*1 S101435. Feb. [No. 2003.] LITTLE,
ALEXANDER M. Plaintiff and Respondent, STIEGLER, INC., AUTO Defendant and Appellant.
Counsel Fisher & Phillips, Christopher C. Hoffman and R. Thurrell Jeffrey Defendant and Appellant.
Fine, Perkins, Boggs, Fine, & Ned A. Cope John P. and Michael K. Boggs Perkins for California Motorcar Dealers Association as Curiae Amicus behalf of Defendant and Appellant. &
Winston Strawn and Lee T. Paterson for The as Amicus Employers Group Curiae on behalf of Defendant and Appellant. Rheinheimer,
Maxie & L. Stephens Vrevich Darin as Amici Wessel Curiae on behalf of Defendant and Appellant.
Moskowitz, Brestoff, Blinderman, Winston & Nelson E. Brestoff and Dennis A. Winston for Plaintiff and Respondent.
McGuinn, Ehrman; Hillsman M. Keith & Cliff Pine & Palefsky, Palefsky, Pine and Norman for Pine California Association as Employment Lawyers Amicus Curiae on of behalf Plaintiff and Respondent.
Opinion
MORENO,
case,
J.
In this we consider four
Is
interlocking questions: (1)
in a
provision
mandatory employment
agreement
arbitration
that permits
either
$50,000
arbitration award of more than
to a
party
“appeal”
arbitrator, unconscionable;
second
if it is unconscionable, then should
(2)
that unconscionable
be severed from the rest of the
provision
arbitration
enforced,
invalid;
agreement and the
or is the
agreement
entire
(3)
former,
if the
then in
the rest of the arbitration
do the
reviewing
agreement,
for
of
minimum
claims that we
requirements
unwaivable statutory
Services, Inc. (2000)
Psychcare
Foundation Health
in Armendariz v.
set forth
also to
745, 6
(Armendariz) apply
P.3d
Cal.Rptr.2d
Cal.4th
669]
if
(4)
of public
in violation
policy;
was terminated
that an employee
claims
imposing
employer
one
those requirements—that
then must
yes,
to arbitra
all costs
must pay
unique
arbitration on the mandatory
United
of a post-Armendariz
and revised in light
reconsidered
tion—be
Tree
cost
Green
sharing,
on arbitration
Court decision
States Supreme
513, 148
We unconscionable; should be $50,000 provision over (2) tration awards enforced; a suit claiming the rest and severed should be subject termination in violation of public policy wrongful Armendariz; Green Tree does require set forth in and (4) We accordingly partly cost modify that we Armendariz's requirements. judgment. reverse the Court Appeal’s of Facts
I. Statement Inc., deal- Alexander M. Little worked for Auto an automobile Stiegler, He manager. Little rose to become Auto service Stiegler’s ership. eventually demoted, terminated, that he was then investigating reporting alleges fraud. He action defendant for demotion in against filed an tortious warranty tortious policy; violation of termination violation public policy; public and breach breach of contract continued implied employment; covenant of faith and first third dealing. through fair good implied action, In the he sought damages. causes compensatory punitive He action, sought damages. cause of contract breach fourth plaintiff no relief California Act Housing under the Fair sought Employment Code, et (FEHA). (Gov. seq.) § three identical while signed nearly agreements employed
Little *6 1996, and The most by defendant in June October 1997. January claim, the three as follows: or agree any dispute, recent of stated “I all discrimina- to, but not limited and claims of any controversy (including, or to allow resort any tion and which would otherwise harassment) require forum between and governmental myself court or other resolution dispute officers, owners, directors, and affiliated its and Company (or parties to, from, or and health related arising with its benefit plans) seeking connection with my employ- or whatsoever having any relationship with, the whether with, or other association employment by, Company, ment law, otherwise, or shall be tort, contract, statutory, based on equitable submitted to and determined exclusively by arbitration under the binding Federal Act, Arbitration with the conformity procedures California Arbitration Act Code (Cal. Civ. Proc. Sec 1280 et seq., section including 1283.05 and all of the act’s other mandatory permissive to rights discovery); however, provided, that: In addition to requirements imposed by law, any arbitrator herein shall be a retired California Court Superior Judge and shall be subject disqualification the same grounds as would apply to a judge such court. To the extent in civil applicable actions in courts, California shall following and be apply observed: all rules of pleading (including right of evidence, all rules of demurrer), all rights resolution of the means of dispute by motions for summary judgment, on the judgment pleadings, under judgment Code of Civil Procedure section 631.8. Resolution of the shall be based dispute solely upon law governing claims and defenses and the arbitrator pleaded, invoke basis other than any law, such controlling but not limited including to, notions of cause.’ ‘just As reasonably allow full use required benefit of this agreement’s modifications to the act’s the arbi- procedures, tration shall extend the times set the act by for the of notices and giving setting $50,000.00 Awards hearings. exceeding shall include the arbitra- tor’s and, written reasoned opinion either party’s written request within after days award, issuance of the shall be remand, subject reversal and modification, or reduction review of following the record and arguments parties by shall, second arbitrator who as far as practicable, proceed to the according law and procedures applicable appellate review by California Court of of a Appeal civil judgment court following trial. I understand by to this agreeing binding both I and the provision, Company give our up rights trial by jury.”
Auto Stiegler’s initial motion to arbitration was compel Follow- granted. our ing Armendariz, court, decision in the trial upon plaintiff’s request reconsideration, denied defendant’s motion to arbitration. compel The trial court ruled: “The court believes that the arbitration clause in issue does not meet the standards set forth by Court and it Supreme should not be enforced. The clauses of the arbitration do not with comport of the Armendariz include the clauses that: 1. [decision] [f] the Plaintiff Require costs; to share the 2. Provide for no review. judicial [$] fatal, The court deems this review of all judicial decisions is not the same as limited review another awards; arbitrator of certain 3. Limit [|] the remedies available to the complaintant exclude possibly equi- [szc] [to] table as remedies, opposed legal to which he otherwise be entitled. might 4. Lack H|] clause, mutuality remedy, that this unlike the one in *7 Armendariz does not bind the obviously employer likewise enforce its in the right arbitration forum.” It that the Armendariz reversed. held
The Court Appeal Further, the claim that the it rejected claims. nonstatutory did not apply Armendariz,s dis- It focused on unconscionable. was arbitrate, concluded that and both were bound cussion of whether parties The Court of Appeal did in fact bind both parties. the arbitration agreements an award by triggered whether the arbitration “appeal” did consider concluded that $50,000 the court Finally, was unconscionable. greater than Tree, as silence the Court’s decision Green under United States Supreme the not a for invalidating who bear the of arbitration was basis costs granted We review. agreement.
