Defendants The Sports Club Company and five of its officers appeal an order denying a motion to compel arbitration.
Susan Gorlach is the former human resources director for Sports Club. She resigned her position on August 6, 2010.
Gorlach was tasked with presenting the new handbook to all Sports Club employees and collecting their signatures to the arbitration agreement. She began conducting general meetings about the handbook and collecting employee signatures the week of June 14, 2010.
On June 30, 2010, Gorlach told chief operating officer April Morgan that all corporate employees except four had signed the arbitration agreement, but she did not identify herself as one of the employees who had not signed. She also told Morgan that 254 of the 256 employees who had attended the general meetings signed all signature pages of the handbook, but that 164 employees had not yet attended meetings. Gorlach said she would resume "make up" meetings the week of July 11, 2010. On July 21, 2010, she informed the Sports Club's group exercise team that she would like their signatures by July 23, 2010.
Gorlach resigned her position with Sports Club on August 6, 2010. It is undisputed that she never signed the arbitration agreement.
Gorlach filed a complaint against Sports Club and five of its officers on January 7, 2011.
Sports Club answered the complaint on February 23, 2011, generally denying the complaint's allegations and asserting 26 affirmative defenses. In its 22d affirmative defense, Sports Club asserted that the court lacked jurisdiction to resolve the dispute "due to the existence of a mandatory, binding arbitration agreement that Plaintiff agreed to be bound by."
On April 15, 2011, Sports Club moved to compel arbitration. The motion asserted that although Gorlach did not sign the arbitration agreement, she assented to it by her continued employment with Sports Club. In support of the motion to compel arbitration, Sports Club submitted the following declarations:
Declaration of Nanette Francini. Francini is Sports Club's president and cofounder. On June 14, 2010, she attended Gorlach's presentation of the handbook at the company's corporate offices. Gorlach emphasized that the handbook contained an arbitration agreement and that signing the agreement was a condition of employment. On about June 15, 2010, Francini asked Gorlach whether all Sports Club employees had signed the arbitration agreement. Gorlach responded "that everyone but four individuals had signed the Agreement." Because Gorlach did not identify herself as one of these four individuals, Francini believed she had signed the agreement. On about July 7, 2010, Francini asked Gorlach whether everyone on the executive committee, which included Gorlach, had signed the agreement. She said that they had. Gorlach never told Francini that she did not want to sign the agreement or that the agreement did not apply to her.
Declaration of Rex Licklider. Licklider is Sports Club's chief executive officer. He was not able to attend Gorlach's presentation of the handbook at the corporate offices on June 14, 2010. Subsequently, Gorlach told him that all corporate office employees had signed the handbook and arbitration agreement except Tim O'Brian and himself; Licklider immediately signed it. Shortly thereafter, Licklider asked Gorlach if all corporate team members had signed the handbook and arbitration agreement; she replied that "everyone at corporate" had signed the handbook and arbitration agreement. Licklider understood this to mean that plaintiff had signed the arbitration agreement because she was a member of "corporate." Gorlach never told Licklider that she did not want to sign the arbitration agreement.
Declaration of April Morgan. Morgan is Sports Club's chief operating officer. Gorlach was responsible for updating the handbook, which last had been updated in 2002 and did not contain an arbitration agreement. Gorlach began updating the handbook in the summer of 2008. The major update to the
Gorlach was tasked with presenting and distributing the new handbook and ensuring that each employee signed each applicable signature page. Gorlach was also to maintain all of the employees' signature pages, including the arbitration agreement's signature pages. Gorlach began presenting the handbook to Sports Club employees on June 14, 2010. She made 26 presentations of the handbook to employees over the next four days. If employees did not sign the arbitration agreement at the presentations, Gorlach would follow up with them and attempt to obtain their signatures.
On June 30, 2010, Gorlach stated that all corporate employees except for four had signed the arbitration agreement. She did not identify herself as an employee who had not signed the arbitration agreement. Further, she said that 254 of the 256 employees who had attended the presentations signed all signature pages of the handbook, but that 164 employees had not yet attended presentations. She said she would resume "make up" presentations the week of July 11, 2010.
On July 30, 2010, Gorlach sent an e-mail saying that some Sports Club employees did not want to sign the arbitration agreement and were seeking advice on how to proceed.
Gorlach opposed the motion to compel arbitration. She noted that she did not sign the arbitration agreement, and thus she urged there was no enforceable arbitration agreement between her and Sports Club. She further contended that the arbitration agreement was procedurally and substantively unconscionable, and Sports Club had waived its right to compel arbitration by taking steps inconsistent with an intent to invoke arbitration.
In support of her opposition, Gorlach declared that Sports Club did not ask its employees to sign an arbitration agreement until 2010, at which time she declined to sign the agreement.
