Zaklit v. Hankey Investment CA2/3

Filed 4/4/23 Zaklit v. Hankey Investment CA2/3
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
MAYRON ZAKLIT, B314081
Plaintiff and Respondent, Los Angeles County
Super. Ct. No.
v. 21STCV05216
HANKEY INVESTMENT
COMPANY, LP, et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of
Los Angeles County, Maureen Duffy-Lewis, Judge. Reversed
with directions.
Molino & Berardino, The Molino Firm, Michelle Cooper,
Benjamin John Carter, John C. Holmes and Ed Chung for
Defendants and Appellants.
Winer, Burritt & Scott, Kelli D. Burritt; Gusdorff Law
and Janet Gusdorff for Plaintiff and Respondent.
_________________________
Hankey Investment Company, LP, Hankey Finance
Company, Inc., Westlake Financial Services1 (Westlake),
Christian Torrez, Brian Renfro, and Kelechi Ogbunamiri
(collectively, defendants) appeal from the trial court’s order
denying their petition to compel arbitration of Mayron Zaklit’s
sexual harassment complaint. We reverse.
FACTS AND PROCEDURAL BACKGROUND
1. The parties
Zaklit alleges Hankey Investment Company, LP,
Hankey Finance Company, Inc., Hankey Group, and Westlake
(collectively, the corporate defendants) collectively employed her,2
beginning in May 2017, as the manager of recruitment and
retention and then as the manager of people and culture. The
individual defendants, Torrez, Renfro, and Ogbunamiri allegedly
were “employed by” the corporate defendants as “officers,
directors, managing agents, managers, and/or supervisors.”
Hankey Investment Company contractually provides
human resources to the Hankey Group companies, including,
Hankey Investment Company, LP, Hankey Finance Company,
Inc., and Westlake. Westlake is a finance company that
“specializes in the acquisition and servicing of prime to subprime
automotive retail installment contracts from over 15,000 new
1 Westlake Financial Services is actually “Westlake Services,
LLC.”
2 According to defendants, the “Hankey Group” is not an
entity but an informal name referring to an associated group
of companies that includes the corporate defendants. We refer
to the three defendants with the name “Hankey” as the “Hankey
defendants” or nonsignatory corporate defendants.
2
and used car dealerships throughout the United States.” Its
employees deal with consumers and dealers in all 50 states.
Hankey Investment Company is a commercial real estate
developer and investor that underwrites, produces, and manages
commercial real estate. Hankey Finance Company owns “vehicle
portfolios used on interstate highways.” It has no employees.
2. Zaklit’s complaint
On February 9, 2021, Zaklit filed a sexual harassment
and retaliation lawsuit against defendants. She alleged she was
jointly employed by the corporate defendants and was supervised
by the individual defendants. Zaklit alleged that, shortly after
her employment began, and continuing through mid-January
2020, she was subjected to a hostile work environment, including
by comments about women’s appearance, including hers,
accompanied by leering; belittling remarks about women’s
opinions, including hers; being impliedly told by the director
of marketing during a meeting that she should shut her mouth;
and other behavior.
In October 2019, the corporate defendants held an event
for about 50 “company ‘leaders’—director-level and up” at a
hotel from Thursday through Saturday. Zaklit attended as part
of the human resources team. Allegedly, at that event, Torrez
approached Zaklit and asked her to have a threesome with
another employee; Renfro asked her to go back to his room; and
Ogbunamiri, after helping Zaklit carry items from the event
to her room for safekeeping, sat down on the bed uninvited with
his shoes off and would not leave right away.3 Zaklit told the
3 At the time, Torrez was the director of flooring, Renfro was
the senior vice president of servicing, and Ogbunamiri was the
chief investment officer.
3
vice president of human resources Tonia Douglas what had
happened. She responded that she had seen what happened,
but Zaklit looked to be “ ‘okay.’ ”
Zaklit alleged she dreaded going to work, her mental
and physical health deteriorated, and she took disability leave
in January 2020. She alleged she “had no choice but to resign
from her employment due to Defendants’ failure to provide a safe
work environment for her to return to, and failure to protect [her]
from being subjected to further harassment.” Zaklit resigned on
January 18, 2021.
Zaklit’s complaint asserts four causes of action under the
Fair Employment and Housing Act (Gov. Code, § 12940 et seq.;
FEHA) for quid pro quo sexual harassment (against all
defendants), hostile work environment based on gender, sex and
sexual orientation (against all defendants), retaliation (against
the corporate defendants), and failure to take reasonable steps
to prevent discrimination, harassment, and retaliation (against
the corporate defendants); intentional infliction of emotional
distress (against all defendants); violation of the Ralph Act
(Civ. Code, § 51.7) for intimidation and implied threat of violence
(against Ogbunamiri and the corporate defendants); gender
violence (Civ. Code, § 52.4) (against Ogbunamiri); battery
(against Torrez and the corporate defendants), and constructive
wrongful termination in violation of public policy (against the
corporate defendants).
3. Litigation over defendants’ petition to compel
arbitration
On March 21, 2021, defendants’ counsel asked Zaklit’s
counsel whether she would stipulate to arbitrate the matter
before the AAA as provided for in a dispute resolution agreement
4
she had signed.4 Counsel agreed a provision in the agreement
excluding the right to punitive damages or injunctive relief
should be severed from it, and said defendants would ask
the court to do so. Zaklit’s counsel declined to stipulate. On
March 26, 2021, defendants filed a joint petition to compel
arbitration.
As part of their petition, defendants provided the trial court
with three different arbitration agreements Zaklit had signed.
On March 24, 2017, Zaklit submitted a signed employment
application to “Westlake Financial Services” that included her
agreement to “submit to binding arbitration all disputes and
claims arising out of submission of this application,” and
acknowledged that, if hired, all disputes that “might arise
out of [her] employment with Westlake Financial Services . . .
will be submitted to binding arbitration.”
That same day Zaklit also signed a separate “Applicant’s
Statement and Agreement” that acknowledged, among other
things, Zaklit’s and “the [c]ompany[’s]” agreement to submit
any disputes between them to binding arbitration.
On May 20, 2017, Zaklit electronically signed the
same agreement. On that same day, Zaklit and “Alexa Soto
– Corporate Recruiter,” as the Company representative,
electronically signed a two-page “Employer-Employee Dispute
Resolution Agreement” (DRA). The DRA states it is a “[m]utual
[a]greement to [a]rbitrate” between the “undersigned employee”
—Zaklit—and Westlake Services, Inc. d/b/a Westlake Financial
4 Defendants’ counsel also mentioned Zaklit had signed an
“Applicant’s Statement” that provided for binding arbitration
and had initialed her consent to arbitration in her employment
application.
