Francis Capital Management v. Lane CA2/4 ( 2014 )


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  • Filed 9/9/14 Francis Capital Management v. Lane CA2/4
    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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 FOUR
    FRANCIS CAPITAL MANAGEMENT                                            B253559
    LLC,
    (Los Angeles County
    Plaintiff and Appellant,                                    Super. Ct. No. BS143051)
    v.
    MARTIN KEITH LANE, JR.,
    Defendant and Respondent.
    APPEAL from a judgment of the Superior Court of Los Angeles County,
    Mary Ann Murphy, Judge. Reversed and remanded with instructions.
    Seyfarth Shaw, David D. Kadue, Robert B. Milligan and Coby M. Turner for
    Plaintiff and Appellant.
    Jeffer Mangels Butler & Mitchell and Travis Gemoets for Defendant and
    Respondent.
    ________________________________
    INTRODUCTION
    The parties are before us for the second time. In the prior case, Francis
    Capital Management LLC (FCM) appealed from an order denying its motion to
    compel a former employee, respondent Martin Keith Lane, Jr. (Lane) to arbitrate
    his employment claims against FCM. We held that the trial court erred in finding
    the arbitration agreement unconscionable, and we determined that all but one of
    Lane’s claims should be sent to arbitration. (See Lane v. Francis Capital
    Management, LLC (2014) 
    224 Cal.App.4th 676
    .) In the instant case, FCM appeals
    from an order denying its motion to compel Lane to arbitrate FCM’s claims against
    him pursuant to the same arbitration agreement. FCM contends the trial court
    erred in determining (1) that the arbitration agreement was unenforceable, and
    (2) that arbitration between the parties may take place only before the American
    Arbitration Association (AAA), which had refused to administer the arbitration
    between the parties. For the reasons stated below, we conclude that FCM is
    entitled to arbitration of its claims against Lane. We decline to reach the second
    issue, as in light of our construction of the controlling agreement, we have no basis
    to assume the AAA will refuse to administer the arbitration. Accordingly, we
    reverse and remand for further proceedings.
    FACTUAL BACKGROUND AND PROCEDURAL HISTORY
    FCM is a California investment advisor that manages investments on behalf
    of individuals and businesses throughout the United States. FCM uses a
    proprietary valuation process to identify domestic and international securities for
    investment.
    In January 2008, FCM hired Lane as an investment analyst. As a condition
    of his employment, on January 15, Lane executed two agreements: an arbitration
    agreement and a nondisclosure agreement (NDA) entitled “Employee Proprietary
    2
    Information Agreement.” FCM executed the arbitration agreement the following
    day; the NDA did not require a signature from FCM.
    A.     Arbitration Agreement
    In the two-page written arbitration agreement, the parties agreed that “all
    claims, disputes and controversies arising out of, relating to or in any way
    associated with [Lane’s] employment by [FCM] or the termination of that
    employment shall be submitted to final and binding arbitration,” except for
    worker’s compensation and unemployment benefits claims and certain
    administrative claims. The parties further agreed to waive their rights to trial on
    “any such arbitrable claims or disputes.” “Examples of such disputes or claims
    which must be resolved through arbitration, rather than a court proceeding,
    include, but are not limited to . . . contract claims . . . tort claims . . . or any other
    employment-related claim of any kind.”
    In addition, the parties agreed on arbitration costs and fees as follows:
    “Each party shall be solely responsible for paying its own costs for the
    arbitration including but not limited to its own attorney[] fees and expert
    witness fees. However, the fees of the arbitrator and all other costs that are
    unique to arbitration shall be paid by the Company. If either party prevails
    on a statutory claim which affords the prevailing party their attorney fees or
    where there is a written agreement providing for such fees, the arbitrator
    may award reasonable attorney[] fees to the prevailing party. The arbitrator
    shall have the authority to award any damages or remedies authorized by
    law, including, without limitation, costs and attorney[] fees.”
