Judge: Anne Richardson, Case: 23STCV08170, Date: 2023-08-08 Tentative Ruling

Case Number: 23STCV08170    Hearing Date: August 8, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

Plaintiff Jasleena Kaur (Plaintiff) sues TPx Defendants, Michael Morello, Alison Lindgren, and Does 1 to 100 pursuant to an April 12, 2023 Complaint alleging claims of (1) Discrimination in Violation of FEHA, (2) Harassment in Violation of FEHA, (3) Retaliation for the Exercise of Rights Guaranteed Under FEHA, (4) Failure to Provide Reasonable Accommodation in Violation of FEHA, (5) Failure to Engage in the Interactive Process in Violation of FEHA, (6) CFRA Leave Discrimination/ Retaliation, (7) Interference with CFRA Rights, (8) Failure to Prevent Discrimination, Harassment, and Retaliation, (9) Whistle-Blower Retaliation in Violation of Labor Code § 1102.5 and Labor Code § 98.6, (10) Wrongful Termination of Employment in Violation of Public Policies, (11) Breach of Express Oral Contract Not to Terminate Employee Without Good Cause, (12) Breach of Implied-In-Fact Contract Not to Terminate Employment Without Good Cause, (13) Breach of the Covenant of Good Faith and Fair Dealing, (14) Violation of Labor Code § 200, et seq., (15) Intentional Infliction of Emotional Distress, and (16) Negligent Infliction of Emotional Distress.

The claims arise from allegations that Plaintiff, a longtime employee, experienced retaliatory conduct and was terminated by Defendants because she complained about wages, has a disability, and required medical leave.

On July 7, 2023, TPx Defendants (hereafter, Defendants) filed the motion to compel arbitration, including a request for an order either dismissing or staying the civil action. The motion was brought pursuant to the Federal Arbitration Act (FAA) and California Code of Civil Procedure §§ 1281.2 and 1281.4.

On July 28, 2023, Plaintiff filed evidentiary objections and an opposition to Defendants’ motion to compel arbitration, including a request for leave to conduct discovery or a live hearing.

The motion is now before the court.

Timeliness

Pursuant to Code of Civil Procedure § 1005, subdivision (b), moving papers are to be filed and served at least 16 court days before a hearing, with opposing papers due at least nine court days before, and reply papers due at least five court days before the hearing.

In reply, Defendants correctly point out that the opposition Plaintiff filed on July 28, 2023 is untimely as it was due by July 26, 2023. Defendants contend that such an untimely opposition has prejudiced them.  

The Court reminds Plaintiff of the obligation to file their pleadings in a timely manner. However, the Court will hear the motion on the merits, considering the opposition and reply, since there is no showing of prejudice.

A review of the reply shows that Defendants have not argued any specific prejudice but also shows that Defendants replied to the opposition on the merits. Even when the opposing party does expressly object to inadequate notice but then opposes the motion on the merits, the issue of defective notice may be waived unless the opposing party makes a request for a continuance or demonstrates prejudice from the defective notice. (Carlton v. Quint (2000) 77 Cal.App.4th 690, 697; Reedy v. Bussell (2007) 148 Cal.App.4th 1272, 1288; but see Robinson v. Woods (2008) 168 Cal.App.4th 1258, 1264 [When a party only “respond[s] to [a] [late-served] motion by filing a written opposition containing only the notice objections and never argue[s] the merits,” no waiver occurs, such that the objecting party need “not … [even] claim or show prejudice [to object to the late-served motion] because the[] [plaintiffs] did not address the merits [of the motion], in writing or otherwise”]; contra. Boyle v. CertainTeed Corp. (2006) 137 Cal.App.4th 645, 650 [“A party’s participation in a hearing after the party’s objection to the hearing as unauthorized does not constitute waiver by acquiescence”].)

Evidentiary Objections

Plaintiff made five objections to the admission of the evidence submitted in support of Defendants’ motion. The objections pertain to the testimony in ¶¶ 10 – 12 of the Declaration of Giovanna Forte, as well Exhibits 1, 3, and 4 of that declaration.

Objection 1, ¶ 12: OVERRULED.

Plaintiffs’ objection to ¶ 12 is concerned with the following testimony: “In reviewing Ms. Kaur’s personnel file, and TPX’s records maintained thereto, Ms. Kaur did not, either—explicitly or implicitly—revoke or rescind, or attempt to revoke or rescind, any of the aforementioned arbitration agreements, including the Agreement.”

