Opinion
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. CV062408
Duffy, J.
Lisa Sepka challenges the trial court’s confirmation of an arbitration award that found against her on employment-related claims she had asserted against her former employer, Global Factory.Net, Inc. She contends that the award should have instead been vacated under Code of Civil Procedure section 1286.2, subdivision (a)(4) on the ground that the arbitrator exceeded his powers by failing to state a “reason” for his decision in two respects. With the limited and strictly prescribed judicial role in matters concerning contractual arbitration in mind, we conclude that Sepka’s contentions must fail on appeal. We accordingly affirm the judgment entered on the arbitration award.
Further unspecified statutory references are to the Code of Civil Procedure unless otherwise indicated.
STATEMENT OF THE CASE
We take the facts as correct from the 16-page arbitration award (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 367, fn. 1 (AMD); Roehl v. Ritchie (2007) 147 Cal.App.4th 338, 347) and from other documents put before the trial court. We decline to consider as part of the appellate record the 703-page transcript of the arbitration hearing that Sepka included as part of her appendix in violation of rule 8.124 of the California Rules of Court. According to respondent, no portion of this transcript was made a part of the superior court file and we see no other aspect of the record that contradicts this representation. Rule 8.124(g) of the California Rules of Court provides that the filing of an appendix in lieu of a clerk’s transcript “constitutes a representation that the appendix consists of accurate copies of documents in the superior court file.” Moreover, as a general rule, the appellate record does not include matters that were not before the trial court. Accordingly, inclusion of the arbitration-hearing transcript here constitutes a misrepresentation and a violation of rule 8.124 of the California Rules of Court. And that is not Sepka’s only violation of this rule. She also failed to include in her appendix matters necessary for a proper consideration of the issues, including “any item that the appellant should reasonably assume the respondent will rely on.” (Cal. Rules of Court, rule 8.124(b)(1)(B).) We decline, however, to impose monetary or dismissal sanctions against Sepka for these violations as respondent requests in its brief rather than through a separate motion as required by rule 8.276 of the California Rules of Court. But we do appreciate respondent having filed its own appendix curing this latter defect and pointing out to us that the arbitration-hearing transcript was not ever made a part of the superior court file, sparing us the need to consider it as part of our review.
Global Factory is a closely held corporation that has developed a specialized software called “ ‘outsource manufacturing operational software’ ” that is marketed to “ ‘fabless’ enterprises.” These companies outsource the fabrication of materials such as electronic components that comprise part of their products. The software’s function “was to integrate an enterprise’s internal management data (e.g., accounting, invoicing, human resources, etc.) with certain external functions of ‘outsourced’ suppliers, such as inventory management, materials orders and shipping, and related functions.” The software package is sold for $250,000 to $1,000,000, depending on the complexity of the customer’s operations.
Global Factory is owned and managed by the creators of its software, Sharone Zehavi, his wife Deganit (Dee) Zehavi, and Itai Raz, who lives in Israel. In early 2005, Global Factory had emerged from the 2000-2001 “ ‘dot.com collapse’ ” in Silicon Valley and it was experiencing renewed marketing promise for its product. The company was looking to hire someone to be its director of sales, a management-level position, to expand its sales and marketing efforts.
We refer to the Zehavis by both first and last name for clarity as they share the same last name. By doing so, we intend no disrespect to Sepka, to whom we refer by her last name only.
In March 2005, Sepka was looking for employment. She had posted her resume on the internet. Sepka had earned a bachelor of science in electrical engineering, graduating from Bucknell University magna cum laude. For approximately 11 years after graduation from college, she had held a number of positions with three different employers relating to various aspects of sales of computer-hardware components. She had been terminated from her last position in or about November 2004.
On March 3, 2005, Sepka received an employment offer from Spirent Communications in southern California, a company she had been interested in since early 2005. The position involved developing a sales territory for Spirent’s product. Sepka signed an employment contract with Spirent on that day, which called for her new job to start four days later, on March 7, 2005.
Meanwhile, Sharone Zehavi of Global Factory had seen Sepka’s resume on the internet and her qualifications appeared to suit Global Factory’s needs for its newly created director-of-sales position. Sharone Zehavi contacted Sepka and she submitted an application for employment. Sharone Zehavi interviewed Sepka on March 1, 3, and 7, 2005. He was impressed with Sepka and he asked her to complete a proposed “marketing plan and organizational structure” to implement Global Factory’s sales efforts, which she did. She was then interviewed by Dee Zehavi. During the interview process, Sepka was in the early stages of pregnancy with her third child. She disclosed this fact to the Zehavis, along with the fact that she was her family’s primary breadwinner. But she did not tell the Zehavis of the offer she had accepted with Spirent on March 3rd. As for her new position with Spirent that was supposed to start on March 7, 2005, Sepka sought and obtained a week extension of her start date, telling Spirent that she had “a houseful of relatives visiting from the East Coast and needed a little more time before beginning work.”
Although Sepka was obviously playing to both companies, the record does not elucidate whether her proferred excuse for needing a later start date with Spirent was actually true.
On or about March 7, 2005, Sepka signed an offer letter she had received from Global Factory to be its director-of-sales, evidencing her acceptance of the at-will position. The letter provided for her employment to start on March 14, 2005. Among other provisions, the letter included that Global Factory would recommend to its Board of Directors that Sepka be granted an option to purchase 15,000 shares of the company’s common stock. The Board of Directors’ discussion on the matter was to take place “no later th[a]n 90 days after” Sepka started the job. The letter also provided that its terms, “the Company’s standard agreement relating to proprietary rights between [Sepka] and [Global Factory]... and the Confidentiality [A]greement [together] set forth the terms of [Sepka’s] employment with [Global Factory] and supersede any prior representations or agreements, whether written or oral.”
