Tzovolos v. Worldwide Flight Services CA2/1

Filed 1/4/20 Tzovolos v. Worldwide Flight Services CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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has not been certified for publication or ordered published for purposes of rule 8.1115.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 ONE
CHRISAVGI TZOVOLOS, B302303
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. 19STCV13254)
v.
WORLDWIDE FLIGHT
SERVICES, INC.,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los
Angeles County, Anthony Mohr, Judge. Reversed and remanded
with directions.
Howard & Howard Attorneys, Ryan A. Ellis and Robert
Rosenthal for Defendant and Appellant.
Jay S. Rothman & Associates and Jeff D. Neiderman for
Plaintiff and Respondent.
_______________________
Chrisavgi Tzovolos (Tzovolos) sued her former employer
Worldwide Flight Services, Inc. (WFS), alleging she was
terminated on the basis of gender and in violation of public
policy. She also asserted wage and hour causes of action. WFS
moved to compel arbitration and stay all proceedings, invoking
an arbitration agreement (the Agreement) Tzovolos signed. The
trial court denied WFS’s motion, finding the Agreement was
substantively unconscionable.
WFS argues the trial court incorrectly concluded the
Agreement was substantively unconscionable because the plain
text of the Agreement reveals mutuality of obligation. WFS also
argues reversal is required because the trial court’s ruling failed
to address procedural unconscionability.
We reverse and remand with directions. The trial court
correctly found the Agreement was substantively unconscionable
because it imposes multiple one-sided obligations on employees,
including a requirement that an employee exhaust a multi-step
internal grievance procedure controlled by WFS as a prerequisite
to commencing arbitration. However, we agree with WFS that
the trial court’s failure to make any findings involving procedural
unconscionability requires reversal. On remand, the trial court is
instructed to make the factual findings necessary to support its
analysis of procedural unconscionability.
FACTUAL AND PROCEDURAL BACKGROUND
Tzovolos began working for WFS in August 2018 as a
customer service agent. That same month, Tzovolos claims her
direct supervisor began sexually harassing her and
discriminating against her on the basis of her gender. After
Tzovolos complained about her supervisor’s harassment, he
retaliated by giving her poor performance reviews, alleging she
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was sexually harassing him, and that she smelled of marijuana
at work.
Tzovolos was terminated on January 28, 2019. WFS cited
poor attendance and her supervisor’s sexual harassment
allegations. She alleges these reasons were pretextual and that
her termination was in fact “a final act of retaliation.”
Tzovolos filed a claim with the California Department of
Fair Employment and Housing, pursuant to Government Code
section 12965, subdivision (b), under the Fair Employment and
Housing Act (FEHA).
On April 17, 2019, following the issuance of a right to sue
letter, Tzovolos filed a complaint in superior court alleging 12
causes of action. Included in the complaint are claims for
wrongful termination in violation of public policy, sexual
harassment, discrimination based on sex/gender, retaliation
(Gov. Code, § 12940 et seq.), and violations of various Labor Code
provisions governing wages, working hours, and rest breaks.
WFS moved to compel arbitration pursuant to Code of Civil
Procedure section 1281.4 and stay all proceedings on the basis of
the Agreement. The trial court denied the motion.
In a brief written ruling, the court found the Agreement
was substantively unconscionable. The ruling did not address
whether the Agreement was procedurally unconscionable, nor did
it address whether the offending portions of the Agreement could
be severed.
WFS timely appealed.
DISCUSSION
A. Standard of Review
We review a trial court’s denial of a motion to enforce an
arbitration agreement de novo. (Roman v. Superior Court (2009)
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172 Cal.App.4th 1462, 1468-1469, citing Nyulassy v. Lockheed
Martin Corp. (2004) 120 Cal.App.4th 1267, 1277 (Nyulassy).)
B. The Trial Court Properly Found the Agreement Was
Substantively Unconscionable
1. The Arbitration Agreement
The arbitration agreement at issue here is a three-page,
single-spaced document entitled “AGREEMENT TO SUBMIT
ALL DISPUTES TO BINDING ARBITRATION.” It begins with
a one-paragraph introduction, and is followed by three sections.
The introduction states, in full: “This Agreement applies to any
claim made by you, as an employee of Worldwide Flight Services
or its affiliate (‘WFS’), that WFS did not comply with its own
policies, that WFS did not comply with governing federal or state
law, and to any other claim arising from or related to your
employment that is not subject to an applicable Collective
Bargaining Agreement and the grievance procedure provided
therein (hereafter collectively referred to as the ‘Claims’).”
The “Grievance and Hearing Process” section outlines five
steps the employee is required to follow in every case in which
the employee has “a job-related problem or complaint.”
The first step requires the employee to submit a written
grievance to her immediate supervisor “within 7 days of the
action grieved.” Step two indicates that if the supervisor is the
subject of the grievance, or if the supervisor did not return a
written decision on the grievance within one week of receipt, or if
the employee is dissatisfied with the resolution, then the
employee must move to step three. Step three “involves
requesting and scheduling an appeal hearing.” At this stage,
WFS’s chief operating officer “will investigate all the facts upon
which the grievance is based and shall render a decision as soon
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as possible but not later than 10 days following receipt of the
appeal.” If still dissatisfied, step four directs the employee to file
another appeal within 20 days with the review board specified in
an applicable collective bargaining agreement. If the dispute still
is not resolved, step five provides that the employee and WFS
agree “to exclusively resolve any and all unresolved Claims
through binding arbitration before a neutral arbitrator.”
In italics, the Agreement warns: “[The] deadlines to file a
grievance and the deadlines to file appeals must be strictly
followed by you. If you do not file the grievance or a subsequent
appeal by the time prescribed in this Agreement then the grievance
and any subsequent appeal right will be considered waived by
you.”
The “Employment Arbitration Plan – Related Procedure”
section indicates that the parties agree to submit to binding
arbitration administrated by the American Arbitration
Association. This section contains the following provision: “The
arbitrator shall be bound by and apply any and all relevant
agreements between the parties including, without limitation,
this Agreement, which includes the Grievance and Hearing
Process contained herein; accordingly, the arbitrator shall enter
an award for WFS promptly on any Claims where it has been
shown that you have not complied with such Grievance and
Hearing Process.”
In the final section, the employee waives all rights to
pursue any class or collective actions against WFS.
Finally, the Agreement contains the following severability
clause: “If any term(s) in this Agreement is found to be void or
voidable, the remainder of the Agreement is severable and will
remain in force.”
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2. Governing Law
Under Civil Code section 1670.5 and Code of Civil
Procedure section 1281, if the court finds as a matter of law that
an arbitration contract or any clause of the contract was
unconscionable when made, the court may refuse to enforce the
contract. (Armendariz v. Foundation Health Psychcare Services,
Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).)
The doctrine of unconscionability has both a procedural and
a substantive element. (Baltazar v. Forever 21, Inc. (2016) 62
Cal.4th 1237, 1243 (Baltazar.) The procedural unconscionability
element focuses on oppression, lack of freedom of assent, and
surprise due to unequal bargaining power. (Ibid.) The
substantive unconscionability element is present when an
agreement has overly harsh or one-sided terms. (Ibid.)
Both procedural and substantive unconscionability must be
present “ ‘ “in order for a court to exercise its discretion to refuse
to enforce a contract or clause under the doctrine of
unconscionability.” ’ ” (Baltazar, supra, 62 Cal.4th at p. 1243,
quoting Armendariz, supra, 24 Cal.4th at p. 114.) Yet, both
forms of unconscionability need not be present in the same
degree. (Baltazar, supra, at p. 1243.) “ ‘ “Essentially a sliding
scale is invoked . . . .” [T]he more substantively oppressive the
contract term, the less evidence of procedural unconscionability is
required to come to the conclusion that the term is unenforceable,
and vice versa.’ ” (Id. at pp. 1243-1244, quoting Armendariz,
supra, at p. 114.)
3. Analysis
“A contractual provision that is substantively
unconscionable ‘may take various forms, but may generally be
described as unfairly one-sided.’ ” (Nyulassy, supra, 120
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Cal.App.4th at p. 1281, quoting Little v. Auto Stiegler, Inc. (2003)
29 Cal.4th 1064, 1071.) In Nyulassy, the Sixth District reviewed
an employment-based agreement to arbitrate containing similar
provisions to those at issue here. Nyulassy held three provisions
of the agreement in particular rendered it substantively
unconscionable. Two such provisions are present in the WFS
Agreement.
The first provision the Nyulassy court examined was a one-
sided requirement that the employee “submit to discussions with
his supervisors in advance of, and as a condition precedent to,
having his dispute resolved through binding arbitration.”
(Nyulassy, supra, 120 Cal.App.4th at p. 1282.) Because the
employer controlled the internal dispute resolution procedure, a
dutiful employee going through that procedure before proceeding
to arbitrate gives the employer “a ‘free-peek’ at [the] plaintiff’s
case, thereby obtaining an advantage if and when [the] plaintiff
were to later demand arbitration.” (Id. at p. 1283.)
The Agreement here also contains a pre-arbitration
internal grievance procedure. The Agreement plainly provides
that the internal grievance procedures apply only to WFS
employees; the employer is not subjected to any corresponding
pre-dispute procedure. Moreover, the pre-arbitration procedures
here are even more burdensome than those addressed in
Nyulassy. There, the employee was required only to discuss the
grievance with his or her supervisor. (See Nyulassy, supra, 120
Cal.App.4th at pp. 1282-1283.) Here, that is but the first of five
steps facing an aggrieved WFS employee who wishes to arbitrate
her claims.
Second, the agreement in Nyulassy materially shortened
the employee’s limitations period, but did not alter the employer’s
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period to bring claims. “In limiting the time to assert a claim to a
maximum of 180 days of the date of his employment termination
. . . , [the] plaintiff’s time for bringing a claim is shortened, in
some instances, by a period of more than three and one-half
years.” (Nyulassy, supra, 120 Cal.App.4th at p. 1283, fn.
omitted.)
