Chuc v. City Fibers CA2/7 ( 2021 )

Filed 5/17/21 Chuc v. City Fibers CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
EDWIN ROGELIO XULU B299854 and B301008
CHUC,
(Los Angeles County
Plaintiff and Respondent, Super. Ct. No. 18STCV04741)
v.
CITY FIBERS, INC. et al.,
Defendants and
Appellants.
APPEAL from an order of the Superior Court of
Los Angeles County, Rafael A. Ongkeko, Judge. Reversed and
remanded.
Hill, Farrer & Burrill and E. Sean McLoughlin for
Defendant and Appellant, City Fibers, Inc.
Rutan & Tucker, Steven J. Goon, Brandon L. Sylvia and
Michael J. Rossiter for Defendants and Appellants,
PriorityWorkforce, Inc., Workforce Outsourcing, Inc. and Geneva
Staffing, Inc.
Bibiyan Law Group and David D. Bibiyan for Plaintiff and
Respondent.
____________________
PriorityWorkforce, Inc., Workforce Outsourcing, Inc. and
Geneva Staffing, Inc. (collectively Priority), related employment
agencies that provide temporary workers to businesses
throughout the United States, and City Fibers, Inc. appeal the
order denying their motion to compel Edwin Rogelio Xulu Chuc
(Xulu) to arbitrate his individual wage and hour claims, which
Xulu filed as part of a putative class action lawsuit in superior
court. Priority and City Fibers contend the court erred in
concluding, because Xulu had signed two different arbitration
agreements with conflicting provisions at about the same time,
there was no meeting of the minds with respect to arbitration.
We agree and reverse. Construing the two agreements together
as required by Civil Code section 1642, an agreement to arbitrate
employment-related disputes unquestionably exists, subject to
any defenses to enforcement advanced by Xulu.
FACTUAL AND PROCEDURAL BACKGROUND
Xulu began working on assignment in October 2016 as a
machine operator for City Fibers, a recycling services operator
and client of Priority, at City Fibers’s Vernon facility. His
employment was terminated on June 14, 2018.
1. Xulu Signs Four Agreements To Arbitrate
As part of the hiring process and in advance of any
assignment, on September 26, 2016 PriorityWorkforce had Xulu
sign two documents written in Spanish, a Mutual Agreement to
Arbitrate Claims (Mutual Agreement) and an Employment At-
2
Will and Arbitration Agreement (Employment Agreement). The
Mutual Agreement, but not the Employment Agreement, had a
line for the signature of a company representative. Martha
Rubio, human resources director at PriorityWorkforce, signed the
agreement as Priority’s representative.
For reasons not explained, Xulu was asked to, and did, sign
another set of the same two documents on February 8, 2017 at
Priority’s offices. The February 8, 2017 Mutual Agreement was
countersigned by a Priority representative, identified by Rubio as
Caroline Tinoco, a PriorityWorkforce recruiter. The parties agree
the text of the two sets of documents is identical and the
February 8, 2017 documents superseded the September 26, 2016
set.
The Mutual Agreement provides for binding arbitration as
the sole and exclusive remedy for all claims between the parties
and defines claims to mean “all past, present, and future claims,
disputes, and controversies of any nature in any way arising out
of, relating to, or associated with Employee’s employment with
Employer.” The Employment Agreement similarly provides for
binding arbitration as “the sole and exclusive means to resolve all
disputes that may arise out of or be related in any way to my
employment, including but not limited to the termination of my
employment and my compensation.”
Xulu asserts he signed the documents on each occasion
without reading or understanding them. He does not dispute it is
his signature on the agreements.
3
2. Xulu’s Class Action and Representative Action
Complaint
On November 13, 2018 Xulu filed a complaint against City
Fibers, PriorityWorkforce, Workforce Outsourcing and Geneva
Staffing alleging individual and putative class claims for failure
to pay overtime wages, failure to pay minimum wages, failure to
provide meal periods, failure to provide rest periods, failure to
pay wages due at termination, wage statement violations, failure
to indemnify employees for necessary expenditures and unfair
business practices. Xulu filed a first amended complaint on
February 19, 2019 realleging the same eight individual and
putative class causes of action in his original complaint and
adding new representative causes of action for civil penalties
under the Labor Code Private Attorneys General Act of 2004
(PAGA) (Lab. Code, § 2698 et seq.) for violations of a host of
Labor Code provisions.