5
Services, “including any and all subsidiary companies including
but not limited to Wilshire Consumer Credit, Westlake Flooring,
Western Funding, hereinafter (‘Company’).”
The agreement includes nine numbered and separately-
headed paragraphs. We need not describe them all here. The
first paragraph states Zaklit
“agrees to submit to binding arbitration before
a neutral arbitrator all disputes and claims
arising out of submission of my employment
application or any and all disputes that may
arise out of or already exist related to my
employment or relationship with Employer,[5]
whether during or after that employment,
including, but not limited to . . . claims for
discrimination . . . and claims for violation
of any federal, state or other governmental
constitution, statute, ordinance or regulation.
I understand that this Agreement to Arbitrate
applies to claims that pre-exist or may pre-exist
the date of the Agreement.”
The middle of the paragraph states, in bold face type,
“I understand and acknowledge that I am waiving my right to
a jury trial.” The paragraph states the Federal Arbitration Act
(FAA) will govern the arbitration, as well as section 1280 et seq.
of the California Code of Civil Procedure, to the extent it “is not
contradictory to or preempted by federal law.”
The third paragraph governing “Arbitration Procedure”
states the arbitration will be conducted by “an impartial
5 The agreement does not appear to define “Employer.”
6
arbitrator experienced in employment law selected from either”
JAMS, ARS, or AAA, “at the election of the Company in
accordance with the applicable entity’s then-current employment
arbitration rules (except as otherwise provided in this
agreement).” The Company is to pay the Arbitrator’s fees
and arbitration expenses. The sixth paragraph provides for
the arbitrator to decide any “issue or dispute concerning the
formation, applicability, interpretation or enforceability” of
the agreement.
Defendants’ reply brief included evidence showing that,
on May 18, 2017, “Onboarding ”
sent Zaklit a “Welcome” email signed by “Human Resources
Department[,] Westlake Financial Services,” instructing Zaklit
to complete “New Hire paperwork online” before coming to
orientation. On May 20, 2017, Alexa Soto, an HR employee
at the time, electronically sent Zaklit “New Hire” documents to
sign electronically through a “docusign portal.” Soto’s reply email
was listed as “asoto6@westlakefinancial.com.” The Applicant’s
Statement and DRA were among those documents. Zaklit
electronically signed them and the other new-hire documents
on May 20, 2017.
In their petition, defendants argued the DRA delegated to
the arbitrator any question relating to the DRA’s enforceability.
They nonetheless asked the court to sever the clause limiting
punitive damages and injunctive relief from the DRA, but
asserted that if the court determined the DRA was unenforceable,
defendants “aver that the arbitration agreements contained in
7
the Application, and Applicant’s Statement are enforceable.”6
Defendants also argued the nonsignatory defendants could
enforce the arbitration agreements because the complaint
alleged they were acting as Westlake’s agents.
Zaklit opposed the motion, arguing defendants’ motion to
compel concerned an arbitration agreement between plaintiff and
Westlake only with no basis to require her to arbitrate her claims
against the nonsignatory defendants; defendants failed to prove
she signed any agreement to arbitrate; and the arbitration
agreements were unconscionable.
In her declaration submitted in support of her opposition,
Zaklit declared she was hired and began her employment
with all the corporate defendants in May 2017, the individual
defendants sexually harassed her at work, and, despite her
complaints, “no one ever really helped [her].”
She declared that when she was hired, she was required
to sign several documents. She was told she had to complete and
sign the documents before starting work, and, “[i]f the arbitration
agreement was even in those documents, it was not discussed or
explained to me.” Zaklit asserted she “did not even know what
arbitration was at that time.” Zaklit declared she “wanted and
needed the job so [she] did what [she] was told.” She averred
she “felt pressure to click on whatever links, and electronically
sign whatever legal documents appeared on [her] screen that
Westlake . . . presented to [her] prior to [her] employment.”
6 In their reply, defendants clarified the petition sought to
enforce the DRA and would seek to enforce the other agreements
only if the court found the DRA unenforceable.
8
Zaklit also stated she “was electronically presented with
numerous complex legal documents and was never informed
nor aware that [she] was possibly signing an ‘arbitration
agreement.’ ” She did not have an opportunity to consult with
an attorney before signing the documents, Westlake did not
explain the documents to her, and she had “no recollection of
actually signing any arbitration agreement.” Zaklit declared she
did not learn she allegedly had signed an arbitration agreement
until she filed her complaint.
4. The court’s order denying defendants’ petition
The trial court heard defendants’ petition on June 3, 2021,
and took the matter under submission. There is no reporter’s
transcript in the appellate record. The trial court issued a
written ruling denying the petition on June 11, 2021.
The court found Zaklit had signed the arbitration
agreements, but the agreements were procedurally and
substantively unconscionable. The court found the arbitration
agreements were not the same, and there were “some
contradictions.” Describing defendants as able to “pick and
choose which of the three documents they seek to enforce,”
the court found the agreements lacked mutuality.
The court also ruled the nonsignatory defendants could
not enforce the DRA, finding there was “not sufficient identity
of parties, the non-signatory [defendants were] not the agent for
any party to the arbitration agreement and the non-signatories
[were] not third-party beneficiaries of the agreement.”
Defendants timely appealed.7
7 An order denying a petition to compel arbitration is
immediately appealable. (Code Civ. Proc., § 1294, subd. (a).)
9
DISCUSSION
1. Applicable law and standards of review
Under both the Federal Arbitration Act (FAA) and
California law, arbitration agreements are enforceable unless
revocable under state law on grounds that exist for any contract,
such as fraud, duress, and unconscionability. (9 U.S.C. § 2; Code
Civ. Proc., § 128; Viking River Cruises, Inc. v. Moriana (2022)
__ U.S. __, __ [142 S.Ct. 1906, 1917]; Armendariz v. Foundation
Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97–98
(Armendariz).) The FAA applies to arbitration agreements
involving interstate commerce. (9 U.S.C. § 2; Tiri v. Lucky
Chances, Inc. (2014) 226 Cal.App.4th 231, 240 (Tiri).) However,
“ ‘[i]n most important respects, the California statutory scheme
on enforcement of private arbitration agreements is similar to
the [FAA]’ . . . . Thus, enforcing valid arbitration agreements is
favored under both state and federal law.” (Tiri, at pp. 239–240,
quoting Rosenthal v. Great Western Financial Securities Corp.
