U.S. Bancorp Investments v. Madison CA2/7 ( 2023 )

Filed 1/13/23 U.S. Bancorp Investments v. Madison CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
U.S. BANCORP INVESTMENTS, B309732
INC. et al.,
(Los Angeles County
Plaintiffs and Respondents, Super. Ct. No. 19STCP05647)
v.
FARIBA MADISON,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of
Los Angeles County. Lia R. Martin, Judge. Affirmed.
K&L Gates, Paul W. Sweeney, Jr., Christina N. Goodrich,
Zachary T. Timm and Kate G. Hummel for Plaintiffs and
Respondents.
Law Offices of Steve A. Buchwalter, Steve Buchwalter; Law
Offices of Scot D. Bernstein and Scot D. Bernstein for Defendant
and Appellant.
_______________________
INTRODUCTION
Fariba Madison appeals from the trial court’s judgment
confirming an arbitration award dated November 27, 2019, in
favor of her former employer U.S. Bancorp Investments, Inc.
(USBI), David Matthew Terrell, and Sean Pong, and denying her
motion to vacate the award. Madison contends the trial court
erred because the arbitration award caused a waiver of her
unwaivable statutory rights, the arbitration decision failed to
provide adequate findings and conclusions, and she did not
receive sufficient discovery. Finding no error, we affirm.
FACTUAL AND PROCEDURAL HISTORY
A. Madison’s Employment with USBI and Termination for
Cause
Madison worked for USBI as a financial advisor from
February 2006 to October 2012. USBI employed her at-will and
paid her a salary plus a commission as set forth in annual
compensation plans that Madison signed each year. District
sales manager Terrell supervised Madison from 2009 through
2012. According to Terrell’s uncontradicted testimony, the plans
had substantially similar language each year, and operated
substantially the same. The plans described monthly “advances
against future earned commissions” that Madison would receive
based on prior production. The 2009 plan described that
“commissions will be considered earned one year following the
commissionable sale, to allow for reconciliation and offset of costs
and chargebacks as provided in this plan. Until commissions are
deemed earned, any advances will be subject to reduction, offset
2
or repayment as provided in this plan.” The monthly
compensation could decrease based on “Revenue Adjustments”—
deductions from the gross revenue—Madison had produced. The
annual compensation plans also required Madison to share a
percentage of her commissions with her sales assistant.
On October 17, 2012, USBI terminated Madison’s
employment. It concluded Madison had interfered with an
internal compliance investigation into inconsistencies with
Madison’s client account documents by attempting to obtain
client signatures on paperwork subject to the investigation.
Madison received her final paycheck on November 14, 2012.
B. Madison’s Arbitration Claims and Discovery
On January 15, 2016, Madison initiated arbitration against
USBI, which proceeded before a three-member panel of the
Financial Industry Regulatory Authority (FINRA). Madison’s
Statement of Claim asserted claims for unpaid wages (Lab. Code,
§ 201), back payment penalties (Lab. Code, § 203), unreimbursed
expenses (Lab. Code, § 2802),1 unjust enrichment, breach of the
implied covenant of good faith and fair dealing, violation of
Business and Professions Code section 17200 et seq., defamation
(specifically by Pong, a USBI employee also supervised by Terrell,
in making derogatory statements about her after her
termination), receipt of stolen property (Pen. Code, § 496,
subd. (a)), failure to return employee bond payment (Lab. Code,
§§ 400-410), and illegal contract (Bus. & Prof. Code, § 16600).
She also sought treble and punitive damages.
1 Further undesignated statutory references are to the Labor
Code.
3
In support of her wage claims, Madison alleged USBI failed
to pay or credit her for various commissions, including for “trades
made before [her] termination but settled afterward,” and failed
to reimburse “expenses she reasonably incurred on behalf of
USBI in the performance of her duties.” She also alleged that
“[b]y withholding and keeping for itself the compensation legally
earned and payable” to her, USBI unjustly enriched itself at her
expense.
During two years of litigation, Madison propounded and
received a substantial amount of discovery, obtained two
evidentiary hearing continuances, and filed three motions to
compel. Prior to the panel ruling on her motions, she reached an
agreement with USBI on production of documents related to her
commission history and commission deductions (among other
things). USBI ultimately produced over 20,000 pages of
documents to Madison. The panel denied Madison’s motion for a
third continuance prior to the evidentiary hearing and denied her
renewed motion for a third continuance the first morning of the
evidentiary hearing in September 2018. The parties proceeded to
an evidentiary hearing, beginning with four days devoted to
discovery matters. The panel denied Madison’s motion to compel
further production of documents relevant to her wage claims.
