Judge: Alison Mackenzie, Case: 24STCV11031, Date: 2024-10-16 Tentative Ruling
Case Number: 24STCV11031 Hearing Date: October 16, 2024 Dept: 55
NATURE OF PROCEEDINGS: Hearing on Defendant’s Motion
to Compel Arbitration
Defendant’s Motion to Compel Arbitration is granted.
BACKGROUND
Plaintiff Christine Haxton
brought this action against Defendant ACSC
Management Services, Inc., alleging claims related to her employment by
Defendant.
The motion now before the Court is Defendant’s Motion to Compel
Arbitration.
EVIDENTIARY OBJECTIONS
The Court rules on Plaintiff’s evidentiary objection as
follows:
Objection 1: Overruled
Objection 2: Overruled
Objection 3: Overruled
Objection 4: Overruled
Objection 5: Overruled
Objection 6: Overruled
Objection 7: Overruled
Objection 8: Overruled
Objection 9: Overruled
Objection 10: Overruled
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
A. Governing Law
Defendant seeks to enforce two arbitration agreements, one
Plaintiff physically signed in 2018 and another allegedly signed electronically
in 2019. Both agreements specify that
they are governed by the Federal Arbitration Act (FAA). Declaration of Steven
Wicker (Wicker Decl.), Ex.1 at p. 7, sec. 8; Ex. 2 at p. 7, sec. 8.
B. 2018 Agreement
Plaintiff argues that the 2018 Arbitration Agreement is
invalid because it contained a provision allowing Defendant to “unilaterally
make changes to this Arbitration Agreement” and that by proposing the 2019
Agreement, which contains an integration clause, Defendant exercised its power
to rescind the earlier agreement. Wicker Decl., Ex. 1 ¶ 8, Ex. 2 ¶ 8.
This argument is frivolous. Plaintiff’s quote of the 2018
Agreement does not reflect the limited nature of Defendant’s authority to make
changes. The provision says, “the Club may unilaterally make changes to this
Arbitration Agreement that are favorable to [Plaintiff] in order to conform to,
or that are consistent with, court decisions or legislation; provided, however,
that any such changes shall take effect only after 30 days’ prior notice to
[Plaintiff].” Wicker Decl. Ex. 1, sec.
8. Moreover, Plaintiff does not explain why the Court should treat the 2019
Agreement as a notice of unilateral modification rather than, by its plain
terms, a bilateral contract requiring Plaintiff’s acceptance to be
binding. The integration clause only
invalidates the 2018 Agreement if the 2019 Agreement was validly signed.
Plaintiff does not dispute that she signed the 2018 Agreement. Therefore, the
2018 Agreement is valid except to the extent that it was superseded by
Plaintiff’s acceptance of the 2019 Agreement.
C. Authentication of 2019 Agreement
Plaintiff contends that Defendant failed to authenticate the
2019 Agreement properly.
Courts apply a three-step burden-shifting process to
determine whether an agreement to arbitrate exists. Gamboa v. Northeast
Community Clinic (2021) 72 Cal.App.5th 158, 164. “First, the moving party
bears the burden of producing ‘prima facie evidence of a written agreement to
arbitrate the controversy.’” Id. at 165 (quoting Rosenthal v. Great
Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413. The moving party can meet this initial burden
by attaching a copy of the arbitration agreement purporting to bear the
opposing party’s signature or setting forth the agreement’s provisions in the
motion. Ibid. “For this step, ‘it
is not necessary to follow the normal procedures of document authentication.” Ibid.
(quoting Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th
215, 218).
“If the movant bears its initial burden, the burden shifts
to the party opposing arbitration to identify a factual dispute as to the
agreement’s existence—in this instance, by disputing the authenticity of their
signatures. To bear this burden, the arbitration opponent must offer admissible
evidence creating a factual dispute as to the authenticity of their signatures.
The opponent need not prove that his or her purported signature is not authentic
but must submit sufficient evidence to create a factual dispute and 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,
Here, the Court finds that Defendant met its initial burden
by providing a copy of the 2019 Agreement, which purportedly bears Plaintiff’s
electronic signature. Wicker Decl., Ex. 2, Ex. 5. The burden then turns to
Plaintiff to provide evidence disputing the signature's authenticity. Plaintiff has offered no declaration or other
evidence disputing that she signed the agreement. In the absence of such evidence, Plaintiff
has failed to meet her burden.
Accordingly, the Court accepts the validity of Plaintiff’s electronic
signature on the 2019 Agreement on its face and need not address whether
Defendant properly authenticated it.