Plaintiff objects to the admission of this testimony on grounds that it lacks personal knowledge, is impermissible conclusion(s) of ultimate fact, and is vague and ambiguous.

However, “the custodian of a document need not have been present or employed when the document was created or signed to authenticate a document in a company’s files.” (See Estate of O’Connor (2017) 16 Cal.App.5th 159, 170 [any qualified witness knowledgeable about documents may lay foundation for business records].) 

Accordingly, Objection 1 is OVERRULED.

Objections 2 and 3, Ex.’s 1 and 3: MOOT.

Exhibit 1 represents a 2003 “Employee’s Proprietary Information and Investment Agreement,” and Exhibit 3 represents a 2010 “Sales Arbitration Agreement.”

Defendant concedes that it is a different agreement that is at issue in their motion.

To the extent that the Court does not rely on the 2003 or 2010 agreements in its decision, Objections 2 and 3 are MOOT.  

Objection 4, ¶ 10: OVERRULED.

Plaintiffs’ objection to ¶ 10 is concerned with the following testimony: “TPx informed all employees of the Agreement via email and employees, including Plaintiff, were given an opportunity to inquire of its contents and obtain any further information if they had questions. TPx did not force or require employees to sign the Agreement.”

The Court OVERRULES Objection 4 on the same grounds as Objection 1.

Objection 5, ¶ 11 & Ex. 4: OVERRULED.

The Court notes that Objection 5 indicates it is directed to ¶ 11 and Exhibit 4, but the Objection itself only addresses ¶ 11.

Plaintiffs’ objection to ¶ 11 is concerned with the following testimony: “Ms. Kaur received the Agreement in 2014, and she physically signed (i.e., a ‘wet signature’) it on March 2, 2014… The Agreement was the third and most recent arbitration agreement concerning Plaintiff’s employment, and is contained in her personnel file, as maintained by TPx in the regular course of business.”

The Court OVERRULES Objection 5 on the same grounds as Objections 1 and 4.

Motion to Compel Arbitration

Preliminary Note

The Court finds that the agreement to be considered in the present motion is the March 2, 2014 Employment Arbitration Agreement (2014 Agreement).

Legal Standard

The 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.)

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 Interstate Commerce is Evidenced

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 contend they engage in interstate commerce as they are a multi-national telecommunication company with regional offices across the country delivering services across the U.S. Defendants also contend that Plaintiff engaged in the supply chain for the production and distribution of Defendants’ services nationwide. (Mot., pp. 7, 13; Mot., Forte Decl., ¶¶ 3-5, 8.)

Plaintiff does not dispute Defendants’ contentions in her opposition. (See Opp’n.)

Without more, the Court finds both that Defendants engaged in interstate commerce and that the employment relationship of the parties involved interstate commerce. Validity of the 2014 Agreement aside, the Court finds that the FAA applies to that agreement.

II.

Whether the 2014 Agreement Covers the Dispute

“[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 contend that the 2014 Agreement covers claims based on, arising out of, or relating to Plaintiff’s employment, including claims for discrimination, harassment, retaliation, and wrongful termination. (Mot., pp. 15-16; Mot., Forte Decl., Ex. 4, § 1 [2014 Agreement’s clause as to scope].) As such, Defendants argue that all of Plaintiff’s claims are covered by the 2014 Agreement. (Mot., p. 16.)

In opposition, Plaintiff contends that her claims relate to the illicit actions by Defendants in response to her own protected medical leave and that of her husband. (Opp’n, p. 4.) The Court notes that Plaintiff makes no further argument relating to the scope of the 2014 Agreement.

Having reviewed the 2014 Agreement—attached as Exhibit 4 to the Forte Declaration—the Court finds that the agreement covers Plaintiff’s claims. The claims in the Complaint involve FEHA claims, Labor Code claims, breach of contract claims, and tort claims. Those clearly fall within the scope of the 2014 Agreement. (Mot., Forte Decl., Ex. 4, § 1 [encompassing, among other things, claims based on, arising out of, or relating to employment or termination with the company, wages, unlawful discrimination, harassment, or retaliation, and contract or tort law].) Though the opposition frames the Complaint’s allegations as involving “illicit” activity (Opp’n, p. 4), the Complaint does not allege causes of action involving crimes under the Penal Code, other statutory scheme, or common law, but rather, alleges statutory employment claims, contract claims, and tort claims.

Accordingly, the Court concludes that the 2014 Agreement covers the claims alleged in Plaintiff’s Complaint.

III.

