Diaz v. West Coast Laboratories

Filed 10/15/07 Diaz v. West Coast Laboratories CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

APPEAL from a judgment of the Superior Court of Los Angeles County. Michael Stern, Judge. Affirmed.

Silver & Freedman, Alison Meshekow Holtzman and Yesenia M. Gallegos for Defendants and Appellants.

The Feldman Law Firm, Alicia Olivares Uyeda and John F. Juenger for Plaintiff and Respondent.

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Maria Diaz sued West Coast Laboratories (WCL) and Charles Shad for disability discrimination and wrongful termination. WCL filed a motion to compel arbitration based on an arbitration clause included in WCLs employee handbook. The trial court denied the motion finding the contract both procedurally and substantively unconscionable. On appeal, WCL contends that the trial court erred in denying the motion because substantial evidence did not support the findings of procedural and substantive unconscionability. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Diaz began to work at WCL as a machine worker in 1997. In 2004 she lost a finger in a work-related accident, an injury that required subsequent surgeries. WCL allegedly fired Diaz for improperly weighing capsules and misrepresenting her time; however, Diaz claims that WCL concocted this reason to fire her when she continued to require medical attention and accommodations for her injury.

On January 11, 2006, Shad, Diazs supervisor, held a meeting in which he discussed safety procedures and passed out a copy of an updated employee handbook. According to Diaz, Shad repeatedly pressured her to sign the Receipt and Acknowledgment form included within the employee handbook as a condition of her continued employment. On January 26, Diaz turned in a signed copy of the Receipt and Acknowledgment form. WCL terminated Diazs employment on February 13.

Diaz sued WCL and Shad for (1) discrimination on the basis of disability in violation of Government Code section 12940, subdivision (a); (2) failure to accommodate disability in violation of Government Code section 12940, subdivision (m); (3) failure to engage in the interactive process in violation of Government Code section 12940, subdivision (m); (4) violation of Government Code section 12954.2; (5) retaliation for exercising rights under FEHA; (6) wrongful termination in violation of public policy (FEHA); (7) wrongful termination in violation of public policy (Lab. Code, 132); and (8) intentional infliction of emotional distress.

In response, WCL filed a petition to compel arbitration based on the arbitration provision included in the employee handbook and the Receipt and Acknowledgment form that Diaz signed. After a hearing, the trial court denied the petition, finding the agreement both procedurally and substantively unconscionable.

Diaz filed a timely notice of appeal.

DISCUSSION

On appeal, WCL asserts that substantial evidence does not support the factual findings made by the trial court in finding procedural and substantive unconscionability.

1. Standard of Review

The parties disagree on the proper standard of review. On appeal the reviewing court must accept the factual findings of the trial court if they are supported by substantial evidence. (See NORCAL Mutual Ins. Co. v. Newton(2000) 84 Cal.App.4th 64, 71.) However, the validity of a clause compelling arbitration is a legal question subject to de novo review. (Nyulassy v. Lockheed Martin Corp. (2004)120 Cal.App.4th 1267, 1277.) Whether Diaz waived her right to a jury trial depends on whether the agreement she signed is unconscionable and therefore invalid, a legal question subject to de novo review. The factual findings made by the trial court concerning Diazs ability to speak English and the events leading up to her termination, however, are reviewed for substantial evidence.

2. The trial court did not err in finding the contract unconscionable

To determine whether a contract is unconscionable and therefore invalid the court must first consider whether it is a contract of adhesion. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113.) A contract of adhesion is drafted by the party with greater bargaining power and effectively gives the weaker party no choice but to adhere to the contract or reject it entirely. (Ibid.) If the contract is adhesive, the court can invalidate it if it contains terms outside of the weaker partys reasonable expectations or if it is unconscionable. (Ibid.) There are two types of unconscionability, procedural and substantive. (Id., at p. 114.) While both types of unconscionability must be present for a court to decline to enforce an arbitration provision, they do not need to 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.)

a. Procedural Unconscionability

Procedural unconscionability occurs when the stronger party drafts the contract and presents it to the weaker party on a take it or leave it basis. In other words, procedural unconscionability focuses on the oppressiveness of the stronger partys conduct. (Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at pp. 113-114.) Although Diazs inability to speak English alone did not constitute procedural unconscionability, substantial evidence supports a finding that Shad repeatedly pressured Diaz into signing the contract, supporting a finding of procedural unconscionability.

