Judge Bruce G. Iwasaki, Case Number: 23STCV02611, Date: 2023-08-11 Tentative Ruling

Case Name: Myesha Smith v. Mar Vista Country Villa Healthcare & Wellness Centre

Tentative Ruling: The Motion to Compel Arbitration is granted.

In this employment dispute action, filed on February 7, 2023, Plaintiff Myesha Smith (Plaintiff) filed a twelve-count complaint against her employers, Defendants Mar Vista Country Villa Healthcare & Wellness Centre, LP, Rockport Healthcare Support Services, LLC, and Modern HR, Inc. (Defendants). The allegations include FEHA violations, wrongful termination claims and Labor Code violations.

On June 23, 2023, Defendants filed a motion to compel arbitration. In opposition, Plaintiff argues the arbitration agreement is both invalid and unenforceable based on unconscionability.

Plaintiff’s objections to Defendant’s evidence is ruled as follows: Nos. 1-2 are overruled, No. 3 is sustained.

Defendants’ objection to Plaintiff’s evidence is ruled as follows: Nos. 1-13 is overruled. In reply, Defendant requests the court take judicial notice of Exhibit 1-2 under Evidence Code section 452, subdivision (d). Plaintiff opposes this request. The request for judicial notice is granted.

Under Code of Civil Procedure section 1281.2, a court may order arbitration of a controversy if it finds that the parties have agreed to arbitrate that dispute. Because the obligation to arbitrate arises from contract, the court may compel arbitration only if the dispute in question is one in which the parties have agreed to arbitrate. (Weeks v. Crow (1980) 113 Cal.App.3d 350, 352.) Since arbitration is a favored method of dispute resolution, arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question. (Id. at p. 353; Segal v. Silberstein (2007) 156 Cal.App.4th 627, 633.)

In ruling on a petition to compel arbitration, a court must determine two threshold matters: first, whether a valid agreement to arbitrate exists; and second, whether that agreement encompasses the dispute at issue. (See Code Civ. Proc. § 1281.2.)

Here, Plaintiff disputes the existence of a valid, binding agreement between Defendant Mar Vista and Plaintiff. The burden is on Defendant to demonstrate the existence of a valid agreement. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413 [“Because the existence of the agreement is a statutory prerequisite to granting the petition [to compel arbitration], the petitioner bears the burden of proving its existence by a preponderance of the evidence.”].)

The summary procedure under Code of Civil Procedure, section 1290.2 involves a three-step burden shifting framework. (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.) In the first step, the party moving to compel arbitration carries the initial burden to present prima facie evidence of an arbitration agreement. (Ibid.) The moving party can meet this initial burden by attaching to its motion a copy of the arbitration agreement “purporting to bear the [opposing party's] signature.” (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 543–544.) Alternatively, the moving party can set forth verbatim in its motion the agreement's provisions. (Gamboa, supra, 72 Cal.App.5th at p. 165; see also Cal. Rules of Court, rule 3.1330 [“The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.”].) At this initial step, “it is not necessary to follow the normal procedures of document authentication.” (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218.)

If, as here, the nonmoving party does challenge the existence of a valid arbitration agreement between the parties, then the second step is triggered. In this second step, “the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement.” (Gamboa, supra, 72 Cal.App.5th at p. 165; see also Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 755 [“If the movant bears its initial burden, the burden shifts to the party opposing arbitration to identify a factual dispute as to the agreement's existence—in this instance, by disputing the authenticity of their signatures”].) At this second step, the “opponent need not prove that [for example] his or her purported signature is not authentic, but must submit sufficient evidence to create a factual dispute and shift the burden back to the arbitration proponent ....” (Iyere, supra, at p. 755.)

If the party opposing arbitration meets its burden of producing evidence to challenge the authenticity of the agreement, then in the third step, the burden of proof shifts back to the moving party to “establish with admissible evidence a valid arbitration agreement between the parties.” (Gamboa, supra, 72 Cal.App.5th at p. 165.) “The burden of proving the agreement by a preponderance of the evidence remains with the moving party.” (Id. at pp. 165–166.) In this third step, the moving party may submit reply evidence establishing the agreement's validity. (See Sprunk v. Prisma LLC (2017) 14 Cal.App.5th 785, 794 [court properly admitted moving party's evidence submitted on reply because nonmoving party placed the arbitration agreement's validity at issue in his opposition papers].)

