Judge: Barbara M. Scheper, Case: 23STCV14867, Date: 2024-03-14 Tentative Ruling

Case Number: 23STCV14867    Hearing Date: March 14, 2024    Dept: 30

Dept. 30

Calendar No.

Calva vs. Martinez, et. al., Case No. 23STCV14867

Tentative Ruling re:  Defendants’ Motion to Compel Arbitration

Defendants TPS Solutions, Inc., TPS Solutions, Inc. dba Coast Personnel, and Hugo Martinez (collectively, Defendants) move to compel Plaintiff Saul Calva (Plaintiff) to binding arbitration and stay this action pending completion of arbitration. The motion is denied.

“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 fourteen causes of action against Defendants, including for assault, battery, sexual harassment, and discrimination under FEHA, retaliation, and wrongful termination.

Defendants TPS Solutions, Inc. and TPS Solutions, Inc. dba Coast Personnel (collectively, TPS) are allegedly staffing agencies. (Comp. ¶¶ 8-9.) Defendant Hugo Martinez (Martinez) is a manager or supervising agent for TPS. (Comp. ¶ 7.) Plaintiff alleges that he was hired by Defendants in 2016 to work at Defendants’ auto facility in Valencia, California. (Comp. ¶ 22.) Martinez became Plaintiff’s manager beginning in 2021. (Comp. ¶¶ 27-28.) Martinez allegedly made a number of harassing and discriminatory comments towards Plaintiff, retaliated against Plaintiff when Plaintiff rebuffed Martinez’s offers to meet outside of work, and physically touched Plaintiff without consent. (Comp. ¶ 30.) As a result of Martinez’s conduct, Plaintiff resigned in May 2023. (Comp. ¶ 30.)

            Defendants move to compel arbitration based on a “Labor Arbitration Agreement” (the Agreement) between Plaintiff and Indu-Electric, Inc. (Indu-Electric), executed on September 3, 2019. (Medina Decl. ¶ 2, Ex. 1.) Under the Agreement, Plaintiff and Indu-Electric “agree to submit to binding arbitration any dispute arising from [Plaintiff] being utilized by INDU-ELECTRIC, the work conditions of INDU-ELECTRIC, any dispute regarding any alleged employment relationship between the Parties, any issues regarding termination of the relationship between the parties . . ., and any claims or legal actions brought after the date this Agreement is executed…” (Id. § 2.) Though none of the Defendants are party to the Agreement, they argue that they may compel arbitration under it based on equitable estoppel.

“In the arbitration context, a party who has not signed a contract containing an arbitration clause may nonetheless be compelled to arbitrate when he seeks enforcement of other provisions of the same contract that benefit him. [Citation.] . . . [T]he equitable estoppel doctrine applies when a party has signed an agreement to arbitrate but attempts to avoid arbitration by suing nonsignatory defendants for claims that are ‘based on the same facts and are inherently inseparable’ from arbitrable claims against signatory defendants.” (Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4th 1705, 1713.) “Courts applying equitable estoppel against a signatory have ‘looked to the relationships of persons, wrongs and issues, in particular whether the claims that the nonsignatory sought to arbitrate were ‘intimately founded in and intertwined with the underlying contract obligations.’ ” (Ibid.)

While Defendants cite Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, for the proposition that a staffing agency may enforce an arbitration agreement as a non-signatory, that is not an accurate description of the facts of that case. In Garcia, the plaintiff signed an arbitration agreement with a staffing agency and was assigned to work for another company, Pexco. (Id. at 784.) The Court of Appeal found that the non-signatory Pexco could enforce the arbitration agreement between the plaintiff and the staffing agency based on equitable estoppel, because “all of [plaintiff’s] claims are intimately founded in and intertwined with his employment relationship with [staffing agency], which is governed by the employment agreement compelling arbitration.” (Id. at 787.)

