Judge Bruce G. Iwasaki, Case Number: 23STCV16119, Date: 2024-01-18 Tentative Ruling

Tentative Ruling: The Motion to Compel Arbitration is granted as to Defendants Tesla, Inc. and Defendant Jacki Charlberg; the matter is stayed pending resolution of arbitration.

In this employment action, Plaintiff Eddie Jones (Plaintiff) filed a Complaint on July 11, 2023, alleging racial discrimination, failure to provide reasonable accommodations, failure to engage in the interactive process, and hostile work environment, as well as wrongful termination in violation of public policy, and other claims against his former employer, Defendant Tesla, Inc., Tesla Motors, Inc., Tesla Warehouse, and Jacki Charlberg.

On September 15, 2023, Defendant Tesla, Inc. moved to compel arbitration pursuant to the parties’ arbitration agreement. In opposition, Plaintiff argues the arbitration agreement is unenforceable based on unconscionability. Tesla, Inc. filed a reply.

Defendant Jacki Charlberg filed a joinder to Defendant Tesla, Inc.’s motion to compel arbitration.

The motion to compel arbitration is granted as to Defendants Tesla, Inc. and Defendant Jacki Charlberg. The matter is stayed pending the outcome of arbitration.

Defendant’s request for judicial notice of Exhibits A-X is denied as irrelevant. Plaintiff’s request for judicial notice Exhibits A-B is denied as irrelevant. Defendant’s reply request for judicial notice of Exhibit 1 is denied as irrelevant.

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.)

Defendant moves to compel arbitration of Plaintiff’s claims and stay the matter while the arbitration is pending.

Defendant seeks to compel arbitration based on an arbitration agreement between the parties. In support of the existence of an arbitration agreement, Defendant submits evidence that, on September 10, 2020, Defendant sent Plaintiff an email containing a link to an employment offer letter (Offer Letter). (Flesch Decl., ¶ 8.) The Offer Letter included an arbitration provision. (Flesch Decl., Ex. A.) Specifically, the arbitration provision stated: “[A]ny and all disputes, claims, or causes of action, in law or equity, arising from or relating to your employment, or the termination of your employment, will be resolved, to the fullest extent permitted by law by final, binding and private arbitration in your city and state of employment conducted by the Judicial Arbitration and Mediation Services/Endispute, Inc. (“JAMS”), or its successors, under the then current rules of JAMS for employment disputes . . ..” (Flesch Decl., Ex. A.)

Plaintiff accepted Tesla’s offer of employment that same day, by electronically signing the Offer Letter. (Flesch Decl., ¶¶ 10-12, Exs. A (offer letter signed by Plaintiff) and B (email confirming Plaintiff’s electronic signature of offer letter). Plaintiff began his employment on September 14, 2020 as a Production Associate. (Flesch Decl., ¶ 12.)

In opposition, Plaintiff argues that Defendant failed to meet its burden to show that Plaintiff signed the Offer Letter. Plaintiff further avers that he does “not even recall or remember electronically signing the Offer Letter.” (Jones Decl., ¶ 2.)

Civil Code section 1633.9, subdivision (a), governs the authentication of electronic signatures. It provides that an electronic signature may be attributed to a person if “it was the act of the person.” (Civ. Code, § 1633.9, subd. (a).) Further, “[t]he act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.” (Ibid.)

“For example, a party may establish that the electronic signature was “the act of the person” by presenting evidence that a unique login and password known only to that person was required to affix the electronic signature, along with evidence detailing the procedures the person had to follow to electronically sign the document and the accompanying security precautions.” (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 545.)

In this case, Plaintiff argues that Defendant’s electronic system did not require any individual utilizing the signing system to create a username or password and did not reflect the IP address of the location where the Offer Letter was allegedly signed. (Flesch Decl. ¶10, Ex. A.)

The Court finds Defendant has met its burden of authenticating the electronic signature. Here, Defendant submits adequate evidence of the process by which Plaintiff applied for employment with Tesla and received and signed the Agreement. Defendant’s evidence shows that Defendant employed Avature to manage and track candidate offer letters and applications executed through the system. (Flesch Decl., ¶ 3.) The employment application required the applicant to create his or her own personal, secure profile through the Tesla Careers website by providing his or her first name, last name, and personal email address. (Flesch Decl., ¶ 4.) Any communications generated thereafter were directed by Avature’s secure system to the email address used to create the profile. (Flesch Decl., ¶ 5.)