Whether the 2014 Agreement is a Valid Contract

“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.)

The parties discuss the validity of the 2014 Agreement based on the following points: contract authentication, contract formation, and contract abandonment.

A. Contract Authentication

In opposition, Plaintiff contends that Defendants did not establish the authenticity of the 2014 Agreement. (Opp’n, pp. 6-7.)

In reply, Defendants contend that Plaintiff does not challenge that the signature on the 2014 Agreement is hers.  (Reply, p. 5.)

A motion to compel arbitration is “a summary proceeding.” (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1057.) The moving party can meet the “initial burden to show an agreement to arbitrate by attaching a copy of the arbitration agreement purportedly bearing the opposing party’s signature.” (Id. at p. 1060.) For this initial burden, “‘it is not necessary to follow the normal procedures of document authentication.’” (Id. at p. 1058.) Only after the opposing party “challenge[s] the validity of that signature” must the moving party “establish by a preponderance of the evidence that the signature was authentic.” (Ibid.)

The Court agrees with Defendants: Plaintiff is not challenging the validity of the signature contained in the 2014 Agreement; rather, Plaintiff only contends she does not recall signing that Agreement. Further, Defendants are not merely stating that Plaintiff entered into the 2014 Agreement; rather, they met their initial burden of showing there is an agreement to arbitrate by attaching a copy of the agreement.

Accordingly, the Court determines that Defendants have met their burden as to authentication.

B. Contract Formation

Pursuant to California Civil Code § 1550, the essential elements of a contract are (1) parties capable of contracting, (2) consent of the parties, (3) a lawful objective, and (4) sufficient cause or consideration.

1. Capacity to Contract

Defendants contend that Plaintiff was a person capable of contracting at the time the 2014 Agreement was signed. (Mot., p. 14.)

Plaintiff does not dispute this contention in her opposition.

The Court finds that pursuant to California Civil Code § 1556, Plaintiff is a person capable of contracting.

2. Consent of the Parties

Defendants contend that Plaintiff expressly and impliedly consented to the 2014 Agreement because she “wet” signed the Agreement and continued working for Defendants after signing. (Mot., pp. 14-15.)

In opposition, Plaintiff contends she did not consent because she did not knowingly sign the 2014 Agreement. (Opp’n, pp. 4-5.) Plaintiff further contends that the Agreement lacks mutual consent because Defendants did not sign the 2014 Agreement. (Opp’n, p. 5.) In support of this second contention, Plaintiff cites Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 86 (Carmona), wherein the court of appeal held that an agreement signed only by the employees lacked mutuality. (Opp’n, p. 5.)

In reply to Plaintiff’s contention that she did not knowingly sign the 2014 Agreement, Defendant contends that failing to read an agreement before signing does not prevent formation of a contract. (Reply, p. 5.) In reply to Plaintiffs second contention, Defendants contend that Plaintiff’s signature alone is sufficient to establish mutual consent and that Defendants’ signature is immaterial to enforcement of the 2014 Agreement. (Reply, p. 5.)

As to the first argument, the Court agrees with Defendants generally that failing to read an agreement before signing does not prevent formation. (See Hulsey v. Elsinore Parachute Center (1985) 168 Cal.App.3d 333, 339 [“It is well established, in the absence of fraud, overreaching or excusable neglect, that one who signs an instrument may not avoid the impact of its terms on the ground that he failed to read the instrument before signing it.”]) Further, “‘ordinarily one who signs an instrument which on its face is a contract is deemed to assent to all its terms” such that “[a] party cannot avoid the terms of a contract on the ground that he or she failed to read it before signing….’”  (Metters v. Ralphs Grocery Co. (2008) 161 Cal.App.4th 696, 701; see also 24 Hour Fitness, Inc. v. Superior Ct. (1998) 66 Cal.App.4th 1199, 1215; Pinnacle v. Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)

Second, the Court finds that the decision in Carmona is not dispositive of whether a contract lacked consent by both parties. In Carmona, the court of appeal considered the lack of Defendant’s signature as a factor in addressing whether the arbitration agreement lacked mutuality as it related to substantive unconscionability. (Carmona v. Lincoln, supra, 22 Cal.App.4th at p. 86.) By contrast, courts have held that the lack of a signature on an employer’s arbitration agreement does not signify lack of an agreement to arbitrate where such agreement is evidenced by, among other things, the fact that the arbitration agreement was on the employer’s letterhead or where subsequent conduct evinced an intent to be bound by the agreement, such a bringing a motion to compel arbitration. (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 176.)

