Judge: Armen Tamzarian, Case: 23STCV21500, Date: 2024-01-09 Tentative Ruling

Case Number: 23STCV21500    Hearing Date: March 22, 2024    Dept: 52

Defendants’ Motion to Compel Arbitration and Stay of Action

Defendants Fred Allen Enterprises, Inc., Monro, Inc., and Dennis Allen move to compel arbitration of this action by plaintiff Rene Ramos Navarrete. 

Evidentiary Objections

            Plaintiff makes 8 objections to defendants’ evidence.  All 8 objections are overruled. 

            Defendants make 17 objections to plaintiff’s evidence.  Objection No. 1 to the entire declaration of Roberto Magana is sustained.  Objection Nos. 2-4 are therefore moot.  Objection Nos. 5-12 are overruled.  Objection Nos. 13-17 are sustained.

Mutual Assent

            Plaintiff argues there was no mutual assent to the arbitration agreement because he did not understand the agreement.  (Opp., pp. 5-6.)  “[O]ne 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.”  (Ramos v. Westlake Services LLC (2015) 242 Cal.App.4th 674, 686.)  “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 does not dispute signing the agreement.  That is the quintessential manner of objectively manifesting his consent to its terms.

Nonsignatories

            Plaintiff opposes the motion on the basis that the agreement to arbitrate is only between him and Fred Allen Enterprises, Inc.  Though only Fred Allen Enterprises, Inc. is a party to the agreement, plaintiff agreed to arbitrate claims against others.  The arbitration agreement provides, “This Agreement to Arbitrate … is entered into by and between Fred Allen Enterprise Inc., dba Allen Tire Company and its subsidiary and affiliated companies, and each of their officers, directors, agents, benefit plans, insurers, successors, and assigns … and Employee.”  (Bauer Decl., Ex. A.)  

Defendants present undisputed evidence that Monro, Inc. is a successor or affiliated company of Fred Allen Enterprises, Inc.  Defendant Monro, Inc. is the sole member of MNRO Holdings, LLC.  (Heisman Decl., ¶ 4.)  MNRO Holdings, LLC purchased several stores owned and operated by Fred Allen Enterprises in California.  (Id., ¶ 5.)  “Monro created MRNO to hold Monro’s California operations including those stores acquired from Fred Allen Enterprises Inc.”  (Id., ¶ 6.)  Plaintiff agreed to arbitrate disputes with affiliated companies and successors, which includes Monro, Inc. 

            Furthermore, a defendant who is not a party to the agreement “may enforce the arbitration agreement, ‘when a plaintiff alleges a defendant acted as an agent of a party to an arbitration agreement.’ ”  (Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 788 (Garcia).)   

            Plaintiff’s complaint alleges defendant Dennis (in the complaint, “Danny”) Allen is liable for harassment based on disability and race.  It alleges Allen “was a Manager, Officer, Shareholder, Director, Supervisor, Manager, Managing Agent, Owner, Principal, and/or Employee of Defendant MONRO, Defendant FRED ALLEN ENTERPRISES and/or DOES 1 through 100.”  (Comp., ¶ 4.)  It further alleges, “Defendants Danny Allen and TUCKER were agents/employees of Defendants MONRO, FRED ALLEN ENTERPRISES, and DOES 1 through 100, and in doing the acts alleged herein, Defendants Danny Allen and TUCKER were acting within the course and scope of their employment as well as in their individual capacity.”  (Comp., ¶ 7.)     

Plaintiff’s complaint also alleges Monro, Inc. and the other entity defendants “were used merely as shells, instrumentalities, and/or conduits of one another and by which the others were doing business.”  (Comp., ¶ 8.)  He further alleges that “Monro/Fred Allen Enterprises employed Plaintiff.”  (¶ 12.)  Plaintiff’s opposition argues, “Although Plaintiff has alleged Defendants Monro and Defendant Fred Allen are joint employers, they are entirely separate companies/entities.”  (Opp., p. 4.)  As in Garcia, “the alleged joint employers … were agents of each other in their dealings with” plaintiff, and therefore the nonsignatory entity “is entitled to compel arbitration of [plaintiff’s] claims against it under the arbitration clause in [plaintiff’s] contract with” the signatory defendant.  (Garcia, supra, 11 Cal.App.5th at p. 788.)

