Judge: Daniel S. Murphy, Case: 23STCV18344, Date: 2024-05-08 Tentative Ruling

Case Number: 23STCV18344    Hearing Date: May 8, 2024    Dept: 32

BACKGROUND

            On August 2, 2023, Plaintiff Marcia D. Brashears filed this employment discrimination action against Defendants American Guard Services, Inc. and AGS Private Security.

            On April 11, 2024, Defendant American Guard Services, Inc. filed the instant motion to compel arbitration. Plaintiff filed her opposition on April 24, 2024. Defendant filed its reply on May 1, 2024.

LEGAL STANDARD

“On 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. Proving an Agreement to Arbitrate

“As to the existence of an agreement, [the moving party bears] the ultimate burden of proof, but the court [is] obliged to resolve the dispute using a three-step burden-shifting process.” (Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 755.)  

a. Defendant’s Initial Burden

“The moving party ‘can meet its initial burden by attaching to the motion or petition a copy of the arbitration agreement purporting to bear the opposing party's signature.’” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.) “At this step, a movant need not ‘follow the normal procedures of document authentication’ and need only ‘allege the existence of an agreement and support the allegation.’” (Iyere, supra, 87 Cal.App.5th at p. 755.) 

Here, Defendant relies on the declaration of its prior HR Manager, Tamra Curtis. (See Qualls Decl., Ex. 3 (Curtis Decl.).) Ms. Curtis avers that Plaintiff electronically signed the arbitration agreement on April 1, 2019. (Curtis Decl. ¶ 6, Ex. A.) The arbitration agreement covers “any dispute between an employee and the Company . . . [that] arises from or relates to employment.” (Ibid.) The last page of the agreement contains an electronic signature bearing Plaintiff’s name. (Ibid.) Therefore, Defendant has satisfied its initial burden.

b. Plaintiff’s Burden to Raise a Factual Dispute

“If the movant bears its initial burden, the burden shifts to the party opposing arbitration to identify a factual dispute as to the agreement's existence—in this instance, by disputing the authenticity of their signatures. To bear this burden, the arbitration opponent must offer admissible evidence creating a factual dispute as to the authenticity of their signatures. The opponent need not prove that his or her purported signature is not authentic, but must submit sufficient evidence to create a factual dispute and shift the burden back to the arbitration proponent, who retains the ultimate burden of proving, by a preponderance of the evidence, the authenticity of the signature.” (Iyere, supra, 87 Cal.App.5th at p. 755.)

Plaintiff denies signing an arbitration agreement, averring that she only signed an employment application which did not include an arbitration agreement. (Brashears Decl. ¶¶ 4, 10.) Plaintiff specifically denies signing the document attached as Exhibit A to the Curtis declaration. (Id., ¶¶ 11, 14, 15.) Therefore, Plaintiff has presented evidence to raise a factual dispute.

c. Defendant’s Ultimate Burden

An electronic signature has the same legal effect as a handwritten signature. (Civ. Code, § 1633.7(a).) An “electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.” (Id., § 1633.9(a).) “[T]he burden of authenticating an electronic signature is not great.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 844.)

In Ruiz, the declarant generally averred that employees must use a unique ID and password to log in and sign the employee acknowledgment form but failed to explain how she was able to infer that the signature on the specific document at issue was “the act of” the plaintiff. (Ruiz, supra, 232 Cal.App.4th at p. 844.) The declarant “did not explain that an electronic signature in the name of ‘Ernesto Zamora Ruiz’ could only have been placed on the 2011 agreement (i.e., on the employee acknowledgement form) by a person using Ruiz's ‘unique login ID and password.’” (Ibid.) In light of the plaintiff’s failure to recall signing the agreement, the court found that the declarant’s generic averments did not satisfy the defendant’s evidentiary burden.   

