Judge: Anne Richardson, Case: 23STCV00087, Date: 2023-09-28 Tentative Ruling

Case Number: 23STCV00087    Hearing Date: September 28, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

Pleadings

Plaintiff Claudia Alvarado, as an aggrieved employee, and on behalf of all other aggrieved employees under the Labor Code Private Attorneys’ General Act of 2004 (PAGA), sues Defendants Charter Communications, LLC, Charter Communications Operating, LLC, Charter Communications Holding Company, LLC, Charter Communications Holdings, LLC, and Does 1 through 100 pursuant to a January 3, 2023 Complaint alleging a single cause of action for Civil Penalties Under the Private Attorneys’ General Act (2004) against all Defendants. (For ease of reference, the Court will drop the “LLC” from the name of each Defendant throughout this memo.)

The claims arise from allegations that Defendants—as agents, principals, employees, employers, representatives, or joint venturers or co-conspirators of each other—engaged in conduct amounting to various Labor Code violations against Plaintiff Alvarado and other aggrieved employees. These violations involve civil penalties premised on Labor Code sections 210, 226.3, 558, 1174.5, 1197.1, and 2699.

Reassignment

This action was originally assigned to Department 69 at the Stanley Mosk Courthouse.

On June 7, 2023, Defendants made a peremptory challenge to Judge William Fahey of Department 69.

On June 8, 2023, Department 69 accepted the peremptory challenge and, at the direction of the Supervising Judge, reassigned this action to Department 40 at the Stanley Mosk Courthouse for all further proceedings.

Department 40 Proceedings

On June 9, 2023, Department 40 (the Court) set a case management conference (CMC) in this action for September 6, 2023.

On September 5, 2023, Defendants made a motion to compel arbitration in this action and stay proceedings pending the outcome of arbitration.

On September 6, 2023, the Court held the CMC, noted that the motion to compel arbitration was on calendar, noted that all Defendants had filed Answers in this PAGA case, and continued the CMC to September 28, 2023, to be heard concurrently with the motion to compel arbitration.

On September 14, 2023, Plaintiff opposed the motion to compel arbitration.

On September 20, 2023, Defendants replied to the opposition.

Defendants’ motion is now before the Court.

Motion to Compel Arbitration and Stay Proceedings

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.)

Order Compelling Arbitration and Staying Proceedings: DENIED.

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 support of their motion, Defendants attach a copy of an arbitration agreement electronically signed by Plaintiff Alvarado. (Mot., Fries Decl., Exs. A-F.) The relevant arbitration agreement is shown at Exhibit B and the signature is confirmed in Exhibit F.

Plaintiff’s opposition does not contest that Plaintiff Alvarado executed an arbitration agreement as part of her onboarding process.

The Court finds that an arbitration agreement exists between Charter Communications and Plaintiff Alvarado and that all Defendants generally may invoke the arbitration agreement.

Exhibit B to the Fries declaration attaches a copy of the relevant arbitration agreement.

The declaration of John Fries, the Vice President of HR Technology for Charter Communications satisfies the requirements for verification of an employee’s electronic signature on an arbitration agreement. (Mot., Fries Decl., ¶¶ 1-19, Exs. A-F; see Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1062 (Espejo).)

Last, while the arbitration agreement facially only involves Charter Communications and Plaintiff Alvarado, the remaining Defendants may invoke the agreement under a theory of equitable estoppel. A nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are “intimately founded in and intertwined” with the underlying contract obligations such that, by relying on contract terms in a claim against a nonsignatory defendant, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement. (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1237.) Here, Charter Communications Operating, Charter Communications Holding Company, and Charter Communications Holdings may invoke the arbitration agreement because Plaintiff’s claims against them are “intimately founded in and intertwined” with the underlying contractual obligations imposed on Charter Communications as Plaintiff’s employer.

