Metropolitan News-Enterprise


Friday, July 29, 2016


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S.C. Upholds Ruling in Bias Suit Against Elway Dealership

Court Says Arbitrator Must Decide Whether Case Proceeds as Class Action




An arbitrator, not a judge, must decide whether a former sales manager at a South Bay auto dealership that was partially owned by former pro football star John Elway can bring a classwide arbitration claim for racial discrimination, the state Superior Court ruled yesterday.

The 4-3 ruling was a victory for the plaintiff, Timothy Sandquist, who appealed after Los Angeles Superior Court Judge Elihu Berle granted the defense motion to compel arbitration and struck the class claims.

The Court of Appeal held it lacked jurisdiction over Sandquist’s claim that the arbitration agreements signed by all of the dealership’s employees were unconscionable, but that the “death knell” doctrine permitted it to rule on the class-action issue. It further held that the trial judge erred in ruling on the question, and that an arbitrator must do so.

Owners Sued

Sandquist filed suit in 2012 against Lebo Automotive, Inc., then doing business as John Elway’s Manhattan Beach Toyota, and its individual owners, including the former Denver Broncos quarterback. Elway is no longer involved in the ownership, as Darrell Sperber, then the general manager, exercised an option to buy out the other principals in 2013.

Sperber renamed the dealership Manhattan Beach Toyota Scion, and said he intended to run it as a family business. He died last year of leukemia, and his son Bradley Sperber later became the general manager.

Sandquist, an African American, claims that minorities were subject to racial slurs, hostile working conditions and were denied equal pay and promotional opportunities. He said that after eight years of working for the dealership, he unofficially assumed the position of general sales manager without the title or pay, before resigning after 11 years with the company.

“Discrimination based on race, color, national origin, and ancestry flourishes and is deeply embedded in the dealership’s corporate culture,” Sandquist alleged in the complaint, adding that racial slurs were allegedly used toward Hispanic, African American, Asian and Middle Eastern employees.

Retaliation Claimed

Those who reported racism to an employee hotline were allegedly retaliated against. Sandquist claimed that Darrell Sperber created a hostile work environment for minority employees through his “rampant harassment and use of racial slurs,” and that Elway and two other co-owners were made aware of what was going on and did nothing to stop it.

In addition to running the Broncos’ football operations, Elway owns or has owned interests in other motor vehicle dealerships in California and Colorado.

Justice Kathryn M. Werdegar, writing yesterday for the high court, said the Court of Appeal was correct.

Whether a judge or an arbitrator decides the issue of classwide litigation is initially a question of state contract law, the jurist explained. If the contract commits the issue to an arbitrator, she said, that provision controls unless federal law requires a different result.

In Sandquist’s case, she noted, the contract comprehensively provided that “any claim, dispute, and/or controversy...which would otherwise require or allow resort to any court…having any relationship or connection whatsoever with…employment by….the Company…shall be submitted to and determined exclusively by binding arbitration.”

The contract specified a few exceptions, including workers’ compensation, National Labor Relations Board, and Employment Development Department claims. Werdegar suggested that if the parties wanted other exceptions, including allowing a court to decide whether classwide claims were permitted, they could have said so.

“These features of the arbitration clauses suggest the ‘who decides’ question is an arbitrable one…,” the justice wrote.  That suggestion is buttressed by other principles of contract law, she said, including that doubts regarding arbitrability are to be resolved in favor of arbitration, and that ambiguities are to be construed against the drafters.

Werdegar distinguished City of Los Angeles v. Superior Court (2013) 56 Cal.4th 1086, which affirmed a trial court ruling construed a memorandum of understanding as giving Los Angeles city employees the right to arbitrate furloughs implemented as a budget-cutting measure. That case did not hold, the justice said, that arbitrability is in all instances to be determined by a trial court rather than an arbitrator.

Federal Arbitration Act

She further noted that the agreement signed by Sandquist expressly invoked the Federal Arbitration Act, which has been interpreted as containing presumptions that the parties intend to have a court decide whether the case is subject to a mandatory arbitration clause, but that they intend to have the arbitrator decide other procedural issues.

Having an arbitrator decide the issue, the jurist added, is also consistent with the presumptions in federal law that the parties to an arbitration agreement desire “expeditious results” and that doubts concerning the scope of arbitration be resolved by the arbitrator.

Werdegar was joined by Chief Justice Tani Cantil-Sakauye and Justices Goodwin H. Liu and Mariano-Florentino Cuéllar.

Justice Leondra R. Kruger, joined Justices Ming Chin and Carol A. Corrigan, dissented.

Kruger argued that under the FAA, “the availability of class arbitration under the parties’ agreement is a ‘gateway question of arbitrability’ that is presumptively for a court to decide.”

The case is Sandquist v. Lebo Automotive, Inc., 16 S.O.S. 3769.


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