3. The Demand To Arbitrate and Motion To Compel
Arbitration
Priority and City Fibers on January 3, 2019 submitted a
demand for arbitration with JAMS Mediation, Arbitration, and
ADR Services. The demand attached both the September 26,
2016 and February 8, 2017 iterations of the Employment
Agreement signed by Xulu as the basis for arbitration. The
demand did not refer to the provisions for arbitration in the
parties’ Mutual Agreement. After being served with the demand,
Xulu through his attorney notified JAMS he was not a party to a
valid or enforceable agreement to arbitrate.
On March 12, 2019 Priority filed in Xulu’s superior court
action a motion for an order compelling Xulu to submit his
individual claims to binding arbitration. Priority’s motion
4
attached as the basis for an order to arbitrate the September 26,
2016 and February 8, 2017 iterations of the Mutual Agreement
signed by Xulu and countersigned by a PriorityWorkforce
representative. Two days later City Fibers filed a petition to
compel arbitration and a joinder in Priority’s motion. City Fibers
also relied on the two signed copies of the Mutual Agreement
and, like Priority, omitted any reference to the arbitration
provisions in the Employment Agreements signed by Xulu.
In his opposition to the motion and petition, filed April 5,
2019, Xulu first argued no enforceable agreement to arbitrate
existed because he had signed two separate agreements to
arbitrate on September 26, 2016 and again on February 8, 2017
with material differences, which made it impossible to know the
terms of the parties’ purported agreement. Specifically, Xulu
contended there were contradictory provisions in the two forms
relating to the extent to which the Federal Arbitration Act (FAA)
or California law governed the procedures for arbitration, the
method for selecting the arbitrator, the extent of permissible
discovery, responsibility for payment of fees and costs and the
location of the arbitration proceedings. In support of this
argument Xulu relied upon Ragab v. Howard (10th Cir. 2016)
841 F.3d 1134, in which the court majority held, applying
Colorado law regarding contract formation, where the parties
during their business relationship had executed six agreements
containing conflicting arbitration provisions, there was no
meeting of the minds as to essential terms and, therefore, no
enforceable agreement to arbitrate.
Xulu also argued in his opposition any purported
agreement to arbitrate was voidable based on fraud;
unconscionable, both procedurally and substantively; and, in any
5
event, inapplicable to nonsignatories City Fibers, Workforce
Outsourcing and Geneva Staffing.1
In a reply memorandum Priority contended, although both
documents were dated February 8, 2017, the Mutual Agreement
was completed after the Employment Agreement and, because it
contained an integration clause, was the operative agreement to
arbitrate between the parties. As evidence for this assertion,
Priority submitted a supplemental declaration from Rubio, who
described Priority’s standard practice with respect to having
temporary workers execute arbitration agreements. “The
Company’s policy and practice when obtaining paperwork from
contingent workers was and is to provide the workers with the
required paperwork, and provide them ample time to review and
sign the documents. Once the worker signs the documents, and
returns them to the Company representative, Priority’s
representative reviews the paperwork to ensure all required
signatures are present, and countersign[s] any documents as
necessary.” Because only the Mutual Agreement required both
the employer’s and the worker’s signature and the general
practice was for the employer to countersign the Mutual
Agreement after the worker had finished all documents, Priority
argued, the Mutual Agreement was necessarily completed after
the Employment Agreement, which was effective on the worker’s
signature.
1 The Employment Agreement defined PriorityWorkforce as
“Company.” The Mutual Agreement defined PriorityWorkforce
as “Employer,” and “Employer” together with “Employee” as
“Parties.” As discussed, the two Mutual Agreement forms were
countersigned by employees of PriorityWorkforce.
6
In its reply Priority also argued, even if the agreements
were signed concurrently, Xulu’s agreement to arbitrate
employment disputes was enforceable. Analyzing the
two documents, Priority insisted they contained nearly identical
terms and any minor differences were properly presented to the
arbitrator for resolution.
