Patterson v. Superior Court ( 2021 )

Filed 10/18/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
MICHAEL PATTERSON, B312411
Petitioner, (Super. Ct.
No. 20STCV14987)
v.
THE SUPERIOR COURT OF
LOS ANGELES COUNTY,
Respondent;
CHARTER COMMUNICATIONS,
INC. et al.,
Real Parties in Interest.
ORIGINAL PROCEEDINGS in mandate. Malcolm
Mackey, Judge. Petition granted.
Kyle Todd, P.C., Kyle Todd, Samantha Johnson and Alfredo
Nava.
No appearance for Respondent.
Hill, Farrer & Burrill, James Bowles and Casey Morris for
Real Parties in Interest Charter Communications, Inc. and
Nicholas Lopez.
______________________
Several well-established rules govern imposition of fees and
costs incurred in actions under the California Fair Employment
and Housing Act (FEHA) (Gov. Code, § 12900 et seq.). First, a
successful plaintiff is entitled to recover his or her reasonable
attorney fees. A prevailing defendant, however, may not be
awarded attorney fees or costs “unless the court finds the action
was frivolous, unreasonable, or groundless when brought, or the
plaintiff continued to litigate after it clearly became so.” (Gov.
Code, § 12965, subd. (b) (§ 12965(b)).) Second, FEHA claims may
be included in a predispute arbitration agreement, but an
employer that seeks to compel arbitration of FEHA claims may
not limit statutorily imposed remedies or “require the employee
to bear any type of expense that the employee would not be
required to bear if he or she were free to bring the action in
court.” (Armendariz v. Foundation Health Psychcare Services,
Inc. (2000) 24 Cal.4th 83, 103, 110-111 (Armendariz).)
Given these fundamental principles, may an employer’s
arbitration agreement authorize the recovery of attorney fees for
a successful motion to compel arbitration of a FEHA lawsuit even
if the plaintiff’s opposition to arbitration was not frivolous,
unreasonable or groundless? Because a fee-shifting clause
directed to a motion to compel arbitration, like a general
prevailing party fee provision, risks chilling an employee’s access
to court in a FEHA case absent section 12965(b)’s asymmetric
standard for an award of fees, a prevailing defendant may
2
recover fees in this situation only if it demonstrates the plaintiff’s
opposition was groundless.
No such finding was made by the superior court in the
underlying action before awarding real party in interest Charter
Communications, Inc. its attorney fees after granting Charter’s
motion to compel Michael Patterson to arbitrate his FEHA
claims. Accordingly, we grant Patterson’s petition for writ of
mandate and direct respondent Los Angeles Superior Court to
vacate its March 16, 2021 order awarding attorney fees to
Charter and to conduct a new hearing to reconsider Charter’s
motion for attorney fees.
FACTUAL AND PROCEDURAL BACKGROUND
1. Patterson’s FEHA Lawsuit
Patterson, a Charter employee from March 2017 through
January 2020, sued Charter in April 2020 for unlawful sexual
harassment/hostile work environment (Gov. Code, § 12040,
subd. (j)), unlawful retaliation (§ 12940, subd. (h)) and failure to
prevent harassment and retaliation in violation of FEHA
(§ 12040, subd. (k)). Patterson also named in the sexual
harassment cause of action Nicholas Lopez, who had been
Patterson’s supervisor at Charter’s Irwindale office during a two-
year period. In his complaint Patterson alleged, in brief, that
Lopez had repeatedly engaged in unwanted and inappropriate
touching; Patterson had complained to Charter’s human
resources department about Lopez’s conduct; and Charter
responded, after conducting inadequate investigations, by
terminating Patterson’s employment.
3
2. Charter’s Motion To Compel Arbitration
Charter moved on June 29, 2020 to compel arbitration of
Patterson’s FEHA claims pursuant to the parties’ written
agreement to arbitrate all employment-related disputes. In its
motion and supporting declaration and exhibits, Charter
explained its active employees had been notified by email on
October 6, 2017 that Charter had implemented an arbitration
program and, unless they opted out within 30 days, they would
be bound by the mutual arbitration agreement that could be
viewed online via an intranet link to a Solution Channel website.
Patterson did not opt out.
In his opposition to the motion Patterson argued he never
saw, much less consented to, the arbitration agreement Charter
was seeking to enforce. (He did not deny the email had been sent
to his work in-box, but he declared he did not see it.) Patterson
also argued the agreement was procedurally and substantively
unconscionable, specifically challenging as one-sided and
inconsistent with the policies underlying access to the courts in
FEHA cases the separate attorney fee provision in the agreement
authorizing attorney fees for a party who successfully compelled
arbitration.
The court granted Charter’s motion on October 20, 2020,
ruling, “The court does not find the agreement to be procedurally
unconscionable and that there was sufficient notice to plaintiff by
Charter as more fully detailed in the notes of the court reporter.”
We summarily denied Patterson’s petition for writ of mandate
seeking review of the order compelling arbitration. (Patterson v.
Superior Court (Dec. 23, 2020, B309452).)
