Judge: Alison Mackenzie, Case: 23STCV15452, Date: 2024-02-01 Tentative Ruling
Case Number: 23STCV15452 Hearing Date: February 1, 2024 Dept: 55
NATURE OF PROCEEDINGS: Defendants’ Motion to Compel Arbitration and
Stay Proceedings.
The motion is granted in part and denied in part.
Background
VANESSA BARRON (“Plaintiff”) brings this employment action
against her former employer LOS ANGELES APPAREL, INC.(“LA Apparel”) and supervisor
JOHN NEWMAN (“Newman”) (LA Apparel and Newman collectively referred to as Defendants”)
alleging that Newman sexually harassed her and LA Apparel terminated her
employment after she reported Newman’s misconduct to the company. Plaintiff’s
individual causes of action in the Complaint are: (1) Sexual Harassment (Cal.
Civ. Code § 51.9); (2) Sexual Harassment in Violation of FEHA (Hostile Work
Environment); (3) Quid Pro Quo Sexual Harassment; and (4) Failure to Prevent
Hostile Work Environment and Harassment in Violation of FEHA. Plaintiff’s Fifth
Cause of Action alleges a PAGA claim against LA Apparel for its alleged Labor
Code wage and hour violations.
Defendants now moves to compel arbitration of Plaintiff’s
sexual harassment claims and her individual PAGA claims, which Plaintiff opposes.
Judicial Notice
The Court grants Defendants’ request for judicial
notice of other trial court orders, except as to the truth of their contents.
Evidentiary Rulings
The Court sustains Plaintiff’s evidentiary objections to
the Declaration of Marina Andrade that Defendants filed with their reply on 1/25/2024.
The Court strikes the untimely Andrade declaration and does not consider it for
the purposes of this motion. Bozzi v. Nordstrom, Inc. (2010) 186 Cal.
App. 4th 755, 765 (affirming court’s discretion to refuse to consider unauthorized
“surrebuttal” filings submitted day of hearing).
Analysis
1. FAA
Applies to Arbitration Agreement
The FAA applies to arbitration agreements in any
contract affecting interstate commerce. 9 U.S.C. §§ 1-2; Allied-Bruce
Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 274. This standard is broadly construed to include
agreements with employers who operate within the flow of commerce, which
includes “the generation of goods and services for interstate markets and their
transport and distribution to the consumer.” Allied-Bruce, 513 U.S. at
273. The party seeking to compel
arbitration pursuant to the FAA has the burden to demonstrate that an
underlying agreement affects interstate commerce. Hoover v. Amer. Income Life Ins. Co.
(2012) 206 Cal.App.4th 1193, 1207-08.
LA Apparel is a clothing manufacturer, designer, and distributor
based in Los Angeles. (Andrade Decl., ¶ 11.) It receives raw materials from
out-of-state and then ships its finished products out of state and internationally.
(Id.) Plaintiff worked in the shipping department, packaging products
that were shipped out of state and/or globally. (Id., ¶ 5.) Defendants
have met their burden of demonstrating that the agreement is a contract affecting
interstate commerce and thus the FAA applies.
Plaintiff nevertheless contends that the limited exemption
from the FAA’s coverage applies to this case. The FAA contains a limited exemption
of its coverage to contracts of “any other class of workers engaged in foreign
or interstate commerce” 9 U.S.C. § 1.
State procedural provisions applicable to arbitration,
including Code of Civil Procedure Section 1281.2(c) regarding stays, are not
preempted by the FAA, because they do not conflict with provisions of the FAA
or undermine or frustrate the FAA’s substantive policy. Cronus Investments,
Inc. v. Concierge Services (2005) 35 Cal.4th 376, 394; Gravillis v.
Coldwell Banker Residential Brokerage Co. (2006) 143 Cal.App.4th
761, 784. According to governing
California law, as to FAA applicability, “the [9 USC § 1] section 1 exemption
is applicable to ‘transportation workers,’ defined as ‘workers’ actually
engaged in the movement of goods in interstate commerce.” E.g., Nieto v. Fresno Beverage Co.
(2019) 33 Cal. App. 5th 274, 281 (internal citation omitted). Here, Plaintiff
worked in LA Apparel’s shipping department packaging products to be shipped out
of state. (Barron Decl., ¶ 2.) Plaintiff was not, however, a truck driver or
other employee actually engaged in the movement of goods in interstate commerce.
Under governing California law, Plaintiff’s job as an onsite employee in the
shipping department simply does not qualify for the FAA exemption.
Hence, the Court will apply FAA law to the limited extent
it is preemptive and applies under California law.
