Da Loc Nguyen v. Applied Medical Resources Corp.
4 Cal. App. 5th 232
| Cal. Ct. App. | 2016Background
- Nguyen applied for and signed a five‑page employment application that included an arbitration clause requiring "binding arbitration" of "all disputes . . . arising out of or relating to" the application or his employment and incorporating AAA rules; the application required initials and signature.
- Nguyen sued Applied Medical in 2014 as a putative class action alleging Labor Code, UCL, and PAGA claims for unpaid overtime, meal/rest breaks, penalties, and related relief.
- Applied moved to compel arbitration of individual claims, strike class allegations, and stay PAGA; the trial court compelled individual arbitration, struck/dismissed the class claims with prejudice, severed the cost‑sharing provision, and ordered Applied to pay arbitration costs beyond what Nguyen would necessarily pay in court.
- Nguyen appealed, arguing (1) the order was immediately appealable under the death‑knell doctrine, (2) the arbitration clause was unconscionable (procedurally and substantively), (3) the cost‑splitting provision was unenforceable, and (4) the court erred by dismissing class claims with prejudice rather than leaving the availability of class arbitration to the arbitrator.
- The Court of Appeal treated the filing as a writ petition, rejected death‑knell appealability (because a representative PAGA claim remained), upheld the arbitration order except that it vacated the portion dismissing class claims and remanded so the arbitrator may decide whether class arbitration is permitted, relying principally on Sandquist.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Appealability / death‑knell doctrine | Nguyen: order terminating class allegations but leaving individual claims is immediately appealable | Applied: order not immediately appealable; writ review only in limited circumstances | Not appealable under death‑knell because PAGA representative claim remained; court treated appeal as writ petition and proceeded to review |
| Procedural unconscionability of arbitration clause | Nguyen: clause is adhesive, lacked AAA rules attachment, and was not explained; high degree of procedural unconscionability | Applied: standard employment adhesion with only modest procedural unconscionability; Nguyen understood English | Modest procedural unconscionability (adhesive), but failure to attach AAA rules did not raise the level because Nguyen did not challenge the rules themselves and trial court’s credibility findings supported enforcement |
| Substantive unconscionability (mutuality, free‑peek, costs) | Nguyen: clause lacks mutuality (uses "I agree"), gives employer a free peek, and forces fee splitting in violation of Armendariz | Applied: clause is bilateral in scope, does not give a unilateral free‑peek, and cost term is severable; AAA rules supply neutral arbitrator, discovery, and written award | Clause is not substantively unconscionable: language creates mutual obligation; no impermissible free‑peek; cost‑splitting severed and trial court ordered Applied to pay arbitration initiation costs beyond what Nguyen would incur in court; Armendariz requirements satisfied by incorporated AAA rules |
| Who decides availability of class arbitration | Nguyen: court should rule class claims preserved or remanded to arbitrator; Nguyen argued trial court erred in dismissing class claims with prejudice | Applied: trial court properly resolved arbitrability and dismissed class claims; any challenge waived | Under Sandquist, the question who decides class arbitration is one of contract interpretation governed by state law; ambiguous employer‑drafted arbitration clause must be construed against drafter and doubts resolved for arbitration — thus arbitrator, not court, should decide class arbitration availability; trial court’s dismissal of class claims reversible and must be vacated for arbitrator determination |
Key Cases Cited
- Sandquist v. Lebo Automotive Inc., 1 Cal.5th 233 (Cal. 2016) (who decides availability of class arbitration is a matter of contract interpretation; ambiguous employer‑drafted clauses allocate the question to the arbitrator)
- Baycol Cases I & II, 51 Cal.4th 751 (Cal. 2011) (death‑knell doctrine applies only where class claims are entirely terminated)
- Baltazar v. Forever 21, Inc., 62 Cal.4th 1237 (Cal. 2016) (adhesive employment arbitration clauses require scrutiny but incorporation of AAA rules does not by itself elevate procedural unconscionability when challenges concern terms in the signed agreement)
- Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (Cal. 2000) (minimum requirements for enforceable employment arbitration: neutral arbitrator, sufficient discovery, written award, full range of relief, and no prohibitive costs)
- Munoz v. Chipotle Mexican Grill, Inc., 238 Cal.App.4th 291 (Cal. Ct. App. 2015) (PAGA penalties can supply incentive to continue litigation, limiting application of the death‑knell doctrine)