Court Opinion

ID: 9695047
Source: CourtListenerOpinion
Date Created: 2023-08-25 18:04:56.63046+00
Date Added: 2024-06-11T12:15:53.526059
License: Public Domain

Filed 8/25/23 Theobald v. Santa Monica Seafood Co. CA2/2
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                        DIVISION TWO

BRAD THEOBALD,                                               B324090

         Plaintiff and Respondent,                           (Los Angeles County
                                                             Super. Ct. No.
         v.                                                  22STCV17589)

SANTA MONICA SEAFOOD
COMPANY,

         Defendant and Appellant.

      APPEAL from an order of the Superior Court of
Los Angeles County, Maureen Duffy-Lewis, Judge. Reversed
with directions.
      Allen Matkins Leck Gamble Mallory & Natsis, Grant P.
Alexander and Shauna E. Woods for Defendant and Appellant.
      Cabanday Law Group and Orlando F. Cabanday for
Plaintiff and Respondent.
          _____________________________________________
       Appellant Santa Monica Seafood Company (SMS) moved to
compel arbitration of an employment lawsuit filed by respondent
Brad Theobald. SMS cited a “Mutual Arbitration Agreement” the
parties signed in 2009. The trial court denied SMS’s motion.
       On de novo review, we conclude that SMS proved the
existence of an enforceable arbitration agreement. Changes to
SMS’s employee handbook in 2011 did not rescind the 2009
arbitration agreement; instead, the handbook reinforced the duty
to arbitrate. Theobald’s failure to sign a new arbitration
agreement after 2011 did not alter his continuing, mandatory
duty to arbitrate. We reverse and remand with directions to
order the parties to arbitrate their dispute.
            FACTS AND PROCEDURAL HISTORY
                   Theobald Files His Lawsuit
       Theobald worked for SMS for over a decade, as an at-will
employee. He was promoted during his tenure but alleges that
SMS let him know he would not become a senior manager
because “he was an old white man and not an Italian.” SMS
allegedly fired Theobald in retaliation for his complaints that it
mislabeled seafood sold to its customers, sexually harassed
female employees, and committed insurance fraud.
       Theobald complained to the Equal Employment
Opportunity Commission, then filed suit against SMS. He
asserts causes of action for discrimination; wrongful termination
in violation of public policy; and retaliation for whistleblowing.
                SMS Moves to Compel Arbitration
       SMS moved to compel arbitration of Theobald’s complaint.
It argued that he is bound by a Mutual Arbitration Agreement

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(Agreement) that the parties signed in 2009.1 He is also subject
to a 2011 Employee Handbook (Handbook), which requires
arbitration.
       The Agreement requires arbitration of “any controversy,
claim or dispute . . . relating to or arising out of your employment
or the cessation of your employment.” Arbitration is the parties’
“exclusive remedy” and is binding, covering alleged violations of
public policy, discrimination, wrongful termination, or any other
employment-related claims, including ones falling under the Fair
Employment and Housing Act (FEHA) or any other federal or
state laws.
       SMS terminated Theobald’s employment in 2022. After he
filed a lawsuit, SMS demanded arbitration. Theobald refused to
stipulate to arbitration, claiming SMS revised its arbitration
agreement in 2011 and he did not sign the revision. SMS
asserted that the Agreement was not invalidated merely because
other employees signed a different arbitration agreement after
2011.
       SMS argued that the Federal Arbitration Act (FAA)
controls because SMS engages in interstate commerce, with
facilities and employees in five states; it does business outside of
California. The FAA requires arbitration unless there are
grounds to revoke the Agreement. SMS agreed that state
contract laws determine if an arbitration agreement is valid and
enforceable.

      1 Theobald agreed to arbitrate when he began working at
SMS in 2008; after a hiatus, he restarted at SMS in 2009 and
signed the Agreement.

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           Theobald Opposes the Motion to Compel
      Theobald admitted signing the Agreement in 2009. He
argued it is not binding because he “never agreed to the new
arbitration agreement” in the 2011 Handbook. Theobald
reasoned that the Handbook “cancelled the previous arbitration
agreements.” (Emphasis omitted.) He did not sign a new
arbitration agreement after 2011.2
      The Handbook’s “Mutual Arbitration of Disputes” clause
reads, “any controversy, claim or dispute between you and the
Company . . . relating to or arising out of your employment or the
cessation of your employment with the Company will be
submitted to final and binding arbitration as the exclusive
remedy for such controversy, claim or dispute. . . . Possible

      2 The Handbook states that SMS “in its sole and absolute
discretion, reserves the right to revise, supplement or rescind any
of the provisions, policies, procedures, benefits and rules in this
Employee Handbook, other than the policies regarding At Will
Employment and Mutual Arbitration of Disputes. If changes are
made, a new written policy will be issued and will prevail. All
existing employees are required to execute an Employee
Acknowledgement Form and Agreement to At Will Employment
and Mutual Mandatory Arbitration of Disputes after receipt and
review of this Employee Handbook. All new employees are
required to execute this same Employee Acknowledgement Form
prior to beginning work with the Company. No oral statements
or representations can in any way change or alter the provisions
of this Employee Handbook. The Employee Handbook is not an
employment contract and is not intended to create a promise or
representation of continued employment for any employee. This
Employee Handbook supersedes all prior and/or written policies,
procedures, rules, regulations, commitments and practices of the
Company.”

