Morales v. Honey Science Corporation CA2/4 ( 2024 )

Filed 10/21/24 Morales v. Honey Science Corporation CA2/4
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
JUAN CARLOS MORALES, II, B331376
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No.
v. 20STCV45280)
HONEY SCIENCE
CORPORATION et al.
Defendants and Respondents.
JUAN CARLOS MORALES, II, B331571
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No.
v. 20STCV11118)
ELIZABETH YANG.
Defendant and Respondent.
APPEAL from judgments of the Superior Court of Los
Angeles County, Michael P. Linfield, Judge. Affirmed.
Sacro & Walker, Lisa M. Burnett; Gagen McCoy and
Gregory L. McCoy for Plaintiff and Appellant.
Greenberg Traurig, Ryan C. Bykerk, Karin L. Bohmholdt
and Andrea Carmona for Defendants and Respondents.
INTRODUCTION
Juan Carlos Morales, II (Morales), appeals from judgments
entered after the trial court denied his petitions to vacate an
arbitration award and granted the petitions of Honey Science
Corporation (Honey Science), PayPal, Inc. (PayPal), and
Elizabeth Yang (collectively, defendants) to confirm the award.1
Morales contends: (1) the arbitrator refused to hear material
evidence; (2) the arbitrator’s refusal to postpone the hearing
prejudiced his substantial rights; (3) the arbitrator was biased;
(4) the settlement agreement containing the arbitration provision
is unenforceable; and (5) the award of attorneys’ fees should be
reversed or reduced.
The trial court concluded the evidence does not support
findings that the arbitrator refused to hear expert testimony,
improperly excluded Morales’s live testimony, or improperly
refused to postpone the hearing. It further concluded Morales’s
other contentions constituted challenges to the legal findings of
the arbitrator, which are beyond the permissible scope of a court’s
1 As described in more detail below, Morales filed two actions
in the superior court stemming from the termination of his
employment with Honey Science. The actions were both ordered
to arbitration and consolidated in a single JAMS proceeding,
resulting in a single arbitration award. The parties then
respectively filed cross-petitions to vacate (on behalf of Morales)
or to confirm the award (on behalf of Honey Science) in both
underlying actions in the superior court, which were heard
together on June 23, 2023. The court granted the motion to
confirm the award and entered substantially identical judgments
in each of the underlying matters. Morales filed separate notices
of appeal from each judgment, and we granted the parties’ joint
request to consolidate the appeals for all purposes.
2
review. The trial court, therefore, confirmed the arbitration
award and awarded attorneys’ fees to defendants. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND2
A. Factual Background
Honey Science provides consumers a service that
automatically finds coupon codes for online shoppers and applies
them to their orders when they check out. Morales began his
employment with Honey Science in February of 2016 as a
business development manager. Honey Science terminated
Morales’s employment on March 8, 2018.3
Morales retained counsel to draft a complaint against
Honey Science for wrongful termination. Before filing the
complaint, however, the parties agreed to mediate the dispute.
The in-person mediation took place on March 28, 2019
before David A. Rotman. During the mediation, Morales and
Honey Science entered into a settlement agreement releasing
2 The facts stated in this opinion are taken primarily from
the arbitrator’s Final Award, and other documents submitted in
the arbitration for additional background/contextual facts. We
have no authority to review the sufficiency of evidence supporting
the arbitrator’s award. (Moncharsh v. Heily & Blase (1992) 3
Cal.4th 1, 11 (Moncharsh).) “We therefore take the arbitrator’s
findings as correct without examining a record of the arbitration
hearings themselves . . . .” (Advanced Micro Devices, Inc. v. Intel
Corp. (1994) 9 Cal.4th 362, 367, fn. 1.) We also note that,
although the parties’ briefs contain lengthy factual backgrounds,
in this opinion we limit our recitation of the facts to those
necessary to provide context for and resolve the issues we are
deciding on appeal.
3 Honey Science merged with PayPal in January 2020.
3
Honey Science (and its owners, employees, successors, etc.) from
any claims arising from Morales’s termination and employment
(the settlement agreement). In return, Morales received a
settlement check, which he cashed.
One year after the parties entered into the settlement
agreement, Morales sued Elizabeth Yang, a former Honey
Science employee, for, among other claims, defamation (the Yang
case). The complaint alleged Morales was abruptly terminated by
Honey Science based on Yang’s false accusations of sexual
harassment.
Morales then filed a separate lawsuit against Honey
Science and PayPal to rescind the settlement agreement (the
PayPal case).4 The complaint alleged that, after his termination
from Honey Science, Morales developed a major depressive
disorder with anxious distress, as well as a generalized anxiety
disorder which caused him to not be able to think clearly and
make reasonable decisions for himself. The complaint further
alleged that, on the date of the mediation, Morales was pressured
to enter into the settlement agreement by his counsel and counsel
for Honey Science. He contends the settlement amount was
“unreasonably so far below the potential value of his wrongful
termination claims that any rational person would not have
accepted the settlement.”
