Judge: Alison Mackenzie, Case: 23STCV30500, Date: 2024-05-14 Tentative Ruling
Case Number: 23STCV30500 Hearing Date: May 14, 2024 Dept: 55
NATURE OF PROCEEDINGS:
MOTION TO COMPEL ARBITRATION AND TO DISMISS OR STAY PROCEEDINGS
BACKGROUND
Christina Faulkner (“Plaintiff”) filed this employment
discrimination cause against her former employer Mama Management USA, LLC (“Defendant”),
alleging claims based on violations of the FEHA.
Defendant has filed a motion requesting for the Court
to issue an order compelling Plaintiff to compel her claims to arbitration on the
grounds that Plaintiff executed a valid agreement to submit all
employment-related disputes to arbitration.
Plaintiff opposes the motion, arguing that: 1) Defendant
failed to establish a valid, enforceable arbitration agreement because
Defendant has not authenticated her signature; and 2) the agreement is
otherwise unenforceable because it is unconscionable.
LEGAL STANDARD
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.) A party meets its initial
burden simply by reciting the terms of the governing provision, or by attaching
a copy of the provisions. (Sprunk v.
Prisma LLC (2017) 14 Cal.App.5th 785, 793.) Once the petitioner meets its
burden, “the burden shifts to the party opposing the motion to compel, who may
present any challenges to the enforcement of the agreement and evidence in
support of those challenges.” (Baker v. Italian Maple Holdings, LLC
(2017) 13 Cal.App.5th 1152, 1160.)
EVIDENTIARY RULINGS
The Court overrules Plaintiff’s objections to the declaration
of Diana De La Torre.
ANALYSIS
Existence of Arbitration Agreement
In determining
the enforceability of an arbitration agreement, the court considers “two
‘gateway issues’ of arbitrability: (1) whether there was an agreement to
arbitrate between the parties, and (2) whether the agreement covered the
dispute at issue.”¿ (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th
955, 961 (Omar).)¿¿¿¿¿
Defendant argues
that it meets its initial burden of proving the existence of an arbitration
agreement because it provides a copy of the parties’ agreement to arbitrate.
(Mot., page 2, lines, 4-22.) Defendants provide the declaration of its Director
of Human Resources, Diana De La Torre, who states that when Plaintiff began to
work for Defendant as a Food and Beverage Manager on or around May 2, 2022,
Plaintiff was presented with and executed the “Employment At-Will and
Arbitration Agreement” (the “Arbitration Agreement”). (Torre Decl. at ¶¶ 4-7,
Exhs. A; B.). The Arbitration Agreement provides the following:
I and the Company agree to utilize
binding individual arbitration as the sole and exclusive means to resolve all
disputes that may arise out of or be related in any way to my employment. I and
the Company each specifically waive and relinquish our respective rights to
bring a claim against the other in a court of law and to have a trial by jury.
Both I and the Company agree that any claim, dispute, and/or controversy that I
may have against the Company (or its owners, directors, officers, managers,
employees or agents), or the Company may have against me, shall be summitted to
and determined exclusively by binding arbitration under the Federal Arbitration
Act (“FAA”), in conformity with the procedures of the California Arbitration
Act (Cal. Code Civ. Proc., § 1280 et seq.,) . . .
(Id.; Exhs. B.) Here,
Defendant meets its initial burden because it attaches a copy of the Arbitration
Agreement with Plaintiff’s electronic signature. (Id.)
“If the moving party meets its initial prima facie burden
and the opposing party disputes the agreement, then in the second step, the
opposing party bears the burden of producing evidence to challenge the
authenticity of the agreement.” (Gamboa v. Northeast Community Clinic (2021)
72 Cal. App. 5th 158, 165 (Gamboa).) The evidence must be sufficient to
create a factual dispute to shift the burden back to the arbitration proponent
who retains the ultimate burden of proving, by a preponderance of the evidence,
the authenticity of the signature. (Iyere v. Wise Auto Group (2023) 87
Cal.App.5th 747, 755 (Iyere).)
Plaintiff
contends that Defendant has not carried its burden of proving an enforceable
agreement because it has failed to authenticate her signature. (Opp., pages 3-4)
Plaintiff further argues that she has no recollection of signing the agreement.
