Lane v. Francis Capital Management LLC
224 Cal. App. 4th 676
Cal. Ct. App.2014Background
- Lane, a California-based analyst, sued former employer Francis Capital Management LLC (FCM) in Los Angeles Superior Court alleging wrongful termination, breach of oral contract, unpaid wages/OT, meal/rest period violations, waiting-time penalties, wage statement violations, and unfair competition; he sought wages, penalties, interest, costs, and attorneys’ fees.
- FCM moved to compel arbitration under a two‑page January 2008 employment arbitration agreement that expressly covered “all claims… arising out of… employment,” including “wage, hour and benefit claims,” and incorporated the AAA Employment Arbitration Rules; arbitration to be in Los Angeles and governed by California law.
- Lane opposed, arguing Labor Code §229 and Hoover v. American Income Life Ins. Co. barred arbitration of statutory wage claims and that the arbitration agreement was procedurally and substantively unconscionable (adhesive form, AAA rules not attached, no express discovery provision).
- The trial court denied the motion, relying on §229 and Hoover and finding the agreement unconscionable; FCM appealed.
- The Court of Appeal held the arbitration agreement, by its express terms, covered Lane’s statutory claims except that only the claim to collect due and unpaid wages (third cause of action) falls within §229’s carve‑out; the court also found FCM failed to prove FAA preemption and that the agreement was not unconscionable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of arbitration — do Lane's employment claims fall within the agreement? | Lane: statutory labor claims aren’t arbitrable under §229/Hoover unless statute is expressly named. | FCM: agreement expressly covers “wage, hour and benefit claims” and broad employment disputes. | Held: Agreement’s language clearly encompasses the claims; arbitration required for all causes except the §229 third cause of action. |
| Applicability of Labor Code §229 to bar arbitration | Lane: §229 allows maintaining statutory wage claims in court regardless of arbitration agreement. | FCM: FAA may preempt §229; if FAA applies, §229 is preempted. | Held: §229 applies only to actions to collect due and unpaid wages (third cause); FCM did not prove FAA preemption, so §229 bars arbitration only for that claim. |
| FAA preemption (whether employment involved interstate commerce) | Lane: §229 controls absent preemption. | FCM: FAA preempts §229 because employment involved interstate commerce (security analyst at investment manager). | Held: FCM failed to present evidence showing interstate commerce; FAA preemption not established. |
| Unconscionability of arbitration agreement | Lane: agreement is adhesive, AAA rules not attached, no express discovery rights — substantively and procedurally unconscionable. | FCM: agreement is two pages, explicitly covers wage claims, AAA rules incorporated (available publicly), and AAA discovery suffices per Armendariz. | Held: Agreement not procedurally or substantively unconscionable; failure to attach AAA rules alone insufficient; AAA rules allow discovery adequate to vindicate statutory rights. |
Key Cases Cited
- Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (California Supreme Court) (arbitration of statutory employment claims permitted if arbitration permits vindication of rights)
- Hoover v. American Income Life Ins. Co., 206 Cal.App.4th 1193 (Cal. Ct. App.) (refused arbitration where arbitration clause lacked clear waiver of statutory wage claims)
- Engalla v. Permanente Medical Group, Inc., 15 Cal.4th 951 (California Supreme Court) (summary proceedings to compel arbitration; burdens of proof)
- Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC, 55 Cal.4th 223 (California Supreme Court) (sliding scale test for procedural and substantive unconscionability)
- Roman v. Superior Court, 172 Cal.App.4th 1462 (Cal. Ct. App.) (AAA rules provide discovery authority consistent with Armendariz)
- Woolls v. Superior Court, 127 Cal.App.4th 197 (Cal. Ct. App.) (burden on party seeking arbitration to show FAA preemption/interstate commerce)
- Spellman v. Securities Annuities & Ins. Services, Inc., 8 Cal.App.4th 452 (Cal. Ct. App.) (broad arbitration clause can encompass statutory employment claims)