Judge Daniel M. Crowley, Case Number: 23STCV10067, Date: 2024-03-06 Tentative Ruling

Defendants CWD, LLC’s, Brake Parts LLC’s, and Modern HR, Inc.’s motion to compel arbitration of Plaintiff Daniel Villalta’s claims in this action is granted. This case is stayed pending arbitration.

Defendants CWD, LLC (“CWD”), Brake Parts LLC (“Brake Parts”), and Modern HR, Inc. (“Modern HR”) (collectively, “Defendants”) move for an order compelling arbitration of all claims asserted by Plaintiff Daniel Villalta (“Villalta”) (“Plaintiff”) and staying the instant action during the pendency of arbitration. (Notice of Motion, pg. 2; 9 U.S.C. §3; C.C.P. §§1280 et seq.; C.C.P. §1281.4.)

Plaintiff’s 2/22/24 evidentiary objections to the Declaration of Dipika Gyanani (“Gyanani”) are overruled as to Nos. 1, 2, 3, 4, 5, 6, and 7.

Defendants’ 2/28/24 evidentiary objections to the Declaration of Villalta are overruled as to Nos. 1, 2, and 3.

Defendants’ 12/6/23 request for judicial notice of (1) The American Arbitration Association (“AAA”) Employment Arbitration Rules and Mediation Procedures, Amended and Effective November 1, 2009, Rule 38 - Serving of Notice, Revised January 1, 2023, available at https://www.adr.org/sites/default/files/EmploymentRules-Web.pdf (D-RJN, Exh. F); and (2) AAA Employment/Workplace Fee Schedule, Amended and Effective January 1, 2023, available at https://www.adr.org/sites/default/files/Employment_ Workplace_Fee_Schedule.pdf (D-RJN, Exh. G), is granted.

On May 4, 2023, Plaintiff filed the instant action for retaliation in violation of the Labor Code, FEHA discrimination, failure to provide a reasonable accommodation, failure to engage in a good faith interactive process, FEHA retaliation, failure to prevent discrimination or retaliation in violation of FEHA, violation of CFRA, and wrongful discharge in violation of public policy against Defendants in connection with Plaintiff’s termination around May 13, 2022. (See Complaint ¶8.) Defendants filed the instant motion on December 6, 2023. Plaintiff filed his opposition on February 22, 2024. On February 28, 2024, Defendants filed their reply.

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 (oh so coincidentally) 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 Alternative Dispute Resolution Policy (“ADR Policy”) and executed the Agreement to be Bound by the ADR Policy (“Arbitration Agreement”) that contained the relevant arbitration clause. (Decl. of Gyanani ¶¶5-6, Exhs. A, B.) Second, the Arbitration Agreement expressly covers “all disputes relating to [Plaintiff’s] employment, the terms and conditions of [his] employment, including but not limited to [his] compensation, wages, . . . discipline, performance evaluations, promotions, transfers, and the termination of [his] employment, as defined in the ADR Policy materials” between Plaintiff and CWD. (Decl. of Gyanani ¶5, Exh. A at pg. 1.)

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.)

Defendants proved the existence of an arbitration agreement with Plaintiff. Defendants submitted evidence that on August 7, 2019, Plaintiff signed the Arbitration Agreement and a second document entitled “Employee Acknowledgement” where Plaintiff confirmed he received the ADR Policy and Arbitration Agreement. (Decl. of Gyanani ¶¶5-6, Exhs. A, B.) Plaintiff argues he does not recall reviewing or signing the Arbitration Agreement but does not argue that it is not his signature on the Arbitration Agreement. (See Opposition, pg. 2; Decl. of Villalta ¶¶6-7.) Therefore, Plaintiff did not meet his burden to produce evidence to challenge the authenticity of the agreement. (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.) Further, Defendants submitted evidence regarding the authentication of the Arbitration Agreement, including a declaration by CWD’s Human Resources Manager stating that the Arbitration Agreement was a part of Plaintiff’s personnel file, which Defendants maintain in the regular course of business. (Decl. of Gyanani ¶¶4-5.)

Additionally, one’s failure to read or understand an arbitration agreement is no bar to enforcement. (Harris v. Tap Worldwide LLC (2016) 248 Cal.App.4th 373, 383 [“The fact that [plaintiff] either chose not to read or take time to understand these [arbitration] provisions is legally irrelevant.”]; Stewart v. Preston Pipeline Inc. (2005) 134 Cal.App.4th 1565, 1589 [“Generally, one who assents to a writing is presumed to know its contents and cannot escape being bound by its terms merely by contending that he did not read them.”], internal citations omitted.)