The panel chair stated, “I don’t see any evidence of documents
being intentionally withheld other than those that are
privileged,” and told Madison, “You certainly had the discovery
for this issue.”
4
C. The Evidentiary Hearing on the Merits and Motion To
Dismiss
In March 2019, the evidentiary hearing resumed. Madison
spent 15 days presenting her case to the arbitration panel. As
part of her case, Madison argued for the first time that USBI
violated section 221 by imposing reversals and adjustments to
her received compensation and by requiring her to share a
percentage of her commission with her sales assistant.2 Madison
contended she was entitled to $623,036.43 in “commission
reversals” and $195,476.87 in “incentive statement summary
reversals” shown as negative entries on her commission reports,
which she characterized as improper wage deductions in violation
of section 221. She also argued the sales assistant commission
share was an improper business expense in violation of
section 2802.
After Madison rested, USBI moved to dismiss all of her
claims pursuant to FINRA Rule 13504, subdivision (b). USBI
argued Madison’s section 221 claim was procedurally improper
and untimely. It also argued she had no legal right to recovery
because the evidence established the reversals were adjustments
to advanced commissions under the annual compensation plans
signed by Madison, not deductions to earned wages. USBI also
argued the sales assistant commission share did not violate
section 2802 as an improper wage deduction and business
expense. In support, USBI contended the compensation plans
Madison executed allowed her to receive advanced commissions,
which she did not actually “earn” until USBI completed all
2 Section 221 provides, “It shall be unlawful for any employer
to collect or receive from an employee any part of wages
theretofore paid by said employer to said employee.”
5
adjustments and reconciliations, including the sales assistant
commission share, meaning USBI never deducted a commission
share for her sales assistant from Madison’s earned wages. USBI
also moved to dismiss Madison’s Penal Code section 496 claims
on the grounds that employment compensation disputes did not
constitute a Penal Code violation and therefore could not support
recovery of treble damages.
After oral argument on the motion to dismiss, the panel
issued an order dismissing Madison’s section 221 claim for
improper wage deductions, her section 2802 claim for improper
deduction of wages and business expenses relating to the sales
assistant commission share, and her Penal Code section 496
claims. The panel explained that it “struck the 221 claim simply
because it wasn’t fair to have that in the case because it wasn’t in
the Statement of Claim,” but that Madison could attempt to
maintain a claim to recoup her alleged improper reversals of
compensation under other Labor Code sections as part of her
remaining claims. The arbitrators suggested that it would be
“helpful to the panel” if USBI put on evidence why Madison was
not entitled to the alleged reversals. The panel also explained
that with regard to the sales assistant commission share, “[w]e
agreed with the argument that it was a matter of contract and it
was appropriate for her to agree to share her commissions with
her assistant.”
USBI presented its defense over four additional evidentiary
hearing days. Madison’s former supervisor, Terrell, explained
that USBI conditionally advanced commission payments to
financial advisors prior to USBI receiving the actual revenue on
the contract. USBI would then “chargeback,” reducing the
advanced commission if the deal did not generate the expected
6
revenue. Terrell also explained Madison received monthly
commission reports. These reports detailed Madison’s advanced
commissions and negative adjustments that resulted from
various types of required chargebacks pursuant to the terms of
her compensation plan.3 USBI’s expert witness addressed the
various transactions in these commission reports. He concluded
Madison’s calculation of purported negative “reversals” ignored
related transactions that reflected corresponding credits. The
expert witness concluded that USBI owed Madison no damages
for unpaid commissions or improper deductions.
D. The Arbitration Award
On November 27, 2019, the panel issued a 10-page award
in favor of USBI on all claims. The panel found that Madison
failed to prove any of her claims by the necessary preponderance
of the evidence. The claims based on sections 201, 203, and 2802
failed because the compensation she claimed USBI did not pay
was only an advance, “subject to appropriate deductions and
adjustments made by USBI.” The advances became wages only
after application of the deductions and adjustments, a process
“explicitly provided for in USBI’s Financial Consultant
Compensation Plan.” Regarding the claim for unpaid
commissions, the panel credited USBI’s expert witness over
Madison’s own testimony that USBI failed to pay any
commissions Madison had earned. The panel similarly rejected
3 The compensation plan contemplated “[r]evenue
[a]djustments” for a variety of events, including (from the 2012
plan) “services and transactions that were cancelled, that did not
close, that were reversed or modified, that were incorrectly
recorded or booked, and/or that USBI determines, in its
discretion, violate USBI policy, this Plan, or business objectives.”