    The agreement also contained merger and severance provisions: “This
    Arbitration Agreement sets forth the entire agreement between the parties and fully
    supersedes any and all prior agreements or understandings between them
    pertaining to the subject matter of this Agreement. Should any provision or term
    or part of a provision or term, of this Agreement be declared or determined by any
    court or arbitrator to be illegal or invalid, the validity of the remaining parts,
    3
    provisions or terms shall not be affected thereby and said illegal or invalid part,
    provision or term shall not be deemed to be a part of this Agreement.”
    Finally, the parties agreed that the arbitration agreement “shall be governed
    by the laws of the State of California.”
    B.     NDA
    In the three-page NDA, Lane agreed to restrictions on his use and disclosure
    of FCM’s proprietary information. The NDA also contained a choice of law
    provision (California law), a severance clause, and a merger clause. Finally, it
    contained a clause entitled “Remedies”:
    “I recognize that nothing in this Agreement is intended to limit any remedy
    of the Company under the California Uniform Trade Secrets Act. I
    recognize that my violation of this Agreement could cause the Company
    irreparable harm, the amount of which may be extremely difficult to
    estimate, making any remedy at law or in damages inadequate. Thus, I
    agree that the Company shall have the right to apply to any court of
    competent jurisdiction for an order restraining any breach or threatened
    breach of this Agreement and for any other relief the Company deems
    appropriate. This right shall be in addition to any other remedy available to
    the Company. I further agree that the prevailing party or parties in any
    proceeding in equity or at law commenced in respect of this Agreement
    [s]hall be entitled to recover from the other party or parties to such
    proceeding all reasonable fees, costs and expenses (including reasonable
    fees and disbursements of counsel) incurred in connection with such
    proceeding and any appeals therefrom.”
    C.     FCM’s Claims Against Lane
    After FCM dismissed Lane, it conducted a forensic investigation of his
    company-issued computer. The investigation purportedly revealed that while
    employed with FCM, Lane had sent FCM’s proprietary work product to
    prospective new employers, including Lane’s current employer. FCM demanded
    that Lane return the proprietary work product, but Lane refused.
    4
    On January 22, 2013, FCM filed its arbitration demand with the AAA. FCM
    alleged claims for breach of contract, breach of the duty of loyalty, conversion,
    possession of personal property, trespass to chattel, breach of confidence, and
    violation of various California statutes. FCM sought injunctive relief, restitution,
    damages and “reasonable attorneys’ fees where authorized by statute and/or
    contract.”
    After receiving FCM’s arbitration demand, the AAA announced that it was
    conditionally willing to arbitrate the parties’ dispute. Citing Code of Civil
    1
    Procedure section 1284.3, the AAA stated that it was prohibited under California
    law from “administering disputes arising out of employer promulgated plans if the
    agreement requires that the employee party pay the fees and costs incurred by an
    opposing party if the employee does not prevail in the arbitration, including, but
    not limited to, the fees and costs of the arbitrator, provider organization, attorney,
    or witnesses.” The AAA requested that both parties “waive the contractual
    requirement [in the NDA] that the employee pays the fees and costs of the
    opposing party if the employee does not prevail in the arbitration and agree to have
    the arbitration administered in accordance with California law.”
    2
    Both FCM and Lane refused to execute the waiver. As a result of the
    parties’ refusal to waive the NDA fee provision, the AAA closed the arbitration
    1
    All further statutory references are to the Code of Civil Procedure, unless
    otherwise indicated.
    2
    In its refusal letter, FCM argued that the AAA’s request for a dual waiver of
    the prevailing party fee provision in the NDA was unfounded and without legal
    support. FCM contended that section 1284.3 was inapplicable, as the arbitration
    was pursuant to the arbitration agreement, not the NDA. Moreover, according to
    FCM, the arbitration agreement and NDA could be harmonized to comply with
    California law, as the arbitration agreement controlled and it provided that the
    5
    file, and returned the paperwork and arbitration fee to FCM. Subsequently, FCM
    changed its mind about the AAA’s requested waiver. On March 21, 2013, FCM’s
    counsel notified Lane’s counsel that FCM would be willing to agree to the AAA’s
    waiver. FCM’s counsel asked Lane’s counsel if Lane also would consent to the
    waiver. He received no response.