Waiver

            Plaintiff argues defendant Monro, Inc. waived its right to compel arbitration because it demurred to the complaint.  “[A] party who resists arbitration on the ground of waiver bears a heavy burden [citation], and any doubts regarding a waiver allegation should be resolved in favor of arbitration.”  (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195.)  Plaintiff does not establish that Monro, Inc. waived the right to compel arbitration.  “[M]erely participating in litigation by itself” does not result in waiver.  (Id. at p. 1203.)  Delay alone is insufficient for waiver.  (Khalatian v. Prime Time Shuttle, Inc. (2015) 237 Cal.App.4th 651, 663 [14-month delay “insufficient to support the waiver”; Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 376 [no waiver despite three years of litigation].)  Demurring to the complaint is insufficient to waive the right to compel arbitration.

Requirements Under Armendariz

Plaintiff argues the arbitration agreement does not meet the requirements for arbitrating FEHA claims in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 (Armendariz).  “With respect to FEHA claims, our Supreme Court has outlined certain minimum requirements which must be met to ensure the preservation of statutory rights in an arbitral forum: (1) the agreement must provide for neutral arbitrators, (2) the agreement may not limit remedies provided under the statute, (3) there must be sufficient discovery to adequately arbitrate the employee’s statutory claim, (4) there must be a written arbitration decision and judicial review sufficient to ensure the arbitrator complied with the statutory requirements, and (5) the employer must pay all costs unique to arbitration.”  (Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1059.)

First, plaintiff argues the agreement does not provide adequate discovery.  But, as plaintiff notes, the “agreement does not mention anything with regards to discovery.”  (Opp., p. 6.)  That means it does not limit discovery.  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.) 

Moreover, the agreement provides for arbitration “in accordance with ADR Services, Inc.’s Rules for the resolution of employment disputes.”  (Bauer Decl., Ex. A.)  Those rules provide, “The arbitrator shall have the authority to order such discovery, by way of deposition, interrogatory, document production, or otherwise, as the arbitrator considers necessary to a full and fair exploration of the issues in dispute, consistent with the expedited nature of arbitration.  With respect to arbitration of employment claims, the parties are entitled to discovery sufficient to adequately arbitrate their claims, including access to essential documents and witnesses, as determined by the arbitrator(s).”  (Sorosky Reply Decl., Ex. B, p. 10.)

Second, plaintiff argues the agreement requires him to pay costs unique to arbitration.  It does not.  It provides, “The fees of the arbitrator and the costs of the arbitration, exclusive of Employee’s attorneys’ fees, shall be paid by Employer.”  (Bauer Decl., Ex. A.)  Plaintiff relies on a separate provision stating, “Subject to the penalty for failure to mediate before arbitration, the Arbitrator shall award the prevailing party attorneys’ fees and costs but only to the extent the prevailing party would have been entitled to such under applicable state, federal, and local laws.”  (Ibid., italics added.)  This provision incorporates the asymmetrical standard for awarding attorney fees and costs in FEHA claims. 

Third, plaintiff argues the agreement “fails to provide for limited judicial review and a written order.”  (Opp., p. 7.)  The agreement expressly provides, “A single arbitrator shall decide all claims and shall provide a detailed written arbitration decision.”  (Bauer Decl., Ex. A.)  That satisfies the requirements of Armendariz.  There, rather than “articulat[ing] precisely what standard of judicial review” is required, the California Supreme Court stated, “All we hold today is that in order for such judicial review to be successfully accomplished, an arbitrator in an FEHA case must issue a written arbitration decision that will reveal, however briefly, the essential findings and conclusions on which the award is based.”  (Id. at p. 107.)    

Plaintiff’s reliance on Gravillis v. Coldwell Banker Residential Brokerage Co. (2010) 182 Cal.App.4th 503 is misplaced.  The court did not consider unconscionability.  It stated, “[T]he Agreement’s silence as to the scope of review indicate that the parties intended the general rule of nonreviewability to apply.”  (Id. at p. 517.)  Rather than finding that general rule is unfair, the court concluded the parties did not agree to expand the scope of judicial review beyond the limited review generally available for arbitration proceedings. 

Unconscionability

            Plaintiff argues the 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.)  “Generally, the burden is on the party opposing arbitration to show an arbitration agreement is unconscionable.”  (Saheli v. White Memorial Medical Center (2018) 21 Cal.App.5th 308, 330.)