Alternatively, the Complaint pleads Defendants as “agents, principals, employees, employers, representatives, or joint venturers or co-conspirators of each of the other [D]efendants,” thus granting standing to all Defendants to invoke the arbitration agreement. (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614 [(“[W]hen a plaintiff alleges a defendant acted as an agent of a party to an arbitration agreement, the defendant may enforce the agreement even though the defendant is not a party thereto. [Citations.]”].)

An agreement to arbitrate thus exists between all parties to this motion.

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.)

Defendants argue that the arbitration agreement encompasses Plaintiff’s individual PAGA claim against them because the scope of the agreement covers all claims “‘related to pre-employment, employment, … or post-employment-related claims, … including without limitation … wage and hour-based claims including claims for unpaid wages, commissions, or other compensation or penalties (including meal and rest break claims, claims for inaccurate wage statements) … arising … during or after the termination of [Plaintiff’s] employment.’” (Mot., p. 12, quoting Mot., Fries Decl., Ex. B, ¶¶ A, B.1.)

Plaintiff’s opposition does not challenge the scope of the arbitration agreement.

The Court finds that the arbitration agreement encompasses Plaintiff’s individual PAGA claim—founded on Labor Code violations—because the language in the arbitration agreement quoted by Defendants is broad and clearly encompasses these employment-related claims.

Plaintiff’s individual PAGA claim thus lies within the broad scope of the relevant arbitration agreement.

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.)

Defendants argue that “the FAA applies to the Agreement because Charter is engaged in interstate commerce.” Defendants cite to the Fries declaration for the purpose of establishing that “Charter, through its employees, provides products, services, and equipment to customers nationwide, and purchases and sells goods, materials, supplies, services, and equipment in multiple states.” (Mot., p. 6 & p. 6, fn. 1, citing to Mot., Fries Decl., ¶ 3.)

Plaintiff’s opposition does not challenge this position as to interstate commerce.

The Court finds that Charter Communications’s business and Plaintiff’s employment with Defendants involves interstate commerce for the reasons advanced in the Fries declaration.

Plaintiff’s employment with Defendants thus sufficiently involves interstate commerce as to support Defendants’ requested relief. Moreover, even if the agreement did not involve interstate commerce, the Court could enforce the agreement under California law. (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.)

Other than matters related to stay, Plaintiff’s opposition focuses on why the arbitration agreement should not be enforced based on procedural and substantive unconscionability. No other defense is raised. (Opp’n, pp. 2-12.)

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.)

Plaintiff argues that the arbitration agreement is procedurally unconscionable because “Defendants’ own evidence establishes that Defendants required job applicants to preemptively agree to the arbitration clause” insofar as the Fries declaration establishes that “any applicant who declined to so submit would ‘be removing [herself] from the application process … [such that] [Defendants] [would] not consider [Plaintiff’s] application for employment.’ (Declaration of John Fries …, ¶ 6 Ex. A.)” Plaintiff also argues that “[t]he purported agreement itself further states clearly that the requirement to arbitrate is ‘a condition of [Defendants] considering’ an employee’s ‘application for employment and/or [] employment with [Defendants].’ (Id., ¶ 7 Ex. B p. 1.)” (Opp’n, p. 3.)

Defendants make various arguments for why the agreement is not procedurally unconscionable, chief among them Plaintiff’s failure to file a declaration explaining the adhesion argued in the opposition. (Reply, p. 1.)

The Court finds that the cited exhibits attached to the Fries declaration establish adhesion. However, the Court notes that adhesion connotes only a small measure of procedural unconscionability here. (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”].) Plaintiff does not provide a declaration advancing grounds for the Court to find otherwise. Therefore, her arguments that “[t]here is no evidence that Defendant provided new hires with the opportunity to negotiate the form arbitration agreements provided to them” and that “there [is no] … evidence that any of the Plaintiffs here were in a position to turn down an offer of employment due to a mandatory arbitration clause” are not supported by any evidence. (Opp’n, p. 4.) Nonetheless, there is a small measure of procedural unconscionability in the fact of the adhesion contract itself.

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.)