B. Motions to Compel Arbitration
In response to the Yang and PayPal complaints, defendants
moved to compel all claims to arbitration based on the arbitration
provision in the settlement agreement. Morales opposed the
4 The trial court issued an order relating the Yang case and
the PayPal case.
4
motions on the following grounds: (1) the arbitration provision is
unenforceable because Morales was suffering from a serious
major depressive disorder at the time he signed the settlement
agreement; (2) the arbitration provision is unconscionable; (3) the
settlement agreement did not comply with the Older Workers
Benefit Protection Act (OWBPA) and thus, the agreement is
revocable; and (4) the allocation of the settlement funds may be
illegal and thus render the entire settlement agreement void and
unenforceable. In the Yang case, the trial court granted Yang’s
motion to compel arbitration based on its finding that a written
arbitration agreement exists between the parties, which contains
a clear and unmistakable delegation clause that reserves
questions of enforceability for the arbitrator. In the PayPal case,
the trial court issued an order stating that “[p]ursuant to the oral
stipulation of the parties at the hearing on the related [Yang]
case . . . , the Court orders the parties to attend arbitration.” The
court stayed the cases pending arbitration.
C. Arbitration Proceedings
After the trial court compelled both cases to arbitration,
Morales filed a demand for arbitration with JAMS on January
26, 2022. The demand sought rescission of the settlement
agreement based on lack of capacity, fraud and coercion, and
declaratory relief. Morales claimed he was suffering from
significant trauma as a result of a major depressive order caused
by his wrongful termination, and he was unduly pressured to
sign the settlement agreement. Morales also asserted a claim for
defamation against Yang “who falsely accused [him] of sexually
harassing . . . female employees of Honey Science.”
The parties selected Judge Elizabeth Allen White (Ret.) as
the arbitrator. On May 6, 2022, Judge White conducted a
5
preliminary hearing and issued a scheduling order. The order set
the evidentiary hearing for June 28-30, 2023, but noted the
parties were waitlisted for March 21-23, 2023. According to the
order, JAMS would notify the parties if and when the waitlisted
dates became available. As relevant here, the order stated:
“Counsel shall identify all non-rebuttal percipient and expert
witnesses expected to testify at the Hearing . . . not later than
May 15, 2023. The witness designations may be supplemented by
May 29, 2023.” The order further instructed the parties to submit
a joint discovery plan, in which the parties were to establish a
“procedure for the identification of expert witnesses and related
discovery” unless the procedure set forth in the order was
acceptable.
The parties submitted their “Joint Discovery Stipulation
and Order” on June 6, 2022. They agreed that experts would be
designated “120 days prior to the arbitration hearing and deposed
within 30 days” and rebuttal experts would be designated “60
days prior to the arbitration hearing and deposed within 30 days
after being so designated.”
On September 21, 2022, JAMS informed the parties, by
email, that the waitlisted hearing dates had become available
and the hearing “is now set to go forward on March 21-23, 2023.”
On October 14, 2022, Judge White issued Scheduling Order
No. 2, which amended certain deadlines to correspond to the new
hearing date. Specifically, Scheduling Order No. 2 provided:
“Counsel shall identify all non-rebuttal percipient and expert
witnesses expected to testify at the [h]earing . . . not later than
February 20, 2023. These witness designations may be
supplemented by February 27, 2023.”
6
On February 1, 2023, defendants moved for leave under
JAMS Rule 18 to file a summary disposition motion. On February
8, 2023, Morales opposed the motion and, for the first time,
disclosed the name of an expert witness: “[A] forensic
psychologist, Dr. David Appleton, who has expertise in drug,
alcohol and substance abuse issues, and will testify unequivocally
that Mr. Morales consumed so much alcohol that he was not
competent to grasp the terms of the settlement that he allegedly
signed.”
On February 15, 2023, Judge White granted defendants’
request for leave to file the dispositive motion. On February 17,
2023, Morales’s counsel sent an expert disclosure letter to
defendants’ counsel identifying David Appleton, Pys.D., and
“Darrell O. Clardy, Psy.D., Ph.D., Analytical & Forensic
Toxicology, Inc.” The letter concluded: “The above referenced
names of the experts are the only experts we intend to call for
testimony at the Arbitration.”
Morales opposed the summary disposition motion on
February 23, 2023. In his opposition, Morales stated “Dr. Darrell
O. Clardy will testify concerning the issue of Mr. Morales[’s] level
of intoxication at the mediation.” Morales also cited a report of a
third expert (which he previously withheld as subject to the
mediation privilege) and argued that his “situation was an
extreme case because not only did it involve his lack of mental
capacity based on his severe depression and anxiety which was
diagnosed by Beth Rosenblat . . . , but also his mental capacity
was significantly impaired by the amount of alcohol he consumed
during the . . . mediation . . . .”