Sports Club contended that even though Gorlach did not sign the arbitration agreement, she is bound by it as a matter of law because she continued to work for Sports Club after learning that signing the agreement was a
The court denied the motion to compel on June 1, 2011, finding that "defendants have failed to demonstrate that there exists a written arbitration agreement between the plaintiff and defendants." The court agreed that Gorlach had led Sports Club to believe she had signed the arbitration agreement, but noted that when Gorlach resigned, she was still in the process of collecting signatures: "We're talking about a period of time in which — if this had gone on — we would have been into a bunch of different case law here if this had gone on for months under their noses and they hadn't known it or something, it would have been a whole different deal. It's clear from the declarations that all the signatures weren't in yet." The court noted, moreover, that just seven days before Gorlach resigned, she advised the chief operating officer that some employees still had not signed the arbitration agreement and were "inquiring about what it means to his or her status." Thus, the court said, "It sounds like by reading this that it was still in its rollout condition.... It sounds like it was still in the rollout condition and everyone hadn't signed it yet, including her. She made a choice not to sign it."
The court concluded: "[B]y her responses, did she make omissions which intentionally misled the [chief operating officer] and [chief executive officer] to believe that she was on board and she said she had signed? I think that she did. But at the same time, ... [s]he quit before she signed it. There is no signed agreement. She clearly didn't want to go to arbitration. There's just no question based on everything that I read that she said she was never planning on signing this."
Sports Club timely appealed.
Ordinarily, we review a denial of a petition to compel arbitration for abuse of discretion. (California Parking Services, Inc. v. Soboba Band of Luiseño Indians (2011) 197 Cal.App.4th 814, 817 [128 Cal.Rptr.3d 560], citing Whaley v. Sony Computer Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 484 [17 Cal.Rptr.3d 88].) However, where the trial court's denial of a petition to arbitrate presents a pure question of law, we review the order de novo. (California Parking Services, supra, at p. 817, citing Robertson v. Health Net of California, Inc. (2005) 132 Cal.App.4th 1419, 1425 [34 Cal.Rptr.3d 547].)
The parties agree that Gorlach never signed a written contract to arbitrate. Sports Club contends, however, that (1) Gorlach is equitably estopped from contending that the arbitration agreement does not apply to her and (2) an implied-in-fact arbitration agreement exists between Gorlach and Sports Club. We consider these issues below.
Sports Club contends that Gorlach is equitably estopped from contending that the arbitration agreement does not apply to her because she deliberately misled the executive committee into believing she signed the agreement. It notes that Gorlach told executive committee members Morgan, Licklider, and Francini that "all of corporate" had signed the agreement, even though she had not. Further, Sports Club urges that Gorlach's responsibility for obtaining signatures and maintaining signed arbitration agreements gave it no practical way to determine that Gorlach had not signed, and Sports Club relied on her representations to its detriment. For the following reasons, we do not agree.
In the present case, the trial court concluded there was no evidence that Sports Club relied to its detriment on Gorlach's implied representations that she had signed the arbitration agreement, and we agree. All of the evidence before the trial court suggested that when Gorlach resigned, Sports Club was still "rolling out" its new handbook and arbitration agreement — that is, it had not yet completed the process of having its employees sign the arbitration agreement. Moreover, although Sports Club had advised its employees, including Gorlach, that signing the arbitration agreement was a "condition of employment," there is no evidence that, as of the date of Gorlach's resignation, Sports Club had decided what it would do if an employee refused to sign the arbitration agreement or had terminated any employee for failing to sign the agreement. Accordingly, there was no evidence from which the trial court could have concluded that had Sports Club known Gorlach had not signed the arbitration agreement, it would have terminated her prior to August 6, 2010.
Sports Club contends that even though there is no signed arbitration agreement between the parties, there is an implied-in-fact agreement to arbitrate that was created when Gorlach remained in Sports Club's employ after learning that signing the arbitration agreement was a condition of employment. It urges that California courts "have repeatedly upheld unexecuted arbitration agreements by finding that an implied-in-fact contract existed between the employer[] and employee[]. Implied-in-fact contracts are found in cases with unexecuted arbitration agreements when (1) employees have knowledge of the arbitration agreement and (2) employees continue to work after receipt of the arbitration agreement. In such cases, Courts have held that the employees' continued employment constitutes their acceptance of the agreements to arbitrate." For the following reasons, we do not agree.
In the present case, the trial court found that the evidence did not permit the inference that plaintiff had intended to agree to arbitrate disputes with Sports Club. According to the trial court, Gorlach "made a choice not to sign it.... [S]he didn't sign it, and she quit." "There's just no question based on everything that I read that she said she was never planning on signing this." The evidence before the trial court — including that plaintiff did not sign the agreement, inquired as to the consequences of refusing to sign, and resigned her position with the company — support the trial court's conclusion that there was no mutual intent to enter an arbitration agreement.
