33 Cal. App. 5th 920
Cal. Ct. App. 5th2019Background
- RADC Enterprises hired Mel R. Bravo and both signed a two‑page Arbitration Agreement titled "ARBITRATION AGREEMENT" covering "any and all disputes" arising from employment, specifically including wage‑related claims under the California Labor Code.
- The Agreement contains a one‑sentence choice‑of‑law clause: "This Agreement shall be governed by and shall be interpreted in accordance with the laws of the State of California."
- After termination, Bravo sued RADC on nine individual employment claims and representative claims under the Private Attorneys General Act (PAGA).
- RADC moved to compel arbitration of Bravo's individual claims and to stay the PAGA claims; the trial court severed and stayed the PAGA claims but compelled arbitration for only 3 of 9 individual claims.
- The trial court reasoned the Federal Arbitration Act (FAA) applied but the choice‑of‑law clause showed the parties intended California law (and thus Cal. Lab. Code § 229), which forbids agreement‑based arbitration of wage claims, so six wage‑related individual claims were not compelled to arbitrate.
- On appeal, the court reviewed contract interpretation de novo and concluded the choice‑of‑law clause should be read so California substantive law governs but special rules limiting arbitrators (like § 229) do not negate the agreement to arbitrate—thus all individual claims must be arbitrated.
Issues
| Issue | Plaintiff's Argument (Bravo) | Defendant's Argument (RADC) | Held |
|---|---|---|---|
| Effect of choice‑of‑law clause on arbitrability of wage claims | Clause shows parties intended California law to govern, so Lab. Code § 229 prevents arbitration of wage claims | Clause does not oust arbitration; agreement's clear purpose is to arbitrate "any and all disputes," so choice‑of‑law should not displace arbitration | Court held clause should be read to incorporate California substantive law but exclude special rules that would defeat arbitration; arbitration enforced for all individual claims |
| Applicability of the Federal Arbitration Act (FAA) | (implicit) California policy should control arbitrability of wage claims | RADC contended FAA applies because employer engaged in interstate commerce, so FAA governs enforceability | Court agreed FAA applies and enforced arbitration consistent with FAA principles |
| Severability and treatment of PAGA claims | Bravo pursued PAGA claims; trial court severed and stayed them | RADC moved to stay PAGA claims and compel arbitration of individual claims | Court affirmed severance and stay of PAGA claims and affirmed arbitration for three claims; reversed denial as to remaining six individual claims (all individual claims to arbitration) |
Key Cases Cited
- Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995) (contracts should be interpreted to harmonize clauses and effectuate arbitration provisions)
- Preston v. Ferrer, 552 U.S. 346 (2008) (choice‑of‑law clauses should not be read to displace arbitration; state law that limits arbitral authority may be excluded)
- Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468 (1989) (discusses circumstances where courts may refuse to enforce arbitration agreements related to third‑party litigation)
- Mastick v. TD Ameritrade, Inc., 209 Cal.App.4th 1258 (2012) (interpreting limits on enforcing arbitration agreements under state procedural provision; distinguished by the court here)