2012-00133484-CU-WT

Joanne M. Linarez vs. Mizzetti, Nash, Lipsey & Burch

Nature of Proceeding: Hearing on Demurrer

Filed By: Bibbes, Kirsten McNelly

Defendants Mizzetti, Nash, Lipsey & Burch (“M+NLB”) and Christian Lindmark’s
demurrer to Plaintiff Joanne Linarez’s first amended complaint (“FAC”) is ruled upon as
follows.

Defendants’ unopposed request for judicial notice of the complete copy of the
“Separation Agreement and General Release” referred to extensively in the FAC is
granted.

Plaintiff asserts causes of action against Defendants for breach of contract, breach of
the implied covenant of good faith and fair dealing, wrongful termination in violation of
public policy, FEHA sexual harassment and discrimination, FEHA sexual harassment
and retaliation, sexual assault, intentional infliction of emotional distress and
defamation.

Release/Separation Agreement

Defendants demur to the entire FAC on the basis that the severance agreement that
she signed released them from all claims. (FAC ¶ 11.) The release provides that it
covers all “statutory, common law, constitutional, and other claims, including but not
limited to:” wrongful discharge claims, breach of employment contract claims, tort
claims, and FEHA claims. (Id.) In the release, Plaintiff acknowledged that by entering
the agreement she was “forever foreclosed from pursuing the claims [she] has waived
in [the release]…” (Id.)

The demurrer on this basis is overruled. The Court finds that at the pleading stage,
Plaintiff has alleged sufficient facts to support a theory that the release does not bar
her claims. Indeed, resolution of her theory presents questions of fact that cannot be
resolved on demurrer. For example, Plaintiff has alleged sufficient facts to support a
theory Defendants exerted undue influence. Undue influence consists of “taking a
grossly oppressive and unfair advantage or another’s necessities or distress.” (Civ.
Code § 1575.) “In essence undue influence involves the use of excessive pressure to
persuade one vulnerable to such pressure, pressure applied by a dominant subject to
a servient object. In combination, the elements of undue susceptibility in the servient
person and excessive pressure by the dominating person make the latter’s influence
undue, for it results in the apparent will of the servient person being in fact the will of the dominant person.” (Odorizzi v. Bloomfield School Dist. (1966) 246 Cal.App.2d
123, 131.)

Here, Plaintiff alleged that she was coerced into signing the release after she was
conditionally terminated after threatening to report defendant Lindmark for sexual
harassment. (FAC ¶ 11xxix.) She alleged that Defendants promised she would be re-
hired as an independent contractor in the interim and then in a full-time position if she
signed the release and if she declined to sign, she would not be re-hired in any
capcity. (Id.) She alleges that the compensation provided in exchange for the release
was two weeks severance pay which Defendants gave every employee upon
severance. She also alleges that at the time, she felt compelled by her economic
circumstances to sign the release because she was a single mother with two children
with no other job prospects. (Id. ¶ 11xxxi, xxxvi.) She also alleges that at the same
meeting which she was presented the release, she was also presented with the
application for an independent contractor position. (Id. ¶ 11xxxii.)

While Defendants are correct that case law has stated that undue influence has
usually been found in cases involving “elderly, sick, senile persons alleged to have
executed wills or deeds under pressure” the doctrine is not limited to such scenarios. (
Odorizzi, supra, 246 Cal.App.2d 123.) Indeed, in Odorizzi, a plaintiff alleged a theory
of undue influence in resigning from his employment position based on allegations that
he signed his resignation at a time he was under severe mental and emotional distress
after being arrested, questioned by the police, not having slept for 40 hours. (Id. at
131-132.) The Court found the plaintiff, while not elderly, sick, or senile, had alleged
facts showing he signed his resignation at a time in which he was prevented from
“freely and completely applying his judgment to the problem before him.” (Id. at 131.)
Here, Plaintiff has alleged that after being sexually harassed by defendant Lindmark
and threatening to turn him in, on May 1, 2011, she was conditionally terminated and
presented with the release in which she would waive all claims against Defendants
and an independent contractor agreement. These documents were presented on a
take it or leave basis and she was told that if she signed the documents she would be
hired as an independent contractor and re-hired as a fulltime employee. She alleges
that while Defendants told her that her position was being eliminated due to
downsizing this was not true. She also alleges that in return for signing the release
she was promised the equivalent of two weeks pay which she alleges was standard
compensation for all severed employees. This all occurred at a time when she was a
single mother with two minor children and no other job prospects. These allegations
are sufficient for pleading purposes to show Defendants exerted undue influence over
Plaintiff by extracting the release from her at a time when she was affected by the
alleged sexual harassment combined with the possibility of having her employment
eliminated with two minor children to support and no other job prospects. While
Defendants argue that the alleged facts do not approach the facts in Odorizzi, the
Court finds, that resolution of the ultimate issue of whether Plaintiff’s “free and
competent judgment was merely influenced, or whether a mind was so dominated as
to prevent the exercise of an independent judgment…cannot be resolved by an
analysis of pleading but requires a finding of fact.” (Id. at 135.) On this basis alone,
the demurrer on the grounds that the FAC is barred by the release is overruled.

