Goss v. Ross Stores

 

 

 

 

 

 

 

 

Filed 10/31/13  Goss v. Ross Stores CA1/1

 

 

 

 

 

 

NOT TO BE PUBLISHED IN OFFICIAL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opinion has not been certified for publication or ordered published for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

 

FIRST APPELLATE DISTRICT

 

DIVISION ONE

 

 
>

RACHEL GOSS,             Plaintiff and Respondent, v. ROSS STORES, INC.,             Defendant and Appellant.

A133895         (Alameda County       Super. Ct. No. RG11577328)

 

>Introduction

            Plaintiff
and respondent Rachel Goss has sued her employer, defendant and appellant Ross
Stores, Inc. (Ross), for alleged Labor Code and wage order violations for
failing to provide “suitable seats” for cashiers.  Goss asserts claims on her own behalf,
including for injunctive relief under the Unfair
Competition Law (Bus. & Prof. Code, § 17200 et seq>.) (UCL), and class claims a
“representational” claim under the Private Attorneys General Act of 2004 (Lab.
Code, § 2698 et seq.) (PAGA).  Ross moved
to compel arbitration of Goss’s individual claims, claiming she waived any
right to pursue class and in a representational claims.  While the trial court concluded Goss entered
into a binding arbitration agreement, it also concluded her waiver of
representational claims was unenforceable and she could not be compelled to
arbitrate her claim for injunctive
relief.  The court therefore denied
Ross’ motion.  We conclude AT&T
Mobility LLC v. Concepcion (2011) 563 U.S. ___ [131 S.Ct. 1740, 179 L.Ed.2d
742] (Concepcion ) is controlling and requires reversal.href="#_ftn1" name="_ftnref1" title="">[1]>

>Factual
and Procedural Background

            Ross
operates Ross Dress for Less stores
nationwide and hired Goss as a cashier in 2010. 
Upon hiring, Ross provided Goss, as it does all new employees, a lengthy
handbook entitled “Store Associate Handbook.” 
The handbook sets forth, in detail, company policies and procedures
concerning matters such as attendance, work scheduling, and employee
conduct.  Page 47 of the handbook is
entitled “Arbitration Policy” and provides in pertinent part:

            “This Arbitration
Policy (‘Policy’) applies to any disputes, arising out of or relating to the
employment relationship, between an associate and Ross. This Policy requires all such disputes to be resolved only by an
Arbitrator through final and binding arbitration. Such disputes include
without limitation disputes about unfair competition, use of trade secrets,
compensation, termination, or harassment and claims arising under the Civil
Rights Act of 1964, Americans With Disabilities Act, Age Discrimination in
Employment Act, Family Medical Leave Act, Fair Labor Standards Act, Employee
Retirement Income Security Act, and state statutes, if any, addressing the same
subject matters, and all other state statutory and common law (excluding workers’
compensation claims). . . .

 

            “This Policy is
governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. Notwithstanding
any other provision of the Policy, an associate retains the right under the
National Labor Relations Act to file charges with the National Labor Relations
Board . . . .

 

            “The parties will have
the right to conduct civil discovery and bring motions, as provided by the
Federal Rules of Civil Procedure and enforced by the Arbitrator. However, there
will be no right or authority for any dispute to be brought, heard or
arbitrated as a class action, private attorney general or in a representative
capacity on behalf of any person.”

 

            A
subsequent page of the handbook is entitled “Store Associates Handbook
Acknowledgement And Agreement.”  This
page is an unnumbered, tear-off appendix, which, on execution by the employee,
is removed from the handbook and filed in the employee’s personnel file.

            The
Acknowledgement and Agreement has several parts.  The first part (which takes up the top half
of the page) begins with the line:  “I
acknowledge that I have received the following policies. I have read,
understand and agree to comply with the following policies . . . .”  It then lists, as separate line items, seven
of the policies explained in detail in the handbook, such as the “Ross
Non-Harassment Policy” and “Ross Workplace Anti-Violence Policy.”  Each listed policy is immediately followed by
a parenthetical, the language of which varies. 
The parenthetical for three of the policies states:  “(I have read and agree to comply with this
policy).”  The parenthetical following
two other policies (“Customer Service” and “Protection Ross’ Assets—Loss
Prevention”) states:  “(I have read and
understand this portion of the handbook).” 
The parenthetical following the policy identified as the “Ross Associate
Problem Resolution Program” states:  “(I
have read and agree to utilize and comply with, and be bound to, this
program).”  The parenthetical following
the policy identified in bold as the “ROSS
ARBITRATION POLICY” states in bold: 
“(I have read and agree to
utilize, comply with and be bound to, this policy).”  To the right of each of these seven listed
policies and parentheticals is a box, with instructions to “[i]nitial
here.”  Goss initialed all seven boxes,
including the box to the right of the referenced arbitration policy. 

