Supreme Court of California Justia
Citation 48 Cal. 4th 665, 229 P.3d 83, 108 Cal. Rptr. 3d 171

Pearson Dental Supplies v. Super. Ct.

Filed 4/26/10

IN THE SUPREME COURT OF CALIFORNIA

PEARSON DENTAL SUPPLIES, INC.,
Petitioner,
S167169
v.
Ct.App. 2/4 B206740
THE SUPERIOR COURT OF
LOS ANGELES COUNTY,
Los Angeles County
Respondent;
Super. Ct. No. BC 359605
LUIS TURCIOS,
Real Party in Interest.

We have emphasized in our case law the limited nature of judicial review of
contractual arbitration awards, concluding that, generally speaking, a court is not
permitted to vacate an arbitration award when the award is based on errors of law.
(Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 25, 28 (Moncharsh).) We also have
indicated that the scope of judicial review may be somewhat greater in the case of a
mandatory employment arbitration agreement that encompasses an employee‟s
unwaivable statutory rights. (Armendariz v. Foundation Health Psychcare Services, Inc.
(2000) 24 Cal.4th 83, 106-107 (Armendariz).)
In the present case involving the resolution of a statutory employment
discrimination claim, an arbitrator decided in favor of an employer against the employee
on the grounds that the claim was time-barred under the one-year contractual deadline for
1


requesting arbitration. The trial court vacated the award, concluding, as explained below,
that the arbitrator had plainly misapplied the relevant tolling statute, Code of Civil
Procedure section 1281.12. The Court of Appeal, while agreeing with the trial court that
the arbitrator had erred, held nonetheless that such error was not a valid basis for vacating
an arbitration award and reversed the trial court.
We conclude that the trial court and Court of Appeal are indeed correct that the
arbitrator clearly erred in ruling that the employee‟s claim was time-barred. We further
conclude that under the particular circumstances of this case, in which a clear error of law
by an arbitrator means that an employee subject to a mandatory arbitration agreement
will be deprived of a hearing on the merits of an unwaivable statutory employment claim,
the trial court did not err in vacating the award. We therefore reverse the judgment of the
Court of Appeal.
In a second issue, the employee argues that language in the arbitration agreement
indicating that he is relinquishing not only the right to go to court but also to access
administrative remedies is unconscionable, and that therefore not only should the
arbitration award be vacated but the entire arbitration agreement should be invalidated.
As explained below, we conclude the language in question is reasonably susceptible to a
lawful interpretation, and therefore reject the employee‟s claim of unconscionability.
I.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Luis Turcios was hired as a janitor by defendant Pearson Dental Supplies,
Inc., in February 1999. He was terminated on January 31, 2006, at the age of 67. He
filed an administrative complaint with the Department of Fair Employment and Housing
(DFEH) on April 5, 2006, claiming age discrimination. On April 14, 2006, the DFEH
issued a right-to-sue letter.
On October 2, 2006, plaintiff filed a complaint against defendant in Los Angeles
Superior Court alleging age discrimination in violation of the Fair Employment and
2
Housing Act (FEHA; Gov. Code, § 12900 et seq.), wrongful termination in violation of
public policy, and breach of an implied-in-fact contract or obligation not to terminate him
without good cause. On November 8, 2006, Pearson filed a demurrer and motion to
strike, contending plaintiff‟s claims of age discrimination and contractual violation were
insufficiently detailed. The trial court overruled the demurrer and motion to strike on
December 11, 2006. Defendant filed its answer on December 29, 2006, raising 31
affirmative defenses. In neither the demurrer nor the answer did defendant mention an
arbitration agreement or plaintiff‟s obligation to arbitrate.
The case proceeded with discovery, and in a joint case management conference
statement submitted to the trial court on February 16, 2007, defendant requested a jury
trial and anticipated the trial would last three days. During a February 20, 2007, case
management conference, defendant‟s counsel mentioned, for the first time, that there was
an arbitration agreement in plaintiff‟s personnel file, and that this was something he
“would have to explore.”
On March 13, 2007, defendant filed a motion to compel arbitration, contending
that plaintiff was bound by a dispute resolution agreement (DRA) he had signed in
January 2001. The agreement stated that “to avoid the inconvenience, cost, and risk that
accompany formal administrative or judicial proceedings,” the parties agreed to arbitrate
disputes arising out of the employment relationship. The arbitration was to be conducted
by a “mutually agreed upon arbitrator pursuant to the California Arbitration Act” (CAA;
Cal. Code Civ. Proc., § 1280 et seq.) The agreement also provided that any covered
dispute “must be submitted to binding arbitration within one year from the date the
dispute arose or the employee or Pearson first became aware of the facts giving rise to the
dispute. If any employment related dispute which may arise is not submitted to binding
arbitration within one year from the date the dispute arose or the Employee or Pearson
first became aware of facts giving rise to the dispute, Pearson and the Employee agree
3
that the claim shall be void and considered waived to the fullest extent allowed by law.”
Plaintiff concurrently signed a document in Spanish advising him, inter alia, of the DRA
and the intention to arbitrate disputes.
On March 29, 2007, plaintiff filed an opposition to the petition to compel
arbitration, arguing primarily that defendant had waived its right to demand arbitration by
participating in the litigation. Plaintiff, whose primary language was Spanish, also
contended he had not understood the DRA and that therefore it was not a valid
agreement. On May 2, 2007, the trial court by written order granted defendant‟s petition.
It rejected plaintiff‟s waiver arguments and found the agreement was valid and not
unconscionable. Plaintiff filed a writ petition challenging the trial court‟s order. The
Court of Appeal summarily denied the petition on May 31, 2007.
On June 13, 2007, plaintiff and defendant agreed upon an arbitrator. On July 24,
2007, defendant filed with the arbitrator a motion for summary judgment, contending that
plaintiff‟s claims were time-barred by the DRA, because they had been submitted to
arbitration over a year after plaintiff‟s termination on January 31, 2006. Plaintiff opposed
the motion, contending that the one-year statute of limitations was substantively
unconscionable, in part because it was shorter than the statute of limitations provided for
FEHA claims.1 Plaintiff also claimed that, even if the one-year period was valid, it had
not yet run, because it had been tolled pursuant to Code of Civil Procedure section
1281.12, as discussed below, from the time the lawsuit was filed to 30 days after the time
the order compelling arbitration became final.

1
Under FEHA, an administrative complaint filed with the DFEH must be filed
within one year of the date of the alleged discriminatory action. (Gov. Code, § 12960,
subd. (d).) The DFEH, if it decides not to pursue the matter, must issue a right-to-sue
letter no later than a year after the complaint is filed. (Id., § 12965, subd. (b).) The
complainant then has one year from the date of that letter to file a civil action. (Id., subd.
(d)(2).)
4


