Judge Audra Mori, Case 22STCV15228 2022-09-14 Tentative Ruling

Plaintiffs Emily Shields (“Shields”), Chelsea Kovinsky (“Kovinsky”), and Hannah Upshaw (“Upshaw”) (collectively, “Plaintiffs”) filed this action against Defendants University of Southern California (“USC”) and Tim Ojeda (“Ojeda”) (collectively, “Defendants”) for injuries Plaintiffs sustained as former student athletes on a lacrosse team at USC. Plaintiffs allege they were diagnosed with rhabdomyolysis after an excessive and punitive workout on September 6, 2019, led by USC employee Ojeda. The operative First Amended Complaint alleges causes of action for negligence against all defendants and intentional infliction of emotional distress (“IIED”) against Ojeda.[1]

At this time, Defendants move for an order compelling arbitration between Plaintiffs and Defendants. Plaintiffs oppose the motion, and Defendants filed a reply.

Defendants assert that Plaintiffs each signed an Informed Consent form that contained an arbitration agreement that covers all claims asserted by Plaintiffs. Defendants argue that they have not waived their right to binding arbitration, that there are no grounds for revocation of the agreement, and that no third-party claim has arisen in this matter. Further, Defendants request that the action be stayed in its entirety until arbitration is completed.

In opposition, Plaintiffs assert that USC forced them to sign the boilerplate arbitration agreements, and that the agreements are unconscionable procedurally and substantively. Additionally, Plaintiffs contend that Defendants waived their right to enforce the arbitration agreements.

Defendants, in reply, aver that Plaintiffs fail to establish that the agreements are unconscionable or that Defendants waived their right to enforce arbitration.

a. Existence of Arbitration Agreement and Claims Covered by Arbitration Clause

In deciding a petition to compel arbitration, trial courts must decide first whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The opposing party has the burden to establish any defense to enforcement. (Gatton v. T-Mobile USA, Inc. (2007) 152 Cal.App.4th 571, 579 (“The petitioner, T–Mobile here, bears the burden of proving the existence of a valid arbitration agreement and the opposing party, plaintiffs here, bears the burden of proving any fact necessary to its defense.”).)

In California, there is a “strong public policy in favor of arbitration.” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) Accordingly, “doubts concerning the scope of arbitrable issues are to be resolved in favor of arbitration.” (Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak St. (1983) 35 Cal.3d 312, 323.) Further, “under both the FAA and California law, ‘arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’ ” (Higgins v. Sup. Ct. (2006) 140 Cal.App.4th 1238, 1247.) This policy, however, is tempered by the recognition that arbitration must be based on an enforceable contract, as “[t]here is no public policy favoring arbitration of disputes which the parties have not agreed to arbitrate.” (Engineers & Architects Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644, 653.)

There is a “ ‘strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.’ “ (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 8-9.) However, it is essential to the proper operation of that policy that “ ‘[t]he scope of arbitration is ... a matter of agreement between the parties' [citation], and ‘ “[t]he powers of an arbitrator are limited and circumscribed by the agreement or stipulation of submission.” ‘ [Citations.]” (Ibid.)

“[T]he party moving to compel arbitration bears the burden of establishing the existence of a valid agreement to arbitrate, and the party opposing arbitration bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 758.)

Here, Defendants submit evidence showing that Shields and Upshaw signed an Informed Consent form that contained an arbitration agreement on August 20, 2017, and Kovinsky signed an Informed consent form with an apparently identical arbitration agreement on August 20, 2018. (Mot. Gupta Decl. ¶ 2 Exhs A-C.) Each Informed Consent form contains an arbitration agreement stating:

Arbitration is the referral of a dispute to one or more impartial persons for a final and binding determination. Arbitration is different than a court proceeding and these differences have advantages and disadvantages. For example, arbitration may be faster, cheaper and more flexible than litigation in court. On the other hand, and among other things, parties to arbitration have only limited rights to discovery or "fact-finding" tools, and the arbitrator's decision generally cannot be appealed and is subject to review only on extremely narrow grounds. Importantly, by entering into this Acknowledgment of Arbitration Policy and Agreement to Arbitrate Claims ("Agreement"), YOU AND USC EXPRESSLY WAIVE YOUR CONSTITUTIONAL RIGHTS TO A COURT OF LAW AND TRIAL BY JURY for covered claims (as described below).

