Udoff v. Proto Homes CA2/8 ( 2023 )

Filed 2/1/23 Udoff v. Proto Homes CA2/8
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
SHAWNA ALLWEIN UDOFF, B309883
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. 20STCV08670)
v.
PROTO HOMES, LLC, et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County. Maureen Duffy-Lewis, Judge. Affirmed.
Clark Hill, Rafael G. Nendel-Flores, Yesi Lagunas and
Monique A. Eginli for Defendants and Appellants.
Custis Law, Keith A. Custis; Zarmi Law and David Zarmi
for Plaintiff and Respondent.
_____________________________
Plaintiff-Respondent Shawna Allwein Udoff sued
Defendants-Appellants Proto Homes, Factors, LLC, Group F.
Builders, LLC, and Farhad Vafaee’s on claims related to her
employment with Proto Homes. Appellants appeal the trial
court’s order denying their motion to compel arbitration of Udoff’s
claims. We affirm the trial court’s findings that the provisions of
Udoff’s employment agreement with Proto Homes invalidate the
arbitration agreement provided by Proto Homes’ payroll company
Avitus, Inc.
BACKGROUND
1. Proto Homes Hires Udoff and Has Her Sign the Proto
Homes Employment Agreement
Defendants-Appellants Proto Homes, Factors, LLC, and
Group F. Builders, LLC, are related construction companies
controlled by individual defendant-appellant Farhad Vafaee.
Vafaee is the Executive Chairman/Chief Executive Officer (CEO)
and Chief Operating Officer (COO) of Proto Homes and the
founder and CEO of both Factors and Group F.
Proto Homes hired Udoff on July 9, 2018 as a sales and
client manager. On July 26, 2018, Udoff signed an employment
agreement (Proto Homes Agreement) and a commission
agreement. Vafaee signed both agreements. The Proto Homes
Agreement provided that it would “begin on the Effective Date of
this Agreement and end on December 31, 2018.”
The Proto Homes Agreement contained several relevant
provisions, including one that laid out dispute resolution
procedures between Proto Homes and Udoff. Under Section 28,
the Parties agreed that:
“a. Any dispute that arises out of or relates to Employee’s
employment relationship with Employer, the termination of that
2
employment relationship, or the validity, enforceability, or breach
of this Agreement (including this Section) shall be submitted to
mediation upon terms set forth in this Section.
“b. Employee and Employer agree mediation must be
completed prior to resorting to court action or other litigation.
The time the matter is in mediation shall not affect the running
of any applicable statute of limitations and no tolling of such
statute of limitations shall occur or be inferred from the
mediation requirement described in this Section in the absence of
a written agreement to that effect executed by the parties.
“c. If, for any dispute subject to the terms of this Section,
any party (1) commences litigation without first attempting to
resolve the matter, in good faith, through mediation, or (2), before
commencement of litigation, refuses to mediate in good faith after
a request has been made, then that party is precluded from
recovering attorney fees in that action, even if such fees would
otherwise be available to that party whether provided by law or
contract.”
The above provision regarding dispute resolution makes no
mention of arbitration.
The Proto Homes Agreement also contained an integration
provision under Section 29:
“a. This Agreement contains the entire agreement between
the parties and supersedes all prior or contemporaneous oral and
written agreements, understandings, commitments, and practices
between them, including all prior employment agreements,
whether or not fully performed by Employee before the date of
this Agreement.
“c. No amendments to this Agreement may be made except
by a writing signed by the Chief Operating Officer and Employee.
3
Any representations contrary to this Agreement, express or
implied, written or oral, made after the date of this Agreement are
hereby disclaimed.”
The Proto Homes Agreement further contained an
assignment clause under Section 24:
“a. [. . .] Employer may, at its sole option, (a) assign this
Agreement and all rights and obligations under it to any business
entity that succeeds to all or substantially all of the Employer’s
business through the merger or sale of assets [. . .]
“b. Employer further retains the sole right and discretion to
assign its performance obligations for payroll, vacation policies,
or benefits plans to one or more independent third-party
organizations, and in that event, such assignment or assignments
shall not adversely affect or modify Employee’s rights or
expectations under this Agreement.”
