Judge: Colin Leis, Case: 22STCV08382, Date: 2023-01-31 Tentative Ruling

Case Number: 22STCV08382    Hearing Date: January 31, 2023    Dept: 74

Superior Court of California

County of Los Angeles – CENTRAL District

Department 74

MOVING PARTIES:             Defendants Acadia Healthcare Company, Inc. d/b/a Pacific Grove Hospital and Vista Behavioral Hospital, LLC

RESPONDING PARTY:       Plaintiff Maria Neill

Motion to Compel Arbitration and Stay Litigation Pending Arbitration Proceedings

The court considered the moving papers, opposition, and reply papers filed in connection with this motion.

BACKGROUND

            On March 8, 2022, Plaintiff Maria Neill filed this wrongful termination action against Defendants Acadia Healthcare Company, Inc. (d/b/a Pacific Grove Hospital), Vista Behavioral Hospital, LLC, Saad Niazi, and Does 1 to 100.  Plaintiff was employed at Pacific Grove Hospital.  During her onboarding process, which took place on February 15, 2019, Plaintiff signed an arbitration agreement. 

Plaintiff opposes defendant’s motion to compel arbitration. Plaintiff contends the court should not enforce the arbitration agreement for the following reasons: (1) the arbitration agreement does not comply with Armendariz; (2) Plaintiff did not consent to the arbitration agreement; and (3) the arbitration agreement is substantively and procedurally unconscionable. None is persuasive.

REQUEST FOR JUDICIAL NOTICE

            Defendants request the court take judicial notice of the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association (“AAA”). (RJN Ex. C).  The unopposed request is granted.  (Evid. Code §§ 452 and 453.)

            Defendants’ request for judicial notice in support of their reply is denied.

EVIDENTIARY OBJECTIONS

            Plaintiff’s evidentiary objections to the Declaration of Kelli Wright are overruled.

LEGAL STANDARD

In ruling on a motion to compel arbitration, a court must first decide whether an enforceable arbitration agreement exists between the parties, and then determine if the agreement covers the claims at issue.  (See Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.)  “The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.  [Citation] In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.  [Citation] No jury trial is available for a petition to compel arbitration. [Citation]”  (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972; see also Chiron Corp. v. Ortho Diagnostic Systems, Inc. (9th Cir. 2000) 207 F. 3d 1126, 1130 [“The court’s role under the [FAA] is therefore limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue. [Citations]”].  The party opposing the petition to compel arbitration bears the burden of proving by a preponderance of the evidence any fact necessary to its opposition.  (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.)

Accordingly, under both the FAA and 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.) 

DISCUSSION

A.    Arbitration Agreement

Defendants prove the existence of an arbitration agreement with Plaintiff.  Defendants submitted evidence that during Plaintiff’s onboarding as a community liaison employee, Plaintiff received a Mediation and Arbitration Agreement (“Arbitration Agreement”) that Plaintiff reviewed and executed on or about February 15, 2019.  (Decl. of Wright ¶¶6, Ex. A [Arbitration Agreement].)  The Arbitration Agreement makes clear that the arbitration agreement is entered into between Vista Behavioral Health LLC, dba Pacific Grove Hospital and Acadia Healthcare and Plaintiff. 

Plaintiff argues she did not consent to the Arbitration Agreement because (i) Plaintiff did not understand the Arbitration Agreement’s legal significance; (ii) Defendants did not explain the Arbitration Agreement’s significance; and (iii) Defendants did not highlight the Arbitration Agreement’s existence.  Thus, no mutual assent existed and no contract arose.  (Opposition, pg. 5.)  However, this argument involves the agreement’s enforceability, as discussed below, not whether a valid arbitration agreement exists.  Here, Defendants show by a preponderance of evidence that Plaintiff signed the Arbitration Agreement and that an agreement to arbitrate exists between Plaintiff and Defendants.  Further, Plaintiff does not dispute signing the Arbitration Agreement.

