PICHLY v. NORTECH WASTE LLC (1999)

Plaintiffs Alice Pichly and Thomas Keshishian sued Nortech Waste LLC as a result of their employment and termination at Nortech.   Pursuant to an arbitration clause in the employment contract, Nortech petitioned to compel arbitration, but the trial court denied the petition.   We reverse, holding that the arbitration clause is not unconscionable and, therefore, must be enforced.

FACTS

On October 2, 1995, Nortech sent plaintiff Alice Pichly a letter offering her employment as a truck driver.   Enclosed was an employment contract.   The letter notified her that it constituted an offer and asked her to read the employment contract.   The letter instructed:  “If you understand and agree to these terms, please sign and date this letter (retain the copy for your personal file) and return it to [Nortech].”  Pichly signed the letter on October 25, 1995, indicating her acceptance of the terms of the offer.

Plaintiff Thomas Keshishian received an almost identical letter and employment contract, sent by Nortech on November 30, 1995, offering to employ him as a mechanic if, as with Pichly, he understood and agreed.   He signed the letter on December 5, 1995.¹

Under the heading “Dispute Resolution,” the employment contract states:  “Except to the extent that the Company is entitled to injunctive relief, any controversy, dispute, or claim arising out of this agreement or otherwise out of employment with the Company will be decided by binding arbitration.   The rules of arbiltration [sic ] will be established by the American Arbitration Association and any judgment or award may be entered in any court having jurisdiction thereof.   The arbitrator's judgment will award costs incurred for the proceedings and reasonable attorneys' fees to the prevailing party.”

Under a separate heading entitled “General,” the contract provides:  “It is agreed that the Employee's breach of this agreement may cause irreparable harm to the Company which may or may not be adequately compensated by monetary damages.   Accordingly, in the event of a breach or threatened breach of this agreement by the Employee, the Company shall be entitled to injunctive relief and recovery of damages including attorneys' fes [sic].”

On January 5, 1998, the plaintiffs filed a complaint in the superior court against Nortech and several Nortech employees alleging numerous torts committed against them in connection with their employment and termination at Nortech.²  Citing the employment contract, Nortech petitioned to compel arbitration.   In response, the plaintiffs filed declarations stating (1) Nortech did not explain the provisions of the employment contract to them and (2) they did not understand that, by signing the contract, they were waiving their right to file a lawsuit alleging tort claims against Nortech.

The trial court issued an order denying the motion to compel arbitration as follows:  “ ‘[Nortech's] petition to compel arbitration is DENIED.   The Court assumes without deciding that the subject arbitration provision is sufficient in its language to apply to plaintiff's [sic ] claims, but the arbitration provision is both procedurally and substantively unconscionable under the cases of Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 171 Cal.Rptr. 604, 623 P.2d 165 and Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 60 Cal.Rptr.2d 138.   The employment contract is a contract of adhesion, giving the employee no meaningful chance to negotiate its terms.   The element of surprise is present given the vague language in the “dispute resolution” subsection significantly affected by the succeeding language of the “general” section.   Most importantly, the element of substantive unconscionability is manifest in the onesidedness resultant from the interrelationship of the “except to the extent the company is entitled to injunctive relief” phrase and its effective definition to encompass all employer claims in the “general” first paragraph.  [¶] [Nortech's] suggestion in the reply papers as to the intended interpretation of the interrelationship of the two paragraphs is, to say the least, unpersuasive.’ ”

Nortech appeals.

DISCUSSION

Our review is de novo.   Accordingly, we determine the issue of whether the arbitration clause should be enforced independent of the trial court's findings.  (See Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at p. 1527, 60 Cal.Rptr.2d 138.)

 The plaintiffs seek to win on emotion.   For example, they state they “are hard working people who were seeking a means of survival, as opposed to executives who may seek the optimum legal advantage attainable through contractual negotiations.”   Statements such as these are unsupported by the evidence.   There is no evidence the plaintiffs are “hard working people.”   Neither do we know what kind of negotiations took place between the plaintiffs and Nortech before the employment contracts were signed.   Accordingly, in our analysis of the petition to compel arbitration, we ignore all unsupported factual (and emotional) statements made by the plaintiffs in their brief.  (See Shaffer v. Superior Court (1995) 33 Cal.App.4th 993, 997, fn. 4, 39 Cal.Rptr.2d 506.) And there are many.

Under Code of Civil Procedure section 1281, “[a] written agreement to submit to arbitration an existing controversy ․ is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” ³

Civil Code section 1670.5, subdivision (a) gives courts authority to refuse to enforce an unconscionable contract or clause of a contract.   It states:  “If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.”