After receiving the initial round of briefing, the superior
court ordered supplemental briefing to address the interplay of
the Employment Agreement and the Mutual Agreement and, in
particular, Xulu’s argument that, applying fundamental
principles of contract formation, there had been no meeting of the
minds.
4. The Superior Court’s Ruling
The superior court denied Priority’s motion, finding there
had been no meeting of the minds regarding arbitration. The
court first rejected Priority’s argument the Mutual Agreement
was the governing document because it was executed after the
Employment Agreement, concluding Rubio’s declaration
concerning Priority’s standard practice regarding countersigning
documents was insufficient to carry Priority’s burden on the
timing issue. The court explained, “It is just as reasonable to
infer that at the same meeting, all parties signed each document
as needed, completing the process in one sitting. In that event, it
makes no sense to ignore the existence of two competing
agreements and make an arbitrary choice that the agreement the
court chooses is exactly what the parties reasonably intended.”
The court then ruled, because the agreements, “each of
which contains an integration clause, have different terms in key
areas which the court does not find to be a ‘minor triviality’ or
relegated to ‘minutiae,’” there had been no meeting of the minds
7
on all material points, as required by California law for the
formation of a contract. Specifically, the court found material
differences with respect to governing law, situs of the arbitration
and selection of the arbitrator. The court also ruled, contrary to
Xulu’s position, there were no material differences between the
arbitration provisions in the Mutual Agreement and Employment
Agreement as to discovery or payment of costs.
The court denied City Fibers’s petition to compel
arbitration “[f]or the same reasons discussed above in connection
with [Priority’s motion] to compel arbitration.”
DISCUSSION
1. Governing Law
Code of Civil Procedure section 1281.2, first paragraph,2
requires the superior court to order arbitration of a controversy
“[o]n petition of a party to an arbitration agreement alleging the
existence of a written agreement to arbitrate a controversy and
that a party to the agreement refuses to arbitrate that
controversy . . . if it determines that an agreement to arbitrate
the controversy exists.” As the language of this section makes
plain, the threshold question presented by every motion or
petition to compel arbitration is whether an agreement to
arbitrate exists. (American Express Co. v. Italian Colors
Restaurant (2013) 570 U.S. 228, 233 [133 S.Ct. 2304, 186 L.Ed.2d
417] [it is an “overarching principle that arbitration is a matter of
contract”]; Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth,
Inc. (1985) 473 U.S. 614, 626 [105 S.Ct. 3346, 87 L.Ed.2d 444]
[“the first task of a court asked to compel arbitration of a dispute
2 Statutory references are to this code unless otherwise
stated.
8
is to determine whether the parties agreed to arbitrate that
dispute”]; Pinnacle Museum Tower Assn. v. Pinnacle Market
Development (US), LLC (2012) 55 Cal.4th 223, 236 (Pinnacle)
[“‘“a party cannot be required to submit to arbitration any
dispute which he has not agreed so to submit”’”]; Bautista v.
Fantasy Activewear, Inc. (2020) 52 Cal.App.5th 650, 656 [“[u]nder
both federal and state law, the threshold question presented by a
petition to compel arbitration is whether there is an agreement to
arbitrate”; internal quotation marks and italics omitted]; see
Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 787
[“[t]here is a strong public policy favoring contractual arbitration,
but that policy does not extend to parties who have not agreed to
arbitrate”].)
We use general contract interpretation principles to
determine whether the parties have agreed to arbitrate a dispute
(Pinnacle, supra, 55 Cal.4th at p. 236; Mendez v. Mid-Wilshire
Health Care Center (2013) 220 Cal.App.4th 534, 541), while
giving due regard to the federal and California policies favoring
arbitration. (Pinnacle, at p. 236; see OTO, L.L.C. v. Kho (2019)
8 Cal.5th 111, 125 [“California law strongly favors arbitration”].)
The basic goal of contract interpretation is to give effect to the
parties’ mutual intent at the time of contracting. (Franco v.
