Judge: Anne Richardson, Case: 22STCV22319, Date: 2023-06-29 Tentative Ruling

Case Number: 22STCV22319    Hearing Date: June 29, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

Pleadings

Plaintiff Geoffrey Williams sues Defendant Dawson Delivery LLC and Does 1-50 pursuant to a July 11, 2022 Complaint alleging claims of (1) FEHA Disability Discrimination, (2) FEHA Failure to Accommodate, (3) FEHA Failure to Engage in the Interactive Process, (4) FEHA Retaliation, (5) FEHA Failure to Prevent, and (6) Wrongful Termination in Violation of Public Policy.

The claims arise from allegations that, while in Dawson Delivery’s employ between August 24, 2020 to December 26, 2020, Plaintiff Williams was forced to take time off work due to (1) COVID-19 between October 2 and 15, 2020 and (2) a December 24, 2020 injury Plaintiff sustained while making a work delivery, caused by Plaintiff falling after being chased by a dog, leading to a concussion and other alleged disabilities. Plaintiff alleges he notified Dawson Delivery of his disabilities and requested an unpaid leave of absence as reasonable accommodation for his disabilities, but was instead terminated from his employment on December 26, 2020 pursuant to a letter stating Dawson Delivery needed “people that can work.”

Motion Before the Court

On April 10, 2023, Dawson Delivery made a motion to compel arbitration and dismiss or stay this action pursuant to an alleged agreement executed by the parties to arbitrate claims arising from Plaintiff’s employment.

On June 15, 2023, Plaintiff Williams opposed the motion.

On June 21, 2023, Dawson Delivery replied to the opposition.

The motion is now before the Court.

Motion to Compel Arbitration and Dismiss or Stay Action: GRANTED.

Legal Standard

The Federal Arbitration Act (“FAA”), while a federal statute, applies in California courts and requires state courts to enforce arbitration agreements as required by the federal common law developed under the FAA. (See Southland Corp. v. Keating (1984) 465 U.S. 1, 15-16; Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1074-78, superseded by statute on another ground as stated in Ferguson v. Corinthian Colleges, Inc. (9th Cir. 2013) 733 F.3d 928, 937.).) The FAA preempts and invalidates state law and state judicial decisions that disfavor arbitration or require arbitration provisions to pass higher scrutiny. (Southland Corp. v. Keating, supra, at p. 12; Perry v. Thomas (1987) 482 U.S. 483, 490.) If the parties designate the FAA applies, then California arbitration law is preempted. (See, e.g., Rodriguez v. American Techs., Inc. (2006) 136 Cal.App.4th 1110, 1121-1122.) However, courts have found that where the FAA is found not to apply, the California Arbitration Act (Code Civ. Proc. § 1280 et seq.) applies. (See Valencia v. Smyth (2010) 185 Cal.App.4th 153, 178.)

 A court’s inquiry is limited to a determination of (1) whether a valid arbitration agreement exists and (2) whether the arbitration agreement covers the dispute. (9 U.S.C. § 4; Chiron Corp. v. Ortho Diagnostics Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130; Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 84; see Simula, Inc. v. Autoliv, Inc. (9th Cir. 1999) 175 F.3d 716, 720 [if the finding is affirmative on both counts the FAA requires the Court to enforce the arbitration agreement in accordance with its terms].) “An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” (United Steelworkers of America v. Warrior & Gulf Navigation Co. (1960) 363 U.S. 574, 582-583.) 

 Moreover, the general rule is that the FAA governs all agreements to arbitrate in contracts “involving interstate commerce.” (Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.) The term “involving” commerce “is broad and is indeed the functional equivalent of “affecting’ commerce.” (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 273-274.) The U.S. Supreme Court has held that this broad interpretation includes employment contracts. (See Circuit City Stores v. Adams (2001) 532 U.S. 105, 106.) The defendant bears the burden of proving applicability of the FAA by showing that its activities constitute interstate commerce. (Hoover v. Am. Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1207.) Failure to demonstrate that the employment agreement affects interstate commerce renders the FAA inapplicable. (See Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 687-688; Woolls v. Superior Court (2005) 127 Cal.App.4th 197, 212.)

