Opinion
No. 2:12-CV-1114-JAM-EFB
06-27-2013
LAURIE BUECHE, an individual, on behalf of herself, and on behalf of all persons similarly situated, Plaintiff, v. FIDELITY NATIONAL MANAGEMENT SERVICES, LLC, a Delaware limited liability company, and DOES 1 through 50, inclusive, Defendants.
ORDER DENYING MOTION TO COMPEL
ARBITRATION
This matter is before the Court on Defendant Fidelity National Management Services, LLC's ("Defendant") Motion to Compel Arbitration (Doc. # 15). Plaintiff Laurie Bueche ("Plaintiff") opposes the motion (Doc. # 16).
This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was originally scheduled for June 5, 2013.
I. BACKGROUND
Plaintiff's first amended class action complaint (Doc. # 1-1, Ex. C) alleges that she was an escrow officer/escrow manager employed by Defendant from April 2000 to July 2011. Plaintiff alleges on behalf of herself and those similarly situated that she was undercompensated by Defendant because she was unlawfully misclassified as exempt from California's wage and hour laws. Plaintiff's claims are 1) Unlawful Business Practices, Cal. Bus. & Prof. Code § 17200, et seq.; 2) Failure to Pay Overtime Compensation, Cal. Lab. Code §§ 510, 515, 1194, and 1198; 3) Failure to Provide Accurate Itemized Wage Statements, Cal. Lab. Code § 226; 4) Failure to Pay Wages When Due, Cal. Lab. Code §§ 201, 202, and 203; and 5) Violation of the Private Attorneys General Act, Cal. Lab. Code § 2698, et seq. Plaintiff alleges that her claims cover a four year period from February 6, 2008 to February 6, 2012. Federal subject matter jurisdiction exists because the parties' citizenship is diverse and the amount in controversy exceeds $5,000,000. 28 U.S.C. § 1332(d).
This motion is based on the arbitration provision in an employment contract the parties executed on March 5, 2004. The contract had a two year term, and the employment relationship defaulted to an at-will agreement when the contract terminated. The employment contract guaranteed Plaintiff's employment with a set salary and benefits for two years absent just cause for her termination. Plaintiff agreed to refrain from competing with Defendant for the two year term. The parties also agreed, "Any dispute, difference, disagreement or controversy been [sic] or among the parties hereto, arising out of or in connection with this Contract, shall be referred to a single arbitrator agreed upon by the parties hereto." Santos Decl. (Doc. # 15-2), Ex. 2 ¶ 9.
Defendant argued in its moving papers that the arbitration clause requires that this matter be submitted to binding arbitration and that her representative claims cannot be arbitrated and should therefore be dismissed. Plaintiff responded in opposition that her claims arise from the California Labor Code, not the employment agreement between the parties, and that they are therefore outside of the scope of the arbitration clause. Neither party specifically addressed the fact that the contract relied on by Defendant expired in March 2006, but Plaintiff's allegations only cover a period beginning in February 2008 and ending in February 2012 when she filed her original complaint. The contract's temporal clause states:
The term of this contract shall be the two (2) year period, commencing on March 05, 2004. Upon expiration of the two (2) year term, employment thereafter with the Employer shall be on an "At Will" basis and such employment may be terminated by either party at any time within such party's sole discretion, with or without notice and with or without reason or cause given.Santos Decl. Ex. 2 ¶ 3. The Court ordered supplemental briefing on the issue of whether the contract's arbitration clause applied to claims arising after the agreement expired (Doc. # 20). Each party submitted a supplemental brief (Doc. ## 23-24).
II. OPINION
A. Legal Standard
The Federal Arbitration Act ("FAA") specifies that arbitration provisions are valid and enforceable, representing "a liberal federal policy favoring arbitration, and the fundamental principle that arbitration is a matter of contract." AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 14-46 (2011) (quotations and citations omitted). The FAA applies to employment contracts. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119 (2001). Section 4 of the FAA allows a party to an arbitration agreement to petition a district court for an order directing arbitration. 9 U.S.C. § 4. It is a basic principle of federal law that a party can only be compelled to arbitrate a dispute if he or she agreed to submit that dispute to arbitration. AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648-49 (1986). Additionally, an arbitration agreement is enforceable except "upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. An arbitration agreement in an employment contract must therefore be enforced so long as the dispute at issue is within its scope and the savings clause in 9 U.S.C. § 2 does not apply.
B. Discussion
1. Motion to Compel Arbitration
The applicability of Plaintiff's employment contract to this dispute must be determined first. If the contract does not apply to disputes arising after the contract's expiration, Defendant's motion must be denied.
Defendant takes the position that Plaintiff's employment guarantee may have expired in March 2006, but the arbitration clause along with other aspects of their agreement continued indefinitely. Defendant argues that the contract's expiration only applied to the just cause termination provision of the contract, but that the remaining contractual terms remained in effect including the amount of Plaintiff's salary, her job duties, her company provided benefits, the incorporation of the employee handbook, the arbitration clause, and her agreement to maintain confidentiality. Defendant takes the position that the contract continued to govern Plaintiff's employment, with the only material change being that she became an "at-will" employee after the two year term ended.
Plaintiff's position is that the contract expired well before the claims in her lawsuit arose, and that Defendant's motion should be denied as a result. Plaintiff also relies on several cases that deal with arbitration in the context of the National Labor Relations Act ("NLRA"). E.g., Litton Fin. Printing Div., a Div. of Litton Bus. Sys., Inc. v. NLRB, 501 U.S. 190 (1991); Winery, Distillery & Allied Workers, Local 186 v. Guild Wineries & Distilleries, 812 F. Supp. 1035 (N.D. Cal. 1993). While such cases may be persuasive on points of general federal law, NLRA jurisprudence is of limited application to Defendant's motion because federal labor law is distinct from the basic state law contract principles at issue here.