7
the unjust enrichment claim because Madison failed to prove
USBI “unlawfully benefited from the deductions and adjustments
to the advances.”
E. The Trial Court Confirms the Arbitration Award
On December 26, 2019, USBI filed a petition in the trial
court to confirm the arbitration award. Madison opposed and
moved to vacate the award. USBI replied, opposed Madison’s
motion to vacate, filed objections to Madison’s evidence, and
submitted its own summary of events as part of its opposition to
Madison’s motion.
On September 2, 2020, the trial court sustained USBI’s
objections to Madison’s evidence and issued a tentative ruling
granting USBI’s petition to confirm the award and denying
Madison’s motion to vacate. After a hearing on September 3,
2020, the trial court adopted its tentative decision and issued an
order confirming the award. The trial court’s order stated:
“Madison argues that she was denied her substantive
rights as the arbitrators failed to follow
[Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th 83 (Armendariz)].
She was denied adequate discovery, did not receive a
complete award as the arbitrators failed to rule on all
issues before them, received an award which violated
public policy and received an award which caused
Madison to waive unwaivable statutory protections
and rights.
[¶]
8
“The documents Madison argues were not produced
in discovery were the subject of at least three
discovery hearings. USBI maintains that it produced
all non-privileged documents in its possession,
custody and control. Madison was unable to provide
evidence that USBI did have documents it refused to
produce, despite being granted continuances and
evidentiary hearings to obtain such evidence.
Madison did have adequate discovery.
“As to Madison’s arguments that the award was
based on a waiver of non-waivable rights and violated
public policy, whether the monies at issue were
wages is a factual issue. Evidence and authority was
submitted by USBI that these were advances on
commissions, which are not considered wages until
earned and are subject to reconciliation, which
includes deductions, prior to being considered wages.
There was evidence explaining the deductions.
Evidence was also submitted that sharing
commissions is a standard industry practice which
does not fall within the category of business expenses
reimbursable by the employer. The sufficiency of
that evidence is not subject to review. Madison has
not established that the award requires a waiver of
non-waivable rights or violated public policy.
9
“Pearson Dental Supplies, Inc. v. Sup.Ct. (2010)
48 Cal.App.4th 665, 680,4 does not support Madison’s
argument. In that case, the claimant was denied a
hearing on the merits of his FEHA claims, due to a
legal error by the arbitrator. The narrow exception
in Pearson applies when there is the denial of a
hearing due to a legal error in the framework of a
non-waivable right. Here, Madison was given
lengthy hearings, both on her discovery issues and on
the merits on her claims. That issues were
determined against her is not a ground to vacate the
award.
“Madison’s argument that she did not receive a fully-
reasoned award as it did not include discussion of
claims which were dismissed prior to the hearing is
not persuasive. The arbitrators issued a lengthy
award which addressed the ruling on the motion to
dismiss.”
The trial court entered judgment on October 19, 2020.
Madison timely appealed.
DISCUSSION
A. Standard of Review
“‘“On appeal from an order confirming an arbitration
award, we review the trial court’s order (not the arbitration
award) under a de novo standard. [Citations.] To the extent that
4 The correct citation is Pearson Dental Supplies, Inc. v.
Superior Court (2010) 48 Cal.4th 665.
10
the trial court’s ruling rests upon a determination of disputed
factual issues, we apply the substantial evidence test to those
issues.”’” (ECC Capital Corp. v. Manatt, Phelps & Phillips, LLP
(2017) 9 Cal.App.5th 885, 900; accord, Roussos v. Roussos (2021)
60 Cal.App.5th 962, 973 (Roussos); Douglass v. Serenivision, Inc.
(2018) 20 Cal.App.5th 376, 386 (Douglass); see Advanced Micro
Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376, fn. 9
[reviewing de novo whether arbitrator exceeded his or her
powers].) “[I]n reviewing a judgment confirming an arbitration
award, we must accept the trial court’s findings of fact if
substantial evidence supports them.” (Alexander v. Blue Cross of
California (2001) 88 Cal.App.4th 1082, 1087; accord, Douglass, at
p. 386.) “We also review de novo ‘legal issue[s] involving
statutory construction and the ascertainment of legislative
intent.’” (Roussos, at p. 973.)
We apply a different, “highly deferential standard of review
to the award itself.” (Cooper v. Lavely & Singer Professional
Corp. (2014) 230 Cal.App.4th 1, 11-12 (Cooper).) Ordinarily
“‘[t]he merits of the controversy between the parties are not
subject to judicial review.’” (Moncharsh v. Heily & Blase (1992)
3 Cal.4th 1, 10-11 (Moncharsh).) Instead, the reviewing court
“‘restrict[s] [its] review to whether the award should be vacated
under the grounds listed in [Code of Civil Procedure]
section 1286.2.’” (EHM Productions, Inc. v. Starline Tours of
Hollywood, Inc. (2018) 21 Cal.App.5th 1058, 1064.) Accordingly,
we do not review the arbitrator’s reasoning or the sufficiency of
the evidence, and “an arbitrator’s decision cannot be reviewed for
errors of fact or law” absent “narrow exceptions.” (Moncharsh, at
p. 11; accord, Cooper, at p. 12.) “These exceptions do not
encompass all errors that are apparent on the face of the award
11
and cause substantial injustice.” (Cooper, at p. 12; accord
Moncharsh, at p. 11.)
B. The Trial Court Properly Confirmed the Arbitration Award
The trial court may vacate an arbitrator’s award if “[t]he
arbitrators exceeded their powers and the award cannot be
corrected without affecting the merits of the decision upon the
controversy submitted.” (Code Civ. Proc., § 1286.2, subd. (a)(4).)
“Arbitrators may exceed their powers by issuing an award that
violates a party’s unwaivable statutory rights or that contravenes
an explicit legislative expression of public policy.” (Richey v.
AutoNation, Inc. (2015) 60 Cal.4th 909, 916; see Moncharsh,
supra, 3 Cal.4th at p. 32 [the “limited and exceptional
circumstances” where judicial review of an arbitrator’s decision is
appropriate “include those in which granting finality to an
arbitrator’s decision would be inconsistent with the protection of
a party’s statutory rights”].)
Madison argues that because sections 201, 203, 221, and
2802 are unwaivable pursuant to sections 219 and 2804,5 the
5 Section 219 provides, “[N]o provision of this article
[section 200 et seq.] can in any way be contravened or set aside
by a private agreement, whether written, oral, or implied.”
Section 2804 provides, “Any contract or agreement, express or
implied, made by any employee to waive the benefits of this
article [section 2800 et seq.] or any part thereof, is null and void,
and this article shall not deprive any employee or his personal
representative of any right or remedy to which he is entitled
under the laws of this State.” “Labor Code section 2804 voids any
agreement to waive the protections of Labor Code section 2802 as
against public policy. . . . Courts have interpreted Labor Code
section 2804 to apply to Labor Code section 2802, making all
contracts that waive an employee’s right to indemnification null
12
arbitration panel exceeded its authority by issuing an award that
violated her unwaivable statutory rights and contravened public
policy. Madison’s argument fails.
1. The arbitration award did not waive Madison’s
unwaivable rights under Labor Code sections 201,
203, and 2802
Madison contends she had the right to immediate payment
of her final paycheck under section 201. Because USBI delivered
her final paycheck 28 days after it terminated her employment,
Madison sought waiting time penalties under section 203.
Madison also asserted that USBI violated sections 201 and 2802
by failing to reimburse her for all wages and costs incurred in
furtherance of her duties as an employee by not including in her
final paycheck all amounts taken back from her past paychecks
and all deductions previously directed to her sales assistant.
Section 201 provides that when an employer discharges an
employee, “the wages earned and unpaid at the time of discharge
are due and payable immediately.” “‘Wages’ includes all amounts
for labor performed by employees of every description, whether
the amount is fixed or ascertained by the standard of time, task,
piece, commission basis, or other method of calculation.” (§ 200,
subd. (a).) Section 203 provides that if an employer willfully fails
to pay in full any wages of a discharged employee, for up to
30 days “the wages of the employee shall continue as a penalty
from the due date thereof at the same rate until paid or until an
action therefor is commenced.” Section 2802 entitles an employee
to reimbursement from an employer “for all necessary
and void.” (Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th
937, 951.)
13
expenditures or losses incurred by the employee in direct
consequence of the discharge of his or her duties, or of his or her
obedience to the directions of the employer.”
