Stazzoni v. American Employers Group

Filed 3/15/06 Stazzoni v. American Employers Group CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

American Employers Group, Inc. (AEG) appeals from the trial court's order denying its petition to compel arbitration of the lawsuit filed against it by Ray Stazzoni. The trial court denied the petition, finding the parties' arbitration agreement unenforceable for two reasons. First, the parties' contract obligates them to arbitrate only if a forum selection clause contained in the same contract is held to be unenforceable. The condition precedent never occurred, so the obligation to arbitrate had not arisen. Second, both the forum selection clause and the arbitration agreement are contained in a separate document from the one that Stazzoni signed. The trial court concluded that the separate document could not be incorporated by reference into the contract Stazzoni signed because it was not readily available to him. AEG concedes the first point. It urges us to reverse because the trial court's second finding is in error. Reversal would, AEG contends, allow it to litigate the enforceability of the forum selection clause and then to compel arbitration. We affirm.

Facts

Stazzoni completed a "SolutionOne Application and Agreement for Service" through which he contracted with AEG for payroll and other employee services. This document states that Stazzoni "accept[s] AEG's standard Services Agreement Terms and Conditions." The Services Agreement Terms and Conditions is a separate document from the Application and Agreement that Stazzoni signed. It includes paragraphs on forum selection and arbitration which provide: "11.0 This Agreement and any disagreement or claim arising between the parties is governed by the internal law of the State of Nebraska, without reference to conflicts of law. By submitting payroll to Us, You expressly submit to the venue and jurisdiction of all courts located in Omaha, Douglas County, Nebraska, and you agree that the exclusive forum for any lawsuit You may bring against Us must be filed in the District Court of Douglas County, Nebraska or in the United States District Court for Nebraska sitting in Omaha and You will not file any lawsuit in any other Court. [¶] 11.1 In the event, the forum selection clause in Paragraph 11.0 is held to be unenforceable, any dispute between the parties shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association (AAA) before one arbitrator in Omaha, Nebraska."

Stazzoni named AEG as a Doe defendant in a lawsuit he initially filed against two other named defendants. AEG petitioned to compel arbitration under the Services Agreement Terms and Conditions. Stazzoni opposed the petition, contending there was no agreement to arbitrate because the Services Agreement Terms and Conditions was not readily available to him when he signed the contract and therefore could not be incorporated by reference into the contract. Stazzoni testified that, when he signed the application and agreement, he asked the AEG representative "if there were additional pages or documents to the Application and Agreement. I was informed that all documents applicable to the contract would be forwarded to my attention. [¶] 3. Despite my request, I did not receive a copy of the 'SolutionOne Services Agreement' containing the arbitration clause until such time AEG filed the pending petition to compel arbitration."

AEG's underwriting operations manager, Michael Carrington, testified that it would have been AEG's standard practice to mail the Services Agreement Terms and Conditions to Stazzoni when it received his Application and Agreement and began working with him. The Services Agreement Terms and Conditions contains the instructions and describes the procedures an employer must follow to have its payroll processed by AEG. Carrington testified that Stazzoni must have received the Services Agreement Terms and Conditions because AEG processed his payroll for several months before the dispute arose. "It would have been difficult if not impossible for plaintiff to perform his obligations correctly without the instructions contained in the Services Agreement [Terms and Conditions]."

The trial court determined that the forum selection clause operated as a condition precedent to the parties' duty to arbitrate. Because the forum selection clause had never been "held to be unenforceable," the parties had no present duty to arbitrate. The trial court further held, "even if an enforceable agreement to arbitrate existed under the facts of this case, the court cannot find that it was 'readily available' to plaintiff, such that the incorporation by reference was effective . . . . AEG as a matter of course, does not disclose to its customers that they have agreed to litigate any disputes in Nebraska, or if that forum selection clause is declared invalid, to arbitrate any disputes in Nebraska, until after they have signed the application, which upon AEG's acceptance becomes the agreement. Under such circumstances, the agreement is not 'readily available,' and will not support the validity of the incorporation by reference of the services agreement containing the arbitration clause."

On appeal, AEG concedes that the trial court's first basis for denying the petition to compel arbitration is correct: the contract does not impose a duty to arbitrate until the forum selection clause has been declared unenforceable, and AEG did not obtain such a ruling before it demanded arbitration. It urges us to reverse the trial court's order because the second basis for the ruling was incorrect. AEG contends the trial court erred when it found that Stazzoni was not bound by the Services Agreement Terms and Conditions because that document was not "readily available" to Stazzoni when he signed the Application and Agreement and therefore its terms could not be incorporated by reference into the Application and Agreement.

