Judge: Barbara M. Scheper, Case: 22STCV35064, Date: 2023-04-07 Tentative Ruling
Case Number: 22STCV35064 Hearing Date: April 7, 2023 Dept: 30
Dept. 30
Calendar No.
Assaad vs. Zenith
Insurance Company, et. al., Case No. 22STCV35064
Tentative Ruling
re: Defendants’ Motion to Compel
Arbitration
Defendants Zenith Insurance
Company, Linda Carmody, Guillermo Gabriel, and Julie Venia (collectively,
Defendants) move to compel Plaintiff Essam Assaad (Plaintiff) to binding
arbitration, and to dismiss or stay this action. The motion is granted. The action is stayed pending completion of
arbitration.
“On petition of a party to an
arbitration agreement alleging the existence of a written agreement to
arbitrate a controversy and that a party thereto refuses to arbitrate such
controversy, the court shall order the petitioner and the respondent to
arbitrate the controversy if it determines that an agreement to arbitrate the
controversy exists, unless it determines that: (a) The right to compel
arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation
of the agreement.” (Code Civ. Proc. §
1281.2, subds. (a), (b).)
A proceeding to compel arbitration
is in essence a suit in equity to compel specific performance of a contract. (Freeman v. State Farm Mutual Auto Insurance
Co. (1975) 14 Cal.3d 473, 479.) Such enforcement may be sought by a party
to the arbitration agreement. (Code Civ. Proc., § 1280, subd. (e)(1).)
The
petition to compel arbitration functions as a motion and is to be heard in the
manner of a motion, i.e., the facts are to be proven by affidavit or
declaration and documentary evidence with oral testimony taken only in the
court’s discretion. (Code Civ. Proc., §1290.2; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th
394, 413–414.) The petition to compel must set forth the provisions of the
written agreement and the arbitration clause verbatim, or such provisions must
be attached and incorporated by reference. (Cal. Rules of Court, rule 3.1330;
see Condee v. Longwood Mgmt. Corp.
(2001) 88 Cal.App.4th 215, 218 (Condee).)
Once
petitioners allege that an arbitration agreement exists, the burden shifts to
respondents to prove the falsity of the purported agreement, and no evidence or
authentication is required to find the arbitration agreement exists. (See Condee, supra, 88 Cal.App.4th at p. 219.) However, if the existence of the
agreement is challenged, “petitioner bears the burden of proving [the
arbitration agreement’s] existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities
Corp. (1996) 14 Cal.4th 394, 413; see also Espejo v. Southern California Permanente Medical Group (2016) 246
Cal.App.4th 1047, 1058–1060.)
Plaintiff’s Complaint asserts
thirteen causes of action against Defendant, arising from Plaintiffs’
employment with Zenith Insurance Company (Zenith). Plaintiff allegedly began
his employment with Zenith in 2005, and was terminated on June 10, 2021. (Comp.
¶ 2.)
Defendants move to compel
arbitration of Plaintiff’s claims based on a Mutual Arbitration Agreement
(Agreement) purportedly signed by Plaintiff on May 9, 2019. (Rivera Decl., Ex.
D.) The Agreement provides, “[a]ll disputes covered by this Agreement will be
decided by a single arbitrator through final and binding arbitration and not by
way of court or jury trial”; coverage extends to “any dispute, past, present,
or future, that the Company may have against You or that You may have against
the Company,” and/or Zenith’s “officers, directors, members, owners,
shareholders, and employees.” (Ibid.)
Plaintiff
first argues that Defendants have not complied with Rules of Court, rule
3.1330, which requires a party moving to compel arbitration to “state, in
addition to other required allegations, the provisions of the written agreement
and the paragraph that provides for arbitration. The provisions must be stated
verbatim or a copy must be physically or electronically attached to the
petition and incorporated by reference.” Defendants have attached a copy of the
Agreement to the Rivera declaration submitted in support, and have quoted the
applicable provision in their motion. This satisfies rule 3.1330.
The Court
also finds that the FAA applies to the Agreement as “a transaction involving
commerce.” (9 U.S.C. § 2.) David C. Park, Zenith’s Senior President and Deputy
General Counsel, states that Zenith transacts with policyholders and
beneficiaries across the United States. (Park ¶ 3.) Plaintiff argues that he is
not involved with interstate commerce, but presents no evidence disputing
Park’s statements.
Plaintiff next argues
that Defendants have not established the existence of a binding, enforceable
arbitration agreement. Gamboa v. Northeast Community Clinic (2021) 286
Cal.Rptr.3d 891, explains the three-step burden-shifting process for
determining the existence of an arbitration agreement as follows:
“First, the moving
party bears the burden of producing ‘prima facie evidence of a written
agreement to arbitrate the controversy.’ [Citation.] The moving party ‘can meet
its initial burden by attaching to the [motion or] petition a copy of the
arbitration agreement purporting to bear the [opposing party's] signature.’
