Judge: Carolyn M. Caietti, Case: 37-2023-00016088-CU-WT-CTL, Date: 2024-04-05 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - April 04, 2024

04/05/2024  10:30:00 AM  C-70 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Carolyn Caietti

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Civil - Unlimited  Wrongful Termination Motion Hearing (Civil) 37-2023-00016088-CU-WT-CTL ROCHA VS PEREZ [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion - Other, 08/21/2023

Defendants Robert Perez, Cota, Inc. and Massage Envy Point Loma's Motion to Compel Arbitration is GRANTED.

Plaintiff's objections to the Declaration of Robert Perez are overruled.

Defendants' objections to the Declaration of Soledad Rocha are overruled.

Based on the evidence provided, including a copy of Defendants' Arbitration Agreement, Defendants proved the existence of an arbitration agreement and this dispute falls within the scope of the agreement. (ROA 32 – Declaration of Jonathan Elia, at Ex. A; ROA 33 – Declaration of Robert Perez.) Plaintiff's condition precedent argument lacks merit. First, the legal authority cited in support does not concern arbitration. Second, the agreement required the parties to submit disputes to arbitration. Plaintiff did not before filing this lawsuit and now faults Defendants for not 'first attempting to resolve the matter informally and exhausting [Company's] internal procedures' under the section titled, 'To Start Arbitration:' Notwithstanding, there is evidence Defendants' internal procedure is to address issues with management and Defendant made an offer to resolve the matter. (ROA 65 – Declaration of Robert Perez, at ¶ 9; ROA 66 – Declaration of Jonathan Elia, at ¶ 3; see also, Hyundai Amco America, Inc. v. S3H, Inc. (2014) 232 Cal.App.4th 572, 574 (finding the plaintiff's lawsuit concerning the parties' performance under an agreement was enough to show the plaintiff's refusal to arbitrate).) The burden then falls on Plaintiff to prove a ground for denial. Plaintiff argues the agreement is unenforceable because it is unconscionable. Under the FAA, generally applicable contract defenses (such as unconscionability) may invalidate an arbitration agreement if it does not interfere with fundamental attributes of arbitration. (Nickson v. Shemran, Inc. (2023) 90 Cal.App.5th 121, 130.) Both procedural and substantive unconscionability must be shown for the defense to be established, but they need not be present in the same degree. (OTO, LLC v. Kho (2019) 8 Cal.5th 111, 125-26.) Here, there is some measure of procedural unconscionability. It is an adhesive contract, presented by Defendants, the parties with superior bargaining power. While Defendants maintain Plaintiff's employment was not dependent on her signing the agreement, Plaintiff was told she needed to sign all of the documents for the job.

However, substantive unconscionability is also required. Although a wide variety of factors may contribute to making an arbitration provision substantively unconscionable, the primary factor is lack of Calendar No.: Event ID:  TENTATIVE RULINGS

3010759  47 CASE NUMBER: CASE TITLE:  ROCHA VS PEREZ [IMAGED]  37-2023-00016088-CU-WT-CTL mutuality, and the key question is whether the contract terms are so one-sided or harsh as to lack basic fairness. (Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1570; see also, Armendariz v. Foundation Health Psychcare Service, Inc. (2000) 24 Cal.4th 83, 102.) Plaintiff first points to the provision requiring her to pursue the internal procedures and informal resolution before arbitration, but does not provide any legal authority that such procedures make an agreement substantively unconscionable. This provision is neither one-sided nor unduly oppressive.

Second, Plaintiff argues the arbitration agreement eliminates her ability to bring PAGA claims, stating, 'Waiver of Class Action/Representative Action Participation: You and Company agree that any and all disputes shall be submitted to final and binding arbitration in an individual capacity only, and not as a class representative or class member in any class action or collective action....' In support, Plaintiff cites to Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639 and Adolph v. Uber Technologies, Inc.

