Judge Daniel M. Crowley, Case Number: 22STCV34832, Date: 2023-09-06 Tentative Ruling

Defendant Atlantic Solutions Group, Inc. d/b/a Empire Workforce Solutions’ motion to compel arbitration is granted. The case is stayed pending arbitration.

The Court sets a non-appearance case review for September 6, 2024, at 8:30 a.m. The parties are directed to submit a joint statement five calendar days in advance, apprising the Court of the status of the arbitration.

Defendant Atlantic Solutions Group, Inc. d/b/a Empire Workforce Solutions [erroneously sued as Empire Workforce Solutions] (“Empire”) (“Defendant”) moves to compel Plaintiff Jonathan O. Sanchez (“Sanchez”) (“Plaintiff”) to arbitrate his individual claims and stay all proceedings in this action pending arbitration. (Notice Compel Arbitration, pg. 2; 9 U.S.C. §1, et seq.; C.C.P. §§1281.2, 1281.4, 1280 et seq.)

Defendant’s 6/14/23 request for judicial notice of (1) Complaint in Alvarez I (Exh. 7); (2) Complaint in Alvarez II (Exh. 8); (3) Motion to Compel Arbitration in Alvarez I (Exh. 9); (4) Complaint in the putative class action (Exh. 10); (5) Declaration filed by Plaintiff’s counsel in the Alvarez matters (Exh. 13); (6) Stipulation and Order in the putative class action (Exh. 15), is granted.

Defendant’s 6/14/23 request for judicial notice of the tentative ruling granting the motions to compel in Alvarez I and II (Exh. 16) is denied.

On November 1, 2022, Plaintiff filed his operative Complaint in the instant action Defendant alleging one cause of action for civil penalties pursuant to the Private Attorneys General Act (“PAGA”) (Lab. Code §§2698, et seq.). Plaintiff’s cause of action stems from Plaintiff’s employment by Defendant as a non-exempt hourly employee. (Complaint ¶11.)

On June 14, 2023, Defendant filed the instant motion to compel arbitration. Plaintiff filed an opposition to the motion on August 23, 2023. Defendant filed its reply August 29, 2023.

Federal law provides for enforcement of this Arbitration Agreement. The Federal Arbitration Act, 9 U.S.C. §1, et seq. (“FAA”), establishes a strong federal policy in favor of arbitration of disputes where a written arbitration agreement exists. Section 2 of the FAA provides, in pertinent part that “[a] written provision . . . to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable.” (9 U.S.C. §2.) The purpose of the FAA is to “reverse the longstanding judicial hostility to arbitration agreements.” (Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 24.) The FAA places arbitration agreements “on an equal footing with other contracts and [requires courts] to enforce them according to their terms.” (AT&T Mobility, LLC v. Concepcion (2011) 563 U.S. 333, 339; see also Rent-A-Center West, Inc. v. Jackson (2010) 561 U.S. 63, 67 [“The FAA reflects the fundamental principle that arbitration is a matter of contract.”].) The FAA will preempt not only a state law that “discriminat[es] on its face against arbitration,” but also a state law that “covertly accomplishes the same objective by disfavoring contracts that . . . have the defining features of arbitration agreements.” (Kindred Nursing Centers Limited Partnership v. Clark (2017) 137 S.Ct. 1421, 1426.)

The United States Supreme Court has specifically held that the FAA applies to employment contracts: “[A]s a matter of law the answer is clear. In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms.” (Epic Systems Corp. v. Lewis (2018) 138 S.Ct. 1612, 1619, [holding that employees must submit to arbitration agreements including those with collective action waivers].)