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disputes covered by the above include (but are not limited to)
unpaid wages, breach of contract, torts, violation of public policy,
discrimination, harassment, or any other employment-related
claims.” The Handbook is available on-line; employees who want
a printed copy can request one.
                             SMS’s Reply
      SMS argued that Theobald signed the Agreement. The
only grounds to rescind it are unconscionability, unjust contract,
fraud or illegality. His failure to sign the Handbook’s forms did
not cancel the Agreement. The Handbook, like the Agreement,
requires arbitration.
                        The Court’s Ruling
      The court denied SMS’s motion to arbitrate. Though
Theobald signed the Agreement, he “never signed a new
agreement. And therefore, there is no new contract.” The
Handbook “canceled” the Agreement “and required existing
employees, including the plaintiff, to sign a new 2011 arbitration
agreement,” which “wasn’t done.” SMS appealed the order
denying arbitration.
                           DISCUSSION
         1. Appeal and Review
      The denial of SMS’s motion to arbitrate is an appealable
order. (Code Civ. Proc., § 1294, subd. (a).) “The party seeking
arbitration bears the burden of proving the existence of an
arbitration agreement, and the party opposing arbitration bears
the burden of proving any defense . . . . Where, as here, the
evidence is not in conflict, we review the trial court's denial of
arbitration de novo.” (Pinnacle Museum Tower Assn. v. Pinnacle
Market Development (US), LLC (2012) 55 Cal.4th 223, 236

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(Pinnacle).) We interpret the Agreement and the Handbook to
determine if the parties must arbitrate.
           2. General Principles
       Public policy strongly favors contractual arbitration as an
expedient means of dispute resolution; there is “ ‘a presumption
in favor of arbitrability.’ ” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th
111, 125.) “Consequently, courts will ‘ “indulge every intendment
to give effect to such proceedings.” ’ ” (Moncharsh v. Heily &
Blase (1992) 3 Cal.4th 1, 9.) The policy favoring arbitration “does
not extend to parties who have not agreed to arbitrate.” (Esparza
v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 787.)
       The threshold question is the existence of an agreement to
arbitrate. (Ahern v. Asset Management Consultants, Inc. (2022)
74 Cal.App.5th 675, 687.) “ ‘[G]eneral principles of contract law
determine whether the parties have entered a binding agreement
to arbitrate.’ (Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th
416, 420; [citation].) Generally, an arbitration agreement must
be memorialized in writing. [Citation.] A party’s acceptance of
an agreement to arbitrate may be express, as where a party signs
the agreement. A signed agreement is not necessary, however,
and a party’s acceptance may be implied in fact (e.g., Craig, at
p. 420 [employee’s continued employment constitutes acceptance
of an arbitration agreement proposed by the employer]) . . . . An
arbitration clause within a contract may be binding on a party
even if the party never actually read the clause.” (Pinnacle,
supra, 55 Cal.4th at p. 236.)
           3. The Parties Agreed to Arbitrate Disputes
       If a court “determines that an agreement to arbitrate the
controversy exists,” it “shall order” arbitration unless “[g]rounds
exist for rescission of the agreement.” (Code Civ. Proc., § 1281.2,

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subd. (b).) Similarly, under the FAA a provision to settle
controversies by arbitration is “valid, irrevocable, and
enforceable” absent legal or equitable grounds to revoke the
agreement. (9 U.S.C. § 2.)
          a. The Handbook Did Not Abrogate the Agreement
       Theobald signed the Agreement in 2009, expressly
consenting to arbitration. He does not claim the Agreement was
invalid at inception, unconscionable, or too narrow to encompass
his claims against SMS. Instead, he asserts that the Handbook
“cancelled” the Agreement. We disagree.
       By its terms, the Handbook “supersedes” prior “policies,
procedures, rules, regulations, commitments and practices of the
Company.” It does not supersede signed, mutual agreements or
support Theobald’s claim that it “expressly stated that all
previous agreements between Appellant and Responded [sic]
were superseded and a nullity.” The Agreement is not nullified
by the Handbook.
       Our reading is fortified by another clause in the same
paragraph. It states that SMS “reserves the right to revise,
supplement or rescind any of the provisions, policies, procedures,
benefits and rules in this Employee Handbook, other than the
policies regarding At Will Employment and Mutual Arbitration of
Disputes.” (Italics added.) The Handbook thus forbids rescission
of arbitration provisions.
       Arbitration may be denied “when there are grounds for
rescinding the agreement.” (Engalla v. Permanente Medical
Group, Inc. (1997) 15 Cal.4th 951, 973.) A party may rescind if
consent is obtained by mistake, duress, menace, fraud, or undue
influence; or consideration for the contract fails or becomes void;
or the contract is unlawful or prejudices the public interest. (Civ.
Code, § 1689.) Neither party to the 2009 Agreement shows
grounds for rescission, nor did the trial court identify grounds to

