Judge: Daniel S. Murphy, Case: 22STCV06114, Date: 2022-09-16 Tentative Ruling

Case Number: 22STCV06114    Hearing Date: September 16, 2022    Dept: 32

BACKGROUND

            On May 9, 2022, Plaintiff Rosario Ruiz filed this action for employment discrimination against Defendant Altamed Health Services Corporation. Defendant presently moves to compel arbitration based on an arbitration agreement signed by Plaintiff at the start of her employment.

LEGAL STANDARD

The Federal Arbitration Act (“FAA”) states that “[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.) California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.)

California law states that “[o]n petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that 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….” (Code Civ. Proc, § 1281.2.) “The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)

EVIDENTIARY OBJECTIONS

            Plaintiff’s objections are overruled.

DISCUSSION

I. Existence of a Valid Arbitration Agreement

            On June 22, 2013, Plaintiff signed a document titled “Employment At-Will and Arbitration Agreement California.” (Brown Decl., Ex. B.) The agreement provides that “the Company and I will utilize binding arbitration as the sole and exclusive means to resolve all disputes that may arise out of or be related in any way to my employment . . . .” (Id., § 2.) The arbitration provision acknowledges that the parties are relinquishing their “right to bring a claim against the other in a court of law . . . .” (Ibid.) The agreement further provides that it covers all disputes, including discrimination. (Ibid.)

            Plaintiff does not dispute the existence or contents of this agreement or that she signed it. (See Ruiz Decl. ¶ 6.) Therefore, Defendant has satisfied its burden of establishing the existence of an arbitration agreement by a preponderance of the evidence. The burden now shifts to Plaintiff to establish a defense against enforcement. Plaintiff argues that the agreement is unconscionable.           

II. Unconscionability

Unconscionability has both a procedural and a substantive element. (Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796, 808.) Both elements must be present for a court to invalidate a contract or clause. (Ibid.) However, the two elements need not be present in the same degree; courts use a sliding scale approach in assessing the two elements. (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 242.)

a. Procedural Unconscionability

Procedural unconscionability “focuses on two factors: ‘oppression’ and ‘surprise.’ ‘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 supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms.” (Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 484, internal citations and quotations omitted.) A contract of adhesion typically denotes a standardized contract imposed and drafted by the party of superior bargaining strength which relegates to the subscribing party only the opportunity to adhere to the contract or reject it. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113.)

            1. Contract of Adhesion

Plaintiff first argues that the agreement is one of adhesion without an opt-out provision. (Opp. 5:23-6:28, 8:18-26.) The offer letter presented to Plaintiff indicated that Defendant has “adopted an arbitration process that applies as a condition of employment.” (Brown Decl., Ex. A.) Courts have recognized that adhesion contracts in the employment context always contain some degree of procedural unconscionability. (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.) However, the mere fact that an arbitration agreement is a condition of employment is not dispositive. (Ibid.) Absent evidence of oppression or surprise, the degree of procedural unconscionability will be low. (Ibid.) 

2. Arbitration Rules

Plaintiff argues that the agreement is oppressive because Defendant failed to provide the arbitration rules to Plaintiff. (Opp. 7:4-13.) However, Plaintiff acknowledges that such failure is not dispositive unless some aspect of the rules themselves are at issue. (Opp. 7:13-18 [citing Baltazar v. Forever 21 (2016) 62 Cal.4th 1237, 1246].) Plaintiff thus argues that AAA and JAMS rules are unfairly surprising due to the limitations they place on discovery. (Opp. 7:19-8:15.)

However, the agreement at issue does not reference either AAA or JAMS rules. Instead, the conditions of arbitration are outlined in the agreement itself. (Brown Decl., Ex. B, §§ 4-5.) Plaintiff does not argue that the conditions of arbitration as outlined in the agreement are unconscionable. In any case, Plaintiff cites no authority for the proposition that a limitation on discovery in arbitration renders an agreement unconscionable. The very purpose of arbitration is to serve as a simplified alternative to litigation. (Aixtron, Inc. v. Veeco Instruments Inc. (2020) 52 Cal.App.5th 360, 395.) Plaintiff also cites no authority that the discovery provisions in AAA or JAMS rules are unconscionable. The agreement states that it is governed by the Federal Arbitration Act and California Arbitration Act. (Brown Decl., Ex. B, § 2.) Neither of these laws are unconscionable.   

