Case Name: Quan Gu vs Ted Sun et al
Case No.: 18CV326401
The Plaintiff Quan Gu, former employee of Defendant Sun Innovations, Inc. (“the corporate defendant”), has filed a petition to compel arbitration against both of the Defendants, the corporate defendant and its President, Ted Sun.
Legal Standard
“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Cal. Code Civ. Proc., § 1281.) “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists…..” (Cal. Code Civ. Proc., § 1281.2, subds. (a), (b).)
Existence of arbitration agreement
“[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)
“If a party to an arbitration contract refuses to arbitrate the controversy, the other party may petition the court to order arbitration under section 1281.2. A party petitioning to compel arbitration must allege “the existence of a written agreement to arbitrate a controversy….” (§ 1281.2; Brodke v. Alphatec Spine Inc. (2008) 160 Cal.App.4th 1569, 1571, 73 Cal.Rptr.3d 554.)” (Toal v. Tardiff (2008) 178 Cal.App.4th 1208.)
As noted above, the Supreme Court has clearly stated that a court, before granting a petition to compel arbitration, must determine the factual issue of “the existence or validity of the arbitration agreement.” (Rosenthal, supra, 14 Cal.4th at pp. 402, 414.) In this way, a court’s role, though limited, is critical. “There is indeed a strong policy in favor of enforcing agreements to arbitrate, but there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate and which no statute has made arbitrable.” (Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 481; Toal v. Tardiff, supra, at 108.) Accordingly, in the first instance, the Court must first decide if there is an agreement to arbitrate, before an arbitrator can determine the scope of arbitration.
Arbitration against Ted Sun
An arbitrator has no power to determine rights and obligations of one who is not a party to the arbitration agreement. Therefore, a trial court must first determine the status of a person who demands arbitration under a contract that he or she did not sign (or against whom arbitration is sought to be enforced). (Smith v. Microskills San Diego L.P. (2007) 153 Cal.App.4th 892, 900; M & M Foods, Inc. v. Pacific American Fish Co., Inc. (2011) 196 Cal.App.4th 554, 561.)
“ ‘Although California has a strong policy favoring arbitration [citations], our courts also recognize that the right to pursue claims in a judicial forum is a substantial right and one not lightly to be deemed waived. [Citations.] Because the parties to an arbitration clause surrender this substantial right, the general policy favoring arbitration cannot replace an agreement to arbitrate. [Citations.] Thus, the right to compel arbitration depends upon the contract between the parties, [citations], and a party can be compelled to submit a dispute to arbitration only where he has agreed in writing to do so. [Citation.]’ [Citation.]” (Smith v. Microskills San Diego L.P., supra, 153 Cal.App.4th at 896 (Smith ); Matthau v. Superior Court (2007) 151 Cal.App.4th 593, 598 (Matthau ) [“Arbitration is a favored method of resolving disputes, but the policy favoring arbitration does not eliminate the need for an agreement to arbitrate and does not extend to persons who are not parties to an agreement to arbitrate.”].)
Numerous cases confirm the general rule that “a party cannot be compelled to arbitrate a dispute that he or she has not agreed to resolve by arbitration. [Citations.]” (Daniels, supra, 212 Cal.App.4th at p. 680; see, e.g., Hotels Nevada, LLC v. L.A. Pacific Center, Inc. (2012) 203 Cal.App.4th 336, 347 [“ ‘The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract. [Citations.] There is no public policy favoring arbitration of disputes which the parties have not agreed to arbitrate.’ ”]; Adajar v. RWR Homes, Inc. (2008) 160 Cal.App.4th 563, 569.)
Plaintiff has presented no evidence to the Court that Ted Sun has agreed to or signed as an individual any alleged agreement to arbitrate. (And not even the corporate defendant signed the Offer Letter that contains the alleged arbitration clause.) Accordingly, the Court DENIES the petition to compel arbitration as to Defendant Ted Sun.
Arbitration against Sun Innovations Corp.
In this case, the parties have presented two alleged agreements between the Plaintiff and Sun Innovations Corp. (“the corporate defendant”), with directly conflicting provisions, an offer letter (“Offer Letter”) signed first and signed only by the plaintiff that includes an arbitration clause, and a second agreement (the Employment, Confidentiality, and Intellectual Property Agreement (“Employment Agreement”) signed by both Plaintiff and signed on behalf of the corporate defendant, that requires litigation in court.
The Employment Agreement provides that “any dispute arising under or relating to this Agreement shall be litigated exclusively in Federal or California courts located in Santa Clara County, California and the Sun Innovations and I [Plaintiff] hereby consent and submit to the jurisdiction and venue of such courts.”
The same authority describe above, that a party who has not agreed in writing to arbitration cannot be compelled to arbitrate. Moreover, the Employment Agreement, the second agreement to be fully executed, contains an integration clause, which provides that “[t]his Agreement constitutes the entire agreement, and supersedes all previous or contemporaneous agreements or representations, whether oral or written, express or implied, between Sun Innovations and me with regard to its subject matter. This Agreement cannot be modified or waived unless in writing, signed by me and either the President or Chief Financial Officer.”
In light of the directly conflicting provisions for dispute resolution in the two alleged agreements, the existence of the integration clause in the Employment Agreement suggests the parties did not intend for any prior agreements, including the Offer Letter, to be the operative contract. (See Founding Members of Newport Beach County Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 953-954 [the existence of an integration clause is a key factor in divining the parties’ intent].)
Accordingly, the Court finds that the Employment Agreement which provides for disputes under or relating to the Agreement to be “litigated exclusively in Federal or California courts,” controls over the conflicting provisions in the Offer Letter, and the Plaintiff has not established the existence of an agreement to arbitrate.
The Petition to Compel Arbitration is DENIED.