Date: 07-04-2018

Case Style: Carlos Juarez v. Wash Depot Holdings, Inc.

Case Number: B282667

Judge: Gilbert, P.J.

Court: California Court of Appeals Second Appellate District Division Six on appeal from the Superior Court, Ventura County

Plaintiff's Attorney: James M. Lee, Caleb H Liang, Hector Antonio Marrache, Jennifer H. Ryu and Hagop Jack Bazerkanian

Defendant's Attorney: Andrew Hoon Woo and Kevin Vaughn Koligian

Description: A company provides its employees with a handbook setting
forth its employment policies. The handbook is written in
English and Spanish. The handbook requires arbitration of
employment disputes and denies an employee's right to bring an
action under the California Private Attorneys General Act
(PAGA). The English version states that the denial of the right
to bring a PAGA action is severable if such denial is found by a
court to be unenforceable. The Spanish version provides that the
PAGA denial is not severable.
In many cases the disparity between the treatment of
PAGA claims may have no consequences. But under the facts
2
here, there are consequences. The arbitration agreement is
unenforceable.
Wash Depot Holdings, Inc. and Sparkling Image Corp.
(collectively Wash Depot) appeal an order of the trial court
denying a petition to compel arbitration of plaintiff's wage-andhour-violations
lawsuit. We affirm.
Arbitration has long been accepted as an efficient and costeffective
alternative to litigation. (Epic Systems Corp. v. Lewis
(2018) _ U.S. _, _ [138 S.Ct. 1612, 1621]; Pinnacle Museum Tower
Assn. v. Pinnacle Market Development (US), LLC (2012) 55
Cal.4th 223, 235, fn. 4; Brookwood v. Bank of America (1996) 45
Cal.App.4th 1667, 1671 [California has a strong public policy in
favor of arbitration as a speedy and relatively inexpensive
method of dispute resolution].) Thus, an employer and employee
may voluntarily agree to arbitrate their employment-related
disputes, but courts will not enforce arbitration agreements that
are unconscionable or in violation of public policy. (Code Civ.
Proc., § 1281 ["A written agreement to submit to arbitration an
existing controversy or a controversy thereafter arising is valid,
enforceable and irrevocable, save upon such grounds as exist for
the revocation of any contract"]; Armendariz v. Foundation
Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97
["California law, like federal law, favors enforcement of valid
arbitration agreements"], overruled on other grounds by AT&T
Mobility LLC v. Concepcion (2011) 563 U.S. 333, 344-346.)
Carlos Juarez is an hourly employee at Wash Depot's handcar
wash in Ventura. During his employment, Wash Depot
adopted a policy set forth in its employee handbook requiring
arbitration of legal claims arising from the employment
relationship. After Juarez filed a wage-and-hour-violations
3
lawsuit, individually and on behalf of others, Wash Depot sought
to compel arbitration pursuant to this policy. The trial court
denied Wash Depot's motion, however, concluding that the
arbitration agreement is unenforceable according to Iskanian v.
CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348
(Iskanian) and Securitas Security Services USA, Inc. v. Superior
Court (2015) 234 Cal.App.4th 1109 (Securitas). In our
independent review, we also conclude that the arbitration
agreement is unenforceable.
FACTUAL AND PROCEDURAL HISTORY
On December 2, 2016, Juarez filed a first amended
complaint against Wash Depot, alleging 13 causes of action for
various wage-and-hour violations, including failure to pay earned
wages, minimum wages, overtime compensation, rest break
compensation, and meal period compensation, among other
violations. Juarez also alleged a representative action pursuant
to PAGA, set forth in Labor Code section 2698 et seq. Juarez
stated that Wash Depot employed him as an hourly non-exempt
employee to wash, detail, and dry vehicles at its Market Street
location.
Wash Depot filed a motion to compel arbitration of Juarez's
claims, relying upon section EE of its employee handbook,
entitled "Dispute Resolution Agreement." Paragraph EE(1)
provides in part: "Except as it otherwise provides, this
Agreement is intended to apply to the resolution of disputes that
otherwise would be resolved in a court of law, and therefore this
Agreement requires all such disputes to be resolved only by an
arbitrator through final and binding arbitration and not by way
of court or jury trial." The paragraph specifically includes the
4
employment relationship and compensation, breaks, and rest
period claims, among others, within the arbitration mandate.
Paragraph EE(4)(c) states a waiver of the employee's right
to bring a representative PAGA action: "There will be no right or
authority for any dispute to be brought, heard or arbitrated as a
private attorney general action." The English-language version
of the handbook further provides that the PAGA waiver is
severable from the arbitration agreement should a court find the
waiver is unenforceable. In contrast, the Spanish-language
version of the handbook provides that the PAGA waiver is not
severable from the arbitration agreement.
Paragraph A provides, “This Handbook may be translated
into languages other than English as a convenience to our
employees. Any ambiguity between this Handbook and any
translated version will be governed by the English version."
Paragraph EE(7) also permits an employee to "opt out” of
arbitration by submitting an appropriate form to the employer.
On July 13, 2013, Juarez signed two acknowledgements,
one in the Spanish language and one in the English language,
stating that he received the handbook and agreed to its terms.
He also signed a separate acknowledgement in the Spanish
language stating that he received a copy of the dispute resolution
agreement.
Juarez resisted Wash Depot's motion to compel arbitration.
In support of his opposition, Juarez declared that he commenced
working at Wash Depot in April 2012, and in July, 2013, he
executed the acknowledgement documents on the condition of
"return[ing] to work." Juarez also declared that Wash Depot did
not provide him with either an English-language version or a
5
Spanish-language version of the handbook. He added that he