II. Discussion Provision Arbitration Unconscionability Appellate A. recounted, that “[ajwards provided As the arbitration agreement $50,000.00 include the arbitrator’s reasoned exceeding opinion shall written the and, days after issuance of either written within party’s request remand, modification, or award, reduction shall be to reversal and subject by and of the a second following review record arguments parties shall, to the according arbitrator who as far as law practicable, proceed Court of review California procedures applicable appellate by Appeal of a civil court trial.” Little contends this judgment following provision agree. unconscionable. We doc unconscionability, To briefly recapitulate principles “ element,’ the former trine has ‘both a a “substantive” “procedural” ‘ ‘ ’ ’ due or focusing unequal bargaining on “oppression” “surprise” ‘ ‘ ’ ’ latter on harsh” or “one-sided” results.” “overly (Armen
power, dariz, of an 24 Cal.4th at element unconscio 114.) procedural “ adhesion, ‘which, nable contract takes the form of a contract of generally by bargaining strength, relegates and drafted imposed party superior contract reject to adhere to the subscribing party only opportunity contracts, the case of it.’” (Id. preemployment “[I]n economic on all the most sought-after exerted but pressure employers acute, stands employees may particularly are in necessary employees between the and few employment, job to refuse because position requirement.” (Id. It is clear case that Auto Stiegler imposed 115.) present agreement. Little adhesive arbitration forms, various but unconscionable terms take
Substantively form, as in one-sided. such be described One may generally unfairly *8 1072 “
Armendariz, is the agreement’s arbitration lack of a ‘modicum of bilater- wherein the ality,”’ claims the the employee’s against but not employer, claims the are to employer’s against employee, subject arbitration. (Armen- dariz, 24 Cal.4th at Another of p. 119.) kind unconscio- substantively nable the provision occurs when arbitration a party mandates imposing arbitral, either post-arbitration judicial or or to its proceeding, wholly largely benefit the on which the arbitration is Two expense party imposed. of Court cases have addressed of Appeal this kind unconscionability. v. Beynon Garden Medical Grove 698 (1980) Group Cal.App.3d the Cal.Rptr. medical (Beynon), on its group imposed patients 146] mandatory arbitration B the agreement. authorized Paragraph the medical but not the the first and group, patient, reject arbitration award submit to a second dispute arbitration The court held panel. the provision unconscionable. “That the B provisions limit paragraph unreasonably of the health and obligations plan health care and provider defeat reasonable of one expectations in the is manifest. term enrolling plan The normally dispute procedure resolution which is imports speedy, economical and ‘bears on the equally’ parties. provisions The [Citation.] B, however, are in favor paragraph weighted health and plan provider of services and against members and can render arbitration an and expensive protracted proceeding. granting the health care By plan health provider unilateral award right reject without cause and rearbitration, B require enables the health care paragraph health plan win, to transform provider arbitration into a ‘heads I lose’ virtually tails you proposition.” (Beynon, Cal.App.3d Saika Gold Cal.App.4th Cal.Rptr.2d (Saika), arose in the also The setting. case doctor/patient that had a either provision permitted party reject award $25,000 or a trial greater and de novo in court. request superior The Court refused to instead enforce the directed the Appeal provision trial court $325,000 confirm award in the favor. court patient’s rejected doctor’s case argument that the was from distinguishable Beynon because challenged arbitration either de permitted party a trial provision request if the novo award exceeded stated late amount. vernacular of “[I]n America, matter, 20th us century ‘get let real.’ As a the benefit practical which the trial de novo clause confers on nothing more than patients $25,000 chimera. The odds that an award will both clear the but threshold (a) be so still low that the have a trial de so (b) want to novo are patient as to small we are negligible. Unless to assume arbitrators in medical cases make awards be malpractice regularly capriciously substantially low what justice that is an which we requires—and assumption will *9 the could benefit possibly cases the trial de novo clause where indulge—the at p. 49 Cal.App.4th to be rare indeed.” going (Saika, supra, are patient the arbitration that “the clause meant The court concluded rejection 1080.) agreement. promise did not function an arbitration really agreement with one the claim resolution to evaporated of an inexpensive, speedy like, already unilateral not We have to avoid results it did ability party’s ffl] is That the arbitration. favoring policy referred to strong public policy which seek in arbitration clauses undermined manifestly by provisions in one weapon party’s itself an offensive make the arbitration process (Id. arsenal.” make several
Auto its amici curiae Stiegler arguments First, the claim that this case from and Saika. Beynon they distinguish that, evenhandedly arbitration both appeal provision applied parties Saika, is at the unlike the there least doctor/patient relationship possibility the in cases of misappropria that an be for employer may plaintiff, example Inc. 25 Cal.4th trade secrets. Brennan v. Tremco e.g., tion of (See, case, P.3d if that is fail they But the Cal.Rptr.2d 1086].) a $50,000 for award threshold. From the reasons the adequately explain be would the decision to resort to arbitral plaintiffs perspective, appeal made not to the amount the arbitration award but according potential costs of If value of the arbitration claim to the compared appeal. or the claim and his her estimate that the value of plaintiff attorney potential substantial, is rules takes because nothing the arbitrator that the plaintiff law, then it erroneous of a is rational for understanding point of its $50,000 Thus, benefits defend threshold plaintiff appeal. inordinately the fact Stiegler ants. Given that Auto the arbitration party imposing was threshold, $50,000 and the it to conclude it imposed is reasonable it be the the threshold with the belief that would knowledge generally defendant. when asymmetrical
Although parties may justify a need” 24 Cal.4th “legitimate there is commercial (Armendariz, its that need must “other than desire to maximize be 117), employer’s no 120.) in the There is such advantage” process. (Id. $50,000 the threshold threshold. The for justification explanation Maxie, Rheinheimer, amicus & Stephens offered curiae Vrevich—that not in which is less than amount in would controversy award there sense worth the extra arbitral review—makes going through step appellate withstand scrutiny. from defendant’s and cannot only standpoint is that an less objectionable Auto also Stiegler argues appeal Saika, novo, de arbitration, as in or a trial as in Beynon, than a second because it is permitting wholly new proceeding, making first but illusory, limited review of the permitting appellate arbitral award. We fail to perceive significant difference. Each of these provisions toward geared giving arbitral defendant a substantial op- portunity Indeed, overturn a sizable arbitration award. in some respects review is appellate more favorable to the its employer attempting protect interests. It is that an unlikely arbitrator who acts in merely an appellate will increase an award capacity against the employer, whereas a trial or arbitration de novo at least runs the risk that the employer become *10 liable for an even sum than larger that awarded in the initial arbitration.
We therefore conclude that the arbitral in this appeal provision particular is agreement one-sided unconscionably not be enforced. may We next turn whether this question severed and the rest of the provision enforced, or agreement whether the entire agreement should be invalidated.