Finally, Section 3 of the Proto Homes Agreement provided
that “when the terms of this Agreement differ from or conflict
with Employer’s general employment policies or practices, this
Agreement shall control.”
2. The Avitus Arbitration Agreement
Sometime in August 2018, Proto Homes entered into an
agreement with Avitus, Inc. (Avitus) to provide various human
resources functions for Proto Homes, including payroll services.
While the Proto Homes Agreement was still in place prior to its
expiration on December 31, 2018, Proto Homes provided Udoff
with documents to electronically sign to begin payroll with
Avitus. Prior to Proto Homes changing its policy to have Avitus
conduct payroll and direct deposit, Udoff received her direct
deposit from Proto Homes for three pay periods.
4
Udoff recalled signing an Avitus direct deposit form and W-
4 but had no recollection of signing any other documents.
However, as the trial court found, a document titled California
Binding Arbitration Agreement (Avitus Arbitration Agreement)
bears Udoff’s electronic signature with a date of August 7, 2018.
No other signature, either from an Avitus or Proto Homes
representative, appears on the document. The Avitus Arbitration
Agreement provides that Avitus, Proto Homes, and Udoff will
“utilize binding arbitration to resolve all disputes that may arise
out of the employment context.”
3. Trial Court Denies Proto Homes’ Motion to
Compel Arbitration
On September 24, 2019, Proto Homes terminated Udoff’s
employment “for Cause as defined in the [Proto Homes]
Employment Agreement (Section 20) executed July 26, 2018.”
On March 3, 2020, Udoff filed her original complaint in Los
Angeles Superior Court against Appellants. On June 18, 2020,
Udoff filed the operative First Amended Complaint (FAC)
asserting causes of action against all appellants for (1) failure to
reimburse business expenses; (2) failure to pay minimum wage;
(3) failure to pay overtime; (4) failure to provide meal periods;
(5) failure to provide rest periods; (6) failure to provide accurate
wage statements; and (7) failure to timely pay wages at
separation. The FAC asserted causes of action against Proto
Homes, LLC, Factors, LLC, and Group F. Builders, LLC for
(8) failure to pay commission wages; (9) failure to pay regular
wages; (10) breach of implied covenant of good faith and fair
dealing; (11) retaliation under Labor Code section 1102.5;
(12) retaliation under Labor Code section 98.6; (13) wrongful
termination; and (14) violation of the Unfair Competition Law.
5
The FAC also asserted (15) breach of written contract against
Proto and (16) breach of oral contract against Factors, Group F,
and Farhad Vafaee.
On June 26, 2020, Appellants filed a motion to compel
arbitration based on the Avitus Arbitration Agreement. On
October 23, 2020, the trial court held a hearing on the motion.
The trial court found that Udoff had already signed the
Proto Homes Agreement which provided the following: (1) the
Proto Homes Agreement had a mediation clause under Section
28, but no arbitration clause; (2) the Proto Homes Agreement had
an integration clause precluding amendments not signed by the
Proto Homes COO 3) the Avitus Arbitration agreement was not
signed by Proto Homes; and 4) the Proto Homes Agreement
restricted Proto’s right to assign certain of its performance
obligations to a third party such that the assignment could “not
adversely affect or modify the employee’s rights or expectations
under this [Proto Homes] Agreement.” The court found that
Proto Homes had the right to assign direct deposits to Avitus but
could not do so if that assignment “adversely affected and
modified the plaintiff’s rights and expectation.” The trial court
concluded that “while the employer had the right to assign direct
deposits to Avitus, this adversely affected and modified the
Plaintiff’s rights and expectation.” The court therefore found that
the Avitus Arbitration Agreement was not valid and denied
Appellants’ motion to compel arbitration. Per the Proto Homes
Agreement, the trial court suggested that the Parties engage in
mediation. Appellants timely appealed.
6
DISCUSSION
I. Standard of Review
“There is no uniform standard of review for evaluating an
order denying a motion to compel arbitration. [Citation.] If the
court’s order is based on a decision of fact, then we adopt a
substantial evidence standard.” (Robertson v. Health Net of
California, Inc. (2005) 132 Cal.App.4th 1419, 1425.) But if the
court’s denial is based “solely on a decision of law, then a de novo
standard of review is employed.” (Ibid.) “Interpreting 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.” (Avery v. Integrated
Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 60.)
“The precise meaning of any contract . . . depends upon the
parties’ expressed intent, using an objective standard. When
there is ambiguity in the contract language, extrinsic evidence
may be considered to ascertain a meaning to which the
instrument’s language is reasonably susceptible . . . We review
the agreement and the extrinsic evidence de novo, even if the
evidence is susceptible to multiple interpretations, unless the
interpretation depends upon credibility. If it does, we must
accept any reasonable interpretation adopted by the trial court.”
(Golden West Baseball Co. v. City of Anaheim (1994) 25
Cal.App.4th 11, 21–22, 31, fns. omitted.) “[W]here . . . the
extrinsic evidence is not in conflict, construction of the agreement
is a question of law for our independent review.” (Appleton v.
Waessil (1994) 27 Cal.App.4th 551, 556; Schaefer’s Ambulance
Service v. County of San Bernardino (1998) 68 Cal.App.4th 581,
586 [“[T]o the extent the evidence is not in conflict, we construe
7
the instrument, and we resolve any conflicting inferences,
ourselves.”].)
Here, the trial court’s ultimate ruling did not require it to
resolve any factual disputes.1 The trial court based its decision
on the wording of the Avitus Arbitration Agreement and the
Proto Homes Agreement. We independently review the ruling.
(Alvarez v. Altamed Health Services Corp. (2021) 60 Cal.App.5th
572, 585 (Alvarez).)
II. The Trial Court Correctly Found That the Avitus
Arbitration Agreement Was Invalid Based On the
Existing Proto Homes Employment Agreement
“In ruling on a motion to compel arbitration, a trial court
must make two determinations. First the trial court must
determine whether there is a valid agreement to arbitrate. If so,
the trial court must grant the order unless, as relevant here, a
ground for revocation of the agreement exists.” ( Alvarez, supra,
60 Cal.App.5th at p. 580.)
While California law establishes “a presumption in favor of
arbitrability,” an agreement to submit disputes to arbitration “is
valid, enforceable and irrevocable . . . except [when] such grounds
[] exist for the revocation of any contract.” (Code Civ. Proc.,
§ 1281; OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125.) “Put
differently, an arbitration agreement will be enforced unless
grounds for its revocation exist.” (Alvarez, supra, 60 Cal.App.5th
at p. 581.)
1 Given that we affirm the trial court’s ruling, we need not
reach the issue of whether the trial court erred in rejecting
Udoff’s argument that Appellants did not meet their burden in
showing that Udoff knowingly signed the Avitus Arbitration
Agreement.
8
a. Any Amendments to Section 28 Required Proto
Homes COO’s Signature
Contrary to Appellants’ claims that the trial court found a
valid arbitration agreement, and as discussed further below, the
trial court correctly determined that the Avitus Arbitration
Agreement was invalid based on the existing Proto Homes
Agreement.
“In considering the language of the . . . agreement’s
arbitration provision, we apply the ordinary rules of contract
interpretation.” (EFund Capital Partners v. Pless (2007) 150
Cal.App.4th 1311, 1321.) “ ‘ “ ‘The fundamental rules of contract
interpretation are based on the premise that the interpretation of
a contract must give effect to the “mutual intention” of the
parties. Under statutory rules of contract interpretation, the
mutual intention of the parties at the time the contract is formed
governs interpretation.’ ” ’ ” (Ibid., citing Civ. Code, § 1636.)
Such intent is to be inferred, if possible, solely from the written
provisions of the contract. (Civ. Code, § 1639.) “ ‘ “The ‘clear and
explicit’ meaning of these provisions, interpreted in their
‘ordinary and popular sense,’ unless ‘used by the parties in a
technical sense or a special meaning is given to them by usage’
[citation], controls judicial interpretation.” ’ ” (Ameron Internat.
Corp. v. Insurance Co. of State of Pennsylvania (2010) 50 Cal.4th
1370, 1378 (Ameron Internat. Corp.), quoting Waller v. Truck Inc.
Exchange, Inc. (1995) 11 Cal.4th 1, 18.) Ambiguous language is
construed against the drafter. (First Options of Chicago, Inc. v.
Kaplan (1955) 514 U.S. 938, 944, citing Civ. Code, § 1654.)
