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Marenco v. DirecTV LLC.

California Court of Appeals, Second District, Fourth Division

February 5, 2015

FRANCISCO MARENCO, Plaintiff and Appellant,
v.
DIRECTV LLC., Defendant and Respondent.

APPEAL from a judgment (order) of the Superior Court of Los Angeles County, No. BC434357, Alan S. Rosenfield, Judge.

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COUNSEL

Karasik Law Firm and Gregory N. Karasik for Plaintiff and Appellant.

O’Melveny & Myers, Apalla U. Chopra, Beata L. Ng, and Adam Karr for Defendant and Respondent.

OPINION

EPSTEIN, P. J.

In this putative class action, plaintiff Francisco Marenco contends that defendant DirecTV LLC violated state wage and unfair competition laws. (Lab. Code, § 212; Bus. & Prof. Code, § 17200 (UCL).) DirecTV moved to compel arbitration as the successor to an arbitration agreement between Marenco and his previous employer, 180 Connect, Inc., which was acquired by DirecTV. The trial court granted the motion over Marenco’s objections that DirecTV is not a signatory to the agreement, and that the agreement’s class action waiver is unconscionable under state law.

In this appeal from the judgment (order) staying the class claims and compelling arbitration of the individual claims, we conclude that DirecTV has standing to enforce the agreement, that the agreement’s class action waiver is enforceable under AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ [179 L.Ed.2d 742, 131 S.Ct. 1740] (Concepcion), and that the California Supreme Court’s recent decision in Iskanian v. CLS Transportation Los Angeles LLC (2014) 59 Cal.4th 348 [173 Cal.Rptr.3d 289, 327 P.3d 129] (Iskanian), which was issued while this appeal was pending, is controlling.

FACTUAL AND PROCEDURAL BACKGROUND

Before it was acquired by DirecTV, 180 Connect entered into an employment arbitration agreement with Marenco. The agreement required both

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parties to submit all claims arising from and related to the employment relationship to binding arbitration.[1] The agreement prohibited filing a class or collective action, or a representative or private attorney general action[2] on behalf of a class of persons or the general public.

After acquiring 180 Connect, DirecTV retained 180 Connect’s employees, including Marenco. Marenco continued working for DirecTV until February 2010.

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In 2012, Marenco filed the present action against DirecTV. In the operative pleading, the first amended complaint, he alleged that DirecTV had issued “ADP TotalPay debit cards” (debit cards) in payment of wages to the putative class of employee plaintiffs. Plaintiffs who used their debit cards to withdraw cash at ATM machines were required to pay an activation fee of either $.50 or $3.50, and a cash withdrawal fee. These fees resulted in DirecTV’s failure to pay plaintiffs’ full wages in violation of the UCL and Labor Code section 212-which requires that instruments issued for payment of wages must be negotiable and payable in cash, on demand, and without discount. The complaint, which did not include a representative PAGA claim for civil penalties, requested statutory damages, penalty wages, restitution, prejudgment interest, costs, and attorney fees on behalf of the putative class.

As successor to 180 Connect’s rights and obligations under the arbitration agreement, DirecTV moved to compel arbitration of Marenco’s individual claims, and stay the class claims. In support of this motion, DirecTV submitted the declaration of its assistant secretary Janet Williamson. She attested that during the acquisition of 180 Connect, DirecTV had assumed all of 180 Connect’s assets, debts, rights, responsibilities, liabilities and obligations, including “all the rights and obligations arising from 180 Connect, Inc.’s employee relationships.”

In opposition to the motion to compel, Marenco argued that as a nonsignatory, DirecTV lacked standing to enforce the arbitration agreement. He also argued that the agreement’s waiver of the employee’s right to bring class claims and representative PAGA claims was unconscionable and unenforceable under California law.

After initially granting DirecTV’s motion to compel, the trial court granted Marenco’s request for a rehearing. Before the rehearing date, the United States Supreme Court issued its decision in Concepcion, supra, 563 U.S.___ [131 S.Ct. 1740], which held that the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) preempts the California rule of unconscionability set forth in Discover Bank v. Superior Court (2005) 36 Cal.4th 148 [30 Cal.Rptr.3d 76, 113 P.3d 1100] (Discover Bank). (Conception, supra, 563 U.S. at p. ___ [131 S.Ct. at p. 1748].)

