Judge: Armen Tamzarian, Case: 22STCV29580, Date: 2022-12-15 Tentative Ruling
Case Number: 22STCV29580 Hearing Date: December 15, 2022 Dept: 52
Defendants Shippers Transport
Express, Inc. and Kevin Baddeley’s Motion to Compel Arbitration
Defendants
Shippers Transport Express, Inc. and Kevin Baddeley move to compel arbitration
of this action by plaintiff Antonietta Violante. In opposition, plaintiff argues the
arbitration agreement is unconscionable.
Unconscionability requires both procedural and substantive
unconscionability using a sliding scale.
(Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th
165, 185.) “Procedural unconscionability
focuses on the elements of oppression and surprise.” (Id. at p. 177.) “Substantive unconscionability focuses on the
actual terms of the agreement and evaluates whether they create overly harsh or
one-sided results. (Ibid., internal
quotes omitted.)
Procedural Unconscionability
For procedural
unconscionability, “[t]he pertinent question … is whether
circumstances of the contract’s formation created such oppression or surprise
that closer scrutiny of its overall fairness is required.” (OTO, L.L.C. v. Kho (2019) 8
Cal.5th 111, 126 (OTO).) Examples
of procedural
unconscionability include when the stronger party drafts the contract and
presents it to the weaker party on a ‘take it or leave it basis.’ ” (Trivedi
v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387, 393, disapproved of
on other grounds by Baltazar v. Forever
21, Inc. (2016) 62 Cal.4th 1237.)
Plaintiff signed the
agreement in oppressive and surprising circumstances. Plaintiff states that during her first day of
work for defendant Shippers Transport Express, Inc., a “low-level
administrative assistant” (Vilante Decl., ¶ 2), Patty Allen, told plaintiff she
“had ‘forgotten’ to sign something” (id., ¶ 5). Plaintiff states, “Ms. Allen placed the
Agreement on my workstation and stood next to me pointing to the areas to
initial and sign. She pointed to the
middle of the first page and instructed me to ‘initial here’ and I initialed my
name. She then pointed to the bottom of
the Agreement and instructed me to ‘sign here.’ I signed as I was instructed.” (Ibid.) Plaintiff further states, “The entire process
took less than two minutes,” (ibid.), and “Ms. Allen did not give me any
time or any opportunity to review the Agreement before and after signing” (id.,
¶ 6).
Furthermore, the
agreement is in “8-point font or smaller” (Violante Decl., ¶, 9; Gutierrez
Decl., Ex. A), which contributed additional oppression and surprise.
These facts are
analogous to those in OTO. There,
the employer “ ‘selected a low-level employee … to present the Agreement,
creating the impression that no request for an explanation was expected and any
such request would be unavailing.’ ” (OTO,
supra, 8 Cal.5th at p. 127.) The
employer “conveyed an expectation that [the employee] sign them immediately,
without examination or consultation with counsel.” (Ibid.) The agreement was “written in an extremely
small font.” (Id. at p. 128.) Our Supreme Court held, “The document itself
and the manner of its presentation did not promote voluntary or informed
agreement to its terms.” (Id. at
p. 129.)
As defendant notes, OTO
differs in one significant factor.
There, “[b]ecause the company used a piece-rate compensation system, any
time [the employee] spent reviewing the agreement would have reduced his pay.” (OTO, supra, 8 Cal.5th at p. 127.) Here, there is no evidence that taking
additional time to review the agreement would have reduced plaintiff’s pay.
Overall, plaintiff
shows substantial procedural unconscionability.
Substantive
Unconscionability
Plaintiff argues the agreement is substantively
unconscionable for three reasons.
First, she argues it requires her to pay fees unique
to arbitration. “[R]equiring [employees]
to share the often substantial costs of arbitrators and arbitration effectively
prevents them from vindicating their FEHA rights.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 107 (Armendariz).) But “silence about costs in an arbitration
agreement is not grounds for denying a motion to compel arbitration.” (Little v. Auto Stiegler, Inc. (2003)
29 Cal.4th 1064, 1084.)
The agreement implies
plaintiff may have to pay the costs of arbitration. It states, “If the Employee is the prevailing
party, the costs and expenses of the arbitration shall be borne by the
Employer.” (Gutierrez Decl., Ex. A, p.
2.) The agreement therefore implies
that, unless plaintiff prevails, she must pay the costs. This
provision is unconscionable to the extent it requires plaintiff to pay fees in
violation of Armendariz. But courts
“assume that the arbitrator will operate in a reasonable manner in conformity
with the law.” (Dotson v. Amgen, Inc. (2010)
181 Cal.App.4th 975, 984.) The court
presumes the arbitrator would, in accordance with the law, not require
plaintiff to pay arbitration costs.
Second, plaintiff argues the agreement permits
defendant to recover costs more easily than it could in court. A provision that reduces a party’s substantive
rights and remedies may be substantively unconscionable. (Carbajal v. CWPSC, Inc. (2016)
245 Cal.App.4th 227, 25 [limit on prevailing employee’s statutory right to
attorney fees].) Under the Fair
Employment and Housing Act, “a prevailing defendant shall not be awarded fees
and costs unless the court finds the action was frivolous, unreasonable, or
groundless when brought, or the plaintiff continued to litigate after it
clearly became so.” (Gov. Code, §
12965(c)(6).)