This is an awkwardly phrased term as the company, which acts through its board of directors, cannot functionally recommend a course of action to itself in this manner. But we interpret the term to mean that Sharone Zehavi, who had hired Sepka, who had signed her offer letter as the company’s president and chief operating officer, and who was a member of the company’s board of directors, would recommend such action to the board as a whole.
At some point, Sepka must have revoked her acceptance of the position she had agreed to fill at Spirent and she reported to work at Global Factory on March 14, 2005. On that day, Sepka was presented with and signed Global Factory’s “Confidential Information, Invention Agreement, and Arbitration Agreement,” which provided for, among other things, the parties’ agreement that with certain exceptions concerning particular forms of equitable relief, “any dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance or breach of this agreement, shall be settled by arbitration to be held in Santa Clara County, California, in accordance with the employment dispute resolution rules then in effect of the American Arbitration Association.... The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration.... [¶] This arbitration clause constitutes a waiver of employee’s right to a jury trial and relates to the resolution of all disputes relating to all aspects of the employer/employee relationship” except as provided therein. The portion of the written agreement concerning arbitration, which was entirely in capital letters, specifically included within its purview claims relating to wrongful discharge, breach of contract, negligent or intentional infliction of emotional distress, negligent or intentional misrepresentation, and federal and state statutory discrimination claims. The document also included an integration clause confirming that the agreement constituted the final written expression of the parties as to its subject matter.
The Global Factory position that Sepka accepted guaranteed less compensation and presented greater risk than the job that she had accepted at Spirent. Both positions offered incentive based aspects of compensation, i.e., commissions, as part of a total compensation package. But the Global Factory role was a management position that would enhance Sepka’s resume for future positions and this, among other factors, led to her decision to choose the Global Factory position over that which she had agreed to assume at Spirent.
Sepka began her new job at Global Factory working many days from her home, as agreed. She submitted data to the company regarding the contacts she had made and the status of her discussions with potential customers. But no actual sales resulted from her efforts. According to Sepka, this was because of several factors beyond her control, including that aspects of the Global Factory software were not “production[-]ready” and that the company’s office infrastructure was inadequate. With respect to the sales organizational structure that Sepka had designed and submitted before accepting the job, she took no steps to implement it and none of the proposed positions were advertised or filled. When Sepka’s anticipated income from sales commissions did not materialize, she pressed for more compensation. In June 2005, her compensation package was increased and modified at her request.
Meanwhile, at a Global Factory Board of Directors’ meeting in late April 2005, Sharone Zehavi presented a proposal that the company offer Sepka stock options, consistently with the signed offer letter. But the Board decided 2-1 against the proposal, with Sharone Zehavi the only director voting in favor. Sepka was not informed of this decision until she asked about it on August 23, 2005. And she was not given a reason for the decision. In September 2005, Sepka revived communication with her contact at Spirent. These communications were left with Sepka agreeing to reinitiate contact regarding potential employment there after she had her baby.
On September 19, 2005, Sepka began her unpaid maternity leave from Global Factory, as agreed. The potential sales accounts that had been assigned to her to develop were reassigned to another employee. As contacts were made with these potential customers, many indicated that Sepka had never contacted them and they had little knowledge or information about Global Factory’s software and its potential benefits to their companies. With this information, Dee Zehavi in particular began to be concerned that Sepka had not performed her job tasks as represented in the data she had submitted.
In mid November 2005, Sepka sent an e-mail to Global Factory reporting about the birth of her child and expressing her intention to come back to work. But a week or so before sending this e-mail, she had submitted her resume to a headhunter with a detailed description of her perceived job duties and accomplishments at Global Factory. Her resume was also posted on the internet, where it came to the attention of the Zehavis. And in mid-November 2005, consistently with discussions she had had with her contact there in September, Sepka pursued the previously open position at Spirent but the position had since been filled.
When Sepka returned to work at Global Factory on November 22, 2005, Dee Zehavi raised the subject of her future employment with the company and confronted her about her internet-posted resume, which, according to the Zehavis, had exaggerated her claims of accomplishment at Global Factory. Dee Zehavi informed Sepka that she would thereafter be subject to a performance improvement plan that imposed new conditions on her continued employment. These conditions included that Sepka was to spend more time in the office rather than working from home, that she was to be present every Friday afternoon for a staff meeting to assess sales progress and related topics, and that she had to meet certain performance-related benchmarks by certain timelines. Sepka objected to the new conditions and said they were unfair because she now had an infant and two pre-school children at home; she was breast feeding her infant son; the Friday afternoon time period was difficult because her husband, who otherwise provided child care, had another obligation at that time; and the Friday afternoon commute traffic was overly burdensome.
By this time in November 2005, Sharone Zehavi retained his position with Global Factory but he had also accepted a consulting position at another company. This meant that Dee Zehavi became Sepka’s immediate supervisor. Dee Zehavi documented by memo the company’s concerns about Sepka’s performance, the fact that she had been unable to complete any sales and had no material prospects in this regard, and the new conditions of Sepka’s continued employment, which included the performance-based goals that had to be met or Sepka would face discipline that might include termination of her employment. Sepka and Dee Zehavi also regularly met and exchanged “sparring” e-mails about the company’s need for the new employment conditions and Sepka’s complaints of unfair treatment.
The arbitrator characterized Sepka’s e-mails in this regard as “creat[ing] a record to support subsequent litigation.”
