Judge: Daniel S. Murphy, Case: 24STCV22361, Date: 2025-01-06 Tentative Ruling

Case Number: 24STCV22361    Hearing Date: January 6, 2025    Dept: 32

BACKGROUND

            On September 3, 2024, Plaintiff Tarita Findley filed this employment discrimination action against Defendants Regal Medical Group, Inc., Heritage Provider Network, Inc., and Wendy Lloyd.

            On November 7, 2024, Defendant Regal Medical Group filed the instant motion to compel arbitration. Plaintiff filed her opposition on December 20, 2024. Defendant filed its reply on December 27, 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.)

Furthermore, 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 FAA governs contracts “involving commerce,” which has been 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.)

EVIDENTIARY OBJECTIONS

            Defendant’s objections are overruled.

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.)

            According to Defendant’s evidence, Plaintiff signed a Mutual Arbitration Agreement (MAA) on May 9, 2016. (Lugo Decl., Ex. A.) The MAA covers “all disputes, claims, complaints, or controversies (‘Claims’) that Employee now has or in the future may have against HPN Provider Network and/or any of its parents, subsidiaries, affiliates[1] . . . including but not limited to, claims in tort or contract, claims for discrimination, harassment, and/or retaliation . . . claims under the California Fair Employment and Housing Act . . . and any other claim under any federal, state, or local statute . . . arising out of and/or directly or indirectly relating to . . . Employee’s employment with the Company.” (Ibid.) The MAA states that these claims are “subject to arbitration pursuant to the terms of this Agreement and will be resolved by arbitration and NOT by a court or jury.” (Ibid.)

            Plaintiff signed the MAA underneath an acknowledgment stating that she “has carefully read this Agreement, understands the terms of this Agreement, and is entering into this Agreement voluntarily” and “is giving up the right to have all Covered Claims decided by a court or jury.” (Lugo Decl., Ex. A.) Plaintiff further signed a Handbook Acknowledgment stating that “I acknowledge, by my signature below, that the Company has implemented an alternative dispute resolution program, and I agree to execute and be bound by the Company's Mutual Arbitration Agreement.” (Id., Ex. B.)

            Plaintiff avers that she “do[es] not recall signing an arbitration agreement or an employment handbook.” (Findley Decl. ¶ 2.) However, “[i]f a party confronted with his or her handwritten signature on an arbitration agreement is unable to allege that the signature is inauthentic or forged, the fact that that person does not recall signing the agreement neither creates a factual dispute as to the signature's authenticity nor affords an independent basis to find that a contract was not formed.” (Iyere v. Wise Auto Group (2023) 87 Cal.App.5th 747, 758.) Plaintiff does not dispute that her actual signature is on the MAA and Handbook Acknowledgment. Thus, her failure to recall signing those documents is irrelevant.

            In sum, the evidence satisfies Defendant’s burden of proving 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 MAA was procured by fraud and is unconscionable.

II. Fraudulent Inducement

            “[A] party who is fraudulently induced to execute a contract can either rescind the contract and restore the consideration, or can affirm the contract and recover damages for fraud.” (Geraghty v. Shalizi (2017) 8 Cal.App.5th 593, 597.)

            Plaintiff argues that she can rescind the MAA because it was induced by fraud. Specifically, Plaintiff argues that she was tricked into signing the MAA under the false pretense that she was signing a document necessary for collecting a settlement payment. According to Plaintiff, “I recall only once being requested to sign a document during my employment with Defendant. That happened in 2016 in connection with the payment of a settlement check.” (Findley Decl. ¶ 3.) “I was summoned to Defendant’s office in San Bernardino . . . and asked to sign a document in order to receive a settlement payment as part of a class action against the Defendant for unpaid overtime wages.” (Ibid.)

            This does not prove that the MAA was procured by fraud. Plaintiff avers that she signed “a document” in relation to the settlement. There is no evidence that this unspecified document was the MAA. Plaintiff’s theory is that if she only signed one document during her employment, that one document must have been the MAA. However, there is no evidence that Plaintiff only signed one document during her employment. Plaintiff avers that she “recalls” signing only one document. This is not evidence that Plaintiff actually signed only one document during her employment. As discussed above, Plaintiff’s undisputed signature appears on the MAA and Handbook Acknowledgment, proving that she signed at least two other documents beyond the unspecified settlement paper. Ultimately, there is no evidence that the MAA was induced by fraud.

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 MAA is unconscionable as a contract of adhesion. (See Lugo Decl. ¶ 2 [“Regal has required all of its employees to submit to binding arbitration”].) However, the adhesive nature of a contract represents only a minimal degree of procedural unconscionability. (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.) “[A] compulsory predispute arbitration agreement is not rendered unenforceable just because it is required as a condition of employment.” (Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1127.)

            2. Oppression and Surprise

Plaintiff argues that she was given little time to sign the MAA and was pressured to sign it in order to receive a settlement payment. (See Findley Decl. ¶ 2.) As discussed above, there is no evidence that the unspecified settlement document was the MAA. Thus, whatever pressures Plaintiff faced in regards to the settlement have no bearing on the arbitration agreement. There is no evidence that Plaintiff was pressured to sign the MAA.