The arbitrator, in a brief letter, ruled in favor of defendant on October 17, 2007,
and granted its motion for summary judgment. The arbitrator stated simply that
plaintiff‟s “failure to submit his claims and disputes to binding arbitration within the one-
year period as required by the Dispute Resolution Agreement or within the tolling period
prescribed in Code of Civil Procedure section 1281.12 has resulted in a waiver of his
right to proceed in this arbitration against his employer . . . .”
Defendant petitioned the superior court to confirm the award on December 5,
2007. Plaintiff filed a motion to vacate the arbitrator‟s award on December 17, 2007.
Plaintiff then filed an opposition to defendant‟s petition to confirm the arbitrator‟s award
on December 26, 2007.
The trial court vacated the arbitration award on January 28, 2008. The court
(Judge Alan Rosenfield) concluded that the arbitrator had made a clear error of law by,
among other things, misinterpreting the tolling provisions of Code of Civil Procedure
section 1281.12. The court further concluded that under our holding in Armendariz,
supra, 24 Cal.4th 83, the court was required to conduct judicial review sufficient to
protect the plaintiff‟s unwaivable statutory rights arising from his FEHA claims and,
pursuant to that authority, the court ruled the arbitrator had acted in excess of his
jurisdiction and vacated the arbitration award.
Defendant filed a timely appeal, and the Court of Appeal reversed. Although the
court rejected plaintiff‟s argument that the DRA‟s one-year limitation period was
unconscionable, it agreed with plaintiff and with the court below that the arbitrator had
“misapplied the tolling period provided by section 1281.12.” The court nonetheless
concluded that the arbitrator‟s erroneous decision “is insulated from judicial review and
is not a proper basis upon which either to deny confirmation of the arbitration award or to
vacate the award.”
5
Plaintiff petitioned for review in this court, raising two questions: First, what
standard of judicial review should a trial court employ to ensure that an employee‟s
antidiscrimination claim brought under FEHA is adequately protected when arbitrated
pursuant to a mandatory employment arbitration agreement? Second, is a mandatory
employment arbitration agreement restricting an employee from seeking administrative
remedies for violations of FEHA unlawful? We granted review.
II.
DISCUSSION
A. Did the Trial Court Err by Vacating the Arbitration Award?
In order to resolve the first issue presented by this case, we address two questions:
First, did the arbitrator make an error of law in granting defendant summary judgment on
the grounds that plaintiff‟s arbitral demand was time-barred? Second, if the arbitrator did
make such an error, was that sufficient grounds for the trial court to vacate the arbitration
award?
1. The Arbitrator Committed a Clear Error of Law
In order to determine whether the arbitrator committed an error of law, we begin
with the pertinent statute. Code of Civil Procedure section 1281.12 states in full: “If an
arbitration agreement requires that arbitration of a controversy be demanded or initiated
by a party to the arbitration agreement within a period of time, the commencement of a
civil action by that party based upon that controversy, within that period of time, shall toll
the applicable time limitations contained in the arbitration agreement with respect to that
controversy, from the date the civil action is commenced until 30 days after a final
determination by the court that the party is required to arbitrate the controversy, or 30
days after the final termination of the civil action that was commenced and initiated the
tolling, whichever date occurs first.”
Neither of the parties disputes that Code of Civil Procedure section 1281.12
applies in the present proceeding. Here, the arbitration agreement required that a dispute
6
“must be submitted to binding arbitration within one year from the date the dispute arose”
or “the claim shall be void and considered waived to the fullest extent allowed by law.”
Plaintiff, the party required to initiate the action, instead commenced a civil action within
the one-year period. The commencement of this civil action therefore tolled the
applicable time limitation until the final order compelling arbitration.
According to its legislative history, the statute prevents “parties from being either
forced to abide by arbitration agreements of dubious validity instead of seeking court
evaluation, initiating costly and duplicative proceedings, or being unfairly deprived of
any forum for resolution of the dispute. Supporters observe that there are many
legitimate reasons why a party might file a lawsuit in court, rather than demanding or
pursuing arbitration. Among these are the following: (1) the plaintiff may believe the
claims are not subject to arbitration because the arbitration agreement is unenforceable on
grounds of unconscionability or similar concepts; (2) there may be a dispute about
whether the particular claims at issue do or do not fall within the scope of an arbitration
agreement; (3) the plaintiff may contend that one or more of the statutory grounds for
denying a petition to compel arbitration set forth in Code of Civil Procedure section
1281.2 exist, assuming the defendant does file a petition to compel arbitration in response
to the plaintiff‟s filing of the lawsuit; (4) the plaintiff may prefer a court trial or jury trial
and simply be hopeful that the defendant will not assert any right to arbitrate the claims,
for whatever reason [indeed, the defendant may decide that it prefers a court proceeding
as well]; and (5) the plaintiff might not even be aware that there is an arbitration
agreement governing the controversy.” (Assem. Com. on Judiciary, Analysis of Assem.
Bill No. 1553 (2005-2006 Reg. Sess.) for hearing Apr. 5, 2005, p. 3, underlining and
extra capitalization omitted.) Thus, the statute unquestionably applies in the present case,
when a plaintiff files a timely action in superior court, and a defendant, either deliberately
7
or through inadvertence, allows the lawsuit to proceed, asserting its right to arbitration
only after the limitations period provided in the arbitration agreement has expired.
The parties disagree, however, on how the tolling provision of Code of Civil
Procedure section 1281.12 operates in the present case. As recounted above, plaintiff
was terminated on January 31, 2006, and filed a civil action on October 2, 2006, well
within the one-year period. The parties disagree on when the order to arbitrate became
final, with defendant arguing the date was either April 12, 2007, when the trial court
orally informed the parties of its ruling in favor of defendant‟s petition to compel
arbitration, or May 2, 2007, when the trial court issued a written order. Plaintiff affixes
the date on May 31, 2007, when the Court of Appeal summarily denied plaintiff‟s writ
petition challenging the trial court‟s grant of defendant‟s petition to compel arbitration.
We do not know the arbitrator‟s reasons for concluding Code of Civil Procedure
section 1281.12 did not save plaintiff‟s claim, but we do have defendant‟s arguments in
defense of the arbitral decision, which may have been adopted by the arbitrator.
Defendant states in its brief before this court: “If the tolling provisions of Code of Civil
Procedure section 1281.12 were applicable, then the one-year limitation period expired
30 days after either April 12, 2007, when the trial court issued from the bench its final
order, or May 2, 2007 when the trial court granted [defendant‟s] Petition to Arbitrate by
Order.” Therefore, plaintiff‟s first attempt to seek arbitration, which according to
defendant was on June 13, 2007, when he agreed to an arbitrator, was untimely by
defendant‟s reasoning.
To understand the error of defendant‟s position, we begin with the meaning of
“tolling.” To “toll” has been defined most pertinently as “to stop the running of; abate
<toll the limitations period>.” (Black‟s Law Dict. (8th ed. 2004) p. 1525.) When it
comes to the tolling of a statute of limitations, we have stated: “Tolling may be
analogized to a clock that is stopped and then restarted. Whatever period of time that
8
remained when the clock is stopped is available when the clock is restarted, that is, when
the tolling period has ended.” (Woods v. Young (1991) 53 Cal.3d 315, 326, fn. 3.)
The only way to make sense of defendant‟s position is to understand it as asserting
that what is being tolled is not the running of the one-year contractual limitations period,
but the contractual one-year deadline itself. In other words, according to defendant‟s
position, the contractual limitation period continues to run after a lawsuit is filed, but the
actual one-year period deadline, if and when it is reached, is tolled, i.e., temporarily
abated; the deadline then is reinstated 30 days after a plaintiff is compelled by judicial
determination to arbitrate, leading to termination of the right to arbitrate if a plaintiff fails
to initiate arbitration within that 30-day period. What makes this interpretation untenable
is not only that it is at variance with the common understanding of the term “tolling,” but
also that it contradicts the express language of Code of Civil Procedure section 1281.12
that tolling starts “from the date the civil action is commenced.” This language
establishes that what is being tolled is the running of the contractual limitations period
itself, as plaintiff argues.
Under a proper interpretation of Code of Civil Procedure section 1281.12,
therefore, plaintiff‟s claim was not time-barred. Leaving aside any tolling of the statute
that may have resulted from the filing of a complaint with the DFEH, approximately
eight months had passed between the time of the termination on January 31, 2006, and
October 2, 2006, when plaintiff filed a complaint in superior court. Choosing arguendo
the earliest date defendant offers for when the trial court‟s order to arbitrate became final,
April 12, 2007, then, by the terms of Code of Civil Procedure section 1281.12, the tolling
ended 30 days after that, on May 12, 2007. But the end of the tolling period simply
means that the contractual limitations clock began to run again, not that the limitations
period ended. Because there were approximately four months left on the one-year
limitation period when the civil action was filed, even if there was no FEHA tolling, then
9
plaintiff had four months from the May 12, 2007, date to initiate the arbitration.
Plaintiff‟s initiation, which even by defendant‟s calculation was no later than June 13,
2007, was well within this period. Therefore, the trial court and the Court of Appeal
were both correct in concluding that the arbitrator misapplied the tolling provision and on
that basis erroneously granted summary judgment for defendant.
2. Did This Error of Law Serve as a Proper Basis for Vacating the
Arbitration Award?
In assessing whether the trial court was correct in vacating the arbitrator‟s award
due to arbitral error, we begin by reviewing pertinent case law. In Moncharsh, supra, 3
Cal.4th 1, a case involving an arbitration between an attorney and his former law firm
over certain claims arising from his employment agreement, we noted that “arbitration
proceedings are governed by title 9 of the Code of Civil Procedure, sections 1280-1294.2.
Section 1286.2 sets forth the grounds for vacation of an arbitrator‟s award. It states in
pertinent part: „[T]he court shall vacate the award if the court determines that: [¶] (a)
The award was procured by corruption, fraud or other undue means; [¶] (b) There was
corruption in any of the arbitrators; [¶] (c) The rights of such party were substantially
prejudiced by misconduct of a neutral arbitrator; [¶] (d) The arbitrators exceeded their
powers and the award cannot be corrected without affecting the merits of the decision
upon the controversy submitted; or [¶] (e) The rights of such party were substantially
prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause
being shown therefor or by the refusal of the arbitrators to hear evidence material to the
controversy or by other conduct of the arbitrators contrary to the provisions of this
title.‟ ” (Moncharsh, supra, 3 Cal.4th at pp. 12-13.)
We rejected a line of earlier cases that had held or suggested that notwithstanding
these statutory criteria for vacating an arbitration award, an award may also be vacated
when an error of law appears on the face of the arbitrator‟s decision and causes
10
substantial injustice. (Moncharsh, supra, 3 Cal.4th at p. 13.) Instead, after an extensive
review of the historical development of arbitration and judicial review of arbitration
awards, the court made clear “ „that in the absence of some limiting clause in the
arbitration agreement, the merits of the award, either on questions of fact or of law, may
not be reviewed except as provided in the statute.‟ ” (Id. at p. 25.)2
The court further rejected the argument that Code of Civil Procedure section
1286.2, subdivision (d) (now subd. (a)(4)), which authorizes an arbitration award to be
vacated if the arbitrators “exceeded their powers,” was a basis for reviewing errors of law
in an arbitration award. “It is well settled that „arbitrators do not exceed their powers
merely because they assign an erroneous reason for their decision.‟ [Citations.] A
contrary holding would permit the exception to swallow the rule of limited judicial
review; a litigant could always contend the arbitrator erred and thus exceeded his powers.
To the extent Moncharsh argues his case comes within section 1286.2, subdivision (d)
merely because the arbitrator reached an erroneous decision, we reject the point.”
(Moncharsh, supra, 3 Cal.4th at p. 28.)
The Moncharsh court recognized “that there may be some limited and exceptional
circumstances justifying judicial review of an arbitrator‟s decision” such as when
“granting finality to an arbitrator‟s decision would be inconsistent with the protection of a
party‟s statutory rights.” (Moncharsh, supra, 3 Cal.4th at p. 32.) Because the issue did
not arise in that case, the Moncharsh court had no occasion to develop this exception.
In Armendariz, supra, 24 Cal.4th 83, a case involving an alleged violation of the
statutory right to be free of sexual harassment under FEHA, we considered the validity of

