Opinion ID: 2630646
Heading Depth: 2
Heading Rank: 3

Heading: Is Arbitration of a Tameny Claim Subject to the Minimal Procedural Requirements Set Forth in Armendariz?

Text: In Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 178,164 Cal.Rptr. 839, 610 P.2d 1330, [ Tameny ] we recognized that although employers have the power to terminate employees at will, they may not terminate an employee for a reason that is contrary to public policy. Little claims that arbitration of Tameny claims are subject to the minimum requirements set forth in Armendariz, reviewed below. We agree. In Armendariz, we held that arbitration of claims under the FEHA is subject to certain minimal requirements: (1) the arbitration agreement may not limit the damages normally available under the statute ( Armendariz, supra, 24 Cal.4th at p. 103, 99 Cal.Rptr.2d 745, 6 P.3d 669); (2) there must be discovery sufficient to adequately arbitrate their statutory claim ( id. at p. 106, 99 Cal.Rptr.2d 745, 6 P.3d 669); (3) there must be a written arbitration decision and judicial review `sufficient to ensure the arbitrators comply with the requirements of the statute' ( ibid. ); and (4) the employer must pay all types of costs that are unique to arbitration ( id. at p. 113, 99 Cal.Rptr.2d 745, 6 P.3d 669). These requirements were founded on the premise that certain statutory rights are unwaivable. This unwaivability derives from two statutes that are themselves derived from public policy. First, Civil Code section 1668 states: `All contracts which have for their object, directly or indirectly, to 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 the policy of the law.' `Agreements whose object, directly or indirectly, is to exempt [their] parties from violation of the law are against public policy and may not be enforced.' [Citation.] Second, Civil Code section 3513 states, `Anyone may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.' [Citations.] ( Armendariz, supra, 24 Cal.4th at p. 100, 99 Cal.Rptr.2d 745, 6 P.3d 669.) We concluded that the FEHA was enacted for public reasons and the rights it conferred on employees were unwaivable. ( Id at pp. 100-101, 99 Cal. Rptr.2d 745, 6 P.3d 669.) We then concluded that the above requirements were necessary to enable an employee to vindicate these unwaivable rights in an arbitration forum. A Tameny claim is almost by definition unwaivable. [The] public policy exception to the at-will employment rule must be based on policies `carefully tethered to fundamental policies that are delineated in constitutional or statutory provisions....' ( Silo v. CHW Medical Foundation (2002) 27 Cal.4th 1097, 1104, 119 Cal.Rptr.2d 698, 45 P.3d 1162.) Moreover, the public policy that is the basis for such a claim must be `public in that it affects society at large rather than the individual, must have been articulated at the time of discharge, and must be `fundamental' and `substantial. ( Ibid. ) Thus, a legitimate Tameny claim is designed to protect a public interest and therefore `cannot be contravened by a private agreement.' ( Armendariz, supra, 24 Cal.4th at p. 100, 99 Cal.Rptr.2d 745, 6 P.3d 669.) In other words, an employment agreement that required employees to waive claims that they were terminated in violation of public policy would itself be contrary to public policy. Accordingly, because an employer cannot ask the employee to waive Tameny claims, it also cannot impose on the arbitration of these claims such burdens or procedural shortcomings as to preclude their vindication. Thus, the Armendariz requirements are as appropriate to the arbitration of Tameny claims as to unwaivable statutory claims. Auto Stiegler cites Broum v. Wheat First Securities, Inc. (D.C.Cir.2001) 257 F.3d 821 ( Brown), which came to a contrary conclusion with respect to a claim for termination in violation of public policy under District of Columbia law. The court held that Cole v. Burns Intern. Security Services (D.C. Cir.1997) 105 F.3d 1465 ( Cole ), a case on which Armendariz relied, and which set forth requirements for arbitrating claims under title VII of the Civil Rights Act of 1964 similar to the Armendariz requirements, should be limited to federal statutory claims, not state tort claims derived from common law. In Brown, an employee of a securities firm was allegedly terminated for alerting the Securities and Exchange Commission to illegal activities occurring at his employer's firm. He claimed to fall within the whistleblower exception to the employment-at-will rule under District of Columbia common law. He refused to participate in subsequent arbitration and moved to vacate the arbitration award on the grounds that he was to be charged substantial arbitration fees, contrary to Cole. The Brown court, which consisted of a different panel of the District of Columbia Circuit Court of Appeals than had decided Cole, began by reviewing the latter decision. As the Brown court summarized it, Cole acknowledged that the Supreme Court in Gilmer v. Interstate/Johnson Lane Corp. 