Plaintiff also argues that no one explained the effect of the MAA to her and that she was not advised of the opportunity to review the agreement with counsel. (See Findley Decl. ¶ 2.) However, “[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.) “Reasonable diligence requires the reading of a contract before signing it. A party cannot use his own lack of diligence to avoid an arbitration agreement.” (Ibid.) Plaintiff was responsible for reading and understanding the MAA before signing it. Plaintiff signed the MAA below an acknowledgment that she read and understood its terms. (Lugo Decl., Ex. A.) The acknowledgment further states that Plaintiff “was given the opportunity to discuss this Agreement with his/her own attorney if he/she wishes to do so, and also has had the opportunity to ask the Company any questions about this Agreement and request an explanation of any term of this Agreement.” (Ibid.) Plaintiff’s signature on the MAA belies her claim that she was not afforded an opportunity to retain counsel or seek clarification.

Lastly, Plaintiff argues that the MAA is overly complex and difficult for a layperson to comprehend. The Court disagrees. The MAA is written in plain language and ends with an explicit acknowledgment that Plaintiff is relinquishing the right to a jury trial. (Lugo Decl., Ex. A.) 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.) Furthermore, as discussed above, Plaintiff was given the opportunity to ask questions or seek counsel.

In sum, 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.)  

1. One-Sided Obligation

Plaintiff argues that the MAA only requires arbitration of claims that an employee brings against Defendant, but not vice versa. However, the MAA plainly applies to “all disputes . . . that Employee now has or in the future may have against HPN . . . or that the Company now has or in the future may have against Employee.” (Lugo Decl., Ex. A.) The MAA expressly covers “any other claim under any federal, state, or local statute, constitution, regulation, rule, ordinance, or common law” arising from the employment. (Ibid.) Thus, any claim by Defendant would also be subject to arbitration if it relates to Plaintiff’s employment.

Navas v. Fresh Venture Foods, LLC (2022) 85 Cal.App.5th 626, cited by Plaintiff, is distinguishable because the arbitration provision in that case was limited to wage, discrimination, and termination claims. (Id. at p. 636.) “[T]hese are the type of claims that only employees bring against employers.” (Ibid.) By contrast, the MAA expressly applies to “all disputes . . . that the Company now has or in the future may have against Employee,” including any claim “under any federal, state, or local statute, constitution, regulation, rule, ordinance, or common law.” (Lugo Decl., Ex. A.) Unlike the provision in Navas, the MAA is not limited to wage, discrimination, and termination claims, or other claims that only an employee would bring. Rather, “any” claim under “any” law, brought by either Plaintiff or Defendant, is subject to arbitration so long as it relates to Plaintiff’s employment. Accordingly, the MAA is sufficiently mutual.     

            2. Indefinite Duration

Plaintiff argues that the MAA is unconscionable because it has an indefinite duration. (See Lugo Decl., Ex. A [“This Agreement survives the termination of Employee's employment with the Company”].) However, this simply means that Plaintiff must arbitrate claims related to her employment no matter how long after termination she decides to bring such claims. Plaintiff cites no authority suggesting that this is unconscionable. Arbitration agreements are not required to have an expiration date in order to be enforceable.

Cook v. University of Southern California (2024) 102 Cal.App.5th 312, cited by Plaintiff, is distinguishable because the arbitration agreement in that case was overbroad in scope, applying to claims beyond employment. (Id. at p. 321.) By contrast, the MAA is expressly limited to claims arising from Plaintiff’s employment. (Lugo Decl., Ex. A.) Additionally, as discussed above, Defendant is equally bound by the MAA. Therefore, the undefined duration of the MAA does not render it unfairly one-sided or unconscionable.

            3. Confidentiality

Plaintiff argues that the MAA’s confidentiality provision renders it unconscionable. (See Lugo Decl., Ex. A [“To the maximum extent permitted by law, the parties shall maintain the confidential nature of the arbitration proceeding and the award, including all disclosures in discovery, submissions to the arbitrator, the hearing, and the contents of the arbitrator's award”].)

However, “a confidentiality provision in an arbitration agreement is not per se unconscionable when it is based on a legitimate commercial need (such as to protect trade secrets or proprietary information).” (Murrey v. Superior Court (2023) 87 Cal.App.5th 1223, 1254.) Here, the dispute involves a healthcare provider and a healthcare professional, which implicates matters of privacy. Moreover, the confidentiality clause in Murrey only “added to th[e] agreement's substantively unconscionability.” (Id. at p. 1255.) The court found the arbitration agreement to be substantively unconscionable for numerous other reasons, including improper cost division, limitations on discovery, unfairly excluded claims, and the arbitration provider’s conflict of interest. (Id. at pp. 1248-53.) No such issues have been identified with the MAA. Thus, even if the confidentiality provision here contributed to substantive unconscionability, it would be insufficient to render the MAA unenforceable.

            4. Free Peek

Plaintiff argues that the MAA is unconscionable because it gives Defendant a free peek at Plaintiff’s claims by requiring an informal meet and confer prior to arbitration. (See Lugo Decl., Ex. A [“As a prerequisite for submitting a claim to arbitration, both Employee and the Company agree to meet and confer and make good faith efforts to resolve any dispute internally on an informal basis”].)

However, Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, cited by Plaintiff, is distinguishable because the agreement in that case lacked mutuality, only requiring the plaintiff to arbitrate his claims. (Id. at p. 1282.) The court found the informal meeting requirement to be problematic “[g]iven the unilateral nature of the arbitration agreement.” (Id. at pp. 1282-83.) The court did not hold that informal meeting requirements are per se unconscionable. As discussed above, the MAA here applies equally to Plaintiff and Defendant. Thus, the meet and confer requirement does not render the agreement unenforceable.  

In sum, the Court finds a minimal degree of unconscionability. The MAA remains enforceable.

CONCLUSION

            Defendant Regal Medical Group, Inc.’s motion to compel arbitration is GRANTED. The case is stayed in its entirety pending the outcome of arbitration.