Defendants submitted a letter brief to Judge White arguing
that, in the event their dispositive motion is denied, Morales’s
7
“sudden identification” of experts in his opposition was untimely
and those experts should be excluded. They relied on the joint
discovery stipulation, which stated initial experts shall be
designated 120 days prior to the arbitration hearing, i.e.,
November 21, 2022. They asserted Morales’s late designation of
experts in February 2023 did not give them time “to designate a
rebuttal expert . . . , or to depose Morales’s” experts. Before
obtaining a ruling, defendants filed a second letter brief seeking
relief from the arbitrator based on Morales’s alleged failure to
confirm expert deposition dates.
Morales’s counsel responded to the letter brief, stating in
part that they did not disclose experts until February 2023
because they “sincerely believed that the disclosure date based
upon . . . Scheduling Order No. 2 was February 20, 2023.”
Morales’s counsel further explained that they “believed . . .
Scheduling Order [No. 2] indicating disclosure of experts by
February 20, 2023, superseded the Joint Discovery Plan which
deadlines were originally based on a June 28, 2023 arbitration
date.” The letter concluded with a request for a continuance of
the hearing “[b]ased upon the conflicting discovery dates
referenced above . . . and the fact that [Morales’s] counsel’s wife
will be having a major surgical procedure in March right around
the time of the presently scheduled arbitration.”
Defendants’ counsel then emailed Morales’s counsel
stating: “With regard to the arbitration date, I think the last
hearing made clear that Judge White would prefer to just
determine the [summary disposition motion] and that may moot
any need to continue the hearing date. I’d also prefer to go that
route and would prefer to simply prepare accordingly. But just to
be clear, we are certainly not going to demand that you attend an
8
arbitration while your wife is undergoing surgery. If your wife’s
health and surgery will ultimately interfere with those dates and
the arbitration is still set to go forward, do know that we will not
stand in the way of a continuance request if it comes to that.”
After holding a hearing on February 27, 2023, Judge White
issued a ruling excluding Morales’s experts for failure to timely
designate them. Judge White found Morales did not designate
experts before November 2022 (i.e., 120 days before the hearing),
but rather first indicated he had experts expected to testify in a
letter to the arbitrator dated February 8, 2023, and again at a
hearing on February 15, 2023. She further found defendants had
“been unable to depose [Morales’s] experts due to the compressed
time frame before the March 21 arbitration date and ha[ve] thus
been prejudiced.” Based on these findings, Judge White precluded
Morales from calling any experts, including, but not limited to,
David Appleton, PhD., Darrell O. Clardy PhD., and Beth
Rosenblatt.
On March 3, 2023, Judge White granted defendants’ motion
for summary disposition after a hearing by conference call. Judge
White reasoned: “Regarding [ ] Morales’[s] claim that he was
suffering from depression and anxiety so severe that he was
incapable of contracting, [Morales] appears to promise no other
evidence than the testimony of experts, but such evidence has
been precluded by [Morales’s] own delay. As to intoxication,
[Morales] does not claim that he can show that the consideration
in the settlement agreement was inadequate or that the
settlement agreement was so unfair as to suggest that he was
taken advantage of. Moreover, as with evidence of his depression
and anxiety, expert evidence about his intoxication or evidence
from the mediation is barred and is of no help to [Morales].”
9
Judge White further found statements allegedly made by Honey
Science executives (offering to help him find another job,
cautioning him that if he proceeded with litigation his stock
options would not be available, and a “scarlet letter” would be
added to his employment file), did not rise to the level of duress
or fraud. She therefore concluded “no triable issue exists as to [ ]
Morales’[s] claim to rescind the contract because duress and lack
of capacity cannot be established on this record, and [ ] Morales is
unable to supplement it.”
On May 4, 2023, Judge White entered a final award in
favor of defendants, and awarded defendants $317,653.83 in
attorneys’ fees as the prevailing parties.
D. Petitions to Vacate and Confirm the Award
Defendants petitioned the superior court to confirm the
award (Code Civ. Proc., § 1286)5; Morales petitioned for the
award to be vacated (§ 1286.2). The parties filed substantially
identical petitions in the Yang and PayPal cases. Morales argued
vacation of the award is warranted because the arbitrator:
refused to hear material evidence; caused prejudice to Morales by
refusing to postpone the hearing; and exceeded her authority by
issuing an award that violates Morales’s statutory rights. He
further argued that because the award must be vacated, the
attorneys’ fee award cannot stand. The trial court disagreed,
holding the evidence does not support a finding that the
arbitrator improperly refused to hear expert testimony nor that
the arbitrator improperly excluded Morales’s live testimony. The
court further held the arbitrator did not act improperly nor
5 All further undesignated statutory references are to the
Code of Civil Procedure.