B. Is the Unconscionable Portion Severable? Agreement Armendariz,
In we reviewed the principles regarding severance of terms from an arbitration illegal As we stated: agreement. “Two reasons for severing terms rather restricting illegal than the entire voiding contract in appear case law. The first is implicit to prevent from parties gaining undeserved benefit or undeserved suffering detriment as a result of voiding the entire when there has been full agreement—particularly or partial per formance of the contract. Second, more the doctrine of generally, [Citations.] severance to conserve a contractual attempts if to do so relationship not be an condoning scheme. illegal is overarching inquiry [Citations.] ‘ ’ whether “the interests of . . . justice would be furthered” severance. by Moreover, courts must have the cure the unlawful capacity [Citation.] contract severance or restriction through clause, of the offending which . . . is not invariably case.” (Armendariz, Cal.4th at pp. 123-124.) Accordingly, are to look to the various of the contract. If purposes “[c]ourts the central of the contract is tainted purpose with then the illegality, contract as a whole cannot be enforced. If the is collateral to the illegality main contract, and the purpose can be from illegal provision extirpated restriction, contract means of by severance or then such severance and (Id. restriction are appropriate.” Armendariz, we found two factors weighed severance of against “First,
the unlawful the arbitration provisions. contains more than agreement one unlawful it has both an provision; unlawful and an damages provision unilateral unconscionably arbitration clause. Such defects indicate a multiple not simply on an systematic impose effort the employer’s forum that works to but as an inferior litigation, alternative to lack of mutuality, case of the Second, agreement’s . in the . . advantage. ][f that there is indicated the fact by [by . . . unlawful purpose] permeation order to remove the can strike or restrict is court single provision no to, Rather, have court would taint from agreement. unconscionable restriction, but contract, by severance or effect, through reform the does not Code section 1670.5 it with additional terms. Civil augmenting nor the arbitration statute. reformation does augmentation, authorize such the court to refuse Procedure 1281.2 authorizes Code of Civil section exist, not to reform the for revocation grounds arbitration if their inherent do such under any power make it lawful. Nor courts have to reform contracts. authority (Armendariz, limited [Citations.]” 124-125.) Cal.4th at pp. is only in the case. There
Neither of these factors is operative present unconscionable, single appeal.1 one-sided provision can be And no contract reformation is required—the offending provision Thus, severed and the rest of left intact. courts *11 similar Saika, in severed them and and Beynon considering provisions, rest of the agreement. supra, enforced the arbitration (Beynon, 713; Saika, at at p. Cal.App.4th 1082.) Cal.App.3d supra, Moreover, no state there is indication that the of the law was “sufficiently was lead to the conclu- signed clear at time arbitration to agreement sion that this was drafted in bad faith.” provision] arbitration [appellate refusing three grounds 1 Wenote that the other the trial court found in this case for to above, agreement, appear enforce the in the statement facts do not to arbitration described First, judicial agreement provide be the fact that an does not explicitly valid. arbitration Second, invalidating (Armendariz, supra, is no basis for it. Cal.4th at unlike review Armendariz, agreement and nothing language present in in the limits remedies no Armendariz, implied. Finally, agreement explicitly be which limitation should unlike in agreement wrongful claims and scope limited the of the arbitration termination therefore 92, against 120), implicitly employer’s employee (id. pp. excluded the claims limitation, applying present arbitration in the case contained no such instead claim, “any controversy employee] Company.” . and the dispute, . . between [the Lawyers provisions Employment points Amicus curiae California Association to other in are, view, contrary Essentially, the agreement public policy that in its or unconscionable. objects legal Stiegler’s the incorporation amicus curiae formalities into Auto observed, agreement: that pleading mandate that the and evidence be its rules of shall cause,” only rely governing “just informal principles arbitrator shall law available to judicial summary judgment motions demurrer and traditional such as informality parties. They procedures of arbitration. claim that such detract from inherent more, however, say provisions, make arbitration more we cannot that these which Without unconscionably not at all obvious that closely judicial procedures, are one-sided. It is follow Stiegler the extent inordinately benefit Auto rather than Little. To provisions such defendant, Stiegler they availability dispositive pre-arbitration motions favor Auto advantage brought in court. be the case had the action been confer no more of than would (Armendariz, 124-125, 24 Cal.4th at fn. There is pp. 13.) of a enough difference between the appellate drafted in the provision, employ- context, ment and the de novo trial and arbitration in the provisions doctor/ Saika, patient setting Beynon determination that the preclude was provision directly contrary to settled law and therefore inferentially drafted bad faith. therefore
We conclude that Auto Stiegler’s is valid and enforceable once the unconscionable is appellate provision deleted. Whether a court should refuse to enforce it on other will be grounds considered below.
C. Is Arbitration Claim Tameny to the Minimal Subject Procedural Forth in
Requirements Set
Armendariz?
In
v. Atlantic
Tameny
167,
Co.
(1980)
Cal.3d
178 [164
Richfield
610 P.2d
Cal.Rptr.
9 A.L.R.4th
we
(Tameny),
recognized
that although
have the
employers
will,
to terminate
power
employees
they
not terminate an
for a reason that
contrary
public policy.
Little claims that arbitration of
claims are
to the
minimum
subject
Armendariz,
set forth in
reviewed below. We agree.
Armendariz,
we held that arbitration of claims under the FEHA is
subject
certain minimal
the arbitration
requirements: (1)
agreement may
not limit the
available under the
damages normally
statute (Armendariz,
These were on requirements founded that certain premise statutory are unwaivable. “This rights derives from two unwaivability statutes are First, themselves derived from Civil Code section public policy. 1668 states: ‘All contracts which have for object, their or to directly indirectly, exempt anyone fraud, from for his own responsibility or willful to the injury person another, law, or or violation property whether willful or are negligent, of the law.’ against policy whose or indi- ‘Agreements object, directly is to rectly, from violation of the exempt parties law are against [their] Second, not be enforced.’ public policy Civil Code [Citation.] states, section 3513 waive the of a ‘Anyone may law intended advantage for his benefit. But a solely law established for a reason cannot be public (Armendariz, agreement.’ a by contravened private [Citations.]” for was enacted public that the FEHA We concluded 100.) Cal.4th at (Id. at pp. unwaivable. it conferred on were rights employees reasons and to necessary were that the above requirements We then concluded 100-101.) an rights these unwaivable enable an to vindicate employee forum. policy is definition unwaivable. public
A
claim almost
Tameny
by
“[The]
‘care
be based on policies
to the
rule must
employment
at-will
exception
in constitutional
that are delineated
tethered to fundamental policies
fully
Foundation (2002)
.
. .’”
statutory
.
CHW Medical
(Silo
provisions
Moreover, the
698, 45
1162].)
P.3d
Cal.4th
Cal.Rptr.2d
“ ‘
in that it
be
“public”
is
basis for such a claim must
public policy
individual,
have been articu
must
society
“affects
at
rather than
large”
”
“
“
and ‘substan
time
and must be ‘fundamental’
discharge,
lated
”” ”
a
Thus,
to
legitimate
designed
protect
tial.
claim
Tameny
(Ibid.)
“
be
private agree
interest and therefore
‘cannot
contravened
public
”
words,
other
ment.’
Cal.4th
(Armendariz, supra,
they
to waive claims that
agreement that required employees
employment
itself be contrary
were terminated in violation of
public policy
ask the employee
because an
cannot
Accordingly,
public policy.
employer
of these
claims,
waive
it also cannot
Tameny
impose
their vindi
shortcomings
claims such burdens or
as
preclude
procedural
Thus,
the arbitra
are
appropriate
cation.
the Armendariz requirements
claims.
statutory
tion of
claims as
unwaivable
Securities,
2001)
First
Inc.
Cir.
Stiegler
(D.C.
Auto
cites Brown v. Wheat
came to a
conclusion with
(Brown),
contrary
respect
We with the Brown least insofar its would be decision extension interpreted preclude of the Armendariz First, claims. Cole was a although title VII case focused man- properly arbitration of datory rights, federal its statutory beyond rationale extends context to unwaivable generally rights conferred for benefit. The public statement in Gilmer that provides point departure in Cole—“ ‘[b]y claim, to arbitrate agreeing does statutory forgo employee] [an statute; substantive submits rights afforded to their resolu- only [he] ” arbitral, tion in an rather than a forum’ judicial, 105 F.3d at (Cole, supra, p. Gilmer, 500 U.S. at quoting S.Ct. at 1652])— apply equally nonstatutory rights. public The Brown court’s rights apparent position federal to Cole’s subject because conditions requirements, any attempt place on arbitration based on state law would be the Federal preempted by
1079 FAA that is The provides Act incorrect. Arbitration (FAA), irrevocable, enforceable, grounds save such “valid, upon and are agreements contract.” U.S.C. (9 of any for revocation as exist at law or in equity “ from the its meaning precisely that takes Thus, state-law principle 2.) ‘[a] § with text does not comport arbitrate is at issue that a contract to [the fact ” Associates, 517 U.S. v. (1996) Inc. Casarotto (Doctor’s FAA].’ 2] [of § added.) second brackets 1652, 1655, 902], 134 L.Ed.2d 681, 685 S.Ct. [116 an refuse to enforce FAA, a court 2 of the state But under section defenses, such contract based on “generally applicable arbitration agreement Associates, Inc., 517 duress, fraud, unconscionability.” (Doctor’s as for ground long-standing at at One such 1656].) U.S. 687 S.Ct. p. p. [116 to forgo term that it would force a party enforce a contractual is refusing Baker e.g., Corp above. (See, unwaivable reviewed public rights, Pacific 1148, Cal.Rptr. 220 1153-1154 (1990) v. Suttles Cal.App.3d 709] [269 for asbestos liability exposure waiver of all [mandatory employer employee contrary public policy].)2 to arbitrate such Thus, rights that a recognize party compelled while we “ arbitral, resolution in an them, but ‘submits to their does not waive merely ” at 26 500 U.S. S.Ct. p.