Plaintiff claims six grounds for substantive unconscionability, each addressed in turn.

a. Limited Discovery

First, Plaintiff argues that the arbitration agreement is substantively unconscionable because it limits discovery. More specifically, Plaintiff argues that: (1) “the purported agreement does not provide for initial disclosures, so there is no initial default discovery permitted at the onset of the case”; (2) “the employee is provided with only four depositions, 20 interrogatories, and 15 requests for production”; and (3) “the parties are only permitted ninety (90) days in which to perform this truncated discovery.” (Opp’n, citing Mot., Fries Decl., Ex. B, Guidelines, p. 23.)

Defendants respond that “Plaintiff makes no showing that such discovery is insufficient for her case.” Defendants also contend that “the arbitrator is empowered to allow more discovery if necessary ‘to allow a full and equal opportunity to all parties to present evidence that the arbitrator deems material and relevant to the resolution of the dispute’” and that “the Agreement incorporates the AAA Employment Arbitration Rules, which empower the arbitrator to ‘order such discovery, by way of deposition, interrogatory, document production, or otherwise, as the arbitrator considers necessary.’” (Reply, p. 2, citing Mot., Fries Decl., Ex. B, p. 18, Guidelines, Exchanging Information and Preparing for Hearing; see also Reply, p. 4.)

“A limitation on discovery is an important way in which arbitration can provide a simplified and streamlined procedure for the resolution of disputes.” (Davis v. Kozak (2020) 53 Cal.App.5th 897, 910.) “At the same time, ‘[a]dequate discovery is indispensable for the vindication of statutory claims’ [citation], and ‘[t]he denial of adequate discovery in arbitration proceedings leads to the de facto frustration of’ statutory rights [citation].” (Ibid.) “In this context, ‘adequate’ does not mean ‘unfettered.’” (Ibid.) “In striking the appropriate balance between the desired simplicity of limited discovery and an employee’s statutory rights, courts assess the amount of default discovery permitted under the arbitration agreement, the standard for obtaining additional discovery, and whether the plaintiffs have demonstrated that the discovery limitations will prevent them from adequately arbitrating their statutory claims.” (Id. at 910-911.)

Here, the Court determines that Plaintiff has not shown that she will be prevented from adequately arbitrating her individual PAGA claim despite the limitations in the Arbitration Agreement. This is because substantial discovery is provided automatically and, to the extent that the terms of the arbitration agreement limit discovery, the arbitrator will be empowered to, upon a proper showing by Plaintiff, enlarge the authorized discovery. Indeed, the agreement provides that “the exchange of information or depositions will be resolved by the arbitrator to allow a full and equal opportunity to all parties to present evidence that the arbitrator deems material and relevant to the resolution of the dispute.” (Mot., Fries Decl., Ex. B, p. 18, Guidelines, Exchanging Information and Preparing for Hearing.)

The Court therefore fails to find this point merits a finding of substantive unconscionability.

b. Lack of Mutuality

Second, Plaintiff argues that the arbitration agreement lacks mutuality because while the agreement covers claims most likely to be brought by employees—such as wage and hour and discrimination claims—the agreement specifically excludes claims most likely to be brought by Defendants, i.e., “‘[c]laims for injunctive or other equitable relief related to unfair competition and the taking, use or unauthorized disclosure of trade secrets or confidential information’ as well as ‘[c]laims over the validity of any party’s intellectual property [IP] rights.’ (Fries Decl., ¶ 7 Ex. B § C(6), (11).)” (Opp’n, p. 6.)

Defendants respond that similar provisions have been found conscionable in cited case law. Defendants also argue that “Plaintiff’s argument rests on the false premise that the sorts of claims excluded from coverage under the Agreement are necessarily more likely to be brought by employers rather than employees.” (Reply, pp. 3-4.)

The Court finds in favor of Plaintiff on this point.

The Court agrees that mutuality does not exist in a provision that carves out from arbitration causes of action that, under the circumstances of this case, would most likely result in judicial proceedings by Defendants against Plaintiff but arbitration of Plaintiff’s claims against Defendants.