By December 2005, it was clear from the documentary record that Sepka “was on her way out and that she knew it—that Global Factory had concluded that she lacked the qualifications for the job, that she had not undertaken any significant steps to perform her job, and that her time with Global Factory had been characterized by consistent dissembling.” But Sepka refuted accusations against her in writing, expressed that the performance targets she was expected to meet were unrealistic, and informed Global Factory that she was consulting a lawyer. Yet, on December 22, 2005, Sepka sent a holiday card to the company that included the claim that she had enjoyed working with people there during that year and that she looked forward to an even better year there in 2006
By December 29, 2005, Sepka had met none of the new performance-based targets of her job and on January 3, 2006, her employment with Global Factory was terminated. Three days later, she filed her complaint in superior court.
II. Procedural Background
Sepkas’s verified complaint named Global Factory and Sharone Zehavi as defendants. It alleged in a cause of action labeled “false representations” that Zehavi had made certain misrepresentations in order to induce her to initially take her job in March 2005. These were that any financial risks inherent in the position were minimal as the company’s software was in full production; that there was an established market for the company’s software; that sales of the company’s software could close within three to six months of contact with a potential customer; and that Sepka would receive 15,000 stock options. The pleading further alleged that in reliance on these misrepresentations, Sepka took the job and gave up the position she had accepted at Spirent, at which she could have earned $300,000 per year. She also claimed that her treatment at Global Factory caused her great mental distress. In a second cause of action, Sepka pleaded a claim for intentional infliction of emotional distress. In a third cause of action, she claimed that she had been terminated in violation of public policy, to wit, in retaliation for her having taken time off to have and care for her new baby.
In response to the complaint, Global Factory and Sharone Zehavi petitioned for an order compelling arbitration of the dispute and staying the action pending completion of that process. The petition was supported by a declaration of Rena Lee, Global Factory’s administrative manager, which attached Sepka’s signed offer letter, and the fully executed Confidential Information, Invention Assignment, and Arbitration Agreement (“Agreement”). Sepka opposed the petition and submitted her own declaration, which stated that her offer letter and not the Agreement governed her employment, that she was told that she had to sign the Agreement and was not given a chance to read it, and that she had assumed the Agreement’s arbitration provision applied only to confidentiality issues, not other employment issues. Her written argument opposing the petition contended that the arbitration portion of the Agreement was unenforceable under Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 (Armendariz), i.e., that it was both substantively unconscionable in that it provided for cost sharing, unilateral relief for the employer, and a waiver of discovery and that it was procedurally unconscionable based on the surprise and oppression surrounding its execution. The defendants’ reply included Rena Lee’s supplemental declaration disputing that she had forced Sepka to sign the Agreement or had given her a limited amount of time within which to review it.
The court held a hearing and then on March 15, 2006, issued an order compelling arbitration of Sepka’s claims and staying the action pending final resolution of the arbitration.
Sepka initiated the arbitration proceedings by submitting to the American Arbitration Association a demand for arbitration that essentially mirrored the claims pleaded in her complaint. Global Factory filed an answer and cross complaint, alleging that Sepka owed it $16,412 that had been advanced to her in the form of a loan. At the outset of the arbitration proceedings, Sepka again raised that the matter was not the proper subject of arbitration and it should instead be litigated in court because she “had not knowingly agreed to have her claims resolved by arbitration.” The arbitrator requested briefing on this preliminary challenge to the enforceability of the Agreement. The factual basis of Sepka’s challenge to arbitration as raised in her briefing was that she had not been told before accepting the job and before being presented with the Agreement on her first day of work that an agreement to arbitrate was a term of her employment, and that this “nondisclosure” constituted fraud in the inducement of the contract. This was in essence the same factual basis for her unconscionability claim already rejected by the trial court. The arbitrator denied Sepka’s “motion.”
The demand for arbitration is not included in the record but the arbitrator characterized it as such in his award.
Neither Global Factory’s letter briefing nor the arbitrator’s written denial are included in the record but the stated facts concerning this challenge to the arbitration agreement’s enforceability are referred to and described in the arbitrator’s later award.
The parties subsequently engaged in discovery and testimony was taken in a three-day arbitration hearing held on March 5-7, 2007. The parties then submitted post-hearing briefing. The arbitrator issued his 16-page award on June 15, 2007, rejecting Sepka’s claims and finding in favor of Global Factory on its monetary claim against her.
Only Sepka’s post-hearing brief is included in the record. Her brief addresses her fraud claim with respect to the 15,000 stock options not only as pleaded, i.e., as a misrepresentation that induced her to initially take the job in March 2005, but also as Global Factory’s concealment from late-April to August 2005 that the board of directors had considered but declined to grant her the options. She further contended in briefing that had she known from late-April to August that she would not be receiving stock options, she “would have quit and taken the job with Spirent.” The record does not reveal that Sepka ever formally amended her initial claim as pleaded to reflect this additional theory of fraud by nondisclosure in the time period from late April to August 2005 as distinguished from the alleged pre-contractual misrepresentations in early March 2005.
The award presented a description of Sepka’s asserted claims, which included that the company “was liable for having induced [Sepka] to forego other employment with false representations of the company’ assets and market opportunities;” a thorough factual background based on the evidence presented; specific findings; and a disposition of the parties’ claims.