D. Inadequate Forum
Next, Plaintiff argues that the arbitration required by the
2019 Agreement is an inadequate forum for resolving her claims.
An adequate arbitration agreement is one that “(1) provides
for neutral arbitrators, (2) provides for more than minimal discovery, (3)
requires a written award, (4) provides for all of the types of relief that
would otherwise be available in court, and (5) does not require employees to
pay either unreasonable costs or any arbitrators’ fees or expenses as a
condition of access to the arbitration forum.”
Armendariz v. Foundation Health Psychcare Services, Inc. (2000)
24 Cal.4th 83, 102 (Armendariz) (citation omitted) (internal quotation
marks omitted). “[W]hen an employer imposes mandatory arbitration as a
condition of employment, the arbitration agreement or arbitration process
cannot generally require the employee to bear any type of expense that the
employee would not be required to bear if he or she were free to bring the
action in court.” Id. at pp. 110-111.
Plaintiff argues that the provision of the 2019 Agreement,
which allows the arbitrator to award attorney’s fees and costs to the
prevailing party at his discretion, renders the arbitration inadequate. Plaintiff
contends that prevailing parties in FEHA actions are entitled to recover
attorney’s fees and costs, and the provision granting the arbitrator discretion
conflicts with Plaintiff’s rights under the statute. Therefore, Plaintiff argues
the agreement violates the requirements that her costs do not exceed those
she would have to pay in court and that all types of relief otherwise available
in a non-arbitration forum be available.
Contrary to Plaintiff’s claim, attorney fees under FEHA are
not mandatory but discretionary. Government Code section 12965, subdivision
(c)(6) provides in relevant part, “In civil actions brought under this section,
the court, in its discretion, may award to the prevailing party,
including the department, reasonable attorney’s fees and costs…. (Emphasis
added).
Similarly, the arbitration agreement provides, “the arbitrator
may include reasonable attorneys’ fees, costs and expenses as part of the
arbitration award to the prevailing party to the extent permitted by applicable
law…. Wicker Decl., Ex. 2 at p. 5.
The Court concludes that this provision does not inflict
upon Plaintiff either greater costs than those which would be incurred in court
or deny her any form of relief available in a non-arbitration forum.
E. Unconscionability
Plaintiff further argues that the agreement is not
enforceable because it is unconscionable.
Like any other contract, arbitration agreements are
subject to a defense of unconscionability. Armendariz, supra, 24 Cal.4th
at p. 113. “The general principles of unconscionability are well established. A
contract is unconscionable if one of the parties lacked a meaningful choice in
deciding whether to agree and the contract contains terms that are unreasonably
favorable to the other party. Unconscionability has both a procedural and a
substantive element. The party resisting enforcement of an arbitration agreement
has the burden to establish unconscionability.” Ramirez v. Charter
Communications, Inc. (2024) 16 Cal.5th 478, 492 (citations omitted)
(internal quotation marks omitted).
“[P]rocedural and substantive unconscionability must both
be present in order for a court to exercise its discretion to refuse to
enforce a contract or clause under the doctrine of unconscionability. But they
need not be present in the same degree. Essentially a sliding scale is invoked
which disregards the regularity of the procedural process of the contract
formation, that creates the terms, in proportion to the greater harshness or
unreasonableness of the substantive terms themselves. In other words, 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 (Baltazar) (cleaned up).
1. Procedural Unconscionability
Plaintiff argues that the agreement is procedurally
unconscionable because it is a contract of adhesion and because Defendant did
not provide Plaintiff with a copy of the arbitration rules.
A “contract of adhesion” 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, 24 Cal.4th at 113 (quoting Neal v.
State Farm Ins. Cos. (1961) 188 Cal. App. 2d 690, 694. “[C]ontracts of
adhesion, although they are indispensable facts of modern life that are
generally enforced, contain a degree of procedural unconscionability even
without any notable surprises, and bear within them the clear danger of
oppression and overreaching.” Baltazar, supra, 62 Cal.4th 1237, 1244 (citation
omitted) (internal quotation marks omitted).
“[C]ourts will more closely scrutinize the substantive
unconscionability of terms that were ‘artfully hidden’ by the simple expedient
of incorporating them by reference rather than including them in or attaching
them to the arbitration agreement. Baltazar, supra, 62 Cal.4th at p.