On rehearing the motion to compel, the trial court ordered arbitration of Marenco’s individual claims. The court found that: (1) as successor to 180 Connect’s rights and obligations, DirecTV had standing to enforce the arbitration agreement; (2) the agreement’s class action waiver is not unconscionable under state law because, according to Concepcion, the FAA preempts the Discover Bank rule of unconscionability; and (3) the agreement’s prohibition of PAGA representative actions does not violate the National Labor Relations Act (NLRA) (29 U.S.C. § 157). This appeal followed.

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DISCUSSION

I

As a preliminary matter, we must decide whether the trial court’s order granting DirecTV’s motion to stay the class claims and compel arbitration of Marenco’s individual claims is appealable. Because the issue is jurisdictional (Koshak v. Malek (2011) 200 Cal.App.4th 1540, 1544 [136 Cal.Rptr.3d 1]), we raised it on our own motion and invited the parties to present further briefing and be prepared to argue the point at oral argument.

Although an order denying a motion to compel arbitration is appealable, an order granting a motion to compel arbitration generally is not. (Code Civ. Proc., § 1294, subd. (a); Nelsen v. Legacy Partners Residential, Inc. (2012) 207 Cal.App.4th 1115, 1122-1123 [144 Cal.Rptr.3d 198].) Recognizing this, Marenco invoked the so-called “death knell” doctrine in his notice of appeal, citing In re Baycol Cases I and II (2011) 51 Cal.4th 751, 757 [122 Cal.Rptr.3d 153, 248 P.3d 681] (Baycol). Marenco also cited the death knell doctrine in his opening brief, and no challenge to the doctrine’s application was raised by DirecTV in its respondent’s brief.

The death knell doctrine applies where an order effectively terminates class claims and preserves only the plaintiff’s individual claims. As the Supreme Court explained in Baycol, the doctrine applies where the order “amounts to a de facto final judgment for absent plaintiffs, under circumstances where... the persistence of viable but perhaps de minimis individual plaintiff claims creates a risk no formal final judgment will ever be entered....” (Baycol, supra, 51 Cal.4th at p. 759.) The doctrine addresses the concern that a single plaintiff may lack incentive to pursue his or her individual claims to judgment, thereby foreclosing review of class issues. (Id. at p. 758.) This case fits within that description because there is little incentive for a single plaintiff, such as Marenco, to pursue de minimis individual claims for reimbursement of ATM cash withdrawal fees and debit card activation fees ranging from $.50 to $3.50. Marenco states that his potential recovery-a $3.00 debit card activation fee and $5, 510 in penalty wages-is too small to pursue on an individual basis.

However, this case does not fall within the death knell doctrine’s procedural requirements as discussed in Sandquist v. Lebo Automotive, Inc. (2014) 228 Cal.App.4th 65, 72-75 [174 Cal.Rptr.3d 672], review granted November 12, 2014, S220812. The doctrine applies only if there is a final order dismissing the class claims with prejudice. In this case, our record does not indicate the status of the class claims, which were not mentioned in the order granting the motion to compel arbitration; presumably, they were stayed. (See

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Code Civ. Proc., § 1281.4 [action must be stayed pending completion of court-ordered arbitration].) At oral argument, we were informed that the class claims have not been dismissed. In contrast with its respondent’s brief, DirecTV argued at the hearing that the death knell doctrine does not apply, and the order compelling arbitration is not appealable.

Assuming the order is not appealable, we exercise our discretion to treat the appeal as a petition for a writ of mandate. (See Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1098 [118 Cal.Rptr.2d 862].) This is appropriate because the question of DirecTV’s standing as a successor in interest, which both parties have extensively briefed, is an issue of first impression that will otherwise evade appellate review. (See Olson v. Cory (1983) 35 Cal.3d 390, 401 [197 Cal.Rptr. 843, 673 P.2d 720].)

II

Code of Civil Procedure section 1281.2 allows a party to an arbitration agreement to petition to compel arbitration. By stating that a party to an arbitration agreement may petition to compel arbitration, the statute assumes that a proceeding to compel arbitration will be between the signatories to the agreement. (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 613, fn. 6 [139 Cal.Rptr.3d 114].)

