Hernandez v. Meridian Management Services, LLC

Filed 1/30/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
JESSICA HERNANDEZ, B312814
Plaintiff and Respondent, Los Angeles County
Super. Ct. No. 20STCV28700
v.
MERIDIAN MANAGEMENT
SERVICES, LLC, et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of
Los Angeles County, Terry A. Green, Judge. Affirmed.
Lewis Brisbois Bisgaard & Smith, Lann G. McIntyre,
Melissa T. Daugherty and Kerri R. Lutfey for Defendants and
Appellants.
Shegerian & Associates, Carney R. Shegerian, Anthony
Nguyen and Leo Livshits for Plaintiff and Respondent.
____________________
Jessica Hernandez signed an arbitration contract with an
employer called Intelex Enterprises, LLC. While working for
Intelex, Hernandez also worked for other firms (Other Firms).
These Other Firms were legally separate from Intelex, but
functionally related to it. The Other Firms did not contract for
arbitration with Hernandez. After termination, Hernandez sued
the Other Firms but not Intelex: Intelex has never been a party
to this case. The Other Firms moved to compel arbitration based
on Hernandez’s agreement with Intelex. The trial court denied
the Other Firms’ motion to enforce a contract they had not
signed.
The trial court was right. The Other Firms cannot
equitably estop Hernandez because they do not show she is trying
to profit from some unfair action. They have no proof of agency.
And they are not third party beneficiaries of Intelex’s contract.
Consequently, we affirm.
I
Intelex distributed medical supplies to skilled nursing
facilities. It hired Hernandez as a customer service
representative in 2015. As part of the hiring process, Hernandez
signed an arbitration contract with Intelex. Hernandez worked
for Intelex until her termination in 2020.
At the same time she worked for Intelex, Hernandez also
worked for six other companies that shared a building with
Intelex. These six firms were Meridian Management Services,
LLC; Comfort Care Enterprises, LLC; Office Smart, LLC;
Shredpro, LLC; JJMBR Foods, LLC; and Premier Medical
Transport, Inc. These six are the Other Firms. Hernandez
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alleged the Other Firms hired her in 2015 and wrongfully
terminated her in 2020 after she returned from maternity leave.
Hernandez brought employment claims against the Other
Firms, but her complaint avoided mention of Intelex. She alleged
the Other Firms shared the same legal and physical address; the
same human resources person; the same controller; the same
payroll department; the same risk management and legal
services; and the same centralized information technology.
Hernandez declared the Other Firms were “jointly owned
and operated.” Hernandez also knew the Other Firms “document
on paper that they are located in different suites,” but that “there
is no real division of the employees assigned to work” for the
Other Firms. “As a result, all employees work in the same
building and share the same facilities, including tools, desks,
supplies, resources, and the like.” Just as she excluded Intelex
from her complaint, Hernandez excluded Intelex from her
declaration.
The Other Firms moved to compel joinder of Intelex as a
necessary party. They submitted Hernandez’s discovery
admission that the events in her complaint occurred when she
was employed by the Other Firms and by Intelex. The Other
Firms also showed Intelex was the sole corporate name on
Hernandez’s pay checks. Hernandez opposed the motion. She
argued Intelex and the Other Firms “are jointly owned and
operated . . . .”
The trial court wrote:
“There is a certain amount of tactical maneuvering taking
place here. . . . [¶] It is undisputed that all the [Other Firms], as
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well as current non-party Intelex, share a single building out in
the city of Brea. It is [Hernandez’s] position in this case that all
of these entities, Intelex included, are commonly-owned and are
operated as a single organism with no meaningful division
between them except on paper. She believes that employees are
shared, records are shared, equipment is shared, and so on. She
has therefore sued the [Other Firms] on a joint employer theory.
“[The Other Firms] naturally take the position that they
are separate businesses and that [Hernandez] was only ever
employed by Intelex. They believe that [Hernandez] has an
arbitration agreement with Intelex and for that reason alone has
left Intelex out of the lawsuit. At least one of the reasons that
[the Other Firms] want Intelex in the case is so that they can
make a motion to compel arbitration based on [Hernandez’s]
agreement with Intelex.”
