Judge Alison Mackenzie, Case Number: 24STCV02678, Date: 2024-06-07 Tentative Ruling

Judge: Alison Mackenzie, Case: 24STCV02678, Date: 2024-06-07 Tentative Ruling

Case Number: 24STCV02678 Hearing Date: June 7, 2024 Dept: 55

NATURE OF PROCEEDINGS: Defendant Beacon Sales Acquisition, Inc.’s Motion to Compel Arbitration and Stay Civil Court Proceedings.

BACKGROUND

JIMMY VELASQUEZ (“Plaintiff”) brings this case against BEACON SALES ACQUISITION, INC. (“Defendant”) alleging wage and hour violations and FEHA claims.

Defendant brings a motion to compel arbitration, which Plaintiff opposes.

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 OBJECTIONS

The Court sustains all opposing evidentiary objections, while noting that the deficiencies have been cured by the reply declaration.

ANALYSIS

1. Governing Law

Defendant contends that both the California Arbitration Act (CAA) and the Federal Arbitration Act (FAA) apply.

California courts must apply procedural provisions of the FAA when the parties expressly agreed to do so. Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1122. Here, Section 1 of the arbitration agreement expressly provides that the FAA shall apply. See Deloach Decl., Ex. A.

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 quotations omitted). Although Plaintiff claims an FAA exemption, his declaration does not state that he was involved in the movement of goods in interstate transportation. See Opposition, 8:20-21. Therefore, the Court will apply the FAA.

2. Contract Formation

Defendant contends that all its employees accept employment by electronically signing onboarding documents, and the totality of the evidence shows Plaintiff’s execution of the arbitration agreement. In support, Defendant submits the declaration of a human resources manager who testifies that Defendant sent Plaintiff a link to the arbitration agreement via an email address that Plaintiff provided to Defendant, which Plaintiff signed. Deloach Decl., ¶¶ 6-7, Ex. A.

Given Plaintiff’s declaration stating that he did not sign the arbitration agreement to the best of his knowledge (Plaintiff’s Decl., ¶ 6), Defendant has burden of proof. See, e.g., Ruiz, 232 Cal.App.4th at 846 (“In the face of … failure to recall signing … had the burden of proving by a preponderance of the evidence that the electronic signature was authentic….”); and Espejo v. So. Cal. Permanente Med. Group (2016) 246 Cal.App.4th 1047, 1060 (“defendants … met their initial burden by attaching to their petition a copy of the purported arbitration agreement bearing … electronic signature. Once … challenged …, defendants were then required to establish by a preponderance of the evidence that the signature was authentic.”).

Defendant’s reply declaration responds with a detailed evidentiary foundation showing that Plaintiff digitally agreed to the arbitration agreement, including by entering a unique password. See Deloach Supp. Decl. Hence, the Court finds contract formation here.

3. Unconscionability

a. Procedural

Defendant asserts that the arbitration agreement was a separate, clearly marked document stating “ARBITRATION AGREEMENT” in large bold font at the top of the first page. Further, Defendant argues that the top of the document, in bold letters, explains arbitration in a conspicuous box. Further, Defendant points out that the agreement expressly gave Plaintiff 30 days to opt out. Plaintiff complains that the agreement is three pages long, with small text stating legally complex language requiring him to review laws to determine the terms. Opposition, 10:11-15. Also, Plaintiff contends that the agreement is one of adhesion. Opposition, 11:4-14. Further, Plaintiff criticizes the agreement for not providing the referenced AAA rules. Opposition, 13:20 et seq.

Persons capable of reading and understanding contracts may not avoid them on the basis of failure to read them before signing, unless there was fraud, coercion or excusable neglect. E.g., Brown v. FSR Brokerage, Inc. (1998) 62 Cal.App.4th 766, 777.

Surprise caused by provisions buried in a long contract, language not fully explained, or misleading captions, indicates procedural unconscionability. Thompson v. Toll Dublin, LLC (2008) 165 Cal.App.4th 1360, 1373.

The absence of "authentic informed choice," due to the lack of straightforward, unbiased explanations of an agreement, may constitute procedural unconscionability. Gentry v. Superior Court (2007) 42 Cal.4th 443, 470 (where employer indicated preference to arbitrate, it was likely that “nonexecutive” lower echelon employees felt some pressure not to opt out of the agreement), overruling on other grounds recognized by Marenco v. DirecTV LLC (2015) 233 Cal.App.4th 1409, 1421.

Here, the relatively short agreement is well-organized, easily read, and, in multiple places, contains clear explanations of both arbitration and Plaintiff’s ability to have others explain the agreement during a 30-day opt out period. Deloach Decl. Ex. A. Plaintiff’s declaration shows no excuse for failing to read the agreement with care or to have an attorney review it, before signing it, and not after.

Further, the agreement provides a link to the specified AAA rules, making them easily accessible on the Internet. Deloach Decl., Ex. A, § 1. “Whether a document purportedly incorporated by reference was ‘readily available’ is a question of fact.” Baker v. Osborne Development Corp. (2008) 159 Cal.App.4th 884, 895.

Thus, the Court finds against procedural unconscionability.

b. Substantive

Defendant states that none of Plaintiff’s raised topics amount to substantive unconscionability. Reply, 9:1-6. In response, first, Plaintiff contends that delegation to the arbitrator the determination of enforceability is unconscionable. Opposition, p. 12. Second, Plaintiff complains that the agreement exempts injunctive relief in aid of arbitration or in connection with an arbitrable controversy. Opposition, 13:9-16.

First, an arbitration agreement’s language that clearly provides for arbitrator determination of arbitrability is done in a lawful manner. Where contracting parties clearly and unmistakably agreed to have the arbitrator determine the scope of the arbitration clause, the arbitrator, rather than the court, determines the scope of an arbitration agreement. Rodriguez v. Amer. Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1123.

Second, the agreement does not expressly exempt employer-type claims like trade secrets, but instead any injunctive relief in aid of arbitration, which could equally serve Plaintiff. See Deloach Decl., Ex. A, § 2. Regardless of whether one party is more likely to seek provisional remedies, simply reciting the parties' rights under Code of Civil Procedure Section 1281.8, allowing parties to seek preliminary injunctive relief during the pendency of the arbitration, does not constitute substantive unconscionability. Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1249. Distinguishably, an arbitration agreement exempting claims typically brought by employers— declaratory and injunctive relief—while restricting claims plaintiffs might bring, supported a finding of substantive unconscionability. See Samaniego v. Empire Today LLC (2012) 205 Cal.App.4th 1138, 1147-1148.

Thus, the Court finds against substantive unconscionability.

CONCLUSION

In sum, the Court grants the motion for the reasons stated. The Court also grants the request to stay the action pending arbitration.

Plaintiff and Defendant shall arbitrate the controversies between them, including the entire Complaint, in accordance with their agreement to arbitrate. This entire case is stayed until such arbitration has been completed.