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Pinela v. Neiman Marcus Group, Inc.

California Court of Appeals, First District, Fourth Division

June 29, 2015

JUAN CARLOS PINELA, Plaintiff and Respondent,
NEIMAN MARCUS GROUP, INC., Defendant and Appellant.

San Francisco City & County No. CGC-07-466079, Hon. Richard Kramer Trial judge.

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Jackson Lewis, David S. Bradshaw, Jeanette R. Youngblood and Nathan W. Austin for Defendant and Appellant.

Cornerstone Law Group Gordon W. Renneisen, Kenneth A. Frost III Harry G. Lewis, Law Offices of Douglas A. Kahn and Douglas A. Kahn for Plaintiff and Respondent.




Plaintiffs Bernadette Tanguilig and Juan Carlos Pinela brought this putative class action against their former employer, Neiman Marcus Group, Inc. (NMG), alleging violations of the Labor Code, and NMG moved to compel arbitration. The trial court initially ordered arbitration of all of Pinela’s claims except his claim under the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.), but later reconsidered its order and denied the motion, concluding the arbitration agreement at issue is illusory. On appeal, NMG argues (1) the court lacked jurisdiction to reconsider its initial order, (2) an arbitrator, rather than a court, must determine any challenges to the enforceability of the arbitration agreement, and (3) the arbitration agreement is enforceable and encompasses all of Pinela’s claims, including his PAGA claim. Finding no merit to these arguments, we affirm.


NMG is a luxury-brand fashion retailer headquartered in Texas with stores across the United States. Tanguilig originally sued NMG in August 2007. The

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case was designated complex, and after a series of pretrial motions not relevant here, she filed the operative third amended complaint (TAC) in March 2011, among other things adding Pinela as a second proposed class representative. Tanguilig and Pinela worked for NMG in California and sought to represent a class of NMG’s current and former California employees. The TAC alleges various wage-and-hour claims under the Labor Code and includes a cause of action under PAGA.[1]

In August 2011, after plaintiffs moved for class certification, NMG-prompted, it says, by the United States Supreme Court’s then recent decision in AT & T Mobility LLC v. Conception (2011) 563 U.S. ___ [179 L.Ed.2d 742, 131 S.Ct. 1740, 1748] (Conception)—moved to compel arbitration of Pinela’s claims under NMG’s mandatory arbitration program for employment-related disputes. In support of its motion, NMG submitted evidence that, at the time of Pinela’s employment (November 2007 through November 2009), it distributed to each new employee a copy of its “Mandatory Arbitration Agreement, ” brochures explaining the arbitration program, and an employee handbook that included a brief description of the program (collectively, the NMG Arbitration Agreement or the Agreement). Under the NMG Arbitration Agreement, any employee working for NMG after July 15, 2007 is deemed to have consented to the terms of the Agreement.

Included within the scope of the Agreement are “any and all complaints, disputes, or legal claims that [Pinela or NMG] may have against the other, arising out of or connected in any way” with Pinela’s employment, including claims for “[v]iolations of any... state... statute, ordinance, regulation, or public policy relating to... meal or rest breaks, ... minimum wage and overtime pay, ... or payment at termination.” The Agreement prohibits the arbitrator from “consolidat[ing] claims of different employees into one (1) proceeding” or from “consider[ing], certify[ing], or hear[ing] an arbitration as a class action.” During the orientation process for all new employees, NMG

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provided each new employee with two acknowledgment forms that refer to the arbitration program. The forms stated that the employee had received the Agreement and understood that it required the employee and NMG to arbitrate any disputes. Pinela signed the two acknowledgment forms in November 2007.[2]