The Other Firms do not challenge the trial court’s denial of
their motion to join Intelex.
Following this loss, the Other Firms moved the trial court
to compel arbitration, arguing they were entitled to enforce
Hernandez’s arbitration agreement with Intelex. Hernandez
opposed this motion, noting she never contracted for arbitration
with any Other Firm. The court denied this motion, and the
Other Firms appealed.
II
The Other Firms give three faulty reasons why they should
be able to enforce a contract they did not sign: equitable
estoppel, agency, and third party beneficiary. The trial court
denied the motion to compel arbitration. We affirm its treatment
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of each doctrine. Our review is independent. (Jarboe v. Hanlees
Auto Group (2020) 53 Cal.App.5th 539, 547 (Jarboe).)
A
The trial court rightly rejected equitable estoppel as a basis
for compelled arbitration.
Equitable estoppel is an old and versatile idea: you cannot
take advantage of your own wrong. (Turner v. Billagram (1852) 2
Cal. 520, 522; cf. Godeffroy v. Caldwell (1852) 2 Cal. 489, 492 [one
who knowingly and silently permits another to spend money
upon land, under a mistaken impression that he has title, will
not then be permitted to set up his right]; Hostler v. Hays (1853)
3 Cal. 302, 306–307 [“The sense of estoppel is, that a man, for the
sake of good faith and fair dealing, ought to be estopped from
saying that to be false which, by his means, has become
accredited for truth, and by his representations has led others to
act.”].)
The side claiming estoppel must establish it. (General
Motors Acceptance Corp. v. Gandy (1927) 200 Cal. 284, 295.) Its
first order of business is to show the wrong: to identify the
supposed mistake or misconduct by the other side and why it
would be unfair to allow it to exploit that mistake or misconduct.
(Cf. Rest.1st Torts, § 894 [“Equitable Estoppel as a Defense”].)
The Other Firms fail in this venture.
The trial court observed, with its emphasis, that “[t]ypically
the doctrine of equitable estoppel is applied where a signatory
has sued both another signatory and certain non-signatories on
identical claims. . . . [¶] But what happens if the other party to
the contract is not also a party to the case, and never was?
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Neither side cites authority addressing those facts. This is an
issue of first impression . . . .”
The trial court continued by noting “ ‘the linchpin of the
estoppel doctrine is fairness.’ . . . [The Other Firms] complain[]
that it is unfair for [Hernandez] to tailor her complaint in such a
way as to avoid arbitration. But it isn’t, really. There is nothing
wrong with either party wanting to appear in court, or in
arbitration. And it isn’t as though [Hernandez] is trying to have
it both ways – to appear in court, she has completely given up her
claims against Intelex. Parties make tactical ‘bargains’ like this
all the time.”
The force of this analysis has overpowered the Other Firms’
ability to respond to it. In their opening brief to us, they claim
equitable estoppel allows them to escape the usual requirement
that you must be a party to a contract to enforce it. Yet the
Other Firms’ opening brief never explains why it would be fair to
do so, or what unfairness they suffer from the trial court ruling.
The Other Firms have ignored the core of the trial court ruling
and the heart of this doctrine. They give us no basis for
disturbing the trial court ruling here, and so their appeal on this
issue is for naught. (Cf. Jarboe, supra, 53 Cal.App.5th at p. 555
[estoppel doctrine concerns fairness].)
B
Agency is theory number two for the Other Firms. They
seek to enforce Intelex’s contract as agents for Intelex. The Other
Firms, however, never established agency.
Agency is a potential theory in this case because
Hernandez contracted with Intelex to arbitrate her employment
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disputes with its “agents.” Agreements like this are enforceable.
(See Dryer v. Los Angeles Rams (1985) 40 Cal.3d 406, 418.)
The agency theory here, however, collides with the fact the
Other Firms offered no evidence they had authority to act on
behalf of Intelex. As the court correctly observed, “[t]he extent of
corporate relationships is a highly fact-intensive inquiry; the
court cannot assume a joint employer relationship simply because
the companies share officers and have offices next to one
another.”
