Judge: Armen Tamzarian, Case: 22STCV13937, Date: 2023-01-27 Tentative Ruling

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Case Number: 22STCV13937    Hearing Date: January 27, 2023    Dept: 52

Defendant Goodridge USA, Inc.’s Motion to Compel Arbitration

Defendant Goodridge USA, Inc. moves to compel arbitration of this action by plaintiff Maria Lara. 

Evidentiary Objections

            Plaintiff makes four objections to defendants’ evidence.  All four objections are overruled.

Mutual Assent

            Plaintiff argues she did not consent to the agreement because she “was forced to sign [it] as a condition of her employment” and “was not given a meaningful opportunity to read or understand the document.”  (Opp., p. 9.)  That does not negate the existence of the agreement.  “Contract formation is governed by objective manifestations, not the subjective intent of any individual involved.  The test is what the outward manifestations of consent would lead a reasonable person to believe.”  (Allen v. Smith (2002) 94 Cal.App.4th 1270, 1277, internal quotes and citations omitted.) 

Plaintiff signed the agreement.  (Scott Decl., Ex. B, p. 3; Lara Decl., ¶ 3.)  Signing a contract is the standard objective manifestation of consent.  Because she objectively manifested consent, it is irrelevant that she may not have understood or read the agreement.  (Ramos v. Westlake Services LLC (2015) 242 Cal.App.4th 674, 686 [“one who accepts or signs an instrument, which on its face is a contract, is deemed to assent to all its terms, and cannot escape liability on the ground that he has not read it”].)

Plaintiff states, “I felt forced to sign [the agreement] if I wanted to keep my job.”  (Lara Decl., ¶ 3) and “did not voluntarily sign” it (id., ¶ 4).  This evidence fails to establish her consent was involuntary.  Economic duress generally is “limited to actions that ‘make a mockery of freedom of contract and undermine the proper functioning of our economic system.’ ”  (Martinez-Gonzalez v. Elkhorn Packing Co. LLC (9th Cir. 2022) 25 F.4th 613, 621.)  It requires “wrongful acts” such as “the assertion of a false claim, a bad faith threat to breach a contract, and a threat to withhold payment of an acknowledged debt.”  (Ibid.)  The circumstances were somewhat oppressive or coercive but did not make a mockery of freedom of contract or undermine the proper functioning of our economic system.

Rather than lack of consent, plaintiff’s argument and evidence support procedural unconscionability.  “ ‘Arbitration contracts imposed as a condition of employment are typically adhesive.’ ” (Davis v. Kozak (2020) 53 Cal.App.5th 897, 906.)  “By itself, however, adhesion establishes only a ‘low’ degree of procedural unconscionability.”  (Id. at p. 907.)  Moreover, plaintiff fails to show any substantive unconscionability.  “No matter how heavily one side of the scale tips . . . both procedural and substantive unconscionability are required for a court to hold an arbitration agreement unenforceable.”  (Kilgore v. KeyBank, Nat. Ass'n (9th Cir. 2012) 673 F.3d 947, 963, citing Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.)

Opt Out

Plaintiff also contends she opted out of the arbitration agreement.  On November 2, 2022, plaintiff sent defendant a letter stating, “By this letter, I am hereby revoking and opting out of the purported Arbitration Agreement pursuant to Paragraph 6 of the agreement.”  (Nadir Decl., ¶ 20, Ex. N.)  The agreement does not permit one side to unilaterally opt out.  It instead provides that it “can be modified or revoked only by a writing signed by you and Thinh Pho (as CEO of Company) referencing this Arbitration Agreement and specifically stating that both the Company and you intend to revoke or modify it.”  (Scott Decl., Ex. A, ¶ 6.)

Waiver

            Plaintiff argues defendant waived any right to compel arbitration.  “[M]erely participating in litigation, by itself, does not result in a waiver.”  (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1203.)  When determining waiver, courts consider factors including “(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place.”  (Id. at p. 1196, internal quotes omitted.)

            Defendant engaged in only minimal actions inconsistent with the right to arbitrate.  They participated in discovery, submitted a case management statement requesting a jury trial, and signed a stipulated protective order.  Those acts did not substantially invoke the machinery of litigation.  Defendant filed this motion just over six months after plaintiff filed this action and less than six months after defendant answered.  The trial is not until September 20, 2023.  And though defendant participated in discovery, plaintiff fails to show any of that discovery would not have been available in arbitration.  

Finally, plaintiff argues that failing to assert the right to arbitrate as an affirmative defense constitutes waiver per se.  (Opp., p. 5.)  Plaintiff relies on Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 558, which quotes a case stating that “failure to plead arbitration as an affirmative defense is insufficient ‘by itself’ to constitute waiver.”  “There is no single determinative test of waiver.”  (Id. at p. 557.)  Not asserting arbitration as an affirmative defense is just one factor in determining whether defendant acted “inconsistent with the later assertion of a right to arbitrate.”  (Id. at p. 558.)  In the totality of circumstances, defendant did not take actions so inconsistent with the right to arbitrate and did not substantially invoke the litigation machinery such as to constitute waiver.

Disposition

            Defendant Goodridge USA, Inc.’s motion to compel arbitration is granted.  Plaintiff Maria Lara is ordered to arbitrate her claims against defendant.  The court hereby stays the entire action pending resolution of the parties’ arbitration proceeding.