2
We recently held that the parties could indeed expressly provide in an arbitration
agreement for expanded judicial review. (Cable Connections, Inc. v. DIRECTV, Inc.
(2008) 44 Cal.4th 1334, 1340 (Cable Connections).) No such contractual provision is at
issue in the present case.
11


a mandatory employment arbitration agreement, i.e., an adhesive arbitration agreement
that an employer imposes on the employee as a condition of employment. (Armendariz,
supra, 24 Cal.4th at pp. 91-92, 103, fn. 8.) Although holding that such an agreement is
enforceable, we concluded that “it is evident that an arbitration agreement cannot be
made to serve as a vehicle for the waiver of statutory rights created by the FEHA” (id. at
p. 101), because the enforcement of such rights was for the public benefit and was not
waivable (id. at pp. 100-101). We concluded that a party to such an arbitration agreement
must be able to fully vindicate his or her statutory cause of action in the arbitral forum.
(Id. at p. 101.) In order to ensure such vindication, “we held that arbitration of claims
under the FEHA is subject to certain minimal requirements: (1) the arbitration agreement
may not limit the damages normally available under the statute (Armendariz, supra, 24
Cal.4th at p. 103); (2) there must be discovery „sufficient to adequately arbitrate their
statutory claim‟ (id. at p. 106); (3) there must be a written arbitration decision and
judicial review „ “sufficient to ensure the arbitrators comply with the requirements of the
statute” ‟ (ibid.); and (4) the employer must „pay all types of costs that are unique to
arbitration‟ (id. at p. 113).” (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076.)
In the present case, we are concerned with the third requirement above —
adequate judicial review. We quote in full this portion of Armendariz: “As the United
States Supreme Court has stated: „[A]lthough judicial scrutiny of arbitration awards
necessarily is limited, such review is sufficient to ensure that arbitrators comply with the
requirements of the statute‟ at issue. (Shearson/American Express Inc. v. McMahon
(1987) 482 U.S. 220, 232 (McMahon).) In Moncharsh, we acknowledged that judicial
review may be appropriate when „granting finality to an arbitrator‟s decision would be
inconsistent with the protection of a party‟s statutory rights.‟ (Moncharsh, supra, 3
Cal.4th at p. 32; see also Board of Education v. Round Valley Teachers Assn. (1996) 13
Cal.4th 269, 276-277.)
12
“We are not faced in this case with a petition to confirm an arbitration award, and
therefore have no occasion to articulate precisely what standard of judicial review is
„sufficient to ensure that arbitrators comply with the requirements of [a] statute.‟
(McMahon, supra, 482 U.S. at p. 232.)3 All we hold today is that in order for such

3
The concurring and dissenting opinion claims that we mischaracterize this
statement in McMahon, contending that the Supreme Court “repeatedly cites this very
same statement when rejecting claims that the [Federal Arbitration Act‟s] provisions for
judicial review, which do not authorize review for error, are too limited to protect rights
under a statutory antidiscrimination law.” (Conc. & dis. opn., post, at p. 8.) However,
the concurring and dissenting opinion‟s categorical statement that “the FAA‟s provisions
for judicial review . . . do not authorize review for error” (conc. & dis. opn., post, at p. 8)
is inaccurate, and the matter is in fact far more complex. As reviewed in Hall Street
Associates, L.L.C. v. Mattel, Inc.
(2008) 552 U.S. 576, 584-585, federal courts have long
held that “manifest disregard of the law” is a ground for vacating an arbitration award,
although there was controversy among the circuits about the extent to which that
formulation authorizes review for legal error. Even after Hall Street, in at least a number
of circuits, the “manifest disregard” standard survives, not as an independent ground for
vacating arbitration awards, but as part of the statutory authorization that arbitration
awards may be vacated when arbitrators “exceed their powers.” (9 U.S.C. § 10(a)(4); see
Comedy Club, Inc. v. Improv West Assocs. (9th Cir.2009) 553 F.3d 1277, 1290; Citigroup
Global Mkts., Inc. v. Bacon
(5th Cir.2009) 562 F.3d 349, 357; Stolt-Neilsen SA v.
Animalfeeds International Corp.
(2nd Cir. 2008) 548 F.3d 85, 94-95.) It has been said
that the manifest disregard standard permits vacutur of arbitration awards under certain
circumstances when an arbitrator‟s decision “strains credulity” (Stolt-Neilsen SA, supra,
548 F.3d at pp. 92-93), and it is indeed questionable whether the arbitrator‟s ruling in the
present case would have survived application of that standard were this case being
litigated in federal court (see Comedy Club, Inc., supra, at pp. 1290-1294). It is against
the background of this “manifest disregard of the law” standard that the above quotation
from McMahon must be understood.
Moreover, in this case we interpret and apply the California Arbitration Act, not
federal law. No matter how the Supreme Court eventually resolves the judicial review
issue under the Federal Arbitration Act, we need not and do not move in lockstep with
the federal courts in matters of judicial review of arbitration awards, as we recently
reaffirmed in Cable Connections in departing from Hall Street by permiting parties to
contract to expand judicial review of legal error. (Cable Connections, supra, 44 Cal.4th
at pp. 1354-1355.) We have also gone our own way in Moncharsh, articulating a strict
review standard precluding vacatur for legal error that does not include a “manifest
(footnote continued on next page)
13


judicial review to be successfully accomplished, an arbitrator in a FEHA case must issue
a written arbitration decision that will reveal, however briefly, the essential findings and
conclusions on which the award is based. While such written findings and conclusions
are not required under the CAA [citations], nothing in the present arbitration agreement
precludes such written findings, and to the extent it applies to FEHA claims the
agreement must be interpreted to provide for such findings. In all other respects, the
employees‟ claim that they are unable to vindicate their FEHA rights because of
inadequate judicial review of an arbitration award is premature.” (Armendariz, supra, 24
Cal.4th at pp. 106-107.)

(footnote continued from previous page)
disregard” exception, while at the same time leaving open the possibility of greater
judicial review, as discussed above, in the case of rulings inconsistent with the protection
of statutory rights. (Moncharsh, supra, 3 Cal.4th at p. 32.) We elaborated on this
statutory exception in Armendariz and do so again today, and in doing so recognize that
McMahon‟s statement that judicial review of arbitration awards is “sufficient to ensure
that arbitrators comply with the requirements of [a] statute” (McMahon, supra, 482 U.S.
at p. 232) has a normative as well as a descriptive meaning. Significantly, the concurring
and dissenting opinion neither repudiates the above statement in McMahon, nor proposes
a coherent alternative interpretation of that statement.
Finally, the concurring and dissenting opinion‟s position, especially viewed
together with our holding in Cable Connections, would significantly increase the level of
inequality in our arbitration system. While those with resources to negotiate may, if they
wish, obtain full judicial review of an arbitrator‟s legal error, those on whom contracts of
adhesion are imposed would receive no judicial review even of plain arbitral errors that
result in a denial of a hearing on the merits on an unwaivable statutory claim. The
concurring and dissenting opinion implicitly contends that such gross inequality is
mandated by the CAA. For reasons explained in this opinion, we disagree.

14


More recently, in Cable Connections, in deciding that parties may contract for
heightened judicial review, we recognized the “public policy exceptions to the general
rule of limited [judicial] review”; for example, “when unwaivable statutory rights are at
stake, this court has repeatedly held that review must be „ “sufficient to ensure that
arbitrators comply with the requirements of the statute.” ‟ ” (Cable Connections, supra,
44 Cal.4th at p. 1353, fn. 14, quoting the portion of Armendariz cited above.)
In the present case, we are faced precisely with the question that was prematurely
posed in Armendariz, i.e., the proper standard of judicial review of arbitration awards
arising from mandatory-arbitration employment agreements that arbitrate claims asserting
the employee‟s unwaivable statutory rights. As an initial matter, we reject the suggestion
of amicus curiae Employers Group, echoed by the concurring and dissenting opinion, that
all Armendariz requires is a written arbitral award. Obviously, we did not envision such
a written award as an idle act, but rather as a precondition to adequate judicial review of
the award so as to enable employees subject to mandatory arbitration agreements to
vindicate their rights under FEHA. That being said, we note that the arbitrator‟s award in
the present case did not even comply with the requirements set forth in Armendariz that
“an arbitrator in a FEHA case must issue a written arbitration decision that will reveal,
however briefly, the essential findings and conclusions on which the award is based.”
(Armendariz, supra, 24 Cal.4th at p. 107.) The arbitrator stated that plaintiff had failed to
“submit his claims and disputes to binding arbitration within the one-year period as
required by the Dispute Resolution Agreement or within the tolling period prescribed in
Code of Civil Procedure section 1281.12,” without explaining, even briefly, his reasoning
as to why plaintiff did not benefit from the tolling period.
Nor need we decide whether the rules suggested by plaintiff and amicus curiae
California Employment Lawyers Association is correct that all legal errors are reviewable
in this context, or that all errors involving the arbitration statute itself are reviewable. We
15
address only the case before us, and a narrower rule is sufficient for its resolution. Here,
as a result of the arbitrator‟s clear legal error, plaintiff‟s claim was incorrectly determined
to be time-barred. Indeed, the legal error misconstrued the procedural framework under
which the parties agreed the arbitration was to be conducted, rather than misinterpreting
the law governing the claim itself. 4 It is difficult to imagine a more paradigmatic
example of when “granting finality to an arbitrator‟s decision would be inconsistent with
the protection of a party‟s statutory rights” (Moncharsh, supra, 3 Cal.4th at p. 32) than
the present case, in which, as a result of allowing the procedural error to stand, and
through no fault of the employee or his attorney, the employee will be unable to receive a
hearing on the merits of his FEHA claims in any forum. Nor can it be plausibly argued
that plaintiff merely received the justice he bargained for. It is beyond dispute that there
was no opportunity for bargaining over the arbitration agreement in this case.
We therefore hold that when, as here, an employee subject to a mandatory
employment-arbitration agreement is unable to obtain a hearing on the merits of his
FEHA claims, or claims based on other unwaivable statutory rights, because of an
arbitration award based on legal error, the trial court does not err in vacating the award.
Stated in other terms, construing the CAA in light of the Legislature‟s intent that
employees be able to enforce their right to be free of unlawful discrimination under
FEHA, an arbitrator whose legal error has barred an employee subject to a mandatory
arbitration agreement from obtaining a hearing on the merits of a claim based on such

