California Court of Appeals, First District, Second Division
Contra
Costa County Superior Court, No. C-18 00228, Honorable Steven
Austin Judge.
Attorney for Plaintiffs and Respondents: Ferber Law, APC,
Jonathan R. Babione, Jennifer Lucas, Connor M. Day.
Attorney for Defendants and Appellants: Fine, Boggs &
Perkins, John Boggs, Roman Zhuk, David Reese.
RICHMAN, J.
This is
an appeal from an order denying a petition to compel
arbitration. We easily affirm the order. And we publish, to
also affirm-and remind the profession of-the importance of
candor toward the court.
BACKGROUND
The
Facts
Appellant
TWC Dealer Group, Inc. (TWC) operated a Toyota dealership in
Walnut Creek. In the spring of 2013, respondents Donald
Davis, Bonnie Davis, and Raymond Davis (when referred to
collectively, the Davises) sought employment at TWC, to run
its special finance department. The Davises are
African-American, and Donald Davis is over the age of 40. And
in connection with that employment, all of the Davises were
required to sign three separate agreements, each providing
that the Davises agreed to arbitration.
At no
place in its 72-pages of briefing here does TWC quote the
entirety of any, let alone all, of the agreements, which we
note are all different. Specifically:
The
first agreement, signed by the Davises on April 3, 2013, is
entitled “Applicant Statement and Agreement”
(hereafter, for consistency with the briefing, Agreement No.
1.) Agreement No. 1 is one page long, and consists of six
paragraphs, all in identical and small-and quite difficult to
read-font. None of the six paragraphs is labeled or titled,
in boldface or otherwise. The fourth of the six paragraphs is
the one that refers to arbitration, though hardly in language
that is easy to comprehend. The paragraph is 30 lines long,
and ends with these three sentences: “If CCP §
1284.2 conflicts with other substantive statutory provisions
or controlling case law, the allocation of costs and
arbitrator fees shall be governed by said statutory
provisions or controlling case law instead of CCP
§1284.2. Both the Company and I agree that any
arbitration proceeding must move forward under the Federal
Arbitration Act (9 U.S.C. §§ 3-4) even though the
claims may also involve or relate to parties who are not
parties in the arbitration agreement and/or claims that are
not subject to arbitration; thus, the court may not refuse to
enforce this arbitration agreement and may not stay the
arbitration proceeding despite the provisions of California
Code of Civil Procedure § 1281.2(c). I UNDERSTAND BY
AGREEING TO THIS BINDING ARBITRATION PROVISION, BOTH I AND
THE COMPANY GIVE UP OUR RIGHTS TO TRIAL BY
JURY.”[1]
The
second of the three agreements was signed by the Davises on
April 10. (Agreement No. 2). Agreement No. 2 is two pages,
the first of which says at the top “Agreements”
in capitalized boldface. The two pages contain two
paragraphs, the first of which is entitled “At Will
Employment Agreement.” The second paragraph runs from
page one over to page two and is entitled in boldface
“Binding Arbitration Agreement.” And what a
paragraph it is: 67 lines long, without any indentation,
included within which is a sentence that is 15 lines
long.[2]
The
third Agreement, also dated April 10, is entitled
“Employee Acknowledgement and Agreement”
(Agreement No. 3). Agreement No. 3 is two pages long, and
consists of six paragraphs, the first of which acknowledges
that the employee has “received a copy of the Employee
Handbook and... will familiarize myself with its
contents.” The arbitration provision is in the third of
the six paragraphs, which paragraph is 49 lines long and
includes the same 15-line sentence in Agreement No 2. And the
49-line paragraph ends with the penultimate-and
confusing-sentence in Agreement No. 1.
As
indicated, nowhere in its briefing does TWC quote the
entirety of any of the three agreements. What it does say,
citing to 19 pages in the Clerk's Transcript, is this:
“Each of these agreements signed by each respondent
expressly provides: I and the Company both agree that any
claim, dispute, and/or controversy that either party may have
against one another... which would otherwise require or allow
resort to any court or other governmental dispute resolution
forum between myself and the Company (or its owners,
directors, officers, managers, employees, agents, and parties
affiliated with its employee benefit and health plans)
arising from, related to, or having any relationship or
connection whatsoever with my seeking employment with,
employment by, or other association with the Company, whether
based on tort, contract, statutory, or equitable law, or
otherwise, ... shall be submitted to and determined
exclusively by binding arbitration.... I agree that the
arbitration and this Agreement shall be controlled by the
Federal Arbitration Act, in conformity with the procedures of
the California Arbitration Act....”