rather a forum’ judicial, (Gilmer, supra, than a facto de waiver accomplish at arbitration cannot misused 1652]), p. specifi the Armendariz Accordingly, although requirements of these rights. not do so out of a generalized do cally agreements, they concern arbitration Associates, Casarotto, Inc. v. of arbitration se Doctor’s per (see mistrust that but from 1656]), recognition 517 U.S. at S.Ct. p. p. terms, harbor conditions some and agreements proceedings may rights. the vindication of unwaivable and that undermine practices state law general are therefore requirements applications Armendariz to the rights unique the unwaivability contract principles regarding public And, arbitration, the FAA. context of and are accordingly preempted to distin above, no reason under Armendariz’s logic as discussed there is derived rights and unwaivable statutory between unwaivable guish rights common from law. generally contrary public is prohibition against exculpatory policy 2We note the contracts Suttles, Corp v. Baker e.g., (See, invoked in the context of contracts of adhesion. Pacific University 1151; Regents Tunkl v.
supra, Cal.App.3d of California Thus, 441, 33, 693].) as with unwaiv 92, P.2d 6 A.L.R.3d Cal.Rptr. Cal.2d 99-100 [32 claims, generally not claims “would special arbitration able knowingly voluntarily enter employer and an apply in situations in which cases, are employees free to dispute has arisen. those into after protections best efficiency procedural determine what trade-offs between arbitral formal (Armendariz, supra, our 8.) fn. Nor would safeguard rights.” their . . . Cal.4th settling right contrary policy preclude party from public conclusion waiver of Authority (2002) 28 Department Youth right. (See, e.g., a claim based Jefferson settling release [approving an Cal.Rptr.2d 48 P.3d Cal.4th 299 [121 claim].) a FEHA *15 1080 recognize
We that 2 of the enacting [FAA], declared a Congress “[i]n § national arbitration and states policy favoring withdrew of the power forum of require judicial for the resolution claims which contracting parties agreed to resolve arbitration.” by (Southland Corp. Keating 852, 858, U.S. S.Ct. 79 L.Ed.2d The (Southland).) object of however, the Armendariz is requirements, not to compel substitution arbitration, but adjudication rather ensure minimum standards fairness in arbitration so that employees subject mandatory agreements can vindicate their in public an arbitral forum. rights with to arbitration in
Specifically, regard costs issue this case and in Brown, the that arbitration costs principle may prevent arbitration claimants from their effectively public with force to pursuing rights apply equal Tameny claims as to FEHA claims or to federal claims. in statutory Nothing the FAA states prevents controlling from arbitration costs by imposed adhesive contracts so that the remedy prosecuting statutory state law common public rights through arbitration is not rendered illusory. Armendariz is cost-shifting to arbitration to the requirement unique arbitration, extent that alone among contract provisions, may potentially require litigants expend sums to for the costs of the that large pay hearing will decide his words, or her other statutory rights. In other it is not public the arbitration itself but the agreement of arbitration forum costs imposition that under certain circumstances violates state law.
Moreover, Armendariz’s cost rule does not
a judicial forum for
“require
resolution of claims which
contracting
agreed to resolve
parties
by
arbitration.” (Southland,
U.S.
S.Ct. at
858])
Rather, we
required that
arbitration forum
under
simply
employers
costs
pay
certain circumstances as a condition of arbitration.
in the United
Nothing
States
Court case
leads
Supreme
law
us to believe that a state requirement
arbitration costs
shifting
mandatory
em
employment agreements
ployer pursuant
established state law contract doctrine violates
FAA.
Furthermore,
1284.2,
Code Civil Procedure section
which
provides
each
rata share of arbitration costs
party pay
unless the
pro
agreement
otherwise, does not
our
provides
alter
conclusion.
held in Armendariz
We
that this statute
does
preclude
judicial imposition
proportionally
costs
greater
on the
the case of FEHA
employer
claims. (Armendariz,
24 Cal.4th
p. We reasoned that “the
to arbitrate a
112.)
agreement
claim
agreement
to abide
the substantive
implicitly
remedial
provisions
statute”
FEHA implicitly prohibited
large arbitration costs that would stand as an obstacle to successfully pursu
conferred on the
ing rights
We
conclude that an
(Ibid.)
similarly
employee.
contrary to public
termination
wrongful
to arbitrate
claim
to proportion
include an to implicitly
must be interpreted
policy
*16
to
in order
for
employee/claimant,
a
is reasonable
the
costs in manner that
to
Code
Civil
rights contrary
of
the de facto waiver
unwaivable
prevent
section
3513,
of Civil Procedure
discussed above. Code
sections 1668
conclusion.
contrary
does not
a
compel
1284.2’s default provision
to
a
arbitrate
seeking
a
Therefore, we
that
plaintiff/employee
conclude
as for
benefit of the same minimal protections
claim should have the
Tameny
such
that
can effectively prosecute
as a
of ensuring
they
FEHA claims
means
damages
of
availability
the
a
in
forum.3 These include
claim the arbitral
court,
includ-
brought
suit
to those available in Tameny
remedies equal
Court
Inc.
Superior
Home
v.
ing
(Commodore
Systems,
damages
punitive
211,
270,
P.2d 912]); discovery
32
649
Cal.Rptr.
Cal.3d
220
(1982)
claims;
arbitration deci-
a written
Tameny
sufficient to
arbitrate
adequately
have complied
to ensure that arbitrators
judicial
sion and
review sufficient
claims; and
of arbitration costs so
the
such
allocation
with
law respecting
not
burden the
they
unduly
employee.
that
will
agreement
have
the contentions that the
already
We
rejected
adequate
the
case
remedies or his
to obtain
ability
limited Little’s
present
will be
it
the
that Little
judicial
agreement
review. Nor is
evident from
however,
is
that there
to
Little argues,
unable
obtain adequate discovery.
him,
Armendariz.
contrary
on
We
being imposed
risk of burdensome costs
in the next
of our
arguments
opinion.4
consider this
part
Tameny
Claims
D. Cost
Arbitration
Sharing
of
silence on the issue of
agreement’s
Little
that the arbitration
argues
under
that
share costs
statutorily compelled
costs means
he would
Inc.,
310, in
of its
also cites Brennan
Tremco
support
Cal.4th
Stiegler
3Auto
Brennan,
Tameny
In
Armendariz
subject
requirements.
the
we
position that
are not
claims
parties
an
the
prosecution may be
for
action that
held that no
for malicious
maintained
suit
rule,
discussing
stated:
the reasons for this
court
through contractual arbitration.
resolve
ready
determination
of
private
always
does not
allow for
nature of
“[T]he
plaintiff’s
prior
actually
prosecution
in the malicious
why
action
terminated
whether
[citing Armendariz],
explain
need not
basis
Except
an arbitrator
favor.
for
claims
(Brennan, supra,
Brennan
did
consider
extension
of
p. 317.)
award.”
not
(People v.
claims,
Stiegler.
Tameny
upon by
Armendariz be relied
Auto
not
Cal.Rptr.2d
P.2d
Superior
Court
(Zamudio)
23 Cal.4th
our
authority
”].) Nor does
extension
propositions
are not
for
not considered’
‘cases
[“
arbitrations,
Tameny
Brennan’s
that
in most
Armendariz point
claims undermine
explain the
for
arbitrator need not
basis
the award.
claims,
Tameny
Little’s
Armendariz argues
if
extended
Stiegler
4Auto
that even
Neither
the trial
allege a
cause
action.
not state facts sufficient
complaint does
issue,
no view on the matter. On
express
and we
Appeal
court nor
Court of
addressed this
remand,
argument.