10
prejudice Morales by refusing to postpone the arbitration
hearing. Finally, the court held it lacked jurisdiction to review
Morales’s remaining arguments regarding whether the
settlement agreement was interpreted correctly, whether the
arbitrator correctly weighed the evidence, and whether the
arbitrator made correct determinations on contract defenses,
stating those matters are “solely to be determined by the
[a]rbitrator” and are “unreviewable by the Court.”6
The trial court confirmed the award, and entered judgment
on July 18, 2023 in favor of Honey Science and PayPal in the
PayPal case. Defendants then filed their memorandum of costs,
and moved for attorneys’ fees incurred in the trial court
proceedings in the amount of $52,937.30. The court awarded
defendants’ attorneys’ fees and costs in the reduced amount of
$25,222.81.7
The trial court subsequently entered an amended judgment
in the PayPal case to reflect the attorneys’ fees and costs
awarded. The court entered a separate judgment in favor of
Yang.
6 This language is taken from the order issued in the Yang
case. In the PayPal case, the trial court’s minute order states:
“The Parties request the exact same relief and make the exact
same arguments in this case as are made for the same petitions
in [the Yang case], which is related to this case. [¶] For the
reasons stated in that Order, there are no grounds upon which to
vacate the Arbitrator’s award. Thus, the Court cannot vacate the
award.”
7 The trial court awarded Honey Science and PayPal
$12,617.50, and awarded Yang $12,605.31, for a total award of
$25,222.81.
11
Morales filed two notices of appeal from the judgments. As
noted above, we consolidated the appeals for all purposes.
DISCUSSION
1. Legal Principles and Standard of Review
“We review de novo the trial court’s order confirming the
arbitration award.” (Greenspan v. LADT, LLC (2010) 185
Cal.App.4th 1413, 1435.) “The scope of judicial review
of arbitration awards is extremely narrow because of the strong
public policy in favor of arbitration and according finality
to arbitration awards.” (Ahdout v. Hekmatjah (2013) 213
Cal.App.4th 21, 33 (Ahdout).) Thus, “an arbitrator’s decision is
not generally reviewable for errors of fact or law, whether or not
such error appears on the face of the award and causes
substantial injustice to the parties.” (Moncharsh, supra, 3 Cal.4th
at p. 6.) “However, Code of Civil Procedure section
1286.2 provides limited exceptions to this general rule.” (Ahdout,
supra, 213 Cal.App.4th at p. 33.)
Morales relies on section 1286.2, subdivisions (3)-(5) as the
statutory bases for challenging the award. Those sections allow a
court to vacate an award when: “[t]he rights of the party were
substantially prejudiced by misconduct of a neutral arbitrator”
(§ 1286.2, subd. (3)); “[t]he arbitrators exceeded their powers and
the award cannot be corrected without affecting the merits of the
decision upon the controversy submitted” (§ 1286.2, subd. (4)); or
“[t]he rights of the party were substantially prejudiced by the
refusal of the arbitrators to postpone the hearing upon sufficient
cause being shown therefor or by the refusal of the arbitrators to
hear evidence material to the controversy or by other conduct of
the arbitrators contrary to the provisions of this title.” (§ 1286.2,
subd. (5).)
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2. The Trial Court Properly Denied Morales’s Petition
to Vacate the Arbitration Award
A. Exclusion of Morales’s Proffered Expert
Testimony
Morales contends the arbitrator improperly refused to hear
testimony from Morales’s expert witnesses: (1) psychologist Beth
Rosenblatt; (2) toxicologist Darrell O. Clardy; and (3) mental
health expert Dr. David Appleton. For the reasons discussed
below, we conclude Judge White’s ruling excluding expert
testimony does not warrant vacation of the award.
The arbitrator has broad discretion in conducting the
hearing and ruling on admission and exclusion of evidence. (See
§ 1282.2, subd. (c) [“The neutral arbitrator shall preside at the
hearing, shall rule on the admission and exclusion of evidence
and on questions of hearing procedure and shall exercise all
powers relating to the conduct of the hearing”].) “[A] challenge to
an arbitrator’s evidentiary rulings or limitations on discovery
should not provide a basis for vacating an award unless the error
substantially prejudiced a party’s ability to present material
evidence in support of its case.” (Schlessinger v. Rosenfeld, Meyer
& Susman (1995) 40 Cal.App.4th 1096, 1110, italics in original
(Schlessinger).) “‘Where, as here, a party complains of excluded
material evidence, the reviewing court should generally focus
first on prejudice, not materiality. To find substantial prejudice
the court must accept, for purposes of analysis, the arbitrator’s
legal theory and conclude that the arbitrator might well have
made a different award had the evidence been allowed.’” (Id. at p.
1111.)