was not informed of, nor was he aware of, the arbitration policy.
Following written and oral argument, the trial court denied
the motion to compel arbitration. In ruling, the trial judge stated
that the differences in the severability of the PAGA waiver clause
in the English-language version and the Spanish-language
version of the handbook were "profound" concerning "a very
significant subject." The court also applied Civil Code section
1654 to construe the arbitration agreement against the drafter,
Wash Depot. (Ibid. ["In cases of uncertainty not removed by the
preceding rules, the language of a contract should be interpreted
most strongly against the party who caused the uncertainty to
exist"].) The court made no factual findings concerning Juarez's
claims that he did not receive a copy of the handbook in either
language.
Wash Depot appeals the trial court's order denying its
petition to compel arbitration.
DISCUSSION
I.
Wash Depot first argues that the trial court abused its
discretion by considering Juarez's untimely opposition (two days
late) to the motion to compel arbitration. Wash Depot points out
that it objected to the late filing in writing and again at the
hearing held 10 days later. Moreover, Juarez assertedly made no
showing of mistake or excusable neglect for his untimely
response.
The trial court did not act unreasonably by considering
Juarez's opposition. The filing was a mere two days late and the
hearing occurred 10 days later. Wash Depot did not establish
prejudice other than perhaps the inconvenience of working on the
6
weekend. In view of the strong policy of the law favoring the
disposition of cases on the merits, the court did not abuse its
discretion. (Au-Yang v. Barton (1999) 21 Cal.4th 958, 963.)
"Proceeding to judgment in the absence of a party is an
extraordinary and disfavored practice in Anglo-American
jurisprudence: '[T]he policy of the law is to have every litigated
case tried upon its merits, and it looks with disfavor upon a
party, who, regardless of the merits of the case, attempts to take
advantage of the mistake, surprise, inadvertence, or neglect of his
adversary.'" (Ibid.)
II.
Wash Depot contends that the trial court erred in its
conclusion that the arbitration agreement is unenforceable,
asserting that the English-language version of the handbook
states that it controls in event of an ambiguity with the Spanishlanguage
version. Wash Depot adds that Juarez acknowledged in
writing that he received each of the language versions of the
handbook.
Wash Depot also points out that courts must interpret
arbitration agreements in a manner to preserve the right to
arbitrate, including severing invalid clauses when necessary.
(Civ. Code, §§ 1599, 1643 [if possible without violating parties'
unambiguous intent, a contract is interpreted as to make it
"lawful, operative, definite, reasonable, and capable of being
carried into effect"]; Pearson Dental Supplies, Inc. v. Superior
Court (2010) 48 Cal.4th 665, 682 [arbitration provision must be
interpreted in a manner that renders it enforceable rather than
void].)
Our review of an order denying a motion to compel
arbitration considers the arbitration agreement to determine
7
whether it is legally enforceable pursuant to general principles of
California contract law. (Baxter v. Genworth North America
Corp. (2017) 16 Cal.App.5th 713, 722; Carmona v. Lincoln
Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 82.) To
the extent the trial court's decision involves factual resolution, we
review the court's factual findings for substantial evidence.
(Ibid.) In assessing whether the court erred by declining to sever
unconscionable provisions and to enforce the remainder of the
arbitration agreement, we apply an abuse-of-discretion standard.
(Carmona, at p. 83.)
The trial court properly concluded that the PAGA waiver
set forth in the handbook is unenforceable as against public
policy. Our Supreme Court in Iskanian, supra, 59 Cal.4th 348,
384, held that an employee's right to bring a PAGA action may
not be waived: "We conclude that where, as here, an employment
agreement compels the waiver of representative claims under the
PAGA, it is contrary to public policy and unenforceable as a
matter of state law." This is so because a waiver indirectly
exempts the employer from responsibility for his own violation of
law. (Id. at p. 383.)
Moreover, the trial court did not abuse its discretion by
declining to sever the PAGA waiver and enforce the remaining
arbitration agreement. (Securitas, supra, 234 Cal.App.4th 1109,
1126.) "We decline to conclude that [the employee's] mere
opportunity to opt out of the dispute resolution agreement or
obtain counsel's advice on it at the inception of [his] employment
and before any dispute arose, without more evidence of [his]
knowledge, gave [him] a sufficient understanding of the relevant
circumstances and likely consequences of forgoing [his] right to
bring a PAGA representative action." (Id. at p. 1122.)
8
At best, the difference in the severability clauses in the
English-language and Spanish-language versions of the
handbook is negligent; at worse, it is deceptive. Under the
circumstances, we construe the ambiguous language against the
interest of the party that drafted it. (Civ. Code, § 1654; Securitas,
supra, 234 Cal.App.4th 1109, 1126.) "[W]here . . . the written
agreement has been prepared entirely by the employer, it is a
'well established rule of construction' that any ambiguities must
be construed against the drafting employer and in favor of the
nondrafting employee." (Sandquist v. Lebo Automotive, Inc.
(2016) 1 Cal.5th 233, 248.) This rule applies with particular force
in the case of a contract of adhesion. (Ibid. [the party of superior
bargaining power prescribes the words of the agreement but the
subscribing party lacks the economic power to challenge the
language].) Indeed, Wash Depot may have left the meaning of
severability "deliberately obscure, intending to decide at a later
date what meaning to assert." (Id. at p. 247.)
In view of our discussion, it is unnecessary to discuss the
parties' remaining contentions.

Outcome: The order is affirmed. Respondent shall recover costs on appeal.

Plaintiff's Experts:

Defendant's Experts:

Comments: