Filed 7/14/16 Zepeda v. Paramount Citrus Packing Co. CA5




                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     FIFTH APPELLATE DISTRICT


VICTOR ZEPEDA et al.,
                                                                                           F071593
         Plaintiffs and Respondents,
                                                                              (Super. Ct. No. CV282439)
                   v.

PARAMOUNT CITRUS PACKING                                                                 OPINION
COMPANY LLC et al.,

         Defendants and Appellants.



         APPEAL from a judgment of the Superior Court of Kern County. David R.
Lampe, Judge.

         Roll Law Group, Azadeh Allayee, J. P. Pecht, and Brooke S. Hammond for
Defendants and Appellants.
         The Downey Law Firm and Cory G. Lee for Plaintiffs and Respondents.
                                                        -ooOoo-
                                                INTRODUCTION
         This is an appeal from the denial of a motion to compel arbitration and request for
stay of defendants Paramount Citrus LLC, Paramount Citrus II LLC, Paramount Citrus
Holdings LLC, Paramount Citrus Packing Company LLC, Paramount Citrus Ventures
LLC, Paramount Citrus Cooperative, and Wonderful Brands Sales and Merchandising
LLC (collectively, Paramount).
       Paramount is a grower and processor of citrus crops in Kern County. The
Randstad Corporation (Randstad) is in the business of providing temporary workers to its
various client companies, including Paramount. Placement Pros is a division of
Randstad. Randstad, through Placement Pros, assigned plaintiffs Victor Zepeda and
Alejandra Villegas to perform work at Paramount’s citrus packing facilities.
       Prior to beginning their temporary work assignments at Paramount, plaintiffs
executed contracts with Randstad, agreeing to arbitrate certain claims between them and
“Randstad, its related companies, and/or their current or former employees” that may
arise during their employment—including claims based on their wages and
compensation. Plaintiffs sued Paramount, who are nonsignatories to the agreement, for
unpaid wages and compensation. Paramount filed a motion to compel arbitration based
on the agreement. The trial court denied the motion.
       On appeal, Paramount contends the trial court erred in denying its motion to
compel arbitration because (1) equitable estoppel precludes plaintiffs from using
Paramount’s nonsignatory status as a defense to enforcement of the agreement; and (2)
Paramount is an intended third-party beneficiary of the agreement. We disagree and
affirm the order.
                    FACTUAL AND PROCEDURAL HISTORY
       Plaintiffs were assigned by Randstad to perform temporary work at Paramount.
During the month of June 2013 and between November 2013 and April 2014, Zepeda
was staffed as a temporary forklift driver at Paramount’s Delano facilities. For a few
days in April 2013 and November 2013, Villegas was staffed as a citrus grader/sorter
with Paramount.




                                            2.
The Arbitration Agreement
       Both Zepeda and Villegas signed identical arbitration agreements with Randstad
prior to beginning their temporary work assignments. The arbitration agreements state
the following, in relevant part:

              “As consideration for accepting or continuing my employment with
       Randstad, Randstad and I agree to use binding arbitration, instead of going
       to court, for any ‘covered claims’ that arise between me and Randstad, its
       related companies, and/or their current or former employees. ‘Covered
       claims’ are any legal claims that relate to my recruitment, hire,
       employment, and/or termination including, but not limited to, those
       concerning wages or compensation, consumer reports, benefits, contracts,
       discrimination, harassment, retaliation, leaves of absence or
       accommodation for a disability.

               “I understand and agree that arbitration is the only forum for
       resolving covered claims, and that both Randstad and I are waiving the
       right to a trial before a judge or jury in federal or state court in favor of
       arbitration. I also agree that covered claims will only be arbitrated on an
       individual basis, and that both Randstad and I waive the right to participate
       in or receive money from any class, collective or representative proceeding.
       I may not bring a claim on behalf of other individuals, and any arbitrator
       hearing my claim may not combine more than one individual’s claim or
       claims into a single case, or arbitrate any form of a class, collective or
       representative hearing. I understand and agree that any ruling by an
       arbitrator combining the covered claims of two or more employees or
       allowing class, collective or representative arbitration would be contrary to
       the intent of this agreement and would be subject to immediate judicial
       review.”
Other Agreements Signed by Plaintiffs
       In addition to the arbitration agreements, plaintiffs signed additional documents
prior to beginning their work at Paramount:
       (1) Both Zepeda and Villegas signed a Placement Pros document entitled “Safety
Policies and Procedures,” acknowledging they would comply with Placement Pros’
safety rules as well as the safety rules of the client (Paramount).