The Agreement here also shortens the employee’s
limitations period, but is far more restrictive. The Agreement
requires the employee to submit a written grievance within seven
days. The Agreement then warns in italic type that if an
employee does not file a grievance within the applicable seven-
day period, “any subsequent appeal right will be considered
waived by you.” A comparison of this seven-day limitations
period to those otherwise applicable to the causes of action
pleaded in the complaint supports the conclusion that the
limitation is unconscionable. The claims for wrongful
termination, sexual harassment, discrimination, and retaliation
under FEHA are subject to a one-year limitations period running
from the date of the alleged unlawful practice. (See Gov. Code,
§ 12960.) While a reduction in the time to file such claims is not
dispositive of whether the arbitration agreement is substantively
unconscionable, we agree with Nyulassy that such a reduction is
“one factor.” (Nyulassy, supra, 120 Cal.App.4th at p. 1283, fn. 12;
see also Martinez v. Master Protection Corp. (2004) 118
Cal.App.4th 107, 117-118 [holding that a provision imposing a
deadline of six months after the claim arose was substantively
unconscionable because the statutes governing the FEHA and
Labor Code violations provided “significantly longer” time
limits].)
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There is yet a third provision in the Agreement weighing
against its enforcement. In the “Employment Arbitration Plan –
Related Procedure” section, the Agreement provides that if the
arbitrator determines the employee has not complied with the
grievance process and its strict deadlines, “the arbitrator shall
enter an award for WFS promptly on all Claims.” The effect of
this provision is that even if a dutiful employee makes it through
the WFS grievance procedure and into arbitration, the arbitrator
may nonetheless rule for WFS without passing on the merits of
the underlying claims if he or she finds the employee did not
comply with the grievance procedure. The Agreement imposes no
such penalty upon WFS because its grievances are not subject to
a grievance procedure.
WFS contends the Agreement is not one-sided because the
plain meaning of the Agreement clearly demonstrates that WFS
and Tzovolos agreed to the exclusive remedy of binding
arbitration. WFS invokes the following language in particular:
“[T]he parties hereby waive any right to assert in court or any
other non-arbitral forum any dispute that was or could have been
brought or raised under the procedures set forth in this
Agreement, and agree to the following exclusive Arbitration
Procedure.”
WFS likens this language to the arbitration agreement
upheld in Baltazar. That agreement provided the parties
“ ‘mutually agree[d]’ to arbitrate ‘any claim or action arising out
of or in any way related to the hire, employment, remuneration,
separation or termination of [the e]mployee.’ ” (Baltazar, supra,
62 Cal.4th at p. 1241.) The court rejected the employee’s claim
that the agreement was too one-sided, holding that the
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agreement made it “clear that the parties mutually agree[d] to
arbitrate all employment-related claims.” (Id. at p. 1249.)
WFS’s reliance on Baltazar is misplaced. The arbitration
agreement in Baltazar did not include a one-sided internal
grievance procedure as a prerequisite to the employee’s ability to
commence arbitration, unlike the procedures set forth in the WFS
Agreement. “[T]he paramount consideration in assessing
[substantive] conscionability is mutuality.” (Abramson v. Juniper
Networks, Inc. (2004) 115 Cal.App.4th 638, 657; see Nyulassy,
supra, 120 Cal.App.4th at p. 1281.) The Agreement here lacks
mutuality in that (a) it imposes a one-sided, multi-step,
employer-controlled, pre-arbitration procedure upon employees;
(b) severely limits the time within which an employee may
demand arbitration to vindicate her rights; and (c) compels the
arbitrator to find for WFS on all claims if it shows that the
employee did not comply with its grievance process, irrespective
of the merit of the underlying claims. We therefore hold the trial
court rightly found the Agreement is substantively
unconscionable.1
C. The Absence of Findings on Procedural
Unconscionability Requires Reversal
WFS contends the trial court erred by failing to rule on the
question of procedural unconscionability and that no evidence
supports such a finding.
1Because we find the Agreement substantively
unconscionable on the grounds discussed above, we need not
address Tzovolos’s argument that the Agreement also is
substantively unconscionable because of the limitations it places
on her discovery rights in arbitration.
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In the trial court, Tzovolos argued that the Agreement is a
“preemployment adhesion contract that was imposed on
[Tzovolos] as a condition of her employment,” but presented no
evidence to support that claim. Accordingly, we must reverse for
the trial court to determine whether the Agreement is
procedurally unconscionable. In conducting its analysis, the trial
court may exercise its discretion to consider additional evidence
as it deems appropriate. Once the trial court makes its
determination, it shall apply the sliding scale analysis as set
forth in Balthazar and Armendariz and, if necessary, reevaluate
the question of severability.
DISPOSITION
The order is reversed and remanded to the trial court for
proceedings consistent with this opinion. The parties are to bear
their own costs on appeal.
NOT TO BE PUBLISHED
FEDERMAN, J.*
We concur:
ROTHSCHILD, P. J. CHANEY, J.
*Judge of the San Luis Obispo County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
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