The trial court found the contract procedurally unconscionable partially because Diaz cannot speak English. Although Maria Diazs declaration provides sufficient evidence for the trial court to find that she did not speak or read English sufficiently to comprehend the arbitration clause, her inability to speak English is not sufficient by itself to establish procedural unconscionability. Ordinarily, one who accepts or signs an instrument, which on its face is a contract, is deemed to consent to all its terms, and cannot escape liability on the ground that he or she has not read it. If the person cannot read, he or she should have it read or explained. (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, 118, p. 157; see also Bolanos v. Khalatian (1991) 231 Cal.App.3d 1586, 1590 [patients limited facility to read Spanish, the language of the contract, alone was not enough to invalidate the agreement]; Randas v. YMCA of Metroplitan Los Angeles (1993) 17 Cal.App.4th 158, 160, 163 [finding a release written in English valid even though plaintiff who signed contract was only literate in Greek].)[1]

However, there is substantial evidence in the record to support the finding by the trial court that Diaz had no choice but submit to the arbitration clause or find another job, which suffices to show procedural unconscionability. (See Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 174-175 [finding procedural unconscionability where employer told plaintiff he did not have the option of not signing the agreement if he wanted to make a living at the defendant company].) In her declaration, Diaz states that I was informed that I had to sign the Receipt and Acknowledgement as a condition of my continued employment and Charles Shad repeatedly pressured me to sign it.

WCL argues that the contract is not procedurally unconscionable because Diaz had time between the January 11 meeting where she received the new employee handbook and the date that she returned a signed copy of the Receipt and Acknowledgment form on January 26 to review the terms. However, time to consider such a contract does not save it from procedural unconscionability under California law according to the Ninth Circuit in Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F.3d 1165, 1172. Because there is substantial evidence in Diazs declaration to support a finding that she had to sign the contract as a condition of her continued employment and Shad pressured her to sign it, the fact that Diaz had time to consider the contract does not save the contract from procedural unconscionability.

b. Substantive Unconscionability

Substantive unconscionability focuses on contractual terms that produce unfair or one-sided results. (See Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at p. 114.) A lack of mutuality can render an arbitration agreement unenforceable. (Mercuro v. Superior Court, supra, 96 Cal.App.4th at p. 176.) An adhesive arbitration provision lacks mutuality if it requires one party but not the other to arbitrate all claims arising out of the same transaction or occurrence. (Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at p. 120.)

Diaz argues that the ability of WCL to obtain provisional relief creates a lack of mutuality because employers are more likely than employees to make claims that would require provisional relief such as an injunction. However, the principal cases cited by Diaz to support this argument are distinguishable, requiring a more explicit reservation of specific claims from arbitration than is present in this case. Mercuro is not directly on point because it involved the specific exclusion of injunctive relief. The agreement there covered some employment-related claims including employment discrimination but excluded others such as injunctive or other equitable relief for unfair competition, unauthorized disclosure of trade secrets or violation of intellectual property rights. (Mercuro v. Superior Court, supra, 96 Cal.App.4th at p. 172.)

The contract at issue in OHare v. Municipal Resource Consultants (2003) 107 Cal.App.4th 267, 271 is also not on point because it specifically reserved the right of the employer to file an injunction against the employee while requiring the employee to submit to arbitration for [a]ny claim . . . arising out of or relating to this Agreement, or the breach thereof, or your employment by MRC, or the termination of your employment by MRC. (Italics deleted.)

In contrast to Mercuro and OHare, the arbitration provision at issue in this case is not substantively unconscionable because it generally allows provisional relief as provided for in the Code of Civil Procedure without explicitly reserving certain employer-favored claims from arbitration. The arbitration provision in the Employee Handbook states in relevant part: Arbitration shall be the exclusive method for resolving any dispute; provided, however, that either party may request provisional relief from a court of competent jurisdiction, as provided in California Code of Civil Procedure Section 1281.8. This clause is not substantively unconscionable because it requires both parties to submit to arbitration except that they can apply for provisional relief in court only upon the ground that the award to which the applicant may be entitled may be rendered ineffectual without provisional relief. (Code Civ. Proc., 1281.8, subd. (a)(4)(b).)

WCL argues that this court should follow 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1214 and read a duty to act fairly and in good faith into the clause allowing WCL to modify the contract at any time thereby saving the contract from substantive unconscionability.[2] However, much persuasive authority says that a clause in an adhesive contract giving one party the unilateral ability to modify the contract is sufficient to establish substantive unconscionability. (Ingle v. Circuit City Stores, Inc.,supra, 328 F.3d at p. 1179.) Furthermore, because there is a showing of procedural unconscionability in this case, only a small showing of substantive unconscionability is necessary to invalidate the contract. Therefore, the ability of WCL to unilaterally modify the contract, even if read with an implied duty to act in good faith, shows sufficient substantive unconscionability to render the contract unenforceable.

Because the contract at issue has both procedurally and substantively unconscionable elements, the trial court did not err in denying the motion to compel arbitration.

DISPOSITION

The judgment is affirmed. Respondent to recover costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

WOODS, J.

We concur:

PERLUSS, P.J.

ZELON, J.

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[1] Appellant cites several unpublished cases with similar holdings. Although appellant acknowledges that unpublished appellate decisions are not binding on this court, such opinions may not be cited. (Cal. Rules of Court, rule 8.1115.)

[2] The Receipt and Acknowledgment form reads in relevant part: I understand the Company has the right to amend, modify, rescind, delete, supplement or add to the provisions of this Handbook, as it deems appropriate from time to time in its sole and absolute discretion.