Here, Defendants submit evidence that, as a condition of Plaintiff’s employment with Defendant Mar Vista, she executed an Alternative Dispute Resolution Policy and Agreement (Agreement) on April 8, 2021. (Blish Decl., ¶¶ 5, 8, Ex. A.) Under the Agreement, Plaintiff agreed to arbitrate all claims arising from her employment with Mar Vista. (Blish Decl., ¶ 6, Ex. A.) Specifically, the Agreement provides, in relevant part:

“I agree that in the event employment disputes arise between Country Villa Mar Vista and/or any of their respective employees or officers (herein collectively referred to as the “Company”), on the one hand, and me, on the other hand, I will be bound by the Company Alternative Dispute Resolution Policy (the “ADR Policy”), which provides for final and binding arbitration … This agreement is a waiver of all rights to a civil court action for a covered dispute; only an arbitrator, not a Judge or Jury, will decide the dispute.” (Ibid.)

Further, on March 31, 2021, Plaintiff also signed an employment application agreement with Defendant Mar Vista that stated her employment would be subject to final and binding arbitration; this Employment Application contained a paragraph stating:

“I understand that any and all disputes regarding my employment with the company, including any disputes relating to the termination of my employment, are subject to the Alternative Dispute Resolution process, which includes final and binding arbitration. I also understand and agree, as a condition of employment, to submit any such disputes for resolution under that process, and I further agree to abide by and accept the decision of the arbitration panel as the final binding decision and resolution of any such disputes I may have.” (Blish Decl., ¶ 7, Ex. B.)

In opposition, Plaintiff represents that she was rushed through signing and reviewing the documents at the time she was hired; nevertheless, she states that she never received the first four pages of the Agreement – only the fifth page that she signed. (Smith Decl., ¶¶ 7-9.) She states she would have never signed the fifth page if she had read the preceding four pages. (Smith Decl., ¶ 9.)

The issue of whether there was a binding, valid arbitration agreement turns on the parties’ credibility, specifically Plaintiff’s credibility.

“[I]t is the exclusive province of the trial judge or jury to determine the credibility of a witness and the truth or falsity of the facts upon which a determination depends.” (Bloxham v. Saldinger (2014) 228 Cal.App.4th 729, 750.)

In a case similar to this one, Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 420, the parties submitted conflicting evidence regarding whether the plaintiff received a copy of the arbitration agreement. The trial court credited the employer's evidence and found the plaintiff did receive a copy of the agreement, after weighing the denial of receipt by the plaintiff with the inference from a proof of mailing. (Ibid.) The Court of Appeal determined that substantial evidence supported the trial court’s finding in Craig. (See id. at p. 421 [“The trial court decided that issue [whether the employee received the arbitration agreement] in favor of [the employer], and its credibility call is binding on this appeal.”].)

In disputing Plaintiff’s assertion that she only received the last page, Defendants note that Plaintiff’s counsel has taken similar positions in other arbitration cases. (RJN Exs. 1-2.) It is peculiar that Plaintiff’s counsel should represent multiple people who are regularly given incomplete arbitration agreements.

Further, in assessing the veracity of Plaintiff’s version of events, Plaintiff claims she was “rushed” through reviewing the numerous documents provided to her that day (Smith Decl., ¶¶ 5-6), but also specifically remembers only receiving a single page of the Arbitration Agreement. It strains credulity that Plaintiff would be rushed through all these documents, including having to take a test, but remembers the exact page length of one of the documents she signed almost two years later.

Moreover, by the terms of the portion of the Agreement that Plaintiff admitted to signing, she was provided a copy of the ADR Policy for her to keep and could obtain a copy of the Employment Arbitration Rules and Procedures on the JAMS website. ((Blish Decl., ¶ 6, Ex. A, p. 5.) Further, Plaintiff’s contention that she would not have signed the Agreement had she read the earlier pages seem disingenuous where Plaintiff agreed on two occasions to binding arbitration: once on the Signature page of the Agreement that restated many of the binding arbitration terms and again on the employment application. For this reason, there also appears to have been no motivation by Defendants to only provide a portion of the Agreement; that is, there is no credibility evidence suggesting Defendants needed to “trick” its prospective employees into signing the arbitration provision by only providing a portion of the Agreement.

Based on the foregoing, Defendant has carried its burden of demonstrating the existence a valid, binding arbitration agreement and that Plaintiff’s claims fall within the scope of the Agreement.

If the moving party establishes the existence of an arbitration agreement, and the nonmoving party does not challenge the agreement's validity or otherwise establish an exception to arbitration, the court must order the parties to arbitrate their dispute. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218–219.)

Plaintiff also argues the arbitration agreement is void as matter of law pursuant to Labor Code section 432.6. Acknowledging that the FAA preempts the application of Labor Code section 432.6,[1] Plaintiff further argues the Arbitration Agreement at issue here cannot be subject to the FAA where no interstate commerce is involved.