On November 22, 2011, the trial court issued an order granting NMG’s motion in part. The court found that the NMG Arbitration Agreement did “not clearly and unmistakably designate the question of arbitrability to an arbitrator, ” but ruled that the Agreement is enforceable and that “[t]he scope of the... Agreement is broad enough to cover all of... Pinela’s claims in this case with the exception of [his] claim under [PAGA], which is not subject to arbitration....” “All other questions on arbitration, ” the court ruled, “including the impact, if any, of the California Supreme Court’s decisions in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 [99 Cal.Rptr.2d 745, 6 P.3d 669] and Gentry v. Superior Court (2007) 42 Cal.4th [443] [64 Cal.Rptr.3d 773, 165 P.3d 556] [abrogated as stated in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360, 366] [173 Cal.Rptr.3d 289, 327 P.3d 129], are for the arbitrator to decide.” Pinela sought writ relief (Tanguilig v. Superior Court (Jan. 19, 2012, A134027), which this court denied in January 2012 on the ground he has “an adequate remedy at law by appeal after a judgment confirming any arbitration award.”

In a joint case management conference statement filed with the trial court following our order denying the writ petition, plaintiffs’ counsel reported that Pinela had submitted a formal demand for arbitration before the American Arbitration Association (AAA), but that, as of February 2012, the parties had “not yet selected an arbitrator... and arbitration proceedings [had] not yet begun.” Given the nascent state of the arbitration proceedings, plaintiffs’ counsel suggested the court might wish to reconsider its arbitration order in light of the February 16, 2012 decision in Ajamian v. CantorCO2e L.P. (2012) 203 Cal.App.4th 771 [137 Cal.Rptr.3d 773] (Ajamian). In a March 2012 order, the court, “on its own motion and exercising its inherent authority, ”

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decided to reconsider its arbitration order. The parties stipulated to a stay of all arbitration proceedings.[3]

Initially, no one questioned whether the trial court had jurisdiction to reconsider or modify its order granting NMG’s motion to compel arbitration. All parties were in favor of it, for different reasons. Pinela and Tanguilig wanted another shot at convincing the court to deny the motion outright. And NMG, facing an effort by Pinela to convince the AAA to permit him to proceed on a class basis under Gentry, an issue that the trial court’s ruling compelling arbitration left open for consideration by the arbitrator, wanted a definitive order that foreclosed any possibility of class arbitration in light of Conception. In fact, NMG affirmatively took the position that the trial court had jurisdiction to reconsider. After the briefing relating to reconsideration was underway, however, NMG took a different tack and argued the trial court lacked jurisdiction to reconsider its order.

Reconsideration proceedings eventually expanded to cover a number of issues, including the effect of the April 17, 2012 decision in Peleg v. Neiman Marcus Group, Inc. (2012) 204 Cal.App.4th 1425 [140 Cal.Rptr.3d 38] (Peleg). In Peleg, Division One of the Second District Court of Appeal held an arbitration agreement identical in form to the agreement at issue in this case was illusory under Texas law (which the appellate court applied pursuant to a choice of law provision) and therefore unenforceable. (Peleg, supra, at pp. 1445, 1448, 1467.) In an order dated November 8, 2012, the trial court

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(1) vacated its November 22, 2011 order compelling arbitration, and (2) denied NMG’s motion to compel arbitration. The court stated that, under Peleg, the NMG Arbitration Agreement was illusory and therefore unenforceable.[4]

NMG timely appealed.


A. The Trial Court Had Jurisdiction to Reconsider Its Order Compelling Arbitration

NMG contends that, once the trial court entered an order compelling arbitration, the court lost jurisdiction to reconsider whether the case belongs in arbitration. We disagree.

“If a court at any time determines that there has been a change of law that warrants it to reconsider a prior order it entered, it may do so on its own motion and enter a different order.” (Code Civ. Proc., § 1008, subd. (c).) Even without a change of law, a trial court may exercise its inherent jurisdiction to reconsider an interim ruling. (Le Francois v. Goel (2005) 35 Cal.4th 1094, 1096–1097, 1107 [29 Cal.Rptr.3d 249, 112 P.3d 636] (Le Francois).)[5] Specifically, the trial court has authority to reconsider orders compelling or denying arbitration. (Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 59–60 [16 Cal.Rptr.3d 687] (Malek); Blake v. Ecker (2001) 93 Cal.App.4th 728, 739 [113 Cal.Rptr.2d 422] (Blake), ...

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