Even where the FAA governs the interpretation of arbitration clauses, California law governs whether an arbitration agreement has been formed in the first instance. (Baker v. Osborne Development Corp. (2008) 159 Cal.App.4th 884, 893.) 

 The party seeking arbitration has the “burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.) “Once that burden is satisfied, the party opposing arbitration must prove by a preponderance of the evidence any defense to the petition.” (Lacayo v. Cataline Restaurant Group Inc. (2019) 38 Cal.App.5th 244, 257.) “The trial court sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.” (Ruiz v. Moss Bros. Auto Group, Inc., supra, at p. 842.) 

On a petition to compel arbitration, the court must grant the petition unless it finds (1) no written agreement to arbitrate exists, (2) the right to compel arbitration has been waived, (3) grounds exist for revocation of the agreement, or (4) litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues. (Code Civ. Proc., § 1281.2; see Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-219.)

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.) If these issues are satisfied in favor of the movant, (3) the party opposing arbitration must prove by a preponderance of the evidence any defense to the petition. (Lacayo v. Cataline Restaurant Group Inc., supra, 38 Cal.App.5th at p. 257.)

I.

Whether Arbitration Agreement Exists

“Parties are not required to arbitrate their disagreements unless they have agreed to do so. [Citation.] A contract to arbitrate will not be inferred absent a ‘clear agreement.’ [Citation.] When determining whether a valid contract to arbitrate exists, we apply ordinary state law principles that govern contract formation. [Citation] In California, a ‘clear agreement’ to arbitrate may be either express or implied in fact. [Citation.]” (Davis v. Nordstrom, Inc. (9th Cir. 2014) 755 F.3d 1089, 1092-93 [applying California law].) The court is only required to make a finding of the agreement’s existence, not an evidentiary determination of its validity. (Condee v. Longwood Management Corp., supra, 88 Cal.App.4th at p. 219.)

In its motion, Dawson Delivery in essence argues that an arbitration agreement was executed by the parties on August 3, 2020. (Mot., pp. 1-2 [background], 3-4 [enforceability]; Mot., Dawson Decl., Ex. 1.)

In his opposition, Plaintiff Williams does not dispute this point. (See Opp’n, pp. 2-5.)

The Court finds that an arbitration agreement exists between the parties.

Exhibits 1 to the Cantwell-Badyna and Dawson declarations show an arbitration agreement electronically signed by Plaintiff Williams, which the Dawson declaration verifies under the principles of Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1062 and Ruiz v. Moss Bros. Auto Group, Inc., supra, 232 Cal.App.4th at p. 844. (See Mot., Cantwell-Badyna Decl., Ex. 1; Mot., Dawson Decl., ¶¶ 1-20, Exs. 1-3.)

II.

Scope of the Arbitration Agreement

“[T]he decision as to whether a contractual arbitration clause covers a particular dispute rests substantially on whether the clause in question is ‘broad’ or ‘narrow.’” (Bono v. David (2007) 147 Cal.App.4th 1055, 1067.) “‘A “broad” clause includes those using language such as “any claim arising from or related to this agreement”‘ [Citation] or ‘arising in connection with the [a]greement’ [Citation.]” (Rice v. Downs (2016) 248 Cal.App.4th 175, 186 [italics omitted].) “But clauses requiring arbitration of a claim, dispute, or controversy ‘arising from’ or ‘arising out of’ an agreement, i.e., excluding language such as ‘relating to this agreement’ or ‘in connection with this agreement,’ are ‘generally considered to be more limited in scope than would be, for example, a clause agreeing to arbitrate “‘any controversy … arising out of or relating to this agreement[.]’” [Citations.]” (Id. at p. 186-87 [italics omitted].) “Several Ninth Circuit cases have held that agreements requiring arbitration of ‘any dispute,’ ‘controversy,’ or ‘claim’ ‘arising under’ or ‘arising out of’ the agreement are intended to encompass only disputes relating to the interpretation and performance of the agreement.” (Id. at p. 187.)

In its motion, Dawson Delivery argues that the arbitration agreement encompasses Plaintiff’s FEHA and wrongful discharge claims. (Mot., pp. 2 [introduction], 4-5 [application].)

