Judge: Daniel S. Murphy, Case: 23STCV21189, Date: 2024-01-17 Tentative Ruling

Case Number: 23STCV21189    Hearing Date: January 17, 2024    Dept: 32

BACKGROUND

            On September 1, 2023, Plaintiff Ryan Mezzacappa filed this employment discrimination action against Defendants IGS Solutions LLC and Tim Nguyen, asserting violations of FEHA, the Labor Code, and wrongful termination. Plaintiff alleges that she was employed by IGS Solutions and that Tim Nguyen was a manager, supervisor, managing agent, or employee of IGS.

            On December 8, 2023, Defendants filed the instant motion to compel arbitration. Plaintiff filed his opposition on January 2, 2023. Defendants filed their reply on January 9, 2024.

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.) The term “involving commerce” is interpreted to mean simply “affecting commerce” to give the FAA the broadest reach possible, and does not require a transaction that is actually “within the flow of interstate commerce.” (See Allied-Bruce Terminix Co. v. Dobson (1995) 513 U.S. 265, 273-74; Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56.) Moreover, parties may agree to apply the FAA notwithstanding any effect on interstate commerce. (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355.)

“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. Prima Facie Proof of an Agreement to Arbitrate

“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, quoting Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 543-44.) 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.)

Here, Plaintiff’s personnel file contains an agreement providing that Plaintiff and Defendants “mutually agree to resolve by final and binding arbitration any dispute, claim, or controversy, including but not limited to . . . claims of discrimination, retaliation, or harassment under federal or state law; claims of wrongful termination.” (Villanueva Decl. ¶ 8, Ex. A.) The agreement covers disputes between Plaintiff and IGS or any of its “officers, directors, employees, and/or agents.” (Ibid.) Therefore, the agreement covers the claims at issue and covers both Defendants. Plaintiff electronically initialed and signed the agreement on April 26, 2021. (Ibid.)

Plaintiff claims that he cannot recall signing the arbitration agreement and argues that Defendants’ evidence is insufficient to prove his electronic signature. Relying on Ruiz, Plaintiff argues that Defendants have not proven that the electronic signature was “the act of” Plaintiff. In Ruiz, the defendant’s representative “summarily asserted” that the plaintiff signed the arbitration agreement without explaining how she arrived at that conclusion. (Ruiz, supra, 232 Cal.App.4th at p. 843.) Even in reply, the defendant’s representative only described the company’s general onboarding process without explaining how she could infer that only the plaintiff could have signed the agreement. (Id. at p. 844.)

By contrast, IGS’s HR director, Ms. Villanueva, does not “summarily assert” that Plaintiff electronically signed the arbitration agreement. Instead, Ms. Villanueva explains how an employee’s digital signature is added to an onboarding document, avers that only the employee has access to the portal to complete the documents, and presents other onboarding documents signed by Plaintiff on the same date using the same digital signature. (Villanueva Decl. ¶¶ 5, 9, Ex. B.) Ms. Villanueva’s supplemental declaration provides further explanation that employees receive a secure link to create a unique username and password, which is inaccessible by IGS. (Villanueva Reply Decl. ¶¶ 3-4.) Ms. Villanueva also verifies that IGS may view onboarding documents but cannot add an employee’s signature to any document. (Ibid.) Lastly, Ms. Villanueva avers that she reviewed Plaintiff’s profile and determined that Plaintiff accessed the secure link using his unique username and logged into his account to sign the arbitration agreement. (Id., ¶ 5.)

These types of facts were missing in Ruiz. While the court in Ruiz declined to find a binding arbitration agreement under the facts of that case, the court also acknowledged that proving an electronic signature is ordinarily “not a difficult evidentiary burden to meet.” Here, unlike in Ruiz, Defendants have met that evidentiary burden. The Court finds that Defendants have proven the existence of an arbitration agreement covering the claims at issue. The burden thus shifts to Plaintiff to articulate 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.)

Plaintiff argues that the agreement is procedurally unconscionable because it fails to include the arbitration rules. However, “the failure to attach the [arbitration] rules, standing alone, is insufficient grounds to support a finding of procedural unconscionability.” (Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1472.) The failure to attach the rules to the agreement does not make the agreement unconscionable unless the rules themselves are arguably unconscionable or result in surprise. (See Baltazar v. Forever 21 (2016) 62 Cal.4th 1237, 1246; Lane v. Francis Capital Mgmt. LLC (2014) 224 Cal.App.4th 676, 691-92.)

Here, the agreement states that the applicable rules are the “Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association.” (Villanueva Decl., Ex. A.) The agreement provides an internet link and informs Plaintiff that “[u]pon request, the Company will provide Employee with a copy of the AAA rules.” (Ibid.) Therefore, the agreement specifically identifies precisely which rules will apply to the arbitration and provides Plaintiff with the means to obtain them. Plaintiff argues that the internet link no longer works and the Agreement does not list the contact information of who to contact to obtain the rules.

This argument is without merit. Even if the link does not work, Plaintiff could have requested a copy from Defendant, as outlined in the agreement. Plaintiff has no evidence that the absence of a functioning link or contact information in the agreement actually hindered his ability to access the rules. Plaintiff does not identify any provision within the rules that could be considered unconscionable or surprising.

Therefore, the Court finds no procedural unconscionability. In the absence of procedural unconscionability, the agreement is not unconscionable no matter how much substantive unconscionability is present. (See Aron, supra, 143 Cal.App.4th at p. 808 [both elements must be present].)

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 confidentiality clause in the agreement renders it substantively unconscionable. The agreement provides that “[n]o party may disclose any information to any other party not involved in the arbitration hearing unless written approval has been given by the other party.” (Villanueva Decl., Ex. A.) In Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1066-67, the court found that a similar provision requiring the parties “to keep ‘all aspects of the arbitration’ secret” was unfairly one-sided because it hinders an employee’s ability to investigate their claim by interviewing potential witnesses. Such a provision “also defeats the purpose of using arbitration as a simpler, more time-effective forum for resolving disputes” and “may discourage potential plaintiffs from filing discrimination cases.” (Ibid.)

The confidentiality provision here is equally broad, barring the disclosure of “any information.” This is functionally the same as the unconscionable clause in Ramos that required the employee to keep “all aspects” of the arbitration a secret. Defendant cites to Sanchez v. Carmax Auto Superstores California, LLC (2014) 224 Cal.App.4th 398, 408, where a less strict confidentiality clause was found not unconscionable. The clause in Sanchez provided that the arbitration must be kept confidential unless disclosure is “appropriate in response to governmental or legal process.” (Ibid.) The confidentiality clause here contains no such carveout and could therefore prevent Plaintiff from effectively interviewing witnesses.

However, the confidentiality provision may be severed. (See Armendariz, supra, 24 Cal.4th at pp. 124-25.) The agreement is not permeated with unconscionability, because Plaintiff only identifies one provision that can be easily stricken to cure the taint. The central purpose of the agreement—to arbitrate disputes arising from Plaintiff’s employment—is not fundamentally illegal. Without the confidentiality clause, the agreement exhibits no substantive unconscionability.

CONCLUSION

            Defendants’ motion to compel arbitration is GRANTED. The confidentiality clause is stricken from the agreement. The case is stayed in its entirety pending the outcome of arbitration.