24 Hour Fitness, Inc. v. Superior Court of Sonoma Cty.

Background

When she was hired, Munshaw signed a document^[1] that provided in pertinent part: “I also read and specifically agree that if there is any dispute arising out of my employment as described in the section called ‘Arbitration of Disputes’ in the handbook, I will submit it exclusively to binding and final arbitration according to the procedures outlined in the ‘Employment Arbitration Procedures Manual.’ ”

According to the “Arbitration of Disputes” section in the personnel handbook: “If any dispute arises from your employment with Nautilus, you and Nautilus agree that you both will submit it exclusively to final and binding arbitration. Except for workers’ compensation and unemployment insurance claims and matters heard by the labor commissioner, the dispute includes every kind or type of dispute including, without limitation, any allegation of wrongful discharge, discrimination, or any injury to your physical, mental or economic interests. This means that a neutral arbitrator, rather than a court or jury, will decide the dispute.

“We agree to settle the dispute according to the provisions of the California Code of Civil Procedure, starting at § 1280, or successor or replacement statutes. To start the arbitration process, either party must submit a written arbitration request to the other, within one (1) year of the date the dispute first arose or within one (1) year of the termination of your employment, whichever occurs first. . . .

“The details of the arbitration procedure are in a separate document called the ‘Employment Arbitration Procedure Manual,’ which Nautilus incorporates into this Personnel Handbook by reference as if it were fully repeated here.” (Italics added, underscore in original, subheadings omitted.)

Munshaw complained that harassment by Nautilus employees rendered her work environment so intolerable that she was constructively discharged on July 3, 1995. She did not invoke arbitration and instead filed this action. The complaint alleged Munshaw had been sexually harassed by Nautilus employees Chad Hamilton, Curtis Harmon, Bill Cunningham and others, and that she had complained repeatedly to the offending individuals, to her

immediate supervisors and to defendant Joe Rodriguez.^[2] She further alleged that these employees were acting within the scope of their managerial authority, with the consent and permission of Nautilus. Her complaint alleged sexual harassment;^[3] assault and battery; denial of the right to be free from violence or intimidation because of sex;^[4] and negligent and intentional infliction of emotional distress.

During prefiling discussions, Nautilus advised Munshaw’s attorneys several times that her claims were subject to the arbitration agreement. Munshaw maintained that the arbitration clause was unenforceable. In a letter sent to Nautilus’s counsel after filing the complaint, Munshaw’s attorney expressly repudiated the arbitration agreement: “plaintiffs [sic] are knowingly waiving their right to arbitrate, and are not reversing their position.”

Nautilus and Rodriguez subsequently moved for summary judgment or summary adjudication, arguing Munshaw’s claims were covered by her agreement to arbitrate. Cunningham, Hamilton and Harmon sought similar relief on the same basis. Munshaw raised three arguments in opposition. First, she asserted, there was no valid contract to arbitrate because the agreement was unconscionable, illusory, and without mutual assent. Second, she claimed that the existence of assertedly nonarbitrable claims against individual employees barred any defendant, including Nautilus, from raising the arbitration agreement defensively on summary judgment. Finally, she contended her cause of action for civil rights violations was unrelated to her employment relationship and, thus, was beyond the scope of the arbitration agreement.

The t

rial court requested additional briefing on the propriety of enforcing the arbitration agreement through summary judgment rather than by motion to compel arbitration and stay the proceedings. Relying on Badgley v. Van Upp (1993) 20 Cal.App.4th 218 [ 24 Cal.Rptr.2d 406 ] (Badgley) and Charles J. Rounds Co. v. Joint Council of Teamsters No. 42 (1971) 4 Cal.3d 888 [ 95 Cal.Rptr. 53 , 484 P.2d 1397 ] (Charles J. Rounds), the court ruled summary judgment was unavailable to any defendant. “Here, there are multiple defendants named in the complaint including defendant 24 Hour. The complaint and answer raise the issue whether the individual defendants were employees of defendant Nautilus and acting within the scope of such employment.

his right to arbitrate, such that defendant could elect to submit the matter to the jurisdiction of the court; (2) defendant may also elect to demur or move for summary judgment on the ground that the plaintiff has failed to exhaust arbitration remedies’, and (3) defendant may also elect to move for a stay of proceedings pending arbitration if defendant also moves to compel arbitration.” However, “Where plaintiff has attempted to exhaust its arbitration remedy or raises issues not susceptible to arbitration or not covered by the arbitration agreement, defendant may not merely assert failure to arbitrate an issue as an affirmative defense; a stay rather than dismissal of the suit is then proper.” (Charles J. Rounds, supra, 4 Cal.3d at p. 899, italics added; see also Cusenza v. Construction Design & Consulting, Inc. (1984) 157 Cal.App.3d 201 , 203-204 [ 203 Cal.Rptr. 605 ].) Because the only issue presented in Charles J. Rounds was covered by the arbitration agreement, it was not error to dismiss the suit.

