Judge Armen Tamzarian, Case Number: 23STCV11590, Date: 2023-08-23 Tentative Ruling

Judge: Armen Tamzarian, Case: 23STCV11590, Date: 2023-08-23 Tentative Ruling

Please notify Department 52 via email at smcdept52@lacourt.org and indicate that the parties are submitting on the tentative ruling. Please provide the attorney's name and represented party. Please notify the opposing side via email if submitting on the Court's tentative ruling.

Case Number: 23STCV11590 Hearing Date: August 23, 2023 Dept: 52

Tentative Ruling:

Defendant Viking River Cruises, Inc.’s Motion to Compel Arbitration and Dismiss Claims, or in the Alternative, Stay Proceedings

Defendant Viking River Cruises, Inc. moves to compel arbitration of this action by plaintiff Arianna Kendrix. Defendant Viking River Cruises (International) LLC filed a notice stating it joins in the motion to compel arbitration.

Evidentiary Objections

Defendant makes 14 objections to plaintiff’s declaration. All 14 objections are overruled.

Delegation to Arbitrator

Defendant argues an arbitrator, not the court, should determine whether the parties’ arbitration agreement must be enforced. “Parties to an arbitration agreement may agree to delegate to the arbitrator, instead of a court, questions regarding the enforceability of the agreement. [Citation.] They ‘can agree to arbitrate almost any dispute—even a dispute over whether the underlying dispute is subject to arbitration.’ ” (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 241 (Tiri).) “There are two prerequisites for a delegation clause to be effective. First, the language of the clause must be clear and unmistakable. [Citation.] Second, the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability.” (Id. at p. 242.)

The parties’ agreement does not have a clear and unmistakable delegation clause. It has no delegation clause at all. Rather than citing any portion of the parties’ arbitration agreement (Whitmore Decl., Ex. 1, § 16, pp. 14-18), defendant’s motion relies on the rules of arbitration providers ADR Services and Judicate West (Memo, p. 15; Blank Decl., Exs. 3, 4). The court rejects this argument for two reasons.

First, the arbitration agreement does not clearly provide for using those rules. Its reference to ADR Services and Judicate West only concerns selecting the arbitrator, not which rules apply: “The Parties shall select a mutually agreeable arbitrator (who shall be a retired judge) from a list of arbitrators provided by ADR Services, ARC, Judicate West, or any other arbitration service that is mutually agreed upon by the parties.” (Whitmore Decl., Ex. 1, § 16.e.) The agreement does “not mandate that” any particular provider’s rules “would necessarily apply.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 791 (Ajamian).)

Second, even if the agreement clearly incorporated the rules of ADR Services or Judicate West, that would not be a clear and unmistakable delegation clause. In Ajamian, the Court of Appeal stated, “[W]hile the incorporation of AAA rules into an agreement might be sufficient indication of the parties’ intent in other contexts, we seriously question how it provides clear and unmistakable evidence that an employer and an employee intended to submit the issue of the unconscionability of the arbitration provision to the arbitrator, as opposed to the court. There are many reasons for stating that the arbitration will proceed by particular rules, and doing so does not indicate that the parties’ motivation was to announce who would decide threshold issues of enforceability.” (Ajamian, supra, 203 Cal.App.4th 771 at p. 790.) The court finds this reasoning persuasive and exercises its discretion to follow it instead of any contrary authority from the Court of Appeal.

The court therefore must decide whether the arbitration agreement is enforceable.

Unconscionability

Plaintiff contends the agreement cannot be enforced because it 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.) “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 (Armendariz).)

Plaintiff shows some procedural unconscionability. The agreement was an adhesion contract drafted by the stronger party, and plaintiff had to sign it as a condition of employment. “By itself, however, adhesion establishes only a ‘low’ degree of procedural unconscionability.” (Davis v. Kozak (2020) 53 Cal.App.5th 897, 907 (Davis).) That is so even where the employee had to sign “ ‘as a condition of employment.’ ” (Id. at p. 906.)

Plaintiff does not, however, show any substantive unconscionability. She argues the agreement is substantively unconscionable because it does not permit adequate discovery from third parties. “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.” (Davis, supra, 53 Cal.App.5th at pp. 910-911.)

Here, the agreement provides, “The Arbitrator shall allow reasonable discovery to prepare for arbitration of any claims. At a minimum, the Arbitrator shall allow at least that discovery that is authorized or permitted by the Federal Rules of Civil Procedure and any other discovery required by law in arbitration proceedings.” (Whitmore Decl., Ex. 1, § 16.g.) The Federal Rules of Civil Procedure permit discovery from nonparties. (Fed. Rules Civ.Proc., rules 30(a)(1), 34(c), 45.) The agreement does not expressly incorporate Code of Civil Procedure section 1283.05 or otherwise give the arbitrator the power to compel discovery from nonparties. (See Aixtron, Inc. v. Veeco Instruments Inc. (2020) 52 Cal.App.5th 360, 402-404.)