The FAA restricts a court’s inquiry related to compelling arbitration to two threshold questions: (1) whether there was an agreement to arbitrate between the parties; and (2) whether the agreement covers the dispute. (Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 84.) Here, both criteria are satisfied. First, Plaintiff agreed to arbitration when he entered into the California Agreement to Arbitrate All Claims (“Arbitration Agreement”) that contained the relevant arbitration clause. (Decl. of Palazzolo ¶¶9-10, Exhs. 1-2.) Second, the Arbitration Agreement expressly covers “any controversy, claim, or dispute arising from, related to, or having any relationship or connection whatsoever with the employment of, or the association between [Plaintiff] and [Defendant], including its co-employers, present and former partners, owners, shareholders, officers, managers, employees, agents, employee benefit and health plans, as well as parent entities, successor entities, related entities, and subsidiaries.” (Decl. of Palazzolo ¶¶9-10, Exhs. 1-2 at §1.) Further, the Arbitration Agreement expressly states it is governed by and construed in accordance with the FAA. (Decl. of Palazzolo ¶¶9-10, Exhs. 1-2 at §3.)

California law also favors arbitration for dispute resolution. The California Arbitration Act (“CAA”), codified at C.C.P. §1281 et seq., provides, “A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (C.C.P. §1281; see also Grafton Partners L.P. v. Superior Court (2005) 36 Cal.4th 944, 955 [“[U]nlike predispute jury waivers, predispute arbitration agreements are specifically authorized by statute.”].)

“California law, like federal law, favors enforcement of valid arbitration agreements.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97, 99.) The public policy in favor of arbitration is so strong that California courts have held that an employee is “bound by the provisions of the [arbitration] agreement regardless of whether [he] read it or [was] aware of the arbitration clause when [he] signed the document.” (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, citing Macaulay v. Norlander (1992) 12 Cal.App.4th 1.) The only prerequisite for a court to order arbitration is a determination that the parties have entered into an agreement to arbitrate the dispute. (United Transportation Union v. Southern California Rapid Transit District (1992) 7 Cal.App.4th 804, 808.) Thus, arbitration must be ordered “unless the agreement clearly does not apply to the dispute in question.” (Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189.)

Defendant proved the existence of an arbitration agreement with Plaintiff. Defendant submitted evidence that on December 28, 2020, Plaintiff signed the Arbitration Agreement. (Decl. of Palazzolo ¶9, Exh. 1 at pg. 3.) Pursuant to C.C.P. §1281.2, Defendant demonstrates it made a formal demand for arbitration, which Plaintiff does not appear to have accepted. (Decl. of Robinson ¶14, Exh. 17 at pg. 3.) Based on the foregoing, Defendant proved the existence of a valid Arbitration Agreement that is enforceable by Defendant.

1. Agreement to Arbitrate Disputes. In the event of any controversy, claim, or dispute arising from, related to, or having any relationship or connection whatsoever with the employment of, or the association between, the employee signing below (“Employee”) [Plaintiff] and Atlantic Solutions Group Inc. dba Empire Workforce Solutions [Defendant], including its co-employers, present and former partners, owners, shareholders, officers, managers, employees, agents, employee benefit and health plans, as well as parent entities, successor entities, related entities, and subsidiaries . . . .

2. Scope of Agreement. Included within the scope of this Agreement are all disputes, whether based on tort, contract, statute (including, but not limited to, any claims of discrimination, harassment and/or retaliation, whether they be based on the California Fair Employment and Housing Act; Title VII of the Civil Rights Act of 1964, as amended; the Fair Labor Standards Act; the California Labor Code; or any other state or federal law or regulation), equitable law, or otherwise.

(Decl. of Palazzolo ¶¶9-10, Exhs. 1-2 at §§1-2, emphasis added.) Plaintiff’s claims arise from his employment relationship with Defendant and are claims made pursuant to statute, including the California Labor Code and any other state law, and are therefore governed by the Arbitration Agreement. Based on the foregoing, Defendant met its burden to establish the Arbitration Agreement covers the cause of action asserted in Plaintiff’s complaint.

“[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, 24 Cal.4th at pg. 102.) Courts invoke a sliding scale which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves, i.e., the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable, and vice versa. (Id., at pg. 114.) Plaintiff bears the burden of proving that the provision at issue is both procedurally and substantively unconscionable.