By contrast, Ms. Curtis avers in her declaration that the agreement was provided to Plaintiff upon onboarding and that “Plaintiff’s signature could have only been placed on the signature page of the Agreement by Plaintiff herself using a unique password known only to Plaintiff.” (Curtis Decl. ¶¶ 4-5.) Therefore, unlike the declarant in Ruiz, Ms. Curtis has “explain[ed] how, or upon what basis, she inferred that the electronic signature on the . . . agreement was ‘the act of’” Plaintiff. (See Ruiz, supra, 232 Cal.App.4th at p. 844.) This is not an “unsupported assertion” like the one found in Ruiz. (Ibid.) As the HR Manager, Ms. Curtis had custody of personnel files and avers that Exhibit A is a true and correct copy of the arbitration agreement presented to Plaintiff. (Curtis Decl. ¶ 6; see Unifund CCR, LLC v. Dear (2015) 243 Cal.App.4th Supp. 1, 8 [“A qualified witness need not be the custodian, the person who created the record, or one with personal knowledge in order for a business record to be admissible under the hearsay exception”].)

Furthermore, due to the burden-shifting nature of the analysis, a defendant employer may present evidence in reply to satisfy its ultimate burden. (See Iyere, supra, 87 Cal.App.5th at p. 755 [at the initial step, the moving party need only allege the existence of an arbitration agreement, but need not authenticate the document]; Ruiz, supra, 232 Cal.App.4th at p. 844 [employer submitted a reply declaration in support of its motion to compel arbitration]; Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1062 [defendant’s supplemental declaration satisfied the Ruiz standard].) Here, Defendant’s Compliance Coordinator, who designed the employee dashboard, explains how a unique password is created for each employee and why only that employee has access to his or her account. (Wafaa Decl. ¶ 2.) Mr. Wafaa further avers that the electronic signature bearing Plaintiff’s name could only have been generated by a person using Plaintiff’s unique ID and password. (Id., ¶ 3.) This is the type of information missing in Ruiz that would have authenticated the employee’s signature. Therefore, the Court finds that Defendant has satisfied its burden of proving an agreement to arbitrate by a preponderance of the evidence.

II. Waiver of FEHA Claims

            “[W]ith respect to statutory discrimination claims, there is no presumption of arbitrability and the waiver of a judicial forum must be clear and unmistakable.” (Marcario v. County of Orange (2007) 155 Cal.App.4th 397, 405.) Plaintiff argues that she could not have knowingly waived her right to bring FEHA claims in court because the arbitration agreement does not expressly name FEHA as one of the covered statutes. However, Plaintiff cites no authority for the proposition that a statute must be expressly named in an arbitration agreement in order for the agreement to cover claims arising under the statute. Here, the agreement clearly covers any claim arising under “any federal, state or local statute, ordinance, regulation or common law doctrine regarding or relating to employment discrimination, terms and conditions of employment, or termination of employment.” (Curtis Decl., Ex. A.) This constitutes a “clear and unmistakable” intent to arbitrate statutory discrimination claims such as those under FEHA. 

III. 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 omitted.)

Plaintiff argues that the agreement is procedurally unconscionable because it was presented as a condition of employment and does not contain an opt-out clause. (Opp. 15:25-26:1; 18:20-17.) However, an adhesion contract, by itself, presents only a minimal degree of procedural unconscionability. (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.)

Plaintiff also argues that “[t]he Agreement is procedurally unconscionable as it failed to provide Plaintiff sufficient time to fully understand the implications of an arbitration agreement, and the Agreement’s length and complexity made it so that it would be difficult to Plaintiff to understand exactly what she rights she was waiving and what each provision meant.” (Opp. 17:21-25.) However, the arbitration agreement was presented as a standalone document that was clearly labeled as an “Arbitration Policy.” (Curtis Decl. ¶ 4, Ex. A.) The agreement is four pages long with clearly labeled sections. The agreement is not “visually impenetrable,” nor does it “challenge the limits of legibility.” (See OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 128.) Plaintiff provides no evidence regarding how much time she was given to review the agreement, nor any evidence that she was pressured to sign quickly.