[Citation.] Alternatively, the moving party can meet its burden by setting
forth the agreement's provisions in the motion. [Citations.] For this step, ‘it
is not necessary to follow the normal procedures of document authentication.’”
(Id. at 896.)
“If the moving party
meets its initial prima facie burden and the opposing party disputes the
agreement, then in the second step, the opposing party bears the burden of
producing evidence to challenge the authenticity of the agreement.” (Ibid.
[citing Condee v. Longwood Management Corp.
(2001) 88 Cal.App.4th 215, 219].) “The opposing party can do this in several ways.
For example, the opposing party may testify under oath or declare under penalty
of perjury that the party never saw or does not remember seeing the agreement,
or that the party never signed or does not remember signing the agreement.” (Ibid.)
“If the opposing party meets its
burden of producing evidence, then in the third step, the moving party must
establish with admissible evidence a valid arbitration agreement between the
parties. The burden of proving the agreement by a preponderance of the evidence
remains with the moving party.” (Ibid.)
Defendants have met their burden on
the first step by attaching a copy of the Agreement purportedly bearing
Plaintiff’s signature. (Rivera Decl., Ex. D.) For the second step,
Plaintiff has the burden to produce evidence challenging the authenticity of
the Agreement. Plaintiff testifies in his declaration that he has no
recollection of ever receiving the Agreement, signing the Agreement, or
returning the signed Agreement, and also states that it is not his custom and
practice to sign documents using only his initials. (Assaad ¶ 9.) The Court
finds this evidence sufficient to satisfy Plaintiff’s burden on the second
step. (Gamboa, supra, 72 Cal.App.5th at 165 [“the opposing party may testify under oath or declare under
penalty of perjury that the party never saw or does not remember seeing the
agreement, or that the party never signed or does not remember signing the
agreement.”].)
For the third step, the Court finds
that Defendant has established the existence of the Agreement by a
preponderance of the evidence. Park presents an email sent to Plaintiff’s work
account on May 10, 2019, attaching a copy of the Agreement, and another
instructing employees to return a physical copy of the Agreement. (Park Decl.
¶¶ 6-7, Ex. A, Ex. B.) Cynthia Rivera, Zenith’s Senior Human Resources Services
Associate, states that Zenith’s records reflect Plaintiff returned his signed
Agreement on May 20, 2019. (Rivera Decl. ¶ 9.) The Court also notes the
similarity between Plaintiff’s purported signature on the Agreement and
Plaintiff’s signature on his declaration submitted in support of this motion.
Accordingly, the Court finds that an enforceable arbitration agreement exists.
Unconscionability
Plaintiff
next argues that the Agreement is unenforceable due to unconscionability.
The inquiry into
unconscionability consists of two prongs: A contract will be revoked if it is
both procedurally unconscionable and substantively unconscionable. (See Armendariz
v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 103.)
Procedural and substantive unconscionability need not be present to the same
degree, with the test operating on a “sliding scale”: “[T]he 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.” (Id. at 114.)
“‘Procedural unconscionability’
concerns the manner in which the contract was negotiated and the circumstances
of the parties at that time. It focuses
on the factors of oppression and surprise. The oppression component arises from
an inequality of bargaining power of the parties to the contract and an absence
of real negotiation or a meaningful choice on the part of the weaker party. The
component of surprise arises when the challenged terms are ‘hidden in a prolix
printed form drafted by the party seeking to enforce them.’” (Nyulassy v. Lockheed Martin Corp. (2004)
120 Cal.App.4th 1267, 1281.)
Where a contract of adhesion
includes the unequal bargaining power of contracting parties, with the weaker
party’s inability to negotiate, this may indicate procedural unconscionability
in the form of oppression. (See Thompson
v. Toll Dublin, LLC (2008) 165 Cal.App.4th 1360, 1372.) “The term ‘adhesion
contract’ refers to standardized contract forms offered to consumers of goods
and services on essentially a ‘take it or leave it’ basis without affording the
consumer a realistic opportunity to bargain and under such conditions that the
consumer cannot obtain the desired product or services except by acquiescing in
the form contract. [Citations.] The distinctive feature of a contract of
adhesion is that the weaker party has no realistic choice as to its terms.
[Citations.]” (Wheeler v. St. Joseph
Hospital (1976) 63 Cal.App.3d 345, 356.)
“[A] compulsory
pre-dispute arbitration agreement is not rendered unenforceable just because it
is required as a condition of employment or offered on a ‘take it or leave it’
basis.” (Lagatree v. Luce, Forward,
Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1127.) However, the fact
that an arbitration agreement is mandatory for employment may be a factor in
determining that it is procedurally unconscionable. (See, e.g., Trivedi v. Curexo Technology Corp.