Accordingly, the Court concludes that the required consent is present in the 2014 Agreement.

3. Lawful of Objective

Defendants contend (Mot., p. 15), and Plaintiff does not dispute, that the objective of resolving disputes through binding arbitration is lawful.

4. Consideration

Defendants contend (Mot., p. 15), and Plaintiff does not dispute, that the mutual promises to arbitrate disputes constitute adequate consideration.

Without more, the Court concludes that the 2014 Agreement was for a lawful objective and was supported with sufficient consideration.

With that, the Court finds all essential elements for the formation of a contract are present and that the 2014 Agreement was formed by the parties. 

C. Contract Abandonment

In opposition, Plaintiff contends that the parties abandoned the 2014 Agreement in 2018 when Defendants presented her with an Amended Arbitration Agreement (2018 Agreement). (Opp’n, pp. 4-5.) According to Plaintiff, abandonment occurs when there is a finding that both parties intended to disregard the contract, and abandonment may be implied from the acts of the parties. (Opp’n, pp. 4-5.) To support this contention, Plaintiff cites C. Norman Peterson Co. v. Container Corp. of Am. (1985) 172 Cal.App.3d 628, 643 (C. Norman). (Opp’n, p. 5.) Plaintiff contends that at that time she declined signing the 2018 Agreement, expressly declared she declined to submit to any binding arbitration agreement, and continued working for Defendants, all of which she argues evidences the intention of both the parties to abandon the 2014 Agreement. (Opp’n, p. 5.)

In reply, Defendants contend, in pertinent part, that the 2018 Agreement is ineffective in rebutting the validity and enforceability of the 2014 Agreement because contracts can only be rescinded by the consent of all parties. (Reply, p. 4.) According to Defendants, by the terms of the 2014 Agreement, “[i]t can only be revoked or modified by writing, specifically stating the intent to revoke or modify this Agreement and signed by (a)… [Defendants]… and [Plaintiff].” (Reply, p. 4; see Mot., Forte Decl., Ex. 4, § 13.)

The Court notes that there is a difference between contract rescission and contract abandonment, and in opposition Plaintiff is arguing for contract abandonment while in reply Defendants argue against contract rescission. Focusing on contract abandonment, the Court finds that the theory of contract abandonment has different applications based on whether the case involves a non-construction contract or a construction contract.

“In [cases involving non-construction contracts], abandonment may start with an intent to abandon by one or both of the contracting parties and conclude with an agreement by each that the contract is terminated and of no further force and effect.” (C. Norman, supra, 172 Cal.App.3d at p. 640.) In contrast, in construction contracts, “by their course and conduct, … parties [may] abandon[] the terms of the written contract while proceeding to complete … [a] project.” (Ibid.)

Factually, the case cited by Plaintiff is in the context of a construction contract. In such cases, the Court considers that conduct after an intent to abandon the contract may establish abandonment. (Ibid.) In contrast, in non-construction contract cases, such as the one now before the court, in addition to the intent to abandon the contract, there needs to be an agreement that the contract is terminated. (Ibid.) On the record before the Court, there is no such agreement.

Accordingly, the Court concludes that the 2014 Agreement was not abandoned.

IV.

Defenses to Compelling Arbitration

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.)

In opposition, Plaintiff argues that the 2014 Agreement is unconscionable.

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.) “‘Oppression’ 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.)

a. Oppression

Plaintiff contends that the 2014 Agreement is procedurally unconscionable because it is a complex adhesion contract presented by a party of superior bargaining power, likely included within the litany of documents she frequently signed as a condition of her employment. (Opp’n, pp. 8-9.) In support of this contention, Plaintiff declares she felt she could not negotiate with Defendants and does not recall a single instance during her employment when she was given a document to sign as a condition of employment and was told it was optional, amenable, or revocable. (Opp’n, p. 9.)

In reply, Defendants contend that there is no evidence or argument of lies or manipulation by Defendants leading to the signing of the 2014 Agreement, and that imposing such agreements as a condition of employment is a valid practice. (Reply, pp. 6-7.)

The Court agrees that this contract was adhesive, as it was offered on a take it or leave it basis. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113.) However, this is not the end of the discussion. If it finds a contract to be adhesive, the court must “then determine whether ‘other factors are present which, under established legal rules – legislative or judicial – operate to render it [unenforceable.]” (Id.) Generally, there are two judicially imposed limitations on contracts of adhesion – either that the provision does not fall within the reasonable expectations of the weaker party, and second, whether the agreement is unduly oppressive. (Id.)

