Judge: Daniel S. Murphy, Case: 22STCV17630, Date: 2022-10-21 Tentative Ruling

Case Number: 22STCV17630    Hearing Date: October 21, 2022    Dept: 32

BACKGROUND

            On May 27, 2022, Plaintiff Omar Kader filed this employment action against various Defendants. Plaintiff is a gay man who worked for Defendant Southern California Medical Center, Inc. (“SCMC”) as CFO and COO. The complaint stems from a series of sexual assaults allegedly committed by SCMC’s founder, Defendant Mohammad Rasekhi, from 2018 to 2022. Defendants ModernHR and ADP Total Source are human resource agencies who partnered with SCMC. Defendant R&B Medical Group is another company owned by Rasekhi, where Plaintiff also worked preparing finances. Defendant Sheila Busheri is the CEO of SCMC, cofounder of R&B, and Rasekhi’s wife. The remaining individual Defendants are SCMC board members.

            Defendants presently move to compel arbitration based on at least one arbitration agreement that Plaintiff signed. On May 3, 2018, Plaintiff signed an arbitration agreement with SCMC covering “[a]ny controversy, dispute or claim arising out of, in connection with, or related to the interpretation, performance, or breach of Employee’s employment with COMPANY.” (Busheri Decl., Ex. A.) On June 25, 2019, Plaintiff signed another agreement prepared by ModernHR covering disputes between himself and SCMC, ModernHR, or their respective employees and officers. (Id., Ex. B.) The June 2019 agreement covers all disputes relating to Plaintiff’s employment, including violations of state statutes or any other statutory scheme addressing discrimination and harassment. (Ibid.) Defendants primarily rely on the June 2019 agreement.  

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.)

DISCUSSION

I. Existence of Valid Agreement

            Plaintiff does not dispute the existence of the June 2019 agreement or its contents, or that he signed it. (See Busheri Decl., Ex. B.) By its terms, the agreement covers all employment-related disputes, including discrimination and harassment. Thus, Plaintiff’s claims fall under the scope of the agreement. The agreement also applies to Defendants besides SCMC and ModernHR because it applies to disputes involving those companies’ employees and officers. Additionally, Plaintiff alleges that all of the Defendants are agents of each other and committed the alleged acts in conjunction. (Compl. ¶ 19; see Ronay Family Ltd. Partnership v. Tweed (2013) 216 Cal.App.4th 830, 838 [“an agent may enforce an arbitration agreement to which its principal is a party”]; Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614 [“when a plaintiff alleges a defendant acted as an agent of a party to an arbitration agreement, the defendant may enforce the agreement even though the defendant is not a party thereto”].)

            Therefore, Defendants have established the existence of a valid arbitration agreement. The burden shifts to Plaintiff to articulate a defense against enforcement.

II. Ending Forced Arbitration of Sexual Assault and Harassment Act of 2021

            Under Title 9 of the United States Code section 402, subdivision (a), “no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.” However, the Act only applies to disputes or claims that arise after March 2, 2022.

            Defendants argue that all of Plaintiff’s claims must be arbitrated because the action accrued in July 2018, upon the first alleged sexual assault. Plaintiff argues none of the claims may be arbitrated because the action did not accrue until his filing of the complaint in May 2022. Neither contention is entirely accurate.

“A cause of action accrues ‘when [it] is complete with all of its elements’—those elements being wrongdoing, harm, and causation.” (Pooshs v. Philip Morris USA, Inc. (2011) 51 Cal.4th 788, 797.) “[O]rdinarily, the statute of limitations runs from ‘the occurrence of the last element essential to the cause of action.’” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191, quoting Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 187.) However, “[w]hen an obligation or liability arises on a recurring basis, a cause of action accrues each time a wrongful act occurs, triggering a new limitations period. Because each new breach of such an obligation provides all the elements of a claim—wrongdoing, harm, and causation—each may be treated as an independently actionable wrong with its own time limit for recovery.” (Aryeh, supra, 55 Cal.4th at p. 1199, internal citations omitted.)  

