Mahmud v. Ralphs Grocery Co. CA2/4 ( 2014 )

Filed 11/10/14 Mahmud v. Ralphs Grocery Co. 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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
STEPHANIE RABB MAHMUD, B237636
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC410754)
v.
RALPHS GROCERY COMPANY,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los Angeles County, Amy
D. Hogue, Judge. Reversed and remanded with directions.
Reed Smith, Linda S. Husar and Steven B. Katz for Defendant and
Appellant.
Karasik Law Firm and Gregory N. Karasik for Plaintiff and Respondent.
_________________________________________
The trial court denied the petition of appellant Ralphs Grocery Company
(Ralphs) to compel arbitration of a wage dispute with its former employee,
respondent Stephanie Rabb Mahmud, relying on the four-factor test set forth in
Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry). While the appeal was
pending, the California Supreme Court held in Iskanian v. CLS Transportation Los
Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian) that Gentry had been abrogated by
the United States Supreme Court’s decision in AT&T Mobility LLC v. Concepcion
(2011) 563 U.S. __ [131 S.Ct. 1740] (Concepcion). As the legal rationale that
formed the basis for the trial court’s ruling has been abrogated and Mahmud
presented no other basis for denial of the petition to compel, we reverse.
FACTUAL AND PROCEDURAL BACKGROUND
A. Complaint
In March 2009, Mahmud brought suit alleging that Ralphs violated
provisions of the state Labor Code requiring employers to provide employees meal
breaks, to allow rest periods, to pay for unused accrued vacation time upon
termination, and to pay all wages owed upon termination. Respondent sought
certification of multiple classes of similarly situated Ralphs’ employees, including
a meal period class, a rest period class, and a final wages class.
B. Prior Proceedings
1. Petition to Compel Arbitration
Ralphs petitioned to compel arbitration of the dispute. Ralphs presented
evidence that in February 2008, Mahmud had signed an application for
employment stating that she “acknowledge[d] and underst[ood]” Ralphs had a
dispute resolution program that included a Mediation & Binding Arbitration Policy
[Arbitration Policy] which applied to “all employees and applicants for
2
employment,” and to “any employment-related disputes that exist or arise between
Employees and [Ralphs] that would constitute cognizable claims or causes of
action in a court or government agency under applicable law including individual
statutory claims or disputes.” In signing the application, Mahmud agreed to be
“bound by the provisions, terms, and conditions of the [Arbitration] Policy” and to
waive her right to a judge or jury trial or to litigate proceedings in a local, state or
federal court or agency.
Ralphs’ Arbitration Policy defined covered disputes as “employment-related
disputes [¶]. . . [¶] which involve the interpretation or application of the Arbitration
Policy, the employer/employee relationship, an Employee’s actual or alleged
employment with Ralphs . . . , the termination of such employment, or applying for
or seeking such employment.” It provided that arbitration proceedings would be
governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq., FAA), the Federal
Rules of Civil Procedure, and the Federal Rules of Evidence, except that there
were no “class actions or Representative Actions permitted.” It further stated:
“[T]here is no right or authority for any Covered Disputes to be heard or arbitrated
on a class action basis, as a private attorney general, or on bases involving claims
or disputes brought in a representative capacity on behalf of the general public, or
other Ralphs employees (or any of them), or of other persons alleged to be
similarly situated.”
2. Mahmud’s Opposition
In opposing the petition to compel arbitration, Mahmud raised three
arguments. She contended the arbitration agreement was unenforceable under
Gentry, supra, 42 Cal.4th 443, in which the California Supreme Court had held
that where “the prohibition of classwide relief would undermine the vindication of
the employees’ unwaivable statutory rights and would pose a serious obstacle to
3
the enforcement of the state’s overtime laws,” and where the trial court determines
that classwide adjudication “would be a significantly more effective way of
vindicating the rights of affected employees than individual arbitration,” the class
action waiver should not be enforced. (Id. at p. 450.) The Supreme Court had
stated in Gentry that in determining whether to enforce a contractual class action
waiver, the trial court should consider four factors: “[(1)] the modest size of the
potential individual recovery, [(2)] the potential for retaliation against members of
the class, [(3)] the fact that absent members of the class may be ill informed about
their rights, and [(4)] other real world obstacles to the vindication of class
members’ rights to overtime pay through individual arbitration.” (Id. at p. 463.)