A. Procedural Unconscionability

Plaintiff shows a high degree of procedural unconscionability.  Procedural unconscionability occurs 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 on other grounds by Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237.)  “Circumstances showing oppression include (1) the amount of time an employee is given to consider a contract; (2) the pressure exerted on him to sign it; (3) its length and complexity; (4) his education and experience; and (5) whether he had legal assistance.  [Citation.]  Significant oppression is shown when, as here, an arbitration agreement is presented to an employee while he is working, along with other documents, neither its contents nor its significance are explained, and the employee is told he must sign the agreement to keep his job.”  (Nunez v. Cycad Management LLC (2022) 77 Cal.App.5th 276, 284.)

Plaintiff presents evidence of such oppression.  Plaintiff states that Patrick Tucker presented the agreement to him during his shift at work.  (Navarette Decl., ¶ 3.)  Tucker offered him $250 to sign it.  (Id., ¶ 4.)  Tucker did not give him time to read the agreement.  (Id., ¶ 5.)  Moreover, plaintiff “mainly speak[s] and read[s] Spanish” and does “not understand complex English or legal terms in English.”  (Id., p 6.)  Plaintiff states Tucker told him, “ ‘[I]f you don’t sign this, you are going against the company.’ ”  (Id., ¶ 8.)  Plaintiff also states, “Tucker was getting visibly upset and angry at employees who refused to sign the agreement.”  (Id., ¶ 11.) 

Plaintiff has not shown he was required to sign the agreement to keep his job.  The circumstances were nonetheless highly oppressive.  The record shows plaintiff’s employer pressured him to sign the agreement during his shift with little time to review it and only a minimal explanation of its meaning.

B. Substantive Unconscionability

Plaintiff argues the agreement has three substantively unconscionable terms. 

First, plaintiff argues the agreement is substantively unconscionable because it provides that the arbitrator will decide whether claims can be arbitrated.  The agreement has no such delegation clause.  It provides, “The Company and Employee mutually agree that any dispute or controversy arising out of or in any way related to any Disputes shall be resolved exclusively by final and binding arbitration.”  (Bauer Decl., Ex. A.)  It defines “Disputes” as “any claim or action arising out of or in any way related to the hire, employment, remuneration, separation or termination of Employee.”  (Ibid.)  That does not include disputes about interpreting or applying the arbitration agreement itself. 

Even if the agreement had a delegation clause, “ ‘clear delegation clauses in employment arbitration agreements are substantively unconscionable only if they impose unfair or one-sided burdens that are different from the clauses’ inherent features and consequences.’ ”  (Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 245.)  Plaintiff identifies nothing unfair in the provision purportedly delegating gateway issues to the arbitrator.  By contrast, in Pinela, the delegation clause was substantively unconscionable because, in conjunction with the agreement’s choice of law provision, “an arbitrator addressing Pinela’s argument that the Agreement as a whole is unconscionable would not have the authority to apply California unconscionability standards in making that determination.”  (Id. at p. 246.)  As the court explained, “When the weaker party to an adhesion contract can show the contract is unconscionable under California law, a contractual provision requiring the application of a different state’s law to enforce the contract is itself unenforceable.”  (Id. at pp. 246-247.)  Those circumstances do not apply here. 

Second, plaintiff argues the agreement is not mutual because it selects Orange County as the forum for arbitration, while he lives in Los Angeles County.  “‘[C]ontractual forum selection clauses are valid and should be given effect unless enforcement of the clause would be unreasonable.’ ”  (Gostev v. Skillz Platform, Inc. (2023) 88 Cal.App.5th 1035, 1061 (Gostev).)  Examples of unreasonable forum selection clauses include “requiring all users of a mobile app to arbitrate their claims in San Francisco regardless of where the users are located”, “requiring college-aged students to travel from San Diego to Indiana to arbitrate claims against a company that solicited their business in California”, or “requiring residents of Colorado to mediate and arbitrate in San Francisco.”  (Ibid.) 

