Lopez v. Fountain View Subacute and Nursing Center CA2/2

Filed 2/16/22 Lopez v. Fountain View Subacute and Nursing Center CA2/2
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
MICHELLE LOPEZ, B309714
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. 20STCV17276)
v.
FOUNTAIN VIEW SUBACUTE
AND NURSING CENTER, LLC,
et al.,
Defendants and
Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Maureen Duffy-Lewis, Judge. Reversed and
remanded.
Littler Mendelson, Curtis A. Graham, Anthony G. Ly and
Melanie H. Rollins for Defendants and Appellants.
Jonny Law, Jonathan Roven and Britanie A. Martinez for
Plaintiff and Respondent.
Defendants and appellants Fountain View Subacute and
Nursing Center, LLC (Fountain View), Genesis Healthcare LLC,
New Generation Health, LLC, and Christina Urbina (collectively,
defendants) appeal the trial court’s denial of their motion to
compel arbitration of employment related claims asserted by
plaintiff and respondent Michelle Lopez (plaintiff) in an action
she filed against defendants. The trial court denied defendants’
motion on the ground that the parties’ arbitration agreement
required mediation of the dispute as a precondition to arbitration
and that defendants could not waive that condition on plaintiff’s
behalf. Defendants contend issues concerning waiver of the right
to arbitrate, interpretation, breach, or enforcement of the
arbitration agreement, and the scope of any arbitrable issues
must be decided by the arbitrator, and not the trial court, under
the terms of the parties’ agreement. We agree and reverse the
order denying the motion to compel arbitration.
BACKGROUND
Fountain View’s employment dispute resolution program
Fountain View hired plaintiff on August 30, 2009. On
August 28 and August 30, 2009, plaintiff acknowledged in writing
that she received a copy of Fountain View’s Employment Dispute
Resolution (EDR) book. The EDR book describes and explains
Fountain View’s EDR program for resolving covered disputes.
Disputes covered under the EDR program include all
employment-related disputes, including claims related to
discipline, discrimination, fair treatment, harassment, and
termination.1 The EDR program consists of four steps: (1)
1 Disputes concerning worker’s compensation,
unemployment benefits, health, welfare and retirement benefits,
2
informal attempts to resolve the dispute by the employee and the
employee’s supervisor; (2) informal attempts at resolution by the
employee and a human resources director; (3) mediation; and (4)
arbitration.
Plaintiff was provided with an updated version of Fountain
View’s EDR book in June 2012. The updated EDR book, like the
previous version, explains the four steps of Fountain View’s EDR
program. Both the previous and updated versions of the EDR
book contain the following advisement concerning step 3—
mediation:
“You are not bound by the outcome of the mediation;
however, in most cases, it is a required step in the
EDR Program. The EDR Program Administrator has
the discretion of allowing you in some circumstances
to move to Step Four without taking advantage of the
Mediation Step.”
The updated EDR book states that the EDR program is
governed by the Federal Arbitration Act (FAA): “[T]he Federal
Arbitration Act covers the application, interpretation and
enforcement of the EDR Program itself. If any court should find
that the Federal Arbitration Act does not apply to the arbitration
of a particular dispute then the law of the state in which you
work will cover the application, interpretation and enforcement of
the EDR Program.”2
and claims for injunctive relief to protect trade secrets and
confidential information are not covered under the EDR program.
2 The previous version of the EDR book contains similar
language: “The Federal Arbitration Act covers the application,
interpretation and enforcement of the EDR Program. If any
court should find that the Federal Arbitration Act does not apply
to the arbitration of your dispute with the Company then the law
3
Both versions of the EDR book also state that the
arbitration shall be governed by the rules of the American
Arbitration Association (AAA). The updated 2012 EDR book
states in relevant part:
“Although arbitration is somewhat less formal than
going to court, it is governed by the established rules
of the EDR Program, which adopts and incorporates
the employment arbitration rules of the AAA (or
other arbitration rules of the AAA that the arbitrator
determines are applicable based on the nature of the
particular dispute) as in effect at the time the dispute
is referred to the arbitrator. You may request a free
copy of the current rules by emailing
hr@skilledhc.com, or they are also available free of
charge on the AAA’s website at www.adr.org.”
As relevant here, rule 6 of the AAA rules in effect at the
time plaintiff filed this action states:
“6. Jurisdiction
“a. The arbitrator shall have the power to rule on
his or her own jurisdiction, including any objections
with respect to the existence, scope or validity of the
arbitration agreement.