4
We requested supplemental briefing by the parties on the meaning of Code of
Civil Procedure section 1286.2, subdivision (a)(5), which provides in pertinent part that
one of the grounds for vacating an arbitration award is “other conduct of the arbitrators
contrary to the provisions of this title.” Because we resolve this case on the above
grounds, we need not address whether the arbitrator‟s misinterpretation of section
1281.12 falls within the scope of the “other conduct” clause of section 1282.6,
subdivision (a)(5).
16


right has exceeded his or her powers within the meaning of Code of Civil Procedure
section 1286.2, subdivision (a)(4), and the arbitrator‟s award may properly be vacated.
(See Armendariz, supra, 24 Cal.4th at pp. 106-107.)
B. The Restriction of Administrative Remedies
As noted, the second question posed by plaintiff‟s petition for review is whether
language in a mandatory employment-arbitration agreement restricting an employee from
seeking administrative remedies for violations of FEHA is lawful. As will be recalled,
the arbitration agreement between plaintiff and defendant contained language stating that
it was the intention of the parties to the agreement “to avoid the inconvenience, cost, and
risk that accompany formal administrative or judicial proceedings.” (Italics added.) He
contends that this language must be interpreted as precluding plaintiff from seeking
administrative remedies, and that such a provision is contrary to public policy. This
provision, plaintiff contends, combined with the shortened statute of limitations noted
above, renders the arbitration agreement unconscionable. Plaintiff therefore argues that
we should not only uphold the trial court‟s vacatur of the arbitration award, but that we
should invalidate the entire arbitration agreement and order the case to proceed in court.
As recounted, although plaintiff resisted defendant‟s petition to compel arbitration,
he did so on the grounds that defendant had waived the right to compel arbitration, and
had failed to present the arbitration agreement in an understandable form. He did not
raise the issue of unconscionability based on preclusion of administrative remedies. We
therefore conclude that plaintiff has forfeited this issue. (See Cummings v. Future Nissan
(2005) 128 Cal.App.4th 321, 328-329 [party to arbitration agreement is generally obliged
to raise unconscionability issues in court at the time she initially resists arbitration]; see
also Moncharsh, supra, 3 Cal.4th at pp. 30-31 [a party contending the entire arbitration
agreement is unlawful generally must raise the issue at the outset in the trial court].)
17
We also conclude that the claim fails on the merits. First, we read the above
quoted language as merely precatory, i.e., as a statement of purpose, that does not in itself
operate to preclude plaintiff from pursuing any administrative remedy. Second, even if
the agreement were understood to preclude “formal administrative . . . proceedings,” it
would not be unlawful in all possible applications. It is true that the United States
Supreme Court has recognized in EEOC v. Waffle House, Inc. (2002) 534 U.S. 279 that
an arbitration agreement between an employer and an employee is not effective to bar the
Equal Employment Opportunity Commission from prosecuting statutory
antidiscrimination violations. And we have stated in Armendariz, supra, 24 Cal.4th at
page 99, footnote 6, anticipating Waffle House: “Nothing in this opinion . . . should be
interpreted as implying that an arbitration agreement can restrict an employee‟s resort to
the Department of Fair Employment and Housing, the administrative agency charged
with prosecuting complaints made under the FEHA, or that the department would be
prevented from carrying out its statutory functions by an arbitration agreement to which it
is not a party.”
But as the United States Supreme Court recently recognized in Preston v. Ferrer
(2008) 522 U.S. 346 [128 S.Ct. 978], an arbitration agreement could, under federal law,
validly limit the resort of an employee to an administrative agency that acts as an
adjudicator, rather than as a prosecutor, of employment claims, such as the Labor
Commissioner in this state. (Id. at p. 359.) Even assuming an arbitration clause
purporting to override the statutory jurisdiction of an administrative adjudicator would
violate California law, state law would be preempted when applied to an arbitration
agreement covered by the Federal Arbitration Act. (522 U.S. at p. 360.)
When an arbitration provision is ambiguous, we will interpret that provision, if
reasonable, in a manner that renders it lawful, both because of our public policy in favor
of arbitration as a speedy and relatively inexpensive means of dispute resolution, and
18
because of the general principle that we interpret a contractual provision in a manner that
renders it enforceable rather than void. (Roman v. Superior Court (2009) 172
Cal.App.4th 1462, 1473; see also Civ. Code, § 3541 [“[a]n interpretation which gives
effect [to an agreement] is preferred to one which makes void”]; Civ. Code, § 1643 [if
possible without violating the parties‟ unambiguous intent, a contract is interpreted so as
to make it “lawful, operative, definite, reasonable and capable of being carried into
effect”].) In the present case, we construe the language of the arbitration agreement,
stating that the parties to the agreement intend “to avoid the inconvenience, cost, and risk
that accompany formal administrative or judicial proceedings,” as stating an intention to
lawfully preclude or restrict the parties to the arbitration agreement from submitting their
claims for adjudication to an administrative entity such as the Labor Commissioner, at
least to the extent set forth by the United States Supreme Court in Preston. We therefore
conclude that the inclusion of a provision limiting resort to an administrative forum does
not render the arbitration agreement unconscionable or unenforceable.5

5
Plaintiff also contends that the one-year statute of limitations provided in the
arbitration agreement is unlawful and independently renders the agreement
unconscionable. As noted above, under FEHA, an administrative complaint with the
DFEH must be filed within one year of the date of the alleged discriminatory action.
(Gov. Code, § 12960, subd. (d).) The DFEH , if it decides not to pursue the matter, must
issue a right-to-sue letter within a year after the charges are filed. (Id., § 12965, subd.
(b).) The complainant then has one year from the date of that letter to file a civil action.
(Id., subd. (d)(2).) Plaintiff claims, inter alia, that because the one-year provision in the
contract does not explicitly include the above provisions for filing claims with the DFEH,
and appears to adhere to a rigid one-year deadline, it is contrary to public policy and
renders the arbitration agreement unconscionable.
This issue was not presented in the petition for review. Generally we will not
decide issues not raised in the petition for review or answer, although we have discretion
to do so. (Cal. Rules of Ct., rule 8.516(b).) Here, the main focus of the briefing was on
whether the trial court correctly vacated the arbitration award, not on whether the
arbitration agreement was unconscionable because of an allegedly unlawful limitations
provision. Moreover, as discussed above, plaintiff did not advance this unconscionability
(footnote continued on next page)
19


Finally, the Court of Appeal noted that defendant advanced certain “procedural
arguments” as to why the trial court improperly granted plaintiff‟s petition to vacate the
award, and deemed these moot in light of its determination that the trial court had erred in
vacating the award. These issues pertain to the timeliness and sufficiency of plaintiff‟s
opposition to Pearson‟s petition to confirm the arbitration award, and whether these
alleged defects undermined the validity of the trial court‟s order vacating the arbitration
award. We now remand the case to the Court of Appeal to have it decide these issues.
III.
DISPOSITION
The judgment of the Court of Appeal is reversed and the cause is remanded for
proceedings consistent with this opinion.
MORENO, J.

WE CONCUR: GEORGE, C. J.
KENNARD, J.
WERDEGAR, J.

(footnote continued from previous page)
claim before the trial court in resisting defendant‟s motion to compel arbitration, and it is
therefore forfeit. (See Cummings v. Future Nissan, supra, 128 Cal.App.4th at pp. 328-
329.) We therefore decline to decide this issue.
20



CONCURRING AND DISSENTING OPINION BY BAXTER, J.