Accordingly, the Court must continue the analysis.

b. Surprise

Plaintiff similarly contends there was surprise because it is likely the 2014 Agreement was included within the frequent litany of document she was given to sign. (Opp’n, p. 10.) More significantly, Plaintiff also contends that the 2014 Agreement is procedurally unconscionable because it did not include the arbitration rules. (Opp’n, pp. 10-11.) Instead, the agreement merely referenced the applicable “AAA Rules” and provided a website link purported to lead to the rules. (Opp’n, p. 11; Opp’n, David Decl., Ex. 2.)

In reply, Defendants contend that there is no surprise because the 2014 Agreement is a standalone document in plain language, and that reference to the arbitration rules is sufficient notice defeating the contention of surprise. (Reply, pp. 6-7.)

The Court notes that Plaintiff’s unconscionability challenge is not concerned with some element of the AAA rules of which she had been unaware when she signed the agreement. For cases where failure to provide a copy of the arbitration rules was held to support a finding of procedural unconscionability, the California Supreme Court has noted that the “claim depended in some manner on the arbitration rules in question” and that those cases “stand for the proposition that courts 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.” (See Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1246.)

Accordingly, Defendants’ failure to attach the arbitration rules, without more, does not represent procedural unconscionability.

Overall, the Court finds no measure of procedural unconscionability.

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.)

a. Whether Adequate Discovery is Precluded

Plaintiff contends that the 2014 Agreement is substantively unconscionable because it contains both a broad confidentiality provision and discovery limitations that prevent the adequate arbitration of statutory claims. (Opp’n, pp. 11-12.) As to the discovery limitations, Plaintiff argues the agreement limits each party to 15 special interrogatories and requests for admissions, one deposition and expert witness, and does not allow for the discovery of documents. (Opp’n, pp. 11-12.)

In reply, Defendants contend that the permitted discovery is adequate, governed by the Code of Civil Procedure, and permits either party to obtain further discovery upon the showing of need. As to the confidentiality provision, Defendants argue it does not materially impact Plaintiff’s ability to prosecute her case. (Reply, pp. 7-8.)

The Court recognizes that expansive confidentiality provisions are unconscionable. (See Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1067-1067 [holding a confidentiality provision about “all aspects of the arbitration” as unconscionable because it effectively prohibited an employee from conducting informal discovery, including by interviewing other employees.]) However, in cases involving provisions protecting the confidentiality of the record of the arbitration hearing, not the proceedings predating the hearing or an employee’s discovery, there is no such effect. (See Sanchez v. Carmax Auto Superstores California, LLC (2014) 224 Cal.App.4th 398; see also Woodside Homes of California, Inc. (2003) 107 Cal.App.4th 723.)

The question here is thus whether the provision that reads, “the parties shall maintain the confidentiality of any proceedings under this Agreement, including but not limited to, any and all information gathered, prepared, and presented for purposes of the arbitration or related to the claims therein,” has an unconscionable effect. (Mot., Forte Decl., Ex. 4, § 4(f).)

The Court concludes that the language of the confidentiality provision supports the finding that the provision has the described unconscionable effect.

Accordingly, the Court finds that this provision adds a degree of substantive unconscionability to the 2014 Agreement. The question remains whether this can be mitigated by severance per Civil Code section 1670.5, subdivision (a), which the Court will discuss below, subsection (c).

b. Whether the Agreement Lacks Mutuality

Plaintiff contends that the 2014 Agreement lacks mutuality because it remains unsigned by Defendants and exempts Defendants from arbitrating the claims they are more likely to bring against Plaintiff. (Opp’n, p. 11.) Plaintiff also contends there is a lack of mutuality because the agreement reserves for Defendants the right to obtain any provisional remedy including injunctive or similar relief from any court of competent jurisdiction. (Opp’n, pp. 12-13.) Plaintiff further contends that there is a lack of mutuality that results from being required to provide notice of claims and facts to Defendants so that Defendants may initiate arbitration. (Opp’n, pp. 14-15.)

In reply, Defendants contend that both parties are obliged to submit their disputes to arbitration. (Reply, pp. 8-9.)

First, the Court does not find that the provisions that Plaintiff identifies lack the mutuality as Plaintiff describes. Rather, section 2 to Exhibit 4 to the Forte Declaration states: “This agreement shall not limit either party’s right to obtain any provisional remedy, including, without limitation, injunctive or similar relief, from any court of competent jurisdiction as may be necessary to protect their rights and interests pending the outcome of arbitration.” (Italics added.)