 Conscionability review involves two elements:  procedural conscionability and substantive conscionability.   A contract or clause of a contract will be enforced unless it is both procedurally and substantively unconscionable.  (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1212-1213, 78 Cal.Rptr.2d 533.)

 Procedural unconscionability arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice.  (See Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at p. 1532, 60 Cal.Rptr.2d 138;  24 Hour Fitness, Inc. v. Superior Court, supra, 66 Cal.App.4th at p. 1213, 78 Cal.Rptr.2d 533.)   A key consideration in determining procedural conscionability is whether the contract is adhesive.  (See West v. Henderson (1991) 227 Cal.App.3d 1578, 1586, 278 Cal.Rptr. 570.)  “Contract of adhesion” signifies a standardized contract which a party with superior bargaining strength imposes on a weaker party, relegating the weaker party to the choice of either adhering to the contract as written or rejecting it.  (Coon v. Nicola (1993) 17 Cal.App.4th 1225, 1234, 21 Cal.Rptr.2d 846.)

 The only attribute of a contract of adhesion that may be shown on this record is that the employment contract was a standard contract.   The plaintiffs signed essentially the same contract.   Evidence of a standard contract alone, however, is insufficient to establish it is a contract of adhesion.   Other factors, such as an inferior bargaining position of the party attacking the contract, are necessary elements of a contract of adhesion.

Our initial presumption, by law, is that the contract is valid and that is was negotiated at arm's length.   Without evidence to the contrary, we presume “[p]rivate transactions are fair and regular.”  (Civ.Code, § 3545.)

 Without supporting evidence, we will not presume a party to a contract held a weaker bargaining position.  (See West v. Henderson, supra, 227 Cal.App.3d at p. 1586, 278 Cal.Rptr. 570.)   Here, there is insufficient evidence to conclude the plaintiffs were in an inferior position to bargain.   There is no evidence concerning the market for jobs.   The record does not establish whether truck drivers and mechanics were in high demand or whether it was difficult to find employment in those specialties.   Job markets change and, with those changes, the relative strength of the bargaining position of prospective employees and employers changes.   The record also does not reveal whether the plaintiffs were already employed at the time they received offers from Nortech or whether they had offers from other potential employers.   Accordingly, we cannot conclude on this record Nortech held a superior bargaining position.

 There is also insufficient evidence to establish the plaintiffs were relegated to a position of accepting the contract as drafted by Nortech or rejecting employment.   While it appears Nortech made an offer of employment, there is nothing to suggest the offer was not negotiable.   The letter authorized the plaintiffs to sign the contract if they understood and agreed.   It was their burden to satisfy themselves whether they understood and agreed.   The letter did not state that if the plaintiffs did not sign the contract as it was presented they would not be employed.   The record does not show what, if any, negotiation took place before the offers were extended.   Thus, we cannot conclude the offer was made on a take-it-or-leave-it basis.

It is plain to see that the plaintiffs made no effort to establish the employment contract was a contract of adhesion.   They, instead, seek a presumption contrary to that explicitly mandated by law.  (Civ.Code, § 3545.)   Apparently, the trial court made such a presumption when it stated:  “The employment contract is a contract of adhesion, giving the employee no meaningful chance to negotiate its terms.”   We come to the opposite conclusion-the contract is not adhesive-because (1) we presume the contract is fair and regular and (2) there is insufficient evidence in the record to rebut that presumption.

On this record, the employment contract is not a contract of adhesion.   This leads us to conclude the circumstances under which the plaintiffs signed the contract were not oppressive.   The contract was not procedurally unconscionable.

 This contract also is not substantively unconscionable.   Substantive unconscionability arises when the contractual terms are so one-sided that they shock the conscience or impose harsh or oppressive terms.  (See 24 Hour Fitness, Inc. v. Superior Court, supra, 66 Cal.App.4th at p. 1213, 78 Cal.Rptr.2d 533.)

Because the plaintiffs allege the terms of the contract concerning dispute resolution were deceptive and vague, we analyze the contract to come to our own conclusion.   As noted above, the paragraph on dispute resolution requires arbitration of all claims arising from the employment “[e]xcept to the extent that the Company is entitled to injunctive relief.”   In the separate “general” section, the contract provides that Nortech “shall be entitled to injunctive relief and recovery of damages including attorneys' fes [sic ].”

