Chezek v. Aramark Uniform & Career Apparel

Filed 11/29/05 Chezek v. Aramark Uniform & Career Apparel CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

PHILIP STEVEN CHEZEK, Plaintiff and Respondent, v. ARAMARK UNIFORM & CAREER APPAREL, INC., Defendant and Appellant.

B177122 (Los Angeles County Super. Ct. No. BC313352)

APPEAL from an order of the Superior Court of Los Angeles County,

Helen I. Bendix, Judge. Reversed and remanded with directions.

Winston & Strawn, Paul J. Coady and Amanda C. Sommerfeld for Defendant and Appellant.

Law Offices of Richard A. Love, Richard A. Love and Beth A. Shenfeld for Plaintiff and Respondent.

This is an appeal from an order denying a motion to compel arbitration of a dispute arising from an employment relationship. We conclude that the trial court erred by finding the arbitration agreement unconscionable and unenforceable. We reverse.

FACTUAL AND PROCEDURAL SUMMARY

Respondent Phillip Steven Chezek was hired by Appellant Aramark Uniform & Career Apparel, Inc. as a help desk support analyst in its information systems department in June 2000. That same month, Chezek signed an employment agreement which included a provision that all claims under the agreement would be subject to arbitration. The provision specifically reserved to Aramark the right to seek injunctive relief in court for violations of the agreement’s nonsolicitation, noncompetition, and nondisclosure provisions. The agreement expressly provided for severability if any paragraph or provision was found illegal, invalid, or unenforceable.

Chezek filed a complaint against Aramark in April 2004, alleging four causes of action: (1) violation of Labor Code sections 510 and 1198; (2) retaliation; (3) wrongful termination in violation of public policy; and (4) unlawful business practices in violation of Business and Professions Code sections 17200 et seq. Chezek also sought an injunctive remedy in his cause of action for unlawful business practices. The complaint alleged that Aramark misclassified Chezek as exempt from California’s overtime compensation requirements, and that he was terminated in January 2004 in retaliation for objecting to this classification.

On May 17, 2004, Aramark served Chezek with a petition to compel arbitration of all claims except the unlawful business practices cause of action which sought injunctive relief. Chezek filed and served an opposition to the petition on June 18, 2004, after the expiration of the 10-day period permitted by Code of Civil Procedure section 1290.6[1] for a response. After two hearings, the trial court found good cause under section 1290.6 to allow consideration of Chezek’s untimely response. The court held that the arbitration agreement was procedurally and substantively unconscionable, and that the provision allowing Aramark injunctive relief could not be severed. The court denied Aramark’s petition on July 26, 2004.

Aramark filed this timely appeal.

DISCUSSION

I

Aramark contends the trial court erred by considering the merits of Chezek’s opposition to the petition to compel arbitration. The court erred, it claims, because Chezek admitted all of the allegations in the petition by failing to respond within the 10 days prescribed by section 1290.6. Aramark argues both that the trial court did not have the authority to allow a late response under section 1290.6, and that it abused its discretion by finding good cause for relief from the untimely response under either section 473 or the court’s inherent equitable power.

Section 1290.6[2] requires that any response to a petition to compel arbitration “shall be served and filed within 10 days” after service of the petition. Aramark filed and served the petition on May 17, 2004. Chezek filed and served an opposition on June 18, 2004. Arguing that the opposition should have been filed no later than June 1, Aramark contends that it should be disregarded and all of the facts alleged in its petition be deemed admitted as provided in section 1290.[3]

The trial court found good cause for the delay, based on a mistake by Chezek’s counsel in treating the petition as a motion. Typically, a response to a motion must be filed nine court days prior to a hearing. (§ 1005, subd. (b).) A response to a petition to compel arbitration, however, must be submitted within 10 days. (§ 1290.6.) Aramark cites DeMello v. Souza (1973) 36 Cal.App.3d 79, 84 for the proposition that section 1290.6 operates as a statute of limitation, so that the trial court may only consider a late response if there is a proper showing of cause pursuant to section 473 or the court’s inherent equitable power.