B.     Covered Claims

Defendants also established the Arbitration Agreement covers Plaintiff’s claims because Plaintiff’s claims involve Plaintiff’s employment with Defendants; Plaintiff does not argue otherwise. Thus, Defendants have demonstrated the Arbitration Agreement covers the causes of action alleged in Plaintiff’s complaint.

C.    Unconscionability

Plaintiff argues the Arbitration Agreement is procedurally and substantively unconscionable. (Opposition, pgs. 9-11.)  “[P]rocedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.”  (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102 (“Armendariz”).)  Courts invoke a sliding scale: the more substantively oppressive the contractual term, the less procedural unconscionability one needs to conclude the term is unenforceable, and vice versa.  (Id., at p. 114.)  Plaintiff bears the burden of proving the provision at issue is both procedurally and substantively unconscionable.

1.      Procedural Unconscionability

“Procedural unconscionability focuses on the elements of oppression and surprise. [Citations] ‘Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice … Surprise involves the extent to which the terms of the bargain are hidden in a ‘prolix printed form’ drafted by a party in a superior bargaining position.’ [Citations]” (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1469.)

Plaintiff argues that the Arbitration Agreement is procedurally unconscionable because: (1) it was presented to Plaintiff as a condition of employment; (2) Defendant did not provide Plaintiff a copy of the Arbitration Agreement; (3) Defendants did not specify procedures should arbitration rules change over time; and (4) Plaintiff is an unsophisticated party to the Arbitration Agreement.  (Opposition, pgs. 10-11.) 

Plaintiff does not submit evidence suggesting she did not have time to read, review, or ask questions about the Arbitration Agreement.  That her employment began sixteen days after signing the Arbitration Agreement on May 3, 2019, during which she did not raise any issues about the Arbitration Agreement, cuts against finding procedural unconscionability. 

Plaintiff declares no one told her about the Arbitration Agreement’s legal effect.  (Neill Decl. ¶ 3.)  Plaintiff further declares no one told her whether the Arbitration Agreement was negotiable or if she could opt-out of the agreement.  (Neill Decl. ¶ 3.)  Such facts do not, however, establish procedural unconscionability.  (See Sanchez v. Valencia Holding Co. (2015) LLC, 61 Cal.4th 899, 914 [(“Valencia was under no obligation to highlight the arbitration clause of its contract, nor was it required to specifically call that clause to Sanchez’s attention.  Any state law imposing such an obligation would be preempted by the FAA.”].) 

Defendants submit evidence about the onboarding process of employees, but do not submit evidence about the specific circumstances surrounding Plaintiff’s signing of the Arbitration Agreement. The records shows that although the Arbitration Agreement is a unremarkable contract of adhesion between an employer and employee, Plaintiff presents no evidence of surprise or sharp practices involving its presentation to Plaintiff or her execution of it.  (See Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1244 (“[T]here are degrees of procedural unconscionability. At one end of the spectrum are contracts that have been freely negotiated by roughly equal parties, in which there is no procedural unconscionability…. Contracts of adhesion that involve surprise or other sharp practices lie on the other end of the spectrum. [Citation.]  Ordinary contracts of adhesion, although they are indispensable facts of modern life that are generally enforced, contain a degree of procedural unconscionability even without any notable surprises, and ‘bear within them the clear danger of oppression and overreaching.’”) The Arbitration Agreement was a separate document which Plaintiff signed as a stand-alone document. Plaintiff offers no evidence that her signature arose from oppression or surprise. 

As to Plaintiff’s argument that she did not receive a copy of the AAA Rules, that omission does not make the Arbitration Agreement procedurally unconscionable because Plaintiff challenges to the Arbitration Agreement targets the Arbitration Agreement’s own terms, not the terms of the AAA Rules. (See Baltazar v. Forever 21, Inc., supra, 62 Cal.4th at 1245-1246.) 

Based on the foregoing, the court finds the Arbitration Agreement is at most minimally procedurally unconscionable.  But, as explained post, the court finds the Arbitration Agreement is not substantively unconscionable. 