We
cannot help but observe the four ellipses in TWC's
quotation-and observe further TWC's lack of candor, given
how much the quotation misrepresents the Agreements here.
Using Agreement No. 3 for comparison, the first and second
ellipses each omit three lines, the third ellipsis seven
lines, and the last ellipsis 24 lines-38 lines. Thirty-eight
lines omitted from a 49-line paragraph, a paragraph that, as
will be discussed in detail below, our Supreme Court has
recently described as a “paragon of prolixity, ”
whose substance is “opaque, ” and which has
sentences that are “complex, filled with statutory
references, and legal jargon.” (OTO, L.L.C. v.
Kho (2019) 8 Cal.5th 111, 128) (Kho).) That is
what the ellipses leave out. TWC's conduct is not to be
condoned.
Sometime
after the Davises became employed, TWC hired a new General
Manager, Ralph Colon. As the Davises describe it, Colon
“began to systematically undermine [the Davises's]
programs, ” an effort “punctuated by shockingly
inappropriate ageist and racist comments to and about
them.” The Davises attempted to address the issue with
TWC, to no avail. They resigned, filed complaints with the
Department of Fair Employment and Housing, and obtained right
to sue letters. And sued.
The
Proceedings Below
On
February 1, 2018, the Davises filed a complaint naming three
defendants: TWC, John Schafer, alleged to be its owner, and
Colon. The complaint alleged sixteen causes of action related
to their employment at TWC.[3]
On
March 26, TWC, Schafer, and Colon (for convenience, TWC)
filed a petition to compel arbitration and stay proceedings.
The petition attached copies of the agreements signed by each
of the Davises, and was accompanied by a declaration of TWC
controller Bonnie Guest, who testified that the three signed
agreements were in each of the three Davises' personnel
files. As Guest also testified, TWC's “company
policy... requires all personnel to participate in its
dispute resolution program, ” going on to testify that
“[t]here are no employees of [TWC] who are not required
to agree to the dispute resolution provisions, which require
binding, individual arbitration of disputes arising out of
the employment.” As she summed it up: “All
personnel who commence or continue employment with [TWC] are
required to comply with the alternative dispute resolution
policy, which includes the mandatory arbitration of
employment-related claims. This dispute resolution policy is
set forth in written agreements throughout the employment of
each individual[].”
The
Davises filed opposition to the petition, which opposition
did not include any declaration.
TWC
filed a reply, and the Davises a sur-reply, the latter
accompanied by a declaration of Jennifer Lucas, their
attorney, which declaration said nothing about the
circumstances surrounding the signing of the agreements.
The
petition came on for hearing on May 10, prior to which the
court had issued a tentative ruling denying the petition. The
hearing was brief, most of it being argument by counsel for
TWC, and questions by the court to him. Among other things
the court questioned TWC's counsel about the adhesive
nature of the agreements, and also asked “what about
Iskanian?, ” referring to Iskanian v. CLS
Transportation Los Angeles, LLC (2014) 59 Cal.4th 348.
At the conclusion of the hearing the court took the matter
under submission.
On July
20, the court issued its order denying the petition. The
order was a comprehensive 11 pages that first determined
there was an agreement to arbitrate, specifically Agreement
No. 2 read in conjunction with Agreement No. 3. The court
went on to find both procedural and substantive
unconscionability, finding among other things that
“Agreements [No.] 2 and [No.] 3 are contracts of
adhesion drafted by [TWC], and signed by [the Davises] on a
‘take-it-or-leave-it' [basis].” And this:
“Adding to the oppressive element of procedural
unconscionability, is surprise resulting from the
[Davises'] apparent inability to determine which of the
three arbitration contracts and which of the provisions
contained therein apply. [The Davises] complain that none of
the three agreements are identical and their terms are
contradicting. The Court agrees that some of the provisions
in the agreements are inconsistent and that some are
substantively dubious. Notably, while Agreement [No.] 2
clearly states that the right to a jury trial would be
waived, Agreement [No.] 3 entirely omits this important
clarification. Confusing characteristics like these weigh in
favor of a finding of procedural unconscionability.
(Samaniego v. Empire Today LLC (2012) 205
Cal.App.4th 1138, 1146.)”
On
August 8, TWC filed a ...