Stiegler
opportunity to
Auto
have an
reassert
this
will
1284.2,
Code of Civil Procedure section
and that
of such
imposition
costs renders the arbitration
unenforceable.
did
Armendariz
conclude
an arbitration agreement silent on costs was unenforceable. On
we
we
contrary,
held
would infer from
such silence
“the
employer must bear
arbitration forum
and that
costs”
absence
“[t]he
on arbitration costs
. .
specific provisions
.
not be
grounds
denying
enforcement
an arbitration agreement.” (Armendariz, supra,
Cal.4th
Association,
The California Motorcar Dealers
amicus curiae
behalf
on
Stiegler,
Auto
that our
argues
holding
costs in
has
Armendariz
been
*17
by the United States
supplanted
Tree,
Court’s
Supreme
holding
Green
on various federal statutory grounds, violation the Truth in including Act et Lending U.S.C. (TILA) (15 failing disclose certain seq.) § Tree, finance charges. (Green U.S. at 82-83 S.Ct. pp. pp. [121 The 517-518].) with the buyer’s agreement lender contained a binding arbitration clause that included all claims. The statutory agreement was silent on issue of who would the costs of arbitration. district pay The court the lender’s granted motion to arbitration but court compel reversed, that appeals holding the risk that the agreement posed plain tiffs to vindicate her “ability be statutory rights would undone by ‘steep’ costs, (Id. arbitration and therefore was unenforceable.” S.Ct. at at p. [121 p. 518].)
The United Supreme States Court reversed. It its first reaffirmed long- that are standing position claims arbitrable under the absent statutory FAA “to expression congressional intent a waiver preclude judicial Tree, remedies for the statutory at issue.” rights (Green 531 U.S. S.Ct. at p. 521].) Finding TILA, no such in the the court expression proceeded address the borrower’s that silence on argument the matter of arbitration costs created risk that she might have unacceptable pay costs and able prohibitive therefore not be to vindicate her statutory rights arbitration. The court “It be through stated: well that the existence of arbitration large costs could such as from preclude litigant Randolph her effectively federal in the arbitral vindicating statutory rights forum. But the record does not show that will bear such costs if Randolph goes she Indeed, arbitration. it contains on the As any information matter. hardly Court of . . . Appeals recognized, ‘we lack information about how claim- ants fare under Green Tree’s record arbitration clause.’ [Citation.] that fact silence on the subject, agreement’s the arbitration reveals that The ‘risk’ it unenforceable. render alone is insufficient plainly to justify speculative costs too be saddled with prohibitive will Randolph S.Ct. at 90-91 agreement.” (Id. pp. of an arbitration the invalidation fn. 522], omitted.) that basis on “To invalidate The court further explained: arbitration favoring agreements.’ federal policy the ‘liberal would undermine that the party with our holdings It would also conflict prior [Citation.] issue are that the claims at bears the burden of proving resisting seeking have held that the party for arbitration. We unsuitable [Citations.] intended the burden of that establishing Congress avoid arbitration bears Similarly, claims at issue. preclude [Citations.] where, here, to invalidate seeks party we believe expensive, that arbitration would prohibitively ground incurring such costs. showing bears the burden of the likelihood party showing did not meet that burden. How detailed prohibitive Randolph must come forward seeking be before the party must expense discuss; this case for in evidence is a matter we need with contrary *18 was the case was on merits discovery neither nor when during presented Court of therefore showing Appeals there at all on any timely point. silence with deciding agreement’s respect erred in that the arbitration Tree, at costs and fees rendered it unenforceable.” 531 U.S. (Green supra, added, 522-523], at fn. omitted.) 91-92 S.Ct. italics pp. pp. case, not most courts interpret- Green Tree was Although employment arrived at it have so in the context. These courts have ing done employment courts of the standard. Some meanings expensive” divergent “prohibitively not affect the and maintain that it does narrowly have that term interpreted Cole, set 105 F.3d of the forth in validity categorical position a arbitra- that the should the costs of employer mandatory employment pay Stores, Inc. v. Adams Cir. (See, City (9th tion of claims. Circuit e.g., 889; Co. 199 2002) 279 F.3d v. MRM Inv. 2002) Cooper (M.D.Tenn. 771, 781; 2001) Inc. 165 (N.D.N.Y. Ball v. SFX F.Supp.2d Broadcasting, that Other courts have held Green Tree 230.) represents depar- F.Supp.2d a case-by-case analysis ture from Cole's categorical position, requires fees the arbitration ability based on such factors the employee’s pay arbitration and fees. litigation (See, and the differential between projected (Blair); v. 283 F.3d 609 (3d 2002) Blair Gases Cir. e.g., Scott Specialty 143; 215 (D.D.C. 2002) F.Supp.2d Nelson v. Inc. Insignia/ESG, Bradford F.3d 549 (Brad- Inc. Cir. 238 2001) Semiconductor Systems, (4th Rockwell the em- information presented by Still other courts have held the ford).) to warrant invalidation before arbitration was too speculative ployee while agreement, retaining jurisdiction to reconsider the cost issue after arbitration. (See, e.g., Mildworm v. (E.D.N.Y. 2002) Ashcroft 171; v. Town F.Supp.2d Boyd Hayneville, AL. (M.D.Ala. 2001) F.Supp.2d 1272.)
Armendariz and First, Green Tree two agree fundamental tenets. silence about costs in is not grounds denying a motion Second, to compel arbitration. can arbitration costs bar- present significant riers the vindication Nonetheless, there statutory rights. difference significant between the two cases. Although Green Tree did not elaborate on the kinds of cost-sharing that would be arrangements unen- forceable, case, dicta in that and several federal cases cited above interpret- it, ing suggest federal law requires only employers impose “prohibitively expensive” Tree, arbitration costs on the employee (Green U.S. S.Ct. that determination of 522]), whether such costs have been are to be made aon imposed case-by-case Armendariz, hand, basis. on the other costs categorically imposes unique arbitration on when employers unwaivable to a rights pursuant mandatory employment agreement are stake. that Green Tree Assuming and Armendariz pose solutions to the problem of arbitration costs that are in different, some respects we do not agree with amicus curiae that the FAA states to with requires federal arbitration comply cost-sharing standards. As reviewed in the of this previous part Armendariz’s cost- opinion, shifting is not It requirement FAA. is not barrier to the preempted enforcement of agreements, nor it does disfavor improperly arbitration in Rather, to other contract comparison clauses. it derived from state contract law regarding of certain principles unwaivability public *19 in the rights context of a contract of adhesion. We do not discern from the United States Supreme Court’s on FAA a jurisprudence preemption require- that ment state law conform with federal law to the precisely manner in which such are public rights protected.