The cases that discuss section 1290.6 are factually inapposite because they deal primarily with petitions to vacate or confirm arbitration awards and the interplay between the time limitations of sections 1288.2 and 1290.6. But they suggest that the trial court has discretion to allow a late response, particularly if doing so will not prejudice the petitioner. (See MJM, Inc. v. Tootoo (1985) 173 Cal.App.3d 598, 603; Travelers Indemnity Co. v. Bell (1963) 213 Cal.App.2d 541, 544-545; Atlas Plastering, Inc. v. Superior Court, supra, 72 Cal.App.3d 63, 68; Edna H. Pagel, Inc. v. Teamsters Local Union 595 (9th Cir. 1982) 667 F.2d 1275, 1278: “We do not read the [California] state law as barring a state court judge from permitting a late response to a petition [to vacate an arbitration award].” The filing deadline in section 1290.6 is not jurisdictional, as it allows an extension for good cause and the court may, without making a formal order, and in the absence of an objection, elect to treat the filing of a responsive opposition as timely. (See, e.g., Atlas Plastering, Inc. v. Superior Court (1977) 72 Cal.App.3d 63, 68.)

Aramark acknowledges that the 10-day period may be extended by the court for good cause, but argues that any request for an extension must be made before expiration of the 10-day limit. Even if we accept this argument, the trial court acted within its authority to grant relief under section 473, subdivision (b), which provides: “The court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect.”

Chezek’s supplemental memorandum on the issue of timeliness reminded the court of its authority to grant relief pursuant to section 473. The memorandum, accompanied by the declarations of Chezek’s counsel and his office manager stating the reasons for their untimely response, is sufficient to serve as a request for relief under section 473. Chezek explained that his attorney’s office manager scheduled the petition as a normal motion, rather than a response to a petition to compel arbitration. The attorney’s declaration states that he was away from the office the week in which the petition was served and did not review the petition until the day before the deadline for a normal motion.

These facts constitute an adequate showing of mistake and excusable neglect to permit relief under section 473. The standard is whether “‘“a reasonably prudent person under the same or similar circumstances” might have made the same error.’ [Citation.]” (Solv-All v. Superior Court (2005) 131 Cal.App.4th 1003, 1007.) The trial court has broad discretion to grant relief under this provision. (Ibid.) While the trial court made no explicit reference to section 473 in its order, it found that the scheduling error was a reasonable mistake caused by the unusual procedural requirements of section 1290.6. The court quoted language describing this provision as “a trap to the unwary practitioner.” The court concluded that in the absence of any prejudice to Aramark, Chezek demonstrated good cause for the late response. We find no abuse of discretion in this decision.

We turn to the merits of the parties’ contentions.

II

Aramark contends the trial court erred by finding the arbitration agreement was unconscionable, and hence unenforceable.

Arbitrability is a legal question subject to our de novo review. (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1527.) A trial court’s resolution of disputed facts will be upheld if supported by substantial evidence. (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1277.) Where no disputed extrinsic evidence is presented concerning an agreement to arbitrate, the arbitrability decision is reviewed de novo. (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 650.) Finally, refusal to enforce an arbitration agreement containing an unconscionable provision is reviewed under an abuse of discretion standard. (Armendariz v. Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 122 (Armendariz).)

Arbitration agreements may be invalidated if found unconscionable. (Armendariz, supra, 24 Cal.4th at pp. 113-114.) A determination of unconscionability involves two elements, procedural and substantive. Each must be present to invalidate a contract. (Ibid.) Procedural unconscionability focuses on the manner in which the agreement was negotiated and may result from either oppression or surprise due to unequal bargaining power. (Nyulassy v. Lockheed Martin Corp., supra, 120 Cal.App.4th at p. 1287.) Substantive unconscionability arises when a provision is overly harsh or one-sided, and is shown if the provision falls outside of the reasonable expectations of the nondrafting party or is “‘unduly oppressive.’” (Armendariz, supra, at pp. 113-114.)