Based on the foregoing, Defendants proved the existence of a valid Arbitration Agreement that is enforceable by Defendants. [stopped here]

The Arbitration agreement that it applies to “employment disputes arising out of or related to [Plaintiff’s] employment, the terms and conditions of [his] employment, and the termination of [his] employment, all of which are also subject to the ADR Policy . . ..” (Decl. of Gyanani ¶5, Exh. A at pg. 1.) This includes “(a) alleged violation of federal, state and/or local constitutions, statutes or regulations, (including but not limited to claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act of 1967, the Equal Pay Act, and any other statutory scheme encompassing claims of discrimination and harassment on the basis of race, color, age, religious creed, national origin, ancestry, disability, sexual orientation, gender identity, sex or any other characteristic protected by law . . ..” (Decl. of Gyanani ¶5, Exh. A at pg. 1.) Plaintiff’s claims arise from his employment relationship with Defendants and are therefore governed by the Arbitration Agreement. Based on the foregoing, Defendants met their burden of establishing the Arbitration Agreement covers the causes 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 argues the Arbitration Agreement is procedurally unconscionable because (1) he had no opportunity to negotiate the terms of the Arbitration Agreement or have a meaningful choice in the matter; (2) he does not recall the Arbitration Agreement or agreeing with the terms within the Arbitration Agreement; (3) he was not provided with opportunity to opt out therefrom or continue his employment with Defendants if he decided not to sign the Arbitration Agreement; (4) Defendants merely inserted the website of AAA in the Arbitration Agreement for Plaintiff to independently find the rules for arbitration; and (5) Defendants provided Plaintiff with a stack of documents in English that he was pressured to sign and return the same day. (Opposition, pgs. 2-6; Decl. of Villalta ¶¶4-7.)

“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.)

Procedural unconscionability “focuses on the unequal bargaining positions and hidden terms common in the context of adhesion contracts.” (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1212-1213.) Although standard employment agreements offered on a “take it or leave it” basis are generally considered contracts of adhesion, this alone is not enough to equate to unconscionability. (See Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 817-819 [“To describe a contract as adhesive in character is not to indicate its legal effect. It is, rather, ‘the beginning and not the end of the analysis insofar as enforceability of its terms are concerned.’”].) Adhesion contracts are “fully enforceable . . . unless certain other factors are present which under established legal rules—legislative or judicial—operate to render it otherwise.” (Id. at pgs. 819-820; Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1409 [adhesion alone does not render arbitration agreements unconscionable]; see also Armendariz, 24 Cal.4th at 114; Lagatree v. Luce, Forward, Hamilton & Scripps, LLP (1999) 74 Cal.App.4th 1105 [discussing many authorities upholding arbitration agreements contained in adhesion contracts].)

Plaintiff’s argument in opposition that his requirement to sign the Arbitration Agreement as a condition of his employment is unavailing and is unsupported by case law. The adhesive nature of arbitration agreements in the employment context does not render an agreement unenforceable. (Lagatree, 74 Cal.App.4th at pg. 1127 [“[C]ases uniformly agree that a compulsory predispute arbitration agreement is not rendered unenforceable just because it is required as a condition of employment or offered on a ‘take it or leave it’ basis.”]; Armendariz, 24 Cal. 4th at pg. 113 [holding that the requirement that the employee sign an arbitration agreement may contain some elements of procedural unconscionability, but that, in itself, does not invalidate the arbitration agreement]; Ajamian v. CantorCO2e, LP (2012) 203 Cal.App.4th 771, 796 [“Where there is no other indication of oppression or surprise, the degree of procedural unconscionability of an adhesion agreement is low[.]”].)

It is well-established that the AAA rules comply with Armendariz and, incorporating the rules into an arbitration agreement, as here, is permissible. (See Roman, 172 Cal.App.4th at pg. 1476 [holding that arbitration agreement incorporating AAA Rules complies with Armendariz]; Lagatree, 74 Cal.App. at pg. 1127 [“The rules of the [AAA] specified by the clause as governing the resolution of disputes are generally regarded to be neutral and fair”].)

Plaintiff’s reliance on Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 486, to support his claim that incorporation of the AAA rules is unconscionable is misplaced. Zullo held that the failure to attach the AAA rules only “adds a bit” to the procedural unconscionability and does not create complete procedural unconscionability. (See Id.)

With regard to Plaintiff’s argument that his limited understanding of English renders the Arbitration Agreement unconscionable, such a situation does not excuse his performance under the Arbitration Agreement. (See Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 710 [“[O]ne who assents to a contract is bound by its provisions and cannot complain of unfamiliarity with the language of the instrument.”); Randas v. YMCA of Metropolitan Los Angeles (1993) 17 Cal.App.4th 158, 163 [“Ordinarily, one who accepts or signs an instrument, which on its face is a contract, is deemed to assent to all its terms, and cannot escape liability on the ground that he has not read it. If he cannot read, he should have it read or explained to him.”].)