“b. The arbitrator shall have the power to
determine the existence or validity of a contract of
which an arbitration clause forms a part. Such an
arbitration clause shall be treated as an agreement
independent of the other terms of the contract. A
decision by the arbitrator that the contract is null
and void shall not for that reason alone render
invalid the arbitration clause.
of the state in which you work shall cover the application,
interpretation and enforcement of the EDR Program.”
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“c. A party must object to the jurisdiction of the
arbitrator or to the arbitrability of a claim or
counterclaim no later than the filing of the answering
statement to the claim or counterclaim that gives rise
to the objection. The arbitrator may rule on such
objections as a preliminary matter or as part of the
award.”
Plaintiff signed two separate dispute resolution
agreements, one on October 28, 2009 (the 2009 arbitration
agreement), and one on June 12, 2012 (the 2012 arbitration
agreement), in which she agreed to binding arbitration of
employment-related disputes and to forego her right to a jury
trial. The 2012 arbitration agreement states in relevant part:
“. . . I agree to be bound by the EDR Program, including having
covered work-related disputes decided through arbitration and
the other processes provided in the EDR Program rather than in
court. . . . I understand that by agreeing to be bound by the EDR
Program, I am waiving the right to a trial by jury and to
participate in a class or collective action.”3
3 The 2009 arbitration agreement contains similar language:
“I understand and agree that the last step of the EDR Program is
final and binding arbitration by a neutral arbitrator. I
understand and agree that this mutual agreement to use the
EDR Program and to arbitrate claims means that the Company
and I are bound to use the EDR Program as the only means of
resolving employment related disputes and to forego any right
either may have to a jury trail [sic]. I further understand and
agree that if I file a lawsuit regarding a dispute arising out of or
relating to my application for employment, my employment or
the termination of my employment, the Company may use this
Agreement in support of its request to the court to dismiss the
lawsuit and require me to use the EDR Program instead.”
5
Plaintiff’s lawsuit and defendants’ motion to compel
arbitration
Plaintiff filed this action on May 6, 2020, alleging
claims against defendants for (1) failure to pay wages and
overtime, provide meal and rest periods, issue accurate
itemized wage statements, and provide personnel files; (2)
unlawful business practices; (3) retaliation; (4) wrongful
termination in violation of public policy; and (5) violation of
Labor Code section 1102.5. Defendants issued a demand
for arbitration, but plaintiff refused to arbitrate her claims.
Defendants moved to compel arbitration of plaintiff’s
claims on July 1, 2020. Attached as an exhibit to
defendants’ motion was correspondence from plaintiff’s
counsel claiming that defendants had breached the
arbitration agreement by bypassing step three (mediation)
of the EDR program—a required step prior to arbitration:
“It appears as though by Defendants moving for
arbitration, they are breaching their agreement under the
program, which would invalidate the agreement. There is a
4-step program, which includes that Defendants pay for a
mediation. Defendant breached the agreement by
demanding arbitration prior to mediation. Also Defendants
cannot demand arbitration until they have mediated the
claim.”
Also attached as an exhibit to the motion was a
declaration by Fountain View’s EDR program
administrator, Lila Ann Mikhail, stating that defendants
had “waived Plaintiff’s obligation to participate in Step 3 in
the EDR Program, which requires the parties to participate
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in mediation before proceeding to Step 4, requiring the
dispute to be resolved by a neutral arbitrator.”
Plaintiff opposed the motion, arguing that the 2009
arbitration agreement was procedurally unconscionable
because it was required as condition of her employment.
Plaintiff further argued that the 2012 arbitration
agreement was illusory because it allowed Fountain Valley
to modify its terms unilaterally.4
At the hearing on the motion to compel arbitration,
the trial court stated that “[t]he signed documents
provided to the court indicated that arbitration is . . . step
four in the ADR process. Then the review of the long form
4 The provision in the 2012 agreement allowing modification
states: “The EDR Program may be modified at any time by the
EDR Program Administrator with 30 days prior notice to you,
including by a general notice distributed or conspicuously posted
in the employee break room or another common area at your
workplace. Copies of the EDR Program, as so modified, will be
available to you upon request by emailing hr@skilledhc.com.
Unless during the 30 day notice period you object to the EDR
Program, as so modified, by delivering written notice of your
objection to your Human Resources Director, the EDR Program
as so modified will be effective beginning at the end of the notice
period or as of a later date specified in the notice, if applicable.