As to the evidence, the arbitrator observed that Sepka’s “personal circumstances around the time of her interviews with Spirent and Global Factory were extensively explored in the hearing and are relevant to the weight to be given each parties’ theories in this case” and the “spin” Sepka put on her resume and qualifications. The arbitrator further noted that as to Sepka’s pre-contractual misrepresentation claims, she testified that Sharone Zehavi had “made a number of glowing statements about the Global Factory software that were either exaggerations or were not true.” But Sharone Zehavi essentially disputed this testimony and although neither party had made contemporaneous notes during the interview process, “on balance, based on the witnesses’ demeanor and the underlying evidence on these issues, the preponderance of the evidence favors Mr. Zehavi’s version of these conversations.”
One of the award’s specific findings was that Sepka had been “properly discharged … for sufficient reasons and was not terminated because of her pregnancy during her employment....” Another finding determined that Sepka owed the company the sums lent to her. There was no specifically expressed factual finding as to Sepka’s misrepresentation claims, other than the credibility finding as to disputed facts concerning the alleged misrepresentations as previously noted. But the award provided that Sepka was to take “nothing on her claims” and that Global Factory was awarded $16,412.40 with interest on its cross-claim against her. The award allocated all costs of arbitration, which exceeded $18,000 plus the cost of the arbitration hearing transcript, against Global Factory, citing Armendariz, with each party to bear its own attorney fees and other costs.
Global Factory and Sharone Zehavi petitioned to confirm the arbitration award and Sepka simultaneously petitioned to vacate it. As grounds for her petition to vacate the award, Sepka contended that the arbitrator had exceeded his power and the award could not be fairly corrected under section 1286.2, subdivision (a)(4) in that the arbitrator had, under rule 39 of the American Arbitration Association (AAA) rules governing employment disputes, failed to provide reasons for the award in two respects. The first of these concerned the arbitrator’s rejection of Sepka’s fraud claim regarding the grant of stock options. The second concerned the arbitrator’s asserted failure to have decided the issue whether the arbitration agreement, allegedly having been induced by fraud, was enforceable and his failure to state a reason why he had rejected Sepka’s challenge to its enforceability.
The record includes a copy of the AAA employment arbitration rules that appears to have been printed from the AAA website in July 2007. We assume these rules as stated were in effect and had not been amended since March 2005, when the parties entered into the Agreement containing an arbitration clause incorporating the rules “then in effect.”
The court by order denied Sepka’s petition to vacate the award and granted the petition to confirm it. Judgment was entered on the award on October 3, 2007, from which Sepka timely appealed.
DISCUSSION
I. General Arbitration Principles and Standard of Review
It is well settled that California maintains a “strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution. [Citations.]” (Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 322.) Because of this important public policy, arbitration awards are subject to extremely narrow judicial review. Courts will not review the merits of the controversy, the validity of the arbitrator’s reasoning, or the sufficiency of the evidence supporting the arbitrator’s award. (Moncharsh v. Heily & Blasé (1992) 3 Cal.4th 1, 11 (Moncharsh).)
As the California Supreme Court recently summarized in Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1184: “When parties contract to resolve their disputes by private arbitration, their agreement ordinarily contemplates that the arbitrator will have the power to decide any question of contract interpretation, historical fact or general law necessary, in the arbitrator’s understanding of the case, to reach a decision. [Citations.] Inherent in that power is the possibility the arbitrator may err in deciding some aspect of the case. Arbitrators do not ordinarily exceed their contractually created powers simply by reaching an erroneous conclusion on a contested issue of law or fact, and arbitral awards may not ordinarily be vacated because of such error, for ‘ “[t]he arbitrator’s resolution of these issues is what the parties bargained for in the arbitration agreement.” ’ [Citations.]” (Accord, Moncharsh, supra, 3 Cal.4th at p. 12 [“ ‘it is within the power of the arbitrator to make a mistake either legally or factually. When parties opt for the forum of arbitration they agree to be bound by the decision of that forum knowing that arbitrators, like judges, are fallible’ ”].)
Consistently with the fundamental nature of the arbitration process, arbitrators may apply both legal and equitable principles and, unless specifically required to act in conformity with the rules of law, may act contrary to substantive law and base their decisions upon broad principles of justice and equity. (Moncharsh, supra, 3 Cal.4th at pp. 10-11; Sapp v. Barenfeld (1949) 34 Cal.2d 515, 523.) “The entire statutory arbitration scheme is designed to give the arbitrator the broadest possible powers.” (Marcus v. Superior Court (1977) 75 Cal.App.3d 204, 210.)
The exclusive grounds for vacating an arbitration award are those specified in section 1286.2. (Moncharsh, supra, 3 Cal.4th at p. 10.) And an award may be vacated under this section under only “very limited circumstances” (Delaney v. Dahl (2002) 99 Cal.App.4th 647, 654.) These include that invoked here at subdivision (a)(4)—“[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.” In cases involving private arbitration, “ ‘ “[t]he powers of an arbitrator are limited and circumscribed by the agreement or stipulation of submission.” ’ ” (Moncharsh, supra, 3 Cal.4th at p. 8.) Awards in excess of those powers may be corrected or vacated by the court. (Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1356.)
But an arbitration award generally may not be overturned simply because a court believes that the arbitrators committed legal or factual error, even if that error causes a substantial injustice. (Moncharsh, supra, 3 Cal.4th at pp. 27-28.) And an arbitrator does not exceed his or her power within the meaning of section 1286.2 by erroneously resolving a legal or factual issue “so long as the issue was within the scope of the controversy submitted.” (Moshonov v. Walsh (2000) 22 Cal.4th 771, 775.)