                                              3.
       (2) Villegas signed a “Notice to Employee,” acknowledging that Randstad was a
temporary staffing agency and that she would be paid $8.00 an hour to do work at
Paramount.
       (3) Villegas signed a “Receipt of Temporary Employee Safety Handbook,”
acknowledging she had received a copy of Paramount’s employee handbook and she had
read and agreed to all policies and procedures therein.
Paramount’s Motion to Compel Arbitration
       On July 9, 2014, Zepeda filed his complaint against Paramount alleging class-wide
violations of the California Labor Code, the California Industrial Welfare Commission
wage orders, the Unfair Business Practices Act, and the Business and Professions Code.
The alleged violations arose from activities occurring during his temporary work
assignment. Neither Randstad nor Placement Pros are parties to the action.
       Paramount workers are required to wear safety gear to prevent cross-
contamination of the food manufactured at Paramount’s facilities. Workers must put on
and sanitize this safety gear at the beginning of every shift, and take off and dispose of
the safety gear at the end of every shift. Zepeda alleged workers were not compensated
for the time it takes to perform these activities, and they were not provided full 15- and
30-minute uninterrupted meal and rest break periods.
       On October 7, 2014, the complaint was amended, adding a claim for conversion
and naming Villegas as a representative party.
       On November 17, 2014, Paramount filed a motion to compel arbitration and
request for a stay. Paramount asserted it is entitled to enforce the arbitration agreements
between plaintiffs and Randstad because it is a third-party beneficiary to the agreement,
and additionally contends plaintiffs are equitably estopped from raising Paramount’s
nonsignatory status as a defense to compelled arbitration.




                                             4.
       On November 21, 2014, plaintiffs filed their second amended complaint, adding a
claim to enforce the labor code through the Labor Code Private Attorneys General Act of
2004 (Lab. Code, § 2698 et seq.).
       On December 5, 2014, plaintiffs filed their opposition to Paramount’s motion to
compel arbitration and request for a stay.
       On December 11, 2014, Paramount filed a reply.
       On January 14, 2015, the trial court heard oral argument on Paramount’s motion.
       On March 20, 2015, the court issued a minute order denying the motion. The
court denied Paramount’s argument that it is a third-party beneficiary of the arbitration
agreement, explaining “there is no express statement in the contract to benefit third-party
entities and there is insufficient evidence that the parties intended to or impliedly agreed
to apply the arbitration agreement set forth in the contract to the third-party
beneficiaries.” (Capitalization omitted.) The court made no remarks regarding the
applicability of equitable estoppel.
       On April 24, 2015, the trial court entered its final order denying Paramount’s
motion to compel arbitration and lifting the stay.
       On this same day, Paramount filed a timely notice of appeal of the order.
                                       DISCUSSION
       This appeal raises issues of law that are subject to de novo review. (See 24 Hour
Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1212.) To the extent the trial
court resolves factual disputes in denying arbitration, we review its determinations for
substantial evidence. (Hotels Nevada, LLC v. L.A. Pacific Center, Inc. (2012) 203
Cal.App.4th 336, 348.) If there is no disputed extrinsic evidence, the court’s
determination is reviewed de novo. (Suh v. Superior Court (2010) 181 Cal.App.4th 1504,
1511–1512.) Because the provisions of the relevant arbitration provisions are
undisputed, we independently review the trial court’s determination that Paramount is not
entitled to enforce the arbitration agreements.