4
3. Charter’s Motion for Attorney Fees
Charter moved on October 29, 2020 for an award of
attorney fees incurred in moving to compel arbitration “on the
ground that Charter was the prevailing party on Charter’s
motion to enforce the Arbitration Agreement entered into by the
parties, which had an attorneys’ fees provision specifically
providing such relief to the prevailing party on a motion to
enforce said agreement.” Specifically, Charter quoted
paragraph K of the agreement:
“K. Arbitration Costs. Charter will pay the AAA
administrative fees and the arbitrator’s fees and
expenses. All other costs, fees and expenses associated
with the arbitration, including without limitation each
party’s attorneys’ fees, will be borne by the party
incurring the costs, fees and expenses. The parties
agree and acknowledge, however, that the failure or
refusal of either party to submit to arbitration as
required by this Agreement will constitute a material
breach of this Agreement. If any judicial action or
proceeding is commenced in order to compel arbitration,
and if arbitration is in fact compelled, or the party
resisting arbitration submits to arbitration following
the commencement of the action or proceeding, the
party that resisted arbitration will be required to pay
the other party all costs, fees and expenses that they
incur in compelling arbitration, including, without
limitation, reasonable attorneys’ fees.”
Citing this court’s decision in Acosta v. Kerrigan (2007)
150 Cal.App.4th 1124, 1132 (Acosta), which involved a lease
dispute between a landlord and tenant, Charter argued, “Under
5
California law, where a fee provision in an arbitration agreement
provides for attorneys’ fees to the prevailing party compelling
arbitration, that party ‘has an immediate right to make a claim
for the attorney fees he incurred in getting the trial court to move
the controversy to arbitration.’” Charter sought $10,583 as
reasonable attorney fees.
Following further briefing and oral argument, the superior
court on March 16, 2021 granted Charter’s motion in substantial
part, reducing the request for excessive hours and awarding
Charter $6,912 as reasonable attorney fees. The court ruled
attorney fees incurred in connection with a petition to compel
arbitration may be awarded before the merits of the dispute have
been determined “where a party prevailed in a discrete
proceeding on the contract.” The court also ruled the asymmetric
standard for attorney fees in FEHA cases applied only after
adjudication of the case on the merits.
4. Patterson’s Writ Petition
On May 14, 2021 Patterson filed a petition for writ of
mandate, prohibition or other appropriate relief in this court,
arguing the superior court had erred in awarding Charter
attorney fees because it had not “commenced” a “judicial action or
proceeding” to compel arbitration, as required by the terms of the
arbitration agreement; FEHA does not permit an employer to
shift attorney fees to a plaintiff employee unless the employee’s
actions were objectively frivolous; and the fee-shifting provision
at issue is unconscionable and should not be enforced. After
receiving an informal opposition from Charter, on June 16, 2021
we ordered respondent superior court to show cause why it
should not be compelled to vacate its order granting the motion
for attorney fees and to issue a new order denying the motion.
6
DISCUSSION
1. The Charter Fee-shifting Clause Applies to a Motion To
Compel Arbitration in a Pending Lawsuit
Traditional rules of contract interpretation apply to
determining the scope of an agreement for the payment of
attorney fees. (Mountain Air Enterprises, LLC v. Sundowner
Towers, LLC (2017) 3 Cal.5th 744, 752 (Mountain Air); see
Santisas v. Goodin (1998) 17 Cal.4th 599, 608.) “Accordingly, we
first consider the mutual intention of the parties at the time the
contract providing for attorney fees was formed. [Citation.] Our
initial inquiry is confined to the writing alone. [Citations.] ‘“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. [Citation.] Thus, if the
meaning a layperson would ascribe to contract language is not
ambiguous, we apply that meaning. [Citations.]”’ [Citations.] At
the same time, we also recognize the ‘interpretational principle
that a contract must be understood with reference to the
circumstances under which it was made and the matter to which
it relates.” (Mountain Air, at p. 752.)
The fee-shifting clause in Charter’s arbitration agreement
applies “[i]f any judicial action or proceeding is commenced in
order to compel arbitration.” As a threshold matter, Patterson
argues this provision, properly interpreted, authorizes the
recovery of attorney fees only when Charter has successfully
initiated a judicial action or proceeding to compel arbitration, not
when, as here, it moved to compel arbitration in a lawsuit filed by
a former employee. That distinction is significant, Patterson
contends, as explained in Roberts v. Packard, Packard & Johnson
7
(2013) 217 Cal.App.4th 822 (Roberts), which held an award of
attorney fees following a successful petition to compel arbitration
filed in a pending lawsuit between a law firm and its former
clients was premature; pursuant to Civil Code section 1717 any
award under those circumstances had to await the arbitrator’s
ultimate determination of the prevailing party: “‘There is an
“analytic distinction” between a motion (or petition) to compel
arbitration filed within an existing [lawsuit,] as here, and a
petition to compel arbitration that commences an independent
[lawsuit]. . . . “A party may file a petition to enforce an
arbitration agreement as an independent lawsuit if there is no
pending lawsuit; otherwise, the party must file the petition in the
pending lawsuit.” . . . A petition to compel arbitration filed in a
pending lawsuit is “part of the underlying action”; it is not a
distinct action.’” (Roberts, at p. 834, quoting Phillips v. Sprint
PCS (2012) 209 Cal.App.4th 758, 772.)