Labor Code section 432.6 prohibits an employer from requiring an employee to waive “any right, forum, or procedure for violation of any provision of the California Fair Employment and Housing Act.” (Labor. Code § 432.6, subd. (a).)

It is not determinative that Plaintiff argues in opposition that she did not engage in interstate commerce in her role as Activity Director for Defendant Mar Vista. Rather, the Agreement is subject to the FAA because Defendant Mar Vista is involved in interstate commerce. (Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265.) Here, Mar Vista is engaged in providing healthcare services purchased in interstate commerce to its customers, and Mar Vista also markets its services nationwide and internationally through internet websites, cellular networks, and mail, to conduct its business. (Blish Decl., ¶ 4.) Mar Vista also uses interstate communication networks including but not limited to the internet, electronic-communications, telephone, and U.S. Mail to conduct business. (Blish Decl., ¶ 4.) Therefore, Mar Vista is engaged in interstate commerce within the meaning of the FAA. (Basura v. U.S. Home Corp. (2002) 98 Cal.App.4th 1205, 1214 [evidence of interstate commerce included declarations regarding builder's contracts with out-of-state subcontractors, communications by interstate mail and national advertising].)

Based on the foregoing, the court finds that there is a valid agreement to arbitrate Plaintiff’s claims here. The Court next considers the enforceability of the Agreement.

Plaintiff argues the contract is unenforceable because it is both procedurally and substantively unconscionable.

If a court finds as a matter of law that a contract or any clause of a contract is unconscionable, the court may refuse to enforce the contract or clause, or it may limit the application of any unconscionable clause so as to avoid any unconscionable result. (Civ. Code § 1670.5, subd. (a).) “An agreement to arbitrate, like any other contract, is subject to revocation if the agreement is unconscionable.” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 83 [citing Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 98].)

“The general principles of unconscionability are well established. A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party. [Citation.] Under this standard, the unconscionability doctrine ‘ “has both a procedural and a substantive element.” ’ [Citation.] ‘The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. [Citations.] Substantive unconscionability pertains to the fairness of an agreement's actual terms and to assessments of whether they are overly harsh or one-sided.’ [Citation.] [¶] Both procedural and substantive unconscionability must be shown for the defense to be established, but ‘they need not be present in the same degree.’ [Citation.] Instead, they are evaluated on ‘ “sliding scale.” ’ [Citation.] ‘[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to’ conclude that the term is unenforceable. [Citation.] Conversely, the more deceptive or coercive the bargaining tactics employed, the less substantive unfairness is required. [Citations.] A contract's substantive fairness ‘must be considered in light of any procedural unconscionability’ in its making. [Citation.] ‘The ultimate issue in every case is whether the terms of the contract are sufficiently unfair, in view of all relevant circumstances, that a court should withhold enforcement.’ ” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125–126.) “The burden of proving unconscionability rests upon the party asserting it.” (OTO, supra, 8 Cal.5th at p. 126.)

Plaintiff argues the Agreement is procedurally unconscionable because the Agreement was a condition of employment, Plaintiff was not a sophisticated party, the parties had unequal bargaining power, Plaintiff had limited time to review the agreement before signing, the arbitration rules were not provided, and there was no opt-out provision. (Smith Decl., ¶¶ 2-16.)

Defendants do not dispute that the Agreement contains some degree of procedural unconscionability as a contract of adhesion given on a “take or leave it” condition of employment. Nonetheless, Defendants argue that courts regularly uphold arbitration agreements where they are presented to employees on a “take it or leave it basis.” (See e.g., Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071; Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1123.)

The Arbitration Agreement here contains some level of procedural unconscionability arising from the circumstances of the contract negotiation (or lack thereof) and unequal bargaining power. It is undisputed that the Agreement was a condition of employment and there was no opportunity for Plaintiff to negotiate the terms.

The level of procedural unconscionability, however, is low. “When arbitration is a condition of employment, there is inherently economic pressure on the employee to accept arbitration. This alone is a fairly low level of procedural unconscionability.” (Cisneros Alvarez v. Altamed Health Services Corporation (2021) 60 Cal.App.5th 572, 591.) Absent other circumstances demonstrating oppression or sharp tactics in forcing the terms of the Agreement, this alone does not render an arbitration agreement unenforceable. (See Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245 [“[t]he adhesive nature of the employment contract requires us to be ‘particularly attuned’ to her claim of unconscionability [citation], but we do not subject the contract to the same degree of scrutiny as ‘[c]ontracts of adhesion that involve surprise or other sharp practices’ ”].)