    D.     FCM’s Motion to Compel Arbitration
    On July 2, 2013, FCM moved, under section 1281.1 et seq. and the Federal
    Arbitration Act (FAA), title 9 of the United States Code section 1 et seq., for an
    order appointing an arbitrator and compelling Lane to arbitrate FCM’s claims
    against him. In the motion, FCM alleged that the parties were signatories to a
    valid, binding arbitration agreement that encompassed FCM’s claims, that Lane
    had refused to arbitrate the parties’ controversy, and that the agreed upon method
    of appointing an arbitrator (the AAA) had failed. FCM argued that the AAA’s
    dual waiver requirement, which effectively gave Lane an “unfettered veto” over
    any arbitration, had no basis in law, as only FCM was adversely affected by the
    waiver. FCM also argued that the arbitration agreement covered its claims against
    Lane, and that the agreement was legally enforceable. FCM observed that the
    arbitration agreement did not require Lane to pay unreasonable arbitral forum
    costs, as it provided that FCM would pay all of the expenses and fees of the
    arbitrator and all other costs unique to arbitration. Finally, FCM argued that
    arbitrator has discretion to award fees to the prevailing party. FCM also contended
    that the severability clauses in the arbitration agreement and the NDA would
    permit the arbitrator to modify any language he or she believed impermissible
    under California law.
    Lane’s refusal was based on his argument that section 1284.3 prohibited
    arbitration of FCM’s claims, as the NDA included a mandatory prevailing party fee
    provision.
    6
    should any provision be found unenforceable, the court should exercise its
    discretion to sever that provision and enforce the remaining provisions.
    Lane opposed FCM’s motion to compel arbitration. He argued that FCM’s
    motion should be denied, as FCM was seeking to enforce the NDA, which
    contained a mandatory prevailing party fee provision in violation of section 1284.3
    and noncompete provisions void against public policy. Lane further argued that
    FCM’s claims could not be arbitrated, as the AAA had refused to accept the
    arbitration case and the superior court lacked authority to appoint a new arbitrator.
    He also requested the superior court stay the motion pending this court’s
    determination of FCM’s appeal of the prior order denying its motion to compel
    arbitration of his claims against FCM.
    In its reply, FCM argued that it would be deprived of its right to arbitrate its
    claims against Lane without a court order appointing a new arbitrator. FCM
    observed that the AAA’s dual waiver requirement gave Lane a veto over any AAA
    arbitration proceeding. It requested that the court issue an order directing Lane to
    commence arbitration and appointing AAA as the arbitrator.
    On November 15, 2013, following a hearing, the trial court denied FCM’s
    motion for an order compelling Lane to arbitrate FCM’s claims and appointing an
    arbitrator. In its oral ruling, the court determined that the arbitration agreement
    was unconscionable and unenforceable. The court held that the FCM was
    attempting to arbitrate a claim under the NDA, and the NDA lacked mutuality as
    only the employer had a right to seek judicial relief for trade secrets claims.
    Second, the dispute could not be arbitrated under section 1284.3, as the arbitration
    agreement and the NDA contained a prevailing party fee provision. Finally, the
    arbitration agreement had elements of unconscionability such as the failure to
    attach the AAA arbitration rules. The court also denied FCM’s motion on the basis
    7
    that the AAA had refused to administer the arbitration. The court held that it
    lacked authority to compel the AAA to arbitrate the case or to appoint another
    arbitrator.
    Notice of entry of judgment was served December 12, 2013. FCM filed a
    timely appeal from the judgment.
