Raymond v. Flynt

Filed 10/23/08 Raymond v. Flynt CA2/1

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

APPEAL from an order and a judgment of the Superior Court of Los Angeles County, Kenneth R. Freeman, Judge. Reversed and remanded with directions.

Horvitz & Levy, Barry R. Levy, Jeremy B. Rosen, Alicia A. Pell; Lipsitz Green Scime Cambria, Paul J. Cambria, Jonathan W. Brown; Labowe, Labowe & Hoffman and Mark S. Hoffman for Defendants and Appellants.

Mancini & Associates, Marcus A. Mancini, Christopher Barnes; Benedon & Serlin, Douglas G. Benedon and Gerald M. Serlin for Plaintiff and Respondent.

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Larry Flynt and L.F.P, Inc. (LFP) (collectively, Flynt defendants) appeal from the trial courts judgment confirming an arbitrators award in favor of Elizabeth Rene Raymond in her sexual harassment suit. The Flynt defendants challenge the trial courts denial of their motion to vacate the arbitrators award, based on the courts conclusion that the provision for judicial review in the arbitration agreement was unenforceable. We reverse and remand to the trial court.

FACTS

Raymond began a job as an executive assistant for two LFP executives in March 2000. On March 14, 2000, she signed the August 1999 Employee Handbook, in effect at the time, agreeing to the terms of her employment as outlined in the handbook. The handbook contained a mandatory arbitration provision in which Raymond agreed that any dispute, including one for sexual . . . discrimination or harassment, would not be the subject of a lawsuit but instead shall be submitted to arbitration before the American Arbitration Association (AAA) or any other individual or organization on which the parties agree or which a court may appoint.

The arbitration agreement also contained the following judicial review clause: Any party may apply to a court of competent jurisdiction for entry of judgment on the arbitration award. The court shall review the arbitration award, including the ruling and findings of fact, and shall determine whether they are supported by competent evidence and by a proper application of law to the facts. If the court finds that the award is properly supported by the facts and law, then it shall enter judgment on the award; if the court finds that the award is not supported by the facts or the law, then the court may enter a different judgment (if such is compelled by the uncontradicted evidence) or may direct the parties to return to arbitration for further proceedings consistent with the order of the court.

LFP fired Raymond on August 5, 2002 for breaching confidentiality requirements. After exhausting her administrative remedies, Raymond filed a lawsuit in superior court against the Flynt defendants on August 5, 2003, alleging sexual harassment in violation of the Fair Employment and Housing Act (FEHA) (Gov. Code, 12900 et seq.). The court granted the Flynt defendants motion to compel arbitration pursuant to the terms contained in the employee handbook.

After a three-day arbitration hearing, the arbitrator found the Flynt defendants liable under FEHA for creating and maintaining a hostile work environment, concluded that the Flynt defendants acted with malice and oppression, and awarded Raymond $175,000 in compensatory damages on November 8, 2006. After a further hearing on May 30, 2006, the arbitrator awarded Raymond punitive damages of $500,000 against Flynt and $250,000 against LFP.

The Flynt defendants then moved to vacate the arbitration award, arguing that the trial court could vacate the award if it were not supported by competent evidence or a correct application of law to facts (as provided in the arbitration agreement). At the hearing on October 2, 2006, the trial court refused to enforce the judicial review provision and denied the motion to vacate, finding it had no power to review the award for errors of fact or law. The court confirmed the arbitration award. The Flynt defendants appeal.

DISCUSSION

The trial court based its conclusion that it could not review the arbitration award for factual or legal error on Crowell v. Downey Community Hospital Foundation (2002) 95 Cal.App.4th 730, which held that given the Legislatures limitations on the courts jurisdiction to review arbitration awards, the judicial review provision in an arbitration agreement was invalid because parties cannot expand that jurisdiction by contract to include a review on the merits. (Id. at p. 739.) While this appeal was pending, the California Supreme Court decided Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334. The Court disapproved Crowell and held that parties may limit the arbitrators authority by providing for [judicial] review of the merits in the arbitration agreement. (Id. at p. 1364.) The judicial review provision at issue in Cable Connection provided that the parties could request judicial review of arbitration awards for errors of law or legal reasoning. (Id. at p. 1341, fn. 3.) The Court held that the trial court erred in refusing to enforce the parties clear agreement, explaining: Incorporating traditional judicial review by express agreement preserves the utility of arbitration as a way to obtain expert factual determinations without delay, while allowing the parties to protect themselves from perhaps the weakest aspect of the arbitral process, its handling of disputed rules of law. (Id. at p. 1363.)

In Cable Connection, the Supreme Court explicitly limited its holding to review for legal error. The provision for judicial review of the arbitration award in this case is thus enforceable to the extent that it provides for review of the arbitrators legal conclusions. The Flynt defendants, on this appeal, assert that as a matter of law, the facts do not show that Raymond was subjected to a hostile work environment because of gender, and that the arbitrators findings were insufficient for judicial review of the issue. They also challenge the punitive damages award as legally excessive. Under Cable Connection, the trial court had jurisdiction to review these legal issues.

The parties do not dispute that Cable Connection applies and that judicial review thus is available. They do differ, however, on whether we ought to remand to the trial court to perform that judicial review in the first instance. Raymond argues that remand would be pointless because the Flynt defendants did not provide an adequate record (a transcript of the arbitration proceedings) to review the sufficiency of the evidence. But the Flynt defendants do not attack the sufficiency of the evidence. Accepting the arbitrators factual findings as correct for the purpose of this appeal, they argue that those factual findings, on their face and as a matter of law, do not constitute sexual harassment. In the event that the legal requirements for sexual harassment were met, they also argue that the punitive damages award was legally excessive. The record is adequate for review of those legal issues.

Because the trial court concluded that the provision for judicial review was unenforceable, it did not reach any of the Flynt defendants legal arguments regarding the merits of the arbitration award. We therefore decline the invitation to reach those issues on this appeal and remand to the trial court to review in the first instance the arbitration award for errors of law or legal reasoning, under the Supreme Courts decision in Cable Connection. (See Daun v. USAA Casualty Ins. Co. (2005) 125 Cal.App.4th 599, 610.)

DISPOSITION

We reverse the trial courts order denying judicial review and the judgment confirming the arbitration award. We remand for consideration of the Flynt defendants legal challenges to the arbitration award. The parties are to bear their own costs on appeal.

NOT TO BE PUBLISHED

WEISBERG, J.*

We concur:

MALLANO, P.J.

ROTHSCHILD, J.

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*Retired Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.