Courts invoke a sliding scale to determine whether a provision is unconscionable; the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa. (Armendariz, supra, 24 Cal.4th at p. 114.)

Aramark acknowledges a “minimal showing” of procedural unconscionability based on the plain language of the provision: “WHEREAS, EMPLOYEE desires new or continued employment with ARAMARK which EMPLOYEE agrees he would not receive but for his agreeing to the terms herein, . . . ” Because this was a classic “take it or leave it” arbitration agreement on its face, where the employee had no choice but to sign the agreement in order to retain his employment, it is a contract of adhesion and thus considered procedurally unconscionable. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071.) Chezek made a strong showing of procedural unconscionability based on the unambiguous nature of this agreement as a contract of adhesion. As a result, he may make a lesser showing of substantive unconscionability under the sliding scale analysis. (Armendariz, supra, 24 Cal.4th at p. 114.)

The key factor affecting the determination of substantive unconscionability is lack of mutuality. (Abramson v. Juniper Networks, Inc., supra, 115 Cal.App.4th at p. 664.) In Armendariz, our Supreme Court held that an arbitration provision in an adhesion contract must bear a “‘modicum of bilaterality’” unless the stronger party has a reasonable justification for unilateral provisions that operate in its favor. (Armendariz, supra, at p. 117.) A reasonable justification is one “grounded in something other than [that party’s] desire to maximize its advantage based on the perceived superiority of the judicial forum . . . .” (Id. at p. 120.) The court explained that bilaterality is the test because, when an arbitration agreement is truly fair, both the employee and employer should be willing to submit their claims to arbitration. (Ibid.)

Aramark argues that the carve-out provision, permitting it to seek injunctive relief in a judicial forum for violations of the nonsolicitation and related provisions of the employment agreement, had the requisite degree of bilaterality. The arbitration agreement requires both Aramark and Chezek to arbitrate all claims, whether or not they arise out of the employment relationship, exempting only any claims by Aramark for “injunctive relief in court with respect to claims against employee resulting from violation of” the nondisclosure, noncompetition, and nonsolicitation provisions of the employment agreement.

In finding the carve-out provision substantively unconscionable, the trial court relied almost exclusively on Mercuro v. Superior Court (2002) 96 Cal.App.4th 167. The provision in that case was found invalid because it required arbitration only for claims an employee was likely to bring against an employer, including employment discrimination and wrongful termination, while the employer reserved the right to litigate in court any claims it was likely to bring against the employee. (Id. at p. 177.) Our case is distinguishable because the provision reserved not only the employer’s right to seek injunctive relief but extended the exception to all other forms of judicial equitable relief. Because arbitrators are authorized to provide some forms of equitable relief, the court held there was no basis to exclude these claims from arbitration. (Ibid.)

Like the trial court, Chezek relies on cases finding these exclusions from arbitration for both injunctive and equitable relief lacked mutuality. (Mercuro v. Superior Court, supra, 96 Cal.App.4th at pp. 175-178; O’Hare v. Municipal Resource Consultants (2003) 107 Cal.App.4th 267; Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107; Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at pp. 1537-1538.) But the provision at issue in this case is significantly narrower in that it reserves Aramark’s right to pursue only injunctive relief, and then only with respect to the contract provisions against disclosure, competition, and customer and employee solicitation. Under the agreement, both Chezek and Aramark must submit all other claims, including any claim seeking other equitable relief, to arbitration.

The issue is whether the difference between the injunctive relief available to Aramark under the agreement and the remedies available to Chezek through arbitration or section 1281.8 destroys the Armendariz requirement of mutuality. (Armendariz, supra, 24 Cal.4th at p. 117.) The power of an arbitrator to issue an injunction, as distinguished from other forms of equitable relief, is still open to question. (See Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1078-1085.) Questions arise as to the ability of an arbitrator to modify or vacate an injunction. Because an arbitrator’s jurisdiction terminates at the end of the proceedings, parties must initiate a new proceeding in order to request any modification. (Id. at p. 1081; see also Swan Magnetics, Inc. v. Superior Court (1997) 56 Cal.App.4th 1504, 1511-1512.)