We must first determine as a matter of law whether the
Proto Homes Agreement is an integrated contract, meaning the
9
parties intended it “as a final expression of their agreement with
respect to the terms included therein” and as “a complete and
exclusive statement of the terms of the agreement.” (Code Civ.
Proc., § 1856, subd. (d).) “When the parties to an agreement
express their intention that it is the final and complete
expression of their agreement, an integration occurs. Such a
contract may not be contradicted by evidence of other
agreements.” (Williams v. Atria Las Posas (2018) 24 Cal.App.5th
1048, 1051.)
As evidence that the Proto Homes Agreement was a
complete statement of Udoff and Proto Homes’ dispute resolution
agreement, Section 29(a) states that “[t]his Agreement contains
the entire agreement between the parties . . .” (See Spitser v.
Kentwood Home Guardians (1972) 24 Cal.App.3d 215,
220 [“[W]hen the language is clear and explicit, does not involve
an absurdity (Civ. Code, § 1638) and no ambiguity is shown,
evidence of conduct is irrelevant. In other words, evidence to
clarify an ambiguity is not needed when no ambiguity is shown to
exist.”].)
Section 29(c) then clearly states that “[n]o amendments to
this Agreement may be made except by writing signed by
Operation Officer and Employee.” Further, “any representations
contrary to this Agreement”, including “written or oral, made
after the date of this Agreement are hereby disclaimed.” (Italics
added.) Finally, the Proto Homes Agreement further provided
that, “when the terms of this Agreement differ from or conflict
with Employer’s general employment policies or practices, this
Agreement shall control.”
As discussed above, the Proto Homes Agreement contains a
dispute resolution provision under Section 28. Section 28 states
10
that the Parties agree to mediate before commencing a court
action, but in the event they do not mediate, then attorney fees
are not recoverable. Importantly, Section 28 is the complete
dispute resolution provision in the Proto Homes Agreement and
makes no mention of compelled arbitration.
Appellants improperly rely on Alvarez to support their
contention that the integration clause is of no import. In that
case, plaintiff pointed to the following language in her offer letter
as proof that an arbitration agreement was a modification that
required the signature of Altamed’s CEO: “ ‘By accepting this
offer of employment, I acknowledge that this in no way
constitutes an employment contract between Altamed Health
Services Corporation and myself. Furthermore, I acknowledge
that my employment with Altamed Health Services Corporation
is, except where prohibited by law, at will and may be terminated
at any time, with or without prior notice and with or without
cause, at the option of either myself or Altamed Health Services
Corporation, and that no promises or representations contrary to
the foregoing are binding on Altamed Health Services
Corporation unless made in writing and signed by the Chief
Executive Officer.’ ” (Alvarez, supra, 60 Cal.App.5th at p. 587.)
We concluded that “the phrase can only reasonably be understood
as applying to respondent’s at will employment status only.”
(Ibid.)
In contrast, the Proto Homes provision requiring that
amendments include the signature of the Proto Homes COO
references amendments made to the entire agreement, including
Section 28. The provision also makes clear that “[a]ny
representations contrary to this Agreement,” including “written
11
or oral, made after the date of this Agreement are hereby
disclaimed.” (Italics added.)
Further, Appellants’ argument that the later Avitus
Arbitration Agreement must control because it was signed after
the Proto Homes Agreement—despite containing an integration
clause that requires future amendments to be signed by the
COO—has no merit. Appellants rely on two inapposite cases
where the first agreement contained an integration that only
integrated prior agreements and did not contemplate future
amendments. (Williams v. Atria Las Posas, supra, 24
Cal.App.5th at p. 1052, and Jenks v. DLA Piper Rudnick Gray
Cary US LLP (2015) 243 Cal.App.4th 1, 15–16.)
