Arevalo v. Pinnacle Farm Labor CA2/6 ( 2024 )

Filed 10/25/24 Arevalo v. Pinnacle Farm Labor CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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 SIX
NELSON AREVALO, 2d Civ. No. B328656
(Super. Ct. No. 56-2022-
Plaintiff and Respondent, 00563165-CU-OE-VTA)
(Ventura County)
v.
PINNACLE FARM LABOR,
INC.,
Defendant and Appellant.
Here the absence of an arbitration agreement cannot be
made to appear through the fiction of a third-party beneficiary
contract.
A farm laborer was employed by a farm labor contractor at
several properties. Only one of the property owners had the
laborer sign an arbitration agreement. The agreement included
the contractor as a third-party beneficiary. The laborer filed a
class action and an action under the Private Attorney General
Act (PAGA) (Lab. Code, § 2698, et seq.) alleging labor law
violations.
The contractor moved to compel arbitration contending that
the arbitration agreement the laborer signed with one property
owner covered all work performed for the contractor. The trial
court granted the motion only for work performed on the property
of the owner who obtained the arbitration agreement. The
contractor appeals. We affirm.
FACTS
Pinnacle Farm Labor, Inc. (Pinnacle) is a farm labor
contractor. Nelson Arevalo is a farm laborer who was employed
by Pinnacle from May 2021 to December 2022. While employed
by Pinnacle, Arevalo worked on a number of farms. He often
worked for several of Pinnacle’s clients in the same week. One
such client was Wonderful Citrus Packing LLC (Wonderful).
The trial court found that Arevalo entered into an
arbitration agreement with Wonderful1 as follows:
“[Y]ou [Arevalo] understand that you will be providing
services to [Wonderful] through [Pinnacle] and in connection
therewith, and with connection to services you have or will
render for [Wonderful] directly or through any other entity, you
and [Wonderful] voluntarily agree that any dispute, or
controversy relating to (i) the services you render for [Wonderful];
(ii) the nature of your service relationship with [Wonderful] and
terms and conditions related thereto; or (iii) the termination
thereof shall be submitted to final and binding arbitration in
accordance with the terms of this Mutual Agreement to Arbitrate
Disputes . . . .
1 Arevalo denied that he entered into any such agreement
but does not challenge the trial court’s finding for purposes of this
appeal.
2
“This agreement applies to all claims that [Wonderful] may
have against you, as well as all claims that you may have against
[Wonderful], including any of [Wonderful’s] partners, affiliated
companies, successors, contractors (including but not limited to
your employer and any entity that provides you your paycheck),
assigns, owners, directors, officers, shareholders, employees,
managers, members, agents.”
The agreement stated that all claims must be brought in
the party’s own capacity and not as a plaintiff member of a class.
The agreement specifically excludes from arbitration small
claims actions, workers compensation claims, unemployment
benefit claims, administrative claims and charges, and PAGA
representative actions. The agreement stated that it shall be
governed by the Federal Arbitration Act (FAA) (9 U.S.C. § 1, et
seq.) and the Code of Civil Procedure.
Underlying Action
Arevalo filed a class action and representative action
complaint under PAGA, against Pinnacle, as the only named
defendant, alleging twelve causes of action. Ten of the causes of
action were for wage and hour violations, including: claims for
unpaid wages; failure to provide rest, meal, and recovery periods;
failure to pay wages timely; failure to maintain and provide
employment records and accurate wage statements and failure to
reimburse for business expenses. Arevalo’s final two causes of
action were for violations of Business and Professions Code
section 17200-17210, unfair competition, and civil penalties
under PAGA.
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Motion to Compel Arbitration
Pinnacle responded to the complaint with a motion to
compel arbitration. Pinnacle’s motion relied on the arbitration
agreement Arevalo allegedly signed with Wonderful.
Ruling
The trial court found that Arevalo entered into an
arbitration agreement with Wonderful and Pinnacle is a third-
party beneficiary of the agreement. The court concluded,
however, that the agreement applied only to work performed for
Wonderful, at its locations, and causes of action arising from
work performed for Wonderful. Work performed at other
locations are not subject to arbitration. The court based its
ruling on its interpretation of the agreement and on the principle
that the rights of a third-party beneficiary cannot exceed the
rights of a party to the contract.
DISCUSSION
I. Interpretation of Agreement
Pinnacle contends that the trial court erroneously
concluded a portion of Arevalo’s causes of action are outside the
scope of the arbitration agreement.
Because there is no extrinsic evidence relating to the
interpretation of the agreement, our review is de novo. (Merrick
v. Writers Guild of America, West, Inc. (1982) 130 Cal.App.3d 212,
217.)
