Metropolitan News-Enterprise


Wednesday, September 22, 2021


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C.A. Justices Battle Over Ripeness of Arbitration Appeal

Majority Says Judge Erred in Finding’s Provision Unenforceable Without First Determining

If Arbitration Agreement Exists, Reverses Order Denying Motion to Compel; Justice Slough Dissents


By a MetNews Staff Writer


Div. Two of the Fourth District Court of Appeal, in a 2-1 decision, yesterday reversed an order denying a motion by to compel arbitration of employment claims against it, holding that the trial judge erred in deciding that the provisions were unenforceable without first determining whether an agreement even existed, prompting a dissent charging that the majority is unduly prolonging the dispute and should address the merit.

Writing for the majority of the Riverside-based panel was Justice Richard T. Fields, who was joined by Presiding Justice Manuel A. Ramirez. The dissenter was Justice Marsha G. Slough.

The majority’s opinion reverses San Bernardino Superior Court Judge Donald R. Alvarez’s denial of an order for arbitration based on his view that the provision for resolution of disputes through binding arbitration—contained in the terms of service (“TOS”) which employees were required to download onto their smartphones—is unenforceable under an exemption provision of the Federal Arbitration Act (“FAA”).

Two delivery drivers, Terry Pettie and Rey Borge, are seeking to establish that, Inc. and Amazon Logistics, Inc. incorrectly classify them as independent contractors, thus denying them rights they should enjoy under employment laws.

Majority Opinion

Fields said, in his unpublished opinion:

“[W]e need not address defendants’ claims of error based upon interpretation of the purported arbitration agreement at this time. The trial court never made a factual finding on the threshold issue of whether an agreement to arbitrate existed between the parties. Without the existence of an agreement, there is no occasion to consider what law should govern the interpretation of the purported agreement, whether its terms are enforceable, or whether any other defense to enforcement exists.”

He declared:

“Thus, we reverse and remand the matter so that the trial court may make a factual finding on the threshold issue of whether an agreement to arbitrate exists.”

Slough’s Dissent

That resolution, Slough protested, “ignores bedrock principles of appellate review and because of that pointlessly extends this dispute.”

The issues presented by the parties, she said, are whether the FAA exempts the drivers from mandatory arbitration and whether the provision in the TOS is enforceable under California law. The majority, she charged, came up with a third issue on its own: whether an agreement even exists.

She wrote:

“This approach is wrong for many fundamental reasons.

“First, courts decide cases as the parties frame and argue them. We typically avoid going out of our way to find issues the parties don’t raise on appeal.”

Slough accused the majority of violating Government Code §68081 by rendering a decision based on an issue not raised by the parties.

Trial Court’s Latitude

The jurist continued:

“Second, courts are free to decide a case on any dispositive ground. It’s simply not correct to say the trial judge was required to find the parties had entered an agreement to arbitrate before deciding the other issues in the appeal. (Another problem I have with the majority approach is I do think the trial judge determined there was an agreement, at least implicitly.) It was completely within the discretion of the trial judge to assume there was a valid agreement but decide the case on the basis of the exemption under the FAA and the inapplicability of state law—both legal issues…. It doesn’t follow that to defeat a petition to compel arbitration an opposing party must obtain a ruling on the existence of an agreement to arbitrate before prevailing on the ground that the agreement isn’t valid or is unenforceable on other grounds.”

She added:

“Third—and relatedly—we review the trial judge’s decision for the correctness of its result, not the correctness of its reasoning.”

The dissenter commented:

“It doesn’t take much reflection on what is likely to happen in this case to understand why appellate courts follow these principles. For the majority do not hold that the trial court erred by determining the plaintiff delivery drivers were exempt from the federal arbitration rales and they do not hold the trial judge erred by interpreting the arbitration clause as excluding enforcement under state law. So, what will happen when we remand this case to the trial court? I posit one of two things. Either the trial judge will find the parties did enter an agreement but reinstate his ruling on the same grounds set out in the order we are reversing. Or he’ll find the parties didn’t enter an agreement and deny the petition on two alternative grounds—lack of agreement and the grounds of his original order.

“In either event, the majority’s decision in this case is likely to keep the parties mired in the same disputes for years. No doubt after the trial judge rules a second time, the parties will appeal the same issues again. I would decide them now. Perhaps the parties can take some comfort that they’ll be [able to economize by recycling in a subsequent appeal the briefs they prepared to no effect in this one.”

Fields’s Rejoinder

In a footnote, Fields responded that there is nothing in the record showing how acceptance of the TOS was manifested so as to create an “electronic agreement,” and commented:

“Given the state of this record, we decline to adopt the dissent’s view that we should express our opinion on the remaining issues raised on appeal because remand will inevitably result in an identical order, triggering an identical appeal of identical legal issues. We do not assume how the trial court will resolve the threshold factual dispute upon remand, let alone what, if any, additional evidence the trial court might accept upon remand. Nor can we predict how any additional evidence, argument, or consideration may impact any subsequent order.”

He said it is “prudent to follow the advice of our Supreme Court,” citing one case as advising that “If it is not necessary to decide more, it is necessary not to decide more” and another as counseling that “we do well to tread carefully and exercise judicial restraint, deciding novel issues only when the circumstances require.”

Slough Responds

Also in a footnote, Slough shot back:

“Contrary to the majority’s suggestion, avoiding these issues is not justified as a matter of prudence. The cases they cite rely on the doctrine of constitutional avoidance or the advisability of reserving judgment on novel issues of statutory construction….There are no such difficult constitutional or statutory issues here, just common contractual issues the trial court determined independently warranted denying the petition to compel arbitration. Refusing to address the briefed issues isn’t prudent, but an abdication of our responsibilities as an appellate tribunal.”

The case is Pettie v., E074241.


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