2. Valid
Arbitration Agreement Exists
A party seeking arbitration has the burden of proving
by a preponderance of evidence that a valid arbitration agreement exists. Ruiz
v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842; see also
§ CCP 1281.2.
Defendants submitted a declaration from LA Apparel’s Manager,
People and Operations, who explains that Plaintiff signed the arbitration
agreement when she began working at the company on or about 12/4/2020. (Andrade
Decl., ¶¶ 1-4, Ex. A.) Andrade explained that it is Defendants’ custom and
practice to provide such agreements to all new employees. (Id., ¶ 6.) Plaintiff
contends that the agreement is not valid because Defendants did not sign the
agreement. But “[i]t is not the presence or absence of a signature which is
dispositive; it is the presence or absence of evidence of an agreement to
arbitrate which matters.” Banner Ent., Inc. v. Superior Ct. (Alchemy
Filmworks, Inc.) (1998) 62 Cal. App. 4th 348, 361. The arbitration
agreement does not state that both Plaintiff and Defendants’ signature must be
present on the agreement to indicate assent, and merely having references to
signatures and a signature line, are not such an expression. Defendants’ acceptance
is sufficiently inferred under the circumstances, including Defendants’ custom
and practice of giving employees arbitration agreements and Defendants’ motion seeking
to compel arbitration pursuant to the arbitration agreement with Plaintiff.
3. Newman
May Enforce Arbitration Agreement
Plaintiff contends that Defendants failed to meet
their burden of establishing that Newman is an intended third-party beneficiary
of the agreement or otherwise able to enforce it (opp., pp. 12-13).
Generally, just signatories to arbitration agreements
have standing to enforce them, with exceptions as to nonsignatory persons “who
are agents or alter egos of a signatory party or intended third party
beneficiaries of an arbitration agreement.”
Bouton v. USAA Casualty Ins. Co. (2008) 167 Cal.App.4th 412,
424. Accord Smith v. Microskills San Diego L.P.
(2007) 153 Cal. App. 4th 892, 896. A
party may be equitably estopped from denying arbitration, such as where a
signatory plaintiff sues nonsignatories as related or affiliated persons with
the signatory entity, based upon an arbitration agreement. See,
e.g., Rowe v. Exline (2007) 153 Cal. App. 4th 1276, 1287.
The provisions in the arbitration agreement contain
nothing indicating that Newman is included in any way. However, the Complaint admits, “each defendant
acted in all respects pertinent to this action as the agent of the other
defendants….” (Complaint, ¶ 15.) The
Court therefore finds that Newman is an agent of LA Apparel, the signatory of
the arbitration agreement, and he can enforce the agreement.
4.
The
Arbitration Agreement Is Unenforceable with Respect to Plaintiff’s Sexual
Harassment Claims
The Ending Forced Arbitration of Sexual Assault and
Sexual Harassment Act of 2021 (“EFAA”), which was enacted on March 3, 2022,
amended the FAA to prohibit the enforcement of arbitration agreements for “conduct
constituting a sexual harassment dispute.” 9 U.S.C. § 402(a); Murrey v. Sup.
Ct. (2023) 87 Cal. App. 5th 1223, 1234 “[9 U.S.C.] Section 402, subdivision
(a), of the Act … [states] that effective immediately, predispute arbitration
agreements … in the context of sexual assault or harassment were no longer
valid or enforceable.” A sexual harassment dispute is defined as “a dispute
relating to conduct that is alleged to constitute sexual harassment under
applicable Federal, Tribal, or State law.” 9 U.S.C. § 401(4).
Plaintiff’s non-PAGA claims indisputably stem from
allegations of sexual harassment in violation of California law. Plaintiff
asserts claims for sexual harassment in violation of Civil Code § 51.9; sexual
harassment in violation of FEHA (hostile work environment), Gov’t Code §§
12955(a), (d); quid pro quo sexual harassment in violation of Gov’t Code §12940(j);
and failure to prevent hostile work environment and harassment in violation of Gov’t
Code §12940(k). In support of these claim, Plaintiff alleges that “for several
months” after she began work in 2020, Newman subjected her to “severe and
pervasive sexual harassment” including initiating conversations of a sexual nature,
asking Plaintiff about her personal life, and making her uncomfortable.
(Compl., ¶ 31.) Plaintiff alleges that she reported multiple incidents of
Newman’s harassment to LA Apparel, which did nothing and instead terminated
Plaintiff. (Id., ¶ 33.) She claims Newman’s harassment and her
termination in September 2022 occurred after the enactment of the EFAA. (Barron
Decl., ¶ 5.)