The Court further discusses this element of substantive unconscionability below in Section V.

c. Limitations on Recovery of Attorney’s Fees

Third, Plaintiff argues that the arbitration agreement is substantively unconscionable because it provides “that all costs besides the arbitration provider’s ‘administrative fees and the arbitrator’s fees and expenses’ are to be borne by each party respectively, ‘including without limitation each party’s attorneys’ fees[.]’ (Fries Decl., ¶ 7 Ex. B § K.)” Plaintiff also argues that substantive unconscionability arises from the agreement’s term providing “for an interim award of attorneys’ fees and costs payable by an employee ‘resisting arbitration’ if the employee commences a judicial action and is subsequently compelled to arbitration. (Ibid.)” (Opp’n, pp. 8-9.)

Defendants respond that “Plaintiff erroneously argues that Section K of the Agreement does not allow recovery of attorney’s fees for a successful PAGA claim and provides an unlawful shifting of fees incurred in compelling arbitration.” As to recovery of attorney’s fees related to a successful PAGA claim, Defendants cite to the arbitration agreement for the proposition that “prevailing party ‘may recover any remedy that the party would have been allowed to recover had the dispute been brought in court.’” (Mot., p. 5, citing to Mot., Fries Decl., Ex. B, Guidelines, p. 9, General Rules, ¶ 13.) As to the interim award of attorney’s fees and costs, Defendants argue that this provision “merely provides a common, lawful remedy for breach of contract.” (Reply, pp. 5-6.)

The Court finds in favor of Plaintiff on both points.

The Court first determines that a measure of substantive unconscionability arises from the attorney’s fees waiver because it denies Plaintiff a right to which she is statutorily entitled. (See Mot., Fries Decl., Ex. B, Guidelines, p. 9, General Rules, ¶ 13 [“At the discretion of the arbitrator, the prevailing party may recover any remedy that the party would have been allowed to recover had the dispute been brought in court,” emphasis added].) Such a provision results in a shift in law as applied to the arbitration agreement, changing the dynamic from one in which Plaintiff may recover statutorily permitted awards of attorney’s fees to one where the Plaintiff must seek the right to recover those fees from the arbitrator.

The Court also determines that substantive unconscionability arises from the provision that “[i]f any judicial action or proceeding is commenced in order to compel arbitration, and if arbitration is in fact compelled or the party resisting arbitration submits to arbitration following the commencement of the action or proceeding, the party that resisted arbitration will be required to pay to the other party all costs, fees and expenses that they incur in compelling arbitration, including, without limitation, reasonable attorneys’ fees.” (Mot., Fries Decl., Ex. B, § K.) Though the Court recognizes the public policy in favor of arbitration and contract, this provision is reasonably calculated to chill a party’s pursuit of judicial remedies. Reasonable courts may differ in determining whether an arbitration agreement is unconscionable or that other defenses or reasons exist for not enforcing an arbitration agreement. Moreover, as argued by Plaintiff (Opp’n, p. 9), this provision unacceptably shifts to the employee costs that would not be imposed by a court. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 110-111 (Armendariz).)

The Court further discusses these two elements of substantive unconscionability below in Section V.

d. Mandatory Pre-Arbitration Dispute Resolution Procedures

Fourth, Plaintiff argues that the arbitration agreement is unconscionable because it contains provisions that give Defendants a “free peek” at Plaintiff’s case and shorten the statute of limitations to file a claim. (Opp’n, pp. 9-10.)

As to the free-peek-through-pre-dispute-procedures argument, Defendants respond that the pre-arbitration dispute resolution procedures are not unconscionable because case law holds that the exhaustion of internal grievance procedures prior to proceeding to arbitration can be reasonable. Defendants also argue that the authorities cited by Plaintiff in support of this argument are distinguishable because those cases involved unilateral arbitration agreements. (Reply, pp. 6-7.)

