Judge: Daniel S. Murphy, Case: 25STCV03066, Date: 2025-05-02 Tentative Ruling

Case Number: 25STCV03066    Hearing Date: May 2, 2025    Dept: 32

BACKGROUND

            On February 4, 2025, Plaintiff Melina Khoshabeh filed this employment action against Defendants Northridge Care Center LLC and Janees Nunez.

            On March 12, 2025, Defendants filed the instant motion to compel arbitration. Plaintiff filed her opposition on March 19, 2025. Defendants filed their reply on March 25, 2025.

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.)

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.)

Plaintiff signed a Mutual Agreement to Arbitrate Claims on June 5, 2024. (Galvan Decl., Ex. B.) Plaintiff does not dispute the existence of the agreement or her signature on it. Thus, Defendants have satisfied their initial burden of proving the existence of an arbitration agreement. The burden shifts to Plaintiff to articulate a defense against enforcement.

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 omitted.)

Here, the arbitration agreement is adhesive because “[a]ll employees sign the arbitration agreement as part of their hiring process.” (Galvan Decl. ¶ 3.) Plaintiff avers that she “was not given a choice to not sign it. [She] had to sign it for the job.” (Khoshabeh Decl. ¶ 2.)

A contract of adhesion results in a low degree of procedural unconscionability. (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.) Therefore, a high degree of substantive unconscionability is needed to invalidate the agreement. (Ibid.)

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.) Here, the decision in Cook v. University of Southern California (2024) 102 Cal.App.5th 312 is directly on point and demonstrates that the arbitration agreement in this case is substantively unconscionable because of its scope, duration, and lack of mutuality.

            1. Scope

In Cook, the arbitration agreement was overbroad in scope because it required arbitration of “all claims, whether or not arising out of Employee's University employment, remuneration or termination.” (Cook, supra, 102 Cal.App.5th at p. 321.) The court found it substantively unconscionable to “require[] Cook to arbitrate claims that are unrelated to her employment with USC.” (Ibid.) Similarly, the agreement here requires Plaintiff to arbitrate “all claims or controversies (‘claims’), past, present or future, whether or not arising out of my employment (or its termination).” (Galvan Decl., Ex. B.)

Defendants argue that this is not unconscionable because the court in Roman v. Superior Court (2009) 172 Cal.App.4th 1462 upheld a similar clause. (Reply 3:13-15.) However, the clause in Roman was not as broad. In Roman, the arbitration clause specifically applied to “all disputes and claims arising out of the submission of this application,” or “all disputes . . . which might arise out of my employment with the company.” (Roman, supra, 172 Cal.App.4th at p. 1467.) The court in Cook specifically noted this in rejecting USC’s reliance on Roman: “In Roman, unlike here, the arbitration clause in question was expressly limited to claims arising from the employee's job application and subsequent employment.” (Cook, supra, 102 Cal.App.5th at p. 323.) Thus, Roman does not support Defendants’ position.

Defendants otherwise fail to distinguish Cook on this point. Therefore, Cook applies and demonstrates that the agreement in this case is overbroad in scope.

            2. Duration

The court in Cook also held that “the arbitration agreement was unconscionable because it survived indefinitely following Cook's termination from USC.” (Cook, supra, 102 Cal.App.5th at p. 325.) The agreement here also survives indefinitely past Plaintiff’s termination: “This Agreement to arbitrate shall survive the termination of my employment and the expiration of any benefit plan.” (Galvan Decl., Ex. B.)

Defendants argue that Cook is inapplicable because “[t]hat case addressed lack of mutual termination rights in a consumer arbitration agreement with indefinite survival. Here, there is no claim that the agreement binds Plaintiff to an indefinite obligation beyond employment, and courts routinely uphold employment arbitration agreements without termination provisions.” (Reply 3:19-23.) However, Cook did not involve a consumer arbitration; it involved an employment arbitration like this case. Moreover, the agreement here, like the agreement in Cook, clearly binds Plaintiff to an obligation to arbitrate beyond employment. As discussed above, the agreement requires Plaintiff to arbitrate any claim “past, present or future, whether or not arising out of my employment.” Thus, Cook is analogous and applicable.

In sum, the indefinite duration of the agreement contributes to substantive unconscionability.           

3. Mutuality

The agreement in Cook was also unconscionable because it lacked mutuality: “The agreement requires Cook to arbitrate any and all claims she may have against USC ‘or any of its related entities, including but not limited to faculty practice plans, or its or their officers, trustees, administrators, employees or agents, in their capacity as such or otherwise.’ However, the agreement does not require USC's ‘related entities’ to arbitrate their claims against Cook.” (Cook, supra, 102 Cal.App.5th at p. 326.) “This confers a benefit on USC and its broadly defined ‘related entities’ that is not mutually afforded to Cook.” (Id. at p. 327.)

The agreement here similarly requires Plaintiff to arbitrate claims against “any of the following (1) the Company, (2) its officers, directors, employees or agents in their capacity as such or otherwise, (3) the Company's management company, (4) the Company's parent, subsidiary and affiliated entities, (5) the Company's benefit plans or the plans' sponsors, fiduciaries, administrators, affiliates and agents, and/or (6) all successors and assigns of any of them.” (Galvan Decl., Ex. B.) Yet, the agreement only requires the Company to arbitrate its claims against Plaintiff, without a corresponding obligation for the Company’s affiliates, agents, employees, etc. (Ibid.) In other words, the agreement lacks mutuality.

Defendants argue that “[t]he agreement is bilateral” because “[b]oth Plaintiff and Defendant agreed to arbitrate claims.” (Reply 3:16-18.) However, this does not end the analysis. Under Cook, the agreement lacks mutuality because Plaintiff is required to arbitrate her claims not only against Defendant, but also against a multitude of others who have no corresponding obligation to arbitrate their claims against Plaintiff. Like USC, Defendant “does not attempt to justify this one-sidedness. No explanation is offered as to why [Plaintiff] should be required to give up the ability to ever bring claims in court against [Defendant’s] employee that are unrelated to [Defendant] or her employment there.” (See Cook, supra, 102 Cal.App.5th at p. 327.) Defendant does not address Cook, much less distinguish it, on this point.  

            4. Severability

The court in Cook found that the virtually limitless scope of arbitrable claims, combined with the lack of mutuality and indefinite duration, created a sufficiently high degree of substantive unconscionability to render the agreement unenforceable: “as it stands, the arbitration agreement is tainted with unconscionability because its central purpose appears to be the ability for the parties to arbitrate all possible disputes between each other, for an indefinite period of time, with USC able to move for arbitration of claims against it and its related entities, but Plaintiff only able to move for arbitration of claims by USC against her.” (Cook, supra, 102 Cal.App.5th at p. 329.)

The court in Cook also found severance to be untenable because “curing the unconscionable provisions would require substantive rewriting of the arbitration agreement to contradict its plain language, and that severance would provide a windfall to USC.” (Cook, supra, 102 Cal.App.5th at p. 330.) The same applies here, because the same unconscionable provisions are at issue. In other words, the agreement here is tainted with unconscionability which cannot be cured by severance.

In sum, the Court finds that the arbitration agreement in this case contains a low degree of procedural unconscionability but a high degree of substantive unconscionability. As a result, the agreement is unenforceable.

CONCLUSION

            Defendants’ motion to compel arbitration is DENIED.