    DISCUSSION
    A.     Standard of Review
    Under section 1281.2, a party to an arbitration agreement may petition the
    trial court to order the parties to the agreement to arbitrate a dispute. The court
    shall order arbitration, unless it determines that the right to compel arbitration has
    been waived by petitioner, that grounds exist for rescission of the agreement, or
    that a party to the agreement is also a party to a pending court action or special
    proceeding with a third party.
    The trial court may resolve motions to compel arbitration in summary
    proceedings, in which “[t]he petitioner bears the burden of proving the existence of
    a valid arbitration agreement by the preponderance of the evidence, and a party
    opposing the petition bears the burden of proving by a preponderance of the
    evidence any fact necessary to its defense. [Citation.] In these summary
    proceedings, the trial court sits as a trier of fact, weighing all the affidavits,
    declarations, and other documentary evidence, as well as oral testimony received at
    the court’s discretion, to reach a final determination. [Citation.]” (Engalla v.
    Permanente Medical Group, Inc. (1997) 
    15 Cal.4th 951
    , 972.) “We will uphold
    the trial court’s resolution of disputed facts if supported by substantial evidence.
    [Citation.] Where, however, there is no disputed extrinsic evidence considered by
    the trial court, we will review its arbitrability decision de novo.” (Nyulassy v.
    8
    Lockheed Martin Corp. (2004) 
    120 Cal.App.4th 1267
    , 1277; Giuliano v. Inland
    Empire Personnel, Inc. (2007) 
    149 Cal.App.4th 1276
    , 1284 [same].)
    B.     The Arbitration Agreement is Legally Enforceable
    On November 15, 2013, the trial court denied FCM’s motion to compel
    arbitration and appoint an arbitrator. It determined that the arbitration agreement
    was unconscionable, as (1) there was a one-sided provision in the NDA that
    allowed the employer, but not the employee, to seek relief in a judicial forum for
    trade secrets claims, (2) the prevailing party fee provision in the arbitration
    agreement was contrary to California law, and (3) the arbitration agreement did not
    attach the AAA arbitration rules.
    As to the last contention, the trial court lacked our guidance in Lane v.
    Francis Capital Management, LLC, supra, 
    224 Cal.App.4th 676
    , decided after the
    trial court entered judgment in the instant case. There, we concluded that the same
    arbitration agreement at issue here was not unconscionable, although it was a
    contract of adhesion, failed to attach a copy of the AAA arbitration rules, and
    contained no express provision for discovery rights. (Id. at pp. 689-693.) In this
    appeal, Lane does not challenge our prior determination. Accordingly, we address
    only the two remaining grounds relied upon by the trial court in finding the
    arbitration agreement unenforceable.
    In determining whether a contractual provision renders an arbitration
    agreement unconscionable and unenforceable, we draw upon the following
    principles enunciated by our Supreme Court: “The party resisting arbitration bears
    the burden of proving unconscionability. [Citations.] Both procedural
    unconscionability and substantive unconscionability must be shown, but ‘they need
    not be present in the same degree’ and are evaluated on ‘“a sliding scale.”’
    (Armendariz [v. Foundation Health Psychcare Services, Inc. (2000) 
    24 Cal.4th 83
    ,
    9
    114 (Armendariz)].) ‘[T]he more substantively oppressive the contract term, the
    less evidence of procedural unconscionability is required to come to the conclusion
    that the term is unenforceable, and vice versa.’ [Citation.]” (Pinnacle Museum
    Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 
    55 Cal.4th 223
    ,
    247 (Pinnacle).) “[P]rocedural unconscionability requires oppression or surprise.
    ‘“Oppression occurs where a contract involves lack of negotiation and meaningful
    choice, surprise where the allegedly unconscionable provision is hidden within a
    prolix printed form.”’” (Ibid., quoting Morris v. Redwood Empire Bancorp (2005)
    
    128 Cal.App.4th 1305
    , 1317.) “Substantive unconscionability pertains to the
    fairness of an agreement’s actual terms and to assessments of whether they are
    overly harsh or one-sided. [Citations.] A contract term is not substantively
    unconscionable when it merely gives one side a greater benefit; rather, the term
    must be ‘so one-sided as to “shock the conscience.”’” (Pinnacle, at p. 246, quoting
    24 Hour Fitness, Inc. v. Superior Court (1998) 
    66 Cal.App.4th 1199
    , 1213.)
    1.    The Provision in the NDA that Only the Employer May Seek
    Judicial Relief for Trade Secrets Claims Did not Render the Arbitration Agreement
    Unenforceable
    In the NDA, Lane agreed that “the Company shall have the right to apply to
    any court of competent jurisdiction for an order restraining any breach or
    threatened breach of this Agreement and for any other relief the Company deems
    appropriate.” The trial court found this provision precluded arbitration of FCM’s
    claims against Lane, as only FCM was entitled to seek relief in a judicial forum for
    its trade secrets claims. (See Armendariz, 
    supra,
     24 Cal.4th at p. 117 [“[I]t is
    unfairly one-sided for an employer with superior bargaining power to impose
    arbitration on the employee as plaintiff but not to accept such limitations when it
    10
    seeks to prosecute a claim against the employee, without at least some reasonable
    justification for such one-sidedness based on ‘business realities.’”].) We disagree.
    FCM seeks arbitration of its claims against Lane pursuant to the arbitration
    agreement. It is not seeking judicial relief under the NDA. The arbitration
    agreement contains no provision allowing FCM to opt out of arbitrating its trade
    secrets claims against Lane. Rather, in the arbitration agreement, both FCM and
    Lane agreed that all claims arising out of Lane’s employment with FCM would be
    arbitrated, except those for worker’s compensation and unemployment benefits and
    certain administrative claims. There was no carve-out in the arbitration agreement
    for trade secrets claims. In addition, the arbitration agreement contains no limits
    on the remedies available in arbitration. It provides that the arbitrator may award
    any damages or remedies authorized by law. Thus, the arbitration agreement is not
    unreasonably one-sided in favor of FCM with respect to trade secrets claims. (Cf.
    Stirlen v. Supercuts, Inc. (1997) 
    51 Cal.App.4th 1519
    , 1524, 1528-1529 [affirming
    denial of motion to compel arbitration where arbitration agreement had carve-out
    3
    for trade secrets claims and restricted remedies available in arbitration].)
    Lane contends the exclusive judicial relief provision in the NDA for FCM’s
    trade secrets claims must be read into the arbitration agreement, and, therefore, the
    arbitration agreement is substantively unconscionable. We disagree. The NDA’s
    exclusive judicial relief provision was never incorporated into the arbitration
    agreement. The NDA never references arbitration, and, as discussed, the
    arbitration agreement has a merger clause which provides that the agreement fully
    supersedes any and all prior agreements, including the NDA. To the extent the
    NDA survives the merger clause, any conflict with the arbitration agreement must
    3
    We note that on appeal, there is no dispute that all of FCM’s claims against
    Lane are encompassed by the arbitration agreement.
    11
    be resolved in favor of the arbitration agreement. As the arbitration agreement
    contains no carve-out for claims related to FCM’s trade secrets, the NDA’s judicial
    relief provision must give way to the mandatory arbitration provision in the
    arbitration agreement. In short, the judicial relief provision in the NDA does not
    preclude arbitration of FCM’s claims against Lane.
