Department 58

Hearing Date: July 26, 2024

Case Name: Blaine Gregory Roque, et al. v. Knight Claremont, Inc., et al.

Case No.: 24STCV01536

Motion: Motion to Compel Arbitration

Moving Party: Defendant Knight Claremont Inc.

Responding Party: Plaintiffs Blaine Gregory Roque, Michael Alexander Luna, Sean Michael Henderson

Tentative Ruling: The Motion to Compel Arbitration is granted.

This is a wrongful termination action. Plaintiffs Blaine Gregory Roque (“Roque”), Michael Alexander Luna (“Luna”), and Sean Michael Henderson (“Henderson”) (collectively, “Plaintiffs”) initiated this action against Defendants Knight Claremont, Inc. and Knight Automotive Group, LLC, alleging the following causes of action: (1) whistleblower retaliation in violation of Labor Code § 1102.5; (2) negligent supervision and retention; (3) breach of express oral contract not to terminate without good cause; (4) breach of implied-in-fact contract not to terminate employment without good cause; (5) wrongful termination in violation of public policy; and (6) intentional infliction of emotional distress.

On March 26, 2024, Defendant Knight Claremont Inc. filed its answer to the Complaint.

On June 12, 2024, Plaintiffs voluntarily dismissed Defendant Knight Automotive Group, LLC without prejudice.

On June 14, 2024, Defendant Knight Claremont Inc. (hereinafter, “Defendant”) filed a motion to compel arbitration. Thereafter, on June 17, 2024, Defendant filed an amended motion to compel arbitration pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 2, and Code of Civil Procedure §§ 1281.2 and 1281.4 on the ground that Plaintiffs entered into valid and enforceable arbitration agreements in connection with their employment with Defendant. Defendants further request the current action to be stayed during the pendency of arbitration.

Legal Standard

California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-972.) The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, the party opposing the petition then bears the burden of proving by a preponderance of the evidence any fact necessary to demonstrate that there should be no enforcement of the agreement, and the trial court sits as a trier of fact to reach a final determination on the issue. (Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 413.) The Court is empowered by Code of Civil Procedure section 1281.2 to compel parties to arbitrate disputes pursuant to an agreement to do so.

The party petitioning to compel arbitration under written arbitration agreement bears the burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, and the party opposing the petition must meet the same evidentiary burden to prove any facts necessary to its defense. The trial court acts as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence. (Code Civ. Proc., § 1281.2; Provencio v. WMA Securities, Inc. (2005) 125 Cal.App.4th 1028, 1031.)

Discussion

A. Existence of an Arbitration Agreement

Under the California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (Code Civ. Proc. § 1281.2.) In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) With respect to the moving party's burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court.” (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218.)

Here, the Court finds that Defendant has satisfied its initial burden by submitting evidence that Plaintiffs each signed separate arbitration agreements in connection with their employment with Defendant. As to Plaintiff Roque, Defendant has shown that he signed two separate arbitration agreements. Plaintiff Roque first signed an arbitration agreement on September 16, 2022, along with other employment documents. (David. Decl. ¶¶ 23-26, Exh. 1-2.) Notably, even though this agreement contained an opt-out provision, Plaintiff Roque made no attempt to exercise this option. (Id. at ¶¶ 27-30.) Thereafter, Plaintiff Roque electronically signed a second arbitration agreement on February 3, 2023 via HRHotlink.com. (Davis Decl. ¶¶ 18-21, 33-34; Exh. 4.) This agreement also included an opt-out provision that specified the methods in which an employee can exercise this option. Again, however, Plaintiff Roque did not elect to opt out of arbitration. (Davis Decl. ¶¶ 35-37; Benbow Decl. ¶ 5, Exh. 16.)

With regard to Plaintiff Luna, Defendant has shown that he electronically signed two separate arbitration agreements. Plaintiff Luna first signed an arbitration agreement on November 17, 2022 as part of the application process. (Davis Decl. ¶¶ 8-12, 40,48; Exhs. 7, 9.) Plaintiff Luna also signed a separate arbitration agreement on November 23, 2022. (Davis Decl. ¶¶ 39, 41-42; Exh. 5-6.)

On October 4, 2022, Plaintiff Henderson, as part of the application process, electronically signed an arbitration agreement. (Davis Decl. ¶¶ 6-13, 53-54, 56; Exhs. 10-12.)

Defendant submitted the declaration of Brandy Davis, who explained the safety precautions associated with using HRHotlink.com in order to ensure the authenticity of the signatures collected. (Davis Decl. ¶¶ 8, 20.) Namely, employees are required to use their own unique email address and password to access the website before being directed to the documents that need to be signed. The employee’s email address must be verified first before proceeding with the process. Thus, Defendant has authenticated the electronic signatures of the each Plaintiff. (See Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1062 [discussing how an electronic signature is properly authenticated].)

Based on this evidence, the Court finds that Defendant has met its initial burden to show that there are arbitration agreements that exist between Defendant and each Plaintiff. Furthermore, as indicated in the aforementioned agreements, the FAA is the governing law. (Ibid.)