As discussed above, the parties briefed their respective
positions regarding the expert designation deadline. Defendants
13
argued Morales’s identification of experts in February 2023 was
untimely because, per the parties’ stipulated Joint Discovery
Plan, experts were to be disclosed 120 days before the hearing
(i.e., November 2022). Morales countered that Judge White’s
Scheduling Order No. 2, issued October 14, 2022, indicated the
deadline for expert disclosures was February 20, 2023 (i.e., a
month before the scheduled hearing), and that order superseded
the Joint Discovery Plan. After a hearing on the issue, Judge
White agreed with defendants, concluding Morales failed to
timely designate experts based on the parties’ Joint Discovery
Plan. She further concluded defendants were prejudiced because
Morales did not identify experts until February 2023, leaving
defendants with no time to depose the experts and designate
rebuttal experts before the March 21 hearing.
We acknowledge the potential for confusion regarding the
expert disclosure deadlines. After JAMS moved the hearing to
March 21-23, 2023, Judge White issued Scheduling Order No. 2
indicating the deadline for expert disclosures was February 20,
2023. But that date conflicted with the parties’ Joint Discovery
Plan. According to the Joint Discovery Plan, experts were to be
disclosed 120 days before the hearing (i.e., November 2022).
Thus, Morales’s counsel’s belief that the expert disclosure
deadline was the new date provided in Scheduling Order No. 2
was not unreasonable.
Even if Judge White erred by excluding Morales’s experts
for failure to timely designate them, however, the proffered
expert testimony would not have changed the outcome.8
8 We limit our prejudice analysis to the proffered expert
testimony of Dr. Appleton and Dr. Clardy. As noted above,
Morales’s counsel’s February 17, 2023 letter unequivocally stated
14
(Schlessinger, supra, 40 Cal.App.4th at p. 1111.) In Morales’s
opposition to defendants’ summary disposition motion, Morales
stated: “According to Dr. Appleton, [Morales] did not attend this
mediation to sabotage it. He attended to try and settle the case,
but as the day progressed, which ended up taking the entire day,
he became increasingly unable to function in a normal capacity
when he finished drinking all of the vodka.” Morales further
states in his brief on appeal that Dr. Appleton “would have
provided testimony that [ ] Morales had a history of alcohol abuse
and depression, and that he should not have proceeded with the
mediation as the combination of alcohol consumption, lack of
sleep, inadequate nutrition, and major depression left him
‘mentally and cognitively impaired.’” And according to Morales,
Dr. Clardy “would have presented testimony that a person who
had consumed the level of alcohol [ ] Morales did at the mediation
would have been meaningfully impaired in cognition, memory,
and overall functioning, yet might have been able to camouflage
those impairments to some extent.”
In her ruling on the summary disposition motion, Judge
White explained that “a court will not set aside a transaction
Dr. Appleton and Dr. Clardy were the “only experts [Morales]
intend[ed] to call for testimony at the Arbitration.” The arbitrator
could not have erred, therefore, by purportedly excluding expert
testimony of an expert witness Morales did not intend to call.
Moreover, Morales first disclosed Rosenblatt’s report on February
23, 2023, when he cited it in his opposition to the summary
disposition motion. As noted above, he previously withheld the
report as being subject to the mediation privilege. Thus, Morales
failed to timely designate Rosenblatt even if we accept Morales’s
position that the expert disclosure deadline was February 20,
2023.
15
merely because a party was voluntarily intoxicated, although the
transaction may be rescinded when the other party knows and
has taken advantage of the condition for a grossly inadequate
consideration.”9 There is no evidence in the record that
defendants’ counsel knew Morales was intoxicated at the
mediation. Thus, expert testimony regarding Morales’s level of
intoxication, and testimony that Morales may have been able to
conceal his condition, is of no help to Morales. If defendants were
unaware of Morales’s alleged condition during the mediation,
they could not have taken advantage of it.
Accordingly, we cannot say that a different result might
have been reached had Morales been allowed to offer the expert
testimony. (Schlessinger, supra, 40 Cal.App.4th at p. 1111.)
Judge White’s exclusion of Morales’s experts, therefore, is not a
basis for vacating the award.10
B. Exclusion of Live Testimony
Morales contends the arbitrator improperly resolved
credibility issues on summary disposition based on excerpts from
9 Neither party contends this standard is incorrect, and, in
any event, “an arbitrator’s decision is not generally reviewable for
errors of fact or law[.]” (Moncharsh, supra, 3 Cal.4th at p. 6.)
10 Morales also argues California Evidence Code section 1119
(describing the mediation privilege) does not prevent Morales or
his experts from testifying about his own physical and mental
state at the time of the mediation. This argument is irrelevant,
however. As discussed above, Judge White excluded expert
testimony for failure to timely designate, not because of the
mediation privilege. And, Morales does not point to any other
evidence submitted in opposition to defendants’ motion for
summary disposition that was excluded based on the mediation
privilege.