            The
second part of the Acknowledgement and Agreement (which takes up the lower half
of the page) contains a signature blocks prefaced by two separate
paragraphs.  The first paragraph
states:  “This is to acknowledge that I
have received a copy of the Ross Store Associate Handbook.  I understand and agree that it is my
responsibility to read the Store Associate Handbook and abide by the rules,
policies and standards as they pertain to my employment.” 

            The
second paragraph states:  “I also
acknowledge and agree that my employment with Ross is not for a specific period
of time and can be terminated at any time for any reason, with or without cause
or with or without notice, by Ross or myself. 
I understand and agree that nothing in the Store Associate Handbook or
Ross’s discretionary use of corrective or progressive discipline creates any
express or implied contract, including any contract contrary to at-will
employment.  I understand that any rules,
policies, or benefits described in the Store Associate Handbook may be changed,
modified, or varied from by Ross at any time, except for the right of the
parties to terminate employment at-will, which may only be modified by an express
written agreement signed by the CEO of the Company and approved by the Board of
Directors.  Accordingly, I understand and
acknowledge that no manager, supervisor, or other associate has any authority
to make any verbal or written statements, representations or agreements,
expressed or implied, contrary to at-will employment and I agree not to rely
upon any verbal or written statements, representations or agreements, expressed
or implied, contrary to at-will employment.” 


            About
a year after she was hired, in May 2011, Goss filed suit against Ross for
allegedly failing to provide suitable seats for her and other similarly
situated employees in violation of Industrial Welfare Commission Wage Order
7-2001, section 14, and Labor Code section 1198.  She asserts claims on her
own behalf, class claims under Code of Civil Procedure section 382, and a
representational claim under the PAGA. 
She also sought, inter alia, penalties under the PAGA and injunctive
relief under the UCL.

            Ross
filed a motion to compel arbitration, seeking to arbitrate Goss’s individual
claims.  Goss maintained there was no
valid contract to arbitrate, and even if there was, she could not be compelled
to arbitrate only her individual claims because the class action and
representational waiver in the arbitration agreement was unenforceable under >Brown v. Ralphs Grocery Co. (2011) 197
Cal.App.4th 489 (Brown). 

            The
trial court rejected Goss’s claim there was no valid contract to
arbitrate.  However, as to the PAGA
claim, the court held the class action and representational waiver was invalid
under the “ â€˜state enforcement’ rationale” of Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277 (>Franco) and Brown, supra, 197 Cal.App.4th 489.  As to the UCL claim for
injunctive relief (which Goss had not separately addressed), the court
concluded “[c]laims for injunctive relief under the UCL are not arbitrable if
they are ‘designed to prevent further harm to the public rather than to redress
or prevent injury to a plaintiff,’ â€ citing Cruz v. PacificCare Health Systems, Inc. (2003) 30 Cal.4th 303 (>Cruz).

>Discussion

>A.        >Agreement to Arbitrate

            “[T]he
first task of a court asked to compel arbitration of a dispute is to determine
whether the parties agreed to arbitrate that dispute.”  (Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth (1985) 473 U.S. 614,
626.)  Thus, while we ordinarily would
not begin our discussion by addressing an argument raised by the respondent as
an alternative basis on which to affirm, we do so here, because Goss contends
there is no contract to arbitrate.  As
mentioned above, she made this assertion, unsuccessfully, in the trial
court.  On this issue, we agree with the
trial court.

            Goss
first asserts the Acknowledgement and Agreement form was too vague to
constitute an agreement to arbitrate. 
She points to phrases in the form like the following: “I acknowledge
that I have received the following policies” and “[t]his is to acknowledge that
I have received a copy of the Ross Store Associate Handbook.”  She maintains merely acknowledging receipt of
an employment policy does not create a binding contract, citing Sparks v. Vista Del Mar Child and Family
Services (2012) 207 Cal.App.4th 1511 (Sparks).  In Sparks, the Court of Appeal concluded an
employee-signed “Acknowledgement” form did not create an agreement to arbitrate
because “the acknowledgment form did not reference the arbitration
clause, much less advise plaintiff that he would be bound by it.”  (Id.
at p. 1522.) 