By signing this Agreement, you and USC further agree that any covered claim or dispute may only be resolved through an individual arbitration and shall not be brought as a class arbitration, a class action, or any other representative proceeding.

Plaintiffs, in opposition, do not dispute signing the arbitrations agreements. Furthermore, the agreements provide the following concerning which claims are covered:

Claims Covered Student-Athlete and USC agree to resolve by individual arbitration all disputes or claims arising directly or indirectly out of, or in any way connected to, the Student-Athlete's participation in the Program, including, but not limited to disputes concerning any accident, injury, illness, death, loss, damage to person or property, or any other tort; claims for discrimination or harassment; claims for breach of any contract or covenant, express or implied; disputes concerning scholarship or eligibility determinations; and claims for violation of any federal, state or other governmental law, statute, regulation, or ordinance.

(Ibid.) As Defendants argue, the agreements cover Plaintiffs’ claims for injury, illness damage to person, and any other tort, which Plaintiffs are alleging arose out of their participation in the subject program.

Therefore, Defendants’ evidence shows the parties entered into a valid arbitration agreement, and that Plaintiffs’ claims are within the scope of the agreement.

“California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes. To further that policy, section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies. Those statutory exceptions arise where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967; CCP § 1281.2.)

In this case, Plaintiffs argue that the agreements are not enforceable because the arbitration clause in them is unconscionable.

In general, the doctrine of unconscionability refers to “ ‘ “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” ’ ” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) In other words, the doctrine consists of procedural and substantive components, “ ‘the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.’ ” (Id.)

If unconscionable, the arbitration agreement is not a valid contract and therefore is unenforceable. (Armendariz, 24 Cal.4th at 114.) Although both components of unconscionability must be present to invalidate an arbitration agreement, they need not be present in the same degree. (Id.) “ ‘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 unconscionable the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.’ ” (Id.)

Ultimately, determining whether an agreement is unconscionable requires evaluating “the totality of the agreement’s substantive terms as well as the circumstances of its formation to determine whether the overall bargain was unreasonably one-sided.” (Sonic, 57 Cal.4th at 1146.) Procedural unconscionability concerns the manner in which the contract was negotiated and the parties' circumstances at that time; it focuses on the factors of oppression or surprise. (Kinney v. United Healthcare Services. Inc. (1999) 70 Cal.App.4th 1322, 1329.)

Plaintiffs contend the arbitration clause in the agreements is procedurally and substantively unconscionable. Plaintiffs contend the agreements are effectively one-sided in their application, and that they were forced to sign them. Plaintiffs argue the agreements are adhesive in nature as Plaintiffs were on a scholarship to play lacrosse at USC, and Plaintiffs feared their scholarships or places on the lacrosse team would be jeopardized if they did not sign the agreements.

In the analogous situation involving an employer’s arbitration agreement, the Courts of Appeal have concluded that take it or leave it employer arbitration agreements are procedurally unconscionable. (See, e.g., Baxter v. Genworth North America Corp. (2017) 16 Cal.App.5th 713, 723-724 [arbitration agreement held procedurally unconscionable where employer presented arbitration agreement on a take-it-or-leave-it basis and agreement was required as a condition of continued employment]; Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 722 [same]; see also Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704 [noting “[i]t is well settled that adhesion contracts in the employment context, that is, those contracts offered on a take-it-or-leave-it basis, typically contain some aspects of procedural unconscionability”].)

