Judge: Bruce G. Iwasaki, Case: 23STCV27254, Date: 2024-04-11 Tentative Ruling

Case Number: 23STCV27254    Hearing Date: April 11, 2024    Dept: 58

Judge Bruce G. Iwasaki

Department 58

Hearing Date:             April 11, 2024

Case Name:                Cail v. Simplified Driver Staffing, LLC

Case No.:                   23STCV27254

Matter:                        Motion to Compel Arbitration

Moving Party:             Defendant Simplified Driver Staffing, LLC, Simplified Transport, LLC, Simplified Labor Staffing Solutions, Inc., And Al Dedicated Transport, LLC

Responding Party:      Plaintiff Frederick Cail

In this employment action, Plaintiff Frederick Cail (Plaintiff) filed a Complaint on November 6, 2023, alleging FEHA claims for discrimination, failure to prevent discrimination, retaliation, harassment, and retaliation pursuant to Labor Code section 1102.5 against his former employer, Defendants Simplified Transport, LLC, Simplified Staffing Solutions, Inc., Simplified Driver Staffing, LLC, A1 Dedicated Transport, LLC (Defendants).

            On December 27, 2023, Defendants filed a motion to compel arbitration pursuant to the parties’ arbitration agreement.[1] In opposition, Plaintiff argues the arbitration agreement is unenforceable because Plaintiff is an exempt transportation worker and the agreement is unconscionable.

            The motion to compel arbitration is granted. The matter is stayed pending the outcome of arbitration.

Legal Standard

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.) Because 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.)

Analysis

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

Existence of Arbitration Agreement:

As a preliminary matter, Defendants argue that issues of scope, validity, and enforceability have been delegated to the arbitrator. However, Defendants do not rely on a specific provision of the Arbitration Agreement but, instead, reference the unattached AAA Rules, which state that the “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.” (Mot., Ex. 2, p. 12 (AAA Rule 6).)

“There are two prerequisites for a delegation clause to be effective. First, the language of the clause must be clear and unmistakable. [Citation.] Second, the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability.” (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 242; see Rent-A-Center, West, Inc. v. Jackson (2010) 561 U.S. 63, 68, 69, fn. 1.) The “clear and unmistakable” test reflects a “heightened standard of proof” that reverses the typical presumption in favor of the arbitration of disputes. (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 787.)

Only one of the cases cited by Defendants found an enforceable delegation clause through incorporation by reference to general arbitrations rules. (Rodriguez v. American Tech., Inc. (2006) 136 Cal. App. 4th 1110, 1123.) However, other courts have looked unfavorably on this holding; thus, the Court declines to find that such incorporation meets the “clear and unmistakable” standard regarding the parties’ intent here. (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 790 [“In our view, while the incorporation of AAA rules into an agreement might be sufficient indication of the parties' intent in other contexts, we seriously question how it provides clear and unmistakable evidence that an employer and an employee intended to submit the issue of the unconscionability of the arbitration provision to the arbitrator, as opposed to the court.”].)

            Thus, the Court first determines whether Defendants have met their burden of demonstrating the existence of a valid arbitration agreement.

Defendants seek to compel arbitration based on an arbitration agreement between the parties. In support of the existence of an arbitration agreement, Defendants submit evidence that Plaintiff was employed by Defendants as a truck driver from January 2022 to June 2023. As a part of this employment, Plaintiff signed an arbitration agreement, dated April 11, 2023. (Escobedo Decl., ¶ 11, Ex. 1.)

            The Arbitration Agreement states that it applies to “any and all claims and disputes related in any way to [Plaintiff’s] employment or termination of [Plaintiff’s] employment.” (Escobedo Decl., ¶ 11, Ex. 1 [Agreement, p. 5].)

            In opposition, Plaintiff does not dispute the existence of the arbitration agreement, his signature on the agreement, or the scope of the Agreement. Thus, Defendants have carried their burden of demonstrating the existence of a valid arbitration agreement between the parties.

Enforceability of the Arbitration Agreement:

            In opposition, Plaintiff first argues that, as a truck driver, he is exempt under the Federal Arbitration Act. Based on this exemption, Plaintiff argues the Agreement is unenforceable.

            Section 2 of the FAA, which acts as the basic coverage provision of the FAA, makes the law applicable to contracts evidencing a transaction “involving commerce.” (9 U.S.C. § 2.) However, Section 1 of the FAA provides a limited exemption from the law’s coverage to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” (9 U.S.C. § 1.)

The United States Supreme Court defined the catchall phrase “ ‘any other class of workers engaged in ... interstate commerce’ ” to mean “transportation workers,” which the court understood as “those workers ‘ “actually engaged in the movement of goods in interstate commerce.” ’ ” (Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 112, 119.) “Truck drivers who cross interstate lines usually are considered transportation workers.” (Performance Team Freight Systems, Inc. v. Aleman (2015) 241 Cal.App.4th 1233, 1240.) A party claiming the section 1 exemption bears the burden of proving it applies. (Id. at p. 1241.)

Even if Plaintiff is correct that the FAA does not apply to the arbitration agreement with Defendants because he is an exempt employee, this does not render the Agreement unenforceable.