1246. In Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1405-06, the
court found an arbitration agreement procedurally unconscionable where it did
not include a copy of the arbitration rules but instead incorporated them by
reference, and the rules limited the damages and remedies available to
dissatisfied customers. However, failure to provide a copy of the arbitration
rules supports a finding of procedural unconscionability only when the substantive
unconscionability claim relates to those rules. Balazar 62 Cal.4th at p.
1246. Where the challenge concerns only matters that were clearly delineated in
the agreement the employee signed, the employer’s failure to attach the
arbitration rules does not affect the level of procedural unconscionability.
Ibid.
Here, the agreement was a contract of adhesion. The contract
was offered on a take-it-or-leave-it basis, and Plaintiff had no ability to
negotiate the terms. See Wicker Decl., Ex. 3, Ex. 4. Therefore, there is
at least a low level of procedural unconscionability.
While Plaintiff argues that there is a heightened level of
procedural unconscionability because Defendant did not provide a copy of the arbitration
rules with the agreement, this argument is without merit because Plaintiff does
not argue that those rules are substantively unconscionable.
Accordingly, the Court finds a low level of procedural
unconscionability typical of mandatory employment arbitration agreements.
2. Substantive Unconscionability
Substantive unconscionability focuses on the actual terms of
the agreement and evaluates whether they create overly harsh or one-sided
results as to shock the conscience. Suh v. Superior Court (2010) 181
Cal.App.4th 1504, 1515.
“When, as here, there is no other indication of oppression
or surprise, the degree of procedural unconscionability of an adhesion
agreement is low, and the agreement will be enforceable unless the degree of
substantive unconscionability is high.” Serpa v. California Surety
Investigations, Inc. (2013) 215 Cal.App.4th 695, 704 (citation omitted)
(internal quotation marks omitted).
a. Attorney’s Fees
First, Plaintiff repeats her earlier argument regarding the arbitrator’s
discretion to award attorney’s fees. For the reasons above, this argument fails
to establish any substantive unconscionability.
b. Class Action/PAGA
Second, Plaintiff argues that the agreement is substantively
unconscionable because it requires the parties to waive their rights to
participate in class actions or PAGA claims.
“[A] state’s refusal to enforce [a class action] waiver on
grounds of public policy or unconscionability is preempted by the FAA.” Iskanian
v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360 (Iskanian)
(overruled on other grounds in Viking River Cruises, Inc. v. Moriana
(2022) 596 U.S. 639, 662 (Viking)).
An employee’s right to bring a PAGA action “is unwaivable.” Id.
at p. 383. The FAA does not preempt the state’s rule against wholesale
waiver of PAGA claims. Viking, supra, 596 U.S. at p. 662. However, the
FAA preempts California case law, preventing the separation of “individual” and
“non-individual” PAGA claims. Id. An arbitration agreement is
enforceable against individual claims but not against non-individual
representational claims. Id. The employee retains standing to bring representational
claims, which may be stayed pending the outcome of the arbitration. Adolph
v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, 1125.
While limiting Plaintiff’s ability to bring a class action
may be unconscionable, the FAA preempts this Court’s ability to deny the motion
to compel arbitration on that basis. Iskanian, supra, 59 Cal.4th at p.
360.
Because Plaintiff does not allege any representational PAGA
claims, the Court need not decide if the agreement's language extends to such
claims. However, to the extent it does, that
provision is unenforceable.
c. Severability
Finally, Plaintiff objects to the broad severability
provision in the agreement because she argues it calls for severability even in
cases where the agreement is permeated with unconscionability.
Civil Code §1670.5 requires that “an arbitration agreement
permeated by unconscionability, or one that contains unconscionable aspects
that cannot be cured by severance, restriction, or duly authorized reformation,
should not be enforced.” Armendariz, supra, 24 Cal.4th at p. 126.
Here, the agreement includes a severance clause stating
in relevant part, “the terms of this Arbitration Agreement are severable, and
the invalidity or unenforceability of any provision will not affect the
application of any other provision.” Wicker Decl. Ex. 2 at p. 7
This severability clause does not contradict the case law
concerning severability because if the Court finds that the agreement is
permeated with procedural unconscionability, it does not sever any provisions
but deems the entire agreement unenforceable. The inclusion of the
severability clause serves only as an expression of the party's intent that where
individual portions of the agreement are unenforceable, the contract as a whole
should still be enforced. But when an
arbitration agreement is permeated with unconscionability, no provisions are
severed, and the contract as a whole is unenforceable.
Accordingly, the Court finds no substantive unconscionability
(and only a very low level of procedural unconscionability), and the motion to
compel arbitration is granted.
CONCLUSION
Defendant’s Motion to Compel Arbitration is granted.