Plaintiff does not, however, present any evidence that compelling discovery from nonparties is necessary to vindicate her rights. Generally, it is “not sufficient simply to claim that the discovery limitations [are] unconscionable in the abstract.” (Baxter v. Genworth North America Corp. (2017) 16 Cal.App.5th 713, 729.) Instead, it is “necessary to make a factual showing that the discovery limitations would as a practical matter thwart the employee’s ability to prove his or her particular claims.” (Ibid.) Employees must “establish as a factual matter that the discovery provisions [are] inadequate to vindicate their statutory rights.” (Ibid.)

Plaintiff’s only evidence in support of the opposition is her declaration, which only concerns the circumstances of her signing the arbitration agreement. (Kendrix Decl., ¶¶ 2-9.) Moreover, the complaint does not identify any individuals other than plaintiff and an unnamed “supervisor.” It otherwise refers to groups of employees such as the “Workforce Optimization team” (Comp., ¶¶ 24-25) and “Human Resources department” (¶¶ 24-30). Assuming the arbitrator would not have the power to compel nonparty discovery, plaintiff has not shown doing so is necessary to vindicate her rights.

Plaintiff further argues the agreement is not mutual. “In assessing substantive unconscionability, the paramount consideration is mutuality.” (Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 241, internal quotes and citations omitted.) “An agreement may be unfairly one-sided if it compels arbitration of the claims more likely to be brought by the weaker party but exempts from arbitration the types of claims that are more likely to be brought by the stronger party.” (Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 724.)

For example, an agreement may be unfairly one-sided when it “specifically covers claims for breach of express or implied contracts or covenants, tort claims, claims of discrimination based on race, sex, age or disability, and claims for violation of any federal, state or other governmental constitution, statute, ordinance, regulation or public policy” but “specifically excludes ‘claims for injunctive and/or other equitable relief for intellectual property violations, unfair competition and/or the use and/or unauthorized disclosure of trade secrets or confidential information…’ ” (Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 175-176.)

Here, the agreement does not exempt claims typically brought only by an employer. The agreement broadly applies to “any and all disputes that may arise in connection with, arise out of or relate to this Agreement, or any dispute that relates in any way, in whole or in part, to Employee’s hiring by, employment with or separation from the company, or any other dispute by and between Employee, on the one hand, and the Company.” (Whitmore Decl., Ex. 1, § 16.a.) Though it expressly applies to employees’ claims such as those under the Fair Labor Standards Act, the Age Discrimination in Employment Act, and the Fair Employment and Housing Act (ibid.), it does not specifically exempt any typical claims brought only by employers. It specifically exempts only “claims for workers’ compensation benefits, unemployment insurance, or state or federal disability insurance … as required by” law. (Id., § 16.b.)

Finally, plaintiff contends the agreement is substantively unconscionable because it requires employees to pay half the costs of arbitration. “[W]hen an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.” (Armendariz, supra, 24 Cal.4th at pp. 110-111.) But “a mandatory employment arbitration agreement that contains within its scope the arbitration of FEHA claims impliedly obliges the employer to pay all types of costs that are unique to arbitration.” (Id. at p. 113.)

The parties’ agreement provides, “The fees of the arbitrator and all arbitration related costs shall be allocated and paid in accordance with applicable state or federal law; provided, however, unless expressly prohibited by applicable law, each party shall pay half of the arbitration-related fees and costs.” (Whitmore Decl., Ex. 1, § 16.i.) Requiring plaintiff to pay half the fees and costs is prohibited by applicable law. 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.)

Assuming this fee provision is unconscionable, it is severable. “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.) At most, the parties’ agreement has one substantively unconscionable provision: the text “each party shall pay half of the arbitration-related fees and costs.” (Whitmore Decl., Ex. 1, § 16.i.) The agreement is not permeated by unconscionability. The court will therefore sever this fee provision.

Disposition

Defendant Viking River Cruises, Inc.’s motion to compel arbitration and stay the action is granted.

The court hereby severs the following provision of the arbitration agreement: “each party shall pay half of the arbitration-related fees and costs.” (Whitmore Decl., Ex. 1, § 16.i.) Defendants shall be required to pay all costs and fees that are unique to arbitration.

Plaintiff Arianna Kendrix is ordered to arbitrate this action against defendants Viking River Cruises (International) LLC and Viking River Cruises, Inc. The court hereby stays the entire action pending resolution of the arbitration proceeding.