As to the statute of limitations argument, Defendants respond that Plaintiff is mistaken. Defendants cite to the arbitration agreement to point out language establishing that “‘[t]he aggrieved party must give written notice of the claim, in the manner required by this Agreement, within the time limit established by the applicable statute of limitations for each legal claim being asserted.’” (Reply, p. 7, quoting Mot., Fries Decl., Ex. B, § E.) Defendants also cite to the Guidelines of the arbitration agreement, which provide that “claim[s] must be submitted ‘within the time period established by the applicable statute of limitations.’” (Reply, p. 7, quoting Mot., Fries Decl., Ex. B, Guidelines, p. 22, ¶ 7.)

The Court finds in favor of Plaintiff in part and in favor of Defendants in part.

The Court determines that the free-peek provisions connote some measure of substantive unconscionability. While it is true that the Nyulassy case that Plaintiff cites did not hold that the “free peek” was categorically unconscionable, Nyulassy did find that such a provision was substantively unconscionable when combined with other factors. (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1282-1283.) Here, the Court determines that because there exist other grounds for substantive unconscionability, the free peek implicated by the arbitration agreement is also substantively unconscionable.

The Court further discusses this element of substantive unconscionability below in Section V.

However, the Court determines that Plaintiff’s statute of limitations argument is unavailing. The arbitration agreement’s Guidelines are clear in providing that the regular statute of limitation applicable to any claim is the same in arbitration as it would be in a judicial action. The Guidelines even provide a clear illustration, which reads: “For example, if the statute of limitations for filing a claim to collect a debt is two years, then the claim must be filed no later than two years after the debt was first owed[;] otherwise, the statute of limitations has run and the claim will be closed.” (Mot., Fries Decl., Ex. B, Guidelines, p. 23, Statute of Limitations.)

e. Preemptive Waiver of Jury Trial in Any Forum

Fifth, Plaintiff argues that the arbitration agreement is substantively unconscionable because it provides that “‘[i]n the event a dispute between [Plaintiff] and [Defendants] is not arbitrable under this Agreement for any reason and is pursued in court, [Plaintiff] and [Defendants] agree to waive any right to a jury trial that might otherwise exist.’ (Fries Decl., ¶ 7 Ex. B § L, emphasis added; see also id., p. 20.)” (Opp’n, pp. 10-11.)

Defendants respond that the provision complained of by Plaintiff “is irrelevant here because Plaintiff asserts only a PAGA claim, for which she has no jury trial right.” Defendants also argue that “other California courts examining this Agreement have held that the waiver is not unconscionable.” (Reply, pp. 7-8.)

The Court finds in favor of Plaintiff on this point.

A jury trial waiver preceded by the words “in the event that any controversy or claim is determined in a court of law” has been found unenforceable by California courts. (See Grafton Partners v. Superior Court (2005) 36 Cal.4th 944, 961 (Grafton) [“Resolving any ambiguity in favor of preserving the right to jury trial, …[] we conclude section 631 [of the Code of Civil Procedure] does not authorize predispute waiver of th[e] right [to a jury trial]”].) Here, the arbitration agreement provides that “‘[i]n the event a dispute between [Plaintiff] and [Defendants] … is pursued in court, [Plaintiff] and [Defendants] agree to waive any right to a jury trial that might otherwise exist.’” (Mot., Fries Decl., Ex. B, § L.)” Such language falls within the ambit of Grafton and is thus unconscionable, whether or not the complaint in this case contains claims that could be tried to a jury. The point is that the arbitration agreement contains a clause which translated into a situation for the employer in which “heads I win, tails you lose” – that is, whether in arbitration or in court, plaintiff would not be entitled to a jury. That pre-dispute jury waiver clause demonstrates that the “central purpose of the contract is tainted with illegality,” which affects the question of whether the clauses should be severed, or the entire agreement founds to be unenforceable. (Armendariz, supra, 24 Cal.4th at p. 124.)