    2.     The Prevailing Party Fee Provision in the Arbitration
    Agreement does not Prohibit the AAA from Arbitrating the Dispute
    In the arbitration agreement, the parties agreed that “[i]f either party prevails
    on a statutory claim which affords the prevailing party their attorney[] fees or
    where there is a written agreement providing for such fees, the arbitrator may
    award reasonable attorney[] fees to the prevailing party. The arbitrator shall have
    the authority to award any damages or remedies authorized by law, including,
    without limitation, costs and attorney[] fees.” In the NDA, Lane agreed that “the
    prevailing party or parties in any proceeding in equity or at law commenced in
    respect to this Agreement [s]hall be entitled to recover from the other party or
    parties to such proceeding all reasonable fees, costs and expenses (including
    reasonable fees and disbursements of counsel) incurred in connection with such
    proceeding and any appeals therefrom.” The trial court found that under section
    1284.3, subdivision (a), the prevailing party fee provision in both the arbitration
    agreement and the NDA precluded the AAA from accepting FCM’s arbitration
    demand. We conclude that the fee provision in the arbitration agreement would
    not prohibit the AAA from administering the arbitration under section 1284.3.
    Although the mandatory prevailing party fee provision in the NDA may run afoul
    of section 1284.3, it is the discretionary prevailing party fee provision in the
    arbitration agreement that controls.
    12
    Section 1284.3, subdivision (a) provides: “No neutral arbitrator or private
    arbitration company shall administer a consumer arbitration under any agreement
    or rule requiring that a consumer who is a party to the arbitration pay the fees and
    costs incurred by an opposing party if the consumer does not prevail in the
    arbitration, including, but not limited to, the fees and costs of the arbitrator,
    provider organization, attorney, or witnesses.” Although we have found no case
    applying section 1284.3 to arbitrations between employers and employees, we
    conclude that it is applicable to certain employment arbitrations. We find guidance
    in California Rules of Court, Ethics Standard for Neutral Arbitrators, promulgated
    pursuant to legislative authorization in section 1281.85. Under Standard 2,
    subdivision (d), a “[c]onsumer arbitration” is defined as “an arbitration conducted
    under a predispute arbitration provision contained in a contract,” where (1) the
    contract is with a “consumer party”; (2) the contract was drafted on behalf of the
    nonconsumer party; and (3) the consumer party was required to accept the
    arbitration provision in the contract. Under Standard 2, subdivision (e), a
    “consumer party” includes “[a]n employee or an applicant for employment in a
    dispute arising out of or relating to the employee’s employment or the applicant’s
    prospective employment that is subject to the arbitration agreement.” Thus,
    section 1284.3 prohibits a neutral or private arbitration company from
    administering certain employment arbitrations where the employee is required to
    pay the fees and costs incurred by the employer if the employer prevails.
    Under the NDA, either party is entitled to fees and costs if the party prevails
    in “any proceeding in equity or at law” commenced in respect to the NDA.
    Although the provision appears immediately after expressly referring to court
    actions, it is not unreasonable to interpret the provision as applying to both court
    actions and arbitrations. If the mandatory fee provision is applied in an
    13
    employment arbitration, section 1284.3, subdivision (a) would prohibit the AAA
    (or any neutral arbitrator or private arbitration company) from administrating an
    arbitration pursuant to the NDA.
    Nevertheless, the instant dispute may be arbitrated, as the mandatory
    prevailing fee provision in the NDA is inapplicable to this arbitration under two
    independent rationales. First, as noted above, FCM seeks arbitration of its breach
    of the NDA claim, its common law claims, and its statutory claims against Lane
    pursuant to the arbitration agreement. That agreement has no mandatory
    prevailing party fee provision. Rather, the arbitration agreement provides that “[i]f
    either party prevails on a statutory claim which affords the prevailing party their
    attorney[] fees or where there is a written agreement providing for such fees, the
    arbitrator may award reasonable attorney[] fees to the prevailing party.” (Italics
    added.) The arbitration agreement also provides that the arbitrator may award fees
    and costs only if authorized by law. Thus, to the extent the NDA’s mandatory fee
    provision runs afoul of California law, the arbitration agreement never
    incorporated it.
