Little v. Auto Stiegler, Inc.

BROWN, J., Concurring and Dissenting.

Like the majority, I find the appellate arbitration provision in the arbitration agreement unconscionable. (Maj. opn., ante, at p. 1069.) I also agree that this “provision should be *1090 severed and the rest of the arbitration agreement enforced.” (Ibid.) I, however, disagree with the majority’s application of the requirements set forth in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 [ 99 Cal.Rptr.2d 745 , 6 P.3d 669 ] (Armendariz) to an action alleging wrongful termination in violation of public policy (Tameny claim) (see Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 178 [ 164 Cal.Rptr. 839 , 610 P.2d 1330 , 9 A.L.R.4th 314 ]). 1 Unlike the majority, I found Brown v. Wheat First Securities, Inc. (D.C. Cir. 2001) 257 F.3d 821 (Brown) persuasive and would not apply Armendariz to Tameny claims.

“In Armendariz , we held that arbitration of claims under the [California Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900 et seq.)] is subject to certain minimal requirements . . . .” (Maj. opn., ante, at p. 1076.) We imposed these requirements despite the preemptive scope of the Federal Arbitration Act (FAA) ( 9 U.S.C. § 1 et seq.) based on “[t]he United States Supreme Court’s dictum that a party, in agreeing to arbitrate a statutory claim, ‘does not forgo the substantive rights afforded by the statute [but] only submits to their resolution in an arbitral . . . forum.’ ” (Armendariz, supra, 24 Cal.4th at p. 99 , quoting Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) 473 U.S. 614, 628 [ 105 S.Ct. 3346, 3354 , 87 L.Ed.2d 444 ] (Mitsubishi).) Because the Legislature enacted FEHA with the express intention of safeguarding certain rights for the benefit of the public at large, we concluded that neither federal nor state arbitration laws preclude our imposition of restrictions on the arbitration of FEHA claims. (See Armendariz, supra, 24 Cal.4th at pp. 100-101.) In doing so, we carefully limited our holding to arbitrations of statutory claims.

Our heavy reliance on Cole v. Burns Intern. Security Services (D.C. Cir. 1997) 105 F.3d 1465 (Cole) demonstrates the limited scope of our holding in Armendariz . (See Armendariz, supra, 24 Cal.4th at pp. 101-102.) In Cole , the District of Columbia Circuit Court of Appeals imposed the same requirements we imposed in Armendariz (Cole/Armendariz requirements) to the arbitration of claims under title VII of the Civil Rights Act of 1964 (Title VII). (Cole, supra, 105 F.3d at p. 1482 .) It imposed these requirements because of the importance of respecting congressional intent as expressed in “public statutes like the [Age Employment in Discrimination Act] and Title VII.” (Cole, at p. 1482.) Ascertaining the unwaivability of the rights conferred by these public statutes from their text, history, and purpose and citing this unwaivability as evidence of congressional intent, the court found that *1091 Congress intended to provide certain procedural protections to employees seeking to vindicate these rights. (Ibid.) Thus, Cole did not impose additional requirements on the arbitration of these statutory claims based solely on their unwaivability or public policy concerns.

The District of Columbia Circuit Court of Appeals made this expressly clear in Brown . In Brown , the court refused to impose the Cole/Armendariz requirements on the arbitration of a common law claim virtually identical to the Tameny claim at issue here. (Brown, supra, 257 F.3d at p. 825 .) As the court explained, Cole was limited “at vital points to statutory rights” (Brown, at p. 825), and “our central rationale—respecting congressional intent—does not extend beyond the statutory context” (ibid.). The court further noted that the FAA preempts “state restrictions on the enforcement of arbitration agreements” and necessarily precludes courts from restricting the arbitration of common law claims. (Brown, at p. 826.) Finally, the court observed that the creation of judicially crafted public policy exceptions to the FAA would, as a practical matter, subject the arbitration of most, if not all, tort and contract claims to the Cole/Armendariz requirements. (Brown, at p. 826.)

Notwithstanding the majority’s arguments to the contrary, I believe Brown should guide our decision here. As explained above, we carefully limited the application of Armendariz to statutory rights. (See ante, at p. 1090.) And our rationale for imposing the Cole/Armendariz requirements on the arbitration of FEHA claims—respecting legislative intent—does not extend beyond the statutory context. (See, ante, at p. 1090.)

Indeed, we are precluded from doing so by both Congress and our own Legislature. Congress enacted the FAA “ ‘to assure those who desired arbitration and whose contracts related to interstate commerce that their expectations would not be undermined ... by state courts . . . .’” (Southland Corp. v. Keating (1984) 465 U.S. 1, 13 [ 104 S.Ct. 852, 859 , 79 L.Ed.2d 1 ].) Recognizing “the widespread unwillingness of state courts to enforce arbitration agreements” (ibid.), Congress intended the FAA “to be a broad enactment appropriate in scope to meet the large problems Congress was addressing” ( 465 U.S. at p. 14 [ 104 S.Ct. at p. 860 ])—i.e., judicial hostility to arbitration—and “unencumbered by state-law constraints” (id. at p. 13 [ 104 S.Ct. at p. 859 ]). As such, the FAA preempts all state laws and rules disfavoring arbitration. (See Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265, 272 [ 115 S.Ct. 834, 838-839 , 130 L.Ed.2d 753 ].)