Pinnacle argues that the agreement must be broadly
construed in favor of arbitration. (Citing AT&T Technologies,
Inc. v. Communications Workers of America (1986) 475 U.S. 643,
650.) But the United States Supreme Court abrogated that rule
in Morgan v. Sundance, Inc. (2022) 596 U.S. 411 [212 L.Ed.2d
753] (Morgan). In Morgan, the question was whether a showing
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of prejudice is necessary for a finding that a party has waived its
right to arbitrate. Some courts have held that a finding of
prejudice is essential to waiver in the context of arbitration, but
not in other contexts. Those courts based the prejudice
requirement on the FAA’s policy favoring arbitration. In
rejecting that requirement, the court stated:
“But the FAA’s ‘policy favoring arbitration’ does not
authorize federal courts to invent special, arbitration-preferring
procedural rules. [Citation.] Our frequent use of that phrase
connotes something different. ‘Th[e] policy,’ we have explained,
‘is merely an acknowledgment of the FAA’s commitment to
overrule the judiciary’s longstanding refusal to enforce
agreements to arbitrate and to place such agreements upon the
same footing as other contracts.’ [Citation.] Or in another
formulation: The policy is to make ‘arbitration agreements as
enforceable as other contracts, but not more so.’ [Citation.]
Accordingly, a court must hold a party to its arbitration contract
just as the court would to any other kind. But a court may not
devise novel rules to favor arbitration over litigation. [Citation.]
If an ordinary procedural rule—whether of waiver or forfeiture or
what-have-you—would counsel against enforcement of an
arbitration contract, then so be it. The federal policy is about
treating arbitration contracts like all others, not about fostering
arbitration.” (Morgan, supra, 596 U.S. at p. 418.)
Although Morgan concerns procedural rules applied to
arbitration agreements, its lesson applies equally to the
interpretation of arbitration agreements.
There is nothing sacred about an arbitration agreement.
As in this case, they are often forced on a party with no
bargaining power as a condition of employment. As our Supreme
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Court stated in Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th 83, 115, “Various studies show
that arbitration is advantageous to employers not only because it
reduces the costs of litigation, but also because it reduces the size
of the award that an employee is likely to get, particularly if the
employer is a ‘repeat player’ in the arbitration system.
[Citations.] It is perhaps for this reason that it is almost
invariably the employer who seeks to compel arbitration.
[Citation.].”
Indeed, any arbitrator who wishes to remain in the
arbitration business must be concerned with offending such a
“repeat player.” In light of the advantage an arbitration
agreement provides an employer over an employee who is forced
to sign the agreement as a condition of employment, there is no
reason to broadly construe the agreement in favor of arbitration.
Instead, an arbitration agreement should be interpreted as any
other contract.
The fundamental rule of contract interpretation is to give
effect to the mutual intent of the parties as it existed at the time
of contracting. (Civ. Code § 1636.) The relevant intent is
objective; that is, derived from the terms of the contract, not a
party’s subjective intent. (Shaw v. Regents of University of
California (1997) 58 Cal.App.4th 44, 54-55.) “A contract must
receive such an interpretation as will make it lawful, operative,
definite, reasonable, and capable of being carried into effect, if it
can be done without violating the intention of the parties.” (Civ.
Code § 1643.)
Here only Wonderful and Arevalo are signatories to the
agreement. Its obvious purpose is to protect Wonderful from
lawsuits that may arise due to labor performed on its land.
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Pinnacle does not suggest why Wonderful would intend to protect
unrelated landowners from lawsuits that arise from labor
performed on unrelated land. Nor is it reasonable to conclude
that by signing an agreement with Wonderful, Arevalo intended
to bind himself to arbitrate disputes that may arise on other
landowners’ land. The agreement provides, “[Y]ou [Arevalo]
understand that you will be providing services to [Wonderful]
. . .” Arevalo had every reason to believe that the agreement
would be limited to services he provided to Wonderful.
Even if we were to broadly construe the agreement in favor
of arbitration, as Pinnacle suggests, we would reach the same
conclusion. Broad construction is limited in part by
reasonableness. (Civ. Code § 1643.) It would be unreasonable to
apply the agreement to services provided to anyone other than
Wonderful.
Moreover, Pinnacle is a third-party beneficiary of the
agreement. A third-party beneficiary to an agreement has no
greater rights under the contract than the actual contracting
parties. (Mercury Casualty Co. v. Maloney (2003) 113
Cal.App.4th 799, 803.) Pinnacle cites no authority giving
Wonderful the right to compel arbitration for work done on
properties in which it has no interest. (See City of Industry v.
City of Fillmore (2011) 198 Cal.App.4th 191, 208 [a person who
has no interest in the subject matter of an action, and therefore
no right to relief, cannot state a cause of action].)
Although the trial court clearly stated the third-party
beneficiary rule as an alternative basis for its decision, Pinnacle
failed to discuss the issue in its opening brief. Instead, it
discusses the issue for the first time in its reply brief, denying
Arevalo the right to respond. Pinnacle has waived argument on
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the issue. (See Reichardt v. Hoffman (1997) 52 Cal.App.4th 754,
766 [court refused to consider issues in reply brief that could have
been raised in the opening brief].) Pinnacle’s argument is not
convincing. The agreement granted Pinnacle no special rights. It
simply included Pinnacle in whatever rights Wonderful has.
