Judge: Barbara M. Scheper, Case: 23STCV11339, Date: 2023-10-12 Tentative Ruling

Case Number: 23STCV11339    Hearing Date: October 12, 2023    Dept: 30

Dept. 30

Calendar No.

Ramirez vs. Joe’s Sweeping, Inc., et. al., Case No. 23STCV11339

Tentative Ruling re:  Defendants’ Motion to Compel Arbitration

Defendants Joe’s Sweeping, Inc., Nationwide Environmental Services A Div. of Joe’s Sweeping, Inc., Nationwide Environmental Services, and George Ramirez (collectively, Defendants) move to compel Plaintiff Hiban Ramirez (Plaintiff) to binding arbitration. The motion is granted.

“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 was hired by Defendant Joe’s Sweeping, Inc. (JSI) as a Sweeper Operator on November 11, 2014. (Comp. ¶ 11; Samuelian Decl. ¶ 4.) Plaintiff was terminated on May 19, 2021. (Comp. ¶ 14.) Plaintiff’s Complaint asserts claims against Defendants arising from alleged disability discrimination and retaliation.

Defendants move to compel Plaintiff to arbitration based an Arbitration Agreement (the Agreement) purportedly signed by Plaintiff on February 25, 2015. (Samuelian Decl. ¶ 4, Ex. A.) The Agreement provides as follows:

[B]oth you [Plaintiff] and the Company agrees to arbitrate any and all disputes, claims, or controversies (‘claim’) that the Company may have against you or that you may have against the Company which could be brought in a court arising out of your relationship with the Company, including, but not limited to, all claims arising out of or relating to your employment with the Company and the end of your employment with the Company.

(Samuelian Decl. ¶ 4, Ex. A, p. 1.)

            Plaintiff does not dispute the existence of the arbitration agreement, but argues that the agreement is unenforceable based on either fraud or unconscionability.

Fraudulent Inducement of Agreement

Code Civ. Proc. § 1281.2 provides that an agreement to arbitrate will not be enforced where “[g]rounds exist for the revocation of the agreement.” (Code Civ. Proc. § 1281.2, subd. (b).) This has been construed “to mean that the petition to compel arbitration is not to be granted when there are grounds for rescinding the agreement. Fraud is one of the grounds on which a contract can be rescinded.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 973.)

“California law distinguishes between fraud in the ‘execution’ or ‘inception’ of a contract and fraud in the ‘inducement’ of a contract. In brief, in the former case ‘the fraud goes to the inception or execution of the agreement, so that the promisor is deceived as to the nature of his act, and actually does not know what he is signing, or does not intend to enter into a contract at all, mutual assent is lacking, and [the contract] is void. In such a case it may be disregarded without the necessity of rescission.’ [Citation.] Fraud in the inducement, by contrast, occurs when ‘the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable…’ ” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 415.)

“[A] contract will not be ‘considered void due to the fraud if the plaintiff had a reasonable opportunity to discover the true terms of the contract. The contract is only considered void when the plaintiff's failure to discover the true nature of the document executed was without negligence on the plaintiff's part. [Citation.] [¶] This issue usually arises when the plaintiff failed to read the terms of the contract, relying instead on the defendant's representation as to the effect of the contract. Generally, it is not reasonable to fail to read a contract; this is true even if the plaintiff relied on the defendant's assertion that it was not necessary to read the contract. [Citation.] Reasonable diligence requires a party to read a contract before signing it. [Citation.]’ ” (Rosencrans v. Dover Images, Ltd. (2011) 192 Cal.App.4th 1072, 1080.)

            Here, Plaintiff argues that his consent to the Agreement was obtained by fraud in the execution. Plaintiff gives the following account of his signing of the Agreement on February 25, 2015:

I was presented with an arbitration agreement, and I was told to sign the arbitration agreement right then and there without the opportunity to think about it or have an attorney review it. . . . I was given the arbitration agreement while waiting in line for my paycheck. As I picked up my paycheck, I was rushed into signing the document without having the chance to review it. When I asked questions about the arbitration agreement . . . Defendants would become upset and say, ‘You have to sign the documents.’ ‘Hurry up, there’s a long line of people still waiting for their paychecks.’ At the time, I could not afford to lose my job and I felt pressured to sign the agreement.

(Ramirez Decl. ¶ 3.)

On Reply, Defendants submit a declaration from Nejteh Der Bedrossian, JSI’s Operations Manager, who states, “Plaintiff was presented with the arbitration agreement similar to all other employees where they are given a copy of the agreement and given a reasonable amount of time to review, and ask questions if they have any prior to signing the documents. Further, arbitration agreements, handbooks, and other important documents are not presented on days that paychecks are issued.” (Der Bedrossian Decl. ¶ 2.) Der Bedrossian also disputes that Plaintiff was told, “You have to sign the documents,” or, “Hurry up, there’s a long line of people still waiting for their paychecks.” (Id. ¶ 3.)

