Carrion v. Sunset Services Holdings CA2/5
B337432
Cal. Ct. App.Apr 22, 2025Background
- Plaintiff Rafael Carrion worked for Sunset Services Holdings, LLC ("Sunset") and was laid off in January 2023.
- In 2021, Carrion electronically signed an employee handbook containing an arbitration provision, but the handbook also included language explicitly stating it was "not a contract."
- Carrion later brought a wage and hour class action lawsuit and a representative PAGA claim against Sunset.
- Sunset moved to compel arbitration based on the handbook's arbitration provisions and Carrion's signed acknowledgment.
- The trial court denied Sunset's motion, relying on disclaimers in the handbook that negated contractual intent.
- Sunset appealed, arguing the references to arbitration in the handbook and acknowledgment created a binding agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitration clause in handbook | Handbook says it is not a contract, so no enforceable arbitration agreement exists | Handbook and acknowledgment unambiguously create a binding duty to arbitrate | Trial court and appellate court agreed: handbook disclaimers negate contractual intent; no enforceable agreement to arbitrate |
| Impact of signed acknowledgment referencing arbitration | Signed acknowledgment does not create contract when document as a whole disclaims contractual effect | Signed acknowledgment referencing arbitration evidences mutual assent to arbitration | Court found that reference in acknowledgment is not enough in light of handbook’s clear disclaimers |
| Effect of ambiguous terms regarding arbitration | Any ambiguity should be construed against Sunset as drafter | Even if ambiguous, provisions should be read as creating an enforceable arbitration agreement | Court construed ambiguity against drafter; no enforceable arbitration agreement |
| Whether California law supports arbitration based on handbook language | Precedent holds handbooks disavowing contract aren’t enforceable for arbitration | Arbitration provisions in handbooks typically enforceable under state law | Court distinguished prior cases; disclaimers here control over arbitration language |
Key Cases Cited
- Esparza v. Sand & Sea, Inc., 2 Cal.App.5th 781 (Cal. Ct. App. 2016) (handbook disclaimer that it is not a contract precludes enforceable arbitration agreement)
- Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951 (Cal. 1997) (burden of proof on party seeking to compel arbitration is to show existence of valid agreement)
- Sellers v. JustAnswer LLC, 73 Cal.App.5th 444 (Cal. Ct. App. 2021) (threshold question is whether an agreement to arbitrate exists; decided under state contract law)
- Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC, 55 Cal.4th 223 (Cal. 2012) (when evidence is not in conflict, contract formation is a question of law)