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rescind. Because the Agreement is “mutual,” ostensibly
benefiting both Theobald and SMS in a dispute, it cannot be
unilaterally terminated by one signatory.
           b. The Handbook Perpetuated Theobald’s Duty to
           Arbitrate
       Theobald does not deny his familiarity with the Handbook.
On the contrary, he concedes that his employment was “subject to
(and his continuing employment conditioned on) the terms of the
[2011] employment manual.” Instead, he declares, “I did not sign
the 2011 arbitration agreement and did not agree to [it].”
Though he failed to sign anything, Theobald impliedly accepted
arbitration by continuing to work at SMS.
       “[A]n agreement to arbitrate may be express or implied so
long as it is written.” (Harris v. TAP Worldwide, LLC (2016) 248
Cal.App.4th 373, 383 (Harris).) Anyone who accepts employment
under the terms of an employee handbook assents to those terms.
(Id. at pp. 383–384.) An arbitration clause in a handbook is not
illusory simply because the employer may modify the handbook.
(Id. at p. 385.) When an employee is at-will, as Theobald was, an
employer may “unilaterally alter the terms of employment,
provided that the alteration does not violate a statute or breach
an implied or express contractual agreement.” (Schachter v.
Citigroup, Inc. (2009) 47 Cal.4th 610, 620.) The parties had an
express contract to arbitrate disputes. The Handbook does not
violate the Agreement because it continues to require arbitration.
       “ ‘[E]mployers must have a mechanism which allows them
to alter the employee handbook to meet the changing needs of
both business and employees.’ ” (Asmus v. Pacific Bell (2000) 23
Cal.4th 1, 12.) When an employer adopts new policies, an
employee’s continued employment under the new policies
constitutes acceptance of the modification. (Id. at p. 15.) “[T]he
availability of continuing employment serv[es] as adequate

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consideration from the employer.” (Ibid.) Thus, an arbitration
agreement is enforceable if the employer exercises its right to
modify its policies because the employer remains bound by the
implied covenant of good faith and fair dealing. (Serafin v. Balco
Properties, Ltd., LLC (2015) 235 Cal.App.4th 165, 176; Harris,
supra, 248 Cal.App.4th at pp. 389–390.)
      SMS has required arbitration of disputes since Theobald
started employment in 2008. He executed the Agreement to
arbitrate in 2009. Likewise, the Handbook requires arbitration of
disputes. Theobald worked for SMS for 14 years, all the while
subject to arbitration under the Agreement and the Handbook.
His assent to arbitration was express (under the Agreement) and
implied when he continued to work at SMS for over a decade after
the Handbook was modified.
      Contrary to Theobald’s belief, the Handbook’s arbitration
clause is mandatory, not “voluntary.” It states that any
controversy, claim, or dispute “will be submitted to final and
binding arbitration . . . as the exclusive remedy.” Language that
“unambiguously require[s] arbitration as the sole and exclusive
remedy” unmistakably waives the right to a judicial forum.
(Volpei v. County of Ventura (2013) 221 Cal.App.4th 391, 396.)
      Theobald invokes the Handbook as grounds for avoiding
the Agreement. He cannot claim the Handbook benefits him by
“cancelling” his Agreement while simultaneously claiming the
mandatory arbitration provisions in the Handbook do not apply
to him. He was supposed to execute documents after reviewing
the Handbook. His failure to do so did not change the Agreement
or the Handbook’s arbitration clause. He continued to work for
SMS and could consult the Handbook at any time to study the
terms of his employment, regardless of whether he signed it.
“[W]hat matters is whether there is agreement, not whether
there is a signature; agreement can be found from conduct that

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ratifies or impliedly accepts the deal.” (Fuentes v. Empire Nissan,
Inc. (2023) 90 Cal.App.5th 919, 933.)
                          DISPOSITION
       The order denying arbitration is reversed. The case is
remanded with directions to order the parties to arbitrate their
dispute pursuant to their 2009 Mutual Arbitration Agreement.
Respondent to bear all costs on appeal.
       NOT TO BE PUBLISHED.

                                          LUI, P. J.
We concur:

      ASHMANN-GERST, J.

      CHAVEZ, J.

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