Greystone Ridge Condominium (2019) 39 Cal.App.5th 221, 227.)
In doing so, it is our responsibility to construe an apparent
agreement between the parties so as to make it “lawful,
operative, definite, reasonable, and capable of being carried into
effect, if it can be done without violating the intention of the
parties.” (Civ. Code, § 1643; see Rodriguez v. Barnett (1959)
52 Cal.2d 154, 160; County of Ventura v. City of Moorpark (2018)
24 Cal.App.5th 377, 393.) In this regard, two agreements
9
relating to the same matter and executed at the same time
should be construed together. (Civ. Code, § 1642; see
Reigelsperger v. Siller (2007) 40 Cal.4th 574, 580 [arbitration
agreement and informed consent form read together to authorize
arbitration for claims relating to future treatment by
chiropractor].)
The failure to reach a meeting of the minds on all material
points prevents the formation of a contract, including an
agreement to arbitrate. (See Cheema v. L.S. Trucking, Inc.
(2019) 39 Cal.App.5th 1142, 1149; Banner Entertainment, Inc. v.
Superior Court (1998) 62 Cal.App.4th 348, 359.) “‘Although the
terms of a contract need not be stated in the minutest detail, it
. . . must evidence a meeting of the minds upon the essential
features of the agreement.’” (Cheema, at p. 1149; accord,
Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793,
797 [“[i]f no meeting of the minds has occurred on the material
terms of a contract, basic contract law provides that no contract
formation has occurred”].)
2. Burdens of Proof and Standard of Review
The party seeking to compel arbitration bears the burden of
proving by a preponderance of the evidence an agreement to
arbitrate exists. (Pinnacle, supra, 55 Cal.4th at p. 236; Rosenthal
v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413;
Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 240.)
Only when the agreement has been proved does the burden shift
to the party resisting arbitration to establish a defense to the
enforcement of the agreement, typically by alleging the
agreement is void due to fraud in the execution, waiver or
revocation. (Rosenthal, at p. 413; accord, Engalla v. Permanente
Medical Group, Inc. (1997) 15 Cal.4th 951, 972; see AT&T
10
Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339 [131 S.Ct.
1740, 179 L.Ed.2d 742] [section 2 of the Federal Arbitration Act
“permits arbitration agreements to be declared unenforceable
‘upon such grounds as exist at law or in equity for the revocation
of any contract’”].)
When, as here, the court’s order denying a motion to compel
arbitration is based on the court’s finding, based on disputed
facts, that the moving party failed to carry its burden of proof,
the question for the reviewing court as to that finding is whether
it is erroneous as a matter of law. (See Juen v. Alain Pinel
Realtors, Inc. (2019) 32 Cal.App.5th 972, 978-979 [“‘where the
issue on appeal turns on a failure of proof at trial, the question
for a reviewing court becomes whether the evidence compels a
finding in favor of the appellant as a matter of law’”]; Almanor
Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th
761, 769 [same].) To the extent the order denying arbitration is
based on undisputed facts, however, we review the denial
de novo. (OTO, L.L.C. v. Kho, supra, 8 Cal.5th at p. 126;
Pinnacle, supra, 55 Cal.4th at p. 236.) Similarly, “‘[i]nterpreting
a written document to determine whether it is an enforceable
arbitration agreement is a question of law subject to de novo
review when the parties do not offer conflicting extrinsic evidence
regarding the document’s meaning.’” (Franco v. Greystone Ridge
Condominium, supra, 39 Cal.App.5th at p. 227; accord, Avery v.
Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th
50, 60.)
11
3. Priority’s Evidence Did Not Establish the Mutual
Agreement Was the Governing Document as a Matter of
Law
As discussed, as the parties seeking to compel arbitration,
it was Priority and City Fibers’s burden to prove the two-
signature February 8, 2017 Mutual Agreement was the operative
agreement to arbitrate because it was executed after the single-
signature February 8, 2017 Employment Agreement, even though
both were provided to Xulu at the same time.3 There was no
direct evidence on this point.