In opposition, Plaintiffs contest the validity of certain agreements. Plaintiff Roque argues that he signed the September 16, 2022 arbitration agreement under duress because the human resource manager, Stephen Miarecki, stated that Plaintiff Roque could not be paid until he signed all of the onboarding documents. (Roque Decl. ¶ 6.) Plaintiff Roque further attests that Mr. Miarecki stated that he could not take the documents to look them over. Economic duress occurs when a party is induced by an act so coercive as to cause a reasonably prudent person faced with such act to have no reasonable alternative and agree to an unfavorable contract regardless of its terms. (Tarpy v. County of San Diego (2003) 110 Cal.App.4th 267, 277.) Economic duress applies only when one party does a wrongful act that is sufficiently coercive that a reasonably prudent person would feel there is no alternative and agree to the contract. (CrossTalk Productions, Inc. v. Jacobsen (1998) 65 Cal.App.4th 631, 644; Rich & Whillock, Inc. v. Ashton Development, Inc. (1984) 157 Cal.App.3d 1154, 1158.) Based on Plaintiff Roque’s declaration, the Court concludes that the signature procured on September 16, 2022 was not the result of economic duress. Mr. Miarecki’s statements do not suggest that Plaintiff Roque could not have reviewed the documents when they were presented to him. Thus, a reasonably prudent person would not have felt they had no alternative but to agree to the arbitration agreement. After all, Plaintiff’s “failure to take measures to learn the contents of the document [he] signed is attributable to [his] own negligence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 431.)

In any case, it is undisputed that Plaintiff signed a subsequent arbitration agreement on February 3, 2023. As to this agreement, Plaintiff Roque contends that he opted out of the arbitration agreement signed on February 3, 2023 because he had submitted a letter opting out
with Diane Agapay, a human resource employee. (Roque Decl. ¶ 12, Exh. 3.) However, this method did not comply with the opt out procedure set out within the arbitration agreement. In it, it states that an employee must provide notice of opting out of the arbitration agreement by either (1) personally delivering a letter to the Human Resource manager, or (2) sending an email to smiarecki@sunriseford.com. (Davis Decl., Exh. 4 at pg. 2.) The evidence submitted by Plaintiffs does not suggest that Ms. Agapay is a Human Resource manager, and there is no evidence to show that Plaintiff Roque provided notice to Mr. Miarecki via email. Therefore, an agreement to arbitrate exists between Plaintiff Roque and Defendant.

Plaintiffs Henderson and Luna deny signing their respective arbitration agreement on October 19, 2022 and November 23, 2022. (Henderson Decl. ¶ 8; Luna Decl. ¶ 8.) Athough these plaintiffs do not recall electronically signing an arbitration agreement that was presented to them during the application process (Henderson Decl. ¶ 6, Luna Decl. ¶ 6), Defendant has authenticated these signatures. Therefore, an agreement to arbitrate exists between these plaintiffs and Defendant.

Accordingly, the Court shall next address whether these arbitration agreements are unconscionable.

B. Unconscionability

Plaintiffs argue that the arbitration agreement is unenforceable because it is substantively and procedurally unconscionable. (Opposition at pp. pp. 6-11.)

An agreement is unenforceable if it is both procedurally and substantively unconscionable. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125; Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910.) But procedural and substantive unconscionability need not be present in the same degree. (OTO, supra, 8 Cal.5th at 125.) Courts use a “sliding scale” approach—“the more substantively unconscionable the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Armendariz v. Found Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 114.) Under general contract principles, unconscionability has both a procedural and substantive element, with the former focusing on oppression or surprise due to unequal bargaining power, and the latter focusing on overly harsh or one-sided rules (Armendariz, supra, 24 Cal.4th at p. 114.) Both procedural and substantive unconscionability must be present in order for a court to exercise its discretion to refuse to enforce a contract on the basis of unconscionability. (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1533.)

i. Procedural Unconscionability

“Procedural unconscionability pertains to the making of the agreement; it focuses on the oppression that arises from unequal bargaining power and the surprise to the weaker party that results from hidden terms or the lack of informed choice.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.) Arbitration clauses are often found in adhesion contracts (standardized contracts drafted by a party of superior bargaining power and presented to the weaker party on a take-it-or-leave-it basis). (See, e.g., Armendariz, supra, 24 Cal.4th at 113-114.)

Here, Plaintiffs first argue that the arbitration agreements is procedurally unconscionable because it is an adhesion contract. (Opposition at pp. 7-8.) The mere fact an adhesion contract is involved does not per se render the arbitration provision unenforceable because such contracts are “an inevitable fact of life for all citizens—businessman and consumer alike.” (Graham v. Scissor-Tail, Inc.¿(1981) 28 Cal.3d 807, 817.)

Second, Plaintiffs argue that oppression was present because the parties are unsophisticated to understand the implications of the arbitration agreement as they were unfamiliar with the legal jargon used within those agreements. (Opposition at pg. 8; Roque Decl., ¶ 6, Henderson Decl. ¶ 6, Luna Decl. ¶ 6.) This argument is unpersuasive because Plaintiffs’ declarations do not set forth their respective educations and experience to suggest that they were truly unsophisticated parties. In any case, Plaintiffs failed to read the agreements before signing them.