(1996) 14 Cal.4th 394, 406 (Rosenthal); but see Rosenthal,
at p. 405 [FAA sets forth “a liberal federal policy favoring
arbitration agreements, notwithstanding any state or procedural
policies to the contrary,” and thus “preempts any contrary state
law and is binding on state courts as well as federal”].)
“ ‘General principles of contract law determine whether
the parties have entered a binding agreement to arbitrate.’ ”
(Pinnacle Museum Tower Assn. v. Pinnacle Market Development
(US), LLC (2012) 55 Cal.4th 223, 236.) A party seeking to
compel arbitration bears the burden of proving the existence of
an arbitration agreement, and the party opposing the petition
bears the burden of establishing a defense to the agreement’s
enforcement. (Engalla v. Permanente Medical Group, Inc. (1997)
10
15 Cal.4th 951, 972.) On a petition to compel arbitration, the
trial court sits as the trier of fact, weighing all the affidavits,
declarations, and other documentary evidence to determine
whether the parties agreed to arbitrate. (Ibid.; Rosenthal, supra,14 Cal.4th at pp. 413–414.)
“ ‘ “There is no uniform standard of review for evaluating
an order denying a motion to compel arbitration. [Citation.]
If the court’s order is based on a decision of fact, then we adopt
a substantial evidence standard. [Citations.] Alternatively, if
the court’s denial rests solely on a decision of law, then a de novo
standard of review is employed.” ’ ” (Chambers v. Crown Asset
Management, LLC (2021) 71 Cal.App.5th 583, 591.)
2. The operative arbitration agreement
The trial court found Zaklit electronically signed the
DRA and Applicant’s Statement in May 2017, and signed the
Application and Applicant’s Statement in March 2017, based
on Zaklit’s and defendants’ human resources representative’s
declarations. Substantial evidence thus supports the existence
of an arbitration agreement. Zaklit does not contest the court’s
finding that she signed the three arbitration agreements in
this appeal.
a. The DRA supersedes the other arbitration agreements
Defendants presented three different arbitration
agreements to the trial court: the Application, signed in March
2017; the Applicant’s Statement, signed in March 2017 and
electronically signed in May 2017; and the DRA, electronically
signed in May 2017. The DRA, however, includes the following
integration clause:
“This is the complete agreement of the parties
on the subject of arbitration of Claims. This
11
Agreement supersedes any prior or
contemporaneous oral or written agreement
or understanding on the subject. In executing
this Agreement, neither party is relying on any
representation, oral or written, on the subject
of the effect, enforceability or meaning of this
Agreement, except as specifically set forth in
this Agreement.”
In both the moving and reply papers in support of their petition
to compel arbitration, defendants asked the court to compel
arbitration under the DRA, and, if the court determined the DRA
was unenforceable, to compel arbitration under the Application
and/or Applicant’s Statement.
The trial court characterized defendants’ argument as
having “changed” in their reply and at the hearing to seek to
enforce only the DRA.8 The court found defendants’ position—
“ ‘if the DRA is not enforceable, then we seek to enforce the other
documents[’] ”—demonstrated defendants could “pick and choose
8 We do not read defendants’ reply as taking a different
stance from their petition. In the petition, after asking the court
to sever the DRA’s provision that excluded recovery of punitive
damages or injunctive relief, defendants asserted that, if the
court determined the DRA was unenforceable, they “aver[red]”
the arbitration agreements in the Application and Applicant’s
Statement were enforceable. The petition thus argued plaintiff
was bound to arbitrate her claims under the DRA “and/or” the
Application “and/or” the Applicant’s Statement. In their reply,
as the trial court noted, defendants clarified their petition
sought to enforce the DRA and included the other two arbitration
agreements “only . . . in the event that the Court finds the DRA
to be unenforceable or void/voidable.”
12
which of the three documents . . . to enforce,” supporting Zaklit’s
argument that the arbitration agreements lacked mutuality
and thus were substantively unconscionable. Neither the
court nor Zaklit addressed whether the DRA in fact superseded
the arbitration provisions in the Application and Applicant’s
Statement, however.
We agree with defendants that the DRA supersedes the
arbitration agreements found in the Application and Applicant’s
Statement, which were signed before and/or contemporaneously
with the DRA. The DRA clearly states the parties intend it
to be the “complete agreement of the parties” on the subject of
arbitration and “supersedes any prior or contemporaneous” oral
or written agreement on the subject. (Civ. Code, § 1639 [parties’
intent determined from writing alone if possible]; id., § 1644
[“words of a contract are to be understood in their ordinary and
popular sense”].) Zaklit does not contend the parties intended
otherwise or that the clause is somehow ambiguous.9 (See, e.g.,
Grey v. American Management Services (2012) 204 Cal.App.4th
803, 807, 809 [existence of an integration clause “is a key factor
in divining” whether the parties “ ‘intended their writing to serve
as the exclusive embodiment of their agreement’ ”; introduction
of extrinsic evidence is prohibited to vary or contradict terms
of integrated agreement but may be admitted to explain an
ambiguity].) Rather, she simply notes defendants continue to
assert her claims are covered by all three arbitration agreements
and to seek to enforce the clauses in the Application and
9 In essence, Zaklit argues the parties’ arbitration agreement
is ambiguous because the three agreements contain different
terms. She does not, however, contend the terms of the DRA—
standing alone—are ambiguous.
13
Applicant’s Statement if this court finds the DRA is
unenforceable.
As we have concluded the arbitration agreements in the
Application and Applicant’s Statement have been superseded, we
consider only whether the trial court erred in denying defendants’
petition to compel arbitration under the DRA.
b. The FAA applies
Here, defendants presented evidence that Westlake and
its employees engage in interstate commerce through servicing
and acquiring automotive retail installment contracts with
dealerships throughout the United States. The parties also
expressly designated the FAA would govern any arbitration
under the DRA, as well as the California Arbitration Act (Code
Civ. Proc., 1280 et seq.) “to the extent that California law is not
contradictory to or preempted by federal law.” “The FAA requires
that courts enforce arbitration agreements according to their
terms.” (Prima Donna Development Corp v. Wells Fargo Bank,
N.A. (2019) 42 Cal.App.5th 22, 35.) The FAA—and California
law to the extent it does not conflict with the FAA—thus governs
our interpretation of the DRA.10
3. The DRA’s delegation clause is enforceable
a. Applicable law
Ordinarily, courts determine the enforceability of an
arbitration agreement. (AT&T Technologies v. Communications
Workers of America (1986) 475 U.S. 643, 649.) “When the parties’
10 Although Zaklit disputed the application of the FAA in
her opposition to defendants’ motion to compel, she does not
challenge its application on appeal. In any event, our analysis
here would be the same under both the FAA and California law.