The agreement does not change that heightened
standard for defendant to recover its costs.
It provides, “If the Employer is the prevailing party, it shall be entitled to
recover from the Employee the same costs it could recover if the matter had
been tried in federal court.” (Gutierrez
Decl., Ex. A, p. 2.) A federal court
would use the same heightened standard.
(See Calderon v. Fresenius USA, Inc. (C.D. Cal., Apr. 19,
2022, No. CV207869PSGJEMX) 2022 WL 3012158.)
Under the Erie
doctrine, “[a] federal court follows federal procedural law and, where it
applies, state substantive law.” (Kohlrautz
v. Oilmen Participation Corp. (9th Cir. 2006) 441 F.3d 827, 830.) “The recovery of prevailing party ‘costs in
federal district court’ is generally considered a question of procedure” (Zomorodian
v. BMW of North America, LLC (C.D. Cal. 2019) 332 F.R.D. 303, 305),
but there is an exception when state law exhibits a “special interest” in
awarding or denying costs under a given substantive law (id., p.
306). The Court of Appeal has stated, “FEHA’s
asymmetric rule for the award of attorney fees is a broadly applicable
substantive right.” (Patterson v.
Superior Court (2021) 70 Cal.App.5th 473, 492.)
The
Legislature has shown such a “special interest” in FEHA’s cost-shifting
provision. The Supreme Court of
California has noted “FEHA’s underlying policy of encouraging the assertion of
meritorious FEHA claims.” (Chavez v.
City of Los Angeles (2010) 47 Cal.4th 970, 986.) The Court further stated, “In FEHA actions,
attorney fee awards, which make it easier for plaintiffs of limited means to
pursue meritorious claims [citation], ‘are intended to provide “fair
compensation to the attorneys involved in the litigation at hand and encourage
[ ] litigation of claims that in the public interest merit litigation.” ’ ” (Id. at p. 984.)
Before the
Legislature codified the asymmetric cost provision, the Supreme Court of
California held that the asymmetric “standard applies to discretionary awards
of both attorney fees and costs to prevailing FEHA parties.” (Williams v. Chino Valley Independent Fire
Dist. (2015) 61 Cal.4th 97, 115 (Williams).) The Court reasoned that “the language and
history of [FEHA] persuade us the Legislature intended a trial court’s
discretion to be exercised in the same manner for costs as for attorney fees.” (Id. at p. 114.) “In FEHA cases, even ordinary litigation
costs can be substantial, and the possibility of their assessment could
significantly chill the vindication of employees’ civil rights.” (Ibid.)
The
Legislature later amended FEHA to adopt the rule stated in Williams. (Stats.2018, c. 955 (S.B.1300), § 5.) The amendment also expressly exempted FEHA
from the general procedural rules under Code of Civil Procedure section 998. The Legislature has shown a special interest
in FEHA’s cost provision such that a federal court would apply the heightened
standard under Government Code section 12965(c)(6).
Finally, plaintiff argues the agreement does not
explain how she can initiate an arbitration or find a neutral arbitrator. As in OTO, the agreement “identifies
no commercial providers” of arbitration.
(OTO, supra, 8 Cal.5th at p. 131.) This agreement, however, gives a far more
thorough explanation of how to commence an arbitration proceeding and how to
select an arbitrator. It provides, “Demand
for arbitration shall be made in writing to the other party during the
applicable statute of limitations and shall reference this Agreement.” (Gutierrez Decl., Ex. A, p. 1.) It further provides, “[T]he arbitrator shall
be a retired state or federal judge mutually agreed to by the parties or, if
the parties are unable to reach agreement within thirty days of the demand for
arbitration, a retired judge chosen by lot from a list of retired judges from
the state’s highest trial court in the County in which the Employee is
employed.” (Ibid.) The agreement is not substantively
unconscionable for failing to explain the arbitration procedure.
Severability
Any
unfair provisions in the agreement can be cured by severance. “The
strong legislative and judicial preference is to sever the offending term and
enforce the balance of the agreement” unless the agreement is “permeated by
unconscionability.” (Lange v. Monster Energy Company (2020) 46 Cal.App.5th 436, 453, internal
quotes, citations, and alterations omitted.)
This agreement is not permeated by unconscionability. Its only unconscionable provision is the one
implying that plaintiff will have to pay the costs of arbitration unless she
wins: “If the
Employee is the prevailing party, the costs and expenses of the arbitration
shall be borne by the Employer.”
(Gutierrez Decl., Ex. A, p. 2.)
The court will therefore sever that provision.
Disposition
Defendants’ motion to compel binding
arbitration is granted. The court hereby severs the following provision of the parties’ arbitration
agreement: “If the Employee is the prevailing party,
the costs and expenses of the arbitration shall be borne by the Employer.” (Gutierrez Decl., Ex. A, p. 2.) Plaintiff shall not be required to pay any
costs unique to arbitration. If she
prevails, she shall be entitled to recover her costs and attorney fees as
permitted under California law.
Plaintiff Antonietta Violante is ordered to arbitrate her claims against defendants. The court hereby stays the entire action pending resolution of the
parties’ arbitration proceeding.