But Court Of Appeal Does Reject Arguments That Nonsignatories Lacked Standing And That They Waived Right To Compel Arbitration – Before Addressing “Crucial Issue Of Scope
In Williams v. Digius, et al., D064183 (4/1 April 24, 2015) (McDonald, McConnell, Haller) (unpublished), the Court of Appeal agreed with appellants, who had not signed an arbitration agreement, that they nevertheless had standing as agents of a signatory to demand arbitration, and also agreed that, despite appellants’ conduct inconsistent with arbitration, they had not caused so much prejudice to respondent as to have waived their right to arbitrate. Then, however, the Court of Appeal addressed the “crucial issue” – the scope of the arbitration clause – and sided largely with respondent, concluding that his Labor Code section 229 claims were outside the scope of the broad arbitration clause.
This case involved an employment dispute between Williams, an on-site property manager, and parties whom he alleged were agents of his employer. A plaintiff who wishes to avoid arbitration must be careful with his allegations: “[A] plaintiff’s allegations of an agency relationship among defendants is sufficient to allow the alleged agents to invoke the benefit of an arbitration agreement executed by their principal even though the agents are not parties to the agreement.” Thomas v. Westlake, 204 Cal.Ap.4th 605, 614-615 (2012).
The arbitration provision included broad language that would include contract and tort claims -- “arising out of or related to this Agreement.” However, the Court held that this language did not clearly cover statutory claims based on violations of the Labor Code that arise independently of the contract. Spared from the net of the arbitration clause were six causes of action for failure to pay minimum wage, failure to provide accurate itemized wage statements, failure to comply with the request to inspect personnel file, failure to pay wages on discharge, fees, costs and penalties for violations of the Labor Code, and unfair competition. Captured by the arbitration net were causes of action for breach of the implied covenant of good faith and fair dealing, and for conversion.
COMMENT: The Court actually offers drafting advice for requiring arbitration of Labor Code or other statutory claims: “[T]hey could have expressly provided for arbitration of any and all disputes or claims arising out of, or related to, Williams’s employment, including but not limited to claims for damages and violation of state or federal laws, including claims for violation of the Labor Code.” Even so, the Court expressly refuses to “decide whether some or all of Williams’s statutory claims may not be subject to arbitration regardless of our interpretation of the Contract’s arbitration provision . . . “ As readers of this blog know, PAGA and other statutory claims may not be subject to arbitration. This is an area of dispute “in flux.”