            Here,
in contrast, the Acknowledgement and Agreement form explicitly references the
arbitration policy in bold, capitalized lettering and unequivocally states the
employee agrees to “be bound” by it:  “>ROSS ARBITRATION POLICY (I have read and
agree to utilize, comply and be bound to, this policy).”  This is the only referenced policy that is
set forth in bold, capitalized lettering, and it is followed by a parenthetical
expressly stating the employee agrees to “be bound” by its terms.  In addition, Goss initialed the box next to
this statement, indicating she understood and agreed to its language. 

             Goss also points to the language in the
Acknowledgment and Agreement form stating, “nothing in the Store Associate Handbook . . .
creates any express or implied contract.” 
Read in context, however, it is clear this phrase, taken from the
paragraph preceding the second signature block, pertains to the issue of
“at-will” employment, and is an affirmation that nothing in the handbook or
policies set forth therein gives rise to an employment relationship requiring cause
for termination.  The provisions
confirming “at-will” employment status do not detract from, or render
ambiguous, the explicit language pertaining to the arbitration provision.  Indeed, as the trial court noted, Goss “failed
to provide a declaration or other evidence to show that she reasonably did not
understand that she was agreeing to arbitrate all employment claims against
defendant.”

            Goss
next contends any agreement to arbitrate is illusory and unenforceable because
the Acknowledgement and Agreement form provides, “any rules, policies, or benefits described in the Store Associate
Handbook may be changed, modified, or varied from by Ross at any time.”  It is well established, however, that “where
the contract specifies performance the fact that one party reserves the power
to vary it is not fatal if the exercise of the power is subject to prescribed
or implied limitations such as the duty to exercise it in good faith and in
accordance with fair dealings.”  (James G. Freeman & Associates, Inc.
v. Tanner (1976) 56
Cal.App.3d 1, 10; accord, 24 Hour
Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1214 (>24 Hour Fitness); Powell v. Central Cal. Fed. Sav. &
Loan Assn. (1976) 59 Cal.App.3d 540, 549; Automatic Vending Co. v. Wisdom (1960) 182 Cal.App.2d
354, 357–358 (Automatic Vending).  In California, “ ‘[where] a contract confers
on one party a discretionary power affecting the rights of the other, a duty is
imposed to exercise that discretion in good faith and in accordance with fair
dealing.  [Citations.]”  (Automatic
Vending, supra,> 182 Cal.App.2d, at p. 358.)  Accordingly, in 24 Hour Fitness, Division Three of this court rejected the same
argument Goss makes here and held the fact the employer reserved the right to
modify the employee handbook did not render the href="http://www.fearnotlaw.com/">arbitration provision therein illusory
and unenforceable.  (24 Hour Fitness, at pp.
1213–1214.)

            In
sum, as did the trial court, we conclude that pursuant to the “Arbitration
Policy” set forth in the handbook and “Acknowledgement and Agreement” form
expressly referencing that policy, the parties entered into a valid arbitration
agreement.

>B.        >Enforceability of Agreement to Arbitrate

>            1. Representational Claim Under the
PAGA

            The
arbitration policy provides:  “[T]here
will be no right or authority for any dispute to be brought, heard, or
arbitrated as a class action, private attorney general, or in a representative
capacity on behalf of any person.” 
Relying on Franco, supra,
171 Cal.App.4th 1277, and Brown, supra, 197
Cal.App.4th 489, the trial court concluded Concepcion
is not controlling and the preclusion of representational claims under the PAGA
is unenforceable.