Furthermore, we
rejected
considered and
in
a
Armendariz
case-by-case
to arbitration costs similar to that
approach
courts
suggested by
interpreting
Green Tree
on
based
the differential
projected
between
arbitration and
(Blair,
fees.
at
litigation
609;
F.3d
supra,
Bradford,
238 F.3d
supra,
sure,
As we stated: “To be
would
p. 556.)
it
be ideal to devise a method by
which the
arbitration,
in
the same
in
exactly
position
put
costwise, as
or she
be
litigation.
he
would
in
But the factors
that
going into
to
ready
calculus refuse
admit
a
to
quantification. Turning motion
compel
arbitration
on
into mini-trial
the
costs and
comparative
benefits
arbitra-
tion
for a
be
litigation
would not
burdensome
particular employee
only
an
likely yield speculative
but would
on
trial court and
parties,
The individualized con
24 Cal.4th at (Armendariz, supra,
swers.”
interpret
costs that courts
arbitration
ability
pay
sideration
employees’
609;
F.3d
Blair,
Bradford,
(see
Green Tree
ing
contemplate
calcu
case-by-case
further complicate
would
p. 556)
F.3d
the notion that
also
in Armendariz
We
rejected
lation of prohibitive expense.
at the
arbitration costs
“there
be an advantage
apportioning
[would]
clearly
rather than at the outset. Without
of the arbitration
conclusion
create a
such
guidelines,
apportionment
articulated
postarbitration
discourage
that could
among
risk and uncertainty
employees
sense of
In for reasons stated courts to ensure the same means as federal state courts to adopt precisely burdensome stymied by will rights the vindication of public Armendariz arbitration costs. We continue believe that represents in the costs context soundest problem approach remand We conclude arbitration. therefore mandatory employment in this should require pay court employer compelling (Armendariz, supra, case “all of costs that are to arbitration.” types unique Cal.4th at p. 113.) Disposition
III. as it of the Court of is reversed insofar judgment Appeal (1) permits arbitral of awards than allowing greater enforcement of clause review claim, he $50,000 assuming arbitration of Little’s requires claim, Auto alleged Stiegler pay has such a without adequately requiring The cause is remanded to costs as set forth Armendariz. forum court to conduct instructions to direct the superior Court with Appeal this opinion. further consistent with the views expressed proceedings is affirmed. judgment all the Court of Appeal’s other respects, L, 1, Kennard, J., concurred. C. George, Werdegar, *20 the that with BAXTER, J., majority Concurring Dissenting. I agree unconscionable, in was $50,000” the clause the arbitration “over unenforceable, hand, I agree On the other and therefore but was severable. arbitra the rules for contractual Brown that procedural with Justice special Health in Armendariz v. Foundation claims, as set forth statutory tion of Services, 745, 6 P.3d 24 83 Cal.Rptr.2d Inc. Cal.4th Psychcare (2000) [99 1086 should not be (Armendariz), extended so-called claims Tameny that
669] an was in of terminated violation wrongfully public policy (see v. Atlantic Tameny 839, Co. 27 Cal.3d Cal.Rptr. [164 Richfield 1330, 610 P.2d A.L.R.4th 314]).1 I dissent also from the rules, decision to retain majority’s first announced Armendariz, for allocation the of costs of of statu- mandatory view, claims.2 In tory United States my intervening Court authority Supreme undermines soundness of sharply Armendariz’s approach, and should us to alter our of the cost issue. prompt analysis To Code of Civil recap briefly: Procedure section 1284.23 states that unless arbitral otherwise, parties agree arbitration costs shall be shared rata. section is pro Though 1284.2 of implied term every costs, silent on Armendariz deemed it preempted part need to ensure that financial considerations would deter an employee who had agreed arbitration from mandatory forum to using pursue claim of under Fair statutory discrimination Employment Housing Act To (FEHA). resolve this Armendariz held that problem, notwithstanding 1284.2, section of regardless any particularized showing of hardship need, FEHA all impliedly requires employer pay employee’s “forum costs” of contractual arbitration aof FEHA claim. (Armendariz, 24 Cal.4th 107-113.)
Thereafter, the United States Court decided Green Supreme Tree Finan- cial Corp.-Ala. Randolph (2000) U.S. S.Ct. 148 L.Ed.2d Green held (Green Tree that where Tree). has evinced no Congress intent limit claim, of a arbitrability federal particular statutory party to avoid seeking mandatory contractual arbitration of such a claim has the burden that the costs arbitration he showing to incur will likely render that forum “prohibitively expensive.” (Id. S.Ct. To cost, contractual arbitration on mere 522].) deny risk undue said Tree, Green “would undermine the ‘liberal federal policy favoring . . . agreements .’ would also conflict with our hold- prior [citation] [and] that the ings party resisting arbitration bears burden that the proving arbitration,” 1 throughout contract,” I opinion, this use the terms “contractual “arbitration agreements mandatory and “arbitration to refer clause” disputes arise in the indicate, majority apply parties’ As different considerations future. agreements disputes already to arbitrate that have arisen. “statutory throughout because, 2 I the term following use claims” discussion like Justice Brown, would of Armendariz protections rights arising I not extend the cost beyond directly action, claims, from statute to other such majority may causes which the consider “nonwaivable.” 3 All further unlabeled references are to the Code of Civil Procedure. *21 (Id. at 91 p. for arbitration. are [121 claims at issue unsuitable [Citations.]” rule of course, of was the analysis, to Green Tree's Central 522].) S.Ct. at p. that arbitration agreements 9 U.S.C. 2) Arbitration Act (FAA; the Federal § grounds appli- be invalidated may commerce interstate involving S.Ct. at Tree, p. supra, to contracts generally. (Green cable [121 521].) Tree, “employer retain Armendariz's majority the instant Green
Despite strictly Tree does not Green majority say cost formula. always pays” law to the contract California application us to alter Armendariz's require majority may On that technical point, issue of arbitration costs. clear, however, FAA, which Green Tree makes not be correct. As “ law, ‘to reverse state arbitration was adopted both federal and governs . . and to place . agreements hostility longstanding judicial ” Tree, other contracts.’ footing (Green the same agreements upon [such] 513, v. Interstate/ 521], Gilmer 531 U.S. S.Ct. quoting supra, 1647, 1651, 114 20, 24 S.Ct. Lane 500 U.S. Johnson Corp. that even where L.Ed.2d Green Tree holds essence (Gilmer).) stake, is when courts interfere with rights statutory vindication exhibit to one party, they undue cost agreement by presuming arbitration, which toward contractual “hostility” particular suspicion FAA was intended to prevent. California requirement
At direct odds with this
current
principle
“forum costs” of arbitrating
must always pay
employee’s
employer
law
claim,
need, and
a California
contrary
of actual
statutory
regardless
term in
arbitration contract unless
cost-sharing
implies
every
reconsid-
I believe Green Tree warrants
otherwise.
expressly agree
parties
on cost allocation.
eration
the Armendariz
views
majority’s
It
California’s minimum
articulating
should
noted that
claims,
placed
Armendariz
contractual arbitration
mandatory
case,
Services
Security
reliance on
federal
Cole v. Burns Intern.
primary
Cole concluded
Among
things,
Cir.