In no event, however, will the modifications in the EDR Program
be effective as to disputes for which a proceeding has already
been initiated under the EDR Program. If you deliver a timely
objection to the EDR Program as so modified, the EDR Program
in the form you previously agreed to will remain in effect as to
you unless and until you later agree to the modified EDR
Program. Your objection to the modified EDR Program will not
change the at-will nature of your employment.”
7
document showed that the prior step is mediation.” The
court noted that there was correspondence from plaintiff’s
counsel to defendants’ counsel “reminding the defense of
this prior step . . . . The defendant declarant says she has
waived Plaintiff’s requirement to mediate and that was
confusing to the court.”
Defendants argued in response that the arbitration
agreements expressly allowed defendants to waive the
mediation step and to proceed directly to arbitration.
Defendants further argued that plaintiff had not raised
any argument concerning mediation as a prerequisite to
arbitration in her opposition to defendants’ motion.
The trial court denied the motion to compel
arbitration, concluding that the parties’ arbitration
agreement specified that mediation was a prerequisite to
arbitration and that defendants could not waive mediation
on plaintiff’s behalf. The court set a trial date of
January 31, 2022. This appeal followed.
DISCUSSION
I. Standard of review
The parties do not dispute that the FAA governs
their arbitration agreement. They disagree on the proper
standard of review. Defendants contend de novo review
applies because the material facts are undisputed. Plaintiff
claims the trial court’s factual finding of waiver should be
reviewed under the clearly erroneous standard. It is well
settled that we review de novo the legal question whether
the FAA required the trial court to grant defendants’
motion to compel arbitration. (California Teachers Assn. v.
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San Diego Community College Dist. (1981) 28 Cal.3d 692,
699; Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th
955, 959.)
II. Arbitrability
Defendants contend the trial court exceeded its
authority by deciding that mediation was a condition
precedent to arbitration and that defendants could not
waive that condition. They argue that the arbitration
agreements specify that the arbitrator, and not the trial
court, must decide that issue, along with any other issues
concerning arbitrability.
“The question whether the parties have submitted a
particular dispute to arbitration, i.e., the ‘question of
arbitrability,’ is ‘an issue for judicial determination [u]nless
the parties clearly and unmistakably provide otherwise.’”
(Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79,
83 (Howsam).) The parties here clearly and unmistakably
agreed to have an arbitrator determine questions of
arbitrability.5 The arbitration agreements mandate
5 During oral argument, plaintiff’s counsel claimed that the
parties did not clearly and unmistakably incorporate the AAA
rules into their arbitration agreement. As support for this
argument, counsel cited language in the 2012 EDR book
pertaining to step three—mediation, allowing the EDR program
administrator to select a mediator “through the American
Arbitration Association (AAA), a similar nationally or regionally-
recognized alternative dispute resolution firm or organization or
by the EDR Program Administrator directly with a neutral
party.” The language governing step four—arbitration, in
contrast, clearly and unmistakable incorporates only the AAA
arbitration rules. It states: “Although arbitration is somewhat
less formal than going to court, it is governed by the established
9
arbitration in accordance with the AAA rules. Rule 6 of
those rules states that the “arbitrator shall have the power
to rule on his or her own jurisdiction, including any
objections with respect to the existence, scope or validity of
the arbitration agreement” and “the existence or validity of
a contract of which an arbitration clause forms a part.” By
incorporating rule 6 of the AAA rules into their agreement,
the parties clearly and unmistakably delegated to the
arbitrator the authority to determine issues concerning
arbitrability. (Rodriguez v. American Technologies, Inc.
(2006) 136 Cal.App.4th 1110, 1123 [“By incorporating [AAA
rules] into their agreement, the parties clearly evidenced
their intention to accord the arbitrator the authority to
determine issues of arbitrability.”]; Dream Theater, Inc. v.
Dream Theater (2004) 124 Cal.App.4th 547, 549, 557
[incorporation of AAA rules clear and unmistakable
evidence of intent to delegate to arbitrator issues of
arbitrability]; Brennan v. Opus Bank (9th Cir. 2015) 796
F.3d 1125, 1130 [“‘[v]irtually every circuit to have
considered the issue has determined that incorporation of
the [AAA] arbitration rules constitutes clear and
unmistakable evidence that the parties agreed to arbitrate
arbitrability’”].)
rules of the EDR Program, which adopts and incorporates the
employment arbitration rules of the AAA (or other arbitration
rules of the AAA that the arbitrator determines are applicable
based on the nature of the particular dispute) as in effect at the
time the dispute is referred to the arbitrator.”