Marenco argues that as a nonsignatory, DirecTV lacks standing to enforce the arbitration agreement. He relies on the rule that “[b]ecause arbitration is a matter of contract, generally “‘one must be a party to an arbitration agreement to be bound by it or invoke it.”’ (Molecular Analytical [Systems v. Ciphergen Biosystems, Inc. (2010)]186 Cal.App.4th [696], 706 [111 Cal.Rptr.3d 876] . . . .)" (DMS Services, LLC v. Superior Court (2012) 205 Cal.App.4th 1346, 1352 [140 Cal.Rptr.3d 896].) Marenco contends that he never agreed to arbitrate any disputes with DirecTV. (See Rodriguez v. Superior Court (2009) 176 Cal.App.4th 1461, 1468 [98 Cal.Rptr.3d 728] [in order for an arbitration agreement to be valid, there must be mutual consent of the parties].)

“The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability. [Citation.]” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (U.S.), LLC (2012) 55 Cal.4th 223, 236 [145 Cal.Rptr.3d 514, 282 P.3d 1217] (Pinnacle).) Where, as here, there are no disputed issues of fact, we determine whether a nonsignatory may enforce an arbitration agreement under the de novo standard of review. (See Daniels v. Sunrise Senior Living, Inc.

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(2013) 212 Cal.App.4th 674, 680 [151 Cal.Rptr.3d 273] [whether an arbitration agreement is binding on a nonsignatory is a question of law subject to de novo review].)

Nonsignatory defendants may enforce arbitration agreements “where there is sufficient identity of parties.” (Valley Casework, Inc. v. Comfort Construction, Inc. (1999) 76 Cal.App.4th 1013, 1021 [90 Cal.Rptr.2d 779].) Enforcement is permitted where the nonsignatory is the agent for a party to the arbitration agreement (id. at p. 1021, citing Dryer v. Los Angeles Rams (1985) 40 Cal.3d 406, 418 [220 Cal.Rptr. 807, 709 P.2d 826]), or the nonsignatory is a third party beneficiary of the agreement (Valley Casework, supra, 76 Cal.App.4th at pp. 1021–1022). In addition, a nonsignatory may enforce an arbitration agreement under the doctrine of equitable estoppel. The doctrine applies where, for example, a signatory plaintiff sues a nonsignatory defendant for claims that are based on an underlying contract. In such instance, the plaintiff may be equitably estopped to deny the nonsignatory defendant’s right to enforce an arbitration clause that is contained within the contract that the plaintiff has placed at issue. (See Molecular Analytical Systems v. Ciphergen Biosystems, Inc., supra, 186 Cal.App.4th at p. 706.)

In this case, we must decide whether a nonsignatory defendant may enforce an arbitration agreement between a signatory plaintiff and a corporation that was acquired by the nonsignatory defendant, which assumed all of the rights and obligations of the acquired corporation. We have found no California cases on this point.

The arbitration agreement stated that issues related to the enforceability or validity of the agreement would be governed by the FAA. One of the cardinal principles of arbitration, whether under the FAA or California law, is that “arbitration... ‘is a matter of consent, not coercion.’ [Citation.] Thus, ‘“a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.”‘ [Citations.]” (Pinnacle, supra, 55 Cal.4th at p. 236.)

Under the FAA, state contract law applies in order to “‘determine whether the parties have entered a binding agreement to arbitrate.’ [Citations.] Generally, an arbitration agreement must be memorialized in writing. [Citation.] A party’s acceptance of an agreement to arbitrate may be express, as where a party signs the agreement. A signed agreement is not necessary, however, and a party’s acceptance may be implied in fact (e.g., Craig [v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, ] 420 [100 Cal.Rptr.2d 818] [employee’s continued employment constitutes acceptance of an arbitration

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agreement proposed by the employer]) or be effectuated by delegated consent [citation]. An arbitration clause within a contract may be binding on a party even if the party never actually read the clause. (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1215 178 Cal.Rptr.2d 533].)" (Pinnacle, supra, 55 Cal.4th at p. 236.)