“Although section 1286.2 permits the court to vacate an award that exceeds the arbitrator’s powers, the deference due an arbitrator’s decision on the merits of the controversy requires a court to refrain from substituting its judgment for the arbitrator’s in determining the contractual scope of those powers.” (AMD, supra, 9 Cal.4th at p. 372.) “An arbitrator exceeds his powers when he acts without subject matter jurisdiction [citation], decides an issue that was not submitted to arbitration [citations], arbitrarily remakes the contract [citation], upholds an illegal contract [citation], issues an award that violates a well-defined public policy [citation], issues an award that violates a statutory right [citation], fashions a remedy that is not rationally related to the contract [citation], or selects a remedy not authorized by law [citations]. In other words, an arbitrator exceeds his powers when he acts in a manner not authorized by the contract or by law.” (Jordan v. Department of Motor Vehicles (2002) 100 Cal.App.4th 431, 443; O’Flaherty v. Belgum (2004) 115 Cal.App.4th 1044, 1055-1056.) In connection with a contract dispute, “a decision exceeds the arbitrator’s powers only if it is so utterly irrational that it amounts to an arbitrary remaking of the contract between the parties.” (Southern Cal. Rapid Transit Dist. v. United Transportation Union (1992) 5 Cal.App.4th 416, 423, disapproved on other grounds in Advanced Micro Devices, supra, 9 Cal.4th at p. 376, fn. 9.) And “a showing of substantial prejudice is required if the arbitration award is to be vacated pursuant to section 1286.2.” (Rosenquist v. Haralambides (1987) 192 Cal.App.3d 62, 69.)
On appeal, our focus is the trial court’s decision, not the arbitrator’s. (Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 55.) “[I]n reviewing a judgment confirming an arbitration award, we must accept the trial court’s findings of fact if substantial evidence supports them, and we must draw every reasonable inference to support the award. [Citation.] On issues concerning whether the arbitrator exceeded his [or her] powers, we review the trial court’s decision de novo, but we must give substantial deference to the arbitrator’s own assessment of his contractual authority. [Citations.]” (Alexander v. Blue Cross of California (2001) 88 Cal.App.4th 1082, 1087; accord, AMD, supra, 9 Cal.4th at pp. 373, 376, fn. 9.)
II. The Arbitrator Did Not Exceed His Powers
Sepka argues on appeal that the trial court should have vacated the arbitration award because the arbitrator exceeded his powers by not stating reasons for his rejection of her contentions that (1) the arbitration agreement was not valid as it was induced by fraud and (2) she was defrauded by Global Factory and Sharone Zehavi’s failure to inform her until August 2005 of the board of director’s April 2005 decision not to issue stock options to her. We address these claims in turn.
A. The Claim That the Arbitration Agreement was Invalid as Having Been Induced by Fraud
Sepka posits, without analysis or citation to authority, that the question of the enforceability or validity of the arbitration agreement was properly one for the arbitrator, and not the court, to decide. Based on this assumption, she contends that the court should have vacated the arbitration award because the arbitrator exceeded his powers by failing to give a reason for his pre-award decision to reject her claim that the arbitration agreement was invalid, having been induced by fraud. But we question the assumption that the validity of the agreement was for the arbitrator and not the court to determine.
Challenges to the enforceability or validity of an arbitration agreement are properly raised California in opposition to a petition to compel arbitration filed under section 1281.2. Petitions or motions to compel arbitration are determined in the trial court in the manner provided for hearing motions generally. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413 (Rosenthal); Brown v. Wells Fargo Bank, NA (2008) 168 Cal.App.4th 938, 953.) Facts are proven by affidavit or declaration and documentary evidence, with oral testimony taken in the trial court’s discretion. (Rosenthal, supra, 14 Cal.4th at pp. 413-414; Brown v. Wells Fargo Bank, NA, supra, 168 Cal.App.4th at p. 953.)
The determination to compel arbitration may be reviewed from a later judgment confirming the award even though under section 1294, no immediate, direct appeal will lie from an order compelling arbitration. (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 648-649; Cummings v. Future Nissan (2005) 128 Cal.App.4th 321, 329.)
The Supreme Court has described the shifting burdens on the motion as follows: “[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists, and if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. If the party opposing the petition raises a defense to enforcement... that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense. [Citation.]” (Rosenthal, supra, 14 Cal.4th at p. 413; accord, Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.)
Under section 1281, “[a] written agreement to submit to arbitration an existing controversy or a controversy arising thereafter is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” Accordingly, an arbitration agreement may be invalidated on the same grounds as any contract. (Armendariz, supra, 24 Cal.4th at p. 98.) Thus, although arbitration agreements are ordinarily enforced according to their terms, their enforceability is limited by the same general contract principles governing the enforceability of contracts. (Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 163 (Discover Bank).)
The agreement here provides for arbitration of “any dispute or controversy arising out of, relating to, or concerning any interpretation, construction, performance, or breach of this agreement” in accordance with the employment dispute resolution rules of the American Arbitration Association (AAA). This provision itself does not reach questions regarding the agreement’s validity or enforceability. But the applicable AAA rules, which it is not clear were ever given to Sepka as part of her execution of the contract, do provide under the category concerning the arbitrator’s jurisdiction (section 6 AAA Employment Arbitration Rules) that the “arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement” and that the “arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part.”
We do not address whether it matters if the AAA rules were or were not given to Sepka when she signed the arbitration agreement as she has not raised any issue over this point.