(See Tiri, supra, 226 Cal.App.4th at p. 240.)
14
contract delegates the arbitrability question to an arbitrator,”
however, “the courts must respect the parties’ decision as
embodied in the contract.” (Henry Schein, Inc. v. Archer &
White Sales, Inc. (2019) __ U.S. __, __ [139 S.Ct. 524, 531].)
Nevertheless, “courts ‘should not assume that the parties agreed
to arbitrate arbitrability unless there is clear and unmistakable
evidence that they did so.’ ” (Ibid.; see also Chin v. Advanced
Fresh Concepts Franchise Corp. (2011) 194 Cal.App.4th 704, 709
[“When the parties ‘ “clearly and unmistakably” ’ delegate issues
of arbitrability to the arbitrator, the arbitrator, not the court,
decides such issues as the scope of the arbitration agreement.”];
Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1560
(Malone) [United States Supreme Court and California courts
agree delegation clause “must be clear and unmistakable” to
be enforceable].)
Under Rent-A-Center, West, Inc. v. Jackson (2010) 561
U.S. 63 (Rent-A-Center), “a party’s challenge to the arbitration
agreement 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, supra,
226 Cal.App.4th at p. 240, quoting Rent-A-Center, at p. 71;
Malone, supra, 226 Cal.App.4th at pp. 1559–1560 [where party
challenges arbitration agreement as a whole, delegation clause
is severed and enforced, leaving arbitrator, not the court, to
determine if agreement is enforceable].)
“In contrast, if the party is making a specific challenge
to the delegation clause, the court must determine whether the
delegation clause itself may be enforced and can only delegate
the general issue of enforceability to the arbitrator if it first
determines the delegation clause is enforceable.” (Malone, supra,
15
226 Cal.App.4th at p. 1560, citing Rent-A-Center, supra, 561 U.S.
at p. 70.) “Stated another way, Rent-A-Center acknowledges that
while courts may consider enforceability challenges specific to
delegation clauses, the arbitrator is to consider challenges to the
arbitration agreement as a whole.” (Tiri, supra, 226 Cal.App.4th
at p. 240.)
“There are two prerequisites for a delegation clause to
be effective. First, the language of the clause must be clear
and unmistakable. [Citation.] Second, the delegation must not
be revocable under state contract defenses such as fraud, duress,
or unconscionability.” (Tiri, supra, 226 Cal.App.4th at p. 242;
see also Rent-A-Center, supra, 561 U.S. at pp. 68, 69, fn. 1.)
“The ‘clear and unmistakable’ test reflects a ‘heightened standard
of proof’ that reverses the typical presumption in favor of the
arbitration of disputes.” (Aanderud v. Superior Court (2017)
13 Cal.App.5th 880, 892 (Aanderud).)
“An arbitration agreement is governed by contract law.
It is construed like other contracts to give effect to the intention
of the parties and the ordinary rules of contract interpretation
apply. [Citation.] If the contractual language is clear and
explicit, it governs.” (Mendoza v. Trans Valley Transport (2022)
75 Cal.App.5th 748, 764 (Mendoza).)
b. Analysis
The DRA includes the following delegation clause in a
separate paragraph with the heading, “Construction and
Enforceability” (capitalization omitted):
“Any issue or dispute concerning the formation,
applicability, interpretation or enforceability
of this Agreement, including any claim
or contention that all or any part of this
16
Agreement is void or voidable, shall be subject
to arbitration as provided herein. The
arbitrator, and not any federal, state or local
court or agency, shall have authority to decide
any such issue or dispute. The decision of an
arbitrator on any such issue or dispute, as well
as on any Claim submitted to arbitration as
provided in this Agreement, shall be final and
binding upon the parties.”
Zaklit argues “the delegation clause itself is part of the
unconscionable mélange of contradictory terms among various
agreements which renders the entire arbitration contractual
scheme unconscionable.” She contends the delegation clause
lacks mutuality—rendering it unconscionable—because the three
arbitration clauses “contained contradictory terms, one such term
of which is the presence and simultaneous absence of delegation
clauses.” Zaklit continues that, given “this lack of mutuality,”
defendants “cannot sustain their burden of showing of ‘ “clear
and unmistakable evidence” ’ that the parties ‘agreed to arbitrate
arbitrability.’ ” (Quoting, Mendoza, supra, 75 Cal.App.5th at
p. 772 [“ ‘[c]ourts should not assume that the parties agreed to
arbitrate arbitrability unless there is “clear and unmistakeabl[e]”
evidence that they did so’ ”].)
In essence, Zaklit contends the delegation clause is
unenforceable because the other agreements she signed do
not contain a delegation clause, making it unclear whether the
parties intended to arbitrate the issue of arbitrability. We cannot
agree. As we discussed, the DRA superseded the arbitration
clauses in the Application and Applicant’s Statement. That those
arbitration agreements contained different terms, therefore, does
17
not make the DRA’s delegation clause ambiguous nor lacking
in mutuality.
Rather, the delegation clause in the DRA expressly
grants authority to the arbitrator to decide threshold issues of
arbitrability. It unambiguously provides that any dispute about
the “formation, applicability, interpretation or enforceability”
of the DRA—including whether it is void or voidable—is subject
to arbitration, and the arbitrator, not the court, has the authority
to decide any such dispute. Courts have found similar language
sufficiently clear and unmistakable evidence of the parties’
intent “to delegate all issues to an arbitrator, including issues
of enforceability.” (Tiri, supra, 226 Cal.App.4th at p. 242 [clause
stating “ ‘[t]he Arbitrator, and not any federal, state, or local
court or agency, shall have the exclusive authority to resolve
any dispute relating to the interpretation, applicability,
enforceability, or formation of this Agreement . . . .’ ” met
“clear and unmistakable” prerequisite]; see also Malone, supra,
226 Cal.App.4th at p. 1560 [clause providing “ ‘[t]he arbitrator
has exclusive authority to resolve any dispute relating to
the interpretation, applicability, or enforceability of this
binding arbitration agreement’ ” was “sufficiently clear and
unmistakable” to be enforceable unless unconscionable];
Aanderud, supra, 13 Cal.App.5th at p. 892 [arbitration provision
stating “the parties ‘agree to arbitrate all disputes, claims and
controversies arising out of or relating to . . . the interpretation,
validity, or enforceability of this Agreement, including the
determination of the scope or applicability of . . . [the “Arbitration
18
of Disputes” section]’ ” was “clear and unmistakable evidence that
the parties intended to arbitrate arbitrability”].)11
As the DRA’s delegation clause is clear and unmistakable,
it was enforceable unless it specifically was revocable on
state-law grounds—here, unconscionability. (Rent-A-Center,
supra, 561 U.S. at p. 72; Malone, supra, 226 Cal.App.4th at
p. 1560; Tiri, supra, 226 Cal.App.4th at p. 243.)