The circumstances in this case differ from Garcia. Here, in contrast, the defendant staffing agency is seeking to enforce an arbitration agreement between their alleged employee and another entity. Defendants do not claim that Plaintiff was employed by Indu-Electric (the Agreement states that “[Plaintiff] acknowledges that he or she has been offered to INDU-ELECTRIC . . . as leased labor.”). Crucially, the claims in Plaintiff’s Complaint do not depend on the purported relationship between Plaintiff and Indu-Electric. Indu-Electric is not named anywhere in the Complaint; rather, Plaintiff alleges that he was hired and employed by Defendants, and that Martinez is TPS’s manager or supervising agent. (Comp. ¶¶ 7, 22.) Defendants have presented no valid evidence explaining the relationships between Indu-Electric, TPS, and Plaintiff, and fail to show that Plaintiff’s claims against them are “based on the same facts and are inherently inseparable” from arbitrable claims Plaintiff may assert against Indu-Electric. (Metalclad Corp., 109 Cal.App.4th at 1713.) Because Defendants have shown no grounds for enforcing the Agreement as non-signatories, the motion is denied.

On reply, Defendants argue they are entitled to enforce the arbitration agreement as third party beneficiaries.  Defendants did not raise this argument in its opening brief, depriving Plaintiff of the opportunity to respond.  The court does not consider this argument.

            Even if the court considered the argument, Defendants fail to establish third party beneficiary status.  “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.”  (Civil Code §1559.)  “In some cases, a nonsignatory was required to arbitrate a claim because a benefit was conferred on the nonsignatory as a result of the contract, making the nonsignatory a third-party beneficiary of the arbitration agreement.”  (County of Contra Costa v. Kaiser Foundation Health Plan, Inc. (1996) 47 Cal.App.4th 237, 242.)

            Third parties do not become “third party beneficiaries” just because a contract benefits them. A contract must be “made expressly” for the third party's benefit. The test is “whether an intent to benefit a third person appears from the terms of the contract.”  (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 301-302; Pillar Project AG v. Payward Ventures, Inc. (2021) 64 Cal.App.5th 671 (plaintiff was not third-party beneficiary to arbitration agreement between “cryptocurrency exchange” platform and intermediary plaintiff hired to convert his cryptocurrency into conventional currency).)

            As the party claiming third party beneficiary status, Defendants TPS and Martinez have the burden of proving each element of third-party beneficiary status.  (Jones v. Jacobson (2011) 195 Cal.App.4th 1, 15 (“the nonsignatory bears the burden to establish he or she is a party to the arbitration agreement/provision covering the dispute”).)  Defendants TPS and Martinez fail to make any cogent argument that they are third party beneficiaries of the Labor Arbitration Agreement except to say that the agreement should be read to benefit workers leased to Indu-Electric, like Martinez.  Defendants conclusory statement does not establish an intent to benefit them in the Labor Arbitration Agreement.  

            Defendants’ request to be deemed third party beneficiaries of the Labor Arbitration Agreement is denied. 

            Defendants ask that the court judicially notice the trial court’s order granting TPS’s motion to compel arbitration in Tarin, which was based on the exact same Labor Arbitration Agreement and a plaintiff who was also an employee of TPS leased out to Indu-Electric.  Individual orders of other trial courts are not authority upon which parties may rely.  “Trial courts do not make binding precedents.” (9 Witkin (6th ed. 2021) California Procedure, Appeal §507.) “When collected and readily available for study,” trial court orders “may be cited for their persuasive value and are occasionally followed in the absence of controlling higher authority.” (Id.) However, an isolated ruling that is not part of a readily available compilation is not citable for its persuasive value. (Santa Ana Hosp. Med. Center v. Belshé (1997) 56 Cal.App.4th 819, 830.)

            Moreover, in Tarin, the plaintiff named both TPS and Indu-Electric in the complaint and alleged that they were both his employers.  (Medina Dec., Ex. 4, 1:25-28.)  Plaintiff did not name Indu-Electric here, nor has he alleged that they were both his employers.  The trial court found Garcia controlling and the facts presented in Tarin were in line with those in Garcia.  Here, the same circumstances do not exist, namely that the joint employment relationship is alleged in the complaint against TPS and Indu-Electric.