1.      Substantive Unconscionability

“Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create ‘overly harsh’ or ‘‘one-sided’ results’ [Citations] that is, whether contractual provisions reallocate risks in an objectively unreasonable or unexpected manner.  [Citation] Substantive unconscionability ‘may take various forms,’ but typically is found in the employment context when the arbitration agreement is ‘one-sided’ in favor of the employer without sufficient justification, for example, when ‘the employee’s claims against the employer, but not the employer’s claims against the employee, are subject to arbitration.’ [Citations]” (Roman at 1469-1470.)

Plaintiff argues the Arbitration Agreement is substantively unconscionable because (1) the Arbitration Agreement lacks mutuality by giving Defendant a unilateral right to modify or terminate the Arbitration Agreement; it mandates administrative exhaustion; and, it imposes costs upon Plaintiff; (2) judicial review is limited; and (3) the Arbitration Agreement applies exclusively to employment claims.  (Opposition, pgs. 6-9.)  The court addresses each argument in turn.

a.       Lack of Mutuality

The Arbitration Agreement states in relevant part that the agreement “may be modified, in whole or in part, or terminated by Pacific Grove Hospital only after Pacific Grove Hospital provides at least 30 days’ written notice of such modification or termination to you, and only with respect to claims submitted under the [Agreement] which are received after the effective date of such modification or termination.”  (Wright Decl., Ex. A.) Plaintiff describes the foregoing provision of the Arbitration Agreement “a carve-out” rendering the Arbitration Agreement applicable only against Plaintiff.  Citing the purported “carve-out,” Plaintiff contends the Arbitration Agreement lacks mutuality, making it unenforceable.

To advance her argument, Plaintiff cites Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267.  In Nyulassy, the court found the employment agreement—which required only employees to arbitrate employment related claims—added to the lack of mutuality because it required the plaintiff “to submit to discussions with his supervisors in advance of, and as a condition precedent to, having his dispute resolved through binding arbitration.”  (Nyulassy, at p. at 1282.)  Here, the Arbitration Agreement states: “Under the Policy, certain disputes that may arise from your employment with Pacific Grove Hospital or the termination of your employment must (after appropriate attempts to resolve your dispute internally through Pacific Grove Hospital Grievance Procedures Policy) be submitted for resolution by nonbinding mediation and, if necessary, mandatory arbitration.”  (Wright Decl., Ex. A.) But unlike Nyulassy, the Arbitration Agreement does not completely lack mutuality because it requires Defendants and Plaintiff alike to arbitrate employment related claims.  (Nyulassy, 120 Cal.App.4th at pp. 1282-83.) 

Plaintiff relies on Fleming Distribution Co. v. Younan (2020) 49 Cal.App.5th 73 for the proposition that Defendants waived their right to arbitration when Plaintiff incurred expenses by engaging in Defendants’ prelitigation mediation.  However, Plaintiff’s reliance on Fleming is misplaced.  In Fleming, the employer moved to compel arbitration only after its former employee had prevailed on his claim before the Labor Commissioner.  (Fleming, 49 Cal.App.5th pp. 78-79.)  The Court of Appeal affirmed the trial court’s finding of waiver, stating the employee “suffered the prejudice of waiting several years to collect wages that at least one tribunal has determined he was owed, when the matter could have been arbitrated ... if [the employer] had sought to compel arbitration” earlier.  (Id. at p. 83.)  Fleming is distinguishable on its facts and does not establish that Defendants acted inconsistently with their right to arbitrate.

Plaintiff next argues that Defendants imposed costs unique to the Arbitration Agreement, including but not limited to mediation expenses.  This argument fails.  A review of the Arbitration Agreement reveals no requirement that Plaintiff should bear any costs related to mediation.  Rather, Plaintiff’s counsel negotiated the mediation cost arrangement.  (Spring Decl., ¶ 4.)  Further, the Arbitration Agreement states: “Pacific Grove Hospital shall pay the costs of arbitration, excluding incidental costs.”  (Wright Decl., Ex. A.)  “Incidental Costs” include photocopying or the costs of producing witnesses or proof.  (Id.)  Such incidental costs are not unique to the arbitration forum.