Thus, Plaintiff’s claims of sexual harassment fall
within the scope of the EFAA and they cannot be compelled to arbitration.
5.
The
Individual PAGA Claim Is Subject to the Arbitration Agreement
The parties both acknowledge that Plaintiff’s
representative PAGA claim cannot be
compelled into arbitration. (Mot., 8:24; Opp., 13:24). The Court concurs. “[W]here a plaintiff has filed a PAGA action
comprised of individual and non-individual claims, an order compelling
arbitration of individual claims does not strip the plaintiff of standing to
litigate non-individual claims in court.”
Adolph v. Uber Techs., Inc. (2023) 14 Cal.5th 1104,
1123.
This leaves Plaintiff’s individual PAGA claim subject
to the arbitration agreement. Plaintiff contends that the arbitration
agreement, even if it exists, should not be enforced because it is procedurally unconscionable (the way the
agreement was negotiated) and substantively unconscionable (whether the
agreement’s terms are unreasonably one-sided). Armendariz v. Found. Health
Psychcare Servs., Inc. (2000) 24 Cal. 4th 83, 113-115. The Court disagrees.
Plaintiff states in her
declaration that no one explained the contents of the agreement to her or
explain that she had an option to opt out of the arbitration agreement (Barron
Decl., ¶
4), whereas Defendants’ People and Operations Manager explained in her
declaration that employees are always offered the opportunity to ask questions
about the agreement and she does not recall Planitiff asking any questions.
(Andrade Decl., ¶¶ 9-10.) Under this competing set of facts, the Court cannot find
that Plaintiff has established procedural unconscionability on the part of
Defendants.
Plaintiff also contends several provisions of the arbitration
agreement are substantively unconscionable.
The agreement limits Plaintiff’s discovery to “no more
than two depositions...” (Andrade Decl., Ex. A, p. 2.). Plaintiff contends she needs at least four. (Opp.,
10:7-11). But the agreement provides that the arbitrator has discretion to
authorize more depositions for good cause. (Andrade Decl., Ex. A, p. 2, § 4, ¶
2). These discovery parameters are acceptable.
Plaintiff contends that the arbitration confidentiality
provision is unconscionable. Given that the Court has determined that the
sexual harassment claims are not subject to the arbitration agreement, the concerns
about Plaintiff’s ability to exercise her free speech rights regarding the
harassment claims is moot. And the agreement otherwise permits disclosures “as
otherwise required by law.”
Plaintiff’s concerns about the costs provision in the
agreement are unfounded. The instant arbitration agreement provides that
Plaintiff will not pay arbitration expenses above those normally associated
with litigation in court. Also, the
provision to pay half of initial arbitration fees is subject to that being in compliance
with law. (Andrade Decl., Ex. A, p. 2, § 6, ¶ 1). See Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242, 1248 (employers
cannot impose on employees arbitration costs he or she would not normally have
to pay if the case were litigated in a court, including based on provisions
that arbitrators may impose costs and arbitration fees on the losing party).
Plaintiff argues that the agreement does not allow for
judicial review. While the agreement contains no express provision for judicial
review, the agreement calls for arbitration to proceed under AAA rules. The
rules of the American Arbitration Association are generally regarded as being
fair. Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74
Cal.App.4th 1105, 1126-27, 1130 n. 21. The agreement also necessarily provides
for judicial review pursuant to the FAA. Accordingly, the Court does not find
that the lack of a specific judicial review provision renders the agreement
unconscionable.
Plaintiff contends the agreement is unconscionable
because it has a provision for the arbitrator to award attorneys’ fees to the
prevailing party, in contravention of FEHA and PAGA statutes. The instant agreement
states, “[a]rbitrator may award the prevailing Party his, her, or its expenses
of arbitration, including reasonable attorney fees and witness fees...” (Andrade
Decl., Ex. A, p. 2, § 6, ¶ 2). Although AAA rules authorize arbitrators to
award attorney fees and costs in compliance with statutory sections, they do
not require it, and a more specific attorney fees provision in an arbitration
agreement controls over more general rules.
Mills v. Facility Solutions Group, Inc. (2022) 84 Cal. App. 5th
1035, 1057 (addressing PAGA statute). But
just because there is a discretionary fee provision in the agreement does not
render the provision unconscionable.
6.
Court
Stays Remainder of Case Pending Arbitration
The Court exercises its discretion to stay Plaintiff’s
sexual harassment and representative PAGA claim pending the outcome of
arbitration on the individual PAGA claim.