This case presents a related but different question; whether a defendant as to whom all claims are arbitrable may be precluded from seeking summary judgment on that basis because the plaintiff has also raised nonarbitrable claims against other defendants. The parties have cited no cases on this precise point, and our research has disclosed none.^[5] We conclude that the presence of nonarbitrable claims against some defendants should not defeat the right of others to seek summary judgment on the basis that all claims against them are subject to arbitration.

As a general observation, the summary judgment statute plainly contemplates circumstances in which one defendant is entitled to judgment even though others are not. “The motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c), italics added; see also § 437c, subds. (j) [pertaining to entry of separate judgment), (k)[concerning effects of summary judgment as to one of multiple defendants in personal injury case].)^[6] The policy behind the summary judgment scheme “is to ‘promote and protect the administration of justice, and to expedite litigation by the elimination of needless trials.’ [Citation].” (Lilienthal & Fowler v. Superior Court (1993) 12 Cal.App.4th 1848 , 1854 [ 16 Cal.Rptr.2d 458 ].) Permitting a defendant to seek summary judgment under the present circumstances would

thus be congruent with the statutory scheme and would serve its underlying policy.

We turn to considerations peculiar to cases involving contractual arbitration. In a case in which fewer than all of the claims against a given defendant are subject to an arbitration agreement, or in which part of the relief sought is beyond the arbitrator’s power to grant, it makes sense to require the party seeking to enforce the arbitration agreement to stay the litigation while compelling arbitration. In such cases, this procedure preserves a forum for the plaintiff’s nonarbitrable claims, while at the same time preventing the defendant from abusing the arbitration agreement to create undue delay. (See Charles J. Rounds, supra, 4 Cal.3d at pp. 896-897.)

This, however, is not such a case. Assuming arguendo that all of Munshaw’s claims against Nautilus are subject to arbitration (see pt. II, post), nothing would remain to litigate against Nautilus following arbitration.^[7] Hence, there seems to be no legitimate reason for keeping Nautilus in the court action.

We are also mindful of the potential repercussions of endorsing the trial court’s interpretation of Charles J. Rounds and Badgley. In the instant case, the court’s ruling would work an injustice by requiring Nautilus to compel arbitration despite Munshaw’s unequivocal waiver of her right to arbitrate. More significantly, a rule that would preclude a defendant in Nautilus’s position from seeking summary judgment because the plaintiff has also named defendants who are not subject to the arbitration agreement would seem likely to encourage spurious claims and frivolous litigation. Absent any compelling reasons in precedent or policy for doing so, we decline to endorse such a rule.

In summary, we discern no reason to preclude Nautilus from seeking summary judgment on the basis of the arbitration agreement. That Munshaw may have raised claims against other defendants beyond the scope of the agreement should not bar Nautilus from obtaining relief at this juncture.

H. Munshaw’s Claims Against Nautilus Are All Subject to the Arbitration Agreement

The arbitration clause at issue is a broad one. With limited exceptions not pertinent here, it extends to “every kind or type of dispute” arising from Munshaw’s employment, including “any allegation of wrongful discharge, discrimination, or any injury to [her] physical, mental or economic interests.”

While Munshaw does not dispute that the majority of her allegations fall within this language, she contends that her civil rights claim (Civ. Code, §§51.7, subd. (a), 52 subd. (b))^[8] is exempt because it “is based upon Plaintiff’s individual statutorily guaranteed rights outside the scope of employment and is not related to the employment relationship.” Not so. Munshaw’s civil rights claim is based on the same factual allegations as the rest of heir claims, all of which involve claimed episodes of harassment arising from her employment. While the existence of an employment relationship is not a necessary predicate of a civil rights claim under Civil Code section 51.7, all of Munshaw’s claims arose from her employment and, thus, are covered by the arbitration agreement. Accordingly, the trial court erred in denying Nautilus’s motion for summary judgment.^[9]

The question remains whether the individual defendants are similarly entitled to summary judgment on the strength of the arbitration clause. While these defendants are not parties to the contract between Munshaw and Nautilus, they are entitled to the benefit of the arbitration agreement if, as the complaint alleges, they were acting as agents for Nautilus. (Dryer v. Los Angeles Rams (1985) 40 Cal.3d 406 , 418 [ 220 Cal.Rptr. 807 , 709 P.2d 826 ]; Berman v. Dean Witter & Co., Inc. (1975) 44 Cal.App.3d 999 , 1004 [ 119 Cal.Rptr. 130 ]; accord, Harris v. Superior Court (1986) 188 Cal.App.3d 475 , 478 [ 233 Cal.Rptr. 186 ] [“It is well established that a nonsignatory beneficiary of an arbitration clause is entitled to require arbitration.”].) Consistent with our analysis above, therefore, each employee defendant is entitled to summary judgment if, but only if, Munshaw’s claims against him are entirely subject to the arbitration agreement.

