISCUSSION

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