In Craig v. Brown & Root, Inc., supra, 84 Cal.App.4th 416, an employee (Craig) sued her employer for wrongful termination; the employer petitioned to compel arbitration; and the petition was granted. In her appeal from the order confirming the arbitration award, Craig challenged the sufficiency of the evidence to prove the existence of an arbitration agreement. The evidence showed that on the one hand, the employer’s documents setting forth its dispute resolution procedure and binding arbitration requirement had been mailed to Craig’s home address and had not been returned. On the other hand, Craig provided an “equivocal denial of receipt.” (84 Cal.App.4th at p. 421.) The trial court’s finding that Craig had received the documents was deemed binding on appeal. (Ibid.) Based on Craig’s continued employment after receiving those documents, the appellate court found there was a binding agreement to arbitrate: “General principles of contract law determine whether the parties have entered a binding agreement to arbitrate. (Chan v. Drexel Burnham Lambert, Inc. (1986) 178 Cal.App.3d 632, 640-641 [223 Cal.Rptr. 838].) This means that a party’s acceptance of an agreement to arbitrate may be express (e.g., Mago v. Shearson Lehman Hutton Inc. (9th Cir. 1992) 956 F.2d 932 [agreement to arbitrate included in job application]; Nghiem v. NEC Electronic, Inc. (9th Cir. 1994) 25 F.3d 1437 [agreement to arbitrate included in handbook executed by employee]; Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105 [88 Cal.Rptr.2d 664] [employer may terminate employee who refuses to sign agreement to arbitrate]) or implied-in-fact where, as here, the employee’s continued employment constitutes her acceptance of an agreement proposed by her employer (Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 11 [96 Cal.Rptr.2d 179, 999 P.2d 71 ] [implied acceptance of changed rules regarding job security]; DiGiacinto v. Ameriko-Omserv Corp. (1997) 59 Cal.App.4th 629, 635 [69 Cal.Rptr.2d 300] [implied acceptance of changed compensation rules]).” (Craig v. Brown & Root, Inc., supra, 84 Cal.App.4th at p. 420.)

DirecTV relied on the Williamson declaration to establish that as a result of its acquisition of 180 Connect, it retained 180 Connect’s employees and assumed all of the rights and obligations arising from its employment relationships, including the arbitration agreement between 180 Connect and Marenco. In response to our inquiry whether that declaration was sufficient to establish the existence of a merger under Corporations Code section 1107,

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subdivision (a), [3] Marenco argued the declaration was not sufficient. He stated that “[a]t most, the Williamson declaration asserts only that DIRECTV ‘purchased’ 180 Connect and ‘assumed’ its rights and liabilities. The Williamson declaration does not remotely establish that 180 Connect ceased to exist or was ‘dead.’”[4]

In response, DirecTV argued that the requirements of a Corporations Code section 1107 merger were met in this case: 180 Connect-the disappearing corporation-no longer exists; and DirecTV-the surviving corporation-succeeded to all rights and liabilities of the disappearing corporation. (See Maudlin v. Pacific Decision Sciences Corp. (2006) 137 Cal.App.4th 1001, 1016 [40 Cal.Rptr.3d 724]; McClellan v. Northridge Park Townhome Owners Assn. (2001) 89 Cal.App.4th 746, 753–754 [107 Cal.Rptr.2d 702] [when one corporation is acquired by another, the purchasing corporation will become liable for the debts and liabilities of the acquired corporation if it expressly or impliedly agrees to such assumption]; Friedman et al., Cal. Practice Guide: Corporations (The Rutter Group 2014) ¶ 8:191, p. 8-59 (rev. #1 2014)) [on effective date of merger, disappearing corporation ceases to exist and is absorbed by surviving corporation, which inherits by operation of law all of its business, assets, rights and liabilities].)

By suing DirecTV for unpaid wages, Marenco acknowledged the existence of an employment relationship with the entity that survived the merger. DirecTV, the surviving corporation, assumed all of the disappearing corporation’s rights and liabilities, including the obligations owed to the disappearing corporation’s employees. Although DirecTV was not a signatory to the employment arbitration agreement between Marenco and 180 Connect, there is no doubt that the agreement formed one of the terms of Marenco’s employment. When Marenco sued DirecTV for violating the terms of his employment, DirecTV was entitled to invoke the arbitration clause to compel Marenco, as a signatory plaintiff, to arbitrate his claims pursuant to the employment agreement. As the court stated in Boucher v. Alliance Title Company, Inc. (2005) 127 Cal.App.4th 262, 271–272 [25 Cal.Rptr.3d 440]: "[U]nder both federal and California decisional authority, a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are ‘intimately

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founded in and intertwined’ with the underlying contract obligations. [Citations.] By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement. [Citations.]”