Accordingly, we take the plain meaning of the above
provisions to mean that any changes to Section 28 would require
an amendment signed by both Udoff and the COO of Proto
Homes. (City of Atascadero v. Merrill Lynch, Pierce, Fenner &
Smith, Inc. (1998) 68 Cal.App.4th 445, 473 [“Courts must
interpret contractual language in a manner which gives force and
effect to every provision, and not in a way which renders some
clauses nugatory, inoperative or meaningless”].)
b. The Proto Homes Agreement Was Still In Effect
When Udoff Signed the Avitus Arbitration Agreement
Appellants’ misleadingly attempt to paint the Proto Homes
Agreement as an expired agreement. Whether the Proto Homes
Agreement expired after December 31, 2018 is a question we
need not resolve.2 The relevant fact is that the Proto Homes
2 We, however, note that there is evidence to support that
Appellants treated the Proto Homes Agreement as still in effect
when Proto Homes terminated Udoff, given that Proto Homes
terminated Udoff “for cause” under the Proto Homes Agreement.
12
Agreement was in place at the time Udoff executed the Avitus
Arbitration Agreement.
Appellants again improperly rely on Citizens for Amending
Proposition L v. City of Pomona (2018) 28 Cal.App.5th 1159 to
support their contention that the Avitus Arbitration Agreement
is a new agreement rather than an amendment. In Citizens for
Amending Proposition L, we observed “there is no reasonable way
to construe the belatedly adopted . . . written agreement as an
amendment . . . of the original agreement, which by its terms had
terminated.” (Id. at p. 1190.) In that case, the original
agreement terminated on June 24, 2014 and the purported
amendment took place on July 7, 2014—a month after the
original agreement’s expiration. (See ibid.)
Here, in contrast, there is no dispute that the Proto Homes
agreement was in effect until at least December 31, 2018 and
that the Avitus Arbitration Agreement is dated August 7, 2018.
As such, the Avitus Arbitration Agreement constituted an
ineffective attempted modification to the dispute resolution
provision (Section 28) of the Proto Homes Agreement. It was
ineffective because the integration provision bound Proto Homes
to the representation that it “disclaimed” any purported written
modification that was not signed by both parties and was
contrary to the Agreement.
c. The Avitus Arbitration Agreement Would Have
Modified Udoff’s Rights and Expectations Under the
Existing Proto Homes Agreement
As the trial court properly found, Section 24 of the Proto
Homes Agreement presciently contemplated this precise scenario.
13
Section 24 clearly states that Proto Homes may “assign its
performance obligations for the payroll . . . to one or more
independent third-party organizations” with the proviso that
“such assignment . . . shall not adversely affect or modify
Employee’s rights or expectations under this Agreement.”
One such right and expectation is Udoff’s right to resolve
disputes by filing a lawsuit in court.
Appellants’ main contention is that the trial court
“impermissibly tipped the scales against California’s strong
public policy favoring arbitration by finding that the assignment
of responsibility for direct deposit to Avitus was adverse to
Respondent and by extension the Arbitration Agreement was
adverse.” But the provision above explicitly states that
assignment “shall not adversely effect or modify Employee’s
rights or expectations under this Agreement.” (Italics added.)
As stated above, one such modification is to Udoff’s expectations
that she would be able to file her claims in court by mediating
first or waiving attorney’s fees if she chooses not to mediate.
(See Ameron Internat. Corp., supra, 50 Cal.4th at p. 1378 [“ ‘ “The
‘clear and explicit’ meaning of these provisions, interpreted in
their ‘ordinary and popular sense,’ [is to be applied] unless ‘used
by the parties in a technical sense or a special meaning is given
to them by usage.’ ” ’ ”].)
Moreover, “[t]here is no public policy favoring arbitration of
disputes which the parties have not agreed to arbitrate.”
(Engineers & Architects Assn. v. Community Development Dept.
(1994) 30 Cal.App.4th 644, 653; see Jarboe v. Hanlees Auto Group
(2020) 53 Cal.App.5th 539, 548; AT&T Technologies v.
Communications Workers (1986) 475 U.S. 643, 648 [“arbitration
14
is a matter of contract and a party cannot be required to submit
to arbitration any dispute which [s]he has not agreed to so
submit”].) Accordingly, and as discussed above, the trial court
properly found that the Avitus Arbitration Agreement was an
invalid attempt to modify Udoff’s rights.
DISPOSITION
The order denying Appellants’ motion to compel arbitration
is affirmed. Udoff shall recover her costs on appeal.
HARUTUNIAN, J.*
We Concur:
STRATTON, P. J.
GRIMES, J.
* Judge of the San Diego Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
15