Judge Cherol J. Nellon, Case Number: 23STCV19742, Date: 2024-04-04 Tentative Ruling

Plaintiff alleges that she was fired from her job because she is a lesbian and was complaining about unpaid wages.

On August 17, 2023, Plaintiff filed her Complaint for (1) Discrimination, (2) Harassment, (3) FEHA Retaliation, (4) Failure to Prevent, (5) CFRA Retaliation, (6) Failure to Accommodate, (7) Failure to Engage, (8) Violation of Labor Code § 98.6, (9) Violation of Labor Code § 1102.5, (10) Wrongful Termination, and (11) Breach of Contract against Defendants Charter Communications, LLC (“Charter”), Marcela Baquero (“Baquero”), Marco Sprague (“Sprague”), and DOES 1-20.

Defendant Charter now moves this court for an order staying this case and compelling Plaintiff to arbitrate her claims, on the basis that the parties have entered into a binding arbitration agreement.

The court sets a Status Conference re: Arbitration for August 16, 2024, at 8:30 am.

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact . . . .

If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.

California procedural rules govern the determination of a party's motion to compel arbitration, unless the parties clearly and unambiguously elect to use federal procedural rules or those of another state. See Cronus Investments, Inc. v. Concierge Services (2005) 35 C.4^th 376, 394; Vivid Video, Inc. v. Playboy Entertainment Group, Inc. (2007) 147 Cal.App.4th 434; see also Peleg v. Neiman Marcus Group, Inc. (2012) 204 C.A.4^th 1425, 1442. And even if the parties elect to use the rules of the Federal Arbitration Act, courts apply state law to determine whether the arbitration clause is binding and enforceable. McGill v. Citibank, N.A. (2017) 2 Cal.5^th 945, 964. “Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” United Steelworkers of America v. Warrior & Gulf Nav. Co. (1960) 363 U.S. 574, 582. A party petitioning to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 356-57.

On October 6, 2017, Plaintiff was a salesperson in the employ of Defendant. On that date, Defendant sent Plaintiff an email at her work account, announcing the implementation of a new program called “Solution Channel” for resolving legal disputes between Defendant and its employees. (Declaration of John Fries ¶¶ 5-8, 19, Exhibits A & E). The announcement indicated that:

“By participating in Solution Channel, you and Charter both waive the right to initiate or participate in court litigation (including class, collective and representative actions) involving a covered claim and/or the right to a jury trial involving any such claim…Unless you opt out of participating in Solution Channel within the next 30 days, you will be enrolled.” (Id. Exhibits A & E).

The announcement contained direct links to more information about “Solution Channel,” as well as instructions on where to go to find out how to opt out. (Id.).

Following either the direct links or the written instructions included in the email announcement would take an employee to an information web page. That page contained a direct link to the text of the arbitration agreement that Defendant planned to enforce if an employee failed to opt out. (Id. ¶¶ 8-10, Exhibit C). The page also contained the following directions:

If you do not opt out of Solution Channel within the designated time, you will be

automatically enrolled in Solution Channel and considered to have consented to the terms

of the Mutual Arbitration Agreement at that time. To opt-out of Solution Channel, please

click here. In the new window that will open, click Main Menu->Self-Service->Solution

By selecting the “click here” hyperlink and following the directions, an employee would arrive at a page where they could check a box, type their name, and click a button. (Id. ¶¶ 12-14, Exhibit D). If they did so, they would be opted out of the arbitration agreement and provided with a confirming email. (Id. ¶ 15).

Plaintiff did not follow this opt-out process. (Id. ¶ 21). Thus, she was “enrolled” in the Solution Channel program, and in Defendant’s eyes became subject to an Arbitration Agreement, quoted in relevant part below:

A. Arbitration Requirement. You and Charter mutually agree that, as a condition of Charter considering your application for employment and/or your employment with Charter, any dispute arising out of or relating to your preemployment application and/or employment with Charter or the termination of that relationship, except as specifically excluded below, must be resolved through binding arbitration by a private and neutral arbitrator, to be jointly chosen by you and Charter.