Plaintiff argues that by its terms, the arbitration agreement is “governed solely by the FAA,” such that it cannot be enforced under the California Arbitration Act (CAA; Code Civ. Proc., § 1280, et seq.). But a contract to arbitrate does not require the FAA to be enforceable. Rather, the FAA only preempts certain state laws that would otherwise prohibit arbitration.

Exemption under the FAA does not prohibit application of the CAA. “Nothing in the CAA, however, requires that an arbitration agreement explicitly reference the CAA to be enforceable under California law.” (Garrido v. Air Liquide Industrial U.S. LP (2015) 241 Cal.App.4th 833, 841; see also Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1121 [“Assuming arguendo that the FAA does not apply, we would assess the validity of the parties' arbitration agreements under the California Arbitration Act.”].)

Thus, Plaintiff’s purported status as exempt from the FAA has no consequence here.

Plaintiff also argues that the 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.” (Id. at p. 126.)

            Plaintiff first argues the Agreement is procedurally unconscionable because the Agreement 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 Defendants made no effort to provide an explanation of its terms to Plaintiff. (Cali Decl., ¶¶ 10-15.)

            Plaintiff also argues that Defendants failed to attach the applicable AAA rules and failed to designate which rules apply.

            In opposition, Defendants argue that mandatory arbitration policies in employment are not per se procedurally unconscionable.

            Courts regularly uphold arbitration agreements even 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.) Moreover, for the reasons discussed below, even assuming the Agreement may contain some degree of procedural unconscionability as a contract of adhesion, this does not invalidate the arbitration agreement.

            Plaintiff next argues that the Agreement is substantively unconscionable.

            Plaintiff identifies only one basis for asserting that the agreement is substantively unconscionable.[2] Specifically, Plaintiff points to the language in the Arbitration Agreement where employees agree to “forego and waive any right to aggregate, join or consolidate claims in arbitration with any others or to bring non-individual, class or collective claims in arbitration.” (Escobedo Decl., ¶ 11, Ex. 1 [Arbitration Agreement, p. 2].) Plaintiff argues that this provision constitutes a collective PAGA Waiver, which is substantively unconscionable as it deprives employees of standing to bring PAGA claims. Plaintiff further argues that this provision cannot be severed because doing so would “change the entirety of the Agreement and the clear intent of the drafting party, and would render the Agreement different as a whole.” (Opp., 12:21-22.)

            To the extent that the Arbitration Agreement prohibits Plaintiff from exercising certain un-waivable statutory rights, such as the right to bring actions pursuant to the Private Attorneys General Act of 2004 (PAGA), the provision is unenforceable and against public policy.[3] (See Armendariz, supra, 24 Cal.4th at p. 103, fn. 8 [courts must ensure that employment-related arbitration agreements “are not used as a means of effectively curtailing an employee's [statutory] rights”].) As such, a PAGA waiver provision is substantively unconscionable. (See Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 498-503, 128 Cal.Rptr.3d 854 (Brown ) [upholding the trial court's determination a PAGA waiver was unconscionable, and that the PAGA waiver and class action waiver together rendered the entire arbitration agreement unenforceable]; see also Brown v. Ralphs Grocery Co. (2018) 28 Cal.App.5th 824, 831, 239 Cal.Rptr.3d 519 [in Brown, “we affirmed the ruling that the PAGA waiver was substantively unconscionable ....”].)

            However, as noted above, Plaintiff has identified only a single provision. “Generally speaking, when an arbitration agreement contains a single term in violation of public policy, that term will be severed and the rest of the agreement enforced. [Citation.]” (Gentry v. Superior Court (2007) 42 Cal.4th 443, 466 abrogation recognized on other grounds in OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 129, fn. 10.) The Arbitration Agreement itself also states that “if any provision of the [Agreement] is deemed to be unenforceable, that provision shall be limited or severed without affecting the obligation to arbitrate . . ..” (Escobedo Decl., ¶ 11, Ex. 1 [Agreement, p. 4].)

             Thus, the Court severs the waiver provision to the extent it requires waiver of a representative PAGA claim. With that, Plaintiff has not demonstrated any substantive unconscionability. Therefore, even if the Agreement contains some degree of procedural unconscionability, the absence of substantive unconscionability is fatal Plaintiff’s unconscionability argument.

            Lastly, Plaintiff argues he was fraudulently induced into signing the Agreement because he was given the Arbitration Agreement while he was on medical leave and told he had to sign it to return to work. (Cali Decl., ¶¶ 12-15.)

            A claim for fraud in the inducement requires a misrepresentation involving a contract in which the promisor knows what he or she is signing but his or her consent is induced by fraud. (Duffens v. Valenti (2008) 161 Cal.App.4th 434, 449.)

Plaintiff’s fraud in the inducement argument and supporting evidence is woefully vague. This argument is not well-taken.

Defendants have met their burden of demonstrating the existence of a valid, enforceable Arbitration Agreement.

CONCLUSION

            Accordingly, the Court grants Defendants’ motion to compel arbitration; the matter will be stayed pending the outcome of arbitration.

            The Court will set the date for a post-arbitration status conference.