Cheng-Canindin v. Renaissance Hotel Associates (50 Cal. App. 4th 676, 1996)

Opinion

HAERLE, J.

I. Introduction

Respondent Georgina Cheng-Canindin brought a wrongful termination suit against the owners and management of her former employer, the Parc Fifty Five Hotel (the Hotel). Appellants Renaissance Hotel Associates and Lawrence Chan are two of the defendants in the wrongful termination action who petitioned the trial court to compel respondent to participate in “mandatory contractual arbitration” of her claims. Appellants contend the trial court erred by denying their petition and refusing to compel respondent to submit her dispute to the Hotel’s “Review Committee” for a final and binding resolution of her claims. We hold that respondent did not agree to arbitrate her claims against the Hotel and therefore affirm the trial court’s order denying the petition to compel arbitration.

II. Statement of Facts

A. Respondent’s Employment by the Hotel

Respondent was hired by the Hotel on January 30, 1985, and was employed in its human resources department. In February 1987, she signed a document entitled “Receipt of Employee Handbook.” That document states, in part: “I have this day received a copy of the Renaissance Employee Handbook. I agree to fully and completely read the Employee Handbook and to abide by the rules and regulations contained therein. I agree to resolve all disputes concerning my employment with the Hotel by the procedures outlined in this Handbook.”

B. The Hotel’s “Internal Problem Solving Procedure”

1. The Employee Handbook

The Renaissance Employee Handbook (the Handbook) contains a section entitled “Internal Problem Solving Procedure.” The stated purpose of this procedure is that “[t]he Hotel realizes that occasionally employees may have comments, questions or complaints concerning working conditions, policies or misunderstandings with other employees or with management. To help solve any concerns you may encounter, we encourage you to talk with your supervisor. We will protect your rights to discuss any job problems without fear of reprisal. Problems relating to our personnel policies and procedures can and should be settled as soon as they arise. [<][] To provide our employees with prompt and fair consideration of unresolved concerns, the Hotel has adopted an Internal Problem Solving Procedure. This procedure is an integral part of our open communication policy, and we encourage you to use it whenever appropriate.”

The Handbook outlines the Hotel’s “four-step” internal problem-solving procedure. Step No. 1 instructs the employee to bring all problems to his or her immediate department head unless the complaint concerns that person. Step No. 2 is to advise the employee’s division head of the problem. If the problem is not solved, step No. 3 is to contact the personnel manager. If the employee is “still not satisfied with the outcome” he or she is instructed to go to step No. 4, which is described as follows:

“You may bring your problem or concern to the Renaissance Review Committee. We hope that most disagreements or problems you have concerning your employment with the Renaissance can be satisfactorily resolved by the three steps listed above. However, we realize that some disputes are better handled by an impartial group of individuals with no ‘stake’ in the outcome. Therefore, the Renaissance Review Committee has been developed to be the final decision-maker in all disputes arising out of your employment with the Hotel. The Renaissance Review Committee is made up of employees and members of management, all from outside of your department. After all facts are presented to the Committee, it will discuss the dispute and reach a binding decision based on a majority vote by the members of the Committee. The decision of the Committee will be final for all parties involved.”

2. The Employee Guide

According to the Hotel, it made available to employees an “Employee Guide” (the Guide) which sets forth rules and procedures applicable to the review committee. The Guide indicates that the scope of the committee’s authority is unclear. Although the committee’s authority is characterized as “final and binding” and expressly extends to “[a]ll challenged terminations of employment,” the committee does not have authority to hear disputes that the general manager deems to be “outside the Committee’s jurisdiction.” Nor does the committee have authority to review performance evaluations, alter Hotel policy or procedure, set rates of pay or benefits or “rule upon minor disputes or grievances whose disposition may be better decided at a later date ....’’ The Guide also instructs that “[njeither party may challenge the existence or wisdom of Hotel policies, rules or procedures.”

The review committee consists of two employees, two members of management and the general manager of the Hotel. The general manger votes as to how to resolve a dispute only in the case of a tie. In addition, there is a “Procedural Chairperson from Personnel, who shall render the final decision on what evidence is relevant” and who, according to the Guide “shall also disallow all testimony which is unnecessarily derogatory and personal in nature.”

The Guide provides employees with advice about preparing for the review by, for example, strongly discouraging using an attorney. On this subject, the Guide states: “We believe this process should be kept as informal as possible. Therefore, neither the Hotel or the employee bringing the dispute should be represented by an attorney or other outside individual before the Committee. However, if you believe you cannot adequately state your position without assistance, you may designate someone from the Personnel Department to assist you in preparing or presenting your case. If you insist on being represented by an attorney, you may bring one with you to the Review, at your expense, provided written notice is given to the Hotel

The Guide provides that employees may call other employees to present information to the committee but imposes significant limits on this right. First, the personnel department must determine whether the employees “may be relieved of duty during the time they are scheduled to meet with the Committee.” Second, the general manager makes the “final decision” regarding the necessity of the appearance of a witness who does not wish to appear. And third, “attendance by all such employees will be voluntary.”

3. The Sourcebook for Members

Employees who volunteer to participate as committee members are given a copy of the “Review Committee Sourcebook for members” (the Source-book). The Sourcebook tells prospective committee members that “[t]he purpose of the Committee is to ensure that major decisions affecting the employment of individual employees is [szc] made in accordance with Hotel policy.” The Sourcebook further advises that “the Committee may not change, alter or modify existing Hotel policies, as this responsibility must remain with the General Manager or Executive Committee.”