In California, “the question whether an arbitration agreement is unenforceable, in whole or in part, based on general contract law principles is a question for the court to decide, rather than an arbitrator.” (Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 165-166 (Sanchez), citing Discover Bank, supra, 36 Cal.4th at p. 171 and Cable Connection, Inc. v. DIRECTV, Inc., supra, 44 Cal.4th at p. 1365; see Rosenthal, supra, 14 Cal.4th at p. 413.) The California Supreme Court in Discover Bank concluded that the Federal Arbitration Act (9 U.S.C. § 1 et seq.) (FAA), and in particular the United States Supreme Court’s opinion in Green Tree Financial Corp. v. Bazzle (2003) 539 U.S. 444, did not conflict with California law on this point and that the California rule therefore governs. (Sanchez, supra, 172 Cal.App.4th at p. 166.)
But, as the court of appeal in Sanchez observed, some courts of appeal have “suggested, without holding, that the enforceability of an arbitration agreement is a question for the arbitrator to decide if the arbitration agreement ‘ “clearly and unmistakably” ’ so provides.” (Sanchez, supra, 172 Cal.App.4th at p. 166, fn. omitted [citing Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1286-1288; Baker v. Osborne Development Corp. (2008) 159 Cal.App.4th 884, 893-894; Murphy v. Check ‘N Go of California, Inc. (2007) 156 Cal.App.4th 138, 144-145; Ontiveros v. DHL Express (USA), Inc. (2008) 164 Cal.App.4th 494, 503 & fn. 2].) These cases so suggested based on the United States Supreme Court’s opinion in AT & T Technologies v. Communications Workers (1986) 475 U.S. 643, 649, which held that under the FAA, the question whether the parties agreed to submit a particular issue to arbitration—i.e., the agreement’s scope—is for the court to decide unless the parties “clearly and unmistakably” agreed otherwise. (Accord, Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 83-84; First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944.)
While we do not doubt the well-accepted principle that doubts and ambiguities about the scope of an arbitration agreement are resolved in favor of arbitrability (Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 386), we consider this question to be different from the issue whether the agreement may be enforced in the first instance due to fraud in its execution or inducement, which would vitiate the consent necessary to form a binding contract. After all, an arbitrator’s authority to decide any issue, including arbitrability questions, derives, in the first place, from an enforceable arbitration agreement. (Boys Club of San Fernando Valley, Inc. v. Fidelity & Deposit Co. (1992) 6 Cal.App.4th 1266, 1271 [right to arbitration depends on contract and party can only be compelled to submit dispute to arbitration where valid contract so provides].) Where the agreement is unconscionable, no jurisdiction is conferred on the arbitrator in the first place because the agreement is not enforceable. (Murphy v. Check ‘N Go of California, Inc., supra, 156 Cal.App.4th at p. 145.) Likewise, where a party’s apparent assent to a written contract is negated, such as by fraud in the execution or inducement of the contract going to its making, there is no valid arbitration agreement to be enforced. (Rosenthal, supra, 14 Cal.4th at pp. 415-419; Duffens v. Valenti (2008) 161 Cal.App.4th 434, 448-449.) Indeed, “ ‘[t]here would... be a severe problem with bootstrapping if a party to a contract could be forced to arbitrate the question whether he had been coerced or deceived into agreeing to arbitrate disputes arising under the contract.’ (Matterhorn, Inc. v. NCR Corp. (7th Cir. 1985) 763 F.2d 866, 869.)” (Bruni v. Didion, supra, 160 Cal.App.4th at p. 1284.)
Accordingly, we question Sepka’s unsupported claim that it was within the arbitrator’s power to decide the very validity of the arbitration agreement against a challenge that the agreement was induced by fraud. If this question were not within the arbitrator’s power to decide, it would follow that Sepka’s contention that in deciding this question, the arbitrator exceeded his powers by failing to state a reason for his decision would fail. The arbitrator could not have so exceeded his powers if the question of the contract’s validity was not properly before him in the first place.
And Sepka did not put the issue of fraud in the inducement before the trial court. She did claim in opposition to Global Factory and Sharone Zehavi’s petition to compel arbitration that the agreement to arbitrate could not be enforced against her because she had been told that she had to sign the Agreement containing the arbitration provision only when she showed up to begin her job, she was not given a chance to read it, and she had assumed that the arbitration provision applied only to the Agreement’s confidentiality obligations and not generally to the employment relationship. But she did not raise these facts as the basis of unenforceability of the contract as having been induced by fraud. Instead, she argued that on these facts, the arbitration agreement was procedurally unconscionable under Armendariz due to the surprise and oppression surrounding its execution. She further contended the Agreement was substantively unconscionable due to its cost-sharing provision, its perceived unilateral relief in favor of the employer, and its waiver of the right to discovery. There was conflicting evidence before the court as to whether Sepka had been in some way forced to sign the Agreement or had been given a limited amount of time within which to review it. But Sepka submitted no facts or argument that would support that the arbitration provision was invalid or void because her execution of the Agreement had been induced by fraud. And, as noted, she raises no claim on appeal that the trial court erred in determining that the agreement was enforceable (i.e., not unconscionable) when it ordered the matter to arbitration over her opposition.
Unconscionability has both procedural and substantive elements. (Armendariz, supra, 24 Cal.4th at p. 99; Jones v. Wells Fargo Bank (2003) 112 Cal.App.4th 1527, 1539 (Jones).) Although both must appear for a court to invalidate a contract or one of its terms (Armendariz, supra, 24 Cal.4th at p. 114), they need not be present in the same degree. “[T]he 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.” (Ibid.) Procedural unconscionability focuses on the elements of oppression and surprise. (Discover Bank, supra, 36 Cal.4th at p. 160.) “ ‘ “ ‘Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice.... Surprise involves the extent to which the terms of the bargain are hidden in a “prolix printed form” drafted by a party in a superior bargaining position.’ ” ’ ” (Wayne v. Staples, Inc. (2006) 135 Cal.App.4th 466, 480.) Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create “ ‘ “overly harsh” ’ ” or “ ‘ “one-sided” ’ results.” (Armendariz, supra, 24 Cal.4th at p. 114.) The issue is whether contractual provisions reallocate risks in an objectively unreasonable or unexpected manner. (Jones, supra, 112 Cal.App.4th at p. 1539.) Substantive unconscionability may take various forms but typically is found in the employment context when the arbitration agreement unilaterally favors the employer without sufficient justification such as when only the employee’s but not the employer’s claims are subject to arbitration. (Armendariz, supra, 24 Cal.4th at p. 119.)
