Judge: Daniel S. Murphy, Case: 24STCV04373, Date: 2024-09-20 Tentative Ruling

Case Number: 24STCV04373    Hearing Date: September 20, 2024    Dept: 32

BACKGROUND

            On February 21, 2024, Plaintiff Gilberto Rodriguez filed this employment discrimination action against Defendants Quality Fabrication Inc., TriNet Group Inc, and Tom Witzigman.

            On August 20, 2024, Defendant Quality Fabrication Inc. (QFI) filed the instant motion to compel arbitration. Plaintiff filed his opposition on September 9, 2024. Defendant filed its reply on September 13, 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. Proof of Agreement

            “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.)

            Here, on August 20, 2019, Plaintiff signed a TriNet Terms and Conditions Agreement (TCA) which contains a Dispute Resolution Protocol (DRP). (Lafreniere Decl., Ex. A.) The DRP “covers any dispute arising out of or relating to your co-employment with TriNet, including your TriNet co-employer, and/or arising out of or relating to your employment with your company, as well as any dispute with an employee, officer, or director of TriNet or of a TriNet customer (all of whom, in addition to TriNet customers, are intended to be beneficiaries of this DRP).” (Id., § 9(a), emphasis added.)

            The DRP is written this way because TriNet is a professional employer organization that provides human resource services and “share[s] certain employer responsibilities” with its customers as “co-employers.” (Lafreniere Decl., Ex. A, § 1.) A “TriNet Customer” is the company that an employee directly works for, also referred to as “your worksite employer,” “your company,” or “my company.” (Ibid.)

            The DRP expressly covers “any dispute” arising from an employee’s “co-employment” with TriNet and the “co-employer.” (Lafreniere Decl., Ex. A, § 9(a).) Plaintiff does not dispute that QFI is a “TriNet Customer” who co-employed Plaintiff in the manner described in the TCA. Because the claims asserted in the complaint arise from Plaintiff’s employment with QFI, they fall under the DRP. Therefore, QFI has satisfied its burden of proving the existence of an arbitration agreement covering the claims at issue.

II. Third-Party Beneficiary

            “The general rule is that only a party to an arbitration agreement may enforce it.” (Ronay Family Limited Partnership v. Tweed (2013) 216 Cal.App.4th 830, 837.) However, one exception to the general rule is that “a third party beneficiary of an arbitration agreement may enforce it.” (Id. at p. 838.) “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” (Civ. Code, § 1559.) “It is ‘not necessary that the beneficiary be named and identified as an individual. A third party may enforce a contract where he shows that he is a member of a class of persons for whose benefit it was made.’” (Ronay, supra, 216 Cal.App.4th at pp. 838-39.)

            As mentioned above, the DRP expressly covers disputes with the “TriNet Customer,” “co-employer,” or “your company.” (Lafreniere Decl., Ex. A, § 9(a).) The DRP expressly provides that a TriNet Customer is “intended to be [a] beneficiar[y] of this DRP.” (Ibid.) Again, Plaintiff does not dispute that QFI is the customer, co-employer, and company in this case. Thus, while QFI is not directly named in the agreement, it “is a member of a class of persons for whose benefit [the agreement] was made.’” (See Ronay, supra, 216 Cal.App.4th at pp. 838-39.) This is sufficient to establish QFI as a third-party beneficiary under the TCA. Therefore, QFI is entitled to enforce the arbitration provision.

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.)

            1. Contract of Adhesion

Plaintiff argues that the agreement is unconscionable because it was presented as a condition of employment. First, Plaintiff has no evidence of this fact, thus failing his burden to prove unenforceability. (See Pinnacle, supra, 55 Cal.4th at p. 236.) In any case, even if the contract had been presented on a take-it-or-leave-it basis, that would raise only a minimal degree of procedural unconscionability, insufficient to render the contract unenforceable. (See Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.)

            2. Failure to Attach Arbitration Rules

Next, Plaintiff argues that the agreement fails to attach the JAMS 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 DRP clearly states that arbitration will proceed under “the applicable employment arbitration rules and procedures of [JAMS] . . . then in effect.” (Lafreniere Decl., Ex. A, § 9(c).) The DRP also informs the reader that “JAMS’ Employment Arbitration Rules may be found on the internet at www.jamsadr.com or by using an internet search engine to locate the ‘JAMS Employment Arbitration Rules.’” (Ibid.)

Plaintiff argues, again without evidence, that he is unable to identify the applicable rules. However, the agreement clearly identifies the JAMS Employment Rules and provides instructions on how to access them. Plaintiff presents no evidence that he is unable to locate the rules from the information provided. Plaintiff also argues that the rules are amended over time. But the DRP incorporates the JAMS rules “then in effect.” Thus, there is no confusion as to which rules govern.

In sum, the Court finds no 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.)  

Plaintiff outlines the standards for substantive unconscionability of an arbitration agreement but then makes no assertion regarding the particular agreement in this case. (See Opp. 7:3-15.) Plaintiff fails to show that the DRP does not provide for a neutral arbitrator, adequate discovery, or a written decision.

The only purported defect with the DRP that Plaintiff identifies is an alleged failure to “limit the cost of arbitration.” (Opp. 7:16-28.) For an arbitration agreement to be valid, the employer must bear all costs unique to arbitration. (Armendariz v. Foundational Health Psychcare Servs. (2000) 24 Cal.4th 83, 111-12.) Here, the DRP provides the following:

“In all cases where the law requires it, TriNet (and, if applicable, any TriNet customer or employee(s) of either TriNet or a TriNet customer interested in enforcing this DRP for its/their own benefit) will pay the arbitrator's and arbitration fees. In cases in which apportionment of the arbitrator's and arbitration fees is permitted by applicable law, these fees will be divided between the parties as is required by law and determined by the arbitrator.”

(Lafreniere Decl., Ex. A, § 9(d).)

            Plaintiff complains that this provision does not expressly specify QFI as the party responsible for the costs unique to arbitration, nor specify that Plaintiff will not be responsible for such costs. However, the DRP provides that TriNet, the TriNet Customer, or employee of the TriNet Customer will pay the costs of arbitration “if applicable” and “where the law requires it.” In other words, responsibility for arbitration costs under the DRP depends on applicable law. Here, applicable law requires TriNet or QFI, not Plaintiff, to bear the costs unique to arbitration. Thus, the DRP does not require Plaintiff to bear any costs unique to arbitration. The fact that the agreement is not phrased in the way Plaintiff prefers does not make it substantively unconscionable.   

            As this is the only potential defect identified by Plaintiff, the Court finds no substantive unconscionability. Without either procedural or substantive unconscionability, the DRP remains enforceable.

IV. Timeliness

            Plaintiff argues that the motion is untimely because he granted QFI an extension to August 12, 2024 to respond to the complaint, but QFI waited until August 20, 2024 to file this motion. Plaintiff cites no authority suggesting that this makes the motion untimely. Code of Civil Procedure section 1281.5, cited by Plaintiff, relates to arbitration involving a claim of lien. There is no claim of lien in this case, thus the deadlines in section 1281.5 are irrelevant. The Court finds that the motion is timely.  

CONCLUSION

            Defendant Quality Fabrication Inc.’s motion to compel arbitration is GRANTED. The Court hereby stays the case in its entirety.