Under the I would overrule Armendariz’s cost arbitrary allocation formula. In its I would Green Tree’s that if place, adopt principle resists party contractual mandatory claim on statutory cost, grounds undue he must amake timely, the particularized showing that, also expected expense, case, must demonstrate in his this particular cost would make arbitration prohibitively to court expensive compared Evidence on litigation. this issue could be to the court presented deciding motion If arbitration. compel arbitration demonstrated party opposing prohibitive the court expense, grant could the motion to compel upon condition that the proponent with the caveat discussed accept, below, a more allocation of costs. equitable
I close with one final In of the point. light strong arbitra- policy favoring tion on the terms agreed by interference parties, with contract’s cost statute, provisions, express implied by should be counte- nanced only to the degree actually to assure that resort necessary mandatory to the arbitral forum has not deterred vindication of a claim. For reason, this whatever reallocation of costs pre-arbitration necessary to ensure that advance, the claimant is not deterred this allocation should be tentative only, and should be subject to once readjustment the true and rewards of the expenses arbitral are known. proceeding it become hindsight, may arbitration, that the actual costs of apparent faster, with its and more economical simpler, were less than the procedures, claim probable expenses resolving same court. Even if were they greater, difference minimal, so may prove claimant’s given general financial or the of his final ability magnitude recovery, that the other forcing party costs, absorb all claimant’s forum to their contrary agreement, an unfair interference with contractual arbitration. Under these circum- stances, the who “fronted” costs for the party claimant should be reimbursed for the excess. Gilmer, 4Cole conceded that cost This, allocation was not issue in 20. U.S. Gilmer, Cole explained, was because the arbitration in brokerage between a firm and its
employee, subject industry was to a standard practice employer securities that the pays (Cole, 1483.) arbitrator’s fees. 105 F.3d cannot, judicial subject appropriate I the arbitrator why see no reason review, proceedings.5 cost allocation at the conclusion reassess the magnitude should consider costs, the arbitrator “When apportioning *23 a arbitration, share of pay the of the ability the unique employee costs to a court costs, compared the of the arbitration and overall expense these Brown, 83, (conc. opn. 24 Cal.4th 129 (Armendariz, proceeding.” claimant in above, by recovered actually As indicated amount J.).) any “Ultimately, appor be a relevant consideration. arbitration should also if known at on the tionment should that the costs imposed employee, ensure her enforcing not have deterred her from the onset of would litigation, rights. these vindicating her from statutory rights effectively stopped (Ibid.) [Citations.]” in case (Little) was this
Believing dispositive, Armendariz a Green showing Believing never to make sought prohibitive expense. held that the arbitration Tree was the Court dispositive, Appeal simply As no its enforcement. silence on costs was bar to unconditional agreement’s it indicated, I to the extent is inconsistent I have overrule Armendariz Thus, claim were entitled to with Green Tree. if I believed Little’s Tameny a remand to allow Little to make Armendariz I would protections, support the requisite showing. it reverse the insofar as judgment
I would Court of Appeal permits a arbitral review of awards than allowing greater enforcement of clause $50,000, and in all other would affirm the Court of Appeal’s judgment I If with the that Armendariz respects. agreed majority protections applied claims—which I do not—I would reverse Court Tameny additionally this claim without insofar as it Little to arbitrate judgment requires Appeal’s him to of forum costs would allowing demonstrate rata pro sharing him, and I would remand to the make arbitration prohibitively expensive further Court of with directions to instruct the trial court to conduct Appeal this consistent with the views in opinion. proceedings expressed Chin, Brown, J., J., concurred. J., I
BROWN, Like the find the Concurring Dissenting. majority, arbitration in the arbitration unconscionable. appellate provision ante, I that this should be agree “provision also (Maj. opn., 1281.2), (§ granting compel 5 I assume that when motion to contractual costs, both superior tentative reallocation of and on court could condition its order power any readjustment later ordered parties’ agreement that the court would retain review Moreover, readjustments cost should also within power the arbitrator. review (§ 1285 et jurisdiction party in either moves to vacate the award. court’s the event seq.) 1090
severed and rest of I, enforced.” how- (Ibid.) ever, with the disagree set majority’s application forth Services, Armendariz v. Foundation Health Psychcare Inc. 24 (2000) Cal.4th 745, 83 6 P.3d Cal.Rptr.2d to an action (Armendariz) alleging wrongful termination violation of public policy (Tameny (see claim) 167, v. Atlantic Tameny Co. 27 Cal.3d 178 Cal.Rptr. Richfield A.L.R.4th P.2d Unlike the I 314]).1 found Brown majority, Securities, v. Wheat First (D.C. Inc. Cir. F.3d 2001) (Brown) and would not persuasive Armendariz to claims. apply Armendariz, “In we held that claims under the [California Fair Employment Code, Act et Housing (FEHA) (Gov. seq.)] § *24 to ante, certain minimal . subject . . .” at requirements (Maj. opn., We these imposed the requirements despite the Federal preemptive scope Arbitration Act 1 (9 U.S.C. et based on (FAA) seq.) United States § “[t]he Court’s dictum that Supreme in to party, agreeing statutory arbitrate claim, ‘does not the substantive forgo rights afforded the statute [but] ” submits their resolution in an arbitral . . . forum.’ (Armendariz, 99, 24 Cal.4th at Mitsubishi supra, p. quoting Motors v. Soler Chrysler- Plymouth 3346, 3354, 473 U.S. 628 S.Ct. L.Ed.2d Because the (Mitsubishi).) Legislature enacted FEHA with the inten- express tion of certain safeguarding rights the benefit of the at we public large, concluded that neither federal nor state arbitration laws our preclude impo- sition restrictions on the Armendariz, arbitration of FEHA claims. (See so, Cal.4th at In 100-101.) doing we limited our pp. carefully holding arbitrations claims. statutory
Our reliance heavy on Cole v. Burns Intern. Security Services Cir. (D.C. 1997) F.3d 1465 (Cole) demonstrates the limited of our in scope holding Armendariz, Cole, Armendariz. (See Cal.4th at the 101-102.) pp. District of Columbia Circuit Court of same Appeals imposed require- ments we in Armendariz imposed (Cole/Armendariz requirements) arbitration of claims under title VII of the Civil Act of Rights 1964 (Title It VII). (Cole, supra, 105 F.3d at p. these 1482.) imposed requirements because of the intent in importance congressional respecting expressed like statutes “public [Age Employment Discrimination and Title Act] (Cole, VII.” at p. 1482.) con- Ascertaining unwaivability rights text, ferred by these statutes from their public and history, purpose citing intent, this unwaivability as evidence of the court congressional found concurring ante, 1 Forthe dissenting opinion, reasons stated in Justice Baxter’s also I disagree majority’s modify with requirements light refusal Armendariz’s cost Tree Corp.-Ala. Randolph (2000) Green Financial 531 U.S. S.Ct. 148 L.Ed.2d 79 [121 373]. protections employees certain procedural intended
Congress provide Thus, not additional Cole did impose rights. (Ibid.) to vindicate these seeking their claims based solely these statutory on the arbitration of requirements concerns. unwaivability policy public this made expressly Circuit Court Appeals
The District of Columbia the Cole/Armendariz Brown, impose the court refused to clear in Brown. In claim identical to virtually a common law on the arbitration of As the 257 F.3d 825.) at issue here. (Brown, supra, p. claim statutory rights” “at vital (Brown, was limited points court Cole explained, intent—does congressional and “our central 825), rationale—respecting further noted that context” court (ibid.). extend beyond enforcement of arbitration restrictions on the the FAA “state preempts from the arbitration restricting courts necessarily precludes agreements” the court observed Finally, 826.) of common law claims. (Brown, would, to the FAA crafted judicially exceptions the creation of public policy all, most, if not tort and matter, the arbitration of subject as a practical at p. 826.) (Brown, claims to Cole/Armendariz requirements. contract Brown contrary, I believe arguments to Notwithstanding majority’s above, limited the *25 carefully here. As we guide explained should our decision ante, at And our of Armendariz to statutory rights. (See application on the arbitration rationale Cole/Armendariz imposing not extend beyond FEHA intent—does legislative claims—respecting ante, context. statutory at p. 1090.) (See, own so both our Indeed, Congress we are from doing by precluded “ who desired enacted the FAA ‘to assure those
Legislature. Congress commerce that their contracts related to interstate whose .’” not undermined ... state courts . . . (South be expectations 852, 859, 1, 79 L.Ed.2d 465 U.S. 13 S.Ct. Keating (1984) land v. Corp. [104 enforce “the of state courts to unwillingness 1].) Recognizing widespread be intended the FAA “to a broad Congress arbitration agreements” (ibid.), Congress was problems to meet scope large enactment appropriate hostility 14 at 860])—i.e., judicial at S.Ct. p. U.S. addressing” (465 p. [104 at 13 (id. state-law constraints” p. to arbitration—and “unencumbered by state laws and rules such, the all at As FAA p. 859]). preempts S.Ct. [104 v. (1995) Terminix Cos. Dobson arbitration. Allied-Bruce disfavoring (See 838-839, 265, 834, 753].) 130 L.Ed.2d 513 U.S. 272 S.Ct. [115 of its enactments. course, is free to circumscribe scope Congress Of 220, 226 482 U.S. Inc. v. McMahon (Shearson/American Express (1987) [107 with this 2332, 2337, principle, L.Ed.2d Consistent S.Ct. 96 185].) 1092
United States
Court has
Supreme
recognized that the FAA does not govern
“if
itself
‘Congress
has evinced
intention
a waiver of
preclude
judicial
”
remedies for the
at
issue.’
v.
rights
(Gilmer
Interstate/Johnson
20,
1652,
Lane
500 U.S.
26
Corp. (1991)
1647,
S.Ct.