                                              5.
       Public policy favors contractual arbitration as a means of resolving disputes.
(Mercury Ins. Group v. Superior Court (1998) 19 Cal.4th 332, 342.) However, “‘“[t]he
strong public policy in favor of arbitration does not extend to those who are not parties to
an arbitration agreement, and [generally,] a party cannot be compelled to arbitrate a
dispute that he has not agreed to resolve by arbitration.”’” (Westra v. Marcus &
Millichap Real Estate Investment Brokerage Co., Inc. (2005) 129 Cal.App.4th 759, 763.)
       This rule is subject to limited exceptions. Paramount contends two exceptions
applicable here are equitable estoppel and the third-party beneficiary exception. For the
reasons set forth below, we reject Paramount’s claims.
I.     Equitable Estoppel
       Under the doctrine of equitable estoppel, “‘“a nonsignatory defendant may invoke
an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes
of action against the nonsignatory are ‘intimately founded in and intertwined’ with the
underlying contract obligations.”’” (DMS Services LLC. v. Superior Court (2012) 205
Cal.App.4th 1346, 1354.) The purpose for this rule is simple: it would be unfair to
permit a party to rely on a contract to assert its claims, while simultaneously repudiating
an agreement to arbitrate contained within that same contract. (Ibid.)
       The gravamen of plaintiffs’ claims against Paramount relates to Paramount’s
failure to compensate its workers for time spent putting on and taking off mandatory
safety gear. Plaintiffs contend they were not compensated for the time required to put on,
take off, and sanitize their safety gear, and performing this work activity also resulted in
the interruption of their 30-minute meal periods. They further assert that given the
amount of time it takes to walk between rest areas and meal period punch clocks, they
were denied full uninterrupted meal periods. Additionally, they were denied two 30-
minute meal periods when working shifts of 10 hours or longer.




                                             6.
       Contrary to Paramount’s contentions, plaintiffs are not asserting claims
“intimately founded in and intertwined” with any contractual obligations. (DMS Services
LLC. v. Superior Court, supra, 205 Cal.App.4th at p. 1354.) Plaintiffs are not asserting
any contractual causes of action at all—their claims are based solely on statutory
violations of labor and employment laws.
       Paramount relies on Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th
262 (Boucher), and asserts that statutory violations necessarily presume the existence of
an underlying employment agreement. It contends “the California Supreme Court has
recognized that, pursuant to the doctrine of equitable estoppel, a court may order
arbitration of claims based on the California Labor Code and Section 17200 of
California’s Business and Professions Code.” However, Boucher is distinguishable and
does not support the conclusion Paramount contends it does.
       In Boucher, the plaintiff entered into an employment contract with his employer
for the position of senior vice-president and division president for a three-year term.
(Boucher, supra, 127 Cal.App.4th at p. 265.) The employment agreement stated it could
not be modified, waived, or discharged except in a writing signed by the plaintiff and the
employer. (Ibid.) Shortly thereafter, the employer’s operations were transferred to
another entity, the nonsignatory defendant. (Ibid.)
       The defendant refused to honor the plaintiff’s contract with his original employer,
and the plaintiff refused to enter into a new agreement with the nonsignatory defendant.
(Boucher, supra, 127 Cal.App.4th at p. 265.) As a result, the plaintiff was terminated
from his employment. (Ibid.) He sued both employers, alleging causes of action for
nonpayment of wages, waiting time penalties, breach of the employment contract, breach
of the covenant of good faith and fair dealing, and unfair business practices. (Ibid.) He
sued the defendant alone for interference with contractual and prospective economic
relations. (Id. at p. 266.) The employers filed a motion to compel the plaintiff to
arbitrate his claims. (Ibid.)

                                             7.
       Because the plaintiff’s claims in Boucher were based on an employment contract,
which contained an arbitration clause, the appellate court held the plaintiff was equitably
required to arbitrate his causes of action against the nonsignatory defendant. (Boucher,
supra, 127 Cal.App.4th at p. 273.) The court reasoned “a party may not make use of a
contract containing an arbitration clause and then attempt to avoid the duty to arbitrate by
defining the forum in which the dispute will be resolved.” (Id. at p. 272.)
       Here, unlike Boucher, plaintiffs are not using the terms or obligations of their
agreements with Randstad as the basis of their claims against Paramount, while
simultaneously refusing to arbitrate under those same contracts. None of plaintiffs’
claims are based on violations of the terms of their agreements with Randstad. In fact,
their claims do not rely on, presume the existence of, nor are they intertwined with any
written contractual obligations.
       Indeed, it is difficult to conceive of a wage and hour claim that plaintiffs could
assert against Paramount based on the Randstad agreements. Randstad is responsible for
hiring, paying, and assigning temporary workers to its clients. The client employer1 is
the entity directing the work activities to be performed. As a result, the client employer
dictates how temporary workers earn wages and when they are entitled to take meal and
rest periods. Randstad has no control over Paramount’s policies in this regard.
       Paramount contends Lucas v. Hertz Corp. (N.D.Cal. 2012) 875 F.Supp.2d 991
(Lucas) supports their argument that equitable estoppel applies. In Lucas, the District
Court of the Northern District of California held the Hertz Corporation could compel
arbitration of the plaintiff’s claims against it on the basis of an arbitration clause

       1Although     we use the term “client employer” to describe Paramount, we emphasize the
fact that there is no contractual employment relationship between Paramount and plaintiffs. In
fact, the “Notice to Employee” signed by Villegas states the following: “Employment At Will:
This document does not constitute a contract of employment. All employees are employees-at-
will who may end their employment relationship with Randstad at any time and for any reason.
Likewise, Randstad may end an employee’s employment at any time, with or without cause.” As
can be seen, plaintiffs do not even have an employment contract with Randstad.