b.      Limited Judicial Review

Plaintiff argues that limited judicial review is further evidence of the Arbitration Agreement’s substantive unconscionability.  This argument fails.  The parties agreed to binding arbitration pursuant to the Federal Arbitration Act (“FAA”).  As such, the FAA governs judicial review.  (Cable Connection, Inc. v. DirecTV, Inc. (2008) 44 Cal.4th 1334, 1340.)  Under the FAA, limited judicial review of arbitration agreements evidences a preference “that the arbitrator’s decision be both binding and final.”  (Prima Donna Development Corp. v. Wells Fargo Bank, N.A. (2019) 42 Cal.App.5th 22, 44.)  Thus “any unconscionability doctrine based on the limited scope of judicial review would not invalidate an arbitration agreement to which the FAA applies.”  (Id.)  Here, the limited judicial review provided by the Arbitration Agreement is not evidence of substantive unconscionability.

c.       Arbitration of Employment Claims Exclusively

Plaintiff contends arbitration agreements that apply exclusively to employment issues are substantively unconscionable because the employee, as opposed to the employer, will almost always initiate the claim.  For this proposition, Plaintiff cites Zullo v. Superior Court (2011) 197 Cal.App.4th 477.  Plaintiff misreads Zullo.  In Zullo, the court found the arbitration agreement to be substantively unconscionable because, among other reasons, it applied to disputes “arising out of the termination” of an employee and included a nonexclusive list of statutes and laws to which it applied, all of which were equal employment and nondiscrimination laws.  (Zullo, 197 Cal.App.4th at p. 486.)  By contrast, the Arbitration Agreement here does not include any reference to employment or nondiscrimination laws.  Rather, it applies to “any controversy or claim arising out of or relating to your employment with Pacific Grove Hospital or the termination of that relationship.”  (Wright Decl., Ex. A.) 

In sum, the court finds the Arbitration Agreement lacks mutuality to a small degree with regards to the internal grievance requirement.  However, the lack of mutuality does not permeate the Agreement so as to render it substantively unconscionably.  The terms of the Arbitration Agreement do not create overly harsh or one-sided results.  The Arbitration Agreement provides for (1) the mutual resolution of disputes, (2) the selection of an impartial arbitrator via the AAA Rules, (3) the same remedies available in a court of law, (4) adequate discovery, (5) the issuance of a written decision and award, and (6) Defendants’ payment for the arbitration fees and costs.  (Wright Decl., Ex. A.)  Those provisions satisfy the requirements for a substantively conscionable agreement.  (Armendariz, supra, 24 Cal.4th 91, 101-113.)  Having found the Arbitration Agreement satisfies the requirements of Armendariz, the court does not address Plaintiff’s arguments regarding severability.

D.    Request for Evidentiary Hearing

Plaintiff requests that she be granted an opportunity to conduct discovery, to present oral testimony, and to cross-examine Kelli Wright at an evidentiary hearing pursuant to California Rules of Court, Rule 3.1306 and Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394.  The court denies Plaintiff’s request for two reasons.  Rules of Court, Rule 3.1306, subdivision (b) requires a party seeking permission to introduce oral evidence to file “a written statement stating the nature and extent of the evidence proposed to be introduced and a reasonable time estimate for the hearing.”  Plaintiff has not filed such a statement, and thus has failed to comply with Rule 3.1306.

Second, Plaintiff does not identify any factual dispute.  In Rosenthal, the Supreme Court concluded that the trial court did not abuse its discretion in granting an evidentiary hearing to determine the enforceability of an agreement to arbitrate because enforceability depend on “two sharply conflicting factual accounts.”  (Rosenthal, 14 Cal.4th at p. 414.)  Here, Plaintiff does not dispute signing the Arbitration Agreement.  Accordingly, the court denies Plaintiff’s request for an evidentiary hearing.

CONCLUSION

Based on the foregoing, the court grants Defendants’ motion to compel arbitration.  The court orders a stay on all proceedings pending completion of arbitration.

Defendants are ordered to give notice of this ruling.

IT IS SO ORDERED.

DATED:  January 31, 2023

_____________________________

Colin Leis

Judge of the Superior Court