Mahmud presented evidence that the individual damages for the Labor Code
violations alleged in the complaint would be insufficient to support separate
litigation by each wronged employee, that she had been unaware of her rights
under the Labor Code with respect to meal breaks and rest periods during her
employment, and that employees who complained about working conditions were
fired or treated badly.
Mahmud also contended Ralphs was collaterally estopped from enforcing
the arbitration agreement based on an unpublished decision in an earlier litigation,
in which the Court of Appeal had held that similar provisions in Ralphs’ 2001,
2003 and 2004 Arbitration Policy precluding all class actions rendered the
arbitration agreements signed by the plaintiffs in that litigation unconscionable.1
1
An unpublished opinion may be cited or relied on when it is relevant under the
doctrines of law of the case, res judicata or collateral estoppel. (Rules of Court, rule
8.1115(b)(1).) The case on which Mahmud then relied to support collateral estoppel --
Massie v. Ralphs Grocery Co. (May 14, 2007, B187844) 2007 Cal.App.Unpub. LEXIS
3818 -- was decided prior to the Supreme Court’s decision in Gentry, and relied primarily
on the pre-Gentry decision Discover Bank v. Superior Court (2005) 36 Cal.4th 148,
abrogated in Concepcion, supra, 563 U.S. __ [131 S.Ct. 1740]. The matter was
(Fn. continued on next page.)
4
Finally, Mahmud contended that the arbitration agreement was “tainted with
illegality” because it prohibited an employee from acting as a private attorney
general under the Private Attorneys General Act of 2004 (Labor Code, § 2699 et
seq. (PAGA)).2 Mahmud did not assert that any provision of the arbitration
agreement other than the class action prohibition rendered it unenforceable or
substantively unconscionable. She presented no evidence concerning the
circumstances under which she signed the agreement or any other facts pertinent to
the issue of procedural unconscionability.3
Relying on Gentry, the trial court found the class action waiver
unenforceable because there was no practical way to vindicate the potential
claimants’ statutory rights outside of class litigation, due to the large number of
claimants with relatively small claims. Ralphs appealed.
remanded for reconsideration in light of Gentry (see McLeod v. Ralphs Grocery Co.
(April 7, 2008, B187854) 2008 Cal.App.Unpub. LEXIS 2839, went through a second
appeal after the trial court found the existence of the four Gentry factors, and was
affirmed. (Massie v. Ralphs Grocery Co. (April 2, 2012, B224196) 2012
Cal.App.Unpub. LEXIS 2508.) Mahmud no longer relies on Massie.
2
In PAGA, the Legislature created a mechanism for aggrieved employees to file
representative actions to recover penalties from employers; the statute acts as an
alternative to enforcement of the Labor Code by the Labor Commissioner. (Rope v.
Auto-Chlor System of Washington, Inc. (2013) 220 Cal.App.4th 635, 650; Dunlap v.
Superior Court (2006) 142 Cal.App.4th 330, 337.) Mahmud raised this contention
although she had asserted no PAGA claim in her complaint, and did not seek to litigate
the matter as a representative nonclass action under PAGA.
3
As explained in Pinnacle Museum Tower Assn. v. Pinnacle Market Development
(US), LLC (2012) 55 Cal.4th 223, 246 (Pinnacle Museum): “Unconscionability consists
of both procedural and substantive elements. The procedural element addresses the
circumstances of contract negotiation and formation, focusing on oppression or surprise
due to unequal bargaining power. [Citation.] 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.]”
5
3. Prior Appeal
While the prior appeal was pending the United States Supreme Court
rendered its decisions in Preston v. Ferrer (2008) 552 U.S. 346 (Preston) and
Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp. (2010) 559 U.S. 662 (Stolt-Nielsen).
In Preston, the court held that the California Talent Agencies Act (Labor Code,
§ 1700 et seq.), which granted the Labor Commissioner exclusive original
jurisdiction to determine the validity of an agreement between an entertainer and
an unlicensed individual or entity purporting to act as a talent agent, was
preempted by the FAA when the parties had agreed to arbitrate all questions
arising under their contract. (Preston, supra, at p. 359.) Stolt-Nielsen held that “a
party may not be compelled under the FAA to submit to class arbitration unless
there is a contractual basis for concluding that the party agreed to do so.” (Stolt-
Nielsen, supra, at p. 684, italics omitted.) Ralphs contended these decisions
undermined Gentry and required reversal of the trial court’s order. By opinion
filed January 5, 2011, we concluded the trial court’s ruling was appropriate under
Gentry and not inconsistent with either decision. Accordingly, we affirmed the
order denying Ralphs’ petition.