Indeed, in Acosta, supra, 150 Cal.App.4th 1124, this court’s
decision that is Charter’s primary authority supporting the
superior court’s fee award, the fee provision specifically
contemplated a motion to compel arbitration in a pending lawsuit
filed notwithstanding the parties’ arbitration agreement:
“‘Should any party to this Agreement hereafter institute any
legal action or administrative proceeding against the other by
any method other than said arbitration, the responding party
shall be entitled to recover from the initiating party all damages,
costs, expenses, and attorneys’ fees incurred as a result of such
action.’” (Id. at p. 1126.) Charter’s use of very different language
in its fee provision, Patterson continues, makes the provision
ambiguous, at the very least, and, as such, should be construed
against Charter, the drafter of the agreement—a common law
8
rule of contract interpretation that applies to arbitration
agreements, including those, like Charter’s, governed by the
Federal Arbitration Act (FAA). (See, e.g., Mastrobuono v.
Shearson Lehman Hutton (1995) 514 U.S. 52, 63 [“[r]espondents
drafted an ambiguous document, and they cannot now claim the
benefit of the doubt. The reason for this rule is to protect the
party who did not choose the language from an unintended or
unfair result”]; see also Civ. Code, § 1654; 24 Hour Fitness, Inc. v.
Superior Court (1998) 66 Cal.App.4th 1199, 1214-1215
[“[p]articularly where the contract is one of adhesion, ambiguity
in the contract language not dispelled by application of other
canons of construction is interpreted against the drafter”]; but cf.
Lamps Plus, Inc. v. Varela (2019) 587 U.S. ___ [139 S.Ct. 1407,
1418-1419 [declining to apply doctrine of contra proferentem to
construe an ambiguous agreement to authorize class arbitration
rather than traditional individualized arbitration favored by the
FAA].)
Charter answers Patterson’s textual analysis by asserting,
“The language ‘judicial action or proceeding’ encompasses both a
lawsuit and a motion,” quoting the definition of “proceeding” in
Black’s Law Dictionary (11th edition 2019): “The regular and
orderly progression of a lawsuit, including all acts and events
between the time of commencement and entry of judgment.”
Charter’s response is overly simplistic.
To be sure, “[t]he term ‘proceeding’ may refer not only to a
complete remedy but also to a mere procedural step that is part
of a larger action or special proceeding.” (Rooney v. Vermont
Investment Corp. (1973) 10 Cal.3d 351, 367.) But as the Supreme
Court explained in Mountain Air, supra, 3 Cal.5th at page 754,
“The word ‘proceeding’ can take on ‘different meanings in
9
different contexts.’ [Citation.] For example, ‘proceeding’ has
been construed narrowly as ‘an action or remedy before a court,’
and, as broadly as ‘“[a]ll the steps or measures adopted in the
prosecution or defense of an action.”’”
The issue in Mountain Air was whether the successful
assertion of an affirmative defense triggered the attorney fee
provision in a contract that provided, “‘If any legal action or any
other proceeding, including arbitration or an action for
declaratory relief[,] is brought for the enforcement of this
Agreement or because of an alleged dispute, breach, default, or
misrepresentation in connection with any provision of this
Agreement, the prevailing party shall be entitled to recover
reasonable attorney fees, expert fees and other costs incurred in
that action or proceeding, in addition to any other relief to which
the prevailing party may be entitled.’” (Mountain Air, supra,
1
3 Cal.5th at p. 752, boldface & italics omitted.) After holding
that pleading an affirmative defense does not constitute bringing
a legal action within the meaning of the attorney fee provision,
the Supreme Court held “proceeding” had been used by the
parties in its narrower sense, referring to the entirety of a case,
not to individual procedural steps within a case. (Id. at p. 754.)
The Court supported this narrow reading of the fee provision by
focusing on the verb “brought,” explaining that “affirmative
1
The defendants successfully asserted a repurchase
agreement with an attorney fee provision was a novation, which
defeated the plaintiffs’ action for breach of an earlier contract
between the parties. (Mountain Air, supra, 3 Cal.5th at p. 749.)
10
defenses are generally pleaded, asserted, or raised, but typically
2
not ‘brought’ by a party.” (Id. at pp. 755-756.)
Patterson’s argument that Charter’s fee-shifting clause
should be interpreted to apply only to a petition to compel
arbitration or other action initiated by Charter, not a motion filed
in an employee’s lawsuit, is certainly reasonable. Just as an
affirmative defense is typically not “brought,” as the Supreme
Court observed in Mountain Air, a motion is generally not
“commenced.” (See Roberts, supra, 217 Cal.App.4th at p. 841
[petition to compel arbitration filed in a pending lawsuit “is not a
‘discrete proceeding’”].) And given the decidedly unilateral
nature of Charter’s imposition of the arbitration agreement on its
employees—an email notice, links to intranet sites with the
2
Similarly, in Shalant v. Girardi (2011) 51 Cal.4th 1164, the
Supreme Court rejected the argument that, because “litigation” is
defined, for purposes of the vexatious litigant statutes, as “any
civil action or proceeding” (Code Civ. Proc., § 391, subd. (a)) and
the term “proceeding” can, in some circumstances, refer to a
procedural step that is part of a larger action, a vexatious litigant
who is barred by a prefiling order from “filing any new litigation”
in propria persona (Code Civ. Proc., § 391.7, subd. (a)), and who
becomes self-represented while an action is pending, cannot take
any further procedural steps in the action without first obtaining
permission from the presiding judge. Emphasizing that the term
“proceeding” needed to be understood in the context of the
vexatious litigant statutes as a collective whole, the Court held,
“If ‘litigation’ as defined in section 391, subdivision (a) included
every motion or other procedural step taken during an action or
special proceeding, and that definition were applied throughout
the vexatious litigant statutes, several provisions would take on
absurd, unworkable, or clearly unintended meanings.” (Shalant,
at pp. 1173-1174.)