Defendant's argument that the parties did not intend for the contract to terminate after two years is not credible. The contract clearly says that Plaintiff's employment would continue on an at-will basis when the agreement expired. At-will employment is defined as "[a]n employment, having no specified term, [which] may be terminated at the will of either party on notice to the other. An at-will employment may be ended by either party at any time without cause, for any or no reason, and subject to no procedure except the statutory requirement of notice." Guz v. Bechtel Nat'l Inc., 24 Cal. 4th 317, 335 (2000) (quotations omitted). All guarantees of salary and benefits in the original contract were obviated at the contract's expiration because Defendant was free to change the terms of and conditions of Plaintiff's employment at any time for any or no reason. There is no ambiguity in the contract's express language; the agreement terminated in March 2006 and the parties' relationship continued under the default employment relationship of employment at-will. See Fremont Indem. Co. v. Fremont Gen. Corp., 55 Cal. Rptr. 3d 621, 633 (Ct. App. 2007) (explaining that a contract's interpretation is only disputable if the contract is reasonably ambiguous in its terms or shown to be reasonably ambiguous through extrinsic evidence). Defendant essentially argues that the only material term that survived the contract's expiration was the arbitration portion of the parties' agreement, but there is no basis for that interpretation either in the terms of the contract itself or in any extrinsic evidence before the court.
Defendant next argues that even if the contract did expire after two years, the arbitration agreement continued to apply to Plaintiff's employment. Defendant explains that arbitration agreements are generally enforceable and they may be extended orally or by implication, citing California Civil Procedure Code § 1280(f). Defendant takes the position that Plaintiff's continued employment, even though it was under completely different contractual terms, implies that the arbitration agreement continued.
To support its position, Defendant first cites Jones v. Deja Vu, Inc., 419 F. Supp. 2d 1146, 1150 (N.D. Cal. 2005). In Jones, dancers at the defendant employer's club signed contracts agreeing to arbitrate disputes arising from their employment. The Magistrate Judge in Jones held that claims arising from brief periods before the dancers signed the contracts or during intervening periods when the agreements had lapsed were still subject to arbitration. Id. at 1150 and 1150 n.5. Jones is distinguishable, however, because there is no indication that the dancers' agreements dictated an at-will employment relationship upon expiration. With the ongoing relationship undefined, it was reasonable to find an implied continuation of the original agreement. In contrast, Plaintiff and Defendant in this case expressly agreed that their contract would expire and continue on an at-will basis.
Defendant also relies on Ajida Technologies, Inc. v. Roos Instruments, Inc. for the proposition that "a party's contractual duty to arbitrate disputes may survive termination of the agreement giving rise to that duty." 87 Cal.App.4th 534, 545 (2001). In Ajida Technologies, however, the dispute concerned the interpretation of an arbitration award that stemmed from a valid contractual agreement to arbitrate. The narrow issue decided by the Ajida Technologies court was whether or not the arbitrators exceeded the scope of the original arbitration agreement by extending joint ownership of certain technology for five years past termination of the agreement as well as extending the arbitration and attorneys' fees provision to future disputes related to the arbitration award itself. Id. at 544-45. The decision simply determined that the arbitration award arose directly from the original agreement to arbitrate, meaning that the arbitrators did not exceed the scope of their authority in making the award. Id. at 545. Ajida Technologies did not analyze a situation such as this one where a dispute unrelated to a contract arose after the contract expired. Ajida Technologies is therefore not applicable to Plaintiff's claims in the present suit because her claims undisputedly arose two years after the contract containing the arbitration clause expired.
The only case cited by the parties that is directly applicable to Defendant's motion to arbitrate is Just Film, Inc. v. Merch. Servs., Inc., No. C 10-1993 CW, 2011 WL 2433044, at *5 (N.D. Cal. June 13, 2011). In that case, the district court analyzed a dispute that arose after a contractual arbitration agreement expired. The plaintiff in Just Film leased equipment from the defendant under a contract that required her to (1) pay all taxes associated with the property and (2) arbitrate all disputes arising from the agreement. Id. at *2. Four years after the plaintiff terminated her lease, the defendant determined that it had under collected the taxes associated with her account and attempted to debit her bank account for $85.50. Id. Because there was no evidence that the money the defendant attempted to debit was related to the original lease, the district court held that the lease's arbitration provision did not apply. Id. at *5-6.
Like in Just Film, there is no evidence in this case that Plaintiff's claims arise from her expired employment contract. She is not contesting the compensation she received under that contract or claiming that Defendant violated any provision of the contract. Her claims are limited to the time period after the contract expired when she was an at-will employee. Her claims therefore do not arise from the expired contract and its arbitration agreement does not apply to her claims. Since the contract's expiration is dispositive, the Court finds it is not necessary to discuss the additional arguments raised by the parties related to enforceability and interpretation of the arbitration agreement generally. Defendant's motion to compel arbitration is accordingly denied.
2. Plaintiff's Class and Representative PAGA Claims
Defendant also moves for dismissal of Plaintiff's representative claims because they exceed the scope of claims permitted by the arbitration agreement. Based on the Court's holding that the arbitration agreement does not apply to this suit, the arbitration agreement cannot limit Plaintiff's representative claims. Defendant's motion to dismiss these claims is denied.
III. ORDER
For the foregoing reasons, Defendant's Motion to Compel Arbitration and Dismiss Plaintiff's Representative Claims is DENIED.
IT IS SO ORDERED.
___________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE