Judge: Ashfaq G. Chowdhury, Case: 24NNCV02244, Date: 2024-09-20 Tentative Ruling
Case Number: 24NNCV02244 Hearing Date: September 20, 2024 Dept: E
Hearing Date: 09/20/2024 – 8:30am
Case No: 24NNCV02244
Trial Date: UNSET
Case Name: JIAONING SHANG vs HUNGRYPANDA US INC
TENTATIVE
RULING ON MOTION TO COMPEL ARBITRATION
Moving Party: Defendant, HungryPanda US, Inc.
(Defendant or HungryPanda)
Responding Party: Plaintiff, Jianing Shang
Moving Papers: Notice; Memorandum; Proposed Order; Curtis
Smolar Declaration; Molly Tang Declaration;
Opposing Papers: Opposition
Reply Papers: Reply; Evidence Objections; Shengzhi
Declaration
RELIEF REQUESTED
“Defendant
HungryPanda US, Inc. (“HungryPanda”) will and hereby does respectfully move the
Court, pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-16, for an order
compelling arbitration of Plaintiff Jiaoning Shang’s claims and dismissing or
staying all proceedings in this action pending conclusion of the arbitration.
HungryPanda’s motion is
based on (1) this Notice of Motion and Motion, (2) the concurrently filed
Memorandum of Points and Authorities, (3) the concurrently filed Declarations
of Molly Tang and Curtis Smolar, (4) the pleadings and papers on file in this action,
(5) the arguments of counsel, and (6) any other matter that the Court may
properly consider.”
(Def. Not. p. 2.)
ANALYSIS
There is a strong public policy in favor of
arbitration of disputes and any doubts concerning the scope of arbitrable
disputes should be resolved in favor of arbitration. (Moncharsh v. Heily
& Blase (1992) 3 Cal.4th 1, 9.) Arbitration agreements should be
liberally interpreted, and arbitration should be ordered unless the agreement
clearly does not apply to the dispute in question. (Vianna v. Doctors’
Management Co. (1994) 27 Cal.App.4th 1186, 1189.)
The Court’s starting
point is whether a valid agreement to arbitrate exists. (Cruise v. Kroger
Co. (2015) 233 Cal.App.4th 390, 396.) In ruling on a motion to compel
arbitration, the court must first determine whether the parties actually agreed
to arbitrate the dispute, and general principles of California contract law
help guide the court in making this determination. (Mendez v. Mid-Wilshire
Health Care Center (2013) 220 Cal.App.4th 534, 541.) A petition to compel
arbitration is a suit in equity to compel specific performance of a contract. (Frog
Creek Partners, LLC. v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515,
532.)
Here, Defendant attached
the Independent Contractor Agreement (ICA) with the Declaration of Molly Tang,
Head of Legal, North America for HungryPanda US, Inc. The ICA contains a section
in bold and all caps titled “GOVERNING LAW, MEDIATION AND ARBITRATION.”
In Opposition, Plaintiff
does not argue that the arbitration agreement does not exist, nor does
Plaintiff argue that he did not sign the arbitration agreement.
Therefore, the Defendant
established the existence of a valid arbitration agreement.
The Plaintiff only
attacks Defendant’s motion to compel arbitration on a few limited grounds.
FAA
Plaintiff argues that the
Federal Arbitration Act (FAA) does not apply to the arbitration agreement
because there is no interstate commerce involved in Plaintiff’s employment
contract with Defendant.
However, as pointed out
by the Reply, Plaintiff’s argument that the FAA does not apply to this
arbitration agreement is unavailing.
Defendant’s Reply points
out how the parties expressly agreed to be bound by the FAA in the arbitration
agreement. In relevant part of section 18.5 in the ICA, “If mediation is
unsuccessful, then, except as provided below, the parties must arbitrate any
dispute between them. This Agreement is then governed by the Federal
Arbitration Act, 9 U.S.C. § 1, et seq.” (Tang Decl., Ex A., § 18.5.)
“It follows that when an
agreement provides that its “enforcement” shall be governed by the FAA, the FAA
governs a party’s motion to compel arbitration.” (Victrola 89, LLC v. Jaman
Properties 8 LLC (2020) 46 Cal.App.5th 337, 346.)
Here, the parties
expressly agreed to be bound by the FAA in the arbitration agreement in § 18.5
of the ICA.
Unconscionability
The only other argument
Plaintiff asserts as to why Defendant’s motion to compel arbitration should be
denied is because the arbitration agreement is unconscionable, both
procedurally and substantively.
Under the Federal
Arbitration Act, arbitration agreements “shall be valid, irrevocable and
enforceable, save upon such grounds that exist at law or in equity for the
revocation of a contract.” (9 U.S.C.
section 2.)
As explained in Lange
:
“ ‘[U]nconscionability has both a
“procedural” and a “substantive” element,’ the former focusing on ‘
“oppression” ’ or ‘ “surprise” ’ due to unequal bargaining power, the latter on
‘ “overly harsh” ’ or ‘ “one-sided” ’ results. [Citation.] ‘The prevailing view
is that [procedural and substantive unconscionability]
must both be present in order for a court to exercise its
discretion to refuse to enforce a contract **43 or clause under the
doctrine of unconscionability.’ [Citation.] But they need not be present
in the same degree. ‘Essentially a sliding scale is invoked which disregards
the regularity of the procedural process of the contract formation,
that creates the terms, in proportion to the greater harshness or
unreasonableness of the substantive terms themselves.’ [Citations.]
In other words, the 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.” (Armendariz, supra,
24 Cal.4th at p. 114, 99 Cal.Rptr.2d 745, 6 P.3d 669.)
(Lange v. Monster
Energy Company (2020) 46 Cal.App.5th 436, 445.)
As to substantive
unconscionability, Plaintiff argues that the ICA imposes an unreasonable
location requirement. Plaintiff cites a federal case that allegedly held that
an agreement requiring arbitration in New Jersey imposed too great a financial
burden on a California resident, and conflicted with federal venue rule.
Even if the Court assumes
that Plaintiff’s case cite is accurately summarized and on point, Plaintiff’s
argument is unavailing.
Plaintiff points to §
18.1 in the ICA which has a New York choice-of-law provision, and Plaintiff
argues that this forces Plaintiff to litigate his claims in New York, which
would cause a great financial burden on him since he is a California resident.
Plaintiff’s argument
makes little to no sense in light of § 18.6 of the ICA. In relevant part of §
18.6, “The location of the arbitration proceeding shall be no more than 45
miles from the place where the Contractor last performed services for the
Company, unless each party to the arbitration agrees in writing otherwise.” (Tang
Decl., Ex A., § 18.6.) Plaintiff’s own declaration states that he was hired as
a delivery driver in California. (Shang Decl. ¶ 2.) Therefore, this agreement
does not force him to arbitrate in New York, it forces him to arbitration
proceedings no more than 45 miles from where he last performed services for the
Company, and Plaintiff’s memorandum concedes he only made “local deliveries” in
California.
Plaintiff’s “unreasonable
location” argument with respect to substantive unconscionability is unavailing.
Plaintiff’s second
argument on substantive unconscionability is confusing.
Plaintiff argues that the
FAA allows arbitration agreements to waive class-wide arbitration, but that
arbitration agreements not governed by the FAA cannot waive class-wide
arbitration. Plaintiff thus concludes that since the ICA is not governed by the
FAA, the class action waiver is unconscionable.
Here, Plaintiff’s
argument fails because this arbitration agreement is in fact governed by the
FAA.
Plaintiff’s third
argument as to substantive unconscionability is that this agreement waives the
ability of the signatory to initiate PAGA actions, and under Iskanian v. CLS
Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, an agreement waiving
the right to take representative action is unenforceable against public policy.
Here, Plaintiff’s
argument is also unavailing as this arbitration agreement does not waive the
ability to bring representative PAGA actions. Although there is in fact a class
action waiver section in the agreement, there is also a section that states
that representative claims arising under PAGA are expressly excluded from the
agreement.
“Representative claims
arising under the California Private Attorney’s General Act of 2004, California
Labor Code section 2698, et seq. (“PAGA”), to the extent available or
applicable, are expressly excluded from this Agreement to the extent that such
claims are not subject to waiver as a matter of law, but the parties to this
Agreement agree that they will first be required to mediate any such claim
pursuant to the mediation provision contained in this Agreement prior to
instituting any litigation.” (Tang Decl., Ex A., § 18.10.)
Lastly, Plaintiff argues
that this agreement is substantively unconscionable because it does not forbid
payment of the arbitrator’s fees by the employee. Plaintiff argues that under Armendariz v. Foundation Health Psychcare Services,
Inc. (2000) 24 Cal.4th 83, 102, where the employee asserts nonwaivable
statutory claims, including FEHA violations, the employer must pay the
arbitrator’s fees and all costs unique to arbitration.
Here, Plaintiff’s
argument is also unavailing. Section 18.11 of the ICA states:
Each party will pay the fees for his, her
or its own attorneys, subject to any remedies to which that party may later be
entitled under applicable law. However, in all cases where required by law, the
Company will pay the Arbitrator’s fees and costs of arbitration. If under
applicable law the Company is not required to pay all of the Arbitrator’s
and/or fees and costs of arbitration, such fee(s) will be apportioned between
the parties in accordance with said applicable law, and any disputes in that
regard will be resolved by the Arbitrator.
(Tang Decl., Ex A., § 18.11.)
Therefore, to the extent that Plaintiff is arguing
that this agreement forces him to pay the arbitrator’s fees and costs, § 18.11 explicitly
states that where required by law, the Company will pay the Arbitrator’s fees
and costs of arbitration.
“The prevailing view is that [procedural and
substantive unconscionability] must both be present in order for a court to
exercise its discretion to refuse to enforce a contract or clause under the
doctrine of unconscionability.” (Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th 83, 114 quoting Stirlen v. Supercuts,
Inc. (1997) 51 Cal.App.4th 1519, 1533.)
Here, Plaintiff’s arguments on substantive
unconscionability are unavailing. Since Plaintiff needed to show both
procedural and substantive unconscionability to demonstrate unconscionability,
and since Plaintiff did not show substantive unconscionability, Plaintiff’s
argument that the arbitration agreement is unconscionable is unavailing.
TENTATIVE RULING
Defendant’s
motion to compel arbitration is GRANTED and this action is stayed pending the
conclusion of arbitration. Plaintiff only opposed Defendant’s motion to compel
arbitration on the grounds that the FAA does not apply to the arbitration
agreement and that the arbitration agreement is unconscionable. As explained
above, Plaintiff’s arguments with respect to the FAA and unconscionability are
unavailing.