I dissent from part II.A. (part A) of the majority‟s decision (ante, at pp. 6-
17), which holds this: Even if the parties to a mandatory employment arbitration
agreement did not agree to arbitral conformity with rules of law or to expanded
judicial review, the arbitral resolution of the employee‟s statutory age
discrimination claim is subject to court review if the claim was found time-barred.
If the court determines that the arbitral award in the employer‟s favor reflects an
error of law, then the award must be vacated pursuant to Code of Civil Procedure1
section 1286.2, subdivision (a)(4) (section 1286.2(a)(4)), which requires vacatur
when a court finds “[t]he arbitrators exceeded their powers and the award cannot
be corrected without affecting the merits of the decision upon the controversy
submitted.”
I cannot join in this unsupported and unprecedented move to judicialize the
arbitration process. The majority misapplies section 1286.2(a)(4) and the
principles articulated in Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1
(Moncharsh) and Armendariz v. Foundation Health Psychcare Services, Inc.
(2000) 24 Cal.4th 83 (Armendariz), so as to significantly undermine the strong
public policy favoring arbitration as a fair, quick, and inexpensive means of
resolving disputes. Because I believe that review of the arbitral decision here is
unauthorized, my dissent to part A expresses no opinion as to whether the

1
Unless otherwise indicated, all further statutory references are to this code.
1


arbitrator‟s application of the contractual time bar was legally erroneous, but
assumes for purposes of argument that it was.2
At the same time, I concur in part II.B. of the majority‟s decision, which
concludes plaintiff has forfeited the claim challenging the arbitration agreement as
unconscionable and unenforceable. (Maj. opn., ante, at p. 17.)
I.
Moncharsh, supra, 3 Cal.4th 1, is our seminal decision governing judicial
review of arbitration awards. Moncharsh was decided in the context of an
employment dispute that did not involve a claim for violation of the Fair
Employment and Housing Act (FEHA; Gov. Code, § 12900 et seq.). In assessing
the extent to which a trial court may review an arbitral decision for errors of law,
Moncharsh emphasized that minimizing judicial intervention in the arbitration
process vindicates the intentions and expectations of the parties to an arbitration
agreement in two significant ways.
First, “[b]ecause the decision to arbitrate grievances evinces the parties‟
intent to bypass the judicial system and thus avoid potential delays at the trial and
appellate levels, arbitral finality is a core component of the parties’ agreement to
submit to arbitration. Thus, an arbitration decision is final and conclusive because
the parties have agreed that it be so. By ensuring that an arbitrator‟s decision is
final and binding, courts simply assure that the parties receive the benefit of their
bargain.” (Moncharsh, supra, 3 Cal.4th at p. 10, first italics added, fn. omitted;

2
As part A of the majority opinion indicates, there is no precedent governing
the interpretation and application of Code of Civil Procedure section 1281.12 and
its tolling provision. Accordingly, while I assume for purposes of argument that
the arbitral decision reflects legal error, I do not accept the majority‟s suggestion
that it amounts to a “manifest disregard of the law.” (Maj. opn., ante, at p. 13,
fn. 3.)
2


see also Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1355,
quoting Moncharsh (Cable Connection); Berglund v. Arthroscopic & Laser
Surgery Center of San Diego, L.P. (2008) 44 Cal.4th 528, 534 (Berglund).)
Second, “ „[a]rbitrators, unless specifically required to act in conformity
with rules of law, may base their decision upon broad principles of justice and
equity, and in doing so may expressly or impliedly reject a claim that a party
might successfully have asserted in a judicial action. [Citations.]‟ ” (Moncharsh,
supra, 3 Cal.4th at pp. 10-11; see also Cable Connection, supra, 44 Cal.4th at p.
1355, quoting Moncharsh; Berglund, supra, 44 Cal.4th at p. 534.) Hence, parties
to an arbitration agreement “ „ “may expect not only to reap the advantages that
flow from the use of that nontechnical, summary procedure, but also to find
themselves bound by an award reached by paths neither marked nor traceable and
not subject to judicial review.” [Citation.]‟ ” (Moncharsh, at p. 11.) Indeed, by
voluntarily submitting to arbitration, the contracting parties have “agreed to bear
[the risk of arbitral error] in return for a quick, inexpensive, and conclusive
resolution to their dispute.” (Ibid., italics added; see also Berglund, at p. 534.)
The Legislature, having enacted a comprehensive statutory scheme
regulating private arbitration (the California Arbitration Act; § 1280 et seq.),
“expressed a „strong public policy in favor of arbitration as a speedy and relatively
inexpensive means of dispute resolution.‟ ” (Moncharsh, supra, 3 Cal.4th at p. 9.)
Therefore, “[a]bsent a clear expression of illegality or public policy undermining
this strong presumption in favor of private arbitration, an arbitral award should
ordinarily stand immune from judicial scrutiny.” (Id. at p. 32.)
3
Upon carefully weighing these considerations, Moncharsh concluded that,
where, as here, there is no limiting clause in the parties‟ arbitration agreement,3 an
arbitral award “is not subject to judicial review except on the grounds set forth in
sections 1286.2 (to vacate) and 1286.6 (for correction). Further, the existence of
an error of law apparent on the face of the award that causes substantial injustice
does not provide grounds for judicial review.” (Moncharsh, supra, 3 Cal.4th at p.
33; see also Moshonov v. Walsh (2000) 22 Cal.4th 771, 775.) Applying these
principles in the instant case leads to only one conclusion: the arbitral decision
finding plaintiff‟s FEHA claim time-barred is not subject to judicial review and
vacatur, even though the decision is based on a legal error that forecloses plaintiff
from proceeding on the merits of that claim.
In holding to the contrary, the majority concludes judicial review and
vacatur are proper under section 1286.2(a)(4), which authorizes vacatur of an
arbitration award if the arbitrators exceeded their powers. (Maj. opn., ante, at pp.
16-17.) That is plain wrong. “It is well settled that „arbitrators do not exceed their
powers merely because they assign an erroneous reason for their decision.‟
[Citations.] A contrary holding would permit the exception to swallow the rule of
limited judicial review; a litigant could always contend the arbitrator erred and
thus exceeded his powers.” (Moncharsh, supra, 3 Cal.4th at p. 28 [addressing the
predecessor to § 1286.2(a)(4)]; see also Gueyffier v. Ann Summers, Ltd. (2008) 43
Cal.4th 1179, 1184; Moshonov v. Walsh, supra, 22 Cal.4th at p. 779.)

3
Parties to an arbitration agreement may limit the arbitral process by
expressly agreeing that “legal errors are an excess of arbitral authority that is
reviewable by the courts.” (Cable Connection, supra, 44 Cal.4th at p. 1361.) The
majority acknowledges that no limiting clause exists in this case. (Maj. opn., ante,
at p. 11, fn. 2.)
4


The majority also reasons that, because “there was no opportunity for
bargaining over the arbitration agreement in this case,” it cannot be said that
“plaintiff merely received the justice he bargained for.” (Maj. opn., ante, at p. 16.)
That reasoning is faulty. Although a court will scrutinize an arbitration provision
in an adhesion contract to determine whether the provision is unduly oppressive or
unconscionable, and therefore subject to revocation (see § 1281.2, subd. (b);
Armendariz, supra, 24 Cal.4th at pp. 113-114), the adhesive nature of a contract
appears irrelevant once the arbitration provision is found enforceable and the
question remaining for determination is whether section 1286.2 authorizes judicial
review and vacatur. Contrary to the majority‟s suggestion, if an employee signed
an employment contract containing an enforceable arbitration agreement as a
condition of employment (Moncharsh, supra, 3 Cal.4th at pp. 6-7), then the risk of
arbitral mistake is acceptable because the parties “voluntarily” submitted to the
arbitration and “agreed to bear that risk in return for a quick, inexpensive, and
conclusive resolution to their dispute.” (Id. at p. 11.)4
II.
Unlike Moncharsh, Armendariz, supra, 24 Cal.4th 83, did not concern
judicial review of an arbitration award. Rather, Armendariz arose in the context of

4
Moncharsh‟s conclusion that an enforceable arbitration agreement is
subject to the limited judicial review provided in the California Arbitration Act is
in accord with the views of the United States Supreme Court. For instance, in
Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20 (Gilmer), the high
court rejected the contention that inequality in bargaining power is a sufficient
reason to categorically preclude enforcement of compulsory arbitration
agreements in the employment context; at the same time, the court found that
claims for violations of the Age Discrimination in Employment Act of 1967 (29
U.S.C. § 621 et seq.) are arbitrable, and that the limited judicial review provided in
the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) is adequate to vindicate
such claims. (Gilmer, at p. 32, fn. 4.)
5