11
document, and the absence of the employee’s affirmative opt-
out—it is impossible to meaningfully consider the mutual
intention of the parties.
That said, read in context, we agree with Charter the fee
provision, poorly drafted though it may be, was intended to cover
the situation presented here. Immediately prior to the sentence
authorizing fees incurred in an action or proceeding to compel
arbitration, the agreement expressly states, “[T]he failure or
refusal of either party to submit to arbitration as required by this
Agreement will constitute a material breach of this Agreement.”
Attorney fees incurred to require the unwilling party to
participate in the contractually mandated arbitration are
damages caused by that breach, made recoverable by the
following sentence (the fee-shifting clause). It is inconceivable
Charter intended to limit that remedy to the relatively rare
situation where it had initiated an independent action to compel
arbitration before its employee or former employee filed a
3
lawsuit.
3
An independent action to compel arbitration is far more
likely in a commercial setting, where both parties to a failed
transaction desire resolution of their dispute, albeit in different
forums. (See, e.g., Otay River Constructors v. San Diego
Expressway (2008) 158 Cal.App.4th 796, 799 [in an action
brought by a general contractor against the project owner solely
to compel arbitration of contractual disputes between the parties,
“a party who succeeds in obtaining an order denying the petition
to compel arbitration is a prevailing party in the action on the
contract”].) In the employment context, in contrast, an employer
has little reason to seek arbitration of the employee’s potential
FEHA or wage-and-hour claims before they have been formally
asserted in a lawsuit.
12
2. To the Extent Lawful, the Charter Fee-shifting Clause
May Be Enforced Immediately in Litigation That Does
Not Involve Other Contract Issues
In Acosta, supra, 150 Cal.App.4th 1124, this court affirmed
an interim award of attorney fees to a defendant landlord who
had responded to his former commercial tenant’s lawsuit for a
writ of possession, injunctive relief and damages for forcible
detainer and forcible entry by successfully moving to compel
arbitration of their dispute. As discussed, the parties’ lease
agreement, in addition to the provision requiring arbitration of
disputes relating to their occupancy agreement and a general
provision stating the prevailing party at an arbitration was
entitled to recover attorney fees, contained a separate clause
specifically authorizing the recovery of fees and costs incurred in
pursuing a motion to compel arbitration in a pending lawsuit
that had been filed notwithstanding the parties’ arbitration
agreement. (Id. at p. 1126 & fn. 2.) Emphasizing the landlord
was not seeking to recover attorney fees under the provision
authorizing an award of fees to the party prevailing on the merits
of a claim under the occupancy agreement, we explained, “[H]e is
seeking fees incurred while enforcing an independent provision of
the contract, fees to which he is entitled even if he loses the case
on the merits in the arbitration. A party who is entitled to
recover attorney fees he or she incurred in making a successful
discovery motion need not wait until the end of the case before
filing the claim for fees. A fortiori, [the landlord] is entitled to an
interim attorney fee award in this case where he already has
13
prevailed on an independent proceeding contemplated in the
4
contract.” (Id. at p. 1132, fn. omitted.)
Our colleagues in Division One of this court distinguished
Acosta in Roberts, supra, 217 Cal.App.4th 822 and reversed an
interim award of attorney fees made to a law firm that had
successfully moved to compel arbitration in its former client’s
pending lawsuit for breach of fiduciary duty. In Roberts, unlike
Acosta, there was no separate provision authorizing an award of
fees if a motion to compel arbitration were filed, only a general
provision authorizing an award of fees to the prevailing party in
an action arising under the parties’ retainer (contingency fee)
agreement. (Roberts, at pp. 829, 843.) Accordingly, the court
held, “Only one side—plaintiffs or their former attorneys—can
prevail in enforcing the contingency fee agreement, and the
determination of the prevailing parties must await the resolution
of plaintiffs’ causes of action by an arbitrator. Attorney fees
under [Civil Code] section 1717 may be awarded only to the
parties that prevail in the ‘action.’” (Id. at p. 843.)
The court in Frog Creek Partners, LLC v. Vance Brown, Inc.
(2012) 206 Cal.App.4th 515 (Frog Creek), like the Roberts court,
distinguished Acosta in denying an interim award of attorney
fees for a successful motion to compel arbitration because there
was no separate contract provision authorizing such an award,
but also disagreed with Acosta’s rationale. (Frog Creek, at
pp. 525, 546.) The plaintiff in Frog Creek filed a lawsuit for
4
All three members of the panel agreed the landlord was
entitled to an interim award of fees based on his successful
motion to compel arbitration. The dissent, however, argued the
fee issue was one for the arbitrator to decide, not the trial court.
(Acosta, supra, 150 Cal.App.4th at p. 1133 (dis. opn. of Zelon, J.).)
14
breach of a construction contract, which contained arbitration
and attorney fee clauses. The defendant petitioned twice to
compel arbitration based on different versions of the parties’
agreement. The plaintiff defeated the first petition; a decision
that was affirmed on appeal. The trial court then granted the
second petition, and the defendant ultimately prevailed on the
merits of the contract dispute in arbitration. In postarbitration
proceedings the trial court awarded attorney fees to both parties
for prearbitration fees and costs: to the plaintiff for its initial
successful opposition to arbitration and prevailing on appeal of
that order, and to the defendant for the second petition to compel
arbitration.