“ ‘[U]nconscionability has both a “procedural” and a
“substantive” element,’ the former focusing on ‘ “oppression” ’
or ‘ “surprise” ’ due to unequal bargaining power, the latter
on ‘ “overly harsh” ’ or ‘ “one-sided” ’ results.” (Armendariz,
supra, 24 Cal.4th at p. 114.) Both procedural and substantive
unconscionability must be present for a court to be able to refuse
to enforce a contract or a contract term, including an arbitration
agreement, under the doctrine of unconscionability. (Ibid.) “But
they need not be present in the same degree.” (Ibid.) “[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.” (Ibid.) The
party opposing arbitration bears the burden of proving
unconscionability. (Tiri, supra, 226 Cal.App.4th at p. 244.)
As we discussed, when challenging the enforceability of a
delegation clause, “any claim of unconscionability must be
11 The delegation clause here did not use the term “exclusive
authority,” but the arbitrator’s exclusive authority to determine
issues of enforceability is implied by the provision that “[t]he
arbitrator, and not any federal, state or local court or agency,
shall have authority to decide any such issue or dispute.” (Italics
added.)
19
specific to the delegation clause.”12 (Ibid., citing Rent-A-Center,
supra, 561 U.S. at p. 73.)
We have little trouble concluding substantial evidence
supports the trial court’s implied finding that the delegation
clause was procedurally unconscionable. An arbitration
agreement imposed as a condition of employment with no
opportunity to negotiate is typically adhesive and demonstrates
some level of procedural unconscionability. (Armendariz,
supra, 24 Cal.4th at pp. 113, 114–115 [adhesive contract is a
standardized contract that, “ ‘imposed and drafted by the party
of superior strength, relegates to the subscribing party only the
opportunity to adhere to the contract or reject it’ ”]; Baltazar v.
Forever 21, Inc. (2016) 62 Cal.4th 1237, 1244 [adhesive contracts
“ ‘contain a degree of procedural unconscionability even without
any notable surprises, and “bear within them the clear danger
of oppression and overreaching” ’ ”].)
The trial court found Zaklit’s testimony sufficient to
demonstrate the process of signing the arbitration agreements
was procedurally unconscionable. “Where the trial court’s
determination of unconscionability is based upon the trial court’s
resolution of conflicts in the evidence, or on the factual inferences
which may be drawn therefrom, we consider the evidence in the
light most favorable to the court’s determination and review
12 Defendants argue Zaklit “waived [her] right to object to the
delegation clause” because she did not specifically address it in
her opposition to defendants’ petition. As defendants’ reliance on
the superseded arbitration agreements as a “backup” if the DRA
were not enforced was not entirely clear from the moving papers,
we find Zaklit did not forfeit her challenge to the delegation
clause.
20
those aspects of the determination for substantial evidence.”
(Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 89.)
Zaklit declared she was told to complete and sign several
“new-hire documents” before she could begin work. The record
shows the DRA was one of the new-hire documents electronically
provided to Zaklit for her signature. She declared she did
not recall signing any arbitration agreement and “was never
informed nor aware” that she “possibly” was signing an
arbitration agreement. Zaklit also averred: she “felt pressure
to click on whatever links, and electronically sign whatever legal
documents appeared on [her] screen”; because she needed the job,
she “was not in a position to argue about any of the documents or
to negotiate any terms or even to refuse to sign documents”; she
had no opportunity to consult with an attorney before signing the
documents; and no one from Westlake explained the documents
to her. We can infer the trial court found Zaklit’s testimony
credible and gave it more weight.
Defendants argued Zaklit’s declaration “reveal[ed] no
evidence . . . that the arbitration agreement was required on
a ‘take it or leave it’ basis,” as Zaklit never claimed she asked
whether “the DRA was required or negotiable” or that anyone
told her she must sign it as a condition of her employment.
Defendants make a similar argument on appeal. The trial
court rejected defendants’ counterargument as relating “only
to plaintiff’s credibility.” We also cannot conclude Zaklit did not
meet her burden by failing to present evidence that she asked
if the DRA were negotiable. (See Tiri, supra, 226 Cal.App.4th
at p. 245 [human resources manager’s statements that employee
“was never told the agreement was nonnegotiable and that
21
[employee] never proposed changes fell far short of demonstrating
an arm’s-length bargaining transaction”].)
Zaklit’s testimony and the documentary evidence in the
record substantially support the trial court’s implied finding that
the DRA was an adhesion contract presented to Zaklit, along
with its delegation clause, on a take-it-or-leave-it basis and thus
bore some level of procedural unconscionability. (Tiri, supra, 226
Cal.App.4th at pp. 245–246 [agreeing with trial court’s implied
finding that delegation clause within contract of adhesion was
procedurally unconscionable as it too was presented on take-it-
or-leave-it basis].) Moreover, Zaklit was an unsophisticated
party, having testified she did not know “what arbitration was,”
who was sent the DRA, with the delegation clause, only a few
days before her start date among several other documents
she was told to sign electronically before starting work. That,
coupled with the “ ‘arcane nature’ of the delegation clause,
added to its oppression and surprise.” (Aanderud, supra,
13 Cal.App.5th at p. 895.)
Although we conclude the delegation clause has some
degree of procedural unconscionability, it nonetheless is valid
because it is not substantively unconscionable. (Tiri, supra, 226
Cal.App.4th at p. 246; see also Malone, supra, 226 Cal.App.4th
at p. 1570 [delegation clause part of arbitration agreement
that was contract of adhesion demonstrated “some evidence of
procedural unconscionability, which must be accompanied by a
high showing of substantive unconscionability in order to result
in the conclusion that the delegation clause is unenforceable”
but had none and thus was valid].)