So long as it does so in writing, an employer can deem
commissions not “earned” (for purposes of section 201) until the
satisfaction of certain conditions precedent, including
chargebacks. (DeLeon v. Verizon Wireless, LLC (2012)
207 Cal.App.4th 800, 810 (DeLeon); accord, Sciborski v. Pacific
Bell Directory (2012) 205 Cal.App.4th 1152, 1166-1167 [“‘“A
commission is ‘earned’ when the employee has perfected the right
to payment; that is, when all of the legal conditions precedent
have been met.”’”].) “An advance is not a wage.” (Semprini v.
Wedbush Securities, Inc. (2020) 57 Cal.App.5th 246, 255; accord,
Steinhebel v. Los Angeles Times Communications, LLC (2005)
126 Cal.App.4th 696, 705.) An advanced commission is not a
wage because, by definition, “at the time of payment the
employer cannot determine whether the commission will
eventually be earned” and if the conditions on the employee’s
right to the commission will occur. (Steinhebel, at p. 705.)
The written incentive compensation plan approved by the
DeLeon court resembles the ones at issue here and illustrates
these principles. The DeLeon plans “clearly and expressly stated”
that commissions were not earned at the time a salesperson sold
a cell phone service plan. (DeLeon, supra, 207 Cal.App.4th at
p. 810.) As here, “[w]hile commission payments were made in
advance, commissions were earned only if the customer did not
cancel the cell phone service before the expiration of the
chargeback period.” (Ibid.) Thus, as in the DeLeon plan,
Madison’s commissions became wages only after calculation of
the final net revenue amount, accounting for any adjustments.
14
(See Prachasaisoradej v. Ralphs Grocery Co., Inc. (2007)
42 Cal.4th 217, 229 [only final net profit figure for each store
determined incentive compensation for store employees, and
“[t]his final figure, and this figure only, once calculated, was the
amount offered or promised”].)
The arbitration panel determined, “[Madison]’s claims
based upon California Labor Code §§ 201, 203, and 2802 are not
applicable to her case because her compensation for her sales
transactions were only advances, subject to appropriate
deductions and adjustments made by USBI, and became wages
only after such deductions and adjustments were made, which
was explicitly provided for in USBI’s Financial Consultant
Compensation Plan.” The trial court concluded: “As to Madison’s
arguments that the award was based on a waiver of non-waivable
rights and violated public policy, whether the monies at issue
were wages is a factual issue. Evidence and authority was
submitted by USBI that these were advances on commissions,
which are not considered wages until earned and are subject to
reconciliation, which includes deductions, prior to being
considered wages. There was evidence explaining the deductions.
Evidence was also submitted that sharing commissions is a
standard industry practice which does not fall within the
category of business expenses reimbursable by the employer. The
sufficiency of that evidence is not subject to review. Madison has
not established that the award requires a waiver of non-waivable
rights or violated public policy.”
We agree up to a point. USBI certainly presented evidence
that Madison signed a compensation agreement providing for
advances. USBI also established, pursuant to the compensation
agreement, that Madison did not “earn” the commissions
15
reflected by those advances until the occurrence of certain
conditions over time. As a factual matter, USBI proved that it
paid Madison in accordance with the provisions of the
compensation plans; that is, it made deductions from the
advances and finalized Madison’s earned commission pursuant to
the compensation plan provisions. The panel found that the
disputed deductions and post-payment reversals constituted
standard adjustments—not unlawful deductions from earned
wages—to Madison’s advanced commissions and permissible
commission sharing with her sales assistant, all as specified by
the compensation plans. We take “as correct” these factual
findings. (Panoche Energy Center, LLC v. Pacific Gas & Electric
Co. (2016) 1 Cal.App.5th 68, 99.)
On the other hand, whether USBI paid Madison advances
or wages when it made the monthly payments to her presents at
least a mixed question of fact and law. Per the arbitration panel,
Madison’s commissions became earned wages only after USBI
charged back the deductions and adjustments. The panel also
made a finding, largely by crediting Terrell’s testimony about the
compensation plans and their implementation, that Madison’s
paychecks constituted advances of her sales commissions, not
wages. Regardless of whether this presents a factual issue, a
legal issue, or a mixture of the two, we agree with the arbitration
panel and the trial court that Madison signed an agreement to
receive advances, with the express understanding that the
advances would not become earned wages until USBI made the
adjustments specified in the plan. (See DeLeon, supra,
207 Cal.App.4th at p. 810.) We also agree that USBI’s initial
payments to Madison amounted to advances that Madison did
not earn until the occurrence of certain conditions as specified in
16
the plans. Because Madison’s compensation initially consisted of
advances and not earned wages, she may not pursue claims
invoking sections 201, 203, and 2802 because those sections apply
only to earned wages. (See Sciborski v. Pacific Bell Directory,
supra, 205 Cal.App.4th at pp. 1166-1167.)
