Won Two-Year Fight in the CA Court of Appeal to Keep Case in Arbitration

Payne & Fears LLP won a two-year fight to keep a case in arbitration after the California Court of Appeal, Fourth Appellate District, Division Three, ruled in favor of the firm’s client. The Court of Appeal held that the former employee must arbitrate her disability discrimination lawsuit based on an arbitration agreement she signed upon her hire after she transferred back and forth between the parent company that hired her and a subsidiary corporation. The employee resisted arbitration on the theory that the agreement was limited to the employment relationship formed at the time of its execution, and that the employee’s transfer to a subsidiary constituted a severance of the employment relationship that limited the arbitration agreement’s coverage. The employee sought to conduct discovery on the issue of arbitrability, which the trial court rejected. The employee then petitioned the Court of Appeal for a writ ordering the trial court to allow discovery, and the Court of Appeal issued a suggestive Palma notice indicating that discovery should be allowed.

After a year of discovery authorized by the trial court, the court again ordered the employee to arbitration, finding that the employment relationship had not been terminated despite her transfers to and from the subsidiary. The employee filed a second writ petition, and the Court of Appeal issued an order to show cause why the petition should not be granted. Payne & Fears objected to the order to show cause and requested full briefing and oral argument on the matter. The Court of Appeal was persuaded to reverse its order to show cause and uphold the trial court’s findings as supported by substantial evidence that the dispute must be arbitrated. Eric Sohlgren, Alex Ruiz and Erik Anderson briefed the issues, and Eric Sohlgren argued the case before the Court of Appeal.