“[t]he Avature system contained security measures so that access to the link was restricted to the applicant, which ensured that other Tesla employees could not access the applicant’s offer letter, except for a small group of administrative employees for the purpose of troubleshooting any technical issues with the link. No one from Tesla’s Recruiting Operations, Human Resources, Legal, or any of the applicant’s managers were able to access the link, even if they pulled up the email sent to the applicant.” (Flesch Decl., ¶ 7.)

Thus, the evidence shows that this was not a case in which Plaintiff presented evidence that another person could have caused his electronic signature to appear on the arbitration agreement.

For instance, in Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 544–545 —a case that also involved an online onboarding process—plaintiff Bannister submitted evidence that a human resources manager Matson visited the facility where Bannister worked and completed the onboarding process and arbitration agreement for her by asking for the necessary information without showing Bannister what was on the computer. (Id. at pp. 546–547.) Bannister also presented evidence that Matson completed the onboarding process for other employees remotely and without their participation. (Id. at p. 547.)

In affirming the denial of the motion to compel arbitration, the court of appeal concluded that this was “a classic example of a trial court drawing a conclusion from conflicting evidence.” (Id. at p. 545.) That is, the trial court disbelieved Matson's account of the onboarding process and instead credited Bannister's evidence that Matson completed the onboarding process for her. (Id. at p. 548.)

There is no similar conflict in the record here. Plaintiff's declaration contains no suggestion that any other human resources personnel completed his onboarding documents (or the onboarding documents for other employees without their knowing participation). Rather, Plaintiff only speculates that it is theoretically possible someone could have signed for him. He does not otherwise address in his declaration how he accepted the offer of employment with Tesla.

Nor is the fact that Avature’s system did not require a username or password dispositive. By statute, an electronic signature may be authenticated “in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.” (Civ. Code, § 1633.9, subd. (a) [italics added].) Thus, while a showing of the efficacy of document security protocols is one way of demonstrating authentication, such a showing is not required.

Further, as discussed above, the evidence here shows that only a limited number of people have access to the applicant’s offer letter – which is sufficient to show “the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.”

Lastly, Plaintiff does not dispute signing the Offer Letter; he only states he does not recall signing it.

Thus, the Court finds that Defendant’s evidence is sufficient to authenticate the electronic signature as “the act of” Plaintiff. Plaintiff does not submit conflicting evidence. Defendant has carried its burden of demonstrating the existence of a valid arbitration agreement between the parties.

In opposition, Plaintiff argues that the Arbitration Agreement 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 first argues the accepted Offer Letter is procedurally unconscionable because the arbitration provision was a condition of employment and offered on a take-it-or leave it basis. That is, Plaintiff had no ability to negotiate the terms of the Agreement, and Defendant made no effort to explain its terms to Plaintiff. (Jones Dec., ¶¶ 1-5.) In sum, Plaintiff could either sign the Agreement or find another job.

Plaintiff also argues that he did not know what “arbitration” was; that is, he did not realize that agreeing to arbitration meant that he was giving up his right to a jury, and no one explained this to him. (Jones Decl., ¶ 3.)

Finally, Plaintiff contends the arbitration provision was “buried” within the Offer Letter. Plaintiff asserts that he was not informed that the Offer Letter contained an arbitration provision, nor did anyone or any document indicate that by signing the Offer Letter, he was giving up his right to a trial by jury. (Jones Decl., ¶ 3)

Given the take it or leave it nature of the contract, the arbitration agreement suffers from some minimal degree of procedural unconscionability. It is an adhesive contract, as are most employment agreements; “few employees are in a position to refuse a job because of an arbitration requirement.” (Armendariz, supra, 24 Cal.4th at p. 115.)

However, Plaintiff’s purported failure to understand the terms of the arbitration provision does not add to the procedural unconscionability of the Offer Letter. (Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 88 [“[S]imply because a provision within a contract of adhesion is not read or understood by the nondrafting party does not justify a refusal to enforce it.”].) Further, although the arbitration agreement was not overly conspicuous in the Offer Letter (it was not bolded or underlined), it was also not buried in a long document, in a smaller font, or otherwise hidden. (Armendariz, at p. 114 [“Surprise” is defined as “the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms.”].)

There is a small degree of procedural unconscionability arising from the inception of the arbitration agreement.