Of course, Congress is free to circumscribe the scope of its enactments. (Shearson/American Express Inc. v. McMahon (1987) 482 U.S. 220, 226 [ 107 S.Ct. 2332, 2337 , 96 L.Ed.2d 185 ].) Consistent with this principle, the *1092 United States Supreme Court has recognized that the FAA does not govern if “ ‘Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.’ ” (Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 26 [ 111 S.Ct. 1647, 1652 , 114 L.Ed.2d 26 ] )Gilmer), quoting Mitsubishi, supra, 473 U.S. at p. 628 [105 S.Ct. at pp. 3354-3355].) Such an intention may, however, be discerned only from “the text [of a federal statute], its legislative history, or an ‘inherent conflict’ between arbitration and” that statute’s underlying purposes. (Gilmer, supra, 500 U.S. at p. 26 [ 111 S.Ct. at p. 1652 ], quoting McMahon, supra, 482 U.S. at p. 227 [ 107 S.Ct. at p. 2338 ].) Thus, in the absence of a statute evidencing a clear congressional intent to restrict arbitration, the FAA controls and precludes courts from imposing their own arbitration-specific restrictions. 2 (See Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 55, 58 [ 115 S.Ct. 1212, 1215, 1216-1217 , 131 L.Ed.2d 76 ] (Mastrobuono) [holding that the FAA precludes the enforcement of a judicially created rule despite its basis in public policy]; see also McMahon, supra, 482 U.S. at p. 227 [ 107 S.Ct. at p. 2338 ] [to defeat application of the FAA, the parties opposing arbitration “must demonstrate that Congress intended to make an exception to the [FAA] for claims arising under” statute, “an intention discernible from the text, history, or purposes of the statute”].)

Similarly, California’s arbitration scheme precludes California courts from restricting arbitrations in the absence of an express legislative intent to do so. “Title 9 of the Code of Civil Procedure . . . represents a comprehensive statutory scheme regulating private arbitration in this state.” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 [ 10 Cal.Rptr.2d 183 , 832 P.2d 899 ].) This scheme establishes “that arbitration agreements will be enforced in accordance with their terms.” (Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 836, fn. 10 [ 88 Cal.Rptr.2d 366 , 982 P.2d 229 ].) Absent certain statutorily enumerated grounds not relevant here (see Code Civ. Proc., § 1281.2), courts must enforce an arbitration agreement as written. While the Legislature may create exceptions to this strong statutory policy in favor of arbitration and selectively limit arbitrations, we may not. (See Armendariz, supra, 24 Cal.4th at p. 98 [recognizing that the Legislature may “selectively prohibit[] arbitration in certain areas”].)

Nonetheless, the majority does just that. A Tameny claim is a common law cause of action created by this court—and not by the Legislature. (See Green *1093 v. Ralee Engineering Co. (1998) 19 Cal.4th 66, 71 [ 78 Cal.Rptr.2d 16 , 960 P.2d 1046 ] (Green) [“Although our Legislature has determined that an employment contract is generally terminable at either party’s will ..., we have created a narrow exception to this rule by recognizing that an employer’s right to discharge an at-will employee is subject to limits that fundamental public policy imposes” (italics added, fn. omitted)].) Thus, Tameny claims are a judicial—and not a legislative—construct, and the public policy underlying these claims “is inconsequential as a measure of [the Legislature’s] interest in the stated policy.” (Brown, supra, 257 F.3d at p. 826 .) As a result, the majority’s extension of Armendariz violates the FAA and our own statutory arbitration scheme.

The statutes the majority cites to establish the unwaivability of Tameny claims are inapposite. Civil Code section 3513, by its terms, applies only to laws enacted by the Legislature. Meanwhile, Civil Code section 1668 merely declares that contracts that “directly or indirectly . . . exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against” public policy. An arbitration agreement does not, however, exempt anyone from responsibility for his or her wrongdoing. Rather, the agreement merely changes the forum in which the determination of responsibility is made. (See Gilmer, supra, 500 U.S. at p. 26 [ 111 S.Ct. at p. 1652 ] [parties compelled to arbitrate their claims merely “ ‘submit)] to their resolution in an arbitral, rather than a judicial, forum’ ”].) Thus, Civil Code section 1668 does not evince a legislative intent to impose any restrictions on the arbitration of Tameny claims.