16
his deposition. He argues the exclusion of his own live testimony
caused prejudice to his substantial rights under section 1286.2,
subdivision (a)(5). It is well settled, however, that “the
arbitrator’s obligation ‘to hear evidence’ does not mean that the
evidence must be orally presented or that live testimony is
required.” (Schlessinger, supra, 40 Cal.App.4th at p. 1105.)
Rather, “[a]n arbitrator ‘hears’ evidence by providing a ‘legal
hearing,’ that is, by affording an ‘opportunity to . . . present one’s
side of a case.’ [Citation.] An arbitrator also ‘hears’ a matter by
‘consider[ing] a motion upon presentation thereof by counsel.””
(Ibid.)
Judge White granted defendants’ motion for summary
disposition after considering briefing from both parties, evidence
submitted in support of, and in opposition to, the motion, as well
as arguments of counsel. She concluded no triable issues of
material fact existed, and thus, disposed of the case prior to a
hearing with live testimony. To the extent Morales is arguing
Judge White erred by granting summary disposition because
triable issues of material fact existed and she improperly made
credibility determinations, Morales is simply disputing the
arbitrator’s factual findings and legal conclusions, which are
beyond the scope of our review. (Moncharsh, supra, 3 Cal.4th at
p. 6.)
C. The Arbitrator’s Alleged Refusal to Postpone the
Hearing
Morales next contends the arbitrator’s refusal to grant a
continuance of the evidentiary hearing prejudiced Morales “in
that it deprived him of testimony that was critical to his
incapacity argument.” A continuance of the hearing, however,
would be of no consequence. As discussed above, Judge White
17
granted defendants’ dispositive motion, obviating the need for an
evidentiary hearing.
It appears that what Morales is really arguing is that
Judge White should have simply moved the hearing date to allow
more time for defendants to depose his experts and to designate
rebuttal experts. But this argument is merely a variation of
Morales’s argument that Judge White erred by excluding expert
testimony. Thus, we reject this argument for the same reasons
discussed above in section 2.A. Judge White acted within her
discretion by ruling on the briefed summary disposition motion
rather than delaying the proceedings (see § 1282.2, subd. (c)), and
Morales has not demonstrated he was prejudiced by the exclusion
of expert testimony.
We likewise reject Morales’s argument premised on the
arbitrator’s purported refusal to postpone the hearing due to
counsel’s family medical emergency. The record reflects no such
thing occurred. Morales’s counsel informed the arbitrator that his
wife was scheduled to have a major surgical procedure in March
“right around the time of the presently scheduled arbitration.”
But Judge White granted summary disposition against Morales
on March 3, 2023. Thus, it was not necessary to continue the
arbitration hearing because the case was disposed of before the
scheduled arbitration hearing and surgery.
D. Arbitrator Bias
For the first time on appeal, Morales argues the award
should be vacated because Judge White demonstrated bias
against Morales. In support of his argument, Morales contends
the final award “exude[s] bias” because it: (1) repeatedly cites
Morales’s delay in designating experts when, according to
Morales, he timely designated experts; (2) asserts without
18
support that statements made by Honey Science executives to
Morales were neither wrongful nor untrue11; (3) proclaims
Morales was not taken advantage of with respect to the
settlement agreement, which ignores that Morales pled his stock
options alone were worth upwards of $2.5 million, yet the
agreement netted him less than 10 percent of that amount; and
(4) found a provision in an agreement prohibiting reemployment
is valid when the employee engaged in sexual harassment, but
Morales “denies all accusations of sexual misconduct in their
entirety.”
By not raising this argument in the trial court in support of
his petition to vacate the award, Morales forfeited it on appeal.
(See Howitson v. Evans Hotels, LLC (2022) 81 Cal.App.5th 475,
489 [“It is well settled that the failure to raise an issue in
the trial court typically forfeits on appeal any claim of error based
on that issue”].) In any event, we conclude Morales’s claim of
arbitrator bias fails on the merits. None of the grounds on which
11 Morales alleged Honey Science executives made the
following statements: (1) The CFO and Co-Founder (Ryan
Hudson) represented that his girlfriend had a start-up company
and would recommend Morales for a position at the company, but
the recommendation did not occur; (2) The CEO and Co-Founder
(George Ruan) represented he was ready to introduce Morales to
two unidentified companies for possible employment, but the
introductions never came; (3) The COO represented to Morales
that he intended to introduce Morales to the CEO of a company
known as Joymode for potential employment, but the
introduction did not occur; (4) Hudson told Morales if he entered
into litigation regarding his employment termination, his stock
options would not be available; and (5) Ruan told Morales that a
“scarlet letter” would be placed in his employment file if he did
not drop his claims for wrongful termination.
19
Morales relies establishes Judge White was biased against him.