(2010) 189 Cal.App.4th 387, 393; Armendariz,
supra, 24 Cal.4th at
pp. 114-115.) Where a contract of adhesion includes the unequal bargaining
power of contracting parties, with the weaker party's inability to negotiate,
this may indicate procedural unconscionability in the form of oppression. (See Thompson v. Toll Dublin, LLC (2008) 165
Cal.App.4th 1360, 1372.)
Plaintiff
argues that procedural unconscionability is present because the Agreement was
made a mandatory condition of Plaintiff’s employment, a fact which Defendants
concede. The Court agrees that that this constitutes evidence of procedural
unconscionability, though on its own does not make the Agreement unenforceable.
(Lagatree, supra, 74 Cal.App.4th at 1126-27.)
Plaintiff
further argues that procedural unconscionability exists because the Agreement
fails to attach a copy of the applicable arbitration rules. In cases where the
failure to provide a copy of arbitration rules supported a finding of
procedural unconscionability, “the plaintiff’s unconscionability claim depended
in some manner on the arbitration rules in question.” (Baltazar v. Forever
21, Inc. (2016) 62 Cal.4th 1237, 1245-46.) That is, whether this factor
indicates unconscionability depends on whether there is unconscionability present
in the omitted rules: “courts will more closely scrutinize the substantive
unconscionability of terms that were ‘artfully hidden’ by the simple expedient
of incorporating them by reference rather than including them or attaching them
to the arbitration agreement.” (Ibid.)
Here, the Agreement provides that
arbitration will be governed by the Employment Arbitration Rules of the
American Arbitration Association. (Rivera Decl., Ex. D, ¶ 3.) Plaintiff has not
made any argument regarding the unconscionability of any incorporated term in
the AAA Employment Arbitration Rules. In this context, the failure to attach a
copy of the rules is not evidence of unconscionability. (Baltazar, 62
Cal.4th at 1246.)
In sum, the Court finds that there
is some procedural unconscionability present because the Agreement was a contract
of adhesion.
“‘Substantive
unconscionability’ focuses on the terms of the agreement and whether those
terms are so one-sided as to ‘shock the conscience.’” (Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th
1322, 1330 (citations omitted).) Substantive unconscionability looks to overly
harsh or one-sided results. (Armendariz,
supra, 24 Cal.4th at 99.) “[T]he paramount consideration in assessing
[substantive] conscionability is mutuality. . . When only the weaker party's
claims are subject to arbitration, and there is no reasonable justification for
that lack of symmetry, the agreement lacks the requisite degree of mutuality.”
(Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 657.)
Plaintiff argues that the Agreement is
substantively unconscionable due to its limitation on discovery. The Agreement
allows each party to depose two individual fact witnesses and any opposing
expert witnesses, to propound requests for production and five interrogatory
requests, and to subpoena witnesses and documents for discovery or the
arbitration hearing. (Rivera Decl., Ex. D, ¶ 4.) Additionally, “the Arbitrator
will have exclusive authority to entertain requests for additional discovery,
and to grant or deny such requests.” (Ibid.)
The Court disagrees
that this provision impermissibly restricts discovery. Similar or more
restrictive limitations on discovery have been found not unconscionable. (Dotson
v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 982-84 [approving discovery
provision allowing each party one deposition and requests for production]; Martinez
v. Master Protection Corporation (2004) 118 Cal.App.4th 107, 118–19
[approving agreement allowing one deposition and a document request].) Arbitration
provisions that provide the arbitrator absolute discretion to approve further
discovery have also been found not unconscionable. (Dotson, 181
Cal.App.4th at 984; Roman v. Superior Court (2009) 172 Cal.App.4th 1462,
1475.)
Plaintiff also argues that the Agreement’s
waiver of Plaintiff’s Labor Code, IIED, and FEHA claims shocks the conscience. This
argument is unsupported by any relevant authority. Statutory claims, including
those under FEHA, may lawfully be subject to an arbitration provision that
meets the requirements set out in Armendariz. (24 Cal.4th
83, 102.) Plaintiff has not shown any respect in which the Agreement fails to
comply with the Armendariz requirements.
The Court thus finds that there is some procedural
unconscionability present, but that the Agreement is not substantively
unconscionable. Consequently, the Agreement is not unenforceable based on
unconscionability.
Plaintiff last argues that he should be
permitted to conduct further discovery into the formation of the Agreement,
citing Civ. Code § 1670.5, subd. (b). Under that section, “[w]hen it is claimed
or appears to the court that the contract or any clause thereof may be
unconscionable the parties shall be afforded a reasonable opportunity to
present evidence as to its commercial setting, purpose, and effect to aid the
court in making the determination.” As discussed above, it does not appear that
the Agreement or any provision within is unconscionable, and so further
evidence regarding the Agreement’s “commercial setting, purpose, and effect” is
unnecessary.
The motion is
granted. The Court stays proceedings pending completion of the arbitration.