            3. Limited Time to Sign

Plaintiff further argues that she only had a “few minutes to review and sign” the documents, citing her declaration as evidence. (Opp. 5:9.) However, Plaintiff’s declaration does not state that Defendant imposed a time limit. On the other hand, Defendant’s HR Director avers that “[e]mployees are not provided a time restriction to review the arbitration agreement and they are free to submit the arbitration agreement to their own personal attorneys for review.” (Brown Decl. ¶ 5.)

Plaintiff avers that “we could not ask questions, nor were we told that we could ask questions.” (Ruiz Decl. ¶ 5.) There is no indication that Plaintiff was actually prohibited from asking questions or that Defendant refused to answer questions. Although Plaintiff avers that no one explained arbitration to her (Ruiz Decl. ¶ 7), she does not aver that Defendant discouraged or prohibited her from seeking clarification. In fact, HR personnel were “available and willing to explain any of the onboarding documents, including the Arbitration Agreement, to employees.” (Brown Decl. ¶ 6.) That Plaintiff chose not to utilize these resources or notify anyone of her concerns does not render the agreement unconscionable.   

            4. Complexity and Plaintiff’s Lack of Legal Knowledge

Lastly, Plaintiff argues that the agreement is unconscionable because it is written in complex legal jargon, and Plaintiff has limited education and was not accompanied by counsel at the time of signing. (Opp. 5:5-21.)

The agreement is written in sufficiently clear language and unambiguously states that “both I and the Company give up our right to trial by jury of any claim I or the Company may have against each other.” (Brown Decl., Ex. B, § 2.) The language regarding arbitration “is not sandwiched in between other topics and is not difficult to find.” (See Alvarez v. Altamed Health Services Corp. (2021) 60 Cal.App.5th 572, 583.) The statutory references “are necessary to define the claims covered by arbitration; the references are explained in lay terms.” (Id. at p. 592.) Furthermore, as discussed above, Defendant did not impose a time limit on employees to review the documents and had HR personnel ready to answer questions. Employees were also free to consult an attorney before signing the documents. (Brown Decl. ¶ 5.)

Notably, the agreement contains unambiguous language in all caps above the signature line: “MY SIGNATURE BELOW ATTESTS TO THE FACT THAT I HAVE READ, UNDERSTAND, AND AGREE TO BE LEGALLY BOUND TO ALL OF THE ABOVE TERMS. DO NOT SIGN UNTIL THE EMPLOYEE HAVE READ THE ABOVE ACKNOWLEDGMENT AND AGREEMENT.” (Brown Decl., Ex. B, emphasis added.) Plaintiff signed the agreement, thus acknowledging that she read and understood the terms. Plaintiff cannot now avoid the consequences of doing so. (See Marin Storage & Trucking, Inc. v. Benco Contracting & Engineering, Inc. (2001) 89 Cal.App.4th 1042, 1049 [“one who signs an instrument which on its face is a contract is deemed to assent to all its terms”].)   

            b. Substantive Unconscionability

Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create overly harsh or one-sided results as to shock the conscience. (Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1515.)   

Plaintiff argues that the agreement is substantively unconscionable due to an arbitral review provision which states as follows: “Within thirty days of the arbitrator’s final written opinion and order, the opinion shall be subject to affirmation, reversal or modification, at either party’s written request, following review of the record and arguments of the parties by a second arbitrator who shall, as far as practicable, proceed according to the law and procedures applicable to appellate review by the California Court of Appeal of a civil judgment following court trial.” (Brown Decl., Ex. B, § 5.)

The Court of Appeal found a similar provision substantively unconscionable in Alvarez. In particular, the Court acknowledged that “even agreements which apply equally on their face to both parties may in practice benefit only one of the parties.” (Alvarez, supra, 60 Cal.App.5th at p. 593.) In the case of a facially bilateral arbitral review provision, the Court recognized that “the employer could unilaterally add costs and time to the arbitration proceeding by seeking this review and thereby maximize the employer's status as the better resourced party.” (Ibid.) According to the Court, an arbitral review provision favors employers because an employee is unlikely to obtain a higher award on review, while an employer can invoke the review process to “increase the expense and possibly the length of time required for the employee to obtain confirmation of her award, and do so with very little risk to itself.” (Id. at p. 595.)

However, the Court in Alvarez ultimately held that “this second review provision appears entirely severable from the remainder of the agreement and removing it would remove the only instance of substantive unconscionability.” (Alvarez, supra, 60 Cal.App.5th at p. 596.) Here, the arbitral review provision is also the only provision challenged as substantively unconscionable. The provision does not taint the entire agreement and is thus severable. (See Armendariz, supra, 24 Cal.4th at p. 124 [“If the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate”].)

CONCLUSION

            Defendant’s motion to compel arbitration is GRANTED. The arbitral review provision is stricken.