The court of appeal reversed the award of fees to the
plaintiff, holding there can be only one prevailing party in a
contract action. (Frog Creek, supra, 206 Cal.App.4th at p. 520.)
The plaintiff’s interim victory on the first petition to compel
arbitration did not make the plaintiff the prevailing party
because denial of that petition “did not resolve the parties’
contract dispute; instead, the merits of that dispute remained
before the court in [the plaintiff’s] complaint and [the
defendant’s] cross-complaint.” (Id. at p. 546.) That dispute was
ultimately resolved in the defendant’s favor through arbitration.
The defendant was thus the prevailing party on the contract
under Civil Code section 1717 and “entitled to all of its fees,
including fees incurred during the lawsuit in proceedings where
it did not prevail.” (Frog Creek, at p. 546.)
Noting that our decision in Acosta did not analyze the
interim award of fees under Civil Code section 1717, the Frog
Creek court observed, “Under Acosta, it would seem that parties
to a contract could provide for an attorney fee award in any
15
specified circumstance, as long as the parties did so with highly
specific contractual language.” (Frog Creek, supra,
206 Cal.App.4th at p. 544.) That rationale, the court explained,
“appears to be contrary to the proposition that Civil Code
section 1717 alone determines a party’s entitlement to attorney
fees under a contractual fee provision” and would “render
irrelevant the Civil Code section 1717 definition of ‘party
prevailing on the contract.’” (Frog Creek, at pp. 544-546;
see DisputeSuite.com, LLC v. Scoreinc.com (2017) 2 Cal.5th 968,
971, 977 [trial court did not abuse its discretion in ruling a
defendant in an action arising out of contract was not entitled to
an award of attorney fees under section 1717 by virtue of having
obtained a dismissal from a California court on the ground the
agreement at issue contained a forum selection clause specifying
the courts of another jurisdiction; Frog Creek “supports the denial
of fees in this case by its invocation of the general principle,
equally applicable here, that fees under section 1717 are awarded
to the party who prevailed on the contract overall, not to a party
who prevailed only at an interim procedural step”].)
Charter argues the fee provision in its arbitration
agreement is analogous to the separate fee provision at issue in
Acosta, supra, 150 Cal.App.4th 1124—that is, it is specifically
directed to fees incurred to compel arbitration—and should be
enforced on the same basis. We agree. Unlike the law firm in
Roberts, supra, 217 Cal.App.4th 822, Charter does not seek to
invoke a general prevailing party fee provision to justify an
interim award of fees. And whatever the merit in the Frog Creek
court’s critique of Acosta’s rationale under Civil Code
section 1717, here there is no other contract issue remaining to
be resolved. Patterson’s claims are based on Charter’s alleged
16
violations of FEHA. The only contract dispute was the
enforceability of the arbitration agreement. Charter was the
prevailing party in the superior court and is entitled to its fees
under the fee provision in that contract to the extent not
5
otherwise prohibited or limited by FEHA.
3. Attorney Fees May Be Awarded to a Defendant Following
a Successful Motion To Compel Arbitration in a FEHA
Lawsuit Only If the Plaintiff’s Opposition Was
Groundless
a. The asymmetric FEHA standard for an award of
attorney fees and costs
Section 12965(b) creates a private right of action to enforce
FEHA. Prior to amendment effective January 1, 2019 (Stats.
2018, ch. 955, § 5), the last sentence of section 12965(b) simply
read, “In civil actions brought under this section, the court, in its
discretion, may award the prevailing party, including the
department, reasonable attorney’s fees and costs, including
expert witness fees.” (See Stats. 2012, ch. 46, § 45.) However, in
Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, the Supreme
Court, after noting that California courts interpreting FEHA
often look to cases construing title VII of the federal Civil Rights
Act of 1964 (42 U.S.C. § 2000e et seq.), explained the United
States Supreme Court had held in title VII cases, “[A] prevailing
plaintiff should ordinarily recover attorney fees unless special
5
As discussed, we denied Patterson’s petition for writ of
mandate seeking immediate review of the superior court’s order
compelling arbitration. That order will be reviewable on appeal
from a final judgment entered after arbitration. (See Ashburn v.
AIG Financial Advisors, Inc. (2015) 234 Cal.App.4th 79, 94;
Phillips v. Sprint PCS, supra, 209 Cal.App.4th at p. 766.)
17
circumstances would render the award unjust, whereas a
prevailing defendant may recover attorney fees only when the
plaintiff’s action was frivolous, unreasonable, without foundation,
or brought in bad faith.” (Chavez, at p. 985, citing Christiansburg
Garment Co. v. EEOC (1978) 434 U.S. 412 (Christiansburg).) The
Supreme Court impliedly approved this asymmetric standard for
the award of fees in FEHA cases after emphasizing the
Legislature’s purpose in adopting the attorney fee provision was
“‘to provide “fair compensation to the attorneys involved in the
litigation at hand and encourage[] litigation of claims that in the
6
public interest merit litigation.”’” (Id. at pp. 984-985.)