a petition to compel arbitration and addressed only the enforceability of a
mandatory employment arbitration agreement. (Id. at pp. 91-92.) Rejecting the
contention that employees may never be compelled to arbitrate discrimination
claims brought under the FEHA, Armendariz concluded “such claims are in fact
arbitrable if the arbitration permits an employee to vindicate his or her statutory
rights.” (Id. at p. 90.)
As Armendariz explained, an employment agreement for mandatory
arbitration of a FEHA claim is valid and enforceable if the agreement (1) does not
limit the remedies normally available under the FEHA; (2) allows discovery
sufficient to adequately arbitrate the FEHA claim; (3) provides for a written
arbitration decision that will reveal, however briefly, the essential findings and
conclusions on which the award is based; and (4) does not require the employee to
bear any type of expenses greater than the usual costs incurred during litigation
(that is, the employer must pay costs that are unique to arbitration). (Armendariz,
24 Cal.4th at pp. 103-113; but see Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th
1064, 1085-1089 (conc. & dis. opn. of Baxter, J.) [disagreeing with Armendariz‟s
views on cost allocation in light of Green Tree Financial Corp.-Ala. v. Randolph
(2000) 531 U.S. 79].) If the arbitration agreement does not make these
requirements explicit, then the requirements are to be implied, so long as they are
not inconsistent with the agreement. (See Armendariz, at pp. 104, 106, 107, 113.)
When a mandatory arbitration agreement satisfies the Armendariz requirements,
then a petition to compel arbitration of a FEHA claim is properly granted.
There appears no question here that the parties‟ mandatory arbitration
agreement may be interpreted consistently with the four Armendariz requirements.
That being the case, the superior court found the agreement enforceable and sent
the matter to arbitration. In contrast to the situation in Armendariz, the parties
here actually appeared before an arbitrator, who made an award in defendant‟s
6
favor after hearing evidence and arguments on an affirmative defense. But
because the instant matter concerns the cross-petitions to confirm or vacate that
award, and not the earlier petition to compel arbitration, the parties deserve to
receive the benefit of their bargain. That bargained-for benefit is the enforcement
of the arbitration award pursuant to the California Arbitration Act and the
principles articulated in Moncharsh, supra, 3 Cal.4th 1, which prohibit judicial
review and vacatur of the award for legal error, even if such error bars a hearing
on the merits of plaintiff‟s FEHA claim.
In hunting down support for expanding judicial involvement in the
arbitration process, the majority states: “The Moncharsh court recognized „that
there may be some limited and exceptional circumstances justifying judicial
review of an arbitrator‟s decision‟ such as when „granting finality to an arbitrator‟s
decision would be inconsistent with the protection of a party‟s statutory rights.‟
(Moncharsh, supra, 3 Cal.4th at p. 32.) Because the issue did not arise in that
case, the Moncharsh court had no occasion to develop this exception.” (Maj. opn.,
ante, at p. 11.)
The majority does not say so, but Moncharsh supported its suggestion that
protection of a statutory right may warrant an exception to the general rule of
nonreviewability with an “accord” citation to Shearson/American Express Inc. v.
McMahon (1987) 482 U.S. 220, 225-227 (McMahon), and a parenthetical notation
describing McMahon as holding that “federal statutory claims are arbitrable under
the Federal Arbitration Act unless party opposing arbitration demonstrates „that
Congress intended to preclude a waiver of judicial remedies for the statutory rights
at issue.‟ ” (Moncharsh, supra, 3 Cal.4th at p. 32.) Thus, with a nod to
McMahon, Moncharsh left open the possibility that judicial review and vacatur
may be appropriate if confirmation of an arbitration award were to contravene a
party‟s statutory right to trial.
7
In support of its more invasive form of judicial review, the majority does in
fact quote a portion of Armendariz that in turn quotes a different part of
McMahon. (Maj. opn., ante, at pp. 12-13.) But nothing in McMahon suggests that
judicial review for legal error is appropriate when plaintiffs assert claims based on
unwaivable substantive rights protected by statute. If anything, McMahon and
later Supreme Court decisions espouse views to the contrary.
In McMahon, supra, 482 U.S. 220, a brokerage firm and its registered
representative were sued by their customers for alleged violations of the Racketeer
Influenced and Corrupt Organizations Act and the Securities Exchange Act of
1934 (Exchange Act). Despite the statutory nature of the plaintiffs‟ claims, the
Supreme Court emphasized that the “duty to enforce arbitration agreements is not
diminished when a party bound by an agreement raises a claim founded on
statutory rights.” (McMahon, at p. 226.) As the high court explained, “ „[b]y
agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights
afforded by the statute; it only submits to their resolution in an arbitral, rather than
a judicial, forum.‟ ” (Id. at pp. 229-230.)
It bears emphasis that the Supreme Court found no basis for limiting
arbitration of the plaintiffs‟ Exchange Act claims, even though the substantive
protections of the Exchange Act, like those of the FEHA, cannot be waived by
agreement. (McMahon, supra, 482 U.S. at pp. 227-230.) In the part of McMahon
that Armendariz quotes, the high court remarked that “although judicial scrutiny of
arbitration awards necessarily is limited, such review is sufficient to ensure that
arbitrators comply with the requirements of the statute” at issue. (McMahon, at p.
232; see Armendariz, supra, 24 Cal.4th at p. 106.) Given the text of McMahon‟s
statement, its use as a springboard for expanding permissible review beyond the
statutory grounds is puzzling. Indeed, the Supreme Court repeatedly cites this
very same statement when rejecting claims that the FAA‟s provisions for judicial
8
review, which do not authorize review for error, are too limited to protect rights
under a statutory antidiscrimination law. (14 Penn Plaza LLC v. Pyett (2009) ___
U.S.____, ____, fn. 10 [129 S.Ct. 1456, 1471, fn. 10] [addressing claim under Age
Discrimination in Employment Act of 1967]; Gilmer, supra, 500 U.S. at p. 32, fn.
4 [same]; cf. Hall Street Associates, L.L.C. v. Mattel, Inc. (2008) 552 U.S. 576,
584-589 [grounds provided in FAA for vacatur are exclusive and do not permit
judicial review for arbitral errors, even when parties contract to limit arbitral
finality in this way].)
Consistent with the Supreme Court‟s decision in McMahon, our recognition
that a statutory right may warrant an exception to the general rule of
nonreviewability was previously restricted to situations in which arbitration
impaired a statutory right to a judicial forum. (Aguilar v. Lerner (2004) 32 Cal.4th
974, 981-983 [judicial review of arbitrator‟s decision appropriate because
enforcement of the attorney-client arbitration agreement at issue contravened the
client‟s right under a specific statutory scheme to reject an arbitrator‟s decision
and proceed to trial]; Board of Education v. Round Valley Teachers Assn. (1996)
13 Cal.4th 269, 276-277 [judicial review of arbitrator‟s decision permissible where
party claimed “an „explicit legislative expression of public policy‟ that issues
involving the reelection of probationary teachers not be subject to arbitration”];
see also Berglund, supra, 44 Cal.4th at pp. 538-539 [allowing full judicial review
of arbitral discovery orders against nonparties to arbitration agreement in order to
preserve the nonparties‟ legal rights].) But employees have no statutory right to a
trial or judicial review of FEHA claims, and this narrow exception has no
application here.
In short, there is nothing in Armendariz, or in McMahon, or in any other
authority cited by the majority, that supports judicial review and vacatur when an
arbitrator rules in favor of an affirmative defense that forecloses a hearing on the
9
merits of an unwaivable statutory claim. Given the vast number of statutory
schemes that can be claimed to protect unwaivable rights, as well as the myriad
ways in which legal error can be claimed to preclude or impair a hearing on the
merits, the majority‟s holding makes for an exception that will surely “swallow the
rule of limited judicial review.” (Moncharsh, supra, 3 Cal.4th at p. 28.)5
III.
Part A of today‟s decision and the logic supporting it are confounding. The
decision runs counter to the settled principle that arbitrators generally may rely on
broad principles of justice and equity to reject a claim. It also contradicts our
seminal case holding that an error of law causing substantial injustice does not
provide grounds for judicial review. Perhaps most troubling, the decision is
irreconcilable with the fundamental premise that the risk of arbitral error is what

5
Apart from the above, I also question the majority‟s decision to allow
judicial review and vacatur of an arbitral award only where the arbitrator
erroneously rules in favor of the employer, but not when the ruling wrongly favors
the employee. Although we generally find a lack of mutuality in an arbitration
agreement troublesome when it favors the employer as the party with superior
bargaining power (see Armendariz, supra, 24 Cal.4th at pp. 114-121), I see no
basis or rationale for imposing a one-sided rule of judicial review where, as here,
neither party can be faulted for the situation. In contrast to the majority‟s rule,
each of the express statutory grounds for vacating or correcting an award is neutral
in its application to the parties. (§§ 1286.2, 1286.6.)

Moreover, because the FAA preempts all state laws and rules disfavoring
arbitration (see Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265, 271-
272), I have the additional concern that the FAA precludes this court from
burdening the arbitral process as the majority does here, in the absence of an
express legislative intent allowing such burdens. (See generally Little v. Auto
Stiegler, Inc.
, supra, 29 Cal.4th at pp. 1089-1095 (conc. & dis. opn. of Brown, J.)
[disagreeing with majority‟s application of the Armendariz requirements to an
action alleging wrongful termination in violation of public policy (Tameny
claims)].)
10


contracting parties bargain for in exchange for a quick, inexpensive, and
conclusive resolution to their dispute.
I am aware that applying Moncharsh has a harsh effect on the employee in
this instance. But it is not for us to second-guess the legal or equitable basis of the
arbitral award. The employer‟s assertion of the time bar was a valid affirmative
defense, and there is nothing to suggest the parties were unable to fairly present
their arguments to the arbitrator on that question. Where, as here, there is no
limiting clause and no statutory right to a trial or judicial forum, the effect of
allowing review and vacatur of the arbitral award is to frustrate the parties‟
contractual expectations and to defeat the strong public policy favoring arbitration.
BAXTER, J.
WE CONCUR:
CHIN, J.
CORRIGAN, J.
11

See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Pearson Dental Supplies, Inc. v. Superior Court
__________________________________________________________________________________

Unpublished Opinion


Original Appeal
Original Proceeding
Review Granted
XXX 166 Cal.App.4th 71
Rehearing Granted

__________________________________________________________________________________

Opinion No.