C. Proceedings After Remand
After remand, Ralphs filed a renewed petition to compel arbitration,
contending that the United States Supreme Court’s opinion in Concepcion, supra,131 S.Ct. 1740 effectively overruled Gentry. In Concepcion, the Supreme Court
reversed a Ninth Circuit decision that had concluded, relying on the California
Supreme Court’s decision in Discover Bank v. Superior Court, supra, 36 Cal.4th
148, that an arbitration provision in a consumer contract that forbade classwide
arbitration was unconscionable where it appeared from the allegations of the
complaint that a large group of consumers had been cheated out of a small sum.
6
The United States Supreme Court abrogated the Discover Bank rule, concluding it
was preempted by the FAA because it interfered with arbitration. (Concepcion,
supra, 131 S.Ct. at p. 1750.) According to the court: “Requiring the availability of
classwide arbitration interferes with fundamental attributes of arbitration and thus
creates a scheme inconsistent with the FAA.” (Id. at p. 1748.)
Mahmud opposed the renewed motion. Her opposition raised only two
points. First, she contended that Concepcion had not abrogated or overruled
Gentry. Second, she contended that Ralphs’ arbitration agreement violated federal
common law and the National Labor Relations Act (29 U.S.C. § 151 et seq.,
NLRA) because it precluded employees from engaging in concerted activity.4
Mahmud did not raise collateral estoppel as a basis for denying the motion.5
Mahmud presented no facts to support procedural unconscionability, and raised no
challenge to any provision of the arbitration agreement other than the class action
waiver.
The trial court denied the renewed motion. This appeal followed.
4
Mahmud also contended that bars against representative PAGA actions were
unenforceable under federal common law and violated the NLRA. Although Mahmud
had filed a first amended complaint in September 2009, making minor changes to
conform her unfair competition claim to the law, she had still not asserted a PAGA claim.
5
The opposition did cite Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489,
but only for the proposition that Gentry remained the law post-Concepcion. In Brown,
however, the appellate court found that the plaintiff had failed to carry her evidentiary
burden under the four-factor test established in Gentry, and did not determine “whether,
under [Concepcion], the rule in [Gentry] concerning the invalidity of class action waivers
in employee-employer contract arbitration clauses is preempted by the FAA.” (Brown,
supra, 197 Cal.App.4th at pp. 497-498.) Because the plaintiff in Brown sought to act as a
private attorney general, the court remanded for the trial court to consider whether the
PAGA waiver provision in the arbitration agreement could be severed and the remainder
of the agreement enforced according to its terms. (Brown, supra, at pp. 503-504.) As
Mahmud asserted no PAGA claim, the holding in Brown is not relevant here.
7
DISCUSSION
In their original briefs, the parties debated whether Concepcion abrogated
Gentry and whether the NLRA precluded enforcement of the agreement due to the
ban on class actions.6 As these issues were raised in fully briefed cases pending
before the California Supreme Court, we stayed the appeal until our Supreme
Court could make its position known. In Iskanian, supra, 59 Cal.4th 348, the court
held that “[u]nder the logic of Concepcion, the FAA preempts Gentry’s rule
against employment class waivers.” (Id. at p. 364.) The court explained: “[T]he
fact that Gentry’s rule against class waiver is stated more narrowly than Discover
Bank’s rule does not save it from FAA preemption under Concepcion. The high
court in Concepcion made clear that even if a state law rule against consumer class
waivers were limited to ‘class proceedings [that] are necessary to prosecute small-
dollar claims that might otherwise slip through the legal system,’ it would still be
preempted because states cannot require a procedure that interferes with
fundamental attributes of arbitration ‘even if it is desirable for unrelated reasons.’
[Citations.] It is thus incorrect to say that the infirmity of Discover Bank was that
it did not require a case-specific showing that the class waiver was exculpatory.
Concepcion holds that even if a class waiver is exculpatory in a particular case, it
is nonetheless preempted by the FAA.” (Iskanian, supra, at p. 364, quoting
Concepcion, supra, 131 S. Ct. at p. 1753.)