    Moreover, FCM has consistently argued that the NDA’s mandatory fee
    provision is inapplicable to its arbitration against Lane. While disagreeing with the
    AAA’s contrary interpretation, FCM has agreed to expressly waive the NDA’s
    4
    mandatory fee provision. On appeal, FCM has reaffirmed its waiver.
    Second, even were the NDA’s mandatory prevailing fee provision
    incorporated in the arbitration agreement, the provision is severable. The
    arbitration agreement contains a severability clause, which provides that “[s]hould
    any provision or term or part of a provision or term, of this Agreement be declared
    4
    As FCM has waived the prevailing party fee provision in the NDA, we need
    not address its alternative argument that the FAA preempts section 1284.3.
    14
    or determined by any court or arbitrator to be illegal or invalid, the validity of the
    remaining parts, provisions or terms shall not be affected thereby and said illegal
    or invalid part, provision or term shall not be deemed to be a part of this
    Agreement.” We discern no reason not to sever the NDA’s mandatory fee
    provision. The arbitration agreement’s reference to a “written agreement providing
    for . . . fees,” impliedly referring to the NDA, may be severed without affecting the
    remainder of the agreement, as the arbitration agreement has its own fee provision.
    (See Armendariz, 
    supra,
     24 Cal.4th at p. 124 [“If the illegality is collateral to the
    main purpose of the contract, and the illegal provision can be extirpated from the
    contract by means of severance and restriction, then such severance or restriction
    are appropriate.”].)
    Additionally, the arbitration agreement is not permeated with illegality or
    defects. (See Armendariz, 
    supra,
     24 Cal.4th at p. 124 [court may refuse to enforce
    agreement permeated with unconscionability].) Absent the incorporation of the
    NDA’s mandatory fee provision, the arbitration agreement is not unconscionable,
    and we have enforced it in our prior decision. (See Lane v. Francis Capital
    Management, LLC, supra, 224 Cal.App.4th at p. 693.) Indeed, a provision
    authorizing a discretionary award of fees to a party that prevails on an arbitrated
    trade secrets claim is codified in the California Uniform Trade Secrets Act, Civil
    Code section 3426 et seq. (See Civ. Code, § 3426.4 [“If a claim of
    misappropriation [of trade secrets] is made in bad faith, a motion to terminate an
    injunction is made or resisted in bad faith, or willful and malicious
    misappropriation exists, the court may award reasonable attorney’s fees and costs
    to the prevailing party. Recoverable costs hereunder shall include a reasonable
    sum to cover the services of expert witnesses, who are not regular employees of
    any party, actually incurred and reasonably necessary in either, or both, preparation
    15
    for trial or arbitration, or during trial or arbitration, of the case by the prevailing
    party.”].) In short, the NDA’s mandatory prevailing party fee provision may be
    severed from the arbitration agreement. As modified, the arbitration agreement no
    longer contains the mandatory fee provision disagreeable to the AAA. In light of
    our construction of the controlling agreement, no dual waiver was required, and we
    have no basis to assume the AAA will refuse to accept arbitration in this matter.
    In sum, we conclude that FCM’s claims are arbitrable, and no legal bar
    prohibits the AAA from accepting the arbitration. We note that Lane would not be
    precluded from challenging the validity of the NDA during arbitration. Thus, we
    reverse the trial court’s order denying FCM’s motion to compel arbitration and to
    appoint an arbitrator. We remand the matter to the court to enter an order granting
    FCM’s motion to compel Lane to submit to arbitration of FCM’s claims.
    DISPOSITION
    The judgment is reversed; the matter is remanded for further proceedings in
    light of this opinion. Appellant is entitled to its costs on appeal.
    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
    MANELLA, J.
    We concur:
    EPSTEIN, P. J.                                          WILLHITE, J.
    16
    

Document Info

Docket Number: B253559

Filed Date: 9/9/2014

Precedential Status: Non-Precedential

Modified Date: 4/18/2021