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) [(Gilmer) , had `made clear that, as a general rule, statutory claims are fully subject to binding arbitration,' [citations][.] [But] we also noted that 'Gilmer cannot be read as holding that an arbitration agreement is enforceable no matter what rights it waives or what burdens it imposes,' [citation]. The arbitration agreement will be valid `so long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum.' [Citations.] As to fees, we found that `it would undermine Congress's intent to prevent employees who are seeking to vindicate statutory rights from gaining access to a judicial forum and then require them to pay for the services of an arbitrator when they would never be required to pay for a judge in court.' [Citation.] Accordingly we interpreted the arbitration agreement as requiring the employer to pay the arbitrator's fees. ( Brown, supra, 251 F.3d at pp. 824-825.) The Brown court, in rejecting the extension of Cole to nonstatutory claims, pointed to language in Cole limiting its holding to such claims. The court further stated: We also see no basis for extending Cole. As we have explained, our central rationalerespecting congressional intent does not extend beyond the statutory context. Moreover, by enacting the Federal Arbitration Act, Congress `manifested] a liberal federal policy favoring arbitration agreements.' [Citations]. The Act also pre-empted state restrictions on the enforcement of arbitration agreements. [Citations.] Gilmer, as we've seen, framed the question as whether dispute resolution under the FAA was consistent with the federal right-creating statute in question. [Citation.] For a common law claim under District of Columbia law, any such inconsistency would be resolved in favor of the only federal law involved, the FAA. ( Brown, supra, 257 F.3d at pp. 825-826.) We disagree with the Brown court, at least insofar as its decision would be interpreted to preclude extension of the Armendariz requirements to Tameny claims. First, although Cole was a Title VII case properly focused on mandatory arbitration of federal statutory rights, its rationale extends beyond that context generally to unwaivable rights conferred for a public benefit. The statement in Gilmer that provides the point of departure in Cole  `[b]y agreeing to arbitrate a statutory claim, [an employee] does not forgo the substantive rights afforded by the statute; [he] only submits to their resolution in an arbitral, rather than a judicial, forum' ( Cole, supra, 105 F.3d at p. 1481, quoting Gilmer, supra, 500 U.S. at p. 26, 111 S.Ct. 1647)would apply equally to nonstatutory public rights. The Brown court's apparent position that only federal statutory rights may be subject to Cole's requirements, because any attempt to place conditions on arbitration based on state law would be preempted by the Federal Arbitration Act (FAA), is incorrect. The FAA provides that arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. (9 U.S.C. § 2.) Thus, `[a] state-law principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue does not comport with [the text of §2 of the FAA].' ( Doctor's Associates, Inc. v. Casarotto (1996) 517 U.S. 681, 685, 116 S.Ct. 1652, 134 L.Ed.2d 902.) But under section 2 of the FAA, a state court may refuse to enforce an arbitration agreement based on generally applicable contract defenses, such as fraud, duress, or unconscionability. ( Doctor's Associates, Inc., supra, 517 U.S. at p. 687, 116 S.Ct. 1652.) One such long-standing ground for refusing to enforce a contractual term is that it would force a party to forgo unwaivable public rights, as reviewed above. (See, e.g., Baker Pacific Corp. v. Suttles (1990) 220 Cal.App.3d 1148, 1153-1154, 269 Cal. Rptr. 709 [mandatory employee waiver of all employer liability for asbestos exposure contrary to public policy].) [2] Thus, while we recognize that a party compelled to arbitrate such rights does not waive them, but merely `submits to their resolution in an arbitral, rather than a judicial, forum' ( Gilmer, supra, 500 U.S. at p. 26, 111 S.Ct. 1647), arbitration cannot be misused to accomplish a de facto waiver of these rights. Accordingly, although the Armendariz requirements specifically concern arbitration agreements, they do not do so out of a generalized mistrust of arbitration per se (see Doctor's Associates, Inc., supra, 517 U.S. at p. 687, 116 S.Ct. 1652), but from a recognition that some arbitration agreements and proceedings may harbor terms, conditions and practices