The Supreme Court also considered whether the class action waiver was
invalid under the NLRA and concluded in light of the FAA’s “‘liberal federal
policy favoring arbitration”’ (Concepcion, supra, 131 S. Ct. at p. 1745), that
sections 7 and 8 of the NLRA do not represent “‘“a contrary congressional
6
Mahmud contended in her brief that the bar against PAGA also violated the
NLRA. She cited no authority for this proposition, however, and we deem it forfeited.
8
command””’ “overriding the FAA’s mandate [citation].” (Iskanian, 59 Cal.4th at
p. 373.) The Supreme Court observed that its conclusion was “consistent with the
judgment of all the federal circuit courts and most of the federal district courts that
have considered the issue.” (Ibid., citing Sutherland v. Ernst & Young LLP (2d
Cir. 2013) 726 F.3d 290, 297, fn. 8; Owen v. Bristol Care, Inc. (8th Cir. 2013) 702
F.3d 1050, 1053-1055; Delock v. Securitas Security Services USA, Inc. (E.D.Ark.
2012) 883 F.Supp.2d 784, 789-790; Morvant v. P.F. Chang’s China Bistro, Inc.
(N.D.Cal. 2012) 870 F.Supp.2d 831, 844-845; Jasso v. Money Mart Express, Inc.
(N.D.Cal. 2012) 879 F.Supp.2d 1038, 1048-1049.)7
In light of the Supreme Court’s binding conclusion that Gentry was no
longer good law and that the NLRA did not override the FAA, we asked the parties
for additional briefing. In her supplemental brief, Mahmud argued for the first
time that Ralphs is collaterally estopped from litigating the enforceability of its
arbitration agreement based on Chavarria v. Ralphs Grocery Co. (9th Cir. 2013)
733 F.3d 916, in which the Ninth Circuit affirmed a district court’s determination
that procedural and substantive unconscionability precluded enforcement of the
Arbitration Policy. We need not address this issue. “[C]ollateral estoppel must be
raised in the trial court . . . and is waived if not raised below [citation].” (People v.
Gillard (1997) 57 Cal.App.4th 136, 160; accord, Franklin Mint Co. v. Manatt,
Phelps & Phillips, LLP (2010) 184 Cal.App.4th 313, 333, fn. 9 [court declined to
7
The Supreme Court also pointed out that the arbitration agreement at issue
“permit[ted] a broad range of collective activity to vindicate wage claims”: it did not
“prohibit employees from filing joint claims in arbitration,” “preclude the arbitrator from
consolidating the claims of multiple employees,” or “prohibit the arbitrator from
awarding relief to a group of employees.” Nor did it “restrict the capacity of employees
to ‘discuss their claims with one another, pool their resources to hire a lawyer, seek
advice and litigation support from a union, solicit support from other employees, and file
similar or coordinated individual claims.’” (Iskanian, supra, 59 Cal.App.4th at p. 374.)
9
take judicial notice of materials from prior lawsuit to determine collateral estoppel,
finding absence of “exceptional circumstances” to justify judicially noticing
“matters that were not presented to the trial court”].) In neither her opposition to
Ralphs’ renewed motion to compel arbitration nor her opening brief did Mahmud
raise collateral estoppel or cite Chavarria, although the district court’s decision in
Chavarria was issued weeks prior to the filing date of her opposition and a year
prior to the filing date of her respondent’s brief on appeal. (See Chavarria v.
Ralphs Grocer Co. (C.D. Cal. 2011) 812 F.Supp.2d 1079 [filed September 15,
2011].)8
Moreover, confidence in the correctness of the prior judgment for purposes
of collateral estoppel is subject to doubt where “a determination relied on as
preclusive is itself inconsistent with some other adjudication of the same issue.”
(Sandoval v. Superior Court (1983) 140 Cal.App.3d 932, 941.) In Macias v.
Ralphs Grocery Co. (August 28, 2008, B202625) 2008 Cal.App.Unpub. LEXIS
6960, the court considered substantially the same Arbitration Policy as in
Chavarria and reached a contrary conclusion regarding unconscionability. (See
also Covarrubias v. Ralph’s Grocery Co. (N.D. Cal. 2004, September 7, 2004, No.
C 02-5465 JSW) 2004 U.S. Dist. LEXIS 18318 [referencing prior order finding
plaintiff’s arbitration agreement with Ralphs binding, enforceable and not
unconscionable].)
