Articles from August 2013

The California Court of Appeal recently affirmed a trial court’s denial of defendant Integrated Healthcare’s petition to compel arbitration. Avery v. Integrated Healthcare Holdings, Inc., No. G046202, ___ Cal. App. 4th ___ (Jun. 27, 2013) (available here). Despite the decision’s ostensibly narrow holding, the unanimous three-judge panel underscored that employers facing a wage-and-hour class action will not be able to seize on recent developments in arbitration jurisprudence with evidence amounting to little more than an “incomplete and confusing patchwork of documents.” Slip op. at 25. On July 23, 2013, nearly a month after the decision was issued, California’s influential Fourth Appellate District, Division Three, ordered Avery published in the Official Reports, stating: “Pursuant to California Rules of Court, rule 8.1105(c), and for good cause shown, nonparty Capstone Law’s request to publish the opinion filed on June 27, 2013 is GRANTED.” See Order Granting Request for Publication.

The defendant premised its contention that the plaintiffs must proceed in individual arbitration rather than pursue a class action on the plaintiffs having signed a form acknowledging receipt of an employee handbook, which was purported to contain the hospital’s arbitration policy – euphemistically called the “Open Door Policy and Fair Treatment Process.” See slip op. at 3-5. (In fact, the defendant brought eight separate motions to compel eight named plaintiffs in related putative class actions to arbitrate.) The trial court denied all of the arbitration motions with the finding that the defendant had “‘failed to meet [its] burden to show that any of the Plaintiffs are subject to an enforceable arbitration agreement’” and the defendant appealed. Slip op. at 7.

In the 3-0 decision upholding the motions’ denial in all respects, despite one motion being subject to a “substantial evidence” standard while the rest were subject to de novo review, Associate Justice Richard Aronson began by noting that one plaintiff had not even signed the form acknowledging receipt of an employee handbook, and that plaintiff could not be deemed to have agreed to arbitration under an implied-in-fact contract theory premised on the plaintiff having continued working and thereby having implicitly agreed to arbitration. See slip op. at 13-14. In particular, the opinion gave emphasis to the defendant’s erroneous contention that it need not establish that the employee ever received the employee handbook to make out its implied-in-fact theory. Slip op. at 16-17.

As to the other employees, the decision faulted the defendant for failing to establish the actual arbitration terms that would govern the plaintiffs’ claims. “Although we agree Plaintiffs . . . generally agreed to a Fair Treatment Process by signing one or more of these documents, we nonetheless affirm the trial court’s order denying the motions to compel arbitration because Integrated failed to present sufficient evidence establishing the specific Fair Treatment Process it presented to the trial court was the Fair Treatment Process to which Plaintiffs agreed.” Slip op. at 17 (emphasis in original).

Thus, while the decision expressly limited its holding to the facts at hand, Avery reiterates a general proposition of law set forth earlier in Kleveland v. Chicago Title Ins. Co., 141 Cal. App. 4th 761 (2006), demanding specificity in the purported arbitration terms when a defendant attempts to enforce an arbitration agreement by way of an employee handbook acknowledgement. “The party seeking to enforce an arbitration provision incorporated by reference must establish the provision it seeks to enforce is the same provision to which the parties agreed.” Slip op. at 18, citing Kleveland at 765.

Again relying on the Kleveland decision, Avery takes seriously the “mutual consent [that] is an essential element of any contract,” a mutuality that many recent aggressively pro-arbitration decisions have seemingly disregarded. In a portion of Avery likely to be much cited by prospective wage-and-hour class representatives, the decision concludes that “it is not sufficient for the party seeking to compel arbitration to show the parties generally agreed to arbitrate their disputes by incorporating some arbitration provision into their contract. Rather, the party must establish the precise arbitration provision which the parties incorporated into their agreement to govern their disputes.” Slip op. at 19-20.