Even if Sepka is correct that the agreement’s validity had been properly within the scope of the arbitrator’s powers to determine, we would reject her claim that he exceeded his powers by failing to state a reason for his rejection of the claim, the basis for her motion to vacate the award below. Section 39 of the AAA Employment Arbitration Rules provides that the arbitration award shall, among other things, be in writing and shall “provide the written reasons for the award unless the parties agree otherwise.” But section 6 of the rules concerning the arbitrator’s power to decide questions of jurisdiction, including the scope or validity of the arbitration agreement, provides for the early deadline within which such matters must be raised and further provides that the “arbitrator may rule on such objections [to jurisdiction or arbitrability] as a preliminary matter or as part of the final award.”
Here, the arbitrator rejected Sepka’s challenge to the arbitration agreement as having been induced by fraud as a preliminary matter separate from the award. The AAA rules do not dictate the form of rulings on preliminary matters, which do not come within rule 39 that requires an award to state its reasons. Accordingly, even if the arbitrator had the power to decide the validity of the agreement against a challenge based on fraud in the inducement, he did not exceed his powers or violate the applicable rules by determining this issue as a separate, preliminary matter without stating the reasons for his decision.
B. Fraud Claim Regarding Issuance of Stock Options
Sepka contends that the arbitrator also exceeded his powers by failing to state a reason in his award for his rejection of her claim that she had been defrauded by Global Factory and Sharone Zehavi’s nondisclosure between April and August 23, 2005 of the company’s decision not to issue her stock options, thus justifying a vacation of the award under section 1286.2, subdivision (a)(4). We reiterate that “this provision does not supply the court with a broad warrant to vacate awards the court disagrees with or believes are erroneous.” (Gueyffier v. Ann Summers, Ltd., supra, 43 Cal.4th at p. 1184.)
As noted, rule 39.c. of the applicable AAA rules requires the arbitrator to “provide the written reasons for the award.” Sepka urges that because the arbitrator had no power to decide a submitted issue without providing a written reason, he acted in excess of his contractually derived powers, and that a decision on this submitted issue was necessary to fully determine the controversy.
But notwithstanding AAA rule 39.c., as far as we can tell from the record, Sepka never articulated this separate and specific fraud-by-nondisclosure claim as part of her arbitration demand under AAA rule 4.b.i.1. It was therefore not a discreet, submitted claim on which the arbitrator was required to provide an independent reason for his decision. According to rule 4.b.i.1., a party initiating arbitration proceedings as a claimant must file a written notice (“Demand”) with AAA that sets forth “a brief statement of the nature of the dispute; the amount in controversy, if any; [and] the remedy sought.” Here, Sepka’s fraud-by-concealment claim regarding the four-month non-disclosure of Global Factory’s April 2005 decision not to issue her stock options was not pleaded as part of her complaint filed in superior court. Her later demand for arbitration following the court’s order compelling arbitration is not included in the record but the arbitrator summarized her tendered arbitration claims as “essentially reasserting the claims advanced in her Superior Court complaint.”
The pleaded fraud claims concern only oral representations made in March 2005 that induced her entry into the written employment contract, including the representation or promise, contrary to the term of the contract, that she would be issued stock options. The contract provided instead that Global Factory’s board of directors would consider issuing her stock options within 90 days of the start of her employment, which it did. We reiterate that the written contract contained an integration clause. Based on the parol evidence rule as codified at section 1856, subdivision (a), this clause might in any event preclude the admission of evidence of prior oral representations that contradict the terms of the written agreement. The rule prohibits a party from resorting to extrinsic evidence of a prior or contemporaneous oral agreement to contradict a plain and unambiguous term of a fully integrated agreement. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 186.) While under section 1856, subdivision (g), the rule does not exclude the use of extrinsic evidence to establish fraud, this exception does not extend to “promissory fraud claims premised on prior or contemporaneous statements at variance with the terms of a written integrated agreement.” (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 346.) The fraud exception to the parol evidence rule thus does not encompass oral promises that contradict written agreements because “[s]uch a principle would nullify the rule....” (Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258, 263.)
Moreover, the record does not show that Sepka ever attempted to amend her claim in arbitration in accordance with AAA rule 5 concerning “Changes of Claim.” This rule provides that after the appointment of an arbitrator, “a party may offer a new or different claim or counterclaim only at the discretion of the arbitrator.”
Finally, although Sepka’s post-arbitration-hearing brief conflated as a “continuing fraud” her pleaded fraud-in-the-inducement claim regarding a pre-contract promise of stock options in March 2005 with a post-contract concealment claim regarding the non-disclosure of the board’s later decision not to issue her stock options, these are different legal claims with different factual allegations, elements, and proof of damages. (See, e.g., Civ. Code, § 1710, subds. 1-4 defining various forms of deceit and § 1572, subds. 1-5 defining forms actual fraud vitiating consent to contract.)