Stazzoni contends we should affirm the order based on the first ground cited by the trial court, without reaching the alternate basis for its decision. He further contends that AEG's failure to request enforcement of the forum selection clause invited any error and waived both enforcement of that clause and any right to arbitration. Finally, Stazzoni contends the trial court correctly found that the Services Agreement Terms and Conditions was not readily available to him and therefore was not incorporated by reference into his contract with AEG.

Standard of Review

"Private arbitration is a matter of agreement between the parties and is governed by contract law." (Platt Pacific Inc. v. Andelson (1993) 6 Cal.4th 307, 313.) We determine whether a contract imposes a duty to arbitrate by applying standard rules of contract interpretation. (CPI Builders Inc. v. Impco Technologies, Inc. (2001) 94 Cal.App.4th 1167, 1171.)

Contract interpretation poses a question of law, unless conflicts in extrinsic evidence must be resolved. In the absence of a trial court ruling resolving such conflicts, we exercise de novo review. (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1670.) "Where the trial court's decision on arbitrability is based upon resolution of disputed facts, we review the decision for substantial evidence. (Engineers & Architects Assn. v. Community Development Dept. of the City of Los Angeles (1994) 30 Cal.App.4th 644, 653 [35 Cal.Rptr.2d 800].) In such a case, we must ' "accept the trial court's resolution of disputed facts when supported by substantial evidence; we must presume the court found every fact and drew every permissible inference necessary to support its judgment, and defer to its determination of the credibility of witnesses and the weight of the evidence." ' (Ibid.)" (NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 71.)

Further, in this case as in any other, we apply the established rules of appellate review. Among these are the rules that we review the result, not the reasoning of the trial court and that we will affirm that judgment if it is correct on any theory of law applicable to the case. (Tippett v. Terich (1995) 37 Cal.App.4th 1517, 1539; Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 769.) We also apply the related rule that, "when an appellate court concludes that affirmance of the judgment is proper on certain grounds it will rest its decision on those grounds and not consider alternative grounds which may be available. [Cittions.]" (Fagerquist v. Western Sun Aviation Inc. (1987) 191 Cal.App.3d 709, 715; see also Petersen v. Hartel (1985) 40 Cal.3d 102, 106, fn. 1.)

Discussion

The trial court here offered two reasons for denying the petition to compel arbitration. First, if the parties have an enforceable agreement to arbitrate, it is subject to a condition precedent that has not been satisfied so there is no present duty to arbitrate. Second, the document containing the agreement to arbitrate is not part of the parties' contract. We conclude that the first basis for the trial court's ruling is correct. It is unnecessary for us to reach the question of whether the second basis was also correct. (Fagerquis v. Western Sun Aviation Inc., supra, 191 Cal.App.3d at p. 715.)

Assuming that AEG's Services Agreement Terms and Conditions

is a part of the contract between AEG and Stazzoni, the plain language of that agreement requires arbitration only, "In the event, the forum selection clause . . . is held to be unenforceable . . . . ." As AEG concedes, this provision is a condition precedent. Because AEG did not obtain a ruling that the forum selection clause is unenforceable, Stazzoni has no duty to arbitrate.

Moreover, AEG's premature demand waives enforcement of the duty to arbitrate. (Platt Pacfiic Inc. v. Andelson, supra, 6 Cal.4th 307, 321.) As our Supreme Court reasoned in Platt Pacific Inc., a contract may impose a condition precedent to the duty to arbitrate, the failure of which waives enforcement of the duty to arbitrate. (Id. at pp. 313-314.) In Platt Pacifi Inc., the condition precedent was filing a demand for arbitration before a certain date. (Id. at p. 311.) The appellant's unexcused failure to file a timely demand waived enforcement of the right to arbitrate, even though it had not intended that result. (Id. at p. 321.) "The nonoccurrence of a condition precedent may be excused for a number of legally recognized reasons. But when a party has failed to fulfill a condition that was within its power to perform, it is not an excuse that the party did not thereby intend to surrender any rights under the agreement." (Id. at p. 314.)

The same reasoning applies here. AEG drafted the contract imposing a condition precedent to the right to arbitrate. The contract requires litigation in the Nebraska courts and imposes a duty to arbitrate (also in Nebraska) only if that provision is held unenforceable. AEG could have obtained a ruling on the question whether it had a contractual right to litigate in Nebraska, but it did not. Instead, it demanded arbitration without reference to the forum selection clause. This failure to fulfill the condition precedent imposed by the contract waives the right to arbitrate.

The order denying AEG's petition to compel arbitration is affirmed. Costs to respondent.

NOT TO BE PUBLISHED.

YEGAN, Acting P.J.

We concur:

COFFEE, J.

PERREN, J.

Thomas P. Anderle, Judge

Superior Court County of Santa Barbara

______________________________

Michael K. Perkins, David J. Reese; Fine, Boggs, Cope & Perkins, for Appellant.

Law Office of Ball & Yorke; Allen R. Ball and Esther R. Sorkin, for Respondents.

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