Next, elaborating on the substantive unconscionability found in Carmona, substantive unconscionability was found where the employer did not sign the agreement, in part because that arbitration agreement consisted of provisions that were not mutual. (Carmona v. Lincoln, supra, 22 Cal.App.4th at p. 86.) Here, the Court has found that the provisions of the 2014 Agreement are mutual. Therefore, the lack of Defendants’ signature does not support a finding that the agreement was substantively unconscionable.  

c. Whether the Agreement Improperly Waives Rights

Plaintiff contends that the agreement improperly contains a waiver of PAGA claims which has recently been affirmed to be an unwaivable right, and thus a substantively unconscionable provision. (Opp’n, p. 13.)

In reply, Defendants contend that (1) there is no PAGA waiver at issue before the Court where Plaintiff’s claims involve FEHA violations and (2) an unenforceable provision, including one that is contrary to public policy, is not per se substantively unconscionable. (Reply, p. 8.)

The Court agrees that the question in determining unconscionability involves whether the terms (such as a PAGA waiver) were unconscionable at the time the agreement was made, not whether such claims were actually brought by the plaintiff. (Subcontracting Concepts (CT), LLC v. Melo (2019) 34 Cal.App.5th 201, 212 [Melo].) Nonetheless, this particular clause is easy to sever, under Civil Code section 1670.5, subdivision (a).

Unlike the agreement in Melo, supra, the Agreement here does not appear to this Court to be permeated with unconscionability. In Melo, the agreement required the employee to pay their own costs; precluded recovery by the employee of attorneys fees; did not allow for punitive damages, barred the arbitration of any PAGA claims, and precluded the employee from taking advantage of the Berman remedy before a Labor Commissioner. (Melo, 34 Cal.App.5th at pp. 212-215.)

By contrast, here, the Court can easily sever the two claims that it finds to be substantively unconscionable: the PAGA waiver (not at issue in this case anyway) and the second clause of the confidentiality agreement, which reads “including but not limited to, any and all information gathered, prepared, and presented for purposes of the arbitration or related to the claims therein.” (Mot., Forte Decl., Ex. 4, § 4(f).)

Having failed to show sufficient unconscionability against the enforcement of the arbitration agreement, the motion to compel arbitration is otherwise GRANTED.

VI.

Request for Leave to Conduct Discovery or a Live Hearing: DENIED.

In opposition, Plaintiff makes a request for leave to conduct discovery and present oral testimony at a hearing before this Court. (Opp’n, p. 15.) Plaintiff contends that there is missing documentation in her personnel file and a need for the taking of depositions, which represent disputed facts supporting the need for an evidentiary hearing before the ruling on this motion. (Opp’n, p. 15.)

According to Plaintiff’s declaration, her personnel file does not reflect significant information, including promotions, awards, trainings, necessitated time off, or her rejection of the 2018 Arbitration Agreement. (Opp’n, Kaur Decl., ¶¶ 10-11.)

The Court finds that the production of the 2014 Agreement and the resolution, above, of Plaintiff’s alleged abandonment of the 2014 Agreement resolves the question of disputed facts in this case. Plaintiff admits that she orally told her supervisor she rejected the 2018 arbitration agreement; even if there were an email or written memo to this effect, it would not change the Court’s analysis. Since Plaintiff has not identified any evidence in her Opposition or in her Declaration, or disputed facts the resolution of which could change the Court’s analysis in this case, the Court denies Plaintiff’s request for leave to conduct discovery and the request for a live hearing.

VII.

Dismissal or 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.)

Defendants request that if all claims are subject to binding arbitration, then the court may dismiss the civil action entirely or, in the alternative, stay the action. (Mot., p. 21.)

The Court STAYS this action until an arbitration is had in accordance with this Order to arbitrate or until such earlier time as the Court specifies. (Code Civ. Proc., § 1281.4.)

Conclusion

Defendants Motion to Compel Arbitration is GRANTED.

The Court will sever, pursuant to Civil Code section 1670.5, subdivision (a) the PAGA waiver and the second clause of the confidentiality agreement, which reads “including but not limited to, any and all information gathered, prepared, and presented for purposes of the arbitration or related to the claims therein.” (Mot., Forte Decl., Ex. 4, § 4(f).)

Plaintiffs Request for Leave to Conduct Discovery or a Live Hearing is DENIED.