In his opposition, Plaintiff Williams does not dispute this point. (See Opp’n, pp. 2-5.)

The Court finds the arbitration agreement has a broad scope—contains the ‘arises from or relates to’ language—and encompasses the claims alleged by Plaintiff Williams in his Complaint.

The agreement reads in relevant part: “Except as explained in the section ‘Claims Not Covered’ below, this Mutual Agreement to Individually Arbitrate Disputes (this ‘Agreement’) covers all past, current, and future grievances, disputes, claims, issues, or causes of action (collectively, ‘claims’) under applicable federal, state or local laws, arising out of or relating to (a) Employee’s application, hiring, hours worked, services provided, and/or employment with the Company or the termination thereof, and/or (b) a Company policy or practice, or the Company’s relationship with or to a customer, vendor, or third party, including without limitation claims Employee may have against the Company and/or any Covered Parties (defined below), or that the Company may have against Employee,” including but “not limited to claims asserted under or relating to … Age Discrimination in Employment Act and similar state statutes,” like FEHA. (Mot., Dawson Decl., Ex. 1, § Covered Claims [emphasis added].)

III.

Interstate Commerce

A motion to compel arbitration based on the FAA must show not only that that the employer engaged in interstate commerce but also that “the employment relationship involved interstate commerce.” (Lane v. Francis Capital Management LLC, supra, 224 Cal.App.4th at pp. 687-688.) Courts have found that where the FAA is found not to apply, the California Arbitration Act (Code Civ. Proc. § 1280 et seq.) applies. (See Valencia v. Smyth, supra, 185 Cal.App.4th at p. 178.)

In its motion, Plaintiff argues that its “business sufficiently involves interstate commerce such that the FAA applies” because: “Defendant is a local delivery service company based in Los Angeles, California. It makes local-only deliveries in California for its clients. One of its clients is Amazon Logistics, Inc. (‘Amazon’). Defendant contracts with Amazon Logistics, Inc. to provide delivery services on behalf of Amazon through Amazon’s Delivery Service Partner program. As a Delivery Service Partner, Defendant hires drivers to deliver packages to Amazon customers who order the products from Amazon’s website. Defendant’s delivery drivers pick up packages at Amazon facilities in California and deliver the packages to Amazon customers locally. Defendant’s delivery drivers use vans, which do not require a commercial license to operate.” (Mot., pp. 1, 2-3; see Mot., Dawson Decl., ¶ 2 [support for this argument].)

In opposition, Plaintiff argues that this agreement does not involve interstate commerce because “Plaintiff was a package delivery driver that operated wholly within the state” and because the Ninth Circuit has held that delivery drivers who operate wholly within state when packages originate out of state are not engaged in interstate commerce. (Opp’n, pp. 2-3 [citing to Rittmann v. Amazon.com, Inc. (9th Cir. 2020) 971 F.3d 904, 914-915 for latter position].)

In its reply, Dawson Delivery makes a confusing about-face and argues that Plaintiff’s employment does not involve interstate commerce and does not qualify under FAA exemptions because “[g]oods transported from out of state, but then subject to ‘new or subsequent [intrastate] transactions,’ are no longer within the stream of interstate commerce”—citing Rittmann for this proposition at p. 916—and because “[h]ere, Plaintiff only picked up packages from Amazon’s warehouse in California” and was “responsible for local-only deliveries,” where the goods delivered are usually held by Amazon at “a fulfillment center for an indefinite period (i.e., until a customer orders them),” “at [which] point that the goods cease their journey through interstate commerce.” (Reply, pp. 4-5.)

The Court finds that the employment relation at issue here fails to involve interstate commerce for the reasons explained in Dawson Delivery’s reply. (Lane v. Francis Capital Management LLC, supra, 224 Cal.App.4th at pp. 687-688)

However, the Court nevertheless finds that the arbitration agreement may still be enforced through California law. (See Valencia v. Smyth, supra, 185 Cal.App.4th at p. 178.)

IV.

Defenses to the Arbitration Agreement

A “party opposing arbitration must prove by a preponderance of the evidence any defense to the petition” to compel arbitration in the matter. (Lacayo v. Cataline Restaurant Group Inc., supra, 38 Cal.App.5th at p. 257.)