Questions also arise over an arbitrator’s authority to enforce an injunction. (Broughton v. Cigna Healthplans, supra, 21 Cal.4th at p. 1081.) The normal form of enforcement is contempt of court, which may be punished by fine, jail, or both. (§§ 1209, subd. (a)(5), 1211, 1218; City of Palo Alto v. Service Employees Internat. Union (1999) 77 Cal.App.4th 327, 338-339.) There is no equivalent for contempt in an arbitration proceeding. (Thus, Cal. Rules of Court, rule 1613(c)(3) provides that the superior court, not the arbitrator, has the power to enforce an arbitrator’s subpoena.) Indeed, importing the doctrine of judicial contempt to private arbitration would substantially expand the arbitrator’s limited role beyond resolving civil disputes.

We observe that Aramark is not seeking injunctive relief in this case. In any event, the clause at issue is a limited carve-out for the right to seek a remedy for provisional relief which Aramark argues it already enjoys under section 1281.8. It is difficult to posit a case in which an employee would seek injunctive relief for an employer’s violation of the nonsolicitation, nondisclosure, or noncompetition provisions. Injunctive relief is an effective remedy to prevent irreparable injury that cannot be compensated by money damages and to prevent a multiplicity of actions. (Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1352; Pacific Decision Sciences Corp. v. Superior Court (2004) 121 Cal.App.4th 1100, 1110; Korean Philadelphia Presbyterian Church v. California Presbytery (2000) 77 Cal.App.4th 1069, 1084.) There is thus a strong case to be made for the necessity of injunctive relief to prevent an employee from misappropriating intellectual property assets. Finally, in light of the statutory provision, there is no showing of how Aramark was advantaged or Chezek disadvantaged by the carve-out provision.

III

Chezek attempts to show that two other provisions invalidate the agreement. Neither was argued to the trial court as a basis to defeat arbitration. One of these operates to shorten the limitations period for all claims to one year from when the claim first arose. The other appears to allow the arbitrator to shift the burden of fees to the employee if Aramark prevails. These arguments were forfeited for failure to raise them in the trial court where Aramark would have been able to dispute them with a counter showing. (City of Merced v. American Motorists Ins. Co. (2005) 126 Cal.App.4th 1316, 1327 [new theory raised on appeal involving issue of fact waived for failure to raise in trial court where opportunity to develop facts]; Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 93 [on appeal, plaintiffs waived any argument that multiple provisions in arbitration agreement were unconscionable when only one raised below].)

The arbitration agreement is enforceable. Accordingly, we conclude that the trial court erred in denying the petition to compel arbitration.

DISPOSITION

The order denying Aramark’s petition for an order compelling arbitration is reversed. The cause is remanded with directions to the trial court to enter a new and different order granting Aramark’s petition to compel arbitration in accordance with the arbitration agreement. Each party is to bear its own costs of appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

EPSTEIN, P. J.

We concur:

HASTINGS, J.

CURRY, J.

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[1] All statutory references are to the Code of Civil Procedure unless otherwise indicated.

[2] Section 1290.6 provides: “A response shall be served and filed within 10 days after service of the petition except that if the petition is served in the manner provided in paragraph (2) of subdivision (b) of Section 1290.4, the response shall be served and filed within 30 days after service of the petition. The time provided in this section for serving and filing a response may be extended by an agreement in writing between the parties to the court proceeding or, for good cause, by order of the court.”

[3] Section 1290 provides: “A proceeding under this title in the courts of this State is commenced by filing a petition. Any person named as a respondent in a petition may file a response thereto. The allegations of a petition are deemed to be admitted by a respondent duly served therewith unless a response is duly served and filed. The allegations of a response are deemed controverted or avoided.”