The trial court sustained Priority’s objections to the
entirety of Xulu’s declaration in opposition to the motion to
compel arbitration, which, in any event, did not address the
timing issue. For its part, Priority provided a declaration from
human resources director Rubio, who had not signed the
February 8, 2017 Mutual Agreement, rather than from Tinoco.
Rubio described the company’s usual practice with regard to
countersigning forms required from temporary employees seeking
assignments.
The trial court, after noting that Priority had submitted the
Employment Agreement to JAMS as the relevant arbitration
agreement, found Rubio’s declaration concerning general policy
and practice insufficient to establish what had actually occurred
with respect to the two February 8, 2017 documents at issue in
this case, explaining it was just as likely the parties had signed
3 The Mutual Agreement’s integration clause provided, “This
Agreement represents the complete agreement between
Employee and Employer concerning the subject matter hereof
and supersedes any prior discussions or representations relating
to its subject matter.”
12
both documents at a single meeting at the same time.4 Although
the court certainly could have come to the opposite conclusion,
Rubio’s declaration was not so compelling “as to leave no room for
a judicial determination that it was insufficient” to support the
factual finding sought by Priority. (See Juen v. Alain Pinel
Realtors, Inc., supra, 32 Cal.App.5th at pp. 978-979 [superior
court’s factual finding that no agreement to arbitrate existed
must be affirmed on appeal unless the moving party’s evidence
“‘was (1) “uncontradicted and unimpeached” and (2) “of such a
character and weight as to leave no room for a judicial
determination that it was insufficient to support a finding”’”];
see also In re R.V. (2015) 61 Cal.4th 181, 201 [where party fails to
meet its burden on an issue in the trial court, “the inquiry on
appeal is whether the weight and character of the evidence . . .
was such that the [trial] court could not reasonably reject it”].)
4 Priority disputes the superior court’s statement it was
required to prove the existence of an agreement to arbitrate by a
preponderance of the evidence, insisting its burden “is only to
offer prima facie evidence of the written agreement,” citing for
this proposition Rosenthal v. Great Western Fin. Securities Corp.,
supra, 14 Cal.4th 394 at page 413. Priority seriously misreads
Rosenthal, which held (on the page Priority cites), “[W]hen a
petition to compel arbitration is filed and accompanied by prima
facie evidence of a written agreement to arbitrate the
controversy, the court itself must determine whether the
agreement exists and, if any defense to its enforcement is raised,
whether it is enforceable. Because the existence of the agreement
is a statutory prerequisite to granting the petition, the petitioner
bears the burden of proving its existence by a preponderance of
the evidence.” (Ibid.)
13
4. When Construed Together, the Employment Agreement
and the Mutual Agreement Create an Agreement To
Arbitrate Employment Disputes
Both the Employment Agreement and the Mutual
Agreement expressly provide for arbitration of all of Xulu’s
employment-related claims. Nonetheless, the superior court
concluded there was no meeting of the minds, and thus no
contract formed, because of material differences in the terms of
the two agreements with respect to the site of the arbitration, the
method for selection of the arbitrator and governing law.5
Because the two agreements are between the same parties,
relate to the same matter and were made as part of a single
transaction, they must be construed together. (Civ. Code, § 1642
[“[s]everal contracts relating to the same matters, between the
same parties, and made as parts of substantially one transaction,
are to be taken together”].) When the provisions of the two
agreements are interpreted together and with a view toward
finding an operative contract (see Civ. Code, § 1643), there are no
material conflicting terms that preclude finding a meeting of the
minds and the existence of an agreement to arbitrate.
a. The site of the arbitration
The Employment Agreement provides that binding
arbitration, as specified in the agreement, will be conducted
“exclusively” under the FAA “in conformity with the procedures of
the California Arbitration Act (Cal. Code Civ. Proc. Sec. 1280
et seq., including section 1283.05 and all of the Act’s other
mandatory and permissive rights to discovery).” The superior
5 As discussed, the court rejected Xulu’s argument there
were also contradictory provisions with respect to permissible
discovery and payment of costs.
14
court interpreted the in-conformity language to include section
1282.2, which specifies, “Unless the arbitration agreement
otherwise provides, or unless the parties to the arbitration
otherwise provide by agreement which is not contrary to the
arbitration agreement as made or modified by all the parties
thereto: [¶] (a)(1) The neutral arbitrator shall appoint a time and
place for the hearing . . . .”
The superior court agreed with Xulu that this provision of
California law conflicted with the Mutual Agreement, which
expressly requires the arbitration to take place in Orange
County, California. There is no conflict or material difference
when these provisions are read together. Section 1282.2
contemplates the parties, rather than a neutral arbitrator, may
designate the location for the arbitration. They did in the Mutual
Agreement.
b. Selection of arbitrator
Both the Employment Agreement and the Mutual
Agreement provide the arbitrator shall be mutually selected by
the parties. (The Employment Agreement adds that “the
arbitrator selected shall be a retired California Superior Court
Judge, or an otherwise qualified individual to whom the parties
mutually agree.”) Nonetheless, the superior court found the
procedures for selecting an arbitrator if the parties could not
agree on one constituted a material difference preventing
contract formation. The Mutual Agreement refers the parties to
the procedure provided by the FAA if they cannot agree on an
arbitrator. The Employment Agreement does not specify a
procedure. The superior court interpreted the in-conformity
language in the Employment Agreement to include
15
section 1281.6, which provides a method for court appointment of
an arbitrator in the absence of agreement by the parties.6
Once more this is a false conflict. The FAA provides, if the
agreement specifies how an arbitrator is to be selected, “such
method shall be followed.” If there is no designated method or
the method fails, then, upon application, the court will appoint an
arbitrator. (9 U.S.C. § 5.)7 To the extent the Employment
6 Section 1281.6 provides in part, “In the absence of an
agreed method, or if the agreed method fails or for any reason
cannot be followed, . . . the court, on petition of a party to the
arbitration agreement, shall appoint the arbitrator. [¶] When a
petition is made to the court to appoint a neutral arbitrator, the
court shall nominate five persons from lists of persons supplied
jointly by the parties to the arbitration or obtained from a
governmental agency concerned with arbitration or private
disinterested association concerned with arbitration. The parties
to the agreement who seek arbitration and against whom
arbitration is sought may within five days of receipt of notice of
the nominees from the court jointly select the arbitrator whether
or not the arbitrator is among the nominees. [¶] If the parties
fail to select an arbitrator within the five-day period, the court
shall appoint the arbitrator from the nominees.”
7 Title 9 United States Code section 5 provides, “If in the
agreement provision be made for a method of naming or
appointing an arbitrator or arbitrators or an umpire, such
method shall be followed; but if no method be provided therein, or
if a method be provided and any party thereto shall fail to avail
himself of such method, or if for any other reason there shall be a
lapse in the naming of an arbitrator or arbitrators or umpire, or
in filling a vacancy, then upon the application of either party to
the controversy the court shall designate and appoint an
arbitrator or arbitrators or umpire, as the case may require, who
shall act under the said agreement with the same force and effect
as if he or they had been specifically named therein; and unless
16
Agreement incorporates Code of Civil Procedure section 1281.6’s
more detailed method for court-selection of the arbitrator, the
provision in the FAA for use of any method agreed to by the
parties mandates use of that process. And even if one looks to
the FAA’s requirement that the court select the arbitrator in the
absence of agreement by the parties, nothing in the FAA
precludes the court, when asked to appoint the arbitrator, from
using the procedure described in section 1281.6. The terms of the
two agreements, interpreted together, are fully compatible.
c. Governing law
As discussed, both the Employment Agreement and the
Mutual Agreement provide they are to be governed by the FAA.
The Employment Agreement additionally provides that
mandatory and permissive rights of discovery under the
California Arbitration Act, as well as California procedural law
with respect to pleadings, summary judgment and evidence shall
apply. None of those provisions of the Employment Agreement
conflicts with the FAA as specified by the Mutual Agreement.
(See Volt Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S.
468, 479 [109 S.Ct. 1248, 103 L.Ed.2d 488] (Volt) [“Just as [the
parties] may limit by contract the issues which they will arbitrate
[citation], so too may they specify by contract the rules under
which that arbitration will be conducted. Where, as here, the
parties have agreed to abide by state rules of arbitration,
enforcing those rules according to the terms of the agreement is
fully consistent with the goals of the FAA”].)
otherwise provided in the agreement the arbitration shall be by a
single arbitrator.”
17
Xulu describes one other area of purported material
conflict, not addressed by the superior court. Section 1281.2, he
explains, authorizes the superior court to refuse to enforce a
contractual arbitration provision if arbitration threatens to
produce a result that may conflict with the outcome of related
litigation not subject to arbitration. (See § 1281.2, subd. (c).)
Because his PAGA claims are not subject to arbitration (Iskanian
v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348,
384; see ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 198), he
asserts, the superior court would have discretion under the terms
of the Employment Agreement to deny arbitration—a result
prohibited by the FAA and, therefore, by the Mutual Agreement.
(See Mastick v. TD Ameritrade, Inc. (2012) 209 Cal.App.4th 1258,
1263 [FAA “does not authorize courts to stay arbitration pending
resolution of litigation, or to refuse to enforce a valid arbitration
provision to avoid duplicative proceedings or conflicting rulings”];
Valencia v. Smyth (2010) 185 Cal.App.4th 153, 157 [FAA does not
permit a trial court to stay or deny arbitration of all claims
within the scope of an arbitration provision even if the action
includes nonarbitrable claims by or against third parties];
see also Volt, supra, 489 U.S. at pp. 470, 477-479 [application of
section 1281.2 to stay arbitration would not undermine the goals
and policies of, and is not preempted by, the FAA in a case where
the parties have agreed that their arbitration agreement will be
governed by California law].)
First, whatever potential impact section 1281.2 might have
in other cases, it cannot create a material conflict here.
Section 1281.2, subdivision (c), authorizes the court to deny
arbitration if a party to the arbitration agreement is also a party
to a pending court action “with a third party arising out of the
18
same transaction or series of related transactions and there is a
possibility of conflicting rulings on a common issue of law or fact.”
There is no third-party litigation here. Section 1281.2,
subdivision (c), even if otherwise applicable, would not authorize
denial of Priority’s motion to compel arbitration.
Section 1281.2, seventh paragraph, in contrast to
section 1281.2, subdivision (c), authorizes the court to delay an
order for arbitration, not to avoid conflicting rulings, but when
determination of nonarbitrable claims pending between the
parties to an arbitration agreement “may make the arbitration
unnecessary.” (See Acquire II, Ltd. v. Colton Real Estate Group
(2013) 213 Cal.App.4th 959, 977; RN Solution, Inc. v. Catholic
Healthcare West (2008) 165 Cal.App.4th 1511, 1521-1522.)
Resolution of the nonarbitrable PAGA claims asserted by Xulu,
however, will still leave undetermined a number of the individual
Labor Code wage-and-hour claims he has asserted, as well as his
cause of action for unfair business practices. That is, trial of the
PAGA claims will not make the arbitration unnecessary.
Accordingly, section 1281.2, seventh paragraph, would not
authorize a stay of arbitration here.
Second, and more fundamentally, Xulu is simply incorrect
in asserting section 1281.2’s provisions for denying or delaying
arbitration could be invoked under the Employment Agreement,
creating a material conflict with the terms of the Mutual
Agreement. As Xulu acknowledges and the superior court ruled,
the Mutual Agreement unambiguously provides it is to be
governed and enforced under the FAA. Although the
Employment Agreement expressly provides certain state
procedural rules apply to arbitration proceedings, it, too, is to be
19
enforced under the FAA, eliminating the court’s authority under
section 1281.2 to deny or delay arbitration.