(2023) 14 Cal.5th 1104. But these cases did not discuss whether such provisions were substantively unconscionable. Rather, they concern whether invalidating PAGA waivers as a matter of public policy was preempted by the Federal Arbitration Act and the limits of compelling arbitration. Notably, Adolph did not eliminate arbitration related to individual PAGA claims. (Adolph, at p. 1104.) Further, in Barrera v. Apple American Group LLC (2023) 95 Cal.App.5th 63, 89, the appellate court found the plaintiffs failed to show substantive unconscionability by arguing an arbitration agreement contained a provision to force PAGA claims into arbitration because the argument was foreclosed by Viking River, which upheld the validity of agreements to arbitrate PAGA claims except to the extent they contained a wholesale waiver to bring a PAGA action in any forum.

Third, Plaintiff argues the arbitration agreement prevents Plaintiff from filing a claim with the Labor Commission. As Plaintiff acknowledges, a waiver of a Berman hearing does not per se make the agreement unconscionable. (OTO, LLC, supra, at p. 130 [stressing that 'the waiver of Berman procedures does not, in itself, render an arbitration agreement unconscionable.'].) Plaintiff's fourth substantive unconscionability argument is that the agreement unfairly limits discovery.

The agreement states: 'For all claims except wage claims as described next, both parties are entitled to conduct discovery in accordance with [C.C.P.] Section 1283.05, which the parties agree to incorporate by reference under CCP Section 1283.1. For wage claims...no pre-arbitration discovery shall be allowed but the parties may subpoena witnesses and documents for the arbitration consistent with the Berman hearing procedures set forth in California Labor Code section 98 and the regulations and Labor Commissioner's rules and procedures regarding Berman Hearings.' It is unclear how discovery is limited. Under C.C.P. section 1283.05, full discovery is permitted. And while parties at a Berman hearing are generally not permitted to independently subpoena witnesses and documents, this agreement gives the parties the opportunity to do so under the powers of the arbitrator. This provision appears consistent with California law.

Finally, Plaintiff argues the agreement illegally attempts to shift fees and costs to Plaintiffs. Armendariz requires employers bear most arbitration costs. (Armendariz, supra, 24 Cal.4th at p. 113 ['We therefore hold that a mandatory employment arbitration agreement that contains within its scope the arbitration of FEHA claims impliedly obliges the employer to pay all types of costs that are unique to arbitration.'].) Here, the agreement states, '[Company] shall pay for the arbitration costs and arbitrator's fees.' Plaintiff points to two other provisions that violate the requirement employers bear arbitration costs. The first requires arbitration fees and expenses to be included as costs in the event the prevailing defendant standard is met or the C.C.P. section 998 standard is met or both. Defendants argue this merely 'defines' costs, but does not deny the result would effectively shift arbitration costs to an employee. The second provision requires a party who successfully compels arbitration to recover reasonable attorney fees and costs. Defendants acknowledge this can be severed. The Court finds these two attorney fees/costs provisions violate Armendariz and are substantively unconscionable, but do not make the agreement permeated by unconscionability. These provisions can and will be severed.

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3010759  47 CASE NUMBER: CASE TITLE:  ROCHA VS PEREZ [IMAGED]  37-2023-00016088-CU-WT-CTL So, while the agreement has some degree of procedural unconscionability, there is no substantive unconscionability that cannot be severed from the agreement. Thus, Plaintiff did not meet her burden of proving a ground for denial.

Accordingly, the Court is required to order arbitration as to Plaintiff's individual claims and individual-PAGA claim.

For these reasons, the motion is GRANTED.

Concluding Orders The Court severs the following provisions from the Arbitration Agreement: - 'The arbitrator's fees and expenses shall be included as costs in the event the 'prevailing defendant' standard is met or the CCP 998 standard is met, or both, and the arbitrator shall have sole discretion to award or deny such costs as the arbitrator deems reasonable under the circumstances.' - 'In any action or proceeding to enforce this Agreement or to compel arbitration, the prevailing party (i.e., who successfully compels arbitration) shall be entitled to recover its reasonable attorneys' fees and costs.' Plaintiff is compelled to arbitrate her individual claims, including her individual claim under PAGA, in accordance with the arbitration agreement.

This action, including Plaintiff's non-individual PAGA claim, is stayed during the pendency of arbitration.

The Case Management Conference is vacated.

The Court sets a status conference on September 6, 2024, at 9:15 a.m. in Department 70.

If the tentative ruling is confirmed without modification, the minute order will be the Court's final ruling.

Defendants are ordered to serve notice of the Court's final ruling by April 9, 2024.

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