                                               8.
contained in a car-rental contract between the plaintiff and Hertz’s licensee, Costa Rica
Rent a Car. Hertz was a nonsignatory to the agreement. (Id. at p. 995.) The plaintiff
driver sued Hertz for strict liability and negligence, alleging Hertz placed a defective car
into the stream of commerce and failed to keep the vehicle in a safe condition. (Id. at p.
997.)
        The court held the plaintiff’s claims made reference to or presumed the existence
of an underlying car rental agreement. (Lucas, supra, 875 F.Supp.2d at p. 1003.) The
court explained the plaintiff “would not have been able to rent the car—and thus would
not have had any relationship with Hertz—without signing the rental agreement.” (Ibid.)
        The district court’s decision in Lucas is nonbinding,2 and we decline to follow its
reasoning as persuasive authority. Here, while plaintiffs’ wage and hour claims
necessarily presume some type of employment relationship existed between plaintiffs and
Paramount, their claims do not intimately rely on any of the terms of the Randstad
agreements. As noted, their claims allege statutory employment violations against
Paramount.
        The Ninth Circuit Court of Appeals’ decision in Kramer v. Toyota Motor Corp.
(9th Cir. 2013) 705 F.3d 1122 illustrates this distinction. In Kramer, purchasers and
lessees of Toyota vehicles brought a class action against the Toyota manufacturer,
alleging the manufacturer violated California consumer statutes and breached warranties
by allegedly including a defective braking system in the vehicles. (Id. at p. 1124.) Each



        2Agreements  relied on to compel arbitration that involve interstate commerce—which
include most employment agreements (see Circuit City Stores, Inc. v. Adams (2001) 532 U.S.
105)—are governed by federal law. (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209,
219.) However, decisions of lower federal courts are nonbinding persuasive authority. (Ibid.)
Moreover, our Supreme Court has held that “A litigant who was not a party to [an] arbitration
agreement may invoke [arbitration under the Federal Arbitration Act] if the relevant state
contract law allows him to enforce the agreement.” (Arthur Andersen LLP v. Carlisle (2009)
556 U.S. 624, 632, italics added.)


                                               9.
class member signed a purchase agreement containing an arbitration clause with a Toyota
dealer. (Id. at pp. 1124–1125.)
       Although the manufacturer was not a party or a signatory to the purchase
agreements, it sought to enforce the arbitration agreements, arguing the plaintiffs were
equitably estopped from asserting the manufacturer’s nonsignatory status as a bar to
compelling arbitration. (Kramer, supra, 705 F.3d at pp. 1125-1126.) The Ninth Circuit
Court of Appeals, applying California law, held the equitable rule was inapplicable,
reasoning the plaintiffs’ claims against the manufacturer were not founded on any
provision in the purchase agreements and, instead, arose based on the manufacturer’s
independent duties owed to the customers. (Id. at pp. 1128–1134.)
       The Ninth Circuit rejected the manufacturer’s argument the plaintiffs’ claims were
necessarily intertwined with the purchase agreements because the lawsuit was predicated
on the fact a vehicle purchase occurred. (Kramer, supra, 705 F.3d at pp. 1131-1132.)
The court explained that although the plaintiffs’ causes of action presume a vehicle sale,
the claims do not rely upon the existence of the purchase agreement and instead the
causes of action arose under state laws or duties to the plaintiffs that were independent
from the underlying purchase agreements. (Id. at pp. 1130-1131.)
       Here, as in Kramer, plaintiffs’ claims against Paramount are not founded on any
provision in the agreements they executed with Randstad. Simply because their claims
are predicated on the fact plaintiffs were assigned by Randstad to work at Paramount’s
facilities does not mean plaintiffs’ claims rely upon any of the Randstad agreements to
pursue their statutory rights. Plaintiffs’ complaint does not mention, reference, or refer to
any of the Randstad agreements. Thus, plaintiffs are not equitably estopped from
avoiding arbitration.