Plaintiff’s sole argument against arbitration here is that the arbitration agreement between the parties is unconscionable. (Opp’n, pp. 3-5.)

A. Unconscionability

“Both procedural unconscionability and substantive unconscionability must be shown [for a finding of unconscionability to exist], but ‘they need not be present in the same degree’ and are evaluated on a ‘sliding scale.’ [Citation.] ‘[T]he 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.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Dev. (US), LLC (2017) 55 Cal.4th 223, 247.)

Whether an arbitration provision is unconscionable is a question of law. (Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1511-1512.)

1. Procedural Unconscionability

Procedural unconscionability “addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power.” (Pinnacle Museum Tower Assn., supra, 55 Cal.4th at p. 246.) Established case law explains that “‘[o]ppression’ arises from an inequality of bargaining power which results in no real negotiation and ‘an absence of meaningful choice’ [and] ‘[s]urprise’ involves the extent to which the supposedly agreed-upon terms of the bargain are hidden [in the agreement] by the party seeking to enforce the disputed terms.” (Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 484.)

In opposition, Plaintiff argues that the arbitration agreement is procedurally unconscionable because “[h]ere, any alleged agreement was part of an onboarding process that required acceptance of the agreement prior to continuing with the onboarding process,” where, “[a]t no point was Plaintiff offered the opportunity to negotiate any terms of the agreement nor was Plaintiff provided a meaningful choice regarding the agreement.” (Opp’n, p. 4.)

In reply, Dawson Delivery argues in relevant part that “[h]ere, the Agreement contains no level of procedural unconscionability” because “[e]ven if the Court considered it ‘adhesive,’ as Plaintiff argues, this alone would not be enough” in light of state and federal precedent. (See Reply, p. 6.)

The Court finds a small measure of procedural unconscionability. (Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 981 [discussing low level of procedural unconscionability in the adhesion contract at issue and going on to discuss substantive unconscionability]; Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1470, fn. 2 [“When bargaining power is not grossly unequal and reasonable alternatives exist, oppression typically inherent in adhesion contracts is minimal”].)

2. Substantive Unconscionability

Substantive unconscionability focuses on the terms of the agreement and whether those terms are so one-sided as to shock the conscience.” (Kinney v. United HealthCare Servs., Inc. (1999) 70 Cal.App.4th 1322, 1330.)

In opposition, Plaintiff argues that the arbitration agreement is substantively unconscionable because of a lack of mutuality in the “Covered Claims” therein. (Opp’n, pp. 4-5 [“Here, none of the claims included in the ‘Covered Claims’ fail to include any claims that an employee would bring against an employer”].)

In reply and relevant part, Dawson Delivery argues that: “The Agreement contains clear language evidencing mutuality. For example, it states, ‘the Employee and Company agree that any covered claim … shall be submitted to binding arbitration,’ … [which] applies both to ‘claims Employee may have against the Company and/or any Covered Parties … or that the Company may have against the Employee.’” (Reply, p. 7.)

The Court’s review of the arbitration agreement confirms the language quoted by Dawson Delivery, clearly evidencing mutuality in the arbitration agreement. (See Mot., Dawson Decl., Ex. 1, § Covered Claims, ¶ 1.)

3. Unconscionability Conclusion

Plaintiff shows only a minimal level of procedural unconscionability, thus failing to raise an adequate unconscionability defense against enforcement of the arbitration agreement.

B. Defenses Conclusion

Because Plaintiff failed to raise adequate defenses to enforcement of the arbitration agreement, the Court GRANTS Dawson Delivery’s motion.

V.

Dismissal or Stay of Action

Because the Court is enforcing the arbitration agreement pursuant to California law, and because this motion has been granted, the Court “STAY[S] th[is] action … until an arbitration is had in accordance with th[is] order to arbitrate or until such earlier time as the [C]ourt specifies.” (Code Civ. Proc., § 1281.4.) 

Conclusion

 Defendant Dawson Delivery LLC’s Motion to Compel Arbitration and Dismiss or Stay Action is GRANTED.

This action is STAYED until an arbitration is had in accordance with this order to arbitrate or until such earlier time as the Court specifies.