Plaintiff also argues that the Agreement did not attach a copy of the arbitration rules. However, as a preliminary matter, the Agreement signed by Plaintiff states that a copy of the Employment Arbitration Rules and Procedures can be found at www.jamsadr.com. California courts have consistently found that when the agreement cites to the applicable arbitration rules but does not attach those rules the agreement is not necessarily rendered procedurally unconscionable as matter of law. (Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 690 [incorporation of AAA rules by reference without attaching them could be a small factor in support of a finding of procedural unconscionability; standing alone, or even in the context of an adhesion contract, without more, it is not enough to support a finding of procedural unconscionability]; accord, Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1472.)

Moreover, the failure to attach arbitration rules does not add to the Agreement’s unconscionability as a contract of adhesion where Plaintiff’s unconscionability claim is not based on the substance of the arbitration rules, themselves. (Baltazar, supra, 62 Cal.4th at p. 1246.) As the Baltazar Court explained, absent some claim that a rule was artfully hidden through incorporation by reference, the failure to attach arbitration rules does not make the agreement either procedurally or substantively unconscionable. (Baltazar, supra, 62 Cal.4th at pp. 1246–1247.)

In spite of this minimal procedural unconscionability, California law requires that courts enforce the arbitration agreements unless they also find the agreement is substantively unconscionable (Baltazar, supra, 62 Cal.4th at p. 1243.)

Plaintiff also argues the Agreement contains several substantively unconscionable provisions.

First, Plaintiff argues the choice of JAMS renders Defendants “repeat players.” Plaintiff claims that there “is no question that Country Villa Mar Vista has all of its arbitration disputes engaged by JAMS. The “repeat player” effect gives the employer the advantage of knowing the arbitrators’ temperaments, procedural preferences, and styles.” (Opp. 12:11-14.) Plaintiff further suggest that “the arbitrators may seek to cultivate further business from the employer by taking a “split the difference” approach to damages.” (Opp. 12:14-16.)

Plaintiff’s argument here renders a choice of arbitration forum provision per se unconscionable; however, this is not the law. (See Mercuro v. Sup.Ct. (2002) 96 Cal.App.4th 167, 178 [“While our Supreme Court has taken notice of the “repeat player effect,” the court has never declared this factor renders the arbitration agreement unconscionable per se.”].)

Here, Plaintiff argument is entirely speculative and lacking any evidence. There is no evidence that any circumstances of the JAMS arbitration procedure would even encourage the “repeat player effect.” For example, in the court in Mercuro found the arbitration agreement was substantively unconscionable because the agreement, which was subject to the procedures by the National Arbitration Forum, identified only eight eligible arbitrators within the applicable rules and the employee was not permitted to participate in the selection process. (Mercuro v. Superior Court, supra, 96 Cal.App.4th at p. 178.)

In contrast, the Agreement here expressly provides for the mutual selection of a neutral arbitrator. (Blish Decl., Ex. A.) Moreover, as Defendants note in reply, there are hundreds of neutrals (approximately 193 in Los Angeles per a JAMS website search, last accessed Aug. 3, 2023) from which the parties may mutually select or submit a rank/strike list. (Reply 10:17-19.) Thus, Plaintiff’s challenge to the arbitration forum provision is unsubstantiated and does not carry her burden of showing unconscionability.

Second, Plaintiff argues the priority clause is substantively unconscionable and renders the Agreement unenforceable.

“I also agree that if I file a lawsuit in court involving both claims that are subject to arbitration in accordance with this Agreement as well as claims that are not subject to arbitration, the court should and will stay, or place on hold, any litigation of the claims in the case that are not subject to arbitration and require arbitration of the claims that are subject to arbitration proceed before any litigation in court of claims that are not subject to arbitration.” (Blish Decl., Ex. A.)

Plaintiff argues that this provision is unfair because it delays prosecution of Plaintiff’s claim. Plaintiff provides no legal authority in support of this challenge. Moreover, there are no causes of action that are exempt from arbitration. There will thus be no delay resolution of Plaintiff’s claims. The Court finds no basis for finding substantive unconscionability.

The Court finds that there is a binding, valid and enforceable agreement to arbitrate Plaintiff’s claims. Although the Agreement contains some minimal procedural unconscionability, this is not a sufficient impediment to enforcing the parties’ agreement.

Accordingly, the Court grants Defendants’ motion to compel arbitration. The matter is stayed pending the outcome of arbitration.

[1] (Chamber of Commerce of the United States of America v. Bonta (9th Cir. 2023) 62 F.4th 473, 479.)

Department 58