            In
Franco, the Court of Appeal addressed
two issues, whether a class action waiver was unconscionable and unenforceable
under our Supreme Court’s decision in Gentry,
supra, 42 Cal.4th 443, and whether a bar to proceeding with a
representational claim under the PAGA was also unenforceable under the
reasoning of Gentry.  In Gentry,
the Supreme Court set forth a multi-part standard by which to determine whether
a class action waiver is unconscionable and, thus, unenforceable.  (Gentry,
at pp. 457–464)  If found to be
unconscionable, Gentry further held
the trial court could require class arbitration.  (Id.
at p. 466.)  In Franco, the Court of Appeal first concluded Gentry, which had involved overtime claims, applied equally to meal
and rest period claims.  It next
concluded the plaintiff had made an adequate showing as to the >Gentry factors and therefore the class
action waiver was unconscionable and unenforceable.  (Franco,
supra, 171 Cal.App.4th at pp.
1295–1299.)  It then concluded >Gentry’s rationale—that a class action
waiver that impedes comprehensive enforcement of “nonwaivable” statutory rights
is unconscionable—also applies to a prohibition against pursuing
representational claims under the PAGA. 
(Franco, at pp.
1299–1303.)  Finding both the class
action waiver and preclusion of representational claims unenforceable, the
court concluded the arbitration agreement “as a whole” was “tainted with
illegality” and therefore enforceable.  (>Id. at p. 1303.)>  >Franco was decided before >Concepcion, and thus did not discuss
preemption under the Federal Arbitration Act. 


            In
Brown, the Court of Appeal once again considered the enforceability of a
class action waiver and preclusion of representational claims under the PAGA,
this time post- Concepcion.  (Brown,
supra, 197 Cal.App.4th at p. 494.) 
The panel majority first concluded it did not need to reach the question
of Concepcion’s impact on >Gentry’s unconscionability analysis
since the plaintiff had not carried her burden under Gentry, in any event, to establish unconscionability.  (Brown,
at pp. 496–498.)  It next concluded >Concepcion, which involved a consumer
contract, did not apply to a claim under the PAGA to enforce labor laws.  (Brown,
at pp. 498–503.)  “The United States
Supreme Court . . . did not specifically address whether California state law
applicable to waiver of statutory representative actions—which actions are a
means to enforce state labor laws for the benefit of the public—was preempted
by the FAA.”  (Id. at p. 502.)  “Supreme
Court authority does not address a statute such as the PAGA, which is a
mechanism by which the state itself can enforce state labor laws,” and until it
does so, the court concluded the public enforcement attribute of the PAGA
precluded waiver of the right to proceed with representational claims there
under.  (Id. at pp. 500–503.)  “In
short, representative actions under the PAGA do not conflict with the purposes
of the FAA.  If the FAA preempted state
law as to the unenforceability of the PAGA representative action waivers, the
benefits of private attorneys general actions to enforce state labor laws would,
in large part, be nullified.”  (>Id. at p. 502.) 

            In
short, the Brown majority> concluded Concepcion was distinguishable because it involved a consumer
contract, and the important public policies vindicated by the PAGA precluded
the waiver of representational claims. 

            The
Brown dissent concluded
otherwise:  “The preemptive effect of the
Federal Arbitration Act (FAA) requires enforcement of the PAGA waiver in the
employment arbitration agreement in this case under the holding of” >Concepcion.  (Brown,
supra, 197 Cal.App.4th at p.
505 (con. & dis. opn. of Kriegler, J.).) 
The dissent considered the rationale of Concepcion controlling and concluded it undercut >Gentry and made clear the FAA >preempts any state law that purports to
preclude arbitration, regardless of the state public policy reasons
undergirding that law.  (>Id. at pp. 505–509.)  “Application of Franco in this case means the agreement to arbitrate will not be
enforced due to state law, which is inconsistent with . . . Supreme Court
authority.”  (Id. at p. 508.)  The dissent observed the federal district
court in Quevedo v. Macy’s, Inc. (C.D.Ca.
June 16, 2011) No. CV 09-1522 GAF (MANx) Civ. Minutes at p. 20, had come to the
same conclusion.  (Brown, at p. 508.) 

            We
agree with the dissent in Brown that
the United States Supreme Court has spoken on the issue of state law
implementing state public policy taking precedence over the FAA, that the high
Court has rejected that result, and that we are required to follow its binding
authority.  Under the rationale of >Concepcion, the public policy reasons
underpinning the PAGA do not allow a court to disregard a binding arbitration
agreement.  The FAA preempts any attempt
by a court or state legislature to insulate a particular type of claim from
arbitration.  (See also >Marmet Health Care Center, Inc. >v. Brown (2012) ___ U.S. ___, 132 S.Ct.
1201 [holding state law prohibiting arbitration of any personal injury or
wrongful death claim against nursing homes on “public policy” grounds preempted
by FAA]; cf. American Express co. v.
Italian Colors Restaurant (2013) ___ U.S. ___ [133 S.Ct. 2304, 2309–2311]
[reiterating courts must “rigorously enforce” arbitration agreements according
to their terms, even for claims alleging violation of a federal statutory right
and rejecting “effective vindication” as theory to invalidate the arbitration
agreement].)