Defendants, in reply, do not dispute the claims that Plaintiffs were required to sign the agreements as a condition of participation in Defendants’ program. The Court, thus, finds procedural unconscionability in the agreements. However, “ ‘a finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided.’ ” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1244.) “To describe a contract as adhesive in character is not to indicate its legal effect. It is, rather, ‘the beginning and not the end of the analysis insofar as enforceability of its terms is concerned.’ Thus, a contract of adhesion is fully enforceable according to its terms unless certain other factors are present which, under established legal rules legislative or judicial operate to render it otherwise,” such as if the contract is unduly oppressive or unconscionable. (Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 819-20, citations and footnotes omitted.)

In arguing that the arbitration clause is substantively unconscionable, Plaintiffs concede that the language of the arbitration agreement is objectively two-sided but argue that they were unfairly forced to sign it.[2] Plaintiffs also argue it would be a substantial injustice to force Plaintiffs to arbitrate their claims for IIED against Ojeda because they did not contemplate that they were agreeing to arbitrate this tort, and that Plaintiffs’ right to a judicial action cannot be lightly waived.

Plaintiffs, however, do not identify any specific provisions they contend are unconscionable. The entire Informed Consent form, in which the arbitration agreements are found, is eight pages total. The arbitration agreements make up three of the eight pages and contain underlined subsections with evenly spaced apart paragraphs.

Page four of the agreements is titled “Part II - ACKNOWLEDGMENT OF ARBITRATION POLICY AND AGREEMENT TO ARBITRATE CLAIMS” and contains the following admonishment, “(READ CAREFULLY -By Signing this Agreement You are Giving Up Rights).” (Mot. Exhs. A-C, capitalizations in originals.) Each page of the arbitration agreement is initialed by each of the Plaintiffs. (Ibid.) Further, the arbitration agreements each contain an underlined subsection titled, “Claims Covered,” which provides in relevant part that “Student-Athlete and USC agree to resolve by individual arbitration all disputes or claims arising directly or indirectly out of, or in any way connected to, the Student-Athlete's participation in the Program, including, but not limited to disputes concerning any accident, injury, illness, death, loss, damage to person or property, or any other tort…” (Ibid.) Although Plaintiffs argue that it would be a substantial injustice to require them to arbitrate their claims for IIED against Ojeda, the agreements are conspicuous, and Plaintiffs agreed to arbitrate all claims arising from their participation in the program, including for injury, illness, loss, and any other tort.

Additionally, Plaintiffs do not submit any evidence showing that language in the arbitration applies to them and not the University, or that there was fraud or surprise in their signing of the arbitration agreements. Lastly, directly above the signature line on each arbitration agreement, the following language appears:

NOTICE: BY SIGNING THIS CONTRACT YOU ARE GIVING UP YOUR CONSTITUTIONAL RIGHT TO A JURY TRIAL AND YOUR RIGHT TO PARTICIPATE AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE ACTION COVERED BY THE AGREEMENT. YOU ARE AGREEING TO INDIVIDUAL ARBITRATION OF ANY AND ALL DISPUTES OR CLAIMS ARISING DIRECTLY OR INDIRECTLY OUT OF, OR IN ANYWAY CONNECTED TO, YOUR PARTICIPATION IN THE PROGRAM, AS WELL AS ANY AND ALL DISPUTES OR CLAIMS ARISING DIRECTLY OR INDIRECTLY OUT OF, OR IN ANYWAY CONNECTED TO, THIS AGREEMENT…

(Mot. Exhs. A-C.) The Court does not find Plaintiffs’ right to a jury trial was lightly waived, rather Plaintiffs were put on clear notice of the effect of signing the arbitration agreements. Plaintiffs do not establish the agreements are substantively unconscionable.

Based on the foregoing, Plaintiffs do not show the arbitration agreement is unenforceable under the doctrine of unconscionability.