Based on the foregoing, the Court finds the Arbitration Agreement is, at most, minimally procedurally unconscionable. However, as discussed below, the Court finds the arbitration agreement is not substantively unconscionable.

Plaintiff argues the Arbitration Agreement is substantively unconscionable because fails to comply with the Armendariz requirements of fairness. (Opposition, pgs. 6-7; Armendariz, 24 Cal.4th at pg. 102.)

“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, 172 Cal.App.4th at pgs. 1469-1470.) In determining whether an arbitration agreement is unconscionable, the Court considers whether the agreement: (1) provides for a neutral arbitrator; (2) provides for reasonable discovery; (3) requires a written award; (4) provides for the same remedies that otherwise would be available in court; and (5) does not require employees to bear costs unique to arbitration. (See Armendariz, 24 Cal.4th at pgs. 102-103.)

First, Plaintiff argues the Arbitration Agreement does not provide for a neutral arbitrator because it states, “The dispute will be decided by a single decision-maker, called the arbitrator. The arbitrator will be mutually selected by the Company and the Employee. If the parties cannot mutually agree on an arbitrator, then a list of arbitrators will be obtained from the American Arbitration Association’s (AAA) Employment Panel.” (Opposition, pg. 6; Decl. of Gyanani, Exh. A.) Plaintiff’s argument is unavailing. AAA Employment Rule 12 provides for a neutral arbitrator selection process that allows the Parties to each strike and rank neutral arbitrators from a proposed list. (See D-RJN, Ex. F at pg. 15.) This method has been deemed to provide for a neutral arbitrator compliant with Armendariz.

Second, Plaintiff’s argument that the discovery permitted under the Arbitration Agreement is inadequate because Plaintiff does not know how many depositions or how much written discovery will be allowed during the arbitration is also unavailing. Armendariz does not require that Plaintiff “know how much discovery” he will be entitled to. Rather, the California Supreme Court has explained that the parties to arbitration need only be permitted discovery sufficient to adequately arbitrate their claims, not unfettered discovery. (Armendariz, 24 Cal.4th at pg. 106.)

Here, under the Arbitration Agreement, the parties have the right to “take depositions and to obtain discovery regarding the subject matter of the action and to use and exercise all of the same rights, remedies and procedures, and be subject to all of the same duties, liabilities and objections as provided for in the civil discovery statutes of the statue in which you provide services.” (Decl. of Gyanani ¶5, Exh. A at pg. 3.) The Arbitration Agreement also provides that “[t]he arbitrator shall have the authority to rule on motions (including the power to issue orders and determine appropriate remedies) regarding discovery and to issue any protective orders necessary to protect the privacy and/or rights of parties and/or witnesses.” (Decl. of Gyanani ¶5, Exh. A at pg. 3.) Under even the most restrictive of standards, this provides for “more than minimal” discovery. It does not limit discovery in any way.

Third, Plaintiff argues that the agreement is unconscionable because it fails to state that “all” types of relief are available. Plaintiff’s argument is unavailing. The plain language of the Arbitration Agreement states: “[t]he arbitrator shall have the same authority to award remedies and damages on the merits of the dispute as provided to a judge and/or jury under parallel circumstances.” (Decl. of Gyanani ¶5, Exh. A.) Additionally, AAA Employment Rule 39 provides that “[t]he arbitrator may grant any remedy or relief that would have been available to the parties had the matter been heard in court including awards of attorney’s fees and costs, in accordance with applicable law.” (D-RJN, Exh. F at pg. 23.)

Finally, Plaintiff argues that the Arbitration Agreement does not provide for a written award. This argument is also unavailing. The Arbitration Agreement states that “the arbitrator shall issue a written opinion and award . . . Following the issuance of the arbitrator’s decision, any party may petition a court to confirm, enforce, correct or vacate the arbitrator’s opinion and award under the Federal Arbitration Act, 9 U.S.C. §§ 1-16, if applicable, and/or applicable state law.” (Decl. of Gyanani ¶5, Exh. A at pg. 3.) There is no discretion provided for pursuant to terms of the agreement. Thus, a written award is required. Similarly, AAA Employment Rule 39, which is incorporated into the agreement, provides that the arbitrator shall issue a written award that provides the reasons for the award unless the Parties agree otherwise. (D- RJN, Exh. F at pg. 23.)

Based on the evidence before the Court, the terms of the Arbitration Agreement do not create overly harsh or one-sided results, satisfying the requirements for a substantively conscionable agreement.

Based on the foregoing, the Court finds the Arbitration Agreement is not substantively unconscionable.

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.)

The case is stayed pending arbitration. The Court sets a non-appearance case review for March 6, 2025, 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