The Court further discusses this element of substantive unconscionability below in Section V.

f. Waiver of Representative PAGA Standing

Last, Plaintiff argues that the arbitration agreement is substantively unconscionable because “the agreement purports to waive the employee’s right to bring claims against Defendants in any ‘representative’ capacity regardless of whether such claims are ‘covered’ or ‘excluded’ from arbitration.” (Opp’n, p. 11, citing to Mot., Fries Decl., Ex. B, § D [“[Plaintiff] and [Defendants] agree that both parties may only bring claims against the other party in their individual capacity and not as a plaintiff or class member in any purported class or representative proceeding, whether those claims are covered claims under Section B, or excluded claims under Section C”].)

Defendants respond that the arbitration agreement “does not purport to entirely waive the right to bring a PAGA claim, even on an individual basis,” because “the Agreement clearly contemplates claims for PAGA penalties, as it requires arbitration of ‘all disputes related to … wage and hour-based claims including claims for unpaid wages, commissions, or other compensation or penalties[.]’” Defendants further argue that “the [a]greement does not waive ‘private attorney general’ claims entirely …, but instead waives only the right to arbitrate such claims on behalf of other employees, as is made clear from the context of the ‘representative’ waiver, which appears only in conjunction with the waiver of the right to represent other employees in class or collective actions.” (Reply, pp. 8-9, quoting and citing Mot., Fries Decl., Ex. B, §§ B.1., D.)

The Court finds that section D of the arbitration agreement is unconscionable.

Defendants’ argument that section D of the arbitration agreement only waives the arbitrability of representative PAGA claims is belied by the clear language of that waiver. (Mot., Fries Decl., Ex. B, § D [“[Plaintiff] and [Defendants] agree that both parties may only bring claims against the other party in their individual capacity and not as a plaintiff or class member in any purported class or representative proceeding, whether those claims are covered claims under Section B, or excluded claims under Section C”].)

“[E]mployment agreements waiving an employee’s right to assert a PAGA claim in a judicial forum are unenforceable. [Citation.]” (Oswald v. Murray Plumbing and Heating Corp. (2022) 82 Cal.App.5th 938, 943.) Moreover, “the United States Supreme Court did not disturb Iskanian[ v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian)]’s holding that a blanket PAGA waiver is unconscionable under California law.” (Alberto v. Cambrian Homecare (2023) 91 Cal.App.5th 482, 494, citing Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1924-1925 (Viking River).)

The Court further discusses this element of substantive unconscionability below in Section V.

3. Unconscionability Conclusion

Here, the Court has found one ground for procedural unconscionability and six grounds for substantive unconscionability, thus meriting a discussion as to severance and whether the entire arbitration agreement is so permeated by unconscionability that it cannot be enforced.

V.

A review of the arbitration agreement shows that it contains a severability clause, stating that “if any portion or provision of this Agreement (including, without implication of limitation, any portion or provision of any section of this Agreement) is determined to be illegal, invalid, or unenforceable by any court of competent jurisdiction and cannot be modified to be legal, valid, or enforceable, the remainder of this Agreement shall not be affected by such determination and shall be valid and enforceable to the fullest extent permitted by law, and said illegal, invalid, or unenforceable portion or provision shall be deemed not to be a part of this Agreement.” (Mot., Fries Decl., Ex. B, § Q.)

“A trial court has the discretion to refuse to enforce an agreement as a whole if it is permeated by … unconscionability.” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 90, citing Armendariz, supra, 24 Cal.4th at p. 122.) “‘The overarching inquiry is whether “‘the interests of justice … would be furthered’” by severance.’” (Carmona v. Lincoln Millennium Car Wash, Inc., supra, at p. 90.) If the central purpose of a contractual provision, such as an arbitration agreement, is tainted with illegality, then the provision as a whole cannot be enforced. (Ibid.) If the illegality is collateral to the main purpose of the contractual provision, and can be severed or restricted from the rest, then severance is appropriate. (Ibid.)