Instead, each purported ground concerns alleged legal or factual
errors, and is essentially a complaint regarding how Judge White
decided the case. The merits of the parties’ controversy, even if
dressed up as an arbitrator bias claim, are not subject to judicial
review. (See Moncharsh, supra, 3 Cal.4th at pp. 6, 11 [“an
arbitrator’s decision is not generally reviewable for errors of fact
or law, whether or not such error appears on the face of the
award and causes substantial injustice to the parties” and “‘[t]he
merits of the controversy between the parties are not subject to
judicial review’”].)
E. Arguments Regarding Enforceability of the
Settlement Agreement
Morales lastly argues the settlement agreement is void for
two reasons: (1) the agreement’s provision prohibiting future
employment at Honey Science or any majority-owned subsidiary
of Honey Science violates Business & Professions Code section
16600; and (2) the settlement agreement does not comply with
the OWBPA. For the reasons discussed below, we conclude
Morales forfeited these arguments.
i. Business and Professions Code section
16600
Morales contends the settlement agreement (which
includes the arbitration agreement) is void in its entirety because
it contains a provision prohibiting future employment.12 (See Bus.
12 Section 7 of the settlement agreement provides: “Morales
agrees not to apply for employment in the future with the
Company or any majority-owned subsidiary of the Company.
Morales further agrees that the Company and any majority-
20
& Prof. Code, § 16600, subd. (a) [“Except as provided in this
chapter, every contract by which anyone is restrained from
engaging in a lawful profession, trade, or business of any kind is
to that extent void”].) When—as here—a party contends the
alleged illegality constitutes grounds to revoke the entire
settlement agreement, he or she is required to first raise the
issue of illegality in the trial court to preserve the issue for later
judicial review. (See Moncharsh, supra, 3 Cal.4th at p. 30 [a
party contending the entire contract is illegal must raise the
illegality issue at the outset in the trial court prior to
participating in the arbitration process]; see also Pearson Dental
Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665, 680-681
[plaintiff forfeited argument that arbitration agreement was
unconscionable and contrary to public policy by failing to raise
the argument in opposition to the petition to compel arbitration].)
As discussed above, although Morales opposed defendants’
petition to compel arbitration, he did so on various grounds
including unconscionability, noncompliance with the OWPBA,
and incapacity. He did not raise the issue of illegality based on
Business and Professions Code section 16600. Rather, he waited
until his opposition to defendants’ motion for summary
disposition in the arbitration to raise the argument for the first
time. Under Moncharsh, this was too late.
Morales maintains “the defense of illegality may be raised
at any time[,]” citing South Bay Radiology Medical Associates v.
Asher (1990) 220 Cal.App.3d 1074, 1079-1080 (South Bay). Our
Supreme Court explicitly rejected this proposition, however: “We
disapprove [South Bay] insofar as it suggests that an ‘attack on
owned subsidiary of the Company may reject without explanation
or liability any application by Morales for employment.
21
the arbitrator’s decision [that] is based on alleged illegality’ is a
defense that ‘may be raised at any time.’” (Law Finance Group,
LLC v. Key (2023) 14 Cal.5th 932, 959, fn. 5.) Morales
alternatively claims the issue has not been forfeited because he
sought declaratory relief in his initial complaint for rescission of
the agreement, and briefed the issue at his earliest opportunity to
do so in the arbitration. These arguments miss the point.
Although Morales’s complaint sought rescission of the agreement,
it did so on grounds other than an alleged illegal restraint on
trade. And, whether Morales raised the issue at his earliest
opportunity in the arbitration is debatable13, but in any event,
irrelevant. As stated in Moncharsh, a party contending the
alleged illegality constitutes grounds to revoke the entire
settlement agreement is required to first raise the issue of
illegality in the trial court, not the arbitration. (Moncharsh,
supra, 3 Cal.4th at p. 30.)
Accordingly, we conclude Morales forfeited his argument
regarding an alleged illegal restraint on trade in the agreement.
(Moncharsh, supra, 3 Cal.4th at p. 30; see also Cummings v.
Future Nissan (2005) 128 Cal.App.4th 321, 328 [“The forfeiture
rule exists to avoid the waste of scarce dispute resolution
resources, and to thwart game-playing litigants who would
conceal an ace up their sleeves for use in the event of an adverse
outcome”].)14
13 In the Final Award, Judge White noted this argument “was
not properly pled and was raised for the first time in his
[o]pposition to the [m]otion for [s]ummary [d]isposition.”
14 Even if we were to consider this argument on the merits,
there is no evidence in the record demonstrating section 7 of the
settlement agreement places a restraint of a substantial
22
ii. Older Workers Benefit Protection Act
(OWBPA)
The OWBPA, which is part of the Age Discrimination in
Employment Act (ADEA), imposes specific requirements for
releases covering ADEA claims. (29 U.S.C. § 626(f)(1).) Under
the OWBPA, an employee may not waive an ADEA claim unless
the release satisfies the OWBPA’s requirements, including that
“the agreement provides that for a period of at least 7 days
following the execution of such agreement, the individual may
revoke the agreement, and the agreement shall not become
effective or enforceable until the revocation period has expired.”