B. Covered Claims. You and Charter mutually agree that the following disputes, claims, and controversies (collectively referred to as "covered claims") will be submitted to arbitration in accordance with this Agreement:

E. Time Limits. The aggrieved party must give written notice of the claim, in the manner required by this Agreement, within the time limit established by the applicable statute of limitations for each legal claim being asserted. To be timely, any claim that must be filed with an administrative agency or body as a precondition or prerequisite to filing the claim in court, must be filed with Solution Channel within the time period by which the charge, complaint or other similar document would have had to be filed with the agency or other administrative body. Whether a demand for arbitration is untimely is an affirmative defense, and will be decided by the arbitrator before any hearing on the merits of the aggrieved party’s claim…

G. Location. Any arbitration hearing conducted under this Agreement will take place within 100 miles of the Charter office to which you last reported during your employment as of the date of the filing of the Notice, or the Charter office at which you sought employment, unless another location is mutually selected by the parties.

H. Selection of Arbitrator. The arbitration shall be held before one arbitrator who is a current member of the American Arbitration Association (AAA) and is listed on the Employment Dispute Resolution Roster. Within 45 days after submission of the claim, Charter will request from the AAA a list of at least five arbitrators willing to hear and decide the dispute. Within 20 days after receipt of the list from the AAA, the parties will select an arbitrator to hear and resolve the dispute and will notify the AAA of the selection of an arbitrator.

1. Rules. Arbitration hearings will be conducted pursuant to the Solution Channel Program Guidelines and the arbitrator shall have the sole authority to determine whether a particular claim or controversy is arbitrable.

2. Authority of the Arbitrator. The arbitrator will decide all discovery disputes related to the arbitration. Unless the parties agree to submit written arguments in lieu of a hearing on the merits of the claim[s], the arbitrator will schedule and conduct an evidentiary hearing, at which the arbitrator will hear testimony and receive evidence. The arbitrator shall apply the governing law applicable to any substantive claim asserted, including the applicable law necessary to determine when the claim arose and any damages.

3. Waiver of Hearing. The parties may, at any time prior to a hearing, mutually agree to forego a hearing, and instead submit all evidence and argument to the arbitrator in writing.

4. Burden of Proof. The arbitrator will apply the burdens of proof and law applicable to the claim, had the claim been adjudicated in court.

5. Decision. The arbitrator will issue a decision within 30 days after the close of an arbitration hearing, or at a later time on which the parties agree. The decision will be signed and dated by the arbitrator, and will contain express findings of fact and the legal reasons for the decision and any award, except as otherwise provided for under the Federal Arbitration Act.

J. Enforcement of the Decision. Judgment on the arbitrator’s decision may be entered in any court having jurisdiction over the matter, within 45 days following its issuance.

K. Arbitration Costs. Charter will pay the AAA administrative fees and the arbitrator’s fees and expenses. All other costs, fees and expenses associated with the arbitration, including without limitation each party’s attorneys’ fees, will be borne by the party incurring the costs, fees and expenses. The parties agree and acknowledge, however, that the failure or refusal of either party to submit to arbitration as required by this Agreement will constitute a material breach of this Agreement. If any judicial action or proceeding is commenced in order to compel arbitration, and if arbitration is in fact compelled or the party resisting arbitration submits to arbitration following the commencement of the action or proceeding, the party that resisted arbitration will be required to pay to the other party all costs, fees and expenses that they incur in compelling arbitration, including, without limitation, reasonable attorneys' fees.

P. Entire Agreement. This Agreement sets for the complete agreement of the parties on the subject of resolution of the covered disputes, and supersedes any prior or contemporaneous oral or written understanding on this subject; provided, however, that this Agreement will not apply to the resolution of any charges, complaints, or lawsuits that have been filed with an administrative agency or court before the Effective Date of this Agreement.