Setting aside for a moment contractual references to injunctive relief, we conclude the contract provides for arbitration of all claims, without regard to which party raises the claims.   While the contract explicitly provides that Nortech may be entitled to monetary damages in the case of a breach by the plaintiffs, it does not preclude recovery by the plaintiffs of monetary damages in the case of a breach by Nortech.   While not explicit in the contract, the plaintiffs' right to recover contract damages in the case of a breach by Nortech arises by law.  (See, generally, Civ.Code, §§ 3274, 3300 et seq.)   Thus, the contract gives Nortech no right in this regard which the plaintiffs do not also possess.   Furthermore, even though the attorney fees provision is unilateral on the face of the “general” section, it is reciprocal by statute.   If the plaintiffs prevail, they are entitled to an award of attorney fees.  (Civ.Code, § 1717.)   In any event, the “dispute resolution” section makes the right to attorney fees on the part of the “prevailing party” explicit.

 The plaintiffs jump to the conclusion the contract gives Nortech “the rights to seek both equitable and legal relief in court, while thoroughly stripping those rights from its employees.”   While it is true that the contract appears to give Nortech alone the right to obtain injunctive relief in court, no rational reading of the contract allows Nortech to obtain monetary damages in court.   The “general” section states that Nortech may obtain injunctive and monetary relief;  it does not specify the forum.   Only the “dispute resolution” section specifies a forum, arbitration, and it only excepts injunctive relief from the obligation to arbitrate.   To the extent there is any ambiguity, it is construed in favor of arbitration (Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 323, 197 Cal.Rptr. 581, 673 P.2d 251;  Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9, 10 Cal.Rptr.2d 183, 832 P.2d 899) and against the drafting party.  (Graham v. Scissor-Tail, Inc., supra, 28 Cal.3d at p. 819, fn. 16, 171 Cal.Rptr. 604, 623 P.2d 165.)

In this action, which is solely for damages, the plaintiffs seek no equitable relief.   Since the employment contract is clear as to damages and requires both parties to litigate such claims by way of arbitration, the clause in the contract enabling Nortech to seek injunctive relief in the trial court is of little, if any, relevance.   Furthermore, if the provision purporting to allow Nortech, but not the plaintiffs, to obtain injunctive relief in court were relevant and unconscionable, a court could amend, or even strike, that term, leaving the remaining provisions intact.  (Civ.Code, § 1670.5, subd. (a) [allowing court to amend or refuse to enforce unconscionable clause].)  Under the circumstances of this case, however, there is no need to determine the conscionability of that provision.

While the agreement to arbitrate is general-that is, it does not specify exactly what actions must be arbitrated-it is not too vague.   Indeed, arbitration is highly favored and courts “ ‘indulge every intendment to give effect to such proceedings.’  [Citation.]”  (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 9, 10 Cal.Rptr.2d 183, 832 P.2d 899.) The failure to specify actions, such as workers' compensation proceedings, to which the arbitration provisions of the employment contract do not apply does not render the arbitration provisions unenforceable in this dispute.   Certainly, it cannot be argued the employment contract limits the employee's statutory rights with respect to workers' compensation.   The California Constitution vests plenary power over workers' compensation in the Legislature.  (Cal. Const. art.   XIV, § 4;  see Board of Education v. Round Valley Teachers Assn. (1996) 13 Cal.4th 269, 276-277, 52 Cal.Rptr.2d 115, 914 P.2d 193.)

 When an agreement requires resolution of claims through arbitration using general terms, as here, it is unnecessary to enumerate the types of claims subject to arbitration or to specify the rights surrendered by the parties to the agreement, such as the right to a jury trial.   Those implications naturally flow from the agreement to arbitrate, especially when, as here, the arbitration provisions of the contract at issue are neither deceptive nor vague and there is no evidence of procedural unconscionability.

 Since the arbitration clause is neither one-sided nor harsh, we conclude it is not substantively unconscionable.   Certainly, the provisions requiring arbitration of claims do not shock the conscience.   As we noted earlier, courts must indulge every contractual intendment in favor of arbitration.  (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 9, 10 Cal.Rptr.2d 183, 832 P.2d 899.) Accordingly, the trial court should not have refused to enforce the arbitration provisions.

DISPOSITION

The order denying Nortech's petition to compel arbitration is reversed and the matter is remanded for entry of a new order compelling arbitration.   Nortech shall recover its costs on appeal.

FOOTNOTES

1.   Since the contracts signed by Pichly and Keshishian were virtually identical, we refer to those contracts singularly, even though there were two contracts.

2.   Since the plaintiffs' briefing makes no attempt to differentiate between Nortech and the other defendants, we refer hereafter to the defendants collectively as Nortech.

3.   Neither party contends that the Federal Arbitration Act, which has a similar provision, applies.  (See 9 U.S.C § 2.)

NICHOLSON, J.

DAVIS, Acting P.J., and KOLKEY, J., concur.