            Goss
contends the National Labor Relations Board’s holding in D.R. Horton (Jan. 3, 2012) 357 NLRB No. 184 (>Horton ) supports the proposition that
“unwaiveable” statutory rights can be
immunized from arbitration.  We explored
the effect of Horton on FAA
preemption in Nelsen v. Legacy Partners Residential, Inc. (2012)
207 Cal.App.4th 1115 (Nelson),
and there declined to follow the case.  (>Id. at p. 1132–1133.)  We similarly decline to follow the NLRB’s
decision here. 

            Goss
also cites EEOC v. Waffle House, Inc. (2002)
534 U.S. 279 (Waffle House) as
support for the proposition the representational waiver is unenforceable
because it purportedly binds the State of California.  In Waffle
House, the United States Supreme Court held “the proarbitration policy
goals of the FAA do not require the agency to relinquish its statutory
authority if it has not agreed to do so.” 
(Id. at pp. 293–294.)  Goss asserts that because her PAGA claim >substitutes for action brought by
California labor enforcement agencies, she cannot be compelled to arbitrate,
since California is a nonparty to the Arbitration Agreement and thus cannot be
bound by its terms under the FAA.  In >Waffle House, the Equal Employment
Opportunity Commission (EEOC) brought a claim on behalf of an employee who had signed an arbitration agreement,
and the court held the EEOC was not bound by the employee’s agreement.  (Id. at
pp. 282–283, 295–296.)  In the
instant case, the situation of the parties is the opposite.  Here, the litigating party, herself, signed
the arbitration agreement and brings the claim.

            In
sum, we agree with the view that Concepcion’s> rationale applies to waivers of
representation claims under the PAGA, and that under Concepcion such waivers cannot be ruled unenforceable on the ground
the PAGA vindicates state law public policies.href="#_ftn2" name="_ftnref2" title="">>[2] 

>            2. Injunctive Relief Under the UCL

            Goss
makes no attempt on appeal to defend the trial court’s determination that her
UCL claim for injunctive relief is not subject to arbitration.  The trial court relied on >Cruz, supra, 30 Cal.4th 303, to
conclude her UCL claim was not arbitrable because such claims are “designed to
prevent further harm to the public at large rather than to redress or prevent
injury to a plaintiff.”  (>Cruz, at pp. 315–316.) (AA 278.) We
discussed Cruz in >Nelson, supra, 207 Cal.App.4th 1115, and concluded the case had been
“abrogated in the wake of Concepcion.”href="#_ftn3" name="_ftnref3" title="">[3]  (Nelson,
at p. 1135.)  Specifically, in >Nelson, this court agreed with the Ninth
Circuit’s decision in Kilgore v. KeyBank,
N.A. (9th Cir. 2012) 673 F.3d 947 (Kilgore),href="#_ftn4" name="_ftnref4" title="">[4]
that “Concepcion adopts a sweeping
rule of FAA preemption.  Under >Concepcion, the FAA preempts any rule or
policy rooted in state law that subjects agreements to arbitrate particular
kinds of claims to more stringent standards of enforceability than contracts
generally. . . .  ‘[W]e hold that “the
analysis is simple:  The conflicting [>Broughton-Cruz] rule is displaced by the
FAA.”  [Citation.]  Conception
allows for no other conclusion’ 
[Citation.]  Since >Broughton-Cruz prohibits outright the
arbitration of claims for public injunctive relief, it is in conflict with the
FAA.”  (Nelson, at p. 1136, citing Kilgore,
at p. 963.) 

>Disposition

            The
order denying Ross’s motion to compel individual arbitration is reversed.  Respondent to recover costs on appeal.

 

 

                                                                                    _________________________

                                                                                    Banke,
J.

 

 

We concur:

 

 

_________________________

Margulies, Acting P. J.

 

 

_________________________

Dondero, J.