Q. Severability. The parties explicitly acknowledge and agree that the provisions of this Agreement are both reasonable and enforceable. However, if any portion or provision of this Agreement (including, without implication of limitation, any portion or provision of any section of this Agreement) is determined to be illegal, invalid, or unenforceable by any court of competent jurisdiction and cannot be modified to be legal, valid, or enforceable, the remainder of this Agreement shall not be affected by such determination and shall be valid and enforceable to the fullest extent permitted by law, and said illegal, invalid, or unenforceable portion or provision shall be deemed not to be a part of this Agreement…

R. Federal Arbitration Act. This Agreement will be governed by the Federal Arbitration Act.” (Id. Exhibit C) (Emphasis in original).

Defendant Charter has met its burden to establish the existence of a valid agreement. In this case, the Defendant employer sent Plaintiff employee an agreement by email. The email informed Plaintiff that she would waive any future right to sue her employer unless she opted out within 30 days. The email did not give Plaintiff direct instructions on how to opt out. To discover the opt-out method, Plaintiff had to navigate to an informational webpage, which in turn would send him to yet another webpage, where Plaintiff could actually opt out.

There is nothing illegal about an opt-out process. Assent to a contract need not be by signature. Assent may also be implied by conduct. In the employment context, an employee manifests assent to a contract by conduct where (1) the employer notifies the employee of the new agreement and (2) the employee continues her employment without comment. Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4^th 416, 418-420 (arbitration agreement was binding where new arbitration policy was circulated by interoffice memorandum and mailed directly to employee’s home).[1] Plaintiff’s declaration indicates that she does not remember seeing the email, but a copy of the email as sent to her is attached as Exhibit E to the Declaration of John Fries. Plaintiff makes no legal argument that the notice was inadequate, though she clearly expresses her opinion that the procedure was “unfair.” (Declaration of Jasmine Ghiotto ¶ 13).

Plaintiff argues instead that (1) there was no signature block in the agreement and (2) there was no consideration for the agreement because it was not a condition of her employment. Neither argument is persuasive.

The lack of a signature block may render an agreement unenforceable where the agreement does not otherwise identify the parties. That was the case in Flores v. Nature’s Best Distribution, LLC (2016) 7 Cal.App.5^th 1, 11 – the employer was identified only as the “Company” and the agreement was unclear as to who would be bound. It is not the case here. Defendant Charter is clearly identified in the text and the letterhead as the other party to the agreement.

The second argument has some characteristics of a “heads I win, tails you lose” scenario. If this was a take-it-or-leave-it agreement, Plaintiff would then have an argument that the agreement was unconscionable. But even if that were not the case, both parties to this agreement can be compelled to arbitration. The consideration here is that both parties give up their rights to proceed in court. The Agreement is enforceable.

Defendant Charter argues that the foregoing is all this court needs to decide. Section B.3 of the Agreement delegates all other issues to the arbitrator. Plaintiff disagrees. Plaintiff is correct.

Arbitrability is presumptively an issue for the court, and not all issues of arbitrability may be delegated to an arbitrator. Aanderud v. Superior Court (2017) 13 Cal.App.5^th 880, 891. For example, an arbitrator may not determine whether a contract or arbitration clause is void for lack of mutual assent. Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4^th 394, 414-419; see also Ericksen, Arbuthnot, McCarthy, Kearney, & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 323. For obvious reasons, a case cannot be sent to arbitration to decide whether both parties actually reached an agreement to arbitrate.

Courts will enforce delegation clauses which require that the arbitrator to determine, in the first instance, whether either party has a viable defense to the enforcement of the arbitration agreement. That includes the defense of unconscionability. Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4^th 231, 242. The only requirement is that the language of the delegation clause be clear. Id.