The Other Firms’ attack on this ruling misunderstands
agency doctrine, so we go to the basics.
“An agent is one who represents another, called the
principal, in dealings with third persons. Such representation is
called agency.” (Civ. Code, § 2295.) “Agency is the fiduciary
relationship that arises when one person (a ‘principal’) manifests
assent to another person (an ‘agent’) that the agent shall act on
the principal’s behalf and subject to the principal’s control, and
the agent manifests assent or otherwise consents so to act.”
(Rest.3d Agency, § 1.01.)
“[T]he concept of agency posits a consensual relationship in
which one person, to one degree or another or respect or another,
acts as a representative of or otherwise acts on behalf of another
person with power to affect the legal rights and duties of the
other person. The person represented has a right to control the
actions of the agent. . . . A relationship is not one of agency
within the common-law definition unless the agent consents to
act on behalf of the principal, and the principal has the right
throughout the duration of the relationship to control the agent’s
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acts. . . . A principal’s right to control the agent is a constant
across relationships of agency, but the content or specific
meaning of the right varies.” (Rest.3d Agency, § 1.01, com. c.)
“Under the common-law definition, agency is a consensual
relationship. The definition requires that an agent-to-be and a
principal-to-be consent to their association with each other.”
(Rest.3d Agency, § 1.01, com. d.) “An essential element of agency
is the principal’s right to control the agent’s actions. Control is a
concept that embraces a wide spectrum of meanings, but within
any relationship of agency the principal initially states what the
agent shall and shall not do, in specific or general terms.”
(Rest.3d Agency, § 1.01, com. f.)
The Other Firms point to six places in the record they say
show agency, but these materials do not measure up. The
citation to Hernandez’s complaint spotlights text that omits
Intelex and cannot show agency. A different citation is to their
attorney’s declaration recounting irrelevant procedural history.
Other citations refer to Hernandez’s admission that she worked
for both Intelex and the Other Firms. This admission does not
establish agency, for I may work two jobs, but that does not
suggest one boss is an agent for the other boss.
In another argument, the Other Firms note Hernandez
complained to a state agency that Intelex misbehaved in ways
identical to the allegations she leveled against the Other Firms,
but this does not imply agency. Several employers may engage in
identical misconduct, but that does not show one has authority to
act for the others.
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The Other Firms cite Garcia v. Pexco, LLC (2017) 11
Cal.App.5th 782, 788, where the plaintiff alleged two companies
were joint employers. Hernandez avoided this allegation, which
distinguishes Garcia v. Pexco.
In sum, the Other Firms claim “the overwhelming evidence
provided by [Hernandez] herself” establishes they were agents for
Intelex, but the trial court accurately found this assertion had no
basis. The agency theory fails.
C
The Other Firms were not third party beneficiaries of
Hernandez’s arbitration contract with Intelex. We sketch this
doctrine.
Civil Code section 1559 states, “A contract, made expressly
for the benefit of a third person, may be enforced by him at any
time before the parties thereto rescind it.”
The test is this: examine the express provisions of the
contract at issue, as well as the relevant circumstances of the
contract’s formation, to determine not only (1) whether the third
party would benefit from the contract, but also (2) whether a
motivating purpose of the contracting parties was to provide a
benefit to the third party, and (3) whether permitting a third
party to bring its own breach of contract action against a
contracting party would be consistent with the objectives of the
contract and the reasonable expectations of the contracting
parties. The proponent must satisfy all three elements for the
third party action to proceed. (Goonewardene v. ADP, LLC (2019)
6 Cal.5th 817, 830.)
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The Other Firms stumble on step two. Nothing shows
Intelex and Hernandez sought to benefit the Other Firms. They
argue the agreement’s reference to “agents” of Intelex shows they
were beneficiaries. This merely recapitulates their fruitless effort
to establish agency.
DISPOSITION
We affirm and award costs to Hernandez.
WILEY, J.
We concur:
STRATTON, P. J.
GRIMES, J.
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