Contrary to Zaklit’s contention, the DRA’s delegation clause
does not lack mutuality. Both Westlake and Zaklit are bound by
22
it equally: “Any issue or dispute” concerning arbitrability—
including applicability or enforceability of the DRA—is subject
to arbitration, and the arbitrator’s decision “on any such issue
or dispute . . . [is] final and binding upon the parties.” (Italics
added; see Tiri, supra, 226 Cal.App.4th at p. 247.) Moreover,
another panel of this court in Malone, as well as the First
District in Tiri, concluded similar delegation clauses were
not substantively unconscionable because they did not lack
mutuality, were not otherwise unreasonably favorable to the
employer, and were not “overly harsh or so one sided as to shock
the conscience.” (Malone, supra, 226 Cal.App.4th at pp. 1557,
1570–1571; Tiri, at pp. 237, 246–247.) Although defendants
relied on both cases on appeal and in the trial court, Zaklit
addressed neither.
We recognize the trial court found provisions within
the DRA itself were substantively unconscionable for lack
of mutuality: the clause that excludes the right to punitive
damages or injunctive relief—which defendants sought to sever
—and a provision that excludes claims “by the Company for
injunctive and/or other equitable relief for unfair competition
and/or the unauthorized disclosure of trade secrets or confidential
information.” Zaklit, however, does not argue how these
provisions “as applied to the delegation clause render[ ] that
clause unconscionable by impeding her ability to arbitrate
whether the arbitration agreement as a whole is unconscionable.”
(Tiri, supra, 226 Cal.App.4th at p. 248, citing Rent-A-Center,
supra, 561 U.S. at p. 73.)
As we have concluded the delegation clause itself is not
substantively unconscionable, whether or not these provisions
are unconscionable and cannot be severed from the DRA—
23
rendering the DRA unenforceable—was for the arbitrator, not
the trial court, to decide. (Tiri, supra, 226 Cal.App.4th at p. 250
[having determined similar delegation clause was valid, “it
[would] be for the arbitrator to consider the conscionability of
the agreement as a whole and its other severable provisions”];
Malone, supra, 226 Cal.App.4th at p. 1571 [determining similar
delegation clause was not unconscionable and holding trial court
“did not err in granting employer’s motion to compel arbitration
to permit the arbitrator to resolve [former employee’s] challenges
to the validity and enforceability of the arbitration agreement
as a whole”].)
Finally, Zaklit urges us to find the arbitration agreement
—and apparently the delegation clause itself—substantively
unconscionable based on the passage of the “Ending Forced
Arbitration of Sexual Assault and Sexual Harassment Act
of 2021” (Act), signed into law on March 3, 2022. (Pub.L.
No. 117-90, 136 Stat. 26.) That statute invalidates predispute
arbitration agreements that require arbitration of sexual assault
or sexual harassment claims. (9 U.S.C. § 402(a).)
Zaklit concedes the Act does not apply retroactively but
contends that, because “the presumptive favorable treatment
of arbitration clauses supposedly flowing from the Federal
Arbitration Act clearly no longer applies to arbitration clauses
related to sexual harassment claims,” we should invalidate the
arbitration agreement here as against public policy. (Citing
Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1145
[unconscionability also concerns terms that “contravene the
public interest or public policy”].)
We decline. The Act expressly notes it applies to “ ‘any
dispute or claim that arises or accrues on or after the date of
24
enactment of this Act.’ ” (Hist. notes, 9 U.S.C. § 401; Pub.L.
No. 117-90, § 3 (Mar. 3, 2022) 136 Stat. 28.) “Such plain
language indicates no Congressional intent to apply the . . . Act
retroactively. While the Act represents a significant sea change
in the enforcement of arbitration provisions, Congress has
chosen to temper that change through prospective rather than
retrospective applicability.” (Zinsky v. Russin (W.D.Pa. July 22,
2022, No. 2:22-cv-547) 2022 WL 2906371 at *4.)
Having concluded the trial court erred in denying at least
Westlake’s petition to compel arbitration, we next consider
whether the court erred in finding the nonsignatory defendants
not entitled to compel Zaklit to arbitrate her claims against them
under the DRA.
4. The nonsignatory defendants can enforce the DRA
Generally, only a party to an arbitration agreement
may enforce it. (DMS Services, LLC v. Superior Court (2012)
205 Cal.App.4th 1346, 1352 (DMS Services).) There is no dispute
that the DRA is between Zaklit—the “Employee”—and Westlake,
“including any and all subsidiary companies including but not
limited to Wilshire Consumer Credit, Westlake Flooring, [and]
Western Funding”—the “Company.” Defendants do not contend
the Hankey defendants are subsidiaries of Westlake but
generally refer to them in their briefing as “sister companies of
Westlake.” And, as the trial court noted, unlike the superseded
Applicant’s Statement, the DRA does not expressly include
managers or employees in the definition of “Company.” Thus,
Westlake is the only named defendant that is a party to the DRA.
Both California and federal courts, however, recognize
nonsignatories to an agreement containing an arbitration
provision may, in limited circumstances, compel arbitration
25
of “a dispute arising within the scope of that agreement.” (DMS
Services, 205 Cal.App.4th at p. 1353; Garcia v. Pexco, LLC (2017)
11 Cal.App.5th 782, 785–786 (Garcia).) The DRA applies to “any
and all disputes that may arise out of or already exist related to
[Zaklit’s] employment or relationship with Employer,” including,
among others, discrimination claims, tort claims, and claims for
violation of any statute. (Italics added.) As all of Zaklit’s claims
involve alleged sexual harassment, retaliation, and related
claims that arose from or were related to her employment, if
the nonsignatory defendants can enforce the DRA against Zaklit,
her claims against them unquestionably fall within the scope of
the DRA. Whether a nonsignatory defendant has standing to
enforce an arbitration agreement is a question of law subject
to de novo review. (Marenco v. DirectTV LLC (2015) 233
Cal.App.4th 1409, 1416–1417 (Marenco).)
Nonsignatory defendants may compel arbitration under
theories of agency and equitable estoppel,13 and as third party
13 The nonsignatory defendants appear to assert they can
compel arbitration under the doctrine of equitable estoppel
because all of Zaklit’s causes of action against them and Westlake
“are intimately founded in and intertwined with the employer’s
obligations.” That doctrine applies when “ ‘the causes of action
against the nonsignatory are “intimately founded in and
intertwined” with the underlying contract obligations.’ ” (Garcia,
supra, 11 Cal.App.5th at p. 786, italics added.) Although Zaklit’s
claims are based on obligations her alleged joint employers owed
her as their employee, they are not founded on, for example, an
employment agreement that contained an arbitration provision.