As quoted above, the agreement provides that “all disputes related to the arbitrability of any claim or controversy” should be submitted to arbitration. However, the agreement also contains a severability clause which allows the court to determine whether any portion of the agreement is “illegal, invalid, or unenforceable.” The existence of such a severability clause renders the delegation clause unclear. Dennison v. Rosland Capital LLC (2020) 47 Cal.App.5^th 204, 209-210 (citing cases); see also Hartley v. Superior Court (2011) 196 Cal.App.4^th 1249, 1257-58. Therefore, the issue of arbitrability remains with this court.

“The procedural element of unconscionability focuses on whether the contract is one of adhesion. Procedural unconscionability focuses on whether there is “oppression” arising from an inequality of bargaining power or “surprise” arising from buried terms in a complex printed form. The substantive element addresses the existence of overly harsh or one-sided terms. An agreement to arbitrate is unenforceable only if both the procedural and substantive elements are satisfied. However…the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” McManus v. CIBC World Markets Corp. (2003) 109 Cal.App.4^th 76, 87 (internal quotations and citations omitted).

Contracts of adhesion are procedurally unconscionable as a matter of law. Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4^th 676, 689. However, this was no contract of adhesion. Plaintiff clearly had the option to reject the agreement.

Plaintiff argues that the agreement does not make clear what rules would apply in arbitration. Defense takes the position that the AAA rules would apply to the arbitration, but that is not an express term of in the Agreement. Section I(1) of the Agreement provides that “hearings will be conducted pursuant to the Solution Channel Program Guidelines.” Reference to those guidelines reveals no inclusion or incorporation of the AAA rules. Defense points out that AAA is clearly chosen as the administrator of the arbitration, and the first rule of the AAA rules is that they will apply in AAA arbitrations. But that argument is circular. Plaintiff cannot be expected to know and apply AAA Rule 1 if she has no knowledge or warning about the AAA rules generally.

However, this ambiguity is not sufficient to render the Agreement procedurally unconscionable. Failure to incorporate or provide a copy of the AAA rules only raises an issue if the plaintiff is attacking some specific element of the AAA rules. Baltazar v. Forever 21, Inc. (2016) 62 Cal.4^th 1237, 1246. Plaintiff does not do so here, other than by a vague reference to “a harsh, one-sided term relating to discovery.” (Opposition p. 15:4).

Plaintiff also argues that the mere act of structuring the agreement as an “opt-out” rather than an “opt-in” is unconscionable. But while Plaintiff mentions two California cases in this argument, she provides no specific page citations. Of those two cases, one (Olvera v. Pollo Loco Inc. (2009) 173 Cal.App.4^th 447 has been abrogated[2] and the other (Gentry v. Superior Court (2007) 42 Cal.4^th 443) involved a one-sided explanation of arbitration that itself exerted pressure on the signatory. Plaintiff makes no effort to compare the facts of those cases to this one.

There is no procedural unconscionability here. And that ends the analysis. In the absence of procedural unconscionability, no finding of substantive unconscionability would justify voiding the contract.

Plaintiff argues that this court should allow the case against the individual defendants to proceed. But the plain language of Code of Civil Procedure § 1281.4 appears to foreclose this option.

Defense presented this agreement to Plaintiff. She had a clear chance to opt out if she wanted to, without negative job consequences. She did not. A valid Agreement was formed by that decision. The defense of unconscionability does not apply here. The Agreement was not a contract of adhesion or the product of surprise; the process for opting out of the Agreement was not perfect, but perfection is not required. Plaintiff did not have express notice of the AAA rules, but that lack of notice is not significant without a specific objection to some provision of those rules. No such objection has been offered.

For these reasons, Defendants’ motion is GRANTED. The case is STAYED pending the outcome in arbitration.

[1] See also Schachter v. Citigroup, Inc. (2009) 47 Cal.4^th 610, 619 (“it is settled that an employer may unilaterally alter the terms of an employment agreement, provided such alteration does not run afoul of the Labor Code”); Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4^th 373, 383-384.

[2] See Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4^th 348, 366.