We would reach the same conclusion regardless of whether 180 Connect disappeared on the date of the merger. The evidence is undisputed that DirecTV acquired all of 180 Connect’s assets, employees, rights, and liabilities. There is no indication that the original terms of Marenco’s employment were modified, superseded, revoked, canceled, or nullified in any manner. The record thus supports a reasonable inference that the 180 Connect employees who continued working after the merger implicitly accepted DirecTV’s decision to maintain their existing terms of employment, including the arbitration agreement. (See Pinnacle, supra, 55 Cal.4th at pp. 236–246 [continued employment constitutes acceptance of arbitration agreement proposed by successor employer].) Marenco offers no persuasive authority to refute the general contract law principle that his continued employment provided implied consent to maintaining the existing terms of employment, including the arbitration agreement. (See Boucher v. Alliance Title Co.. Inc., supra, 127 Cal.App.4th at pp. 271–272.)

Marenco does not argue that the arbitration agreement was modified or rescinded, but simply argues that because DirecTV did not sign the agreement, it lacks standing to enforce it. Under these circumstances, the fact that Marenco did not sign a new arbitration agreement with DirecTV is not a sufficient basis to invalidate his original agreement that constituted one of the established terms of his employment and was never extinguished, rescinded, altered, or revised. Based on the record and arguments presented to us, Marenco’s continued employment with DirecTV served as his implied consent to preserving the original terms of employment, including the arbitration agreement. Our determination is consistent with the established principle that “[a] voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting.” (Civ. Code, § 1589; see El Escorial Owners’ Assn. v. DLC Plastering, Inc. (2007) 154 Cal.App.4th 1337, 1360 [65 Cal.Rptr.3d 524]; Prograph International, Inc. v. Barhydt (N.D.Cal. 1996) 928 F.Supp. 983, 991 [nonsignatory successors and alleged alter egos may enforce arbitration agreements signed by the corporations whose liabilities they have assumed].)

III

Shortly before DirecTV’s motion to compel arbitration was granted, the United States Supreme Court issued the Concepcion decision (563 U.S.___

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[131 S.Ct. 1740]), which overruled the Discover Bank rule of unconscionability regarding class arbitration waivers in consumer contracts. Because Concepcion did not address Gentry v. Superior Court (2007) 42 Cal.4th 443 [64 Cal.Rptr.3d 773, 165 P.3d 556] (Gentry), which found certain class action waivers in employment arbitration agreements to be unenforceable, Marenco urged the trial court to invalidate the agreement’s class action waiver under Gentry. The trial court, however, upheld the class action waiver and this appeal followed.

While this appeal was pending, the California Supreme Court issued the Iskanian decision. Based on Concepcion, the court concluded that Gentry’s rule-that certain class action waivers in employment arbitration agreements are invalid under state law-is preempted by the FAA. (Iskanian, supra, 59 Cal.4th at p. 366.) Marenco’s argument on appeal-that the agreement’s class action waiver is unenforceable under Gentry-was rejected by Iskanian, which is binding on this court. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455 [20 Cal.Rptr. 321, 369 P.2d 937].)

IV

Marenco contends the trial court erred in finding the arbitration agreement’s PAGA waiver does not violate the NLRA. Since the complaint does not indicate that Marenco seeks to bring a representative PAGA claim, that issue is not before us for review. We note, however, that while the appeal was pending, the California Supreme Court held that PAGA waivers are contrary to public policy and unenforceable as a matter of state law. (Iskanian, supra, 59 Cal.4th at pp. 383–384.)[5] The Supreme Court also held that the NLRA does not prohibit class action waivers in employment arbitration agreements. (Iskanian, supra, 59 Cal.4th at p. 372, citing D.R. Horton, Inc. v. NLRB (5th Cir. 2013) 737 F.3d 344.)

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DISPOSITION

The judgment (order) staying the class claims and compelling arbitration of Marenco’s individual claims is affirmed. DirecTV is awarded its costs on appeal.

Willhite, J., and Manella, J., concurred.


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