Given the above, the Court need not address whether Plaintiff also alleged other
grounds to avoid the release, specifically, fraud, duress, adhesion, unconscionability,
etc. The above is sufficient for pleading purposes to withstand Defendants’ demurrer.
Arbitration

Defendants also demur to the FAC on the basis that the release contains a mandatory
arbitration provision requiring her to arbitrate all of the claims alleged in the FAC. The
demurrer on this basis is overruled.

Defendants argue that even assuming Plaintiff alleged a basis to challenge the validity
of the release, any challenge is not considered when determining arbitrability.
However, Code of Civil Procedure § 1281.2(b) expressly provides that where grounds
exist for revocation of “the agreement”, arbitration will not be enforced. As seen from
relevant case law, the general rule is that the court, not the arbitrator, “decides the
th
gateway issue of arbitrability.” (Hartley v. Superior Court (2011) 196 Cal.App.4 1249,
1258.) Indeed, the California Supreme Court has made clear that the “question
whether ‘grounds exist for the revocation of the [arbitration] agreement’ (Code Civ.
Proc., § 1281.2) based on ‘grounds as exist for the revocation of any contract’ (id., §
1281) is for the courts to decide, not an arbitrator. [Citation.] This includes the
determination of whether arbitration agreements or portions thereof are deemed to be
unconscionable or contrary to public policy.” (Engalla v. Permanente Medical Group,
th
Inc. (1997) 15 Cal.4 951, 973.) The United States Supreme Court is similarly clear
that unless the parties “clearly and unmistakably provide otherwise” the question of
arbitrability is an issue for judicial determination. (Howsam v. Dean Witter Reynolds
(2002) 537 U.S. 79, 84; see, also Peleg v. Neiman-Marcus Group, Inc. (2012) 204 Cal.
App. 4th 1425, 1439-1445.) Defendants point to no such language in the arbitration
provision referred to in the FAC (and which is attached to Defendants’ counsel’s
declaration) which meets such standard and make no argument in this regard.
Further, the cases cited by Defendants make clear that the question of defenses to the
validity of a contract go to the arbitrator in the first instance only where there is no
specific challenge to the arbitration provision itself. (Buckeye Cashing, Inc. v.
Cardegna (2006) 546 U.S. 440, 445-446 [“Second, unless the challenge is to the
arbitration clause itself, the issue of the contract’s validity is considered by the
arbitrator in the first instance”].) Here, Plaintiff has directly challenged the arbitration
provision in the release in the FAC. (FAC ¶ 11 lvi.) Thus, Defendants have failed to
demonstrate that the issue of the release’s validity goes to the arbitrator in the first
instance.

Further, Plaintiff’s allegations challenging the arbitration provision are sufficient to
withstand a demurrer on the basis that the matter must be submitted to arbitration.
Indeed, Plaintiff alleged that the provision does not satisfy California law because it
does not provide for neutral arbitrators, for more than minimal discovery, require a
written reward, provide for all types of relief that would be available in court and/or
provide that employees are not required to pay unreasonable costs/fees as a condition
of arbitration. (FAC ¶ 11.lvi.) These factors are those that have been outlined by the
California Supreme Court in Armendariz v. Foundation Health Psychcare Services,
th
Inc. (2000) 24 Cal.4 83.

Defendants argue that these allegations fail because the provision indicates that the
matter would be arbitrated with AAA and AAA’s rules have withstood similar
challenges of unconscionability. The problem with Defendants’ argument, however, is
that it is defect that does not appear on the face of the pleading, or in the release
which the Court judicially noticed. Indeed, the release indicates only that the “matter
will be submitted to and settled by final and binding arbitration, before the American
Arbitration Association in San Francisco County, California as provided in this paragraph.” (Release p .3 ¶ 14.) The subject paragraph, however, does not
specifically identify what rules will apply at the arbitration and in any event the content
of any rules that would apply are not before the Court on the instant demurrer.
Whether the rules that might apply to this dispute comply with California law therefore
cannot be resolved on the instant demurrer.

Thus the demurrer to the FAC on the basis that the arbitration provision in the release
precludes the action is overruled.

Breach of Contract/Implied Covenant of Good Faith and Fair Dealing Causes of Action

Defendants’ demur to the first and second cause of action on the basis that they are
vague and uncertain is sustained with leave to amend. Plaintiff failed to address these
arguments in her opposition and the Court deems the lack of opposition as a
concession on the merits.

In sum, the demurrer to the entire FAC on the grounds that it is barred by the release
and/or the arbitration provision in the release is overruled. The demurrer to the first
and second causes of action on the basis that they are uncertain as pled is sustained
with leave to amend.

Plaintiff may file and serve a second amended complaint no later than November 27,
2013. Defendants shall file and serve their response within 15 days thereafter, 20
days if the second amended complaint is served by mail. (Although not required by
any statute or rule of court, Plaintiff is requested to attach a copy of the instant minute
order to the second amended complaint to facilitate the filing of the pleading.)

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or other notice is required.