In any event, the majority’s focus on the unwaivability of Tameny claims is misplaced. To evade FAA preemption, the majority purports to apply a generally applicable contract defense by “refusing to enforce a contractual term . . . that . . . would force a party to forgo unwaivable public rights . . . .” (Maj. opn., ante, at p. 1079.) Thus, the majority sees “no reason under Armendariz’’ s logic to distinguish between unwaivable statutory rights and unwaivable rights derived from common law.” (Ibid.) The majority’s logic, however, is specious. The majority finds an agreement to arbitrate Tameny claims violative of public policy absent satisfaction of the Cole/ Armendariz requirements solely because of alleged deficiencies unique to an arbitral forum established by an otherwise valid agreement. In doing so, the majority necessarily premises its holding on plaintiff’s purported inability to vindicate his common law claim in the arbitral forum and creates a rule specific to arbitration agreements. As such, the majority’s holding rests on a “suspicion of arbitration as a method of weakening the protections afforded in the substantive law to would-be complainants” rejected long ago. (Rodriguez de Quijas v. Shearson/Am. Exp. (1989) 490 U.S. 477, 481 [ 109 S.Ct. *1094 1917, 1920 , 104 L.Ed.2d 526 ].) This is true regardless of whether the claim is waivable or not.

Thus, the unwaivability of Tameny claims is a red herring. The crucial question is whether there is any evidence of a congressional (see Gilmer, supra, 500 U.S. at p. 26 [ 111 S.Ct. at p. 1652 ]) or legislative intent (see Broughton, supra, 21 Cal.4th at p. 1083 ) to place restrictions on the arbitration of Tameny claims. While the unwaivability of a statutory right established by the statute’s text, history, or purpose may evidence such an intent (see Cole, supra, 105 F.3d at p. 1482 ; Armendariz, supra, 24 Cal.4th at p. 100 ), a judicial finding of unwaivability for public policy reasons cannot. Indeed, the public policy exception the majority adopts subjects most, if not all, tort claims to the Cole/Armendariz requirements. “All claims not based on contract—including, for example, . . . defamation and tortious interference claims . . .—implement values that society has in one way or another thought deserving.” (Brown, supra, 257 F.3d at p. 826 .) Under this public policy rationale, “it is hard to see what falls outside it.” (Ibid.) For example, under the majority’s logic, any arbitration of an intentional tort claim must abide by the Cole/Armendariz requirements because such claims are unwaivable under Civil Code section 1668.

In this respect, this case is no different from Mastrobuono . In Mastrobuono , the United States Supreme Court held that the FAA preempted a judicially created rule prohibiting arbitrators from awarding punitive damages even though a state court created the rule for public policy reasons. ( Mastrobuono, supra, 514 U.S. at pp. 55, 58 [115 S.Ct. at pp. 1215, 1216-1217].) The same reasoning precludes our application of the judicially created Cole/Armendariz requirements to the arbitration of Tameny claims. By creating a rule applicable only to arbitration provisions, the majority necessarily violates the FAA. (See Doctor’s Associates, Inc. v. Casarotto (1996) 517 U.S. 681, 687 [ 116 S.Ct. 1652, 1656 , 134 L.Ed.2d 902 ] [“Courts may not, however, invalidate arbitration agreements under state laws applicable only to arbitration provisions”].)

Our extension of Armendariz to Tameny claims therefore usurps Congress’s authority to establish “the supreme law of the land” (U.S. Const., art. VI, cl. 2) and the Legislature’s “responsibility to declare the public policy of the state” (Green, supra, 19 Cal.4th at p. 71 ). Moreover, by imposing arbitration-specific restrictions that have no congressional or legislative basis, the majority not only undermines the “liberal federal policy favoring arbitration” (Moses H. Cone Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 24 [ 103 S.Ct. 927, 941 , 74 L.Ed.2d 765 ]), but also contravenes California’s “strong public policy in favor of arbitration as a speedy and *1095 relatively inexpensive means of dispute resolution.” (Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 322 [ 197 Cal.Rptr. 581 , 673 P.2d 251 ]). Even if Tameny claims cannot be effectively vindicated absent imposition of the Cole/Armendariz requirements, both Congress and our Legislature have declined to impose them. By disregarding their intentions, the majority appears intent on turning “the judicial clock backwards to an era of hostility toward arbitration.” (Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 714 [ 131 Cal.Rptr. 882 , 552 P.2d 1178 ].) Indeed, this court appears to be “chip[ping] away at” United States Supreme Court precedents broadly construing the scope of the FAA “by indirection,” despite the high court’s admonition against doing so. (Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 122 [ 121 S.Ct. 1302, 1313 , 149 L.Ed.2d 234 ].) I therefore urge the high court to clarify once and for all whether our approach to arbitration law comports with its precedents.

Baxter, J., and Chin, J., concurred.

For the reasons stated in Justice Baxter’s concurring and dissenting opinion, ante, I also disagree with the majority’s refusal to modify Armendariz’s cost requirements in light of Green Tree Financial Corp.-Ala. v. Randolph (2000) 531 U.S. 79 [ 121 S.Ct. 513 , 148 L.Ed.2d 373 ].

We have extended this rationale of Gilmer to state legislative enactments and restricted the arbitration of certain statutory causes of action serving a transcendent public purpose as determined by a state legislature. (See Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1083 [ 90 Cal.Rptr.2d 334 , 988 P.2d 67 ] (Broughton).) While I reluctantly concede that Broughton is binding until the United States Supreme Court decides otherwise (but see Broughton, supra, 1066, 1088-1103 (dis. opn. of Chin, J.)), neither this court nor the United States Supreme Court has ever suggested that a federal or state court may, on its own initiative, restrict the arbitration of a common law cause of action.