In a recent California Court of Appeals decision, Avery v. Integrated Healthcare, Inc. (7/23/13) the 4th Appellate District, Division 3 affirmed a trial Court ruling denying defendant's motion to compel arbitration.
The rationale from their ruling stemmed from the fact that “[Defendant] Integrated failed to establish Plaintiff agreed to the specific arbitration agreement Integrated submitted to the trial court.” Therefore, in the agreement sought to be enforced, there was no evidence that the plaintiff had actually agreed to it.
The Court emphasized that “Arbitration is therefore, a matter of contract.” As such, the Court opined that a trial Court's first task when presented with a petition to compel arbitration is to determine if, in fact, an arbitration agreement exists.
The Court's opinion addressed two factual issues that are relevant to various disputes. One, the Court addressed the timing or agreements in concluding that where there are one or more arbitration agreements, the last agreement does not dominate the field and retroactively cover all disputes. Rather, an arbitration agreement cannot apply to claims that occurred prior to its existence.
This is very important today where numerous employers are rolling out new arbitration agreements. To the extent a defendant has an arbitration agreement that is less than four (4) years old, Averyshould prove useful in undermining the agreement for the time period prior to its signature.
The second issue the Court addressed is much more fact intensive. The plaintiff in Avery failed to sign an acknowledgement of the employee handbook. The employer could not establish that the plaintiff had received or was aware of defendant's arbitration policy. While the Court did not rule out the possibility of an implied agreement if defendant could show that plaintiff was aware of the policy, here the facts presented no meeting of the minds and therefore no agreement was formed.
Thus, Avery could prove useful if the agreement is not explicit in what the parties are agreeing upon or if acknowledgment forms don't make clear what agreement applies. Contract formation may be one of the only defenses to arbitration that won't be obliterated by the FAA so cases like Avery can be very useful in the right setting.