Sports Club cites Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416 [100 Cal.Rptr.2d 818] (Brown & Root) for the proposition that the trial court was required to find an implied contract because the evidence was undisputed that Gorlach continued in Sports Club's employ after learning about the arbitration agreement. In Brown & Root, plaintiff Craig began working for defendant Brown & Root's predecessor in 1981. In 1993, Brown & Root established a dispute resolution program that required all employee-employer disputes to be submitted to binding arbitration. In a memorandum sent to its employees, Brown & Root informed its employees: "`The enclosed brochure explains the procedures as well as how the Dispute Resolution Program works as a whole.... IT APPLIES TO YOU. It will govern all future legal disputes between you and the Company that are related in any way to your employment.'" (Id. at p. 419.) Brown & Root sent copies of the memorandum and brochure to Craig's home in May 1993 and fall 1994. (Id. at pp. 419-420.)
We do not agree that Brown & Root governs the present case. In Brown & Root, the employee memorandum did not ask employees to sign an arbitration agreement; it simply informed them that any employment-related dispute would henceforth be subject to arbitration. The employee handbook in the present case is different: Rather than unilaterally imposing an arbitration requirement, the handbook told employees that, "As a condition to employment, all Team Members must sign the Mutual Agreement to Arbitrate Claims...." (Italics added.) In other words, the handbook told employees that they must sign the arbitration agreement, implying that it was not effective until (and unless) they did so. Because Gorlach never signed the arbitration agreement, we cannot imply the existence of such an agreement between the parties.
The present case is analogous to Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164 [69 Cal.Rptr.3d 223] (Mitri). There, the plaintiffs sued their former employer for sexual discrimination and harassment. The defendants moved to compel arbitration. In support of their motion to compel, the defendants submitted copies of their employee handbook, which stated: "`Any dispute arising out of employment with the Company, as allowed by law, will be settled by binding arbitration. As a condition of employment, all employees are required to sign an arbitration agreement.'" (Id. at p. 1167, italics added.) The defendants submitted evidence that both employees had signed an acknowledgement that they had received the employee handbook, but there was no evidence that either employee had ever signed the arbitration agreement referenced in it. (Ibid.)
"Defendants cite Asmus[, supra,] 23 Cal.4th 1, 11 ... and DiGiacinto v. Ameriko-Omserv Corp. (1997) 59 Cal.App.4th 629, 637 [69 Cal.Rptr.2d 300], for the proposition that `[i]n order [to] establish that [plaintiffs] assented to the arbitration agreement, it is only necessary for [defendants] to show that [plaintiffs] received a copy of the agreement and that [plaintiffs] continued to work after they received a copy of the agreement.' Significantly, however, neither Asmus nor DiGiacinto v. Ameriko-Omserv Corp. addressed whether an arbitration agreement existed between an employer and employee.
"Asmus, supra, 23 Cal.4th 1, arose in the context of an employer's discontinuance of a management employment security policy but did not involve an arbitration agreement. In Asmus, the California Supreme Court addressed the issue whether `"[o]nce an employer's unilaterally adopted policy — which requires employees to be retained so long as a specified condition does not occur — has become a part of the employment contract, may the employer thereafter unilaterally [terminate] the policy, even though the specified condition has not occurred?"' (Id. at pp. 5-6, fn. omitted.) In holding an employer could do so, the Supreme Court recognized that `California law permits employers to implement policies that may become unilateral implied-in-fact contracts when employees accept them by continuing their employment.' (Id. at p. 11.) In Asmus, both parties agreed that the employees had accepted a unilateral contract by their performance. (Ibid.) Thus, the question in Asmus was whether the unilateral contract, once formed, could be unilaterally modified or terminated by the employer. (Ibid.)
The Mitri court also distinguished its case from Brown & Root: "In their reply brief on appeal, defendants also cite Craig v. Brown & Root, Inc., supra, 84 Cal.App.4th 416, 420, in which the appellate court rejected an employee's contention the evidence was insufficient to show she entered a binding arbitration agreement with her employer. The court cited evidence the employer sent the employee a memorandum informing her of the employer's new dispute resolution program, emphasized `IT APPLIES TO YOU,' and explained `[i]t will govern all future legal disputes between you and the Company.' [Citation.] Unlike the arbitration agreement provision in the Arnel employee handbook, the memorandum in Craig v. Brown & Root, Inc., established in and of itself the employer's dispute resolution program, and did not include an express requirement that its employees sign an arbitration agreement. Therefore, Craig v. Brown & Root, Inc., is inapposite." (Mitri, supra, 157 Cal.App.4th at p. 1172.)
In the present case, as in Mitri, the employee handbook did not purport unilaterally to impose an arbitration agreement on its employees; instead, it urged employees to agree to submit to arbitration and to sign a representation that "... I have entered into the Agreement voluntarily...." Under these circumstances, the trial court properly inferred from Gorlach's election not to sign the arbitration agreement that she did not intend to be bound by it.
The order denying the petition to compel arbitration is affirmed. Gorlach shall recover her costs on appeal.
Epstein, P. J., and Manella, J., concurred.