(Id., page 4, lines 6-7; Faulker Decl. ¶ 3.) However, the Court is not
persuaded. Ms. De la Torre’s declaration states that at the time of Plaintiff’s
hire, personnel forms and documents were distributed to employees
electronically at or around the time of hire through “the secure, password-protected
Paycom system.” (Torre Decl. ¶ 2.) To electronically sign personnel documents,
Defendant’s employees were required to create unique passwords, using their
work or personal email and temporary password, to electronically sign the
documents on Paycom. (Id. ¶ 3.) If and when the documents were signed,
Defendant retained employees' digital signatures and acknowledgments on the
personnel forms in the Paycom system. (Id.) Based on this, the only
person who could have signed the documents was the Plaintiff. Plaintiff does not
provide any other challenges to the validity of the Arbitration Agreement;
therefore, Defendant establishes that an agreement to arbitrate exists. Moreover,
Plaintiff does not dispute that the Arbitration Agreement covers the claims in
her complaint.
Enforceability of the Arbitration Agreement
Plaintiff argues
that even if Defendant establishes the existence of the Arbitration Agreement,
the agreement is unenforceable 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, page 6, lines 27-28.)
Unconscionability
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)).¿¿
1. Procedural Unconscionability
Plaintiff
contends that the Arbitration Agreement is procedurally unconscionable because
the agreement was buried in the middle of a group of twenty-four documents when
it was presented for Plaintiff’s review and she signed the agreement after reviewing
it for only 26 seconds. (Opp’n, page 7, lines 10-18.) Plaintiff
asserts that she was not provided the opportunity to negotiate any of the terms,
and as far as she knew, she was required to complete all the forms to get the
job. (Id, lines 20-22; Faulker Decl. ¶¶ 2-3.) Plaintiff
further argues that the Arbitration Agreement failed to state which rules
applied to the Agreement. Defendant contends that the
procedural unconscionability does not render the agreement unenforceable citing
Gilmer v. Interstate/Johnson Lane Corp. (Gilmer v.
Interstate/Johnson Lane Corp. (1991) 500 U.S. 20.)
Courts determine whether an agreement is procedurally
unconscionable by looking at surprise and oppression. Oppression is an
“inequality of bargaining power, when one party has no real power to negotiate
or a meaningful choice. Surprise occurs when the allegedly unconscionable
provision is hidden.” (Carmona v. Lincoln Millennium Car Wash, Inc.¿(2014)
226 Cal.App.4th 74, 84 (Carmona).) Examples of contracts that are
procedurally unconscionable are contracts of adhesion, which is a “standardized
contract, which, imposed and drafted by the party of superior bargaining
strength, relegates to the subscribing party only the opportunity to adhere to
the contract or reject it.” (Armendariz, supra, at p. 113). “The circumstances
relevant to establishing oppression include, but are not limited to (1) the
amount of time the party is given to consider the proposed contract; (2) the
amount and type of pressure exerted on the party to sign the proposed contract;
(3) the length of the proposed contract and the length and complexity of the
challenged provision; (4) the education and experience of the party; and (5)
whether the party’s review of the proposed contract was aided by an attorney. (OTO,
L.L.C. v. Kho (2019) 8 Cal.5th 111, 126-27 (OTO).)
Here, there is minimal procedural unconscionability. “When arbitration is a
condition of employment, there is inherently economic pressure on the employee
to accept arbitration. This alone is a fairly low level of procedural
unconscionability.” (Cisneros Alvarez v. Altamed Health Services Corporation
(2021) 60 Cal.App.5th 572, 591). There is no dispute that this was a contract
of adhesion as Defendant used the same Arbitration Agreement for all employees.
(Torre Decl. ¶ 2.) That alone will satisfy the procedural element of the
analysis as a matter of law. (Lane v. Francis Capital Management LLC
(2014) 224 Cal.App.4th 676, 689.) However, it bears emphasizing that
unconscionability is examined on a sliding scale – the stronger the procedural
issues, the less prominent the substantive issues need to be, and vice versa.
