Caviani v. Mentor Graphics Corporation

Background

Ron Caviani filed suit in Alameda County Superior Court alleging discrimination claims under California’s Fair Employment and Housing Act. Mentor Graphics Corporation removed the case to federal court. Mentor Graphics then moved to compel arbitration and stay the court proceedings.

Caviani received an employment offer on June 18, 2008, signed it the next day, began working on June 26, 2008, and signed the arbitration agreement on June 30, 2008. The agreement required all disputes to be resolved through final and binding arbitration under the rules and procedures of JAMS, formerly known as Judicial Arbitration & Mediation Services, Inc. It provided that arbitration would occur in the state and county where Caviani was or had been employed.

The parties disputed whether the arbitration agreement was included with the original employment offer. They also disputed the legal effect of Caviani’s 2012 promotion from inside sales representative to territory account manager. Caviani argued that the promotion was a new employment offer that required a new arbitration agreement, which he did not sign. Mentor Graphics characterized the change as an internal transfer that preserved the existing employment relationship and arbitration agreement.

Formation of the Arbitration Agreement

The court applied California law to determine whether an arbitration agreement was formed. It held that the 2008 agreement was valid even assuming that Caviani did not receive it with the original offer. The court reasoned that the agreement was supported by consideration because it was bilateral and because Caviani’s continued employment also supplied sufficient consideration.

The court also held that the 2008 agreement remained effective after the 2012 promotion. The agreement contained no expiration clause or other time limit. If Caviani did not sign the 2012 letter, the 2008 agreement continued in effect. If he did sign it, the 2012 letter incorporated the 2008 agreement. The court therefore found that Mentor Graphics proved the existence of an agreement to arbitrate by a preponderance of the evidence.

Delegation of Arbitrability

“Arbitrability” means whether a dispute must be arbitrated and whether the arbitration agreement covers that dispute. Courts ordinarily decide those gateway questions, but parties may clearly and unmistakably assign them to an arbitrator.

The agreement did not contain a separate delegation clause. It did, however, incorporate the JAMS rules. Those rules provided that the arbitrator would decide jurisdiction and arbitrability issues, including disputes about the agreement’s existence, validity, interpretation, or scope. The court explained that Ninth Circuit precedent generally treats incorporation of specified arbitration rules as clear and unmistakable evidence that the parties delegated arbitrability to the arbitrator.

Caviani argued that he had not received a copy of the JAMS rules or a hyperlink to them, and therefore could not know that they delegated arbitrability. The court acknowledged that this failure could support a finding that delegation was not clear and unmistakable in some cases. But it held that Caviani was sophisticated under the circumstances described in the opinion: he was a well-versed businessman, had attended an M.B.A. program, was fluent in English, had 15 years of business dealings, and had possession of the agreement for multiple days. The court concluded that the agreement clearly and unmistakably delegated arbitrability to the arbitrator.

Disposition

The court granted Mentor Graphics’s motion to compel arbitration. It held that the arbitrator, rather than the court, must decide arbitrability, and it stayed all proceedings in the case pending arbitration. The order disposed of Docket No. 24.