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Appellate court affirms trial court’s ruling in favor of CW’s client

May 2024

California’s Second District Court of Appeal sided with CW’s client in a ruling that brings clarity to the enforcement of arbitration agreements under California law.

CW partner Marc Williams and associate Cris Santos represented a California individual who entered into a business partnership with two associates. When the client eventually provided his associates with written notice of his express will to withdraw from the partnership and a demand for payment for his partnership interest, they neither responded nor tendered payment. CW filed a complaint with a single cause of action for Buyout of Interest in Partnership under California Corporations Code section 16405. In response, the defendants moved to compel arbitration, claiming the client was a mere employee, not partner, who had previously, impliedly agreed to an arbitration agreement. A declaration filed by the company’s Chief People Officer revealed that the client had, in fact, expressly refused to sign or agree to the agreement and told his associates they would have to terminate their relationship with him if they could not accept his rejection of the clause. In light of this evidence, the trial court denied the petition to compel arbitration. California’s Second District Court of Appeal then affirmed the ruling in a published opinion.

Employers in California can enforce an arbitration agreement that is made an express condition of employment against employees who do not sign the agreement. However, as the court opined, “where an employee promptly and unequivocally rejects an arbitration agreement as a modified term of employment, mutual assent to arbitrate is lacking. If [the defendants] did not want [CW's client] to continue his employment without an arbitration agreement, it had a simple remedy—to terminate him. It did not.”