that undermine the vindication of unwaivable rights. The Armendariz requirements are therefore applications of general state law contract principles regarding the unwaivability of public rights to the unique context of arbitration, and accordingly are not preempted by the FAA. And, as discussed above, there is no reason under Armendariz's logic to distinguish between unwaivable statutory rights and unwaivable rights derived from common law. We recognize that [i]n enacting § 2 of the [FAA], Congress declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration. ( Southland Corp. v. Keating (1984) 465 U.S. 1, 10, 104 S.Ct. 852, 79 L.Ed.2d 1 ( Southland ).) The object of the Armendariz requirements, however, is not to compel the substitution of adjudication for arbitration, but rather 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. Specifically, with regard to arbitration costs at issue in this case and in Brawn, the principle that arbitration costs may prevent arbitration claimants from effectively pursuing their public rights would apply with equal force to Tameny claims as to FEHA claims or to federal statutory claims. Nothing in the FAA prevents states from controlling arbitration costs imposed by adhesive contracts so that the remedy of prosecuting state statutory or common law public rights through arbitration is not rendered illusory. The Armendariz cost-shifting requirement is unique to arbitration only to the extent that arbitration, alone among contract provisions, may potentially require litigants to expend large sums to pay for the costs of the hearing that will decide his or her statutory other public rights. In other words, it is not the arbitration agreement itself but the imposition of arbitration forum costs that under certain circumstances violates state law. Moreover, Armendariz's cost rule does not require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration. ( Southland, supra, 465 U.S. at p. 10, 104 S.Ct. 852) Rather, we simply required that employers pay arbitration forum costs under certain circumstances as a condition of arbitration. Nothing in the United States Supreme Court case law leads us to believe that a state requirement shifting arbitration costs in mandatory employment agreements to the employer pursuant to established state law contract doctrine violates the FAA. Furthermore, Code of Civil Procedure section 1284.2, which provides that each party pay a pro rata share of arbitration costs unless the agreement provides otherwise, does not alter our conclusion. We held in Armendariz that this statute does not preclude the judicial imposition of proportionally greater costs on the employer in the case of FEHA claims. ( Armendariz, supra, 24 Cal.4th at p. 112, 99 Cal.Rptr.2d 745, 6 P.3d 669.) We reasoned that the agreement to arbitrate a statutory claim is implicitly an agreement to abide by the substantive remedial provisions of the statute and that the FEHA implicitly prohibited large arbitration costs that would stand as an obstacle to successfully pursuing rights conferred on the employee. ( Ibid. ) We similarly conclude that an agreement to arbitrate a claim of wrongful termination contrary to public policy must be interpreted to implicitly include an agreement to proportion costs in a manner that is reasonable for the employee/claimant, in order to prevent the de facto waiver of unwaivable rights contrary to Civil Code sections 1668 and 3513, discussed above. Code of Civil Procedure section 1284.2's default provision does not compel a contrary conclusion. Therefore, we conclude that a plaintiff/employee seeking to arbitrate a Tameny claim should have the benefit of the same minimal protections as for FEHA claims as a means of ensuring that they can effectively prosecute such a claim in the arbitral forum. [3] These include the availability of damages remedies equal to those available in a Tameny suit brought in court, including punitive damages ( Commodore Home Systems, Inc. v. Superior Court (1982) 32 Cal.3d 211, 220, 185 Cal. Rptr. 270, 649 P.2d 912); discovery sufficient to adequately arbitrate Tameny claims; a written arbitration decision and judicial review sufficient to ensure that arbitrators have complied with the law respecting such claims; and allocation of arbitration costs so that they will not unduly burden the employee. We have already rejected the contentions that the arbitration agreement in the present case limited Little's remedies or his ability to obtain adequate judicial review. Nor is it evident from the agreement that Little will be unable to obtain adequate discovery. Little argues, however, that there is a risk of burdensome costs being imposed on him, contrary to Armendariz. We consider this arguments in the next part of our opinion. [4]