Here, each alleged sexual assault is an independently actionable wrong. Thus, the cause of action accrued on the dates of each occurrence. This means that most of the claims accrued prior to the passage of the Act, except one. Plaintiff alleges that Rasekhi assaulted him on March 16, 2022. (Compl. ¶¶ 85-86.) Each cause of action may be arbitrated except the one arising from the March 16 assault. Although this would result in parallel proceedings on similar claims, the agreement must be enforced to the extent possible. (See 9 U.S.C. § 2 [arbitration agreements must be enforced “save upon such grounds as exist at law or in equity for the revocation of any contract”]; Engalla, supra, 15 Cal.4th at pp. 971-72 [the law favors arbitration].) Moreover, the court action may be stayed pending the outcome of arbitration, which would prevent duplicate proceedings or inconsistent rulings. (See Code Civ. Proc., §§ 1281.2(d), 1281.4.) The agreement also provides that if only some claims are subject to arbitration, the court will stay litigation of the claims not subject to arbitration. (Busheri Decl., Ex. B, p. 4.)

III. Labor Code § 432.6 (AB 51)

Plaintiff also argues that Labor Code section 432.6 makes the arbitration agreement illegal. Section 432.6 states: “A person shall not, as a condition of employment, continued employment, or the receipt of any employment-related benefit, require any applicant for employment or any employee to waive any right, forum, or procedure for a violation of any provision of the California Fair Employment and Housing Act or this code . . . .” (Lab. Code, § 432.6(a).)

However, Section 432.6 also expressly provides: “Nothing in this section is intended to invalidate a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act.” (Lab. Code, § 432.6(f).) The Ninth Circuit has confirmed that “§ 432.6 cannot be used to invalidate, revoke, or fail to enforce an arbitration agreement . . . .” (Chamber of Commerce of the United States v. Bonta (9th Cir. 2021) 13 F.4th 766, 775.) The June 2019 agreement in this case is expressly governed by the FAA. (Busheri Decl., Ex. B.) Section 432.6 also applies only to agreements entered on or after January 2020 (Lab. Code, § 432.6(h)), and both agreements in this case were executed before that (Busheri Decl., Ex. A, B). Thus, Section 432.6 does not invalidate the agreement.   

IV. 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.)   

            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.) Plaintiff argues that the agreement is oppressive because he had already been working for Defendants at the time the agreement was presented, as opposed to signing it prior to starting his employment. However, Plaintiff cites no authority for the proposition that an arbitration agreement presented as a condition of continued employment is more oppressive than one presented as a condition of beginning employment. Therefore, there is a minimal degree of procedural unconscionability.  

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.) With regards to a mandatory employment arbitration agreement, the Supreme Court has imposed the following requirements: (1) the agreement must provide for a neutral arbitrator; (2) the agreement must provide for more than minimal discovery; (3) the arbitration decision must be written and disclose the essential findings and conclusions upon which an award is based; (4) the agreement must provide for all of the types of relief that would otherwise be available in court; and (5) the agreement must not require employees to pay the costs of arbitration. (Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 102.)

            Here, the June 2019 agreement satisfies all of the Armendariz factors. Plaintiff signed the agreement to be bound the ADR Policy, and the ADR Policy outlines the processes and procedures governing the arbitration. (Busheri Decl., Ex. B, p. 5.) Plaintiff does not otherwise explain how the agreement is “rigged” or “one-sided.” Therefore, there is no substantive unconscionability.

V. Public Policy

            Lastly, Plaintiff argues that under Armendariz, “an employment contract that required employees to waive their rights under the FEHA to redress sexual harassment or discrimination would be contrary to public policy and unlawful.” (Armendariz, supra, 24 Cal.4th at pp. 100-101.) However, an employee does not waive his statutory rights merely by agreeing to arbitration. “[A] party, in agreeing to arbitrate a statutory claim, does not forgo the substantive rights afforded by the statute [but] only submits to their resolution in an arbitral . . . forum.” (Id. at p. 99, quoting Mitsubishi Motors v. Soler Chrysler-Plymouth (1985) 473 U.S. 614, 628.)

            The agreement in this case merely reflects the parties’ intent to submit their dispute to an arbitral forum. The agreement does not waive any of Plaintiff’s rights under FEHA and is not void for violating public policy.

CONCLUSION

            Defendants’ motions to compel arbitration are GRANTED.  Trial concerning the March 16 assault is stayed until the conclusion of the arbitration.