Furthermore, “[n]o law requires that parties dealing at arm's length have a duty to explain to each other the terms of a written contract.” (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1674.) “An arbitration clause within a contract may be binding on a party even if the party never actually read the clause.” (Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 777.) “[O]ne who signs an instrument which on its face is a contract is deemed to assent to all its terms.” (Marin Storage & Trucking, Inc. v. Benco Contracting & Engineering, Inc. (2001) 89 Cal.App.4th 1042, 1049.) Defendant was under no obligation to specifically explain the terms of the agreement, and Plaintiff cites no evidence suggesting that she was prevented from obtaining more information on the agreement or seeking legal advice. Because Plaintiff signed the agreement, whether she read it or recalls reading it is immaterial.    

Therefore, the Court finds 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.) An agreement “lacks basic fairness and mutuality if it requires one contracting party, but not the other, to arbitrate all claims arising out of the same transaction or occurrence or series of transactions or occurrences.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 120.)

            1. Arbitration Fees

Plaintiff argues that “[t]he arbitration clause did not provide that the defendants would pay any fees for the arbitration and thus it is unconscionable.” (Opp. 16:1-3.) However, the agreement incorporates AAA rules, which require the employer to cover the costs of arbitration. (Curtis Decl., Ex. A; Qualls Decl., Ex. 2, p. 33.)

            2. Bilaterality

Plaintiff argues that the agreement is one-sided because “the arbitration agreement provided by Defendants would seek to have Plaintiff relinquish all her rights to bring a claim against Defendant, while having Defendants waive no specific claims, other than a general waiver.” (Opp. 17:1-3.) However, the agreement does not waive Plaintiff’s rights to bring a claim. Rather, it governs the forum in which the claims are brought. Furthermore, the agreement clearly covers “any dispute between an employee and the Company,” including “any dispute the Company might have with a current or former employee which arises or relates to employment.” (Curtis Decl., Ex. A.) Therefore, the agreement applies equally to Plaintiff and Defendant. The agreement does not exempt Defendant from its provisions, nor does it allow Defendant to file claims in court that Plaintiff must arbitrate.

            3. Class Action and PAGA Waiver

Plaintiff argues that the agreement is void because it contains a class action and PAGA waiver. The agreement states: “Any dispute covered by this Policy will be arbitrated on an individual basis, and the parties mutually waive their right to participate in, or receive money from, any class, collective, or representative proceeding. No dispute between an employee and the Company may be consolidated or joined with a dispute between any other employee and the Company, nor may an individual employee seek to bring his/her dispute on behalf of other employees as a class or collective action or other representative proceeding.” (Curtis Decl., Ex. A.)

To the extent this clause is interpreted as a wholesale waiver of class action or representative PAGA claims, it may be severed without affecting the agreement to arbitrate on an individual basis. (See Armendariz, supra, 24 Cal.4th at p. 124; Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906.) Plaintiff has only brought individual claims and is therefore bound to arbitrate those claims. Even if Plaintiff had brought class action or representative claims, she would still have to arbitrate her individual claims.

4. Defendant’s Right to Modify or Terminate the Agreement     

            “An employer's unrestricted right to amend, modify, or terminate an arbitration agreement at any time renders the agreement illusory.” (Peleg v. Neiman Marcus Group, Inc. (2012) 204 Cal.App.4th 1425, 1461, emphasis in original.) An employer’s right to modify or terminate an arbitration agreement is properly limited (and the contract is thereby not illusory) where the modification or termination does not apply to claims that have already accrued. (Id. at p. 1462.)

            Here, the arbitration agreement provides that Defendant may amend, modify, or terminate the arbitration policy only with 60 days advance notice. (Curtis Decl., Ex. A.) Furthermore, “[n]o such amendment or termination shall affect any arbitration procedure which has already been commenced pursuant to this Policy.” (Ibid.) The clause limits Defendant’s ability to modify or terminate the agreement to ensure that Defendant cannot retroactively alter the terms of arbitration or absolve itself from arbitration once a dispute arises. Therefore, the agreement is not illusory.

            In sum, the Court finds no substantive unconscionability. With only a minimal degree of procedural unconscionability and no substantive unconscionability, the contract remains enforceable. 

CONCLUSION

            Defendant American Guard Services, Inc.’s motion to compel arbitration is GRANTED. The Court hereby stays the case in its entirety.