S167169
Date Filed: April 26, 2010
__________________________________________________________________________________

Court:

Superior
County: Los Angeles
Judge: Alan S. Rosenfield

__________________________________________________________________________________

Attorneys for Appellant:

Law Offices of Russell F. Behjatnia and Russell F. Bahjatnia for Petitioner.

Jones Day, George S. Howard, Jr., and Kristine S. Tremble for Employers Group as Amicus Curiae on
behalf of Petitioner.

__________________________________________________________________________________

Attorneys for Respondent:

No appearance of Respondent.

Altshuler Berzon, Michael Rubin, Rebecca Smullin; Lavi & Ebrahimian, N. Nick Ebrahimian, Joseph Lavi,
Jordan D. Bello; The deRubertis Law Firm and David M. deRubertis for Real Party in Interest.

McGuinn, Hillsman & Palefsky, Cliff Palefsky and Keith Ehrman for California Employment Lawyers
Association as Amicus Curiae on behalf of Real Party in Interest.



Counsel who argued in Supreme Court (not intended for publication with opinion):

Russell F. Bahjatnia
Law Offices of Russell F. Behjatnia
14401 Gilmore Street, Suite 100
Van Nuys, CA 91401
(818) 779-8888

George S. Howard
Jones Day
12265 El Camino Real, Suite 200
San Diego, CA 92130
(858) 314-1200

Michael Rubin
Altshuler Berzon
177 Post Street, Suite 300
San Francisco, CA 94108
(415) 421-7151

Cliff Palefsky
McGuinn, Hillsman & Palefsky
535 Pacific Avenue
San Francisco, CA 94133
(415) 421-9292


Petition for review after the Court of Appeal granted a petition for peremptory writ of mandate. This case presents the following issues: (1) What standard of judicial review applies to an arbitrator's decision on an employee's anti-discrimination claim under the Fair Employment and Housing Act (Gov. Code, section 12900 et seq.) that is arbitrated pursuant to a mandatory employment arbitration agreement? (2) Can such a mandatory arbitration agreement restrict an employee from seeking administrative remedies for violations of the Act?

Opinion Information
Date:Citation:Docket Number:Category:Status:
Mon, 04/26/201048 Cal. 4th 665, 229 P.3d 83, 108 Cal. Rptr. 3d 171S167169Review - Civil Original Proceedingsubmitted/opinion due

Parties
1Pearson Dental Supplies, Inc. (Petitioner)
Represented by Russell Farzin Behjatnia
Law Offices of Russell F. Behjatnia
14401 Gilmore Street, Suite 100
Van Nuys, CA

2Superior Court of Los Angeles County (Respondent)
3Turcios, Luis (Real Party in Interest)
Represented by Jordan Domingo Bello
Lavi & Ebrahimian, LLP
8383 Wilshire Boulevard, Suite 840
Beverly Hills, CA

4Turcios, Luis (Real Party in Interest)
Represented by Nassir Nick Ebrahimian
Lavi & Ebrahimian, LLP
8383 Wilshire Boulevard, Suite 840
Beverly Hills, CA

5Turcios, Luis (Real Party in Interest)
Represented by Rebecca Harriet Smullin
Altshuler Berzon, LLP
177 Post Street, Suite 300
San Francisco, CA

6Turcios, Luis (Real Party in Interest)
Represented by David Michael deRubertis
The deRubertis Law Firm
21800 Oxnard Boulevard, Suite 1180
Woodland Hills, CA

7Turcios, Luis (Real Party in Interest)
Represented by Michael Rubin
Altshuler Berzon, LLP
177 Post Street, Suite 300
San Francisco, CA

8California Employment Lawyers Association (Amicus curiae)
Represented by Cliff Palefsky
McGuinn Hillsman & Palefsky
535 Pacific Avenue
San Francisco, CA

9Employers Group (Amicus curiae)
Represented by George S. Howard
Jones Day
12265 El Camino Real, Suite 200
San Diego, CA

10Miller Clark Clavert & Obenour (Pub/Depublication Requestor)
Represented by Allan C. Miller
Miller Clark Calvert & Obenour
2222 Martin L. King Jr. Way
Berkeley, CA


Opinion Authors
OpinionJustice Carlos R. Moreno
ConcurJustice Marvin R. Baxter
DissentJustice Marvin R. Baxter

Dockets
Sep 30 2008Petition for review filed
  Luis Turcios, Rpi Jordan D. Bello, Esq.,
Oct 1 2008Record requested
 
Oct 1 2008Received Court of Appeal record
 
Oct 9 2008Request for depublication (petition for review pending)
  by the Law Firm of Miller Clark Calvert & Obenour (non-party) by Allan C. Miller, counsel
Oct 10 2008Request for depublication filed (another request pending)
  The California employment Lawyers Association, depublication requestor by Cliff Palefksy, counsel
Oct 20 2008Answer to petition for review filed
  Petitioner Pearson Dental Supplies, Inc. ~Attorney Russell F. Behjatnia
Oct 24 2008Opposition filed
  Pearson Dental Supplies, petitioner by Russell Farzin Behjatnia, counsel
Oct 30 2008Reply to answer to petition filed
  Real Party Luis Turcios ~Attorney Jordan D. Bello
Nov 19 2008Petition for review granted (civil case)
  Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno, and Corrigan, JJ.
Dec 1 2008Certification of interested entities or persons filed
  Petitioner Pearson Dental Supplies, Inc. ~Attorney Russell F. Behjatnia
Dec 15 2008Association of attorneys filed for:
  Real Party in Interest Luis Turcios, attorney David M. deRubertis. by counsel, Jordan Bello, and David M. deRubertis.
Dec 18 2008Request for extension of time filed
  RPI, Luis Turcios, is asking for a 60 day extension to file the Opening Brief on the Merits. by counsel, David M. deRubertis
Dec 30 2008Extension of time granted
  On application of Real Party in Interest and good cause appearing, it is ordered that the time to serve and file the Opening Brief on the Merits is extended to and including February 15, 2009.
Feb 11 2009Request for extension of time filed
  to file opening brief/merits to 4-15-09 Real Party Luis Turcios
Feb 20 2009Extension of time granted
  On application of real Party in Interest and good cause appearing, it is ordered that the time to serve and file the opening brief on the merits is extended to and including March 17, 2009. No further extensions are contemplated.
Feb 27 2009Association of attorneys filed for:
  Attorneys Michael Rubin and Rebecca Smullin for Real Party Luis Turcios ~Attorneys Jordan Bello, David M. deRubertis and N. Nick Ebrahimian
Mar 4 2009Request for extension of time filed
  Real Party in Interest, Luis Turcios, is asking to 3-31-09 to file the opening brief on the merits by counsel, Michael Rubin.
Mar 4 2009Filed:
  Separate declaration of Michael Rubin in support of request for extension of time to file the opening brief on the merits.
Mar 5 2009Extension of time granted
  On application of Real Party in Interest and good cause appearing, it is ordered that the time to serve and file the opening brief on the merits is extended to and including April 1, 2009. No further extensions of time will be granted.
Apr 1 2009Received:
  Opening Brief on the Merits in excess of word count. Real Party in Interest, Luis Turcios by counsel, Michael Rubin
Apr 1 2009Filed:
  application to exceed applicable length limit for the opening brief on the merits. with separate declaration Real Party in Interest, Luis Turcios by cousel, Michael Rubin
Apr 6 2009Opening brief on the merits filed
Real Party in Interest: Turcios, LuisAttorney: Michael Rubin   with permission Real Party in Interest, Luis Turcios by counsel, Michael Rubin.
Apr 30 2009Request for extension of time filed
  Petitioner requesting a 60-day extension to and including July 6, 2009.
May 1 2009Extension of time granted
  On application of Petitioner and good cause appearing, it is ordered that the time to serve and file petitioner's Answer brief on the Merits is extended to and including July 6, 2009.
Jul 6 2009Answer brief on the merits filed
Petitioner: Pearson Dental Supplies, Inc.Attorney: Russell Farzin Behjatnia  
Jul 27 2009Reply brief filed (case fully briefed)
Real Party in Interest: Turcios, LuisAttorney: Michael Rubin   Luis Turcios, Real Party in Interest by cousnel, Michael Rubin.
Aug 21 2009Application to file amicus curiae brief filed
  California Employment Lawyers Association, in support of Real Party in Interest, Luis Turcios. by counsel, Cliff Palefsky
Aug 25 2009Application to file amicus curiae brief filed
  Employers Group in support of Petitioner - Pearson Dental Supplies, Inc. by George S. Howard Jr., counsel
Aug 27 2009Permission to file amicus curiae brief granted
  The application of California Employment Lawyers Association for permission to file an amicus curiae brief in support of Real Party in Interest, Luis Turcios, is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Aug 27 2009Amicus curiae brief filed
Amicus curiae: California Employment Lawyers AssociationAttorney: Cliff Palefsky   California Employment Lawyers Associatin in support of RPI, Luis Turcios. by counsel, Cliff Palefsky.
Aug 27 2009Permission to file amicus curiae brief granted
  The application of Employers Group for permission to file an amicus curiae brief in support of petitioner is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Aug 27 2009Amicus curiae brief filed
Amicus curiae: Employers GroupAttorney: George S. Howard   Employers Group in support of petitioner. by counsel, George S. Howard, Jr.
Sep 17 2009Response to amicus curiae brief filed
Real Party in Interest: Turcios, LuisAttorney: Michael Rubin   By Real Party in Interest to AC brief filed by Employers Group.
Sep 17 2009Response to amicus curiae brief filed
Petitioner: Pearson Dental Supplies, Inc.Attorney: Russell Farzin Behjatnia  
Dec 2 2009Case ordered on calendar
  to be argued on January 7, 2010, at 9:00 a.m., in San Francisco.
Dec 14 2009Application filed
  Application to divide oral argument time filed by Russell Behjatnia, counsel for petitioner Pearson Dental Supplies, asking to share 10 minutes of argument time with amicus curiae Employers Group.
Dec 17 2009Order filed
  The request of counsel for petitioner in the above-referenced cause to allow two counsel to argue on behalf of petitioner at oral argument is hereby granted. The request of petitioner to allocate to amicus curiae Employers Group 10 minutes of petitioner's 30-minute allotted time for oral argument is granted.
Dec 23 2009Supplemental briefing ordered
  The parties are directed to address at oral argument, in addition to any other relevant matters, the following question: Was the arbitrator's award subject to vacatur under Code of Civil Procedure section 1286.2, subdivision (a)(5), on the grounds that the arbitrator's failure to properly apply the tolling statute (Code Civ. Proc., ?1281.12) constituted "conduct of the arbitrator[] contrary to the provisions of this title" that substantially prejudiced the rights of a party? (Code Civ. Proc., ? 1286.2, subd. (a)(5); see Real Party in Interest's Opening Brief on the Merits at pp. 55-56.) Supplemental briefs addressing this issue may be served and filed by both parties in the San Francisco office of this court no later than January 21, 2010, and supplemental reply briefs may be served and filed in the San Francisco office of this court no later than January 28, 2010. Werdegar, J., was absent and did not participate.
Dec 30 2009Application filed
  application to divide oral argument time, filed by Rebecca Smullin, counsel for real party in interest, asking to share 10 minutes of argument with amicus curiae California Employment Lawyers Association.
Dec 31 2009Order filed
  The request of counsel for real party in interest in the above-referenced cause to allow two counsel to argue on behalf of real party at oral argument is hereby granted. The request of real party in interest to allocate to amicus curiae California Employment Lawyers Association 10 minutes of real party's 30-minute allotted time for oral argument is granted.
Jan 7 2010Cause argued and submitted
 