            Accepting Plaintiff’s account as true for purposes of argument, the circumstances would not support voiding the Agreement based on fraud.  For comparison, in Rosencrans v. Dover Images, Ltd. (2011) 192 Cal.App.4th 1072, while driving into his workplace, the plaintiff-employee was handed a release agreement with “approximately 10 cars in line behind [him]” and was told, “Here, just sign this.” (Id. at 1080.) The plaintiff claimed that this constituted fraud in the execution because he “was not aware that he was signing a waiver and release of his rights.” (Id. at 1079.) The Court of Appeal disagreed, finding that the plaintiff “could have read the Release while in line, or he could have moved his truck to the side and read the Release. There is nothing indicating that [plaintiff] was forced to sign the Release or that he was somehow denied an opportunity to read the Release before signing it.” (Ibid.) Here, similarly, there is no apparent reason why Plaintiff could not have moved to the side of the line to review the Agreement before signing it. Plaintiff’s account, if true, would not show that he was denied a reasonable opportunity to discover the true terms of the contract, and so does not support a finding of fraud in the execution.

Unconscionability

            Plaintiff next argues that the Agreement is unenforceable based on unconscionability. The Court disagrees.

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.)

            Plaintiff argues that procedural unconscionability exists because he was pressured into signing the Agreement, as described above. (Ramirez Decl. ¶ 3.) Defendants dispute Plaintiff’s account of the signing. (Der Bedrossian Decl. ¶¶ 2-3.)  As discussed above, it does not appear to the Court that Plaintiff could not have read the agreement while stepping out of the line so as not to hold up other employees.  The Court also finds Defendant’s account of the process of presenting documents to be signed by new employees the more persuasive.

            Plaintiff also argues that there was procedural unconscionability because he was not provided with the rules for arbitration. 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 JAMS Employment Rules & Procedures. (Samuelian Decl. ¶ 4, Ex. A [8].) Plaintiff has not made any argument regarding the unconscionability of any incorporated term in the JAMS Rules. In this context, the failure to attach a copy of the rules is not evidence of procedural unconscionability. (Baltazar, 62 Cal.4th at 1246.)

“‘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 substantive unconscionability is present based on (1) the Agreement’s confidentiality clause, and (2) the Agreement’s severability clause.

The Agreement provides, “[t]he arbitrator’s decision shall be final and binding upon the Parties, except as provided in this Agreement. Neither the Parties nor the arbitrator may disclose the existence, content, or results of any arbitration without the prior written consent of the Parties.” (Samuelian Decl. ¶ 4, Ex. A [9].) Plaintiff argues that this provision is substantively unconscionable because it improperly stifles discovery. The Court agrees. “An inability to mention even the existence of a claim to current or former . . . employees would handicap if not stifle an employee's ability to investigate and engage in discovery.” (Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1065.) As in Ramos, where an unconscionable confidentiality provision required the plaintiff to keep “all aspects of the arbitration” secret, the Agreement restricts Plaintiff from disclosing “the existence, content, or results of any arbitration” without prior written consent. The Court finds that this broad limitation is substantively unconscionable, as “[i]t is hard to see how [Plaintiff] could engage in informal discovery or contact witnesses without violating the prohibition…” (Ibid.)  Accordingly, the Court severs the confidentiality provision from the Agreement.

The Agreement also contains a severability clause which provides, “[i]f an arbitrator finds any other provision of this Agreement unenforceable, a court or arbitrator shall interpret or modify this Agreement, to the extent necessary, for it to be enforceable…” (Samuelian Decl. ¶ 4, Ex. A [9].) While Plaintiff argues this term is unconscionable, Plaintiff presents no authority suggesting that a severability clause may evidence substantive unconscionability.

            In sum, the Court finds that there is some substantive unconscionability present but no procedural unconscionability. Because Plaintiff has not shown that the Agreement is procedurally unconscionable, the Agreement is not unenforceable based on unconscionability.

Finally, Plaintiff argues that Defendant George Garcia’s claims are not subject to the Agreement because he is a non-signatory. The Court disagrees. Garcia may enforce the Agreement as an alleged agent of the signatory, JSI. “[W]hen a plaintiff alleges a defendant acted as an agent of a party to an arbitration agreement, the defendant may enforce the agreement even though the defendant is not a party thereto.” (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614.) Here, Plaintiff’s Complaint alleges that Garcia was his manager during the period at issue. (Comp. ¶ 15a.) An allegation of joint employment is sufficient to support application of the agency exception for enforcement by a non-signatory. (Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 788.)