114 L.Ed.2d
[111
26]
Mitsubishi,
)Gilmer),
Nonetheless, the just does that. A claim is common majority Tameny a law cause of action created this court—and not the by by Legislature. Green (See 2We have extended this rationale of Gilmer to state legislative enactments and the restricted statutory serving arbitration of certain causes of action a as public purpose transcendent (See Broughton Cigna Healthplans by a legislature. determined state (1999) 21 Cal.4th 1066, 334, (Broughton).) Cal.Rptr.2d reluctantly 1083 988 P.2d IWhile concede that [90 67] Broughton binding is until the States Supreme (but United Court decides otherwise see Broughton, supra, 1066, Chin, (dis. opn. J.)), 1088-1103 neither this court nor the United Supreme States Court suggested may, has ever that a federal or state court on its own initiative, restrict the of a common law cause of action. 16, Cal.Rptr.2d 19 Cal.4th v. Ralee Co. Engineering that an has determined our [“Although Legislature P.2d (Green) 1046] ..., we either will party’s terminable at contract is generally employment that recognizing employ this rule by created a narrow to exception have to limits that funda is subject to an at-will right discharge er’s Thus, added, Tameny fn. omitted)].) mental public imposes” (italics policy a and the public policy are a judicial—and legislative—construct, claims Legisla a measure of these claims “is underlying inconsequential [the As 826.) F.3d at (Brown, p. in the stated interest policy.” ture’s] the FAA and our result, of Armendariz violates the extension majority’s scheme. own unwaivability Tameny to establish the
The statutes cites majority terms, to section its applies claims are Civil Code by inapposite. Meanwhile, merely Code section 1668 enacted Civil by Legislature. laws . from anyone . . “directly indirectly declares that contracts or exempt fraud, his own or willful to injury property person responsibility another, law, are or violation of whether willful or negligent, against” public not, however, from anyone An arbitration does exempt policy. Rather, agreement merely for his or her wrongdoing. responsibility is made. (See the forum in which determination of changes responsibility Gilmer, 500 U.S. S.Ct. at [parties compelled “ arbitral, arbitrate their their resolution in an merely ‘submit)] claims Thus, 1668 does not judicial, rather than forum’ Civil Code section ”].) evince a intent to on the arbitration of legislative any restrictions impose claims. Tameny event,
In claims any unwaivability focus on majority’s Tameny To evade FAA misplaced. preemption, majority purports apply to enforce a contractual contract defense generally applicable by “refusing . . . unwaivable forgo rights term . . . would force a party public ante, Thus, . . . .” sees “no reason majority (Maj. opn., s unwaivable logic distinguish statutory rights under Armendariz’’ between derived from common law.” The rights (Ibid.) majority’s and unwaivable to arbitrate however, is finds an majority logic, specious. satisfaction of the Cole/ claims violative of absent public policy deficiencies solely alleged unique Armendariz because so, doing established an otherwise valid agreement. arbitral forum necessarily inability its majority premises holding plaintiff’s purported *27 creates a rule his claim in the arbitral forum and vindicate common law such, a holding As rests on to arbitration specific agreements. majority’s afforded of as a method of weakening protections “suspicion (Rod rejected long ago. the substantive law would-be complainants” 477, S.Ct. 490 U.S. 481 riguez de v. Shearson/Am. Quijas Exp. (1989) [109 1094
1917, 1920, 104 L.Ed.2d true 526].) regardless This whether the claim is waivable or not.
Thus, a claims is red unwaivability Tameny herring. crucial is whether there is question Gilmer, evidence of a any congressional (see 500 at supra, U.S. 26 S.Ct. or p. p. 1652]) legislative intent (see [111 Broughton, 21 Cal.4th at on 1083) restrictions supra, p. place arbitra tion claims. While the of a Tameny estab unwaivability right text, lished by statute’s history, may or evidence such an intent purpose Cole, 1482; Armendariz, 105 (see F.3d at supra, 24 Cal.4th at p. supra, 100), judicial for finding unwaivability reasons cannot. public policy Indeed, the public most, not policy exception majority if adopts subjects all, tort to the claims Cole/Armendariz “All claims not requirements. based . . . contract—including, example, defamation and tortious interfer ence claims . . values that has in .—implement one or another society way (Brown, thought deserving.” 257 F.3d at this p. 826.) Under public rationale, “it is hard to see falls policy what outside it.” For (Ibid.) example, under the majority’s logic, any arbitration of an intentional tort claim must abide by Cole/Armendariz because such are requirements claims unwaiv able under Civil Code section 1668.
In this this case is no respect, different from In Mas Mastrobuono. trobuono, the United States Court held that the FAA Supreme preempted rule judicially created arbitrators prohibiting from dam awarding punitive even a state court ages though created the rule for reasons. public policy 55, 514 (Mastrobuono, supra, 1215, U.S. at 58 S.Ct. pp. pp. [115 The same 1216-1217].) reasoning our precludes application judicially created Cole/Armendariz to the arbitration of claims. a rule By creating to arbitration applicable only provisions, majority Associates, violates the FAA. necessarily Doctor’s v. (See Inc. Casarotto 681, 1652, 1656, U.S. S.Ct. 134 L.Ed.2d 902] [“Courts not, however, invalidate arbitration under agreements state laws appli cable only arbitration provisions”].)
Our extension
Armendariz to Tameny claims therefore
Con
usurps
gress’s
establish “the
authority
Const.,
law of
land”
art.
supreme
(U.S.
VI, cl.
and the
2)
Legislature’s
to declare the
“responsibility
public policy
Moreover,
the state”
(Green,
Cal.4th
71).
imposing
restrictions that have no
arbitration-specific
congressional
legislative
basis, the
undermines
majority
“liberal federal
favoring
policy
arbitration”
H. Cone
Constr.
(Moses
Hospital Mercury
Corp. (1983)
1,
U.S.
S.Ct.
74 L.Ed.2d
but also contravenes
765]),
California’s
in favor of arbitration
“strong public policy
speedy
*28
Arbuthnot,
resolution.” (Ericksen,
of dispute
means
inexpensive
relatively
312,
Walsh,
35 Cal.3d
Oak
(1983)
Inc. v. 100
Street
&
Kearney
McCarthy,
cannot be
claims
if Even
581,
251]).
673 P.2d
Cal.Rptr.
322 [197
require
of the Cole/Armendariz
imposition
vindicated absent
effectively
By
them.
declined
impose
have
ments,
Legislature
and our
both Congress
“the
turning
intent on
intentions,
majority
appears
their
disregarding
(Madden
arbitration.”
toward
hostility
to an era
clock backwards
judicial
699,
Cal.Rptr.
17 Cal.3d
(1976)
Foundation Hospitals
v. Kaiser
at”
Indeed,
away
to be “chip[ping]
this court
882,
appears
1178].)
552 P.2d
construing
scope
broadly
Court precedents
Supreme
United States
so.
against doing
court’s admonition
indirection,”
high
despite
FAA “by
Stores,
105, 122
S.Ct.
Adams
U.S.
Inc. v.
City
(Circuit
once
clarify
court
urge
high
I therefore