Opinion ID: 2576197
Heading Depth: 2
Heading Rank: 2

Heading: Armendariz and Little.

Text: Boghos next contends the policy's arbitration clause is unenforceable under Armendariz, supra, 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669, and Little, supra, 29 Cal.4th 1064, 130 Cal.Rptr.2d 892, 63 P.3d 979, because it requires him to pay costs he would not have to pay were he suing in court, namely costs imposed by the American Arbitration Association (AAA) [6] and the arbitrators' fees. The cases on which Boghos relies, which address the legality and effect of employer-mandated arbitration clauses covering claims by employees based on statutory and constitutional provisions, do not support his contention. In Armendariz, supra, 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669, we set out the conditions under which an employer can lawfully require its employees to arbitrate claims arising under the California Fair Employment and Housing Act (Gov.Code, § 12900 et seq.) (FEHA). Through the FEHA, we reasoned, the Legislature created substantive and procedural rights not just for the benefit of individuals but also for public purposes; accordingly, those statutory rights are unwaivable under Civil Code sections 1668 [7] and 3513. [8] ( Armendariz, at pp. 100-101, 99 Cal.Rptr.2d 745, 6 P.3d 669.) To ensure that employer-mandated arbitration agreements would not become vehicles for the waiver of FEHA rights, we held that such agreements are enforceable only if they provide for neutral arbitrators, more than minimal discovery, a written award, and all of the types of relief that would otherwise be available in court and, in addition, `do[] not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum.' ( Armendariz, at p. 102, 99 Cal.Rptr.2d 745, 6 P.3d 669, italics added, quoting Cole v. Burns Intern. Security Services (D.C.Cir.1997) 105 F.3d 1465, 1482.) We borrowed these requirements from an analogous federal decision, Cole, which had in turn formulated them to ensure that employer-mandated arbitration agreements did not violate title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e et seq.). In Little, supra, 29 Cal.4th 1064, 130 Cal.Rptr.2d 892, 63 P.3d 979, we extended Armendariz, supra, 24 Cal.4th 83, 99 Cal. Rptr.2d 745, 6 P.3d 669, and applied its requirements to employer-mandated arbitration of tort claims for wrongful discharge in violation of public policy (i.e., claims under Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 164 Cal.Rptr. 839, 610 P.2d 1330). Justifying the extension, we reasoned that Tameny claims, even though not statutory, are nevertheless almost by definition unwaivable ( Little, at p. 1077, 130 Cal.Rptr.2d 892, 63 P.3d 979) because they seek to enforce public policies that are carefully tethered to fundamental policies delineated in constitutional or statutory provisions ( ibid.; see Silo v. CHW Medical Foundation (2002) 27 Cal.4th 1097, 1104, 119 Cal.Rptr.2d 698, 45 P.3d 1162; Gantt v. Sentry Insurance (1992) 1 Cal.4th 1083, 1095, 4 Cal.Rptr.2d 874, 824 P.2d 680). To extend the Armendariz requirements to Tameny claims was also consistent with the object of those requirements, which is to ensure minimum standards of fairness in arbitration so that employees subject to mandatory arbitration agreements can vindicate their public rights in an arbitral forum. ( Little, at p. 1080, 130 Cal.Rptr.2d 892, 63 P.3d 979.) Boghos asks us to extend the holdings of Armendariz, supra, 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669, and Little, supra, 29 Cal.4th 1064, 130 Cal.Rptr.2d 892, 63 P.3d 979, to insurance disputes and to declare the policy's arbitration clause unenforceable because it requires him to share with the Underwriters the costs of arbitration and the arbitrators' fees. We find no merit in the request. Even if the holdings in Armendariz and Little might conceivably be extended beyond the employment context to cover other types of unwaivable claims based on or tethered to statutes, Boghos's claims for nonpayment of benefits and breach of the covenant of good faith and fair dealing cannot properly be so described. Boghos's claim that the Underwriters have failed to pay benefits under the policy is a claim for breach of contract, pure and simple. His claim that the Underwriters have, by failing to pay, violated the covenant of good faith and fair dealing may properly be described either as a tort claim ( Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425, 433-434, 58 Cal.Rptr. 13, 426 P.2d 173) or as a special type of contract claim for which we allow tort damages ( ibid.; Erlich v. Menezes (1999) 21 Cal.4th 543, 551-552, 87 Cal.Rptr.2d 886, 981 P.2d 978). While insurance bad faith claims were for a time thought to have a statutory basis in the Unfair Practices Act (Ins.Code, § 790 et seq.), we definitively rejected that position in Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 304, 250 Cal.Rptr. 116, 758 P.2d 58, and expressly overruled prior contrary authority ( ibid., overruling Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329). For the same reason, insurance bad faith claims also cannot properly be described as tethered to a statute, in the sense that Tameny claims subject to arbitration under Little are necessarily `based on policies carefully tethered to fundamental policies ... delineated in constitutional or statutory provisions....' ( Little, at p. 1077, 130 Cal.Rptr.2d 892, 63 P.3d 979, quoting Silo v. CHW Medical Foundation, supra, 27 Cal.4th 1097, 1104, 119 Cal.Rptr.2d 698, 45 P.3d 1162.) While the business of insurance is sufficiently affected with a public interest to justify its regulation by the state (see Ins.Code, § 680 et seq.), as Boghos observes, the fact of regulation does not suffice to demonstrate that any given insurance-related claim entails an unwaivable statutory right, or that any given claim seeks to enforce a public policy articulated in a statute. In any event, we have not extended the Armendariz/Little cost-shifting rule to common law claims generally. The rule is a judicially created exception to Code of Civil Procedure section 1284.2, which provides that the parties to an arbitration agreement do share costs [u]nless the arbitration agreement otherwise provides or the parties to the arbitration otherwise agree.... [9] We justified our creation of the exception in Armendariz, supra, 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669, by reasoning that section 1284.2 is a default provision, and the agreement to arbitrate a statutory claim [e.g., a FEHA claim] is implicitly an agreement [by the employer] to abide by the substantive remedial provisions of the statute ( Armendariz, at p. 112, 99 Cal.Rptr.2d 745, 6 P.3d 669) and to pay all types of cost that are unique to arbitration. ( Id., at p. 113, 99 Cal.Rptr.2d 745, 6 P.3d 669.) The same reasoning fairly covers common law Tameny claims, which must be carefully tethered to statutory or constitutional provisions (see Little, supra, 29 Cal.4th 1064, 1077, 1081-1082, 130 Cal.Rptr.2d 892, 63 P.3d 979), but not to common law claims generally. To extend Armendariz to the arbitration of claims not carefully tethered to statutory or constitutional provisions would seem an arbitrary refusal to enforce section 1284.2, a legislative act, and thus raise concerns about judicial policymaking similar to those that led us to require a statutory or constitutional basis for Tameny claims. ( Silo v. CHW Medical Foundation, supra, 27 Cal.4th 1097, 1104, 119 Cal.Rptr.2d 698, 45 P.3d 1162; Gantt v. Sentry Insurance, supra, 1 Cal.4th 1083, 1095, 4 Cal.Rptr.2d 874, 824 P.2d 680.)