Rather, the DRA is a stand-alone arbitration agreement. As
plaintiff’s claims do not arise from a contract, the doctrine of
equitable estoppel does not apply.
26
beneficiaries, among others. (Marenco, supra, 233 Cal.App.4th
at p. 1417; Garcia, supra, 11 Cal.App.5th at pp. 786, 788.)
“These exceptions to the general rule that one must be a party
to an arbitration agreement to invoke it or be bound by it
‘generally are based on the existence of a relationship between
the nonsignatory and the signatory, such as principal and
agent or employer and employee, where a sufficient “identity
of interest” exists between them.’ ” (DMS Services, supra,
205 Cal.App.4th at p. 1353.)
Courts look to traditional principles of contract and
agency law to determine whether a nonsignatory can enforce
an arbitration agreement signed by its principal or agent.
(Cohen v. TNP 2008 Participating Notes Program, LLC (2019)
31 Cal.App.5th 840, 860 (Cohen).) Allegations of an agency
relationship with a signatory—without more—are generally
insufficient to allow a nonsignatory defendant to enforce an
agreement to arbitrate between a signatory defendant and
a plaintiff. (See Barsegian v. Kessler & Kessler (2013) 215
Cal.App.4th 446, 451 (Barsegian) [rejecting contention that
plaintiff’s allegation that each of the defendants was the agent
of the other defendants entitled all defendants “to enforce
each other’s arbitration agreements,” because “then in every
multidefendant case in which the complaint contained such
boilerplate allegations of mutual agency, as long as one defendant
had entered into an arbitration agreement with the plaintiff,
every defendant would be able to compel arbitration, regardless
of how tenuous or nonexistent the connections among the
defendants might actually be”]; but see Thomas v. Westlake
(2012) 204 Cal.App.4th 605, 614 [nonsignatory defendants could
enforce arbitration agreement because each was alleged to have
27
“acted as an agent of [signatory defendant] in connection with
the acts and omissions” described in the complaint].)
A nonsignatory defendant, however, may “compel a
signatory plaintiff to arbitrate where there is a connection
between the claims alleged against the nonsignatory and its
agency relationship with a signatory” defendant. (Cohen, supra,
31 Cal.App.5th at p. 863; accord, Garcia, supra, 11 Cal.App.5th
at p. 788 [nonsignatory defendant could enforce arbitration
agreement when it was alleged to have been joint employer with
signatory defendant, and thus agent of signatory “in [its] dealings
with [plaintiff]”].) Put another way, “[n]onsignatory defendants
may enforce arbitration agreements ‘where there is sufficient
identity of parties.’ ” (Marenco, supra, 233 Cal.App.4th at
p. 1417.)
The trial court here found the complaint’s allegations that
the defendants were “ ‘all agents of each other’ ” were insufficient
“to create an agency for the purposes of invoking the arbitration
clause.” The complaint included general boilerplate allegations
that each defendant acted as the other’s agent, true. But, the
agency relationship between Westlake and the nonsignatory
defendants is not simply based on a boilerplate mutual agency
allegation, as in Barsegian.
As for the nonsignatory corporate defendants, the
complaint alleged the corporate defendants—Westlake and
the three Hankey defendants—jointly employed Zaklit and the
individual defendants “at all times.” The complaint makes no
distinction between the corporate defendants’ joint employment
of Zaklit, or of the individual defendants. It also alleged the
corporate defendants jointly failed to develop policies and
inform their employees about the prohibition of discrimination,
28
harassment, and retaliation and to take corrective action against,
or to deter, those who engaged in discrimination, harassment,
and retaliation; alleged the corporate defendants and their
“officers, directors, managing agents, managers, and supervisors
knew, or should have known, of the acts” alleged in the
complaint, and the corporate defendants approved of or ratified
those acts. Moreover, every cause of action in the complaint,
except the cause of action for gender violence alleged against only
Ogbunamiri, is asserted against the corporate defendants jointly.
Garcia, supra, 11 Cal.App.5th 782, is instructive. There,
a temporary staffing company—Real Time—hired Garcia and
assigned him to work for Pexco. (Id. at p. 784.) Garcia signed
an arbitration agreement with Real Time, but not with Pexco.
(Ibid.) Garcia sued both Real Time and Pexco (and another
defendant) for wage and hour violations that occurred during his
assignment with Pexco, alleging they jointly employed him and
acted as each other’s agent. (Id. at p. 785.) The appellate court
concluded Pexco, as a nonsignatory to Real Time’s arbitration
agreement with Garcia, could compel Garcia to arbitrate his
claims against it under the agency exception based on Garcia’s
agency allegations and that the complaint’s causes of action
alleged identical claims and conduct regarding the workplace
violations against “[a]ll [d]efendants without any distinction.”
(Id. at p. 788.)
Zaklit’s complaint not only alleged Westlake and the
nonsignatory corporate defendants were acting as agents of
one another but, as in Garcia, the complaint alleges they also
were her “joint employers fulfilling the same role,” and asserted
identical claims against them based on the identical set of facts
29
“without any distinction” between them. (Garcia, supra, 11
Cal.App.5th at p. 788.)
Zaklit nevertheless argues defendants’ “failure to provide
evidence as to the elements required for agency is fatal to
the invocation of agency status.” We disagree. The corporate
defendants could not be jointly liable to Zaklit for the individual
defendants’ torts and their own workplace violations—as the
complaint alleges—unless the corporate defendants were acting
as each other’s agents in their dealings with their employees—
Zaklit and the individual defendants—as alleged joint employers.
(See Barsegian, supra, 215 Cal.App.4th at p. 453, fn. 3
[explaining boilerplate allegations that defendants acted as each
other’s agents “can be sufficient to support a motion to compel
arbitration even if the allegation is not treated as a judicial
admission” when the defendants’ liability was dependent upon
the boilerplate agency allegation, which was not the case there].)
Moreover, although the court did not mention it in its
ruling, defendants presented with their petition the declaration
of the Vice President of Human Resources for Hankey Investment
Company—Tonia Douglas—who averred Hankey Investment
Company provides “human resource services” to the Hankey
Group companies, which include all of the corporate defendants.
Thus, at the time of Zaklit’s alleged joint employment by the
corporate defendants, defendant Hankey Investment Company
was providing human resource services to Westlake, e.g., acting
as its agent.14 The complaint refers to this relationship. Zaklit
14 Douglas also declared Hankey Finance Company has no
employees, and, as we noted, defendants assert the Hankey
Group is simply a name—rather than an actual entity—used
to refer to the group of associated companies.