Plaintiff contends the arbitration agreement is substantively unconscionable because, when read with the Tesla, Inc. Employee Non-Disclosure and Inventions Assignment Agreement (PIIA), it creates a one-sided framework that provides Tesla with all the advantages of suing in court while limiting Plaintiff to suing in arbitration. In making this argument, Plaintiff relies on the holdings in two superior court cases involving similar Offer Letters and PIIAs. (Opp., p. 5, fn. 3 [RJN Exs. A [Barraza v. Tesla, Inc., dated May 22, 2022 in the Superior Court of the State of California, County of Alameda, Case No. 21CV002714], B [Hollocks v. Tesla, Inc., dated October 28, 2020 in the Superior Court of California, County of Los Angeles, Case No. 20STCP00884]].)

“While a contract ‘ “ ‘can provide a “margin of safety” that provides the party with superior bargaining strength a type of extra protection for which it has a legitimate commercial need without being unconscionable’ ” ’ [citation],” an arbitration agreement's carve-out for an employer’s claims that lacks any justification and is “not limited to provisional judicial remedies” is substantively unconscionable. (Farrar v. Direct Commerce, Inc. (2017) 9 Cal.App.5th 1257, 1263, 1273; Lange v. Monster Energy Company (2020) 46 Cal.App.5th 436, 447 [“ ‘ “[U]nconscionability turns not only on a ‘one-sided’ result, but also on an absence of ‘justification’ for it ....” ’ ”].)

In response, Defendant argues that the cases cited are not controlling on this Court. Defendant is correct. Further, as noted in the reply, these superior court cases are distinguishable. Specifically, in both Hollocks and Barraza, the arbitration agreements at issue contained the following term:

“Notwithstanding the foregoing, you and Tesla each have the right to resolve any issue or dispute arising under the Proprietary Information and Inventions Agreement by Court action instead of arbitration.” (Lopez Reply Decl., Exs. B (Hollocks arbitration agreement) and C (Barraza arbitration agreement).)

In this case, the PIIA at issue here is a separate agreement requiring a separate signature. Moreover, the PIIA is neither mentioned, referenced, incorporated in, or attached to the Offer Letter.

Lastly, Plaintiff’s reliance on the holding in Lange v. Monster Energy Company (2020) 46 Cal.App.5th 436 to suggest a separate contract agreement can be considered in determining the unconscionability of an arbitration agreement is not well taken as the facts in that case are distinguishable. That is, the arbitration agreement in Lange – unlike the Offer Letter here — attached and incorporated by reference the unconscionable Employee Proprietary Information, Confidentiality, Intellectual Property and Non-Solicitation Agreement. (Lange v. Monster Energy Company, supra, 46 Cal.App.5th at 443.)

Plaintiff has not provided any legal authority indicating the Court must consider this separate contract when determining the substantive unconscionability of this Offer Letter. Thus, Plaintiff has not demonstrated the existence of any substantive unconscionability in the Offer Letter.

Therefore, even if the Offer Letter contains some degree of procedural unconscionability, the absence of substantive unconscionability is fatal Plaintiff’s unconscionability argument. Defendant has met its burden of demonstrating the existence of a valid, enforceable Arbitration Agreement.

In the moving papers, Defendant Tesla argues that Defendant Jacki Charlberg should be permitted to enforce the arbitration agreement under the doctrine of equitable estoppel. Defendant Jacki Charlberg joins the motion.

When, as here, a plaintiff sues a non-signatory as an agent of a signatory, the non-signatory may enforce the arbitration agreement. (Thomas v. Westlake (2012) 204 Cal. App. 4th 605, 614-615 [“[A] plaintiff's allegations of an agency relationship among defendants is sufficient to allow the alleged agents to invoke the benefit of an arbitration agreement executed by their principal even though the agents are not parties to the agreement.”].)

In opposition, Plaintiff does not address this argument or otherwise dispute that Defendant Jacki Charlberg may enforce the arbitration provision in the Offer Letter.

Defendant Carlsberg may enforce the arbitration provision in the Offer Letter as an alleged agent of Tesla. (Compl., ¶ 6.)

Accordingly, the Court grants Defendant’s motion to compel arbitration as to Defendants Tesla, Inc. and Defendant Jacki Charlberg. The motion to compel arbitration is granted as to Plaintiff’s claims; the matter will be stayed pending the outcome of arbitration.

Department 58