Jan 7 2010Submission vacated
  Submission of the above-entitled matter is vacated. The matter will be resubmitted upon completion of the supplemental briefing ordered by this court, scheduled for January 28, 2010.
Jan 21 2010Supplemental brief filed
Petitioner: Pearson Dental Supplies, Inc.Attorney: Russell Farzin Behjatnia  
Jan 21 2010Supplemental brief filed
Real Party in Interest: Turcios, LuisAttorney: Michael Rubin  
Jan 29 2010Filed:
  Pearson Dental supplies, Inc's reply to the supplemental brief of real party in interest. by counsel, Russell F. Behjatnia filed with permission.
Jan 29 2010Filed:
  Real Party in Interest's response to defendant Pearson's supplemental post-argument brief. by counsel, Michael Rubin filed with permission
Feb 1 2010Filed:
  Real Party in Interest's application for leave to submit newly decided case authority; proposed submission of new case authority by Michael Rubin, counsel
Feb 8 2010Submitted by order
  Supplemental briefing having been completed on January 21, 2010, this cause is now submitted as of February 8, 2010.
Apr 23 2010Notice of forthcoming opinion posted
  To be filed Monday, April 26, 2010 at 10 a.m.

Briefs
Apr 6 2009Opening brief on the merits filed
Real Party in Interest: Turcios, LuisAttorney: Michael Rubin  
Jul 6 2009Answer brief on the merits filed
Petitioner: Pearson Dental Supplies, Inc.Attorney: Russell Farzin Behjatnia  
Jul 27 2009Reply brief filed (case fully briefed)
Real Party in Interest: Turcios, LuisAttorney: Michael Rubin  
Aug 27 2009Amicus curiae brief filed
Amicus curiae: California Employment Lawyers AssociationAttorney: Cliff Palefsky  
Aug 27 2009Amicus curiae brief filed
Amicus curiae: Employers GroupAttorney: George S. Howard  
Sep 17 2009Response to amicus curiae brief filed
Real Party in Interest: Turcios, LuisAttorney: Michael Rubin  
Sep 17 2009Response to amicus curiae brief filed
Petitioner: Pearson Dental Supplies, Inc.Attorney: Russell Farzin Behjatnia  
If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website
May 3, 2010
Annotated by gtnolan

Annotation by Greg Nolan

Issues: Arbitration, Dispute Resolution Agreement, DRA, employee discrimination, Fair Employment and Housing Act, FEHA, mandatory arbitration

Facts:

The plaintiff, Luis Turcois, was a janitor for Pearson Dental Supplies, Inc., for nearly seven years when he was fired at the age of 67. Most pertinently, he alleged age discrimination under California’s Fair Employment and Housing Act (FEHA). The plaintiff’s employment contract contained a mandatory arbitration agreement that required any covered dispute to be “submitted to binding arbitration within one year from the date the dispute arose or the employee or Pearson first became aware of the facts giving rise to the dispute.”

Procedural History:

The plaintiff was fired on January 31, 2006. On October 2, 2006, he filed his discrimination-based law suit with the Los Angeles Superior Court. During a preliminary court conference on February 20, 2007, the defendant’s counsel for the first time mentioned the arbitration agreement, and filed a motion to compel arbitration on March 13, 2007. On May 2, 2007 the court granted the motion. On June 13, 2007 the plaintiff and defendant agreed upon an arbitrator, who later granted the defendant’s motion for summary judgment on grounds that the plaintiff’s claims were filed with the arbitrator more than a year after the plaintiff was fired— nullifying his claims by the 1-year limit in the mandatory arbitration agreement.

The trial court vacated the arbitrator’s decision, claiming that the arbitrator made a “clear error of law” in “misinterpreting the tolling provision of Code of Civil Procedure section 128.12,” and the court said it was required to judicially review the case to protect the plaintiff’s unwaivable statutory rights under FEHA. (A tolling provision is akin to a stopclcok—a hold on the countdown to the deadline by which arbitration must begin.)

The Court of Appeals reversed, agreeing that the arbitrator misinterpret the tolling provision of § 128.12, but that such an error “is insulated from judicial review and is not a proper basis upon which either to deny confirmation of the arbitration award or to vacate the award.”

Issue:

There were two issues
1. “What standard of judicial revidew should a trial court employ to ensure that an employee’s antidiscrimination claim brought under FEHA is adequately protected when arbitrated pursuant to a mandatory employment arbitration agreement?”
2. “Is a mandatory employment arbitration agreement restricting an employee from seeking administrative remedies for violations of FEHA unlawful?”

Reasoning and Holding:

The first issue was broken into two parts: (1) whether the arbitrator made an error of law in finding the plaintiff’s claim was time barred, and (2) if such an error was made, was the trial court justified in vacating the arbitration award.
The arbitrator made an error of law on § 1281.12. When the initial civil action was filed, the tolling period was initiated. Tolling periods effectively stop the clock on the time limit for filing a suit properly (in this case with an arbitrator). The plaintiff filed his suit 8 months after being terminated, so he had four months plus 30 days (per § 1281.12) to begin arbitration once the court compelled arbitration. Plaintiff and defendant selected an arbitrator by this time.

The trial court was justified. The Court relied on its dicta in Moncharsh: judicial review may be appropriate when “granting finality to an arbitrator’s would be inconsistent with the protection of a party’s statutory rights.” The Court also cited dicta in Armendariz: “It is evident that an arbitration agreemen cannot be made to serve as a vehicle for the waiver of statutory rights created by the FEHA.” The Court narrowed its decision to the facts of this case, holding that when an arbitrator has made a clear legal error about the “procedural framework under which the parties agreed the arbitration was to be conducted” judicial review is warranted if it is necessary to protect a statutory right.

The Court refused to strike the arbitration agreement down on a different ground: that it unlawfully restricted an employee from seeking administrative remedies. The Court understood this issue as one relating to unconscionability (a doctrine that allows courts to rescind contracts that are procedurally and substantively unfair), and the Court rejected that the arbitration agreement was unconscionable on two grounds. First, the plaintiff forfeited this issue when he did not raise it at trial. Second, the Court held that it interpreted ambiguous language in a contract so as to not strike it down as void, when possible. Accordingly, the Court interpreted the agreement’s language precluding seeking adjudication from “administrative or judicial hearings” to be limited only precluding an employee to resorting to an administrative agency that functions as an ajudicator, as opposed to a prosecutor—a restriction the U.S. Supreme Court held to be legal for arbitration agreements.

Dissent and Concurrence (written by Baxter, J):

The dissent takes issue with the majority’s use of Armendariz and Moncharsh, and claims that the majority’s opinion “significantly undermine[s] the strong public policy favoring arbitration as a fair, quick, and inexpensive means of resolving disputes.” This opinion concurred with denying the plaintiff’s unconscionability claim.

Student Note:

The Court painstakingly sought to balance (1) the benefits of social reliance on arbitration agreements as a way of restraining the costs of litigation with (2) remedying unjust arbitrations where a key law was clearly interpreted incorrectly and an un-waivable statutory right is at stake. The Court’s narrow ruling to the facts of this case represents its desire to tread lightly on new ground that had been previously only hypothesized in cases such as Moncharsh and Armendariz.