(29 U.S.C. § 626(f)(1)(G).)
Under the settlement agreement, Morales released all
claims against Honey Science (and its successors, assigns,
employees, etc.) relating to “Morales’s hire, employment
remuneration or employment separation” and claims “arising in
tort, including, without limitation, [c]laims of wrongful dismissal
or discharge, discrimination, harassment, retaliation,
character on Morales’s ability to practice his profession. (See
Golden v. Cal Emergency Physicians Med. Grp. (9th Cir. 2018)
896 F.3d 1018, 1020, quoting Chamberlain v. Augustine (1916)
172 Cal. 285 [“[Business and Professions Code section 16600]
applies not only to noncompetition agreements but also to any
contractual provision that places a ‘restraint of a substantial
character’ on a person’s ability to practice a profession, trade, or
business”].) Morales merely speculates, without citation to the
record, that “if the ‘majority owned subsidiary’ language is taken
to apply to PayPal Ventures and its vast swathe [sic] of market
share in the e-commerce industry, employment options for [ ]
Morales are scarce.” Morales conceded at his deposition,
however, that he has applied to several jobs in the “tech
industry.”
23
misrepresentation, defamation, slander, libel, infliction of
emotional distress, violation of public policy, and/or breach of the
implied covenant of good faith and fair dealing[.]” The agreement
does not, however, contain the language required by the OWBPA.
In ruling on defendants’ motion to compel arbitration, the
trial court found the issue of whether the agreement was
unenforceable based on noncompliance with the OWBPA was for
the arbitrator to decide based on the arbitration agreement’s
delegation clause. It is undisputed, however, that Morales did not
raise the issue in arbitration. As our Supreme Court has held, a
party to an arbitration may not “sit on his rights, content in the
knowledge that should he suffer an adverse decision, he could
then raise the illegality issue in a motion to vacate the
arbitrator’s award. A contrary rule would condone a level of
‘procedural gamesmanship’ that we have condemned as
‘undermining the advantages of arbitration.’” (Moncharsh, supra,
3 Cal.4th at p. 30.) We therefore deem this issue forfeited.15
3. Attorneys’ Fees
After the trial court confirmed the arbitration award, it
awarded defendants their attorneys’ fees and costs incurred in
the trial court proceedings in the reduced amount of $25,222.81.
As an initial matter, it is unclear whether Morales is
disputing the attorneys’ fees awarded by the arbitrator and the
trial court, or only those awarded by the trial court. In any event,
15 We note that even if Morales preserved this issue for
appeal, he does not point to any case law or language in the
statutory scheme to support his argument that failure to comply
with the OWBPA invalidates the entire agreement (as opposed to
merely preventing defendants from enforcing the agreement’s
release of a claim brought under the ADEA).
24
we conclude Judge White and the trial court properly awarded
attorneys’ fees to defendants as the prevailing parties under Civil
Code section 1717.
Civil Code section 1717 authorizes an award of attorneys’
fees to a prevailing party “[i]n any action on a contract, where
the contract specifically provides that attorney’s fees and
costs, which are incurred to enforce that contract, shall be
awarded . . . to . . . the prevailing party.” (Civ. Code, § 1717, subd.
(a).) The settlement agreement included an attorneys’ fee
provision, which provided: “If it is necessary for either party to
file suit to enforce this Agreement, the prevailing party shall
recover its reasonable costs of enforcement, including costs and
reasonable attorneys’ fees.” Morales contends fees incurred in the
Yang case are not subject to the attorneys’ fee provision because
“[i]t is not a suit to enforce the settlement agreement and does
not even sound in contract.” He therefore proposes the “fee award
be reduced by 50% to account for the Yang [case].” We are
unpersuaded.
“[T]he pivotal point in the analysis whether a prevailing
party is entitled to recover contractual attorney fees for defending
against a competing noncontractual claim (when the language of
the agreement does not encompass noncontractual claims or is
ambiguous) is . . . whether a defense against the noncontractual
claim is necessary to succeed on the contractual claim.” (Siligo v.
Castellucci (1994) 21 Cal.App.4th 873, 879 (Siligo).) Here,
Morales released his claims, including his claim for defamation,
against Honey Science and each of its employees. Thus, defending
a defamation lawsuit against an employee of the company
“constituted part of the cost of enforcing the [settlement
agreement].” (Siligo, supra, 21 Cal.App.4th at p. 880.) Judge
25
White and the trial court, therefore, properly awarded attorneys’
fees to defendants as the prevailing parties in both the Yang and
PayPal cases.
DISPOSITION
The judgments are affirmed. Defendants are awarded their
costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
CURREY, P. J.
We concur:
COLLINS, J.
MORI, J.
26