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Ma Na Tam, worked for KMS Automotive Inc., dba Browning Mazda of Alhambra. Tam began working at the dealership in April 2017, after signing a number of employment-related documents and forms, including a form entitled “EMPLOYEE ACKNOWLEDGEMENT AND AGREEMENT – AGREEMENT TO ARBITRATE.”

In April 2020, approximately three years after commencing employment, Tam filed a first amended complaint against the dealership and Adrian Hernandez, a dealership employee and desk manager for sales or finance manager. The complaint allegations depicted the dealership as a racially and sexually charged environment in which Tam and other Asian employees and customers were subject to harassing, discriminatory, and retaliatory acts. Tam alleged Hernandez drugged and raped her on multiple occasions, and the dealership did not take appropriate action in response to her complaints.

Seven causes of action were asserted against the dealership alone, and five causes of action were alleged against both the dealership and Hernandez. There are no separate causes of action asserted solely against Hernandez.

In August 2020, the dealership filed a motion to compel arbitration. Hernandez filed a joinder to the dealership’s notice of motion and motion to compel arbitration and dismiss or stay action.

Tam opposed the motion, arguing the arbitration agreement was unconscionable and that there was no meeting of the minds, both because she was given very little time to sign a large volume of employment-related materials, and because she has a limited command of English. Tam also argued that her drugging and rape-related claims were outside the scope of the arbitration agreement.  Finally, Tam argued she should not be required to arbitrate her claims for violation of the Unfair Business Practices Act and for equitable relief, and that severing these and the drugging and rape-related claims would raise the possibility of conflicting determinations by the arbitrator and the court.

On January 19, 2021, the court denied the dealership’s motion to compel arbitration. The court’s minute order explained, Code of Civil Procedure section 1281.2(c) “gives courts discretion to deny a petition to compel arbitration when [a] party to the arbitration agreement is also a party to a pending court action . . . with a third party arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” Relying on Civil Code section 3513, which prohibits private parties from waiving the advantage of a law established for a public reason, the trial court found invalid the language in the arbitration agreement that would have otherwise prohibited the trial court from refusing to stay or deny arbitration under section 1281.2(c).

The Court of Appeal reversed the court’s denial of the motion to compel and direct the court to order the parties to arbitration in the unpublished case of Tam v. KMS Automotive – .B311407 (April 2023).

Whether as an agent or under the doctrine of equitable estoppel, the law permits Hernandez, a nonsignatory to the arbitration agreement, to compel Tam to arbitrate her claims against him. Because Hernandez can compel arbitration, he is not a third party within the meaning of section 1281.2(c). (Laswell v. AG Seal Beach, LLC (2010) 189 Cal.App.4th 1399 at pp. 1405-1406; Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696 at p. 709.).

Tam’s claims against Hernandez for sexual assault, harassment, intentional infliction of emotional distress, and unfair business practices are intimately founded in and intertwined with the employment relationship she had with the dealership, so there is no question that they fall within the scope of the arbitration agreement.

The Court of Appeal was unpersuaded by Tam’s explanations about why Hernandez cannot enforce the arbitration agreement under an agency theory or the doctrine of equitable estoppel, and why those principles do not preclude application of section 1281.2(c). Tam’s arguments present a limited view of the applicable case law and ignore the broad wording of the arbitration agreement here.

In addition to the principal and agent relationship between the dealership and Hernandez, section 1281.2(c) is also not applicable here because the equitable estoppel doctrine prevents Tam from avoiding arbitration when her claims against Hernandez, even the tort claims, are inextricably intertwined with her claims against the dealership, all of which arise from and relate to the contractual employment relationship governed by the arbitration agreement. (See Molecular Analytical, supra, 186 Cal.App.4th at pp. 714-715 [courts review the nature of claims asserted against nonsignatory defendant and relationships of persons, wrongs, and issues when applying equitable estoppel] Rice v. Downs (2016) 248 Cal.App.4th 248 at p. 186 [broadly worded arbitration language may extend to tort claims arising from contractual relationship between parties].)

The arbitration agreement signed by Tam covered “any and all claims” between Tam and the dealership or its employees “arising from, related to, or having any relationship or connection whatsoever” with Tam’s employment by or with the dealership, “whether sounding in tort, contract, statute or equity, . . . . [including] without limitation, any claims of discrimination, harassment, or retaliation,” including claims under FEHA.

The Court also noted that a recent federal law entitled “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021amends the Federal Arbitration Act to prohibit employers from requiring employees to resolve sexual harassment and sexual assault claims through private arbitration unless the employee – after the claim arises – voluntarily elects to participate in arbitration. This law was not in effect when the trial court made its decision, or at the time of the alleged acts. No party argues that the law has retroactive effect.

However the dissenting opinion discusses this new legislation, and his views of the policies behind it, to fashion a new rule that would make all arbitration provisions purporting to cover claims based on sexual assault or sexual harassment per se unconscionable.

However the majority declined to adopt the position articulated in the dissent, which in effect attempts to impose the new legislation in this (and other similar) cases by judicial fiat, and contrary to the express terms of the legislation regarding the limits of its retroactive application.