Requiring arbitration in Orange County is not unreasonable.  Plaintiff asserts, “I reside in Los Angeles County and filed this lawsuit in Los Angeles County Superior Court.  To arbitrate in Orange County would severely prejudice and inconvenience me, as I carry no ties to Orange County.  For example, I would have to reside in a hotel and/or commute for over an hour and a half every day during the entire arbitration.”  (Navarette Decl., ¶ 13.)  Los Angeles County and Orange County border one another.  Plaintiff does not need to travel hundreds of miles or to another state as in Gostev and the cases it discusses.  Requiring plaintiff to travel to a neighboring county is not substantively unconscionable.  Furthermore, other authority states that “ ‘[n]either inconvenience nor the additional expense of litigating in the selected forum is a factor to be considered’ ” when analyzing whether a forum selection clause is substantively unconscionable.  (Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1067 (Ramos).)

In the opposition’s section regarding the forum selection clause, plaintiff cites the following portion of Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 723: “ ‘In assessing substantive unconscionability, the paramount consideration is mutuality.’ ”  (Opp., p. 11.)  This provision is mutual.  All parties are required to arbitrate disputes in Orange County.  Fitz v. NCR Corp. did not discuss the unconscionability of a venue or forum selection provision. 

Finally, plaintiff argues the agreement is substantively unconscionable because it requires confidentiality of the proceedings.  The Court of Appeal has sometimes found confidentiality provisions are not substantively unconscionable.  (Sanchez v. Carmax Auto Superstores California, LLC (2014) 224 Cal.App.4th 398, 408; Woodside Homes of Cal., Inc. v. Superior Court (2003) 107 Cal.App.4th 723, 731-732.)  On the other hand, a confidentiality provision has been held substantively unconscionable when it prohibits employees from discussing their wages (Alberto v. Cambrian Homecare (2023) 91 Cal.App.5th 482, 493 (Alberto)) or otherwise “prevents [plaintiffs] from gathering evidence” (Ramos, supra, 28 Cal.App.5th at p. 1065).

The arbitration agreement in this case provides, “The parties agree that all proceedings and all documents prepared in connection with any arbitrated claim shall be confidential and, unless otherwise required by law, the subject matter thereof shall not be disclosed to any person other than the parties to the proceedings, their counsel, witnesses and experts, the Arbitrator, and if involved, the court and court staff.  All documents filed with the Arbitrator or with a court shall be filed under seal.”  (Bauer Decl., Ex. A.)

This provision presents some substantive unconscionability.  It is not as broad as the confidentiality provision in Ramos.  Plaintiff does not articulate how it would prevent him from gathering evidence or conducting informal discovery.  It permits disclosing information to witnesses.  The provision therefore would not interfere with plaintiff’s efforts to gather information.  But, as plaintiff argues, confidentiality can benefit only defendants.  The confidentiality provision is thus not mutual. 

Severability

            The court will exercise its discretion to sever the confidentiality provision.  “In the context of severing unconscionable provisions from an arbitration agreement, ‘the strong legislative and judicial preference is to sever the offending term and enforce the balance of the agreement.’ ”  (Alberto, supra, 91 Cal.App.5th at p. 495.)  Courts should not enforce an agreement “permeated by unconscionability.”  (Ibid., internal quotes omitted.)  “One factor weighing against severance is when ‘the arbitration agreement contains more than one unlawful provision.’ ”  (Ibid.)

Here, the parties’ agreement has only one somewhat one-sided clause.  That provision can be “stri[cken] or restrict[ed] in order to remove the unconscionable taint from the agreement.”  (Armendariz, supra, 24 Cal.4th at pp. 124-125.)  The agreement is not permeated with unconscionability. 

Disposition

            Defendants Fred Allen Enterprises, Inc., Monro, Inc., and Dennis Allen’s motion to compel arbitration is granted. 

The court hereby severs the following provision of the parties’ arbitration agreement: “The parties agree that all proceedings and all documents prepared in connection with any arbitrated claim shall be confidential and, unless otherwise required by law, the subject matter thereof shall not be disclosed to any person other than the parties to the proceedings, their counsel, witnesses and experts, the Arbitrator, and if involved, the court and court staff.  All documents filed with the Arbitrator or with a court shall be filed under seal.”  (Bauer Decl., Ex. A.)

Plaintiff Rene Ramos Navarette is ordered to arbitrate this action against defendants Fred Allen Enterprises, Inc., Monro, Inc., and Dennis Allen.  The court hereby stays the entire action pending resolution of the arbitration proceeding.