                                             10.
II.    Third-party Beneficiaries
       Paramount also claims it is a third-party beneficiary to the arbitration agreements.
“A contract, made expressly for the benefit of a third person, may be enforced by him.”
(Civ. Code, § 1559.) The beneficiary need not be the sole or primary beneficiary (Prouty
v. Gores Technology Group (2004) 121 Cal.App.4th 1225, 1233), nor does the contract
need to identify or refer to the beneficiary by name (Marina Tenants Assn. v. Deauville
Marina Development Co. (1986) 181 Cal.App.3d 122, 128). However, the terms of the
contract must evidence an intent by the parties to confer more than a mere incidental
benefit to the third party. (Prouty, at p. 1233.) “‘“‘It must appear to have been the
intention of the parties to secure to [the third party] personally the benefit of its
provisions.’”’” (Ibid.)
       Neither the terms of the arbitration agreements nor the circumstances surrounding
execution of the agreements evidence an intent to benefit Paramount. The express
language of the agreement states the following, in relevant part: “Randstad and I agree to
use binding arbitration, instead of going to court, for any ‘covered claims’ that arise
between me and Randstad, its related companies, and/or their current or former
employees” that “relate to my recruitment, hire, employment, and/or termination ….”
The language of the agreements evidence an intent to arbitrate claims between plaintiffs
and Randstad, including its related companies and employees, and no one else.
       Nonetheless, Paramount advances several arguments to support its claim it is a
third-party beneficiary of the agreement. First, Paramount contends it is a “related
company” of Randstad. There is, however, no evidence in the record to support this
assertion.
       Based on the context of the arbitration agreement, we presume Randstad’s “related
companies” include its affiliates, like Placement Pros, rather than its client employers.
Under the “Procedure” section of the agreements, employees are encouraged to initially
present concerns to a “Randstad HR manager.” To initiate arbitration, employees are


                                              11.
directed to prepare a written demand and submit it to Randstad’s general counsel, as well
as the American Arbitration Association. However, there is no language in the
agreement directing employees to file a claim with the client employer they perform
work for. It would be absurd to require employees to file a claim with Randstad to
initiate arbitration of a claim solely against the client employer.
       Second, Paramount asserts an agreement to arbitrate wage and hour claims “would
be virtually meaningless unless the parties believed and intended that the Arbitration
Agreements apply to Randstad’s third-party client companies where Plaintiffs would
actually perform their work and earn their wages and compensation.” Plainly, Randstad’s
arbitration agreement is not meaningless to the parties it was intended to protect.
Randstad is responsible for hiring, paying, and assigning temporary employees to its
clients’ work projects. Conceivably, it is subject to litigation based on the performance
of these responsibilities, and the arbitration agreement protects it from the possibility of
protracted litigation.
       Finally, Paramount argues other evidence supports the conclusion the arbitration
agreement was intended to benefit it, including the other documents plaintiffs executed
with Randstad and the fact Zepeda had previously been assigned to perform work for
Paramount. Villegas signed a document acknowledging Randstad was a temporary
staffing agency and she would be paid $8.00 an hour to do work at Paramount. She also
signed a document acknowledging receipt of a copy of Paramount’s employee handbook.
Further, both Zepeda and Villegas signed a document acknowledging they read and
understood Paramount’s safety rules. While we agree these documents show plaintiffs
were aware Randstad would assign them to Paramount, nothing in them evidences an
intent to confer a benefit on Paramount. Thus, we conclude Paramount is not an intended
third-party beneficiary of the arbitration agreements.
       Paramount contends that allowing plaintiffs to avoid arbitration would thwart the
strong policy favoring arbitration under state and federal law. The right to trial by jury in

                                             12.
a civil case is a substantial right “‘not lightly to be deemed waived.’” (Young v. Horizon
West, Inc. (2013) 220 Cal.App.4th 1122, 1128.) “‘Because the parties to an arbitration
clause surrender this substantial right, the general policy favoring arbitration cannot
replace an agreement to arbitrate.’” (Ibid.) In other words, not even the strong policy in
favor of arbitration can manifest an agreement to arbitrate where one simply does not
exist, and here, plaintiffs did not agree to arbitrate claims against Randstad’s client
employers.
                                      DISPOSITION
       The judgment is affirmed. Plaintiffs are awarded costs on appeal.


                                                          ___________________________
                                                                              PEÑA, J.
WE CONCUR:


 __________________________
LEVY, Acting P.J.


 __________________________
SMITH, J.




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