Judge Alison Mackenzie, Case Number: 23STCV22956, Date: 2025-01-16 Tentative Ruling

Judge: Alison Mackenzie, Case: 23STCV22956, Date: 2025-01-16 Tentative Ruling

Case Number: 23STCV22956 Hearing Date: January 16, 2025 Dept: 55

Plaintiff Kelly Lee Salido (“Plaintiff”) filed this employment discrimination case against Defendants Royal Bank of Canada, Joanne Arago, and City National Bank. Defendant City National Bank (“Defendant”) moves to compel arbitration pursuant to the Mutual Agreement for Arbitration of Disputes (“Agreement”) between the parties. Plaintiff opposes the motion.

Request for Judicial Notice

The Court takes judicial notice of the six court filings submitted by Defendant.

Legal Standard

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists….” Code Civ. Proc, § 1281.2. “The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.” Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.

Analysis

Plaintiff does not dispute that the Agreement exists, that she repeatedly confirmed the Agreement, or that the Agreement covers her claims in this lawsuit. Plaintiff instead argues that the Agreement is not enforceable because it is both procedurally unconscionable (the way the agreement was negotiated) and substantively unconscionable (whether the agreement’s terms are unreasonably one-sided). Opp’n, pp. 9:7-13:20. Plaintiff further contends that the objectionable provisions cannot be severed from the remainder of the arbitration agreement.

In Armendariz, the California Supreme Court stated that when determining whether an arbitration agreement was unconscionable, there is both a procedural and a substantive element. (Armendariz v. Foundation Health Psychcare Service, Inc. (2000) 24 Cal.4th 82, 114 (Armendariz)).¿¿ Both types of unconscionability must be present for a court to refuse to enforce an arbitration agreement. The court uses a sliding scale in assessing the procedural and substantive elements, i.e., “the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1243-44.

Procedural Unconscionability

Plaintiff argues that the Agreement is procedurally unconscionable because it is a contract of adhesion. It is undisputed that the Agreement was a contract of adhesion, a take it or leave it contract, that Plaintiff agreed to when she began working for Defendant and then had to agree to at various times during her nearly 17 years of employment with Defendant. Therefore, there is at most a low level of procedural unconscionability as is typical in mandatory employment arbitration agreements.

Substantive Unconscionability

Plaintiff argues that the Agreement is substantively unconscionable because it is (1) infinite in scope; (2) infinite in duration; and (3) lacks mutuality. Plaintiff contends that these provisions are undistinguishable from those at issue in Cook v. Univ of S. Cal., 102 Cal.App.5th 312 (2024), in which the court found the agreement unconscionable and unenforceable.

Plaintiff argues that the Agreement compels arbitration of “all claims” between Plaintiff and an expansive web of Defendant-related entities, with no temporal or substantive limitations. (Opp., pg. 9.) As such, Plaintiff argues the scope extends far beyond any reasonable nexus to Plaintiff’s employment relationship, encompassing personal banking matters, consumer transactions, privacy claims, and any conceivable dispute with all affiliated entities Defendant has had or will have in the future. (Opp., pgs. 9-10.)

The Court disagrees with Plaintiff. In Cook, the case on which Plaintiff relies, the agreement required arbitration of all claims the plaintiff/employee might have against the university, even claims unrelated to her employment. 102 Cal.App.5th 312, 321. Unlike in Cook, the Agreement’s scope (Section 3.1) is limited to claims arising out of her employment. The scope does not extend far beyond a reasonable nexus to the kinds of privacy or financial claims Plaintiff appears to be contemplating.

Plaintiff contends that the Agreement impermissibly requires Plaintiff to arbitrate disputes indefinitely. Plaintiff points to Section 3.1 of the Agreement, which provides for arbitration of any employment-related claim even after Plaintiff’s employment ends with Defendant, and Section 14, which requires that any amendment to the Agreement be made in writing and signed by both parties. In Cook, the Court of Appeal concluded that a provision providing for arbitration of any claims after the employee’s employment terminated was not terminable at will after a reasonable time because any changes had to be done in writing signed by both parties, and thus was substantively unconscionable. Cook, 102 Cal.App.5th at 326. Th difference in this case is that the Agreement’s scope is limited to employment-related claims, and thus the duration of any such claims is necessarily restricted by any statutes of limitations applicable to the arbitrable claims. Unlike in Cook, therefore, a time limit does exist for the arbitrable claims. The Court therefore concludes that the Agreement is not unconscionable with regards to duration.

Finally, Plaintiff contends that the Agreement lacks mutuality because Section 2.2 grants enforcement rights under the Agreement to “CNB-related entities,” not just Defendant, the signatory to the Agreement. Read together, Section 2.2 and 3.1 provide that Defendant and other CNB-related entities may seek to arbitrate any employment-related claim against Plaintiff. In Cook, the Court of Appeal held that a provision that enabled non-signatories to assert claims against a plaintiff/signatory was unconscionable because the third-parties could enforce the agreement simply by showing they are beneficiaries under the agreement whereas the plaintiff would have to show the third parties accepted a benefit under the agreement. Cook, 102 Cal.App.5th at 327-28. The Court reasoned that such a scenario is a significant benefit to the employer’s related entities without a reciprocal benefit to the employee. Id. Similarly here, Defendant’s unnamed related entities can easily enforce the Agreement by showing they are intended beneficiaries whereas Plaintiff could only enforce the Agreement against third-parties if she could establish they accepted a benefit under the Agreement. The bottom line is that Plaintiff should be able to This is an unfair and one-sided provision that constitutes substantive unconscionability.

Severability

The Court therefore finds a very low level of procedural unconscionability and one item of substantive unconscionability. The issue regarding non-signatory third parties is not fatal to the Agreement, however, because the reference in Section 2.2 to the CNB entities other than Defendant can be severed from the Agreement without affecting the rest of the otherwise valid Agreement.

Conclusion

The Court grants the motion to compel arbitration but severs Section 2.2’s reference to CNB-related entities such that the terms of the Agreement only apply as between Plaintiff and Defendant, the signatory to the Agreement. The case is stayed pending completion of the arbitration.