Finally, even were we inclined to overlook the waiver and address
unconscionability on the merits, Mahmud could not prevail on the record before
us. As the California Supreme Court stated in Pinnacle Museum, supra, 55 Cal.4th
8
A final district court judgment retains its collateral estoppel effect while the appeal
is pending. (Collins v. D.R. Horton, Inc. (9th Cir. 2007) 505 F.3d 874, 882; accord,
Tripati v. Henman (9th Cir. 1988) 857 F.2d 1366, 1367.)
10
223, the party resisting arbitration bears the burden of presenting evidence to
support both procedural and substantive unconscionability, which are evaluated on
a “‘“sliding scale”’”: “‘[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.’” (55 Cal.4th at pp. 246-247; see
Armendariz v. Foundation Health Psychcare Servs. (2000) 24 Cal.4th 83, 114,
italics omitted, quoting Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1533
[procedural and substantive unconscionability “‘must both be present in order for a
court to exercise its discretion to refuse to enforce a contract or clause under the
doctrine of unconscionability’”].) Procedural unconscionability focuses on the
circumstances surrounding the execution of the agreement: lack of negotiation,
lack of meaningful choice, or insertion of arbitration terms in small type in a prolix
printed form. (See, e.g., Crippen v. Central Valley RV Outlet (2004) 124
Cal.App.4th 1159, 1165.) Unlike the plaintiff in Chavarria, Mahmud presented no
evidence of the circumstances surrounding her application for employment or her
decision to sign the arbitration agreement. Even after the United States Supreme
Court’s decision in Concepcion called Gentry into question and led Ralphs to
renew its petition to compel arbitration, Mahmud chose to base her opposition
entirely on the four Gentry factors, providing neither a declaration nor other
evidence to support unconscionability on any other ground. In the absence of such
evidence, we will not presume procedural unconscionability.
Alternatively, Mahmud contends Ralphs’ Arbitration Policy is
unconscionable “under [the California Supreme Court’s decision in] Sonic-
Calabasas A., Inc. v. Moreno (2013) 57 Cal.4th 1109 (Sonic II).” She cites no
provisions of the policy to support that contention, however, and advances no
argument explaining how any of the arbitration procedures set forth in the policy
11
demonstrate unconscionability under the standards set forth in Sonic II.9 She
suggests no evidence she could have presented to address the “fact specific
inquiry” mandated in Sonic II. “An appellant must affirmatively demonstrate error
through reasoned argument, citation to the appellate record, and discussion of legal
authority.” (Bullock v. Philip Morris USA, Inc. (2008) 159 Cal.App.4th 655, 685.)
“‘The reviewing court is not required to make an independent, unassisted study of
the record in search of error or grounds to support the judgment.’ [Citations.]”
(Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1115, quoting 9
Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 594, p. 627.) Where “an appellant
fails to raise a point, or asserts it but fails to support it with reasoned argument and
citations to authority,” we treat the point as forfeited. (Badie v. Bank of America
(1998) 67 Cal.App.4th 779, 784-785; accord, Nelson v. Avondale Homeowners
Assn. (2009) 172 Cal.App.4th 857, 862.) Any contention appellant may have had
with respect to Sonic II is forfeited.
9
In Sonic II, the employer unsuccessfully petitioned the superior court to compel
arbitration of an ex-employee’s administrative wage claim. The California Supreme
Court held that in determining the unconscionability of an adhesive employment-related
arbitration agreement that precludes assertion of administrative claims, a court may
consider whether the employee has been provided an accessible and affordable forum for
effective wage dispute resolution, similar to that provided under the Labor Code for a
Berman hearing. (Sonic II, supra, 57 Cal.4th at p. 1146; see Labor Code § 98, et seq.,
Post v. Palo/Haklar & Associates (2000) 23 Cal.4th 942, 946-947.) The court further
held that “a finding of unconscionability” under this rule “requires a court to examine the
totality of the agreement’s substantive terms as well as the circumstances of its formation
to determine whether the overall bargain was unreasonably one-sided,” a “fact-specific
inquiry.” (Sonic II, supra, at p. 1146.)
12
DISPOSITION
The order denying Ralphs’ petition to compel arbitration is reversed. The
matter is remanded for entry of an order granting the petition. Ralphs is awarded
costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
MANELLA, J.
We concur:
EPSTEIN, P. J.
WILLHITE, J.
13