Five years later in Williams v. Chino Valley Independent
Fire Dist. (2015) 61 Cal.4th 97 the Supreme Court made explicit
its prior implicit approval of the asymmetric standard of
Christiansburg in FEHA cases and extended it to the trial court’s
award of costs, as well as attorney fees. (Id. at p. 109.) In doing
so, the Supreme Court once again emphasized the Legislature’s
intent to encourage employees to vigorously enforce the state’s
antidiscrimination law: “In amending California’s employment
antidiscrimination law to authorize discretionary awards of
attorney fees and costs, our Legislature, like Congress before it,
6
The Supreme Court stated with seeming approval that
“California courts have adopted this rule for attorney fee awards
under the FEHA”; but, in holding the trial court had discretion to
deny attorney fees to the plaintiff under the particular
circumstances of the case before it, the Court did not expressly
adopt Christiansburg’s asymmetric rule for the award of fees in
FEHA cases. (See Chavez v. City of Los Angeles, supra,47 Cal.4th at p. 985.)
18
sought ‘to encourage persons injured by discrimination to seek
judicial relief.’” (Id. at p. 112.)
In 2018 the Legislature amended section 12965(b) to
incorporate the asymmetric standard articulated in existing case
law, authorizing the court, in its discretion, to award reasonable
attorney fees and costs “to the prevailing party . . . except that . . .
a prevailing defendant shall not be awarded fees and costs unless
the court finds the action was frivolous, unreasonable, or
groundless when brought, or the plaintiff continued to litigate
after it clearly became so.” (Stats. 2018, ch. 955, § 5.) As the
Supreme Court explained recently in Pollock v. Tri-Modal
Distribution Services, Inc. (2021) 11 Cal.5th 918, 949 when
applying this rule to an award of costs on appeal, to permit a
prevailing FEHA defendant to collect fees and costs when the
plaintiff brought a potentially meritorious suit that ultimately
did not succeed “would undercut the Legislature’s intent to
promote vigorous enforcement of our civil rights laws.”
b. An employee may not be required to waive the
asymmetric FEHA attorney fee standard
The Supreme Court in Armendariz, supra, 24 Cal.4th 83held employees may be compelled to arbitrate FEHA claims “if
the arbitration permits an employee to vindicate his or her
statutory rights.” (Id. at p. 90.) “[A]n arbitration agreement
cannot be made to serve as a vehicle for the waiver of statutory
rights created by the FEHA.” (Id. at p. 101.) To be valid and
enforceable, the Court ruled, a predispute arbitration agreement
involving FEHA claims, among other requirements, “may not
limit statutorily imposed remedies such as punitive damages and
attorney fees” (id. at p. 103) and “cannot generally require the
employee to bear any type of expense that the employee would not
19
be required to bear if he or she were free to bring the action in
court” (id. at pp. 110-111).
Applying these Armendariz principles, the court of appeal
in Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th
387, disapproved on another ground in Baltazar v. Forever 21,
Inc. (2016) 62 Cal.4th 1237, 1246, held an arbitration clause in an
employment agreement that authorized the recovery of attorney
fees and costs by the prevailing party in the arbitration, rather
than adopting FEHA’s asymmetric standard, made the
arbitration clause substantively unconscionable: “[E]nforcing the
arbitration clause and compelling Trivedi to arbitrate his FEHA
claims lessens his incentive to pursue claims deemed important
to the public interest, and weakens the legal protection provided
to plaintiffs who bring nonfrivolous actions from being assessed
fees and costs.” (Trivedi, at p. 395; accord, Wherry v. Award, Inc.
(2011) 192 Cal.App.4th 1242, 1249 [arbitration agreement that
provides prevailing party is entitled to attorney fees “without any
limitation for a frivolous action or one brought in bad faith”
violates Armendariz]; see Serafin v. Balco Properties Ltd., LLC
(2015) 235 Cal.App.4th 165, 183 [“By requiring both parties to
bear their own attorney fees and costs, the [arbitration] provision
before us runs counter to FEHA which allows a successful
plaintiff to recover attorney fees and costs from the employer (but
does not similarly allow an employer to recover fees and costs
from an employee in most cases.) [Citation.] Such a modification
of California law is inappropriate under Armendariz as it has the
effect of denying a plaintiff the rights and remedies he or she
would have if he or she were litigating his or her claims in
20
court”]; Serpa v. California Surety Investigations, Inc. (2013)
7
215 Cal.App.4th 695, 709-710 [same].)
Permitting Charter to recover its attorney fees for a
successful motion to compel arbitration in a pending FEHA
lawsuit without a showing the plaintiff’s insistence on a judicial
forum to determine his or her claims was objectively groundless
similarly denies the plaintiff the rights guaranteed by
section 12965(b) with a corresponding chill on access to the courts
for any employee or former employee who has an arguably
meritorious argument that the Charter arbitration agreement is
unenforceable. Even with a strong claim of unconscionability, an
employee might not pursue it and risk a substantial award of
attorney fees before arbitration begins.
Charter attempts to avoid the conclusion the fee clause as
written is unenforceable under Armendariz by asserting its
7
Whether the arbitration agreement and the Solution
Channel Program Guidelines under which the arbitration will be
conducted entitle Patterson to recover his attorney fees and costs
if he prevails in the arbitration—an issue not now before us—is
unclear. Both documents provide Charter will pay
administrative expenses and the arbitrator’s fees, but all other
costs, fees and expenses, “including, without limitation, each
party’s attorneys’ fees, will be borne by the party incurring the
costs, fees and expenses.” However, the guidelines also provide,
“At the discretion of the arbitrator, the prevailing party may
recover any remedy that the party would have been allowed to
recover had the dispute been brought in court.” (We take judicial
notice pursuant to Evidence Code sections 452, subdivision (d),
and 459 of the Solution Channel Program Guidelines, which are
part of the record on appeal in Ramirez v. Charter
Communications Holding Co., LLC, B309408, pending in Division
Four of this court.)