Madison concedes UBSI’s compensation plan designates
commission compensation as an advance until certain conditions
occur, but she disputes the panel’s determination that her final
compensation consisted of an advance. She also argues “the
arbitrators’ ruling that Ms. Madison’s final paycheck was an
advance makes no logical sense whatsoever,” and that the
commissions reflected in her final paycheck should be considered
earned wages, not an advance. As it did in the trial court, this
argument goes to the merits of her dispute with USBI by
relitigating the panel’s reasoning and conclusions. We do not
review the arbitrators’ reasoning. (Moncharsh, supra, 3 Cal.4th
at pp. 10-11.) Simply because Madison did not receive a
favorable determination on the merits does not mean the
arbitration award violated her statutory rights. Generally “it is
within the ‘powers’ of the arbitrator to resolve the entire ‘merits’
of the ‘controversy submitted’ by the parties[;]” including “all the
contested issues of law and fact submitted to the arbitrator for
decision. The arbitrator’s resolution of these issues is what the
parties bargained for in the arbitration agreement[;] . . . the
arbitrator’s award does no more than resolve that dispute.” (Id.
at p. 28.) Under the circumstances here, the panel did not exceed
its powers in resolving the questions of law and fact presented to
it, and the trial court did not err in concluding that no statutory
ground asserted by Madison warranted vacating the arbitration
award.
17
2. The arbitration panel did not improperly shift the
burden of proof onto Madison or waive Madison’s
unwaivable rights under section 221
Madison contends the arbitration panel “reversed” the
burden of proof on her statutory wage claims, depriving her of the
ability to vindicate her unwaivable statutory rights. As USBI
points out, section 221 is the only statute asserted by Madison
where the burden of proof may shift to the employer. “An
employee seeking to recover under Labor Code section 2802 for
business expenses paid out of pocket must show that the
expenditures were ‘necessarily expend[ed] in direct consequence
of the discharge of the employee’s duties[.]’” (Davis v. Farmers
Ins. Exchange (2016) 245 Cal.App.4th 1302, 1337 (Davis).)
However, where an employee establishes her employer deducted
“apparently business-related expenses” from her paychecks,
“[u]nder Labor Code sections 221 and 224, the employer bears the
burden of establishing that such deductions are authorized by
law.” (Davis, at p. 1337.)
As the panel found, Madison failed timely to assert a
section 221 claim that would trigger a burden-shifting analysis.
Although Madison relies on section 221 for her argument about
improper wage deductions, she did not assert a claim for
improper wage deductions in violation of section 221 in her
Statement of Claim or pursue a section 221 claim for improper
wage deductions during discovery, and she never filed an
amended Statement of Claim adding any causes of action based
on section 221. Rather, she argued for the first time at the
evidentiary hearing that various post-paycheck adjustments to
compensation, and her commission shared with her sales
assistant, constituted improper wage deductions in violation of
18
section 221. The panel dismissed the section 221 claim as
improper because Madison did not include it in her Statement of
Claim, but the panel did permit her to maintain a claim to recoup
her alleged improper reversals of compensation under her
remaining Labor Code causes of action. Because Madison neither
sought nor obtained leave to amend her Statement of Claim, the
panel acted well within its authority to dismiss the section 221
claim. (See FINRA rule 13309(b) [party may only amend
pleading if panel grants a motion that includes with it copy of the
proposed amended pleading].) We do not revisit that decision
here.
In any event, even if Madison properly had presented a
section 221 claim for improper wage deductions, it would suffer
the same flaw as Madison’s other claims. The panel found
Madison’s compensation prior to adjustment consisted of
advances, not earned wages. These commissions did not become
earned wages until USBI adjusted them with the chargebacks.
We do not second guess or disturb these findings on appeal.
(Moncharsh, supra, 3 Cal.4th at p. 11.)