An agreement to arbitrate is considered “permeated” by unconscionability where, for example, it contains more than one unconscionable provision. (Magno v. The College Network, Inc. (2016) 1 Cal.App.5th 277, 292 (Magno).) This is because such multiple defects indicate a systematic effort to impose arbitration on an employee not simply as an alternative to litigation but as an inferior forum that works to the employer’s advantage. (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 254 (Carbajal).) The Court has discretion, but is not required, to find that the entire agreement is permeated by unconscionability in the presence of multiple unconscionable terms. (Lange v. Monster Energy Co. (2020) 46 Cal.App.5th 436, 455 [“we agree with the trial court that the parties’ arbitration agreement is permeated with too high a degree of unconscionability for severance to rehabilitate”].)

In opposition, Plaintiff argues that the unconscionable provisions in the arbitration agreement should render it unenforceable because (1) the agreement is rife with multiple defects that render the agreement unconscionable and (2) the interests of justice would not be served by severance where no continuing contractual relationship exists between the parties and where severance of the multiple unlawful provisions would produce, not prevent, an undeserved benefit in favor of Defendants. (Opp’n, pp. 11-12.)

Defendants respond that “even if the Court accepts any of Plaintiff’s arguments, the Court must sever any provisions it finds substantively unconscionable, as the Agreement is not so permeated with unconscionable provisions as to make it wholly invalid,” particularly where “[s]everance … would not undermine the main purpose of the agreement—the arbitration of covered claims.” Defendants also argue that “Plaintiff’s analysis of the two policy reasons supporting severance misses the mark” because (1) “contrary to Plaintiff’s … conclusion, a contractual relationship exists here, as the Agreement expressly provides that it survives the end of employment” and (2) “if the Court does not enforce the Agreement, Charter will be deprived of the benefit of its bargained … right to arbitrate.” (Reply, p. 9.)

Here, the Court determines that the agreement to arbitrate is “permeated” by unconscionability.

The Court has found one ground for procedural unconscionability and six grounds for substantive unconscionability, supporting a conclusion that the arbitration agreement should not be severed. (See discussions at Sections IV.A.2.b-f. supra; see also Magno, supra, 1 Cal.App.5th at p. 292.) Indeed, severance of those provisions and enforcement of the arbitration agreement would be against the interests of justice, where Defendants would be allowed to enforce an agreement that had to be so truncated by the Court as to change the nature of the agreement itself, thus benefiting Defendants to the detriment of Plaintiff, who would face enforcement of an arbitration agreement rife with unconscionability. (Armendariz, supra, 24 Cal.4th at pp. 123-124.) Moreover, the existence of multiple grounds for a finding of unconscionability shows a systematic effort to impose arbitration on an employee not simply as an alternative to litigation but as an inferior forum that works to the employer’s advantage. (Carbajal, supra, 245 Cal.App.4th at p. 254.)

Here, the Court finds that the arbitration agreement is so tainted with illegality that the contract should not be enforced and cannot be cured through severance. (Compare Lange v. Monster Energy Company, supra, 46 Cal.App.5th at pp. 446-455 [considering various unconscionable provisions and agreeing with trial court’s determination that arbitration agreement should not be enforced].)

VI.

Arbitration Conclusion

Defendants have met their burden of showing that an arbitration agreement exists between the parties that covers Plaintiff’s individual PAGA claim and involves interstate commerce.

Plaintiff has met her responsive burden of showing a valid defense to enforcement of that arbitration agreement.

The Court therefore DENIES Defendants’ motion.

VII.

Stay of Action

“If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.)

Here, the question of staying this action is MOOTED by the determination that the parties’ arbitration agreement is unenforceable and therefore need not be further discussed. 

Conclusion

Defendants Charter Communications, LLC, Charter Communications Operating, LLC, Charter Communications Holding Company, LLC, and Charter Communications Holdings, LLC’s Motion to Compel Arbitration of Plaintiff’s Individual PAGA Claim and Stay Action Pending Arbitration is DENIED.