30
alleged Douglas was the Vice President of Human Resources,
that she witnessed sexually harassing conduct directed at Zaklit,
and that Zaklit reported the individual defendants’ conduct from
the October 2019 event to Douglas, who essentially did nothing.
And, Zaklit received her new-hire documents from both Hankey
Investment Company and Westlake.
In any event, Zaklit’s allegations were sufficient to support
the agency exception, entitling the nonsignatory corporate
defendants to compel arbitration of Zaklit’s claims under the
DRA.
Zaklit’s allegations against the individual defendants
similarly establish they were acting as agents of Westlake.
Beyond the “boilerplate” agency allegation, Zaklit specifically
alleged the corporate defendants, including Westlake, employed
the individual defendants as “officers, directors, managing
agents, managers, and/or supervisors,” and each individual
defendant held a title reflecting their employment in that
capacity: the Senior Vice President of Servicing (Renfro), the
Director of Flooring (Torrez), and the Chief Investment Officer
(Ogbunamiri).
The complaint also alleged that, when they engaged in
the alleged sexually harassing conduct—which forms the basis
of all Zaklit’s causes of action—the individual defendants were
supervisors under the FEHA, specifically, Government Code
section 12926, subdivision (t). That section defines “[s]upervisor”
as “any individual having the authority, in the interest of the
employer, to hire, transfer, suspend, lay off, recall, promote,
discharge, assign, reward, or discipline other employees, or the
responsibility to direct them, or to adjust their grievances, or
effectively to recommend that action, if, in connection with the
31
foregoing, the exercise of that authority is not of a merely routine
or clerical nature, but requires the use of independent judgment.”
(Gov. Code, § 12926, subd. (t), italics added.) In other words, the
individual defendants had authority to act on behalf of Westlake
and the other corporate defendants. And, as we discussed, the
complaint alleged the corporate defendants “approved” of the acts
alleged in the complaint or “ratified them after learning of them.”
Moreover, although the complaint does not use the words
“acted within the scope of their employment,” Zaklit’s causes of
action all are based on sexually harassing conduct the individual
defendants allegedly engaged in within the course and scope
of their employment by Westlake (and the other corporate
defendants): in the workplace generally, and at a three-day
event the corporate defendants held for employees at a hotel in
October 2019.
For example, Zaklit’s cause of action for quid pro quo
sexual harassment alleged her job, other terms of her
employment, and the like, were “expressly or impliedly
contingent upon” her acceptance of the individual defendants’
unwanted sexual advances and verbal conduct—including
the conduct that allegedly occurred at the hotel event in
October 2019—while the defendants were acting as supervisors.
Similarly, Zaklit’s second cause of action for hostile work
environment alleged the individual defendants were supervisors
“at all times,” and their conduct alleged in the complaint was
unwelcome and “created an oppressive, hostile, intimidating,
and/or offensive work environment” for her, and affected her
“emotional well-being and her ability to do her job.”
Zaklit’s tort claims for intentional infliction of emotional
distress, battery, implied threat of violence in violation of Civil
32
Code section 51.7, and gender violence under Civil Code
section 52.4 also all are based on the individual defendants’
conduct at the October 2019 work event where they allegedly
had authority to act for Westlake (and the other corporate
defendants) as supervisors, managers, managing agents, officers,
or directors.
Accordingly, the complaint’s allegations are sufficient to
establish the individual defendants were acting as Westlake’s
agents, entitling them to enforce the DRA against Zaklit. (See
24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th
1199, 1210–1211 [allegations individual defendants allegedly
sexually harassed plaintiff within the course and scope of
their employment established they were acting as defendant
employer’s agents and thus they were entitled to summary
judgment on ground the claims against them were subject to
arbitration agreement between the plaintiff and defendant
employer].)
5. We decline to consider the validity of the superseded
agreements
Finally, defendants contend that, if the arbitrator
determines the DRA is unenforceable based on unconscionability,
“it would be appropriate for the trial court to enforce either of
the . . . two preceding arbitration agreements.” Defendants argue
a finding that the DRA is unconscionable and thus void would
“vitiate the entire agreement, including the superseding clause,”
essentially reinstating the superseded arbitration agreements.
Defendants did not make this argument in the trial court,
although, as we discussed, they did argue the Application and/or
Applicant’s Statement also compelled Zaklit to arbitrate her
claims if the DRA were unenforceable.
33
Defendants’ claim is not ripe. It would be premature
for us to determine whether the trial court should enforce the
arbitration provisions under the Application and Applicant’s
Statement when the arbitrator has yet to determine the validity
of the DRA. We note, however, as Zaklit argues, the authorities
on which defendants rely to support their assertion that the
“superseding clause” would be “vitiate[ed]”—and the earlier
arbitration agreements reinstated—if the arbitrator finds
the DRA is unconscionable—do not stand for that proposition.
(See Moncharsh v. Heily & Blasé (1992) 3 Cal.4th 1, 29 [“If a
contract includes an arbitration agreement, and grounds exist
to revoke the entire contract, such grounds would also vitiate
the arbitration agreement. Thus, if an otherwise enforceable
arbitration agreement is contained in an illegal contract, a party
may avoid arbitration altogether.”]; California State Council
of Carpenters v. Superior Court (1970) 11 Cal.App.3d 144, 157
[“illegality in a contract containing a provision for arbitration,
in order to vitiate such provision, must be such as renders the
entire contract illegal and unenforceable; and that a claim of
illegality of one of the incidental clauses of the contract that falls
short of affording ground for revocation of the contract is itself
subject to arbitration”]; Bianco v. Superior Court of Los Angeles
County (1968) 265 Cal.App.2d 126, 130 [plaintiff not required
to arbitrate where entire agreement found revocable based on
illegality].)
34
DISPOSITION
The order denying defendants’ petition to compel
arbitration is reversed. On remand, the trial court shall stay
the current litigation and allow Westlake to choose an arbitrator
from JAMS, ARS, or AAA, as provided by the DRA. The
arbitrator shall determine the validity of the DRA, or what
should occur if the arbitrator finds the DRA is invalid or
unenforceable. We express no opinion on the validity of the DRA,
or what should occur if the arbitrator finds the DRA is invalid or
unenforceable. The parties shall bear their own costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
EGERTON, J.
We concur:
LAVIN, Acting P. J.
NGUYEN (KIM), J.*
* Judge of the Los Angeles County Superior Court, assigned
by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
35