21
motion to compel arbitration did not relate to Patterson’s
underlying FEHA claims but was “a contractual matter separate
8
and apart from the merits of a FEHA action.” We need not
decide whether this contention would have any merit if Charter
had initiated an independent action to compel arbitration prior to
Patterson’s filing of his lawsuit, an issue not before us. But
Charter cannot have it both ways. As discussed, its argument a
motion to compel arbitration in pending litigation comes within
the scope of the fee-shifting clause is premised on its
interpretation of the term “proceeding” to include all procedural
steps within a lawsuit. Either Charter’s motion to compel
arbitration is a “proceeding” within Patterson’s FEHA action, or
it is not. We have agreed with Charter it is the former. (See
Roberts, supra, 217 Cal.App.4th at p. 834 [a petition to compel
arbitration filed in a pending lawsuit is part of the underlying
action].) As a consequence, Charter’s motion, an integral part of
Patterson’s FEHA lawsuit, is subject to Patterson’s rights, and
the remedies available to him, under FEHA.
c. We interpret the Charter arbitration agreement as
containing a valid attorney fee provision
Patterson urges us to hold the fee-shifting provision in the
Charter arbitration agreement is unenforceable and direct the
superior court to enter a new order denying Charter’s motion for
8
Charter also suggests that Patterson could have avoided
any liability for attorney fees “if he had simply stipulated to
arbitration.” Of course, an individual often can escape additional
adverse consequence by capitulating to an opponent, rather than
seeking to vindicate his or her rights. But that does not mean it
is improper to assert those rights, nor does it justify imposition of
a penalty for doing so.
22
attorney fees. However, given the strong public policy favoring
arbitration (see, e.g., AT&T Mobility LLC v. Concepcion (2011)
563 U.S. 333, 339 (Concepcion); OTO, L.L.C. v. Kho (2019)
8 Cal.5th 111, 125) and the requirement we interpret the
provisions in a contract in a manner that render them legal
rather than void when possible (see Civ. Code, §§ 1643 [if possible
without violating the parties’ unambiguous intent, a contract is
interpreted so as to make it “lawful, operative, definite,
reasonable, and capable of being carried into effect”], 3541 [“[a]n
interpretation which gives effect is preferred to one which makes
void”]), we construe the prevailing party fee provision in the
arbitration agreement to impliedly incorporate the FEHA
asymmetric rule for awarding attorney fees and costs.
(Cf. Pearson Dental Supplies, Inc. v. Superior Court (2010)
48 Cal.4th 665, 682; Roman v. Superior Court (2009)
172 Cal.App.4th 1462, 1473.) That is precisely the course
followed by the Supreme Court in Armendariz, which, after
concluding it violated FEHA to require an employee to pay the
costs associated with arbitration of a FEHA claim, held, “[A]
mandatory employment arbitration agreement that contains
within its scope the arbitration of FEHA claims impliedly obliges
the employer to pay all types of costs that are unique to
arbitration.” (Armendariz, supra, 24 Cal.4th at p. 113.) As a
result, the Court continued, “[t]he absence of specific provisions
on arbitration costs would therefore not be grounds for denying
the enforcement of an arbitration agreement.” (Ibid.)
Similarly, by construing the fee-shifting provision in the
Charter arbitration agreement to preclude an award of attorney
fees and costs to Charter following a successful motion to compel
arbitration absent a showing that Patterson’s opposition to the
23
motion was frivolous, unreasonable or groundless, as set forth in
section 12965(b), the provision is enforceable. Accordingly, in
addition to directing the superior court to vacate its order
awarding attorney fees to Charter, we direct the court, if Charter
wishes to pursue its request for attorney fees, to conduct a
hearing to make the required findings before awarding fees.
(See Roman v. BRE Properties, Inc. (2015) 237 Cal.App.4th 1040,
1058 [“to avoid undermining the important public policy issues
implicated by an award of fees to the defendant in an
antidiscrimination case, ‘where the required findings are not
made by the trial court, the matter must be reversed and
remanded for findings, unless the appellate court determines no
9
such findings reasonably could be made from the record’”].)
9
Quoting Walker v. Ticor Title Co. of California (2012)
204 Cal.App.4th 363, 372, the superior court ruled it was
improper to consider Patterson’s financial status as an equitable
factor in assessing contractual attorney fees. In Roman v. BRE
Properties, Inc., supra, 237 Cal.App.4th 1040, 1062, in contrast,
this court held, “[T]he trial court has discretion to deny or reduce
a cost award to a prevailing FEHA defendant when a large award
would impose undue hardship on the plaintiff—the financial
circumstances of the losing plaintiff and the impact of the award
on that party are relevant circumstances in determining whether
the costs to be awarded are ‘reasonable in amount’ within the
meaning of Government Code section 12965, subdivision (b).”
The discretion authorized under the FEHA standard should be
exercised by the trial court in connection with any fee award in
this case.