C. Madison Conducted Adequate Discovery To Arbitrate Her
Statutory Claims
An arbitration “permits an employee to vindicate his or her
statutory rights” only if it “meet[s] certain minimum
requirements, including neutrality of the arbitrator, the provision
of adequate discovery, a written decision that will permit a
limited form of judicial review, and limitations on the costs of
arbitration.” (Armendariz, supra, 24 Cal.4th at pp. 90-91
[addressing arbitration of FEHA claims]; see Mercuro v. Superior
Court (2002) 96 Cal.App.4th 167, 180 (Mercuro) [“[W]e see no
19
reason why Armendariz’s ‘particular scrutiny’ of arbitration
agreements should be confined to claims under FEHA. Rather,
under the Supreme Court’s analysis, such scrutiny should apply
to the enforcement of rights under any statute enacted ‘for a
public reason.’”].) “These requirements were founded on the
premise that certain statutory rights are unwaivable.” (Little v.
Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076.) Parties to an
arbitration must have discovery “sufficient to adequately
arbitrate their statutory claim, including access to essential
documents and witnesses, as determined by the arbitrator(s) and
subject to limited judicial review pursuant to Code of Civil
Procedure section 1286.2.” (Armendariz, at p. 106.)
Here, over two years of discovery, Madison propounded
more than 80 written discovery requests on USBI, obtained two
evidentiary hearing continuances, and reached agreement with
USBI after she filed three motions to compel to produce specific
documents relating to her commission history and deductions.
USBI produced over 20,000 pages of documents. This discovery
included USBI’s annual compensation plans signed by Madison
detailing how financial advisors earned commissions and other
incentive pay, Madison’s entire detailed pay history and monthly
incentive pay detail, and Madison’s 2010-2012 monthly
commission reports showing revenue, deductions and
adjustments made to Madison’s advanced commissions. Over
USBI’s objections, and with the benefit of multiple continuances,
Madison participated in four days of discovery hearings.
Ultimately, the panel concluded USBI did not improperly
withhold any documents.
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Notwithstanding USBI’s voluminous document production
Madison contends she still did not receive sufficient discovery
regarding the adjustments and reconciliations made to her
advance commissions or “evidence that would enable her to show
that USBI did not have a legitimate reason for taking back her
earned wages.” “‘[A]dequate’ discovery does not mean unfettered
discovery,” and “[u]ltimately it is up to the arbitrator and the
reviewing court to balance the need for simplicity in arbitration
with the discovery needs of the parties.” (Mercuro, supra,
96 Cal.App.4th at p. 184.) Madison propounded and received
more than adequate discovery to vindicate her statutory rights as
required under Armendariz.
D. The Arbitration Decision Was Sufficiently Detailed To
Permit Judicial Review
Madison contends the written arbitration decision further
violates Armendariz because it lacked sufficient detail and failed
to set forth reasons for the rulings made. As noted, Armendariz
requires arbitrations to result in “a written decision that will
permit a limited form of judicial review.” (Armendariz, supra,
24 Cal.4th at p. 91.) The arbitrator “must issue a written
arbitration decision that will reveal, however briefly, the
essential findings and conclusions on which the award is based.”
(Id. at p. 107.)
The arbitration award in this case satisfies that
requirement. The 10-page decision includes sufficient clarity and
detail that we can review the panel’s conclusion rejecting
Madison’s claims under sections 201, 203, and 2802 based on its
finding that Madison’s paychecks consisted of commission
advances rather than earned wages, and its conclusion that she
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received adequate discovery. As did the trial court, we also find
unpersuasive Madison’s argument she did not receive a fully
reasoned award because it did not include discussion of her Penal
Code section 496, subdivision (a), claims or attempted section 221
claim that the panel dismissed. The award noted the panel’s
rulings on USBI’s motion to dismiss the Penal Code and
section 221 claims, which adequately reveals the panel’s reason
for not discussing those claims further. Regarding the
section 221 claim, Madison cites no authority requiring an
arbitration decision to discuss a claim not asserted in the
Statement of Claim and dismissed after being untimely raised at
the arbitration hearing, and where the panel explained its
reasoning for the dismissal on the record.
The panel’s decision allows judicial review sufficient to
ensure the panel complied with the requirements of the statutes
on which Madison based her claims.
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DISPOSITION
The judgment confirming the arbitration award is affirmed.
USBI shall recover its costs on appeal.
HOWARD, J.*
We concur:
SEGAL, Acting P. J.
FEUER, J.
* Judge of the Marin County Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
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