Court Of Appeal Addresses A Trial Court’s Role In Determining Initial Issues Of Arbitrability And Waiver

Issue

In Omar v. Ralphs Grocery Company, (2004 Daily Journal D.A.R. 6025, Cal.App. 2 Dist., May 6, 2004), the California Court of Appeal addressed whether a trial court erred in analyzing initial issues of arbitrability and in determining that waiver of the right to compel arbitration is a matter for the court to decide.

Facts

Adel Omar was hired by Ralphs Grocery Company’s predecessor in 1986. In 1990, after Ralphs acquired the store where Omar worked, a Ralphs’ manager claims that he delivered to Omar a copy of Ralphs’ Mediation and Binding Arbitration Policy. The policy requires that any employee who wishes to initiate formal proceedings to resolve any employment-related disputes against Ralphs must submit the matter to binding arbitration. Omar claims that he never received a copy of the policy. Ralphs does not dispute that Omar never signed a form acknowledging that he received a copy of the policy. Ralphs terminated Omar’s employment in November 2001 for allegedly making offensive comments to another employee. Ralphs sent Omar a copy of the arbitration agreement and forms to be used to request mediation and arbitration. Omar signed the request for mediation form which contained a clause acknowledging that, if the matter is not resolved through mediation, it must be submitted to final and binding arbitration. Ralphs later informed Omar that the dispute was not appropriate for mediation and could only be submitted to final and binding arbitration.

Omar filed a lawsuit against Ralphs alleging harassment and discrimination based on race, age and religion, among other things. Ralphs filed a motion for summary judgment and a motion to compel arbitration. The trial court found that the matter should not yet be submitted to arbitration because issues of fact remain as to whether Omar received the arbitration policy, whether the arbitration policy is enforceable, and whether Ralphs waived its right to request or compel arbitration after giving Omar “the royal run-around” and delaying the matter.

Appellate Court Decision

The Court of Appeal determined that the trial court erred in analyzing the initial issues of arbitrability. The Court found that the trial court should have decided two gateway issues: (1) whether there is an agreement between the parties to arbitrate, and (2) whether the arbitration agreement covered the dispute. The Court of Appeal sent the case back to the trial court to decide if there was an agreement to arbitrate between the parties and instructed the trial court to consider whether there was a pre-termination agreement to arbitrate and/or a post-termination agreement to arbitrate. If the trial court finds an enforceable arbitration agreement, it must then decide whether Omar’s claims are covered by the agreement.

The Court of Appeal further found that the issue of whether Ralphs waived its right to compel arbitration is not an issue properly before the court, but one that must be reserved for the arbitrator. The agreement provides that it is to be governed by the Federal Arbitration Act. Under Federal law, if an alleged waiver is based on conduct during the judicial process, the question of waiver is for the court to decide. If the alleged waiver involves interpretation of the arbitration agreement or procedures, the matter is one for the arbitrator. Here, the Court determined that the circumstances surrounding the alleged waiver involve non-litigation conduct and should be left for the arbitrator to decide if the matter is ultimately submitted to arbitration.

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