24
4. Application of Section 12965(b)’s Asymmetric Rule for
Attorney Fees to Charter’s Arbitration Agreement Is Not
Preempted by the FAA
Charter’s mutual arbitration agreement expressly provides
it “will be governed” by the FAA. Citing Epic Systems Corp. v.
Lewis (2018) 584 U.S. ___ [138 S.Ct. 1612], Concepcion, supra,563 U.S. 333 and a host of other United States Supreme Court
cases involving very different issues from the one presented by
the case at bar, Charter makes the generalized (and generally
indisputable) statement that the overarching purpose of the FAA
is to ensure enforcement of arbitration agreements according to
their terms and, as a consequence, the FAA preempts state laws
that interfere with the enforcement of arbitration agreements. It
then asserts, without further analysis, “California law under
FEHA would be preempted by the FAA if it was interpreted to
prohibit the enforcement of the Arbitration Agreement’s
attorneys’ fee provision.”
Charter’s abbreviated and overly broad discussion of FAA
preemption, however, omits several fundamental principles of
FAA jurisprudence. As the California Supreme Court explained
10
in McGill v. Citibank, N.A. (2017) 2 Cal.5th 945 (McGill),
although section 2 of the FAA requires courts to place arbitration
10
The Supreme Court in McGill, supra, 2 Cal.5th 945 held a
provision in a predispute arbitration agreement that waives the
right to seek a public injunction as a remedy authorized by
several California statutes, including the Consumers Legal
Remedies Act (Civ. Code, § 1750 et seq.), was unenforceable
under California law and further held the FAA does not preempt
this rule of California law or require enforcement of the waiver
provision.
25
agreements on an equal footing with other contracts and to
enforce them according to their terms, the final phrase of
section 2, known as the “saving clause,” “‘permits arbitration
agreements to be declared unenforceable “upon such grounds as
exist at law or in equity for the revocation of any contract.”’”
(McGill, at pp. 961-962, quoting Concepcion, supra, 563 U.S. at
11
p. 339.) “This clause, the high court has stated, ‘indicates’ that
Congress’s ‘purpose’ in enacting the FAA ‘was to make
arbitration agreements as enforceable as other contracts, but not
more so.’” (Id. at p. 962, quoting Prima Paint v. Flood & Conklin
(1967) 388 U.S. 395, 404, fn. 12.) Thus, “‘[b]y agreeing to
arbitrate a statutory claim, a party does not forgo the substantive
rights afforded by the statute; it only submits to their resolution
in an arbitral, rather than a judicial, forum.’” (Ibid., quoting
Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) 473 U.S.
12614, 628.) “[T]he FAA does not require enforcement of a
11
Section 2 is “the primary substantive provision of the FAA.”
(Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th
376, 384.) It provides, “A written provision in any maritime
transaction or a contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter arising
out of such contract or transaction . . . shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.” (9 U.S.C. § 2.)
12
This same principle, directly applicable here, was restated
by the United States Supreme Court in Preston v. Ferrer (2008)
552 U.S. 346, 359, which held the FAA preempted a state law
that provided the California Labor Commissioner had primary
jurisdiction over claims the parties had agreed to arbitrate: “‘By
agreeing to arbitrate a statutory claim, a party does not forgo the
substantive rights afforded by the statute; it only submits to their
26
provision in an arbitration agreement that ‘forbid[s] the assertion
of certain statutory rights’ or that ‘eliminates . . . [the] right to
pursue a [a] statutory remedy.’” (Id. at p. 963, quoting American
Express Co. v. Italian Colors Restaurant (2013) 570 U.S. 228,
236.) Consistent with these principles, the McGill Court stated,
“[W]e have held that the FAA does not require enforcement of a
provision in an arbitration agreement that, in violation of
generally applicable California contract law, ‘limit[s] statutorily
imposed remedies such as punitive damages and attorney fees.’”
(Ibid.)
FEHA’s asymmetric rule for the award of attorney fees is a
broadly applicable substantive right, not one that pertains only to
arbitration or derives its meaning from the fact an agreement to
arbitrate is at issue. A provision in any contract, whether or not
it had an arbitration provision, that purported to waive an
employee’s statutory right to recover attorney fees if the
prevailing party in a FEHA lawsuit and the employee’s corollary
right not to be liable for attorney fees unless his or her FEHA
claim was objectively groundless would be invalid and
unenforceable under California law. The FAA does not require
enforcement of such a provision because it has been placed in an
arbitration agreement. “To conclude otherwise would, contrary to
Congress’s intent, make arbitration agreements not merely ‘as
enforceable as other contracts, but . . . more so.’” (McGill, supra,
2 Cal.5th at p. 962.)
resolution in an arbitral . . . forum.’ [Citation.] So here, [the
party opposing arbitration] relinquishes no substantive rights the
[California Talent Agencies Act] or other California law may
accord him. But under the contract he signed, he cannot escape
resolution of those rights in an arbitral forum.”
27
DISPOSITION
The petition is granted. Let a peremptory writ of mandate
issue directing the superior court to vacate its March 16, 2021
order granting Charter’s motion for attorney fees and to enter a
new order scheduling a hearing to determine whether Patterson’s
opposition to the motion to compel arbitration was frivolous,
unreasonable or groundless. Patterson is to recover his costs in
this proceeding.
PERLUSS, P. J.
We concur:
FEUER, J.
*
IBARRA, J.
*
Judge of the Santa Clara Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
28