Third, Plaintiffs argue that they were never advised of the significance the arbitration agreements, and they were never provided a copy of the agreements once they were signed. (Opposition at pp. 8-9.) Defendant asserts that the arbitration agreements prominently explained that by agreeing the Plaintiffs gave up a right to a jury trial. Each Plaintiff was presented with an arbitration agreement along with several onboarding documents.

Fourth, Plaintiffs contend there is evidence of surprise because the arbitration agreements were buried within other documents unrelated to arbitration and the agreements themselves are not conspicuously written. (Reply at pp. 9-10.) These arguments are only slightly persuasive. Surprise occurs “where the allegedly unconscionable provision is hidden within a prolix printed form.” (Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 247.) As stated above, the arbitration agreements were included with several other documents. The text of the arbitration agreements is conspicuously written and easy to read.

Lastly, Plaintiffs argue that they were never provided with a copy of the arbitration rules, and the arbitration agreements that Plaintiffs Luna and Henderson signed were vague as to which rules are followed. (Reply at pg. 10; Roque Decl. ¶ 8, Henderson Decl. ¶ 9, Luna Decl. ¶ 11.) But the arbitration agreement that Roque signed states that the arbitration rules from JAMS would apply, and the agreement includes a link to find where these rules can be found. (Davis Decl. Exh. 4.) Thus, while the applicable rules were not provided, they were not artfully hidden from Plaintiff Roque. (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1246.) Also, the failure to attach a copy of the arbitration rules is not in of itself an indication of procedural unconscionability. (Lane v. Francis Cap. Mgmt, LLC (2014) 224 Cal.App.4th 676, 692.)

With regard to Plaintiffs Luna and Henderson, the absence of arbitration rules does raise an issue. Other than stating that arbitration would be governed by the Federal Arbitration Act and the California Arbitration Act, these arbitration agreements fail to articulate the specific rules that would apply during arbitration or where to find them. Although the procedure for selecting the arbitrator is disclosed, the governing arbitration rules are not.

Accordingly, the Court finds that there is a slight degree of procedural unconscionability because the arbitration agreements are adhesion contracts and, as to Plaintiffs Luna and Henderson, a moderate degree of procedural unconscionability because the arbitration rules were not referenced or included.

ii. Substantive Unconscionability

Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether the terms create overly harsh or one-sided results as to shock the conscience. (Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1515; Sanchez, supra, 61 Cal.4th at 910-911 [an “old-fashioned bad bargain” or a contract term which “merely gives one side a greater benefit” insufficient].)

Here, Plaintiff argues that the arbitration agreements have a high degree of substantive unconscionability for the following reasons. First, Plaintiff contends that the arbitration agreements are indefinite in scope and duration. (Opposition at pp. 9-13, relying on Cook v. University of Southern California, et al., (2024)102 Cal.App.5th 312.) As to the arbitration agreements signed by Plaintiffs Henderson and Luna, Plaintiff references the following language to show that the agreements are indefinite in duration and scope: “Our agreement to arbitrate includes any and all claims which arise out of the employment context or any other interaction/relationship we had, have or may have in the future.” (David. Decl. ¶¶ 50-51, 54, Exh. 9, 12 at ¶ 4.) Also, these arbitration agreements are intended to cover “the Company’s owners, directors, officers, managers, employees, agents, partners, attorneys, sister companies…affiliated persons/entities, independent contractors…” (Ibid.) But Plaintiffs ignore language that defines what claims are covered by these arbitrations, all of which arise from the Plaintiffs’ employment with Defendant. Thus, in actuality, the arbitration agreements are limited in scope to claims that arise during or related to Plaintiff’s employment.

As to Plaintiff Roque, Plaintiffs contend that the following language is impermissibly overbroad: “Employee and Dealership agree to resolve by final and binding arbitration any dispute, claim, or controversy, including but not limited to those related to Employee’s employment with or termination of employment by Dealership, its affiliated entities, or their respective officers, directors, employees, or agents.” (David Decl. ¶ 34, Exh. 4 at ¶ 1.) This exact language has been found to be reasonable. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1069-1070.) Therefore, there is no basis to substantiate the Plaintiff Roque’s argument that his arbitration agreement is substantively unconscionably on this ground.

Lastly, Plaintiffs argue that the arbitration agreements are substantively unconscionable because it prevents them from engaging in collective action but allows Defendants to join other plaintiffs to the instant action. (Reply at pg. 13.) This argument is unpersuasive. There is no indication that Plaintiff’s claims give rise to a class action or that other individuals could be joined in this action.

Consequently, Plaintiffs have failed to meet their burden in showing that there is any degree of substantive unconscionability in the arbitration agreements that they executed. Accordingly, the Court declines to find that these agreements are unconscionable.

Plaintiffs alternatively request the Court to hold an evidentiary hearing pursuant to California Rules of Court, rule 3.1306 in order to present extrinsic evidence and oral testimony before the Court. The Court finds no basis for this request; it is denied.

Conclusion

The motion to compel arbitration is granted.