The adhesive nature of a contract does not weigh strongly on the procedural
side of the scale. (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237,
1245; Nguyen v. Applied Medical Resources Corp. (2016) 4 Cal.App.5th
232, 248-249.)
Plaintiff’s
arguments for procedural unconscionability ultimately fail under OTO
because her claims that she was pressured to complete the
paperwork quickly is contradicted by Ms. De la Torre’s declaration which states
that the Paycom system did not place any time limit on employees to review and
electronically sign a document. (Torre Decl. ¶ 3.) In fact, employees could
have taken as much time as they wished to review the documents. (Id.) Moreover,
the Arbitration Agreement was clearly visible as it said “EMPLOYMENT-AT-WILL
AND ARBITRATION AGREEMENT” at the top so the argument that Defendant was trying
to “hide the ball” is not persuasive considering that Plaintiff had as much time
as she wanted to review the documents and act accordingly. Finally, the Arbitration
Agreement provides that the parties will mutually select an arbitrator, and
thus an arbitration service with its set of rules. The absence of any specific
arbitration rules attached or incorporated is not sufficient to find the
agreement procedurally unconscionable. (Peng v. First Republic Bank
(2013) 219 Cal. App. 4th 1462, 1471-72.)
Thus, the
agreement is minimally procedurally unconscionable.¿
2. Substantive Unconscionability
“Substantive unconscionability pertains to the fairness of
an agreement's actual terms and to assessments of whether they are overly harsh
or one-sided.” (Carmona, supra, at p. 85). There are five minimum
substantive requirements to an enforceable arbitration agreement: (1) neutral
arbitrators, (2) more than minimal discovery, (3) written award sufficient for
judicial review, (4) all types of relief otherwise available in court, and (5)
no unreasonable costs or fees as a condition of access. (Armendariz, supra, at
p.102.) When there is little procedural unconscionability, a party opposing
arbitration must show substantial substantive unconscionability. (Id. at 114.) Plaintiff argues that the Arbitration
Agreement is substantively unconscionable because it requires the matter
relating to the agreement to be kept confidential, prohibits PAGA claims, and
contains an unenforceable severability clause. (Opp’n, pages 9: 12-18; 9:20-21;
10:15)
The Court disagrees. The Arbitration Agreement meets the Armendariz
factors by providing: (1) “arbitrator selected to hear claims …shall be
a retired California Superior Court Judge, or, an otherwise qualified
individual to whom the parties mutually agree”; (2) all
rules of evidence, all rights to resolution of the dispute by means of motions
for summary judgment, judgment on the pleadings, and judgment under Code of
Civil Procedure Section 631.8 shall apply and be observed; (3) “all communications during or in connection
with the arbitration proceedings are privileged in accordance with Cal. Civil
Code Section 47(b)”; (4) Awards shall include
the arbitrator's written reasoned opinion; and (5) “Resolution
of all disputes shall be based solely upon the law governing the claims and
defenses pleaded, and the arbitrator may not invoke any basis (including but
not limited to, notions of .. just cause") other than such controlling law.” (Torre Decl., Exhibit B.)
Plaintiff’s
contention that the agreement bars PAGA claims is disingenuous at best. The
Arbitration Agreement states that “If under applicable law a representative
claim under the California Private Attorney General Act (“PAGA”) is found to be
unwaivable and such an action is pursued in court, I and the Company agree that
any such PAGA claim will be severed and stayed pending resolution of claims
that are arbitrable.” (Id.) This provision does not bar a PAGA claim. Contrary
to Plaintiff’s claim, the agreement does not contain a blanket confidentiality
provision. Rather, the agreement limits communications relating to the
arbitration as provided by law. Finally, the Court is not persuaded that the
severability clause is unconscionable because it clearly states that “If any
term or provision or any portion of this Agreement is deemed invalid or
unenforceable, it shall be severed and the remainder of this Agreement shall be
enforceable.” Defendant correctly points out that the provision is completely
neutral.
Accordingly, the Arbitration Agreement lacks substantive
unconscionability.
CONCLUSION
For the foregoing reasons, the Court GRANTS
Defendant’s Motion to Compel Arbitration. The action is stayed under Code of
Civil Procedure § 1281.4 pending the outcome of the parties' arbitration.