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III. Mediation as a prerequisite to arbitration
Once it is determined that the parties have
contractually agreed to arbitrate, questions concerning
“procedural” preconditions to arbitration, such as “whether
grievance procedures or some part of them apply to a
particular dispute, whether such procedures have been
followed or excused, or whether the unexcused failure to
follow them avoids the duty to arbitrate” should be decided
by the arbitrator. (John Wiley & Sons v. Livingston (1964)
376 U.S. 543, 557 (Wiley).) The United States Supreme
Court has held, for example, that an arbitrator, and not the
court, should decide whether a party’s failure to follow the
first two steps in a three-step grievance procedure in which
arbitration was the third and final step precluded
arbitration. (Id. at pp. 555-557.) The Supreme Court has
consistently reaffirmed that arbitrators, and not courts,
must decide whether a condition precedent to arbitrability
has been fulfilled. (BG Group PLC v. Republic of Argentina
(2014) 572 U.S. 25, 34-35 (BG Group); Howsam, supra, 537
U.S. at pp. 85-86.)6 Whether mediation was a condition
6 Federal appellate courts in the First and 11th Circuits have
refused to compel arbitration when the party requesting
arbitration failed to request mediation, when mediation was a
condition precedent to arbitration. (See HIM Portland LLC v.
DeVito Builders, Inc. (1st Cir. 2003) 317 F.3d 41, 44 [refusing to
compel arbitration because “[u]nder the plain language of the
contract, the arbitration provision of the agreement is not
triggered until one of the parties requests mediation”]; Kemiron
Atlantic, Inc. v. Aguakem Internat. Inc. (11th Cir. 2002) 290 F.3d
1287, 1291 [same].) The Fourth Circuit has declined to follow
these cases, which predate and conflict with the Supreme Court’s
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precedent to arbitration, and whether plaintiff has no duty
to arbitrate because defendants failed to seek mediation
before moving to compel arbitration, are issues to be
decided by the arbitrator, and not the trial court.
Assuming the arbitrator determines that mediation was a
condition precedent to arbitration, whether defendants’ failure to
request mediation waived their right to compel arbitration must
also be decided by the arbitrator, and not the trial court. (Wiley,
supra, 376 U.S. at p. 557.) Wagner Construction Co. v. Pacific
Mechanical Corp. (2007) 41 Cal.4th 19, which plaintiff cites as
authority to the contrary, is inapposite. The arbitration
agreement in that case did not contain a delegation provision, nor
did it involve application of the FAA.
IV. Validity and enforceability of arbitration agreement
In opposition to defendants’ motion to compel
arbitration, plaintiff challenged the validity of the
arbitration agreements as a whole. Plaintiff did not,
however, challenge the validity of the delegation provision,
which empowers the arbitrator to rule on “the existence,
scope or validity of the arbitration agreement.” Because
plaintiff did not challenge the delegation provision
specifically, the enforceability of the arbitration agreement
as a whole must be decided by the arbitrator. (Rent-A-
decisions in BG Group, supra, 572 U.S. 25 and Howsam, supra,537 U.S. 79. (Chorley Enterprises, Inc. v. Dickey’s Barbecue
Restaurants, Inc. (4th Cir. 2015) 807 F.3d 553, 565, fn. 14
[arbitrator, and not court, must decide whether party’s failure to
first seek mediation as a condition precedent to invoking
arbitration provision forfeited right to arbitrate].) We find the
Fourth Circuit’s reasoning in Chorley to be persuasive.
12
Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 75-76;
Luxor Cabs, Inc. v. Applied Underwriters Captive Risk
Assurance Co. (2018) 30 Cal.App.5th 970, 979.) “[A] party’s
challenge to the arbitration agreement [as a whole] does
not invalidate the delegation clause, and therefore the
arbitrator, and not a court, must consider any challenge to
the arbitration agreement as a whole.” (Tiri v. Lucky
Chances, Inc. (2014) 226 Cal.App.4th 231, 240.)
DISPOSITION
The order denying the motion to compel arbitration is
reversed. The matter is remanded to the trial court with
directions to vacate its prior order denying defendants’
motion to compel arbitration and to enter a new order
granting the motion. Defendants are awarded their costs
on appeal.
___________________________
CHAVEZ, J.
We concur:
_______________________________
ASHMANN-GERST, Acting P. J.
_______________________________
HOFFSTADT, J.
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