Waiver in arbitration means the contractual right to arbitration has been lost. (Saint Agnes Med. Ctr. v. PacifiCare of Calif. (2003) 31 Cal.4th 1187, 1195, fn. 4.) It is a question of fact with the party claiming waiver bearing a heavy burden of proof. (Iskanian v. CLS Transp. Los Angeles. LLC (2014) 59 Cal.4th 348, 375; Saint Agnes, supra. 31 Cal.4th at 1195-96.) A petition to compel arbitration is resolved in a summary proceeding where the trial court sits as the trier of fact. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.)

To prove waiver, the plaintiff must show (1) the defendant was aware of the right to compel arbitration, (2) the defendant acted inconsistently with that right, and (3) the plaintiff was prejudiced as a result. (Hoover v. American Income Life ins. Co. (2012) 206 Cal.App.4th 1193, 1203.) A party seeking to arbitrate should within a reasonable time move, to compel arbitration, and unreasonable delay may constitute a waiver. (Lewis v. Fletcher Jones Motor Cars. Inc. (2012) 205 Cal.App.4th 436. 445-46; Zamora v. Lehman (2010) 186 Cal.App.4th 1, 17.) Nevertheless, mere participation in litigation, short of determination on the merits, does not constitute, in itself, a waiver. (Iskanian, supra. 59 Cal.4th at 375.)

In determining if a party waived his right to compel arbitration, the courts consider the following factors: “ ‘ “ ‘(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”; and (6) whether the delay “affected, misled, or prejudiced” the opposing party.’ ” ’ ” (Id. at p. 375.) Also, “bad faith” or “willful misconduct” of a party may constitute a waiver and thus justify a refusal to compel arbitration. [Citation.]’ ” (Id. at 374–375.)

Here, Plaintiffs argue that Defendants have waived their right to enforce the arbitration agreements because Defendants filed their answer to the complaint on July 5, 2022, propounded written discovery on all three Plaintiffs, and Defendants filed a demurrer and motion to strike portions of Plaintiffs’ complaint on July 18, 2022.

However, Plaintiffs filed this action on May 6, 2022, and Defendants submit evidence showing defense counsel sent Plaintiffs’ counsel correspondence on June 2, June 16, July 5, July 15, July 17, and August 12, 2022, concerning the arbitration agreements and clearly and repeatedly requesting the parties stipulate to arbitration. (Mot. Gupta Decl. ¶ 3 Exh. D.) Defendants assert that after conveying the arbitration agreements to Plaintiffs’ counsel on June 16, 2022, Plaintiffs did not agree to arbitrate their claims, so Defendants were forced to file their responsive pleadings or risk default. Although Defendants served an initial set of written discovery on Plaintiffs, Defendants otherwise filed this motion on August 16, 2022, just over three months after the complaint was filed. While Plaintiffs state in a conclusory manner that countless attorney hours have been expended on this matter, Plaintiffs do not articulate any prejudice they have suffered due to Defendants’ conduct. Mere participation in the litigation standing alone does not constitute a waiver. (Iskanian, 59 Cal.4th at 375.) Furthermore, the Court notes that Plaintiffs did not file their operative First Amended Complaint following Defendants’ demurrer to the original complaint until September 8, 2022, and thus, the litigation machinery has not been substantially invoked in this action. (Id. at 375.) There is no showing that Defendants have delayed in seeking arbitration, or that Defendants have engaged in any bad faith regarding seeking to compel arbitration.

Accordingly, Plaintiffs do not establish that Defendants waived the right to enforce the arbitration agreements.

Defendants’ petition to compel arbitration is granted. The action is stayed pending arbitration.

Hon. Audra Mori

Judge of the Superior Court

[1] Plaintiffs filed the First Amended Complaint on September 8, 2022, which was the day after Defendants filed their reply to Plaintiff’s opposition to the instant motion.

[2] In discussing substantive unconscionability, Plaintiffs repeatedly reference the argument that they, as students, were forced to sign the arbitration clause. That argument has been considered above and supports a finding of procedural unconscionability.