In support of summary judgment, the employee defendants relied on the allegations in Munshaw’s complaint that they were acting within the course

and scope of their employment at all relevant times. Although a party cannot rely on its own pleadings on summary judgment, a party seeking or opposing summary judgment under these circumstances can rely on admissions of material fact made in the opposing party’s pleadings. (Pinewood Investors v. City of Oxnard (1982) 133 Cal.App.3d 1030 , 1034-1035 [ 184 Cal.Rptr. 417 ]; Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial 2 (The Rutter Group 1998) ¶¶ 10:19 to 10:20, 10:204, pp. 10-6 to 10-7, 10-71 (hereafter Weil & Brown).)

The question arises whether allegations that a party was acting within the course and scope of his employment qualify, for summary judgment purposes, as admissions of fact rather than legal conclusions. At least one court has observed that such allegations are best characterized as mixed legal-factual conclusions. (Bahan v. Kurland (1979) 98 Cal.App.3d 808 , 812 [ 159 Cal.Rptr. 661 ].) However, it is settled that, in the absence of countervailing evidence, declarations that a party acted within the scope of his employment are treated as statements of fact for purposes of summary judgment. (Golden West Baseball Co. v. Talley (1991) 232 Cal.App.3d 1294 , 1305 [ 284 Cal.Rptr. 53 ]; Weil & Brown 2, supra, ¶ 10:128.1, p. 10-50; see also Bahan v. Kurland, supra, 98 Cal.App.3d 808 , 812 [for purposes of summary judgment, admission in complaint that the defendant acted within the course and scope of his employment will not bind the plaintiff on summary judgment if he proffers countervailing evidence in opposition to the summary judgment motion].) Accordingly, the employee defendants met their initial burden of showing the existence of a complete defense to Munshaw’s claims against them. (§ 437c, subd. (o)(2).)

The burden then shifted back to Munshaw to show that a triable issue of material fact indeed existed as to whether the arbitration agreement applied. (§ 437c, subd. (o)(2).)^[10] With one exception discussed below, Munshaw rested her opposition to both summary judgment motions on an allegation in Nautilus’s answer that any harassment was carried out by employees acting beyond the course and scope of their employment. Nautilus’s allegation, however, is not an admission by the individual defendants. To the extent that Munshaw’s opposition thus rests only upon pleadings, rather than evidence, it was insufficient to satisfy her burden. (See College Hospital, Inc. v.

Handbook can be modified or deleted, nor anything added, in any way by oral statement or practice. Only the President of Nautilus can change this Handbook and the change must be in writing. If Nautilus makes any material changes, it will give me a copy of them.” This clause, she contends, renders the arbitration agreement illusory on its face and lacking consideration.^[11] Again, we disagree.

James G. Freeman & Associates, Inc. v. Tanner (1976) 56 Cal.App.3d 1 , 8, 10 [ 128 Cal.Rptr. 109 ] is instructive. The contract there permitted one party to amend the terms at will upon thirty days’ written notice. The court squarely rejected the notion that this power rendered the contract illusory: “ ‘[W]here the contract specifies performance the fact that one party reserves the power to vary it is not fatal if the exercise of the power is subject to prescribed or implied limitations such as the duty to exercise it in good faith and in accordance with fair dealings.’ ” (Id. at p. 10; see also Automatic Vending Co. v. Wisdom (1960) 182 Cal.App.2d 354 , 357-358 [ 6 Cal.Rptr. 31 ]; Powell v. Central Cal. Fed. Sav. & Loan Assn. (1976) 59 Cal.App.3d 540 , 549 [ 130 Cal.Rptr. 635 ]; 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 233, pp. 240-241.) Nautilus’s discretionary power to modify the terms of the personnel handbook in writing notice indisputably carries with it the duty to exercise that right fairly and in good faith. (See Automatic Vending Co. v. Wisdom, supra, 182 Cal.App.2d at p. 358.) So construed, the modification provision does not render the contract illusory.

Munshaw next contends the arbitration is unenforceable because Nautilus’s personnel handbook and its arbitration procedures manual contain conflicting provisions governing the allocation of arbitration costs. The personnel handbook provides that each party is to bear one-half of the arbitrator’s fees and expenses; if, however, the employee wins, Nautilus will pay all of those costs. The employment arbitration procedures manual referenced in the personnel handbook, however, states simply that each party is responsible for one-half of the arbitrator’s fees and costs. Pointing to this discrepancy, Munshaw argues there was no mutual assent and, hence, no enforceable agreement to arbitrate. The argument is unpersuasive.

We view the cited clauses in light of the standard rules of contract interpretation. “An interpretation which gives effect is preferred to one which makes void.” (Civ. Code, § 3541.) If it may be done without violating the parties’ intent, we must interpret the contract in such a way as to make it “lawful, operative, definite, reasonable,' and capable of being carried into effect.” (Civ. Code, § 1643). Particularly where the contract is one of

and Cunningham.^[12] Costs are awarded to Nautilus, Rodriguez, Harmon and Cunningham pursuant to rule 56.4 of the California Rules of Court. Munshaw and Hamilton are to bear their own costs.

Phelan, P. J., and Walker, J., concurred.