We therefore conclude that the arbitrator did not exceed his contractually derived powers by not stating an independent reason under AAA rule 39.c. for rejecting Sepka’s fraud-by-non-disclosure claim, which was never tendered as a separate and independent legal claim on which she sought relief. The arbitrator’s 15-page decisional analysis of the submitted claims and his dispositional award that Sepka take “nothing on her claims against Sharone Zehavi and/or Global Factory.Net, Inc.” were sufficient to dispose of the issue to the extent it was a part of the res gestae. This is particularly so in view of the substantial deference to which the arbitrator was entitled in matters concerning his own assessment of his contractual authority (AMD, supra, 9 Cal.4th at p. 372; Alexander v. Blue Cross of California, supra, 88 Cal.App.4th at p. 1087) and the power he derived from the arbitration agreement to decide all questions of historical fact or general law necessary, in his view, to reach a decision. (Cable Connection, Inc. v. DIRECTV, Inc., supra, 44 Cal.4th at p. 1360; Moncharsh, supra, 3 Cal.4th at p. 28.)
Apart from relying on the contractual specification of the AAA rules regulating the form of the arbitrator’s award, Sepka also invokes section 1283.4 in support of her contention that the arbitrator failed to provide a reason for rejecting her fraud-by-non-disclosure claim concerning stock options. This section provides that an arbitration award “shall include a determination of all the questions submitted to the arbitrators the decision of which is necessary in order to determine the controversy.” (§ 1283.4.) If the “record shows that an issue has been submitted to an arbitrator and that he totally failed to consider it, such failure may constitute ‘other conduct of the arbitrators contrary to the provisions of this title’ justifying vacation of the award under section 1286.2, subdivision [(a)(5)]” if the rights of the party were substantially prejudiced. (Rodrigues v. Keller (1980) 113 Cal.App.3d 838, 841 (Rodrigues).)
We note that Sepka did not seek to vacate the award on this independent statutory ground. Nor does she separately address it on appeal, instead lumping all of her contentions under section 1286.2, subdivision (a)(4) concerning the arbitrator having exceeded his powers. This is an ill-fitting catch all into which to cast her claims because the failure to ascribe a reason to a decision is more properly characterized as an insufficient exercise of authorized power rather than an act in excess of it.
But we start with the presumption that the arbitrator has resolved all issues submitted for decision and the burden of proving otherwise is on the party challenging the award. (Rodrigues, supra, 113 Cal.App.3d at p. 842.) To discharge that burden, the party attacking the award must demonstrate that a particular claim was expressly raised before the award and that the arbitrator failed to consider it. (Ibid.) Moreover, the arbitrator’s failure to determine an issue submitted is not error unless such a determination “ ‘is necessary in order to determine the controversy.’ ” (Cothron v. Interinsurance Exchange (1980) 103 Cal.App.3d 853, 860.) Put another way, an “arbitrator’s failure to render express findings on disputed questions does not invalidate the award where... the award ‘ “serves to settle the entire controversy.” (Sapp v. Barenfeld[, supra,] 34 Cal.2d at pp. 522-523.)’ (Rodrigues[, supra, 113 Cal.App.3d at p. 842].)” (Luster v. Collins (1993) 15 Cal.App.4th 1338, 1345; see also Armendariz, supra, 24 Cal.4th at p. 107 [stating general rule that arbitrators are not required to provide written findings and conclusions].) Thus, a decision that one of the parties “ ‘should pay the other a sum of money is sufficiently determinative of all items embraced in the submission.’ ” (Rodrigues, supra, 113 Cal.App.3d at p. 843; Sapp v. Barenfeld, supra, 34 Cal.2d at pp. 522-523, disapproving dictum to the contrary in Muldrow v. Norris (1859) 12 Cal. 331.)
Here, Sepka has not shown that any post-contractual, fraud-by-nondisclosure claim was expressly raised as a separate and independent claim from her pre-contractual misrepresentation claims, which she concedes the arbitrator adequately decided (against her) in his award based on a credibility finding. As we have already pointed out, she did not plead any such claim in her complaint, the allegations of which were mirrored in her demand for arbitration that framed her request for relief in that forum. She did not seek to offer such a claim by way of amendment before the arbitrator, consistently with the AAA rules. And she conflated any post-contractual concealment claim with her pre-contractual misrepresentation claims in her briefing submitted to the arbitrator as if she were tendering but one claim or cause of action for fraud rather than separate claims requiring separate rulings.
The record thus does not demonstrate that any discreet issue was submitted to the arbitrator that he totally failed to consider or that the award is invalid because it lacks particular findings on its face. Moreover, the comprehensive award contains detailed factual findings that served to settle the entire controversy with the penultimate determination that defendants prevailed on Sepka’s claims. That finding subsumes all incorporated issues. The award included a determination of all the expressly submitted questions, the decision on which was necessary to determine the entire controversy and it awarded a sum of money to one party payable by the other, thus resolving “ ‘all items embraced in the submission’ ” as required under section 1283.4. (Rodrigues, supra, 113 Cal.App.3d at p. 843.)
Finally, even if the arbitrator did fail to comply with section 1283.4 by rendering an incomplete decision, Sepka has not attempted to show that she was prejudiced by this, a requirement to vacate an award under section 1286.2. (Rosenquist v. Haralambides (1987) 192 Cal.App.3d 62, 69.)
For these reasons, we accordingly also reject Sepka’s claim that the award must be vacated for the arbitrator’s alleged failure to have complied with section 1283.4.
DISPOSITION
The judgment is affirmed.
WE CONCUR: Bamattre-Manoukian, Acting P.J., McAdams, J.