According to the Sourcebook, “[t]he members of the Committee for a particular session will be chosen at random from a pool of volunteers. The Personnel Department is responsible for administering the selection process.” The members are chosen one week before the scheduled meeting to hear the dispute. Before any testimony is heard, the procedural chairperson provides the committee with a summary of the employee’s personnel file and copies of relevant Hotel rules and regulations.

The Sourcebook instructs volunteers that “[a]fter having heard all the evidence presented to you by both sides, you will vote on the basis of whether or not Hotel policies were followed.” First among the “standards” that prospective members are instructed to apply to their decisionmaking process is that “Hotel policies will govern all actions. The Committee is not authorized to make exceptions to Hotel policies or interpret the policies differently for any one individual, unless such an exception has been authorized in writing by the General Manager.”

C. The Present Action

On March 10, 1994, respondent, who was five months pregnant, was terminated from her employment. Respondent filed a wrongful termination complaint alleging, among other things, sex and race discrimination, violations of public policy and defamation. Instead of answering the complaint, respondents filed a “petition to compel plaintiff’s compliance with contractual alternative dispute resolution, , including arbitration pursuant to California Code of Civil Procedure § 1281.2” (the petition).

In their petition, appellants alleged that respondent was terminated for breaching company policy concerning confidentiality of personnel information. The petition further alleged that respondent refused to resolve her dispute concerning the basis for her termination by participating in the mandatory internal problem solving procedures which she had previously agreed to follow. The petition requested that the trial court stay court proceedings pending completion of “arbitration in the form of the Parc Fifty Five Review Committee procedures.”

At the hearing on their petition, appellants argued that respondent, by agreeing to comply with the terms of the Handbook, did not simply agree to participate in the review committee procedure before filing suit, but that she effectively waived her right to a judicial forum with respect to any claim relating to her employment. Appellants also challenged any notion that the review committee procedure was “inherently biased.” According to appellants, federal law preempts state law regarding the enforceability of this agreement and federal law requires proof of actual bias. After the hearing, the trial court issued a minute order denying appellants’ petition to compel arbitration on two primary grounds.

First, the trial court ruled the agreement was unconscionable under the standards set forth in Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807 [171 Cal.Rptr. 604, 623 P.2d 165] (Graham). The court reasoned the agreement did not meet the requisite level of “minimum integrity” articulated by the Supreme Court in Graham because the agreement was “inherently biased in design and thus unconscionable and unenforceable.” The court found the agreement was inherently biased because it provided for a “non-neutral" arbitration panel by naming coworkers as final arbitrators to employment disputes. In response to appellants’ argument that state law prohibiting the use of non-neutral panels was preempted by conflicting federal law, the trial court ruled that the agreement at issue in this case was outside the jurisdiction of the Federal Arbitration Act. (9 U.S.C. § 1 et seq.)

Second, relying on Prudential Ins. Co. of America v. Lai (9th Cir. 1994) 42 F.3d 1299, the trial court held that the agreement did not fully protect respondent’s title VII rights and remedies (42 U.S.C. § 2000e et seq.). Noting that state antidiscrimination laws are explicitly made part of title VII’s enforcement scheme, the court found no evidence respondent “knowingly waived the rights and remedies created by Title VII.”

III. Discussion

Appellants contend the trial court erroneously concluded that the agreement at issue in this case is not governed by the Federal Arbitration Act (the FAA), that the FAA mandates that an arbitration agreement be enforced absent proof of actual bias, and that there is no evidence of actual bias in this case, We find it unnecessary to address these contentions because we conclude that the parties to this appeal did not enter into an arbitration agreement at all.

Under both federal and state law, the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate. The United States Supreme Court has stated that “. . . the first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute.” (Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) 473 U.S. 614, 626 [87 L.Ed.2d 444, 454, 105 S.Ct. 3346].) Similarly, under California law, “ ‘[arbitration is recognized as a matter of contract, and a party cannot be forced to arbitrate something in the absence of an agreement to do so.’ ” (Chan v. Drexel Burnham Lambert, Inc., supra, 178 Cal.App.3d at p. 640; see also Delta Dental Plan v. Banasky (1994) 27 Cal.App.4th 1598 [33 Cal.Rptr.2d 381]; Spellman v. Securities, Annuities & Ins. Services, Inc. (1992) 8 Cal.App.4th 452, 457 [10 Cal.Rptr.2d 427].)

The question of whether the parties agreed to arbitrate is answered by applying state contract law even when it is alleged that the agreement is covered by the FAA. (See Chan v. Drexel Burnham Lambert, Inc., supra, 178 Cal.App. 3d at p. 640; Wasyl, Inc. v. First Boston Corp. (9th Cir. 1987) 813 F.2d 1579, 1582; Progressive Cas. v. C.A. Reaseguradora Nacional (2d Cir. 1993) 991 F.2d 42, 45-46; Ziegler v. Whale Securities, Co., L.P. (N.D.Ind. 1992) 786 F.Supp. 739, 741-742; Cook Chocolate Co. v. Salomon, Inc. (S.D.N.Y. 1988) 684 F.Supp. 1177, 1182.)

In the present case, neither the alleged agreement nor any of the literature describing the Hotel’s review committee procedure employs the term arbitration. “[T]he failure of the agreement to identify the grievance procedure as ‘arbitration’ is not fatal to its use as a binding mechanism for resolving disputes between the parties. [Citations.] [