Our colleagues in Division Four of this court, interpreting
language substantially similar to that in the Employment
Agreement, addressed this question in Victrola 89, LLC v. Jaman
Properties 8 LLC (2020) 46 Cal.App.5th 337 (Victrola 89). At
issue in that case was whether the superior court had discretion
to deny a motion to compel arbitration pursuant to
section 1281.2, subdivision (c), because only one of the defendants
named in the complaint had agreed to arbitrate and there was a
possibility of conflicting rulings on a common issue of fact or law
regarding the defendants’ liability. (Victrola 89, supra,
46 Cal.App.5th at p. 345.) The arbitration agreement provided in
part, “‘The Parties shall have the right to discovery in accordance
with Code of Civil Procedure § 1283.05. In all other respects, the
arbitration shall be conducted in accordance with Title 9 of Part 3
of the Code of Civil Procedure. . . . Enforcement of this
agreement to arbitrate shall be governed by the Federal
Arbitration Act.’” (Id. at p. 343, boldface deleted.)
Construing this language de novo in the absence of any
conflicting extrinsic evidence, the court of appeal held, because
the parties had expressly provided the FAA governed
enforcement of the arbitration agreement, the superior court
erred in applying section 1281.2, subdivision (c), to deny the
motion to compel arbitration. (Victrola 89, supra, 46 Cal.App.5th
at pp. 345-346.)8 The references to California law in the
8 The court of appeal rejected the argument the parties
intended only that enforcement of the arbitration award would be
governed by the FAA: “‘Enforcement of this agreement to
arbitrate’ does not and cannot mean ‘Enforcement of the
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arbitration provision did not affect this conclusion. As the court
explained, “The parties were free to agree that discovery would
be conducted in accordance with Code of Civil Procedure
section 1283.05. Their choice does little to inform us about what
law the parties intended to apply when deciding whether the
arbitration agreement should be enforced. Similarly, a directive
that arbitration shall be ‘conducted’ in accordance with the
[California Arbitration Act] in all other respects has no bearing
on the law that should be used to determine whether arbitration
is required.” (Id. at p. 349; accord, Warren-Guthrie v. Health Net
(2000) 84 Cal.App.4th 804, 816 [“[a]greement to apply California
contractual arbitration law is expressly limited to that law which
bears on how the arbitration shall be conducted, as distinguished
from agreeing that the plan shall be governed by California law
for all purposes, including the determination . . . whether or not
arbitration is required”], disapproved on another ground in
Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th
376, 393, fn. 8.)
Here, the Employment Agreement provided employment-
related disputes would be “submitted to and determined
exclusively by binding arbitration under the Federal Arbitration
Act,” while the arbitration proceedings themselves would be
conducted “in conformity with” the California Arbitration Act.
For the reasons discussed in Victrola 89, this express choice-of-
law provision requiring submission of disputes to arbitration
under the FAA mandates federal law, not California law, be used
to determine whether arbitration is required. (Cf. Cronus
arbitration award that may result from an arbitration
undertaken pursuant to this agreement to arbitrate.’”
(Victrola 89, supra, 46 Cal.App.5th at p. 348.)
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Investments, Inc. v. Concierge Services, supra, 35 Cal.4th at
pp. 387, 394 [language in arbitration clause providing “[t]his
agreement shall be construed and enforced in accordance with
and governed by the laws of the State of California” generally
incorporates California law, including the California Arbitration
Act, and permits a stay of arbitration proceedings pursuant to
section 1281.2].) The superior court would not be authorized to
deny or delay arbitration under section 1281.2 under either the
Mutual Agreement or the Employment Agreement. There is no
conflict between the two agreements on this point.
In sum, the Employment Agreement and the Mutual
Agreement do not contain “different terms in key areas” as
argued by Xulu and found by the superior court. The parties
plainly agreed to arbitrate their employment-related disputes,
and the procedures for conducting such an arbitration are clear.
There was a meeting of the minds sufficient to form a contract.
Whether there are defenses to enforcement of the agreement
formed, as Xulu contends, must be addressed by the superior
court in the first instance.
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DISPOSITION
The order denying the motion to compel arbitration is
reversed. On remand the court is directed to consider the points
raised in Xulu’s opposition to the motion to compel arbitration
other than his argument no agreement to arbitrate exists and to
enter a new ruling on the motion. City Services,
PriorityWorkforce, Workforce Outsourcing and Geneva Staffing
are to recover their costs on appeal.
PERLUSS, P. J.
We concur:
FEUER, J.
McCORMICK, J.*
* Judge of the Orange County Superior Court, assigned by
the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
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