Plaintiff states in his opposition that he never asserted that the Arbitration Agreement is unconscionable, thereby conceding his argument pertaining to procedural and substantive unconscionability. (Opposition, pg. 2 & n.3.)

Plaintiff argues Arbitration Agreement §12, “Representative Action Waiver” requires this Court to deny Defendant’s motion as an invalid wholesale waiver.

Employee further agrees that Employee is waiving the right to bring, or to participate in, a representative action, including a Private Attorneys General Act (“PAGA”) action, whether filed in a court of law or in arbitration, against Empire (the “Representative Action Waiver”). If the Representative Action Waiver is found to be unenforceable, the Parties agree that a court of law, and not arbitration, is the only forum for a representative action, including a PAGA action, against Empire. No arbitrator shall have the authority under this Agreement to order any such representative action.

The Court disagrees with Plaintiff’s interpretation of the effect of the waiver on Plaintiff’s PAGA claim. The Arbitration Agreement includes a severance provision, §18, stating:

If any provision of this Agreement is deemed invalid or unenforceable, such provision shall be severed and the remainder of this Agreement shall be enforceable. The Parties specifically agree that if the Class Action Waiver or Representative Action Waiver is found to be unenforceable, they may be severed from this Agreement. In such case, the remainder of the claims shall be decided by arbitration under the terms of this Agreement and the class or representative action stayed in court until the later occurrence of a judgment entered in a court of law on the arbitrator’s decision or dismissal of the arbitration.

The Arbitration Agreement expressly states that to the extent to the representative action waiver is deemed invalid, the waiver must be severed from the Agreement. Plaintiff’s argument with regards to PAGA as one indivisible cause of action has been refuted in Piplack v. In-N-Out Burgers (2023) 88 Cal.App.5th 1281, 1288-1289. In Piplack, the arbitration agreement contained similar language waiving the right to bring a “private attorney general action,” providing that if the waiver was unenforceable “any private attorney general claim must be litigated” in court. (Id.) Because the trial court found the waiver unenforceable, the plaintiff argued that his “private attorney general action” had to be litigated. The Court of Appeal disagreed, noting the dispute turned on the meaning of “private attorney general action.” (Id.) The Piplack Court stated that gollowing Viking River v. Moriana, a PAGA claim could be divided into individual and representative components. (Id. at pg. 1287, citing Viking River v. Moriana (2022) 142 S.Ct. 1906, 1925.) Thus, the Piplack Court severed the waiver and found the individual component arbitrable. (Id. at pg. 1289.)

Here, the Court does not need to reach the issue of whether the PAGA waiver is an unenforceable, wholesale waiver where an alternative, lawful interpretation of the waiver is possible. (See 14A Cal.Jur.3d Contracts §216; Civ. Code §1643; Koenig v. Warner Unified School District (2019) 41 Cal.App.5th 43, 55 (2019); Pappas v. Chang (2022) 75 Cal.App.5th 975, 990.) The Court interprets the language of the waiver in line with Piplack and Viking River, which refers to Plaintiff’s individual PAGA claim as an aggrieved employee, and the representative claims he brings on behalf of aggrieved employees. Therefore, the representative action waiver is not grounds to deny Defendant’s motion.

Pursuant to C.C.P. §1281.4, if an application has been made to a court involving order to arbitrate a controversy and such application is undetermined, the court where the application is pending shall, upon motion of a party to the action, stay the action until the application for an order to arbitrate is determined. (C.C.P. §1281.4.)

Defendant’s motion to compel arbitration is granted. The case is stayed pending arbitration. The Court sets a non-appearance case review for September 6, 2024, at 8:30 a.m. The parties are directed to submit a joint statement five calendar days in advance, apprising the Court of the status of the arbitration.

Hon. Daniel M. Crowley

Judge of the Superior Court