Pinnacle’s rights cannot exceed Wonderful’s rights.
II. Order Does Not Split Causes of Action
Pinnacle contends that the trial court’s order impermissibly
splits causes of action between arbitration and court actions.
California follows the primary rights theory that one
inquiry gives rise to only one cause of action. (Mycogen Corp. v.
Monsanto Co. (2002) 28 Cal.4th 888, 904.) The primary right is
distinguished from the legal theory on which liability for the
injury is premised on the remedy sought. (Ibid.) It follows that
where there is a single injury, a plaintiff may not bring two
lawsuits based on different legal theories or different remedies
sought. (Ibid.) For example, a single breach of contract cannot
support a lawsuit for specific performance and a subsequent
separate lawsuit for damages. (Id. at p. 905.)
Here Arevalo did not bring multiple lawsuits based on
different remedies; he brought a single lawsuit. That a portion of
the lawsuit will be tried in a different forum does not violate the
ban on splitting a cause of action. The ban applies to multiple
lawsuits, not different forums in the same lawsuit.
As our Supreme Court stated in Adolph v. Uber
Technologies, Inc. (2023) 14 Cal.5th 1104, 1124-1125 (Adolph):
“When a case includes arbitrable and nonarbitrable issues,
the issues may be adjudicated in different forums while
remaining part of the same action. Code of Civil Procedure
section 1281.4 states that upon ‘order[ing] arbitration of a
8
controversy which is an issue involved in an action,’ the court
should ‘stay the action.’ It further provides that ‘[i]f the issue
which is the controversy subject to arbitration is severable, the
stay may be with respect to that issue only.’ Section 1281.4 does
not contemplate that the compelled arbitration of an issue in
controversy in the action is a separate action. The statute makes
clear that the cause remains one action, parts of which may be
stayed pending completion of the arbitration. [Citations.]
“Indeed, it is a regular and accepted feature of litigation
governed by the FAA that the arbitration of some issues does not
sever those issues from the remainder of the lawsuit. The high
court has long recognized that the FAA ‘requires piecemeal
resolution [of related disputes in different forums] when
necessary to give effect to an arbitration agreement.’ [Citation.]
. . . When an action includes arbitrable and nonarbitrable
components, the resulting bifurcated proceedings are not severed
from one another; rather, the court may ‘stay the trial of the
action until such arbitration has been had in accordance with the
terms of the agreement.’ [Citation.].” (Adolph, supra, 14 Cal.5th
at pp. 1124-1125.)
Pinnacle attempts to distinguish Adolph on the ground that
the case concerned standing. But our Supreme Court’s discussion
on what constitutes a single cause of action applies equally to
whether the trial court’s referral of only a part of the case to
arbitration constitutes splitting a cause of action. In fact, in its
discussion, our Supreme Court cited Cuevas v. Truline Corp.
(2004) 118 Cal.App.4th 56, 61 (Cuevas) with approval. (Adolph,
supra, 14 Cal.5th at p. 1125.) In Cuevas, the appellate court held
that plaintiffs did not split a cause of action by filing a single
complaint and arbitrating against some but not all defendants.
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III. No Violation of Principles of Arbitration
Pinnacle contends that the trial court’s ruling violates
other basic principles of arbitration and creates unmanageable
confusion and uncertainty.
Pinnacle argues that the trial court’s order violates the
principle that the objective of arbitration is to provide an efficient
forum for the resolution of disputes (Citing Iskanian v. CLS
Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 384.)
But both the United States and the California Supreme Courts
have recognized that bifurcation can create inefficiencies, but
nevertheless approved it. (Adolph, supra, 14 Cal.5th at p. 1125.)
Pinnacle also argues that the bifurcated proceedings can
create problems with res judicata. But the proceedings constitute
a single cause of action. (Adolph, supra, 14 Cal.5th at pp. 1124-
1125.) Res judicata is not implicated.
Finally, Pinnacle imagines several problems that could
arise in a bifurcated proceeding. It claims the imagined problems
are sufficient to deprive Arevalo of his constitutional right to a
jury trial on nonarbitrable issues. Pinnacle refrains from
explaining why the same imaginary problems are not sufficient to
deprive it of its non-constitutional right to arbitrate issues.
Suffice it to say that Pinnacle cites no authority for depriving
Arevalo of his constitutional right to a jury trial on nonarbitrable
issues.
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DISPOSITION
The judgment (order) is affirmed. Costs are awarded to
respondent.
NOT TO BE PUBLISHED.
GILBERT, P. J.
We concur:
YEGAN, J.
BALTODANO, J.
11
Mark S. Borrell, Judge
Superior Court County of Ventura
______________________________
LightGabler, Brian R. Weilbacher; Ferguson Case Orr
Paterson and John A. Hribar for Defendant and Appellant.
Melmed Law Group, Jonathan Melmed, Laura M. Supanich
and Michiko Vartanian for Plaintiff and Respondent.